MAINSTAY FUNDS - Notes to Mutual Funds Financial Statements - 3-6-2001 - DOC

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MAINSTAY FUNDS - Notes to Mutual Funds Financial Statements - 3-6-2001 - DOC Powered By Docstoc

The MainStay Funds (the "Trust") was organized on January 9, 1986 as a Massachusetts business trust. The
Trust is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
management investment company and comprises twenty-five funds (collectively referred to as the "Funds").
These financial statements and notes relate only to MainStay MAP Equity Fund (the "Fund").

MainStay MAP Equity Fund commenced operations in 1970 as the Mutual Benefit Fund. It was renamed MAP-
Equity Fund on May 1, 1995. Pursuant to an Agreement and Plan of Reorganization approved by MAP-Equity
shareholders on June 3, 1999, the MAP-Equity Fund was reorganized as the MainStay MAP Equity Fund. The
acquisition was accomplished by a tax free exchange of Class I shares of MainStay MAP Equity Fund in the
amount equal to the outstanding shares of MAP-Equity Fund, effective on June 9, 1999. The financial statements
of the MainStay MAP Equity Fund reflect the historical financial results of the MAP-Equity Fund prior to the
reorganization. Prior to the reorganization, the MainStay MAP Equity Fund had not commenced operations and
had no assets or liabilities. MainStay Management LLC agreed to bear all costs related to the reorganization.

The Fund currently offers four classes of shares, Class A shares, Class B shares, Class C shares and Class I
shares. Distribution of the four classes commenced on June 9, 1999. Class A shares are offered at net asset value
per share plus an initial sales charge. No sales charge applies on investments of $1 million or more (and certain
other qualified purchases) in Class A shares, but a contingent deferred sales charge is imposed on certain
redemptions of such shares within one year of the date of purchase. Class B shares and Class C shares are
offered without an initial sales charge, although a declining contingent deferred sales charge may be imposed on
redemptions made within six years of purchase of Class B shares and within one year of purchase of Class C
shares. Class I shares are not subject to sales charge. Prior to reorganization Class I shares were subject to a
sales charge. The four classes of shares bear the same voting (except for issues that relate solely to one class),
dividend, liquidation and other rights and conditions except that Class B shares and Class C shares are subject to
higher distribution fee rates than Class A shares under a distribution plan pursuant to Rule 12b-1 under the 1940
Act. Class I shares are not subject to a distribution or service fee and may be sold to institutional investors and
other individuals, as detailed in the prospectus.

The Fund's investment objective is to seek long-term appreciation of capital. The Fund also seeks to earn
income, but this is a secondary objective.

Notes to Financial Statements


The following is a summary of significant accounting policies followed by the Fund:

VALUATION OF FUND SHARES. The net asset value per share of each class of shares is calculated on each
day the New York Stock Exchange (the "Exchange") is open for trading as of the close of regular trading on the
Exchange. The net asset value per share of each class of shares is determined by taking the assets attributable to
a class of shares, subtracting the liabilities attributable to that class, and dividing the result by the outstanding
shares of that class.

SECURITIES VALUATION. Portfolio securities of the Fund 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, at the mean between the closing bid and asked prices, (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, and (d) by appraising over-the-counter securities not quoted on the
NASDAQ system at prices supplied by the pricing agent or brokers selected by the Fund's subadvisor, if these
prices are deemed to be representative of market values at the regular close of business of the Exchange. Short-
term securities that mature in more than 60 days are valued at current market quotations. Short-term securities
that 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 certain portfolio securities that occur between the close of trading on the principal
market for such securities (foreign exchanges and over-the-counter markets) and the regular close of the
Exchange will not be reflected in the Fund's calculation of net asset value unless the Fund's subadvisor believes
that the particular event would materially affect net asset value, in which case an adjustment may be made.

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 its taxable income to the shareholders
of the Fund within the allowable time limits. Therefore, no federal income tax provision is required.

Investment income received by the Fund from foreign sources may be subject to foreign income taxes withheld at
the source.

MainStay MAP Equity Fund

DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions are recorded on
the ex-dividend date. The Fund intends to declare and pay any dividends quarterly. Income dividends and capital
gain distributions are determined in accordance with federal income tax regulations which may differ from
generally accepted accounting principles. These "book/tax differences" are either considered temporary or
permanent in nature. To the extent these differences are permanent in nature, such amounts are reclassified within
the capital accounts based on their federal tax basis treatment; temporary differences do not require
reclassification. A permanent book-tax difference of $3,480 resulted in an increase to accumulated undistributed
net realized gain on investments. In addition, a decrease of $3,480 has been made to accumulated undistributed
net investment income. These book/tax differences are due primarily to the tax treatment of income earned from
Real Estate Investment Trusts and reclassification of distributions.

SECURITY TRANSACTIONS AND INVESTMENT INCOME. The Fund records security transactions on
the trade date. Realized gains and losses on security transactions are determined using the identified cost method.
Dividend income is recognized on the ex-dividend date and interest income is accrued daily.

EXPENSES. Expenses of the Trust are allocated to the individual Funds in proportion to the net assets of the
respective Funds when the expenses are incurred except when direct allocations of expenses can be made. The
investment income and expenses (other than expenses incurred under the distribution plans) and realized and
unrealized gains and losses on investments of the Fund are allocated to separate classes of shares based upon
their relative net asset value 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.


MANAGER AND SUBADVISOR. MainStay Management, LLC (the "Manager"), an indirect wholly owned
subsidiary of New York Life Insurance Company ("New York Life"), served as the Fund's manager pursuant to
a management agreement and provided offices and conducted clerical, recordkeeping and bookkeeping services,
and kept most of the financial and accounting records required for the Fund. The Manager has delegated its
portfolio management responsibilities to Markston International, LLC (the "Subadvisor"). Under the supervision
of the Trust's Board of Trustees and the Manager, the Subadvisor is responsible for the day-to-day portfolio
management of the Fund.

The Trust, on behalf of the Fund, paid the Manager a monthly fee for services performed and the facilities
furnished at an annual rate of 0.75% of the average daily net assets of the Fund. For the year ended December
31, 2000, the Manager earned $812,821 and reimbursed the Fund $201,201. The

Notes to Financial Statements (continued)

Manager has contractually agreed to limit total annual fund operating expenses to 1.00%, 1.25%, 2.00% and
2.00% for Class I, Class A, Class B and Class C shares, respectively, through May 30, 2001, after which time
the Manager may discontinue the limitation. For a two-year period following expiration of the expense limitation,
the Manager may be entitled to reimbursement for a portion of expenses paid pursuant to the expense limitation.
At December 31, 2000, the amount of such expenses was $267,155.

Pursuant to the terms of a Sub-Advisory Agreement between the Manager and the Subadvisor, the Manager
paid the Subadvisor a monthly fee at an annual rate of the Fund's average daily net assets of 0.45% on assets up
to $250 million, 0.40% on assets from $250 million to $500 million and 0.35% on assets in excess of $500

Effective January 2, 2001, New York Life Investment Management LLC ("NYLIM"), an affiliate of MainStay
Management LLC and under the common control of New York Life, was substituted in place of MainStay
Management LLC as the Fund's investment adviser. Under the Substitution Agreement among MainStay
Management LLC, NYLIM and the Fund, NYLIM has assumed all of the interests, rights and responsibilities of
MainStay Management LLC under the Management and Sub-Advisory Agreements to which it is a party. The
terms and conditions of these agreements, including management fees paid, have not changed in any other
respect. The substitution has not resulted in any change of the advisory and other personnel servicing the Fund
and the investment process used by NYLIM is identical to that which was used by MainStay Management LLC.

DISTRIBUTION AND SERVICE FEES. The Trust, on behalf of the Fund, has a Distribution Agreement with
NYLIFE Distributors Inc. (the "Distributor"). The Fund, with respect to Class A, Class B and Class C shares,
has adopted distribution plans (the "Plans") in accordance with the provisions of Rule 12b-1 under the 1940 Act.
Pursuant to the Class A Plan, the Distributor receives a monthly fee from the Fund at an annual rate of 0.25% of
the average daily net assets of the Fund's Class A shares, which is an expense of the Class A shares of the Fund
for distribution or service activities as designated by the Distributor. Pursuant to the Class B and Class C Plans,
the Fund pays the Distributor a monthly fee, which is an expense of the Class B and Class C shares of the Fund,
at the annual rate of 0.75% of the average daily net assets of the Fund's Class B and Class C shares. The
Distribution Plans provide that the Class B and Class C shares of the Fund also incur a service fee at the annual
rate of 0.25% of the average daily net asset value of the Class B or Class C shares of the Fund. Class I shares
are not subject to a distribution or service fee.

The Plans provide that the distribution and service fees are payable to the Distributor regardless of the amounts
actually expended by the Distributor for distribution of the Fund's shares and service activities.

MainStay MAP Equity Fund

SALES CHARGES. The Fund was advised by the Distributor that the amount of sales charge retained on sales
of Class A Fund shares was $10,403 for the year ended December 31, 2000. The Fund was also advised that
the Distributor retained contingent deferred sales charges on redemption of Class A, Class B and Class C shares
of $3,999, $24,503 and $2,485, respectively, for the year ended December 31, 2000.

Company LLC, ("NYLIM Service"), an affiliate of New York Life Investment Management LLC, is the Fund's
transfer, dividend disbursing and shareholder servicing agent. NYLIM Service has entered into an agreement with
Boston Financial Data Services ("BFDS") by which BFDS will perform certain of the services for which NYLIM
Service is responsible. Transfer agent expense accrued for the year ended December 31, 2000 amounted to

TRUSTEES' FEES. Trustees, other than those affiliated with New York Life, MainStay Management or
NYLIFE Distributors, currently are paid an annual fee of $45,000, $2,000 for each Board meeting and $1,000
for each Committee meeting attended plus reimbursement for travel and out-of-pocket expenses. The Lead
Independent Trustee is also paid an annual fee of $20,000. The Trust allocates this expense in proportion to the
net assets of the respective Funds.

OTHER. Fees for the cost of legal services provided to the Fund by the Office of General Counsel of New York
Life amounted to $1,129 for the year ended December 31, 2000.

Fees for recordkeeping services provided to the Fund by the Manager amounted to $36,961 for the year ended
December 31, 2000.


During the year ended December 31, 2000, purchases and sales of securities, other than short-term securities,
were $74,383 and $42,085, respectively.


The Fund and certain affiliated funds maintain a line of credit of $375,000,000 with a syndicate of banks in order
to secure a source of funds for temporary purposes to meet unanticipated or excessive shareholder redemption
requests. The funds pay a commitment fee, at an annual rate of 0.075% of the average commitment amount,
regardless of usage, to The Bank of New York, which acts as agent to the syndicate. Such commitment fees are
allocated amongst the funds based upon net assets and other factors. Interest on any revolving credit loan is
charged based upon the Federal Funds Advances rate. There were no borrowings on the line of credit during the
year ended December 31, 2000.

Notes to Financial Statements (continued)


                                      YEAR ENDED
                                   DECEMBER 31, 2000                        YEAR ENDED DECEMBER 31, 1999
                         -------------------------------------   ------------------------------------------
                         CLASS A   CLASS B   CLASS C   CLASS I   CLASS A(a)    CLASS B(a)   CLASS C(a)   CLA
                         -------   -------   -------   -------   ----------    ----------   ----------   ---
Shares sold..........      534        998      146       265        354           437           93
Shares issued in
  reinvestment of
  dividends and
  distributions......       81        150       25       265         11           14            3
                          ----      -----      ---      ----        ---          ---           --
                           615      1,148      171       530        365          451           96
Shares redeemed......     (136)       (99)     (23)     (406)       (35)         (11)          (1)
                          ----      -----      ---      ----        ---          ---           --
Net increase
  (decrease).........      479      1,049      148       124        330          440           95
                          ====      =====      ===      ====        ===          ===           ==

                 (a)    First offered on June 9, 1999.
                 (b)    As a result of the reorganization of MAP-Equity Fund into
                        MainStay MAP Equity Fund, effective June 9, 1999,
                        shareholders of MAP-Equity Fund received Class I shares of
                        MainStay MAP Equity Fund.

Report of Independent Accountants

To the Board of Trustees of The MainStay Funds and Shareholders of The MainStay MAP Equity Fund

In our opinion, the accompanying statement of assets and liabilities, including the portfolio of investments, and the
related statements of operations and of changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of MainStay MAP Equity Fund (one of the portfolios constituting The
MainStay Funds, hereafter referred to as the "Fund") at December 31, 2000, the results of its operations for the
year then ended, and the changes in its net assets for each of the two years in the period then ended and the
financial highlights for each of the periods presented, in conformity with accounting principles generally accepted
in the United States of America. These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion
on these financial statements based on our audits. We conducted our audits of these financial statements in
accordance with auditing standards generally accepted in the United States of America, which require that we
plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We believe that our audits, which
included confirmation of securities at December 31, 2000 by correspondence with the custodian and brokers,
provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York
February 19, 2001


MainStay Select 20 Equity Fund
MainStay Small Cap Growth Fund
MainStay Small Cap Value Fund
MainStay Mid Cap Growth Fund
MainStay Capital Appreciation Fund
MainStay Blue Chip Growth Fund
MainStay Equity Index Fund

MainStay Growth Opportunities Fund
MainStay Equity Income Fund
MainStay MAP Equity Fund
MainStay Research Value Fund
MainStay Value Fund
MainStay Strategic Value Fund
MainStay Convertible Fund
MainStay Total Return Fund

MainStay High Yield Corporate Bond Fund
MainStay Strategic Income Fund
MainStay Government Fund
MainStay California Tax Free Fund
MainStay New York Tax Free Fund
MainStay Tax Free Bond Fund
MainStay Money Market Fund

MainStay International Equity Fund
MainStay Global High Yield Fund
MainStay International Bond Fund


Parsippany, New Jersey


New York, New York

New York, New York

Rye, New York

New York, New York

White Plains, New York
(1) An affiliate of New York Life Investment Management LLC.

Contact your investment professional for a free prospectus containing more information, including advisory fees,
risks, other expenses, and share classes. Please read the prospectus carefully before you invest or send money.

Officers and Trustees*

                         RICHARD M. KERNAN, JR.        Chairman and Trustee
                         STEPHEN C. ROUSSIN            President, Chief Executive
                                                       Officer, and Trustee
                         EDWARD J. HOGAN               Trustee
                         HARRY G. HOHN                 Trustee
                         NANCY MAGINNES KISSINGER      Trustee
                         TERRY L. LIERMAN              Trustee
                         JOHN B. MCGUCKIAN             Trustee
                         DONALD E. NICKELSON           Trustee
                         DONALD K. ROSS                Trustee
                         RICHARD S. TRUTANIC           Trustee
                         GARY E. WENDLANDT             Trustee
                         JEFFERSON C. BOYCE            Senior Vice President
                         JOHN A. FLANAGAN              Chief Financial Officer
                                                       and Secretary
                         RICHARD W. ZUCCARO            Tax Vice President

Legal Counsel

Independent Accountants
* As of December 31, 2000.


MainStay is a division of New York Life Investment Management LLC, the investment advisor to The MainStay

Not FDIC insured. No bank guarantee. May lose value.

300 Interpace Parkway, Building A
Parsippany, New Jersey 07054
Distributor of the MainStay Funds

This report may only be distributed to Fund shareholders or when accompanied or preceded by a current Fund

(C)2001 NYLIFE Distributors Inc. All rights reserved. MSME11-02/01


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MAP Equity Fund

                                           ANNUAL REPORT

                                          DECEMBER 31, 2000

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