<PAGE>
[GRAPHIC]
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[LOGO]
MAINSTAY(R)
INSTITUTIONAL
FUNDS INC.
1998
SEMIANNUAL
REPORT
Unaudited June 30, 1998
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<PAGE>
Performance Highlights--Total Returns*
6 Months Ended June 30, 1998
<TABLE>
<CAPTION>
------------------------
SEC Average Annual
Total Returns
as of June 30, 1998
- ------------------------------------------------------------------------------------------------------------------------------------
Since
Incep-
Funds 1991 1992 1993 1994 1995 1996 1997 1 Year 5 Year tion
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Equity Funds
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<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
EAFE Index (Instl. Class)+ 10.10% -12.22% 28.97% 6.83% 9.03% 6.45% 0.40% 4.41% 9.01% 8.08%
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EAFE Index (Serv. Class)++ 10.10 -12.22 28.97 6.83 8.63 6.37 0.08 4.13 8.82 7.95
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Growth Equity (Instl. Class)+ 67.00 5.63 9.59 -2.23 37.88 21.62 24.73 31.46 21.72 22.98
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Growth Equity (Serv. Class)++ 67.00 5.63 9.59 -2.23 37.50 21.29 24.50 31.21 21.51 22.84
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Indexed Equity (Instl. Class)+ 29.80 7.19 9.41 0.90 36.88 22.57 32.88 29.67 22.59 20.40
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Indexed Equity (Serv. Class)++ 29.80 7.19 9.41 0.90 36.70 22.21 32.60 29.31 22.39 20.27
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International Equity (Instl. Class)(S) N/A -5.37 25.03 8.36 7.17 12.09 5.44 10.70 11.08 11.55
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International Equity (Serv. Class)(S) N/A -5.37 25.03 8.36 6.86 11.59 4.88 10.08 10.78 11.30
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Multi-Asset (Instl. Class)+ 17.90 7.09 8.79 -0.86 26.81 16.16 26.69 23.44 16.90 15.20
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Multi-Asset (Serv. Class)++ 17.90 7.09 8.79 -0.86 26.70 15.89 26.30 23.02 16.71 15.08
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Value Equity (Instl. Class)+ 36.60 20.71 14.90 1.22 29.42 22.41 22.63 14.64 16.97 19.77
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Value Equity (Serv. Class)++ 36.60 20.71 14.90 1.22 29.32 22.10 22.28 14.36 16.80 19.65
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Income Funds
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Bond (Instl. Class)+ 14.00% 6.39% 9.74% -3.31% 17.88% 2.80% 8.57% 9.59% 6.28% 7.81%
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Bond (Serv. Class)++ 14.00 6.39 9.74 -3.31 17.55 2.62 8.21 9.35 6.10 7.68
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Indexed Bond (Instl. Class)+ 14.70 7.09 9.64 -3.44 18.07 2.55 9.01 10.04 6.28 7.99
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Indexed Bond (Serv. Class)++ 14.70 7.09 9.64 -3.44 17.97 2.34 8.75 9.68 6.13 7.89
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International Bond (Instl. Class)(S) 18.73 7.68 14.56 3.11 18.46 14.32 2.62 5.23 9.06 9.62
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International Bond (Serv. Class)(S) 18.73 7.68 14.56 3.11 18.26 14.08 2.27 4.97 8.88 9.52
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Money Market|| (Instl. Class)+ 5.95 3.66 2.89 3.88 5.63 5.11 5.27 5.34 4.79 4.66
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Money Market|| (Serv. Class)++ 5.95 3.66 2.89 3.88 5.46 4.85 5.01 5.08 4.63 4.55
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Short-Term Bond (Instl. Class)+ 11.30 5.94 5.67 0.11 10.27 4.81 6.13 6.16 5.18 6.22
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Short-Term Bond (Serv. Class)++ 11.30 5.94 5.67 0.11 10.07 4.46 5.98 5.90 5.00 6.10
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</TABLE>
* 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% on an annualized basis of the average daily net asset value of the
Service Class shares.
+ 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 sub-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
5.30% with a current 7-day yield of 5.17%, both as of 6/30/98. The Money
Market Fund-Service Class had an effective 7-day yield of 5.04% with a
current 7-day yield of 4.92%, both as of 6/30/98. These yields reflect
certain expense limitations. Had these expenses not been limited, the
effective 7-day yield and the current 7-day yield would have been 5.18% and
5.06%, respectively, for the Institutional Class and 4.92% and 4.81%,
respectively, for the Service Class. These expense limitations are
voluntary and may be terminated or revised at any time.
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 (through 1993 for the Value Equity Fund and Growth
Equity Fund and 1996 for the Multi-Asset Fund) reflect certain fee waivers
and/or expense limitations. As a result, total return figures, which take
into account these fee waivers and/or expense limitations may have been
lower had they not been in effect. The fee waivers and expense limitations
are voluntary and may be terminated at any time. Please read the
prospectuses carefully before you invest or send money.
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% on an annualized basis of the average daily net asset value of the
Service Class shares.
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>
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TABLE OF CONTENTS
Chairman's Letter 2
PORTFOLIO MANAGERS' INTERVIEWS & COMMENTS
&
FINANCIAL STATEMENTS
EQUITY FUNDS
EAFE Index Fund 3
Growth Equity Fund 20
Indexed Equity Fund 32
International Equity Fund 48
Multi-Asset Fund 64
Value Equity Fund 82
INCOME FUNDS
Bond Fund 94
Indexed Bond Fund 106
International Bond Fund 118
Money Market Fund 130
Short-Term Bond Fund 140
Note 1 Organization and Business 150
Note 2 Significant Accounting Policies 151
Note 3 Fees and Related Party Policies 155
Note 4 Federal Income Tax 157
Note 5 Financial Investments 158
Note 6 Portfolio Securities Loaned 159
Note 7 Line of Credit 159
Note 8 Purchases and Sales of Securities 160
Note 9 Capital Share Transactions 160
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<PAGE>
CHAIRMAN'S LETTER
================================================================================
REPORT TO SHAREHOLDERS FOR THE SIX MONTHS
ENDED JUNE 30, 1998
The first half of 1998 was a dynamic period, with active markets reflecting
strong investor preferences. In general, investors chose large-capitalization
stocks over small-cap issues, and growth investing over value disciplines.
Established economies generally outperformed emerging markets--and domestic and
European stocks and bonds generally performed well, while many securities with
ties to Asia tended to underperform.
Generally, long-term bonds outpaced shorter-term securities, Treasuries outpaced
corporate and mortgage-backed bonds, and the strength of the U.S. dollar was
reflected in the weakness of the Japanese yen. Against this backdrop, the S&P
500* advanced to record levels and the yield on 30-year Treasury bonds dropped
to all-time lows during the reporting period, presenting investors with
opportunities or challenges, depending on their investment orientation.
Putting market results in perspective
After several years of steady U.S. stock market growth, perhaps a word of
caution is in order. The positive results many investors have experienced in
recent years, although worth celebrating, have been well above historical norms+
and probably can't be sustained forever.
Many of the stocks that have been leading the market are trading at
historically high prices relative to their earnings and profit projections. If
inflation, unemployment, or wage pressures increase--or if other events upset
the economy--it's difficult to say what may lie ahead. To avoid
disappointments, you need to have realistic expectations and strategies that
are appropriate for various economic scenarios.
Coping with volatility
One aspect of investing that concerns many investors is volatility--or rapid
changes in the price of securities over short periods of time. While the level
of volatility investors experience may vary across asset classes and market
sectors, no investor is entirely immune to changes in prices, yields, or total
returns.
Diversification is viewed as a way to help spread risk and may help investors
reduce their exposure to volatile market sectors. Even in periods of extreme
volatility, maintaining steady diversification guidelines and a long-term
focus can help investors avoid shifting assets too often, possibly missing as
many opportunities as they may gain.
Improved support
MainStay Institutional Funds is pleased to report that our Marketing Directors
are now located in our corporate headquarters. This move gives them greater
access to our portfolio managers, more support from our corporate offices, and
a more fluid exchange of ideas on how to better assist you, our institutional
clients.
This semiannual report explains the performance and holdings of your MainStay
Institutional Fund(s), with commentary from the portfolio managers. At
MainStay, we're working hard to earn your trust--by endeavoring to provide the
information, selection, and service you need to make sound investment
decisions.
Sincerely,
/s/ Stephen C. Roussin
Stephen C. Roussin
July 1998
================================================================================
* The "S&P 500(R)" is a registered trademark of The McGraw-Hill Companies,
Inc. The S&P 500(R) 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.
2
<PAGE>
PORTFOLIO MANAGEMENT DiSCUSSION AND ANALYSIS
EAFE INDEX FUND
================================================================================
================================================================================
MARKET RECAP FOR THE 6-MONTH PERIOD ENDED 6/30/98
================================================================================
o During the first half of 1998, a bull market reigned in Europe while a bear
market continued to persist in Asian and Pacific Rim countries.
o European markets continued to surge upward, fueled by low inflation, low
interest rates, and continued economic growth, with returns in excess of
40% (in U.S. dollar terms) in countries such as Spain, Belgium, and France.
o Asian and Pacific Rim countries continued to suffer from ongoing fears of
currency devaluations, political unrest, and economic weakness.
o U.S. stock market returns remained impressive in the first half of 1998
with the large-cap S&P 500 Index* and the broader Wilshire 5000+ returning
17.71% and 14.68%, respectively.
================================================================================
FUND RECAP FOR THE 6- AND 12-MONTH PERIODS ENDED 6/30/98
================================================================================
o One-year total returns of 4.41% and 4.13% for Institutional Class and
Service Class shares, respectively, as of 6/30/98.
o Both share classes slightly underperformed the Morgan Stanley Capital
International (MSCI) Europe, Australia, and Far East ("EAFE") Index,++
which returned 15.93% for the six-month period ended 6/30/98.
o Both share classes also slightly underperformed the average
Lipper(S) international fund, which returned 15.50% during the first six
months of 1998.
During the first half of 1998, global markets showed widely divergent
performance, with Europe dominated by a bull market, while a bear market reigned
in Asia and the Pacific Rim. European markets were fueled by strong
macroeconomic factors such as low inflation, low interest rates, and increasing
growth. The market responded favorably to the perception of many investors that
Europe was embracing greater market efficiences and that corporations were
seeking to increase the value of their shares through mergers and strategic
alliances, share repurchases, cost cutting, and other means.
================================================================================
* The "S&P 500(R)" is a registered trademark of The McGraw-Hill Companies,
Inc. The S&P 500(R) 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.
+ An unmanaged market-value weighted index of 5000 common stocks traded in
the United States, considered to be the broadest general measure of U.S.
equity performance.
++ The Morgan Stanley Capital International Europe, Australia, Far East (Free)
Index--The EAFE Index--is an unmanaged index generally considered to be
representative of the international stock market.
(S) 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.
- --------------------------------------------------------------------------------
Bull market/bear market A bull market occurs when security prices are rising, a
bear market occurs when security prices decline.
Mergers and acquisitions A merger is a combination of two companies, an
acquisition is the purchase of a company, division, or business unit. Companies
that engage in mergers and acquisitions often pay shareholders a premium, or an
amount over the current share price, to complete the transaction quickly and
under favorable terms.
- --------------------------------------------------------------------------------
3
<PAGE>
================================================================================
The Asian and Pacific Rim countries continued to be held back in the first half
of the year by lingering effects of currency devaluations and other economic
setbacks in the last half of 1997. Increasing political unrest, as seen in
Indonesia, seemed to have a negative impact on many other markets in the region.
Lack of confidence in the progress of the Japanese economy continues to weigh
heavily on the minds of many investors as they consider the prospects for Asia
in general.
Given this backdrop, how did the MainStay Institutional EAFE Index Fund fare in
the first half of 1998?
For the six months ended 6/30/98, the MainStay Institutional EAFE Index Fund
returned 15.43% and 15.29% for Institutional Class and Service Class shares,
respectively. Both share classes slightly underperformed the MSCI EAFE Index,
which returned 15.93% for the first half of 1998. Both share classes also ranked
in the top 50% of their Lipper category, with the average Lipper international
fund returning 15.50% for the first half of 1998.
Why did the Fund slightly underperform the MSCI EAFE Index?
The MainStay Institutional EAFE Index Fund is designed to replicate the risk and
return profiles of the MSCI EAFE Index by holding a subset of the benchmark's
securities. The Fund holds a basket of stocks within each EAFE country, which
are weighted in such a manner as to closely mirror the overall weight, risk, and
return profiles of each individual country in the Index. The Fund does not seek
to make any regional, country, or industry evaluations. Rather, it seeks to
generate Index-like returns within an acceptable range of tracking error. During
the reporting period, most of the baskets owned by the Fund performed closely in
line with their target markets. However, the Fund carries fees and expenses that
the Index does not, and as a result the Fund slightly underperformed the Index.
During the reporting period, which countries contributed most positively to the
Fund's performance?
The Index was led by Spain, Belgium, France, and Germany, which returned 43%,
42%, 40%, and 38%, respectively, in U.S. dollar terms. With the approach of
European Monetary Union, we believe the stock markets in these countries have
been strengthened by concerted efforts to improve economic stability and keep
interest rates low. At the same time, there were ongoing efforts by corporations
to make acquisitions and strategic alliances across national borders. We believe
these factors have helped the stock markets in these countries, and may improve
their competitive standing as Europe becomes a more homogeneous marketplace with
fewer boundaries and trade barriers.
Which countries provided the worst performance?
Countries in Asia and the Pacific Rim were by far the weakest performers.
Singapore, Malaysia, Hong Kong, and New Zealand were the worst markets,
returning -28%, -23%, -20%, and -15%, respectively, in U.S. dollar terms.
Uncertainty over currencies, political unrest in these countries, and decreasing
demand for manufactured products caused these and other Pacific markets to
experience continued difficulties. We believe these general concerns were
heightened when Japan announced that it was in recession.
- --------------------------------------------------------------------------------
Devaluation Lowering the value of a country's currency relative to gold and/or
the currencies of other nations. Devaluation may also result from a rise in the
value of other currencies relative to the currency of a particular country.
Weighting The proportion of a portfolio allocated to a specific security or
sector, 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.
Local currency/U.S. dollar terms 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.
European Monetary Union A proposed system that would allow participating
European countries to operate with a common currency or monetary unit.
- --------------------------------------------------------------------------------
4
<PAGE>
================================================================================
What is your outlook for the second half of 1998 and beyond?
Given the nature of an index fund, we do not seek to make specific market
predictions or emphasize any particular region or country in the Fund's
investment portfolio. However, we believe the continued divergence between the
European and Asian markets may demonstrate that the world is not behaving as one
global market. We would anticipate this to hold true in the relatively near
term, which we believe shows the potential value of global diversification as an
effective means of controlling overall portfolio variation and risk.
How long do you believe this market divergence will continue?
We are not economic forecasters. Instead, we seek to track the markets wherever
they may move. From our vantage point, European markets may continue to show
signs of strength, and we believe that European Monetary Union, which will begin
in early 1999, may help solidify the progress many European companies have
already made. The introduction of a uniform currency across Europe may have
far-reaching effects, but we believe many of these are already being priced into
European stocks.
At the same time, we do not know how the world will react if there is continued
weakness in Asia. It may be that investors will take a greater interest in Asian
markets, believing that the troubles have been fully discounted. Alternatively,
investors may continue to shy away from Asian markets until Japan shows signs of
strengthening its economy and currency, and other markets appear to be
recovering from the setbacks they have recently encountered.
Whatever happens, the Fund will continue to seek to provide investment results
that correspond to the total return performance (reflecting reinvestment of
dividends) of common stocks in the aggregate, as represented by the MSCI EAFE
Index.
James A. Mehling, CFA
Portfolio Manager
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.
================================================================================
Past performance is no guarantee of future results.
[GRAPHIC]
5
<PAGE>
$10,000 INVESTED IN MAINSTAY INSTITUTIONAL
EAFE INDEX FUND VS MSCI EAFE INDEX
INSTITUTIONAL CLASS SHARES
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
================================================================================
<TABLE>
<CAPTION>
EAFE Index MSCI EAFE
<S> <C> <C>
1/2/91 10,000 10,000
91 11,010 11,249
92 9,665 9,916
93 12,464 13,183
94 13,315 14,246
95 14,518 15,891
96 15,453 16,591
97 15,515 16,887
6/30/98 17,909 19,576
</TABLE>
$10,000 INVESTED IN MAINSTAY INSTITUTIONAL
EAFE INDEX FUND VS MSCI EAFE INDEX
SERVICE CLASS SHARES
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
================================================================================
<TABLE>
<CAPTION>
EAFE Index MSCI EAFE
<S> <C> <C>
1/2/91 10000 10000
91 11010 11249
92 9665 9916
93 12464 13183
94 13315 14246
95 14465 15891
96 15385 16591
97 15397 16887
6/30/98 17752 19576
</TABLE>
o 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, 1998 as of June 30, 1998
- -------------------------------------------------------------------------------------------------------------
Year to Date One Year Five Year Since Inception
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
EAFE Index Fund Institutional Class 15.43% 4.41% 9.01% 8.08%
EAFE Index Fund Service Class+ 15.29% 4.13% 8.82% 7.95%
Average Lipper International Fund 15.50% 8.19% 12.22% 11.32%
MSCI EAFE Index 15.93% 6.10% 10.03% 9.37%
</TABLE>
YEAR-BY-YEAR PERFORMANCE
- --------------------------------------------------------------------------------
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
Institutional Class Shares
<TABLE>
<CAPTION>
Total Return
Year end %*
-------- ------------
<S> <C>
1991 10.10
1992 -12.22
1993 28.97
1994 6.83
1995 9.03
1996 6.45
1997 0.40
1998 (as of 6/30/98) 15.43
</TABLE>
================================================================================
PORTFOLIO COMPOSITION
(% of net assets as of June 30, 1998)
- --------------------------------------------------------------------------------
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
<TABLE>
<S> <C>
Common Stocks 96.42%
Cash & Equivalents 2.65%++
Other 0.93%
</TABLE>
================================================================================
<TABLE>
<CAPTION>
TOP 10 HOLDINGS
(% of net assets as of June 30, 1998)
- --------------------------------------------------------------------------------
<S> <C>
1. Royal Dutch Petroleum Co. 1.83%
2. Glaxo Wellcome PLC 1.61%
3. Nippon Telegraph & Telephone Corp. 1.46%
4. British Petroleum Co. PLC 1.46%
5. Toyota Motor Corp. 1.42%
6. Novartis S.A. Registered 1.41%
7. British Telecommunications PLC 1.23%
8. Lloyds TSB Group PLC 1.20%
9. UBS AG Registered 1.19%
10. Nestle S.A. Registered 1.19%
</TABLE>
<TABLE>
<CAPTION>
================================================================================
TOP 10 COUNTRIEs
(% of net assets as of June 30, 1998)
- --------------------------------------------------------------------------------
<S> <C>
1. United Kingdom 21.55%
2. Japan 20.14%
3. Germany 11.00%
4. France 9.47%
5. Switzerland 7.76%
6. Netherlands 5.58%
7. Italy 4.50%
8. Spain 3.26%
9. Sweden 3.20%
10. Australia 2.32%
</TABLE>
================================================================================
* 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% on an annualized basis of the average daily net asset value of the
Service Class shares.
+ 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, 1998 (Unaudited)
COMMON STOCKS (96.4%)+
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
---------------------------------------------------------
AUSTRALIA (2.1%)
Boral, Ltd. (building materials & components)............. 9,600 $ 18,013
Broken Hill Proprietary Co., Ltd.
(energy sources)......................................... 22,984 194,277
Coles Myer, Ltd. (merchandising).......................... 14,858 57,966
National Australia Bank, Ltd.
(banking)................................................ 13,390 176,614
News Corp., Ltd.
(broadcasting & publishing).............................. 22,950 187,311
Pacific Dunlop, Ltd.
(multi-industry)......................................... 8,700 14,061
Pioneer International, Ltd. (building materials &
components).............................................. 25,231 60,153
Rio Tinto, Ltd.
(metals-nonferrous)...................................... 8,677 103,165
Smith (Howard), Ltd.
(multi-industry)......................................... 6,441 37,891
Star City Holdings, Ltd.
(leisure & tourism) (a).................................. 37,214 21,662
Telstra Corp., Ltd.
(telecommunications)..................................... 53,600 137,414
Westpac Banking Corp., Ltd.
(banking)................................................ 22,071 134,624
WMC, Ltd. (metals-nonferrous)............................. 19,846 59,727
-----------
1,202,878
-----------
AUSTRIA (0.4%)
Bank Austria AG (banking)................................. 1,039 84,509
EA-Generali AG (insurance)................................ 311 91,348
Flughafen Wien AG
(transportation-airlines)................................ 1,094 52,465
-----------
228,322
-----------
BELGIUM (1.6%)
Electrabel, S.A.
(utilities-electrical & gas)............................. 809 229,373
Fortis AG (insurance)..................................... 1,145 292,327
Generale de Banque, S.A.
(banking)................................................ 300 222,722
PetroFina, S.A. (energy sources).......................... 477 195,812
-----------
940,234
-----------
DENMARK (0.9%)
Dampskibsselskabet AF 1912 Class B (transportation-
shipping)................................................ 10 85,793
Dampskibsselskabet Svendborg AS Class B (transportation-
shipping)................................................ 10 122,146
Den Danske Bank (banking)................................. 889 106,649
FLS Industries AS Class B
(machinery & engineering)................................ 435 11,069
Novo Nordisk AS Class B
(health & personal care)................................. 965 133,026
Tele Danmark AS Class B
(telecommunications)..................................... 1,000 95,972
-----------
554,655
-----------
</TABLE>
- --------
+Percentages indicated are based on Fund net assets.
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
----------------------------------------------------------
FINLAND (1.0%)
Kesko
(food & household products).............................. 3,900 $ 61,488
Kone Corp. Class B
(transportation-shipping)................................ 174 24,420
Metra AB PLC Class B
(machinery & engineering)................................ 2,139 70,176
Nokia AB Class A (electronic components & instruments).... 5,662 416,408
Pohjola Insurance Group Class B
(insurance).............................................. 629 31,298
-----------
603,790
-----------
FRANCE (9.5%)
Alcatel Alsthom, S.A.
(electrical & electronics)............................... 1,414 287,897
AXA-UAP, S.A. (insurance)................................. 3,990 448,757
Cap Gemini, S.A.
(business & public services)............................. 1,289 202,538
Carrefour, S.A.
(food & household products).............................. 454 287,222
Compagnie de Saint Gobain, S.A. (miscellaneous-materials &
components).............................................. 1,343 249,007
Compagnie Generale de Geophysique, S.A. (energy equipment
& service) (a)........................................... 175 25,674
Elf Aquitaine, S.A. (energy sources)...................... 1,089 153,100
Etablissements Economiques du Casino Guichard-Perrachon,
S.A. (merchandising)..................................... 1,809 144,456
France Telecom, S.A.
(telecommunications)..................................... 8,236 568,044
Groupe Danone, S.A.
(food & household products).............................. 905 249,525
L'Air Liquide, S.A. (chemicals)........................... 1,722 284,877
L'Oreal, S.A.
(health & personal care)................................. 937 521,190
LVMH (Moet Hennessy Louis Vuitton), S.A.
(beverages & tobacco).................................... 980 196,129
Michelin (CGDE), S.A. Class B
(industrial components).................................. 2,173 125,434
Paribas, S.A. (banking)................................... 2,899 310,229
PSA Peugeot, S.A. (automobiles)........................... 628 135,031
Sanofi, S.A.
(health & personal care)................................. 1,554 182,747
Schneider, S.A.
(electrical & electronics)............................... 2,418 192,807
Societe Generale, S.A. Class A
(banking)................................................ 1,140 237,012
Total, S.A. Class B
(oil/gas-exploration).................................... 2,330 302,906
Vivendi, S.A.
(business & public services)............................. 1,974 421,505
-----------
5,526,087
-----------
</TABLE>
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, 1998 (Unaudited)
COMMON STOCKS (Continued)
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
---------------------------------------------------------
GERMANY (10.3%)
AGIV-AG fuer Industrie und Verkehrswesen
(multi-industry) (a)..................................... 904 $ 24,841
Allianz AG Registered (insurance)......................... 1,906 628,282
BASF AG (chemicals)....................................... 5,234 247,921
Bayer AG (chemicals)...................................... 6,417 330,976
Bayerische Hypotheken-und Wechsel-Bank AG (banking)....... 1,707 108,187
Bayerische Vereinsbank AG (banking)....................... 2,557 217,447
Beiersdorf AG
(health & personal care)................................. 1,546 98,411
Daimler-Benz AG (automobiles)............................. 4,758 466,565
Daimler-Benz AG Rights (automobiles) (a).................. 4,758 5,272
Deutsche Bank AG (banking)................................ 5,100 431,867
Deutsche Telekom AG (telecommunications).................. 20,778 560,592
Dresdner Bank AG (banking)................................ 3,950 212,924
Heidelberger Zement AG (building materials & components).. 1,215 115,103
Hochtief AG
(construction & housing)................................. 1,636 78,400
Mannesmann AG
(machinery & engineering)................................ 3,100 314,459
Metro AG (merchandising).................................. 2,650 160,759
Metro AG Rights
(merchandising) (a)...................................... 2,650 71
Muenchener Rueckversicherungs-Gesellschaft AG Registered
(insurance).............................................. 658 326,260
RWE AG (utilities-electrical & gas)....................... 3,389 200,895
SAP AG (data processing & reproduction)................... 550 333,650
Siemens AG
(electrical & electronics)............................... 5,458 332,010
STRABAG AG
(construction & housing) (a)............................. 216 18,686
VEBA AG
(utilities-electrical & gas)............................. 4,829 329,061
Viag AG (multi-industry).................................. 294 198,711
Volkswagen AG (automobiles)............................... 300 288,360
-----------
6,029,710
-----------
HONG KONG (1.7%)
Cathay Pacific Airways, Ltd. (transportation-airlines).... 22,409 15,763
Chinese Estates Holdings, Ltd. (multi-industry)........... 68,854 11,994
CLP Holdings, Ltd.
(utilities-electrical & gas)............................. 20,432 93,082
Hang Lung Development Co.
(multi-industry)......................................... 44,946 44,663
Hang Seng Bank, Ltd. (banking)............................ 16,730 94,570
Hong Kong & China Gas Co., Ltd. (utilities-electrical &
gas)..................................................... 39,548 44,915
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
----------------------------------------------------------
HONG KONG (Continued)
Hong Kong Telecommunications, Ltd. (telecommunications)... 95,258 $ 178,875
Hopewell Holdings, Ltd. (construction & housing).......... 93,531 10,017
Hutchison Whampoa, Ltd.
(multi-industry)......................................... 37,381 197,312
Miramar Hotel & Investment, Ltd. (leisure & tourism)...... 36,028 31,618
New World Development Co., Ltd. (multi-industry).......... 31,772 61,504
Shangri-La Asia, Ltd.
(multi-industry)......................................... 67,464 43,535
Sun Hung Kai Properties, Ltd. (construction & housing).... 28,000 118,885
Swire Pacific, Ltd. Class A
(multi-industry)......................................... 16,385 61,852
-----------
1,008,585
-----------
IRELAND (0.5%)
Allied Irish Banks PLC (banking).......................... 16,000 230,984
Irish Life PLC (insurance)................................ 6,900 63,521
-----------
294,505
-----------
ITALY (4.5%)
Banca Commerciale Italiana S.p.A. (banking)............... 35,820 214,207
Bulgari S.p.A. (recreation & other consumer goods)........ 5,548 29,089
Cementir S.p.A. (building materials & components)......... 31,373 35,652
Credito Italiano S.p.A. (banking)......................... 40,119 210,011
Ente Nazionale Idrocarburi S.p.A. (energy sources)........ 66,248 434,189
Fiat S.p.A. (automobiles)................................. 28,566 125,028
Istituto Mobiliare Italiano S.p.A. (banking).............. 12,235 192,726
Istituto Nazionale delle Assicurazioni S.p.A. (insurance). 59,698 169,602
Magneti Marelli S.p.A. (automobiles) 889 1,951
Mediaset S.p.A.
(broadcasting & publishing).............................. 14,500 92,545
Mediobanca S.p.A.
(financial services)..................................... 8,523 108,123
Montedison S.p.A. (multi-industry)........................ 75,868 94,114
Pirelli S.p.A.
(industrial components).................................. 35,468 110,742
Snia BPD S.p.A. (multi-industry).......................... 42,373 51,966
Telecom Italia S.p.A. (telecommunications)................ 40,920 301,224
Telecom Italia Mobile S.p.A. (telecommunications)......... 74,196 453,723
-----------
2,624,892
-----------
JAPAN (20.1%)
Acom Co., Ltd. (financial services)....................... 500 23,742
Ajinomoto Co., Inc.
(food & household products).............................. 4,567 39,982
</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>
---------------------------------------------------------
JAPAN (Continued)
Arabian Oil Co., Ltd.
(energy sources)......................................... 987 $ 14,330
Asahi Bank, Ltd. (banking)................................ 21,986 96,635
Asahi Breweries, Ltd.
(beverages & tobacco).................................... 4,098 51,673
Asahi Chemical Industry Co., Ltd. (chemicals)............. 18,649 67,187
Asahi Glass Co., Ltd. (miscellaneous-materials &
components).............................................. 17,000 91,868
Ashikaga Bank, Ltd. (banking)............................. 18,043 22,491
Bank of Tokyo-Mitsubishi, Ltd. (banking) (c).............. 41,375 437,942
Bank of Yokohama, Ltd. (banking).......................... 11,000 26,948
Bridgestone Corp.
(industrial components).................................. 7,935 187,533
Brother Industries, Ltd. (appliances & household
durables)................................................ 13,601 50,764
Canon, Inc. (recreation & other consumer goods)........... 8,288 188,113
Chiba Bank, Ltd. (banking)................................ 11,600 40,120
Chichibu Onoda Cement Corp. (building materials &
components).............................................. 12,783 23,119
Chiyoda Corp.
(machinery & engineering) (a)............................ 5,000 6,125
Chugai Pharmaceutical Co., Ltd. (health & personal care).. 5,974 39,085
Citizen Watch Co., Ltd. (recreation & other consumer
goods)................................................... 3,678 30,344
Dai Nippon Printing Co., Ltd.
(business & public services)............................. 7,133 113,842
Daiei, Inc. (merchandising)............................... 11,467 26,853
Daikin Industries, Ltd.
(machinery & engineering)................................ 6,000 38,650
Dainippon Ink & Chemical, Inc. (chemicals)................ 1,203 3,684
Daiwa House Industry Co., Ltd. (construction & housing)... 6,667 58,847
Daiwa Securities Co., Ltd.
(financial services)..................................... 10,287 44,251
Denso Corp.
(industrial components) (c).............................. 7,331 121,492
East Japan Railway Co.
(transportation-road & rail)............................. 42 197,312
Ebara Corp.
(machinery & engineering)................................ 5,660 50,325
Eisai Co., Ltd.
(health & personal care)................................. 3,677 50,074
Fanuc, Ltd. (electronic components & instruments)......... 2,223 76,884
Fuji Bank, Ltd. (banking) (c)............................. 25,432 113,429
Fuji Photo Film, Ltd. (recreation & other consumer goods)
(c)...................................................... 5,394 187,722
Fujitsu, Ltd. (data processing & reproduction)............ 20,107 211,524
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
---------------------------------------------------------
JAPAN (Continued)
Furukawa Electric Co., Ltd.
(industrial components).................................. 11,558 $ 38,892
Gakken Co., Ltd.
(broadcasting & publishing) (a).......................... 13,000 21,732
Gunma Bank, Ltd. (banking)................................ 9,766 66,076
Hitachi Corp., Ltd.
(electrical & electronics) (c)........................... 31,857 207,736
Hitachi Zosen Corp. (metals-steel)........................ 19,634 31,689
Hokuriku Bank (banking)................................... 15,952 20,690
Honda Motor Co., Ltd.
(automobiles) (c)........................................ 8,345 297,037
Industrial Bank of Japan, Ltd.
(banking)................................................ 22,283 139,685
Ito-Yokado Co., Ltd.
(merchandising).......................................... 4,375 205,849
Japan Airlines Co.
(transportation-airlines) (a)............................ 11,138 30,978
Japan Energy Corp.
(energy sources)......................................... 5,637 5,971
Japan Steel Works
(metals-steel) (a)....................................... 25,176 31,019
Joyo Bank (banking)....................................... 13,550 49,989
Kajima Corp.
(construction & housing)................................. 12,910 35,348
Kamigumi Co., Ltd.
(business & public services) (a)......................... 456 1,906
Kansai Electric Power Co., Inc.
(utilities-electrical & gas)............................. 5,228 90,784
Kao Corp.
(food & household products).............................. 7,000 107,936
Kawasaki Heavy Industries
(construction & housing)................................. 19,050 38,433
Kawasaki Steel Corp.
(metals-steel)........................................... 34,815 62,712
Keihin Electric Express Railway (transportation-road &
rail).................................................... 18,000 52,139
Kinki Nippon Railway Co., Ltd. (transportation-road &
rail).................................................... 10,124 47,416
Kirin Brewery Co., Ltd.
(beverages & tobacco).................................... 14,154 133,601
Komatsu, Ltd.
(machinery & engineering)................................ 12,162 59,064
Kubota Corp.
(machinery & engineering)................................ 17,806 41,055
Kumagai Gumi Co., Ltd.
(construction & housing)................................. 29,812 21,480
Kurabo Industries
(textile & apparel)...................................... 15,000 19,563
Kyocera Corp. (electronic components & instruments)....... 2,490 121,643
Kyowa Hakko Kogyo
(health & personal care)................................. 4,234 16,779
Makita Corp.
(electrical & electronics)............................... 2,448 28,204
Marubeni Corp. (wholesale & international trade).......... 13,723 27,390
</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, 1998 (Unaudited)
COMMON STOCKS (Continued)
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
---------------------------------------------------------
JAPAN (Continued)
Marui Co., Ltd. (merchandising)........................... 378 $ 5,638
Matsushita Electric Industrial Co., Ltd. (appliances &
household durables)...................................... 19,247 309,261
Mitsubishi Chemical Corp.
(chemicals).............................................. 29,833 53,956
Mitsubishi Corp. (multi-industry)......................... 13,531 83,846
Mitsubishi Estate Co., Ltd.
(construction & housing)................................. 13,191 115,957
Mitsubishi Heavy Industries, Ltd. (machinery & engineer-
ing)..................................................... 27,059 102,164
Mitsubishi Oil Co., Ltd.
(energy sources) (a)..................................... 8,000 11,241
Mitsubishi Trust & Banking Corp. (financial services)..... 4,031 34,244
Mitsui & Co. (wholesale & international trade)............ 10,822 58,482
Mitsui Fudosan Co., Ltd.
(construction & housing)................................. 129 1,019
Mitsui Marine & Fire Insurance Co., Ltd. (insurance)...... 8,359 41,981
Mitsui O.S.K. Lines, Ltd.
(transportation-shipping)................................ 25,266 42,965
Mitsui Trust & Banking Co., Ltd.
(financial services)..................................... 8,000 18,850
Mitsukoshi, Ltd. (merchandising).......................... 14,758 42,429
NEC Corp.
(electrical & electronics)............................... 15,416 143,625
NGK Insulators, Ltd.
(industrial components).................................. 2,800 24,311
Niigata Engineering Co., Ltd.
(machinery & engineering) (a)............................ 11,000 7,371
Nikon Corp. (multi-industry).............................. 6,407 46,073
Nippon Express Co., Ltd.
(transportation-road & rail)............................. 14,446 77,442
Nippon Fire & Marine Insurance
(insurance).............................................. 9,686 39,572
Nippon Light Metal Co.
(metals-nonferrous)...................................... 18,577 21,417
Nippon Meat Packers, Inc.
(food & household products).............................. 3,357 41,096
Nippon Oil Co., Ltd.
(energy sources)......................................... 8,936 28,845
Nippon Steel Corp. (metals-steel)......................... 60,313 106,036
Nippon Telegraph & Telephone Corp. (telecommunications)... 103 853,478
Nissan Motor Co., Ltd.
(automobiles)............................................ 25,121 79,101
Nisshinbo Industries, Inc.
(textile & apparel)...................................... 7,363 29,445
Nissin Food Products Co., Ltd. (food & household prod-
ucts).................................................... 2,384 42,686
NKK Corp. (metals-steel).................................. 35,919 34,421
Nomura Securities Co., Ltd.
(financial services)..................................... 14,955 174,027
Obayashi Corp.
(construction & housing)................................. 10,799 45,753
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
---------------------------------------------------------
JAPAN (Continued)
Oji Paper Co., Ltd.
(forest products & paper)................................ 17,490 $ 76,118
Olympus Optical Co., Ltd. (recreation & other
consumer goods).......................................... 1,000 8,690
Orient Corp. (financial services)......................... 13,483 29,436
Osaka Gas Co., Ltd.
(utilities-electrical & gas)............................. 10,126 25,974
Penta-Ocean Construction (construction & housing)......... 10,000 23,057
Pioneer Electronic Corp. (appliances & household
durables)................................................ 3,078 58,772
Sakura Bank, Ltd. (banking)............................... 30,834 79,980
Sankyo Co., Ltd.
(health & personal care)................................. 4,654 105,967
Sanrio Co., Ltd.
(business & public services) (a)......................... 4,861 57,967
Sanyo Electric Co., Ltd. (appliances & household
durables)................................................ 22,684 68,649
Sapporo Breweries, Ltd.
(beverages & tobacco).................................... 5,692 21,778
Sato Kogyo Co., Ltd.
(construction & housing)................................. 12,000 9,857
Sharp Corp. (appliances & household durables)............. 10,279 83,249
Shimizu Corp.
(construction & housing)................................. 11,055 31,863
Shin-Etsu Chemical Co., Ltd. (chemicals).................. 4,830 83,525
Shionogi & Co., Ltd.
(health & personal care)................................. 5,396 31,104
Shiseido Co., Ltd.
(health & personal care)................................. 5,739 65,170
Shizuoka Bank, Ltd.
(banking)................................................ 6,494 69,720
Sony Corp. (appliances & household durables).............. 3,741 322,117
Sumitomo Bank, Ltd.
(banking) (c)............................................ 23,242 226,082
Sumitomo Chemical Co., Ltd. (chemicals)................... 23,403 72,173
Sumitomo Corp. (wholesale & international trade).......... 11,864 57,018
Sumitomo Electric Industries (industrial components)...... 8,982 90,801
Sumitomo Marine & Fire Insurance Co. (insurance).......... 8,126 45,436
Sumitomo Metal Industries, Ltd. (metals-steel)............ 34,343 55,182
Sumitomo Metal Mining Co. (metals-nonferrous)............. 11,298 45,831
Taisei Corp.
(construction & housing)................................. 14,713 31,804
Taisho Pharmaceutical Co., Ltd. (health & personal care).. 4,066 75,880
Taiyo Yuden Co., Ltd. (electronic components &
instruments)............................................. 2,127 22,621
</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)
Takashimaya Co., Ltd. (merchandising)..................... 6,574 $ 49,547
Takeda Chemical Industries, Ltd. (health & personal care). 9,318 247,746
Teikoku Oil Co., Ltd.
(energy sources)......................................... 5,646 17,452
Tobu Railway Co., Ltd. (transportation-road & rail)....... 16,000 42,310
Tohoku Electric Power Co., Inc. (utilities-electrical &
gas)..................................................... 1,168 17,210
Tokai Bank, Ltd. (banking)................................ 18,989 104,533
Tokio Marine & Fire Insurance Co. (insurance)............. 12,540 128,847
Tokyo Electric Power Co., Inc. (utilities-electrical &
gas)..................................................... 10,951 214,625
Tokyo Electron, Ltd. (electronic components &
instruments)............................................. 2,192 67,125
Tokyo Gas Co., Ltd.
(utilities-electrical & gas)............................. 12,091 26,921
Tokyo Steel Manufacturing Co., Ltd. (machinery &
engineering)............................................. 5,394 27,750
Tokyu Corp.
(transportation-road & rail)............................. 7,451 22,603
Toppan Printing Co., Ltd.
(business & public services)............................. 10,076 107,741
Tostem Corp. (building materials & components)............ 2,935 38,024
Toto, Ltd. (building materials & components).............. 5,467 33,207
Toyo Seikan Kaisha (miscellaneous-materials & components). 445 5,451
Toyoda Automatic Loom Works, Ltd. (machinery &
engineering)............................................. 3,000 52,960
Toyota Motor Corp.
(automobiles) (c)........................................ 32,152 831,685
Ube Industries, Ltd. (miscellaneous-materials &
components).............................................. 28,768 37,312
Uny Co., Ltd.
(food & household products).............................. 4,346 70,458
Yamaha Corp. (recreation & other consumer goods).......... 4,188 40,738
Yamanouchi Pharmaceutical Co., Ltd. (health & personal
care).................................................... 4,000 83,294
Yasuda Trust & Banking
(financial services)..................................... 15,000 14,050
-----------
11,759,828
-----------
MALAYSIA (0.5%)
Golden Hope Plantations Berhad (food & household
products)................................................ 39,056 35,783
Hong Leong Properties Berhad (construction & housing)..... 56,625 8,058
Kuala Lumpur Kepong Berhad (forest products & paper)...... 21,044 33,994
Leader Universal Holdings Berhad (electrical &
electronics)............................................. 30,000 4,485
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
----------------------------------------------------------
MALAYSIA (Continued)
Malayan Banking Berhad
(banking)................................................ 21,588 $ 21,756
Malaysia International Shipping Berhad Foreign Registered
(transportation-shipping)................................ 14,236 20,766
Malaysian Airline System Berhad (transportation-airlines). 856 283
Malaysian Resources Corp. Berhad (construction & housing)
(a)...................................................... 25,333 6,414
Metroplex Berhad
(construction & housing)................................. 10,434 1,673
Multi-Purpose Holdings Berhad (multi-industry)............ 27,000 6,704
Perlis Plantations Berhad
(multi-industry)......................................... 13,560 11,770
Resorts World Berhad
(leisure & tourism)...................................... 19,000 20,891
Sime Darby Berhad
(multi-industry)......................................... 464 320
Technology Resources Industries Berhad (multi-industry)... 25,409 17,461
Telekom Malaysia Berhad (telecommunications).............. 28,700 48,440
Tenaga Nasional Berhad
(utilities-electrical & gas)............................. 23,117 27,868
-----------
266,666
-----------
NETHERLANDS (5.6%)
ABN AMRO Holding N.V.
(banking)................................................ 14,276 334,053
Elsevier N.V.
(broadcasting & publishing).............................. 12,921 195,001
Hollandsche Beton Groep N.V.
(construction & housing)................................. 2,218 46,230
ING Groep N.V. (insurance)................................ 8,614 564,041
Koninklijke Hoogovens CVA N.V. (metals-steel)............. 1,081 46,764
Koninklijke KNP BT N.V.
(forest products & paper)................................ 2,839 73,270
Koninklijke Nedlloyd Groep N.V. (transportation-shipping). 1,165 23,653
Koninklijke Pakhoed N.V.
(transportation-shipping)................................ 921 29,882
Philips Electronics N.V. (appliances & household
durables)................................................ 3,369 283,204
Royal Dutch Petroleum Co.
(energy sources)......................................... 19,284 1,069,321
Stork N.V. (multi-industry)............................... 1,864 59,377
Unilever CVA N.V.
(food & household products).............................. 6,744 535,085
-----------
3,259,881
-----------
NEW ZEALAND (0.2%)
Carter Holt Harvey Ltd.
(forest products & paper)................................ 21,197 18,486
Fletcher Challenge Energy
(oil/gas-exploration).................................... 2,375 5,671
</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, 1998 (Unaudited)
COMMON STOCKS (Continued)
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
----------------------------------------------------------
NEW ZEALAND (Continued)
Fletcher Challenge Forest
(forest products & paper)................................ 20,290 $ 11,374
Telecom Corp. of New Zealand Ltd. (telecommunications).... 20,270 83,543
-----------
119,074
-----------
NORWAY (0.5%)
Christiania Bank Og Kreditkasse (banking)................. 23,553 98,527
Elkem ASA Class A
(metals-nonferrous)...................................... 4,033 48,353
Norsk Hydro ASA
(energy sources)......................................... 2,759 121,347
Orkla ASA Class A
(multi-industry)......................................... 2,000 46,523
-----------
314,750
-----------
PORTUGAL (0.6%)
Banco Comercial Portugues, S.A. Registered (banking)...... 2,100 59,628
Banco Espirito Santo e Comercial de Lisboa, S.A. Regis-
tered
(banking)................................................ 1,200 36,035
Banco Espirito Santo e Comercial de Lisboa, S.A. Regis-
tered Bonus Rights (banking) (a)......................... 1,200 7,471
Cimpor-Cementos de Portugal SGPS, S.A. (building materials
& components)............................................ 1,200 42,161
Electricidade de Portugal, S.A.
(utilities-electrical & gas)............................. 4,875 113,324
Portugal Telecom, S.A. Registered (telecommunications).... 2,050 108,648
-----------
367,267
-----------
SINGAPORE (0.5%)
City Developments, Ltd.
(real estate)............................................ 18,348 51,261
Development Bank of Singapore, Ltd. Foreign Registered
(banking)................................................ 6,213 34,383
First Capital Corp., Ltd.
(multi-industry)......................................... 30,000 10,209
Singapore Airlines, Ltd. Foreign Registered
(transportation-airlines)................................ 10,273 48,036
Singapore Technologies Industrial Corp. (multi-industry).. 20,000 14,798
Singapore Telecommunications, Ltd. (telecommunications)... 83,258 118,276
United Overseas Bank, Ltd. Foreign Registered (banking)... 9,898 30,758
-----------
307,721
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
----------------------------------------------------------
SPAIN (3.3%)
Banco de Bilbao Vizcaya, S.A. Registered (banking)........ 8,932 $ 459,174
Banco de Central Hispanoamericano, S.A. (banking)......... 2,200 69,266
Banco de Santander, S.A.
(banking)................................................ 8,530 218,697
Empresa Nacional de Celulosas, S.A. (forest products & pa-
per)..................................................... 1,466 25,855
Endesa, S.A.
(utilities-electrical & gas)............................. 6,867 150,492
Gas Natural SDG, S.A.
(utilities-electrical & gas)............................. 1,846 133,606
Iberdrola, S.A.
(utilities-electrical & gas)............................. 10,558 171,725
Repsol, S.A. (energy sources)............................. 3,527 194,677
Tabacalera, S.A.
(beverages & tobacco).................................... 1,400 28,715
Telefonica de Espana, S.A.
(telecommunications)..................................... 9,742 451,177
-----------
1,903,384
-----------
SWEDEN (3.2%)
ABB AB Series B
(utilities-electrical & gas)............................. 6,380 88,801
Astra AB Series A
(health & personal care)................................. 17,922 366,308
ForeningsSparbanken AB Series A (banking)................. 2,600 78,245
Hennes & Mauritz AB Series B
(merchandising).......................................... 1,600 102,120
Mandmus AB (real estate).................................. 130 815
Svenska Cellulosa AB Series B
(forest products & paper)................................ 8,150 211,033
Svenska Handelsbanken Series A (banking).................. 1,300 60,314
Swedish Match AB
(beverages & tobacco).................................... 19,483 64,740
Telefonaktiebolaget LM Ericsson Series B
(telecommunications)..................................... 22,984 671,512
Volvo AB Series B (automobiles)........................... 7,525 224,100
-----------
1,867,988
-----------
SWITZERLAND (7.8%)
ABB AG Bearer
(utilities-electrical & gas)............................. 80 118,142
Adecco, S.A.
(business & public services)............................. 160 72,151
Credit Suisse Group Registered
(financial services)..................................... 2,100 467,263
Holderbank Financiere Glarus AG Bearer (building materials
& components)............................................ 60 76,344
Holderbank Financiere Glarus AG Registered (building mate-
rials & components)...................................... 140 35,212
</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)
Jelmoli Holdings, Ltd. Bearer
(merchandising).......................................... 10 $ 12,691
Nestle S.A. Registered
(food & household products).............................. 325 695,505
Novartis S.A. Bearer
(health & personal care)................................. 20 33,307
Novartis S.A. Registered
(health & personal care)................................. 495 823,688
Roche Holdings AG Bearer
(health & personal care)................................. 10 148,173
Roche Holdings AG Genusscheine (health & personal care)... 58 569,557
Schindler Holding AG Participating Certificates
(miscellaneous-materials & components)................... 10 15,229
Schindler Holding AG Registered (miscellaneous-materials &
components).............................................. 10 15,493
Societe Generale de Surveillance Holding S.A. Bearer
(business & public services)............................. 15 25,425
Societe Generale de Surveillance Holding S.A. Registered
(business & public services)............................. 70 24,090
Sulzer AG Registered
(industrial components).................................. 50 39,458
Swatch Group AG (The) Registered (recreation & other con-
sumer goods)............................................. 300 50,039
Swiss Reinsurance Registered
(insurance).............................................. 130 328,769
UBS AG Registered (banking)............................... 1,875 697,043
Zurich Vericherungs Gesellschaft Registered (insurance)... 440 280,800
-----------
4,528,379
-----------
UNITED KINGDOM (21.6%)
Abbey National PLC (banking).............................. 13,800 245,910
Associated British Foods PLC
(food & household products).............................. 8,159 76,779
BAA PLC (transportation-airlines)......................... 6,100 66,003
Barclays PLC (banking).................................... 14,990 432,937
Bass PLC (beverages & tobacco)............................ 7,412 138,502
B.A.T Industries PLC
(beverages & tobacco).................................... 28,804 287,637
BG PLC (energy sources)................................... 34,222 198,134
Boots Co. PLC (merchandising)............................. 12,773 212,478
British Aerospace PLC (aerospace & military technology)... 29,600 227,183
British Petroleum Co. PLC
(energy sources)......................................... 58,600 853,081
British Sky Broadcasting Group PLC (broadcasting & pub-
lishing)................................................. 12,463 89,780
British Steel PLC (metals-steel).......................... 52,800 116,730
British Telecommunications PLC (telecommunications)....... 58,411 718,759
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
---------------------------------------------------------
UNITED KINGDOM (Continued)
BTR PLC (multi-industry).................................. 34,990 $ 99,394
Cable & Wireless PLC
(telecommunications)..................................... 20,928 254,729
Centrica PLC (energy sources) (a)......................... 34,134 57,806
Coats Viyella PLC
(textile & apparel)...................................... 15,111 18,658
Courtaulds PLC (chemicals)................................ 7,263 53,987
De La Rue PLC
(forest products & paper)................................ 1,910 9,545
Diageo PLC
(beverages & tobacco).................................... 33,363 397,180
Elementis Holdings PLC (miscellaneous materials &
components).............................................. 8,693 22,338
General Electric Co. PLC (electrical & electronics)....... 31,816 274,184
Glaxo Wellcome PLC
(health & personal care)................................. 31,266 941,097
Granada Group PLC
(leisure & tourism)...................................... 8,820 162,466
Great Universal Stores PLC (The) (merchandising).......... 15,300 201,799
Guardian Royal Exchange PLC
(insurance).............................................. 19,044 112,878
Halifax PLC (financial services).......................... 14,400 187,286
Hanson PLC (multi-industry)............................... 9,656 58,604
HSBC Holdings PLC (HK par)
(financial services) (i)................................. 14,346 348,513
HSBC Holdings PLC ((Pounds) par)
(financial services) (i)................................. 7,100 180,183
Imperial Chemical Industries PLC (chemicals).............. 7,746 124,848
Kingfisher PLC (merchandising)............................ 13,900 225,195
Ladbroke Group PLC
(leisure & tourism)...................................... 18,213 100,510
LASMO PLC (energy sources)................................ 21,000 84,267
Legal & General Group PLC
(insurance).............................................. 20,900 222,830
Lloyds TSB Group PLC (banking)............................ 50,067 699,201
Marks & Spencer PLC
(merchandising).......................................... 34,406 314,013
National Grid Group PLC
(utilities-electrical & gas)............................. 18,314 123,526
National Power PLC
(utilities-electrical & gas)............................. 4,257 40,060
Next PLC (merchandising).................................. 6,649 57,245
Prudential Corp. PLC (insurance).......................... 18,366 242,086
Racal Electronic PLC
(multi-industry)......................................... 4,570 25,811
Rank Group PLC
(leisure & tourism)...................................... 12,294 66,922
Rentokil Initial PLC
(industrial components).................................. 16,500 118,793
Reuters Group PLC
(broadcasting & publishing).............................. 16,400 187,710
Rio Tinto PLC Registered
(metals-nonferrous)...................................... 12,231 137,852
</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, 1998 (Unaudited)
COMMON STOCKS (Continued) SHORT-TERM INVESTMENT (0.9%)
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
----------------------------------------------------------
UNITED KINGDOM (Continued)
Rolls-Royce PLC (aerospace & military technology)..... 20,600 $ 85,154
Royal & Sun Alliance Insurance Group PLC (insurance).. 18,266 186,366
Royal Bank of Scotland Group PLC (banking)............ 6,929 120,119
Sainsbury (J.) PLC (merchandising).................... 22,313 198,059
Siebe PLC (industrial components)..................... 2,900 58,015
SmithKline Beecham PLC
(health & personal care)............................. 46,204 562,381
Tarmac PLC (building materials & components).......... 946 1,701
Tesco PLC (merchandising)............................. 30,169 294,220
Thames Water PLC
(utilities-electrical & gas)......................... 3,200 58,411
Unilever PLC
(food & household products).......................... 33,900 363,978
United Biscuits (Holdings) PLC (food & household prod-
ucts)................................................ 11,183 44,874
Vodafone Group PLC
(multi-industry)..................................... 27,061 343,602
Williams PLC (building materials & components)........ 16,312 105,464
Wilson Connolly Holdings PLC (construction & housing). 1,820 4,160
Zeneca Group PLC (chemicals).......................... 7,953 341,692
-----------
12,583,625
-----------
Total Common Stocks
(Cost $43,760,465)................................... 56,292,221 (f)
-----------
PREFERRED STOCKS (0.9%)
AUSTRALIA (0.2%)
News Corp., Ltd.
A$ 0.075
(broadcasting &
publishing) (d)(i)................................... 21,600 153,019
-----------
GERMANY (0.7%)
RWE AG
DM 1.60
(utilities-electrical & gas) (d)(i).................. 2,754 118,397
SAP AG
DM 2.85
(data processing &
reproduction) (d)(i)................................. 400 271,906
-----------
390,303
-----------
Total Preferred Stocks
(Cost $311,058)...................................... 543,322
-----------
WARRANTS (0.0%) (b)
HONG KONG (0.0%) (b)
Hong Kong & China Gas Co., Ltd. Call Warrants
Strike price HK 12.27
Expire 9/30/99
(utilities-electrical & gas) (a)(i).................. 1,797 123
-----------
Total Warrants........................................ 123
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
--------------------------------------------------------------
U.S. GOVERNMENT (0.9%)
United States Treasury Bill 4.86%, due 8/13/98
(c).............................................. $500,000 $ 497,097
-----------
Total Short-Term Investment (Cost $497,097)....... 497,097
-----------
Total Investments
(Cost $44,568,620) (g)........................... 98.2% 57,332,763 (h)
Cash and Other Assets,
Less Liabilities................................. 1.8 1,050,100
-------- -----------
Net Assets........................................ 100.0% $58,382,863
======== ===========
FUTURES
CONTRACTS (0.0%) (b)
<CAPTION>
UNREALIZED
CONTRACTS APPRECIATION/
LONG (DEPRECIATION) (E)
--------------------------------------------------------------
<S> <C> <C>
JAPAN (0.0%) (b)
Japanese Yen, TOPIX Index, September 1998......... 3 $ 7,097
-----------
UNITED KINGDOM (0.0%) (b)
Pound Sterling, FTSE 100 Index,
September 1998................................... 3 (10,439)
-----------
Total Futures Contracts
(Settlement Value $559,584)...................... $ (3,342)
===========
</TABLE>
- --------
(a) Non-income producing security.
(b) Less than one tenth of a percent.
(c) Segregated or partially segregated as collateral for futures contracts.
(d) Dividend rate shown represents the most recent annual payment.
(e) Represents the difference between the value of the contracts at the time
they were opened and the value at June 30, 1998.
(f) The combined market value of common stocks and settlement value of Index
futures contracts represents 97.4% of net assets.
(g) The cost for Federal income tax purposes is $45,137,592.
(h) At June 30, 1998 net unrealized appreciation for securities was
$12,195,171, 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 $20,469,606 and aggregate
gross unrealized depreciation for all investments on which there was an
excess of cost over market value of $8,274,435.
(i) A$--Australian Dollar
DM--Deutsche Mark
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.
14
<PAGE>
MAINSTAY
INSTITUTIONAL FUNDS INC.
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........................... $ 312,337 0.5%
Appliances & Household Durables........................... 1,176,015 2.0
Automobiles............................................... 2,454,130 4.2
Banking................................................... 8,383,116 14.4
Beverages & Tobacco....................................... 1,319,955 2.3
Broadcasting & Publishing................................. 927,098 1.6
Building Materials & Components........................... 584,153 1.0
Business & Public Services................................ 1,027,165 1.8
Chemicals................................................. 1,664,825 2.9
Construction & Housing.................................... 705,939 1.2
Data Processing & Reproduction............................ 817,080 1.4
Electrical & Electronics.................................. 1,470,948 2.5
Electronic Components & Instruments....................... 704,682 1.2
Energy Equipment & Service................................ 25,674 0.0#
Energy Sources............................................ 3,633,851 6.2
Financial Services........................................ 1,629,968 2.8
Food & Household Products................................. 2,652,396 4.5
Forest Products & Paper................................... 459,676 0.8
Health & Personal Care.................................... 5,094,985 8.7
Industrial Components..................................... 915,471 1.6
Insurance................................................. 4,245,000 7.3
Leisure & Tourism......................................... 404,070 0.7
Machinery & Engineering................................... 781,168 1.3
Merchandising............................................. 2,311,388 4.0
Metals-Nonferrous......................................... 416,346 0.7
Metals-Steel.............................................. 484,555 0.8
Miscellaneous-Materials & Components...................... 436,698 0.7
Multi-Industry............................................ 1,666,936 2.9
Oil/Gas-Exploration....................................... 308,577 0.5
Real Estate............................................... 52,076 0.1
Recreation & Other Consumer Goods......................... 534,735 0.9
Telecommunications........................................ 5,604,410 9.6
Textile & Apparel......................................... 67,665 0.1
Transportation-Airlines................................... 213,528 0.4
Transportation-Road & Rail................................ 439,222 0.8
Transportation-Shipping................................... 349,624 0.6
U.S. Government........................................... 497,097 0.9
Utilities-Electrical & Gas................................ 2,417,314 4.1
Wholesale & International Trade........................... 142,890 0.2
----------- -----
57,332,763 98.2
Cash and Other Assets, Less Liabilities................... 1,050,100 1.8
----------- -----
Net Assets................................................ $58,382,863 100.0%
=========== =====
</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 STATEMENT OF OPERATIONS
As of June 30, 1998 (Unaudited) For the six months ended June 30,
1998 (Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investment in securities, at value
(identified cost $44,568,620)................................... $57,332,763
Cash denominated in foreign currencies (identified cost
$16,833)........................................................ 18,355
Receivables:
Investment securities sold....................................... 658,345
Fund shares sold................................................. 385,000
Dividends and interest........................................... 364,618
-----------
Total assets................................................... 58,759,081
-----------
LIABILITIES:
Payables:
Investment securities purchased.................................. 233,209
Custodian........................................................ 74,212
MainStay Management.............................................. 27,099
Fund shares redeemed............................................. 3,022
Transfer agent................................................... 2,255
Accrued expenses................................................. 33,079
Variation margin payable on futures
contracts....................................................... 3,342
-----------
Total liabilities.............................................. 376,218
-----------
Net assets....................................................... $58,382,863
===========
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.001 per share)
1 billion shares authorized
Institutional Class.............................................. $ 4,894
Institutional Service Class...................................... 44
Additional paid-in capital....................................... 42,064,564
Accumulated distribution in excess of net investment income...... (14,646)
Accumulated undistributed net realized gain on investments....... 3,587,876
Accumulated net realized loss on foreign currency transactions .. (5,497)
Net unrealized appreciation on investments....................... 12,760,801
Net unrealized depreciation on translation of other assets and
liabilities in foreign currencies............................... (15,173)
-----------
Net assets....................................................... $58,382,863
===========
Institutional Class
Net assets applicable to outstanding shares...................... $57,859,953
===========
Shares of capital stock outstanding.............................. 4,894,308
===========
Net asset value per share outstanding............................ $ 11.82
===========
Institutional Service Class
Net assets applicable to outstanding shares...................... $ 522,910
===========
Shares of capital stock outstanding.............................. 44,459
===========
Net asset value per share outstanding............................ $ 11.76
===========
</TABLE>
<TABLE>
<S> <C>
INVESTMENT INCOME:
Income:
Dividends (a).................................................... $ 723,045
Interest......................................................... 24,071
----------
Total income................................................... 747,116
----------
Expenses:
Management....................................................... 276,703
Portfolio pricing................................................ 34,748
Professional..................................................... 21,385
Transfer agent................................................... 13,848
Custodian........................................................ 12,875
Registration..................................................... 12,074
Shareholder communication........................................ 6,398
Directors........................................................ 823
Service.......................................................... 609
Miscellaneous.................................................... 2,729
----------
Total expenses before
reimbursement................................................. 382,192
Expense reimbursement from Manager............................... (107,794)
----------
Net expenses................................................... 274,398
----------
Net investment income............................................ 472,718
----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN
CURRENCY TRANSACTIONS:
Net realized gain (loss) from:
Security transactions............................................ 3,493,075
Futures transactions............................................. 137,996
Foreign currency transactions.................................... (5,497)
----------
Net realized gain on investments and foreign currency
transactions.................................................... 3,625,574
----------
Net change in unrealized appreciation (depreciation) on
investments:
Security transactions............................................ 4,382,368
Futures transactions............................................. 13,836
Translation of other assets and liabilities in foreign
currencies...................................................... (1,422)
----------
Net unrealized gain on investments and foreign currency
transactions.................................................... 4,394,782
----------
Net realized and unrealized gain on investments and foreign
currency transactions........................................... 8,020,356
----------
Net increase in net assets resulting from operations............. $8,493,074
==========
</TABLE>
- --------
(a) Dividends recorded net of foreign withholding taxes of $101,726.
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, 1998 (Unaudited) and the year ended December
31, 1997
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income............................. $ 472,718 $ 885,580
Net realized gain on investments.................. 3,631,071 13,669,000
Net realized loss on foreign currency
transactions..................................... (5,497) (12,176)
Net change in unrealized appreciation on
investments...................................... 4,396,204 (11,618,701)
Net change in unrealized depreciation on
translation of other assets and liabilities in
foreign currencies............................... (1,422) (7,995)
------------ ------------
Net increase in net assets resulting from
operations....................................... 8,493,074 2,915,708
------------ ------------
Dividends and distributions to shareholders:
From net investment income:
Institutional Class.............................. -- (878,664)
Institutional Service Class...................... -- (6,916)
From net realized gain on investments and foreign
currency transactions:
Institutional Class.............................. -- (13,337,599)
Institutional Service Class...................... -- (106,298)
In excess of net investment income:
Institutional Class.............................. -- (353,710)
Institutional Service Class...................... -- (1,817)
------------ ------------
Total dividends and distributions to
shareholders................................... -- (14,685,004)
------------ ------------
Capital share transactions:
Net proceeds from sale of shares:
Institutional Class.............................. 12,555,947 10,993,310
Institutional Service Class...................... 48,567 140,022
Net asset value of shares issued to shareholders
in reinvestment of dividends and distributions:
Institutional Class.............................. -- 14,564,746
Institutional Service Class...................... -- 115,016
------------ ------------
12,604,514 25,813,094
Cost of shares redeemed:
Institutional Class.............................. (18,299,752) (47,761,439)
Institutional Service Class...................... (31,080) (91,780)
------------ ------------
Decrease in net assets derived from capital
share transactions.............................. (5,726,318) (22,040,125)
------------ ------------
Net increase (decrease) in net assets............ 2,766,756 (33,809,421)
NET ASSETS:
Beginning of period............................... 55,616,107 89,425,528
------------ ------------
End of period..................................... $ 58,382,863 $ 55,616,107
============ ============
Accumulated distribution in excess of net
investment income at end of period............... $ (14,646) $ (487,364)
============ ============
</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 SERVICE
CLASS CLASS
------------- -------------
SIX MONTHS ENDED
JUNE 30, 1998*
----------------------------
<S> <C> <C>
Net asset value at beginning of period......... $ 10.24 $ 10.20
------- -------
Net investment income.......................... 0.09 0.07
Net realized and unrealized gain (loss) on
investments................................... 1.49 1.49
Net realized and unrealized gain (loss) on
foreign currency transactions................. (0.00)(a) (0.00)(a)
------- -------
Total from investment operations............... 1.58 1.56
------- -------
Less dividends and distributions:
From net investment income..................... -- --
From net realized gain on investments and
foreign currency transactions................. -- --
In excess of net investment income............. -- --
------- -------
Total dividends and distributions.............. -- --
------- -------
Net asset value at end of period............... $ 11.82 $ 11.76
======= =======
Total investment return (b).................... 15.43% 15.29%
Ratios (to average net assets)/Supplemental
Data:
Net investment income.......................... 1.63%+ 1.38%+
Net expenses................................... 0.94%+ 1.19%+
Expenses (before reimbursement)................ 1.31%+ 1.56%+
Portfolio turnover rate........................ 11% 11%
Net assets at end of period (in 000's)......... $57,860 $ 523
</TABLE>
- --------
* Unaudited.
+ Annualized.
(a) Less than one cent per share.
(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.
18
<PAGE>
MAINSTAY
INSTITUTIONAL FUNDS INC.
<TABLE>
<CAPTION>
INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL
INSTITUTIONAL SERVICE INSTITUTIONAL SERVICE INSTITUTIONAL SERVICE INSTITUTIONAL
CLASS CLASS CLASS CLASS CLASS CLASS CLASS
- ------------- ------------- ------------- ------------- ------------- ------------- ----------------
YEAR ENDED DECEMBER 31
- --------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993
- ---------------------------- ---------------------------- --------------------------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 14.00 $ 13.97 $ 13.56 $ 13.51 $ 12.63 $ 12.63 $ 12.03 $ 9.60
------- ------- ------- ------- ------- ------- ------- -------
0.22 0.19 0.16 0.12 0.13 0.14 0.10 0.06
(0.28) (0.29) 0.71 0.73 1.11 1.05 0.70 2.71
(0.00)(a) (0.00)(a) (0.00)(a) (0.00)(a) (0.10) (0.10) 0.03 (0.01)
------- ------- ------- ------- ------- ------- ------- -------
(0.06) (0.10) 0.87 0.85 1.14 1.09 0.83 2.76
------- ------- ------- ------- ------- ------- ------- -------
(0.22) (0.19) (0.16) (0.12) (0.04) (0.04) (0.09) (0.14)
(3.39) (3.39) (0.25) (0.25) (0.14) (0.14) (0.14) (0.19)
(0.09) (0.09) (0.02) (0.02) (0.03) (0.03) -- --
------- ------- ------- ------- ------- ------- ------- -------
(3.70) (3.67) (0.43) (0.39) (0.21) (0.21) (0.23) (0.33)
------- ------- ------- ------- ------- ------- ------- -------
$ 10.24 $ 10.20 $ 14.00 $ 13.97 $ 13.56 $ 13.51 $ 12.63 $ 12.03
======= ======= ======= ======= ======= ======= ======= =======
0.40% 0.08% 6.45% 6.37% 9.03% 8.63% 6.83% 28.97%
1.04% 0.79% 1.11% 0.86% 1.01% 0.76% 0.57% 0.53%
0.94% 1.19% 0.94% 1.19% 1.03% 1.28% 1.26% 1.27%
1.26% 1.51% 1.23% 1.48% 1.24% 1.49% 1.26% 1.27%
6% 6% 4% 4% 6% 6% 7% 16%
$55,177 $ 439 $89,029 $ 396 $80,087 $ 257 $72,265 $53,714
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
19
<PAGE>
GROWTH EQUITY FUND
================================================================================
MARKET RECAP FOR THE 6-MONTH PERIOD ENDED 6/30/98
================================================================================
o A robust economy, with low interest rates, modest inflation, and low
unemployment moved stocks higher in the first six months of 1998.
o Weaknesses in Asian economies caused a flight to high-quality, liquid
companies that many investors felt might reduce risk in the event of an
economic downturn.
o Merger and acquisition activity was high, with several large transactions
that stimulated interest in the stock market.
o The S&P 500*# advanced to record levels in June.
================================================================================
FUND RECAP FOR THE 6- AND 12-MONTH PERIODS ENDED 6/30/98
================================================================================
o The Mainstay Institutional Growth Equity Fund returned 31.46% and 31.21%
for Institutional Class shares and Service Class shares, respectively, for
the one-year period ended 6/30/98.
o Both share classes outperformed the S&P 500, which returned 17.71% during
the six-month reporting period.
o The Fund benefited from individual security selection among consumer retail
stocks, and a reduction in its technology and energy holdings.
o Both share classes outperformed the average Lipper+ capital appreciation
fund, which returned 12.86% for the six months ended 6/30/98.
With U.S. gross domestic product increasing more than many investors anticipated
in the first half of 1998, the stock market enjoyed robust returns. Low interest
rates, benign inflation, low unemployment, and a rallying bond market all
contributed to positive investor psychology during the reporting period.
A number of factors combined to focus investor attention on large-capitalization
growth stocks. Continuing difficulties in Asian markets spread to China, Latin
America, and Russia, causing a flight to quality, which attracted many investors
to domestic companies and highly liquid securities. Asian difficulties also
caused problems for several technology companies. Declining oil, gold, and
copper prices caused weakness among energy and commodity-related issues and
moved many investors from undervalued securities into large, dependable growth
companies.
Strong merger and acquisition activity stimulated interest in the stock market,
with several large deals in the financial sector. Problems with an earlier
merger, however, had a negative impact on Cendant Corp., which was among the
worst-performing stocks in the S&P 500 during the second quarter of 1998.
- --------------------------------------------------------------------------------
Inflation An increase in the cost of goods and services over time. As prices
rise, the purchasing power of the dollar declines.
Flight to quality When investors in general move to improve the quality or
liquidity of the securities they own, because of economic, industry, or market
concerns that suggest lower quality securities or those that are less liquid are
likely to be more vulnerable to negative market events.
- --------------------------------------------------------------------------------
================================================================================
* The "S&P 500(R)" is a registered trademark of The McGraw-Hill Companies,
Inc. The S&P 500(R) 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.
20
<PAGE>
================================================================================
Given this context, how did the MainStay Institutional Growth Equity Fund
perform in the six months ended 6/30/98?
The MainStay Institutional Growth Equity Fund returned 19.39% and 19.22% for
Institutional Class shares and Service Class shares, respectively, for the six
months ended 6/30/98. Both share classes outperformed the S&P 500 Index, which
returned 17.71% over the same period. Both share classes also outperformed the
average Lipper capital appreciation fund, which returned 12.86% for the six
months ended 6/30/98.
Why was the Fund able to outperform its peers?
The Fund benefited from strong security selection, strategic sales, and strong
growth among many of its core holdings. The Fund's domestic retail stocks
provided excellent performance. We reduced the Fund's technology holdings,
particularly among commodity-type products. At the same time, the Fund benefited
from strength in companies with proprietary products, such as Microsoft and
certain pharmaceuticals. Also, our decision to reduce holdings in the oil
services sector helped us reduce the impact of declining oil prices on the Fund.
What were some of the Fund's significant purchases during the reporting period?
The Fund purchased EMC Corp., a corporate data storage provider with a
consistent growth record. The Fund sold some 3Com stock to make the purchase, a
result of our decision to reduce commodity-based technology companies and
increase the Fund's exposure to companies that offer more proprietary products
and services. EMC rose 63% in the first half of 1998 and had a positive impact
on the Fund's performance.
The Fund also purchased Pfizer, which had a slightly negative impact on
performance as some investors sold their positions to take profits in the stock.
Nevertheless, we kept the security in the portfolio because of Pfizer's
accelerated earnings growth, broad product line, and direct-to-the-consumer
marketing strategy.
Another large purchase for the Fund was Disney, which we quickly sold when the
stock began to decline, with a slightly negative impact on performance. A more
positive holding was Colgate, which the Fund bought in late April. The company
benefited from its global scope, cost cutting, and track record of generating
dependable earnings.
Were there any significant sales during the reporting period?
The Fund sold Adaptec, which had a dramatically negative change in fundamentals
due to Asian difficulties and a slowdown in earnings. The stock declined 61%
during the first half of 1998. The Fund also sold 3Com, which we mentioned
earlier. The company faced Asian difficulties and suffered from inventory
problems in its U.S. Robotics unit, which we believe may have a negative impact
on earnings. The Fund also sold Compaq when our fundamental reasons for owning
it disappeared.
- --------------------------------------------------------------------------------
Mergers and acquisitions A merger is a combination of two companies, an
acquisition is the purchase of a company, division, or business unit. Companies
that engage in mergers and acquisitions often pay shareholders a premium, or an
amount over the current share price, to complete the transaction quickly and
under favorable terms.
Earnings per share The portion of a company's profit allocated to each share of
outstanding common stock.
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.
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.
Cyclicals Securities that tend to rise quickly with economic upturns and fall
quickly when the economy slows. Noncyclical industries, such as food, insurance,
and pharmaceuticals, are likely to have more consistent performance regardless
of economic changes.
- --------------------------------------------------------------------------------
21
<PAGE>
================================================================================
As interest rates declined, mortgage refinancing activity increased, which had a
negative impact on mortgage insurer MGIC. Given the stock's declining growth
profile, we decided to sell the Fund's position in that security late in the
second quarter of 1998 to take profits earned over the last several years. The
Fund also took profits in Mattel, a stock it has owned and sold over the years.
We saw the fundamentals weakening when sales of their Barbie Doll declined, Toys
"R" Us cut back on its inventory, and the company's Tyco toy division provided
lower-than-anticipated earnings estimates. The sale had a positive impact on the
Fund's performance.
Did you say you reduced holdings in the energy services sector?
Yes. We decided that because of declining oil prices and reduced demand from
Asia, we would sell the Fund's positions in Diamond Offshore and ENSCO. The
general effect of holding energy services companies was negative, so we viewed
the sales as positive for the portfolio. However, the Fund continued to hold
Halliburton, which is an exploration and drilling company, and reviewed the
company's prospects during the reporting period.
Which stocks were the best performers?
Lucent Techologies was up 108.6% in the first half of the year and had a
substantial positive impact on the Fund's performance, as it won
telecommunications contracts and continued to have solid earnings per share
growth and an attractive cost structure.
Tyco International is a conglomerate with holdings in fire retardation, security
systems, fiber optic cable, and health care. Tyco bought ADT Limited and
Sherwood Davis, a medical device manufacturer, and advanced nearly 40%, with a
large and positive impact on the Fund's performance.
Schering-Plough is a premier pharmaceutical company. Its Claritin product for
allergy sufferers was an excellent performer with $1.7 billion in sales and
rapid growth in sales and earnings. Once again, the portfolio benefited strongly
as the stock rose 48.3%.
Were there other names that performed well for the Fund?
Yes, there were several. Kohl's is a family apparel retailer that benefited as
many investors focused on purely domestic issues. The stock was up 52% with a
substantial positive impact on the Fund. Staples and Home Depot were other
retailers that fit a similar profile and also had a positive impact on
performance.
In the financial sector, the Fund had good success with SunAmerica, a retirement
product provider. The company sells fixed and variable annuities which appeal to
baby boomers. As the baby boom generation nears retirement age, their fixed and
variable annuity purchases have helped contribute to SunAmerica's rapid earnings
per share growth during the reporting period. The company had faced some
questions last year about accounting practices, these issues have since been
resolved and the stock rose 35% during the reporting period.
Finally, WorldCom rose 60% during the first half of the year following the first
quarter announcement that the company would purchase MCI, a telecommunications,
long-distance, local, and internet provider.
Were there names that detracted from the Fund's performance?
Cendant was a stock the Fund owned that had major problems in April. The company
was formed in the fourth quarter of 1997 from the merger of HFS and CUC
International. When certain of CUC's accounting practices came into question in
April, the stock price was cut in half. The business units appear to have robust
trends and are in sectors that we believe to be vibrant, such as housing and
travel--so at the end of June, the Fund continued to hold the stock. But the
overall impact of the news was negative for the Fund's performance.
Adaptec and MGIC declined during the reporting period, although we sold the
Fund's holdings in MGIC at a profit from the original purchase price. Eli Lilly
also underperformed expectations, when the benefits of an osteoporosis drug
proved less dramatic than some investors anticipated.
What do you believe were the best decisions you made for the Fund during the
first half of 1998?
Sticking to our disciplines and proactively reviewing every stock in the
portfolio. We decided to increase the Fund's weighting in the securities we felt
most confident about, within our diversification guidelines. That led us to
increase the Fund's holdings in companies
22
<PAGE>
================================================================================
such as Lucent Technologies, which were strongly positive.
We also believe our decision to reduce technology and energy stocks helped the
Fund. Sticking with the Fund's heavy exposure to domestic retailers and
financial firms helped performance in a low interest-rate environment that
stimulated consumer spending and loan activity.
Were there any decisions you made that you now regret?
Of course, in hindsight, we wish we hadn't held the Fund's position in Cendant
in April, but we could never have foreseen the difficulties the company faced.
We would have liked for the Fund to have had zero energy exposure, but we're
glad we sold the stocks we did.
Which sectors did the Fund emphasize during the first half of the year?
We're bottom-up investors who select stocks on their individual merits. As a
result of this approach, the Fund was overweighted in communications. Although
this sector underperformed as a whole, the Fund's communications holdings
returned more than 60% in the first half of the year. We were also heavy in
consumer cyclicals, such as retailers and restaurants, automotive stocks, and
housing, which--with the exception of Cendant--were generally positive for the
Fund's performance.
Being overweighted in technology stocks was beneficial, primarily because the
Fund invested in companies with proprietary products. Over the reporting period,
we decreased the Fund's exposure in light of the impact Asian difficulties had
on technology production and the declining interest in commodity-type products
such as memory chips and adapter cards.
The Fund was also overweighted in financial stocks, although the companies it
held underperformed the market in general. Several were tied up in merger
transactions and may perform well when the deals are completed.
Were there sectors where the Fund was underweighted?
During the reporting period, the Fund was underweighted in basic materials and
capital goods, which was beneficial for performance. The Fund was also
underweighted in consumer staples, since many of the companies didn't meet our
growth criteria. While this sector underperformed in general, the Fund's
holdings in consumer staples outperformed the market.
Our decision to be underweighted in energy, utilities, and transportation stocks
generally had a positive impact on the Fund's performance.
What is your outlook for the future?
We believe the domestic economy is slowing down and may continue to do so as we
begin to feel the full impact of Asian difficulties. That could result in lower
corporate profits, which may have a generally positive effect on companies with
dependable earnings growth, such as proprietary technology companies,
pharmaceuticals, retailers, and financial firms. Of course, it could also have a
negative effect if the impact of the Asian difficulties is severe.
We anticipate low inflation and possibly even lower interest rates. Whatever the
future brings, we will continue to apply our research disciplines as the Fund
seeks long-term growth of capital, with dividend income, if any, as an
incidental consideration.
Edmund Spelman
Rudolph Carryl
Portfolio Managers
================================================================================
Past performance is no guarantee of future results.
[GRAPHIC]
23
<PAGE>
$10,000 INVESTED IN MAINSTAY INSTITUTIONAL
GROWTH EQUITY FUND VS S&P 500 INDEX
INSTITUTIONAL CLASS SHARES
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
================================================================================
<TABLE>
<CAPTION>
Growth Equity S & P 500
<S> <C> <C>
1/2/91 10,000 10,000
91 16,700 13,047
92 17,640 14,040
93 19,333 15,456
94 18,901 15,660
95 26,062 21,546
96 31,696 26,493
97 39,535 35,331
6/30/98 47,200 41,588
</TABLE>
$10,000 INVESTED IN MAINSTAY INSTITUTIONAL
GROWTH EQUITY FUND VS S&P 500 INDEX
SERVICE CLASS SHARES
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
================================================================================
<TABLE>
<CAPTION>
Growth Equity S & P 500
<S> <C> <C>
1/2/91 10,000 10,000
91 16,700 13,047
92 17,640 14,040
93 19,333 15,456
94 18,901 15,660
95 25,990 21,546
96 31,529 26,493
97 39,245 35,331
6/30/98 46,786 41,588
</TABLE>
o 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, 1998 as of June 30, 1998
- ----------------------------------------------------------------------------------------------------------------
Year to Date One Year Five Year Since Inception
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Growth Equity Fund Institutional Class 19.39% 31.46% 21.72% 22.98%
Growth Equity Fund Service Class+ 19.22% 31.21% 21.51% 22.84%
Average Lipper Growth Fund 15.10% 25.38% 18.91% 18.79%
S&P 500 Stock Index 17.71% 30.15% 23.08% 20.93%
</TABLE>
YEAR-BY-YEAR PERFORMANCE
- --------------------------------------------------------------------------------
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
Institutional Class Shares
<TABLE>
<CAPTION>
Total Return
Year end %*
-------- ------------
<S> <C>
1991 67.00
1992 5.63
1993 9.59
1994 -2.23
1995 37.88
1996 21.62
1997 24.73
1998 (as of 6/30/98) 19.39
</TABLE>
================================================================================
PORTFOLIO COMPOSITION
(% of net assets as of June 30, 1998)
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Common Stocks 97.23%
Cash, Equivalents & Other Assets 2.77%++
</TABLE>
================================================================================
TOP 10 HOLDINGS
(% of net assets as of June 30, 1998)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
1. Tyco International Ltd. 3.56%
2. Lucent Technologies, Inc. 3.54%
3. SunAmerica Inc. 3.17%
4. Schering-Plough Corp. 3.09%
5. Travelers Group Inc. 3.00%
6. Cisco Systems, Inc. 2.80%
7. Medtronic, Inc. 2.68%
8. Microsoft Corp. 2.53%
9. Lilly (Eli) and Co. 2.49%
10. American International Group, Inc. 2.37%
</TABLE>
================================================================================
TOP 5 INDUSTRY
Holdings
(% of net assets as of June 30, 1998)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
1. Retail 14.16%
2. Financial Services 11.65%
3. Drugs 9.97%
4. Computer Software 7.84%
5. Medical Equipment 6.39%
</TABLE>
================================================================================
* 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% on an annualized basis of the average daily net asset value of the
Service Class shares.
+ 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.
24
<PAGE>
MAINSTAY
INSTITUTIONAL FUNDS INC.
GROWTH EQUITY FUND
PORTFOLIO OF INVESTMENTS
June 30, 1998 (Unaudited)
COMMON STOCKS (97.2%)+
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
-----------------------------------------------------------
BANKS (5.4%)
NationsBank Corp. .................................... 175,000 $ 13,387,500
Norwest Corp. ........................................ 306,100 11,440,487
SouthTrust Corp. ..................................... 145,500 6,329,250
Summit Bancorp........................................ 157,000 7,457,500
Washington Mutual Inc. ............................... 166,200 7,219,312
------------
45,834,049
------------
BROADCASTING (1.6%)
Chancellor Media Corp. (a)............................ 129,600 6,435,456
Clear Channel Communications, Inc. (a)................ 65,000 7,093,125
------------
13,528,581
------------
BUILDINGS (0.7%)
Oakwood Homes Corp. .................................. 210,000 6,300,000
------------
COMPUTER SOFTWARE (7.8%)
Computer Associates International, Inc................ 291,600 16,202,025
Compuware Corp. (a)................................... 387,300 19,800,712
Microsoft Corp. (a)................................... 200,000 21,675,000
Oracle Corp. (a)...................................... 383,625 9,422,789
------------
67,100,526
------------
COMPUTERS & OFFICE EQUIPMENT (4.4%)
EMC Corp. (a)......................................... 333,000 14,922,562
Hewlett-Packard Co. .................................. 115,800 6,933,525
Sun Microsystems (a).................................. 371,000 16,115,312
------------
37,971,399
------------
CONSUMER DURABLES (1.8%)
Harley-Davidson, Inc. ................................ 398,000 15,422,500
------------
CONSUMER SERVICES (3.0%)
Cendant Corp. (a)..................................... 706,910 14,756,746
Service Corp. International........................... 256,000 10,976,000
------------
25,732,746
------------
COSMETICS (2.3%)
Colgate-Palmolive Co. ................................ 59,300 5,218,400
Gillette Co. ......................................... 250,000 14,171,875
------------
19,390,275
------------
DRUGS (10.0%)
Elan Corp. PLC ADR (a)(b)............................. 203,000 13,055,437
Lilly (Eli) & Co. .................................... 323,000 21,338,187
Merck & Co., Inc. .................................... 123,000 16,451,250
Pfizer Inc. .......................................... 74,000 8,042,875
Schering-Plough Corp. ................................ 288,500 26,433,813
------------
85,321,562
------------
</TABLE>
- --------
+ Percentages indicated are based on Fund net assets.
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
-----------------------------------------------------------
ENERGY (0.5%)
British Petroleum Co., PLC ADR (b).................... 51,484 $ 4,543,463
------------
FINANCIAL SERVICES (11.7%)
Associates First Capital Corp. Class A................ 156,300 12,015,563
Equifax Inc. ......................................... 241,000 8,751,313
Fannie Mae............................................ 197,600 12,004,200
Household International, Inc. ........................ 270,000 13,432,500
MGIC Investment Corp. ................................ 11,760 671,055
SunAmerica Inc. ...................................... 472,500 27,139,219
Travelers Group Inc. ................................. 423,197 25,656,318
------------
99,670,168
------------
HEALTH CARE (5.2%)
Cardinal Health Inc. ................................. 117,000 10,968,750
HEALTHSOUTH Corp. (a)................................. 472,200 12,601,838
Tenet Healthcare Corp. (a)............................ 329,775 10,305,469
United Healthcare Corp. .............................. 165,500 10,509,250
------------
44,385,307
------------
INDUSTRIAL (5.1%)
Illinois Tool Works Inc. ............................. 198,600 13,244,138
Tyco International Ltd. .............................. 483,000 30,429,000
------------
43,673,138
------------
INSURANCE (3.9%)
American International Group, Inc. ................... 138,825 20,268,450
Conseco, Inc. ........................................ 284,100 13,281,675
------------
33,550,125
------------
LEISURE (0.4%)
Mirage Resorts Inc. (a)............................... 167,400 3,567,713
------------
MATERIALS/PROCESSING (1.0%)
Monsanto Co. ......................................... 160,900 8,990,287
------------
MEDICAL EQUIPMENT (6.4%)
Guidant Corp. ........................................ 215,400 15,360,713
Johnson & Johnson..................................... 222,504 16,409,670
Medtronic, Inc. ...................................... 359,600 22,924,500
------------
54,694,883
------------
OIL SERVICES (0.4%)
Halliburton Co. ...................................... 68,000 3,030,250
------------
POLLUTION CONTROL (1.6%)
USA Waste Services Inc. (a)........................... 285,300 14,086,688
------------
RETAIL (14.2%)
Bed Bath & Beyond, Inc. (a)........................... 204,700 10,606,019
CVS Corp. ............................................ 338,400 13,176,450
Dollar General Corp. ................................. 273,437 10,817,851
</TABLE>
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
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1998 (Unaudited)
COMMON STOCKS (Continued)
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
-----------------------------------------------------------
RETAIL (Continued)
Home Depot, Inc. (The)................................ 229,450 $ 19,058,691
Kohl's Corp. (a)...................................... 380,000 19,712,500
Kroger Co. (a)........................................ 278,000 11,919,250
Safeway Inc. (a)...................................... 488,200 19,863,638
Staples, Inc. (a)..................................... 554,000 16,031,375
------------
121,185,774
------------
TECHNOLOGY (4.0%)
Cisco Systems, Inc. (a)............................... 259,950 23,931,647
Intel Corp. .......................................... 134,200 9,947,575
------------
33,879,222
------------
TELECOMMUNICATION EQUIPMENT (3.5%)
Lucent Technologies Inc. ............................. 363,900 30,271,931
------------
TELECOMMUNICATION SERVICES (2.3%)
WorldCom, Inc. (a).................................... 409,088 19,815,200
------------
Total Common Stocks (Cost $412,912,985)............... 831,945,787
------------
</TABLE>
SHORT-TERM
INVESTMENT (2.4%)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
------------------------------------------------------------
COMMERCIAL PAPER (2.4%)
Prudential Funding Corp. 6.30%, due 7/1/98........ $20,565,000 $ 20,565,000
------------
Total Short-Term Investment (Cost $20,565,000).... 20,565,000
------------
Total Investments (Cost $433,477,985) (c)......... 99.6% 852,510,787 (d)
Cash and Other Assets,
Less Liabilities................................. 0.4 3,101,872
----------- ------------
Net Assets........................................ 100.0% $855,612,659
=========== ============
</TABLE>
- --------
(a) Non-income producing security.
(b) ADR-American Depository Receipt.
(c) The cost stated also represents the aggregate cost for Federal income tax
purposes.
(d) At June 30, 1998 net unrealized appreciation was $419,032,802 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 $421,315,833 and aggregate gross unrealized
depreciation for all investments on which there was an excess of cost over
market value of $2,283,031.
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 ASSETS AND LIABILITIES STATEMENT OF OPERATIONS
As of June 30, 1998 (Unaudited) For the six months ended June 30,
1998 (Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investment in securities, at value
(identified cost $433,477,985)................................. $852,510,787
Cash............................................................ 2,728
Receivables:
Investment securities sold...................................... 26,422,870
Dividends....................................................... 283,455
Fund shares sold................................................ 10,708
------------
Total assets.................................................. 879,230,548
------------
LIABILITIES:
Payables:
Investment securities purchased................................. 21,755,506
Fund shares redeemed............................................ 1,173,137
Mainstay Management............................................. 577,541
Transfer agent.................................................. 30,711
Custodian....................................................... 29,040
Accrued expenses................................................ 51,954
------------
Total liabilities............................................. 23,617,889
------------
Net assets...................................................... $855,612,659
============
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.001 per share) 1 billion shares
authorized
Institutional Class............................................. $ 27,764
Institutional Service Class..................................... 426
Additional paid-in capital...................................... 409,360,323
Accumulated net investment loss................................. (1,319,317)
Accumulated undistributed net realized gain on investments...... 28,510,661
Net unrealized appreciation on investments...................... 419,032,802
------------
Net assets...................................................... $855,612,659
============
Institutional Class
Net assets applicable to outstanding shares..................... $842,788,099
============
Shares of capital stock outstanding............................. 27,764,211
============
Net asset value per share outstanding........................... $ 30.36
============
Institutional Service Class
Net assets applicable to outstanding shares..................... $ 12,824,560
============
Shares of capital stock outstanding............................. 426,216
============
Net asset value per share outstanding........................... $ 30.09
============
</TABLE>
<TABLE>
<S> <C>
INVESTMENT INCOME:
Income:
Dividends (a).................................................... $ 1,941,583
Interest......................................................... 424,670
------------
Total income................................................... 2,366,253
------------
Expenses:
Management....................................................... 3,330,910
Transfer agent................................................... 139,218
Shareholder communication........................................ 64,426
Professional..................................................... 54,489
Custodian........................................................ 33,745
Registration..................................................... 20,425
Service.......................................................... 14,762
Directors........................................................ 9,262
Miscellaneous.................................................... 18,333
------------
Total expenses................................................. 3,685,570
------------
Net investment loss.............................................. (1,319,317)
------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments................................. 19,667,073
Net change in unrealized appreciation on investments............. 120,303,044
------------
Net realized and unrealized gain on investments.................. 139,970,117
------------
Net increase in net assets resulting from operations............. $138,650,800
============
</TABLE>
- --------
(a) Dividends recorded net of foreign withholding taxes of $3,079.
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
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 1998 (Unaudited) and the year ended December
31, 1997
<TABLE>
<CAPTION>
1998 1997
------------ -------------
<S> <C> <C>
INCREASE IN NET ASSETS:
Operations:
Net investment loss.............................. $ (1,319,317) $ (2,035,692)
Net realized gain on investments................. 19,667,073 58,052,272
Net change in unrealized appreciation on
investments..................................... 120,303,044 84,067,993
------------ -------------
Net increase in net assets resulting from
operations...................................... 138,650,800 140,084,573
------------ -------------
Distributions to shareholders:
From net realized gain on investments:
Institutional Class............................. -- (49,601,396)
Institutional Service Class..................... -- (761,884)
------------ -------------
Total distributions to shareholders............ -- (50,363,280)
------------ -------------
Capital share transactions:
Net proceeds from sale of shares:
Institutional Class............................. 65,195,172 191,569,771
Institutional Service Class..................... 1,401,101 3,838,239
Net asset value of shares issued to shareholders
in reinvestment of distributions:
Institutional Class............................. -- 49,596,146
Institutional Service Class..................... -- 691,022
------------ -------------
66,596,273 245,695,178
Cost of shares redeemed:
Institutional Class............................. (59,049,169) (170,865,746)
Institutional Service Class..................... (1,323,288) (1,866,670)
------------ -------------
Increase in net assets derived from capital
share transactions............................. 6,223,816 72,962,762
------------ -------------
Net increase in net assets...................... 144,874,616 162,684,055
NET ASSETS:
Beginning of period.............................. 710,738,043 548,053,988
------------ -------------
End of period ................................... $855,612,659 $ 710,738,043
============ =============
Accumulated net investment loss at end of period. $ (1,319,317) --
============ =============
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
28
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK)
29
<PAGE>
GROWTH EQUITY FUND
FINANCIAL HIGHLIGHTS
(Selected per share data and ratios)
<TABLE>
<CAPTION>
INSTITUTIONAL
INSTITUTIONAL SERVICE
CLASS CLASS
------------- -------------
SIX MONTHS ENDED
JUNE 30, 1998*
-----------------------------
<S> <C> <C>
Net asset value at beginning of period........... $ 25.43 $ 25.24
-------- --------
Net investment income (loss)..................... (0.05)(a) (0.08)(a)
Net realized and unrealized gain (loss) on
investments..................................... 4.98 4.93
-------- --------
Total from investment operations................. 4.93 4.85
-------- --------
Less dividends and distributions:
From net investment income....................... -- --
From net realized gain on investments............ -- --
In excess of net investment income............... -- --
In excess of net realized gain on investments.... -- --
-------- --------
Total dividends and distributions................ -- --
-------- --------
Net asset value at end of period................. $ 30.36 $ 30.09
======== ========
Total investment return (c)...................... 19.39% 19.22%
Ratios (to average net assets)/Supplemental Data:
Net investment income (loss).................... (0.33%)+ (0.58%)+
Net expenses.................................... 0.94% + 1.19% +
Expenses (before reimbursement)................. 0.94% + 1.19% +
Portfolio turnover rate.......................... 11% 11%
Net assets at end of period (in 000's)........... $842,788 $ 12,825
</TABLE>
- --------
* Unaudited.
+ Annualized.
(a) Per share data based on average shares outstanding during the period.
(b) Less than one cent per share.
(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.
30
<PAGE>
MAINSTAY
INSTITUTIONAL FUNDS INC.
<TABLE>
<CAPTION>
INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL
INSTITUTIONAL SERVICE INSTITUTIONAL SERVICE INSTITUTIONAL SERVICE
CLASS CLASS CLASS CLASS CLASS CLASS INSTITUTIONAL CLASS
- ------------- ------------- ------------- ------------- ------------- ------------- -----------------------
YEAR ENDED DECEMBER 31
- -----------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993
- ----------------------------- ----------------------------- ----------------------------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 21.99 $ 21.88 $ 18.84 $ 18.80 $ 13.68 $ 13.68 $ 14.40 $ 14.71
-------- -------- -------- -------- -------- -------- --------- ---------
(0.08)(a) (0.14)(a) (0.06)(a) (0.11)(a) 0.02 (0.01) 0.01 (0.01)
5.45 5.43 4.14 4.12 5.16 5.14 (0.33) 1.41
-------- -------- -------- -------- -------- -------- --------- ---------
5.37 5.29 4.08 4.01 5.18 5.13 (0.32) 1.40
-------- -------- -------- -------- -------- -------- --------- ---------
-- -- -- -- (0.02) (0.01) (0.01) --
(1.93) (1.93) (0.93) (0.93) -- -- (0.39) (1.68)
-- -- -- -- (0.00)(b) (0.00)(b) -- --
-- -- -- -- (0.00)(b) (0.00)(b) (0.00)(b) (0.03)
-------- -------- -------- -------- -------- -------- --------- ---------
(1.93) (1.93) (0.93) (0.93) (0.02) (0.01) (0.40) (1.71)
-------- -------- -------- -------- -------- -------- --------- ---------
$ 25.43 $ 25.24 $ 21.99 $ 21.88 $ 18.84 $ 18.80 $ 13.68 $ 14.40
======== ======== ======== ======== ======== ======== ========= =========
24.73% 24.50% 21.62% 21.29% 37.88% 37.50% (2.23%) 9.59%
(0.31%) (0.56%) (0.27%) (0.52%) 0.12% (0.13%) 0.04% (0.07%)
0.93% 1.18% 0.92% 1.17% 0.93% 1.18% 0.92% 0.90%
0.93% 1.18% 0.92% 1.17% 0.93% 1.18% 0.92% 0.93%
36% 36% 22% 22% 33% 33% 37% 81%
$700,070 $ 10,668 $541,212 $ 6,842 $412,129 $ 2,729 $ 284,388 $ 258,751
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
31
<PAGE>
INDEXED EQUITY FUND
================================================================================
================================================================================
MARKET RECAP FOR THE 6-MONTH PERIOD ENDED 6/30/98
================================================================================
o The S&P 500* returned 17.71% in the first half of 1998, well above the
stock market's annual historical average of 10.7%.+
o The U.S. economy continued to expand with moderate growth, increasing gross
domestic product, low inflation, low unemployment, and consumer confidence.
o The Federal Reserve Board refrained from raising interest rates and the
30-year Treasury bond traded at its lowest yield since the bond was first
offered over 20 years ago.
o Investors appeared to be adopting more defensive positions as evidenced by
widening credit spreads and a willingness to pay a premium for more liquid
issues.
================================================================================
FUND RECAP FOR THE 6- AND 12-MONTH PERIODS ENDED 6/30/98
================================================================================
o For the one-year period ended 6/30/98, the MainStay Institutional Indexed
Equity Fund returned 29.67% and 29.31% for Institutional Class and Service
Class shares, respectively.
o The Fund slightly underperformed the S&P 500 Index and exceeded the 11.75%
return of the Lipper++general equity average for the six months ended
6/30/98.
o The large-capitalization stocks of which the Fund is composed retained
their leadership in the first half of the year, surpassing their mid- and
small-capitalization counterparts by an extraordinary margin of 9.1% and
11.6% respectively (based on the performance of the S&P 400 MidCap (S) and
S&P 600 SmallCap|| Indexes).
o The Institutional Class shares outperformed and the Service Class shares
underperformed the average Lipper S&P 500 Index objective fund, which
returned 17.37% for the six months ended 6/30/98.
A number of factors influenced stock market returns over the first half of 1998.
Primary among these was the persistence of strong economic growth and low
inflation in the United States. First quarter reports indicated that Gross
Domestic Product (GDP) was increasing at a rate in excess of 5% a year, well
above what most economists
- --------------------------------------------------------------------------------
Inflation An increase in the cost of goods and services over time. As prices
rise, the purchasing power of the dollar declines.
Gross Domestic Product The market value of the goods and services produced by
labor and property.
- --------------------------------------------------------------------------------
================================================================================
* The "S&P 500(R)" is a registered trademark of The McGraw-Hill Companies,
Inc. and has been licensed for use by Monitor Capital Advisors, Inc. The
product is not sponsored, endorsed, sold or promoted by Standard &
Poor's(R) and Standard & Poor's(R) makes no representation regarding the
advisability of purchasing the product. The S&P 500(R) 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.
++ 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.
(S) S&P 400 MidCap Index is an index consisting of 400 domestic stocks chosen
for market size, liquidity, and industry group representation. It is a
market-value weighted index that represents approximately 10% of the
aggregate market value of U.S. domestic companies.
|| S&P 600 SmallCap Index is a capitalization-weighted index that measures the
performance of selected U.S. stocks with a small market capitalization.
32
<PAGE>
================================================================================
consider sustainable. At the same time, consumer confidence was strong, capital
expenditures continued unabated, and unemployment fell to its lowest level in 20
years.
In the past, the Federal Reserve Board has often reacted to such rapid growth by
raising short-term interest rates--the rates at which corporations borrow money
to fund the growth of their business. In so doing, the Federal Reserve Board
would hope to head off inflation by slowing the economy before price pressure
has an opportunity to mount. In the first half of 1998, however, there were few
signs of inflationary pressure. Consumer and producer prices remained in check,
wage growth was less than that of the economy, and the price of raw materials
declined. Since there seemed to be little or no threat of inflation and there
were concerns that a hike in rates might strengthen the dollar and compound
Asia's economic problems, the Federal Reserve Board has refrained from raising
rates.
The impact of the global economy on U.S. stock prices is less easily
discernible. During the first six months of 1998, Continental Europe enjoyed
double digit gains--over 40% in many cases, both in local currency and U.S.
dollar terms. Asia on the other hand has languished amid currency devaluations,
economic turmoil, and political upheaval. For companies that export goods to the
region, maintain facilities there, or compete with Asia's now less expensive
products, this is certainly a negative development and may become more so in the
second half of 1998. But for manufacturers that import raw materials and for the
consumers of these goods, it has been a windfall.
The S&P 500 is a broad index, and its performance was affected by a variety of
other factors. In this overall market environment, however, the S&P 500 climbed
17.71% in the first six months of 1998, a rate well above historic norms for an
entire year.+
Given this context, how did the MainStay Institutional Indexed Equity Fund
perform in the first six months of 1998?
For the six months ended 6/30/98, the MainStay Institutional Indexed Equity Fund
returned 17.56% and 17.34% for Institutional Class and Service Class shares,
respectively. Institutional Class shares outperformed and Service Class shares
slightly underperformed the average Lipper S&P 500 Index objective fund, which
returned 17.37% for the first half of 1998. Both share classes outperformed the
Lipper general equity average, which returned 11.75%.
What was the primary reason the Fund underperformed the Index?
The Fund performed precisely as anticipated, closely mirroring the S&P 500
Index, but trailing by a slight margin due to expenses. The Index itself
represents a hypothetical investment and does not face the day-to-day expenses
associated with mutual fund investing. In addition, the Fund cannot fully
replicate the Index at all times, since it must make ongoing accommodations for
new investments and redemptions.
During the reporting period, which industries contributed most positively to the
Fund's performance?
Makers of communications equipment (computer networking) posted the highest
industry-group return of 61.8%. With a growing domestic economy, high
employment, rising personal income, and strong consumer confidence during the
first half of 1998, companies producing goods and services also generated strong
performance. Apparel retailers were up 55.8%, with retail in general rising
50.7%, automobiles were up 50.9%, personal loans rose 37.3%, and restaurants
advanced 36.5%.
Which of the Fund's individual stocks showed the strongest performance?
Capital One Financial generated the single highest gain for the period, rising
129.2%. Other strong performers were Dell Computer, up 121.0%; Apple Computer,
up 118.6%; Lucent Technologies, up 108.3%; and Unisys, which rose 103.6% during
the first six months of 1998.
- --------------------------------------------------------------------------------
Devaluation A lowering of the value of a country's currency relative to gold
and/or the currencies of other nations. Devaluation can also result from a rise
in the value of other currencies relative to the currency of a particular
country.
- --------------------------------------------------------------------------------
33
<PAGE>
================================================================================
Which industries provided the worst performance during the reporting period?
Oversupply problems and shrinking global demand proved costly for oil and gas
companies in the first half of 1998. Those specializing in drilling declined
35.6%, well equipment and services stocks dropped 11.7%, and exploration &
production companies fell 9.7%. At the same time, declining commodity prices
drove mining companies in the metals-miscellaneous sector of the S&P 500 down
9.9%. Other industries also had disappointing results. Tobacco lost 13.9%,
specialty chemicals dropped 13.0%, and railroads were down 11.1%.
Which individual stocks recorded major losses in the first half of the year?
With a decline of 49.2%, National Semiconductor was the worst-performing stock
in the Index during the reporting period. Semiconductor manufacturers suffered
from declining demand and writeoffs on Asian operations. IKON Office Solutions
fell 48.2% when it preannounced a quarterly earnings shortfall and Cendant Corp.
dropped 39.3% when accounting practices at its CUC International subsidiary came
into question. Rounding out the five worst-performing issues were Rowan
Companies, down 36.3%, and Helmerich and Payne, which lost 34.4% in the first
half of 1998.
What is your outlook for the second half of 1998 and beyond?
Securities markets are inherently unpredictable, particularly in the short term.
But taking a longer-term perspective, the bull market we have enjoyed the last
fifteen years is without precedent. By most traditional yardsticks,
(price-to-earnings ratios, price to book values, dividend yield, capitalization
to GDP), current stock valuations are extremely high in historical terms. We
believe it may be unlikely that stock returns in the coming decade will bear
much resemblance to those investors have enjoyed in recent years.
The past six months have even provided some indications that the good times
could be coming to an end sooner than we might wish. The credit spread between
Treasury bonds and comparable-duration investment-grade debt widened noticeably,
suggesting a flight to quality. As a result, large companies which are highly
liquid and easy to sell in the event of a downturn have had stronger performance
than smaller, less liquid stocks.
The Fund will seek to track the total return performance of the S&P 500, with
dividends reinvested, whether the market moves up or down.
James A. Mehling, CFA
Portfolio Manager
- --------------------------------------------------------------------------------
Supply and demand/ Oversupply In the stock market, an oversupply of a product or
service can reduce demand and lower stock prices. When demand increases relative
to supply, stock prices may recover.
Price-to-earnings ratio Price of a stock relative to its earnings per share.
Price to book value Price of a stock relative to its book value per share.
Dividend yield Annual percentage return earned by an investor on a common or
preferred stock.
Credit spread The yield differential between debt securities of issuers with
varying credit ratings. Credit spread may refer to the extra yield investors
demand for holding investment-grade corporate bonds rather than the debt of the
United States Treasury (considered to be free of default risk).
Flight to quality When investors in general move to improve the quality or
liquidity of the securities they own, because of economic, industry, or market
concerns that suggest lower-quality securities or those that are less liquid are
likely to be more vulnerable to negative market events.
- --------------------------------------------------------------------------------
================================================================================
Past performance is no guarantee of future results.
[GRAPHIC]
34
<PAGE>
$10,000 INVESTED IN MAINSTAY INSTITUTIONAL
INDEXED EQUITY FUND VS S&P 500 INDEX
INSTITUTIONAL CLASS SHARES
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
================================================================================
<TABLE>
<CAPTION>
Year Indexed Equity S&P 500
---- -------------- -------
<S> <C> <C>
1/2/91 10,000 10,000
91 12,980 13,047
92 13,913 14,040
93 15,222 15,456
94 15,359 15,660
95 21,024 21,546
96 25,769 26,493
97 34,241 35,331
6/30/98 40,254 41,588
</TABLE>
$10,000 INVESTED IN MAINSTAY INSTITUTIONAL
INDEXED EQUITY FUND VS S&P 500 INDEX
SERVICE CLASS SHARES
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
================================================================================
<TABLE>
<CAPTION>
Year Indexed Equity S&P 500
---- -------------- -------
<S> <C> <C>
1/2/91 10,000 10,000
91 12,980 13,047
92 13,913 14,040
93 15,222 15,456
94 15,359 15,660
95 20,995 21,546
96 25,659 26,493
97 34,024 35,331
6/30/98 39,924 41,588
</TABLE>
o 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, 1998 as of June 30, 1998
- ------------------------------------------------------------------------------------------------------------------------
Year to Date One Year Five Year Since Inception
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Indexed Equity Fund Institutional Class 17.56% 29.67% 22.59% 20.40%
Indexed Equity Fund Service Class+ 17.34% 29.31% 22.39% 20.27%
Average Lipper S&P 500 Index Fund 17.37% 29.39% 22.55% 20.39%
S&P 500 Stock Index 17.71% 30.15% 23.08% 20.93%
</TABLE>
YEAR-BY-YEAR PERFORMANCE
- --------------------------------------------------------------------------------
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
Institutional Class Shares
<TABLE>
<CAPTION>
Total Return
Year end %*
-------- ------------
<S> <C>
1991 29.80
1992 7.19
1993 9.41
1994 0.90
1995 36.88
1996 22.57
1997 32.88
1998 (as of 6/30/98) 17.56
</TABLE>
================================================================================
PORTFOLIO COMPOSITION
(% of net assets as of June 30, 1998)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Common Stocks 99.69%
Cash, Equivalents & Other Assets 0.31%++
</TABLE>
================================================================================
TOP 10 HOLDINGS
(% of net assets as of June 30, 1998)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
1. General Electric Co. 3.29%
2. Microsoft Corp. 2.97%
3. Coca-Cola Co. (The) 2.34%
4. Exxon Corp. 1.94%
5. Merck & Co., Inc. 1.78%
6. Pfizer Inc. 1.58%
7. Wal-Mart Stores, Inc. 1.51%
8. Intel Corp. 1.40%
9. Procter & Gamble Co. (The) 1.36%
10. Royal Dutch Petroleum Co. 1.30%
</TABLE>
================================================================================
TOP 5 INDUSTRY
Holdings
(% of net assets as of June 30, 1998)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
1. Oil-Integrated International 5.31%
2. Drugs 5.17%
3. Computer Software & Services 4.57%
4. Health Care-Diversified 4.51%
5. Major Regional Banks 4.36%
</TABLE>
================================================================================
* 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% on an annualized basis of the average daily net asset value of the
Service Class shares.
+ 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.
35
<PAGE>
INDEXED EQUITY FUND
PORTFOLIO OF INVESTMENTS
June 30, 1998 (Unaudited)
COMMON STOCKS (99.7%)+
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
-----------------------------------------------------------
AEROSPACE/DEFENSE (1.4%)
Boeing Co. (The)........................................ 147,933 $ 6,592,264
General Dynamics Corp. ................................. 18,509 860,669
Lockheed Martin Corp. .................................. 28,528 3,020,402
Northrop Grumman Corp. ................................. 9,804 1,011,038
Raytheon Co. Class B.................................... 49,639 2,934,905
Rockwell International Corp. ........................... 28,752 1,381,893
United Technologies Corp. .............................. 33,645 3,112,163
--------------
18,913,334
--------------
AIRLINES (0.4%)
AMR Corp. (a)........................................... 26,743 2,226,354
Delta Air Lines, Inc. .................................. 11,022 1,424,594
Southwest Airlines Co. ................................. 32,681 968,175
US Airways Group, Inc. (a).............................. 14,788 1,171,949
--------------
5,791,072
--------------
ALUMINUM (0.2%)
Alcan Aluminum Ltd. .................................... 33,273 919,167
Aluminum Co. of America................................. 24,684 1,627,601
Reynolds Metals Co. .................................... 10,497 587,176
--------------
3,133,944
--------------
AUTO PARTS & EQUIPMENT (0.2%)
Cooper Tire & Rubber Co. ............................... 11,537 237,951
Echlin Inc. ............................................ 9,343 458,391
Genuine Parts Co. ...................................... 26,229 906,540
Goodyear Tire & Rubber Co. (The)........................ 23,053 1,485,477
--------------
3,088,359
--------------
AUTOMOBILES (1.7%)
Chrysler Corp. ......................................... 94,456 5,324,957
Ford Motor Co. ......................................... 177,610 10,478,990
General Motors Corp. ................................... 97,893 6,540,476
--------------
22,344,423
--------------
BEVERAGES--ALCOHOLIC (0.5%)
Anheuser-Busch Cos., Inc. .............................. 71,148 3,357,296
Brown-Forman Corp. Class B.............................. 10,065 646,676
Coors (Adolph) Co. Class B.............................. 5,307 180,438
Seagram Co. Ltd. (The).................................. 50,736 2,077,005
--------------
6,261,415
--------------
BEVERAGES--SOFT DRINKS (3.0%)
Coca-Cola Co. (The) (d)................................. 361,545 30,912,098
PepsiCo, Inc. .......................................... 218,257 8,989,460
--------------
39,901,558
--------------
BROADCAST/MEDIA (1.1%)
CBS Corp. (a)........................................... 105,154 3,338,640
Clear Channel
Communications, Inc. (a)............................... 18,084 1,973,417
</TABLE>
- --------
+ Percentages indicated are based on Fund net assets.
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
-----------------------------------------------------------
BROADCAST/MEDIA (Continued)
Comcast Corp. Special Class A........................... 54,038 $ 2,193,608
MediaOne Group Inc. (a)................................. 89,148 3,916,940
Tele-Communications, Inc. Series A TCI Group (a)........ 74,262 2,854,445
--------------
14,277,050
--------------
BUILDING MATERIALS (0.2%)
Masco Corp. ............................................ 24,924 1,507,902
Owens Corning........................................... 7,850 320,378
Sherwin-Williams Co. (The).............................. 25,319 838,692
--------------
2,666,972
--------------
CHEMICALS (2.0%)
Air Products & Chemicals, Inc. ......................... 34,323 1,372,920
Dow Chemical Co. (The).................................. 32,928 3,183,726
Du Pont (E.I.) De Nemours & Co. ........................ 165,224 12,329,841
Eastman Chemical Co. ................................... 11,535 718,053
Goodrich (B.F.) Co. (The)............................... 10,681 530,044
Hercules Inc. .......................................... 13,894 571,391
Monsanto Co. ........................................... 87,723 4,901,523
Praxair, Inc. .......................................... 23,111 1,081,884
Rohm & Haas Co. ........................................ 8,867 921,614
Union Carbide Corp. .................................... 19,952 1,064,938
--------------
26,675,934
--------------
CHEMICALS--DIVERSIFIED (0.3%)
Avery Dennison Corp. ................................... 17,160 922,350
Engelhard Corp. ........................................ 21,118 427,639
FMC Corp. (a)........................................... 5,049 344,279
PPG Industries, Inc. ................................... 25,925 1,803,408
--------------
3,497,676
--------------
CHEMICALS--SPECIALTY (0.1%)
Grace (W.R.) & Co. (a).................................. 11,156 190,349
Great Lakes Chemical Corp. ............................. 8,608 339,478
Morton International, Inc. ............................. 19,089 477,225
Nalco Chemical Co. ..................................... 9,699 340,677
Sigma-Aldrich Corp. .................................... 14,695 516,162
--------------
1,863,891
--------------
COMMUNICATION--EQUIPMENT MANUFACTURERS (3.2%)
Andrew Corp. (a)........................................ 12,926 233,476
Ascend Communications, Inc. (a)......................... 28,203 1,397,811
Bay Networks, Inc. (a).................................. 32,475 1,047,319
Cabletron Systems, Inc. (a)............................. 23,194 311,669
Cisco Systems, Inc. (a)................................. 149,640 13,776,233
DSC Communications Corp. (a)............................ 17,349 520,470
General Instrument Corp. (a)............................ 21,963 597,119
Lucent Technologies Inc. ............................... 192,038 15,975,161
Northern Telecom Ltd. .................................. 76,225 4,325,769
Scientific-Atlanta, Inc. ............................... 11,556 293,234
Tellabs, Inc. (a)....................................... 26,671 1,910,310
3Com Corp. (a).......................................... 52,031 1,596,701
--------------
41,985,272
--------------
</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>
---------------------------------------------------------
COMPUTER SOFTWARE & SERVICES (4.6%)
Adobe Systems Inc. ................................... 9,746 $ 413,596
Autodesk, Inc. ....................................... 6,817 263,307
Automatic Data Processing, Inc. ...................... 44,112 3,214,662
Ceridian Corp. (a).................................... 10,621 623,984
Computer Associates International, Inc. .............. 79,929 4,441,055
Computer Sciences Corp. (a)........................... 22,831 1,461,184
Equifax Inc. ......................................... 21,687 787,509
First Data Corp. ..................................... 65,343 2,176,738
HBO & Co. ............................................ 62,948 2,218,917
Microsoft Corp. (a)(d)................................ 360,796 39,101,267
Novell, Inc. (a)...................................... 51,452 656,013
Oracle Corp. (a)...................................... 142,484 3,499,763
Parametric Technology Corp. (a)....................... 39,569 1,073,309
Shared Medical Systems Corp. ......................... 3,808 279,650
--------------
60,210,954
--------------
COMPUTER SYSTEMS (3.8%)
Apple Computer, Inc. (a).............................. 19,493 559,205
Compaq Computer Corp. ................................ 241,929 6,864,735
Data General Corp. (a)................................ 7,112 106,236
Dell Computer Corp. (a)............................... 94,329 8,754,911
EMC Corp. (a)......................................... 72,846 3,264,411
Gateway 2000, Inc. (a)................................ 22,709 1,149,643
Hewlett-Packard Co. .................................. 151,652 9,080,164
International Business Machines Corp. ................ 138,008 15,845,044
Seagate Technology, Inc. (a).......................... 35,600 847,725
Silicon Graphics, Inc. (a)............................ 27,617 334,856
Sun Microsystems, Inc. (a)............................ 55,459 2,409,000
Unisys Corp. (a)...................................... 36,800 1,039,600
--------------
50,255,530
--------------
CONGLOMERATES (0.2%)
Tenneco Inc. ......................................... 24,799 943,912
Textron Inc. ......................................... 23,942 1,716,342
--------------
2,660,254
--------------
CONTAINERS--METAL & GLASS (0.2%)
Ball Corp. ........................................... 4,414 177,388
Crown Cork & Seal Co., Inc. .......................... 18,191 864,072
Owens-Illinois, Inc. (a).............................. 22,587 1,010,768
--------------
2,052,228
--------------
CONTAINERS--PAPER (0.1%)
Bemis Co., Inc. ...................................... 7,814 319,397
Stone Container Corp. (a)............................. 14,629 228,579
Temple-Inland Inc. ................................... 8,230 443,391
--------------
991,367
--------------
COSMETICS (0.9%)
Alberto-Culver Co. Class B............................ 8,352 242,208
Avon Products, Inc. .................................. 19,258 1,492,495
Gillette Co. (The).................................... 164,487 9,324,357
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
-----------------------------------------------------------
COSMETICS (Continued)
International Flavors & Fragrances Inc. ................ 15,762 $ 684,662
--------------
11,743,722
--------------
DRUGS (5.2%)
Lilly (Eli) & Co. ...................................... 162,175 10,713,686
Merck & Co., Inc. ...................................... 175,044 23,412,135
Pfizer Inc. ............................................ 191,205 20,781,593
Pharmacia & Upjohn, Inc. ............................... 74,331 3,428,518
Schering-Plough Corp. .................................. 107,455 9,845,564
--------------
68,181,496
--------------
ELECTRIC POWER COMPANIES (2.4%)
Ameren Corp. ........................................... 20,134 800,327
American Electric Power Co., Inc. ...................... 27,854 1,263,875
Baltimore Gas & Electric Co. ........................... 21,649 672,472
Carolina Power & Light Co. ............................. 22,182 962,144
Central & South West Corp. ............................. 31,061 834,764
Cinergy Corp. .......................................... 23,087 808,045
Consolidated Edison, Inc. .............................. 34,502 1,589,248
Dominion Resources, Inc. ............................... 28,688 1,169,036
DTE Energy Co. ......................................... 21,208 856,273
Duke Energy Corp. ...................................... 52,734 3,124,490
Edison International.................................... 52,993 1,566,606
Entergy Corp. .......................................... 36,063 1,036,811
FirstEnergy Corp. ...................................... 33,775 1,038,581
FPL Group, Inc. ........................................ 26,526 1,671,138
GPU, Inc. .............................................. 18,770 709,741
Houston Industries Inc. ................................ 43,258 1,335,591
Niagara Mohawk Power
Corp. (a).............................................. 24,431 364,938
Northern States Power Co. .............................. 22,103 632,698
PacifiCorp.............................................. 43,500 984,188
PECO Energy Co. ........................................ 32,564 950,462
PG&E Corp. ............................................. 55,855 1,762,923
PP&L Resources, Inc. ................................... 24,560 557,205
Public Service Enterprise Group Inc. ................... 33,963 1,169,601
Southern Co. (The)...................................... 102,066 2,825,952
Texas Utilities Co. .................................... 40,913 1,703,004
Unicom Corp. ........................................... 31,712 1,111,902
--------------
31,502,015
--------------
ELECTRICAL EQUIPMENT (3.9%)
AMP Inc. ............................................... 32,087 1,102,991
Emerson Electric Co. ................................... 64,831 3,910,120
General Electric Co. (d)................................ 476,975 43,404,725
General Signal Corp. ................................... 6,345 228,420
Grainger (W.W.), Inc. .................................. 14,332 713,913
Honeywell Inc. ......................................... 18,477 1,543,984
Raychem Corp. .......................................... 12,227 361,460
Thomas & Betts Corp. ................................... 7,968 392,424
--------------
51,658,037
--------------
ELECTRONIC--DEFENSE (0.0%) (b)
EG&G, Inc. ............................................. 6,682 200,460
--------------
</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, 1998 (Unaudited)
COMMON STOCKS (Continued)
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
-----------------------------------------------------------
ELECTRONIC--INSTRUMENTATION (0.1%)
Perkin-Elmer Corp. (The)................................ 7,093 $ 441,096
Tektronix, Inc. ........................................ 7,391 261,457
--------------
702,553
--------------
ELECTRONIC--SEMICONDUCTORS (2.3%)
Advanced Micro Devices, Inc. (a)........................ 21,037 358,944
Applied Materials, Inc. (a)............................. 53,602 1,581,259
Intel Corp. ............................................ 248,340 18,408,202
KLA-Tencor Corp. (a).................................... 12,739 352,711
LSI Logic Corp. (a)..................................... 20,629 475,756
Micron Technology, Inc. (a)............................. 31,190 773,902
Motorola, Inc. ......................................... 87,536 4,601,111
National Semiconductor Corp. (a)........................ 24,031 316,909
Texas Instruments Inc. ................................. 57,178 3,334,192
--------------
30,202,986
--------------
ENGINEERING & CONSTRUCTION (0.1%)
Fluor Corp. ............................................ 11,975 610,725
Foster Wheeler Corp. ................................... 5,982 128,239
--------------
738,964
--------------
ENTERTAINMENT (1.6%)
King World Productions, Inc. (a)........................ 10,667 272,009
Time Warner Inc. ....................................... 86,523 7,392,309
Viacom Inc. Class B (a)................................. 52,242 3,043,096
Walt Disney Co. (The)................................... 99,790 10,484,187
--------------
21,191,601
--------------
FINANCIAL--MISCELLANEOUS (3.6%)
American Express Co. ................................... 67,500 7,695,000
American General Corp. ................................. 37,105 2,641,412
Associates First Capital Corp. Class A.................. 50,724 3,899,408
Capital One Financial Corp. ............................ 9,500 1,179,781
Fannie Mae.............................................. 151,819 9,223,004
Franklin Resources Inc. ................................ 36,992 1,997,568
Freddie Mac............................................. 99,395 4,677,778
Green Tree Financial Corp. ............................. 19,654 841,437
MBIA Inc. .............................................. 14,320 1,072,210
MBNA Corp. ............................................. 73,407 2,422,431
Morgan Stanley, Dean Witter, Discover & Co. ............ 87,838 8,026,197
SLM Holding Corp. ...................................... 24,500 1,200,500
SunAmerica Inc. ........................................ 28,580 1,641,564
Transamerica Corp. ..................................... 9,147 1,053,048
--------------
47,571,338
--------------
FOOD DISTRIBUTORS (0.2%)
Cardinal Health, Inc. .................................. 16,122 1,511,438
SUPERVALU Inc. ......................................... 8,755 388,503
SYSCO Corp. ............................................ 49,474 1,267,771
--------------
3,167,712
--------------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
---------------------------------------------------------
FOODS (2.4%)
Bestfoods............................................. 42,255 $ 2,453,431
Campbell Soup Co. .................................... 66,484 3,531,963
ConAgra, Inc. ........................................ 70,374 2,229,976
General Mills, Inc. .................................. 23,168 1,584,112
Heinz (H.J.) Co. ..................................... 53,570 3,006,616
Hershey Foods Corp. .................................. 20,982 1,447,758
Kellogg Co. .......................................... 59,877 2,249,130
Quaker Oats Co. (The)................................. 20,261 1,113,089
Ralston-Ralston Purina Group.......................... 15,476 1,807,790
Sara Lee Corp. ....................................... 68,376 3,824,783
Unilever, N.V. ....................................... 93,687 7,395,417
Wrigley (Wm.) Jr. Co. ................................ 16,966 1,662,668
--------------
32,306,733
--------------
GOLD (0.2%)
Barrick Gold Corp. ................................... 54,573 1,047,119
Battle Mountain Gold Co. ............................. 33,675 199,945
Homestake Mining Co. ................................. 30,927 320,868
Newmont Mining Corp. ................................. 22,952 542,241
Placer Dome Inc. ..................................... 36,587 429,898
--------------
2,540,071
--------------
HARDWARE & TOOLS (0.1%)
Black & Decker Corp. (The)............................ 13,889 847,229
Snap-on Inc. ......................................... 8,639 313,164
Stanley Works (The)................................... 12,954 538,400
--------------
1,698,793
--------------
HEALTH CARE--DIVERSIFIED (4.5%)
Abbott Laboratories................................... 225,943 9,235,420
Allergan, Inc. ....................................... 9,555 443,113
American Home Products Corp. ......................... 192,185 9,945,574
Bristol-Myers Squibb Co. ............................. 145,694 16,745,704
Johnson & Johnson..................................... 196,837 14,516,729
Mallinckrodt Inc. .................................... 10,746 319,022
Warner-Lambert Co. ................................... 119,939 8,320,768
--------------
59,526,330
--------------
HEALTH CARE--HMOs (0.2%)
Humana Inc. (a)....................................... 24,381 760,382
United Healthcare Corp. .............................. 28,245 1,793,558
--------------
2,553,940
--------------
HEALTH CARE--MISCELLANEOUS (0.4%)
ALZA Corp. (a)........................................ 12,626 546,074
Amgen Inc. (a)........................................ 37,149 2,428,616
HEALTHSOUTH Corp. (a)................................. 58,681 1,566,049
Manor Care, Inc. ..................................... 9,341 359,045
--------------
4,899,784
--------------
HEAVY DUTY TRUCKS & PARTS (0.3%)
Cummins Engine Co., Inc. ............................. 5,614 287,717
Dana Corp. ........................................... 15,538 831,283
Eaton Corp. .......................................... 10,479 814,742
</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>
---------------------------------------------------------
HEAVY DUTY TRUCKS & PARTS (Continued)
ITT Industries, Inc. ................................. 17,391 $ 649,989
Navistar International Corp. (a)...................... 10,098 291,580
PACCAR Inc. .......................................... 11,424 596,904
--------------
3,472,215
--------------
HOMEBUILDING (0.1%)
Centex Corp. ......................................... 8,700 328,425
Kaufman & Broad Home Corp. ........................... 5,720 181,610
Pulte Corp. .......................................... 6,172 184,388
--------------
694,423
--------------
HOSPITAL MANAGEMENT (0.3%)
Columbia/HCA Healthcare Corp. ........................ 94,232 2,744,507
Tenet Healthcare Corp. (a)............................ 45,095 1,409,219
--------------
4,153,726
--------------
HOTEL/MOTEL (0.2%)
Harrah's Entertainment, Inc. (a)...................... 14,781 343,658
Hilton Hotels Corp. .................................. 36,182 1,031,187
Marriott International, Inc. Class A.................. 37,384 1,210,307
--------------
2,585,152
--------------
HOUSEHOLD--FURNISHINGS & APPLIANCES (0.1%)
Armstrong World
Industries, Inc. .................................... 5,831 392,864
Maytag Corp. ......................................... 13,821 682,412
Whirlpool Corp. ...................................... 10,962 753,637
--------------
1,828,913
--------------
HOUSEHOLD PRODUCTS (2.1%)
Clorox Co. (The)...................................... 15,153 1,445,217
Colgate-Palmolive Co. ................................ 43,383 3,817,704
Fort James Corp. ..................................... 32,303 1,437,484
Kimberly-Clark Corp. ................................. 81,521 3,739,776
Procter & Gamble Co. (The)............................ 196,368 17,881,761
--------------
28,321,942
--------------
HOUSEWARES (0.2%)
Fortune Brands, Inc. ................................. 25,247 970,431
Newell Co. ........................................... 23,319 1,161,578
Rubbermaid Inc. ...................................... 21,918 727,404
Tupperware Corp. ..................................... 9,139 257,034
--------------
3,116,447
--------------
INSURANCE BROKERS (0.3%)
Aon Corp. ............................................ 24,609 1,728,782
Marsh & McLennan Cos., Inc. .......................... 37,443 2,262,962
--------------
3,991,744
--------------
INVESTMENT BANK/BROKERAGE (0.6%)
Bear Stearns Cos., Inc. (The)......................... 16,400 932,750
Lehman Brothers Holdings Inc. ........................ 17,392 1,348,967
Merrill Lynch & Co., Inc. ............................ 50,625 4,670,156
Schwab (Charles) Corp. (The).......................... 39,126 1,271,595
--------------
8,223,468
--------------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
-----------------------------------------------------------
LEISURE TIME (0.1%)
Brunswick Corp. ........................................ 14,528 $ 359,568
Mirage Resorts, Inc. (a)................................ 26,293 560,370
--------------
919,938
--------------
LIFE INSURANCE (0.5%)
Aetna Inc. ............................................. 21,261 1,618,494
Conseco, Inc. .......................................... 27,373 1,279,688
Jefferson-Pilot Corp. .................................. 15,484 897,104
Lincoln National Corp. ................................. 14,740 1,346,867
Torchmark Corp. ........................................ 20,575 941,306
UNUM Corp. ............................................. 20,229 1,122,710
--------------
7,206,169
--------------
MACHINE TOOLS (0.0%) (b)
Cincinnati Milacron Inc. ............................... 5,815 141,377
--------------
MACHINERY--DIVERSIFIED (0.7%)
Briggs & Stratton Corp. ................................ 3,432 128,486
Case Corp. ............................................. 10,953 528,482
Caterpillar Inc. ....................................... 53,669 2,837,748
Cooper Industries, Inc. ................................ 17,709 972,888
Deere & Co. ............................................ 36,321 1,920,473
Harnischfeger Industries, Inc. ......................... 6,989 197,876
Ingersoll-Rand Co. ..................................... 24,205 1,066,533
NACCO Industries, Inc. Class A.......................... 1,164 150,447
Thermo Electron Corp. (a)............................... 23,359 798,586
Timken Co. (The)........................................ 9,079 279,747
--------------
8,881,266
--------------
MAJOR REGIONAL BANKS (4.4%)
Banc One Corp. ......................................... 102,731 5,733,674
Bank of New York Co., Inc. (The)........................ 55,022 3,339,148
BankBoston Corp. ....................................... 43,014 2,392,654
BB&T Corp. ............................................. 20,709 1,400,446
Comerica Inc. .......................................... 22,960 1,521,100
Fifth Third Bancorp..................................... 38,473 2,423,799
Fleet Financial Group, Inc. ............................ 41,605 3,474,017
Huntington Bancshares Inc. ............................. 28,162 943,427
KeyCorp................................................. 64,388 2,293,822
Mellon Bank Corp. ...................................... 38,108 2,653,269
Mercantile Bancorp Inc. ................................ 19,543 984,479
National City Corp. .................................... 48,073 3,413,183
Northern Trust Corp. ................................... 16,328 1,245,010
Norwest Corp. .......................................... 110,845 4,142,832
PNC Bank Corp. ......................................... 44,060 2,370,979
Republic New York Corp. ................................ 15,862 998,315
State Street Corp. ..................................... 23,556 1,637,142
Summit Bancorp. ........................................ 25,952 1,232,720
SunTrust Banks, Inc. ................................... 30,868 2,509,954
Synovus Financial Corp. ................................ 38,459 913,401
U.S. Bancorp............................................ 108,748 4,676,164
Wachovia Corp. ......................................... 30,184 2,550,548
Wells Fargo & Co. ...................................... 12,489 4,608,441
--------------
57,458,524
--------------
</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, 1998 (Unaudited)
COMMON STOCKS (Continued)
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
-----------------------------------------------------------
MANUFACTURED HOUSING (0.0%) (b)
Fleetwood Enterprises, Inc. ............................ 5,311 $ 212,440
--------------
MANUFACTURING--DIVERSIFIED (1.2%)
Aeroquip-Vickers, Inc. ................................. 4,089 238,695
AlliedSignal Inc. ...................................... 82,796 3,674,073
Crane Co. .............................................. 6,676 324,203
Dover Corp. ............................................ 32,662 1,118,673
Illinois Tool Works Inc. ............................... 36,579 2,439,362
Johnson Controls, Inc. ................................. 12,341 704,208
Millipore Corp. ........................................ 6,400 174,400
Pall Corp. ............................................. 18,129 371,645
Parker-Hannifin Corp. .................................. 16,216 618,235
Sealed Air Corp. (a).................................... 12,261 450,592
Tyco International Ltd. ................................ 85,340 5,376,420
--------------
15,490,506
--------------
MEDICAL PRODUCTS (1.1%)
Bard (C.R.), Inc. ...................................... 8,281 315,196
Bausch & Lomb Inc. ..................................... 8,054 403,707
Baxter International Inc. .............................. 41,140 2,213,846
Becton, Dickinson & Co. ................................ 17,978 1,395,542
Biomet, Inc. ........................................... 16,311 539,282
Boston Scientific Corp. (a)............................. 28,416 2,035,296
Guidant Corp. .......................................... 22,038 1,571,585
Medtronic, Inc. ........................................ 68,742 4,382,303
St. Jude Medical, Inc. (a).............................. 12,256 451,174
United States Surgical Corp. ........................... 11,162 509,266
--------------
13,817,197
--------------
METALS--MISCELLANEOUS (0.1%)
ASARCO Inc. ............................................ 5,792 128,872
Cyprus Amax Minerals Co. ............................... 13,678 181,233
Freeport-McMoRan Copper & Gold Inc. Class B............. 26,467 401,968
Inco Ltd. .............................................. 24,271 330,692
Phelps Dodge Corp. ..................................... 8,570 490,097
--------------
1,532,862
--------------
MISCELLANEOUS (1.4%)
AirTouch Communications, Inc. (a)....................... 83,763 4,894,900
American Greetings Corp. Class A........................ 10,659 542,943
Archer-Daniels-Midland Co. ............................. 83,567 1,619,111
Corning Inc. ........................................... 33,936 1,179,276
Harcourt General, Inc. ................................. 10,324 614,278
Harris Corp. ........................................... 11,746 524,899
Jostens, Inc. .......................................... 5,421 130,782
Minnesota Mining & Manufacturing Co. ................... 59,228 4,867,801
Nextel Communications, Inc. Class A (a)................. 39,963 994,080
Pioneer Hi-Bred International, Inc. .................... 35,712 1,477,584
TRW Inc. ............................................... 17,961 981,119
--------------
17,826,773
--------------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
-----------------------------------------------------------
MONEY CENTER BANKS (4.2%)
BankAmerica Corp. ...................................... 99,916 $ 8,636,489
Bankers Trust Corp. .................................... 14,320 1,662,015
Chase Manhattan Bank (The).............................. 124,938 9,432,819
Citicorp................................................ 66,083 9,862,888
First Chicago NBD Corp. ................................ 42,015 3,723,579
First Union Corp. ...................................... 141,874 8,264,161
Morgan (J.P.) & Co., Inc. .............................. 26,118 3,059,071
NationsBank Corp. ...................................... 140,252 10,729,278
--------------
55,370,300
--------------
MULTI-LINE INSURANCE (2.2%)
American International Group, Inc. ..................... 102,468 14,960,328
CIGNA Corp. ............................................ 31,559 2,177,571
Hartford Financial Services
Group, Inc. (The)...................................... 17,257 1,973,769
Travelers Group Inc. ................................... 168,331 10,205,067
--------------
29,316,735
--------------
NATURAL GAS DISTRIBUTORS & PIPELINES (0.7%)
Coastal Corp. (The)..................................... 15,507 1,082,582
Columbia Energy Group................................... 12,147 675,677
Consolidated Natural Gas Co. ........................... 13,916 819,304
Eastern Enterprises..................................... 2,969 127,296
Enron Corp. ............................................ 48,090 2,599,866
NICOR Inc. ............................................. 7,028 281,998
ONEOK, Inc. ............................................ 4,610 183,824
Peoples Energy Corp. ................................... 5,139 198,494
Sempra Energy (a)....................................... 36,404 1,010,218
Sonat Inc. ............................................. 16,081 621,129
Williams Cos., Inc. (The)............................... 62,088 2,095,470
--------------
9,695,858
--------------
OFFICE EQUIPMENT & SUPPLIES (0.5%)
Moore Corp. Ltd. ....................................... 12,949 171,574
Pitney Bowes Inc. ...................................... 40,011 1,925,529
Xerox Corp. ............................................ 48,091 4,887,248
--------------
6,984,351
--------------
OIL & GAS DRILLING (0.0%) (b)
Helmerich & Payne, Inc. ................................ 7,333 163,159
Rowan Cos., Inc. (a).................................... 12,612 245,146
--------------
408,305
--------------
OIL--EXPLORATION & PRODUCTION (0.2%)
Anadarko Petroleum Corp. ............................... 8,735 586,883
Apache Corp. ........................................... 14,478 456,057
Burlington Resources Inc. .............................. 25,899 1,115,276
Oryx Energy Co. (a)..................................... 15,571 344,508
Union Pacific Resources Group, Inc. .................... 36,741 645,264
--------------
3,147,988
--------------
</TABLE>
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.
COMMON STOCKS (Continued)
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
-----------------------------------------------------------
OIL--INTEGRATED DOMESTIC (1.0%)
Amerada Hess Corp. ..................................... 13,380 $ 726,701
Ashland Inc. ........................................... 11,065 571,231
Atlantic Richfield Co. ................................. 46,979 3,670,234
Kerr-McGee Corp. ....................................... 6,960 402,810
Occidental Petroleum Corp. ............................. 53,776 1,451,952
Pennzoil Co. ........................................... 6,902 349,414
Phillips Petroleum Co. ................................. 38,187 1,840,136
Sun Co., Inc. .......................................... 13,755 533,866
Unocal Corp. ........................................... 35,299 1,261,939
USX-Marathon Group...................................... 42,333 1,452,551
--------------
12,260,834
--------------
OIL--INTEGRATED INTERNATIONAL (5.3%)
Amoco Corp. ............................................ 140,486 5,847,730
Chevron Corp. .......................................... 95,808 7,958,052
Exxon Corp. ............................................ 358,191 25,543,496
Mobil Corp. ............................................ 114,433 8,768,428
Royal Dutch Petroleum Co. .............................. 313,914 17,206,411
Texaco Inc. ............................................ 79,238 4,729,518
--------------
70,053,635
--------------
OIL--WELL EQUIPMENT & SERVICES (0.7%)
Baker Hughes Inc. ...................................... 24,790 856,804
Dresser Industries, Inc. ............................... 25,710 1,132,847
Halliburton Co. ........................................ 38,527 1,716,859
McDermott International, Inc. .......................... 8,813 303,498
Schlumberger Ltd. ...................................... 73,059 4,990,843
Western Atlas Inc. (a).................................. 7,951 674,841
--------------
9,675,692
--------------
PAPER & FOREST PRODUCTS (0.6%)
Boise Cascade Corp. .................................... 8,147 266,815
Champion International Corp. ........................... 13,982 687,739
Georgia-Pacific Corp. .................................. 13,407 790,175
International Paper Co. ................................ 44,970 1,933,710
Louisiana-Pacific Corp. ................................ 16,087 293,588
Mead Corp. (The)........................................ 15,286 485,331
Potlatch Corp. ......................................... 4,233 177,786
Union Camp Corp. ....................................... 10,136 502,999
Westvaco Corp. ......................................... 14,885 420,501
Weyerhaeuser Co. ....................................... 29,180 1,347,751
Willamette Industries, Inc. ............................ 16,301 521,632
--------------
7,428,027
--------------
PERSONAL LOANS (0.4%)
Beneficial Corp. ....................................... 7,878 1,206,811
Countrywide Credit Industries, Inc. .................... 15,885 806,164
Household International, Inc. .......................... 47,098 2,343,125
Providian Financial Corp. .............................. 13,911 1,092,883
--------------
5,448,983
--------------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
-----------------------------------------------------------
PHOTOGRAPHY/IMAGING (0.3%)
Eastman Kodak Co. ...................................... 47,221 $ 3,450,084
IKON Office Solutions, Inc. ............................ 19,817 288,585
Polaroid Corp. ......................................... 6,501 231,192
--------------
3,969,861
--------------
POLLUTION CONTROL (0.3%)
Browning-Ferris Industries, Inc. ....................... 26,949 936,478
Waste Management, Inc. ................................. 69,648 2,437,680
--------------
3,374,158
--------------
PROPERTY--CASUALTY INSURANCE (1.3%)
Allstate Corp. (The).................................... 61,430 5,624,684
Chubb Corp. (The)....................................... 24,574 1,975,135
Cincinnati Financial Corp. ............................. 24,458 938,576
General Re Corp. ....................................... 11,093 2,812,075
Loews Corp. ............................................ 16,808 1,464,397
MGIC Investment Corp. .................................. 16,733 954,827
Progressive Corp. (The)................................. 10,532 1,485,012
SAFECO Corp. ........................................... 20,658 938,648
St. Paul Cos., Inc. (The)............................... 34,299 1,442,702
--------------
17,636,056
--------------
PUBLISHING (0.1%)
McGraw-Hill Cos., Inc. (The)............................ 14,460 1,179,394
Meredith Corp. ......................................... 7,753 363,906
--------------
1,543,300
--------------
PUBLISHING--NEWSPAPER (0.6%)
Dow Jones & Co., Inc. .................................. 13,664 761,768
Gannett Co., Inc. ...................................... 41,647 2,959,540
Knight-Ridder, Inc. .................................... 11,481 632,173
New York Times Co. (The) Class A........................ 14,016 1,110,768
Times Mirror Co. (The) Class A.......................... 12,989 816,683
Tribune Co. ............................................ 17,872 1,229,817
--------------
7,510,749
--------------
RAILROADS (0.5%)
Burlington Northern Santa Fe Corp. ..................... 23,045 2,262,731
CSX Corp. .............................................. 32,083 1,459,776
Norfolk Southern Corp. ................................. 55,421 1,652,239
Union Pacific Corp. .................................... 36,159 1,595,516
--------------
6,970,262
--------------
RESTAURANTS (0.6%)
Darden Restaurants, Inc. ............................... 20,925 332,184
McDonald's Corp. ....................................... 100,669 6,946,161
Tricon Global Restaurants, Inc. (a)..................... 22,273 705,776
Wendy's International, Inc. ............................ 19,176 450,636
--------------
8,434,757
--------------
</TABLE>
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
PORTFOLIO OF INVESTMENTS (Continued)
June 30, 1998 (Unaudited)
COMMON STOCKS (Continued)
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
---------------------------------------------------------
RETAIL STORES--APPAREL (0.4%)
Gap, Inc. (The)....................................... 57,586 $ 3,548,737
Limited, Inc. (The)................................... 33,121 1,097,133
TJX Cos., Inc. (The).................................. 46,790 1,128,809
--------------
5,774,679
--------------
RETAIL STORES--DEPARTMENT (0.6%)
Dillard's, Inc. Class A............................... 15,798 654,630
Federated Department Stores, Inc. (a)................. 30,714 1,652,797
May Department Stores
Co. (The)............................................ 33,793 2,213,441
Mercantile Stores Co., Inc. .......................... 5,259 415,132
Nordstrom, Inc. ...................................... 11,118 858,866
Penney (J.C.) Co., Inc. .............................. 36,709 2,654,520
--------------
8,449,386
--------------
RETAIL STORES--DRUGS (0.4%)
Longs Drug Stores Corp. .............................. 5,636 162,739
Rite Aid Corp. ....................................... 37,793 1,419,600
Walgreen Co. ......................................... 72,726 3,004,493
--------------
4,586,832
--------------
RETAIL STORES--FOOD (0.5%)
Albertson's, Inc. .................................... 36,008 1,865,665
American Stores Co. .................................. 40,063 969,024
Giant Food Inc. Class A............................... 8,744 376,538
Great Atlantic & Pacific Tea Co., Inc. (The).......... 5,552 183,563
Kroger Co. (The) (a).................................. 37,512 1,608,327
Winn-Dixie Stores, Inc. .............................. 21,755 1,113,584
--------------
6,116,701
--------------
RETAIL STORES--GENERAL MERCHANDISE (2.1%)
Dayton Hudson Corp. .................................. 64,011 3,104,533
Kmart Corp. (a)....................................... 71,425 1,374,931
Sears, Roebuck & Co. ................................. 57,208 3,493,264
Wal-Mart Stores, Inc. ................................ 328,788 19,973,871
--------------
27,946,599
--------------
RETAIL STORES--SPECIALTY (1.5%)
AutoZone, Inc. (a).................................... 22,229 709,939
Circuit City Stores, Inc.-Circuit City Group.......... 14,438 676,781
Consolidated Stores Corp. (a)......................... 15,758 571,227
Costco Cos., Inc. (a)................................. 31,524 1,987,982
CVS Corp. ............................................ 56,289 2,191,753
Home Depot, Inc. (The)................................ 107,593 8,936,944
Lowe's Cos., Inc. .................................... 51,358 2,083,209
Pep Boys-Manny, Moe & Jack (The)...................... 9,253 175,229
Tandy Corp. .......................................... 14,823 786,545
Toys "R" Us, Inc. (a)................................. 40,824 961,916
Venator Group, Inc. (a)............................... 19,747 377,661
--------------
19,459,186
--------------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
-----------------------------------------------------------
SAVINGS & LOANS (0.3%)
Ahmanson (H.F.) & Co. .................................. 16,028 $ 1,137,988
Golden West Financial Corp. ............................ 8,381 891,005
Washington Mutual, Inc. ................................ 56,716 2,463,623
--------------
4,492,616
--------------
SHOES (0.2%)
NIKE, Inc. Class B...................................... 42,143 2,051,837
Reebok International Ltd. (a)........................... 8,202 227,093
--------------
2,278,930
--------------
SPECIALIZED SERVICES (0.9%)
Block (H&R), Inc. ...................................... 15,370 647,461
Cendant Corp. (a)....................................... 124,580 2,600,607
Cognizant Corp. ........................................ 23,815 1,500,345
Dun & Bradstreet Corp. (The)............................ 25,094 906,521
Ecolab Inc. ............................................ 18,897 585,807
Interpublic Group of Cos., Inc. (The)................... 19,953 1,210,898
Laidlaw Inc. ........................................... 48,145 586,767
National Service Industries, Inc. ...................... 6,177 314,255
Omnicom Group Inc. ..................................... 24,961 1,244,930
Service Corp. International............................. 37,519 1,608,627
--------------
11,206,218
--------------
SPECIALTY PRINTING (0.1%)
Deluxe Corp. ........................................... 11,792 422,301
Donnelley (R.R.) & Sons Co. ............................ 20,731 948,443
--------------
1,370,744
--------------
STEEL (0.2%)
Allegheny Teledyne Inc. ................................ 28,768 658,068
Armco Inc. (a).......................................... 15,746 100,381
Bethlehem Steel Corp. (a)............................... 18,809 233,937
Nucor Corp. ............................................ 12,868 591,928
USX Corp.-U.S. Steel Group, Inc. ....................... 12,617 416,361
Worthington Industries, Inc. ........................... 14,157 213,240
--------------
2,213,915
--------------
TELECOMMUNICATIONS--LONG DISTANCE (2.4%)
AT&T Corp. ............................................. 237,747 13,581,297
MCI Communications Corp. ............................... 106,062 6,164,854
Sprint Corp. ........................................... 63,057 4,445,519
WorldCom, Inc. (a)...................................... 151,096 7,318,712
--------------
31,510,382
--------------
TELEPHONE (4.0%)
ALLTEL Corp. ........................................... 39,531 1,838,191
Ameritech Corp. ........................................ 161,087 7,228,779
Bell Atlantic Corp. .................................... 227,214 10,366,639
BellSouth Corp. ........................................ 144,998 9,732,991
Frontier Corp. ......................................... 25,060 789,390
GTE Corp. .............................................. 140,936 7,839,565
SBC Communications Inc. ................................ 269,238 10,769,520
US West Communications Group............................ 73,445 3,451,906
--------------
52,016,981
--------------
</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.
COMMON STOCKS (Continued)
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
------------------------------------------------------------
TEXTILES--APPAREL MANUFACTURERS (0.2%)
Fruit of the Loom, Inc. Class A (a)................. 10,540 $ 349,796
Liz Claiborne, Inc. ................................ 9,679 505,728
Russell Corp. ...................................... 5,335 161,050
Springs Industries, Inc. Class A.................... 2,827 130,395
Valley Forge Corp. ................................. 17,812 916,205
--------------
2,063,174
--------------
TOBACCO (1.1%)
Philip Morris Cos. Inc. ............................ 355,726 14,006,711
UST Inc. ........................................... 27,090 731,430
--------------
14,738,141
--------------
TOYS (0.2%)
Hasbro, Inc. ....................................... 19,468 765,336
Mattel, Inc. ....................................... 42,949 1,817,279
--------------
2,582,615
--------------
TRANSPORTATION--MISCELLANEOUS (0.1%)
FDX Corp. (a)....................................... 21,506 1,349,502
Ryder System, Inc. ................................. 10,930 344,978
--------------
1,694,480
--------------
Total Common Stocks (Cost $762,607,018)............. 1,314,564,280 (c)
--------------
Total Investments (Cost $762,607,018) (f)........... 99.7% 1,314,564,280 (g)
Cash and Other Assets, Less Liabilities............. 0.3 4,109,965
------- --------------
Net Assets.......................................... 100.0% $1,318,674,245
======= ==============
</TABLE>
SHORT POSITIONS (-0.0%) (b)
COMMON STOCKS (-0.0%) (b)
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
-------------------------------------------------------------
ADVERTISING/MARKETING (-0.0%) (b)
R.H. Donnelley Corp. W/I (e)........................ (25,094) $ (76,850)
--------------
BROADCAST/MEDIA (-0.0%) (b)
Nielsen Media Research, Inc.W/I (e)................. (23,815) (104,191)
--------------
Total Short Positions
(Proceeds $199,684)................................ $ (181,041)
==============
FUTURES
CONTRACTS (0.0%) (b)
<CAPTION>
CONTRACTS UNREALIZED
LONG DEPRECIATION (H)
-------------------------------------------------------------
<S> <C> <C>
Standard & Poor's 500
September 1998..................................... 8 $ (16,215)
Mini September 1998................................ 1 (317)
--------------
Total Futures Contracts (Settlement Value
$2,343,150) (c).................................... $ (16,532)
==============
</TABLE>
- --------
(a) Non-income producing security.
(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 99.9% of net
assets.
(d) Segregated as collateral for futures contracts.
(e) W/I (when-issued security)--this security is a commitment by the Fund to
sell at a future settlement date.
(f) The cost for Federal income tax purposes is $762,764,578.
(g) At June 30, 1998 net unrealized appreciation was $551,618,661, 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 $560,349,801 and aggregate gross unrealized
depreciation for all investments on which there was an excess of cost over
market value of $8,731,140.
(h) Represents the difference between the value of the contracts at the time
they were opened and the value at June 30, 1998.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
43
<PAGE>
INDEXED EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES STATEMENT OF OPERATIONS
As of June 30, 1998 (Unaudited) For the six months ended June 30,
1998 (Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investment in securities, at value
(identified cost $762,607,018)................................ $1,314,564,280
Receivables:
Investment securities sold..................................... 9,747,840
Dividends and interest......................................... 1,460,070
Fund shares sold............................................... 1,075,728
--------------
Total assets................................................. 1,326,847,918
--------------
LIABILITIES:
Securities sold short (proceeds $199,684)...................... 181,041
Payables:
Investment securities purchased................................ 5,968,567
Custodian...................................................... 1,633,660
MainStay Management............................................ 252,164
Fund shares redeemed........................................... 48,139
Transfer agent................................................. 3,541
Accrued expenses............................................... 69,590
Variation margin payable on futures contracts.................. 16,971
--------------
Total liabilities............................................ 8,173,673
--------------
Net assets..................................................... $1,318,674,245
==============
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.001 per share) 1 billion shares
authorized
Institutional Class............................................ $ 40,511
Institutional Service Class.................................... 967
Additional paid-in capital..................................... 743,458,825
Accumulated undistributed net investment income................ 7,971,784
Accumulated undistributed net realized gain on investments..... 15,242,785
Net unrealized appreciation on investments..................... 551,959,373
--------------
Net assets..................................................... $1,318,674,245
==============
Institutional Class
Net assets applicable to outstanding shares.................... $1,288,052,715
==============
Shares of capital stock outstanding............................ 40,511,017
==============
Net asset value per share outstanding.......................... $ 31.80
==============
Institutional Service Class
Net assets applicable to outstanding shares.................... $ 30,621,530
==============
Shares of capital stock outstanding............................ 966,742
==============
Net asset value per share outstanding.......................... $ 31.67
==============
</TABLE>
<TABLE>
<S> <C>
INVESTMENT INCOME:
Income:
Dividends (a)................................................... $ 8,464,173
Interest........................................................ 1,286,947
------------
Total income.................................................. 9,751,120
------------
Expenses:
Management...................................................... 2,937,640
Shareholder communication....................................... 90,464
Professional.................................................... 72,251
Custodian....................................................... 65,943
Registration.................................................... 36,725
Service......................................................... 33,420
Transfer agent.................................................. 17,279
Directors....................................................... 13,034
Miscellaneous................................................... 23,008
------------
Total expenses before
reimbursement................................................ 3,289,764
Expense reimbursement from Manager.............................. (1,493,761)
------------
Net expenses.................................................. 1,796,003
------------
Net investment income........................................... 7,955,117
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain from:
Security transactions........................................... 9,933,757
Futures transactions............................................ 1,685,387
------------
Net realized gain on investments................................ 11,619,144
------------
Net change in unrealized appreciation (depreciation) on
investments:
Security transactions........................................... 165,659,980
Futures transactions............................................ (55,767)
------------
Net unrealized gain on investments.............................. 165,604,213
------------
Net realized and unrealized gain on investments................. 177,223,357
------------
Net increase in net assets resulting from operations............ $185,178,474
============
</TABLE>
- --------
(a) Dividends recorded net of foreign withholding taxes of $57,382.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
44
<PAGE>
MAINSTAY
INSTITUTIONAL FUNDS INC.
INDEXED EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 1998 (Unaudited) and the year ended December
31, 1997
<TABLE>
<CAPTION>
1998 1997
-------------- -------------
<S> <C> <C>
INCREASE IN NET ASSETS:
Operations:
Net investment income.......................... $ 7,955,117 $ 12,926,062
Net realized gain on investments............... 11,619,144 13,824,202
Net change in unrealized appreciation on in-
vestments..................................... 165,604,213 199,341,116
-------------- -------------
Net increase in net assets resulting from op-
erations...................................... 185,178,474 226,091,380
-------------- -------------
Dividends and distributions to shareholders:
From net investment income:
Institutional Class........................... -- (12,753,262)
Institutional Service Class................... -- (156,133)
From net realized gain on investments:
Institutional Class........................... -- (18,598,652)
Institutional Service Class................... -- (264,603)
-------------- -------------
Total dividends and distributions to share-
holders..................................... -- (31,772,650)
-------------- -------------
Capital share transactions:
Net proceeds from sale of shares:
Institutional Class........................... 230,885,614 295,739,975
Institutional Service Class................... 16,163,277 10,256,956
Net asset value of shares issued to
shareholders in reinvestment of dividends and
distributions:
Institutional Class........................... -- 31,351,914
Institutional Service Class................... -- 420,736
-------------- -------------
247,048,891 337,769,581
Cost of shares redeemed:
Institutional Class........................... (89,915,480) (170,645,271)
Institutional Service Class................... (3,682,462) (4,979,101)
-------------- -------------
Increase in net assets derived from capital
share transactions........................... 153,450,949 162,145,209
-------------- -------------
Net increase in net assets.................... 338,629,423 356,463,939
NET ASSETS:
Beginning of period ........................... 980,044,822 623,580,883
-------------- -------------
End of period.................................. $1,318,674,245 $ 980,044,822
============== =============
Accumulated undistributed net investment income
at end of period ............................. $ 7,971,784 $ 16,667
============== =============
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
45
<PAGE>
INDEXED EQUITY FUND
FINANCIAL HIGHLIGHTS
(Selected per share data and ratios)
<TABLE>
<CAPTION>
INSTITUTIONAL
INSTITUTIONAL SERVICE
CLASS CLASS
------------- -------------
SIX MONTHS ENDED
JUNE 30, 1998*
----------------------------
<S> <C> <C>
Net asset value at beginning of period.......... $ 27.05 $ 26.99
---------- ----------
Net investment income........................... 0.19 0.15
Net realized and unrealized gain (loss) on
investments.................................... 4.56 4.53
---------- ----------
Total from investment operations................ 4.75 4.68
---------- ----------
Less dividends and distributions:
From net investment income...................... -- --
From net realized gain on investments........... -- --
In excess of net realized gain on investments... -- --
---------- ----------
Total dividends and distributions............... -- --
---------- ----------
Net asset value at end of period................ $ 31.80 $ 31.67
========== ==========
Total investment return (b) .................... 17.56% 17.34%
Ratios (to average net assets)/Supplemental
Data:
Net investment income........................... 1.36%+ 1.11%+
Net expenses.................................... 0.30%+ 0.55%+
Expenses (before reimbursement)................. 0.55%+ 0.80%+
Portfolio turnover rate......................... 2% 2%
Net assets at end of period (in 000's).......... $1,288,053 $ 30,621
</TABLE>
- --------
* Unaudited.
+ Annualized.
(a) Less than one cent per share.
(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.
46
<PAGE>
MAINSTAY
INSTITUTIONAL FUNDS INC.
<TABLE>
<CAPTION>
INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL
INSTITUTIONAL SERVICE INSTITUTIONAL SERVICE INSTITUTIONAL SERVICE
CLASS CLASS CLASS CLASS CLASS CLASS INSTITUTIONAL CLASS
- ------------- ------------- ------------- ------------- ------------- ------------- ------------------------
YEAR ENDED DECEMBER 31
- -------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993
- ---------------------------- --------------------------- --------------------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 21.05 $ 21.01 $ 17.82 $ 17.81 $ 13.53 $ 13.53 $ 13.86 $ 13.50
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
0.37 0.32 0.34 0.31 0.35 0.33 0.33 0.30
6.54 6.52 3.69 3.66 4.64 4.64 (0.20) 0.93
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
6.91 6.84 4.03 3.97 4.99 4.97 0.13 1.23
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
(0.37) (0.32) (0.34) (0.31) (0.34) (0.33) (0.33) (0.61)
(0.54) (0.54) (0.46) (0.46) (0.36) (0.36) (0.13) (0.25)
-- -- -- -- -- -- 0.00(a) (0.01)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
(0.91) (0.86) (0.80) (0.77) (0.70) (0.69) (0.46) (0.87)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
$ 27.05 $ 26.99 $ 21.05 $ 21.01 $ 17.82 $ 17.81 $ 13.53 $ 13.86
========== ========== ========== ========== ========== ========== ========== ==========
32.88% 32.60% 22.57% 22.21% 36.88% 36.70% 0.90% 9.41%
1.56% 1.31% 1.96% 1.71% 2.21% 1.96% 2.43% 2.39%
0.30% 0.55% 0.44% 0.69% 0.50% 0.75% 0.50% 0.45%
0.56% 0.81% 0.59% 0.84% 0.59% 0.84% 0.58% 0.60%
3% 3% 8% 8% 4% 4% 5% 5%
$ 966,217 $ 13,828 $ 617,716 $ 5,865 $ 354,420 $ 969 $ 244,685 $ 219,351
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
47
<PAGE>
INTERNATIONAL EQUITY FUND
================================================================================
MARKET RECAP FOR THE 6-MONTH PERIOD ENDED 6/30/98
================================================================================
o International markets were divided in the first six months of 1998, with
most Asian stock markets down and most European markets providing positive
returns.
o Australia and New Zealand stock performance deteriorated along with Asian
markets, with problems intensified by declining prices in gold and other
commodities.
o In the U.K., the central bank increased interest rates to slow economic
growth, which made it more difficult for Britain to compete in the export
market.
o Overall, the Morgan Stanley Capital International EAFE Index* was up 15.93%
for the six months ended June 30, 1998.
================================================================================
FUND RECAP FOR THE 6- AND 12-MONTH PERIODS ENDED 6/30/98
================================================================================
o The MainStay Institutional International Equity Fund returned 10.70% and
10.08% for Institutional Class and Service Class shares, respectively, for
the one-year period ended 6/30/98.
o Both share classes outperformed the Morgan Stanley EAFE Index during the
six-month reporting period.
o The Fund benefited by shifting assets out of Asian markets and increasing
its weightings in core European markets.
o Both share classes outperformed the average Lipper+ international fund,
which returned 15.50% for the six months ended 6/30/98.
International equity markets showed highly divergent performance during the
first six months of 1998, with Europe outperforming and Asian markets continuing
to deteriorate. Japan officially announced that it was in recession, and the
Hong Kong stock market fell 26% in local terms during the reporting period.
Asian emerging markets had even more severe setbacks. Australia and New Zealand,
whose economies are largely dependent on commodities and Asian commerce, also
fared badly.
European stocks, on the other hand, generally surged ahead, with several markets
posting double-digit returns in the first half of the year. Finland was up 66.8%
and Spain rose 44.5%, both in local terms, during the reporting period. Other
European markets also had excellent performance, buoyed by low interest rates,
low inflation, ongoing corporate restructuring, and merger and acquisition
activity related to European Monetary Union (EMU).
In an effort to slow rapid growth, the Bank of England raised interest rates,
which dampened the competitive environment for British exports and raised
concerns for some investors about U.K. equities. Over the reporting period, the
U.K. stock market advanced 14.1% in local terms.
- --------------------------------------------------------------------------------
Recession A downturn in economic activity, typically defined by at least two
consecutive quarters of decline in a country's gross domestic product.
Local currency terms Returns expressed in local currency terms show what
investors 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.
- --------------------------------------------------------------------------------
================================================================================
* The Morgan Stanley Capital International (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.
48
<PAGE>
================================================================================
Given this context, how did the MainStay Institutional International Equity Fund
perform in the six months ended 6/30/98?
The MainStay Institutional International Equity Fund returned 17.62% and 17.56%
for Institutional Class shares and Service Class shares, respectively, for the
six months ended 6/30/98. Both share classes outperformed the Morgan Stanley
Capital International EAFE Index, which returned 15.93% over the same period.
Both share classes also outperformed the average Lipper international fund,
which returned 15.50% for the six months ended 6/30/98.
Why was the Fund able to outperform its peers?
The Fund came into 1998 well positioned for the market environment. Given the
continuing deterioration in Asian markets during the first six months of 1998,
we decided to reduce the Fund's Asian exposure, which had a positive impact on
performance. The proceeds of those sales were invested primarily in core
European markets, which also had a positive effect. In this respect, our
investment approach of focusing on strict country selection served the Fund
well. We also benefited from individual security selection within several
European markets and Japan.
Which countries provided the best results for the Fund?
In Europe, the best-performing markets in which the Fund invested were Spain, up
44.5%, Belgium, up 43.9%, France, up 39.4%, Germany, up 37%, and Italy, up
33.9%, all in local terms. Unfortunately, the Fund was not invested in Finland,
which was up 66.8% in local terms during the reporting period. Finland's stock
market performance was largely the result of a single stock, Nokia, a
telecommunications company. We felt that an overheating Finnish economy and the
rapid expansion of this single stock made Finland a high-risk market. We believe
that concerns about the nation's pace of economic growth led the Bank of Finland
to raise interest rates to slow growth and control inflation.
Which markets were the worst performers during the reporting period?
Fortunately, the Fund was not invested in the worst of the Asian markets. We
did, however, have substantial investments in Japan, which was up 4% in local
terms, but down 2.6% in U.S. dollar terms.
Did you change the Fund's weightings significantly during the first six months
of 1998?
Yes. We went from a neutral weighting in Europe to a heavily overweighted
position of about 78% of the Fund's total net assets. At the same time, we
substantially reduced Asian and Japanese holdings to just 8.7% of the Fund's
total net assets. In doing so, we sold 5% of the Fund's assets, and raised
German investments from 10% to 15% of the Fund's total net assets. We increased
the Fund's holdings in the Netherlands from 3% to 8% of total net assets. We
also increased overall weightings in Belgium and France.
How did the Fund's currency exposure affect performance?
As the dollar rose relative to many foreign currencies, the Fund had
opportunities and disappointments. We took advantage of some volatile periods to
increase currency exposure in selected European markets, which had a modestly
- --------------------------------------------------------------------------------
Emerging markets Countries with smaller or more recently established capital
markets.
Mergers and acquisitions A merger is a combination of two companies, an
acquisition is the purchase of a company, division, or business unit. Companies
that engage in mergers and acquisitions often pay shareholders a premium, or an
amount over the current share price, to complete the transaction quickly and
under favorable terms.
European Monetary Union A proposed system that would allow participating
European countries to operate with a common currency or monetary unit.
Weighting/Overweighted 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.
- --------------------------------------------------------------------------------
49
<PAGE>
================================================================================
positive impact on the Fund's performance. During the first six months of 1998,
the Fund also had some exposure to the Japanese yen and Australian dollar which
had a negative impact on performance. Foreign exchange parity levels have been
established in European Monetary Union countries, and beginning in 1999, we
believe exchange rates will generally play less of a role in investment decision
making in those nations.
Which securities in the Fund were among the best performers?
Olivetti is an Italian company that manufactures office and computer equipment
and provides telecommunications services in several countries. In the second
quarter of 1998, Olivetti Computers Worldwide announced two powerful new
servers, offering advantages over existing corporate computer systems. The stock
soared 195.2% in local terms over the first half of the year.
Another strong performer was KBC Bancassurance Holding, a Belgian financial
services holding company that moved to create a financial service giant,
including Kredietbank, Cera Bank, and ABB, an insurance group. In the first six
months of 1998, the stock rose 114.1% in local terms.
Mannesmann, an industrial products, machinery, and equipment manufacturer, rose
104.1% in local terms after completing a $1.85 billion secondary offering to
expand its telecommunications operations in France and Italy. Other stocks that
were among the Fund's top performers included Vodafone Group, Telefonica de
Espana, and British Telecom- munications, up 71.5%, 67.7%, and 54.6%,
respectively, in local terms.
Were there other outstanding performers?
Yes, News Corp. is an international media company that grew 55.6% in local
terms, benefiting from existing operations and the formation of a multimedia
distributor in the United States.
Despite setbacks in Japan, the Fund benefited from individual stock selection
with Kawasaki Steel, up 40.4% in local terms, and Teijin, which rose 53.8% in
local terms when it decided to expand its poly-carbonate resin capacity in
Singapore to service the electronics industry. In this case, weaker currencies
strengthened the company's export competitiveness, turning the Asian crisis into
a positive.
Did all of the Fund's stocks do that well?
No. Japanese retailer Daiei posted its first-ever pretax loss last year and
reversed its long-standing policy of not closing stores that generated losses.
The stock fell 39.8% in local terms during the reporting period. Nissan Motor
decided to reorganize and restructure to improve productivity and product
development. But in the meantime, the stock lost 19.1% in local terms. Tokyu,
Tokyo's leading railway company, felt the pressure of the nation's recession and
fell 16.5% in local terms, with the impact experienced across all lines of
business, including real estate leasing and hotel operations.
What prompted you to sell securities in the Fund?
As previously noted, we reduced the Fund's Asian exposure and increased its
European holdings to help avoid problem areas and invest where we felt prospects
for growth were more attractive. We also reduced the Fund's holdings in
Australia as we saw the potential impact of declining gold and commodity prices.
Both of these moves were positive for the Fund's performance.
Although Spain was up 44.5% over the first six months of 1998, we decreased the
Fund's Spanish holdings to a minimal weighting in the second quarter to take
profits and invest assets where we believed they could do more good. Since Spain
only advanced 1.6% during the second quarter, this decision was also positive
for the Fund's performance.
What is your outlook going forward?
We continue to view Asia as a problem area, but as we noted with Teijin, even
difficult markets can provide opportunities for forward-thinking companies. The
Japanese economy has continued to disappoint us, but we believe that the
strongest companies may be the best performers there.
50
<PAGE>
================================================================================
As European Monetary Union approaches, we remain relatively bullish on Europe,
where we believe restructurings, mergers, and strategic acquisitions will
continue to abound. The Fund will continue to seek long-term growth of capital
by investing in a portfolio consisting of non-U.S. equity securities. As always,
current income will remain a secondary objective.
Shigemi Takagi
Portfolio Manager
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.
================================================================================
Past performance is no guarantee of future results.
[GRAPHIC]
51
<PAGE>
$10,000 INVESTED IN MAINSTAY INSTITUTIONAL
EAFE INDEX FUND VS MSCI EAFE INDEX
INSTITUTIONAL CLASS SHARES
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
================================================================================
<TABLE>
<CAPTION>
International
Year Equity MSCI EAFE
---- ------------- ---------
<S> <C> <C>
7/31/92 10,000 10,000
92 9,463 10,014
93 11,831 13,275
94 12,820 14,309
95 13,739 15,913
96 15,400 16,874
97 16,238 17,175
6/30/98 19,100 19,911
</TABLE>
$10,000 INVESTED IN MAINSTAY INSTITUTIONAL
EAFE INDEX FUND VS MSCI EAFE INDEX
SERVICE CLASS SHARES
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
================================================================================
<TABLE>
<CAPTION>
International
Year Equity MSCI EAFE
---- ------------- ---------
<S> <C> <C>
7/31/92 10,000 10,000
92 9,463 10,014
93 11,831 13,275
94 12,820 14,309
95 13,699 15,913
96 15,287 16,874
97 16,032 17,175
6/30/98 18,848 19,911
</TABLE>
o 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, 1998 as of June 30, 1998
- -----------------------------------------------------------------------------------------------------------------------------
Year to Date One Year Five Year Since Inception
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
International Equity Fund Institutional Class+ 17.62% 10.70% 11.08% 11.55%
International Equity Fund Service Class+ 17.56% 10.08% 10.78% 11.30%
Average Lipper International Fund 15.50% 8.19% 12.22% 12.45%
MSCI EAFE Index 15.93% 6.10% 10.03% 12.34%
</TABLE>
================================================================================
PORTFOLIO COMPOSITION
(% of net assets as of June 30, 1998)
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Common Stocks 89.52%
Cash, Equivalents & Other Assets 10.48%++
</TABLE>
================================================================================
TOP 10 HOLDINGS
(% of net assets as of June 30, 1998)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
1. Royal Dutch Petroleum Co. 2.57%
2. Novartis S.A. Registered 1.83%
3. Glaxo Wellcome PLC 1.79%
4. British Petroleum Co. PLC 1.78%
5. Allianz AG Registered 1.66%
6. Deutsche Telekom AG 1.62%
7. Roche Holdings AG Genusscheine 1.44%
8. Nestle S.A. Registered 1.41%
9. Lloyds TSB Group PLC 1.41%
10. UBS AG Registered 1.38%
</TABLE>
================================================================================
TOP 10 COUNTRIES
(% of net assets as of June 30, 1998)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
1. United Kingdom 22.96%
2. Germany 14.53%
3. France 11.51%
4. Japan 8.72%
5. Switzerland 8.12%
6. Netherlands 7.93%
7. Italy 4.64%
8. Spain 4.60%
9. Belgium 3.73%
10. Portugal 1.34%
</TABLE>
================================================================================
* 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% on an annualized basis of the average daily net asset value of the
Service Class shares.
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, 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. MacKay-Shields Financial Corporation, the International
Equity Fund's sub-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.
52
<PAGE>
MAINSTAY
INSTITUTIONAL FUNDS INC.
INTERNATIONAL EQUITY FUND
PORTFOLIO OF INVESTMENTS
June 30, 1998 (Unaudited)
COMMON STOCKS (89.5%)+
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
-----------------------------------------------------------
AUSTRALIA (1.3%)
Broken Hill Proprietary Co., Ltd. (energy sources)..... 11,979 $ 101,255
Coles Myer, Ltd. (merchandising)....................... 9,436 36,812
Foster's Brewing Group, Ltd. (beverages & tobacco)..... 19,327 45,479
National Australia Bank, Ltd. (banking)................ 11,605 153,070
News Corp., Ltd.
(broadcasting & publishing)........................... 11,172 91,182
Pacific Dunlop, Ltd.
(multi-industry)...................................... 10,430 16,857
Telstra Corp., Ltd. (telecommunications)............... 522,000 1,338,245
WMC, Ltd.
(metals-nonferrous)................................... 8,125 24,453
------------
1,807,353
------------
BELGIUM (3.7%)
Delhaize-Le Lion, S.A. (merchandising)................. 4,840 338,182
Electrabel, S.A.
(utilities-electrical & gas).......................... 2,700 765,506
Fortis AG (insurance).................................. 3,650 931,856
Generale de Banque, S.A. (banking)..................... 970 720,123
KBC Bancassurance Holding N.V. (banking)............... 3,840 343,643
PetroFina, S.A.
(energy sources)...................................... 990 406,395
Reunies Electrobel & Tractebel, S.A. (multi-industry).. 6,070 889,032
Solvay, S.A. Class A
(chemicals)........................................... 8,760 694,478
------------
5,089,215
------------
FRANCE (11.5%)
Alcatel Alsthom, S.A.
(electrical & electronics)............................ 3,914 796,910
AXA-UAP, S.A. (insurance).............................. 9,684 1,089,166
Carrefour, S.A.
(merchandising)....................................... 1,525 964,787
Compagnie de Saint Gobain, S.A. (miscellaneous-
materials & commodities).............................. 2,657 492,637
Compagnie de Suez, S.A. (banking)...................... 27 108
Elf Aquitaine, S.A.
(energy sources)...................................... 7,095 997,474
Eridania Beghin-Say, S.A.
(food & household products)........................... 1,970 434,989
France Telecom, S.A. (telecommunications).............. 23,130 1,595,298
Groupe Danone, S.A.
(food & household products)........................... 2,507 691,226
</TABLE>
- --------
+Percentages indicated are based on Fund net assets.
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
-----------------------------------------------------------
FRANCE (Continued)
Havas, S.A.
(business & public services).......................... 5,050 $ 428,488
Lafarge, S.A. (building materials & components)........ 3,973 410,704
L'Air Liquide, S.A. (chemicals)........................ 7,230 1,195,828
L'Oreal, S.A.
(health & personal care).............................. 2,198 1,222,601
LVMH (Moet Hennessy Louis Vuitton), S.A.
(beverages & tobacco)................................. 1,610 322,212
Michelin (CGDE), S.A. Class B (tire & rubber).......... 5,045 291,217
Paribas, S.A. (banking)................................ 2,444 261,539
Pernod-Ricard, S.A.
(beverages & tobacco)................................. 2,680 185,729
Pinault-Printemps-Redoute, S.A. (building materials &
components)........................................... 450 376,611
PSA Peugeot, S.A.
(automobiles)......................................... 1,620 348,328
Rhone-Poulenc, S.A. Class A (chemicals)................ 6,632 374,050
Schneider, S.A.
(machinery & engineering)............................. 3,096 246,870
Societe Generale, S.A. Class A (banking)............... 2,054 427,038
Suez Lyonnaise des Eaux, S.A. (multi-industry)......... 3,414 561,845
Thomson CSF, S.A. (aerospace & military technology).... 9,085 345,607
Total, S.A. Class B
(energy sources)...................................... 4,280 556,412
Vivendi, S.A.
(business & public services).......................... 5,112 1,091,559
------------
15,709,233
------------
GERMANY (14.5%)
Allianz AG Registered (insurance)...................... 6,800 2,265,995
BASF AG (chemicals).................................... 20,300 964,372
Bayer AG (chemicals)................................... 27,850 1,441,075
Daimler-Benz AG
(automobiles)......................................... 17,050 1,676,630
Daimler-Benz AG Rights (automobiles) (a)............... 12,050 13,352
Deutsche Bank AG (banking)............................. 16,350 1,382,251
Deutsche Telekom AG (telecommunications)............... 81,000 2,216,800
Dresdner Bank AG (banking)............................. 22,900 1,236,957
Karstadt AG (merchandising)............................ 800 388,912
Linde AG
(machinery & engineering)............................. 650 446,529
Mannesmann AG
(machinery & engineering)............................. 10,000 1,027,681
Muenchener Rueckversicherungs-Gesellschaft AG
Registered (insurance)................................ 1,940 962,995
</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, 1998 (Unaudited)
COMMON STOCKS (Continued)
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
------------------------------------------------------------
GERMANY (Continued)
Preussag AG (multi-industry)........................... 200 $ 71,578
RWE AG
(utilities-electrical & gas).......................... 20,700 1,224,774
Siemens AG
(electrical & electronics)............................ 27,150 1,656,795
Thyssen AG (metals-steel).............................. 1,150 292,432
VEBA AG
(utilities-electrical & gas).......................... 15,050 1,011,791
Viag AG (multi-industry)............................... 1,000 688,075
Volkswagen AG (automobiles)............................ 900 869,069
------------
19,838,063
------------
ITALY (4.7%)
Assicurazioni Generali S.p.A. (insurance).............. 14,015 456,068
Banca Commerciale Italiana S.p.A. (banking)............ 56,000 335,143
Benetton Group S.p.A.
(textile & apparel)................................... 114,400 237,663
Credito Italiano S.p.A.
(banking)............................................. 79,000 413,858
Edison S.p.A. (energy sources)......................... 11,000 88,343
Ente Nazionale Idrocarburi S.p.A. (energy sources)..... 152,000 996,960
Fiat S.p.A. (automobiles).............................. 55,300 242,222
Fiat S.p.A. di Risp
(automobiles)......................................... 61,600 152,595
Istituto Bancario San Paolo di Torino S.p.A. (banking). 3,000 43,323
Istituto Nazionale delle Assicurazioni S.p.A.
(insurance)........................................... 132,000 375,296
Italgas S.p.A.
(utilities-electrical & gas).......................... 43,000 175,273
Mediobanca S.p.A.
(financial services).................................. 19,900 252,643
Montedison S.p.A.
(multi-industry)...................................... 142,900 177,398
Olivetti Group S.p.A.
(data processing & reproduction) (a).................. 50,000 74,457
Parmalat Finanziaria S.p.A. (food & household
products)............................................. 43,000 87,758
Pirelli S.p.A.
(industrial components)............................... 35,000 109,363
Riunione Adriatica di Sicurta S.p.A. (insurance)....... 8,600 112,088
Sirti S.p.A. (telecommunications)...................... 28,000 152,438
Telecom Italia S.p.A. (telecommunications)............. 95,111 700,669
Telecom Italia S.p.A. di Risp (telecommunications)..... 47,093 228,147
Telecom Italia Mobile S.p.A. (telecommunications)...... 114,000 697,658
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
------------------------------------------------------------
ITALY (Continued)
Telecom Italia Mobile S.p.A. di Risp
(telecommunications).................................. 69,000 $ 233,082
------------
6,342,445
------------
JAPAN (8.7%)
Ajinomoto Co., Inc. (food & household products) (c).... 1,000 8,754
Asahi Chemical Industry Co., Ltd. (chemicals) (c)...... 1,000 3,603
Asahi Glass Co., Ltd. (miscellaneous-materials &
components) (c)....................................... 50,000 270,188
Bank of Tokyo-Mitsubishi, Ltd. (banking)............... 46,000 486,871
Bridgestone Corp.
(industrial components)............................... 7,000 165,427
Canon, Inc. (recreation & other consumer goods) (c).... 13,000 295,045
Dai Nippon Printing Co., Ltd. (business & public
services) (c)......................................... 7,000 111,714
Daiei, Inc. (merchandising) (c)........................ 37,000 86,640
Denso Corp.
(industrial components) (c)........................... 12,000 198,858
Fanuc, Ltd. (electronic components & instruments) (c).. 2,000 69,168
Fuji Bank, Ltd. (banking) (c).......................... 14,000 62,439
Fuji Photo Film, Ltd. (recreation & other consumer
goods) (c)............................................ 2,000 69,600
Fujitsu, Ltd. (data processing & reproduction) (c)..... 21,000 220,905
Furukawa Electric Co., Ltd. (industrial components)
(c)................................................... 51,000 171,601
Hankyu Corp. (transportation-road & rail) (c).......... 21,000 86,093
Hitachi Corp., Ltd.
(electrical & electronics) (c)........................ 54,000 352,108
Honda Motor Co., Ltd. (automobiles) (c)................ 6,000 213,556
Industrial Bank of Japan, Ltd. (banking) (c)........... 32,000 200,587
Ito-Yokado Co., Ltd. (merchandising) (c)............... 5,000 235,243
Itochu Corp. (wholesale & international trade) (c)..... 1,000 2,162
Japan Airlines Co. (transportation-airlines) (a)(c).... 2,000 5,562
Japan Energy Corp.
(energy sources) (c).................................. 86,000 91,086
Kajima Corp. (construction & housing) (c).............. 26,000 71,185
Kansai Electric Power Co., Inc. (utilities-electrical &
gas) (c).............................................. 9,200 159,749
Kao Corp. (food & household products) (c).............. 14,000 215,862
</TABLE>
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.
COMMON STOCKS (Continued)
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
-----------------------------------------------------------
JAPAN (Continued)
Kawasaki Steel Corp.
(metals-steel) (c).................................... 45,000 $ 81,056
Kirin Brewery Co., Ltd. (beverages & tobacco) (c)...... 11,000 103,824
Komatsu, Ltd. (machinery & engineering) (c)............ 48,000 233,096
Kubota Corp. (machinery & engineering) (c)............. 10,000 23,056
Marubeni Corp. (wholesale & international trade) (c)... 96,000 191,595
Marui Co., Ltd.
(merchandising) (c)................................... 1,000 14,914
Matsushita Electric Industrial Co., Ltd. (appliances &
household durables) (c)............................... 22,000 353,477
Mitsubishi Chemical Corp. (chemicals) (c).............. 19,471 35,212
Mitsubishi Corp.
(multi-industry) (c).................................. 33,000 204,478
Mitsubishi Electric Corp. (electrical &
electronics) (a)(c)................................... 104,000 239,033
Mitsubishi Estate Co., Ltd. (construction &
housing) (c).......................................... 22,000 193,382
Mitsubishi Heavy Industries, Ltd. (machinery &
engineering) (c)...................................... 29,000 109,487
Mitsubishi Trust & Banking Corp. (financial services).. 11,000 93,442
Mitsui Engineering & Shipbuilding Co., Ltd. (machinery
& engineering) (a).................................... 56,000 42,365
Mitsui Fudosan Co., Ltd. (construction & housing)...... 21,000 165,830
Mitsui Marine & Fire Insurance Co., Ltd. (insurance)... 2,000 10,044
Mitsui Trust & Banking Co., Ltd. (financial services).. 28,000 65,969
Mitsukoshi, Ltd. (merchandising)....................... 26,000 74,745
NEC Corp.
(electrical & electronics)............................ 20,000 186,321
Nippon Express Co., Ltd. (transportation-road & rail).. 15,000 80,408
Nippon Oil Co., Ltd.
(energy sources)...................................... 56,000 180,759
Nippon Paper Industries Co. (forest products & paper).. 13,000 54,138
Nippon Steel Corp.
(metals-steel)........................................ 75,000 131,852
Nippon Telegraph & Telephone Corp.
(telecommunications).................................. 100 828,620
Nippon Yusen Kabushiki Kaisha (transportation-
shipping)............................................. 1,000 3,386
Nissan Motor Co., Ltd. (automobiles)................... 60,000 188,915
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
------------------------------------------------------------
JAPAN (Continued)
NKK Corp. (metals-steel)............................... 106,000 $ 101,576
Nomura Securities Co., Ltd. (financial services)....... 9,000 104,725
Obayashi Corp.
(construction & housing).............................. 14,000 59,312
Oji Paper Co., Ltd.
(forest products & paper)............................. 1,000 4,352
Osaka Gas Co., Ltd.
(utilities-electrical & gas).......................... 46,000 117,989
Sakura Bank, Ltd. (banking)............................ 12,000 31,126
Sankyo Co., Ltd.
(health & personal care).............................. 8,000 182,142
Sanyo Electric Co., Ltd. (appliances & household
durables)............................................. 55,000 166,436
Sekisui Chemical Co., Ltd. (chemicals)................. 6,000 30,693
Sekisui House, Ltd.
(construction & housing).............................. 1,000 7,745
Sharp Corp. (appliances & household durables).......... 23,000 186,264
Shimizu Corp.
(construction & housing).............................. 1,000 2,882
Sony Corp. (appliances & household durables)........... 5,200 447,719
Sumitomo Bank, Ltd.
(banking)............................................. 19,000 184,808
Sumitomo Chemical Co., Ltd. (chemicals)................ 8,000 24,670
Sumitomo Electric Industries (industrial components)... 19,000 192,064
Sumitomo Marine & Fire Insurance Co. (insurance)....... 2,000 11,182
Sumitomo Metal Industries, Ltd. (metals-steel)......... 5,000 8,034
Sumitomo Metal Mining Co. (metals-nonferrous).......... 1,000 4,056
Takeda Chemical Industries, Ltd. (health & personal
care)................................................. 6,000 159,519
Teijin, Ltd. (chemicals)............................... 4,000 12,104
Tobu Railway Co., Ltd. (transportation-road & rail).... 48,000 126,923
Tohoku Electric Power Co., Inc. (utilities-electrical &
gas).................................................. 9,000 132,608
Tokio Marine & Fire Insurance Co. (insurance).......... 20,000 205,487
Tokyo Dome Corp.
(leisure & tourism)................................... 9,000 48,634
Tokyo Electric Power Co., Inc. (utilities-electrical &
gas).................................................. 15,300 299,843
Tokyo Gas Co., Ltd.
(utilities-electrical & gas).......................... 1,000 2,226
Tokyu Corp.
(transportation-road & rail).......................... 27,000 81,899
Toppan Printing Co., Ltd. (business & public services). 10,000 106,922
</TABLE>
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
PORTFOLIO OF INVESTMENTS (Continued)
June 30, 1998 (Unaudited)
COMMON STOCKS (Continued)
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
------------------------------------------------------------
JAPAN (Continued)
Tostem Corp. (building materials & components)......... 3,000 $ 38,864
Toto, Ltd. (building materials & components)........... 1,000 6,074
Toyoda Automatic Loom Works, Ltd. (machinery &
engineering).......................................... 5,000 88,261
Toyota Motor Corp. (automobiles)....................... 26,000 672,515
Yamanouchi Pharmaceutical Co., Ltd. (health & personal
care)................................................. 15,000 312,337
------------
11,905,401
------------
NETHERLANDS (7.9%)
ABN AMRO Holding N.V. (banking)........................ 30,600 716,027
Akzo Nobel N.V.
(health & personal care).............................. 2,200 489,051
Elsevier N.V.
(broadcasting & publishing)........................... 10,900 164,500
Heineken N.V.
(beverages & tobacco)................................. 9,100 357,429
ING Groep N.V. (insurance)............................. 28,805 1,886,138
Koninklijke KPN N.V.
(forest products & paper)............................. 17,786 684,607
Philips Electronics N.V. (appliances & household
durables)............................................. 10,600 891,053
Royal Dutch Petroleum Co. (energy sources)............. 63,300 3,510,056
TNT Post Group N.V. (transportation-shipping) (a)...... 17,786 454,656
Unilever CVA N.V. (food & household products).......... 18,800 1,491,635
Wolters Kluwer CVA N.V. (broadcasting & publishing).... 1,310 179,799
------------
10,824,951
------------
NEW ZEALAND (0.1%)
Telecom Corp. of New Zealand Ltd. (telecommunications). 74,250 158,794
------------
PORTUGAL (1.4%)
Banco Comercial Portugues, S.A. Registered (banking)... 10,200 289,644
Banco Espirito Santo e Comercial de Lisboa, S.A.
Registered (banking).................................. 6,100 183,192
Electricidade de Portugal, S.A. (utilities-electrical &
gas).................................................. 23,500 546,321
Jeronimo Martins & Filho SGPS, S.A. (food & household
products)............................................. 4,000 192,175
Portugal Telecom, S.A. Registered (telecommunications). 11,600 614,836
------------
1,826,168
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
-----------------------------------------------------------
SPAIN (4.6%)
Acerinox, S.A. (metals-steel).......................... 924 $ 123,246
Autopistas Concesionares Espanola, S.A. (business &
public services) (a).................................. 11,893 184,502
Banco de Bilbao Vizcaya, S.A. Registered (banking)..... 18,280 939,717
Banco de Central Hispanoamericano, S.A. (banking)...... 13,460 423,778
Banco de Santander, S.A. (banking)..................... 26,060 668,129
Corporacion Bancaria de Espana, S.A. (banking)......... 20,080 451,199
Corporacion Mapfre, S.A. (insurance)................... 3,780 132,837
Endesa, S.A.
(utilities-electrical & gas).......................... 28,370 621,725
Fomento de Construcciones y Contratas, S.A.
(construction & housing).............................. 2,180 112,637
Gas Natural SDG, S.A.
(utilities-electrical & gas).......................... 4,060 293,841
Iberdrola, S.A.
(utilities-electrical & gas).......................... 36,370 591,546
Repsol, S.A. (energy sources).......................... 9,550 527,116
Telefonica de Espana, S.A. (telecommunications)........ 26,260 1,216,150
------------
6,286,423
------------
SWITZERLAND (8.1%)
Credit Suisse Group Registered (banking)............... 5,200 1,157,033
Nestle S.A. Registered (food & household products)..... 900 1,926,015
Novartis S.A. Registered
(health & personal care).............................. 1,500 2,496,027
Roche Holdings AG Genusscheine
(health & personal care).............................. 200 1,963,989
Schweizerische Rueckversicherungs Gesellschaft
Registered (insurance)................................ 400 1,011,596
UBS AG Registered (banking)............................ 5,084 1,890,412
Zurich Versicherungs Gesellschaft Registered
(insurance)........................................... 1,000 638,181
------------
11,083,253
------------
UNITED KINGDOM (23.0%)
Abbey National PLC
(banking) (c)......................................... 59,428 1,058,983
Barclays PLC (banking) (c)............................. 51,031 1,473,866
Bass PLC
(beverages & tobacco) (c)............................. 27,033 505,172
B.A.T Industries PLC
(beverages & tobacco) (c)............................. 96,927 967,911
</TABLE>
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.
COMMON STOCKS (Continued)
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
-----------------------------------------------------------
UNITED KINGDOM (Continued)
BG PLC (energy sources) (c)............................ 120,167 $ 695,731
BOC Group PLC (chemicals) (c).......................... 75,187 1,026,178
Boots Co. PLC
(merchandising) (c)................................... 39,324 654,153
British Airways PLC (transportation-airlines) (c)...... 39,694 427,512
British Petroleum Co. PLC (energy sources) (c)......... 166,990 2,430,987
British Telecommunications PLC (telecommunications)
(c)................................................... 142,236 1,750,243
BTR PLC (multi-industry) (c)........................... 124,166 352,191
BTR PLC Class B
(multi-industry) (a)(c)............................... 90,384 52,028
Cable & Wireless PLC (telecommunications) (c).......... 41,978 510,945
Centrica PLC
(energy sources) (a)(c)............................... 52,514 88,934
Commercial Union PLC (insurance) (c)................... 38,124 711,796
Diageo PLC
(beverages & tobacco) (c)............................. 79,623 947,893
EMI Group PLC (recreation & other consumer goods) (c).. 31,850 279,260
General Electric Co. PLC (electrical & electronics)
(c)................................................... 100,912 869,641
GKN PLC (machinery & engineering) (c).................. 33,130 422,043
Glaxo Wellcome PLC
(health & personal care) (c).......................... 81,392 2,449,881
Granada Group PLC
(leisure & tourism) (c)............................... 20,166 371,463
Great Universal Stores PLC (The) (merchandising) (c)... 48,686 642,144
Hanson PLC
(multi-industry) (c).................................. 35,635 216,275
HSBC Holdings PLC
(financial services) (c).............................. 28,752 729,666
Imperial Chemical Industries PLC (chemicals) (c)....... 24,720 398,430
Imperial Tobacco Group PLC (beverages & tobacco) (c)... 17,420 128,033
Kingfisher PLC
(merchandising) (c)................................... 21,778 352,829
Lloyds TSB Group PLC
(banking) (c)......................................... 137,438 1,919,371
Marks & Spencer PLC (merchandising) (c)................ 82,288 751,018
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
------------------------------------------------------------
UNITED KINGDOM (Continued)
MEPC PLC (real estate) (c)............................. 34,944 $ 308,429
National Power PLC
(utilities-electrical & gas) (c)...................... 28,450 267,724
Peninsular & Oriental Steam Navigation Co. Deferred
Stock (The)
(transportation-shipping) (c)......................... 22,626 326,362
Prudential Corp. PLC
(insurance) (c)....................................... 90,909 1,198,287
Rank Group PLC
(leisure & tourism) (c)............................... 27,627 150,387
Reed International PLC (broadcasting & publishing) (c). 47,962 433,334
Reuters Group PLC (broadcasting & publishing) (c)...... 27,352 313,069
Rio Tinto PLC Registered (metals-nonferrous) (c)....... 34,448 388,254
RMC Group PLC (building materials & components) (c).... 14,163 245,999
Sainsbury (J.) PLC (merchandising) (c)................. 56,459 501,154
Scottish Power PLC
(utilities-electrical & gas) (c)...................... 47,860 422,430
SmithKline Beecham PLC
(health & personal care).............................. 133,840 1,633,529
Thorn PLC (appliances & household durables) (c)........ 7,617 29,232
Unilever PLC (food & household products) (c)........... 103,154 1,107,545
Vodafone Group PLC
(multi-industry) (c).................................. 65,872 836,397
------------
31,346,709
------------
Total Common Stocks (Cost $98,334,724)................. 122,218,008
------------
WARRANTS (0.0%) (b)
FRANCE (0.0%) (b)
Vivendi, S.A.
Call Warrants
Strike price FF 900
Expire 5/2/01
(business & public
services) (a)(f)...................................... 5,112 10,062
------------
Total Warrants......................................... 10,062
------------
</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
PORTFOLIO OF INVESTMENTS (Continued)
June 30, 1998 (Unaudited)
SHORT-TERM INVESTMENTS (7.7%)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
------------------------------------------------------------
COMMERCIAL PAPER (7.7%)
UNITED STATES (7.7%)
BellSouth Telecommunications Inc.
5.95%, due 7/2/98 (telecommunications)............ $1,600,000 $ 1,599,736
Goldman Sachs Group L.P. (The)
6.25%, due 7/1/98
(financial services).............................. 4,630,000 4,630,000
Merrill Lynch & Co. Inc.
6.14%, due 7/1/98
(financial services).............................. 4,269,000 4,269,000
------------
Total Short-Term Investments (Cost $10,498,736).... 10,498,736
------------
Total Investments (Cost $108,833,460) (d).......... 97.2% 132,726,806 (e)
Cash and Other Assets, Less Liabilities............ 2.8 3,816,909
---------- ------------
Net Assets......................................... 100.0% $136,543,715
========== ============
</TABLE>
- --------
(a) Non-income producing security.
(b) Less than one tenth of a percent.
(c) Segregated or partially segregated as collateral for forward foreign
currency contracts.
(d) The cost for Federal income tax purposes is $109,910,273.
(e) At June 30, 1998 net unrealized appreciation for securities was
$22,816,533, 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 $31,042,752 and aggregate
gross unrealized depreciation for all investments on which there was an
excess of cost over market value of $8,226,219.
(f) FF-French Franc.
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.......................... $ 345,607 0.3%
Appliances & Household Durables.......................... 2,353,439 1.7
Automobiles.............................................. 4,377,182 3.2
Banking.................................................. 17,454,232 12.8
Beverages & Tobacco...................................... 3,563,681 2.6
Broadcasting & Publishing................................ 1,181,884 0.9
Building Materials & Components.......................... 1,078,251 0.8
Business & Public Services............................... 1,933,247 1.4
Chemicals................................................ 6,200,693 4.5
Construction & Housing................................... 612,973 0.5
Data Processing & Reproduction........................... 295,362 0.2
Electrical & Electronics................................. 4,100,808 3.0
Electronic Components & Instruments...................... 69,168 0.1
Energy Sources........................................... 10,671,509 7.8
Financial Services....................................... 10,145,445 7.4
Food & Household Products................................ 6,155,958 4.5
Forest Products & Paper.................................. 743,097 0.5
Health & Personal Care................................... 10,909,077 8.0
Industrial Components.................................... 837,313 0.6
Insurance................................................ 11,999,011 8.8
Leisure & Tourism........................................ 570,484 0.4
Machinery & Engineering.................................. 2,639,390 1.9
Merchandising............................................ 5,041,536 3.7
Metals-Nonferrous........................................ 416,763 0.3
Metals-Steel............................................. 738,196 0.5
Miscellaneous-Materials & Commodities.................... 492,638 0.4
Miscellaneous-Materials & Components..................... 270,188 0.2
Multi-Industry........................................... 4,066,155 3.0
Real Estate.............................................. 308,429 0.2
Recreation & Other Consumer Goods........................ 364,645 0.3
Telecommunications....................................... 13,841,659 10.1
Textile & Apparel........................................ 237,663 0.2
Tire & Rubber............................................ 291,217 0.2
Transportation-Airlines.................................. 433,074 0.3
Transportation-Road & Rail............................... 375,323 0.3
Transportation-Shipping.................................. 784,404 0.6
Utilities-Electrical & Gas............................... 6,633,348 4.9
Wholesale & International Trade.......................... 193,757 0.1
------------ -----
132,726,806 97.2
Cash and Other Assets, Less Liabilities.................. 3,816,909 2.8
------------ -----
Net Assets............................................... $136,543,715 100.0%
============ =====
</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.
58
<PAGE>
MAINSTAY
INSTITUTIONAL FUNDS INC.
INTERNATIONAL EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES STATEMENT OF OPERATIONS
As of June 30, 1998 (Unaudited) For the six months ended June 30,
1998 (Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investment in securities, at value
(identified cost $108,833,460)................................. $132,726,806
Cash denominated in foreign currencies (identified cost
$16,498,719)................................................... 16,474,304
Cash............................................................ 330,050
Receivables:
Investment securities sold...................................... 12,150,012
Fund shares sold................................................ 660,000
Dividends and interest.......................................... 611,139
Unrealized appreciation on forward foreign currency contracts... 384,925
Unamortized organization expense................................ 3,408
------------
Total assets.................................................. 163,340,644
------------
LIABILITIES:
Payables:
Investment securities purchased................................. 26,340,358
MainStay Management............................................. 92,247
Custodian....................................................... 26,707
Transfer agent.................................................. 2,222
Accrued expenses................................................ 34,282
Unrealized depreciation on forward foreign currency contracts... 301,113
------------
Total liabilities............................................. 26,796,929
------------
Net assets...................................................... $136,543,715
============
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.001 per share)
1 billion shares authorized
Institutional Class............................................. $ 11,629
Institutional Service Class..................................... 58
Additional paid-in capital...................................... 114,904,478
Accumulated undistributed net investment income................. 984,176
Accumulated distribution in excess of net realized gain on
investments.................................................... (3,337,442)
Accumulated net realized loss on foreign currency transactions.. (20,890)
Net unrealized appreciation on investments...................... 23,893,346
Net unrealized appreciation on translation of other assets and
liabilities in foreign currencies and forward foreign currency
contracts...................................................... 108,360
------------
Net assets...................................................... $136,543,715
============
Institutional Class
Net assets applicable to outstanding shares..................... $135,867,522
============
Shares of capital stock outstanding............................. 11,629,272
============
Net asset value per share outstanding........................... $ 11.68
============
Institutional Service Class
Net assets applicable to outstanding shares..................... $ 676,193
============
Shares of capital stock outstanding............................. 58,380
============
Net asset value per share outstanding........................... $ 11.58
============
</TABLE>
<TABLE>
<S> <C>
INVESTMENT INCOME:
Income:
Dividends (a).................................................... $ 1,475,309
Interest......................................................... 381,372
-----------
Total income................................................... 1,856,681
-----------
Expenses:
Management....................................................... 539,586
Custodian........................................................ 29,222
Professional..................................................... 24,755
Transfer agent................................................... 13,387
Registration..................................................... 11,493
Shareholder communication........................................ 11,117
Directors........................................................ 1,553
Amortization of organization expense............................. 1,124
Service.......................................................... 811
Miscellaneous.................................................... 13,070
-----------
Total expenses before
reimbursement................................................. 646,118
Expense reimbursement from Manager............................... (10,500)
-----------
Net expenses................................................... 635,618
-----------
Net investment income............................................ 1,221,063
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN
CURRENCY TRANSACTIONS:
Net realized gain (loss) from:
Security transactions............................................ 2,312,271
Foreign currency transactions.................................... (20,890)
-----------
Net realized gain on investments and foreign currency
transactions.................................................... 2,291,381
-----------
Net change in unrealized appreciation on investments:
Security transactions............................................ 16,883,178
Translation of other assets and liabilities in foreign
currencies and forward foreign currency contracts............... (111,985)
-----------
Net unrealized gain on investments and foreign currency
transactions.................................................... 16,771,193
-----------
Net realized and unrealized gain on investments and foreign
currency transactions........................................... 19,062,574
-----------
Net increase in net assets resulting from operations............. $20,283,637
===========
</TABLE>
- --------
(a) Dividends recorded net of foreign withholding taxes of $207,223.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
59
<PAGE>
INTERNATIONAL EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 1998 (Unaudited) and the year ended December
31, 1997
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income.............................. $ 1,221,063 $ 1,587,348
Net realized gain (loss) on investments............ 2,312,271 (1,080,939)
Net realized gain (loss) on foreign currency
transactions...................................... (20,890) 10,328,021
Net change in unrealized appreciation on
investments....................................... 16,883,178 2,187,439
Net change in unrealized appreciation on
translation of other assets and liabilities in
foreign currencies and forward foreign currency
contracts......................................... (111,985) (4,839,110)
------------ ------------
Net increase in net assets resulting from
operations........................................ 20,283,637 8,182,759
------------ ------------
Dividends and distributions to shareholders:
From net investment income and net realized gain
on foreign currency transactions:
Institutional Class............................... -- (9,819,650)
Institutional Service Class....................... -- (50,906)
From net realized gain on investments:
Institutional Class............................... -- (2,944,160)
Institutional Service Class....................... -- (15,790)
------------ ------------
Total dividends and distributions to
shareholders.................................... -- (12,830,506)
------------ ------------
Capital share transactions:
Net proceeds from sale of shares:
Institutional Class............................... 9,362,488 11,849,479
Institutional Service Class....................... 33,951 163,090
Net asset value of shares issued to shareholders
in reinvestment of dividends and distributions:
Institutional Class............................... -- 12,104,179
Institutional Service Class....................... -- 66,689
------------ ------------
9,396,439 24,183,437
Cost of shares redeemed:
Institutional Class............................... (7,448,441) (31,841,602)
Institutional Service Class....................... (69,196) (318,224)
------------ ------------
Increase (decrease) in net assets derived from
capital share transactions....................... 1,878,802 (7,976,389)
------------ ------------
Net increase (decrease) in net assets............. 22,162,439 (12,624,136)
NET ASSETS:
Beginning of period................................ 114,381,276 127,005,412
------------ ------------
End of period...................................... $136,543,715 $114,381,276
============ ============
Accumulated undistributed net investment income
(excess distribution) at end of period............ $ 984,176 $ (236,887)
============ ============
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
60
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK)
61
<PAGE>
INTERNATIONAL EQUITY FUND
FINANCIAL HIGHLIGHTS
(Selected per share data and ratios)
<TABLE>
<CAPTION>
INSTITUTIONAL
INSTITUTIONAL SERVICE
CLASS CLASS
------------- -------------
SIX MONTHS
ENDED
JUNE 30, 1998*
---------------------------
<S> <C> <C>
Net asset value at beginning of period............. $ 9.93 $ 9.85
-------- --------
Net investment income.............................. 0.10 0.10
Net realized and unrealized gain (loss) on
investments....................................... 1.66 1.64
Net realized and unrealized gain (loss) on foreign
currency transactions............................. (0.01) (0.01)
-------- --------
Total from investment operations................... 1.75 1.73
-------- --------
Less dividends and distributions:
From net investment income and net realized gain on
foreign currency transactions..................... -- --
From net realized gain on investments.............. -- --
In excess of net investment income................. -- --
-------- --------
Total dividends and distributions.................. -- --
-------- --------
Net asset value at end of period................... $ 11.68 $ 11.58
======== ========
Total investment return (c)........................ 17.62% 17.56%
Ratios (to average net assets)/Supplemental Data:
Net investment income............................. 1.92%+ 1.67%+
Net expenses...................................... 1.00%+ 1.25%+
Expenses (before reimbursement)................... 1.02%+ 1.27%+
Portfolio turnover rate............................ 28% 28%
Net assets at end of period (in 000's)............. $135,868 $ 676
</TABLE>
- --------
* Unaudited.
+ Annualized.
(a) Commencement of operations.
(b) Less than one cent per share.
(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.
62
<PAGE>
MAINSTAY
INSTITUTIONAL FUNDS INC.
<TABLE>
<CAPTION>
INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL
INSTITUTIONAL SERVICE INSTITUTIONAL SERVICE INSTITUTIONAL SERVICE
CLASS CLASS CLASS CLASS CLASS CLASS
- ------------- ------------- ------------- ------------- ------------- -------------
YEAR ENDED DECEMBER 31 JANUARY 1, 1995(A)
- -------------------------------------------------------- THROUGH
1997 1996 DECEMBER 31, 1995
- ---------------------------- --------------------------- -----------------------------
<S> <C> <C> <C> <C> <C>
$ 10.63 $ 10.58 $ 10.35 $ 10.33 $ 10.00 $ 10.00
-------- -------- -------- -------- -------- --------
1.14 1.11 0.64 0.62 0.36 0.35
(0.10) (0.10) 0.09 0.09 0.17 0.16
(0.49) (0.52) 0.51 0.48 0.18 0.17
-------- -------- -------- -------- -------- --------
0.55 0.49 1.24 1.19 0.71 0.68
-------- -------- -------- -------- -------- --------
(0.96) (0.93) (0.84) (0.82) (0.10) (0.09)
(0.29) (0.29) (0.12) (0.12) (0.26) (0.26)
-- -- -- -- (0.00)(b) (0.00)(b)
-------- -------- -------- -------- -------- --------
(1.25) (1.22) (0.96) (0.94) (0.36) (0.35)
-------- -------- -------- -------- -------- --------
$ 9.93 $ 9.85 $ 10.63 $ 10.58 $ 10.35 $ 10.33
======== ======== ======== ======== ======== ========
5.44% 4.88% 12.09% 11.59% 7.17% 6.86%
1.23% 0.98% 0.83% 0.58% 1.05% 0.80%
1.00% 1.25% 1.00% 1.25% 1.00% 1.25%
1.04% 1.29% 1.07% 1.32% 1.07% 1.32%
37% 37% 23% 23% 26% 26%
$113,774 $ 607 $126,280 $ 725 $ 96,714 $ 213
</TABLE>
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
================================================================================
MARKET RECAP FOR THE 6-MONTH PERIOD ENDED 6/30/98
================================================================================
o European stock market performance was particularly strong, with France and
Germany posting returns in excess of 35% in U.S. dollar terms, fueled by
low inflation, low interest rates, and continued economic expansion.
o Asian and Pacific Rim countries continued to face a bear market, with Hong
Kong and Japan underperforming as economic, financial, and industrial
concerns spread throughout the region.
o The U.S. stock market continued to post strong gains, with the S&P 500*
returning 17.71% for the first half of 1998.
================================================================================
FUND RECAP FOR THE 6- AND 12-MONTH PERIODS ENDED 6/30/98
================================================================================
o One-year total returns of 23.44% and 23.02% for Institutional Class and
Service Class shares, respectively, as of 6/30/98.
o The Fund benefited from holding approximately 69% of its assets in stocks
and particularly from investments in France, Germany, and the United
States.
o Hong Kong stocks provided negative returns during the reporting period, but
accounted for less than 2% of the Fund's assets.
o Both share classes outperformed the average Lipper+ flexible portfolio
fund, which returned 10.13% during the first six months of 1998.
The U.S. equity market provided strong performance in the first half of 1998,
with continued growth, modest inflation, and low interest rates. Many equity
investors were concerned about the potential impact that the Asian crisis would
have on U.S. corporate earnings. Although this may have caused the market to be
somewhat choppy, in the end, investor confidence contributed to the domestic
stock market's moving to higher levels.
Europe experienced a bull market in the first half of the year, while Asia and
the Pacific Rim faced a bear market. Generally speaking, European markets were
fueled by strong macroeconomic factors such as low inflation, low interest
rates, and strong economic growth. Investors responded favorably to perceived
European market efficiencies and efforts by European corporations to increase
the value of their shares through mergers, strategic alliances, share
repurchases, cost cutting, or other means.
- --------------------------------------------------------------------------------
Inflation An increase in the cost of goods and services over time. As prices
rise, the purchasing power of the dollar declines.
Bull market/bear market A bull market occurs when security prices are rising, a
bear market occurs when security prices decline.
Mergers and acquisitions A merger is a combination of two companies, an
acquisition is the purchase of a company, division, or business unit. Companies
that engage in mergers and acquisitions often pay shareholders a premium, or an
amount over the current share price, to complete the transaction quickly and
under favorable terms.
- --------------------------------------------------------------------------------
================================================================================
* The "S&P 500(R)" is a registered trademark of The McGraw-Hill Companies,
Inc. The S&P 500(R) 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.
64
<PAGE>
================================================================================
During the first half of the year, Asian and Pacific Rim countries continued to
feel the lingering effects of earlier currency devaluations and lack of
confidence by many investors in the Japanese economy. In general, investor
confidence sank even lower when Japan announced that it was in recession.
Given this backdrop, how did the MainStay Institutional Multi-Asset Fund perform
in the first half of 1998?
For the six months ended 6/30/98, the MainStay Institutional Multi-Asset Fund
returned 13.76% and 13.57% for Institutional Class shares and Service Class
shares, respectively. Both share classes outperformed the average Lipper
flexible portfolio fund, which returned 10.13% for the first half of 1998.
What were the key factors that helped the Fund outperform its peers?
Primarily, the Fund benefited from its multifactor asset allocation models,
which estimate risk, return, and correlation for the asset classes. These models
are also used in determining how much to invest in domestic and foreign
securities. During the reporting period, the Fund had an average allocation to
equities of 69%, which helped it benefit from a strong market in the United
States and exceptional performance in key European countries. U.S. bond
investments also contributed positively to performance.
How much of the Fund's equity investments were in the United States?
The prospectus limits the amount of investments in foreign securities, so most
of the Fund's portfolio was in domestic stocks. As of June 30, 1998, 52% of the
Fund's net assets were invested in domestic stocks. In its domestic equity
investments, the Fund seeks to track the performance of the S&P 500, which
gained 17.71% over the reporting period.
Where did the Fund invest in Europe?
Although the Fund was not directly invested in foreign equities, it used stock
index futures contracts to obtain exposure to foreign stocks.
In the first six months of 1998, the Fund allocated approximately 3% of its
assets to stock index futures contracts of the French CAC-40 Index, a narrow
based capitalization-weighted index of 40 companies listed on the Paris stock
exchange. The CAC-40 Index returned 40.1% over the reporting period. During the
same period, the Fund invested approximately 3% of its assets in stock index
futures contracts in the German DAX Index, a total rate of return index of 30
selected blue-chip stocks traded on the Frankfurt Stock Exchange. The DAX
returned 33.8% during the first six months of 1998. Using futures contracts, the
Fund also benefited from exposure to equities in Great Britian (FTSE 100 Index)
and Canada (TSE 35 Official Index).
Were there markets that didn't have such positive performance?
Yes. The Fund had a small amount of its assets invested in futures contracts of
the Hong Kong Hang Seng Index, which declined 20% during the first half of the
year. It also had assets invested in futures contracts of the Australian
All-Ordinairies Index and the Japanese TOPIX, which were up 2% and 5%,
respectively, in U.S. dollar terms. Although these returns were positive, they
were well below the returns in the U.S. and Europe and negatively impacted the
Fund's overall performance.++
- --------------------------------------------------------------------------------
Devaluation Lowering the value of a country's currency relative to gold and/or
the currencies of other nations. Devaluation may also result from a rise in the
value of other currencies relative to the currency of a particular country.
Futures contract An agreement to buy or sell a specific amount of a financial
instrument at a particular price on a stipulated future date.
- --------------------------------------------------------------------------------
================================================================================
++ All of the country-specific indexes mentioned are unmanaged and are
considered to be representative of the stock markets of their respective
countries.
65
<PAGE>
================================================================================
How did the Fund's bond investments perform?
The Fund's bond investments seek to track the performance of the Salomon Smith
Barney Broad Investment Grade (BIG) Index.++ Thirty-year U.S. Treasury bonds
rallied as yields dropped to all-time lows in June. During the reporting period,
the Index as a whole returned 3.96%, with the best performance recorded by
Treasuries, up 4.22%. Mortgage-backed securities were the worst-performing
sector, but also provided positive performance, gaining 3.37%. While bonds
contributed positively to performance, the higher returns of stocks underscored
the value of the Fund's proprietary asset allocation.
Can investors look forward to similar performance in the second half of 1998?
Past performance is no guarantee of future results, and the returns that the
Fund achieved for the first six months of 1998 have been much higher than the
average annual total returns of domestic common stocks from 1926 through
1997.(S) While we cannot say how markets will move in the next several months,
we believe investors should maintain realistic expectations for the year as a
whole.
What is your outlook for the second half of 1998 and beyond?
We believe the continued divergence between the U.S., European, and Asian
markets demonstrates that the world may not be behaving as one global market.
This may help provide opportunities for us to identify pricing anomalies among
the various markets and asset classes in which the Fund may invest. Wherever the
markets may move, the Fund will continue to seek to maximize total return,
consistent with its percentage constraints on amounts allocated to each asset
class, from a combination of common stocks, income securities, and money market
instruments.
James A. Mehling, CFA
Portfolio Manager
================================================================================
Past performance is no guarantee of future results.
++ The Salomon Smith Barney Broad Investment Grade (BIG) Bond Index is an
unmanaged index that is considered representative of the U.S. bond market.
(S) Source: Ibbotson Associates, Chicago. Used with permission. All rights
reserved.
[GRAPHIC]
66
<PAGE>
$10,000 INVESTED IN MAINSTAY INSTITUTIONAL
MULTI-ASSET FUND VS LIPPER FLEXIBLE PORTFOLIO AVERAGE
INSTITUTIONAL CLASS SHARES
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
================================================================================
<TABLE>
<CAPTION>
Multi-Asset
Year Fund Lipper
---- ----------- --------
<S> <C> <C>
1/2/91 10,000 10,000
91 11,790 12,542
92 12,626 13,559
93 13,736 15,027
94 13,618 14,710
95 17,269 18,363
96 20,061 20,842
97 25,415 24,689
6/30/98 28,911 27,122
</TABLE>
$10,000 INVESTED IN MAINSTAY INSTITUTIONAL
MULTI-ASSET FUND VS LIPPER FLEXIBLE PORTFOLIO AVERAGE
SERVICE CLASS SHARES
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
================================================================================
<TABLE>
<CAPTION>
Multi-Asset
Year Fund Lipper
---- ----------- --------
<S> <C> <C>
1/2/91 10,000 10,000
91 11,790 12,542
92 12,626 13,559
93 13,736 15,027
94 13,618 14,710
95 17,254 18,363
96 19,995 20,842
97 25,255 24,689
6/30/98 28,682 27,122
</TABLE>
o 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, 1998 as of June 30, 1998
- -----------------------------------------------------------------------------------------------------------------
Year to Date One Year Five Year Since Inception
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Multi-Asset Fund Institutional Class 13.76% 23.44% 16.90% 15.20%
Multi-Asset Fund Service Class+ 13.57% 23.02% 16.71% 15.08%
Average Lipper Flexible Portfolio Fund 10.13% 18.16% 13.88% 14.36%
</TABLE>
YEAR-BY-YEAR PERFORMANCE
- --------------------------------------------------------------------------------
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
Institutional Class Shares
<TABLE>
<CAPTION>
Total Return
Year end %*
-------- ------------
<S> <C>
1991 17.90
1992 7.09
1993 8.79
1994 -0.86
1995 26.81
1996 16.16
1997 26.69
1998 (as of 6/30/98) 13.76
</TABLE>
================================================================================
TOP 10 EQUITY HOLDINGS
(% of net assets as of June 30, 1998)
<TABLE>
<S> <C>
1. General Electric Co. 1.71%
2. Microsoft Corp. 1.54%
3. Coca-Cola Co. (The) 1.22%
4. Exxon Corp. 1.00%
5. Merck & Co., Inc. 0.93%
6. Pfizer Inc. 0.82%
7. Wal-Mart Stores, Inc. 0.79%
8. Intel Corp. 0.72%
9. Procter & Gamble Co. (The) 0.71%
10. Royal Dutch Petroleum Co. 0.68%
</TABLE>
================================================================================
TOP 5 INDUSTRY HOLDINGS
(% of net assets as of June 30, 1998)
<TABLE>
<S> <C>
1. Financial-Miscellaneous 3.26%
2. Oil-Integrated International 2.76%
3. Drugs 2.69%
4. Computer Software & Services 2.37%
5. Health Care-Diversified 2.34%
</TABLE>
================================================================================
* 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% on an annualized basis of the average daily net asset value of the
Service Class shares.
+ 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%.
67
<PAGE>
MULTI-ASSET FUND
PORTFOLIO OF INVESTMENTS
June 30, 1998 (Unaudited)
LONG-TERM BONDS (12.0%)+ FOREIGN GOVERNMENT (0.2%)
CORPORATE BONDS (5.3%)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
-------------------------------------------------------------
BANKS (2.0%)
First Union Corp.
8.77%, due 11/15/04 (c).............................. $ 1,000,000 $ 1,038,750
Morgan (J.P.) & Co. Inc.
8.50%, due 8/15/03 (c)............................... 500,000 551,875
National Bank of Canada Series B
8.125%, due 8/15/04 (c)(d)........................... 7,850,000 8,625,188
------------
10,215,813
------------
BROKERAGE (0.1%)
PaineWebber Group, Inc. 7.75%, due 9/1/02 (c)......... 400,000 421,500
------------
CHEMICALS (0.1%)
Rhone-Poulenc S.A.
7.75%, due 1/15/02 (c)(d)............................ 350,000 366,625
------------
CONSUMER FINANCIAL SERVICES (0.1%)
Bear Stearns Cos., Inc. (The) 6.625%, due 1/15/04 (c). 500,000 506,875
------------
FINANCIAL--MISCELLANEOUS (1.4%)
Ford Motor Credit Co.
7.00%, due 9/25/01 (c)............................... 1,600,000 1,646,000
Morgan Stanley, Dean Witter, Discover & Co.
7.50%, due 2/1/24 (c)................................ 5,000,000 5,250,000
------------
6,896,000
------------
INDUSTRIAL (0.4%)
Cox Communications Inc. 6.50%, due 11/15/02 (c)....... 1,000,000 1,010,000
Petroleum Geo-Services ASA 6.625%, due 3/30/08 (c)(d). 1,000,000 1,000,000
------------
2,010,000
------------
OIL--INTEGRATED DOMESTIC (0.1%)
Occidental Petroleum Corp. 10.125%, due 11/15/01 (c).. 500,000 560,000
------------
PAPER & FOREST PRODUCTS (0.1%)
Georgia-Pacific Corp.
8.50%, due 2/1/22 (c)................................ 500,000 558,125
------------
UTILITIES--ELECTRIC (1.0%)
Citizens Utilities Co.
7.45%, due 1/15/04 (c)............................... 1,000,000 1,071,250
Florida Power & Light Co. 6.875%, due 4/1/04 (c)...... 500,000 511,875
Wisconsin Electric Power Co. 7.70%, due 12/15/27 (c).. 3,000,000 3,213,750
------------
4,796,875
------------
Total Corporate Bonds (Cost $26,232,355).............. 26,331,813
------------
</TABLE>
- --------
+ Percentages indicated are based on Fund net assets.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
------------------------------------------------------
CANADA (0.2%)
Manitoba (Province of)
9.625%, due 3/15/99 (c)(d)................... $ 500,000 $ 512,500
Quebec (Province of)
9.375%, due 4/1/99 (c)(d).................... 500,000 512,500
-------------
Total Foreign Government
(Cost $1,060,440)............................ 1,025,000
-------------
U.S. GOVERNMENT &
FEDERAL AGENCIES (6.5%)
FEDERAL HOME LOAN MORTGAGE CORPORATION GOLD (MORTGAGE PASS-THROUGH SECU-
RITIES)(0.8%)
6.00%, due 1/1/26- 1/1/28 (c)................ 1,152,828 1,123,648
7.00%, due 3/1/26- 10/1/26 (c)............... 881,172 894,390
7.50%, due 7/1/11- 9/1/11 (c)................ 744,496 765,668
7.75%, due 10/1/07 (c)....................... 562,123 583,730
8.00%, due 10/1/11- 11/1/11 (c).............. 706,060 728,565
-------------
4,096,001
-------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (MORTGAGE PASS-THROUGH
SECURITIES)(1.2%)
6.50%, due 11/1/03 (c)....................... 802,591 809,614
7.00%, due 10/1/03- 6/1/26 (c)............... 1,546,493 1,568,241
7.50%, due 7/1/11- 10/1/11 (c)............... 651,650 669,978
8.00%, due 7/1/09- 11/1/11 (c)............... 1,441,991 1,488,406
8.50%, due 6/1/26- 10/1/26 (c)............... 438,183 457,353
9.00%, due 6/1/26- 9/1/26 (c)................ 794,752 838,960
-------------
5,832,552
-------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (MORTGAGE PASS-THROUGH SECURI-
TIES)(0.7%)
7.00%, due 7/15/11- 10/15/11 (c)............. 883,073 904,874
7.50%, due 3/15/26- 6/15/26 (c).............. 806,796 828,983
8.00%, due 8/15/26- 10/15/26 (c)............. 758,977 786,490
8.50%, due 11/15/26 (c)...................... 431,995 455,619
9.00%, due 4/15/25- 11/15/26 (c)............. 547,268 585,748
-------------
3,561,714
-------------
RESOLUTION FUNDING CORP. (0.3%)
(zero coupon), due 10/15/10 (c).............. 2,600,000 1,292,356
-------------
</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.
U.S. GOVERNMENT & FEDERAL AGENCIES (Continued)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
------------------------------------------------------------
UNITED STATES TREASURY BONDS (1.3%)
6.125%, due 11/15/27 (c)............................. $ 1,500,000 $ 1,607,265
6.25%, due 8/15/23 (c)............................... 1,000,000 1,070,870
8.125%, due 5/15/21 (c).............................. 1,000,000 1,300,880
10.625%, due 8/15/15 (c)............................. 1,000,000 1,536,140
11.875%, due 11/15/03 (c)............................ 700,000 901,957
------------
6,417,112
------------
UNITED STATES TREASURY NOTES (2.2%)
5.00%, due 1/31/99 (c)............................... 1,000,000 997,400
5.75%, due 8/15/03 (c)............................... 2,300,000 2,323,736
6.375%, due 1/15/99 (c).............................. 1,000,000 1,003,760
7.00%, due 7/15/06 (c)............................... 2,100,000 2,292,528
7.50%, due 11/15/01- 5/15/02 (c)..................... 2,000,000 2,125,150
7.875%, due 11/15/99 (c)............................. 1,000,000 1,030,610
8.25%, due 7/15/98 (c)............................... 1,000,000 1,001,400
------------
10,774,584
------------
Total U.S. Government & Federal Agencies
(Cost $30,977,867)................................... 31,974,319
------------
Total Long-Term Bonds (Cost $58,270,662).............. 59,331,132
------------
COMMON STOCKS (51.7%)
<CAPTION>
SHARES
--------------
<S> <C> <C>
AEROSPACE/DEFENSE (0.7%)
Boeing Co. (The)...................................... 28,958 1,290,441
General Dynamics Corp................................. 3,694 171,771
Lockheed Martin Corp.................................. 5,626 595,653
Northrop Grumman Corp................................. 1,905 196,453
Raytheon Co. Class B.................................. 9,647 570,379
Rockwell International Corp........................... 5,594 268,862
United Technologies Corp.............................. 6,562 606,985
------------
3,700,544
------------
AIRLINES (0.2%)
AMR Corp. (a)......................................... 5,223 434,815
Delta Air Lines, Inc.................................. 2,249 290,684
Southwest Airlines Co................................. 6,361 188,445
US Airways Group, Inc. (a)............................ 2,906 230,300
------------
1,144,244
------------
ALUMINUM (0.1%)
Alcan Aluminum Ltd.................................... 6,452 178,236
Aluminum Co. of America............................... 4,871 321,182
Reynolds Metals Co.................................... 2,033 113,721
------------
613,139
------------
AUTO PARTS & EQUIPMENT (0.1%)
Cooper Tire & Rubber Co............................... 2,238 46,159
Echlin Inc............................................ 1,717 84,240
Genuine Parts Co...................................... 5,100 176,269
Goodyear Tire & Rubber Co. (The)...................... 4,515 290,935
------------
597,603
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
-------------------------------------------------------------
AUTOMOBILES (0.9%)
Chrysler Corp.......................................... 18,472 $ 1,041,359
Ford Motor Co.......................................... 34,779 2,051,961
General Motors Corp.................................... 19,196 1,282,533
------------
4,375,853
------------
BEVERAGES--ALCOHOLIC (0.2%)
Anheuser-Busch Cos., Inc............................... 13,931 657,369
Brown-Forman Corp. Class B............................. 2,015 129,464
Coors (Adolph) Co. Class B............................. 1,140 38,760
Seagram Co. Ltd. (The)................................. 9,875 404,258
------------
1,229,851
------------
BEVERAGES--SOFT DRINKS (1.6%)
Coca-Cola Co. (The) (c)................................ 70,952 6,066,396
PepsiCo, Inc. (c)...................................... 42,728 1,759,859
------------
7,826,255
------------
BROADCAST/MEDIA (0.6%)
CBS Corp. (a).......................................... 20,575 653,256
Clear Channel Communications, Inc. (a)................. 3,560 388,485
Comcast Corp. Special Class A.......................... 10,548 428,183
MediaOne Group Inc. (a)................................ 17,483 768,159
Tele-Communications, Inc. Series A TCI Group (a)....... 14,526 558,343
------------
2,796,426
------------
BUILDING MATERIALS (0.1%)
Masco Corp............................................. 4,844 293,062
Owens Corning.......................................... 1,503 61,341
Sherwin-Williams Co. (The)............................. 4,965 164,466
------------
518,869
------------
CHEMICALS (1.1%)
Air Products & Chemicals, Inc.......................... 6,777 271,080
Dow Chemical Co. (The)................................. 6,406 619,380
Du Pont (E.I.) De Nemours & Co......................... 32,514 2,426,357
Eastman Chemical Co.................................... 2,326 144,794
Goodrich (B.F.) Co. (The).............................. 2,053 101,880
Hercules Inc........................................... 2,733 112,395
Monsanto Co............................................ 17,116 956,356
Praxair, Inc........................................... 4,555 213,231
Rohm & Haas Co......................................... 1,703 177,006
Union Carbide Corp..................................... 3,891 207,682
------------
5,230,161
------------
CHEMICALS--DIVERSIFIED (0.1%)
Avery Dennison Corp.................................... 3,357 180,439
Engelhard Corp......................................... 4,193 84,908
FMC Corp. (a).......................................... 1,033 70,438
PPG Industries, Inc.................................... 5,153 358,456
------------
694,241
------------
</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, 1998 (Unaudited)
COMMON STOCKS (Continued)
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
------------------------------------------------------------
CHEMICALS--SPECIALTY (0.1%)
Grace (W.R.) & Co. (a)................................ 2,163 $ 36,906
Great Lakes Chemical Corp............................. 1,687 66,531
Morton International, Inc............................. 3,656 91,400
Nalco Chemical Co..................................... 1,993 70,004
Sigma-Aldrich Corp.................................... 2,951 103,654
------------
368,495
------------
COMMUNICATION--EQUIPMENT MANUFACTURERS (1.6%)
Andrew Corp. (a)...................................... 2,602 46,999
Ascend Communications, Inc. (a)....................... 5,504 272,792
Bay Networks, Inc. (a)................................ 6,317 203,723
Cabletron Systems, Inc. (a)........................... 4,551 61,154
Cisco Systems, Inc. (a)............................... 29,303 2,697,707
DSC Communications Corp. (a).......................... 3,280 98,400
General Instrument Corp. (a).......................... 4,322 117,504
Lucent Technologies Inc............................... 37,552 3,123,857
Northern Telecom Ltd.................................. 14,807 840,297
Scientific-Atlanta, Inc............................... 2,156 54,709
Tellabs, Inc. (a)..................................... 5,102 365,431
3Com Corp. (a)........................................ 10,233 314,025
------------
8,196,598
------------
COMPUTER SOFTWARE & SERVICES (2.4%)
Adobe Systems Inc..................................... 1,885 79,995
Autodesk, Inc......................................... 1,408 54,384
Automatic Data Processing, Inc........................ 8,655 630,733
Ceridian Corp. (a).................................... 2,199 129,191
Computer Associates International, Inc................ 15,662 870,220
Computer Sciences Corp. (a)........................... 4,483 286,912
Equifax Inc........................................... 4,236 153,820
First Data Corp....................................... 12,773 425,501
HBO & Co.............................................. 12,282 432,940
Microsoft Corp. (a)(c)................................ 70,624 7,653,876
Novell, Inc. (a)...................................... 10,031 127,895
Oracle Corp. (a)...................................... 27,909 685,515
Parametric Technology Corp. (a)....................... 7,717 209,324
Shared Medical Systems Corp........................... 785 57,648
------------
11,797,954
------------
COMPUTER SYSTEMS (2.0%)
Apple Computer, Inc. (a).............................. 3,823 109,672
Compaq Computer Corp. (c)............................. 47,388 1,344,634
Data General Corp. (a)................................ 1,480 22,108
Dell Computer Corp. (a)............................... 18,415 1,709,142
EMC Corp. (a)......................................... 14,281 639,967
Gateway 2000, Inc. (a)................................ 4,497 227,661
Hewlett-Packard Co.................................... 29,679 1,777,030
International Business Machines Corp.................. 27,038 3,104,300
Seagate Technology, Inc. (a).......................... 7,035 167,521
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
------------------------------------------------------------
COMPUTER SYSTEMS (Continued)
Silicon Graphics, Inc. (a)............................ 5,402 $ 65,499
Sun Microsystems, Inc. (a)............................ 10,840 470,863
Unisys Corp. (a)...................................... 7,186 203,005
------------
9,841,402
------------
CONGLOMERATES (0.1%)
Tenneco Inc........................................... 4,828 183,766
Textron Inc........................................... 4,710 337,648
------------
521,414
------------
CONTAINERS--METAL & GLASS (0.1%)
Ball Corp. ........................................... 861 34,601
Crown Cork & Seal Co., Inc............................ 3,654 173,565
Owens-Illinois, Inc. (a).............................. 4,404 197,079
------------
405,245
------------
CONTAINERS--PAPER (0.0%) (b)
Bemis Co., Inc........................................ 1,547 63,234
Stone Container Corp. (a)............................. 2,734 42,719
Temple-Inland Inc..................................... 1,582 85,230
------------
191,183
------------
COSMETICS (0.5%)
Alberto-Culver Co. Class B............................ 1,581 45,849
Avon Products, Inc.................................... 3,789 293,647
Gillette Co. (The).................................... 32,216 1,826,245
International Flavors & Fragrances Inc................ 3,083 133,918
------------
2,299,659
------------
DRUGS (2.7%)
Lilly (Eli) & Co...................................... 31,858 2,104,619
Merck & Co., Inc...................................... 34,423 4,604,076
Pfizer Inc............................................ 37,449 4,070,238
Pharmacia & Upjohn, Inc............................... 14,540 670,658
Schering-Plough Corp.................................. 21,017 1,925,683
------------
13,375,274
------------
ELECTRIC POWER COMPANIES (1.2%)
Ameren Corp........................................... 3,806 151,289
American Electric Power Co., Inc...................... 5,497 249,426
Baltimore Gas & Electric Co........................... 4,232 131,456
Carolina Power & Light Co............................. 4,236 183,737
Central & South West Corp............................. 6,020 161,788
Cinergy Corp.......................................... 4,486 157,010
Consolidated Edison, Inc.............................. 6,739 310,415
Dominion Resources, Inc............................... 5,635 229,626
DTE Energy Co......................................... 4,156 167,798
Duke Energy Corp...................................... 10,292 609,801
Edison International.................................. 10,373 306,652
Entergy Corp.......................................... 7,040 202,400
FirstEnergy Corp...................................... 6,500 199,875
FPL Group, Inc........................................ 5,308 334,404
</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>
------------------------------------------------------------
ELECTRIC POWER COMPANIES (Continued)
GPU, Inc. ............................................ 3,600 $ 136,125
Houston Industries Inc. .............................. 8,485 261,974
Niagara Mohawk Power Corp. (a)........................ 4,754 71,013
Northern States Power Co. ............................ 4,304 123,202
PacifiCorp............................................ 8,387 189,756
PECO Energy Co. ...................................... 6,327 184,669
PG&E Corp. ........................................... 10,972 346,304
PP&L Resources, Inc. ................................. 4,814 109,218
Public Service Enterprise Group Inc.................. 6,668 229,629
Southern Co. (The).................................... 20,017 554,221
Texas Utilities Co. .................................. 7,994 332,750
Unicom Corp. ......................................... 6,156 215,845
------------
6,150,383
------------
ELECTRICAL EQUIPMENT (2.0%)
AMP Inc............................................... 6,151 211,441
Emerson Electric Co................................... 12,709 766,511
General Electric Co. (c).............................. 93,373 8,496,943
General Signal Corp................................... 1,248 44,928
Grainger (W.W.), Inc. ................................ 2,823 140,621
Honeywell Inc. ....................................... 3,619 302,413
Raychem Corp. ........................................ 2,395 70,802
Thomas & Betts Corp................................... 1,510 74,367
------------
10,108,026
------------
ELECTRONIC--DEFENSE (0.0%) (b)
EG&G, Inc............................................. 1,259 37,770
------------
ELECTRONIC--INSTRUMENTATION (0.0%) (b)
Perkin-Elmer Corp. (The).............................. 1,333 82,896
Tektronix, Inc. ...................................... 1,408 49,808
------------
132,704
------------
ELECTRONIC--SEMICONDUCTORS (1.2%)
Advanced Micro Devices, Inc. (a)...................... 4,134 70,536
Applied Materials, Inc. (a)........................... 10,515 310,193
Intel Corp. .......................................... 48,650 3,606,181
KLA-Tencor Corp. (a).................................. 2,451 67,862
LSI Logic Corp. (a)................................... 3,996 92,158
Micron Technology, Inc. (a)........................... 6,058 150,314
Motorola, Inc. ....................................... 17,135 900,658
National Semiconductor Corp. (a)...................... 4,586 60,478
Texas Instruments Inc. ............................... 11,082 646,219
------------
5,904,599
------------
ENGINEERING & CONSTRUCTION (0.0%) (b)
Fluor Corp. .......................................... 2,331 118,881
Foster Wheeler Corp. ................................. 1,131 24,246
------------
143,127
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
------------------------------------------------------------
ENTERTAINMENT (0.8%)
King World Productions, Inc. (a)...................... 2,048 $ 52,224
Time Warner Inc. ..................................... 16,906 1,444,406
Viacom Inc. Class B (a)............................... 10,213 594,907
Walt Disney Co. (The)................................. 19,511 2,049,874
------------
4,141,411
------------
FINANCIAL--MISCELLANEOUS (1.9%)
American Express Co. ................................. 13,233 1,508,562
American General Corp. ............................... 7,243 515,611
Associates First Capital Corp. Class A................ 9,884 759,833
Capital One Finanicial Corp. ......................... 1,800 223,538
Fannie Mae............................................ 29,680 1,803,060
Franklin Resources Inc. .............................. 7,294 393,876
Freddie Mac........................................... 19,430 914,424
Green Tree Financial Corp. ........................... 3,872 165,770
MBIA Inc. ............................................ 2,772 207,553
MBNA Corp. ........................................... 14,388 474,804
Morgan Stanley, Dean Witter, Discover & Co. .......... 17,224 1,573,843
SLM Holding Corp. .................................... 4,800 235,200
SunAmerica Inc. ...................................... 5,591 321,133
Transamerica Corp. ................................... 1,830 210,679
------------
9,307,886
------------
FOOD DISTRIBUTORS (0.1%)
Cardinal Health, Inc. ................................ 3,077 288,469
SUPERVALU Inc. ....................................... 1,737 77,079
SYSCO Corp. .......................................... 9,667 247,717
------------
613,265
------------
FOODS (1.3%)
Bestfoods............................................. 8,231 477,912
Campbell Soup Co. .................................... 13,159 699,072
ConAgra, Inc. ........................................ 13,786 436,844
General Mills, Inc. .................................. 4,493 307,209
Heinz (H.J.) Co. ..................................... 10,338 580,220
Hershey Foods Corp. .................................. 4,088 282,072
Kellogg Co. .......................................... 11,767 441,998
Quaker Oats Co. (The)................................. 3,864 212,279
Ralston-Ralston Purina Group.......................... 3,002 350,671
Sara Lee Corp. ....................................... 13,365 747,605
Unilever, N.V. ....................................... 18,363 1,449,529
Wrigley (Wm.) Jr. Co. ................................ 3,311 324,478
------------
6,309,889
------------
GOLD (0.1%)
Barrick Gold Corp. ................................... 10,562 202,658
Battle Mountain Gold Co. ............................. 6,632 39,378
Homestake Mining Co. ................................. 6,001 62,260
Newmont Mining Corp. ................................. 4,426 104,564
Placer Dome Inc. ..................................... 7,119 83,648
------------
492,508
------------
</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, 1998 (Unaudited)
COMMON STOCKS (Continued)
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
------------------------------------------------------------
HARDWARE & TOOLS (0.1%)
Black & Decker Corp. (The)............................ 2,733 $ 166,713
Snap-on Inc. ......................................... 1,656 60,030
Stanley Works (The)................................... 2,575 107,023
------------
333,766
------------
HEALTH CARE--DIVERSIFIED (2.3%)
Abbott Laboratories................................... 44,259 1,809,087
Allergan, Inc. ....................................... 1,856 86,072
American Home
Products Corp. ...................................... 37,657 1,948,750
Bristol-Myers Squibb Co. ............................. 28,564 3,283,075
Johnson & Johnson (c)................................. 38,518 2,840,702
Mallinckrodt Inc. .................................... 2,058 61,097
Warner-Lambert Co. ................................... 23,434 1,625,734
------------
11,654,517
------------
HEALTH CARE--HMOs (0.1%)
Humana Inc. (a)....................................... 4,739 147,798
United Healthcare Corp. .............................. 5,561 353,123
------------
500,921
------------
HEALTH CARE--MISCELLANEOUS (0.2%)
ALZA Corp. (a)........................................ 2,405 104,016
Amgen Inc. (a)........................................ 7,273 475,472
HEALTHSOUTH Corp. (a)................................. 11,438 305,252
Manor Care, Inc. ..................................... 1,833 70,456
------------
955,196
------------
HEAVY DUTY TRUCKS & PARTS (0.1%)
Cummins Engine Co., Inc. ............................. 1,157 59,296
Dana Corp. ........................................... 3,042 162,747
Eaton Corp. .......................................... 2,005 155,889
ITT Industries, Inc. ................................. 3,351 125,244
Navistar International Corp. (a)...................... 1,989 57,432
PACCAR Inc. .......................................... 2,223 116,152
------------
676,760
------------
HOMEBUILDING (0.0%) (b)
Centex Corp. ......................................... 1,671 63,080
Kaufman & Broad
Home Corp. .......................................... 1,106 35,116
Pulte Corp. .......................................... 1,096 32,743
------------
130,939
------------
HOSPITAL MANAGEMENT (0.2%)
Columbia/HCA
Healthcare Corp. .................................... 18,411 536,220
Tenet Healthcare Corp. (a)............................ 8,857 276,781
------------
813,001
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
------------------------------------------------------------
HOTEL/MOTEL (0.1%)
Harrah's Entertainment, Inc. (a)...................... 2,926 $ 68,030
Hilton Hotels Corp. .................................. 7,100 202,350
Marriott International, Inc. Class A.................. 7,305 236,499
------------
506,879
------------
HOUSEHOLD--FURNISHINGS & APPLIANCES (0.1%)
Armstrong World Industries, Inc. ..................... 1,122 75,595
Maytag Corp. ......................................... 2,666 131,634
Whirlpool Corp. ...................................... 2,144 147,400
------------
354,629
------------
HOUSEHOLD PRODUCTS (1.1%)
Clorox Co. (The)...................................... 2,908 277,350
Colgate-Palmolive Co. ................................ 8,430 741,840
Fort James Corp. ..................................... 6,328 281,596
Kimberly-Clark Corp. ................................. 15,934 730,972
Procter & Gamble Co. (The) (c)........................ 38,553 3,510,733
------------
5,542,491
------------
HOUSEWARES (0.1%)
Fortune Brands, Inc. ................................. 4,984 191,573
Newell Co. ........................................... 4,571 227,693
Rubbermaid Inc. ...................................... 4,364 144,830
Tupperware Corp. ..................................... 1,835 51,609
------------
615,705
------------
INSURANCE BROKERS (0.2%)
Aon Corp. ............................................ 4,877 342,609
Marsh & McLennan Cos., Inc. .......................... 7,295 440,922
------------
783,531
------------
INVESTMENT BANK/BROKERAGE (0.3%)
Bear Stearns Cos., Inc. (The)......................... 3,200 182,000
Lehman Brothers Holdings Inc. ........................ 3,388 262,782
Merrill Lynch & Co., Inc. ............................ 9,921 915,212
Schwab (Charles) Corp. (The).......................... 7,612 247,390
------------
1,607,384
------------
LEISURE TIME (0.0%) (b)
Brunswick Corp. ...................................... 2,836 70,191
Mirage Resorts, Inc. (a).............................. 5,173 110,250
------------
180,441
------------
LIFE INSURANCE (0.3%)
Aetna Inc. ........................................... 4,144 315,462
Conseco, Inc. ........................................ 5,295 247,541
Jefferson-Pilot Corp. ................................ 3,034 175,782
Lincoln National Corp. ............................... 2,880 263,160
Torchmark Corp. ...................................... 3,948 180,621
UNUM Corp............................................. 3,962 219,891
------------
1,402,457
------------
</TABLE>
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.
COMMON STOCKS (Continued)
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
------------------------------------------------------------
MACHINE TOOLS (0.0%) (b)
Cincinnati Milacron Inc. ............................ 1,119 $ 27,206
------------
MACHINERY--DIVERSIFIED (0.3%)
Briggs & Stratton Corp. ............................. 631 23,623
Case Corp. .......................................... 2,086 100,650
Caterpillar Inc. .................................... 10,509 555,663
Cooper Industries, Inc. ............................. 7,098 194,863
Deere & Co. ......................................... 1,345 375,307
Harnischfeger Industries, Inc. ...................... 1,592 38,080
Ingersoll-Rand Co. .................................. 4,790 211,059
NACCO Industries, Inc. Class A....................... 196 25,333
Thermo Electron Corp. (a)............................ 4,554 155,690
Timken Co. (The)..................................... 1,745 53,768
------------
1,734,036
------------
MAJOR REGIONAL BANKS (2.3%)
Banc One Corp. ...................................... 20,078 1,120,603
Bank of New York Co., Inc. (The) .................... 10,706 649,720
BankBoston Corp. .................................... 8,404 467,473
BB&T Corp. .......................................... 4,071 275,301
Comerica Inc. ....................................... 4,510 298,788
Fifth Third Bancorp.................................. 7,517 473,571
Fleet Financial Group, Inc. ......................... 8,161 681,444
Huntington Bancshares Inc. .......................... 5,507 184,485
KeyCorp ............................................. 12,572 447,878
Mellon Bank Corp. ................................... 7,482 520,934
Mercantile Bancorp Inc. ............................. 3,812 192,030
National City Corp. ................................. 9,309 660,939
Northern Trust Corp. ................................ 3,224 245,830
Norwest Corp. ....................................... 21,641 808,832
PNC Bank Corp. ...................................... 8,659 465,962
Republic New York Corp. ............................. 3,068 193,092
State Street Corp. .................................. 4,568 317,476
Summit Bancorp. ..................................... 5,083 241,442
SunTrust Banks, Inc. ................................ 6,071 493,648
Synovus Financial Corp. ............................. 7,492 177,935
U.S. Bancorp......................................... 21,315 916,545
Wachovia Corp. ...................................... 5,926 500,747
Wells Fargo & Co. ................................... 2,574 949,806
------------
11,284,481
------------
MANUFACTURED HOUSING (0.0%) (b)
Fleetwood Enterprises, Inc........................... 1,015 40,600
------------
MANUFACTURING--DIVERSIFIED (0.6%)
Aeroquip-Vickers, Inc. .............................. 749 43,723
AlliedSignal Inc. ................................... 16,217 719,629
Crane Co. ........................................... 1,345 65,317
Dover Corp. ......................................... 6,401 219,234
Illinois Tool Works Inc. ............................ 7,092 472,948
Johnson Controls, Inc. .............................. 2,305 131,529
Millipore Corp. ..................................... 1,273 34,689
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
------------------------------------------------------------
MANUFACTURING--DIVERSIFIED (Continued)
Pall Corp. .......................................... 3,693 $ 75,707
Parker-Hannifin Corp. ............................... 3,144 119,865
Sealed Air Corp. (a)................................. 2,384 87,612
Tyco International Ltd. ............................. 16,700 1,052,100
------------
3,022,353
------------
MEDICAL PRODUCTS (0.5%)
Bard (C.R.), Inc. ................................... 1,674 63,717
Bausch & Lomb Inc. .................................. 1,506 75,488
Baxter International Inc. ........................... 8,077 434,644
Becton, Dickinson & Co. ............................. 3,537 274,560
Biomet, Inc. ........................................ 3,124 103,287
Boston Scientific Corp. (a).......................... 5,459 391,001
Guidant Corp. ....................................... 4,295 306,287
Medtronic, Inc. ..................................... 13,492 860,115
St. Jude Medical, Inc. (a)........................... 2,365 87,062
United States Surgical Corp. ........................ 2,063 94,124
------------
2,690,285
------------
METALS--MISCELLANEOUS (0.1%)
ASARCO Inc. ......................................... 1,285 28,591
Cyprus Amax Minerals Co. ............................ 2,604 34,503
Freeport-McMoRan Copper & Gold Inc. Class B.......... 5,158 78,337
Inco Ltd. ........................................... 4,827 65,768
Phelps Dodge Corp. .................................. 1,732 99,049
------------
306,248
------------
MISCELLANEOUS (0.7%)
AirTouch Communications, Inc. (a).................... 16,412 959,076
American Greetings Corp. Class A..................... 2,057 104,778
Archer-Daniels-Midland Co. .......................... 16,422 318,176
Corning Inc. ........................................ 6,606 229,559
Harcourt General, Inc. .............................. 1,961 116,680
Harris Corp. ........................................ 2,365 105,686
Jostens, Inc. ....................................... 1,077 25,983
Minnesota Mining & Manufacturing Co. ................ 11,623 955,265
Nextel Communications, Inc. Class A (a).............. 7,889 196,239
Pioneer Hi-Bred International, Inc. ................. 6,952 287,639
TRW Inc. ............................................ 3,459 188,948
------------
3,488,029
------------
MONEY CENTER BANKS (2.2%)
BankAmerica Corp. ................................... 19,607 1,694,780
Bankers Trust Corp. ................................. 2,896 336,117
Chase Manhattan Bank (The)........................... 24,474 1,847,787
Citicorp............................................. 12,899 1,925,176
First Chicago NBD Corp. ............................. 8,221 728,586
First Union Corp. ................................... 27,790 1,618,768
</TABLE>
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
PORTFOLIO OF INVESTMENTS (Continued)
June 30, 1998 (Unaudited)
COMMON STOCKS (Continued)
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
------------------------------------------------------------
MONEY CENTER BANKS (Continued)
Morgan (J.P.) & Co., Inc. ............................ 5,068 $ 593,589
NationsBank Corp...................................... 27,427 2,098,165
------------
10,842,968
------------
MULTI-LINE INSURANCE (1.2%)
American International Group, Inc. ................... 20,030 2,924,380
CIGNA Corp. .......................................... 6,196 427,524
Hartford Financial Services Group, Inc. (The)......... 3,349 383,042
Travelers Group Inc. ................................. 32,917 1,995,593
------------
5,730,539
------------
NATURAL GAS DISTRIBUTORS & PIPELINES (0.4%)
Coastal Corp. (The)................................... 3,008 209,996
Columbia Energy Group................................. 2,332 129,690
Consolidated Natural Gas Co. ......................... 2,703 159,139
Eastern Enterprises................................... 578 24,782
Enron Corp............................................ 9,401 508,242
NICOR Inc............................................. 1,355 54,369
ONEOK, Inc............................................ 912 36,366
Peoples Energy Corp. ................................. 1,003 38,741
Sempra Energy (a)..................................... 7,080 196,464
Sonat, Inc............................................ 3,130 120,896
Williams Cos., Inc. (The)............................. 12,197 411,649
------------
1,890,334
------------
OFFICE EQUIPMENT & SUPPLIES (0.3%)
Moore Corp. Ltd. ..................................... 2,486 32,940
Pitney Bowes Inc. .................................... 7,774 374,124
Xerox Corp. .......................................... 9,367 951,921
------------
1,358,985
------------
OIL & GAS DRILLING (0.0%) (b)
Helmerich & Payne, Inc. .............................. 1,430 31,817
Rowan Cos., Inc. (a).................................. 2,527 49,119
------------
80,936
------------
OIL--EXPLORATION & PRODUCTION (0.1%)
Anadarko Petroleum Corp. ............................. 1,690 113,547
Apache Corp. ......................................... 2,791 87,917
Burlington Resources Inc. ............................ 5,151 221,815
Oryx Energy Co. (a)................................... 2,979 65,910
Union Pacific Resources Group, Inc. .................. 7,227 126,924
------------
616,113
------------
OIL--INTEGRATED DOMESTIC (0.5%)
Amerada Hess Corp. ................................... 2,617 142,136
Ashland Inc. ......................................... 2,111 108,980
Atlantic Richfield Co. ............................... 9,101 711,016
Kerr-McGee Corp. ..................................... 1,447 83,745
Occidental Petroleum Corp. ........................... 10,535 284,445
Pennzoil Co. ......................................... 1,393 70,521
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
------------------------------------------------------------
OIL--INTEGRATED DOMESTIC (Continued)
Phillips Petroleum Co. ............................... 7,484 $ 360,635
Sun Co., Inc. ........................................ 2,689 104,367
Unocal Corp. ......................................... 6,875 245,781
USX-Marathon Group.................................... 8,290 284,451
------------
2,396,077
------------
OIL--INTEGRATED INTERNATIONAL (2.8%)
Amoco Corp. .......................................... 27,510 1,145,104
Chevron Corp. ........................................ 18,759 1,558,169
Exxon Corp. (c)....................................... 70,077 4,997,366
Mobil Corp. .......................................... 22,394 1,715,940
Royal Dutch Petroleum Co. (c)......................... 61,433 3,367,296
Texaco Inc. .......................................... 15,486 924,320
------------
13,708,195
------------
OIL--WELL EQUIPMENT & SERVICES (0.4%)
Baker Hughes Inc. .................................... 4,801 165,935
Dresser Industries, Inc. ............................. 4,974 219,167
Halliburton Co. ...................................... 7,584 337,962
McDermott International, Inc. ........................ 1,742 59,990
Schlumberger Ltd. .................................... 14,263 974,341
Western Atlas Inc. (a)................................ 1,564 132,744
------------
1,890,139
------------
PAPER & FOREST PRODUCTS (0.3%)
Boise Cascade Corp. .................................. 1,589 52,040
Champion International Corp. ......................... 2,717 133,642
Georgia-Pacific Corp. ................................ 2,586 152,412
International Paper Co. .............................. 8,828 379,604
Louisiana-Pacific Corp. .............................. 3,057 55,790
Mead Corp. (The)...................................... 2,959 93,948
Potlatch Corp. ....................................... 851 35,742
Union Camp Corp. ..................................... 2,006 99,548
Westvaco Corp. ....................................... 2,830 79,948
Weyerhaeuser Co. ..................................... 5,658 261,329
Willamette Industries, Inc. .......................... 3,245 103,840
------------
1,447,843
------------
PERSONAL LOANS (0.2%)
Beneficial Corp. ..................................... 1,556 238,360
Countrywide Credit Industries, Inc. .................. 3,040 154,280
Household International, Inc. ........................ 9,264 460,884
Providian Financial Corp. ............................ 2,715 213,297
------------
1,066,821
------------
PHOTOGRAPHY/IMAGING (0.2%)
Eastman Kodak Co. .................................... 9,271 677,362
IKON Office Solutions, Inc. .......................... 3,897 56,750
Polaroid Corp. ....................................... 1,404 49,930
------------
784,042
------------
</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.
COMMON STOCKS (Continued)
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
------------------------------------------------------------
POLLUTION CONTROL (0.1%)
Browning-Ferris Industries, Inc. ..................... 5,213 $ 181,152
Waste Management, Inc. ............................... 13,620 476,700
------------
657,852
------------
PROPERTY--CASUALTY INSURANCE (0.7%)
Allstate Corp. (The).................................. 11,988 1,097,651
Chubb Corp. (The)..................................... 5,720 389,980
Cincinnati Financial Corp. ........................... 4,852 181,859
General Re Corp. ..................................... 4,739 540,969
Loews Corp. .......................................... 2,134 294,831
MGIC Investment Corp. ................................ 3,384 181,915
Progressive Corp. (The)............................... 3,188 285,666
SAFECO Corp. ......................................... 2,026 177,888
St. Paul Cos., Inc. (The)............................. 3,915 280,683
6,673
------------
3,431,442
------------
PUBLISHING (0.1%)
McGraw-Hill Cos., Inc. (The).......................... 2,770 225,928
Meredith Corp. ....................................... 1,486 69,749
------------
295,677
------------
PUBLISHING--NEWSPAPER (0.3%)
Dow Jones & Co., Inc. ................................ 2,665 148,574
Gannett Co., Inc. .................................... 8,190 582,002
Knight-Ridder, Inc. .................................. 2,277 125,377
New York Times Co. (The) Class A...................... 2,826 223,961
Times Mirror Co. (The) Class A........................ 2,564 161,211
Tribune Co. .......................................... 3,620 249,101
------------
1,490,226
------------
RAILROADS (0.3%)
Burlington Northern
Santa Fe Corp. ...................................... 4,494 441,255
CSX Corp. ............................................ 6,306 286,923
Norfolk Southern Corp. ............................... 10,806 322,154
Union Pacific Corp. .................................. 7,000 308,875
------------
1,359,207
------------
RESTAURANTS (0.3%)
Darden Restaurants, Inc. ............................. 4,068 64,580
McDonald's Corp. ..................................... 19,736 1,361,784
Tricon Global Restaurants, Inc. (a)................... 4,396 139,298
Wendy's International, Inc. .......................... 3,664 86,104
------------
1,651,766
------------
RETAIL STORES--APPAREL (0.2%)
Gap, Inc. (The)....................................... 11,227 691,864
Limited, Inc. (The)................................... 6,515 215,809
TJX Cos., Inc. (The).................................. 9,328 225,038
------------
1,132,711
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
------------------------------------------------------------
RETAIL STORES--DEPARTMENT (0.3%)
Dillard's, Inc. Class A............................... 3,113 $ 128,995
Federated Department Stores, Inc. (a)................. 6,028 324,382
May Department Stores Co. (The)....................... 6,646 435,313
Mercantile Stores Co., Inc. .......................... 1,122 88,568
Nordstrom, Inc. ...................................... 2,231 172,345
Penney (J.C.) Co., Inc. .............................. 7,115 514,503
------------
1,664,106
------------
RETAIL STORES--DRUGS (0.2%)
Longs Drug Stores Corp. .............................. 1,152 33,264
Rite Aid Corp. ....................................... 7,329 275,296
Walgreen Co. ......................................... 14,256 588,951
------------
897,511
------------
RETAIL STORES--FOOD (0.2%)
Albertson's, Inc. .................................... 7,027 364,086
American Stores Co. .................................. 7,821 189,170
Giant Food Inc. Class A .............................. 1,690 72,776
Great Atlantic & Pacific Tea Co., Inc. (The).......... 1,032 34,121
Kroger Co. (The) (a).................................. 7,386 316,675
Winn-Dixie Stores, Inc. .............................. 4,225 216,267
------------
1,193,095
------------
RETAIL STORES--GENERAL MERCHANDISE (1.1%)
Dayton-Hudson Corp. .................................. 12,525 607,463
Kmart Corp. (a)....................................... 14,032 270,116
Sears, Roebuck & Co................................... 11,155 681,152
Wal-Mart Stores, Inc. (c)............................. 64,403 3,912,482
------------
5,471,213
------------
RETAIL STORES--SPECIALTY (0.8%)
AutoZone, Inc. (a).................................... 4,293 137,108
Circuit City Stores-Circuit City Group................ 2,838 133,031
Consolidated Stores Corp. (a)......................... 3,044 110,345
Costco Cos., Inc. (a)................................. 6,154 388,087
CVS Corp.............................................. 11,025 429,286
Home Depot, Inc. (The)................................ 21,084 1,751,290
Lowe's Cos., Inc...................................... 9,912 402,056
Pep Boys-Manny, Moe & Jack (The)...................... 1,726 32,686
Tandy Corp............................................ 2,895 153,616
Toys "R" Us, Inc. (a)................................. 7,999 188,476
Venator Group, Inc. (a)............................... 3,748 71,680
------------
3,797,661
------------
SAVINGS & LOANS (0.2%)
Ahmanson (H.F.) & Co. ................................ 3,109 220,739
Golden West Financial Corp. .......................... 1,716 182,432
Washington Mutual, Inc. .............................. 11,048 479,898
------------
883,069
------------
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
75
<PAGE>
MULTI-ASSET FUND
PORTFOLIO OF INVESTMENTS (Continued)
June 30, 1998 (Unaudited)
COMMON STOCKS (Continued)
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
------------------------------------------------------------
SHOES (0.1%)
NIKE, Inc. Class B.................................... 8,196 $ 399,043
Reebok International Ltd. (a)......................... 1,606 44,466
------------
443,509
------------
SPECIALIZED SERVICES (0.4%)
Block (H&R), Inc. .................................... 2,898 122,078
Cendant Corp. (a)..................................... 24,365 508,619
Cognizant Corp. ...................................... 4,721 297,423
Dun & Bradstreet Corp. (The).......................... 4,876 176,145
Ecolab Inc. .......................................... 3,765 116,715
Interpublic Group of Cos., Inc. (The)................. 3,890 236,074
Laidlaw Inc. ......................................... 9,281 113,112
National Service Industries, Inc. .................... 1,242 63,187
Omnicom Group Inc. ................................... 4,921 245,435
Service Corp. International........................... 7,345 314,918
------------
2,193,706
------------
SPECIALTY PRINTING (0.1%)
Deluxe Corp. ......................................... 2,326 83,300
Donnelley (R.R.) & Sons Co. .......................... 4,070 186,202
------------
269,502
------------
STEEL (0.1%)
Allegheny Teledyne Inc. .............................. 5,563 127,254
Armco Inc. (a)........................................ 3,014 19,214
Bethlehem Steel Corp. (a)............................. 3,666 45,596
Nucor Corp. .......................................... 2,557 117,622
USX-U.S. Steel Group, Inc. ........................... 2,473 81,609
Worthington Industries, Inc. ......................... 2,776 41,813
------------
433,108
------------
TELECOMMUNICATIONS--LONG DISTANCE (1.2%)
AT&T Corp. (c)........................................ 46,563 2,659,911
MCI Communications Corp. ............................. 20,803 1,209,174
Sprint Corp. ......................................... 12,304 867,432
WorldCom, Inc. (a).................................... 29,576 1,432,588
------------
6,169,105
------------
TELEPHONE (2.0%)
ALLTEL Corp. ......................................... 7,711 358,562
Ameritech Corp. ...................................... 31,548 1,415,717
Bell Atlantic Corp. .................................. 44,276 2,020,092
BellSouth Corp. ...................................... 28,442 1,909,169
Frontier Corp. ....................................... 4,939 155,578
GTE Corp. ............................................ 27,633 1,537,086
SBC Communications Inc. (c)........................... 52,650 2,106,000
US West Communications Group.......................... 14,342 674,067
------------
10,176,271
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
------------------------------------------------------------
TEXTILES--APPAREL MANUFACTURERS (0.1%)
Fruit of the Loom, Inc.
Class A (a).......................................... 2,033 $ 67,470
Liz Claiborne, Inc.................................... 1,992 104,082
Russell Corp. ........................................ 1,050 31,697
Springs Industries, Inc. Class A...................... 568 26,199
Valley Forge Corp..................................... 3,546 182,397
------------
411,845
------------
TOBACCO (0.6%)
Philip Morris Cos. Inc. (c)........................... 69,605 2,740,697
UST Inc. ............................................. 5,283 142,641
------------
2,883,338
------------
TOYS (0.1%)
Hasbro, Inc. ......................................... 3,797 149,270
Mattel, Inc. ......................................... 8,368 354,071
------------
503,341
------------
TRANSPORTATION--MISCELLANEOUS (0.1%)
FDX Corp. (a)......................................... 4,183 262,483
Ryder System, Inc. ................................... 2,102 66,344
------------
328,827
------------
Total Common Stocks (Cost $169,736,078)............... 257,268,913
------------
SHORT-TERM
INVESTMENTS (36.2%)
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
----------------
COMMERCIAL PAPER (33.1%)
Akzo Nobel Inc.
5.58%, due 7/10/98 (c)............................... $ 8,753,000 8,740,790
5.58%, due 7/13/98 (c)............................... 3,134,000 3,128,049
Banca CRT Financial Corp.
5.90%, due 7/15/98 (c)............................... 450,000 448,968
Bat Capital Corp.
5.70%, due 7/8/98 (c)................................ 9,700,000 9,689,249
CSC Enterprises
5.55%, due 7/21/98 (c)............................... 3,100,000 3,090,442
Dynamic Funding Corp.
6.00%, due 7/22/98 (c)............................... 1,000,000 996,500
Engelhard Corp.
5.66%, due 7/6/98 (c)................................ 2,150,000 2,148,310
GTE Corp.
5.60%, due 7/2/98 (c)................................ 500,000 499,922
5.80%, due 7/8/98 (c)................................ 189,000 188,787
Hosokawa Micron International Inc.
5.70%, due 7/7/98 (c)................................ 3,874,000 3,870,320
Mitsubishi Motors Credit of America Inc.
5.75%, due 7/10/98 (c)............................... 3,900,000 3,894,394
6.00%, due 7/24/98 (c)............................... 854,000 850,726
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
76
<PAGE>
MAINSTAY
INSTITUTIONAL FUNDS INC.
SHORT-TERM
INVESTMENTS (Continued)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
-------------------------------------------------------------
COMMERCIAL PAPER (Continued)
Mitsui & Co. (USA) Inc.
5.75%, due 7/6/98 (c)............................ $ 800,000 $ 799,361
5.80%, due 7/6/98 (c)............................ 20,000,000 19,983,889
5.83%, due 7/6/98 (c)............................ 2,000,000 1,998,381
Nomura Holding America Inc.
5.65%, due 7/9/98 (c)............................ 2,800,000 2,796,484
5.66%, due 7/6/98 (c)............................ 20,000,000 19,984,278
PHH Corp.
5.61%, due 8/3/98 (c)............................ 5,000,000 4,974,288
5.75%, due 7/2/98 (c)............................ 15,000,000 14,997,604
5.79%, due 7/2/98 (c)............................ 1,400,000 1,399,775
Repsol International Finance B.V.
6.00%, due 7/2/98 (c)............................ 190,000 189,968
Riverside Funding Inc.
5.75%, due 7/1/98 (c)............................ 3,839,000 3,839,000
5.80%, due 7/30/98 (c)........................... 9,246,000 9,202,801
Sanwa Business Credit Corp.
5.75%, due 8/4/98 (c)............................ 12,000,000 11,934,833
6.10%, due 7/6/98 (c)............................ 7,000,000 6,994,069
Tokyo Leasing (U.S.A.) Inc.
5.90%, due 7/8/98 (c)............................ 1,126,000 1,124,708
Toshiba Capital (Asia) Ltd.
5.66%, due 8/7/98 (c)............................ 475,000 472,237
5.68%, due 7/20/98 (c)........................... 2,300,000 2,293,105
5.70%, due 7/8/98 (c)............................ 1,300,000 1,298,559
5.70%, due 7/10/98 (c)........................... 1,100,000 1,098,432
5.80%, due 7/16/98 (c)........................... 13,600,000 13,567,133
Toshiba International Finance (U.K.) PLC
5.65%, due 8/3/98 (c)............................ 7,600,000 7,560,638
5.66%, due 8/5/98 (c)............................ 500,000 497,249
5.70%, due 7/15/98 (c)........................... 138,000 137,694
------------
Total Commercial Paper
(Cost $164,690,943).............................. 164,690,943
------------
U.S. GOVERNMENT (3.1%)
United States Treasury Bills
4.82%, due 8/6/98 (c)............................ 4,600,000 4,578,129
4.86%, due 8/13/98 (c)........................... 11,000,000 10,936,145
------------
Total U.S. Government
(Cost $15,514,274)............................... 15,514,274
------------
Total Short-Term Investments
(Cost $180,205,217).............................. 180,205,217
------------
Total Investments
(Cost $408,211,957) (f).......................... 99.9% 496,805,262 (g)
Cash and Other Assets,
Less Liabilities................................. 0.1 655,907
----------- ------------
Net Assets........................................ 100.0% $497,461,169
=========== ============
</TABLE>
SHORT POSITIONS (-0.0%) (b)
COMMON STOCKS (-0.0%) (b)
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
---------------------------------------------------------------
ADVERTISING/MARKETING (-0.0%) (b)
R.H. Donnelley Corp. W/I (e).................... (4,876) $ (14,933)
------------
BROADCAST/MEDIA (-0.0%) (b)
Nielsen Media Research, Inc. W/I (e)............ (4,721) (20,654)
------------
Total Short Positions (Proceeds $39,232)........ $ (35,587)
============
FUTURES CONTRACTS (0.6%)
<CAPTION>
UNREALIZED
CONTRACTS APPRECIATION/
LONG (DEPRECIATION) (H)
---------------------------------------------------------------
<S> <C> <C>
AUSTRALIA (0.2%)
Australian All
Ordinaries Index
September 1998................................. 379 $ 846,478
CANADA (-0.0%) (b)
Toronto 35 Index
September 1998................................. 36 (182,108)
FRANCE (0.0%) (b)
French CAC 40 Index
September 1998................................. 109 193,707
GERMANY (0.2%)
German Dax Index
September 1998................................. 76 1,042,215
HONG KONG (0.1%)
Hong Kong Hang Seng Index
July 1998...................................... 176 439,287
UNITED KINGDOM (0.1%)
Great Britian FTSE 100 Index
September 1998................................. 253 440,244
------------
Total Futures Contracts
(Settlement Value $95,467,871)................. $ 2,779,823
============
</TABLE>
- --------
(a) Non-income producing security.
(b) Less than one tenth of a percent.
(c) Segregated or partially segregated as collateral for futures contracts.
(d) Yankee bonds.
(e) W/I (when-issued security)--this security is a commitment by the Fund to
sell at a future settlement date.
(f) The cost for Federal income tax purposes is $408,509,443.
(g) At June 30, 1998, net unrealized appreciation was $88,295,819, 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 $91,622,766 and aggregate gross unrealized
depreciation for all investments on which there was an excess of cost over
market value of $3,326,947.
(h) Represents the difference between the value of the contracts at the time
they were opened and the value at June 30, 1998.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
77
<PAGE>
MULTI-ASSET FUND
STATEMENT OF ASSETS AND LIABILITIES
As of June 30, 1998 (Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investment in securities, at value
(identified cost $408,211,957).................................. $496,805,262
Receivables:
Dividends and interest........................................... 1,375,022
Investment securities sold....................................... 1,255,846
Fund shares sold................................................. 496,967
Variation margin receivable on futures contracts................. 46,165
------------
Total assets................................................... 499,979,262
------------
LIABILITIES:
Securities sold short (proceeds $39,232)......................... 35,587
Payables:
Investment securities purchased.................................. 2,011,883
MainStay Management.............................................. 261,693
Custodian........................................................ 79,565
Fund shares redeemed............................................. 47,098
Transfer agent................................................... 31,105
Accrued expenses................................................. 51,162
------------
Total liabilities.............................................. 2,518,093
------------
Net assets....................................................... $497,461,169
============
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.001 per share) 1 billion shares
authorized
Institutional Class.............................................. $ 28,556
Institutional Service Class...................................... 942
Additional paid-in capital....................................... 341,909,864
Accumulated undistributed net investment income.................. 5,843,717
Accumulated undistributed net realized gain on investments....... 58,249,500
Net unrealized appreciation on investments....................... 91,376,773
Net unrealized appreciation on foreign currency transactions..... 51,817
------------
Net assets....................................................... $497,461,169
============
Institutional Class
Net assets applicable to outstanding shares...................... $481,615,679
============
Shares of capital stock outstanding.............................. 28,556,128
============
Net asset value per share outstanding............................ $ 16.87
============
Institutional Service Class
Net assets applicable to outstanding shares...................... $ 15,845,490
============
Shares of capital stock outstanding.............................. 941,868
============
Net asset value per share outstanding............................ $ 16.82
============
</TABLE>
STATEMENT OF OPERATIONS
For the six months ended June 30,
1998 (Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Income:
Dividends (a)..................................................... $ 2,068,800
Interest.......................................................... 5,569,100
-----------
Total income.................................................... 7,637,900
-----------
Expenses:
Management........................................................ 1,511,458
Transfer agent.................................................... 129,568
Custodian......................................................... 54,634
Professional...................................................... 38,396
Shareholder communication......................................... 37,920
Registration...................................................... 22,578
Service........................................................... 17,500
Directors......................................................... 5,427
Miscellaneous..................................................... 13,712
-----------
Total expenses ................................................. 1,831,193
-----------
Net investment income............................................. 5,806,707
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND FOREIGN CURRENCY
TRANSACTIONS:
Net realized gain from:
Security transactions............................................. 21,274,684
Futures transactions.............................................. 10,588,746
Foreign currency transactions..................................... 79,217
-----------
Net realized gain on investments and foreign currency
transactions..................................................... 31,942,647
-----------
Net change in unrealized appreciation on investments:
Security transactions............................................. 20,776,800
Futures transactions.............................................. 489,781
Foreign currency transactions..................................... 34,526
-----------
Net unrealized gain on investments and foreign currency
transactions..................................................... 21,301,107
-----------
Net realized and unrealized gain on investments and foreign
currency transactions............................................ 53,243,754
-----------
Net increase in net assets resulting from operations.............. $59,050,461
===========
</TABLE>
- --------
(a) Dividends recorded net of foreign withholding taxes of $15,643.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
78
<PAGE>
MAINSTAY
INSTITUTIONAL FUNDS INC.
MULTI-ASSET FUND
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 1998 (Unaudited) and the year ended December
31, 1997
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
INCREASE IN NET ASSETS:
Operations:
Net investment income............................. $ 5,806,707 $ 8,734,708
Net realized gain on investments.................. 31,863,430 45,016,603
Net realized gain (loss) on foreign currency
transactions..................................... 79,217 (32,358)
Net change in unrealized appreciation on
investments...................................... 21,266,581 35,097,668
Net change in unrealized appreciation on foreign
currency transactions............................ 34,526 17,446
------------ ------------
Net increase in net assets resulting from
operations....................................... 59,050,461 88,834,067
------------ ------------
Dividends and distributions to shareholders:
From net investment income:
Institutional Class.............................. -- (8,423,272)
Institutional Service Class...................... -- (182,014)
From net realized gain on investments:
Institutional Class.............................. -- (37,506,931)
Institutional Service Class...................... -- (890,648)
------------ ------------
Total dividends and distributions to
shareholders................................... -- (47,002,865)
------------ ------------
Capital share transactions:
Net proceeds from sale of shares:
Institutional Class.............................. 39,907,590 45,388,650
Institutional Service Class...................... 5,282,825 4,026,989
Net asset value of shares issued to shareholders
in reinvestment of dividends and distributions:
Institutional Class.............................. -- 45,930,203
Institutional Service Class...................... -- 1,072,662
------------ ------------
45,190,415 96,418,504
Cost of shares redeemed:
Institutional Class.............................. (30,422,037) (41,612,145)
Institutional Service Class...................... (1,071,010) (1,221,935)
------------ ------------
Increase in net assets derived from capital
share transactions.............................. 13,697,368 53,584,424
------------ ------------
Net increase in net assets....................... 72,747,829 95,415,626
NET ASSETS:
Beginning of period............................... 424,713,340 329,297,714
------------ ------------
End of period..................................... $497,461,169 $424,713,340
============ ============
Accumulated undistributed net investment income at
end of period.................................... $ 5,843,717 $ 37,010
============ ============
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
79
<PAGE>
MULTI-ASSET FUND
FINANCIAL HIGHLIGHTS
(Selected per share data and ratios)
<TABLE>
<CAPTION>
INSTITUTIONAL INSTITUTIONAL
CLASS SERVICE CLASS
------------- -------------
SIX MONTHS ENDED
JUNE 30, 1998*
-----------------------------
<S> <C> <C>
Net asset value at beginning of period........... $ 14.83 $ 14.81
-------- --------
Net investment income............................ 0.20 0.17
Net realized and unrealized gain (loss) on
investments..................................... 1.84 1.84
Net realized and unrealized loss on foreign
currency transactions........................... (0.00)(a) (0.00)(a)
-------- --------
Total from investment operations................. 2.04 2.01
-------- --------
Less dividends and distributions:
From net investment income....................... -- --
From net realized gain on investments............ -- --
In excess of net realized gain on investments.... -- --
-------- --------
Total dividends and distributions................ -- --
-------- --------
Net asset value at end of period................. $ 16.87 $ 16.82
======== ========
Total investment return(b)....................... 13.76% 13.57%
Ratios (to average net assets)/Supplemental Data:
Net investment income........................... 2.50%+ 2.25%+
Net expenses.................................... 0.78%+ 1.03%+
Expenses (before reimbursement)................. 0.78%+ 1.03%+
Portfolio turnover rate.......................... 11% 11%
Net assets at end of period (in 000's)........... $481,616 $ 15,845
</TABLE>
- --------
* Unaudited.
+ Annualized.
(a) Less than one cent per share.
(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.
80
<PAGE>
MAINSTAY
INSTITUTIONAL FUNDS INC.
<TABLE>
<CAPTION>
INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL
CLASS SERVICE CLASS CLASS SERVICE CLASS CLASS SERVICE CLASS CLASS
- ------------- ------------- ------------- ------------- ------------- ------------- -------------------
YEAR ENDED DECEMBER 31
- ---------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993
- ----------------------------- ----------------------------- --------------------------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 13.19 $ 13.19 $ 11.79 $ 11.79 $ 10.67 $ 10.67 $ 11.67 $ 12.02
-------- -------- -------- -------- -------- -------- -------- --------
0.34 0.31 0.38 0.34 0.48 0.47 0.45 0.39
3.15 3.13 1.53 1.53 2.39 2.39 (0.55) 0.59
(0.00)(a) (0.00)(a) (0.00)(a) (0.00)(a) (0.01) (0.01) -- --
-------- -------- -------- -------- -------- -------- -------- --------
3.49 3.44 1.91 1.87 2.86 2.85 (0.10) 0.98
-------- -------- -------- -------- -------- -------- -------- --------
(0.34) (0.31) (0.38) (0.34) (0.48) (0.47) (0.45) (0.88)
(1.51) (1.51) (0.13) (0.13) (1.18) (1.18) (0.42) (0.44)
-- -- -- -- (0.08) (0.08) (0.03) (0.01)
-------- -------- -------- -------- -------- -------- -------- --------
(1.85) (1.82) (0.51) (0.47) (1.74) (1.73) (0.90) (1.33)
-------- -------- -------- -------- -------- -------- -------- --------
$ 14.83 $ 14.81 $ 13.19 $ 13.19 $ 11.79 $ 11.79 $ 10.67 $ 11.67
======== ======== ======== ======== ======== ======== ======== ========
26.69% 26.30% 16.16% 15.89% 26.81% 26.70% (0.86%) 8.79%
2.27% 2.02% 2.99% 2.74% 4.03% 3.78% 3.63% 3.55%
0.76% 1.01% 0.70% 0.95% 0.70% 0.95% 0.70% 0.60%
0.76% 1.01% 0.75% 1.00% 0.77% 1.02% 0.75% 0.75%
19% 19% 103% 103% 261% 261% 128% 101%
$414,824 $ 9,889 $323,790 $ 5,508 $273,351 $ 3,536 $229,079 $258,345
</TABLE>
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
================================================================================
================================================================================
MARKET RECAP FOR THE 6-MONTH PERIOD ENDED 6/30/98
================================================================================
o A robust economy, with low interest rates, modest inflation, and low
unemployment moved stocks higher in the first six months of 1998.
o Weakness in Asian economies caused a flight to high-quality companies with
relatively predictable earnings growth.
o Merger and acquisition activity was high, with several large transactions
that occurred mostly outside of traditional value sectors.
o With investors primarily focused on large-cap growth stocks, the S&P 500*
advanced to record levels in June.
================================================================================
FUND RECAP FOR THE 6- AND 12-MONTH PERIODS ENDED 6/30/98
================================================================================
o The MainStay Institutional Value Equity Fund returned 14.64% and 14.36% for
Institutional Class and Service Class shares, respectively, for the
one-year period ended 6/30/98.
o The Fund used the underperformance of value stocks to add to its holdings
in several sectors at low prices.
o The Fund benefited from individual security selection among automotive and
financial stocks as well as selected retailers.
o Both share classes underperformed the average Lipper+ growth and income
fund, which returned 12.11% for the six months ended 6/30/98.
With U.S. gross domestic product increasing more than many investors anticipated
in the first half of 1998, the stock market enjoyed robust returns. Low interest
rates, benign inflation, low unemployment, and a rallying bond market all added
positively to investor psychology during the reporting period.
A number of factors combined to focus the attention of many investors on
large-capitalization growth stocks and away from value issues. Continuing
difficulties in Asian markets spread to China, Latin America, and Russia,
causing a flight to quality which attracted many investors to domestic companies
and highly liquid securities. Declining oil, gold, and copper prices caused
weakness among energy and commodity-related issues, which are traditionally in
deep value sectors.
Financial stocks did well in a declining rate environment, with low inflation
keeping the Federal Reserve Board from taking any action. With strong consumer
confidence, higher employment, and wage increases during the first half of the
year, retailers and selected automotive and auto-related stocks showed strength.
Transportation issues and tobacco stocks, on the other hand, showed relatively
weak performance. During the period, the top 30 stocks in the S&P 500 accounted
for half of the total return of the Index.
This is an unusual concentration, the magnitude of which was last seen in late
1972.
- --------------------------------------------------------------------------------
Inflation An increase in the cost of goods and services over time. As prices
rise, the purchasing power of the dollar declines.
Growth versus value Growth investments typically include stocks with rising
prices and positive earnings trends. Value stocks typically include equities
that are currently trading below their fair market value, even if they have the
potential to increase in value over time.
- --------------------------------------------------------------------------------
================================================================================
* The "S&P 500(R)" is a registered trademark of The McGraw-Hill Companies,
Inc. The S&P 500(R) 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.
82
<PAGE>
================================================================================
Given this context, how did the MainStay Institutional Value Equity Fund perform
in the six months ended 6/30/98?
The MainStay Institutional Value Equity Fund returned 3.85% and 3.73% for
Institutional Class shares and Service Class shares, respectively, for the six
months ended 6/30/98. Both share classes underperformed the average Lipper
growth and income fund, which returned 12.11% for the six months ended 6/30/98.
What factors caused the Fund to underperform its peers?
Value stocks in general were out of favor throughout the first half of 1998. Due
to our strict deep value investment disciplines, most of the best-performing
stocks fell outside of our valuation tolerance.
The Fund did not compromise its value disciplines to seek higher returns in a
period when growth stocks were in favor. Instead, we utilized the weakness in
value stocks to reposition the portfolio and seek issues at attractive
prices--often in declining market sectors--during the reporting period. While
the results were not always positive during the first six months of the year, we
remain bullish on deep-value stocks.
Which stocks did the Fund purchase during the first half of the year?
The most significant allocation change in the portfolio was in the energy
sector, which represents about 8% of the S&P 500, but as of June 30, represented
15% of the Fund's portfolio. In particular, we bought or added to our positions
in a number of exploration and production companies including Union Pacific
Resources, Oryx Energy, Apache Corp., Noble Affiliates, Inc., and Texaco. We
found the stocks compelling on the basis of their price to cash flow valuations.
While these stocks were punished during the first six months because of falling
oil prices and reduced demand in Asia, we believe that if supply and demand
fundamentals improve, they may have potential going forward.
Late in the second quarter, cyclical stocks returned to our screens as strong
value candidates. Browning-Ferris is a waste management company we found
attractive and purchased for the Fund during the reporting period. We also found
value for the Fund in Continental Airlines and Northwest Airlines, which were
trading at attractive prices because of declining international and Asian air
traffic.
Finally, Goodyear Tire is a company that has gone through cost restructuring and
earnings development, but is still going through a period of uncertainty related
to economic difficulties in Asia and Brazil. We believe the stock is undervalued
and added it to the Fund's portfolio.
Were there other major purchases during the reporting period?
Yes. We increased the Fund's tobacco holdings, largely because the litigation
controversy has depressed their prices well below the companies' underlying
asset values. Even taking anticipated litigation risk into account, companies
such as RJR Nabisco and Philip Morris have been trading at values well below the
price of their assets, yet the stocks provided yields that are close to or above
those available from Treasury securities.
We also added to the Fund's telecommunications holdings with U.S. West. In
addition, we added to the Fund's utility holdings with Texas Utilities, Illinova
Corporation, OGE Energy Corp., Niagra Mohawk, and Energy East. Overall,
utilities were positive contributors to the Fund's performance, but as a group,
utilities underperformed the market.
- --------------------------------------------------------------------------------
Flight to quality When investors in general move to improve the quality or
liquidity of the securities they own, because of economic, industry, or market
concerns that suggest lower-quality securities or those that are less liquid are
likely to be more vulnerable to negative market events.
Weighting/Overweighting 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.
- --------------------------------------------------------------------------------
83
<PAGE>
================================================================================
What positions did the Fund sell in order to make these purchases?
In the utility area, the Fund redeployed capital from issues we felt had reached
their target valuations. The Fund sold its position in PG&E, which outperformed
the S&P 500 during the reporting period.
The Fund also sold a number of cyclical stocks in the first quarter of the year,
trimming back on paper and forest products companies that we thought might
underperform if Asian production slowed down. We sold the Fund's positions in
Tenneco, Georgia Pacific, and Chesapeake to avoid short-term risk, even though
we saw long-term merit in the stocks. We may revisit these companies later in
the year if valuations are favorable.
We also had significant sales in the Fund's financial stocks, largely because
they rose so high they triggered our sell disciplines. The Fund sold Bankers
Trust and Chase Manhattan, and substantially trimmed its positions in Equitable,
NationsBank, and Transamerica.
All of these sales had a significantly positive impact on the Fund's
performance.
Were there other significant sales during the reporting period?
Yes. IBP Inc. is a meat packing company that didn't perform up to our
expectations, so we sold the Fund's position. We also found that offshore
drilling companies were selling at a premium to exploration and production
companies, so the Fund sold Diamond Offshore Drilling, Noble Drilling, and R&B
Falcon Corp. to purchase the exploration and production companies we mentioned
above.
Which stocks were the best performers in the Fund during the first half of 1998?
About a third of the portfolio outperformed the market. Ford Motor Company was
up 21% in the first six months of 1998. Lexmark International Group, a printer
company, was up 60%. And Xerox was up 39%. Equitable, which benefited from low
interest rates, was up 50%, and we pared back on the Fund's position to take
some profits. Following the announcement of an acquisition by Dana Corp.,
Echlin, an automotive afterparts company, was up 38%. All of these stocks
reflected the potential in our value strategy, even in a market that showed a
strong preference for growth disciplines.
With low inflation and low interest rates, financial stocks did particularly
well, with NationsBank up 27%, CIGNA up 21%, and Bank One and Travelers both up
15% for the reporting period. The strength of the economy, increasing consumer
confidence, and rising personal income also rewarded retail companies such as
Federated Department Stores, which was up 25% for the first half of 1998. The
optimistic outlook also helped the gaming industry, sending Harrah's
Entertainment up 23% for the reporting period.
Which stocks underperformed?
As noted, the tobacco industry has been hard hit by news reports about ongoing
litigation. RJR Nabisco was down 34% over the first six months and Philip Morris
declined 11%. However, their strong fundamentals and attractive prices were
consistent with our value discipline and we added to the Fund's positions in
both stocks.
With declining oil prices, Union Pacific Resources dropped 27%, Seagull Energy
fell 20%, Oryx Energy declined 13%, and Apache Oil was down 10%.
During the reporting period, CSX Corp., a railroad company, declined 15%, and
Northwest Airlines suffered from low Asian air traffic and lost 20% in the first
half of the year.
What do you feel were the best decisions you made for the Fund during the
reporting period?
Our best decision for the Fund was to not allow any style drift during the first
half of 1998. We stuck to our value disciplines, and invested the Fund's assets
where we found value. In a period when growth stocks are popular, it's tempting
to go for their strong returns rather than sticking to your discipline. We also
exercised good judgment in cutting back on companies with Asian exposure.
In which sectors was the Fund overweighted?
At the end of the first half of the year, the Fund was heavily overweighted in
materials processing, energy, transportation, and utilities, relative to the S&P
500. In other areas, the Fund was generally in line with the Index.
84
<PAGE>
================================================================================
What is your outlook going forward?
We believe that value stocks are at historically low valuation levels. With the
stock market selling at all-time highs and the "deep value" segment of the
market selling at substantial discounts, we believe a value approach may provide
a way to take advantage of bargains in the market.
The Fund will continue to seek maximum long-term total return from a combination
of capital growth and income.
Denis Laplaige
Jeffrey A. Simon
Portfolio Managers
================================================================================
Past performance is no guarantee of future results.
[GRAPHIC]
85
<PAGE>
$10,000 INVESTED IN MAINSTAY INSTITUTIONAL
VALUE EQUITY FUND VS S&P 500 INDEX
INSTITUTIONAL CLASS SHARES
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
================================================================================
<TABLE>
<CAPTION>
Year Value Equity S&P 500
---- ------------ -------
<S> <C> <C>
1/2/91 10,000 10,000
91 13,660 13,047
92 16,489 14,040
93 18,945 15,456
94 19,177 15,660
95 24,819 21,546
96 33,749 31,955
97 37,255 35,331
6/30/98 38,689 41,588
</TABLE>
$10,000 INVESTED IN MAINSTAY INSTITUTIONAL
VALUE EQUITY FUND VS S&P 500 INDEX
SERVICE CLASS SHARES
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
================================================================================
<TABLE>
<CAPTION>
Year Value Equity S&P 500
---- ------------ -------
<S> <C> <C>
1/2/91 10,000 10,000
91 13,660 13,047
92 16,489 14,040
93 18,945 15,456
94 19,177 15,660
95 24,799 21,546
96 33,584 31,955
97 37,024 35,331
6/30/98 38,406 41,588
</TABLE>
o 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, 1998 as of June 30, 1998
- -----------------------------------------------------------------------------------------------------------------------
Year to Date One Year Five Year Since Inception
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Value Equity Fund Institutional Class 3.85% 14.64% 16.97% 19.77%
Value Equity Fund Service Class+ 3.73% 14.36% 16.80% 19.65%
Average Lipper Growth & Income Fund 12.11% 22.86% 18.93% 18.34%
S&P 500 Stock Index 17.71% 30.15% 23.08% 20.93%
</TABLE>
YEAR-BY-YEAR PERFORMANCE
- --------------------------------------------------------------------------------
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
Institutional Class Shares
<TABLE>
<CAPTION>
Total Return
Year end %*
-------- ------------
<S> <C>
1991 36.60
1992 20.71
1993 14.90
1994 1.22
1995 29.42
1996 22.41
1997 22.63
1998 (as of 6/30/98) 3.85
</TABLE>
================================================================================
PORTFOLIO COMPOSITION
(% of net assets as of June 30, 1998)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Common Stocks 97.49%
Preferred Stocks 0.14%++
Cash, Equivalents & Other Assets 2.37%
</TABLE>
================================================================================
TOP 10 HOLDINGS
(% of net assets as of June 30, 1998)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
1. Texas Utilities Co. 2.66%
2. CIGNA Corp. 2.39%
3. Philip Morris Cos 2.30%
4. Echlin Inc. 2.27%
5. Browning-Ferris Industries Inc. 2.14%
6. Central & South West Corp. 2.09%
7. Foundation Health Systems Inc. Class A 2.04%
8. AT&T Corp. 2.02%
9. Union Pacific Resources Group Inc. 1.97%
10. American Standard Cos. Inc. 1.93%
</TABLE>
================================================================================
TOP 5 INDUSTRY
Holdings
(% of net assets as of June 30, 1998)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
1. Electric Utilities 11.58%
2. Insurance 9.87%
3. Oils 7.51%
4. Health Care 7.04%
5. Banks 6.14%
</TABLE>
================================================================================
* 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% on an annualized basis of the average daily net asset value of the
Service Class shares.
+ 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.
86
<PAGE>
MAINSTAY
INSTITUTIONAL FUNDS INC.
VALUE EQUITY FUND
PORTFOLIO OF INVESTMENTS
June 30, 1998 (Unaudited)
COMMON STOCKS (97.5%)+
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
------------------------------------------------------------
AEROSPACE/DEFENSE ELECTRONICS (0.9%)
Coltec Industries Inc (a)............................. 468,200 $ 9,305,475
------------
AIRLINES (2.2%)
Continental Airlines, Inc. Class B (a)................ 202,200 12,308,925
Northwest Airlines Corp. Class A (a).................. 240,900 9,289,706
------------
21,598,631
------------
AUTO MANUFACTURING (1.3%)
Ford Motor Co. ....................................... 219,900 12,974,100
------------
AUTO PARTS (5.1%)
Echlin Inc. .......................................... 461,100 22,622,719
LucasVarity PLC ADR (b)............................... 419,800 16,713,288
Mark IV Industries, Inc. ............................. 542,825 11,738,591
------------
51,074,598
------------
BANKS (6.1%)
Banc One Corp. ....................................... 280,480 15,654,290
KeyCorp............................................... 177,200 6,312,750
NationsBank Corp. .................................... 206,420 15,791,130
PNC Bank Corp. ....................................... 239,000 12,861,187
Wells Fargo & Co. .................................... 28,500 10,516,500
------------
61,135,857
------------
CHEMICALS (3.0%)
Agrium Inc. .......................................... 814,300 10,280,537
Georgia Gulf Corp. ................................... 331,700 7,566,906
IMC Global Inc. ...................................... 402,260 12,118,083
------------
29,965,526
------------
COMPUTER PERIPHERALS (0.9%)
Adaptec Inc. (a)...................................... 639,400 9,151,413
------------
COMPUTERS & OFFICE EQUIPMENT (4.3%)
International Business Machines Corp. ................ 111,500 12,801,594
Lexmark International Group, Inc. Class A (a)......... 265,000 16,165,000
Xerox Corp. .......................................... 134,300 13,648,237
------------
42,614,831
------------
CONGLOMERATES (1.9%)
American Standard Cos. Inc. (a)....................... 429,900 19,211,156
------------
CONTAINERS (2.9%)
Crown Cork & Seal Co., Inc. .......................... 213,600 10,146,000
Owens-Illinois Inc. (a)............................... 413,100 18,486,225
------------
28,632,225
------------
</TABLE>
- --------
+ Percentages indicated are based on Fund net assets.
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
------------------------------------------------------------
ELECTRIC UTILITIES (11.6%)
Central & South West Corp............................. 773,400 $ 20,785,125
Energy East Corp. .................................... 241,300 10,044,112
FPL Group, Inc. ...................................... 260,700 16,424,100
Illinova Corp. ....................................... 429,200 12,876,000
MarketSpan Corp. ..................................... 293,128 8,775,520
Niagara Mohawk Power Corp. (a)........................ 236,200 3,528,238
Northeast Utilities (a)............................... 90,000 1,524,375
OGE Energy Corp. ..................................... 167,600 4,525,200
Pinnacle West Capital Corp. .......................... 229,200 10,314,000
Texas Utilities Co.................................... 635,000 26,431,875
------------
115,228,545
------------
ELECTRONIC COMPONENTS (1.7%)
Raychem Corp. ........................................ 265,400 7,845,887
UCAR International Inc. (a)........................... 320,000 9,340,000
------------
17,185,887
------------
ENERGY (2.9%)
Coastal Corp. (The)................................... 213,100 14,877,044
Seagull Energy Corp. (a).............................. 704,000 11,660,000
Tosco Corp. .......................................... 87,500 2,570,313
------------
29,107,357
------------
FOOD (0.2%)
IBP, Inc. ............................................ 93,800 1,700,125
------------
HEALTH CARE (7.0%)
Aetna Inc. ........................................... 205,700 15,658,913
Allegiance Corp. ..................................... 314,000 16,092,500
Columbia/HCA Healthcare Corp. ........................ 620,600 18,074,975
Foundation Health Systems, Inc. Class A (a)........... 768,000 20,256,000
------------
70,082,388
------------
INSURANCE (9.9%)
Allstate Corp. (The).................................. 142,571 13,054,157
Chubb Corp. .......................................... 206,400 16,589,400
CIGNA Corp. .......................................... 345,300 23,825,700
Equitable Cos., Inc. (The)............................ 223,600 16,756,025
Transamerica Corp..................................... 92,900 10,695,113
Travelers Group Inc................................... 284,852 17,269,152
------------
98,189,547
------------
INTERNATIONAL OIL (1.2%)
British Petroleum Co., PLC ADR (b).................... 133,061 11,742,633
------------
LEISURE (0.4%)
Callaway Golf Co. .................................... 200,900 3,955,219
------------
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
87
<PAGE>
VALUE EQUITY FUND
PORTFOLIO OF INVESTMENTS (Continued)
June 30, 1998 (Unaudited)
COMMON STOCKS (Continued)
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
------------------------------------------------------------
OIL SERVICES (2.0%)
Union Pacific Resources Group Inc..................... 1,115,700 $ 19,594,481
------------
OILS (7.5%)
Apache Corporation.................................... 357,500 11,261,250
Noble Affiliates, Inc. ............................... 410,600 15,602,800
Occidental Petroleum Corp. ........................... 534,900 14,442,300
Oryx Energy Co. (a)................................... 644,800 14,266,200
Texaco Inc. .......................................... 78,300 4,673,531
Unocal Corp. ......................................... 406,900 14,546,675
------------
74,792,756
------------
PAPER & FOREST PRODUCTS (2.2%)
Bowater Inc. ......................................... 264,200 12,483,450
Georgia-Pacific Corp. (Timber Group).................. 397,000 9,131,000
------------
21,614,450
------------
POLLUTION & RELATED (2.1%)
Browning-Ferris Industries Inc. ...................... 612,600 21,287,850
------------
RAILROADS (1.7%)
CSX Corp.............................................. 223,000 10,146,500
Union Pacific Corp. .................................. 157,700 6,958,512
------------
17,105,012
------------
RECREATION & ENTERTAINMENT (1.6%)
Harrah's Entertainment, Inc. (a)...................... 687,000 15,972,750
------------
RETAIL (4.5%)
Federated Department Stores, Inc. (a)................. 334,100 17,978,756
Toys "R' Us, Inc. (a)................................. 718,200 16,922,588
Venator Group, Inc. (a)............................... 528,000 10,098,000
------------
44,999,344
------------
STEEL, ALUMINUM & OTHER METALS (1.3%)
Reynolds Metals Co.................................... 229,100 12,815,281
------------
TELECOMMUNICATION (3.9%)
AT&T Corp. ........................................... 352,100 20,113,712
US West Inc. ......................................... 400,000 18,800,000
------------
38,913,712
------------
TELECOMMUNICATION SERVICES (1.4%)
GTE Corp. ............................................ 246,800 13,728,250
------------
TEXTILE/HOME FURNISHINGS & APPAREL (0.6%)
Burlington Industries, Inc. (a)....................... 320,000 4,500,000
Shaw Industries, Inc. ................................ 51,800 912,975
------------
5,412,975
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
-------------------------------------------------------------
TIRE & RUBBER (1.5%)
Goodyear Tire & Rubber Co. (The)..................... 227,800 $ 14,678,863
------------
TOBACCO (3.7%)
Philip Morris Cos. .................................. 580,600 22,861,125
RJR Nabisco Holdings Corp............................ 580,700 13,791,625
------------
36,652,750
------------
Total Common Stocks
(Cost $857,582,542)................................. 970,423,987
------------
PREFERRED STOCK (0.1%)
RAILROADS
Union Pacific $6.25 (c).............................. 30,000 1,389,390
------------
Total Preferred Stock
(Cost $1,500,000)................................... 1,389,390
------------
SHORT-TERM
INVESTMENT (2.7%)
<CAPTION>
PRINCIPAL
AMOUNT
----------------
<S> <C> <C>
COMMERCIAL PAPER (2.7%)
Prudential Funding Corp.
6.30%, due 7/1/98................................... $27,090,000 27,090,000
------------
Total Short-Term Investment (Cost $27,090,000)....... 27,090,000
------------
Total Investments
(Cost $886,172,542) (d)............................. 100.3% 998,903,377
Liabilities in Excess of Cash and Other Assets....... (0.3) (3,594,107)
----------- ------------
Net Assets........................................... 100.0% $995,309,270
=========== ============
</TABLE>
- --------
(a) Non-income producing security.
(b) ADR-American Depository Receipt.
(c) May be sold to institutional investors only.
(d) The cost for Federal income tax purposes is $886,653,512.
(e) At June 30, 1998, net unrealized appreciation was $112,249,865, 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 $160,951,194 and aggregate gross unrealized
depreciation for all investments on which there was an excess of cost over
market value of $48,701,329.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
88
<PAGE>
MAINSTAY
INSTITUTIONAL FUNDS INC.
VALUE EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES STATEMENT OF OPERATIONS
As of June 30, 1998 (Unaudited) For the six months ended June 30,
1998 (Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investment in securities, at value
(identified cost $886,172,542)................................ $ 998,903,377
Cash........................................................... 1,246
Receivables:
Investment securities sold..................................... 33,437,795
Dividends...................................................... 2,394,110
Fund shares sold............................................... 153,965
--------------
Total assets................................................. 1,034,890,493
--------------
LIABILITIES:
Payables:
Investment securities purchased................................ 37,218,089
Fund shares redeemed........................................... 1,495,170
MainStay Management............................................ 705,922
Transfer agent................................................. 58,593
Custodian...................................................... 38,200
Accrued expenses............................................... 65,249
--------------
Total liabilities............................................ 39,581,223
--------------
Net assets..................................................... $ 995,309,270
==============
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.001 per share) 1 billion shares
authorized
Institutional Class............................................ $ 57,925
Institutional Service Class.................................... 659
Additional paid-in capital..................................... 755,925,991
Accumulated undistributed net investment income................ 4,950,051
Accumulated undistributed net realized gain on investments..... 121,643,809
Net unrealized appreciation on investments..................... 112,730,835
--------------
Net assets..................................................... $ 995,309,270
==============
Institutional Class
Net assets applicable to outstanding shares.................... $ 984,134,798
==============
Shares of capital stock outstanding............................ 57,925,169
==============
Net asset value per share outstanding.......................... $ 16.99
==============
Institutional Service Class
Net assets applicable to outstanding shares.................... $ 11,174,472
==============
Shares of capital stock outstanding............................ 658,843
==============
Net asset value per share outstanding.......................... $ 16.96
==============
</TABLE>
<TABLE>
<S> <C>
INVESTMENT INCOME:
Income:
Dividends (a).................................................... $ 8,779,148
Interest......................................................... 1,029,931
------------
Total income................................................... 9,809,079
------------
Expenses:
Management....................................................... 4,332,467
Transfer agent................................................... 262,168
Shareholder communication........................................ 87,619
Professional..................................................... 68,866
Custodian........................................................ 41,020
Registration..................................................... 28,591
Service.......................................................... 14,382
Directors........................................................ 12,507
Miscellaneous.................................................... 17,198
------------
Total expenses................................................. 4,864,818
------------
Net investment income............................................ 4,944,261
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments................................. 96,217,540
Net change in unrealized appreciation on investments............. (62,965,440)
------------
Net realized and unrealized gain on investments.................. 33,252,100
------------
Net increase in net assets resulting from operations............. $ 38,196,361
============
</TABLE>
- --------
(a) Dividends recorded net of foreign withholding taxes of $38,403.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
89
<PAGE>
VALUE EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 1998 (Unaudited) and the year ended December
31, 1997
<TABLE>
<CAPTION>
1998 1997
------------ -------------
<S> <C> <C>
INCREASE IN NET ASSETS:
Operations:
Net investment income............................ $ 4,944,261 $ 11,824,808
Net realized gain on investments................. 96,217,540 153,566,785
Net change in unrealized appreciation on
investments..................................... (62,965,440) 19,142,088
------------ -------------
Net increase in net assets resulting from
operations...................................... 38,196,361 184,533,681
------------ -------------
Dividends and distributions to shareholders:
From net investment income:
Institutional Class............................. -- (11,794,002)
Institutional Service Class..................... -- (93,075)
From net realized gain on investments:
Institutional Class............................. -- (143,738,757)
Institutional Service Class..................... -- (1,600,702)
------------ -------------
Total dividends and distributions to
shareholders.................................. -- (157,226,536)
------------ -------------
Capital share transactions:
Net proceeds from sale of shares:
Institutional Class............................. 58,381,915 182,364,147
Institutional Service Class..................... 1,016,344 4,997,992
Net asset value of shares issued to shareholders
in reinvestment of dividends and distributions:
Institutional Class............................. -- 155,256,205
Institutional Service Class..................... -- 1,693,777
------------ -------------
59,398,259 344,312,121
Cost of shares redeemed:
Institutional Class............................. (96,229,046) (200,632,469)
Institutional Service Class..................... (1,286,109) (12,233,644)
------------ -------------
Increase (decrease) in net assets derived from
capital share transactions..................... (38,116,896) 131,446,008
------------ -------------
Net increase in net assets...................... 79,465 158,753,153
NET ASSETS:
Beginning of period ............................. 995,229,805 836,476,652
------------ -------------
End of period ................................... $995,309,270 $ 995,229,805
============ =============
Accumulated undistributed net investment income
at end of period................................ $ 4,950,051 $ 5,790
============ =============
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
90
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK)
91
<PAGE>
VALUE EQUITY FUND
FINANCIAL HIGHLIGHTS
(Selected per share data and ratios)
<TABLE>
<CAPTION>
INSTITUTIONAL
INSTITUTIONAL SERVICE
CLASS CLASS
------------- -------------
SIX MONTHS
ENDED
JUNE 30, 1998*
---------------------------
<S> <C> <C>
Net asset value at beginning of period............. $ 16.36 $ 16.35
-------- --------
Net investment income.............................. 0.08 0.07
Net realized and unrealized gain (loss) on
investments....................................... 0.55 0.54
-------- --------
Total from investment operations................... 0.63 0.61
-------- --------
Less dividends and distributions:
From net investment income......................... -- --
From net realized gain on investments.............. -- --
-------- --------
Total dividends and distributions.................. -- --
-------- --------
Net asset value at end of period................... $ 16.99 $ 16.96
======== ========
Total investment return(a)......................... 3.85% 3.73%
Ratios (to average net assets)/Supplemental Data:
Net investment income............................. 0.97%+ 0.72%+
Net expenses...................................... 0.95%+ 1.20%+
Expenses (before reimbursement)................... 0.95%+ 1.20%+
Portfolio turnover rate............................ 38% 38%
Net assets at end of period (in 000's)............. $984,135 $ 11,174
</TABLE>
- --------
* Unaudited.
+ Annualized.
(a) Total return not annualized.
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.
<TABLE>
<CAPTION>
INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL
CLASS SERVICE CLASS CLASS SERVICE CLASS CLASS SERVICE CLASS CLASS
- ------------- ------------- ------------- ------------- ------------- ------------- ------------------
YEAR ENDED DECEMBER 31
- -------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993
- ---------------------------- --------------------------- --------------------------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 15.87 $ 15.85 $ 14.43 $ 14.43 $ 11.58 $ 11.58 $ 12.40 $ 14.16
-------- -------- -------- -------- -------- -------- -------- --------
0.23 0.16 0.25 0.23 0.21 0.20 0.17 0.16
3.31 3.32 2.98 2.96 3.20 3.20 (0.02) 1.63
-------- -------- -------- -------- -------- -------- -------- --------
3.54 3.48 3.23 3.19 3.41 3.40 0.15 1.79
-------- -------- -------- -------- -------- -------- -------- --------
(0.23) (0.16) (0.25) (0.23) (0.21) (0.20) (0.17) (0.37)
(2.82) (2.82) (1.54) (1.54) (0.35) (0.35) (0.80) (3.18)
-------- -------- -------- -------- -------- -------- -------- --------
(3.05) (2.98) (1.79) (1.77) (0.56) (0.55) (0.97) (3.55)
-------- -------- -------- -------- -------- -------- -------- --------
$ 16.36 $ 16.35 $ 15.87 $ 15.85 $ 14.43 $ 14.43 $ 11.58 $ 12.40
======== ======== ======== ======== ======== ======== ======== ========
22.63% 22.28% 22.41% 22.10% 29.42% 29.32% 1.22% 14.90%
1.30% 1.05% 1.70% 1.45% 1.64% 1.39% 1.50% 1.38%
0.93% 1.18% 0.92% 1.17% 0.93% 1.18% 0.92% 0.90%
0.93% 1.18% 0.92% 1.17% 0.93% 1.18% 0.92% 0.93%
66% 66% 50% 50% 51% 51% 43% 83%
$984,220 $ 11,010 $821,725 $ 14,752 $603,749 $ 3,213 $396,537 $305,060
</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
================================================================================
================================================================================
MARKET RECAP FOR THE 6-MONTH PERIOD ENDED 6/30/98
================================================================================
o Domestic bond markets were influenced by Asian economic contraction, a
solid U.S. economy, and relatively tame inflation during the first six
months of 1998.
o During the reporting period, the market experienced low volatility and a
flattening yield curve in the second quarter.
o Although 30-year Treasury bond yields declined to record levels in June,
overall, yields tended to remain in a relatively narrow range.
o Mortgage prepayments came in waves with minor shifts in interest rates over
the reporting period.
o Yield spreads widened on corporate bonds to the widest level in five years.
================================================================================
FUND RECAP FOR THE 6- AND 12-MONTH PERIODS ENDED 6/30/98
================================================================================
o One-year total returns of 9.59% and 9.35% for Institutional Class and
Service Class shares, respectively, as of 6/30/98.
o The Fund benefited by shifting from long to neutral duration and moving
between newer and older Treasury issues in both the first and second
quarters of 1998.
o Strategically increasing and decreasing the Fund's exposure to
mortgage-backed securities also benefited the Fund, although being
overweighted at the end of the second quarter had a negative impact on
performance.
o Although corporate bonds generally underperformed Treasuries, the Fund
benefited from strong individual security selection in the corporate
sector.
o Both share classes outperformed the average Lipper* intermediate U.S.
government fund, which returned 3.43% for the six months ended 6/30/98,
with Institutional Class shares ranking in the top 27% of all peer funds.
During the first half of 1998, the domestic bond markets were largely influenced
by world events. Economic contractions in Asian markets, including Japan, may
have caused difficulties in markets from Latin America to Russia and China. One
positive outcome has been relatively tame inflation, keeping the Federal Reserve
from adjusting domestic interest rates. As a result, interest rates in general
have remained within a relatively narrow range, with 2-year Treasuries declining
just 16 basis points over the first half of the year, and 30-year Treasuries
remaining flat in the first quarter, but declining 30 basis points in the second
quarter of 1998.
- --------------------------------------------------------------------------------
Inflation An increase in the cost of goods and services over time. As prices
rise, the purchasing power of the dollar declines.
- --------------------------------------------------------------------------------
================================================================================
* 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.
94
<PAGE>
================================================================================
Many investors have shown a renewed interest in the fixed-income market. Bond
market returns exceeded 10% over the past year, which is what a typical equity
investor may have expected before the strong bull market of the last three
years. In fact, bond market returns in two out of the past three quarters were
in line with or exceeded typical stock returns, and many investors have
responded by increasing their bond allocations.
The bond price rally led to a flattening yield curve, which presented some
opportunities. Supply dynamics created trading opportunities among newer and
older issues. Higher-coupon mortgage-backed securities saw high prepayments
early in the year, creating buying opportunities. When interest rates declined,
corporations found they could save money by issuing debt at lower rates. As a
result, many corporations came to the market, increasing the supply of new bond
issues. Overall, Treasuries tended to outperform other sectors over the first
half of the year.
Given this context, how did the MainStay Institutional Bond Fund perform in the
first six months of 1998?
For the six months ended 6/30/98, the MainStay Institutional Bond Fund returned
3.81% and 3.72% for Institutional Class shares and Service Class shares,
respectively. Both share classes outperformed the average Lipper intermediate
U.S. government fund, which returned 3.43% for the first half of 1998, with
Institutional Class shares ranking in the top 27% of all peer funds.
What accounted for the Fund's solid performance?
Our duration strategy benefited performance throughout the reporting period.
Given our strategically bullish outlook during the first half of the year, we
kept duration in the neutral to long range. Over the period the Fund's duration
was neutral as rates headed higher and longer as rates were declining.
Another factor that helped the Fund's performance relative to its peers was the
yield curve. In the first quarter, the yield curve was unchanged, so the Fund
had no opportunity to add value there. But in the second quarter, the curve
flattened about 20 basis points. Because the Fund was very heavily concentrated
in the back end of the market, it was able to benefit from the rally in 30-year
Treasury bonds, compared to funds with investments more evenly spread across
various maturities. Finally, individual security selection helped the Fund in
the corporate sector, even though corporate bonds generally underperformed
Treasury securities.
Were there specific strategies you used to add value to the Fund's portfolio
during the reporting period?
We added value to the Fund through specific security selection in the Treasury
market. Using a variety of technical indicators, we moved the Fund's assets
between newer and older issues to take advantage of shifting supply dynamics.
The result was an incremental increase in return. Older Treasuries added value
in the beginning part of both the first and second quarters, newer securities in
the latter part of each quarter. On the whole, the strategy had a positive
impact on the Fund's performance.
- --------------------------------------------------------------------------------
Basis point One hundredth of one percent in the yield of an investment, i.e.,
100 basis points equals 1%.
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.
Supply and demand In the bond market, supply is influenced by the amount of new
securities issued and the amount of bonds investors wish to sell. Demand
reflects the amount of bonds investors wish to buy, which may decrease when
other markets offer greater opportunities.
Mortgage-backed securities Securities representing interests in "pools" of
mortgages in which principal and interest payments by the holders of 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).
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.
- --------------------------------------------------------------------------------
95
<PAGE>
================================================================================
What happened in the market for mortgage-backed securities?
At the beginning of the year, the Fund was underweighted in higher-coupon
mortgage-backed securities. At the time, we anticipated an increase in
prepayments and believed that mortgage-related bonds would underperform. That's
exactly what happened, and our decision to reduce the Fund's exposure to
high-coupon mortgage securities had a positive impact on performance.
After the prepayments rose, we increased the Fund's exposure to mortgage
securities, feeling that at their adjusted price levels they had appreciation
potential. At that point, the Fund focused primarily on commercial mortgages,
for a couple of reasons. First, new issuance was heavy, but demand was not,
which tended to force prices down to attractive levels. We also liked commercial
mortgages for the Fund because we believed they carried less risk of prepayments
if interest rates continued to decline.
What was the impact on the Fund's performance?
As the market began to rally in the second quarter of 1998, we pared back on the
positions to take profits for the Fund. Naturally, that was positive for
performance. But the Fund remained overweighted in mortgage-backed securities in
the latter part of the second quarter, which hurt performance a bit when a
second wave of prepayments began.
As it happens, the Fund had invested in securities with coupons that were
relatively insensitive to prepayment risk, but as the mortgage market in general
underperformed, we believe the Fund missed some opportunities available in the
Treasury market.
How did the Fund benefit from corporate bond selection during the reporting
period?
As rates rallied at the beginning of the year, the prospect of low-cost capital
attracted a number of corporations to the bond market. The oversupply of
corporates caused spreads to widen, resulting in the underperformance of the
Fund's corporate bond position in the first part of the first quarter. After
corporates underperformed, we increased the Fund's exposure to what we believed
were strong companies whose bonds were highly liquid, selecting issues like
Coca-Cola Enterprises and Wal-mart Stores, Inc., which have strong domestic
markets and do not depend on business in Asia. The Fund also sought securities
with solid collateral, such as airplane leases, which have actual aircraft
supporting their debt obligations.
Did the Fund make any dramatic shifts in its sector allocations during the
reporting period?
Not really. Overall, the Fund increased its weighting in corporates and sold
agency securities during the first half of 1998. The allocations to asset-backed
securities and collateralized mortgage obligations (CMOs) were reduced.
As of the end of June, the Fund continued to invest in a wide range of
securities, from Treasuries, mortgage-backed bonds, and CMOs to asset-backed
securities, corporate bonds, and variable rate notes. We believe that this
diversification adds value to the Fund's investment portfolio by reducing the
risks associated with any single sector of the market.
- --------------------------------------------------------------------------------
Back end of the market Bonds are issued in a variety of maturities from very
short to as long as 30 years or more. The back end of the market refers to bonds
with longer maturities, such as 30-year issues.
Weighting/Underweighting The proportion of a portfolio allocated to a specific
security or sector, i.e., a fund is said to be underweighted in a sector when
that portion of the portfolio is lower than the sector's general relationship to
the market as a whole.
- --------------------------------------------------------------------------------
96
<PAGE>
================================================================================
What steps did you take to manage risk for the Fund in the corporate sector?
We monitored the credit quality of corporate securities. We also watched the
stock market for indicators of potential weakening. We believe that the stock
market is able to discount information much more quickly than rating agencies
can assimilate it. So if we see a stock's price begin to fall faster than the
market and without apparent reason, it gives us a clue to reexamine the Fund's
bond holdings in that company and ask what stock investors see that we don't. We
believe tying our bond monitoring to stocks is an efficient way to detect--and
possibly correct--problems before they affect the Fund.
Have the securities held by the Fund maintained their high overall quality
rating?
Yes. As we seek opportunities for the Fund, we try to keep the Fund invested in
securities that don't expose the Fund's shareholders to unnecessary risks. We're
pleased with the Fund's recent performance, because we believe it has provided
investors with higher-than-average returns with lower-than-average risk in the
bond market.
What is your outlook for the future?
We believe the major factors influencing our strategy over the past year--Asian
turmoil, inflation expectations, and reactions to the reduced Treasury
financing--have been almost fully priced into the market. While we remain
bullish on bonds for the longer term, unless market conditions change, we plan
to take a more neutral strategy in the third quarter. Because of the budget
surplus, the need for new Treasury securities may be reduced. This may change
the Treasury's financing calendar and may provide opportunities along the yield
curve.
Whatever happens, the Fund will continue to seek maximum 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.
[GRAPHIC]
97
<PAGE>
$10,000 INVESTED IN MAINSTAY INSTITUTIONAL
BOND FUND VS LEHMAN BROTHERS
GOVERNMENT/CORPORATE BOND INDEX
INSTITUTIONAL CLASS SHARES
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
================================================================================
<TABLE>
<CAPTION>
Year Bond Fund Institutional Lehman Brothers Gov't/Corp Bond Index
---- ----------------------- --------------------------------------
<S> <C> <C>
1/2/91 10,000 10,000
91 11,400 11,613
92 12,128 12,494
93 13,310 13,873
94 12,870 13,388
95 15,170 15,963
96 15,595 16,426
97 16,931 18,029
6/30/98 17,576 18,783
</TABLE>
$10,000 INVESTED IN MAINSTAY INSTITUTIONAL
BOND FUND VS LEHMAN BROTHERS
GOVERNMENT/CORPORATE BOND INDEX
SERVICE CLASS SHARES
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
================================================================================
<TABLE>
<CAPTION>
Year Bond Fund Service Lehman Brothers Gov't/Corp
---- ----------------- --------------------------
<S> <C> <C>
1/2/91 10,000 10,000
91 11,400 11,613
92 12,128 12,494
93 13,310 13,873
94 12,870 13,388
95 15,128 15,963
96 15,525 16,426
97 16,799 18,029
6/30/98 17,424 18,783
</TABLE>
o 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, 1998 as of June 30, 1998
- ---------------------------------------------------------------------------------------------------------------------------
Year to Date One Year Five Year Since Inception
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Bond Fund Institutional Class 3.81% 9.59% 6.28% 7.81%
Bond Fund Service Class+ 3.72% 9.35% 6.10% 7.68%
Average Lipper Intermediate U.S.
Government Fund 3.43% 9.05% 5.49% 7.27%
Lehman Brothers Gov't/Corporate Bond Index 4.17% 11.28% 6.88% 8.76%
</TABLE>
YEAR-BY-YEAR PERFORMANCE
- --------------------------------------------------------------------------------
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
Instutional Class Shares
<TABLE>
<CAPTION>
Total Return
Year end %*
-------- ------------
<S> <C>
1991 14.00
1992 6.39
1993 9.74
1994 (3.31)
1995 17.88
1996 2.80
1997 8.57
1998 (as of 6/30/98) 3.81
</TABLE>
QUALITY BREAKDOWN++
(% of bonds as of June 30, 1998)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Government/Agency 50.45%
AAA 17.59%
AA 3.52%
A 17.42%
BBB 11.02%
------
100.00%
</TABLE>
================================================================================
PORTFOLIO COMPOSITION
(% of net assets as of June 30, 1998)
- --------------------------------------------------------------------------------
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
<TABLE>
<S> <C>
U.S. Government & Federal Agencies 49.44%
Domestic Bonds 21.85%
Other Asset-Backed/Mortgage Backed Securities 19.65%
Other Bonds 5.92%
Cash, Equivalents & Other Assets 1.99%(S)
Certificates of Deposit 1.15%
</TABLE>
================================================================================
TOP 10 HOLDINGS
(% of net assets as of June 30, 1998)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
1. US Treasury Note, 11/30/00, 5.625% 9.91%
2. US Treasury Note, 11/15/04, 7.875% 6.84%
3. US Treasury Bond, 2/15/25, 7.625% 6.13%
4. US Treasury Note, 2/15/03, 6.25% 5.97%
5. US Treasury Note, 5/15/07, 6.625% 4.26%
6. FNMA, 3/15/01, 5.625% 3.68%
7. GTCT 1997-CA1, 2/15/18, 6.49% 2.44%
8. US Treasury Bond, 8/15/17, 8.875% 2.22%
9. US Treasury Note, 2/28/02, 6.25% 2.20%
10. GNMA, 8/19/28, 8.00% 1.97%
</TABLE>
================================================================================
TOP 5 INDUSTRY
HOLDINGS
(% of net assets as of June 30, 1998)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
1. US Government & Federal Agencies 49.44%
2. Commercial Mortgage Loans 5.80%
3. Consumer Loans 4.64%
4. Banks 3.93%
5. Food, Beverage & Tobacco 3.35%
Average Maturity 9.4 years
(as of 6/30/98)
</TABLE>
================================================================================
* 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% on an annualized basis of the average daily net asset value of the
Service Class shares.
+ 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.
(S) Adjusted for liabilities.
98
<PAGE>
MAINSTAY
INSTITUTIONAL FUNDS INC.
BOND FUND
PORTFOLIO OF INVESTMENTS
June 30, 1998 (Unaudited)
LONG-TERM INVESTMENTS (98.0%)+
ASSET-BACKED CORPORATE BONDS (21.9%)
SECURITIES (10.7%)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
------------------------------------------------------------
AIRLINE LEASES (1.2%)
Continental Airlines
Pass-Through Trusts
Series 1998-1A
6.648%, due 3/15/19.................................. $ 2,100,000 $ 2,109,828
------------
AIRPLANE LEASES (2.1%)
Aircraft Lease Portfolio Securitization Ltd.
Series 1996-1 Class CX
7.0375%, due 6/15/06 (c)(d).......................... 1,881,234 1,881,234
Airplanes Pass-Through Trust
Series 1 Class C
8.15%, due 3/15/19................................... 1,736,624 1,827,363
------------
3,708,597
------------
CONSUMER LOANS (4.6%)
Chase Manhattan Recreational Vehicle Owner Trust
Series 1997-A Class A5
6.05%, due 11/15/04.................................. 2,025,000 2,027,207
CIT Recreational Vehicle Trust Series 1998-A Class A2
5.92%, due 3/15/07................................... 830,000 831,071
Green Tree Recreational Equipment & Consumer Trust
Series 1997-C Class A1
6.49%, due 2/15/18................................... 4,238,172 4,260,973
NationsCredit Grantor Trust
Series 1997-2 Class A2
6.25%, due 11/15/13.................................. 982,969 985,761
------------
8,105,012
------------
CREDIT CARD RECEIVABLES (1.1%)
Chase Credit Card Master Trust Series 1997-2 Class A
6.30%, due 4/15/03................................... 1,910,000 1,925,662
------------
EQUIPMENT LOANS (1.7%)
Case Equipment Loan Trust
Series 1997-A Class A3
6.45%, due 3/15/04................................... 2,865,000 2,882,820
------------
Total Asset-Backed Securities
(Cost $18,709,769)................................... 18,731,919
------------
CERTIFICATE OF DEPOSIT (1.2%)
BANKS (1.2%)
Mercantile Safe Deposit & Trust Co., Baltimore, MD
6.30%, due 8/16/99................................... 2,000,000 2,009,400
------------
Total Certificate of Deposit
(Cost $2,000,000).................................... 2,009,400
------------
</TABLE>
- --------
+ Percentages indicated are based on Fund net assets.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C> <C>
-------------------------------------------------------------
BANKS (2.8%)
Banc One Corp.
7.60%, due 5/1/07................................. $ 2,110,000 $ 2,299,119
Capital One Bank
Series BKNT
6.375%, due 2/15/03............................... 2,560,000 2,556,262
------------
4,855,381
------------
BROKERAGE (1.8%)
Bear Stearns Companies, Inc. (The)
6.20%, due 3/30/03................................ 620,000 620,930
Lehman Brothers Holdings, Inc.
6.25%, due 4/1/03................................. 620,000 620,428
Salomon, Smith Barney Holdings Inc.
6.25%, due 5/15/03................................ 1,840,000 1,847,066
------------
3,088,424
------------
COMPUTERS & OFFICE EQUIPMENT (1.5%)
International Business Machines Corp.
6.50%, due 1/15/28................................ 2,520,000 2,526,527
------------
ELECTRIC UTILITIES (1.0%)
Public Service Electric & Gas Co.
Series UU
6.75%, due 3/1/06................................. 1,675,000 1,725,149
------------
FINANCE (1.2%)
EOP Operating LP
6.50%, due 6/15/04 (a)............................ 2,140,000 2,135,206
------------
FINANCIAL SERVICES (2.5%)
Conseco, Inc.
6.40%, due 6/15/11................................ 1,680,000 1,677,245
Equitable Companies, Inc. (The)
7.00%, due 4/1/28................................. 830,000 859,623
Travelers Group, Inc.
6.625%, due 1/15/28............................... 1,880,000 1,893,348
------------
4,430,216
------------
FOOD, BEVERAGES & TOBACCO (3.4%)
Coca-Cola Enterprises, Inc.
6.95%, due 11/15/26............................... 2,935,000 3,069,511
Philip Morris Companies, Inc.
6.15%, due 3/15/10 (d)............................ 2,780,000 2,777,498
------------
5,847,009
------------
MEDIA (0.9%)
Time Warner, Inc.
8.375%, due 7/1/13................................ 1,328,000 1,528,090
------------
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
99
<PAGE>
BOND FUND
PORTFOLIO OF INVESTMENTS (Continued)
June 30, 1998 (Unaudited)
CORPORATE BONDS (Continued)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
------------------------------------------------------------
PAPER & FOREST PRODUCTS (0.8%)
Georgia-Pacific Corp.
7.25%, due 6/1/28.................................... $ 1,440,000 $ 1,466,510
------------
RETAIL (2.5%)
Albertson's, Inc.
Medium-Term Note
Series C
6.625%, due 6/1/28................................... 1,385,000 1,383,989
Federated Department Stores, Inc.
7.00%, due 2/15/28................................... 1,630,000 1,666,952
Sears Roebuck Acceptance Corp. Medium-Term Note
Series IV
6.36%, due 12/4/01................................... 1,360,000 1,371,900
------------
4,422,841
------------
SOFTWARE (1.1%)
Computer Associates
International, Inc.
6.375%, due 4/15/05 (a).............................. 1,885,000 1,868,978
------------
STEEL, ALUMINUM & OTHER METALS (0.4%)
Carpenter Technology Corp. Medium-Term Note
Series B
6.275%, due 4/7/03................................... 635,000 636,340
------------
TELECOMMUNICATION SERVICES (2.0%)
BellSouth Telecommunications Inc.
6.375%, due 6/1/28................................... 1,625,000 1,619,491
GTE Corp.
6.94%, due 4/15/28................................... 1,960,000 1,984,500
------------
3,603,991
------------
Total Corporate Bonds
(Cost $37,788,426)................................... 38,134,662
------------
MORTGAGE-BACKED
SECURITIES (8.9%)
COMMERCIAL MORTGAGE LOANS (COLLATERALIZED MORTGAGE OBLIGATIONS)
(5.8%)
First Union-Lehman Brothers
Bank of America
Commercial Mortgage Trust
Series 1998-C2 Class A1
6.28%, due 6/18/07................................... 14,942 15,042
FMAC Loan Receivable Trust
Series 1998-BA Class A2
6.74%, due 11/15/20 (a).............................. 1,235,000 1,252,772
General Motors Acceptance Corp., Commercial
Mortgage Securities, Inc.
Series 1998-C1 Class A1
6.411%, due 11/15/07................................. 1,390,000 1,407,722
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
------------------------------------------------------------
COMMERCIAL MORTGAGE LOANS (COLLATERALIZED MORTGAGE OBLIGATIONS)
(Continued)
GS Mortgage Securities Corp. II Series 1998-GL II
Class A1
6.312%, due 4/13/31.................................. $ 1,599,146 $ 1,611,427
Merrill Lynch Mortgage
Investors, Inc.
Series 1998-C2 Class A2 6.39%, due 2/15/30........... 1,015,000 1,024,957
Series 1998-C1 Class A2
6.48%, due 11/15/26.................................. 1,015,000 1,025,485
Series 1995-C2 Class A1
7.0875%, due 6/15/21 (c)(d).......................... 1,797,556 1,828,762
Morgan Stanley Capital I
Series 1998-WF1 Class A1
6.25%, due 7/15/07................................... 1,355,305 1,362,380
Mortgage Capital Funding, Inc.
Series 1998-MC1 Class A1
6.417%, due 6/18/07.................................. 594,078 601,468
------------
10,130,015
------------
RESIDENTIAL MORTGAGE LOANS (COLLATERALIZED MORTGAGE OBLIGATIONS)
(3.1%)
Bear Stearns Mortgage
Securities Inc.
Series 1996-4 Class AI2
10.50%, due 9/25/27.................................. 331,108 335,764
Residential Asset Securitization Trust
Series 1997-A3 Class A7
10.00%, due 5/25/27.................................. 1,269,088 1,305,574
Series 1997-A5 Class A4
10.00%, due 7/25/27.................................. 603,230 616,803
Series 1997-A8 Class A2
10.00%, due 10/25/27................................. 755,532 819,752
Series 1997-A9 Class A8
10.00%, due 11/26/27................................. 1,137,266 1,181,688
Structured Asset Securities Corp.
Series 1996-2 Class A1
7.00%, due 8/25/26................................... 1,163,543 1,168,418
------------
5,427,999
------------
Total Mortgage-Backed Securities
(Cost $15,587,231)................................... 15,558,014
------------
U.S. GOVERNMENT &
FEDERAL AGENCIES (49.4%)
FEDERAL AGENCY (COLLATERALIZED MORTGAGE OBLIGATION) (0.6%)
Fannie Mae
Series 1998-M1 Class A1
5.96%, due 5/25/07................................... 1,123,458 1,118,694
------------
</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.
U.S. GOVERNMENT & FEDERAL AGENCIES (Continued)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
-------------------------------------------------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (4.5%)
5.25%, due 1/15/03.............................. $ 1,560,000 $ 1,530,500
5.625%, due 3/15/01 (e)......................... 6,435,000 6,426,442
------------
7,956,942
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (MORTGAGE PASS-THROUGH SECURITIES)
(0.8%)
6.54%, due 1/1/05............................... 1,395,605 1,432,770
------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION I (MORTGAGE PASS-THROUGH
SECURITIES) (2.0%)
8.00%, due 8/19/28 TBA (b)...................... 3,315,000 3,434,141
------------
UNITED STATES TREASURY BONDS (9.8%)
6.125%, due 11/15/27............................ 2,275,000 2,437,799
7.625%, due 2/15/25 (e)......................... 8,500,000 10,702,010
8.875%, due 8/15/17............................. 2,844,000 3,877,168
------------
17,016,977
------------
UNITED STATES TREASURY NOTES (31.7%)
5.625%, due 11/30/00 (e)........................ 17,260,000 17,297,799
6.25%, due 2/28/02-2/15/03 (e).................. 13,880,000 14,260,454
6.625%, due 5/15/07............................. 6,920,000 7,432,495
7.75%, due 11/30/99............................. 1,890,000 1,946,398
7.875%, due 11/15/99-11/15/04................... 13,005,000 14,386,026
------------
55,323,172
------------
Total U.S. Government &
Federal Agencies
(Cost $85,751,739).............................. 86,282,696
------------
YANKEE BONDS (5.9%)
CONSUMER FINANCIAL SERVICES (2.0%)
Ford Capital Co. B.V.
9.50%, due 6/1/10............................... 2,700,000 3,381,858
------------
ELECTRIC UTILITIES (0.8%)
United Utilities, PLC
6.45%, due 4/1/08............................... 1,425,000 1,427,878
------------
FINANCE (0.8%)
Fairfax Financial Holdings Ltd.
6.875%, due 4/15/08............................. 1,450,000 1,446,738
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
-------------------------------------------------------------
GAS UTILITIES (0.4%)
Camuzzi Gas Pampeana S.A.
9.25%, due 12/15/01 (a).......................... $ 695,000 $ 706,148
------------
MULTI-INDUSTRIAL (0.8%)
Tyco International Group S.A.
6.125%, 6/15/01.................................. 1,400,000 1,400,868
------------
OIL SERVICES (1.1%)
Petroleum Geo-Services ASA
7.125%, due 3/30/28.............................. 1,935,000 1,961,142
------------
Total Yankee Bonds
(Cost $10,267,372)............................... 10,324,632
------------
Total Long-Term Investments
(Cost $170,104,537).............................. 171,041,323
------------
SHORT-TERM INVESTMENT (2.9%)
COMMERCIAL PAPER (2.9%)
Prudential Funding Corp.
5.82%, due 6/30/98............................... 4,950,000 4,950,000
------------
Total Short-Term Investment
(Cost $4,950,000)................................ 4,950,000
------------
Total Investments
(Cost $175,054,537) (f).......................... 100.9% 175,991,323 (g)
Liabilities in Excess of Cash and Other Assets.... (0.9) (1,484,521)
----------- ------------
Net Assets........................................ 100.0% $174,506,802
=========== ============
</TABLE>
- --------
(a) May be sold to institutional investors only.
(b) TBA: Securities purchased on a forward commitment basis with an
approximate principal amount and maturity date. The actual principal
amount and the maturity date will be determined upon settlement.
(c) Segregated as collateral for TBA.
(d) Floating rate. Rate shown is the rate in effect at June 30, 1998.
(e) Represents securities out on loan or a portion of which is out on loan.
(f) The cost for Federal income tax purposes is $175,075,628.
(g) At June 30, 1998 net unrealized appreciation was $915,695 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 $1,169,053 and aggregate gross unrealized
depreciation for all investments on which there was an excess of cost over
market value of $253,358.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
101
<PAGE>
BOND FUND
STATEMENT OF ASSETS AND LIABILITIES STATEMENT OF OPERATIONS
As of June 30, 1998 (Unaudited) For the six months ended June 30,
1998 (Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investment in securities, at value (identified cost
$175,054,537).................................................. $175,991,323
Collateral held for securities loaned, at value (Note 6)........ 30,630,000
Receivables:
Investment securities sold...................................... 15,712,193
Interest........................................................ 2,155,528
Fund shares sold................................................ 228,588
------------
Total assets.................................................. 224,717,632
------------
LIABILITIES:
Securities lending collateral, at value (Note 6)................ 30,630,000
Payables:
Investment securities purchased................................. 19,338,276
MainStay Management............................................. 90,408
Fund shares redeemed............................................ 65,946
Custodian....................................................... 52,360
Transfer agent.................................................. 2,458
Accrued expenses................................................ 31,382
------------
Total liabilities............................................. 50,210,830
------------
Net assets...................................................... $174,506,802
============
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.001 per share) 1 billion shares
authorized
Institutional Class............................................. $ 16,958
Institutional Service Class..................................... 350
Additional paid-in capital...................................... 177,700,135
Accumulated undistributed net investment income................. 5,100,630
Accumulated net realized loss on investments.................... (9,248,057)
Net unrealized appreciation on investments...................... 936,786
------------
Net assets...................................................... $174,506,802
============
Institutional Class
Net assets applicable to outstanding shares..................... $170,995,774
============
Shares of capital stock outstanding............................. 16,957,628
============
Net asset value per share outstanding........................... $ 10.08
============
Institutional Service Class
Net assets applicable to outstanding shares..................... $ 3,511,028
============
Shares of capital stock outstanding............................. 349,630
============
Net asset value per share outstanding........................... $ 10.04
============
</TABLE>
<TABLE>
<S> <C>
INVESTMENT INCOME:
Income:
Interest........................................................... $5,774,030
----------
Expenses:
Management......................................................... 669,383
Professional....................................................... 23,245
Custodian.......................................................... 18,472
Shareholder communication.......................................... 15,375
Transfer agent..................................................... 14,380
Registration....................................................... 12,066
Service............................................................ 4,017
Directors.......................................................... 2,173
Miscellaneous...................................................... 7,396
----------
Total expenses before
reimbursement................................................... 766,507
Expense reimbursement from Manager................................. (93,107)
----------
Net expenses..................................................... 673,400
----------
Net investment income.............................................. 5,100,630
----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments................................... 3,474,263
Net change in unrealized appreciation on investments............... (1,807,342)
----------
Net realized and unrealized gain on investments.................... 1,666,921
----------
Net increase in net assets resulting from operations............... $6,767,551
==========
</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.
BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 1998 (Unaudited) and the year ended December
31, 1997
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income............................. $ 5,100,630 $ 11,105,409
Net realized gain on investments.................. 3,474,263 1,673,440
Net change in unrealized appreciation on
investments...................................... (1,807,342) 1,794,244
------------ ------------
Net increase in net assets resulting from
operations....................................... 6,767,551 14,573,093
------------ ------------
Dividends to shareholders:
From net investment income:
Institutional Class.............................. -- (10,960,664)
Institutional Service Class...................... -- (87,118)
------------ ------------
Total dividends to shareholders................. -- (11,047,782)
------------ ------------
Capital share transactions:
Net proceeds from sale of shares:
Institutional Class.............................. 8,761,973 9,276,484
Institutional Service Class...................... 2,471,473 645,193
Net asset value of shares issued to shareholders
in reinvestment of dividends:
Institutional Class.............................. -- 10,960,664
Institutional Service Class...................... -- 86,673
------------ ------------
11,233,446 20,969,014
Cost of shares redeemed:
Institutional Class.............................. (28,280,519) (16,896,833)
Institutional Service Class...................... (590,367) (826,594)
------------ ------------
Increase (decrease) in net assets derived from
capital share transactions...................... (17,637,440) 3,245,587
------------ ------------
Net increase (decrease) in net assets............ (10,869,889) 6,770,898
NET ASSETS:
Beginning of period............................... 185,376,691 178,605,793
------------ ------------
End of period..................................... $174,506,802 $185,376,691
============ ============
Accumulated undistributed net investment income at
end of period.................................... $ 5,100,630 $ --
============ ============
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
103
<PAGE>
BOND FUND
FINANCIAL HIGHLIGHTS
(Selected per share data and ratios)
<TABLE>
<CAPTION>
INSTITUTIONAL
INSTITUTIONAL SERVICE
CLASS CLASS
------------- -------------
SIX MONTHS
ENDED
JUNE 30, 1998*
---------------------------
<S> <C> <C>
Net asset value at beginning of period............. $ 9.71 $ 9.68
-------- --------
Net investment income.............................. 0.25 0.23
Net realized and unrealized gain (loss) on
investments....................................... 0.12 0.13
-------- --------
Total from investment operations................... 0.37 0.36
-------- --------
Less dividends and distributions:
From net investment income......................... -- --
From net realized gain on investments.............. -- --
In excess of net realized gain on investments...... -- --
-------- --------
Total dividends and distributions.................. -- --
-------- --------
Net asset value at end of period................... $ 10.08 $ 10.04
======== ========
Total investment return(a) ........................ 3.81% 3.72%
Ratios (to average net assets)/Supplemental Data:
Net investment income............................. 5.72%+ 5.47%+
Net expenses...................................... 0.75%+ 1.00%+
Expenses (before reimbursement)................... 0.85%+ 1.10%+
Portfolio turnover rate............................ 217% 217%
Net assets at end of period (in 000's)............. $170,996 $ 3,511
</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.
104
<PAGE>
MAINSTAY
INSTITUTIONAL FUNDS INC.
<TABLE>
<CAPTION>
INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL
CLASS SERVICE CLASS CLASS SERVICE CLASS CLASS SERVICE CLASS CLASS
- ------------- ------------- ------------- ------------- ------------- ------------- -------------------
YEAR ENDED DECEMBER 31
- --------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993
- ---------------------------- --------------------------- --------------------------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 9.51 $ 9.49 $ 9.85 $ 9.83 $ 8.93 $ 8.93 $ 9.98 $ 11.08
-------- -------- -------- -------- -------- -------- -------- --------
0.61 0.59 0.62 0.60 0.68 0.67 0.72 0.74
0.20 0.19 (0.34) (0.34) 0.92 0.90 (1.05) 0.26
-------- -------- -------- -------- -------- -------- -------- --------
0.81 0.78 0.28 0.26 1.60 1.57 (0.33) 1.00
-------- -------- -------- -------- -------- -------- -------- --------
(0.61) (0.59) (0.62) (0.60) (0.68) (0.67) (0.72) (1.35)
-- -- -- -- -- -- -- (0.65)
-- -- -- -- -- -- -- (0.10)
-------- -------- -------- -------- -------- -------- -------- --------
(0.61) (0.59) (0.62) (0.60) (0.68) (0.67) (0.72) (2.10)
-------- -------- -------- -------- -------- -------- -------- --------
$ 9.71 $ 9.68 $ 9.51 $ 9.49 $ 9.85 $ 9.83 $ 8.93 $ 9.98
======== ======== ======== ======== ======== ======== ======== ========
8.57% 8.21% 2.80% 2.62% 17.88% 17.55% (3.31%) 9.74%
6.21% 5.96% 6.10% 5.85% 6.62% 6.37% 7.13% 6.86%
0.75% 1.00% 0.75% 1.00% 0.75% 1.00% 0.75% 0.70%
0.85% 1.10% 0.86% 1.11% 0.86% 1.11% 0.82% 0.84%
338% 338% 398% 398% 470% 470% 478% 567%
$183,846 $ 1,531 $177,009 $ 1,597 $193,518 $ 749 $202,970 $219,834
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
105
<PAGE>
INDEXED BOND FUND
================================================================================
================================================================================
MARKET RECAP FOR THE 6-MONTH PERIOD ENDED 6/30/98
================================================================================
o The U.S. economy continued to expand in a favorable environment of solid
growth, modest inflation, and low interest rates.
o Consumer confidence soared, employment rates reached highs not seen in
nearly three decades, and commodity prices generally declined.
o Concerned that taking action might exacerbate problems in Asia, the Federal
Reserve Board refrained from raising interest rates.
o The 30-year Treasury bond traded at its lowest yield since it was first
offered more than twenty years ago.
o The Salomon Smith Barney Broad Investment Grade (BIG) Bond Index* returned
3.96% for the first half of 1998.
================================================================================
FUND RECAP FOR THE 6- AND 12-MONTH PERIODS ENDED 6/30/98
================================================================================
o One-year total returns of 10.04% and 9.68% for Institutional Class and
Service Class shares, respectively, as of 6/30/98.
o The Fund closely tracked the performance of the Salomon Smith Barney Broad
Investment Grade Bond Index.
o Institutional Class shares outperformed and Service Class shares slightly
underperformed the average Lipper+ general U.S. government fund, which
returned 3.62% for the six months ended 6/30/98.
During the first half of 1998, domestic bond markets were influenced by solid
economic growth, low inflation, high employment, strong consumer confidence, and
declining commodity prices. With modest inflation and widespread concern that
any Federal Reserve Board action might exacerbate problems in Asian economies,
the Federal Reserve Board did not overtly move to influence the direction of
interest rates. During June, however, 30-year Treasury bond yields dropped to
their lowest levels since the securities were first introduced over twenty years
ago.
In this general context, the Salomon Smith Barney Broad Investment Grade (BIG)
Bond Index returned 3.96% for the first six months of 1998. The Treasury sector
led the way, returning 4.22%. The corporate bond sector returned 4.18%, and
mortgage-backed securities returned 3.37%. As of June 30, the average life of
the bonds in the Index was about 8.4 years and effective duration was about 4.5
years.
- --------------------------------------------------------------------------------
Inflation An increase in the cost of goods and services over time. As prices
rise, the purchasing power of the dollar declines.
Federal Reserve Board The seven-member governing board of the Federal Reserve
System, which is the central bank of the United States. The Board sets policies
on reserve requirements, bank regulations, the discount rate, tightens or
loosens the availability of credit in the economy, and regulates the purchase of
securities on margin.
- --------------------------------------------------------------------------------
================================================================================
* The Salomon Smith Barney Broad Investment Grade (BIG) Bond Index is an
unmanaged index that is 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.
106
<PAGE>
================================================================================
Given this context, how did the MainStay Institutional Indexed Bond Fund perform
in the first six months of 1998?
For the six months ended 6/30/98, the MainStay Institutional Indexed Bond Fund
returned 3.72% and 3.54% for Institutional Class shares and Service Class
shares, respectively. Institutional Class shares outperformed and Service Class
shares slightly underperformed the average Lipper general U.S. government fund,
which returned 3.62% for the first half of 1998. Both share classes
underperformed the Salomon Smith Barney Broad Investment Grade Bond Index, which
returned 3.96% over the same period.
Why did the Fund underperform the Index?
The Fund seeks to track the Salomon Smith Barney Broad Investment Grade Bond
Index. However, the Fund faces fees and expenses that do not apply to the Index,
which account for the bulk of the Fund's underperformance. The Fund also has to
account for the timing and amount of new investments and redemptions, which the
Index does not. This may result in tracking differences.
During the reporting period, what were the most significant factors that
influenced the bond market's performance?
In general, the bond markets were focused on the Federal Reserve Board, which
seeks to balance economic growth and inflation concerns. Typically, the Federal
Reserve Board seeks to head off inflation by slowing the economy before price
pressure has an opportunity to mount. During 1998, however, inflationary
pressure has been negligible, with consumer and producer prices remaining in
check. Given this backdrop and concerns that increasing rates might strengthen
the dollar and compound Asia's economic difficulties, the Federal Reserve Board
has remained on the sidelines.
During the reporting period, which sectors contributed most positively to the
Fund's performance?
The Treasury sector was the best-performing segment of the Index returning
4.22%. Declining yields, particularly among longer-term Treasuries, helped move
prices higher in June. Treasuries and government-sponsored bonds accounted for
48% of the Index on June 30, 1998.
Which sector performed the worst and why?
Mortgage-backed securities were the worst-performing sector, returning 3.37% for
the first half of 1998. As yields declined, prepayments caused mortgage-backed
bonds to underperform bonds in general. The mortgage sector accounted for 30% of
the Salomon Smith Barney Broad Investment Grade Index on June 30, 1998.
What is your outlook for the second half of 1998 and beyond?
With signs that the economy is slowing and inflation will remain in check, we
believe the Federal Reserve may remain on the sidelines. In our opinion, the
impact of the General Motors strike and weaker corporate earnings that may
result from the Asian crisis may provide a favorable environment for bond
investors. Unless the Federal Reserve Board changes its target rate, we believe
interest rates may remain stable or decline slightly.
- --------------------------------------------------------------------------------
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.
Mutual fund yields are expressed as a percentage of the fund's current price per
share.
Mortgage-backed securities Securities representing interests in "pools" of
mortgages in which principal and interest payments by the holders of 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).
- --------------------------------------------------------------------------------
107
<PAGE>
================================================================================
Of course, the Federal Reserve Board will continue to monitor domestic economic
growth closely. But regardless of what happens to interest rates or bond prices,
we will continue to seek to provide investment results that correspond to the
total return performance of fixed-income securities in the aggregate, as
represented by the Salomon Smith Barney Broad Investment Grade Bond Index.
James A. Mehling, CFA
Portfolio Manager
================================================================================
Past performance is no guarantee of future results.
[GRAPHIC]
108
<PAGE>
$10,000 INVESTED IN MAINSTAY INSTITUTIONAL
INDEXED BOND FUND VS SALOMON BROTHERS BIG INDEX
INSTITUTIONAL CLASS SHARES
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
================================================================================
<TABLE>
<CAPTION>
Indexed Bond Fund
Year Institutional Salomon Brothers BIG Index
---- ----------------- --------------------------
<S> <C> <C>
1/2/91 10,000 10,000
91 11,470 11,599
92 12,283 12,477
93 13,467 13,716
94 13,003 13,326
95 15,354 15,794
96 15,745 16,365
97 17,164 17,940
6/30/98 17,803 18,650
</TABLE>
$10,000 INVESTED IN MAINSTAY INSTITUTIONAL
INDEXED BOND FUND VS SALOMON BROTHERS BIG INDEX
SERVICE CLASS SHARES
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
================================================================================
<TABLE>
<CAPTION>
Year Indexed Bond Fund Service Salomon Brothers BIG Index
---- ------------------------- --------------------------
<S> <C> <C>
1/2/91 10,000 10,000
91 11,470 11,599
92 12,283 12,477
93 13,467 13,716
94 13,003 13,326
95 15,341 15,794
96 15,699 16,365
97 17,073 17,940
6/30/98 17,677 18,650
</TABLE>
o 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 Annual Total Return*
PERFORMANCE as of June 30, 1998 as of June 30, 1998
- -------------------------------------------------------------------------------------------------------------------------
Year to Date One Year Five Year Since Inception
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Indexed Bond Fund Institutional Class 3.72% 10.04% 6.28% 7.99%
Indexed Bond Fund Service Class+ 3.54% 9.68% 6.13% 7.89%
Average Lipper General U.S. Government Fund 3.62% 10.17% 5.72% 7.52%
Salomon Brothers BIG Bond Index 3.96% 10.59% 6.90% 8.66%
</TABLE>
YEAR-BY-YEAR PERFORMANCE
- --------------------------------------------------------------------------------
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
Instutional Class Shares
<TABLE>
<CAPTION>
Total Return
Year end %*
-------- ------------
<S> <C>
1991 14.70
1992 7.09
1993 9.64
1994 (3.44)
1995 18.07
1996 2.55
1997 9.01
1998 (as of 6/30/98) 3.72
</TABLE>
<TABLE>
<CAPTION>
QUALITY BREAKDOWN++
(% of bonds as of June 30, 1998)
- --------------------------------------------------------------------------------
<S> <C>
Government/Agency 74.42%
AAA 4.37%
AA 3.78%
A 11.28%
BBB 6.15%
------
100.00%
</TABLE>
================================================================================
PORTFOLIO COMPOSITION
(% of net assets as of June 30, 1998)
- --------------------------------------------------------------------------------
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
<TABLE>
<S> <C>
U.S. Government & Federal Agencies 74.10%
Domestic Bonds 19.92%
Foreign & Other Bonds 4.62%
Cash, Equivalents & Other Assets 1.36%(S)
</TABLE>
================================================================================
================================================================================
TOP 10 HOLDINGS
(% of net assets as of June 30, 1998)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
1. US Treasury Note, 10/31/01, 6.25% 3.43%
2. Federal Home Loan Bank, 8/25/99, 8.60% 2.35%
3. Orion Capital Trust I, 1/1/37, 8.73% 2.18%
4. Cox Communications, 11/15/02, 6.50% 2.15%
5. Donaldson, Lufkin & Jenrette, 11/1/05, 6.875% 2.00%
6. US Treasury Note, 4/30/01, 6.25% 1.91%
7. AT&T Corp., 12/1/31, 8.625% 1.79%
8. US Treasury Note, 11/15/01, 7.50% 1.64%
9. FNCL, 2/1/28, 6.50% 1.63%
10. Tennessee Valley Authority, 6/15/44, 7.85% 1.52%
</TABLE>
================================================================================
================================================================================
TOP 5 INDUSTRY HOLDINGS
(% of net assets as of June 30, 1998)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
1. US Government & Federal Agencies 74.10%
2. Finance 5.19%
3. Banks 4.58%
4. Telecommunications Services 3.95%
5. Retail-General Merchandise 1.25%
Average Maturity 14.9 years
(as of 6/30/98)
</TABLE>
- --------------------------------------------------------------------------------
================================================================================
* 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% on an annualized basis of the average daily net asset value of the
Service Class shares.
+ 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.
109
<PAGE>
INDEXED BOND FUND
PORTFOLIO OF INVESTMENTS
June 30, 1998 (Unaudited)
LONG-TERM INVESTMENTS (97.7%)+
CORPORATE BONDS (19.9%)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
------------------------------------------------------------
AUTOMOTIVE RENTALS (0.5%)
Hertz Corp.
7.00%, due 7/15/03................................... $ 700,000 $ 719,250
------------
BANKS (1.5%)
First Union Corp.
8.77%, due 11/15/04.................................. 1,000,000 1,038,750
Inter-American Development Bank
6.80%, due 10/15/25.................................. 1,200,000 1,308,000
------------
2,346,750
------------
CHEMICALS (0.6%)
DuPont (E.I.) de Nemours & Co.
8.125%, due 3/15/04.................................. 800,000 884,000
------------
COMPUTERS & OFFICE EQUIPMENT (0.8%)
Xerox Corp.
5.91%, due 4/1/37.................................... 1,250,000 1,256,250
------------
CONSUMER FINANCIAL SERVICES (0.7%)
General Motors Acceptance Corp.
8.40%, due 10/15/99.................................. 500,000 515,555
KFW International Finance, Inc.
9.125%, due 5/15/01.................................. 500,000 541,250
------------
1,056,805
------------
ENTERTAINMENT (0.4%)
Walt Disney Co. (The)
6.75%, due 3/30/06................................... 600,000 626,250
------------
FINANCE (5.2%)
Commercial Credit Co.
8.70%, due 6/15/10................................... 450,000 548,437
Donaldson, Lufkin & Jenrette Securities Corp.
6.875%, due 11/1/05.................................. 3,000,000 3,105,000
Finova Capital Corp.
6.19%, due 10/22/99.................................. 1,000,000 1,000,860
Orion Capital Trust I
8.73%, due 1/1/37.................................... 3,000,000 3,378,750
------------
8,033,047
------------
FOOD, BEVERAGES & TOBACCO (0.4%)
Coca-Cola Enterprises, Inc.
8.50%, due 2/1/22.................................... 500,000 610,625
------------
INDUSTRIAL (0.9%)
USA Waste Services, Inc.
7.00%, due 10/1/04................................... 1,300,000 1,350,375
------------
MACHINERY (0.4%)
Caterpillar, Inc.
9.00%, due 4/15/06................................... 500,000 587,500
------------
</TABLE>
- --------
+ Percentages indicated are based on Fund net assets.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
------------------------------------------------------------
OIL & GAS (0.3%)
Texaco Capital, Inc.
9.75%, due 3/15/20................................... $ 350,000 $ 479,500
------------
PAPER & FOREST PRODUCTS (0.4%)
Scott Paper Co.
7.00%, due 8/15/23................................... 650,000 680,875
------------
RETAIL--GENERAL MERCHANDISE (1.3%)
Limited, Inc.
7.50%, due 3/15/23................................... 1,900,000 1,930,875
------------
STEEL (0.7%)
USX Corp.
7.20%, due 2/15/04................................... 1,100,000 1,144,000
------------
TELECOMMUNICATION SERVICES (3.9%)
AT&T Corp.
8.625%, due 12/1/31.................................. 2,500,000 2,778,125
Cox Communications, Inc.
6.50%, due 11/15/02.................................. 3,300,000 3,333,000
------------
6,111,125
------------
UTILITIES--ELECTRIC (1.2%)
Pennsylvania Power & Light Co.
7.30%, due 3/1/24.................................... 1,000,000 1,030,000
Texas Utility Electric Co.
8.25%, due 4/1/04.................................... 800,000 880,000
------------
1,910,000
------------
UTILITIES--TELEPHONE (0.7%)
United Telecommunication, Inc.
9.50%, due 4/1/03.................................... 1,000,000 1,136,250
------------
Total Corporate Bonds
(Cost $29,688,873)................................... 30,863,477
------------
INTERNATIONAL
CORPORATE BONDS (2.6%)
BANKS (2.6%)
ABN Amro Bank, NV
Chicago Branch
7.55%, due 6/28/06................................... 800,000 867,000
Bayerische Landesbank Girozentrale
New York Branch
6.20%, due 2/9/06.................................... 1,900,000 1,902,375
International Bank for Reconstruction & Development
7.12%, due 9/27/99................................... 1,200,000 1,219,500
------------
Total International
Corporate Bonds
(Cost $3,848,847).................................... 3,988,875
------------
</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.
U.S. GOVERNMENT & FEDERAL AGENCIES (73.1%)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
------------------------------------------------------------
FEDERAL HOME LOAN BANK (2.3%)
8.60%, due 8/25/99................................... $ 3,525,000 $ 3,638,752
------------
FEDERAL HOME LOAN BANK
(MEDIUM-TERM LOAN) (1.0%)
8.00%, due 9/11/01................................... 1,400,000 1,493,072
------------
FEDERAL HOME LOAN MORTGAGE CORPORATION (MORTGAGE PASS-THROUGH SECURITIES)
(8.6%)
6.00%, due 9/1/02-10/1/02............................ 1,915,921 1,917,118
6.50%, due 10/1/01-3/1/27............................ 3,524,158 3,532,089
7.00%, due 8/1/03-12/1/27............................ 4,721,408 4,795,758
7.50%, due 9/1/11-3/1/27............................. 2,354,031 2,414,953
8.00%, due 7/1/26.................................... 659,733 682,206
------------
13,342,124
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (0.6%)
(zero coupon), due 7/5/14............................ 2,500,000 979,275
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(MEDIUM-TERM NOTE) (0.3%)
5.83%, due 12/10/99.................................. 500,000 501,000
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (MORTGAGE PASS-THROUGH SECURITIES)
(16.1%)
5.50%, due 3/1/05.................................... 1,196,484 1,172,554
6.50%, due 7/1/03-2/1/28............................. 6,463,598 6,464,990
7.00%, due 5/1/11-11/1/26............................ 3,706,989 3,765,191
7.50%, due 11/1/26-1/1/28............................ 2,293,070 2,353,263
8.00%, due 7/1/07-4/1/27............................. 8,163,491 8,451,755
9.50%, due 3/1/16-9/1/19............................. 2,548,996 2,719,460
------------
24,927,213
------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION I (MORTGAGE PASS-THROUGH SECURITIES)
(6.3%)
7.00%, due 3/15/07-12/15/27.......................... 2,704,316 2,755,223
7.50%, due 8/15/08-11/15/26.......................... 2,563,009 2,637,204
8.00%, due 6/15/26-9/15/27........................... 2,959,728 3,067,018
8.50%, due 7/15/26-11/15/26.......................... 1,179,942 1,244,470
------------
9,703,915
------------
PRIVATE EXPORT FUNDING CORP. (0.7%)
8.35%, due 1/31/01................................... 1,000,000 1,062,500
------------
TENNESSEE VALLEY AUTHORITY (1.5%)
Power Board 1994 Series A
7.85%, due 6/15/44................................... 2,200,000 2,359,500
------------
UNITED STATES TREASURY BONDS (15.6%)
6.00%, due 2/15/26................................... 500,000 520,390
6.125%, due 11/15/27................................. 1,100,000 1,178,661
6.25%, due 8/15/23................................... 700,000 749,609
6.625%, due 2/15/27.................................. 1,100,000 1,241,988
6.875%, due 8/15/25.................................. 500,000 578,730
7.125%, due 2/15/23.................................. 600,000 709,296
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
-------------------------------------------------------------
UNITED STATES TREASURY BONDS (Continued)
7.25%, due 5/15/16................................ $ 500,000 $ 585,185
7.50%, due 11/15/16-11/15/24...................... 1,200,000 1,456,084
7.625%, due 11/15/22-2/15/25...................... 800,000 1,001,232
8.00%, due 11/15/21 (a)........................... 1,000,000 1,288,090
8.125%, due 8/15/19-5/15/21....................... 1,300,000 1,684,034
8.50%, due 2/15/20................................ 400,000 535,460
8.75%, due 5/15/17-8/15/20........................ 1,500,000 2,046,815
8.875%, due 2/15/19............................... 600,000 826,152
9.375%, due 2/15/06............................... 530,000 654,221
9.875%, due 11/15/15.............................. 600,000 873,480
10.375%, due 11/15/12............................. 500,000 669,270
11.25%, due 2/15/15............................... 400,000 640,320
11.75%, due 2/15/01............................... 1,700,000 1,959,080
11.875%, due 11/15/03............................. 500,000 644,255
12.00%, due 8/15/13............................... 500,000 740,845
12.75%, due 11/15/10.............................. 400,000 569,296
13.125%, due 5/15/01.............................. 1,000,000 1,201,060
13.375%, due 8/15/01.............................. 1,200,000 1,466,376
14.25%, due 2/15/02............................... 300,000 384,648
------------
24,204,577
------------
UNITED STATES TREASURY NOTES (17.7%)
5.75%, due 10/31/00-8/15/03....................... 2,200,000 2,219,308
6.125%, due 9/30/00-8/15/07....................... 2,100,000 2,164,638
6.25%, due 4/30/01-2/15/03........................ 9,200,000 9,390,280
6.375%, due 3/31/01-
8/15/02 (a)...................................... 1,500,000 1,540,520
6.50%, due 10/15/06............................... 1,200,000 1,273,212
6.75%, due 4/30/00................................ 700,000 714,602
6.875%, due 3/31/00............................... 1,600,000 1,635,232
7.50%, due 10/31/99-2/15/05....................... 5,350,000 5,643,643
7.75%, due 2/15/01................................ 500,000 526,575
7.875%, due 11/15/99.............................. 1,000,000 1,030,610
8.50%, due 2/15/00................................ 1,200,000 1,254,444
------------
27,393,064
------------
UNITED STATES TREASURY NOTES
(SECURED STRIPPED BONDS) (2.4%)
(zero coupon), due 2/15/01........................ 1,000,000 868,710
(zero coupon), due 2/15/05........................ 2,500,000 1,743,150
(zero coupon), due 5/15/10........................ 1,500,000 771,450
(zero coupon), due 2/15/27........................ 1,500,000 303,585
------------
3,686,895
------------
Total U.S. Government & Federal Agencies
(Cost $109,834,733)............................... 113,291,887 (b)
------------
YANKEE BONDS (2.1%)
BANKS (0.5%)
ANZ Banking Group, Ltd.
7.55%, due 9/15/06................................ 700,000 762,125
------------
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
111
<PAGE>
INDEXED BOND FUND
PORTFOLIO OF INVESTMENTS (Continued)
June 30, 1998 (Unaudited)
YANKEE BONDS (Continued) FUTURES CONTRACTS (0.0%) (c)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
-------------------------------------------------------------
CONSUMER FINANCIAL SERVICES (0.4%)
Japan Financial Corp.
8.70%, due 7/30/01............................... $ 600,000 $ 647,250
------------
FOREIGN GOVERNMENT (0.8%)
Ontario Hydro
7.45%, due 3/31/13............................... 500,000 556,250
Quebec (Province of)
7.50%, due 7/15/23............................... 600,000 672,750
------------
1,229,000
------------
UTILITIES--TELEPHONE (0.4%)
Northern Telecom
8.75%, due 6/12/01............................... 500,000 536,875
------------
Total Yankee Bonds
(Cost $2,905,899)................................ 3,175,250
------------
Total Long-Term Investments
(Cost $146,278,352).............................. 151,319,489
------------
SHORT-TERM
INVESTMENTS (0.9%)
U.S. GOVERNMENT (0.9%)
United States Treasury Bills
4.81%, due 8/13/98 (a)........................... 400,000 397,685
4.86%, due 8/6/98 (a)............................ 1,000,000 995,150
4.87%, due 8/13/98 (a)........................... 100,000 99,419
------------
Total Short-Term Investments
(Cost $1,492,261)................................ 1,492,254
------------
Total Investments
(Cost $147,770,613) (e).......................... 98.6% 152,811,743 (f)
Cash and Other Assets,
Less Liabilities................................. 1.4 2,095,300
----------- ------------
Net Assets........................................ 100.0% $154,907,043
=========== ============
</TABLE>
<TABLE>
<CAPTION>
CONTRACTS UNREALIZED
LONG APPRECIATION (D)
<S> <C> <C>
--------------------------------------------------------------
United States Treasury Note
September 1998 (5 Year)........................... 6 $ 1,159
United States Treasury Note
September 1998 (10 Year).......................... 4 1,272
United States Treasury Bond
September 1998 (30 Year).......................... 3 1,189
------------
Total Futures Contracts............................
(Settlement Value $1,484,281)..................... $ 3,620
============
</TABLE>
- --------
(a) Segregated or partially segregated as collateral for futures contracts.
(b) The combined market value of U.S. Government and Federal Agencies
Investments and the value of securities purchased under U.S. Treasury
futures contracts represents 74.09% of net assets.
(c) Less than one tenth of a percent.
(d) Represents the difference between the value of the contracts at the time
they were opened and the value at June 30, 1998.
(e) The cost stated also represents the aggregate cost for Federal income tax
purposes.
(f) At June 30, 1998 net unrealized appreciation was $5,041,130, 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 $5,578,658 and aggregate gross unrealized
depreciation for all investments on which there was an excess of cost over
market value of $537,528.
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.
INDEXED BOND FUND
STATEMENT OF ASSETS AND LIABILITIES STATEMENT OF OPERATIONS
As of June 30, 1998 (Unaudited) For the six months ended June 30,
1998 (Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investment in securities, at value (identified cost
$147,770,613).................................................. $152,811,743
Cash............................................................ 71,975
Receivables:
Interest........................................................ 2,063,207
Fund shares sold................................................ 1,142,705
Variation margin receivable on futures contracts................ 2,709
------------
Total assets.................................................. 156,092,339
------------
LIABILITIES:
Payables:
Investment securities purchased................................. 1,094,408
MainStay Management............................................. 46,432
Custodian....................................................... 13,560
Transfer agent.................................................. 2,242
Accrued expenses................................................ 28,654
------------
Total liabilities............................................. 1,185,296
------------
Net assets...................................................... $154,907,043
============
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.001 per share) 1 billion shares
authorized
Institutional Class............................................. $ 13,581
Institutional Service Class..................................... 327
Additional paid-in capital...................................... 147,032,901
Accumulated undistributed net investment income................. 4,605,729
Accumulated net realized loss on investments.................... (1,790,245)
Net unrealized appreciation on investments...................... 5,044,750
------------
Net assets...................................................... $154,907,043
============
Institutional Class
Net assets applicable to outstanding shares..................... $151,268,918
============
Shares of capital stock outstanding............................. 13,581,299
============
Net asset value per share outstanding........................... $ 11.14
============
Institutional Service Class
Net assets applicable to outstanding shares..................... $ 3,638,125
============
Shares of capital stock outstanding............................. 327,051
============
Net asset value per share outstanding........................... $ 11.12
============
</TABLE>
<TABLE>
<S> <C>
INVESTMENT INCOME:
Income:
Interest........................................................... $4,961,370
----------
Expenses:
Management......................................................... 354,315
Professional....................................................... 20,751
Custodian.......................................................... 16,626
Registration....................................................... 14,837
Transfer agent..................................................... 13,722
Shareholder communication.......................................... 11,039
Pricing Service.................................................... 9,466
Service............................................................ 4,147
Directors.......................................................... 1,573
Miscellaneous...................................................... 7,055
----------
Total expenses before
reimbursement................................................... 453,531
Expense reimbursement from Manager................................. (95,070)
----------
Net expenses..................................................... 358,461
----------
Net investment income.............................................. 4,602,909
----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) from:
Security transactions.............................................. 21,932
Futures transactions............................................... (210,242)
----------
Net realized loss on investments................................... (188,310)
----------
Net change in unrealized appreciation on investments:
Security transactions.............................................. 807,565
Futures transactions............................................... 4,312
----------
Net unrealized gain on investments................................. 811,877
----------
Net realized and unrealized gain on investments.................... 623,567
----------
Net increase in net assets resulting from operations............... $5,226,476
==========
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
113
<PAGE>
INDEXED BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 1998 (Unaudited) and the year ended December
31, 1997
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
INCREASE IN NET ASSETS:
Operations:
Net investment income............................. $ 4,602,909 $ 7,845,428
Net realized loss on investments.................. (188,310) (147,749)
Net change in unrealized appreciation on invest-
ments............................................ 811,877 2,570,186
------------ ------------
Net increase in net assets resulting from opera-
tions............................................ 5,226,476 10,267,865
------------ ------------
Dividends to shareholders:
From net investment income:
Institutional Class.............................. -- (7,646,229)
Institutional Service Class...................... -- (184,643)
------------ ------------
Total dividends to shareholders................. (7,830,872)
------------ ------------
Capital share transactions:
Net proceeds from sale of shares:
Institutional Class.............................. 41,421,721 26,987,386
Institutional Service Class...................... 864,545 1,425,561
Net asset value of shares issued to shareholders
in reinvestment of dividends:
Institutional Class.............................. -- 7,626,166
Institutional Service Class...................... -- 184,643
------------ ------------
42,286,266 36,223,756
Cost of shares redeemed:
Institutional Class.............................. (13,184,283) (28,549,926)
Institutional Service Class...................... (357,958) (1,420,783)
------------ ------------
Increase in net assets derived from capital
share transactions.............................. 28,744,025 6,253,047
------------ ------------
Net increase in net assets....................... 33,970,501 8,690,040
NET ASSETS:
Beginning of period............................... 120,936,542 112,246,502
------------ ------------
End of period..................................... $154,907,043 $120,936,542
============ ============
Accumulated undistributed net investment income at
end of period.................................... $ 4,605,729 $ 2,820
============ ============
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
114
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK)
115
<PAGE>
INDEXED BOND FUND
FINANCIAL HIGHLIGHTS
(Selected per share data and ratios)
<TABLE>
<CAPTION>
INSTITUTIONAL
INSTITUTIONAL SERVICE
CLASS CLASS
------------- -------------
SIX MONTHS
ENDED
JUNE 30, 1998*
---------------------------
<S> <C> <C>
Net asset value at beginning of period............. $ 10.74 $10.74
-------- ------
Net investment income.............................. 0.32 0.30
Net realized and unrealized gain (loss) on
investments....................................... 0.08 0.08
-------- ------
Total from investment operations................... 0.40 0.38
-------- ------
Less dividends and distributions:
From net investment income......................... -- --
From net realized gain on investments.............. -- --
In excess of net realized gain on investments...... -- --
-------- ------
Total dividends and distributions.................. -- --
-------- ------
Net asset value at end of period................... $ 11.14 $11.12
======== ======
Total investment return(a)......................... 3.72% 3.54%
Ratios (to average net assets)/Supplemental Data:
Net investment income............................. 6.50%+ 6.25%+
Net expenses...................................... 0.50%+ 0.75%+
Expenses (before reimbursement)................... 0.63%+ 0.88%+
Portfolio turnover rate............................ 8% 8%
Net assets at end of period (in 000's)............. $151,269 $3,638
</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.
116
<PAGE>
MAINSTAY
INSTITUTIONAL FUNDS INC.
<TABLE>
<CAPTION>
INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL
INSTITUTIONAL SERVICE INSTITUTIONAL SERVICE INSTITUTIONAL SERVICE
CLASS CLASS CLASS CLASS CLASS CLASS INSTITUTIONAL CLASS
- ------------- ------------- ------------- ------------- ------------- ------------- ---------------------
YEAR ENDED DECEMBER 31
- ----------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993
- ---------------------------- --------------------------- --------------------------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 10.52 $ 10.52 $ 10.99 $ 10.99 $ 10.06 $ 10.06 $ 11.08 $ 11.65
-------- -------- -------- -------- -------- -------- --------- ---------
0.73 0.70 0.76 0.74 0.82 0.81 0.65 0.67
0.22 0.22 (0.48) (0.48) 1.00 1.00 (1.03) 0.38
-------- -------- -------- -------- -------- -------- --------- ---------
0.95 0.92 0.28 0.26 1.82 1.81 (0.38) 1.05
-------- -------- -------- -------- -------- -------- --------- ---------
(0.73) (0.70) (0.75) (0.73) (0.82) (0.81) (0.64) (1.46)
-- -- -- -- (0.07) (0.07) -- (0.15)
-- -- -- -- -- -- -- (0.01)
-------- -------- -------- -------- -------- -------- --------- ---------
(0.73) (0.70) (0.75) (0.73) (0.89) (0.88) (0.64) (1.62)
-------- -------- -------- -------- -------- -------- --------- ---------
$ 10.74 $ 10.74 $ 10.52 $ 10.52 $ 10.99 $ 10.99 $ 10.06 $ 11.08
======== ======== ======== ======== ======== ======== ========= =========
9.01% 8.75% 2.55% 2.34% 18.07% 17.97% (3.44%) 9.64%
6.60% 6.35% 6.21% 5.96% 6.38% 6.13% 6.13% 6.19%
0.50% 0.75% 0.50% 0.75% 0.50% 0.75% 0.50% 0.45%
0.65% 0.90% 0.65% 0.90% 0.63% 0.88% 0.61% 0.61%
32% 32% 312% 312% 284% 284% 274% 213%
$117,922 $ 3,015 $109,482 $ 2,764 $163,219 $ 471 $ 169,404 $ 159,792
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
117
<PAGE>
INTERNATIONAL BOND FUND
================================================================================
================================================================================
MARKET RECAP FOR THE 6-MONTH PERIOD ENDED 6/30/98
================================================================================
o Difficulties in several Asian markets caused liquidity concerns, sending
bond investors to other established markets.
o The dollar's strength against other major currencies increased the
importance of currency hedging for U.S. investors, especially with respect
to Asian currencies.
o With price and yield convergence within European Monetary Union countries,
bond investors sought diversification in Sweden, Denmark, the United
Kingdom, and the dollar bloc.
o Bonds in Japan, Australia, New Zealand, and several emerging markets
underperformed, while European and other dollar-bloc bonds generally
performed well.
================================================================================
FUND RECAP FOR THE 6- AND 12-MONTH PERIODS ENDED 6/30/98
================================================================================
o One-year total returns of 5.23% and 4.97% for Institutional Class and
Service Class shares, respectively, as of 6/30/98.
o The Fund invested primarily in Europe, seeking diversification both within
and outside European Monetary Union countries as well as within dollar-bloc
countries.
o Canadian bonds contributed positively to the Fund's performance, while some
South African, Mexican, and New Zealand bonds negatively impacted
performance.
o Both share classes outperformed the average Lipper* international income
fund, which returned 2.78% for the first half of 1998.
In the first six months of 1998, international bond markets were influenced by a
number of factors. Liquidity concerns that grew out of relative weakness in the
currencies of Japan, Taiwan, and other Asian countries spread to Russia, Latin
America, South Africa, and other emerging markets. With economic setbacks in
these regions, demand for their bonds declined, with investments flowing into
Europe, the United States, and established dollar-bloc nations, such as Canada
and Australia.
Advancements toward European Monetary Union (EMU) caused the bonds of
participating nations to converge in price and yield, reducing opportunities for
diversification and yield advantages in core European countries. As a result,
the bonds of Sweden, Denmark, and the United Kingdom, which are not yet
participating in EMU, became attractive diversification candidates.
Throughout the reporting period, the dollar strengthened against most major
currencies, increasing the risk of unhedged positions for U.S. investors.
- --------------------------------------------------------------------------------
Emerging markets Countries with smaller or more recently established capital
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.
- --------------------------------------------------------------------------------
================================================================================
* 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.
118
<PAGE>
================================================================================
Given this context, how did the MainStay Institutional International Bond Fund
perform in the first six months of 1998?
For the six months ended 6/30/98, the MainStay Institutional International Bond
Fund returned 3.28% and 3.20% for Institutional Class shares and Service Class
shares, respectively. Both share classes outperformed the average Lipper
international income fund, which returned 2.78% for the first half of 1998.
What was the principal reason why the Fund outperformed its peers?
Late in 1997, we saw the difficulties in Japanese and Asian markets and
generally avoided their bonds. Instead, we focused the Fund's investments
primarily in European countries including Italy, Sweden, France, Germany, and
dollar-bloc nations such as Canada and Australia. We generally avoided currency
exposure during the first six months of 1998. Both decisions had a positive
impact on the Fund's performance.
Where did the Fund invest in Europe?
The Fund had diversified exposure throughout Europe, with investments in most
EMU countries. As prices, yields, and returns began to converge in these
nations, however, the Fund sought diversification in bonds of non-EMU countries,
including Sweden, Denmark, and the United Kingdom.
How did the Fund's European investments perform?
Generally, they performed well. Among the many EMU nations, France returned
5.0%, Germany 4.6%, and Austria 4.6%, all in local terms, during the first half
of the year. Outside the EMU, Sweden returned 7.4%, Denmark 5.2%, and the U.K.
5.9% in local terms.
How did those returns translate into U.S. dollars?
The results varied, depending on the level of hedging the Fund employed in
various countries. As the dollar strengthened against local currencies, the
returns on some unhedged positions were negatively impacted, but the level of
currency exposure wasn't a major factor in the Fund's overall performance.
What securities did you select for the Fund in Sweden?
We bought 10-year Swedish government bonds for their attractive valuations and
to add diversification to the Fund's holdings. During the reporting period the
Swedish economy was strong, with low inflation and the central bank moving rates
lower. As a result, the bonds were significant positive contributors to the
Fund's performance.
What bonds appealed to you in Denmark?
We purchased Danish mortgage bonds for the Fund for their liquidity, higher
yield potential, and quality. Unfortunately, the bonds we chose underperformed
as interest rates declined. Even so, we think they have underlying value and at
the end of the first half of the year, we intended to continue to hold them in
the Fund's portfolio.
- --------------------------------------------------------------------------------
Hedging/Currency management The process of managing or "hedging" the risks
associated with owning securities denominated in different currencies, the
relative values of which may change at any time.
Local currency terms 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.
Inflation An increase in the cost of goods and services over time. As prices
rise, the purchasing power of the dollar declines.
Front end of the 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. Yields on short-term securities with maturities
of five years or less would appear on the left of such a graph and are sometimes
referred to as the front end of the yield curve.
- --------------------------------------------------------------------------------
119
<PAGE>
================================================================================
In the United Kingdom, were there specific securities that appeared attractive?
We added to the Fund's position by buying bonds with shorter maturities, or as
we like to say, at the front end of the yield curve. Although the U.K. has been
raising interest rates, we believe that the nation is near the end of that phase
of its economic cycle. Based on market conditions at the end of June, we believe
that 5-year bonds will perform well in the coming months. The Fund also
benefited from the performance of a sterling-denominated 10-year bond for
Bayerische Landesbank Giro that we purchased in February, 1997. The bond was up
about 4.5% in local terms for the reporting period. Another U.K. bond that did
well was a 20-year European Investment Bank issue that the Fund has owned for
approximately one year. It was up 7.8% in local terms during the reporting
period, and was sold for a British Telecom 20-year issue on March 18. The
British Telecom bond returned 4.9% in local terms from purchase date through the
end of the second quarter.
Were there other developments in Europe that were noteworthy?
Yes. As EMU convergence developed, a high-yield bond market emerged in Europe,
giving lower-rated credits access to the public bond markets as an alternative
to bank financing. Although the Fund doesn't invest primarily in high-yield
securities, it did participate in one such issue late in the second quarter.
How did the Fund's dollar-bloc investments perform?
We liked the dollar bloc during the first six months of 1998 and the Fund had
success with Canadian 30-year government bonds we purchased in May, which
returned 2.8% in local terms through the end of the second quarter.
Unfortunately, the Fund carried some currency exposure with that position, which
reduced the positive effect on the Fund's performance.
Other dollar-bloc nations, including Australia and New Zealand, provided mixed
results. While the "Asian contagion" negatively impacted demand for key
commodities which both of these economies rely upon for exports, the primary
forces behind the price action in bonds were excessive currency volatility
caused by the intense speculative activity and inconsistent comments on monetary
policy by the Central Bank of New Zealand. We fully hedged the currency exposure
on the Fund's New Zealand holdings, giving a positive aspect to negative
performers, as the New Zealand dollar dropped about 10% versus the U.S. dollar.
In local terms, our New Zealand holdings were down 2.2%.
In Australia, we sold the Fund's 3-year bonds to buy 10-year issues and
capitalize on changes in the yield curve. The 10-year bonds outperformed the
3-year securities by 30 basis points as the yield curve flattened amid concerns
of many investors that interest rates would move to quell currency speculation.
Unfortunately, the gains from the Fund's investment in 10-year bonds were
somewhat offset by the Fund's exposure to Australian dollars, which declined
about 5% relative to the U.S. dollar in the first six months of 1998.
Did the Fund have other investments that did not perform well?
Yes. The Fund held about 2.5% of its assets in South African bonds that declined
about 1.8% in local terms during the first six months of 1998. Although we had
anticipated a decline in South African interest rates, when Asian difficulties
raised the specter of deflation, just the opposite occurred. Recognizing the
problem, we sold the entire position during the second quarter, which was
beneficial for the Fund.
The Fund also purchased bonds of a Mexican company named Innova S de R.L. The
company, which sells satellite dishes, has positive fundamentals, growing
subscription rates, and is owned by major players in the broadcasting and
telecommunications industries. Even so, the bonds declined about 1.9% in local
terms, due to rising interest rates, a weakening peso, and softening demand for
Mexican bonds.
- --------------------------------------------------------------------------------
Basis point One hundredth of one percent in the yield of an investment, i.e.,
100 basis points equals 1%.
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.
- --------------------------------------------------------------------------------
120
<PAGE>
================================================================================
What was the Fund's duration strategy during the reporting period?
We tried to keep the Fund's portfolio neutral, with a duration around 5 years.
Within certain core European markets, the Fund maintained a somewhat longer
duration and in the U.K., Ireland, and Italy, we tended to stress shorter-term
securities for the Fund.
What was the overall quality of the securities in the Fund's investment
portfolio?
As of June 30, 1998, the overall quality of the securities in the Fund's
investment portfolio was AA,+ although the Fund owned securities of various
quality ratings. Since the Fund invests primarily in government bonds in
established markets, we anticipate that the quality of the portfolio will most
likely remain in the AA range. Yet, when we see opportunities that we believe
are attractive, we may purchase emerging market or high-yield bonds for the Fund
within the constraints outlined in the prospectus.
What is your outlook going forward?
We believe that Europe will continue to benefit from restructuring and movement
toward monetary union. But this may also cause prices and yields to further
converge within core European markets. As a result, bonds of EMU nations may
become more of a commodity, which could increase the attractiveness of non-EMU
nations. The latter countries may provide yield advantages or other attractive
characteristics such as currency exchange rate opportunities.
As of the end of the first half of 1998, we saw little reason to consider
Japanese bonds for the Fund's portfolio and remain somewhat shy of Asian issues,
even though some markets may have fully discounted the economic problems. We
continue to favor dollar-bloc countries as well as the U.K. and will employ
hedging selectively as we seek to identify opportunities in local currencies.
Most importantly, we'll continue to seek to provide total return by investing in
a portfolio of non-U.S. (primarily government) debt securities.
Joseph Portera
Portfolio Manager
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.
================================================================================
Past performance is no guarantee of future results.
+ Debt rated AA by Standard & Poor's differs from the highest rated issues
only in small degree. The obliger's capacity to meet its financial
commitment on obligations is very strong.
[GRAPHIC]
121
<PAGE>
$10,000 INVESTED IN MAINSTAY INSTITUTIONAL
INTERNATIONAL BOND FUND VS SALOMON BROTHERS
NON-US DOLLAR WORLD GOV'T BOND INDEX
INSTITUTIONAL CLASS SHARES
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
================================================================================
<TABLE>
<CAPTION>
Intl. Bond Fund
Institutional Salomon Brothers
---------------- ----------------
<S> <C> <C>
1/31/90 10,000 10,000
91 11,868 12,445
92 12,779 13,039
93 14,640 15,012
94 15,094 16,910
95 17,881 19,022
96 20,441 19,798
97 20,978 17,648
6/30/98 21,666 19,351
</TABLE>
$10,000 INVESTED IN MAINSTAY INSTITUTIONAL
INTERNATIONAL BOND FUND VS SALOMON BROTHERS
NON-US DOLLAR WORLD GOV'T BOND INDEX
SERVICE CLASS SHARES
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
================================================================================
<TABLE>
<CAPTION>
Int'l Bond Lipper Non-US
Year Fund Service World Gov't
---- ------------ -------------
<S> <C> <C>
1/31/90 10,000 10,000
91 11,868 12,445
92 12,779 13,039
93 14,640 15,012
94 15,094 16,910
95 17,850 19,022
96 20,363 19,798
97 20,825 17,698
6/30/98 21,490 19,351
</TABLE>
o 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, 1998 as of June 30, 1998
- ---------------------------------------------------------------------------------------------------------------------------------
Year to Date One Year Five Year Since Inception
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
International Bond Fund Institutional Class+ 3.28% 5.23% 9.06% 9.62%
International Bond Fund Service Class+ 3.20% 4.97% 8.88% 9.52%
Average Lipper International Income Fund 2.78% 3.67% 5.96% 7.16%
Salomon Brothers Non-U.S. Dollar World Gov't Bond Index 2.09% 0.88% 6.36% 9.27%
</TABLE>
================================================================================
PORTFOLIO COMPOSITION
(% of net assets as of June 30, 1998
- --------------------------------------------------------------------------------
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
<TABLE>
<S> <C>
Foreign Government Bonds 68.49%
Foreign Corporate Bonds 16,84%
Cash, Equivalents & Other Assets 9.70%(S)
Short-Term Foreign Bonds & Yankee Bonds 4.97%
</TABLE>
================================================================================
QUALITY BREAKDOWN++
(% of bonds as of June 30, 1998)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
AAA 62.52%
AA 20.86%
A 12.26%
BBB 0.79%
BB 2.68%
B 0.89%
------
100.00%
Average Maturity 7.5 years
(as of 6/30/98)
</TABLE>
================================================================================
TOP 10 HOLDINGS
(% of net assets as of June 30, 1998)
<TABLE>
<S> <C>
1. Irish Government, 10/18/00, 8.00% 6.81%
2. United Kingdom Treasury Bonds, 12/7/07, 7.25% 4.41%
3. Republic of Deutschland Series 95,
1/3/05, 7.375% 4.12%
4. United Kingdom Treasury Bonds, 12/7/00, 8.00% 3.50%
5. Canadian Government Series J24, 2/1/04,10.25% 3.34%
6. Australian Government Series 1007,
10/15/07, 10.00% 3.09%
7. Hydro-Quebec, 5/15/03, 5.50% 3.01%
8. Buoni Poliennali del Tesoro, 7/15/00, 10.50% 2.89%
9. Ford Motor Credit Co., 6/16/08, 5.25% 2.74%
10. Bayerische Landesbank Giro, 12/7/06, 7.875% 2.72%
</TABLE>
================================================================================
TOP 10 COUNTRIES
(% of net assets as of June 30, 1998)
<TABLE>
<S> <C>
1. Germany 15.43%
2. United Kingdom 11.88%
3. Canada 10.64%
4. Italy 9.11%
5. Sweden 6.88%
6. Ireland 6.81%
7. Australia 5.12%
8. Denmark 5.03%
9. France 4.72%
10. Spain 3.25%
</TABLE>
================================================================================
* 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% on an annualized basis of the average daily net asset value of the
Service Class shares.
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, 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 sub-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.
122
<PAGE>
MAINSTAY
INSTITUTIONAL FUNDS INC.
INTERNATIONAL BOND FUND
PORTFOLIO OF INVESTMENTS*
June 30, 1998 (Unaudited)
LONG-TERM BONDS (85.6%)+ GOVERNMENTS &
CORPORATE BONDS (16.5%) FEDERAL AGENCIES (68.5%)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
--------------------------------------------------------------
DENMARK (2.5%)
Nykredit
Series ANN
6.00%, due 10/1/26............................... DK 9,125,000 $ 1,323,169
-----------
EUROPEAN MONETARY UNION (1.5%)
European Investment Bank
Series BR
5.00%, due 4/15/08............................... ECU 760,000 836,521
-----------
GERMANY (4.5%)
Bayerische VBK New York
4.50%, due 6/24/02............................... DM 1,049,000 582,704
Deutsche Pfandbrief Bank
Series 436
5.75%, due 3/4/09................................ 170,000 99,481
Euronet Services Inc.
Series DTCU
(zero coupon), due 7/1/06
12.375%, beginning 7/1/02........................ 725,000 248,529
Ford Motor Credit Co.
5.25%, due 6/16/08............................... 2,662,000 1,470,103
-----------
2,400,817
-----------
SWEDEN (2.8%)
Banque Nationale de Paris Medium-Term Notes
Series E
11.00%, due 11/4/99.............................. SK 6,050,000 814,773
Stadshypotek AB
Series 1553
10.00%, due 12/20/00............................. 5,000,000 703,969
-----------
1,518,742
-----------
UNITED KINGDOM (4.0%)
Bayerische Landesbank Giro
7.875%, due 12/7/06.............................. (Pounds) 807,000 1,461,551
British Telecom PLC
8.625%, due 3/26/20.............................. 315,000 663,895
-----------
2,125,446
-----------
UNITED STATES (1.2%)
Banco Hipotecario S.A.
10.00%, due 4/17/03 (c).......................... $ 200,000 197,500
Conproca S.A.
12.00%, due 6/16/10 (c).......................... 470,000 477,050
-----------
674,550
-----------
Total Corporate Bonds
(Cost $8,907,959)................................ 8,879,245
-----------
</TABLE>
- --------
*Investments are grouped by currency denomination.
+Percentages indicated are based on Fund net assets.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
--------------------------------------------------------------
ARGENTINA (0.7%)
Argentina Bocon Previs
Series Pre-1
2.996%, due 4/1/01 (b)........................... AP 404,958 $ 363,677
-----------
AUSTRALIA (5.1%)
Australian Government
Series 808
8.75%, due 8/15/08............................... A$ 572,000 440,148
Series 1007
10.00%, due 10/15/07............................. 2,030,000 1,656,584
Fannie Mae
6.375%, due 8/15/07.............................. 1,015,000 648,703
-----------
2,745,435
-----------
CANADA (10.6%)
Alberta Government Telephone
Series UB
9.60%, due 7/7/98................................ C$ 850,000 579,752
Canadian Government
Series VW17
8.00%, due 6/1/27................................ 708,000 654,750
Series J24
10.25%, due 2/1/04............................... 2,135,000 1,790,318
Hydro-Quebec
5.50%, due 5/15/03............................... 2,378,000 1,617,090
Province of Quebec
7.75%, due 3/30/06............................... 1,385,000 1,065,595
-----------
5,707,505
-----------
DENMARK (2.6%)
Kingdom of Denmark
7.00%, due 11/15/07.............................. DK 8,212,000 1,375,033
-----------
FRANCE (4.7%)
France Obligations
Assimilables du Tresor
5.25%, due 4/25/08............................... FF 4,752,000 810,624
7.50%, due 4/25/05............................... 3,618,000 697,387
8.50%, due 3/28/00-12/26/12...................... 5,370,000 1,026,593
-----------
2,534,604
-----------
GERMANY (11.0%)
Bundesobligation
Series 123
4.50%, due 5/17/02 (a)........................... DM 1,265,000 705,625
Series 117
5.125%, due 11/21/00............................. 1,759,000 997,105
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
123
<PAGE>
INTERNATIONAL BOND FUND
PORTFOLIO OF INVESTMENTS (Continued)
June 30, 1998 (Unaudited)
GOVERNMENTS & FEDERAL AGENCIES
(Continued)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
-------------------------------------------------------------
GERMANY (Continued)
Republic of Deutschland
Series 98
5.625%, due 1/4/28.............................. DM 1,555,000 $ 894,216
Series 95
7.375%, due 1/3/05 (a).......................... 3,465,000 2,211,991
Treuhandanstalt
7.50%, due 9/9/04 (a)........................... 1,666,000 1,065,573
-----------
5,874,510
-----------
IRELAND (6.8%)
Irish Government
8.00%, due 10/18/00............................. IP 2,450,000 3,653,140
-----------
ITALY (9.1%)
Buoni Poliennali del Tesoro
6.50%, due 11/1/27.............................. IL 500,000,000 320,465
8.50%, due 1/1/04............................... 1,690,000,000 1,120,639
9.50%, due 2/1/01............................... 1,020,000,000 643,110
10.50%, due 7/15/00-4/1/05...................... 3,140,000,000 2,047,174
12.00%, due 5/1/02.............................. 1,075,000,000 758,047
-----------
4,889,435
-----------
NORWAY (1.9%)
Norwegian Government
6.75%, due 1/15/07.............................. NK 7,280,000 1,024,138
-----------
SPAIN (3.3%)
Spanish Government
7.35%, due 3/31/07.............................. SP 64,830,000 494,388
10.25%, due 11/30/98............................ 37,880,000 253,098
10.50%, due 10/30/03............................ 120,060,000 997,190
-----------
1,744,676
-----------
SWEDEN (4.0%)
Swedish Government
Series 1040
6.50%, due 5/5/08............................... SK 10,000,000 1,398,734
Series 1030
13.00%, due 6/15/01............................. 5,000,000 773,317
-----------
2,172,051
-----------
UNITED KINGDOM (7.9%)
United Kingdom Treasury Bonds
7.25%, due 12/7/07.............................. (Pounds)1,288,000 2,366,620
8.00%, due 12/7/00.............................. 1,100,000 1,878,655
-----------
4,245,275
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
-------------------------------------------------------------
UNITED STATES (0.8%)
Republic of Panama
8.875%, due 9/30/27.............................. $ 437,000 $ 411,873
-----------
Total Governments &
Federal Agencies
(Cost $36,983,155)............................... 36,741,352
-----------
YANKEE BONDS (0.6%)
UNITED STATES (0.6%)
Innova S de R.L.
12.875%, due 4/1/07.............................. $ 305,000 311,100
-----------
Total Yankee Bonds
(Cost $333,213).................................. 311,100
-----------
Total Long-Term Bonds
(Cost $46,224,327)............................... 45,931,697
-----------
SHORT-TERM
INVESTMENTS (9.9%)
COMMERCIAL PAPER (5.2%)
UNITED STATES (5.2%)
Goldman Sachs Group L.P. (The)
6.25%, due 7/1/98................................ $ 2,400,000 2,400,000
Merrill Lynch & Co. Inc.
6.14%, due 7/1/98................................ 400,000 400,000
-----------
Total Commercial Paper
(Cost $2,800,000)................................ 2,800,000
-----------
CORPORATE BONDS (0.3%)
UNITED STATES (0.3%)
Nacional Financiera S.N.C.
6.688%, due 3/15/99 (b).......................... $ 155,000 155,000
-----------
Total Corporate Bonds
(Cost $155,124).................................. 155,000
-----------
GOVERNMENT BONDS (4.4%)
AUSTRALIA (0.3%)
Treasury Corp. Victoria
Series 1098
12.00%, due 10/22/98............................. A$ 285,000 180,090
-----------
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
124
<PAGE>
MAINSTAY
INSTITUTIONAL FUNDS INC.
SHORT-TERM
INVESTMENTS (Continued)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
--------------------------------------------------------------
GOVERNMENT BONDS (Continued)
CANADA (4.1%)
Canadian Treasury Bill
(zero coupon), due 9/17/98................... C$ 3,230,000 $ 2,173,541
-----------
Total Government Bonds
(Cost $2,387,616)............................ 2,353,631
-----------
Total Short-Term Investments
(Cost $5,342,740)............................ 5,308,631
-----------
Total Investments
(Cost $51,567,067) (d)....................... 95.5% 51,240,328 (e)
Cash and Other Assets,
Less Liabilities............................. 4.5 2,403,916
---------------- -----------
Net Assets.................................... 100.0% $53,644,244
================ ===========
</TABLE>
- --------
(a) Segregated or partially segregated as collateral for forward foreign
currency contracts.
(b) Floating rate. Rate shown is the rate in effect at June 30, 1998.
(c) May be sold to institutional investors only.
(d) The cost for Federal income tax purposes is $51,592,401.
(e) At June 30, 1998 net unrealized depreciation for securities was $352,073,
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 $718,026 and aggregate gross
unrealized depreciation for all investments on which there was an excess
of cost over market value of $1,070,099.
(f) The following abbreviations are used in the above portfolio:
AP --Argentine Peso
A$ --Australian Dollar
C$ --Canadian Dollar
DK --Danish Krone
DM --Deutsche Mark
ECU--European Currency Unit
FF --French Franc
IP --Irish Punt
IL --Italian Lira
NK --Norwegian Krone
(P--PoundoSterlingunds)
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.
125
<PAGE>
INTERNATIONAL BOND FUND
STATEMENT OF ASSETS AND LIABILITIES STATEMENT OF OPERATIONS
As of June 30, 1998 (Unaudited) For the six months ended June 30,
1998 (Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investment in securities, at value
(identified cost $51,567,067)................................... $51,240,328
Cash denominated in foreign currencies (identified cost
$607,907)....................................................... 608,324
Cash............................................................. 220,557
Receivables:
Investment securities sold....................................... 3,995,633
Interest......................................................... 1,214,002
Unrealized appreciation on forward foreign currency contracts.... 530,539
Unamortized organization expense ................................ 1,142
-----------
Total assets................................................... 57,810,525
-----------
LIABILITIES:
Payables:
Investment securities purchased.................................. 3,755,056
MainStay Management.............................................. 27,909
Fund shares redeemed............................................. 18,743
Custodian........................................................ 15,514
Transfer agent................................................... 2,122
Accrued expenses................................................. 27,513
Unrealized depreciation on forward foreign currency contracts.... 319,424
-----------
Total liabilities.............................................. 4,166,281
-----------
Net assets....................................................... $53,644,244
===========
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.001 per share) 1 billion shares
authorized Institutional Class.................................. $ 5,145
Institutional Service Class...................................... 22
Additional paid-in capital....................................... 52,499,833
Accumulated undistributed net investment income.................. 1,583,383
Accumulated undistributed net realized gain on investments....... 449,966
Accumulated net realized loss on foreign currency transactions... (763,029)
Net unrealized depreciation on investments....................... (326,739)
Net unrealized appreciation on translation of other assets and
liabilities in foreign currencies and forward foreign currency
contracts....................................................... 195,663
-----------
Net assets....................................................... $53,644,244
===========
Institutional Class
Net assets applicable to outstanding shares...................... $53,415,386
===========
Shares of capital stock outstanding.............................. 5,145,345
===========
Net asset value per share outstanding............................ $ 10.38
===========
Institutional Service Class
Net assets applicable to outstanding shares...................... $ 228,858
===========
Shares of capital stock outstanding.............................. 22,147
===========
Net asset value per share outstanding............................ $ 10.33
===========
</TABLE>
<TABLE>
<S> <C>
INVESTMENT INCOME:
Income:
Interest......................................................... $1,736,066
----------
Expenses:
Management....................................................... 204,010
Professional..................................................... 20,497
Custodian........................................................ 16,550
Transfer agent................................................... 14,875
Registration..................................................... 12,331
Shareholder communication........................................ 4,263
Directors........................................................ 601
Amortization of organization expense............................. 376
Service.......................................................... 297
Miscellaneous.................................................... 5,162
----------
Total expenses before
reimbursement................................................. 278,962
Expense reimbursement from Manager............................... (36,403)
----------
Net expenses................................................... 242,559
----------
Net investment income............................................ 1,493,507
----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN
CURRENCY TRANSACTIONS:
Net realized gain (loss) from:
Security transactions............................................ 447,804
Foreign currency transactions.................................... (763,029)
----------
Net realized loss on investments and foreign currency
transactions.................................................... (315,225)
----------
Net change in unrealized appreciation (depreciation) on
investments:
Security transactions............................................ 306,915
Translation of other assets and liabilities in
foreign currencies and forward foreign currency contracts....... 175,596
----------
Net unrealized gain on investments and
foreign currency transactions................................... 482,511
----------
Net realized and unrealized gain on investments and foreign
currency transactions........................................... 167,286
----------
Net increase in net assets resulting from operations............. $1,660,793
==========
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
126
<PAGE>
MAINSTAY
INSTITUTIONAL FUNDS INC.
INTERNATIONAL BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 1998 (Unaudited) and the year ended December
31, 1997
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income............................... $ 1,493,507 $ 2,993,215
Net realized gain on investments.................... 447,804 1,535,035
Net realized gain (loss) on foreign currency trans-
actions............................................ (763,029) 1,308,158
Net change in unrealized appreciation (deprecia-
tion) on investments............................... 306,915 (4,098,551)
Net change in unrealized appreciation on transla-
tion of other assets and liabilities in foreign
currencies and forward foreign currency con-
tracts............................................. 175,596 (382,945)
----------- -----------
Net increase in net assets resulting from opera-
tions.............................................. 1,660,793 1,354,912
----------- -----------
Dividends and distributions to shareholders:
From net investment income and net realized gain on
foreign currency transactions:
Institutional Class................................ -- (4,197,703)
Institutional Service Class........................ -- (19,891)
From net realized gain on investments:
Institutional Class................................ -- (1,539,271)
Institutional Service Class........................ -- (7,516)
----------- -----------
Total dividends and distributions to sharehold-
ers.............................................. -- (5,764,381)
----------- -----------
Capital share transactions:
Net proceeds from sale of shares:
Institutional Class................................ 4,780,525 1,477,297
Institutional Service Class........................ 21,589 58,930
Net asset value of shares issued to shareholders in
reinvestment of dividends and distributions:
Institutional Class................................ -- 5,736,968
Institutional Service Class........................ -- 27,401
----------- -----------
4,802,114 7,300,596
Cost of shares redeemed:
Institutional Class................................ (1,631,818) (6,192,594)
Institutional Service Class........................ (35,400) (54,357)
----------- -----------
Increase in net assets derived from capital share
transactions...................................... 3,134,896 1,053,645
----------- -----------
Net increase (decrease) in net assets.............. 4,795,689 (3,355,824)
NET ASSETS:
Beginning of period................................. 48,848,555 52,204,379
----------- -----------
End of period....................................... $53,644,244 $48,848,555
=========== ===========
Accumulated undistributed net investment income at
end of period ..................................... $ 1,583,383 $ 89,876
=========== ===========
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
127
<PAGE>
INTERNATIONAL BOND FUND
FINANCIAL HIGHLIGHTS
(Selected per share data and ratios)
<TABLE>
<CAPTION>
INSTITUTIONAL INSTITUTIONAL
CLASS SERVICE CLASS
------------- -------------
SIX MONTHS
ENDED
JUNE 30, 1998*
---------------------------
<S> <C> <C>
Net asset value at beginning of period............. $ 10.05 $ 10.01
------- -------
Net investment income.............................. 0.29 0.29
Net realized and unrealized gain (loss) on
investments....................................... 0.18 0.14
Net realized and unrealized gain (loss) on foreign
currency transactions............................. (0.14) (0.11)
------- -------
Total from investment operations................... 0.33 0.32
------- -------
Less dividends and distributions:
From net investment income and net realized gain on
foreign currency transactions..................... -- --
From net realized gain on investments.............. -- --
------- -------
Total dividends and distributions.................. -- --
------- -------
Net asset value at end of period................... $ 10.38 $ 10.33
======= =======
Total investment return (b) ....................... 3.28% 3.20%
Ratios (to average net assets)/Supplemental Data:
Net investment income............................. 5.86%+ 5.61%+
Net expenses...................................... 0.95%+ 1.20%+
Expenses (before reimbursement)................... 1.09%+ 1.34%+
Portfolio turnover rate............................ 118% 118%
Net assets at end of period (in 000's)............. $53,415 $ 229
</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.
128
<PAGE>
MAINSTAY
INSTITUTIONAL FUNDS INC.
<TABLE>
<CAPTION>
INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL
INSTITUTIONAL SERVICE INSTITUTIONAL SERVICE INSTITUTIONAL SERVICE
CLASS CLASS CLASS CLASS CLASS CLASS
- ------------- ------------- ------------- ------------- ------------- -------------
YEAR ENDED DECEMBER 31 JANUARY 1, 1995(A)
- -------------------------------------------------------- THROUGH
1997 1996 DECEMBER 31, 1995
- ---------------------------- --------------------------- ---------------------------
<S> <C> <C> <C> <C> <C>
$ 11.10 $ 11.07 $ 11.16 $ 11.14 $ 10.00 $ 10.00
------- ------- ------- ------- ------- -------
1.01 0.98 1.21 1.19 0.70 0.70
(1.11) (1.13) 0.11 0.11 1.12 1.10
0.40 0.41 0.27 0.26 0.02 0.02
------- ------- ------- ------- ------- -------
0.30 0.26 1.59 1.56 1.84 1.82
------- ------- ------- ------- ------- -------
(0.99) (0.96) (1.37) (1.35) (0.55) (0.55)
(0.36) (0.36) (0.28) (0.28) (0.13) (0.13)
------- ------- ------- ------- ------- -------
(1.35) (1.32) (1.65) (1.63) (0.68) (0.68)
------- ------- ------- ------- ------- -------
$ 10.05 $ 10.01 $ 11.10 $ 11.07 $ 11.16 $ 11.14
======= ======= ======= ======= ======= =======
2.62% 2.27% 14.32% 14.08% 18.46% 18.26%
5.86% 5.61% 6.02% 5.77% 6.61% 6.36%
0.95% 1.20% 0.95% 1.20% 0.95% 1.20%
1.10% 1.35% 1.08% 1.33% 1.03% 1.28%
186% 186% 57% 57% 92% 92%
$48,613 $ 235 $51,980 $ 225 $44,388 $ 6
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
129
<PAGE>
MONEY MARKET FUND
================================================================================
================================================================================
MARKET RECAP FOR THE 6-MONTH PERIOD ENDED 6/30/98
================================================================================
o Domestic bond markets were influenced by Asian economic contractions, a
solid U.S. economy, and relatively tame inflation during the first six
months of 1998.
o During the reporting period, short-term rates remained low and the yield
curve continued to flatten, particularly during the second quarter, when
30-year Treasury yields reached all-time lows.
o Commercial paper underperformed during the reporting period.
o As demand for floating-rate notes increased, prices also increased.
================================================================================
FUND RECAP FOR THE 6- AND 12-MONTH PERIODS ENDED 6/30/98
================================================================================
o One-year total returns of 5.34% and 5.08% for Institutional Class and
Service Class shares, respectively, as of 6/30/98.
o The Fund benefited by purchasing longer-maturity securities in the
beginning of the year, but found few yield-curve opportunities later in the
first half of the year.
o Both share classes underperformed the average Lipper* institutional money
market fund, which returned 2.64% for the six months ended 6/30/98.
During the first half of 1998, the domestic bond markets were largely influenced
by world events. Economic contractions in Asian markets, including Japan, may
have caused difficulties in markets from Latin America to Russia and China. One
positive outcome has been relatively tame inflation, keeping the Federal Reserve
from adjusting domestic interest rates. As a result, interest rates in general
have remained within a relatively narrow range, with money market rates
relatively stable during the reporting period.
With 30-year Treasury yields declining to all-time lows in the second quarter,
the yield curve flattened substantially during the reporting period. The average
maturity of most money market funds remained approximately 57 to 58 days for
most of the first half of 1998.
Given this context, how did the MainStay Institutional Money Market Fund perform
in the first six months of 1998?
For the six months ended 6/30/98, the MainStay Institutional Money Market Fund
returned 2.60% and 2.47% for Institutional Class shares and Service Class
shares, respectively. Both share classes underperformed the average Lipper
institutional money market fund, which returned 2.64% for the first half of
1998.
- --------------------------------------------------------------------------------
Inflation An increase in the cost of goods and services over time. As prices
rise, the purchasing power of the dollar declines.
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.
- --------------------------------------------------------------------------------
* 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.
130
<PAGE>
================================================================================
What were the primary reasons why the Fund underperformed its peers?
With interest rates and bond prices moving in a very narrow range, and the yield
curve flattening somewhat, there were few opportunities to benefit from changes
in duration during the reporting period. The Fund offset the flattening somewhat
by purchasing longer-maturity securities in the beginning of the year. However,
the Fund was hurt by the yield curve as the year wore on and it became
increasingly difficult to pick up yield through lengthening the portfolio's
duration.
What was the Fund's average weighted maturity during the reporting period?
The average weighted maturity ranged from 50 to 76 days, with the target range
being 60 to 65 days. As of June 30, 1998, the average stood at 57 days. The Fund
was short of its target at the end of the first half of the year, because the
Fund purchased some short-maturity paper that was offered at attractive prices
due to quarter-end balance sheet pressures.
What were the Fund's most significant purchases during the first half of 1998?
We purchased some corporate bonds and notes for the Fund during the reporting
period. They were significant because they had longer maturities and higher
yields than other securities the Fund owned.
Were there any significant sales during the reporting period?
No. Most of the Fund's securities were held to maturity.
Which securities contributed most significantly to the Fund's performance?
During the reporting period, the Fund's corporate positions and floating-rate
securities contributed most to the Fund's performance.
Which securities were the worst performers?
Commercial paper was the worst-performing category for the Fund during the
reporting period. Even so, we anticipate that it will continue to make up an
important part of the Fund as long as it provides liquidity, which is important
for a money market fund. The Fund's investments also focused on high-quality
domestic issues, which tended to carry slightly higher prices than foreign
issues. As of the end of June, we were comfortable with this approach, because
we did not believe that taking on additional risk would be generally
advantageous for the Fund's investors. We will continue to monitor the credit
quality of the securities held in the Fund's portfolio.
What do you believe was the best decision you made for the Fund during the
reporting period?
We believe our best decision was extending the duration of the Fund's portfolio
early in the year, before the yield curve flattened. That helped the Fund pick
up yield and positioned it positively for the first quarter of 1998.
Were there decisions that didn't work out as well?
When the Fund's domestic floating-rate securities matured, we didn't replace
them as quickly as we might have, believing that the prices were somewhat
expensive at the time, particularly given the uncertainty surrounding Asia.
Unfortunately, the prices have not declined, so our decision placed the Fund at
a slight disadvantage. During the second half of the year, we may seek to
increase the Fund's position in floating-rate securities.
- --------------------------------------------------------------------------------
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.
Commercial paper Short-term obligations with maturities ranging from 2 to 270
days, issued by banks, corporations, and other borrowers to investors with
temporarily idle cash.
- --------------------------------------------------------------------------------
131
<PAGE>
================================================================================
Are there segments of the market where the Fund was overweighted or
underweighted as of June 30, 1998?
Yes. At the end of the first half of the year, the Fund was overweighted in
corporate securities and underweighted in floating-rate and asset-backed
securities. Since both of these sectors had strong performance, the
overweighting in corporates helped the Fund, while the underweighted positions
have had a negative impact on performance.
What is your outlook going forward?
For the remainder of the year, we believe the environment may be similar to the
first half of the year. We don't expect the Federal Reserve Board to take much
action in moving interest rates. If short-term rates remain relatively stable,
we will seek to increase the Fund's floating-rate security positions and
continue to focus on high-quality, domestic commercial paper. As long as the
yield curve remains relatively flat, we see few opportunities to increase yield
through duration plays and will continue to focus on incremental opportunities
as they arise in the money markets.
Whatever happens, the Fund will seek to provide a high level of current income
while preserving capital and maintaining liquidity.
David Clement
Portfolio Manager
- --------------------------------------------------------------------------------
Weighting/Overweighted 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.
- --------------------------------------------------------------------------------
================================================================================
Past performance is no guarantee of future results.
[GRAPHIC]
132
<PAGE>
$10,000 INVESTED IN MAINSTAY INSTITUTIONAL
MONEY MARKET FUND VS
LIPPER INSTITUTIONAL MONEY MARKET AVERAGE INDEX
INSTITUTIONAL CLASS SHARES
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
================================================================================
<TABLE>
<CAPTION>
Year Money Market Fund Average Lipper
---- ----------------- --------------
<S> <C> <C>
1/2/91 10,000 10,000
91 10,595 10,599
92 10,983 10,972
93 11,300 11,294
94 11,738 11,745
95 12,399 12,419
96 13,032 13,058
97 13,720 13,752
6/30/98 14,076 14,114
</TABLE>
$10,000 INVESTED IN MAINSTAY INSTITUTIONAL
MONEY MARKET FUND VS
LIPPER INSTITUTIONAL MONEY MARKET AVERAGE INDEX
SERVICE CLASS SHARES
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
================================================================================
<TABLE>
<CAPTION>
Money Market Fund
Service Average Lipper
----------------- --------------
<S> <C> <C>
1/2/91 10,000 10,000
91 10,595 10,599
92 10,983 10,972
93 11,300 11,294
94 11,738 11,745
95 12,379 12,419
96 12,972 13,055
97 13,630 13,752
6/30/98 13,967 14,114
</TABLE>
o Money Market Fund -- Lipper Institutional Money Market Average 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, 1998 as of June 30, 1998
- --------------------------------------------------------------------------------------------------------------------------------
Year to Date One Year Five Year Since Inception
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Money Market Fund Institutional Class+ 2.60% 5.34% 4.79% 4.66%
Money Market Fund Service Class+ 2.47% 5.08% 4.63% 4.55%
Average Lipper Institutional Money Market Fund 2.64% 5.40% 4.90% 4.76%
</TABLE>
YEAR-BY-YEAR PERFORMANCE
- --------------------------------------------------------------------------------
Institutional Class Shares
<TABLE>
<CAPTION>
Total
Return
Year end %
- -------- ------
<S> <C>
1991 5.95
1992 3.66
1993 2.89
1994 3.88
1995 5.63
1996 5.11
1997 5.27
1998 (as if 6/30/98 2.60
</TABLE>
================================================================================
PORTFOLIO COMPOSITION
(% of net assets as of June 30, 1998
- --------------------------------------------------------------------------------
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
<TABLE>
<S> <C>
Commercial Paper 64.20%
Medium-Term Notes 12.66%
Bank Notes 2.84%
Other 20.19%
Cash, Equivalents & Other Assets 0.11%
</TABLE>
================================================================================
TOP 10 HOLDINGS
(% of net assets as of June 30, 1998)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
1. Society of New York Hospital Fund, Inc. 4.54%
2. Sears Roebuck Acceptance Corp. 3.61%
3. Wood Street Funding Corp. 3.59%
4. Whiting Indiana Industrial Sewage &
Solid Waste Disposal 3.56%
5. Fortune Brands Inc. 3.56%
6. Ford Motor Credit Co. 3.55%
7. Morgan Stanley, Dean Witter, Discover & Co. 3.55%
8. Salomon Smith Barney Holdings Inc. 3.55%
9. General Electric Capital Corp. 3.54%
10. Holy Cross Health System 3.54%
</TABLE>
================================================================================
TOP 5 INDUSTRY HOLDINGS
(% of net assets as of June 30, 1998)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
1. Special Purpose Finance 14.74%
2. Brokerage 12.00%
3. Auto Manufacturing 10.81%
4. Banks 10.65%
5. Retail 6.80%
Average Maturity 57 Days
(as of 6/30/98)
</TABLE>
================================================================================
* 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% on an annualized basis of the average daily net asset value of the
Service Class shares.
+ 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
5.30% and a 7-day current yield of 5.17%, both as of 6/30/98. The Money
Market Fund--Service Class had a 7-day effective yield of 5.04% with a
7-day current yield of 4.92%, both as of 6/30/98. These yields reflect
certain expense limitations. Had certain expenses not been limited, the
7-day effective yield and the 7-day current yield would have been 5.18% and
5.06%, respectively, for the Institutional Class and 4.92% and 4.81%,
respectively, for the Service Class. These expense limitations are
voluntary and may be terminated or revised at any time.
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.
133
<PAGE>
MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS
June 30, 1998 (Unaudited)
SHORT-TERM
INVESTMENTS (99.9%)+
<TABLE>
<CAPTION>
PRINCIPAL AMORTIZED
AMOUNT COST
<S> <C> <C>
----------------------------------------------------------
ASSET-BACKED SECURITY (2.8%)
Asset-Backed Securities Investment Trust
Series 1997-E Class N
5.66%, due 8/17/98 (a)(b)(d)........................ $ 7,900,000 $ 7,900,000
------------
BANK NOTES (2.8%)
Comerica Bank Detroit, Michigan
5.56%, due 7/22/98 (b)(d)........................... 3,000,000 2,999,900
LaSalle National Bank Chicago
5.71%, due 7/27/98 (d).............................. 5,000,000 5,000,486
------------
8,000,386
------------
CERTIFICATES OF DEPOSIT (2.8%)
Societe Generale Bank New York
5.71%, due 8/25/98 (b)(d)........................... 5,000,000 4,999,564
Swiss Bank Corp. New York
5.69%, due 1/7/99 (d)............................... 2,750,000 2,749,013
------------
7,748,577
------------
COMMERCIAL PAPER (64.2%)
American General Finance Corp.
5.49%, due 7/2/98................................... 9,000,000 8,998,628
Bear Stearns Cos. Inc.
5.52%, due 7/13/98.................................. 8,000,000 7,985,280
Cogentrix of Richmond Inc.
5.60%, due 7/10/98.................................. 4,144,000 4,138,198
Countrywide Home Loans Inc.
5.56%, due 8/18/98.................................. 10,000,000 9,925,867
Delaware Funding Corp.
5.58%, due 8/25/98 (a).............................. 2,081,000 2,063,259
Duke Capital Corp.
6.00%, due 7/6/98 (a)............................... 2,000,000 1,998,333
Ford Motor Credit Co.
5.51%, due 7/15/98.................................. 10,000,000 9,978,572
Fortune Brands Inc.
5.50%, due 7/6/98................................... 10,000,000 9,992,361
General Electric Capital Corp.
5.51%, due 8/3/98................................... 10,000,000 9,949,492
General Motors Acceptance Corp.
5.57%, due 7/8/98................................... 120,000 119,870
Holy Cross Health System
5.57%, due 8/13/98.................................. 10,000,000 9,933,469
Massachusetts College of Pharmacy & Allied
Health Sciences
5.54%, due 7/24/98.................................. 5,000,000 4,982,303
5.55%, due 7/1/98................................... 2,994,000 2,994,000
5.55%, due 8/20/98.................................. 5,000,000 4,961,458
</TABLE>
- --------
+ Percentages indicated are based on Fund net assets.
<TABLE>
<CAPTION>
PRINCIPAL AMORTIZED
AMOUNT COST
<S> <C> <C>
-----------------------------------------------------------
COMMERCIAL PAPER (Continued)
Morgan Stanley, Dean Witter, Discover & Co.
5.75%, due 7/6/98.................................... $ 1,026,000 $ 1,025,181
6.25%, due 7/1/98.................................... 9,974,000 9,974,000
Remsen Funding Corp.
5.65%, due 7/31/98 (a)............................... 6,710,000 6,678,407
Riverwoods Funding Corp.
5.51%, due 7/10/98................................... 5,000,000 4,993,113
Salomon Smith Barney Holdings Inc.
5.48%, due 7/23/98................................... 10,000,000 9,966,511
Sears Roebuck Acceptance Corp.
5.57%, due 8/5/98 (d)................................ 10,130,000 10,130,000
Society of New York Hospital Fund Inc.
5.57%, due 8/31/98................................... 12,875,000 12,753,579
Texaco Inc.
5.51%, due 7/29/98................................... 8,000,000 7,965,716
Toys "R' Us Inc.
5.50%, due 7/1/98.................................... 8,966,000 8,966,000
Windmill Funding Corp.
5.53%, due 7/8/98 (a)................................ 7,560,000 7,551,871
Wood Street Funding Corp.
5.55%, due 7/20/98 (a)............................... 10,097,000 10,067,424
5.65%, due 8/7/98 (a)................................ 2,141,000 2,128,567
------------
180,221,459
------------
CORPORATE BONDS (1.9%)
Fleet Financial Group Inc.
6.00%, due 10/26/98 (d).............................. 1,000,000 1,000,165
Iowa & Illinois Gas & Electric Co.
5.05%, due 10/15/98 (d).............................. 1,500,000 1,497,023
Northern States Power Minnesota
5.50%, due 2/1/99 (d)................................ 2,820,000 2,818,226
------------
5,315,414
------------
CORPORATE NOTES (6.0%)
Associates Corp. of North America
6.00%, due 3/15/99 (d)............................... 1,345,000 1,347,197
Chrysler Financial Corp.
5.63%, due 1/15/99 (d)............................... 1,770,000 1,769,220
Deere (John) Capital Corp.
6.00%, due 2/1/99 (d)................................ 2,025,000 2,029,423
Eaton Corp.
6.37%, due 4/1/99 (d)................................ 5,000,000 5,020,764
Greyhound Financial
6.75%, due 3/25/99 (d)............................... 1,000,000 1,005,635
Lehman Brothers Holdings Inc.
8.37%, due 2/15/99 (d)............................... 2,000,000 2,030,149
8.87%, due 11/1/98 (d)............................... 1,675,000 1,691,342
Merrill Lynch & Co. Inc.
6.37%, due 3/30/99 (d)............................... 1,000,000 1,004,350
NationsBank Corp.
5.12%, due 9/15/98 (d)............................... 1,000,000 998,787
------------
16,896,867
------------
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
134
<PAGE>
MAINSTAY
INSTITUTIONAL FUNDS INC.
SHORT-TERM
INVESTMENTS (Continued)
<TABLE>
<CAPTION>
PRINCIPAL AMORTIZED
AMOUNT COST
<S> <C> <C>
----------------------------------------------------------
MEDIUM-TERM NOTES (12.7%)
Abbey National Treasury Services
5.87%, due 12/22/98 (d)............................ $ 5,000,000 $ 5,002,331
Air Products & Chemicals
6.21%, due 3/17/99 (d)............................. 2,750,000 2,759,573
Beneficial Corp. Series C
9.72%, due 1/19/99 (d)............................. 1,000,000 1,021,221
Caterpillar Financial Service Corp. Series E
5.47%, due 12/15/98 (d)............................ 6,535,000 6,527,267
6.76%, due 1/15/99 (d)............................. 1,000,000 1,004,599
Chrysler Financial Corp.
Series Q
5.28%, due 2/16/99 (d)............................. 1,570,000 1,564,815
Series L
5.83%, due 9/16/98 (d)............................. 3,000,000 3,000,381
Series P
6.12%, due 11/30/98 (d)............................ 1,000,000 1,001,543
General Motors Acceptance Corp.
5.87%, due 1/12/99 (d)............................. 2,000,000 2,000,752
6.05%, due 10/9/98 (d)............................. 1,000,000 1,000,832
8.37%, due 2/3/99 (d).............................. 1,100,000 1,115,650
Norwest Corp. Series G
6.00%, due 10/13/98 (d)............................ 5,000,000 5,003,510
PepsiCo Inc.
5.46%, due 7/1/98 (c)(d)........................... 4,550,000 4,550,000
------------
35,552,474
------------
MUNICIPAL BONDS (6.7%)
West Baton Rouge Parish
State of Louisiana
5.59%, due 8/10/98 (a)(c)(d)....................... 8,800,000 8,800,000
Whiting Indiana Industrial Sewage & Solid Waste
Disposal
5.59%, due 9/8/98 (c)(d)........................... 10,000,000 10,000,000
------------
18,800,000
------------
Total Short-Term Investments
(Amortized Cost
$280,435,177) (e).................................. 99.9% 280,435,177
Cash and Other Assets,
Less Liabilities................................... 0.1 303,779
----------- ------------
Net Assets.......................................... 100.0% $280,738,956
=========== ============
</TABLE>
- --------
(a) May be sold to institutional investors only.
(b) Floating rate. Rate shown is the rate in effect at June 30, 1998.
(c) Variable rate. Rate shown is the rate in effect at June 30, 1998.
(d) Coupon interest bearing security.
(e) 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....................................... $ 30,351,635 10.8%
Banks.................................................... 29,891,725 10.7
Brokerage................................................ 33,676,814 12.0
Capital Goods............................................ 7,531,866 2.7
Chemicals................................................ 2,759,573 1.0
Commercial Banks......................................... 2,749,013 1.0
Conglomerates............................................ 9,949,492 3.5
Consumer Financial Services.............................. 10,345,824 3.7
Consumer Products........................................ 9,992,361 3.6
Diversified Financial Services........................... 6,007,966 2.1
Diversified Manufacturing................................ 5,020,764 1.9
Domestic Oil............................................. 17,965,716 6.4
Education................................................ 7,976,303 2.8
Finance.................................................. 4,050,809 1.4
Industrial............................................... 4,550,000 1.6
Medical-Hospitals........................................ 14,894,928 5.3
Mortgage Banks........................................... 9,925,867 3.5
National Commercial Banks................................ 6,002,297 2.1
Retail................................................... 19,096,000 6.8
Special Purpose Finance.................................. 41,382,641 14.7
Utilities-Electric....................................... 6,313,583 2.3
------------ -----
280,435,177 99.9
Cash and Other Assets, Less Liabilities.................. 303,779 0.1
------------ -----
Net Assets............................................... $280,738,956 100.0%
============ =====
</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.
135
<PAGE>
MONEY MARKET FUND
STATEMENT OF ASSETS AND LIABILITIES STATEMENT OF OPERATIONS
As of June 30, 1998 (Unaudited) For the six months ended June 30,
1998 (Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investment in securities, at value (amortized cost
$280,435,177).................................................. $280,435,177
Cash............................................................ 969
Interest receivable............................................. 1,558,847
------------
Total assets.................................................. 281,994,993
------------
LIABILITIES:
Payables:
MainStay Management............................................. 45,133
Custodian....................................................... 12,567
Transfer agent.................................................. 3,076
Accrued expenses................................................ 59,616
Dividend payable................................................ 1,135,645
------------
Total liabilities............................................. 1,256,037
------------
Net assets...................................................... $280,738,956
============
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.001 per share) 12 billion shares
authorized
Institutional Class............................................. $ 193,490
Institutional Service Class..................................... 87,253
Additional paid-in capital...................................... 280,462,543
Accumulated net realized loss
on investments................................................. (4,330)
------------
Net assets...................................................... $280,738,956
============
Institutional Class
Net assets applicable to outstanding shares..................... $193,485,972
============
Shares of capital stock outstanding............................. 193,490,302
============
Net asset value per share outstanding........................... $ 1.00
============
Institutional Service Class
Net assets applicable to outstanding shares..................... $ 87,252,984
============
Shares of capital stock outstanding............................. 87,252,984
============
Net asset value per share outstanding........................... $ 1.00
============
</TABLE>
<TABLE>
<S> <C>
INVESTMENT INCOME:
Income:
Interest........................................................... $7,715,169
----------
Expenses:
Management......................................................... 678,166
Service............................................................ 91,295
Shareholder communication.......................................... 81,489
Registration....................................................... 30,564
Professional....................................................... 25,823
Transfer agent..................................................... 17,303
Custodian.......................................................... 15,407
Directors.......................................................... 3,205
Miscellaneous...................................................... 8,849
----------
Total expenses before
reimbursement................................................... 952,101
Expense reimbursement from Manager................................. (182,640)
----------
Net expenses..................................................... 769,461
----------
Net investment income.............................................. 6,945,708
----------
REALIZED GAIN ON INVESTMENTS:
Net realized gain on investments................................... 62
----------
Net increase in net assets resulting from operations............... $6,945,770
==========
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
136
<PAGE>
MAINSTAY
INSTITUTIONAL FUNDS INC.
MONEY MARKET FUND
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 1998 (Unaudited) and the year ended December
31, 1997
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
INCREASE IN NET ASSETS:
Operations:
Net investment income............................. $ 6,945,708 $ 10,768,396
Net realized gain (loss) on investments........... 62 (497)
------------ ------------
Net increase in net assets resulting from
operations....................................... 6,945,770 10,767,899
------------ ------------
Dividends and distributions to shareholders:
From net investment income:
Institutional Class.............................. (5,141,118) (8,228,621)
Institutional Service Class...................... (1,804,590) (2,539,775)
From net realized gain on investments:
Institutional Class.............................. -- (2,265)
Institutional Service Class...................... -- (742)
------------ ------------
Total dividends and distributions to
shareholders................................... (6,945,708) (10,771,403)
------------ ------------
Capital share transactions:
Net proceeds from sale of shares:
Institutional Class.............................. 123,853,809 383,541,801
Institutional Service Class...................... 45,517,718 90,078,559
Net asset value of shares issued to shareholders
in reinvestment of dividends and distributions:
Institutional Class.............................. 5,164,575 7,733,123
Institutional Service Class...................... 1,749,718 2,386,943
------------ ------------
176,285,820 483,740,426
Cost of shares redeemed:
Institutional Class.............................. (125,851,347) (311,712,755)
Institutional Service Class...................... (24,242,703) (62,901,724)
------------ ------------
Increase in net assets derived from capital
share transactions.............................. 26,191,770 109,125,947
------------ ------------
Net increase in net assets....................... 26,191,832 109,122,443
NET ASSETS:
Beginning of period............................... 254,547,124 145,424,681
------------ ------------
End of period..................................... $280,738,956 $254,547,124
============ ============
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
137
<PAGE>
MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
(Selected per share data and ratios)
<TABLE>
<CAPTION>
INSTITUTIONAL
INSTITUTIONAL SERVICE
CLASS CLASS
------------- -------------
SIX MONTHS
ENDED
JUNE 30, 1998*
---------------------------
<S> <C> <C>
Net asset value at beginning of period............. $ 1.00 $ 1.00
-------- -------
Net investment income.............................. 0.05 0.05
-------- -------
Less dividends and distributions:
From net investment income......................... (0.05) (0.05)
From net realized gain on investments.............. -- --
-------- -------
Total dividends and distributions.................. (0.05) (0.05)
-------- -------
Net asset value at end of period................... $ 1.00 $ 1.00
======== =======
Total investment return (b) ....................... 2.60% 2.47%
Ratios (to average net assets)/Supplemental Data:
Net investment income............................. 5.19%+ 4.94%+
Net expenses...................................... 0.50%+ 0.75%+
Expenses (before reimbursement)................... 0.63%+ 0.88%+
Net assets at end of period (in 000's)............. $193,486 $87,253
</TABLE>
- --------
* Unaudited.
+ Annualized.
(a) Less than one cent per share.
(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.
138
<PAGE>
MAINSTAY
INSTITUTIONAL FUNDS INC.
<TABLE>
<CAPTION>
INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL
INSTITUTIONAL SERVICE INSTITUTIONAL SERVICE INSTITUTIONAL SERVICE INSTITUTIONAL
CLASS CLASS CLASS CLASS CLASS CLASS CLASS
- ------------- ------------- ------------- ------------- ------------- ------------- ----------------
YEAR ENDED DECEMBER 31
- --------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993
- ----------------------------- --------------------------- --------------------------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -------- -------- ------- -------
0.05 0.05 0.05 0.05 0.05 0.05 0.04 0.03
-------- -------- -------- -------- -------- -------- ------- -------
(0.05) (0.05) (0.05) (0.05) (0.05) (0.05) (0.04) (0.03)
(0.00)(a) (0.00)(a) -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- ------- -------
(0.05) (0.05) (0.05) (0.05) (0.05) (0.05) (0.04) (0.03)
-------- -------- -------- -------- -------- -------- ------- -------
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ======== ======== ======= =======
5.27% 5.01% 5.11% 4.85% 5.63% 5.46% 3.88% 2.89%
5.18% 4.93% 5.00% 4.75% 5.48% 5.23% 3.89% 2.85%
0.50% 0.75% 0.50% 0.75% 0.50% 0.75% 0.50% 0.45%
0.61% 0.86% 0.67% 0.92% 0.73% 0.98% 0.68% 0.67%
$190,319 $ 64,228 $110,760 $ 34,664 $ 67,869 $ 2,784 $65,106 $75,832
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
139
<PAGE>
SHORT-TERM BOND FUND
================================================================================
================================================================================
MARKET RECAP FOR THE 6-MONTH PERIOD ENDED 6/30/98
================================================================================
o Domestic bond markets were influenced by Asian economic contractions, a
solid U.S. economy, and relatively tame inflation during the first six
months of 1998.
o During the first half of 1998, the bond market experienced a period of low
volatility.
o The 2-year Treasury yield was very stable, declining just 8 basis points in
the first quarter and another 8 basis points in the second.
o Yield spreads on agency securities widened during the reporting period.
================================================================================
FUND RECAP FOR THE 6- AND 12-MONTH PERIODS ENDED 6/30/98
================================================================================
o One-year total returns of 6.16% and 5.90% for Institutional Class and
Service Class shares, respectively, as of 6/30/98.
o The Fund benefited by investing primarily in Treasury securities during the
reporting period.
o As yield spreads widened, we increased the Fund's exposure to agency
securities.
o Institutional Class shares outperformed and Service Class shares slightly
underperformed the average Lipper* short U.S. government fund, which
returned 2.64% for the six months ended 6/30/98.
During the first half of 1998, the domestic bond markets were largely influenced
by world events. Economic setbacks in Asian markets, including Japan, caused
difficulties in markets from Latin America to Russia and China. A positive
outcome from this situation has been relatively tame inflation. This was among
the factors which kept the Federal Reserve Board from adjusting domestic
interest rates. As a result, interest rates in general have remained within a
relatively narrow range, with 2-year Treasuries declining just 8 basis points
over the first quarter of 1998, and another 8 basis points in the second quarter
of the year.
While short-term securities tended to trade in a relatively narrow range during
the first half of the year, yield spreads on agency securities widened somewhat,
creating potential opportunities if spreads narrow again in the future.
Many investors have shown a renewed interest in the fixed income market. Bond
market returns exceeded 10% over the past year, which is what many equity
investors may have expected before the strong bull equity market of the last
three years. In fact, bond market returns in two of the past three quarters were
in line with or exceeded typical stock returns and many investors have responded
by increasing their bond allocation.
- --------------------------------------------------------------------------------
Inflation An increase in the cost of goods and services over time. As prices
rise, the purchasing power of the dollar declines.
Basis point One hundredth of one percent in the yield of an investment, i.e.,
100 basis points equals 1%.
- --------------------------------------------------------------------------------
================================================================================
* 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.
140
<PAGE>
================================================================================
Given this context, how did the MainStay Institutional Short-Term Bond Fund
perform in the first six months of 1998?
For the six months ended 6/30/98, the MainStay Institutional Short-Term Bond
Fund returned 2.77% and 2.56% for Institutional Class shares and Service Class
shares, respectively. Institutional Class shares outperformed and Service Class
shares slightly underperformed the average Lipper short U.S. government fund,
which returned 2.64% for the first half of 1998.
What were the primary factors affecting the Fund's performance?
With interest rates and bond prices moving in a very narrow range, the Fund
maintained an average maturity of approximately 1.9 years. The decline in
interest rates helped increase bond prices. The Fund's philosophy is to follow a
very conservative investment style, which it maintained during the first half of
1998.
Where did the Fund invest?
The bulk of the Fund's assets was invested in U.S. Treasury and agency
securities, which are of higher quality than AAA.+ As yield spreads widened in
agency securities, we increased the Fund's exposure to that segment of the
market. The Fund also had a small position in corporate bonds, which increased
slightly over the first half of the year. We reduced the Fund's holdings among
CMOs and asset-backed securities over the reporting period and the Fund held a
small position in mortgage-backed securities. Overall, however, the Fund's
holdings did not change substantially over the reporting period.
Why did you make the minor adjustments you mentioned?
With few opportunities to benefit from the yield curve or major shifts in
duration, we tried to take advantage of pricing differentials that we perceived
as advantageous for the Fund. The widening of agency spreads that occurred in
the first half of the year may present investment opportunities going forward if
yield spreads narrow and agencies outperform other securities.
Were there any problem securities in the Fund during the reporting period?
No. In the short-term bond market, the Fund focused on the highest-quality
securities to avoid difficulties. The Fund had no exposure to emerging-market
debt or other securities that may have faced problems during the first half of
1998.
Are there any active steps you can take to manage risk in the portfolio?
Yes. We monitor the credit quality of all of our securities. But we also watch
the stock market for indicators of potential weakening in the corporate bond
sector. We believe that the stock market is able to discount information much
more quickly
- --------------------------------------------------------------------------------
Collateralized Mortgage Obligation (CMO) A mortgage-backed bond that separates
mortgage pools into different maturity classes, called tranches, which may offer
different payouts over different periods.
Asset-backed securities Securities backed by loan paper or an anticipated income
stream from the sale of merchandise or services. The securities are generally
originated by banks, credit card companies, or other providers of credit and
often "enhanced" by a bank letter of credit or by insurance from an institution
other than the issuer.
Mortgage-backed securities Securities representing interests in "pools" of
mortgages in which principal and interest payments by the holders of 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).
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.
- --------------------------------------------------------------------------------
================================================================================
+ Currently debt rated AAA has the highest rating assigned by Standard &
Poor's and according to Standard & Poor's the obligor's capacity to meet
its financial commitment on the obligation is extremely strong. 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.
141
<PAGE>
================================================================================
than rating agencies can reflect it in their ratings. So if we see a stock's
price begin to fall faster than the market and without apparent reason, it gives
us a clue to reexamine the Fund's bond holdings in that company and ask what
stock investors see that we don't. We believe tying our monitoring to stocks is
an efficient way to detect--and possibly correct--problems before they affect
the Fund.
What is your outlook going forward?
We believe the major factors influencing our strategy over the past year--Asian
turmoil, inflation expectations, and reactions to the reduced Treasury
financing--have been almost fully priced into the market. While we remain
bullish on bonds for the longer term, unless market conditions change from those
we experienced at the end of June, we plan to take a more neutral strategy in
the third quarter. Because of the budget surplus, the need for new Treasury
securities may be reduced. This may change the Treasury's financing calendar and
provide opportunities along the yield curve. Whether that happens or not,
however, the Fund will continue to seek to maximize total return consistent with
liquidity, preservation of capital, and investment in short-term securities.
Ravi Akhoury
Edward J. Munshower
Portfolio Managers
================================================================================
Past performance is no guarantee of future results.
[GRAPHIC]
142
<PAGE>
$10,000 INVESTED IN MAINSTAY INSTITUTIONAL
SHORT-TERM BOND FUND VS
SALOMON 1-3 YEAR TREASURY INDEX
INSTUTIONAL CLASS SHARES
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
================================================================================
<TABLE>
<CAPTION>
Short-Term Bond Fund
Institutional Salomon 1-3 Year
-------------------- ----------------
<S> <C> <C>
1/2/91 10,000 10,000
91 11,130 11,166
92 11,791 11,870
93 12,459 12,510
94 12,473 12,577
95 13,754 13,927
96 14,415 14,636
97 15,299 15,608
6/30/98 15,723 16,078
</TABLE>
$10,000 INVESTED IN MAINSTAY INSTITUTIONAL
SHORT-TERM BOND FUND VS
SALOMON 1-3 YEAR TREASURY INDEX
SERVICE CLASS SHARES
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
================================================================================
<TABLE>
<CAPTION>
Short-Term Bond Fund
Service Salomon 1-3 Year
-------------------- ---------------
<S> <C> <C>
1/2/91 10,000 10,000
91 11,130 11,166
92 11,791 11,870
93 12,459 12,510
94 12,473 12,577
95 13,728 13,927
96 14,340 14,636
97 15,198 15,608
6/30/98 15,587 16,078
</TABLE>
o 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, 1998 as of June 30, 1998
- ---------------------------------------------------------------------------------------------------------------------------------
Year to Date One Year Five Year Since Inception
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Short-Term Bond Fund Institutional Class 2.77% 6.16% 5.18% 6.22%
Short-Term Bond Fund Service Class+ 2.56% 5.90% 5.00% 6.10%
Average Lipper Short-Term U.S. Government Fund 2.64% 5.94% 4.81% 5.82%
Salomon 1-3 Year Treasury Index 3.01% 6.80% 5.56% 6.53%
</TABLE>
YEAR-BY-YEAR PERFORMANCE
- --------------------------------------------------------------------------------
Institutional Class Shares
<TABLE>
<CAPTION>
Total
Return
Year end %
- -------- ------
<S> <C>
1991 11.30
1992 5.94
1993 5.67
1994 0.11
1995 10.27
1996 4.81
1997 6.13
1998 (as of 6/30/98 2.77
</TABLE>
QUALITY BREAKDOWN++
(% of bonds as of June 30, 1998)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Government/Agency 81.51%
AAA 12.60%
AA 3.62%
A 2.27%
------
100.00%
</TABLE>
================================================================================
PORTFOLIO COMPOSITION
(% of net assets as of June 30, 1998)
- --------------------------------------------------------------------------------
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
<TABLE>
<S> <C>
U.S. Government & Agency Bonds 79.96%
Other Asset-Backed/Mortgage-Backed Securities 12.36%
Certificates of Deposit 3.55%
Cash, Equivalent & Other Assets 1.91%(S)
Domestic Bonds 1.41
Other Goods 0.81%
</TABLE>
================================================================================
TOP 10 HOLDINGS
(% of net assets as of June 30, 1998)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
1. US Treasury Note, 4/30/00, 6.75% 18.43%
2. US Treasury Note, 11/30/99, 7.75% 16.27%
3. FNMA, 3/15/01, 5.625% 12.95%
4. US Treasury Note, 8/31/00, 6.25% 12.50%
5. US Treasury Note, 11/15/99, 7.875% 10.44%
6. US Treasury Note, 2/15/00, 5.875% 4.57%
7. NASCOR 1997-10 A2, 8/25/27, 6.50% 3.98%
8. Mercantile Safe Deposit & Trust Co.,
8/16/99, 6.30% 3.55%
9. US Treasury Note, 10/31/00, 5.75% 2.89%
10. FASI 1997-NAMC 2 FXA8, 7/25/27, 10.00% 2.38%
</TABLE>
================================================================================
TOP 5 INDUSTRY HOLDINGS
(% of net assets as of June 30, 1998)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
1. US Government & Federal Agencies 79.96%
2. Residential Mortgage Loans 10.45%
3. Banks 3.55%
4. Recreational Vehicles 1.90%
5. Food, Beverage & Tobacco 1.41%
Average Maturity 1.9 years
(as of 6/30/98)
</TABLE>
================================================================================
* 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% on an annualized basis of the average daily net asset value of the
Service Class shares.
+ 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.
(S) Adjusted for liabilities.
143
<PAGE>
SHORT-TERM BOND FUND
PORTFOLIO OF INVESTMENTS
June 30, 1998 (Unaudited)
LONG-TERM INVESTMENTS (98.1%)+
ASSET-BACKED SECURITY (1.9%)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
-----------------------------------------------------------
RECREATIONAL VEHICLES (1.9%)
Fleetwood Credit Corp.
Grantor Trust
Series 1996-A Class A
6.75%, due 10/17/11.................................. $ 799,650 $ 807,814
------------
Total Asset-Backed Security
(Cost $799,080)...................................... 807,814
------------
CERTIFICATE OF DEPOSIT (3.6%)
BANKS (3.6%)
Mercantile Safe Deposit & Trust Co., Baltimore, MD
6.30%, due 8/16/99................................... 1,500,000 1,507,050
------------
Total Certificate of Deposit
(Cost $1,500,000).................................... 1,507,050
------------
CORPORATE BONDS (1.4%)
FOOD, BEVERAGE & TOBACCO (1.4%)
Philip Morris Companies, Inc.
6.15%, due 3/15/10 (c)............................... 600,000 599,460
------------
Total Corporate Bonds
(Cost $599,693)...................................... 599,460
------------
MORTGAGE-BACKED SECURITIES (10.5%)
RESIDENTIAL MORTGAGE LOANS (COLLATERALIZED MORTGAGE OBLIGATIONS) (10.5%)
Financial Asset Securitization, Inc.
Series 1997-NAMC 2
Class FXA8
10.00%, due 7/25/27 (b).............................. 970,897 1,010,034
Norwest Asset Securities Corp.
Series 1997-10 Class A2
6.50%, due 8/25/27................................... 1,685,000 1,688,117
Residential Asset Securitization Trust
Series 1997-A8 Class A2
10.00%, due 10/25/27................................. 889,929 965,573
Structured Asset Securities Corp.
Series 1996-2 Class A1
7.00%, due 8/25/26................................... 767,443 770,659
------------
Total Mortgage-Backed Securities
(Cost $4,468,695).................................... 4,434,383
------------
U.S. GOVERNMENT &
FEDERAL AGENCIES (79.9%)
FEDERAL NATIONAL MORTGAGE
ASSOCIATION (12.9%)
5.625%, due 3/15/01 (d).............................. 5,500,000 5,492,685
------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION I (MORTGAGE PASS-THROUGH SECURITY)
(1.9%)
8.00%, due 8/19/28 TBA (a)........................... 785,000 813,213
------------
</TABLE>
- --------
+ Percentages indicated are based on Fund net assets.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
----------------------------------------------------------
UNITED STATES TREASURY NOTES (65.1.%)
5.75%, due 10/31/00 (d)........................ $ 1,220,000 $ 1,225,722
5.875%, due 2/15/00............................ 1,930,000 1,940,557
6.25%, due 8/31/00 (d)......................... 5,225,000 5,301,755
6.75%, due 4/30/00 (d)......................... 7,655,000 7,816,444
7.75%, due 11/30/99............................ 6,700,000 6,899,928
7.875%, due 11/15/99 (d)....................... 4,295,000 4,426,513
------------
27,610,919
------------
Total U.S. Government & Federal Agencies
(Cost $33,967,462)............................. 33,916,817
------------
YANKEE BONDS (0.8%)
MULTI-INDUSTRIAL (0.8%)
Tyco International Group, S.A.
6.125%, due 6/15/01............................ 345,000 345,214
------------
Total Yankee Bonds
(Cost $344,703)................................ 345,214
------------
Total Long-Term Investments
(Cost $41,679,633)............................. 41,610,738
------------
SHORT-TERM
INVESTMENT (2.7%)
COMMERCIAL PAPER (2.7%)
Prudential Funding Corp.
6.30%, due 7/1/98.............................. 1,150,000 1,150,000
------------
Total Short-Term Investment
(Cost $1,150,000).............................. 1,150,000
------------
Total Investments
(Cost $42,829,633) (e)......................... 100.8% 42,760,738 (f)
Liabilities in Excess of
Cash and Other Assets.......................... (0.8) (341,237)
----------- ------------
Net Assets...................................... 100.0% $ 42,419,501
=========== ============
</TABLE>
- --------
(a) TBA: Securities purchased on a forward commitment basis with an
approximate principal amount and maturity date. The actual principal
amount and maturity date will be determined upon settlement.
(b) Segregated as collateral for TBA.
(c) Floating rate. Rate shown is the rate in effect at June 30, 1998.
(d) Represents securities out on loan or a portion which is out on loan.
(e) The cost for Federal income tax purposes is $42,842,858.
(f) At June 30, 1998 net unrealized depreciation was $82,120, 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 $63,617 and aggregate gross unrealized
depreciation for all investments on which there was an excess of cost over
market value of $145,737.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
144
<PAGE>
MAINSTAY
INSTITUTIONAL FUNDS INC.
SHORT-TERM BOND FUND
STATEMENT OF ASSETS AND LIABILITIES STATEMENT OF OPERATIONS
As of June 30, 1998 (Unaudited) For the six months ended June 30,
1998 (Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investment in securities, at value (identified cost $42,829,633).. $42,760,738
Cash.............................................................. 2,826
Collateral held for securities loaned, at value
(Note 6)......................................................... 9,039,913
Receivables:
Investment securities sold........................................ 1,110,000
Interest.......................................................... 517,821
Fund shares sold.................................................. 66,509
-----------
Total assets.................................................... 53,497,807
-----------
LIABILITIES:
Securities lending collateral, at value
(Note 6)......................................................... 9,039,913
Payables:
Investment securities purchased................................... 1,964,850
Fund shares redeemed.............................................. 26,927
MainStay Management............................................... 10,583
Custodian......................................................... 7,007
Transfer agent.................................................... 2,336
Accrued expenses.................................................. 26,690
-----------
Total liabilities............................................... 11,078,306
-----------
Net assets........................................................ $42,419,501
===========
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.001 per share) 1 billion shares
authorized
Institutional Class............................................... $ 4,264
Institutional Service Class....................................... 134
Additional paid-in capital........................................ 48,234,200
Accumulated undistributed net investment income................... 1,261,468
Accumulated net realized loss on investments...................... (7,011,670)
Net unrealized depreciation on investments........................ (68,895)
-----------
Net assets........................................................ $42,419,501
===========
Institutional Class
Net assets applicable to outstanding shares....................... $41,135,112
===========
Shares of capital stock outstanding............................... 4,264,088
===========
Net asset value per share outstanding............................. $ 9.65
===========
Institutional Service Class
Net assets applicable to outstanding shares....................... $ 1,284,389
===========
Shares of capital stock outstanding............................... 133,548
===========
Net asset value per share outstanding............................. $ 9.62
===========
</TABLE>
<TABLE>
<S> <C>
INVESTMENT INCOME:
Income:
Interest........................................................... $1,383,164
----------
Expenses:
Management......................................................... 124,114
Professional....................................................... 15,973
Transfer agent..................................................... 13,634
Registration....................................................... 11,803
Custodian.......................................................... 6,190
Shareholder communication.......................................... 3,932
Service............................................................ 1,685
Directors.......................................................... 544
Miscellaneous...................................................... 8,328
----------
Total expenses before
reimbursement................................................... 186,203
Expense reimbursement from Manager................................. (60,404)
----------
Net expenses..................................................... 125,799
----------
Net investment income.............................................. 1,257,365
----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments................................... 105,257
Net change in unrealized appreciation on investments............... (202,703)
----------
Net realized and unrealized loss on investments.................... (97,446)
----------
Net increase in net assets resulting from operations............... $1,159,919
==========
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
145
<PAGE>
SHORT-TERM BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 1998 (Unaudited) and the year ended December
31, 1997
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
DECREASE IN NET ASSETS:
Operations:
Net investment income............................. $ 1,257,365 $ 3,208,385
Net realized gain (loss) on investments........... 105,257 (245,150)
Net change in unrealized appreciation on
investments...................................... (202,703) 107,487
------------ ------------
Net increase in net assets resulting from
operations....................................... 1,159,919 3,070,722
------------ ------------
Dividends to shareholders:
From net investment income:
Institutional Class.............................. -- (3,108,772)
Institutional Service Class...................... -- (95,584)
------------ ------------
Total dividends to shareholders................. -- (3,204,356)
------------ ------------
Capital share transactions:
Net proceeds from sale of shares:
Institutional Class.............................. 6,196,114 19,252,118
Institutional Service Class...................... 170,860 803,378
Net asset value of shares issued to shareholders
in reinvestment of dividends:
Institutional Class.............................. -- 3,108,769
Institutional Service Class...................... -- 95,581
------------ ------------
6,366,974 23,259,846
Cost of shares redeemed:
Institutional Class.............................. (12,860,846) (33,366,279)
Institutional Service Class...................... (406,284) (720,752)
------------ ------------
Decrease in net assets derived from capital
share transactions.............................. (6,900,156) (10,827,185)
------------ ------------
Net decrease in net assets....................... (5,740,237) (10,960,819)
NET ASSETS:
Beginning of period............................... 48,159,738 59,120,557
------------ ------------
End of period..................................... $ 42,419,501 $ 48,159,738
============ ============
Accumulated undistributed net investment income at
end of period ................................... $ 1,261,468 $ 4,103
============ ============
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
146
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK)
147
<PAGE>
SHORT-TERM BOND FUND
FINANCIAL HIGHLIGHTS
(Selected per share data and ratios)
<TABLE>
<CAPTION>
INSTITUTIONAL
INSTITUTIONAL SERVICE
CLASS CLASS
------------- -------------
SIX MONTHS
ENDED
JUNE 30, 1998*
---------------------------
<S> <C> <C>
Net asset value at beginning of period............. $ 9.39 $ 9.38
-------- --------
Net investment income.............................. 0.29 0.27
Net realized and unrealized gain (loss) on
investments....................................... (0.03) (0.03)
-------- --------
Total from investment operations................... 0.26 0.24
-------- --------
Less dividends and distributions:
From net investment income......................... -- --
From net realized gain on investments.............. -- --
In excess of net investment income................. -- --
In excess of net realized gain on investments...... -- --
-------- --------
Total dividends and distributions.................. -- --
-------- --------
Net asset value at end of period................... $ 9.65 $ 9.62
======== ========
Total investment return(a)......................... 2.77% 2.56%
Ratios (to average net assets)/Supplemental Data:
Net investment income............................. 6.09%+ 5.84%+
Net expenses...................................... 0.60%+ 0.85%+
Expenses (before reimbursement)................... 0.89%+ 1.14%+
Portfolio turnover rate............................ 60% 60%
Net assets at end of period (in 000's)............. $ 41,135 $ 1,285
</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.
148
<PAGE>
MAINSTAY
INSTITUTIONAL FUNDS INC.
<TABLE>
<CAPTION>
INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL
INSTITUTIONAL SERVICE INSTITUTIONAL SERVICE INSTITUTIONAL SERVICE
CLASS CLASS CLASS CLASS CLASS CLASS INSTITUTIONAL CLASS
- ------------- ------------- ------------- ------------- ------------- ------------- --------------------
YEAR ENDED DECEMBER 31
- ---------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993
- ---------------------------- --------------------------- --------------------------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 9.48 $ 9.46 $ 9.68 $ 9.67 $ 9.37 $ 9.37 $ 10.33 $ 11.23
-------- -------- -------- -------- -------- -------- --------- ---------
0.67 0.64 0.66 0.64 0.65 0.64 0.97 0.72
(0.09) (0.08) (0.20) (0.21) 0.31 0.30 (0.96) (0.12)
-------- -------- -------- -------- -------- -------- --------- ---------
0.58 0.56 0.46 0.43 0.96 0.94 0.01 0.60
-------- -------- -------- -------- -------- -------- --------- ---------
(0.67) (0.64) (0.66) (0.64) (0.65) (0.64) (0.97) (1.36)
-- -- -- -- -- -- -- (0.04)
-- -- -- -- -- -- -- (0.02)
-- -- -- -- -- -- -- (0.08)
-------- -------- -------- -------- -------- -------- --------- ---------
(0.67) (0.64) (0.66) (0.64) (0.65) (0.64) (0.97) (1.50)
-------- -------- -------- -------- -------- -------- --------- ---------
$ 9.39 $ 9.38 $ 9.48 $ 9.46 $ 9.68 $ 9.67 $ 9.37 $ 10.33
======== ======== ======== ======== ======== ======== ========= =========
6.13% 5.98% 4.81% 4.46% 10.27% 10.07% 0.11% 5.67%
6.24% 5.99% 5.85% 5.60% 6.38% 6.13% 5.90% 6.32%
0.60% 0.85% 0.60% 0.85% 0.60% 0.85% 0.60% 0.55%
0.82% 1.07% 0.79% 1.04% 0.82% 1.07% 0.72% 0.68%
153% 153% 195% 195% 171% 171% 269% 232%
$ 46,674 $ 1,485 $ 57,805 $ 1,316 $ 50,902 $ 1,128 $ 62,340 $ 148,846
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
149
<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, 1998 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.
150
<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 current market value of total 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 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 sub-adviser if such prices are deemed to be representative of market
values at the regular close of business of the Exchange; (e) by appraising
debt securities at prices supplied by a pricing agent selected by a Fund's
sub-adviser, whose prices reflect broker/dealer supplied valuations and
electronic data processing techniques if those prices are deemed by a Fund's
sub-adviser to be representative of market values at the regular close of
business of the 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 sub-adviser to be representative of market values, but excluding money
market instruments with a remaining maturity of 60 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
Company's Board of Directors. Short-term securities which mature in more than
60 days are valued at current market quotations. Short-term securities which
mature in 60 days or less are valued at amortized cost if their term to
maturity at purchase was 60 days or less, or by amortizing the difference
between market value on the 61st day prior to maturity and value on maturity
date if their original term to maturity at purchase exceeded 60 days.
Events affecting the values of portfolio securities that occur between the
time their prices are determined and the close of the Exchange will not be
reflected in the Funds' calculation of net asset values unless a Fund's sub-
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.
151
<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 at least 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 accreted 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 New York Life Insurance Company ("New York Life"), 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 direct allocations of expenses can 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.
152
<PAGE>
MAINSTAY
INSTITUTIONAL FUNDS INC.
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 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. The International Bond Fund isolates the effect of changes
in foreign exchange rates from the fluctuations arising from changes in the
market prices of long-term debt securities sold during the period. 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, 1998:
<TABLE>
<CAPTION>
CURRENCY COST VALUE
--------------------------------------------------- -----------
<S> <C> <C> <C>
Pound Sterling (Pounds) 11,000 $ 16,833 $ 18,355
=========== ===========
INTERNATIONAL EQUITY FUND
Foreign cash held at June 30, 1998:
<CAPTION>
CURRENCY COST VALUE
--------------------------------------------------- -----------
<S> <C> <C> <C>
Austrian Schilling AS 1,065 $ 83 $ 84
Belgian Franc BF 2,712,071 73,514 72,884
Canadian Dollar C$ 9,801,816 6,695,001 6,665,186
Deutsche Mark DM 1,876,947 1,037,062 1,039,861
French Franc FF 1,034,994 172,898 171,187
Hong Kong Dollar HK 14,469,051 1,867,332 1,867,318
Italian Lira IL 74,979,365 42,415 42,213
Japanese Yen (Yen)10,104,683 71,286 72,804
Netherland Guilder NG 12,873,799 6,323,579 6,328,682
New Zealand Dollar N$ 9,112 4,818 4,730
Norwegian Krone NK 4,547 618 593
Portuguese Escudo PE 20,821,575 114,076 112,728
Pound Sterling (Pounds) 52,466 87,454 87,539
Spanish Peseta SP 1,300,590 8,583 8,495
----------- -----------
$16,498,719 $16,474,304
=========== ===========
INTERNATIONAL BOND FUND
Foreign cash held at June 30, 1998:
<CAPTION>
CURRENCY COST VALUE
--------------------------------------------------- -----------
<S> <C> <C> <C>
Canadian Dollar C$ 349,693 $ 237,933 $ 237,790
Danish Krone DK 161 24 23
Deutsche Mark DM 519,484 288,458 287,803
European Currency Unit ECU 11 12 12
French Franc FF 944 159 156
Italian Lira IL 138,301 79 78
Norwegian Krone NK 5,671 743 739
South African Rand ZAR 959 188 163
Spanish Peseta SP 8,286 55 54
Swedish Krona SK 650,000 80,256 81,506
----------- -----------
$ 607,907 $ 608,324
=========== ===========
</TABLE>
(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).
153
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
INTERNATIONAL EQUITY FUND
Forward foreign currency contracts open at June 30, 1998:
<TABLE>
<CAPTION>
UNREALIZED
CONTRACT AMOUNT CONTRACT AMOUNT APPRECIATION/
SOLD PURCHASED (DEPRECIATION)
----------------- ----------------- --------------
<S> <C> <C> <C>
FOREIGN CURRENCY SALE CON-
TRACTS
- --------------------------
Australian Dollar vs. U.S.
Dollar, expiring 7/10/98... AD 1,917,250 $ 1,134,053 $ (53,480)
Deutsche Mark vs. Italian
Lira, expiring 7/14/98..... DM 4,403,205 IL 4,342,000,000 2,934
Deutsche Mark vs. Pound
Sterling, expiring 7/1/98.. DM 28,028,951 (Pounds)9,483,650 294,974
Deutsche Mark vs. Spanish
Peseta, expiring 7/14/98... DM 4,275,797 SP 362,975,000 1,078
Deutsche Mark vs. U.S. Dol-
lar, expiring 7/24/98...... DM 19,745,027 $ 11,020,541 64,835
Deutsche Mark vs. U.S. Dol-
lar, expiring 7/24/98...... DM 9,643,000 $ 5,322,185 (28,321)
Italian Lira vs. Deutsche
Mark, expiring 7/14/98..... IL 4,342,000,000 DM 4,384,973 (13,043)
Pound Sterling vs. Deutsche
Mark, expiring 7/1/98...... (Pounds)9,483,650 DM 28,205,548 (197,136)
Pound Sterling vs. Deutsche
Mark, expiring 9/30/98..... (Pounds)2,033,200 DM 6,058,936 601
Spanish Peseta vs. Deutsche
Mark, expiring 7/14/98..... SP 423,745,000 DM 4,988,052 (3,259)
FOREIGN CURRENCY BUY CON- CONTRACT AMOUNT CONTRACT AMOUNT
TRACTS PURCHASED SOLD
- ------------------------- ----------------- -----------------
Australian Dollar vs. U.S.
Dollar, expiring 7/10/98... AD 1,917,250 $ 1,167,030 20,503
Deutsche Mark vs. U.S. Dol-
lar, expiring 7/24/98...... DM 2,547,360 $ 1,419,300 (5,874)
---------
Net unrealized appreciation
on forward foreign currency
contracts.................. $ 83,812
=========
INTERNATIONAL BOND FUND
Forward foreign currency contracts open at June 30, 1998:
<CAPTION>
UNREALIZED
CONTRACT AMOUNT CONTRACT AMOUNT APPRECIATION/
SOLD PURCHASED (DEPRECIATION)
----------------- ----------------- --------------
<S> <C> <C> <C>
FOREIGN CURRENCY SALE CON-
TRACTS
- --------------------------
Australian Dollar vs. U.S.
Dollar, expiring 7/6/98.... A$ 2,690,000 $ 1,758,588 $ 92,520
Australian Dollar vs. U.S.
Dollar, expiring 7/6/98-
7/10/98.................... A$ 4,663,850 $ 2,781,008 (107,714)
Canadian Dollar vs. U.S.
Dollar, expiring 7/22/98... C$ 3,925,000 $ 2,672,977 2,619
Danish Krone vs. Deutsche
Mark, expiring 9/22/98..... DK 10,300,000 DM 2,700,718 606
Deutsche Mark vs. French
Franc, expiring 8/18/98.... DM 5,955,043 FF 19,970,000 3,859
Deutsche Mark vs. Irish
Punt, expiring 7/1/98...... DM 586,699 IP 233,000 (31)
Deutsche Mark vs. Italian
Lira, expiring 7/14/98..... DM 121,292 IL 120,000,000 303
Deutsche Mark vs. Pound
Sterling, expiring 7/1/98.. DM 20,911,685 (Pounds)7,114,200 284,628
Deutsche Mark vs. Spanish
Peseta, expiring 7/14/98... DM 869,903 SP 73,900,000 568
Deutsche Mark vs. Swiss
Franc, expiring 9/29/98.... DM 604,885 CF 505,000 (960)
Deutsche Mark vs. U.S. Dol-
lar, expiring 7/24/98...... DM 7,221,502 $ 4,029,357 22,441
Irish Punt vs. Deutsche
Mark, expiring 7/1/98...... IP 233,000 DM 586,205 (243)
New Zealand Dollar vs. U.S.
Dollar, expiring 7/13/98... N$ 2,270,740 $ 1,123,150 (54,540)
Norwegian Krone vs. Deutsche
Mark, expiring 9/14/98..... NK 8,162,050 DM 1,933,448 10,573
Pound Sterling vs. Deutsche
Mark, expiring 7/1/98-
9/30/98.................... (Pounds)7,711,850 DM 22,950,396 (141,699)
Swedish Krone vs. Deutsche
Mark, expiring 8/11/98..... SK 16,729,000 DM 3,884,864 56,568
Swedish Krone vs. Deutsche
Mark, expiring 8/11/98..... SK 4,000,000 DM 902,955 (882)
<CAPTION>
CONTRACT AMOUNT CONTRACT AMOUNT
PURCHASED SOLD
----------------- -----------------
<S> <C> <C> <C>
FOREIGN CURRENCY BUY CON-
TRACTS
- -------------------------
Australian Dollar vs. U.S.
Dollar, expiring 7/6/98.... A$ 2,845,600 $ 1,751,040 11,400
Australian Dollar vs. U.S.
Dollar, expiring 7/6/98.... A$ 850,300 $ 539,643 (13,004)
Deutsche Mark vs. U.S. Dol-
lar, expiring 7/24/98...... DM 152,379 $ 84,900 (351)
New Zealand Dollar vs. U.S.
Dollar, expiring 7/13/98... N$ 2,270,740 $ 1,133,235 44,454
---------
Net unrealized appreciation
on forward foreign currency
contracts.................. $ 211,115
=========
</TABLE>
154
<PAGE>
MAINSTAY
INSTITUTIONAL FUNDS INC.
(K)
FUTURES CONTRACTS. A futures contract is an agreement to purchase or sell a
specified quantity of an underlying instrument at a specified future date and
price, or to make or receive a cash payment based on the value of a 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).
(L)
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 liabilities for such purchase commitments
are 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.
(M)
SECURITIES LENDING. The Fund may lend its securities to broker-dealers and
financial institutions. The loans are secured by collateral (cash or
securities) at least equal at all times to the market value of the securities
loaned. The Fund may bear the risk of delay in recovery of, or loss of rights
in, the securities loaned should the borrower of the securities experience
financial difficulty. The Fund 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)
MANAGER AND SUB-ADVISERS. MainStay Management, Inc. (the "Manager"), an
indirect wholly-owned subsidiary of New York Life, serves as manager and
provides management services to the Company under a Management Agreement.
MacKay-Shields Financial Corporation ("MacKay-Shields"), a registered
investment adviser and an indirect wholly-owned subsidiary of New York Life,
serves as sub-adviser to the Growth Equity Fund, International Equity Fund,
Value Equity Fund, Bond Fund, International Bond Fund and the Short-Term Bond
Fund under a Sub-Advisory Agreement with the Manager. New York Life serves as
sub-adviser to the Money Market Fund under a Sub-Advisory agreement with the
Manager. Monitor Capital Advisors Inc. ("Monitor Capital"), a registered
investment adviser and an indirect wholly-owned subsidiary of New York Life,
serves as sub-adviser to the EAFE Index Fund, Indexed Equity Fund, Multi-Asset
Fund and Indexed Bond Fund under a Sub-Advisory Agreement with the Manager.
The Company, on behalf of each Fund, pays the Manager a monthly fee for the
services performed and facilities furnished at an annual rate of average daily
net assets of that Fund as follows:
<TABLE>
<S> <C>
EAFE Index Fund............. .95%
Growth Equity Fund.......... .85%
Indexed Equity Fund......... .50%
International Equity Fund... .85%
Multi-Asset Fund............ .65%
Value Equity Fund........... .85%
</TABLE>
<TABLE>
<S> <C>
Bond Fund................... .75%
Indexed Bond Fund........... .50%
International Bond Fund..... .80%
Money Market Fund........... .50%
Short-Term Bond Fund........ .60%
</TABLE>
155
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
Pursuant to the terms of the Sub-Advisory Agreements between the Manager and
each of the above referenced sub-advisers, the Manager pays each Fund's
respective sub-adviser a monthly fee at an annual rate of average daily net
assets of that Fund as follows:
<TABLE>
<S> <C>
EAFE Index Fund............. .15%
Growth Equity Fund.......... .25%
Indexed Equity Fund......... .10%
International Equity Fund... .35%
Multi-Asset Fund............ .15%
Value Equity Fund........... .25%
</TABLE>
<TABLE>
<S> <C>
Bond Fund................. .20%
Indexed Bond Fund......... .10%
International Bond Fund... .30%
Money Market Fund......... .10%
Short-Term Bond Fund...... .15%
</TABLE>
The Manager voluntarily agreed to assume the portion of the Fund's operating
expenses for the six months ended June 30, 1998, 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%
</TABLE>
<TABLE>
<S> <C>
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 Manager assumed
the following expenses for the six months ended June 30, 1998:
<TABLE>
<S> <C>
EAFE Index Fund...... $ 107,794
Indexed Equity Fund.. 1,493,761**
International Equity
Fund................ 10,500
Bond Fund............ 93,107
</TABLE>
<TABLE>
<S> <C>
Indexed Bond Fund....... $ 95,070
International Bond
Fund................... 36,403
Money Market Fund....... 182,640
Short-Term Bond Fund.... 60,404
</TABLE>
- --------
** For the Indexed Equity Fund the manager assumed $1,199,997, Monitor Capital
the sub-adviser assumed $293,764.
The Growth Equity Fund, Multi-Asset Fund and the Value Equity Fund do not
have a voluntary expense limitation.
These voluntary expense limitations will remain in effect through December
31, 1998, after which they may be terminated or revised at anytime.
(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.
156
<PAGE>
MAINSTAY
INSTITUTIONAL FUNDS INC.
(D)
TRANSFER, DIVIDEND DISBURSING AND SHAREHOLDER SERVICING AGENT. MainStay
Shareholder Services Inc. ("MSS"), an indirect wholly-owned subsidiary of New
York Life, is the Fund's transfer, dividend disbursing and shareholder
servicing agent. MSS has entered into an agreement with Boston Financial Data
Services ("BFDS"), by which BFDS will perform certain of the services for
which MSS is responsible. Prior to May 1, 1998, BFDS acted as transfer,
dividend disbursing and shareholder servicing agent. Transfer agent expenses
paid to MSS for the period May 1, 1998 through June 30, 1998 were as follows:
<TABLE>
<S> <C>
EAFE Index Fund......... $ 4,499
Growth Equity Fund...... 60,160
Indexed Equity Fund..... 7,150
International Equity
Fund................... 4,446
Multi-Asset Fund........ 61,230
Value Equity Fund....... 113,666
</TABLE>
<TABLE>
<S> <C>
Bond Fund................. $4,902
Indexed Bond Fund......... 4,492
International Bond Fund... 4,244
Money Market Fund......... 6,152
Short-Term Bond Fund...... 4,668
</TABLE>
(E)
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.
(F)
CAPITAL. The Funds have been advised that at June 30, 1998 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.... $ 44,278,000
Growth Equity
Fund.............. 745,460,768
Indexed Equity
Fund.............. 1,078,836,236
International
Equity Fund....... 104,677,929
Multi-Asset Fund... 339,095,765
Value Equity Fund.. 813,315,251
</TABLE>
<TABLE>
<S> <C>
Bond Fund............ $141,459,936
Indexed Bond Fund.... 121,681,524
International Bond
Fund................ 47,494,625
Money Market Fund.... 138,546,602
Short-Term Bond
Fund................ 14,207,784
</TABLE>
From time to time, the Funds may have a concentration of several shareholders
holding a significant percentage of shares outstanding. Investment activities
of these shareholders could have a material impact on the Fund.
(G)
OTHER. 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, 1998, these fees were as follows:
<TABLE>
<S> <C>
EAFE Index Fund......... $ 1,578
Growth Equity Fund...... 21,331
Indexed Equity Fund..... 30,752
International Equity
Fund................... 3,401
Multi-Asset Fund........ 12,464
Value Equity Fund....... 28,605
</TABLE>
<TABLE>
<S> <C>
Bond Fund................. $4,876
Indexed Bond Fund......... 3,613
International Bond Fund... 1,377
Money Market Fund......... 7,484
Short-Term Bond Fund...... 1,183
</TABLE>
- -------------------------------------------------------------------------------
NOTE 4--Federal Income Tax:
- -------------------------------------------------------------------------------
At December 31, 1997, 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 after October 31, 1997 as if they arose on January 1, 1998.
157
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
<TABLE>
<CAPTION>
CAPITAL LOSS CAPITAL LOSS
AVAILABLE THROUGH AMOUNT (000'S) DEFERRED (000'S)
----------------- -------------- ----------------
<S> <C> <C> <C>
EAFE Index Fund........... $ 0 $ 135
======= ======
International Equity
Fund..................... $ 0 $5,288
======= ======
Bond Fund................. 2002 $10,864
2004 1,625
-------
$12,489 $ 213
======= ======
Indexed Bond Fund......... 2004 $ 1,439
2005 44
-------
$ 1,483 $ 120
======= ======
Money Market Fund......... $ 0 $ 4
======= ======
Short-Term Bond Fund...... 2001 $ 164
2002 4,478
2003 1,770
2004 485
2005 173
-------
$ 7,070 $ 22
======= ======
</TABLE>
The Multi-Asset Fund intends to elect to treat for Federal income tax purposes
approximately $11,032 of qualifying foreign exchange losses that arose during
the year after October 31, 1997 as if they arose on January 1, 1998. The Bond
Fund utilized $1,757,701 of capital loss carryforwards during the prior year.
- -------------------------------------------------------------------------------
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.
158
<PAGE>
MAINSTAY
INSTITUTIONAL FUNDS INC.
- -------------------------------------------------------------------------------
NOTE 6--Portfolio Securities Loaned:
- -------------------------------------------------------------------------------
At June 30, 1998, the Bond Fund and Short-Term Bond Fund had portfolio
securities with a fair market value of $29,688,900 and $8,766,265,
respectively, on loan to broker-dealers and government securities dealers.
Cash collateral received by the Bond Fund and Short-Term Bond Fund are
invested in investment grade commercial paper, or other securities in
accordance with the Funds' Securities Lending Procedures. Such investments are
included as an asset and a corresponding liability in the Statement of Assets
and Liabilities. While these Funds invest cash collateral in investment grade
securities or other "high quality" investment vehicles, the Funds bear the
risk that liability for the collateral may exceed the value of the investment.
Net income earned on securities lending amounted to $50,918 and $3,197, net of
broker fees and rebates, respectively, for the six months ended June 30, 1998
which is included as interest income on the Statement of Operations.
- -------------------------------------------------------------------------------
NOTE 7--Line of Credit:
- -------------------------------------------------------------------------------
The Funds maintain a line of credit of $375,000,000 with the custodian in order
to secure a source of funds for temporary purposes to meet unanticipated or
excessive shareholder redemption requests. The Funds pay a commitment fee, at
an annual rate of .06% of the average commitment amount, regardless of usage.
Such commitment fees are allocated amongst the Funds based upon net assets.
Interest on any such borrowings is charged based upon the Federal Funds
Advances rate. There were no borrowings on the line of credit at June 30,
1998.
159
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
- --------------------------------------------------------------------------------
NOTE 8--Purchases and Sales of Securities (in 000's):
- --------------------------------------------------------------------------------
During the six months ended June 30, 1998, 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 securi-
ties $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ --
All others 6,301 11,826 102,736 88,682 177,625 18,257 36,093 29,335
------------------------------------------------------------------------------
Total $6,301 $11,826 $102,736 $88,682 $177,625 $18,257 $ 36,093 $ 29,335
------------------------------------------------------------------------------
------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
NOTE 9--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, 1998 1997 June 30, 1998 1997
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold 1,110 4 766 9 2,404 50 7,615 160
Shares issued in
reinvestment of
dividends and
distributions -- -- 1,467 12 -- -- 2,018 28
-----------------------------------------------------------------------------------------------------
1,110 4 2,233 21 2,404 50 9,633 188
Shares redeemed (1,604) (3) (3,202) (6) (2,166) (47) (6,715) (78)
-----------------------------------------------------------------------------------------------------
Net increase
(decrease) (494) 1 (969) 15 238 3 2,918 110
-----------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------
<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, 1998 1997 June 30, 1998 1997
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold 2,497 341 3,058 260 3,407 60 10,407 287
Shares issued in
reinvestment of
dividends and
distributions -- -- 3,152 74 -- -- 9,661 105
-----------------------------------------------------------------------------------------------------
2,497 341 6,210 334 3,407 60 20,068 392
Shares redeemed (1,918) (67) (2,779) (84) (5,654) (75) (11,665) (649)
-----------------------------------------------------------------------------------------------------
Net increase
(decrease) 579 274 3,431 250 (2,247) (15) 8,403 (257)
-----------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------
<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, 1998 1997 June 30, 1998 1997
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold 464 2 137 5 123,854 45,518 383,542 90,079
Shares issued in
reinvestment of
dividends and
distributions -- -- 567 3 5,164 1,750 7,733 2,387
-----------------------------------------------------------------------------------------------------
464 2 704 8 129,018 47,268 391,275 92,466
Shares redeemed (158) (3) (546) (5) (125,851) (24,243) (311,713) (62,902)
-----------------------------------------------------------------------------------------------------
Net increase
(decrease) 306 (1) 158 3 3,167 23,025 79,562 29,564
-----------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------
</TABLE>
160
<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>
$ -- $ -- $ -- $ -- $268,149 $266,959 $37,629 $10,292 $ -- $ -- $24,714 $24,820
35,661 57,248 371,950 372,428 105,769 111,826 10,252 490 57,792 50,271 345 4,347
- -----------------------------------------------------------------------------------------------------------------
$35,661 $57,248 $371,950 $372,428 $373,918 $378,785 $47,881 $10,782 $ 57,792 $ 50,271 $25,059 $29,167
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<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, 1998 1997 June 30, 1998 1997
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
7,897 579 12,006 404 850 3 1,051 14
-- -- 1,180 16 -- -- 1,247 7
- ----------------------------------------------------------------------------------------------------------------
7,897 579 13,186 420 850 3 2,298 21
(3,100) (125) (6,821) (187) (675) (6) (2,721) (28)
- ----------------------------------------------------------------------------------------------------------------
4,797 454 6,365 233 175 (3) (423) (7)
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
<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, 1998 1997 June 30, 1998 1997
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
890 251 944 67 3,802 79 2,458 131
-- -- 1,129 9 -- -- 710 17
- ----------------------------------------------------------------------------------------------------------------
890 251 2,073 76 3,802 79 3,168 148
(2,875) (60) (1,737) (86) (1,201) (33) (2,590) (130)
- ----------------------------------------------------------------------------------------------------------------
(1,985) 191 336 (10) 2,601 46 578 18
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
<CAPTION>
Short-Term Bond
Fund
Institutional Institutional Institutional Institutional
Class Service Class Class Service Class
- ------------- ------------- ------------- -------------
Six months ended Year ended
June 30, 1998 1997
- ---------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
650 18 1,988 82
-- -- 331 10
- ---------------------------------------------------------------
650 18 2,319 92
(1,355) (43) (3,450) (73)
- ---------------------------------------------------------------
(705) (25) (1,131) 19
- ---------------------------------------------------------------
- ---------------------------------------------------------------
</TABLE>
161
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK)
162
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163
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164
<PAGE>
================================================================================
OFFICERS AND DIRECTORS
Stephen C. Roussin
Chairman 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
Richard Zuccaro
Tax Vice President
Anthony W. Polis
Treasurer
Sara L. Badler
Secretary
MANAGER
MainStay Management, Inc.
SUB-ADVISERS
New York Life Insurance Company
MacKay-Shields Financial Corporation
Monitor Capital Advisors, Inc.
DISTRIBUTOR
NYLIFE Distributors Inc.
TRANSFER AGENT
MainStay Shareholder Services Inc.
CUSTODIAN
The Bank of New York
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers 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>
[GRAPHIC]
- --------------------------------------------------------------------------------
[LOGO]
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.
Sub-Advisers:
New York Life Insurance Company
MacKay-Shields Financial Corporation
Monitor Capital Advisors, Inc.
This semiannual report is also available in Spanish.
Please call 800-695-2126 to obtain a copy.
Distributed by NYLIFE Distributors Inc., member NASD,
300 Interpace Parkway, Building A, 2nd Floor, Parsippany, NJ 07054
NYLIFE Distributors Inc. is an indirect wholly owned NEW
subsidiary of New York Life Insurance Company. YORK
LIFE [LOGO]
02-010-0698
- --------------------------------------------------------------------------------
<PAGE>
[GRAPHIC]
- --------------------------------------------------------------------------------
[LOGO]
MAINSTAY(R)
INSTITUTIONAL
FUNDS INC.
MONEY MARKET
FUND
1998
SEMIANNUAL
REPORT
Unaudited June 30, 1998
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
Chairman's Letter 2
Portfolio Manager Interview & Comments 3
Financial Statements 7
Note 1 Organization and Business 14
Note 2 Significant Accounting Policies 14
Note 3 Fees and Related Party Policies 15
Note 4 Line of Credit 16
Note 5 Capital Share Transactions 16
- --------------------------------------------------------------------------------
<PAGE>
CHAIRMAN'S LETTER
================================================================================
REPORT TO SHAREHOLDERS FOR THE SIX MONTHS
ENDED JUNE 30, 1998
The first half of 1998 was a dynamic period, with active markets reflecting
strong investor preferences. In general, investors chose large-capitalization
stocks over small-cap issues, and growth investing over value disciplines.
Established economies generally outperformed emerging markets--and domestic and
European stocks and bonds generally performed well, while many securities with
ties to Asia tended to underperform.
Generally, long-term bonds outpaced shorter-term securities, Treasuries outpaced
corporate and mortgage-backed bonds, and the strength of the U.S. dollar was
reflected in the weakness of the Japanese yen. Against this backdrop, the S&P
500* advanced to record levels and the yield on 30-year Treasury bonds dropped
to all-time lows during the reporting period, presenting investors with
opportunities or challenges, depending on their investment orientation.
Putting market results in perspective
After several years of steady U.S. stock market growth, perhaps a word of
caution is in order. The positive results many investors have experienced in
recent years, although worth celebrating, have been well above historical norms+
and probably can't be sustained forever.
Many of the stocks that have been leading the market are trading at historically
high prices relative to their earnings and profit projections. If inflation,
unemployment, or wage pressures increase--or if other events upset the
economy--it's difficult to say what may lie ahead. To avoid disappointments, you
need to have realistic expectations and strategies that are appropriate for
various economic scenarios.
Coping with volatility
One aspect of investing that concerns many investors is volatility--or rapid
changes in the price of securities over short periods of time. While the level
of volatility investors experience may vary across asset classes and market
sectors, no investor is entirely immune to changes in prices, yields, or total
returns.
Diversification is viewed as a way to help spread risk and may help investors
reduce their exposure to volatile market sectors. Even in periods of extreme
volatility, maintaining steady diversification guidelines and a long-term focus
can help investors avoid shifting assets too often, possibly missing as many
opportunities as they may gain.
Improved support
MainStay Institutional Funds is pleased to report that our Marketing Directors
are now located in our corporate headquarters. This move gives them greater
access to our portfolio managers, more support from our corporate offices, and a
more fluid exchange of ideas on how to better assist you, our institutional
clients.
This semiannual report explains the performance and holdings of your MainStay
Institutional Fund, with commentary from the portfolio managers. At MainStay,
we're working hard to earn your trust--by endeavoring to provide the
information, selection, and service you need to make sound investment decisions.
Sincerely,
/s/ Stephen C. Roussin
Stephen C. Roussin
July 1998
================================================================================
* The "S&P 500(R)" is a registered trademark of The McGraw-Hill Companies,
Inc. The S&P 500(R) 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.
2
<PAGE>
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
MONEY MARKET FUND
================================================================================
================================================================================
MARKET RECAP FOR THE 6-MONTH PERIOD ENDED 6/30/98
================================================================================
o Domestic bond markets were influenced by Asian economic contractions, a
solid U.S. economy, and relatively tame inflation during the first six
months of 1998.
o During the reporting period, short-term rates remained low and the yield
curve continued to flatten, particularly during the second quarter, when
30-year Treasury yields reached all-time lows.
o Commercial paper underperformed during the reporting period.
o As demand for floating-rate notes increased, prices also increased.
================================================================================
FUND RECAP FOR THE 6- AND 12-MONTH PERIODS ENDED 6/30/98
================================================================================
o One-year total returns of 5.34% and 5.08% for Institutional Class and
Service Class shares, respectively, as of 6/30/98.
o The Fund benefited by purchasing longer-maturity securities in the
beginning of the year, but found few yield-curve opportunities later in the
first half of the year.
o Both share classes underperformed the average Lipper* institutional money
market fund, which returned 2.64% for the six months ended 6/30/98.
During the first half of 1998, the domestic bond markets were largely influenced
by world events. Economic contractions in Asian markets, including Japan, may
have caused difficulties in markets from Latin America to Russia and China. One
positive outcome has been relatively tame inflation, keeping the Federal Reserve
from adjusting domestic interest rates. As a result, interest rates in general
have remained within a relatively narrow range, with money market rates
relatively stable during the reporting period.
With 30-year Treasury yields declining to all-time lows in the second quarter,
the yield curve flattened substantially during the reporting period. The average
maturity of most money market funds remained approximately 57 to 58 days for
most of the first half of 1998.
Given this context, how did the MainStay Institutional Money Market Fund perform
in the first six months of 1998?
For the six months ended 6/30/98, the MainStay Institutional Money Market Fund
returned 2.60% and 2.47% for Institutional Class shares and Service Class
shares, respectively. Both share classes underperformed the average Lipper
institutional money market fund, which returned 2.64% for the first half of
1998.
- --------------------------------------------------------------------------------
Inflation An increase in the cost of goods and services over time. As prices
rise, the purchasing power of the dollar declines.
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.
- --------------------------------------------------------------------------------
================================================================================
* 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>
================================================================================
What were the primary reasons why the Fund underperformed its peers?
With interest rates and bond prices moving in a very narrow range, and the yield
curve flattening somewhat, there were few opportunities to benefit from changes
in duration during the reporting period. The Fund offset the flattening somewhat
by purchasing longer-maturity securities in the beginning of the year. However,
the Fund was hurt by the yield curve as the year wore on and it became
increasingly difficult to pick up yield through lengthening the portfolio's
duration.
What was the Fund's average weighted maturity during the reporting period?
The average weighted maturity ranged from 50 to 76 days, with the target range
being 60 to 65 days. As of June 30, 1998, the average stood at 57 days. The Fund
was short of its target at the end of the first half of the year, because the
Fund purchased some short-maturity paper that was offered at attractive prices
due to quarter-end balance sheet pressures.
What were the Fund's most significant purchases during the first half of 1998?
We purchased some corporate bonds and notes for the Fund during the reporting
period. They were significant because they had longer maturities and higher
yields than other securities the Fund owned.
Were there any significant sales during the reporting period?
No. Most of the Fund's securities were held to maturity.
Which securities contributed most significantly to the Fund's performance?
During the reporting period, the Fund's corporate positions and floating-rate
securities contributed most to the Fund's performance.
Which securities were the worst performers?
Commercial paper was the worst-performing category for the Fund during the
reporting period. Even so, we anticipate that it will continue to make up an
important part of the Fund as long as it provides liquidity, which is important
for a money market fund. The Fund's investments also focused on high-quality
domestic issues, which tended to carry slightly higher prices than foreign
issues. As of the end of June, we were comfortable with this approach, because
we did not believe that taking on additional risk would be generally
advantageous for the Fund's investors. We will continue to monitor the credit
quality of the securities held in the Fund's portfolio.
What do you believe was the best decision you made for the Fund during the
reporting period?
We believe our best decision was extending the duration of the Fund's portfolio
early in the year, before the yield curve flattened. That helped the Fund pick
up yield and positioned it positively for the first quarter of 1998.
Were there decisions that didn't work out as well?
When the Fund's domestic floating-rate securities matured, we didn't replace
them as quickly as we might have, believing that the prices were somewhat
expensive at the time, particularly given the uncertainty surrounding Asia.
Unfortunately, the prices have not declined, so our decision placed the Fund at
a slight disadvantage. During the second half of the year, we may seek to
increase the Fund's position in floating-rate securities.
- --------------------------------------------------------------------------------
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.
Commercial paper Short-term obligations with maturities ranging from 2 to 270
days, issued by banks, corporations, and other borrowers to investors with
temporarily idle cash.
- --------------------------------------------------------------------------------
4
<PAGE>
================================================================================
Are there segments of the market where the Fund was overweighted or
underweighted as of June 30, 1998?
Yes. At the end of the first half of the year the Fund was overweighted in
corporate securities and underweighted in floating-rate and asset-backed
securities. Since both of these sectors had strong performance, the
overweighting in corporates helped the Fund, while the underweighted positions
have had a negative impact on performance.
What is your outlook going forward?
For the remainder of the year, we believe the environment may be similar to the
first half of the year. We don't expect the Federal Reserve Board to take much
action in moving interest rates. If short-term rates remain relatively stable,
we will seek to increase the Fund's floating-rate security positions and
continue to focus on high-quality, domestic commercial paper. As long as the
yield curve remains relatively flat, we see few opportunities to increase yield
through duration plays and will continue to focus on incremental opportunities
as they arise in the money markets.
Whatever happens, the Fund will seek to provide a high level of current income
while preserving capital and maintaining liquidity.
David Clement
Portfolio Manager
- --------------------------------------------------------------------------------
Weighting/Overweighted 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.
- --------------------------------------------------------------------------------
================================================================================
Past performance is no guarantee of future results.
5
<PAGE>
$10,000 INVESTED IN MAINSTAY INSTITUTIONAL
MONEY MARKET FUND VS
LIPPER INSTITUTIONAL MONEY MARKET AVERAGE INDEX
INSTITUTIONAL CLASS SHARES
================================================================================
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
<TABLE>
<CAPTION>
Year Money Market Fund Average Lipper
---- ----------------- --------------
<S> <C> <C>
1/2/91 10,000 10,000
91 10,595 10,599
92 10,983 10,972
93 11,300 11,294
94 11,738 11,745
95 12,399 12,419
96 13,032 13,058
97 13,720 13,752
6/30/98 14,076 14,114
</TABLE>
$10,000 INVESTED IN MAINSTAY INSTITUTIONAL
MONEY MARKET FUND VS
LIPPER INSTITUTIONAL MONEY MARKET AVERAGE INDEX
SERVICE CLASS SHARES
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
================================================================================
<TABLE>
<CAPTION>
Money Market Fund
Service Average Lipper
----------------- --------------
<S> <C> <C>
1/2/91 10,000 10,000
91 10,595 10,599
92 10,983 10,972
93 11,300 11,294
94 11,738 11,745
95 12,379 12,419
96 12,972 13,055
97 13,630 13,752
6/30/98 13,967 14,114
</TABLE>
o Money Market Fund -- Lipper Institutional Money Market Average 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, 1998 as of June 30, 1998
- ---------------------------------------------------------------------------------------------------------------------
Year to Date One Year Five Year Since Inception
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Money Market Fund Institutional Class+ 2.60% 5.34% 4.79% 4.66%
Money Market Fund Service Class+ 2.47% 5.08% 4.63% 4.55%
Average Lipper Institutional Money Market Fund 2.64% 5.40% 4.90% 4.76%
</TABLE>
YEAR-BY-YEAR PERFORMANCE
- --------------------------------------------------------------------------------
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
Institutional Class Shares
<TABLE>
<CAPTION>
Total Return
Year end %*
-------- ------------
<S> <C>
1991 5.95
1992 3.66
1993 2.89
1994 3.88
1995 5.63
1996 5.11
1997 5.27
1998 (as of 6/30/98) 2.60
</TABLE>
================================================================================
Portfolio Composition
(% of net assets as of June 30, 1998)
- --------------------------------------------------------------------------------
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
<TABLE>
<S> <C>
Commercial Paper 64.20%
Medium-Term Notes 12.66%
Bank Notes 2.84%
Other 20.19%
Cash, Equivalents &
Other Assets 0.11%++
</TABLE>
================================================================================
================================================================================
TOP 10 HOLDINGS
(% of net assets as of June 30, 1998)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
1. Society of New York Hospital Fund, Inc. 4.54%
2. Sears Roebuck Acceptance Corp. 3.61%
3. Wood Street Funding Corp. 3.59%
4. Whiting Indiana Industrial Sewage &
Solid Waste Disposal 3.56%
5. Fortune Brands Inc. 3.56%
6. Ford Motor Credit Co. 3.55%
7. Morgan Stanley, Dean Witter, Discover & Co. 3.55%
8. Salomon Smith Barney Holdings Inc. 3.55%
9. General Electric Capital Corp. 3.54%
10. Holy Cross Health System 3.54%
</TABLE>
================================================================================
================================================================================
TOP 5 INDUSTRY
HOLDINGS
(% of net assets as of June 30, 1998)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
1. Special Purpose Finance 14.74%
2. Brokerage 12.00%
3. Auto Manufacturing 10.81%
4. Banks 10.65%
5. Retail 6.80%
Average Maturity 57 Days
(as of 6/30/98)
</TABLE>
================================================================================
* 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% on an annualized basis of the average daily net asset value of the
Service Class shares.
+ 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
5.30% and a 7-day current yield of 5.17%, both as of 6/30/98. The Money
Market Fund--Service Class had a 7-day effective yield of 5.04% with a
7-day current yield of 4.92%, both as of 6/30/98. These yields reflect
certain expense limitations. Had certain expenses not been limited, the
7-day effective yield and the 7-day current yield would have been 5.18% and
5.06%, respectively, for the Institutional Class and 4.92% and 4.81%,
respectively, for the Service Class. These expense limitations are
voluntary and may be terminated or revised at any time.
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.
6
<PAGE>
MAINSTAY
INSTITUTIONAL FUNDS INC.
MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS
June 30, 1998 (Unaudited)
SHORT-TERM
INVESTMENTS (99.9%)+
<TABLE>
<CAPTION>
PRINCIPAL AMORTIZED
AMOUNT COST
<S> <C> <C>
----------------------------------------------------------
ASSET-BACKED SECURITY (2.8%)
Asset-Backed Securities Investment Trust
Series 1997-E Class N
5.66%, due 8/17/98 (a)(b)(d)........................ $ 7,900,000 $ 7,900,000
------------
BANK NOTES (2.8%)
Comerica Bank Detroit, Michigan
5.56%, due 7/22/98 (b)(d)........................... 3,000,000 2,999,900
LaSalle National Bank Chicago
5.71%, due 7/27/98 (d).............................. 5,000,000 5,000,486
------------
8,000,386
------------
CERTIFICATES OF DEPOSIT (2.8%)
Societe Generale Bank New York
5.71%, due 8/25/98 (b)(d)........................... 5,000,000 4,999,564
Swiss Bank Corp. New York
5.69%, due 1/7/99 (d)............................... 2,750,000 2,749,013
------------
7,748,577
------------
COMMERCIAL PAPER (64.2%)
American General Finance Corp.
5.49%, due 7/2/98................................... 9,000,000 8,998,628
Bear Stearns Cos. Inc.
5.52%, due 7/13/98.................................. 8,000,000 7,985,280
Cogentrix of Richmond Inc.
5.60%, due 7/10/98.................................. 4,144,000 4,138,198
Countrywide Home Loans Inc.
5.56%, due 8/18/98.................................. 10,000,000 9,925,867
Delaware Funding Corp.
5.58%, due 8/25/98 (a).............................. 2,081,000 2,063,259
Duke Capital Corp.
6.00%, due 7/6/98 (a)............................... 2,000,000 1,998,333
Ford Motor Credit Co.
5.51%, due 7/15/98.................................. 10,000,000 9,978,572
Fortune Brands Inc.
5.50%, due 7/6/98................................... 10,000,000 9,992,361
General Electric Capital Corp.
5.51%, due 8/3/98................................... 10,000,000 9,949,492
General Motors Acceptance Corp.
5.57%, due 7/8/98................................... 120,000 119,870
Holy Cross Health System
5.57%, due 8/13/98.................................. 10,000,000 9,933,469
Massachusetts College of Pharmacy & Allied
Health Sciences
5.54%, due 7/24/98.................................. 5,000,000 4,982,303
5.55%, due 7/1/98................................... 2,994,000 2,994,000
5.55%, due 8/20/98.................................. 5,000,000 4,961,458
</TABLE>
- --------
+ Percentages indicated are based on Fund net assets.
<TABLE>
<CAPTION>
PRINCIPAL AMORTIZED
AMOUNT COST
<S> <C> <C>
-----------------------------------------------------------
COMMERCIAL PAPER (Continued)
Morgan Stanley, Dean Witter, Discover & Co.
5.75%, due 7/6/98.................................... $ 1,026,000 $ 1,025,181
6.25%, due 7/1/98.................................... 9,974,000 9,974,000
Remsen Funding Corp.
5.65%, due 7/31/98 (a)............................... 6,710,000 6,678,407
Riverwoods Funding Corp.
5.51%, due 7/10/98................................... 5,000,000 4,993,113
Salomon Smith Barney Holdings Inc.
5.48%, due 7/23/98................................... 10,000,000 9,966,511
Sears Roebuck Acceptance Corp.
5.57%, due 8/5/98 (d)................................ 10,130,000 10,130,000
Society of New York Hospital Fund Inc.
5.57%, due 8/31/98................................... 12,875,000 12,753,579
Texaco Inc.
5.51%, due 7/29/98................................... 8,000,000 7,965,716
Toys "R' Us Inc.
5.50%, due 7/1/98.................................... 8,966,000 8,966,000
Windmill Funding Corp.
5.53%, due 7/8/98 (a)................................ 7,560,000 7,551,871
Wood Street Funding Corp.
5.55%, due 7/20/98 (a)............................... 10,097,000 10,067,424
5.65%, due 8/7/98 (a)................................ 2,141,000 2,128,567
------------
180,221,459
------------
CORPORATE BONDS (1.9%)
Fleet Financial Group Inc.
6.00%, due 10/26/98 (d).............................. 1,000,000 1,000,165
Iowa & Illinois Gas & Electric Co.
5.05%, due 10/15/98 (d).............................. 1,500,000 1,497,023
Northern States Power Minnesota
5.50%, due 2/1/99 (d)................................ 2,820,000 2,818,226
------------
5,315,414
------------
CORPORATE NOTES (6.0%)
Associates Corp. of North America
6.00%, due 3/15/99 (d)............................... 1,345,000 1,347,197
Chrysler Financial Corp.
5.63%, due 1/15/99 (d)............................... 1,770,000 1,769,220
Deere (John) Capital Corp.
6.00%, due 2/1/99 (d)................................ 2,025,000 2,029,423
Eaton Corp.
6.37%, due 4/1/99 (d)................................ 5,000,000 5,020,764
Greyhound Financial
6.75%, due 3/25/99 (d)............................... 1,000,000 1,005,635
Lehman Brothers Holdings Inc.
8.37%, due 2/15/99 (d)............................... 2,000,000 2,030,149
8.87%, due 11/1/98 (d)............................... 1,675,000 1,691,342
Merrill Lynch & Co. Inc.
6.37%, due 3/30/99 (d)............................... 1,000,000 1,004,350
NationsBank Corp.
5.12%, due 9/15/98 (d)............................... 1,000,000 998,787
------------
16,896,867
------------
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
7
<PAGE>
MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS
(CONTINUED)
June 30, 1998 (Unaudited)
SHORT-TERM
INVESTMENTS (Continued)
<TABLE>
<CAPTION>
PRINCIPAL AMORTIZED
AMOUNT COST
<S> <C> <C>
----------------------------------------------------------
MEDIUM-TERM NOTES (12.7%)
Abbey National Treasury Services
5.87%, due 12/22/98 (d)............................ $ 5,000,000 $ 5,002,331
Air Products & Chemicals
6.21%, due 3/17/99 (d)............................. 2,750,000 2,759,573
Beneficial Corp. Series C
9.72%, due 1/19/99 (d)............................. 1,000,000 1,021,221
Caterpillar Financial Service Corp. Series E
5.47%, due 12/15/98 (d)............................ 6,535,000 6,527,267
6.76%, due 1/15/99 (d)............................. 1,000,000 1,004,599
Chrysler Financial Corp.
Series Q
5.28%, due 2/16/99 (d)............................. 1,570,000 1,564,815
Series L
5.83%, due 9/16/98 (d)............................. 3,000,000 3,000,381
Series P
6.12%, due 11/30/98 (d)............................ 1,000,000 1,001,543
General Motors Acceptance Corp.
5.87%, due 1/12/99 (d)............................. 2,000,000 2,000,752
6.05%, due 10/9/98 (d)............................. 1,000,000 1,000,832
8.37%, due 2/3/99 (d).............................. 1,100,000 1,115,650
Norwest Corp. Series G
6.00%, due 10/13/98 (d)............................ 5,000,000 5,003,510
PepsiCo Inc.
5.46%, due 7/1/98 (c)(d)........................... 4,550,000 4,550,000
------------
35,552,474
------------
MUNICIPAL BONDS (6.7%)
West Baton Rouge Parish
State of Louisiana
5.59%, due 8/10/98 (a)(c)(d)....................... 8,800,000 8,800,000
Whiting Indiana Industrial Sewage & Solid Waste
Disposal
5.59%, due 9/8/98 (c)(d)........................... 10,000,000 10,000,000
------------
18,800,000
------------
Total Short-Term Investments
(Amortized Cost
$280,435,177) (e).................................. 99.9% 280,435,177
Cash and Other Assets,
Less Liabilities................................... 0.1 303,779
----------- ------------
Net Assets.......................................... 100.0% $280,738,956
=========== ============
</TABLE>
- --------
(a) May be sold to institutional investors only.
(b) Floating rate. Rate shown is the rate in effect at June 30, 1998.
(c) Variable rate. Rate shown is the rate in effect at June 30, 1998.
(d) Coupon interest bearing security.
(e) 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....................................... $ 30,351,635 10.8%
Banks.................................................... 29,891,725 10.7
Brokerage................................................ 33,676,814 12.0
Capital Goods............................................ 7,531,866 2.7
Chemicals................................................ 2,759,573 1.0
Commercial Banks......................................... 2,749,013 1.0
Conglomerates............................................ 9,949,492 3.5
Consumer Financial Services.............................. 10,345,824 3.7
Consumer Products........................................ 9,992,361 3.6
Diversified Financial Services........................... 6,007,966 2.1
Diversified Manufacturing................................ 5,020,764 1.9
Domestic Oil............................................. 17,965,716 6.4
Education................................................ 7,976,303 2.8
Finance.................................................. 4,050,809 1.4
Industrial............................................... 4,550,000 1.6
Medical-Hospitals........................................ 14,894,928 5.3
Mortgage Banks........................................... 9,925,867 3.5
National Commercial Banks................................ 6,002,297 2.1
Retail................................................... 19,096,000 6.8
Special Purpose Finance.................................. 41,382,641 14.7
Utilities-Electric....................................... 6,313,583 2.3
------------ -----
280,435,177 99.9
Cash and Other Assets, Less Liabilities.................. 303,779 0.1
------------ -----
Net Assets............................................... $280,738,956 100.0%
============ =====
</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.
8
<PAGE>
MAINSTAY
INSTITUTIONAL FUNDS INC.
MONEY MARKET FUND
STATEMENT OF ASSETS AND LIABILITIES STATEMENT OF OPERATIONS
As of June 30, 1998 (Unaudited) For the six months ended June 30,
1998 (Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investment in securities, at value (amortized cost
$280,435,177).................................................. $280,435,177
Cash............................................................ 969
Interest receivable............................................. 1,558,847
------------
Total assets.................................................. 281,994,993
------------
LIABILITIES:
Payables:
MainStay Management............................................. 45,133
Custodian....................................................... 12,567
Transfer agent.................................................. 3,076
Accrued expenses................................................ 59,616
Dividend payable................................................ 1,135,645
------------
Total liabilities............................................. 1,256,037
------------
Net assets...................................................... $280,738,956
============
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.001 per share) 12 billion shares
authorized
Institutional Class............................................. $ 193,490
Institutional Service Class..................................... 87,253
Additional paid-in capital...................................... 280,462,543
Accumulated net realized loss
on investments................................................. (4,330)
------------
Net assets...................................................... $280,738,956
============
Institutional Class
Net assets applicable to outstanding shares..................... $193,485,972
============
Shares of capital stock outstanding............................. 193,490,302
============
Net asset value per share outstanding........................... $ 1.00
============
Institutional Service Class
Net assets applicable to outstanding shares..................... $ 87,252,984
============
Shares of capital stock outstanding............................. 87,252,984
============
Net asset value per share outstanding........................... $ 1.00
============
</TABLE>
<TABLE>
<S> <C>
INVESTMENT INCOME:
Income:
Interest........................................................... $7,715,169
----------
Expenses:
Management......................................................... 678,166
Service............................................................ 91,295
Shareholder communication.......................................... 81,489
Registration....................................................... 30,564
Professional....................................................... 25,823
Transfer agent..................................................... 17,303
Custodian.......................................................... 15,407
Directors.......................................................... 3,205
Miscellaneous...................................................... 8,849
----------
Total expenses before
reimbursement................................................... 952,101
Expense reimbursement from Manager................................. (182,640)
----------
Net expenses..................................................... 769,461
----------
Net investment income.............................................. 6,945,708
----------
REALIZED GAIN ON INVESTMENTS:
Net realized gain on investments................................... 62
----------
Net increase in net assets resulting from operations............... $6,945,770
==========
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
9
<PAGE>
MONEY MARKET FUND
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 1998 (Unaudited) and the year ended December
31, 1997
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
INCREASE IN NET ASSETS:
Operations:
Net investment income............................. $ 6,945,708 $ 10,768,396
Net realized gain (loss) on investments........... 62 (497)
------------ ------------
Net increase in net assets resulting from
operations....................................... 6,945,770 10,767,899
------------ ------------
Dividends and distributions to shareholders:
From net investment income:
Institutional Class.............................. (5,141,118) (8,228,621)
Institutional Service Class...................... (1,804,590) (2,539,775)
From net realized gain on investments:
Institutional Class.............................. -- (2,265)
Institutional Service Class...................... -- (742)
------------ ------------
Total dividends and distributions to
shareholders................................... (6,945,708) (10,771,403)
------------ ------------
Capital share transactions:
Net proceeds from sale of shares:
Institutional Class.............................. 123,853,809 383,541,801
Institutional Service Class...................... 45,517,718 90,078,559
Net asset value of shares issued to shareholders
in reinvestment of dividends and distributions:
Institutional Class.............................. 5,164,575 7,733,123
Institutional Service Class...................... 1,749,718 2,386,943
------------ ------------
176,285,820 483,740,426
Cost of shares redeemed:
Institutional Class.............................. (125,851,347) (311,712,755)
Institutional Service Class...................... (24,242,703) (62,901,724)
------------ ------------
Increase in net assets derived from capital
share transactions.............................. 26,191,770 109,125,947
------------ ------------
Net increase in net assets....................... 26,191,832 109,122,443
NET ASSETS:
Beginning of period............................... 254,547,124 145,424,681
------------ ------------
End of period..................................... $280,738,956 $254,547,124
============ ============
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
10
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK)
11
<PAGE>
MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
(Selected per share data and ratios)
<TABLE>
<CAPTION>
INSTITUTIONAL
INSTITUTIONAL SERVICE
CLASS CLASS
------------- -------------
SIX MONTHS
ENDED
JUNE 30, 1998*
---------------------------
<S> <C> <C>
Net asset value at beginning of period............. $ 1.00 $ 1.00
-------- -------
Net investment income.............................. 0.05 0.05
-------- -------
Less dividends and distributions:
From net investment income......................... (0.05) (0.05)
From net realized gain on investments.............. -- --
-------- -------
Total dividends and distributions.................. (0.05) (0.05)
-------- -------
Net asset value at end of period................... $ 1.00 $ 1.00
======== =======
Total investment return (b) ....................... 2.60% 2.47%
Ratios (to average net assets)/Supplemental Data:
Net investment income............................. 5.19%+ 4.94%+
Net expenses...................................... 0.50%+ 0.75%+
Expenses (before reimbursement)................... 0.63%+ 0.88%+
Net assets at end of period (in 000's)............. $193,486 $87,253
</TABLE>
- --------
* Unaudited.
+ Annualized.
(a) Less than one cent per share.
(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.
12
<PAGE>
MAINSTAY
INSTITUTIONAL FUNDS INC.
<TABLE>
<CAPTION>
INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL
INSTITUTIONAL SERVICE INSTITUTIONAL SERVICE INSTITUTIONAL SERVICE INSTITUTIONAL
CLASS CLASS CLASS CLASS CLASS CLASS CLASS
- ------------- ------------- ------------- ------------- ------------- ------------- ----------------
YEAR ENDED DECEMBER 31
- --------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993
- ----------------------------- --------------------------- --------------------------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -------- -------- ------- -------
0.05 0.05 0.05 0.05 0.05 0.05 0.04 0.03
-------- -------- -------- -------- -------- -------- ------- -------
(0.05) (0.05) (0.05) (0.05) (0.05) (0.05) (0.04) (0.03)
(0.00)(a) (0.00)(a) -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- ------- -------
(0.05) (0.05) (0.05) (0.05) (0.05) (0.05) (0.04) (0.03)
-------- -------- -------- -------- -------- -------- ------- -------
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ======== ======== ======= =======
5.27% 5.01% 5.11% 4.85% 5.63% 5.46% 3.88% 2.89%
5.18% 4.93% 5.00% 4.75% 5.48% 5.23% 3.89% 2.85%
0.50% 0.75% 0.50% 0.75% 0.50% 0.75% 0.50% 0.45%
0.61% 0.86% 0.67% 0.92% 0.73% 0.98% 0.68% 0.67%
$190,319 $ 64,228 $110,760 $ 34,664 $ 67,869 $ 2,784 $65,106 $75,832
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
13
<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, 1998 the Company has eleven separate investment portfolios
(collectively referred to as the "Funds"). These financial statements and
notes relate only to the Company's Money Market Fund (the "Fund").
The 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
the 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 Fund's investment objective is to seek a high level of current income
while preserving capital and maintaining liquidity.
- -------------------------------------------------------------------------------
NOTE 2--Significant Accounting Policies:
- -------------------------------------------------------------------------------
The following is a summary of significant accounting policies followed by the
Fund:
VALUATION OF FUND SHARES. The 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
on a continuous basis, and it has adopted certain investment, portfolio and
dividend and distribution policies designed to enable it to do so.
SECURITIES VALUATION. Securities 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.
FEDERAL INCOME TAXES. The Fund'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 the Fund within
the allowable time limits. Therefore, no Federal income or excise tax
provision is required.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends are recorded on the ex-
dividend date. Dividends are declared daily and paid monthly. Income dividends
and capital gain distributions are determined in accordance with Federal
income tax regulations which may differ from generally accepted accounting
principles.
SECURITY TRANSACTIONS AND INVESTMENT INCOME. The Fund records security
transactions on the trade date. Interest income is accrued daily and discounts
and premiums on securities purchased for the Fund are accreted and amortized,
respectively, on the constant yield method over the life of the respective
securities.
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 direct allocations of expenses can 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 the 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.
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.
14
<PAGE>
MAINSTAY
INSTITUTIONAL FUNDS INC.
- -------------------------------------------------------------------------------
NOTE 3--Fees and Related Party Policies:
- -------------------------------------------------------------------------------
(A)
MANAGER AND SUB-ADVISER. MainStay Management, Inc. (the "Manager"), an indirect
wholly-owned subsidiary of New York Life Insurance Company ("New York Life"),
serves as manager and provides management services to the Company under a
Management Agreement. New York Life serves as sub-adviser to the Fund under a
Sub-Advisory agreement with the Manager.
The Company, on behalf of the Fund, pays the Manager a monthly fee for the
services performed and facilities furnished at an annual rate of 0.50% of the
average daily net assets of the Fund. The Manager voluntarily agreed to assume
the portion of the Fund's operating expenses for the six months ended June 30,
1998, to the extent the expenses (excluding service fees) on an annualized
basis exceeded 0.50% of the average daily net assets of the Fund.
Pursuant to the terms of the Sub-Advisory Agreement between the Manager and
New York Life, the Manager pays New York Life a monthly fee at an annual rate
of 0.10% of the average daily net assets of the Fund.
In connection with the voluntary expense limitation, the Manager assumed
$182,640 for the six months ended June 30, 1998.
This voluntary expense limitation will remain in effect through December 31,
1998, after which it may be terminated or revised at anytime.
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 the Fund.
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.
TRANSFER, DIVIDEND DISBURSING AND SHAREHOLDER SERVICING AGENT. MainStay
Shareholder Services, Inc. ("MSS"), an indirect wholly-owned subsidiary of New
York Life, is the Fund's transfer, dividend disbursing and shareholder
servicing agent. MSS has entered into an agreement with Boston Financial Data
Services ("BFDS"), by which BFDS will perform certain of the services for
which MSS is responsible. Prior to May 1, 1998, BFDS acted as transfer,
dividend disbursing and shareholder servicing agent. Transfer agent expense
paid to MSS for the period May 1, 1998 through June 30, 1998 amounted to
$6,152.
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.
CAPITAL. The Fund has been advised that at June 30, 1998 affiliates of New
York Life owned a significant number of shares of the Fund with a market value
of $138,546,602.
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.
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 Fund. For the
six months ended June 30, 1998, these fees amounted to $7,484.
15
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
- --------------------------------------------------------------------------------
NOTE 4--Line of Credit:
- --------------------------------------------------------------------------------
The Fund and certain affiliated funds maintain a line of credit with the
custodian in order to secure a source of funds for temporary purposes to meet
unanticipated or excessive shareholder redemption requests. There was no
borrowing on this line of credit at June 30, 1998.
- --------------------------------------------------------------------------------
NOTE 5--Capital Share Transactions (in 000's):
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Institutional Institutional Institutional Institutional
Class Service Class Class Service Class
------------- ------------- ------------- -------------
Six months ended Year ended
June 30, 1998 1997
-------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold............. 123,854 45,518 383,542 90,079
Shares issued in rein-
vestment of dividends
and distributions...... 5,164 1,750 7,733 2,387
-------- ------- -------- -------
129,018 47,268 391,275 92,466
Shares redeemed......... (125,851) (24,243) (311,713) (62,902)
-------- ------- -------- -------
Net increase............ 3,167 23,025 79,562 29,564
======== ======= ======== =======
</TABLE>
16
<PAGE>
OFFICERS AND DIRECTORS
Stephen C. Roussin
Chairman 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
Richard Zuccaro
Tax Vice President
Anthony W. Polis
Treasurer
Sara L. Badler
Secretary
MANAGER
MainStay Management, Inc.
SUB-ADVISER
New York Life Insurance Company
DISTRIBUTOR
NYLIFE Distributors Inc.
TRANSFER AGENT
MainStay Shareholder Services Inc.
CUSTODIAN
The Bank of New York
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers 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>
[GRAPHIC]
- --------------------------------------------------------------------------------
[LOGO]
MAINSTAY(R)
INSTITUTIONAL
FUNDS INC.
This is a copy of a report by MainStay Institutional Funds Inc. to the Money
Market Fund shareholders. Distribution of this report to persons other than
these shareholders is authorized only when accompanied or preceded by a current
MainStay Institutional Funds Inc. prospectus. This report does not offer for
sale or solicit orders to buy any securities.
Sub-Adviser:
New York Life Insurance Company
This semiannual report is also available in Spanish. Please call 800-695-2126 to
obtain a copy.
Distributed by NYLIFE Distributors Inc., member NASD,
300 Interpace Parkway, Building A, 2nd Floor, Parsippany, NJ 07054
NYLIFE Distributors Inc. is an indirect wholly owned NEW
subsidiary of New York Life Insurance Company. YORK
LIFE [LOGO]
02-020-0698
- --------------------------------------------------------------------------------
