MAINSTAY FUNDS Notes to Mutual Funds Financial Statements 3 7 2003

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MAINSTAY FUNDS Notes to Mutual Funds Financial Statements 3 7 2003 Powered By Docstoc
					Notes to Financial Statements

debt securities. These securities pay a premium--a high interest rate or yield--because of the increased risk of
loss. These securities can also be subject to greater price volatility.

NOTE 2--SIGNIFICANT ACCOUNTING POLICIES:

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 of the 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 of the Fund 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 number of outstanding shares of that class.

SECURITIES VALUATION. Portfolio securities of the Fund are stated at value determined (a) by appraising
debt securities at prices supplied by a pricing agent selected by the Fund's Manager or Subadvisor, whose prices
reflect broker/dealer supplied valuations and electronic data processing techniques if those prices are deemed by
the Fund's Manager or Subadvisor to be representative of market values at the regular close of business of the
Exchange, (b) by appraising options and futures contracts at the last posted settlement price on the market where
any such options or futures are principally traded, and (c) by appraising all other securities and other assets,
including debt securities for which prices are supplied by a pricing agent or brokers but are not deemed by the
Fund's Manager or Subadvisor 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 Trust's Board of Trustees.
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. Foreign currency forward
contracts are valued at their fair market values determined on the basis of the mean between the last current bid
and asked prices based on dealer or exchange quotations.

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 Fund's calculation of net asset values unless the Fund's Manager
or Subadvisor deems that the particular event would materially affect the Fund's net asset value, in which case an
adjustment may be made.

FOREIGN CURRENCY FORWARD CONTRACTS. A foreign currency forward 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
20

MainStay International Bond Fund

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.
The Fund may enter into foreign currency forward contracts primarily to hedge its foreign currency denominated
investments and receivables and payables against adverse movements in future foreign exchange rates or to try to
enhance the Fund's returns.

The use of foreign currency 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 the
Fund's involvement in these financial instruments. Risks arise from the possible movements in the foreign exchange
rates underlying these instruments. The unrealized appreciation on forward contracts reflects the Fund's exposure
at year end to credit loss in the event of a counterparty's failure to perform its obligations.

Foreign currency forward contracts open at December 31, 2002:

                                                                CONTRACT             CONTRACT           UNREALIZED
                                                                 AMOUNT               AMOUNT          APPRECIATION/
                                                                  SOLD               PURCHASED        (DEPRECIATION)
                                                             ---------------       -------------      --------------
Foreign Currency Sale Contracts
Australian Dollar vs. U.S. Dollar, expiring
  1/23/03.........................................           AD       500,000      $     282,000        $     925
Euro vs. U.S. Dollar, expiring 1/15/03............           E        583,118      $     576,704          (34,465)
Euro vs. U.S. Dollar, expiring 2/28/03............           E        200,000      $     199,380           (9,868)
Euro vs. U.S. Dollar, expiring 3/31/03............           E      4,599,721      $   4,513,705         (292,495)
Japanese Yen vs. U.S. Dollar, expiring 3/24/03....           Y    115,906,000      $     948,494          (31,439)
Pound Sterling vs. U.S. Dollar, expiring
  1/15/03.........................................           L     1,059,000       $   1,672,161            (30,848)
Swedish Krona vs. Euro, expiring 1/15/03..........           SK    3,679,000       E     407,284              4,160
Swedish Krona vs. Euro, expiring 1/8/03...........           SK    3,630,050       E     399,323              1,360
                                                                CONTRACT             CONTRACT
                                                                 AMOUNT               AMOUNT
                                                                PURCHASED              SOLD
                                                             ---------------       -------------
Foreign Currency Buy Contracts
Euro vs. U.S. Dollar, expiring 1/9/03.............           E         530,000     $      524,117          31,525
                                                                                                        ---------
Net unrealized depreciation on foreign currency forward contracts..................                     $(361,145)
                                                                                                        =========




PURCHASED AND WRITTEN OPTIONS. The Fund may write covered call and put options on its portfolio
securities or foreign currencies. Premiums are received and are recorded as liabilities. The liabilities are
subsequently adjusted to reflect the current value of the options written. Premiums received from writing options
which expire are treated as realized gains. Premiums received from writing options which are exercised or are
cancelled in closing purchase transactions are added to the proceeds or netted against the amount paid on the
transaction to determine the realized gain or loss. By writing a
                                                         21

Notes to Financial Statements (continued)

covered call option, a Fund foregoes in exchange for the premium the opportunity for capital appreciation above
the exercise price should the market price of the underlying security or foreign currency increase. By writing a
covered put option, a Fund, in exchange for the premium, accepts the risk of a decline in the market value of the
underlying security or foreign currency below the exercise price.

The Fund may purchase call and put options on its portfolio securities or foreign currencies. The Fund may
purchase call options to protect against an increase in the price of the security or foreign currency it anticipates
purchasing or to seek to enhance returns. The Fund may purchase put options on its securities or foreign
currencies to protect against a decline in the value of the security or foreign currency or to close out covered
written put positions. Risks may arise from an imperfect correlation between the change in market value of the
securities or foreign currencies held by the Fund and the prices of options relating to the securities or foreign
currencies purchased or sold by the Fund and from the possible lack of a liquid secondary market for an option.
The maximum exposure to loss for any purchased option is limited to the premium initially paid for the option.

RESTRICTED SECURITIES. A restricted security is a security which has been purchased through a private
offering and cannot be resold to the general public without prior registration under the Securities Act of 1933 (the
"1933 Act"). The Fund does not have the right to demand that such securities be registered. Disposal of these
securities may involve time-consuming negotiations and expense, and prompt sale at an acceptable price may be
difficult.

Restricted security held at December 31, 2002:

                                                                                                                PERCENT
                                                     DATE OF         PRINCIPAL                    12/31/02         OF
                SECURITY                           ACQUISITION        AMOUNT           COST        VALUE       NET ASSETS
                --------                           -----------      -----------      --------     --------     ----------
Republic of Algeria
  Term Loan, Tranche 3
  Series YEN
  0.9375%, due 3/4/10...................             2/9/01         Y27,631,580      $177,831     $200,246         0.8%
                                                                                     ========     ========         ===




Y--Japanese Yen

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 or excise tax provision is required.

Investment income received by the Fund from foreign sources may be subject to foreign income taxes withheld at
the source.
22

MainStay International Bond Fund

DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions are recorded on
the ex-dividend date. The Fund intends to declare and pay dividends monthly and capital gain distributions, if any,
are declared and paid annually. 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.

The following table discloses the current year reclassifications between accumulated undistributed net investment
income, accumulated net realized loss on investments, accumulated undistributed net realized loss on foreign
currency transactions and additional paid-in capital arising from permanent differences; net assets at December
31, 2002, are not affected.

   ACCUMULATED               ACCUMULATED
  UNDISTRIBUTED              NET REALIZED                     ACCUMULATED
  NET INVESTMENT               LOSS ON               NET REALIZED LOSS ON FOREIGN                   ADDITIONAL
      INCOME                 INVESTMENTS                 CURRENCY TRANSACTIONS                    PAID-IN CAPITAL
  --------------             ------------            ----------------------------                 ---------------
    $(386,174)                 $34,269                         $362,948                              $(11,043)




The reclassifications for the Fund are primarily due to foreign currency gain
(loss), premium amortization adjustments, net operating losses and reclassification of distributions.

The tax character of distributions paid during the years ended December 31, 2002 and December 31, 2001 was
as follows:

                                                                       2002                2001
                                                                       ----                ----
                 Distributions paid from:
                   Ordinary Income.......................           $ 28,176            $       --
                   Return of Capital.....................            714,038             1,362,886
                                                                    --------            ----------
                                                                    $742,214            $1,362,886
                                                                    ========            ==========




SECURITY TRANSACTIONS AND INVESTMENT INCOME. The Fund records security transactions on
the trade date. Realized gains and losses on security transactions are determined using the identified cost method.
Interest income is accrued daily. Discounts and premiums on securities, other than short-term securities,
purchased for the Fund are accreted and amortized, respectively, 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. Discounts and
premiums on short-term securities are accreted and amortized, respectively, on the straight line method.
                                                           23

Notes to Financial Statements (continued)

EXPENSES. Expenses of the Trust are allocated to the individual Funds in proportion to the net assets of the
respective Funds when the expenses are incurred except where direct allocations of expenses can be made.

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 assets on the date the income is earned or expenses and realized and unrealized gains and losses
are incurred.

FOREIGN CURRENCY TRANSACTIONS. The books and records of the Fund 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) purchases and sales of investment securities, 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 year. The
realized and unrealized changes in net assets arising from fluctuations in exchange rates and market prices of
securities are not separately presented. Accordingly, gains and losses from foreign currency transactions are
included in the reported net realized gain (loss) on investment transactions.

Net realized gain (loss) on foreign currency transactions represents net gains and losses on foreign currency
forward contracts, net currency gains and losses realized as a result of differences between the amounts of
securities sale proceeds or purchase cost, dividends, interest and withholding taxes as recorded on the Fund's
books, and the U.S. dollar equivalent amount actually received or paid. Net currency gains or losses from valuing
foreign currency denominated assets and liabilities, other than investments, at year end exchange rates are
reflected in unrealized foreign exchange gains or losses.
24

MainStay International Bond Fund

Foreign currency held at December 31, 2002:

                  CURRENCY                                              COST                        VALUE
     ----------------------------------                               --------                     --------
     Australian Dollar    A$    35,179                                $ 19,809                     $ 19,809
     Canadian Dollar      C$       960                                     619                          608
     Euro                 E    562,154                                 567,024                      589,924
     New Zealand Dollar   NZ    29,271                                  14,570                       15,312
     Pound Sterling       L     23,314                                  36,713                       37,534
     Swedish Krona        SK       463                                      48                           53
                                                                      --------                     --------
                                                                      $638,783                     $663,240
                                                                      ========                     ========




USE OF ESTIMATES. The preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America 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.

NOTE 3--FEES AND RELATED PARTY TRANSACTIONS:

MANAGER AND SUBADVISOR. New York Life Investment Management LLC ("NYLIM" or the
"Manager"), an indirect wholly-owned subsidiary of New York Life Insurance Company ("New York Life"),
serves as the Fund's manager. The Manager provides offices, conducts clerical, record-keeping and
bookkeeping services, and keeps most of the financial and accounting records required for the Fund. The
Manager also pays the salaries and expenses of all personnel affiliated with the Fund and all the operational
expenses that are not the responsibility of the Fund. The Manager has delegated its portfolio management
responsibilities to MacKay Shields LLC (the "Subadvisor"), a registered investment advisor and indirect wholly-
owned subsidiary of New York Life. 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 0.70% of the Fund's average daily net assets. Through March 11, 2002, the
Manager had agreed to waive a portion of its fee, 0.30% of the Fund's average daily net assets, until such time as
the Fund reached $50 million in net assets. Effective March 12, 2002, the Manager voluntarily agreed to
reimburse the expenses of the Fund to the extent that operating expenses would exceed on an annualized basis
1.70%, 2.45% and 2.45% of the average daily net assets of the Class A, Class B and Class C shares,
respectively. For the year ended December 31, 2002, the Manager earned from the Fund $137,841 and waived
$105,663 of its fee.

Pursuant to the terms of a Sub-Advisory Agreement between NYLIM and MacKay-Shields, the Manager paid
the Subadvisor a monthly fee at an annual rate of 0.45% of the average daily net assets of the
                                                        25

Notes to Financial Statements (continued)

Fund. To the extent that the Manager has agreed to reimburse Fund expenses, the Subadvisor has voluntarily
agreed to do so proportionately.

DISTRIBUTION AND SERVICE FEES. The Trust, on behalf of the Fund, has a Distribution Agreement with
NYLIFE Distributors Inc. (the "Distributor"), an indirect wholly-owned subsidiary of New York Life. The Fund,
with respect to each class of 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.

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.

SALES CHARGES. The Fund was advised by the Distributor that the amount of sales charges retained on sales
of Class A shares was $168 for the year ended December 31, 2002. The Fund was also advised that the
Distributor retained contingent deferred sales charges on redemptions of Class A, Class B and Class C shares of
$182, $10,713 and $195, respectively, for the year ended December 31, 2002.

TRANSFER, DIVIDEND DISBURSING AND SHAREHOLDER SERVICING AGENT. NYLIM Service
Company LLC, ("NYLIM Service"), an affiliate of NYLIM, is the Fund's transfer, dividend disbursing and
shareholder servicing agent. NYLIM Service has entered into an agreement with Boston Financial Data Services
("BFDS") pursuant to which BFDS will perform certain of the services for which NYLIM Service is responsible.
Transfer agent expense accrued for the year ended December 31, 2002 amounted to $127,247.

TRUSTEES FEES. Trustees, other than those currently affiliated with NYLIM, are paid an annual fee of
$45,000, $2,000 for each Board meeting, $1,000 for each Committee meeting and $500 for each Valuation
Subcommittee telephonic meeting attended plus reimbursement for travel and out-of-pocket expenses. The Lead
Non-Interested 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.

CAPITAL. At December 31, 2002, NYLIFE Distributors held shares of Class A with net asset value of
$6,651,818 which represents 58.6% of the Class A net assets at year end.
26

MainStay International Bond Fund

OTHER. Fees for the cost of legal services, included in Professional fees as shown in the Statement of
Operations, provided to the Fund by the Office of General Counsel of NYLIM amounted to $403 for the year
ended December 31, 2002.

The Fund pays the Manager a monthly fee for recordkeeping services provided under the Accounting Agreement
at the annual rate of 1/20 of 1% for the first $20 million of average monthly net assets, 1/30 of 1% of the next
$80 million of average monthly net assets and 1/100 of 1% of any amount in excess of $100 million of average
monthly net assets. Fees for recordkeeping services provided to the Fund by the Manager amounted to $12,000
for the year ended December 31, 2002.

NOTE 4--FEDERAL INCOME TAX:

As of December 31, 2002, the components of accumulated gain on a tax basis were as follows:

                         ACCUMULATED CAPITAL         UNREALIZED       TOTAL ACCUMULATED
                          AND OTHER LOSSES          APPRECIATION            GAIN
                         -------------------       --------------     -----------------
                            $(1,578,588)             $2,475,180           $896,592




The difference between book-basis and tax-basis unrealized appreciation is primarily due to wash sales deferrals
and mark-to-market of foreign currency forward transactions.

At December 31, 2002, for federal income tax purposes, capital loss carryforwards of $1,578,588 were
available as shown in the table below, to the extent provided by the regulations to offset future realized gains of
the Fund through the years indicated. To the extent that these loss carryforwards are used to offset future capital
gains, it is probable that the capital gains so offset will not be distributed to shareholders.

                                        CAPITAL LOSS                                       AMOUNT
                                     AVAILABLE THROUGH                                    (000'S)
                ------------------------------------------------------------              --------
                     2007...................................................               $ 392
                     2008...................................................                  849
                     2009...................................................                  338
                                                                                           ------
                                                                                           $1,579
                                                                                           ======




In addition, the Fund intends to elect to treat for federal income tax purposes $311,186 of qualifying foreign
exchange losses that arose after October 31, 2002 as if they arose on January 1, 2003.

The Fund utilized $11,043 of capital loss carryforward during the year ended December 31, 2002.

NOTE 5--PURCHASES AND SALES OF SECURITIES (IN 000'S):

During the year ended December 31, 2002, purchases and sales of U.S. Government securities were $802 and
$840, respectively. Purchases and sales of securities, other than U.S. Government securities and short-term
securities, were $12,411 and $9,435, respectively.
                                                       27

Notes to Financial Statements (continued)

NOTE 6--LINE OF CREDIT:

The Fund and certain affiliated funds maintain a line of credit of $160,000,000 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 .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 among 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, 2002.

NOTE 7--CAPITAL SHARE TRANSACTIONS (IN 000'S):

                                                                YEAR ENDED                            YEAR ENDED
                                                             DECEMBER 31, 2002                     DECEMBER 31, 2001
                                                       ---------------------------            -------------------------
                                                       CLASS A    CLASS B   CLASS C           CLASS A   CLASS B   CLASS
                                                       -------    -------   -------           -------   -------   -----
Shares sold..................................            731        518        50                910       96        30
Shares issued in reinvestment of dividends
  and distributions..........................              17         36           1              50         61        2
                                                         ----       ----         ---          ------       ----      ---
                                                          748        554          51             960        157       32
Shares redeemed..............................            (591)      (212)        (16)         (1,760)      (241)     (28
                                                         ----       ----         ---          ------       ----      ---
Net increase (decrease)......................             157        342          35            (800)       (84)       4
                                                         ====       ====         ===          ======       ====      ===
28

Report of Independent Accountants

To the Board of Trustees of The MainStay Funds and Shareholders of MainStay International Bond 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 International Bond Fund (one of the funds constituting The
MainStay Funds, hereafter referred to as the "Fund") at December 31, 2002, the results of its operations for the
year then ended, 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, 2002 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, 2003
                                                          29

Trustees and Officers

Following are the Trustees and Officers of The MainStay Funds, along with a brief description of their principal
occupations during the past five years.

Each Trustee serves until his/her successor is elected and qualified or until his/her resignation, death, or removal.
Officers serve a term of one year and are elected annually by the Trustees.

The business address of each Trustee and Officer is 51 Madison Avenue, New York, New York 10010.

                                                                                     NUMBER OF
                                                                                     PORTFOLIOS
                           POSITION(S)                                                IN FUND
                          HELD WITH FUND                                              COMPLEX
        NAME AND          AND LENGTH OF            PRINCIPAL OCCUPATION(S)            OVERSEEN    OTHER D
     DATE OF BIRTH         TIME SERVED              DURING PAST FIVE YEARS           BY TRUSTEE     HELD
---------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEES(1)
---------------------------------------------------------------------------------------------------------
Gary E. Wendlandt         Chairman since   Chief Executive Officer, Chairman, and         43
10/8/50                   January 1,       Manager, New York Life Investment
                          2002, and        Management LLC (including predecessor
                          Trustee since    advisory organizations) and New York
                          2000             Life Investment Management Holdings LLC;
                                           Executive Vice President, New York Life
                                           Insurance Company; Director, NYLIFE
                                           Distributors, Inc.; Vice Chairman and
                                           Manager, McMorgan & Company LLC;
                                           Manager, MacKay Shields LLC; Executive
                                           Vice President, New York Life Insurance
                                           and Annuity Corporation; Chairman, Chief
                                           Executive Officer, and Director,
                                           MainStay VP Series Fund, Inc. (19
                                           portfolios); Executive Vice President
                                           and Chief Investment Officer, MassMutual
                                           Life Insurance Company (1993 to 1999).
---------------------------------------------------------------------------------------------------------
Stephen C. Roussin        President,       President, Chief Operating Officer, and        45
7/12/63                   Chief            Manager, New York Life Investment
                          Executive        Management LLC (including predecessor
                          Officer, and     advisory organizations) and New York
                          Trustee since    Life Investment Management Holdings LLC;
                          1997             Senior Vice President, New York Life
                                           Insurance Company; Director, NYLIFE
                                           Securities, Inc.; Chairman and Director,
                                           NYLIFE Distributors Inc.; Manager,
                                           McMorgan & Company LLC; Chairman,
                                           President, and Trustee, Eclipse Funds,
                                           (4 portfolios); Chairman, President and
                                           Director, Eclipse Funds Inc. (14
                                           portfolios); Chairman and Trustee, New
                                           York Life Investment Management
                                           Institutional Funds (3 portfolios);
                                           Senior Vice President, Smith Barney
                                           (1994 to 1997).
---------------------------------------------------------------------------------------------------------
1 Certain Trustees are considered to be interested persons of the Trust within the meaning of the 1940 Ac
  their affiliation with New York Life Insurance Company, New York Life Investment Management LLC, MacKay
  LLC, McMorgan & Company LLC, Eclipse Funds, Eclipse Funds Inc., MainStay VP Series Fund, Inc., New York
  Investment Management Institutional Funds, NYLIFE Securities Inc., and/or NYLIFE Distributors Inc., as
  detail in the column "Principal Occupation(s) During Past Five Years."




INFORMATION ON THIS PAGE HAS NOT BEEN AUDITED.
30

                                                                                     NUMBER OF
                                                                                     PORTFOLIOS
                           POSITION(S)                                                IN FUND
                          HELD WITH FUND                                              COMPLEX
         NAME AND         AND LENGTH OF            PRINCIPAL OCCUPATION(S)            OVERSEEN    OTHER D
     DATE OF BIRTH         TIME SERVED              DURING PAST FIVE YEARS           BY TRUSTEE     HELD
---------------------------------------------------------------------------------------------------------
Harry G. Hohn             Trustee since    Retired. Chairman and Chief Executive          24      Directo
3/1/32                    1996             Officer, New York Life Insurance Company               Corpora
                                           (1990 to 1997); Chairman of the Board,
                                           Life Insurance Council of New York (1996
                                           to 1997); Director, Million Dollar
                                           Roundtable Foundation (1996 to 1997).
---------------------------------------------------------------------------------------------------------
Donald K. Ross            Trustee since    Retired. Chairman, Chief Executive             24      Manager
7/1/25                    1991             Officer, and President, New York Life                  Shields
                                           Insurance Company (1981 to 1990).
---------------------------------------------------------------------------------------------------------
NON-INTERESTED TRUSTEES
---------------------------------------------------------------------------------------------------------
Charlynn Goins            Trustee since    Retired. Consultant to U.S. Commerce           24
9/15/42                   2001             Department, Washington, DC (1998 to
                                           2000); Senior Vice President and
                                           Director of International Marketing,
                                           Prudential Mutual Funds and Annuities
                                           (1990 to 1997).
---------------------------------------------------------------------------------------------------------
Edward J. Hogan           Trustee since    Rear Admiral U.S. Navy (Retired);              24
8/17/32                   1996             Independent Management Consultant.
---------------------------------------------------------------------------------------------------------
Terry L. Lierman          Trustee since    Partner, Health Ventures LLC; Vice             24
1/4/48                    1991             Chair, Employee Health Programs;
                                           Partner, TheraCom (1994 to 2001);
                                           President, Capitol Associates, Inc.
                                           (1984 to 2001).
---------------------------------------------------------------------------------------------------------
John B. McGuckian         Trustee since    Chairman, Ulster Television Plc; Pro           24      Chairma
11/13/39                  1997             Chancellor, Queen's University (1985 to                Norther
                                           2001).                                                 Plc; No
                                                                                                  Directo
                                                                                                  Irish B
                                                                                                  Non-Exe
                                                                                                  Directo
                                                                                                  Plc (en
                                                                                                  Non-Exe
                                                                                                  Directo
                                                                                                  Contine
                                                                                                  Plc (sh
---------------------------------------------------------------------------------------------------------
Donald E. Nickelson       Trustee since    Retired. Vice Chairman, Harbour Group          24      Directo
12/9/32                   1994 and Lead    Industries, Inc. (leveraged buyout                     Carey &
                          Non-             firm).
                          Interested
                          Trustee
---------------------------------------------------------------------------------------------------------
Richard S. Trutanic       Trustee since    Managing Director, The Carlyle Group           24
2/13/52                   1994             (private investment firm); Chairman and
                                           Chief Executive Officer, Somerset Group
                                           (financial advisory firm); Senior
                                           Managing Director, Groupe Arnault
                                           (private investment firm) (1999 to
                                           2001).
---------------------------------------------------------------------------------------------------------




INFORMATION ON THIS PAGE HAS NOT BEEN AUDITED.
                                               31

                                                                                     NUMBER OF
                                                                                     PORTFOLIOS
                           POSITION(S)                                                IN FUND
                          HELD WITH FUND                                              COMPLEX
         NAME AND         AND LENGTH OF            PRINCIPAL OCCUPATION(S)            OVERSEEN    OTHER D
     DATE OF BIRTH         TIME SERVED              DURING PAST FIVE YEARS           BY TRUSTEE     HELD
---------------------------------------------------------------------------------------------------------
OFFICERS WHO ARE NOT TRUSTEES
---------------------------------------------------------------------------------------------------------
Jefferson C. Boyce        Senior Vice      Senior Managing Director, New York Life       N/A
9/17/57                   President        Investment Management LLC (including
                          since 1995       predecessor advisory organizations);
                                           Senior Vice President, New York Life
                                           Insurance Company; Senior Vice
                                           President, Eclipse Funds and Eclipse
                                           Funds Inc.; Director, NYLIFE
                                           Distributors, Inc.
---------------------------------------------------------------------------------------------------------
Patrick J. Farrell        Chief            Managing Director, New York Life              N/A
9/27/59                   Financial and    Investment Management LLC (including
                          Accounting       predecessor advisory organizations);
                          Officer,         Treasurer, Chief Financial and
                          Treasurer, and   Accounting Officer, Eclipse Funds Inc.,
                          Vice President   Eclipse Funds, MainStay VP Series Fund,
                          since 2001       Inc., and New York Life Investment
                                           Management Institutional Funds; Chief
                                           Financial Officer and Assistant
                                           Treasurer, McMorgan Funds.
---------------------------------------------------------------------------------------------------------
Robert A. Anselmi         Secretary        Senior Managing Director, General             N/A
10/19/46                  since 2001       Counsel, and Secretary, New York Life
                                           Investment Management LLC (including
                                           predecessor advisory organizations);
                                           Secretary, New York Life Investment
                                           Management Holdings LLC; Senior Vice
                                           President, New York Life Insurance
                                           Company; Vice President and Secretary,
                                           McMorgan & Company LLC; Secretary,
                                           NYLIFE Distributors, Inc.; Secretary,
                                           MainStay VP Series Fund, Inc., Eclipse
                                           Funds Inc., Eclipse Funds and New York
                                           Life Investment Management Institutional
                                           Funds; Managing Director and Senior
                                           Counsel, Lehman Brothers Inc., (October
                                           1998 to December 1999); General Counsel
                                           and Managing Director, JP Morgan
                                           Investment Management Inc. (1986 to
                                           September 1998).
---------------------------------------------------------------------------------------------------------
Richard W. Zuccaro        Tax Vice         Vice President, New York Life Insurance       N/A
12/12/49                  President        Company; Vice President, New York Life
                          since 1991       Insurance and Annuity Corporation,
                                           NYLIFE Insurance Company of Arizona,
                                           NYLIFE LLC, NYLIFE Securities Inc., and
                                           NYLIFE Distributors Inc.; Tax Vice
                                           President, New York Life International,
                                           LLC; Tax Vice President, Eclipse Funds,
                                           Eclipse Funds Inc., MainStay VP Series
                                           Fund, Inc., and New York Life Investment
                                           Management Institutional Funds.
---------------------------------------------------------------------------------------------------------




INFORMATION ON THIS PAGE HAS NOT BEEN AUDITED.
32

THE MAINSTAY FUNDS

EQUITY FUNDS
MainStay Select 20 Equity Fund
MainStay Small Cap Growth Fund
MainStay Small Cap Value Fund(1)
MainStay Mid Cap Growth Fund
MainStay Capital Appreciation Fund
MainStay Blue Chip Growth Fund
MainStay Equity Index Fund(2)
MainStay U.S. Large Cap Equity Fund

EQUITY & INCOME FUNDS
MainStay Growth Opportunities Fund
MainStay Equity Income Fund
MainStay MAP Fund
MainStay Research Value Fund
MainStay Value Fund
MainStay Strategic Value Fund
MainStay Convertible Fund
MainStay Total Return Fund

INCOME FUNDS
MainStay High Yield Corporate Bond Fund
MainStay Strategic Income Fund
MainStay Government Fund
MainStay Tax Free Bond Fund
MainStay Money Market Fund

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

INVESTMENT ADVISOR

NEW YORK LIFE INVESTMENT MANAGEMENT LLC
Parsippany, New Jersey

INVESTMENT SUBADVISORS

MACKAY SHIELDS LLC(3)
New York, New York

DALTON, GREINER, HARTMAN, MAHER & CO.
New York, New York

FUND ASSET MANAGEMENT, L.P.
d/b/a Mercury Advisors
Plainsboro, New Jersey

GABELLI ASSET MANAGEMENT COMPANY
Rye, New York

JENNISON ASSOCIATES LLC
New York, New York
MARKSTON INTERNATIONAL, LLC
White Plains, New York

MCMORGAN & COMPANY LLC(3)
San Francisco, California


1 Closed to new investors as of December 1, 2001. 2 Closed to new purchases as of January 1, 2002. 3 An
affiliate of New York Life Investment Management LLC.
This page intentionally left blank
This page intentionally left blank
                           [ARROW GRAPHIC] THE MAINSTAY(R) FUNDS

Trustees and Officers(1)

                          GARY E. WENDLANDT            Chairman and Trustee
                          STEPHEN C. ROUSSIN           President, Chief Executive
                                                       Officer, and Trustee
                          CHARLYNN GOINS               Trustee
                          EDWARD J. HOGAN              Trustee
                          HARRY G. HOHN                Trustee
                          TERRY L. LIERMAN             Trustee
                          JOHN B. MCGUCKIAN            Trustee
                          DONALD E. NICKELSON          Trustee
                          DONALD K. ROSS               Trustee
                          RICHARD S. TRUTANIC          Trustee
                          JEFFERSON C. BOYCE           Senior Vice President
                          PATRICK J. FARRELL           Chief Financial and
                                                       Accounting Officer,
                                                       Treasurer, and
                                                       Vice President
                          ROBERT A. ANSELMI            Secretary
                          RICHARD W. ZUCCARO           Tax Vice President




DECHERT
Legal Counsel

PRICEWATERHOUSECOOPERS LLP
Independent Accountants

1 As of December 31, 2002.

[MAINSTAY NEW YORK LIFE INVESTMENT MANAGEMENT LLC LOGO]

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


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

NYLIFE DISTRIBUTORS INC.
NYLIM Center
169 Lackawanna Avenue
Parsippany, New Jersey 07054

www.mainstayfunds.com

This report may only be distributed when preceded or accompanied by a current Fund prospectus.

(C)2003 NYLIFE Distributors Inc. All rights reserved. MSIB11- 02/03

                                                    09

[RECYCLE LOGO]

MainStay(R)
International Bond Fund

                                           ANNUAL REPORT

                                          DECEMBER 31, 2002
[MAINSTAY NEW YORK LIFE INVESTMENT MANAGEMENT LLC LOGO]
                Table of Contents

President's Letter                              3
$10,000 Invested in MainStay Government Fund
versus Lehman Brothers(R) Government Bond
Index and Inflation--Class A, Class B, and
Class C Shares                                  4
Portfolio Management Discussion and Analysis    5
Year-by-Year Performance                        6
Returns and Lipper Rankings as of 12/31/02     10
Portfolio of Investments                       12
Financial Statements                           15
Notes to Financial Statements                  20
Report of Independent Accountants              27
Trustees and Officers                          28
The MainStay(R) Funds                          31
This page intentionally left blank

                                     2
President's Letter

In many respects, 2002 was a difficult year for investors. From the start, geopolitical tensions, homeland security
concerns, corporate accounting scandals, and rising unemployment all contributed to market uncertainty. Early
hopes for a sustained economic recovery eventually gave way to more realistic expectations, and stock prices fell
to progressive lows in August and October. When all was said and done, the U.S. stock market recorded its
third consecutive annual decline--something investors had not seen in more than 60 years. International stocks
were also weak, with most developed foreign markets providing double-digit negative returns in U.S. dollar
terms.

Weakness in the equity markets increased demand for bonds--both domestic and foreign--as investors sought a
potentially "safer haven" for their assets. In the absence of a 30-year U.S. Treasury auction, longer-term Treasury
bonds were particularly strong throughout the year. Investment-grade corporate debt also provided impressive
returns, but lower-rated issues suffered from continuing credit-quality concerns.

The economy provided mixed signals, with weak business investment and relatively strong consumer spending
throughout much of the year. Low interest rates stimulated the housing market and contributed to high levels of
mortgage refinancing. Gross domestic product continued to advance, surging ahead in the third quarter of 2002,
but growing at a slower pace in the fourth quarter.

Regardless of how the markets or the economy may move, each MainStay Fund adheres to a disciplined
investment process suited to its individual investment objective. We believe that in challenging markets, consistent
application of sound investment principles makes it easier for our shareholders to understand performance and
make appropriate portfolio adjustments.

The report that follows explains the market forces and management decisions that affected your MainStay Fund
during 2002. Your registered representative can help you with any questions you may have about this report or
your MainStay investments. As you look to the future, we hope you will remain optimistic and focused on the
potential benefits of long-term investing.

Sincerely,

                                            /s/ STEPHEN C. ROUSSIN
                                            Stephen C. Roussin
                                            January 2003




                                                         3
$10,000 Invested in MainStay Govern-
ment Fund versus Lehman Brothers(R)
Government Bond Index and Inflation

CLASS A SHARES Total Returns: 1 Year 4.81%, 5 Years 5.65%, 10 Years 5.78%

                                                             MAINSTAY GOVERNMENT                 LEHMAN BROTHERS
                                                                    FUND                    GOVERNMENT BOND INDEX1
                                                             -------------------            ----------------------
12/92                                                        $     9,550.00                    $     10,000.00
12/93                                                             10,111.00                          11,064.00
12/94                                                              9,823.00                          10,690.00
12/95                                                             11,432.00                          12,651.00
12/96                                                             11,657.00                          13,001.00
12/97                                                             12,721.00                          14,246.00
12/98                                                             13,779.00                          15,649.00
12/99                                                             13,391.00                          15,298.00
12/00                                                             15,024.00                          17,324.00
12/01                                                             15,976.00                          18,578.00
12/02                                                             17,534.00                          20,714.00




CLASS B AND CLASS C SHARES
Class B Total Returns: 1 Year 3.94%, 5 Years 5.53%, 10 Years 5.68% Class C Total Returns: 1 Year 7.94%,
5 Years 5.85%, 10 Years 5.68%

                                                             MAINSTAY GOVERNMENT                 LEHMAN BROTHERS
                                                                    FUND                    GOVERNMENT BOND INDEX1
                                                             -------------------            ----------------------
12/92                                                        $    10,000.00                    $     10,000.00
12/93                                                             10,588.00                          11,064.00
12/94                                                             10,286.00                          10,690.00
12/95                                                             11,900.00                          12,651.00
12/96                                                             12,050.00                          13,001.00
12/97                                                             13,078.00                          14,246.00
12/98                                                             14,062.00                          15,649.00
12/99                                                             13,556.00                          15,298.00
12/00                                                             15,114.00                          17,324.00
12/01                                                             15,951.00                          18,578.00
12/02                                                             17,377.00                          20,714.00




PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. DUE TO MARKET
VOLATILITY, CURRENT PERFORMANCE MAY BE LESS THAN THAT SHOWN. INVESTMENT
RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND SHARES, UPON REDEMPTION, MAY
BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. Performance tables and graphs do not
reflect the deduction of taxes that a shareholder would pay on distributions or Fund-share redemptions. Total
returns reflect change in share price, reinvestment of dividend and capital gain distributions, and maximum
applicable sales charges explained in this paragraph. The graphs assume an initial investment of $10,000 and
reflect deduction of all sales charges that would have applied for the period of investment. Class A share
performance reflects the effect of the maximum 4.5% initial sales charge and includes the historical performance
of the Class B shares for periods from the Fund's inception on 5/1/86 through 12/31/94. Performance figures for
the two classes vary after 12/31/94, based on differences in their sales charges and expense structures. Class C
share performance includes the historical performance of the Class B shares for periods from the Fund's inception
on 5/1/86 through 8/31/98. Class B shares would be subject to a contingent deferred sales charge (CDSC) of up
to 5% if redeemed within the first six years of purchase, and Class C shares would be subject to a CDSC of 1%
if redeemed within one year of purchase.

1 The Lehman Brothers(R) Government Bond Index is an unmanaged index that includes issues of the U.S.
government and its agencies, as well as fixed-rate debt issues that are rated investment grade by Moody's,
Standard & Poor's, or Fitch, in that order, with at least one year to maturity. Results assume the reinvestment of
all income and capital gains. An investment cannot be made directly into an index.

2 Inflation is measured by the Consumer Price Index (CPI), which is a commonly used measure of the rate of
inflation and shows the changes in the cost of selected goods. The rate of inflation does not represent an
investment return.

                                                         4
Portfolio Management Discussion and Analysis

For bond investors, 2002 was generally a positive year. The economy continued to advance at an unimpressive
inflation-adjusted rate of between 2.5% and 3.0% for the year. Consumer and government spending remained
relatively strong, but consumer confidence declined and business investment was weak.

Many investors were concerned about credit quality after a series of accounting scandals, layoffs, and
bankruptcies rocked the market. As stock prices continued to fall, a general flight to quality increased demand for
investment-grade debt. In the absence of a 30-year Treasury auction, longer-term U.S. government bonds
tended to outperform other debt securities.

Despite low interest rates, corporate leaders had little pricing power and few incentives to spend money in a
challenging economic environment. As a result, few corporate issuers ventured into the market, and those that did
faced a lukewarm reception. To attract investors and compensate for the higher risk of impaired cash flows in a
sluggish economy, many corporate bonds were priced at wider-than-usual spreads to Treasuries.

To restore business and investor confidence, the Federal Reserve cut the targeted federal funds rate by 50 basis
points in November 2002, to an exceedingly low 1.25%. While stocks rallied temporarily after the Fed's move,
the long-term effects have yet to be felt throughout the economy.

In 2002, interest rates declined sharply across all segments of the yield curve. Thirty-year Treasury yields fell 70
basis points to 5.5%. Five-year Treasury yields declined 160 basis points to 2.7%. Other Treasury notes and
bonds saw yields decline within this basis point range. With interest rates at 40-year lows, homeowners raced to
refinance their mortgages, lower their monthly payments, and turn home equity into cash. Most indications suggest
that the extra money was spent rather than saved.

PERFORMANCE REVIEW

For the year ended December 31, 2002, MainStay Government Fund Class A shares returned 9.75% and Class
B and Class C shares returned 8.94%, excluding all sales charges. All share classes underperformed the 9.88%
return of the average Lipper(1) general U.S. government fund over the same period. All share classes also
underperformed the 11.50% return of the Lehman Brothers(R) Government Bond Index(2) for the year ended
December 31, 2002.

Although the Fund was well diversified in a number of attractive sectors, it underperformed its peers and its
benchmark largely because the Fund's duration was not long enough to fully capitalize on rapidly falling interest
rates.


1 See footnote and table on page 10 for more information about Lipper Inc. 2 See footnote on page 4 for more
information about Lehman Brothers Government Bond Index.

                                                         5
YEAR-BY-YEAR PERFORMANCE

CLASS A SHARES

    YEAR-END                                                                                      TOTAL RETURN %
    --------                                                                                      --------------
    12/92                                                                                               3.81
    12/93                                                                                               5.88
    12/94                                                                                              -2.85
    12/95                                                                                              16.38
    12/96                                                                                               1.97
    12/97                                                                                               9.12
    12/98                                                                                               8.32
    12/99                                                                                              -2.81
    12/00                                                                                              12.20
    12/01                                                                                               6.33
    12/02                                                                                               9.75




Returns reflect the historical performance of the Class B shares through 12/94. See footnotes 1 on page 10 for
more information on performance.

CLASS B AND CLASS C SHARES

    YEAR-END                                                                                      TOTAL RETURN %
    --------                                                                                      --------------
    12/92                                                                                               3.81
    12/93                                                                                               5.88
    12/94                                                                                              -2.85
    12/95                                                                                              15.69
    12/96                                                                                               1.25
    12/97                                                                                               8.54
    12/98                                                                                               7.52
    12/99                                                                                              -3.60
    12/00                                                                                              11.49
    12/01                                                                                               5.54
    12/02                                                                                               8.94




Class C returns reflect the historical performance of the Class B shares through 8/98. See footnotes 1 on page 10
for more information on performance.

CORE POSITIONS

The Fund invests with a long-term strategy that emphasizes sector and issue selection as the primary sources of
total return. Capital gains and yield both contribute to total return. We seek capital gains by identifying securities
that we believe are mispriced and may increase in value as prices realign and by investing in sectors priced at
spreads to Treasuries that may narrow over time. When we believe that risk-reward tradeoffs are favorable, we
may invest in higher-yielding securities.

                                                           6
Within the Treasury sector, we found value in inflation-protected Treasuries (TIPS) and bonds that mature
between 2016 and 2030. We believe that these older, or "off-the-run," bonds may offer appreciation potential as
the yield gap between shorter- and longer-maturity Treasuries narrows. The absence of a 30- year bond auction
supports our approach. Although TIPS were introduced five years ago, they lack the popularity of traditional
Treasury securities and trade at a yield concession that is consistent with our longer-term investment horizon. We
also believe that TIPS may show greater yield stability than other securities when the economy revives.

The Fund's agency holdings among housing government-sponsored enterprises such as Fannie Mae, Freddie
Mac, and the Federal Home Loan Bank are worthy sources of yield. To add variety and pick-up additional yield,
a portion of the Fund's agency allocation is invested in callable debentures and high-quality subordinated issues
that are slightly lower in the capital structure than senior unsecured debt.

The Fund benefited from a resilient market for residential mortgage-backed securities in 2002. Lower interest
rates caused a surge of mortgage refinancings, but not enough to overwhelm the market. Banks were good
buyers, turning to residential mortgage-backed securities to compensate for slower growth in their commercial
and industrial loan portfolios. Many security dealers also pursued opportunities among collateralized mortgage
obligations as the Treasury yield curve steepened. We expect the technical outlook to remain positive, and in
October 2002, we increased the Fund's commitment to residential mortgage-backed securities by 15%, selling
Treasuries to fund the purchase.

YIELD ENHANCEMENT

Diversification plays an important role in the Fund's performance, and we use our discretion within prospectus
guidelines to invest in securities that are not government-related. As of December 31, 2002, the Fund held 10%
of its assets in nongovernment securities. We believe these issues offer attractive yields and appreciation potential.

The Fund owns triple-A rated(3) commercial mortgage-backed securities, triple-A rated asset-backed securities,
and a select set of moderate-quality (triple-B rated)(4) corporate bonds. In selecting commercial mortgage-
backed securities, the Fund seeks to ensure stability of cash flows with issues backed by a wide range of
property types and mortgages that are several years old. Among asset-backed securities, we have been attracted
to rate-reduction bonds. These securities are designed to help utilities in states that are shifting to a competitive
electricity market. The bonds, which help utilities recover costs that would otherwise be lost, are collateralized by
mandatory user tariffs that are passed along to investors.


3 Debt rated AAA has the highest rating assigned by Standard & Poor's. In the opinion of Standard & Poor's,
the obligor's capacity to meet its financial commitment on the obligation is extremely strong. Bonds that are rated
Aaa by Moody's Investors Service, Inc. are judged to be of the best quality. They are deemed by Moody's to
carry the smallest degree of investment risk and are generally referred to as "gilt edged." In the opinion of
Moody's, interest payments are protected by a large or by an exceptionally stable margin and principal is secure.
While the various protective elements are likely to change, Moody's believes that such changes as can be
visualized are most unlikely to impair the fundamentally strong position of such issues. When applied to Fund
holdings, ratings are based solely on the creditworthiness of the bonds in the portfolio and are not meant to
represent the security or safety of the Fund.
4 Debt rated BBB by Standard & Poor's is deemed to exhibit adequate protection parameters. It is Standard &
Poor's opinion that adverse economic conditions or changing circumstances are more likely to lead to a
weakened capacity of the obligor to meet its financial commitment on the obligation than would be the case for
debt in higher rating categories. When applied to Fund holdings, ratings are based solely on the creditworthiness
of the bonds in the portfolio and are not meant to represent the security or safety of the Fund.

                                                          7
We believe corporate bonds offer value relative to Treasuries because their spreads have room to tighten when
the economy recovers. We favor corporate bonds whose issuers have durable revenue streams. Earlier in the
year, when trust in corporate governance came under fire, the Fund's corporate-bond holdings detracted from
performance. We have since reduced the average duration of our holdings in the sector to better protect the Fund
against widening spreads.

DURATION

We are not active duration managers and do not try to time the market by manipulating the Fund's duration.
Instead, we prefer to position the Fund for opportunities with higher probabilities of success over the long-term.
Since interest-rate trends tend to be short-lived, duration-based profits can be elusive. This was evident when
rates rose in November on encouraging economic news and a Republican sweep in Congress, only to reverse
course on softer economic data and heightened tensions with Iraq in December.

We generally maintain the Fund's duration between 3.5 and 4.0 years to moderate the sensitivity of the portfolio
to interest-rate changes. The half-year range is a reasonable one to accommodate the shifting durations of the
residential mortgage-backed securities held by the Fund.

PORTFOLIO COMPOSITION

At year-end 2002, the portfolio held 24.5% of its net assets in Treasuries, 10.9% in agencies, 47.6% in
residential mortgage-backed securities, 2.8% in commercial mortgage-backed securities, 4.8% in asset-backed
securities, and 2.5% in corporate bonds. The balance of the Fund was in money-market instruments.

LOOKING FORWARD

The Fund has a moderate risk profile and is positioned for range-bound Treasuries, lower volatility, tighter
spreads, and contained inflation. As of year-end, we believe that total-return prospects are strongest in sectors
other than Treasuries. This view is based on a large reservoir of investor liquidity that has the potential to
invigorate the capital markets once it is put to work. We believe that as the economy rebounds, investors may
search for high-quality, better-yielding alternatives to Treasuries, such as those to which the Fund is committed.

Whatever the markets or the economy may bring, the Fund will continue to seek a high level of current income
consistent with safety of principal.

Gary Goodenough
Joseph Portera
Portfolio Managers
MacKay Shields LLC

                                                         8
                                   TARGETED DIVIDEND POLICY

MainStay Government Fund seeks to maintain a fixed dividend, with changes made only on an infrequent basis.
During the 12-month period ending December 31, 2002, the Fund maintained a stable dividend. Since the Fund's
managers did not alter their trading strategies to provide dividends, the Fund's portfolio turnover rate and
transaction costs were not affected.

                                                     9
Returns and Lipper Rankings as of 12/31/02
FUND TOTAL RETURNS (WITHOUT SALES CHARGES)(1)

                                                                            SINCE INCEPTION
                                         1 YEAR   5 YEARS     10 YEARS      THROUGH 12/31/02
                    Class A               9.75%    6.63%       6.26%             6.86%
                    Class B               8.94%    5.85%       5.68%             6.51%
                    Class C               8.94%    5.85%       5.68%             6.51%




                         FUND TOTAL RETURNS (WITH SALES CHARGES)(1)

                                                                            SINCE INCEPTION
                                         1 YEAR   5 YEARS     10 YEARS      THROUGH 12/31/02
                    Class A               4.81%    5.65%       5.78%             6.57%
                    Class B               3.94%    5.53%       5.68%             6.51%
                    Class C               7.94%    5.85%       5.68%             6.51%




       FUND LIPPER(2) RANKINGS AND LIPPER CATEGORY RETURNS AS OF 12/31/02

                                                                               SINCE INCEPTION
                                     1   YEAR      5 YEARS       10 YEARS      THROUGH 12/31/02
               Class A              67   out of   54 out of         n/a             46 out of
                                   155   funds    123 funds                         87 funds
               Class B             103   out of   101 out of     46 out of          23 out of
                                   155   funds    123 funds      50 funds           26 funds
               Class C             103   out of      n/a            n/a            100 out of
                                   155   funds                                     127 funds
               Average Lipper
               general U.S.
               government fund       9.88%          6.55%           6.54%           7.26%




   FUND PER-SHARE NET ASSET VALUES AND DISTRIBUTIONS FOR THE YEAR ENDED
                                  12/31/02

                                         NAV 12/31/02    INCOME      CAPITAL GAINS
                              Class A       $8.67        $0.3660        $0.0000
                              Class B       $8.66        $0.3022        $0.0000
                              Class C       $8.66        $0.3022        $0.0000




1 PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. DUE TO MARKET
VOLATILITY, CURRENT PERFORMANCE MAY BE LESS THAN THAT SHOWN. INVESTMENT
RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND SHARES, UPON REDEMPTION, MAY
BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. Performance tables and graphs do not
reflect the deduction of taxes that a shareholder would pay on distributions or Fund-share redemptions. Total
returns reflect change in share price and reinvestment of all dividend and capital gain distributions.

Class A shares are sold with a maximum initial sales charge of 4.5%. Performance figures for this class include
the historical performance of the Class B shares for periods from the Fund's inception on 5/1/86 through
12/31/94. Performance figures for the two classes vary after 12/31/94, based on differences in their sales charges
and expense structures. Class B shares are subject to a CDSC of up to 5% if shares are redeemed within the first
six years of purchase. Class C shares are subject to a CDSC of 1% if redeemed within one year of purchase.
Performance figures for this class include the historical performance of the Class B shares for periods from the
Fund's inception on 5/1/86 through 8/31/98. Performance figures for the two classes vary after 8/31/98, based
on differences in their sales charges.

                                                        10
2 Lipper Inc. is an independent monitor of mutual fund performance. Rankings are based on total returns with all
dividend and capital gain distributions reinvested. Results do not reflect any deduction of sales charges. Lipper
averages listed are not class specific. Since-inception rankings reflect the performance of each share class from its
initial offering date through 12/31/02. Class A shares were first offered to the public on 1/3/95, Class B shares on
5/1/86, and Class C shares on 9/1/98. Since-inception return for the average Lipper peer fund is for the period
from 5/1/86 through 12/31/02.

INFORMATION ON THIS PAGE AND THE PRECEDING PAGES HAS NOT BEEN AUDITED.

                                                         11
MainStay Government Fund

                                                  PRINCIPAL
                                                   AMOUNT            VALUE
                                                 -----------------------------
               LONG-TERM INVESTMENTS (93.1%)+
               ASSET-BACKED SECURITIES (4.8%)

               AUTO LEASES (1.2%)
               DaimlerChrysler Auto Trust
                Series 2001-D Class A3
                3.15%, due 11/6/05............   $6,750,000      $ 6,850,940
                                                                 ------------

               AUTOMOBILES (1.3%)
               Harley-Davidson Motorcycle
                Trust
                Series 2002-1 Class A2
                4.50%, due 1/15/10............   7,040,000          7,394,077
                                                                 ------------

               CONSUMER LOANS (0.4%)
               Atlantic City Electric
                Transition Funding
                Series 2002-1 Class A4
                5.55%, due 10/20/23...........   2,275,000          2,309,739
                                                                 ------------

               ELECTRIC UTILITIES (1.5%)
               Massachusetts RRB
                Special Purpose Trust
                Series 2001-1 Class A
                6.53%, due 6/1/13.............   8,173,140          9,082,917
                                                                 ------------

               HOME EQUITY LOANS (0.1%)
               Southern Pacific Secured Assets
                Corp.
                Series 1997-1 Class A1
                1.62%, due 4/25/27 (a)........     406,648            406,723
                                                                 ------------

               MULTI-UTILITIES & UNREGULATED POWER (0.3%)
               Public Service of New Hampshire
                Funding LLC
                Series 2002-1 Class A
                4.58%, due 2/1/08.............   1,866,430          1,950,792
                                                                 ------------
               Total Asset-Backed Securities
                (Cost $26,503,553)............                     27,995,188
                                                                 ------------
               CORPORATE BONDS (2.5%)

               DIVERSIFIED FINANCIALS (0.7%)
               Ford Motor Credit Co.
                1.70%, due 6/20/03 (a)........   1,515,000          1,504,719
                6.50%, due 1/25/07............   2,515,000          2,484,113
                                                                 ------------
                                                                    3,988,832
                                                                 ------------
               ELECTRIC UTILITIES (1.0%)
               Consumers Energy Co.
                6.00%, due 3/15/05............   3,680,000           3,647,789



                                                  PRINCIPAL
                                                   AMOUNT            VALUE
                                                 -----------------------------
               ELECTRIC UTILITIES (CONTINUED)
               PPL Energy Supply LLC
                Series A
                6.40%, due 11/1/11............   $2,490,000      $   2,477,142
                                                                                  ------------
                                                                                     6,124,931
                                                                                  ------------
                     MACHINERY (0.8%)
                     Attransco, Inc.
                      Series 1998
                      6.11%, due 10/1/07............          4,583,636              4,849,441
                                                                                  ------------
                     Total Corporate Bonds
                      (Cost $14,822,626)............                                14,963,204
                                                                                  ------------
                     MORTGAGE-BACKED SECURITIES (2.8%)

                     COMMERCIAL MORTGAGE LOANS
                      (COLLATERALIZED MORTGAGE OBLIGATIONS) (2.8%)
                     GMAC Commercial Mortgage
                      Securities, Inc.
                      Series 1998-C2 Class A1
                      6.15%, due 5/15/35............   2,622,682                      2,810,791
                     Morgan Stanley Capital I
                      Series 1998-HF2 Class A1
                      6.01%, due 11/15/30...........   1,839,132                      1,982,311
                      Series 1997-WF1 Class A2
                      7.22%, due 7/15/29 (e)........   4,698,000                      5,352,182
                     Mortgage Capital Funding, Inc.
                      Series 1998-MC3 Class A2
                      6.337%, due 11/18/31..........   3,270,000                      3,634,203
                     Nationslink Funding Corp.
                      Series 1998-2 Class A1
                      6.001%, due 8/20/30...........   2,304,059                     2,475,958
                                                                                  ------------
                     Total Mortgage-Backed
                      Securities
                      (Cost $15,733,617)............                                16,255,445
                                                                                  ------------
                     U.S. GOVERNMENT & FEDERAL AGENCIES (83.0%)

                     BEARER CORPORATE CONVERSION SYSTEM (1.0%)
                      (zero coupon), due 11/15/11
                      14.00%, beginning 11/15/06....   6,000,000                     5,389,602
                                                                                  ------------

                     FEDERAL HOME LOAN BANK (1.0%)
                      3.25%, due 8/15/05............          5,600,000              5,769,120
                                                                                  ------------

                     FEDERAL HOME LOAN MORTGAGE CORPORATION (6.5%)
                      3.875%, due 2/15/05 (c).......   4,810,000                     5,013,141
                      4.875%, due 3/15/07...........   8,375,000                     9,049,112
                      6.25%, due 3/5/12............. 21,800,000                     23,929,489
                                                                                  ------------
                                                                                    37,991,742
                                                                                  ------------




The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial
statements.

                                                         12
Portfolio of Investments December 31, 2002

                                                   PRINCIPAL
                                                    AMOUNT            VALUE
                                                  -----------------------------
                 U.S. GOVERNMENT & FEDERAL AGENCIES (CONTINUED)
                 FEDERAL HOME LOAN MORTGAGE CORPORATION
                 (MORTGAGE PASS-THROUGH SECURITIES) (6.3%)
                  5.50%, due 1/1/32-12/1/32..... $36,489,063       $ 37,247,591
                                                                   ------------

                 FEDERAL NATIONAL MORTGAGE ASSOCIATION (1.7%)
                  5.25%, due 3/22/07-1/15/09....   9,300,000        10,005,490
                                                                  ------------
                 FEDERAL NATIONAL MORTGAGE ASSOCIATION
                  (MORTGAGE PASS-THROUGH SECURITIES) (29.3%)
                  5.50%, due 1/1/17-2/1/17
                  (c)........................... 47,097,323         48,898,837
                  5.50%, due 1/17/17 TBA (b).... 14,900,000         15,435,476
                  6.00%, due 12/1/16-11/1/32.... 47,931,040         49,705,228
                  6.50%, due 10/1/31 (c)........ 13,031,156         13,574,477
                  7.00%, due 7/1/31............. 10,588,631         11,137,589
                  7.50%, due 1/1/30-8/1/31
                  (d)........................... 31,666,822         33,763,237
                                                                  ------------
                                                                   172,514,844
                                                                  ------------

                 GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
                  (MORTGAGE PASS-THROUGH SECURITIES) (12.0%)
                  6.00%, due 8/15/32-12/15/32
                  (c)........................... 23,234,319         24,238,672
                  6.50%, due 8/15/28-4/15/31.... 23,008,011         24,179,502
                  7.00%, due 9/15/31............   8,713,709         9,241,647
                  7.50%, due 12/15/28-2/15/32... 11,814,510         12,627,813
                                                                  ------------
                                                                    70,287,634
                                                                  ------------
                 OVERSEAS PRIVATE INVESTMENT CORPORATION (0.7%)
                  3.64%, due 8/14/10............   4,303,331         4,346,364
                                                                  ------------

                 UNITED STATES TREASURY BONDS (10.7%)
                  6.25%, due 8/15/23-5/15/30
                  (c)........................... 29,880,000         35,517,585
                  6.875%, due 8/15/25 (c).......   3,650,000         4,616,538
                  7.50%, due 11/15/16 (c).......   3,220,000         4,210,903
                  8.75%, due 8/15/20 (c)........ 12,550,000         18,530,853
                                                                  ------------
                                                                    62,875,879
                                                                  ------------
                 UNITED STATES TREASURY NOTES (13.8%)
                  3.25%, due 5/31/04............   2,850,000         2,925,927
                  3.375%, due 1/15/07 (f)....... 14,575,000         18,062,102
                  4.375%, due 5/15/07 (c)....... 10,025,000         10,765,126
                  4.875%, due 2/15/12 (c).......   7,070,000         7,677,299
                  5.75%, due 11/15/05-8/15/10
                  (c)........................... 29,100,000         32,859,655
                  6.00%, due 8/15/09 (c)........   7,820,000         9,091,970
                                                                  ------------
                                                                    81,382,079
                                                                  ------------
                 Total U.S. Government & Federal
                  Agencies
                  (Cost $468,067,548)...........                   487,810,345
                                                                  ------------
                 Total Long-Term Investments
                  (Cost $525,127,344)...........                   547,024,182
                                                                  ------------



                                                   PRINCIPAL
                                                                AMOUNT            VALUE
                                                              -----------------------------
                     SHORT-TERM INVESTMENTS (33.4%)
                     CORPORATE BONDS (5.9%)
                     General Electric Capital Corp.
                      1.563%, due 1/28/04 (g).......          $20,000,000         $ 19,984,284
                     Liberty Light US Capital
                      1.4176%, due 2/18/03(g).......          15,000,000            15,002,643
                                                                                  ------------
                     Total Corporate Bonds
                      (Cost $34,986,927)............                                34,986,927
                                                                                  ------------

                     COMMERCIAL PAPER (10.2%)
                     Atlantic Asset Security Corp.
                      1.5717%, due 1/3/03 (g).......          3,020,000               3,019,740
                     Atlantic Asset Security Corp.
                      1.3692%, due 1/10/03 (g)......          17,010,000            17,004,259
                     Bryant Park Funding LLC
                      1.6229%, due 1/2/03 (g).......          2,800,000               2,799,876
                     Fairway Finance Corp.
                      1.5826%, due 1/10/03 (g)......          23,290,000            23,280,917
                     Hudson-American Realty
                      Protection LLC
                      1.523%, due 1/6/03 (g)........          11,235,000            11,232,659
                     Rhineland Funding Capital Corp.
                      1.5229%, due 1/21/03 (g)......          2,348,000              2,346,043
                                                                                  ------------
                     Total Commercial Paper
                      (Cost $59,683,494)............                                59,683,494
                                                                                  ------------

                     FEDERAL AGENCIES (7.7%)
                     Federal Home Loan Mortgage
                      Corporation
                      (Discount Note)
                      1.23%, due 1/16/03............          10,000,000             9,994,874
                      1.25%, due 1/23/03............          13,245,000            13,234,882
                      1.26%, due 1/14/03............          13,975,000            13,968,635
                                                                                  ------------
                                                                                    37,198,391
                                                                                  ------------
                     Federal National Mortgage
                      Association
                      (Discount Note)
                      1.00%, due 1/2/03.............          2,025,000              2,024,955
                      1.28%, due 1/27/03............          6,160,000              6,154,303
                                                                                  ------------
                                                                                     8,179,258
                                                                                  ------------
                     Total Federal Agencies
                      (Cost $45,377,649)............                                45,377,649
                                                                                  ------------




The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial
statements.

                                                         13
MainStay Government Fund

                                                 SHARES            VALUE
                                               -----------------------------
              SHORT-TERM INVESTMENTS (CONTINUED)
              INVESTMENT COMPANIES (1.4%)
              AIM Institutional Funds Group
               (g)...........................   1,945,575       $ 1,945,575
              Merrill Lynch Premier
               Institutional Fund............   6,605,000          6,605,000
                                                                ------------
              Total Investment Companies
               (Cost $8,550,575).............                      8,550,575
                                                                ------------
                                                PRINCIPAL
                                                 AMOUNT
                                               -----------
              MASTER NOTE (3.4%)
              Bank of America LLC
               1.4374%, due 1/2/03 (g)....... $20,000,000         20,000,000
                                                                ------------
              Total Master Note
               (Cost $20,000,000)............                     20,000,000
                                                                ------------

              REPURCHASE AGREEMENT (4.8%)
              Countrywide Securities Corp.
               1.3924%, dated 12/31/02,
               due 1/2/03
               Proceeds at maturity
               $28,002,165 (g)
               (Collateralized by
               $29,400,000 Countrywide
               Securities Corp.
               Asset Backed Security
               3.3197%, due 6/25/33
               Market Value $29,400,000).....   28,000,000       28,000,000
                                                               ------------
              Total Repurchase Agreement
               (Cost $28,000,000)............                    28,000,000
                                                               ------------
              Total Short-Term Investments
               (Cost $196,598,645)...........                   196,598,645
                                                               ------------
              Total Investments
               (Cost $721,725,989) (h).......       126.5%      743,622,827(i)
              Liabilities in Excess of
               Cash and Other Assets.........        (26.5)    (155,760,189)
                                                -----------    ------------
              Net Assets.....................        100.0%    $587,862,638
                                                ===========    ============



                -------
                (a) Floating rate. Rate shown is the rate in effect at
                     December 31, 2002.
                (b) TBA: Securities purchased on a forward commitment basis
                     with an approximate principal amount and maturity date.
                     The actual principal amount and maturity date will be
                     determined upon settlement.
                (c) Represents securities out on loan or a portion of which
                     is out on loan. (See Note 2).
                (d) Segregated or partially segregated as collateral for
                     TBA.
                (e) May be sold to institutional investors only.
                (f) Treasury Inflation Indexed Security-Pays a fixed rate of
                     interest on a principal amount that is continuously
                     adjusted for inflation based on the Consumer Price
                     Index-Urban Consumers.
                (g) Represents security or a portion thereof, purchased with
                     cash collateral received for securities on loan.
                (h) The cost for federal income tax purposes is
                            $721,822,835.
                      (i)   At December 31, 2002 net unrealized appreciation was
                            $21,799,992, 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 $22,009,763 and
                            aggregate gross unrealized depreciation for all
                            investments on which there was an excess of cost over
                            market value of $209,771.




The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial
statements.

                                                         14
Statement of Assets and Liabilities as of December 31, 2002

         ASSETS:
         Investment in securities, at value (identified cost
           $721,725,989) including $142,104,081 of
           securities loaned.........................................                      $ 743,622,827
         Cash........................................................                              4,260
         Deposits with brokers for securities loaned.................                             23,582
         Receivables:
           Interest..................................................                          4,697,575
           Fund shares sold..........................................                          1,109,514
         Other asset.................................................                             25,117
                                                                                           -------------
                   Total assets........................................                      749,482,875
                                                                                           -------------
         LIABILITIES:
         Securities lending collateral...............................                          144,639,578
         Payables:
           Investment securities purchased...........................                         15,188,687
           Fund shares redeemed......................................                            712,233
           NYLIFE Distributors.......................................                            434,760
           Manager...................................................                            293,453
           Transfer agent............................................                            241,771
           Trustees..................................................                              6,839
           Custodian.................................................                              5,722
         Accrued expenses............................................                             96,012
         Dividends payable...........................................                              1,182
                                                                                           -------------
                   Total liabilities...................................                      161,620,237
                                                                                           -------------
         Net assets..................................................                      $ 587,862,638
                                                                                           =============
         COMPOSITION OF NET ASSETS:
         Shares of beneficial interest outstanding (par value of $.01
           per share) unlimited number of shares authorized:
           Class A...................................................                      $     106,802
           Class B...................................................                            551,508
           Class C...................................................                             20,728
         Additional paid-in capital..................................                        617,561,529
         Accumulated net investment loss.............................                            (58,709)
         Accumulated net realized loss on investments................                        (52,216,058)
         Net unrealized appreciation on investments..................                         21,896,838
                                                                                           -------------
         Net assets..................................................                      $ 587,862,638
                                                                                           =============
         CLASS A
         Net assets applicable to outstanding shares.................                      $ 92,581,434
                                                                                           =============
         Shares of beneficial interest outstanding...................                         10,680,212
                                                                                           =============
         Net asset value per share outstanding.......................                      $        8.67
         Maximum sales charge (4.50% of offering price)..............                               0.41
                                                                                           -------------
         Maximum offering price per share outstanding................                      $        9.08
                                                                                           =============
         CLASS B
         Net assets applicable to outstanding shares.................                      $ 477,340,761
                                                                                           =============
         Shares of beneficial interest outstanding...................                         55,150,786
                                                                                           =============
         Net asset value and offering price per share outstanding....                      $        8.66
                                                                                           =============
         CLASS C
         Net assets applicable to outstanding shares.................                      $ 17,940,443
                                                                                           =============
         Shares of beneficial interest outstanding...................                          2,072,801
                                                                                           =============
         Net asset value and offering price per share outstanding....                      $        8.66
                                                                                           =============




The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial
statements.

              15
Statement of Operations for the year ended December 31, 2002

              INVESTMENT INCOME:
              Income:
                Interest (a)..............................................                $25,627,108
                                                                                          -----------
              Expenses:
                Distribution--Class B.....................................                  3,249,060
                Distribution--Class C.....................................                     92,677
                Manager...................................................                  3,104,474
                Transfer agent............................................                  1,295,609
                Service--Class A..........................................                    179,948
                Service--Class B..........................................                  1,082,632
                Service--Class C..........................................                     30,950
                Shareholder communication.................................                    104,841
                Professional..............................................                     91,488
                Recordkeeping.............................................                     78,408
                Custodian.................................................                     58,247
                Registration..............................................                     41,501
                Trustees..................................................                     27,662
                Miscellaneous.............................................                     32,263
                                                                                          -----------
                   Total expenses..........................................                 9,469,760
                                                                                          -----------
              Net investment income.......................................                 16,157,348
                                                                                          -----------
              REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
              Net realized gain on investments............................                 13,384,281
              Net change in unrealized appreciation on investments........                 14,691,813
                                                                                          -----------
              Net realized and unrealized gain on investments.............                 28,076,094
                                                                                          -----------
              Net increase in net assets resulting from operations........                $44,233,442
                                                                                          ===========




(a) Includes securities lending income of $177,803.

The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial
statements.

                                                         16
Statement of Changes in Net Assets

                                                                               Year ended          Year ended
                                                                              December 31,        December 31,
                                                                                  2002                2001
                                                                              -------------       -------------
   INCREASE IN NET ASSETS:
   Operations:
     Net investment income.....................................               $ 16,157,348        $   18,785,577
     Net realized gain on investments..........................                 13,384,281            17,054,693
     Net change in unrealized appreciation (depreciation) on
       investments.............................................                 14,691,813          (10,882,747)
                                                                              -------------       -------------
     Net increase in net assets resulting from operations......                 44,233,442           24,957,523
                                                                              -------------       -------------
   Dividends and distributions to shareholders:
     From net investment income:
       Class A.................................................                 (3,148,466)            (2,397,758)
       Class B.................................................                (15,614,432)           (16,556,438)
       Class C.................................................                   (453,946)              (297,833)
     Return of capital:
       Class A.................................................                         --             (341,814)
       Class B.................................................                         --           (2,359,233)
       Class C.................................................                         --              (42,247)
                                                                              -------------       -------------
          Total dividends and distributions to shareholders.....               (19,216,844)         (21,995,323)
                                                                              -------------       -------------
   Capital share transactions:
     Net proceeds from sale of shares:
       Class A.................................................                207,805,168            135,129,711
       Class B.................................................                132,321,833             87,353,492
       Class C.................................................                 14,085,627             10,286,389
     Net asset value of shares issued to shareholders in
       reinvestment of dividends and distributions:
       Class A.................................................                  2,650,009            3,251,086
       Class B.................................................                 12,557,843           14,988,182
       Class C.................................................                    350,032              259,375
                                                                              -------------       -------------
                                                                               369,770,512          251,268,235
   Cost of shares redeemed:
       Class A.................................................               (180,730,168)        (137,813,347)
       Class B.................................................                (99,780,727)         (97,243,713)
       Class C.................................................                 (6,334,835)          (6,358,583)
                                                                              -------------       -------------
          Increase in net assets derived from capital share
           transactions.........................................                82,924,782            9,852,592
                                                                              -------------       -------------
         Net increase in net assets............................                107,941,380           12,814,792
   NET ASSETS:
   Beginning of year...........................................                479,921,258          467,106,466
                                                                              -------------       -------------
   End of year.................................................               $587,862,638        $ 479,921,258
                                                                              =============       =============
   Accumulated net investment loss.............................               $    (58,709)       $    (180,564)
                                                                              =============       =============




The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial
statements.

                                                         17
Financial Highlights selected per share data and ratios

                                                                                                 Class A
                                                                    -------------------------------------------------
                                                                                         Year ended December 31,
                                                                    -------------------------------------------------
                                                                      2002          2001           2000          1999
                                                                    --------      --------       --------      -------
Net asset value at beginning of period................              $   8.25      $   8.19       $   7.75      $   8.4
                                                                    --------      --------       --------      -------
Net investment income.................................                  0.32          0.39(a)(d)      0.46(a)      0.4
Net realized and unrealized gain (loss) on
  investments.........................................                  0.47             0.12(d)           0.45           (0.6
                                                                    --------         --------          --------        -------
Total from investment operations......................                  0.79             0.51              0.91           (0.2
                                                                    --------         --------          --------        -------
Less dividends and distributions:
  From net investment income..........................                 (0.37)           (0.39)            (0.46)          (0.4
  Return of capital...................................                    --            (0.06)            (0.01)          (0.0
                                                                    --------         --------          --------        -------
Total dividends and distributions.....................                 (0.37)           (0.45)            (0.47)          (0.4
                                                                    --------         --------          --------        -------
Net asset value at end of period......................              $   8.67         $   8.25          $   8.19        $   7.7
                                                                    ========         ========          ========        =======
Total investment return (b)...........................                  9.75%            6.33%            12.20%          (2.8
Ratios (to average net assets)/
  Supplemental Data:
    Net investment income.............................                  3.76%            4.71%(d)          5.89%           5.1
    Expenses..........................................                  1.19%            1.17%             1.16%           1.1
Portfolio turnover rate...............................                   117%             151%              324%            25
Net assets at end of period (in 000's)................              $ 92,581         $ 59,405          $ 58,674        $ 34,11




                    *    Class C shares were first offered on September 1, 1998.
                    +    Annualized.
                   (a)   Per share data based on average shares outstanding during
                         the period.
                   (b)   Total return is calculated exclusive of sales charges and is
                         not annualized.
                   (c)   Less than one cent per share.
                   (d)   As required, effective January 1, 2001 the Fund has adopted
                         the provisions of the AICPA Audit and Accounting Guide for
                         Investment Companies and began amortizing premium on debt
                         securities. The effect of this change for the year ended
                         December 31, 2001 is shown below. Per share ratios and
                         supplemental data for periods prior to January 1, 2001 have
                         not been restated to reflect this change in presentation.



                                                                                Class A      Class B      Class C
                                                                                -------      -------      -------
 Decrease net investment income..............................                   ($0.03)      ($0.03)      ($0.03)
 Increase net realized and unrealized gains and losses.......                     0.03         0.03         0.03
 Decrease ratio of net investment income.....................                    (0.37%)      (0.37%)      (0.37%)




The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial
statements.

                                                          18
                      Class B                                                                Class C
--------------------------------------------------------                ----------------------------------------------

                  Year ended December 31,                                          Year ended December 31,
--------------------------------------------------------                ----------------------------------------------
  2002       2001           2000        1999       1998                   2002       2001            2000        1999
--------   --------       --------    --------   --------               --------   --------        --------    --------
$   8.24   $   8.18       $   7.73    $   8.44   $   8.25               $   8.24   $   8.18        $   7.73    $   8.44
--------   --------       --------    --------   --------               --------   --------        --------    --------
    0.26       0.33(a)(d)     0.40(a)     0.36       0.37                   0.26       0.33(a)(d)      0.40(a)     0.36
    0.46       0.12(d)        0.46       (0.66)      0.24                   0.46       0.12(d)         0.46       (0.66
--------   --------       --------    --------   --------               --------   --------        --------    --------
    0.72       0.45           0.86       (0.30)      0.61                   0.72       0.45            0.86       (0.30
--------   --------       --------    --------   --------               --------   --------        --------    --------
   (0.30)     (0.34)         (0.41)      (0.36)     (0.37)                 (0.30)     (0.34)          (0.41)      (0.36
       --     (0.05)         (0.00)(c) (0.05)       (0.05)                     --     (0.05)          (0.00)(c) (0.05
--------   --------       --------    --------   --------               --------   --------        --------    --------
   (0.30)     (0.39)         (0.41)      (0.41)     (0.42)                 (0.30)     (0.39)          (0.41)      (0.41
--------   --------       --------    --------   --------               --------   --------        --------    --------
$   8.66   $   8.24       $   8.18    $   7.73   $   8.44               $   8.66   $   8.24        $   8.18    $   7.73
========   ========       ========    ========   ========               ========   ========        ========    ========
    8.94%      5.54%         11.49%      (3.60%)     7.52%                  8.94%      5.54%          11.49%      (3.60
    3.01%      3.96%(d)       5.14%       4.42%      4.45%                  3.01%      3.96%(d)        5.14%       4.42
    1.94%      1.92%          1.91%       1.88%      1.87%                  1.94%      1.92%           1.91%       1.88
     117%       151%           324%        255%       371%                   117%       151%            324%        255
$477,341   $411,271       $403,374    $483,495   $590,592               $ 17,940   $ 9,245         $ 5,059     $    532




The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial
statements.

                                                         19
MainStay Government Fund

NOTE 1--ORGANIZATION AND BUSINESS:

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-four funds (collectively referred to as the "Funds").
These financial statements and notes relate only to MainStay Government Fund (the "Fund"), a diversified fund.

The Fund currently offers three classes of shares. Class A shares, whose distribution commenced on January 3,
1995, 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. Distribution of Class B shares and Class C shares commenced on May 1, 1986
and September 1, 1998, respectively. Class A shares, Class B shares and Class C shares bear the same voting
(except for issues that relate solely to one class), dividend, liquidation and other rights and conditions except that
the Class B shares and Class C shares are subject to higher distribution fee rates. Each class of shares bears
distribution and/or service fee payments under a distribution plan pursuant to Rule 12b-1 under the 1940 Act.

The Fund's investment objective is to seek a high level of current income, consistent with safety of principal.

NOTE 2--SIGNIFICANT ACCOUNTING POLICIES:

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 of the 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 of the Fund 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 number of outstanding shares of that class.

SECURITIES VALUATION. Portfolio securities of the Fund are stated at value determined (a) by appraising
debt securities at prices supplied by a pricing agent selected by the Fund's Manager or Subadvisor, whose prices
reflect broker/dealer supplied valuations and electronic data processing techniques if those prices are deemed by
the Fund's Manager or Subadvisor to be representative of market values at the regular close of business of the
Exchange, (b) by appraising options and futures contracts at the last posted settlement price on the market where
such options or futures are principally traded, and

                                                            20
Notes to Financial Statements

(c) by appraising all other securities and other assets, including debt securities for which prices are supplied by a
pricing agent but are not deemed by the Fund's Manager or Subadvisor 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 Trust's Board of Trustees. 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 portfolio securities that occur between the time their prices are determined and the
close of the Exchange will not be reflected in the Fund's calculation of net asset values unless the Fund's Manager
or Subadvisor deems that the particular event would materially affect the Fund's net assets, in which case an
adjustment may be made.

MORTGAGE DOLLAR ROLLS. The Fund enters into mortgage dollar roll ("MDR") transactions in which it
sells mortgage-backed securities ("MBS") from its portfolio to a counterparty from whom it simultaneously agrees
to buy a similar security on a delayed delivery basis. The MDR transactions of the 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 Fund has agreed to acquire are included at market
value in the portfolio of investments and liabilities for such purchase commitments are included as payables for
investments purchased. 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.

SECURITIES LENDING. The Fund may lend its securities to broker-dealers and financial institutions. The loans
are collateralized by 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.

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 or excise tax provision is required.

                                                          21
MainStay Government Fund

DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions are recorded on
the ex-dividend date. The Fund intends to declare and pay dividends monthly and capital gain distributions, if any,
are declared and paid annually. 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.

The following table discloses the current year reclassifications between accumulated net investment loss,
accumulated net realized loss on investments and additional paid-in capital arising from permanent differences; net
assets at December 31, 2002, are not affected.

                                                  ACCUMULATED
                             ACCUMULATED          NET REALIZED
                            NET INVESTMENT          LOSS ON            ADDITIONAL
                                 LOSS             INVESTMENTS        PAID-IN CAPITAL
                            --------------       --------------      ---------------
                              $3,181,351          $62,166,384         $(65,347,735)




The reclassifications for the Fund are primarily due to paydown gain (loss), premium amortization adjustments,
reclassification of distribution and expiration of capital loss carryforward.

The tax character of distributions paid during the years ended December 31, 2002 and December 31, 2001 was
as follows:

                                                             2002              2001
                                                         ------------      ------------
                          Distributions paid from:
                            Ordinary Income              $19,216,844       $19,252,029
                            Return of Capital                     --         2,743,294
                                                         -----------       -----------
                                                         $19,216,844       $21,995,323
                                                         ===========       ===========




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
and include gains and losses from repayments of principal on mortgage backed securities. Interest income is
accrued daily. Discounts and premiums on securities, other than short-term securities, purchased for the Fund are
accreted and amortized, respectively, on the constant yield method over the life of the respective securities or, in
the case of callable security, over the period to the first date of call. Discounts and premiums on short-term
securities are accreted and amortized, respectively, on the straight line method.

EXPENSES. Expenses of the Trust are allocated to the individual Funds in proportion to the net assets of the
respective Funds when the expenses are incurred except where direct allocations of expenses can be made.

                                                        22
Notes to Financial Statements (continued)

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 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 accounting principles
generally accepted in the United States of America 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.

NOTE3--FEES AND RELATED PARTY TRANSACTIONS:
MANAGER AND SUBADVISOR. New York Life Investment Management LLC ("NYLIM" or the
"Manager"), an indirect wholly-owned subsidiary of New York Life Insurance Company ("New York Life"),
serves as the Fund's manager. The Manager provides offices, conducts clerical, record-keeping and
bookkeeping services, and keeps most of the financial and accounting records required for the Fund. The
Manager also pays the salaries and expenses of all personnel affiliated with the Fund and all the operational
expenses that are not the responsibility of the Fund. The Manager has delegated its portfolio management
responsibilities to MacKay Shields LLC (the "Subadvisor"), a registered investment adviser and indirect wholly-
owned subsidiary of New York Life. 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 0.60% of the Fund's average daily net assets. Through March 11, 2002, the
Manager had voluntarily established a fee breakpoint of 0.55% on assets in excess of $1 billion. Effective March
12, 2002, the Manager established contractual fee breakpoints for its management fee of 0.60% annually on
assets up to $1 billion and 0.55% annually on assets in excess of $1 billion. For the year ended December 31,
2002, the Manager earned from the Fund $3,104,474. It was not necessary for the Manager to waive part of its
fee during the year.

Pursuant to the terms of a Sub-Advisory Agreement between NYLIM and MacKay Shields, the Manager paid
the Subadvisor a monthly fee of 0.30% of the Fund's average daily net assets through March 11, 2002. Effective
March 12, 2002, the Manager pays the Subadvisor a monthly fee at an annual rate of 0.30% on assets up to $1
billion and 0.275% on assets in excess of $1 billion. To the extent that the Manager had voluntarily established a
fee breakpoint prior to March 11, 2002, the Subadvisor had voluntarily agreed to do so proportionately.

DISTRIBUTION AND SERVICE FEES. The Trust, on behalf of the Fund, has a Distribution Agreement with
NYLIFE Distributors Inc. (the "Distributor"), an indirect wholly-owned subsidiary of New York Life. The Fund,
with respect to each class of 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

                                                        23
MainStay Government Fund

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.

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.

SALES CHARGES. The Fund was advised by the Distributor that the amount of sales charges retained on sales
of Class A shares was $7,688 for the year ended December 31, 2002. The Fund was also advised that the
Distributor retained contingent deferred sales charges for redemption of Class A, Class B and Class C shares of
$14,519, $305,060 and $6,359, respectively, for the year ended December 31, 2002.

TRANSFER, DIVIDEND DISBURSING AND SHAREHOLDER SERVICING AGENT. NYLIM Service
Company LLC, ("NYLIM Service"), an affiliate of NYLIM, is the Fund's transfer, dividend disbursing and
shareholder servicing agent. NYLIM Service has entered into an agreement with Boston Financial Data Services
("BFDS") pursuant to which BFDS will perform certain of the services for which NYLIM Service is responsible.
Transfer agent expenses accrued to NYLIM Service for the year ended December 31, 2002 amounted to
$1,295,609.

TRUSTEES FEES. Trustees, other than those currently affiliated with NYLIM, are paid an annual fee of
$45,000, $2,000 for each Board meeting, $1,000 for each Committee meeting and $500 for each Valuation
Subcommittee telephonic meeting attended plus reimbursement for travel and out-of-pocket expenses. The Lead
Non-Interested 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, included in professional expenses as shown on the Statement of
Operations, provided to the Fund by the Office of General Counsel of NYLIM amounted to $10,432 for the
year ended December 31, 2002.

The Fund pays the Manager a monthly fee for recordkeeping services provided under the Accounting Agreement
at the annual rate of 1/20 of 1% for the first $20 million of average monthly net assets, 1/30 of 1% of the next
$80 million of average monthly net assets and 1/100 of 1% of any amount in excess of $100 million of average
monthly net assets. Fees for recordkeeping services provided to the Fund by the Manager amounted to $78,408
for the year ended December 31, 2002.

                                                        24
Notes to Financial Statements (continued)

NOTE 4--FEDERAL INCOME TAX:

As of December 31, 2002, the components of accumulated loss on a tax basis were as follows:

                                                                             TOTAL
                           ACCUMULATED CAPITAL          UNREALIZED        ACCUMULATED
                            AND OTHER LOSSES           APPRECIATION           LOSS
                           -------------------        --------------      ------------
                              $(52,177,920)            $21,799,992        $(30,377,928)




The difference between book-basis and tax-basis unrealized appreciation is primarily due to wash sales deferrals
and premium amortization adjustments.

At December 31, 2002 for federal income tax purposes, capital loss carryforwards of $52,177,920 were
available as shown in the table below, to the extent provided by the regulations to offset future realized gains of
the Fund through the years indicated. To the extent that these carryforwards are used to offset future capital
gains, it is probable that the capital gains so offset will not be distributed to shareholders.

                                           CAPITAL LOSS                                         AMOUNT
              AVAILABLE THROUGH                                                                (000'S)
                                                                                               -------
              2004........................................................                     $13,291
              2005........................................................                       1,897
              2007........................................................                      30,060
              2008........................................................                       6,930
                                                                                               -------
                                                                                               $52,178
                                                                                               =======




During the year ended December 31, 2002, for federal income tax purposes, the Fund utilized $12,741,078 to
offset realized gain. The Fund also had capital loss carryforwards of $62,691,293 that expired.

NOTE 5--PURCHASES AND SALES OF SECURITIES (IN 000'S):

During the year ended December 31, 2002, purchases and sales of U.S. Government securities were $598,439
and $474,051, respectively. Purchases and sales of securities other than U.S. Government securities and short-
term securities, were $104,769 and $99,535, respectively.

As of December 31, 2002, the Fund had securities on loan with an aggregate market value of $142,104,081.
The Fund received $144,639,578 in cash collateral for securities on loan which was used to purchase highly
liquid short-term investments in accordance with Fund's securities lending procedures.

NOTE 6--LINE OF CREDIT:

The Fund and certain affiliated funds maintain a line of credit of $160,000,000 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 .075% of the average

                                                         25
MainStay Government Fund

commitment amount, regardless of usage, to The Bank of New York, which acts as agent to the syndicate. Such
commitment fees are allocated among 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, 2002.

NOTE 7--CAPITAL SHARE TRANSACTIONS (IN 000'S):

                                                        YEAR ENDED                           YEAR ENDED
                                                     DECEMBER 31, 2002                    DECEMBER 31, 2001
                                                ---------------------------          ---------------------------
                                                CLASS A   CLASS B   CLASS C          CLASS A   CLASS B   CLASS C
                                                -------   -------   -------          -------   -------   -------
Shares sold..............................        24,465    15,607    1,659            16,354    10,522    1,241
Shares issued in reinvestment of
  dividends and distributions............           314      1,491         41            394       1,816          31
                                                -------    -------      -----        -------     -------       -----
                                                 24,779     17,098      1,700         16,748      12,338       1,272
Shares redeemed..........................       (21,296)   (11,840)      (749)       (16,714)    (11,762)       (769)
                                                -------    -------      -----        -------     -------       -----
Net increase.............................         3,483      5,258        951             34         576         503
                                                =======    =======      =====        =======     =======       =====




                                                     26
Report of Independent Accountants

To the Board of Trustees of the MainStay Funds and Shareholders of MainStay Government 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 Government Fund (one of the funds constituting The
MainStay Funds, hereafter referred to as the "Fund") at December 31, 2002, the results of its operations for the
year then ended, 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, 2002 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, 2003

                                                         27
Trustees and Officers

Following are the Trustees and Officers of The MainStay Funds, along with a brief description of their principal
occupations during the past five years.

Each Trustee serves until his/her successor is elected and qualified or until his/her resignation, death, or removal.
Officers serve a term of one year and are elected annually by the Trustees.

The business address of each Trustee and Officer is 51 Madison Avenue, New York, New York 10010.

                                                                                     NUMBER OF
                                                                                     PORTFOLIOS
                           POSITION(S)                                                IN FUND
                          HELD WITH FUND                                              COMPLEX
        NAME AND          AND LENGTH OF            PRINCIPAL OCCUPATION(S)            OVERSEEN    OTHER D
     DATE OF BIRTH         TIME SERVED              DURING PAST FIVE YEARS           BY TRUSTEE     HELD
---------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEES(1)
---------------------------------------------------------------------------------------------------------
Gary E. Wendlandt         Chairman since   Chief Executive Officer, Chairman, and         43
10/8/50                   January 1,       Manager, New York Life Investment
                          2002, and        Management LLC (including predecessor
                          Trustee since    advisory organizations) and New York
                          2000             Life Investment Management Holdings LLC;
                                           Executive Vice President, New York Life
                                           Insurance Company; Director, NYLIFE
                                           Distributors, Inc.; Vice Chairman and
                                           Manager, McMorgan & Company LLC;
                                           Manager, MacKay Shields LLC; Executive
                                           Vice President, New York Life Insurance
                                           and Annuity Corporation; Chairman, Chief
                                           Executive Officer, and Director,
                                           MainStay VP Series Fund, Inc. (19
                                           portfolios); Executive Vice President
                                           and Chief Investment Officer, MassMutual
                                           Life Insurance Company (1993 to 1999).
---------------------------------------------------------------------------------------------------------
Stephen C. Roussin        President,       President, Chief Operating Officer, and        45
7/12/63                   Chief            Manager, New York Life Investment
                          Executive        Management LLC (including predecessor
                          Officer, and     advisory organizations) and New York
                          Trustee since    Life Investment Management Holdings LLC;
                          1997             Senior Vice President, New York Life
                                           Insurance Company; Director, NYLIFE
                                           Securities, Inc.; Chairman and Director,
                                           NYLIFE Distributors Inc.; Manager,
                                           McMorgan & Company LLC; Chairman,
                                           President, and Trustee, Eclipse Funds,
                                           (4 portfolios); Chairman, President and
                                           Director, Eclipse Funds Inc. (14
                                           portfolios); Chairman and Trustee, New
                                           York Life Investment Management
                                           Institutional Funds (3 portfolios);
                                           Senior Vice President, Smith Barney
                                           (1994 to 1997).
---------------------------------------------------------------------------------------------------------
1 Certain Trustees are considered to be interested persons of the Trust within the meaning of the 1940 Ac
  their affiliation with New York Life Insurance Company, New York Life Investment Management LLC, MacKay
  LLC, McMorgan & Company LLC, Eclipse Funds, Eclipse Funds Inc., MainStay VP Series Fund, Inc., New York
  Investment Management Institutional Funds, NYLIFE Securities Inc., and/or NYLIFE Distributors Inc., as
  detail in the column "Principal Occupation(s) During Past Five Years."




INFORMATION ON THIS PAGE HAS NOT BEEN AUDITED.

                                                          28
                                                                                     NUMBER OF
                                                                                     PORTFOLIOS
                           POSITION(S)                                                IN FUND
                          HELD WITH FUND                                              COMPLEX
         NAME AND         AND LENGTH OF            PRINCIPAL OCCUPATION(S)            OVERSEEN    OTHER D
     DATE OF BIRTH         TIME SERVED              DURING PAST FIVE YEARS           BY TRUSTEE     HELD
---------------------------------------------------------------------------------------------------------
Harry G. Hohn             Trustee since    Retired. Chairman and Chief Executive          24      Directo
3/1/32                    1996             Officer, New York Life Insurance Company               Corpora
                                           (1990 to 1997); Chairman of the Board,
                                           Life Insurance Council of New York (1996
                                           to 1997); Director, Million Dollar
                                           Roundtable Foundation (1996 to 1997).
---------------------------------------------------------------------------------------------------------
Donald K. Ross            Trustee since    Retired. Chairman, Chief Executive             24      Manager
7/1/25                    1991             Officer, and President, New York Life                  Shields
                                           Insurance Company (1981 to 1990).
---------------------------------------------------------------------------------------------------------
NON-INTERESTED TRUSTEES
---------------------------------------------------------------------------------------------------------
Charlynn Goins            Trustee since    Retired. Consultant to U.S. Commerce           24
9/15/42                   2001             Department, Washington, DC (1998 to
                                           2000); Senior Vice President and
                                           Director of International Marketing,
                                           Prudential Mutual Funds and Annuities
                                           (1990 to 1997).
---------------------------------------------------------------------------------------------------------
Edward J. Hogan           Trustee since    Rear Admiral U.S. Navy (Retired);              24
8/17/32                   1996             Independent Management Consultant.
---------------------------------------------------------------------------------------------------------
Terry L. Lierman          Trustee since    Partner, Health Ventures LLC; Vice             24
1/4/48                    1991             Chair, Employee Health Programs;
                                           Partner, TheraCom (1994 to 2001);
                                           President, Capitol Associates, Inc.
                                           (1984 to 2001).
---------------------------------------------------------------------------------------------------------
John B. McGuckian         Trustee since    Chairman, Ulster Television Plc; Pro           24      Chairma
11/13/39                  1997             Chancellor, Queen's University (1985 to                Norther
                                           2001).                                                 Plc; No
                                                                                                  Directo
                                                                                                  Irish B
                                                                                                  Non-Exe
                                                                                                  Directo
                                                                                                  Plc (en
                                                                                                  Non-Exe
                                                                                                  Directo
                                                                                                  Contine
                                                                                                  Plc (sh
---------------------------------------------------------------------------------------------------------
Donald E. Nickelson       Trustee since    Retired. Vice Chairman, Harbour Group          24      Directo
12/9/32                   1994 and Lead    Industries, Inc. (leveraged buyout                     Carey &
                          Non-             firm).
                          Interested
                          Trustee
---------------------------------------------------------------------------------------------------------
Richard S. Trutanic       Trustee since    Managing Director, The Carlyle Group           24
2/13/52                   1994             (private investment firm); Chairman and
                                           Chief Executive Officer, Somerset Group
                                           (financial advisory firm); Senior
                                           Managing Director, Groupe Arnault
                                           (private investment firm) (1999 to
                                           2001).
---------------------------------------------------------------------------------------------------------




INFORMATION ON THIS PAGE HAS NOT BEEN AUDITED.

                                               29
                                                                                     NUMBER OF
                                                                                     PORTFOLIOS
                           POSITION(S)                                                IN FUND
                          HELD WITH FUND                                              COMPLEX
         NAME AND         AND LENGTH OF            PRINCIPAL OCCUPATION(S)            OVERSEEN    OTHER D
     DATE OF BIRTH         TIME SERVED              DURING PAST FIVE YEARS           BY TRUSTEE     HELD
---------------------------------------------------------------------------------------------------------
OFFICERS WHO ARE NOT TRUSTEES
---------------------------------------------------------------------------------------------------------
Jefferson C. Boyce        Senior Vice      Senior Managing Director, New York Life       N/A
9/17/57                   President        Investment Management LLC (including
                          since 1995       predecessor advisory organizations);
                                           Senior Vice President, New York Life
                                           Insurance Company; Senior Vice
                                           President, Eclipse Funds and Eclipse
                                           Funds Inc.; Director, NYLIFE
                                           Distributors, Inc.
---------------------------------------------------------------------------------------------------------
Patrick J. Farrell        Chief            Managing Director, New York Life              N/A
9/27/59                   Financial and    Investment Management LLC (including
                          Accounting       predecessor advisory organizations);
                          Officer,         Treasurer, Chief Financial and
                          Treasurer, and   Accounting Officer, Eclipse Funds Inc.,
                          Vice President   Eclipse Funds, MainStay VP Series Fund,
                          since 2001       Inc., and New York Life Investment
                                           Management Institutional Funds; Chief
                                           Financial Officer and Assistant
                                           Treasurer, McMorgan Funds.
---------------------------------------------------------------------------------------------------------
Robert A. Anselmi         Secretary        Senior Managing Director, General             N/A
10/19/46                  since 2001       Counsel, and Secretary, New York Life
                                           Investment Management LLC (including
                                           predecessor advisory organizations);
                                           Secretary, New York Life Investment
                                           Management Holdings LLC; Senior Vice
                                           President, New York Life Insurance
                                           Company; Vice President and Secretary,
                                           McMorgan & Company LLC; Secretary,
                                           NYLIFE Distributors, Inc.; Secretary,
                                           MainStay VP Series Fund, Inc., Eclipse
                                           Funds Inc., Eclipse Funds and New York
                                           Life Investment Management Institutional
                                           Funds; Managing Director and Senior
                                           Counsel, Lehman Brothers Inc., (October
                                           1998 to December 1999); General Counsel
                                           and Managing Director, JP Morgan
                                           Investment Management Inc. (1986 to
                                           September 1998).
---------------------------------------------------------------------------------------------------------
Richard W. Zuccaro        Tax Vice         Vice President, New York Life Insurance       N/A
12/12/49                  President        Company; Vice President, New York Life
                          since 1991       Insurance and Annuity Corporation,
                                           NYLIFE Insurance Company of Arizona,
                                           NYLIFE LLC, NYLIFE Securities Inc., and
                                           NYLIFE Distributors Inc.; Tax Vice
                                           President, New York Life International,
                                           LLC; Tax Vice President, Eclipse Funds,
                                           Eclipse Funds Inc., MainStay VP Series
                                           Fund, Inc., and New York Life Investment
                                           Management Institutional Funds.
---------------------------------------------------------------------------------------------------------




INFORMATION ON THIS PAGE HAS NOT BEEN AUDITED.

                                               30
THE MAINSTAY FUNDS

EQUITY FUNDS
MainStay Select 20 Equity Fund
MainStay Small Cap Growth Fund
MainStay Small Cap Value Fund(1)
MainStay Mid Cap Growth Fund
MainStay Capital Appreciation Fund
MainStay Blue Chip Growth Fund
MainStay Equity Index Fund(2)
MainStay U.S. Large Cap Equity Fund

EQUITY & INCOME FUNDS
MainStay Growth Opportunities Fund
MainStay Equity Income Fund
MainStay MAP Fund
MainStay Research Value Fund
MainStay Value Fund
MainStay Strategic Value Fund
MainStay Convertible Fund
MainStay Total Return Fund

INCOME FUNDS
MainStay High Yield Corporate Bond Fund
MainStay Strategic Income Fund
MainStay Government Fund
MainStay Tax Free Bond Fund
MainStay Money Market Fund

INTERNATIONAL FUNDS
MainStay International Equity Fund
MainStay Global High Yield Fund
MainStay International Bond Fund
INVESTMENT ADVISOR

NEW YORK LIFE INVESTMENT MANAGEMENT LLC
Parsippany, New Jersey

INVESTMENT SUBADVISORS

MACKAY SHIELDS LLC(3)
New York, New York

DALTON, GREINER, HARTMAN, MAHER & CO.
New York, New York

FUND ASSET MANAGEMENT, L.P.
D/B/A MERCURY ADVISORS
Plainsboro, New Jersey

GABELLI ASSET MANAGEMENT COMPANY
Rye, New York

JENNISON ASSOCIATES LLC
New York, New York

MARKSTON INTERNATIONAL, LLC
White Plains, New York
MCMORGAN & COMPANY LLC(3)
San Francisco, California


1 Closed to new investors as of December 1, 2001. 2 Closed to new purchases as of January 1, 2002. 3 An
affiliate of New York Life Investment Management LLC.

                                                    31
Trustees and Officers(1)

                         GARY E. WENDLANDT           Chairman and Trustee
                         STEPHEN C. ROUSSIN          President, Chief Executive
                                                     Officer, and Trustee
                         CHARLYNN GOINS              Trustee
                         EDWARD J. HOGAN             Trustee
                         HARRY G. HOHN               Trustee
                         TERRY L. LIERMAN            Trustee
                         JOHN B. MCGUCKIAN           Trustee
                         DONALD E. NICKELSON         Trustee
                         DONALD K. ROSS              Trustee
                         RICHARD S. TRUTANIC         Trustee
                         JEFFERSON C. BOYCE          Senior Vice President
                         PATRICK J. FARRELL          Chief Financial and
                                                     Accounting Officer,
                                                     Treasurer, and
                                                     Vice President
                         ROBERT A. ANSELMI           Secretary
                         RICHARD W. ZUCCARO          Tax Vice President




DECHERT
Legal Counsel

PRICEWATERHOUSECOOPERS LLP
Independent Accountants

1 As of December 31, 2002.

[MAINSTAY.LOGO]

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


YNot FDIC insured. Y No bank guarantee. Y May lose value.

NYLIFE DISTRIBUTORS INC.
NYLIM Center
169 Lackawanna Avenue
Parsippany, New Jersey 07054

www.mainstayfunds.com

This report may only be distributed when preceded or accompanied by a current Fund prospectus.

(C)2003 NYLIFE Distributors Inc. All rights reserved. MSG11- 02/03

                                                    07

RECYCLE.LOGO

                                     [MAINSTAY FUNDS LOGO]

MainStay(R)
Government Fund

                                           ANNUAL REPORT

                                          DECEMBER 31, 2002
[MAINSTAY.LOGO]
                Table of Contents

President's Letter                              3
$10,000 Invested in MainStay Growth
Opportunities Fund versus S&P 500(R) Index,
Russell 1000(R) Index, and Inflation--Class
A, Class B, and Class C Shares                  4
Portfolio Management Discussion and Analysis    6
Year-by-Year Performance                        7
Returns and Lipper Rankings as of 12/31/02     11
Portfolio of Investments                       12
Financial Statements                           14
Notes to Financial Statements                  20
Report of Independent Accountants              26
Trustees and Officers                          27
The MainStay(R) Funds                          30
This page intentionally left blank

                                     2
President's Letter

In many respects, 2002 was a difficult year for investors. From the start, geopolitical tensions, homeland security
concerns, corporate accounting scandals, and rising unemployment all contributed to market uncertainty. Early
hopes for a sustained economic recovery eventually gave way to more realistic expectations, and stock prices fell
to progressive lows in August and October. When all was said and done, the U.S. stock market recorded its
third consecutive annual decline--something investors had not seen in more than 60 years. International stocks
were also weak, with most developed foreign markets providing double-digit negative returns in U.S. dollar
terms.

Weakness in the equity markets increased demand for bonds--both domestic and foreign--as investors sought a
potentially "safer haven" for their assets. In the absence of a 30-year U.S. Treasury auction, longer-term Treasury
bonds were particularly strong throughout the year. Investment-grade corporate debt also provided impressive
returns, but lower-rated issues suffered from continuing credit-quality concerns.

The economy provided mixed signals, with weak business investment and relatively strong consumer spending
throughout much of the year. Low interest rates stimulated the housing market and contributed to high levels of
mortgage refinancing. Gross domestic product continued to advance, surging ahead in the third quarter of 2002,
but growing at a slower pace in the fourth quarter.

Regardless of how the markets or the economy may move, each MainStay Fund adheres to a disciplined
investment process suited to its individual investment objective. We believe that in challenging markets, consistent
application of sound investment principles makes it easier for our shareholders to understand performance and
make appropriate portfolio adjustments.

The report that follows explains the market forces and management decisions that affected your MainStay Fund
during 2002. Your registered representative can help you with any questions you may have about this report or
your MainStay investments. As you look to the future, we hope you will remain optimistic and focused on the
potential benefits of long term investing.

Sincerely,

                                            /s/ STEPHEN C. ROUSSIN
                                            Stephen C. Roussin
                                            January 2003




                                                         3
The disclosure and footnotes on the following page are an integral part of these graphs and should be carefully
read in conjunction with them.

$10,000 Invested in MainStay Growth
Opportunities Fund versus S&P 500(R) Index, Russell 1000(R) Index, and Inflation

CLASS A SHARES Total Returns: 1 Year -29.67%, Since Inception -3.10%

                                                MAINSTAY GROWTH
                                               OPPORTUNITIES FUND           S&P 500 INDEX(1)        RUSSELL 1000 INDEX(2
                                               ------------------           ----------------        --------------------
6/1/98                                               9450.00                    10000.00                  10000.00
12/98                                               11208.00                    11366.00                  11335.00
12/99                                               14533.00                    13759.00                  13706.00
12/00                                               14140.00                    12508.00                  12640.00
12/01                                               11627.00                    11022.00                  11067.00
12/02                                                8653.00                     8586.00                   8671.00




CLASS B SHARES Total Returns: 1 Year -29.82%, Since Inception -3.06%

                                                MAINSTAY GROWTH
                                               OPPORTUNITIES FUND           S&P 500 INDEX(1)        RUSSELL 1000 INDEX(2
                                               ------------------           ----------------        --------------------
6/1/98                                              10000.00                    10000.00                  10000.00
12/98                                               11800.00                    11366.00                  11335.00
12/99                                               15199.00                    13759.00                  13706.00
12/00                                               14673.00                    12508.00                  12640.00
12/01                                               11972.00                    11022.00                  11067.00
12/02                                                8670.00                     8586.00                   8671.00




CLASS C SHARES Total Returns: 1 Year -26.86%, Since Inception -2.64%

                                                MAINSTAY GROWTH
                                               OPPORTUNITIES FUND           S&P 500 INDEX(1)        RUSSELL 1000 INDEX(2
                                               ------------------           ----------------        --------------------
6/1/98                                              10000.00                    10000.00                  10000.00
12/98                                               11800.00                    11366.00                  11335.00
12/99                                               15199.00                    13759.00                  13706.00
12/00                                               14673.00                    12508.00                  12640.00
12/01                                               11972.00                    11022.00                  11067.00
12/02                                                8844.00                     8686.00                   8671.00




                                                        4
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. DUE TO MARKET
VOLATILITY, CURRENT PERFORMANCE MAY BE LESS THAN THAT SHOWN. INVESTMENT
RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND SHARES, UPON REDEMPTION, MAY
BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. Performance tables and graphs do not
reflect the deduction of taxes that a shareholder would pay on distributions or Fund-share redemptions. Total
returns reflect change in share price, reinvestment of dividend and capital gain distributions, and maximum
applicable sales charges explained in this paragraph. The graphs assume an initial investment of $10,000 and
reflect deduction of all sales charges that would have applied for the period of investment. Class A share
performance reflects the effect of the maximum 5.5% initial sales charge. Class B shares are subject to a
contingent deferred sales charge (CDSC) of up to 5% if shares are redeemed within the first six years of
purchase. Class B share performance reflects a CDSC of 2%, which would apply for the period shown. Class C
share performance includes the historical performance of the Class B shares for periods from 6/1/98 through
8/31/98. Class C shares would be subject to a CDSC of 1% if redeemed within one year of purchase.


1 "S&P 500(R)" is a trademark of The McGraw-Hill Companies, Inc. The S&P 500 Index is an unmanaged
index and is widely regarded as the standard for measuring large-cap U.S. stock market performance. Results
assume reinvestment of all income and capital gains. An investment cannot be made directly into an index.

2 The Russell 1000(R) Index is an unmanaged index that measures the performance of the 1,000 largest U.S.
companies based on total market capitalization. Results assume reinvestment of all income and capital gains. An
investment cannot be made directly into an index.

3 Inflation is measured by the Consumer Price Index (CPI), which is a commonly used measure of the rate of
inflation and shows the changes in the cost of selected goods. The rate of inflation does not represent an
investment return.

                                                       5
Portfolio Management Discussion and Analysis

In 2002, equity investors were generally disappointed by the U.S. stock market, which registered its third
consecutive year of negative returns. Overall, smaller companies tended to outperform larger ones, and value
stocks outperformed growth stocks at all capitalization levels. Still, the equity market was difficult for most
participants, as the vast majority of stocks incurred losses for the year. Sector selection proved just as
problematic, since all sectors of the market provided negative annual returns. Information technology and
telecommunication services were among the weakest sectors.

The equity market's troubles were largely the result of lackluster economic growth, despite a Federal Reserve
move to lower the cost of capital. Early in the year, many investors anticipated that low interest rates would
translate into robust corporate earnings gains. As the year progressed, however, corporate spending restraint by
risk-averse companies placed the burden of sustaining the economy squarely on the consumer.

Many homeowners refinanced their mortgages to take advantage of lower interest rates, which helped keep
consumers spending through much of the year. Eventually, however, the weak economy and a declining stock
market began to affect consumer confidence. By year-end, consumer spending had slowed, as evidenced by
weaker-than-anticipated sales during the holiday season.

The risk premium for U.S. equities went up significantly during 2002, due to economic uncertainty and
widespread concern about corporate accounting and governance. Geopolitical tensions also affected stock
prices, and risk aversion became a key investment theme as investors focused on global terrorism, homeland
security, and the potential for military engagement with Iraq.

PERFORMANCE REVIEW

For the year ended December 31, 2002, MainStay Growth Opportunities Fund returned -25.58% for Class A
shares and -26.12% for Class B and Class C shares, excluding all sales charges. All share classes
underperformed the -23.49% return of the average Lipper(1) large-cap core fund over the same period. All
share classes also underperformed the -22.10% return of the S&P 500 Index(2) and the -21.65% of the Russell
1000(R) Index(3) for the year 2002.

The Fund's relative performance was strong through the first three quarters of 2002. Poor relative performance in
the fourth quarter, however, led to disappointing annual returns. Throughout the year, the Fund was positioned
with a strong emphasis on companies with higher-quality earnings growth, but during the fourth quarter, stocks
with low-quality earnings rallied. We remain



1 See footnote and table on page 11 for more information about Lipper Inc.

2 See footnote on page 5 for more information about the S&P 500 Index.

3 See footnote on page 5 for more information about the Russell 1000 Index.

                                                         6
YEAR-BY-YEAR PERFORMANCE

CLASS A SHARES
[FUND PERFORMANCE BAR CHART-CLASS A]

                                  Year-end                      Total Return %
                                  --------                      --------------
                                  12/98                          18.60

                                  12/99                          29.67

                                  12/00                          -2.70

                                  12/01                         -17.77

                                  12/02                         -25.58




See footnote 1 on page 11 for more information on performance.

CLASS B AND CLASS C SHARES
[CLASS B AND C SHARES CHART]

                                  Year-end                      Total Return %
                                  --------                      --------------
                                  12/98                          18.00

                                  12/99                          28.80

                                  12/00                          -3.46

                                  12/01                         -18.41

                                  12/02                         -26.12




Class C share returns reflect the historical performance of the Class B shares through 8/98. See footnote 1 on
page 11 for more information on performance.

committed to focusing the portfolio on higher-quality stocks, as we do not believe that the short-term run-up in
lower-quality stocks was based on earnings fundamentals.

STRATEGY AND SECTOR ALLOCATION

Throughout most of 2002, the Fund was evenly positioned across growth and value stocks. At the start of the
year, the Fund maintained a cyclical tilt, since we expected robust economic growth. Later, when we realized that
corporate earnings disappointments and negative headlines about corporate accountability were creating selling
pressure, we adjusted the portfolio toward higher-quality

                                                        7
stocks with greater earnings visibility. Unfortunately, technical factors--spurred in part by the aggressive 50 basis
point Federal Reserve easing move November 2002--led the market to rotate toward stocks with lower-quality
earnings. Even so, the Fund's positions in the least cyclical sectors, namely health care and consumer staples,
were its best relative performers for the annual period.

The Fund's shift from an overweighted to a slightly underweighted position among cyclical issues in the consumer
discretionary sector also benefited performance. We correctly anticipated slower consumer spending during the
second half of 2002. In light of current interest-rate levels, we believe that the secular trend toward lower interest
rates that has benefited consumers over the last few decades has likely run its course. We also expect aging baby
boomers to begin to increase their savings as they approach retirement over the next decade, which may reduce
discretionary spending. During 2002, the Fund also benefited from a heavily underweighted position in the poorly
performing information technology sector.

Since we expected a stronger economy to end the Federal Reserve's accommodative cycle, we underweighted
financial stocks, which tend to underperform as interest rates rise. This decision proved to be unwise, since a
sluggish economy and a declining stock market prompted a fourth-quarter Federal Reserve easing move, which
helped financial stocks in general to outperform the S&P 500 Index.

STRONG AND WEAK PERFORMERS

Boston Scientific (+76%),(4) a maker of medical supplies used in minimally invasive surgery, was the Fund's
strongest performer for the year. The stock benefited from rising earnings expectations, based on new products
coming to the market in 2003. Defense contractor Lockheed Martin (+25%) was another strong performer,
benefiting from the U.S. government's increased emphasis on defense spending and from several new defense
contracts.

SLM (+25%), a student loan provider with strong market share, performed well when the company's lending
programs provided solid earnings gains. Avon Products (+18%), a global manufacturer and marketer of beauty
products, was able to generate strong earnings growth despite difficult currency translations from its Latin
American business. Surgical and medical supply company Stryker (+15%) saw increased demand for its
products that prompted earnings growth. Bank of America (+14%), the large banking and finance company,
outperformed primarily due to strong results from its major lines of business.

The Fund's best-performing new purchase was International Game Technology (+11%), a leading manufacturer
of casino-gaming equipment. With its strong market position, the company benefited from increasing product
demand in an expanding portion of the hotels restaurants & leisure industry. Telecommunica-



4 Unless otherwise indicated, returns are for the year ended December 31, 2002.

                                                          8
tions company Verizon performed well for the Fund during the second half of the year. It was up 20% for the
period it was held by the Fund. We repurchased it at a lower price after selling the stock during the first half of
2002. In light of our earnings expectations for the company, we believed that the stock was undervalued.

One of the Fund's most disappointing holdings was electric utility TXU (-56%). The company's international
operation deteriorated quickly, leading to a cash crunch that forced Texas Utilities to raise additional capital and
reduce its dividend. Hospital management company Tenet Healthcare (-58%) was a poor performer, primarily as
a result of its well-publicized Medicare billing scandal. Capital One Financial (-44%), a credit card provider, saw
its stock price fall as the company was forced to increase loss reserves in its loan portfolio. Intel (-50%) suffered
from weakness in the semiconductor industry, and Applied Materials (-35%) was hurt when the slowdown
affected semiconductor machinery suppliers.

In a difficult market, strict selling disciplines can be as important as strict buying criteria. The Fund sold its
holdings in cable operator Charter Communications and semiconductor manufacturer NVIDIA during the year.
Since the stocks declined 91% and 80%, respectively, after the transactions, the sale decisions were two of the
best we made for the Fund in 2002. Early in the year, we anticipated slower consumer demand and an
increasingly competitive environment and decided to sell the Fund's position in supermarket operator Kroger.
After the sale, the stock price declined by an additional 24%.

LOOKING AHEAD

We remain cautiously optimistic in our outlook for U.S. stocks. Hopefully, corporations will be able to generate
earnings growth and a sustainable economic recovery will get underway. We believe that corporate earnings
growth is likely to be gradual, as many companies are continuing to deleverage their balance sheets. While
valuations remain high in some sectors of the stock market, we believe that generally speaking, valuations have
become more reasonable. We will, of course, carefully monitor the potential conflict with Iraq and other
geopolitical events that may impact the equity market and investor sentiment going forward.

As we enter 2003, the Fund is overweighted in both the health care and consumer staples sectors due to their
superior earnings visibility. We believe that health care stocks may prosper in the new year, since a Republican
congressional majority may help to improve the regulatory environment. Many of the Fund's consumer staples
stocks should benefit from a weak U.S. dollar, given that a large percentage of their earnings come from
overseas. The Fund remains underweighted in financials, since we see little room for additional Federal Reserve
easing.

                                                          9
We would like to increase the Fund's exposure to the information technology sector, but are concerned that
current valuations are high in light of embedded earnings expectations. We will likely wait until valuations are
more in line with the equity market as a whole before we add to this sector.

Overall, we will continue to emphasize high-quality stocks with reasonable valuations and positive earnings-
growth profiles. If we have learned anything in the bear market of the last few years, it is that we should not
overestimate future earnings potential in a slow-growth economy.

We intend to increase the Fund's focus on dividends, as we closely monitor the yield of the Fund's portfolio as
compared to the S&P 500 Index. We believe that dividends will become even more important in light of
legislative proposals and the aging of baby boomers, who may ultimately rely on dividend income during their
retirement years. No matter how the economy or the markets may move, the Fund will continue to seek long-
term growth of capital, with income as a secondary consideration.

James Agostisi
Patricia S. Rossi
Portfolio Managers
New York Life Investment Management LLC

                                                         10
Returns and Lipper Rankings as of 12/31/02

                      FUND TOTAL RETURNS (WITHOUT SALES CHARGES)(1)

                                          1 YEAR              SINCE INCEPTION THROUGH 12/31/02
                Class A                  -25.58%                           -1.90%
                Class B                  -26.12%                           -2.64%
                Class C                  -26.12%                           -2.64%




                          FUND TOTAL RETURNS (WITH SALES CHARGES)(1)

                                          1 YEAR              SINCE INCEPTION THROUGH 12/31/02
                Class A                  -29.67%                           -3.10%
                Class B                  -29.82%                           -3.06%
                Class C                  -26.86%                           -2.64%




       FUND LIPPER(2) RANKINGS AND LIPPER CATEGORY RETURNS AS OF 12/31/02

                                          1 YEAR              SINCE INCEPTION THROUGH 12/31/02
               Class A             673 out of 933 funds              99 out of 534 funds
               Class B             719 out of 933 funds             144 out of 534 funds
               Class C             719 out of 933 funds             260 out of 570 funds
               Average Lipper
               large-cap core
               fund                       -23.49%                         -4.35%




   FUND PER-SHARE NET ASSET VALUES AND DISTRIBUTIONS FOR THE YEAR ENDED
                                  12/31/02

                                         NAV 12/31/02      INCOME      CAPITAL GAINS
                              Class A       $9.02          $0.0000        $0.0000
                              Class B       $8.71          $0.0000        $0.0000
                              Class C       $8.71          $0.0000        $0.0000




(1) PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. DUE TO MARKET
VOLATILITY, CURRENT PERFORMANCE MAY BE LESS THAN THAT SHOWN. INVESTMENT
RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND SHARES, UPON REDEMPTION, MAY
BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. Performance tables and graphs do not
reflect the deduction of taxes that a shareholder would pay on distributions or Fund-share redemptions. Total
returns reflect change in share price and reinvestment of all dividend and capital gain distributions.

Class A shares are sold with a maximum initial sales charge of 5.5%. Class B shares are subject to a CDSC of
up to 5% if shares are redeemed within the first six years of purchase. Class C shares are subject to a CDSC of
1% if redeemed within one year of purchase. Performance figures for this class include the historical performance
of the Class B shares for periods from the Fund's inception on 6/1/98 through 8/31/98. Performance figures for
the two classes vary after 8/31/98, based on differences in their sales charges.

(2) Lipper Inc. is an independent monitor of mutual fund performance. Rankings are based on total returns with
all dividend and capital gain distributions reinvested. Results do not reflect any deduction of sales charges. Lipper
averages listed are not class specific. Since-inception rankings reflect the performance of each share class from its
initial offering date through 12/31/02. Class A and Class B shares were first offered to the public on 6/1/98, and
Class C shares on 9/1/98. Since-inception return for the average Lipper peer fund is for the period from 6/1/98
through 12/31/02.

INFORMATION ON THIS PAGE AND THE PRECEDING PAGES HAS NOT BEEN AUDITED.
11
MainStay Growth Opportunities Fund

                                                      SHARES           VALUE
                                                    ---------------------------
                 COMMON STOCKS (96.3%)+
                 AEROSPACE & DEFENSE (3.0%)
                 General Dynamics Corp. .........     13,900       $ 1,103,243
                 Lockheed Martin Corp. ..........     22,100         1,276,275
                                                                   -----------
                                                                     2,379,518
                                                                   -----------
                 AUTOMOBILES (1.4%)
                 Harley-Davidson, Inc. ..........     24,300         1,122,660
                                                                   -----------

                 BANKS (7.8%)
                 Bank of America Corp. ..........     14,350             998,330
                 Bank One Corp. .................     34,000           1,242,700
                 Compass Bancshares, Inc. .......     12,700             397,129
                 FleetBoston Financial Corp. ....     15,700             381,510
                 KeyCorp.........................     49,900           1,254,486
                 National Commerce Financial
                  Corp. .........................     15,600           372,060
                 U.S. Bancorp....................     38,500           816,970
                 Wells Fargo & Co. ..............     13,900           651,493
                                                                   -----------
                                                                     6,114,678
                                                                   -----------
                 BEVERAGES (1.6%)
                 Anheuser-Busch Cos., Inc. ......     25,900         1,253,560
                                                                   -----------

                 BIOTECHNOLOGY (1.9%)
                 Amgen, Inc. (a).................     31,400         1,517,876
                                                                   -----------
                 CHEMICALS (2.6%)
                 E.I. du Pont de Nemours & Co. ..     21,100           894,640
                 PPG Industries, Inc. ...........     23,000         1,153,450
                                                                   -----------
                                                                     2,048,090
                                                                   -----------
                 COMMERCIAL SERVICES & SUPPLIES (1.1%)
                 First Data Corp. ...............     24,500           867,545
                                                                   -----------
                 COMMUNICATIONS EQUIPMENT (2.4%)
                 Cisco Systems, Inc. (a).........     60,900           797,790
                 Motorola, Inc. .................     39,800           344,270
                 Nokia Corp. ADR (b).............     46,600           722,300
                                                                   -----------
                                                                     1,864,360
                                                                   -----------
                 COMPUTERS & PERIPHERALS (1.1%)
                 Dell Computer Corp. (a).........     31,300           836,962
                                                                   -----------

                 DIVERSIFIED FINANCIALS (5.9%)
                 American Express Co. ...........     32,300         1,141,805
                 Citigroup, Inc. ................     34,397         1,210,430
                 Countrywide Financial Corp. ....      9,300           480,345
                 SLM Corp. ......................     17,750         1,843,515
                                                                   -----------
                                                                     4,676,095
                                                                   -----------
                 DIVERSIFIED TELECOMMUNICATION SERVICES (1.3%)
                 Verizon Communications, Inc. ...     25,900         1,003,625
                                                                   -----------



                                                      SHARES           VALUE
                                                    ---------------------------
                 ELECTRIC UTILITIES (1.0%)
                 Consolidated Edison, Inc. ......     18,900       $    809,298
                                                                                   -----------

                      ENERGY EQUIPMENT & SERVICES (1.5%)
                      Baker Hughes, Inc. .............             26,000              836,940
                      ENSCO International, Inc. ......             12,900              379,905
                                                                                   -----------
                                                                                     1,216,845
                                                                                   -----------
                      FOOD & DRUG RETAILING (2.5%)
                      CVS Corp. ......................             28,300              706,651
                      SYSCO Corp. ....................             42,500            1,266,075
                                                                                   -----------
                                                                                     1,972,726
                                                                                   -----------
                      FOOD PRODUCTS (2.6%)
                      Kellogg Co. ....................             35,900            1,230,293
                      Unilever N.V. ..................             13,800              851,598
                                                                                   -----------
                                                                                     2,081,891
                                                                                   -----------
                      HEALTH CARE EQUIPMENT & SUPPLIES (6.7%)
                      Baxter International, Inc. .....     40,800                    1,142,400
                      Boston Scientific Corp. (a).....     47,500                    2,019,700
                      Medtronic, Inc. ................     17,300                      788,880
                      Stryker Corp. ..................     19,700                    1,322,264
                                                                                   -----------
                                                                                     5,273,244
                                                                                   -----------
                      HEALTH CARE PROVIDERS & SERVICES (3.7%)
                      Anthem, Inc. (a)................     20,300                    1,276,870
                      HCA, Inc. ......................     20,000                      830,000
                      WellPoint Health Networks,
                       Inc. (a).......................     11,700                      832,572
                                                                                   -----------
                                                                                     2,939,442
                                                                                   -----------
                      HOTELS, RESTAURANTS & LEISURE (2.1%)
                      International Game
                       Technology (a).................      6,400                      485,888
                      MGM MIRAGE (a)..................     11,700                      385,749
                      Starwood Hotels & Resorts
                       Worldwide, Inc. ...............     34,600                      821,404
                                                                                   -----------
                                                                                     1,693,041
                                                                                   -----------
                      HOUSEHOLD DURABLES (1.2%)
                      Newell Rubbermaid, Inc. ........             31,400              952,362
                                                                                   -----------

                      HOUSEHOLD PRODUCTS (2.7%)
                      Colgate-Palmolive Co. ..........             18,600              975,198
                      Procter & Gamble Co. (The)......             13,800            1,185,972
                                                                                   -----------
                                                                                     2,161,170
                                                                                   -----------
                      INDUSTRIAL CONGLOMERATES (3.5%)
                      3M Co. .........................             11,700            1,442,610
                      General Electric Co. ...........             53,400            1,300,290
                                                                                   -----------
                                                                                     2,742,900
                                                                                   -----------



                           -------
                           + 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.

                                                         12
Portfolio of Investments December 31, 2002

                                                       SHARES           VALUE
                                                     ---------------------------
                  COMMON STOCKS (CONTINUED)

                  INSURANCE (3.0%)

                  Allstate Corp. (The)............     45,500       $ 1,683,045
                  American International
                   Group, Inc. ...................     12,200           705,770
                                                                    -----------
                                                                      2,388,815
                                                                    -----------
                  INTERNET & CATALOG RETAIL (0.6%)
                  eBay, Inc. (a)..................      6,700           454,394
                                                                    -----------
                  IT CONSULTING & SERVICES (1.5%)
                  Computer Sciences Corp. (a).....     12,100           416,845
                  Sungard Data Systems,
                   Inc. (a).......................     32,700           770,412
                                                                    -----------
                                                                      1,187,257
                                                                    -----------
                  MACHINERY (3.9%)
                  Eaton Corp. ....................     18,000         1,405,980
                  Illinois Tool Works, Inc. ......     13,900           901,554
                  ITT Industries, Inc. ...........     12,900           782,901
                                                                    -----------
                                                                      3,090,435
                                                                    -----------
                  MEDIA (4.0%)
                  AOL Time Warner, Inc. (a).......     51,600           675,960
                  Clear Channel Communications,
                   Inc. (a).......................     20,300           756,987
                  New York Times Co. (The) Class
                   A..............................     21,400           978,622
                  Viacom, Inc. Class B (a)........     18,500           754,060
                                                                    -----------
                                                                      3,165,629
                                                                    -----------
                  MULTILINE RETAIL (1.5%)
                  Wal-Mart Stores, Inc. ..........     23,100         1,166,781
                                                                    -----------

                  OIL & GAS (3.5%)
                  ConocoPhillips..................     18,900           914,571
                  ExxonMobil Corp. ...............     25,000           873,500
                  Occidental Petroleum Corp. .....     33,300           947,385
                                                                    -----------
                                                                      2,735,456
                                                                    -----------
                  PAPER & FOREST PRODUCTS (1.3%)
                  International Paper Co. ........     29,100         1,017,627
                                                                    -----------
                  PERSONAL PRODUCTS (1.9%)
                  Avon Products, Inc. ............     27,800         1,497,586
                                                                    -----------

                  PHARMACEUTICALS (7.3%)
                  Abbott Laboratories.............     29,100         1,164,000
                  Johnson & Johnson...............     26,300         1,412,573
                  Lilly (Eli) & Co. ..............     12,200           774,700
                  Mylan Laboratories, Inc. .......     12,300           429,270
                  Pharmacia Corp. ................     35,300         1,475,540
                  Schering-Plough Corp. ..........     21,400           475,080
                                                                    -----------
                                                                      5,731,163
                                                                    -----------



                                                     SHARES           VALUE
                                                              ---------------------------
                    REAL ESTATE (1.0%)
                    Equity Residential..............             32,400          $   796,392
                                                                                 -----------

                    ROAD & RAIL (1.3%)
                    Union Pacific Corp. ............             16,700              999,829
                                                                                 -----------

                    SEMICONDUCTOR EQUIPMENT & PRODUCTS (2.3%)
                    Applied Materials, Inc. (a).....     59,200                      771,376
                    Intel Corp. ....................     66,300                    1,032,291
                                                                                 -----------
                                                                                   1,803,667
                                                                                 -----------
                    SOFTWARE (3.2%)
                    Electronic Arts, Inc. (a).......             12,200              607,194
                    Intuit, Inc. (a)................              8,100              380,052
                    Microsoft Corp. (a).............             29,000            1,499,300
                                                                                 -----------
                                                                                   2,486,546
                                                                                 -----------
                    SPECIALTY RETAIL (2.4%)
                    AutoZone, Inc. (a)..............             14,100              996,165
                    TJX Cos., Inc. (The)............             44,200              862,784
                                                                                 -----------
                                                                                   1,858,949
                                                                                 -----------
                    Total Common Stocks
                     (Cost $79,390,556).............                              75,908,414
                                                                                 -----------
                                                              PRINCIPAL
                                                                AMOUNT
                                                              ----------
                    SHORT-TERM INVESTMENT (4.3%)

                    COMMERCIAL PAPER (4.3%)
                    UBS Finance Delaware LLC
                     1.20%, due 1/2/03..............          $3,367,000           3,366,888
                                                                                 -----------
                    Total Short-Term Investment
                     (Cost $3,366,888)..............                               3,366,888
                                                                                 -----------
                    Total Investments
                     (Cost $82,757,444) (c).........              100.6%          79,275,302(d)
                    Liabilities in Excess of Cash
                     and Other Assets...............               (0.6)            (477,388)
                                                              ----------         -----------
                    Net Assets......................              100.0%         $78,797,914
                                                              ==========         ===========



                      -------
                      (a) Non-income producing security.
                      (b) ADR-American Depositary Receipt.
                      (c) The cost for federal income tax purposes is $82,855,285.
                      (d) At December 31, 2002, net unrealized depreciation was
                           $3,579,983, based on cost for federal income tax
                           purposes. This consisted of aggregate gross unrealized
                           appreciation for all investments on which there was an
                           excess of market value over cost of $3,934,357 and
                           aggregate gross unrealized depreciation for all
                           investments on which there was an excess of cost over
                           market value of $7,514,340.




The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial
statements.

                                                         13
Statement of Assets and Liabilities as of December 31, 2002

          ASSETS:
          Investment in securities, at value (identified cost
            $82,757,444)..............................................                      $ 79,275,302
          Cash........................................................                               706
          Receivables:
            Dividends and interest....................................                           149,213
            Fund shares sold..........................................                            73,694
          Other assets................................................                             7,095
          Unamortized organization expense............................                             5,633
                                                                                            ------------
                    Total assets........................................                      79,511,643
                                                                                            ------------
          LIABILITIES:
          Payables:
            Investment securities purchased...........................                           393,565
            Fund shares redeemed......................................                            99,680
            Transfer agent............................................                            91,908
            NYLIFE Distributors.......................................                            49,493
            Manager...................................................                            36,791
            Professional..............................................                            11,232
            Custodian.................................................                             2,864
            Trustees..................................................                               940
          Accrued expenses............................................                            27,256
                                                                                            ------------
                    Total liabilities...................................                         713,729
                                                                                            ------------
          Net assets..................................................                      $ 78,797,914
                                                                                            ============
          COMPOSITION OF NET ASSETS:
          Shares of beneficial interest outstanding (par value of $.01
            per share) unlimited number of shares authorized:
            Class A...................................................                      $     31,759
            Class B...................................................                            55,623
            Class C...................................................                             1,980
          Additional paid-in capital..................................                       116,655,512
          Accumulated net realized loss on investments................                       (34,464,818)
          Net unrealized depreciation on investments..................                        (3,482,142)
                                                                                            ------------
          Net assets..................................................                      $ 78,797,914
                                                                                            ============
          CLASS A
          Net assets applicable to outstanding shares.................                      $ 28,639,304
                                                                                            ============
          Shares of beneficial interest outstanding...................                         3,175,871
                                                                                            ============
          Net asset value per share outstanding.......................                      $       9.02
          Maximum sales charge (5.50% of offering price)..............                              0.52
                                                                                            ------------
          Maximum offering price per share outstanding................                      $       9.54
                                                                                            ============
          CLASS B
          Net assets applicable to outstanding shares.................                      $ 48,434,376
                                                                                            ============
          Shares of beneficial interest outstanding...................                         5,562,251
                                                                                            ============
          Net asset value and offering price per share outstanding....                      $       8.71
                                                                                            ============
          CLASS C
          Net assets applicable to outstanding shares.................                      $ 1,724,234
                                                                                            ============
          Shares of beneficial interest outstanding...................                           198,017
                                                                                            ============
          Net asset value and offering price per share outstanding....                      $       8.71
                                                                                            ============




The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial
statements.
14
Statement of Operations for the year ended December 31, 2002

             INVESTMENT INCOME:
             Income:
               Dividends (a).............................................                $  1,270,526
               Interest..................................................                      51,684
                                                                                         ------------
                  Total income............................................                  1,322,210
                                                                                         ------------
             Expenses:
               Manager...................................................                     654,351
               Transfer agent............................................                     540,900
               Distribution--Class B.....................................                     447,840
               Distribution--Class C.....................................                      13,137
               Service--Class A..........................................                      80,038
               Service--Class B..........................................                     149,280
               Service--Class C..........................................                       4,379
               Shareholder communication.................................                      45,809
               Professional..............................................                      36,010
               Recordkeeping.............................................                      33,991
               Registration..............................................                      29,054
               Custodian.................................................                      19,514
               Amortization of organization expense......................                      13,490
               Trustees..................................................                       8,000
               Miscellaneous.............................................                      22,150
                                                                                         ------------
                  Total expenses before reimbursement.....................                  2,097,943
                Expense reimbursement from Manager........................                    (94,568)
                                                                                         ------------
                  Net expenses............................................                  2,003,375
                                                                                         ------------
             Net investment loss.........................................                    (681,165)
                                                                                         ------------
             REALIZED AND UNREALIZED LOSS ON INVESTMENTS:
             Net realized loss on investments............................                 (18,412,322)
             Net change in unrealized appreciation on investments........                  (9,712,182)
                                                                                         ------------
             Net realized and unrealized loss on investments.............                 (28,124,504)
                                                                                         ------------
             Net decrease in net assets resulting from operations........                $(28,805,669)
                                                                                         ============




(a) Dividends recorded net of foreign withholding taxes of $1,582.

The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial
statements.

                                                         15
Statement of Changes in Net Assets

                                                                                Year ended         Year ended
                                                                               December 31,       December 31,
                                                                                   2002               2001
                                                                               ------------       ------------
    DECREASE IN NET ASSETS:
    Operations:
      Net investment loss.......................................               $ (681,165)        $ (1,066,590)
      Net realized loss on investments..........................               (18,412,322)        (14,706,029)
      Net change in unrealized appreciation on investments......                (9,712,182)         (8,506,176)
                                                                               ------------       ------------
      Net decrease in net assets resulting from operations......               (28,805,669)        (24,278,795)
                                                                               ------------       ------------
    Capital share transactions:
      Net proceeds from sale of shares:
        Class A.................................................                 14,219,392          6,796,136
        Class B.................................................                  8,949,625         14,489,535
        Class C.................................................                  1,202,762            653,976
                                                                                ------------      ------------
                                                                                 24,371,779         21,939,647
      Cost of   shares redeemed:
        Class   A.................................................              (7,164,908)         (6,568,060)
        Class   B.................................................             (15,108,651)        (15,736,874)
        Class   C.................................................                (614,541)           (814,757)
                                                                               ------------       ------------
           Increase (decrease) in net assets derived from capital
            share transactions...................................                1,483,679          (1,180,044)
                                                                               ------------       ------------
          Net decrease in net assets............................               (27,321,990)        (25,458,839)
    NET ASSETS:
    Beginning of year...........................................               106,119,904         131,578,743
                                                                               ------------       ------------
    End of year.................................................               $78,797,914        $106,119,904
                                                                               ============       ============




The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial
statements.

                                                         16
This page intentionally left blank

                                     17
Financial Highlights selected per share data and ratios

                                                                                                  Class A
                                                                      ------------------------------------------------

                                                                                 Year ended December 31,
                                                                      ----------------------------------------------
                                                                       2002         2001         2000         1999
                                                                      -------      -------      -------      -------
Net asset value at beginning of period.............                   $ 12.12      $ 14.74      $ 15.37      $ 11.86
                                                                      -------      -------      -------      -------
Net investment loss (a)............................                     (0.02)       (0.05)       (0.04)       (0.02)
Net realized and unrealized gain (loss) on
  investments......................................                     (3.08)         (2.57)          (0.38)             3.54
                                                                      -------        -------         -------           -------
Total from investment operations...................                     (3.10)         (2.62)          (0.42)             3.52
                                                                      -------        -------         -------           -------
Less distributions to shareholders:
  From net realized gain on investments............                         --              --          (0.17)           (0.01)
  In excess of net realized gain on
    investments: ..................................                        --             --           (0.04)               --
                                                                      -------        -------         -------           -------
Total distributions to shareholders................                        --             --           (0.21)            (0.01)
                                                                      -------        -------         -------           -------
Net asset value at end of period...................                   $ 9.02         $ 12.12         $ 14.74           $ 15.37
                                                                      =======        =======         =======           =======
Total investment return (b)........................                    (25.58%)       (17.77%)         (2.70%)           29.67%
Ratios (to average net assets)
  Supplemental Data:
    Net investment loss............................                     (0.24%)        (0.42%)         (0.26%)           (0.16%)
    Net expenses...................................                      1.65%          1.58%           1.49%             1.59%
    Expenses (before reimbursement)................                      1.75%          1.58%           1.49%             1.59%
Portfolio turnover rate............................                       130%            95%             70%               72%
Net assets at end of period (in 000's).............                   $28,639        $31,389         $38,040           $26,214




                    *    Commencement of Operations.
                   **    Class C shares were first offered on September 1, 1998.
                    +    Annualized.
                         Per share data based on average shares outstanding during
                   (a)   the period.
                         Total return is calculated exclusive of sales charges and is
                   (b)   not annualized.
                   (c)   Less than one thousand.




The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial
statements.

                                                          18
                        Class B                                                          Class C
----------------------------------------------------               -------------------------------------------------
                                             June 1*                                                    September 1**
         Year ended December 31,             through                     Year ended December 31,           through
-------------------------------------      December 31,            ---------------------------------    December 31,
 2002        2001      2000       1999         1998                 2002      2001     2000      1999        1998
-------     -------   -------    -------   ------------            ------    ------   ------   ------   -------------
$ 11.79     $ 14.45   $ 15.19    $ 11.80     $ 10.00               $11.79    $14.45   $15.19   $11.80      $ 9.22
-------     -------   -------    -------     -------               ------    ------   ------   ------      ------
  (0.10)      (0.15)    (0.15)     (0.11)      (0.08)               (0.10)    (0.15)   (0.15)    (0.11)      (0.06)
  (2.98)      (2.51)    (0.38)      3.51        1.88                (2.98)    (2.51)   (0.38)     3.51        2.64
-------     -------   -------    -------     -------               ------    ------   ------   ------      ------
  (3.08)      (2.66)    (0.53)      3.40        1.80                (3.08)    (2.66)   (0.53)     3.40        2.58
-------     -------   -------    -------     -------               ------    ------   ------   ------      ------
      --          --    (0.17)     (0.01)         --                   --        --    (0.17)    (0.01)         --
      --          --    (0.04)         --         --                   --        --    (0.04)       --          --
-------     -------   -------    -------     -------               ------    ------   ------   ------      ------
      --          --    (0.21)     (0.01)         --                   --        --    (0.21)    (0.01)         --
-------     -------   -------    -------     -------               ------    ------   ------   ------      ------
$ 8.71      $ 11.79   $ 14.45    $ 15.19     $ 11.80               $ 8.71    $11.79   $14.45   $15.19      $11.80
=======     =======   =======    =======     =======               ======    ======   ======   ======      ======
 (26.12%) (18.41%)      (3.46%)    28.80%      18.00%              (26.12%) (18.41%) (3.46%) 28.80%          27.98%
  (0.99%)     (1.17%)   (1.01%)    (0.91%)     (1.84%)+             (0.99%) (1.17%) (1.01%) (0.91%)          (1.84%)+
   2.40%       2.33%     2.24%      2.34%       3.28%+               2.40%     2.33%    2.24%     2.34%       3.28%+
   2.50%       2.33%     2.24%      2.34%       3.28%+               2.50%     2.33%    2.24%     2.34%       3.28%+
    130%          95%       70%        72%        32%                 130%       95%      70%       72%         32%
$48,434     $73,048   $91,246    $58,937     $12,351               $1,724    $1,683   $2,293   $ 806       $    --(c)




The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial
statements.

                                                         19
MainStay Growth Opportunities Fund

NOTE 1--ORGANIZATION AND BUSINESS:

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 is comprised of twenty-four funds (collectively referred to as the "Funds").
These financial statements and notes relate only to MainStay Growth Opportunities Fund (the "Fund"), a
diversified fund.

The Fund currently offers three classes of shares. Distribution of Class A shares and Class B shares commenced
on June 1, 1998. Class C shares were initially offered on September 1, 1998. Class A shares are offered at net
asset value per share plus an initial sales charge. No sales charge applies on invest- ments 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 A shares, Class B shares and Class C shares bear the same voting (except for issues that relate
solely to one class), dividend, liquidation and other rights and conditions except that the Class B shares and Class
C shares are subject to higher distribution fee rates. Each class of shares bears distribution and/or service fee
payments under a distribution plan pursuant to Rule 12b-1 under the 1940 Act.

The Fund's investment objective is to seek long-term growth of capital, with income as a secondary
consideration.

NOTE 2--SIGNIFICANT ACCOUNTING POLICIES:

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 of the 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 of the Fund 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 number of 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 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

                                                            20
Notes to Financial Statements

not listed on the National Market System) at the closing bid price supplied through such system, (d) by appraising
over-the-counter securities not quoted on the NASDAQ system at prices supplied by a pricing agent selected by
the Fund's Manager if such prices are deemed to be representative of market values at the regular close of
business of the Exchange, and (e) by appraising all other securities and other assets, including over-the-counter
common and preferred stocks not quoted on the NASDAQ system, 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 Trust's Board of Trustees.
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 Fund's calculation of net asset values unless the Fund's Manager
deems that the particular event would materially affect the Fund's net asset value, in which case an adjustment
may be made.

ORGANIZATION COSTS. Costs incurred in connection with the Fund's initial organization and registration
totalled approximately $67,460 and are being amortized over 60 months beginning at the commencement of
operations.

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 or excise tax provision is required.

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

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 and capital gain distributions,
if any, are declared and paid annually. 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.

                                                        21
MainStay Growth Opportunities Fund

The following table discloses the current year reclassifications between accumulated net investment loss,
accumulated net realized loss on investments and paid-in-capital arising permanent differences; net assets at
December 31, 2002, are not affected.

                                                   ACCUMULATED
                               ACCUMULATED         NET REALIZED
                              NET INVESTMENT         LOSS ON           ADDITIONAL
                                   LOSS            INVESTMENTS       PAID-IN-CAPITAL
                              --------------       ------------      ---------------
                                 $681,165             $2,690            $(683,855)




The reclassifications for the Fund are primarily due to real estate investment trusts gain (loss), nondeductible
expenses (organization costs) and net operating losses.

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. Discounts and
premiums on short-term securities are accreted and amortized, respectively, on the straight line method.

EXPENSES. Expenses of the Trust are allocated to the individual Funds in proportion to the net assets of the
respective Funds when the expenses are incurred except where direct allocations of expenses can be made.

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 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 accounting principles
generally accepted in the United States of America 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.

NOTE 3--FEES AND RELATED PARTY TRANSACTIONS:

MANAGER. New York Life Investment Management LLC ("NYLIM" or the "Manager"), an indirect wholly-
owned subsidiary of New York Life, serves as the Fund's Manager. The Manager provides offices, conducts
clerical, record-keeping and bookkeeping services, and keeps most of the financial and accounting records
required for the Fund. The Manager also pays the salaries and expenses of all personnel affiliated with the Fund
and all the operational expenses that are not the responsibility of the Fund. The Fund is advised by the Manager
directly, without a Subadvisor.

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 0.70% of the Fund's average daily net assets. The Manager has

                                                         22
Notes to Financial Statements (continued)

voluntarily agreed to reimburse the expenses of the Fund to the extent that operating expenses would exceed on
an annualized basis 1.65%, 2.40% and 2.40% of the average daily net assets of the Class A, Class B and Class
C shares, respectively. For the year ended December 31, 2002, the Manager earned from the Fund $654,351
and reimbursed the Fund for $94,568.

DISTRIBUTION AND SERVICE FEES. The Trust, on behalf of the Fund, has a Distribution Agreement with
NYLIFE Distributors, Inc. ("the Distributor"), an indirect wholly-owned subsidiary of New York Life. The Fund,
with respect to each class of 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.

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.

SALES CHARGES. The Fund was advised by the Distributor that the amount of sales charges retained on sales
of Class A shares was $581 for the year ended December 31, 2002. The Fund was also advised that the
Distributor retained contingent deferred sales charges on redemptions of Class A, Class B and Class C shares of
$988, $105,472 and $1,440, respectively, for the year ended December 31, 2002.

TRANSFER, DIVIDEND DISBURSING AND SHAREHOLDER SERVICING AGENT. NYLIM Service
Company LLC, ("NYLIM Service"), an affiliate of NYLIM, is the Fund's transfer, dividend disbursing and
shareholder servicing agent. NYLIM Service has entered into an agreement with Boston Financial Data Services
("BFDS") pursuant to which BFDS will perform certain of the services for which NYLIM Service is responsible.
Transfer agent expenses accrued to NYLIM Service for the year ended December 31, 2002, amounted to
$540,900.

TRUSTEES FEES. Trustees, other than those currently affiliated with NYLIM, are paid an annual fee of
$45,000, $2,000 for each Board meeting, $1,000 for each Committee meeting and $500 for each Valuation
Subcommittee telephonic meeting attended plus reimbursement for travel and out-of-pocket expenses. The Lead
Non-Interested 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.

                                                        23
MainStay Growth Opportunities Fund

CAPITAL. At December 31, 2002, New York Life held shares of Class A with a net asset value of
$8,240,807. This represents 28.8% of the Class A net assets at year end.

OTHER. Fees for the cost of legal services, included in Professional fees as shown on the Statement of
Operations, provided to the Fund by the Office of General Counsel of NYLIM amounted to $1,801 for the year
ended December 31, 2002.

The Fund pays the Manager a monthly fee for recordkeeping services provided under the Accounting Agreement
at the annual rate of 1/20 of 1% for the first $20 million of average monthly net assets, 1/30 of 1% of the next
$80 million of average monthly net assets and 1/100 of 1% of any amount in excess of $100 million of average
monthly net assets. Fees for recordkeeping services provided to the Fund by the Manager amounted to $33,991
for the year ended December 31, 2002.

NOTE 4--FEDERAL INCOME TAX:

As of December 31, 2002, the components of accumulated loss on a tax basis were as follows:

                          ACCUMULATED CAPITAL         UNREALIZED        TOTAL ACCUMULATED
                           AND OTHER LOSSES          DEPRECIATION             LOSS
                          -------------------        ------------       -----------------
                             $(30,869,217)           $(3,579,983)         $(34,449,200)




The difference between book-basis and tax-basis unrealized depreciation is primarily due to wash sales deferrals.

At December 31, 2002, for federal income tax purposes, capital loss carryforwards of $30,869,217 were
available as shown in the table below, to the extent provided by the regulations to offset future realized gains
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.

                         CAPITAL LOSS                                                        AMOUNT
                      AVAILABLE THROUGH                                                      (000'S)
                 ------------------------------------------------------------                -------
                      2009...................................................                $14,676
                      2010...................................................                 16,193
                                                                                             -------
                                                                                             $30,869




In addition, the Fund intends to elect to treat for federal income tax purposes $3,497,760 of qualifying capital
losses that arose after October 31, 2002 as if they arose on January 1, 2003.

NOTE 5--PURCHASES AND SALES OF SECURITIES (IN 000'S):

During the year ended December 31, 2002, purchases and sales of securities, other than short-term securities,
were $117,535 and $117,078, respectively.

                                                          24
Notes to Financial Statements (continued)

NOTE 6--LINE OF CREDIT:

The Fund and certain affiliated funds maintain a line of credit of $160,000,000 with a syndicate of banks in order
to secure a source of funds for temporary purposes to meet unanticipated or excessive share- holder redemption
requests. The funds pay a commitment fee, at an annual rate of .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 among 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, 2002.

NOTE 7--CAPITAL SHARE TRANSACTIONS (IN 000'S):

                                                                 YEAR ENDED                              YEAR ENDED
                                                              DECEMBER 31, 2002                       DECEMBER 31, 2001
                                                         ---------------------------            ------------------------
                                                         CLASS A   CLASS B   CLASS C            CLASS A    CLASS B   CLAS
                                                         -------   -------   -------            -------    -------   ----
Shares sold...................................            1,271       891       118               534       1,152        5
Shares redeemed...............................             (685)   (1,523)      (63)             (525)     (1,273)      (6
                                                          -----    ------       ---              ----      ------       --
Net increase (decrease).......................              586      (632)       55                 9        (121)      (1
                                                          =====    ======       ===              ====      ======       ==




                                                       25
Report of Independent Accountants

To the Board of Trustees of The MainStay Funds and Shareholders of MainStay Growth Opportunities 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 Growth Opportunities Fund (one of the funds constituting
The MainStay Funds, hereafter referred to as the "Fund") at December 31, 2002, the results of its operations for
the year then ended, 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, 2002 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, 2003

                                                         26
Trustees and Officers

Following are the Trustees and Officers of The MainStay Funds, along with a brief description of their principal
occupations during the past five years.

Each Trustee serves until his/her successor is elected and qualified or until his/her resignation, death, or removal.
Officers serve a term of one year and are elected annually by the Trustees.

The business address of each Trustee and Officer is 51 Madison Avenue, New York, New York 10010.

                                                                                     NUMBER OF
                                                                                     PORTFOLIOS
                           POSITION(S)                                                IN FUND
                          HELD WITH FUND                                              COMPLEX
        NAME AND          AND LENGTH OF            PRINCIPAL OCCUPATION(S)            OVERSEEN    OTHER D
     DATE OF BIRTH         TIME SERVED              DURING PAST FIVE YEARS           BY TRUSTEE     HELD
---------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEES(1)
---------------------------------------------------------------------------------------------------------
Gary E. Wendlandt         Chairman since   Chief Executive Officer, Chairman, and         43
10/8/50                   January 1,       Manager, New York Life Investment
                          2002, and        Management LLC (including predecessor
                          Trustee since    advisory organizations) and New York
                          2000             Life Investment Management Holdings LLC;
                                           Executive Vice President, New York Life
                                           Insurance Company; Director, NYLIFE
                                           Distributors, Inc.; Vice Chairman and
                                           Manager, McMorgan & Company LLC;
                                           Manager, MacKay Shields LLC; Executive
                                           Vice President, New York Life Insurance
                                           and Annuity Corporation; Chairman, Chief
                                           Executive Officer, and Director,
                                           MainStay VP Series Fund, Inc. (19
                                           portfolios); Executive Vice President
                                           and Chief Investment Officer, MassMutual
                                           Life Insurance Company (1993 to 1999).
---------------------------------------------------------------------------------------------------------
Stephen C. Roussin        President,       President, Chief Operating Officer, and        45
7/12/63                   Chief            Manager, New York Life Investment
                          Executive        Management LLC (including predecessor
                          Officer, and     advisory organizations) and New York
                          Trustee since    Life Investment Management Holdings LLC;
                          1997             Senior Vice President, New York Life
                                           Insurance Company; Director, NYLIFE
                                           Securities, Inc.; Chairman and Director,
                                           NYLIFE Distributors Inc.; Manager,
                                           McMorgan & Company LLC; Chairman,
                                           President, and Trustee, Eclipse Funds,
                                           (4 portfolios); Chairman, President and
                                           Director, Eclipse Funds Inc. (14
                                           portfolios); Chairman and Trustee, New
                                           York Life Investment Management
                                           Institutional Funds (3 portfolios);
                                           Senior Vice President, Smith Barney
                                           (1994 to 1997).
---------------------------------------------------------------------------------------------------------
1 Certain Trustees are considered to be interested persons of the Trust within the meaning of the 1940 Ac
  their affiliation with New York Life Insurance Company, New York Life Investment Management LLC, MacKay
  LLC, McMorgan & Company LLC, Eclipse Funds, Eclipse Funds Inc., MainStay VP Series Fund, Inc., New York
  Investment Management Institutional Funds, NYLIFE Securities Inc., and/or NYLIFE Distributors Inc., as
  detail in the column "Principal Occupation(s) During Past Five Years."




INFORMATION ON THIS PAGE HAS NOT BEEN AUDITED.

                                                          27
                                                                                     NUMBER OF
                                                                                     PORTFOLIOS
                           POSITION(S)                                                IN FUND
                          HELD WITH FUND                                              COMPLEX
         NAME AND         AND LENGTH OF            PRINCIPAL OCCUPATION(S)            OVERSEEN    OTHER D
     DATE OF BIRTH         TIME SERVED              DURING PAST FIVE YEARS           BY TRUSTEE     HELD
---------------------------------------------------------------------------------------------------------
Harry G. Hohn             Trustee since    Retired. Chairman and Chief Executive          24      Directo
3/1/32                    1996             Officer, New York Life Insurance Company               Corpora
                                           (1990 to 1997); Chairman of the Board,
                                           Life Insurance Council of New York (1996
                                           to 1997); Director, Million Dollar
                                           Roundtable Foundation (1996 to 1997).
---------------------------------------------------------------------------------------------------------
Donald K. Ross            Trustee since    Retired. Chairman, Chief Executive             24      Manager
7/1/25                    1991             Officer, and President, New York Life                  Shields
                                           Insurance Company (1981 to 1990).
---------------------------------------------------------------------------------------------------------
NON-INTERESTED TRUSTEES
---------------------------------------------------------------------------------------------------------
Charlynn Goins            Trustee since    Retired. Consultant to U.S. Commerce           24
9/15/42                   2001             Department, Washington, DC (1998 to
                                           2000); Senior Vice President and
                                           Director of International Marketing,
                                           Prudential Mutual Funds and Annuities
                                           (1990 to 1997).
---------------------------------------------------------------------------------------------------------
Edward J. Hogan           Trustee since    Rear Admiral U.S. Navy (Retired);              24
8/17/32                   1996             Independent Management Consultant.
---------------------------------------------------------------------------------------------------------
Terry L. Lierman          Trustee since    Partner, Health Ventures LLC; Vice             24
1/4/48                    1991             Chair, Employee Health Programs;
                                           Partner, TheraCom (1994 to 2001);
                                           President, Capitol Associates, Inc.
                                           (1984 to 2001).
---------------------------------------------------------------------------------------------------------
John B. McGuckian         Trustee since    Chairman, Ulster Television Plc; Pro           24      Chairma
11/13/39                  1997             Chancellor, Queen's University (1985 to                Norther
                                           2001).                                                 Plc; No
                                                                                                  Directo
                                                                                                  Irish B
                                                                                                  Non-Exe
                                                                                                  Directo
                                                                                                  Plc (en
                                                                                                  Non-Exe
                                                                                                  Directo
                                                                                                  Contine
                                                                                                  Plc (sh
---------------------------------------------------------------------------------------------------------
Donald E. Nickelson       Trustee since    Retired. Vice Chairman, Harbour Group          24      Directo
12/9/32                   1994 and Lead    Industries, Inc. (leveraged buyout                     Carey &
                          Non-             firm).
                          Interested
                          Trustee
---------------------------------------------------------------------------------------------------------
Richard S. Trutanic       Trustee since    Managing Director, The Carlyle Group           24
2/13/52                   1994             (private investment firm); Chairman and
                                           Chief Executive Officer, Somerset Group
                                           (financial advisory firm); Senior
                                           Managing Director, Groupe Arnault
                                           (private investment firm) (1999 to
                                           2001).
---------------------------------------------------------------------------------------------------------




INFORMATION ON THIS PAGE HAS NOT BEEN AUDITED.

                                               28
                                                                                     NUMBER OF
                                                                                     PORTFOLIOS
                           POSITION(S)                                                IN FUND
                          HELD WITH FUND                                              COMPLEX
         NAME AND         AND LENGTH OF            PRINCIPAL OCCUPATION(S)            OVERSEEN    OTHER D
     DATE OF BIRTH         TIME SERVED              DURING PAST FIVE YEARS           BY TRUSTEE     HELD
---------------------------------------------------------------------------------------------------------
OFFICERS WHO ARE NOT TRUSTEES
---------------------------------------------------------------------------------------------------------
Jefferson C. Boyce        Senior Vice      Senior Managing Director, New York Life       N/A
9/17/57                   President        Investment Management LLC (including
                          since 1995       predecessor advisory organizations);
                                           Senior Vice President, New York Life
                                           Insurance Company; Senior Vice
                                           President, Eclipse Funds and Eclipse
                                           Funds Inc.; Director, NYLIFE
                                           Distributors, Inc.
---------------------------------------------------------------------------------------------------------
Patrick J. Farrell        Chief            Managing Director, New York Life              N/A
9/27/59                   Financial and    Investment Management LLC (including
                          Accounting       predecessor advisory organizations);
                          Officer,         Treasurer, Chief Financial and
                          Treasurer, and   Accounting Officer, Eclipse Funds Inc.,
                          Vice President   Eclipse Funds, MainStay VP Series Fund,
                          since 2001       Inc., and New York Life Investment
                                           Management Institutional Funds; Chief
                                           Financial Officer and Assistant
                                           Treasurer, McMorgan Funds.
---------------------------------------------------------------------------------------------------------
Robert A. Anselmi         Secretary        Senior Managing Director, General             N/A
10/19/46                  since 2001       Counsel, and Secretary, New York Life
                                           Investment Management LLC (including
                                           predecessor advisory organizations);
                                           Secretary, New York Life Investment
                                           Management Holdings LLC; Senior Vice
                                           President, New York Life Insurance
                                           Company; Vice President and Secretary,
                                           McMorgan & Company LLC; Secretary,
                                           NYLIFE Distributors, Inc.; Secretary,
                                           MainStay VP Series Fund, Inc., Eclipse
                                           Funds Inc., Eclipse Funds and New York
                                           Life Investment Management Institutional
                                           Funds; Managing Director and Senior
                                           Counsel, Lehman Brothers Inc., (October
                                           1998 to December 1999); General Counsel
                                           and Managing Director, JP Morgan
                                           Investment Management Inc. (1986 to
                                           September 1998).
---------------------------------------------------------------------------------------------------------
Richard W. Zuccaro        Tax Vice         Vice President, New York Life Insurance       N/A
12/12/49                  President        Company; Vice President, New York Life
                          since 1991       Insurance and Annuity Corporation,
                                           NYLIFE Insurance Company of Arizona,
                                           NYLIFE LLC, NYLIFE Securities Inc., and
                                           NYLIFE Distributors Inc.; Tax Vice
                                           President, New York Life International,
                                           LLC; Tax Vice President, Eclipse Funds,
                                           Eclipse Funds Inc., MainStay VP Series
                                           Fund, Inc., and New York Life Investment
                                           Management Institutional Funds.
---------------------------------------------------------------------------------------------------------




INFORMATION ON THIS PAGE HAS NOT BEEN AUDITED.

                                               29
THE MAINSTAY FUNDS

EQUITY FUNDS
MainStay Select 20 Equity Fund
MainStay Small Cap Growth Fund
MainStay Small Cap Value Fund(1)
MainStay Mid Cap Growth Fund
MainStay Capital Appreciation Fund
MainStay Blue Chip Growth Fund
MainStay Equity Index Fund(2)
MainStay U.S. Large Cap Equity Fund

EQUITY & INCOME FUNDS
MainStay Growth Opportunities Fund
MainStay Equity Income Fund
MainStay MAP Fund
MainStay Research Value Fund
MainStay Value Fund
MainStay Strategic Value Fund
MainStay Convertible Fund
MainStay Total Return Fund

INCOME FUNDS
MainStay High Yield Corporate Bond Fund
MainStay Strategic Income Fund
MainStay Government Fund
MainStay Tax Free Bond Fund
MainStay Money Market Fund

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

INVESTMENT ADVISOR

NEW YORK LIFE INVESTMENT MANAGEMENT LLC
Parsippany, New Jersey

INVESTMENT SUBADVISORS

MACKAY SHIELDS LLC(3)
New York, New York

DALTON, GREINER, HARTMAN, MAHER & CO.
New York, New York

FUND ASSET MANAGEMENT, L.P.
d/b/a Mercury Advisors
Plainsboro, New Jersey

GABELLI ASSET MANAGEMENT COMPANY
Rye, New York

JENNISON ASSOCIATES LLC
New York, New York

MARKSTON INTERNATIONAL, LLC
White Plains, New York

MCMORGAN & COMPANY LLC(3)
San Francisco, California


1 Closed to new investors as of December 1, 2001. 2 Closed to new purchases as of January 1, 2002. 3 An
affiliate of New York Life Investment Management LLC.

                                                    30
Trustees and Officers(1)

                         GARY E. WENDLANDT             Chairman and Trustee
                         STEPHEN C. ROUSSIN            President, Chief Executive
                                                       Officer, and Trustee
                         CHARLYNN GOINS                Trustee
                         EDWARD J. HOGAN               Trustee
                         HARRY G. HOHN                 Trustee
                         TERRY L. LIERMAN              Trustee
                         JOHN B. MCGUCKIAN             Trustee
                         DONALD E. NICKELSON           Trustee
                         DONALD K. ROSS                Trustee
                         RICHARD S. TRUTANIC           Trustee
                         JEFFERSON C. BOYCE            Senior Vice President
                         PATRICK J. FARRELL            Chief Financial and
                                                       Accounting Officer,
                                                       Treasurer, and
                                                       Vice President
                         ROBERT A. ANSELMI             Secretary
                         RICHARD W. ZUCCARO            Tax Vice President




DECHERT
Legal Counsel

PRICEWATERHOUSECOOPERS LLP
Independent Accountants
1 As of December 31, 2002.

[MAINSTAY.LOGO]

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


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

NYLIFE DISTRIBUTORS INC.
NYLIM Center
169 Lackawanna Avenue
Parsippany, New Jersey 07054
www.mainstayfunds.com

This report may only be distributed when preceded or accompanied by a current Fund prospectus.

(C)2003 NYLIFE Distributors Inc. All rights reserved. MSGP11- 02/03

                                                    21

RECYCLE.LOGO

                                     [MAINSTAY FUNDS LOGO]

                                MainStay(R) Growth Opportunities Fund

                                           ANNUAL REPORT

                                          DECEMBER 31, 2002

                                          [MAINSTAY.LOGO]
                Table of Contents

President's Letter                              3




$10,000 Invested in MainStay High Yield
Corporate Bond Fund versus Credit Suisse
First Boston(TM) High Yield Index and
Inflation--Class A, Class B, and Class C
Shares                                          4




Portfolio Management Discussion and Analysis    5




Year-by-Year Performance                        6




Returns and Lipper Rankings as of 12/31/02     11




Portfolio of Investments                       12




Financial Statements                           25




Notes to Financial Statements                  30




Report of Independent Accountants              43




Trustees and Officers                          44




The MainStay(R) Funds                          47
This page intentionally left blank

                                     2
President's Letter

In many respects, 2002 was a difficult year for investors. From the start, geopolitical tensions, homeland security
concerns, corporate accounting scandals, and rising unemployment all contributed to market uncertainty. Early
hopes for a sustained economic recovery eventually gave way to more realistic expectations, and stock prices fell
to progressive lows in August and October. When all was said and done, the U.S. stock market recorded its
third consecutive annual decline--something investors had not seen in more than 60 years. International stocks
were also weak, with most developed foreign markets providing double-digit negative returns in U.S. dollar
terms.

Weakness in the equity markets increased demand for bonds--both domestic and foreign--as investors sought a
potentially "safer haven" for their assets. In the absence of a 30-year U.S. Treasury auction, longer-term Treasury
bonds were particularly strong throughout the year. Investment-grade corporate debt also provided impressive
returns, but lower-rated issues suffered from continuing credit-quality concerns.

The economy provided mixed signals, with weak business investment and relatively strong consumer spending
throughout much of the year. Low interest rates stimulated the housing market and contributed to high levels of
mortgage refinancing. Gross domestic product continued to advance, surging ahead in the third quarter of 2002,
but growing at a slower pace in the fourth quarter.

Regardless of how the markets or the economy may move, each MainStay Fund adheres to a disciplined
investment process suited to its individual investment objective. We believe that
in challenging markets, consistent application of sound investment principles makes it
easier for our shareholders to understand performance and make appropriate portfolio
adjustments.

The report that follows explains the market forces and management decisions that affected your MainStay Fund
during 2002. Your registered representative can help you with any questions you may have about this report or
your MainStay investments. As you look to the future, we hope you will remain optimistic and focused on the
potential benefits of long- term investing.

Sincerely,

                                            /s/ STEPHEN C. ROUSSIN
                                            Stephen C. Roussin
                                            January 2003




                                                         3
$10,000 Invested in MainStay High Yield
Corporate Bond Fund versus Credit Suisse First Boston(TM) High Yield Index and Inflation

CLASS A SHARES Total Returns: 1 Year -5.24%, 5 Years 0.45%, 10 Years 7.08%

[Class A Shares LINE GRAPH]

                                                          MAINSTAY HIGH YIELD          CREDIT SUISSE FIRST BOSTON
                                                          CORPORATE BOND FUND             HIGH YIELD INDEX(1)
                                                          -------------------          --------------------------
12/92                                                           9550.00                         10000.00
12/93                                                          11618.00                         11891.00
12/94                                                          11792.00                         11775.00
12/95                                                          14183.00                         13822.00
12/96                                                          16499.00                         15539.00
12/97                                                          18513.00                         17501.00
12/98                                                          18896.00                         17603.00
12/99                                                          20848.00                         18180.00
12/00                                                          19496.00                         17233.00
12/01                                                          19982.00                         18230.00
12/02                                                          19827.00                         18782.00




CLASS B AND CLASS C SHARES
Class B Total Returns: 1 Year -5.99%, 5 Years 0.38%, 10 Years 6.99% Class C Total Returns: 1 Year -
2.43%, 5 Years 0.62%, 10 Years 6.99%
[Class B Shares LINE GRAPH]

                                                          MAINSTAY HIGH YIELD          CREDIT SUISSE FIRST BOSTON
                                                          CORPORATE BOND FUND             HIGH YIELD INDEX(1)
                                                          -------------------          --------------------------
12/92                                                            10000                           10000
12/93                                                            12165                           11891
12/94                                                            12347                           11775
12/95                                                            14781                           13822
12/96                                                            17084                           15539
12/97                                                            19057                           17501
12/98                                                            19306                           17603
12/99                                                            21143                           18180
12/00                                                            19621                           17233
12/01                                                            19959                           18230
12/02                                                            19652                           18782




PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. DUE TO MARKET
VOLATILITY, CURRENT PERFORMANCE MAY BE LESS THAN THAT SHOWN. INVESTMENT
RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND SHARES UPON REDEMPTION MAY
BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. Performance tables and graphs do not
reflect the deduction of taxes that a shareholder would pay on distributions or Fund-share redemptions. Total
returns reflect change in share price, reinvestment of dividend and capital gain distributions, and maximum
applicable sales charges explained in this paragraph. Performance figures reflect certain fee waivers and/or
expense limitations, without which total return figures may have been lower. Fee waivers and/or expense
limitations are voluntary and may be discontinued at any time. The graphs assume an initial investment of $10,000
and reflect deduction of all sales charges that would have applied for the period of investment. Class A share
performance reflects the effect of the maximum 4.5% initial sales charge and includes the historical performance
of the Class B shares for periods from the Fund's inception on 5/1/86 through 12/31/94. Performance figures for
the two classes vary after 12/41/94 based on differences in their sales charges and expense structures. Class C
share performance includes the historical performance of the Class B shares for periods from the Fund's inception
on 5/1/86 through 8/31/98. Class B shares would be subject to a contingent deferred sales charge (CDSC) of up
to 5% if redeemed within the first six years of purchase, and Class C shares would be subject to a CDSC of 1%
if redeemed within one year of purchase.

1 The Credit Suisse First Boston(TM) High Yield Index is an unmanaged, market-weighted index that includes
publicly traded bonds rated below BBB by Standard & Poor's and Baa by Moody's. Results assume
reinvestment of all income and capital gains. An investment cannot be made directly into an index.

2 Inflation is measured by the Consumer Price Index (CPI), which is a commonly used measure of the rate of
inflation and shows the changes in the cost of selected goods. The rate of inflation does not represent an
investment return.

                                                        4
Portfolio Management Discussion and Analysis

Although 2002 was generally a positive year for income investors, most of the advances were in high-grade
sectors. A broad sell-off in the stock market during the second and third quarters led to a flight to quality.
Although U.S. Treasuries and investment-grade bonds enjoyed strong returns, high-yield bonds had more modest
results.

Early high-yield gains were largely offset when corporate accounting scandals and other misconduct captured
headlines later in the period. As the Enron debacle continued to unwind, WorldCom, Qwest, Adelphia
Communications, and Xerox all suffered major setbacks. Although the accounting problems were company-
specific, the fallout was widespread, as investors began to question the accuracy and transparency of financial
statements issued by American corporations.

The third quarter saw Treasury securities rise by 11.1% and the S&P 500(R) Index(1) drop by 17.3%. In an
attempt to stabilize both the economy and the markets, the Federal Reserve took action in November, reducing
the targeted federal funds rate by 50 basis points to an unusually low 1.25%. The stock market responded
favorably, and several sectors that had been particularly weak during most of the year staged strong recoveries.
High-yield bonds, which often tend to track equity results, also rallied in the fourth quarter of 2002.

PERFORMANCE REVIEW

For the year ended December 31, 2002, MainStay High Yield Corporate Bond Fund returned -0.78% for Class
A shares and -1.53% for Class B and Class C shares, excluding all sales charges. All share classes outperformed
the -1.76% return of the average Lipper(2) high current yield fund over the same period. All share classes
underperformed the 3.01% return of the Credit Suisse First Boston(TM) High Yield Index(3) for the year ended
December 31, 2002.

The Fund saw strong performance in the nondurable segments of the consumer discretionary sector, including
several companies in the hotels restaurants & leisure industry. Media companies with diversified interests also
contributed positively to the Fund's performance. The Fund's weakest performing sectors for 2002 included
telecommunication services and utilities. Companies in broadcasting and cable TV also detracted from the Fund's
overall performance.

STRONG AND WEAK PERFORMERS
Over the course of 2002, the Fund's strongest-performing holdings included Medaphis, Crown Cork & Seal,
Alaris Medical, and Sovereign Bank. Each of these companies benefited from strong operations, positive cash
flow, and an

------- 5
1 "S&P 500(R)" is a trademark of the McGraw-Hill Companies, Inc. The S&P 500 is an unmanaged index and
is widely regarded as the standard for measuring large-cap U.S. stock market performance. Results assume
reinvestment of all income and capital gains. An investment cannot be made directly into an index. 2 See footnote
and table on page 11 for more information about Lipper Inc. 3 See footnote on page 4 for more information
about the Credit Suisse First Boston High Yield Index.
YEAR-BY-YEAR PERFORMANCE

CLASS A SHARES
[CLASS A SHARES LINE GRAPH]

Year-end                                                                                CLASS A SHARES
                                                                                  --------------------------
12/92                                                                                        21.65
12/93                                                                                        21.65
12/94                                                                                         1.50
12/95                                                                                        20.28
12/96                                                                                        16.33
12/97                                                                                        12.20
12/98                                                                                         2.07
12/99                                                                                        10.33
12/00                                                                                        -6.48
12/01                                                                                         2.49
12/02                                                                                        -0.78




Returns reflect the historical performance of the Class B shares through 12/94. See footnote 1 on page 11 for
more information on performance.

CLASS B AND CLASS C SHARES
[CLASS B SHARES LINE GRAPH]

Year-end                                                                          CLASS B AND CLASS C SHARES
-----                                                                             --------------------------
12/92                                                                                        21.65
12/93                                                                                        21.65
12/94                                                                                         1.50
12/95                                                                                        19.71
12/96                                                                                        15.58
12/97                                                                                        11.55
12/98                                                                                         1.31
12/99                                                                                         9.51
12/00                                                                                        -7.20
12/01                                                                                         1.72
12/02                                                                                        -1.53




Class C share returns reflect the historical performance of the Class B shares through 8/98. See footnote 1 on
page 11 for more information on performance.

improving outlook. Medaphis, a leading provider of billing services to physicians, saw improvements in its core
physician's service business. Crown Cork & Seal benefited by raising prices, reducing working capital, and
paying off debt that was nearing maturity. Alaris Medical successfully launched a new line of products that was
well received in the marketplace. The company also completed a refinancing that alleviated investor concerns.
Sovereign Bank benefited from low interest rates, which prompted high levels of mortgage origination and
refinancing.

                                                        6
Not all of the Fund's holdings had such positive results. Among the Fund's weakest holdings were Adelphia
Communications, Charter Communications, and PG&E National Energy Group. Adelphia Communications
bonds suffered from a liquidity crisis when accounting fraud and other forms of misconduct were discovered.
Charter Communications was caught in the downdraft that followed. PG&E National Energy Group's debt
traded sharply downward when merchant-power prices collapsed during the company's massive construction
program. With earnings and cash flow declining, the company lost its investment-grade rating in August 2002,
then shocked the credit markets by disclosing over $2 billion of potential contingent liabilities that were triggered
by the rating downgrades. The company plans to restructure.

OTHER STRATEGIC POSITIONING

Airlines were relatively strong early in the year, but the Fund's holdings in Delta Air Lines and Northwest came
under pressure in August when US Airways filed for bankruptcy and financial problems came to light at UAL.
We believe that Delta can still benefit from its low cost structure relative to other major carriers and that
Northwest has strength in both its young fleet and its attractive routes.

The hotels restaurants & leisure industry provided solid returns throughout most of 2002, with strong
performance from Hilton Hotels, Hollywood Park, Venetian Casino, Pinnacle Entertainment, and Vail Resorts,
among others. Health care holdings performed well in the first half, with strong performances from HCA, Manor
Care, and Team Health. By year-end, two of the Fund's health care holdings were among its top performers, and
several had contributed positively to the Fund's performance for 2002.

Utilities suffered through much of 2002, and an overweighted position in the sector detracted from the Fund's
performance. Among the Fund's utility holdings were AES, Mirant, Calpine, and Western Resources. Although
some of the setbacks during the year were severe, we believe that eventually the market will realize the
opportunities that have been created by lower valuations.

The Fund had holdings in a number of energy companies during 2002, and values fluctuated over the course of
the year as geopolitical tensions and other factors shaped energy prices and demand. Among the Fund's positions
were Comstock Resources, El Paso, Parker Drilling, Plains Exploration & Production, and Vintage Petroleum. In
the fourth quarter of 2002, the Fund's energy holdings generally provided lackluster performance. Petroleum Geo
Services, an oil services company, suffered from weak prices and high leverage. Although the company was
unable to complete a deleveraging merger with Veritas, we expect the company to either sell assets or otherwise
restructure to improve its debt coverage.

                                                          7
Telecommunication services holdings were generally weak through most of 2002. Although the Fund did not own
WorldCom bonds, it held positions in Qwest, Sprint, AT&T Wireless, Millicom International, and US Unwired,
all of which suffered during the first half of the year. The Fund's telecommunications holdings revived in the
second half of 2002 and were among the Fund's strongest holdings in the fourth quarter when the market became
more accepting of risk. Qwest Communications, which was the Fund's largest holding as of December 31, 2002,
made a positive contribution to performance as efforts to repair the company's balance sheet and build asset
coverage for bondholders were recognized by the market. Some of the Fund's holdings in the wireless
telecommunication services industry were particularly strong as the year came to a close.

In the fourth quarter, information technology stocks showed a substantial turnaround, but high-yield bonds of
information technology companies continued to lag as the poor economy continued to drag on cash flows.
Several investment-grade information technology companies traded at high-yield valuations well in advance of
downgrades to high-yield status. The Fund's investments in Avaya, Nortel, and Lucent were penalized along with
the industry, but we believe these issuers are managing their cash flows better and are positioned to benefit when
the economy begins to recover in earnest.

SIGNIFICANT PURCHASES AND SALES

Significant purchases for the year included: Qwest, FrontierVision, Owens- Brockway Glass, Pacific Gas &
Electric, and Vintage Petroleum. Most of these purchases had a positive impact on the Fund's performance for
the period the securities were held in the Fund. Although FrontierVision was in default at year-end, we believe
that the Fund may be able to recover some of the value of its position.

Significant sales for the year included Paxson, Regional Independent Media, Great Central Mines, PSEG Energy
Holdings, and Crown Cork & Seal. Each of these holdings benefited the Fund's performance during the period
the securities were held in the Fund.

LOOKING AHEAD

The prospects for the economy remain somewhat uncertain. With higher unemployment and increasing personal
debt, it's possible that consumer spending could weaken, making it difficult to maintain a robust economy. On the
other hand, consumers have proven resilient over time, and the housing market is holding up reasonably well. As
we move into 2003, the high-yield asset class is experiencing positive in-flows. Since many corporations have

                                                        8
reduced their spending and many individual investors have been sitting on the sidelines, there may be more
investment capital available than recent performance may suggest.

Barring a protracted global recession, we continue to see high-yield corporate bonds as an attractive investment.
Yield spreads remain at historically wide levels. Unless the economy goes back into a recession, default rates
should continue to decline from their recent highs. Whatever the markets or the economy may bring, the Fund will
continue to seek maximum current income through investment in a diversified portfolio of high-yield debt
securities. Capital appreciation will remain a secondary objective.

Donald E. Morgan
J. Matthew Philo
Portfolio Managers
MacKay Shields LLC

High-yield securities ("junk bonds") are generally considered speculative because they present a greater risk of
loss than higher-quality debt securities and may be subject to greater price volatility. Foreign securities may be
subject to greater risks than U.S. investments, including currency fluctuations, less-liquid trading markets, greater
price volatility, political and economic instability, less publicly available information, and changes in tax or
currency laws or monetary policy. These risks are likely to be greater for emerging markets than in developed
markets.

                                                          9
                                      NONTAXABLE DISTRIBUTION

As far as possible, MainStay High Yield Corporate Bond Fund seeks to distribute a monthly dividend reflecting
the amount of investment income earned by the Fund, excluding currency gains or losses. During the year ended
December 31, 2002, lower interest rates, reduced issuance, higher default rates, and the lower yields of new
issues have led to reduced earnings potential for the Fund. As a result, a portion of the dividends paid in 2002,
have been reclassified as a return of capital. The return of capital to shareholders had no material impact on the
Fund's performance or net asset value. Since the Fund's portfolio managers did not engage in additional trading to
accommodate dividend payments, the Fund's portfolio turnover rate and transaction costs were not affected.

Whenever a Fund returns capital to you, the cost basis of your Fund holdings is reduced by the amount of the
nontaxable distribution. Accurate cost-basis accounting is important in determining any capital gains or losses
when shares are eventually sold. You should consult with your tax advisor for additional information on
determining the cost basis of your mutual fund shares. This material is provided for informational purposes only.
Shareholders should refer to their 2002 Form 1099-DIV for the total amounts of their distributions that are
taxable and nontaxable.

                                                        10
Returns and Lipper Rankings as of 12/31/02

                       FUND TOTAL RETURNS (WITHOUT SALES CHARGES)(1)

                                                                             SINCE INCEPTION
                                           1 YEAR    5 YEARS     10 YEARS    THROUGH 12/31/02
                 Class A                   -0.78%     1.38%       7.58%           7.97%
                 Class B                   -1.53%     0.62%       6.99%           7.62%
                 Class C                   -1.53%     0.62%       6.99%           7.62%




                        FUND TOTAL RETURNS (WITH SALES CHARGES)(1)

                                                                             SINCE INCEPTION
                                           1 YEAR    5 YEARS     10 YEARS    THROUGH 12/31/02
                 Class A                   -5.24%     0.45%       7.08%           7.67%
                 Class B                   -5.99%     0.38%       6.99%           7.62%
                 Class C                   -2.43%     0.62%       6.99%           7.62%




       FUND LIPPER(2) RANKINGS AND LIPPER CATEGORY RETURNS AS OF 12/31/02

                                                                                  SINCE INCEPTION
                                       1   YEAR       5 YEARS       10 YEARS      THROUGH 12/31/02
             Class A                 171   out of    40 out of        n/a               7 out of
                                     379   funds     188 funds                         91 funds
             Class B                 209   out of    57 out of        2 out             3 out of
                                     379   funds     188 funds       of                31 funds
                                                                     53 funds
             Class C                 209 out of      n/a              n/a               66 out of
                                     379 funds                                         231 funds
             Average Lipper high
             current yield fund         -1.76%         -1.41%        4.60%             6.14%




   FUND PER-SHARE NET ASSET VALUES AND DISTRIBUTIONS FOR THE YEAR ENDED
                                  12/31/02

                                      NAV 12/31/02     INCOME     RETURN OF CAPITAL
                           Class A       $4.95         $.5133          $.0466
                           Class B       $4.94         $.4771          $.0433
                           Class C       $4.94         $.4771          $.0433




1 PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. DUE TO MARKET
VOLATILITY, CURRENT PERFORMANCE MAY BE LESS THAN THAT SHOWN. INVESTMENT
RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND SHARES, UPON REDEMPTION, MAY
BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. Performance tables and graphs do not
reflect the deduction of taxes that a shareholder would pay on distributions or Fund-share redemptions. Total
returns reflect change in share price and reinvestment of all dividend and capital gain distributions. Performance
figures reflect certain fee waivers and/or expense limitations, without which total return figures may have been
lower. Fee waivers and/or expense limitations are voluntary and may be discontinued at any time.

Class A shares are sold with a maximum initial sales charge of 4.5%. Performance figures for this class include
the historical performance of the Class B shares for periods from the Fund's inception on 5/1/86 through
12/31/94. Performance figures for the two classes vary after 12/31/94, based on differences in their sales charges
and expense structures. Class B shares are subject to a CDSC of up to 5% if shares are redeemed within the first
six years of purchase. Class C shares are subject to a CDSC of 1% if redeemed within one year of purchase.
Performance figures for this class include the historical performance of the Class B shares for periods from the
Fund's inception on 5/1/86 through 8/31/98. Performance figures for the two classes vary after 8/31/98 based on
differences in their sales charges.
2 Lipper Inc. is an independent monitor of mutual fund performance. Its rankings are based on total returns with
all dividend and capital gain distributions reinvested. Results do not reflect any deduction of sales charges. Lipper
averages are not class specific. Since-inception rankings reflect the performance of each share class from its initial
offering date through 12/31/02. Class A shares were first offered to the public on 1/3/95, Class B shares on
5/1/86, and Class C shares on 9/1/98. Since- inception return for the average Lipper peer fund is for the period
from 5/1/86 through 12/31/02.
INFORMATION ON THIS PAGE AND THE PRECEDING PAGES HAS NOT BEEN AUDITED.

                                                         11
MainStay High Yield Corporate Bond Fund

                                               PRINCIPAL
                                                AMOUNT               VALUE
                                             -----------------------------------
               LONG-TERM BONDS (84.0%)+
               ASSET-BACKED SECURITIES (1.7%)

               AIRPLANE LEASES (0.0%) (B)
               Northwest Airlines, Inc.
                Pass-Through Certificates
                Series 1996-1
                8.97%, due 1/2/15.........   $     2,239,797   $      1,129,888
                                                               ----------------

               ELECTRIC UTILITIES (1.0%)
               AES Eastern Energy, L.P.
                Pass-Through Certificates
                Series 1999-A
                9.00%, due 1/2/17 (d).....        19,080,000         17,570,581
                Series 1999-B
                9.67%, due 1/2/29.........        16,765,000         14,541,123
                                                               ----------------
                                                                     32,111,704
                                                               ----------------
               MEDIA (0.2%)
               United Artists Theatre
                Circuit, Inc.
                Pass-Through Certificates
                Series 1995-A
                9.30%, due 7/1/15 (e).....         5,530,169          5,198,359
                                                               ----------------

               MULTILINE RETAIL (0.0%) (B)
               Kmart Corp.
                Pass-Through Certificates
                Series 1995-K3
                8.54%, due 1/2/15
                (f)(g)....................         4,111,432          1,562,344
                                                               ----------------

               MULTI-UTILITIES & UNREGULATED POWER (0.5%)
               Tiverton/Rumford Power
                Associates Ltd., L.P.
                Pass-Through Certificates
                9.00%, due 7/15/18 (c)....     29,970,000            15,884,100
                                                               ----------------
               Total Asset-Backed
                Securities
                (Cost $73,863,356)........                           55,886,395
                                                               ----------------
               CONVERTIBLE BONDS (6.5%)

               BIOTECHNOLOGY (0.1%)
               CuraGen Corp.
                6.00%, due 2/2/07.........         1,465,000            939,431
               Vertex Pharmaceuticals,
                Inc.
                5.00%, due 9/19/07........         1,055,000            795,206
                                                               ----------------
                                                                      1,734,637
                                                               ----------------
               COMMUNICATIONS EQUIPMENT (1.7%)
               Brocade Communications
                Systems, Inc.
                2.00%, due 1/1/07.........      5,295,000             3,739,594
               CIENA Corp.
                3.75%, due 2/1/08.........     25,805,000            18,063,500



                                                 PRINCIPAL
                                                  AMOUNT            VALUE
                                                 -----------------------------------
                    COMMUNICATIONS EQUIPMENT (CONTINUED)
                    Juniper Networks, Inc.
                     4.75%, due 3/15/07........ $ 25,240,000        $     19,687,200
                    Nortel Networks Corp.
                     4.25%, due 9/1/08.........      5,465,000             2,882,788
                    Riverstone Networks, Inc.
                     3.75%, due 12/1/06 (c)....     14,580,000             9,896,175
                                                                    ----------------
                                                                          54,269,257
                                                                    ----------------
                    COMPUTERS & PERIPHERALS (0.3%)
                    Quantum Corp.
                     7.00%, due 8/1/04.........      9,865,000             8,779,850
                                                                    ----------------

                    CONSTRUCTION & ENGINEERING (0.1%)
                    Shaw Group, Inc.
                     (zero coupon), due
                     5/1/21....................      5,180,000                       2,991,450
                                                                              ----------------

                    DIVERSIFIED FINANCIALS (0.1%)
                    Providian Financial Corp.
                     3.25%, due 8/15/05........             6,205,000                4,645,994
                                                                              ----------------

                    DIVERSIFIED TELECOMMUNICATION SERVICES (0.6%)
                    At Home Corp.
                     4.75%, due 12/15/06
                     (f)(g)....................     60,905,767                         8,526,807
                    KPNQwest N.V.
                     10.00%, due 3/15/12
                     (f)(h).................... E    4,282,000                            11,234
                    Premiere Technologies, Inc.
                     5.75%, due 7/1/04......... $ 11,750,000                        10,222,500
                                                                              ----------------
                                                                                    18,760,541
                                                                              ----------------
                    ENERGY EQUIPMENT & SERVICES (0.0%) (B)
                    Parker Drilling Co.
                     5.50%, due 8/1/04.........        943,000                         875,811
                                                                              ----------------

                    HOTELS, RESTAURANTS & LEISURE (0.1%)
                    Capstar Hotel Co.
                     4.75%, due 10/15/04.......      3,663,000                       3,058,605
                                                                              ----------------

                    MEDIA (0.2%)
                    Adelphia Communications
                     Corp.
                     6.00%, due 2/15/06 (f)....            23,250,000                  2,034,375
                    Cox Communications, Inc.
                     0.4259%, due 4/19/20......             2,130,000                    969,150
                    Interpublic Group of Cos.,
                     Inc. (The)
                     (zero coupon), due
                     12/14/21..................               445,000                  349,325
                     1.80%, due 9/16/04........             5,000,000                4,381,250
                                                                              ----------------
                                                                                     7,734,100
                                                                              ----------------
                    METALS & MINING (0.1%)
                    Algoma Steel, Inc.
                     1.00%, due 12/31/30
                     (f)(i)....................            10,371,000                  3,474,285




12
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial
statements.
Portfolio of Investments December 31, 2002

                                               PRINCIPAL
                                                AMOUNT               VALUE
                                             -----------------------------------
                CONVERTIBLE BONDS (CONTINUED)

                METALS & MINING (CONTINUED)
                Battle Mountain Gold Co.
                 6.00%, due 1/4/05 (j).....   $   1,135,000     $      1,129,738
                                                                ----------------
                                                                       4,604,023
                                                                ----------------
                PHARMACEUTICALS (0.3%)
                ICN Pharmaceuticals, Inc.
                 6.50%, due 7/15/08........       11,880,000           9,652,500
                                                                ----------------
                SEMICONDUCTOR EQUIPMENT & PRODUCTS (2.2%)
                Advanced Micro Devices,
                 Inc.
                 4.75%, due 2/1/22.........     16,990,000            10,661,225
                LSI Logic Corp.
                 4.00%, due 2/15/05........     30,390,000            27,199,050
                 4.00%, due 11/1/06........     10,000,000             8,200,000
                PMC-Sierra, Inc.
                 3.75%, due 8/15/06........     16,720,000            12,623,600
                Vitesse Semiconductor Corp.
                 4.00%, due 3/15/05........     17,330,000            14,557,200
                                                                ----------------
                                                                      73,241,075
                                                                ----------------
                SOFTWARE (0.1%)
                QuadraMed Corp.
                 5.25%, due 5/1/05.........       4,205,000            2,570,306
                                                                ----------------
                WIRELESS TELECOMMUNICATION SERVICES (0.6%)
                COLT Telecom Group PLC
                 2.00%, due 3/29/06 (c).... E 15,270,000               7,251,013
                 2.00%, due 12/16/06 (c)...      7,103,000             3,261,076
                 2.00%, due 4/3/07 (c).....     20,230,000             9,022,479
                                                                ----------------
                                                                      19,534,568
                                                                ----------------
                Total Convertible Bonds
                 (Cost $250,586,750).......                          212,452,717
                                                                ----------------
                CORPORATE BONDS (57.4%)

                AEROSPACE & DEFENSE (0.3%)
                BE Aerospace, Inc.
                 9.50%, due 11/1/08........   $   1,000,000              760,000
                K&F Industries, Inc.
                 9.625%, due 12/15/10
                 (c).......................       8,985,000            9,142,238
                Sequa Corp.
                 Series B
                 8.875%, due 4/1/08........       1,795,000            1,714,225
                                                                ----------------
                                                                      11,616,463
                                                                ----------------



                                                PRINCIPAL
                                                 AMOUNT               VALUE
                                              -----------------------------------
                AIRLINES (1.6%)
                Delta Air Lines, Inc.
                 Series C
                 6.65%, due 3/15/04........   $    8,925,000    $      7,497,000
                 8.30%, due 12/15/29.......       20,623,000          12,167,570
                 9.25%, due 3/15/22........        9,000,000           5,850,000
                 10.375%, due 12/15/22.....        4,685,000           3,045,250
                    Northwest Airlines, Inc.
                     8.52%, due 4/7/04.........             8,400,000                7,098,000
                     9.875%, due 3/15/07.......            25,450,000               16,288,000
                                                                              ----------------
                                                                                    51,945,820
                                                                              ----------------
                    AUTO COMPONENTS (0.9%)
                    Hayes Lemmerz
                     International, Inc.,
                     Series B
                     8.25%, due 12/15/08
                     (f)(g)....................             8,210,000                    184,725
                     9.125%, due 7/15/07
                     (f)(g)....................             2,500,000                     56,250
                    Mark IV Industries, Inc.
                     7.50%, due 9/1/07.........            36,020,000                 28,816,000
                    Rexnord Corp.
                     10.125%, due 12/15/12
                     (c).......................             1,015,000                1,040,375
                                                                              ----------------
                                                                                    30,097,350
                                                                              ----------------
                    BANKS (0.4%)
                    B.F. Saul Real Estate
                     Investment Trust
                     Series B
                     9.75%, due 4/1/08.........            12,765,000               12,669,263
                                                                              ----------------

                    CHEMICALS (1.4%)
                    Equistar Chemicals, L.P.
                     7.55%, due 2/15/26........             3,185,000                  2,452,450
                    General Chemical Industrial
                     Products, Inc.
                     10.625%, due 5/1/09.......             6,160,000                  3,880,800
                    Millennium America, Inc.
                     7.625%, due 11/15/26......             5,960,000                  4,954,250
                    Sovereign Specialty
                     Chemicals, Inc.
                     11.875%, due 3/15/10......            11,750,000                 10,575,000
                    Terra Capital, Inc.
                     12.875%, due 10/15/08.....            21,820,000               23,456,500
                                                                              ----------------
                                                                                    45,319,000
                                                                              ----------------
                    COMMERCIAL SERVICES & SUPPLIES (1.1%)
                    Alderwoods Group, Inc.
                     11.00%, due 1/2/07........      6,422,300                         6,422,300
                    American Color Graphics,
                     Inc.
                     12.75%, due 8/1/05........     16,000,000                        15,760,000
                    Protection One Alarm
                     Monitoring, Inc.
                     7.375%, due 8/15/05.......     19,566,000                      16,044,120
                                                                              ----------------
                                                                                    38,226,420
                                                                              ----------------
                    COMMUNICATIONS EQUIPMENT (0.9%)
                    Avaya, Inc.
                     11.125%, due 4/1/09.......             8,445,000                  7,642,725




                                                         13

The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial
statements.
MainStay High Yield Corporate Bond Fund

                                             PRINCIPAL
                                              AMOUNT               VALUE
                                           -----------------------------------
               CORPORATE BONDS (CONTINUED)
               COMMUNICATIONS EQUIPMENT (CONTINUED)
               Lucent Technologies, Inc.
                6.45%, due 3/15/29........ $ 28,605,000        $    12,586,200
                6.50%, due 1/15/28........      5,485,000            2,413,400
                7.25%, due 7/15/06........      7,560,000            4,271,400
               NorthEast Optic Network,
                Inc.
                12.75%, due 8/15/08 (f)...     34,369,000             2,405,830
                                                               ----------------
                                                                     29,319,555
                                                               ----------------
               CONSTRUCTION & ENGINEERING (0.4%)
               URS Corp.
                11.50%, due 9/15/09 (c)...     14,800,000            13,172,000
                                                               ----------------
               CONTAINERS & PACKAGING (1.0%)
               Owens-Brockway Glass
                Container, Inc.
                8.875%, due 2/15/09.......      24,495,000          25,229,850
               Owens-Illinois, Inc.
                7.80%, due 5/15/18........       9,730,000            8,270,500
                                                               ----------------
                                                                     33,500,350
                                                               ----------------
               DIVERSIFIED FINANCIALS (3.1%)
               Caithness Coso Funding
                Corp.
                Series B
                9.05%, due 12/15/09.......      24,730,503          24,235,893
               Cedar Brakes II LLC
                9.875%, due 9/1/13........      50,893,535          37,661,216
               ESI Tractebel Acquisition
                Corp.
                Series B
                7.99%, due 12/30/11.......      15,484,000          13,944,736
               FINOVA Group, Inc. (The)
                7.50%, due 11/15/09.......      28,155,000           9,713,475
               IPC Acquisition Corp.
                11.50%, due 12/15/09......      18,900,000           16,254,000
                                                               ----------------
                                                                    101,809,320
                                                               ----------------
               DIVERSIFIED TELECOMMUNICATION SERVICES (4.7%)
               IMPSAT Fiber Networks, Inc.
                13.75%, due 2/15/05 (f)...     16,915,000              507,450
               Nextel International, Inc.
                13.00%, due 11/15/09
                (e)(h)....................     19,398,225           14,354,687
               NTL Communications Corp.
                9.875%, due 11/15/09
                (f)....................... E 10,515,000              1,048,272
               NTL, Inc.
                Series B
                (zero coupon), due 4/1/08
                9.75%, beginning 4/1/03
                (f)....................... $    3,840,000              307,200
               Qwest Capital Funding, Inc.
                5.875%, due 8/3/04........     14,315,000           12,024,600
                7.75%, due 2/15/31........      1,560,000              873,600
               Qwest Corp.
                7.625%, due 6/9/03........     21,820,000           21,383,600
                8.875%, due 3/15/12 (c)...     30,555,000           29,638,350



                                               PRINCIPAL
                                                AMOUNT             VALUE
                                  -----------------------------------
     DIVERSIFIED TELECOMMUNICATION SERVICES (CONTINUED)
     Qwest Services Corp.
      13.00%, due 12/15/07
      (c)....................... $ 11,631,400        $     11,980,342
      13.50%, due 12/15/10
      (c).......................     14,709,175            15,297,542
      14.00%, due 12/15/14
      (c).......................      3,721,350             3,981,845
     Sprint Capital Corp.
      5.875%, due 5/1/04........     10,780,000            10,672,200
      7.90%, due 3/15/05........      2,785,000             2,812,850
      8.75%, due 3/15/32........     12,660,000            12,027,000
     U.S. West Capital Funding,
      Inc.
      6.25%, due 7/15/05........      8,415,000             6,395,400
     U.S. West Communications,
      Inc.
      5.625%, due 11/15/08......      1,420,000             1,207,000
      7.20%, due 11/1/04........      8,040,000             7,638,000
      8.875%, due 6/1/31........      3,595,000             3,235,500
                                                     ----------------
                                                          155,385,438
                                                     ----------------
     ELECTRICAL EQUIPMENT (0.9%)
     Knowles Electronics
      Holdings, Inc.
      13.125%, due 10/15/09.....     27,250,000            15,805,000
     Mirant Americas Generation
      LLC
      7.20%, due 10/1/08........      4,675,000             2,220,625
      8.30%, due 5/1/11.........      1,325,000               629,375
      8.50%, due 10/1/21........      3,325,000             1,479,625
      9.125%, due 5/1/31........      5,190,000             2,309,550
     Thomas & Betts Corp.
      6.625%, due 5/7/08........      7,050,000             6,436,812
                                                     ----------------
                                                           28,880,987
                                                     ----------------
     ELECTRONIC COMPONENTS, INSTRUMENTS (0.6%)
     UCAR Finance, Inc.
      10.25%, due 2/15/12.......     23,780,000            18,905,100
                                                     ----------------

     ENERGY EQUIPMENT & SERVICES (1.4%)
     Grant Prideco, Inc.
      9.00%, due 12/15/09 (c)...      6,370,000            6,624,800
     Halliburton Co.
      1.93%, due 7/16/03 (k)....     19,470,000           18,983,250
      6.00%, due 8/1/06.........     13,150,000           13,413,000
      8.75%, due 2/15/21........      3,145,000            3,145,000
     Parker Drilling Co.
      Series D
      9.75%, due 11/15/06.......      1,500,000            1,522,500
      Series B
      10.125%, due 11/15/09.....      2,255,000            2,322,650
                                                    ----------------
                                                          46,011,200
                                                    ----------------
     FOOD PRODUCTS (0.9%)
     Chiquita Brands
      International, Inc.
      10.56%, due 3/15/09.......    13,444,000            13,763,295
     Dole Foods Co., Inc.
      7.875%, due 7/15/13.......     2,445,000             2,359,662
     Swift & Co.
      10.125%, due 10/1/09
      (c).......................    12,685,000            11,987,325
                                                    ----------------
                                                          28,110,282
                                                    ----------------




14
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial
statements.
Portfolio of Investments December 31, 2002

                                                PRINCIPAL
                                                 AMOUNT               VALUE
                                              -----------------------------------
                CORPORATE BONDS (CONTINUED)
                GAS UTILITIES (0.3%)
                El Paso Energy Partners
                 L.P.
                 7.80%, due 8/1/31.........   $   8,515,000     $      8,706,588
                                                                ----------------

                HEALTH CARE EQUIPMENT & SUPPLIES (1.9%)
                ALARIS Medical, Inc.
                 (zero coupon), due 8/1/08
                 11.125%, beginning
                 8/1/03....................     32,300,000            29,716,000
                 9.75%, due 12/1/06........     17,460,000            17,460,000
                dj Orthopedics, LLC
                 12.625%, due 6/15/09......     15,045,000            14,894,550
                                                                ----------------
                                                                      62,070,550
                                                                ----------------
                HEALTH CARE PROVIDERS & SERVICES (5.1%)
                Columbia/HCA Healthcare
                 Corp.
                 7.50%, due 11/15/95 (d)...     54,125,000            50,484,065
                Fountain View, Inc.
                 Series B
                 11.25%, due 4/15/08 (f)...     23,920,000            14,352,000
                Genesis Health Ventures,
                 Inc.
                 6.8063%, due 4/2/07 (k)...        833,580               775,229
                Harborside Healthcare Corp.
                 (zero coupon), due 8/1/07
                 12.00%, beginning 8/1/04
                 (e)(l)....................     52,015,000            27,307,875
                Manor Care, Inc.
                 7.50%, due 6/15/06........        400,000               415,447
                 8.00%, due 3/1/08.........      6,265,000             6,609,575
                Medaphis Corp.
                 Series B
                 9.50%, due 2/15/05........     44,149,000            42,603,785
                Service Corp. International
                 6.875%, due 10/1/07.......      1,615,000             1,477,725
                 7.70%, due 4/15/09........      2,000,000             1,880,000
                Team Health, Inc.
                 Series B
                 12.00%, due 3/15/09.......     21,085,000            21,822,975
                Unilab Finance Corp.
                 12.75%, due 10/1/09.......        486,000               566,190
                                                                ----------------
                                                                     168,294,866
                                                                ----------------
                HOTELS, RESTAURANTS & LEISURE (3.6%)
                Bally Total Fitness Holding
                 Corp.
                 Series D
                 9.875%, due 10/15/07......     11,433,000             9,946,710
                Capstar Hotel Co.
                 8.75%, due 8/15/07........      1,460,000               978,200
                El Comandante Capital Corp.
                 11.75%, due 12/15/03
                 (e)(f)....................     17,186,051             9,796,049
                FRI-MRD Corp.
                 12.00%, due 1/31/05
                 (e)(h)(l)(m)..............     42,766,286            23,949,120



                                                PRINCIPAL
                                                 AMOUNT               VALUE
                                              -----------------------------------
                    HOTELS, RESTAURANTS & LEISURE (CONTINUED)
                    President Casinos, Inc.
                     12.00%, due 9/15/03
                     (c)(e)(f)(m).............. $    7,567,000                $        5,296,900
                    President Riverboat
                     Casinos, Inc.
                     13.00%, due 9/15/03
                     (e)(f)(m).................     16,273,000                         7,729,675
                    Starwood Hotels & Resorts
                     Worldwide, Inc.
                     7.375%, due 11/15/15......     18,405,000                        16,932,600
                    Trump Atlantic City
                     Funding, Inc.
                     11.25%, due 5/1/06........      4,140,000                         3,229,200
                    Vail Resorts, Inc.
                     8.75%, due 5/15/09........     13,150,000                        13,478,750
                    Venetian Casino Resort LLC
                     11.00%, due 6/15/10.......     23,035,000                        24,071,575
                    Wheeling Island Gaming,
                     Inc.
                     10.125%, due 12/15/09.....      4,270,000                       4,398,100
                                                                              ----------------
                                                                                   119,806,879
                                                                              ----------------
                    HOUSEHOLD DURABLES (0.1%)
                    Foamex L.P.
                     10.75%, due 4/1/09 (c)....             3,930,000                2,751,000
                                                                              ----------------

                    INTERNET SOFTWARE & SERVICES (0.2%)
                    Globix Corp.
                     11.00%, due 5/1/08
                     (c)(e)(n).................      8,896,662                         6,405,596
                    PSINet, Inc.
                     Series B
                     10.00%, due 2/15/05 (f)...      2,700,000                          81,000
                     11.00%, due 8/1/09 (f)....     21,125,000                         633,750
                     11.50%, due 11/1/08 (f)...     15,305,000                         459,150
                                                                              ----------------
                                                                                     7,579,496
                                                                              ----------------
                    IT CONSULTING & SERVICES (0.2%)
                    Unisys Corp.
                     8.125%, due 6/1/06........             7,194,000                7,499,744
                                                                              ----------------

                    LEISURE EQUIPMENT & PRODUCTS (0.2%)
                    Hasbro, Inc.
                     5.60%, due 11/1/05........         85,000                            82,449
                    Phoenix Color Corp.
                     10.375%, due 2/1/09.......      7,535,000                       6,404,750
                                                                              ----------------
                                                                                     6,487,199
                                                                              ----------------
                    MACHINERY (0.1%)
                    Dresser, Inc.
                     9.375%, due 4/15/11.......             2,565,000                  2,577,825
                    Thermadyne Holdings Corp.
                     9.875%, due 6/1/08
                     (f)(g)....................               650,000                    175,500
                     (zero coupon), due 6/1/08
                     12.50%, beginning 6/1/03
                     (f)(g)....................             2,585,000                   12,925
                                                                              ----------------
                                                                                     2,766,250
                                                                              ----------------




                                                         15

The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial
statements.
MainStay High Yield Corporate Bond Fund

                                               PRINCIPAL
                                                AMOUNT               VALUE
                                             -----------------------------------
               CORPORATE BONDS (CONTINUED)
               MEDIA (9.2%)
               @Entertainment, Inc.
                Series B
                (zero coupon), due 7/15/08
                14.50%, beginning 7/15/03
                (e)(f)....................   $   43,290,000    $      9,956,700
               Adelphia Communications
                Corp.
                Series B
                9.25%, due 10/1/04 (f)....        1,820,000             673,400
                10.25%, due 11/1/06 (f)...        5,010,000           1,878,750
                10.25%, due 6/15/11 (f)...       18,565,000           7,147,525
               AMC Entertainment, Inc.
                9.50%, due 3/15/09........         485,000              480,150
               Charter Communications
                Holdings, LLC
                (zero coupon), due 1/15/10
                11.75%, beginning
                1/15/05...................       36,730,000          10,835,350
                (zero coupon), due 5/15/11
                11.75%, beginning
                5/15/06...................       27,485,000           6,871,250
                8.625%, due 4/1/09........        1,645,000             732,025
                10.00%, due 4/1/09........          765,000             340,425
                10.00%, due 5/15/11.......       11,991,000           5,335,995
               Comcast Cable
                Communications, Inc.
                6.20%, due 11/15/08.......       4,330,000            4,483,191
                6.75%, due 1/30/11........       9,335,000            9,712,927
                8.125%, due 5/1/04........       3,075,000            3,238,814
                8.875%, due 5/1/17........       3,265,000            3,804,009
               Continental Cablevision,
                Inc.
                8.875%, due 9/15/05.......       14,719,000          16,020,572
                9.00%, due 9/1/08.........        2,105,000           2,400,016
                9.50%, due 8/1/13.........        8,440,000           9,772,963
               Dex Media East LLC
                9.875%, due 11/15/09
                (c).......................       7,185,000            7,687,950
                12.125%, due 11/15/12
                (c).......................       8,905,000            9,862,288
               FrontierVision Operating
                Partners, L.P.
                11.00%, due 10/15/06
                (f).......................       25,535,000          20,044,975
                11.875%, due 9/15/07
                (f).......................       10,605,000           5,938,800
                Series B
                11.875%, due 9/15/07
                (f).......................       4,495,000            2,517,200
               Garden State Newspapers,
                Inc.
                Series B
                8.75%, due 10/1/09........       3,755,000            3,811,325
               General Media, Inc.
                15.00%, due 3/29/04
                (e)(f)(o1)................          22,253           14,492,266
               Houghton Mifflin Co.
                7.125%, due 4/1/04........       2,040,000            2,131,800
                7.20%, due 3/15/11........       9,495,000            9,400,050
               Jacobs Entertainment Co.
                11.875%, due 2/1/09.......       8,750,000            9,056,250
               Jones Intercable, Inc.
                8.875%, due 4/1/07........       10,360,000          11,065,858
                                                         PRINCIPAL
                                                          AMOUNT               VALUE
                                                       -----------------------------------
                    MEDIA (CONTINUED)
                    Key3Media Group, Inc.
                     11.25%, due 6/15/11 (f)...        $   14,120,000         $          847,200
                    LIN Television Corp.
                     8.00%, due 1/15/08........             1,530,000                  1,619,888
                    Paxson Communications Corp.
                     (zero coupon), due 1/15/09
                     12.25%, beginning
                     1/15/06...................            64,005,000                 40,643,175
                    Radio Unica Corp.
                     11.75%, due 8/1/06........            24,123,000                 12,453,498
                    Time Warner Entertainment
                     Co.
                     6.625%, due 5/15/29.......             2,340,000                  2,151,451
                     7.25%, due 9/1/08.........             3,945,000                  4,279,319
                     8.375%, due 3/15/23.......            11,715,000                 13,182,666
                     8.375%, due 7/15/33.......            13,425,000                 15,201,651
                    UIH Australia/Pacific, Inc.
                     Series B
                     14.00%, due 5/15/06 (f)...            148,670,000                 7,433,500
                     Series D
                     14.00%, due 5/15/06 (f)...            27,050,000                  1,352,500
                    Young Broadcasting, Inc.
                     8.50%, due 12/15/08.......             9,000,000                  9,292,500
                    Ziff Davis Media, Inc.
                     Series B
                     12.00%, due 8/12/09.......            13,427,300                4,850,612
                                                                              ----------------
                                                                                   303,000,784
                                                                              ----------------
                    METALS & MINING (0.6%)
                    Commonwealth Aluminum Corp.
                     10.75%, due 10/1/06.......               750,000                    750,938
                    Neenah Corp.
                     Series B
                     11.125%, due 5/1/07.......            12,030,000                  3,789,450
                     Series D
                     11.125%, due 5/1/07.......             7,495,000                  2,360,925
                     Series F
                     11.125%, due 5/1/07.......             9,605,000                  3,025,575
                    Ormet Corp.
                     11.00%, due 8/15/08
                     (c)(f)....................            12,885,000                  6,700,200
                    United States Steel LLC
                     10.75%, due 8/1/08........             5,625,000                5,540,625
                                                                              ----------------
                                                                                    22,167,713
                                                                              ----------------
                    MULTI-UTILITIES & UNREGULATED POWER (2.7%)
                    AES Corp. (The)
                     10.00%, due 12/12/05
                     (c).......................     23,755,000                        22,567,250
                    PG&E National Energy Group,
                     Inc.
                     10.375%, due 5/16/11
                     (f).......................     74,940,000                        28,477,200
                    Western Resources, Inc.
                     6.25%, due 8/15/18........     24,505,000                        23,524,800
                     6.875%, due 8/1/04........      7,700,000                         7,007,000
                     7.875%, due 5/1/07........      2,170,000                         2,197,124
                    Xcel Energy, Inc.
                     7.00%, due 12/1/10........      7,585,000                       6,523,100
                                                                              ----------------
                                                                                    90,296,474
                                                                              ----------------




16
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial
statements.
Portfolio of Investments December 31, 2002 (continued)

                                                PRINCIPAL
                                                 AMOUNT               VALUE
                                              -----------------------------------
                CORPORATE BONDS (CONTINUED)
                OFFICE ELECTRONICS (0.7%)
                Xerox Corp.
                 Series E
                 5.25%, due 12/15/03.......   $      880,000    $        851,400
                 5.50%, due 11/15/03.......       12,530,000          12,216,750
                 7.20%, due 4/1/16.........        1,800,000           1,350,000
                 9.75%, due 1/15/09 (c)....        9,495,000           9,115,200
                                                                ----------------
                                                                      23,533,350
                                                                ----------------
                OIL & GAS (2.9%)
                Chesapeake Energy Corp.
                 7.75%, due 1/15/15 (c)....       3,045,000            3,029,775
                 Series B
                 8.50%, due 3/15/12........       5,033,000            5,209,155
                Comstock Resources, Inc.
                 11.25%, due 5/1/07........       16,715,000          17,717,900
                Energy Corp. of America
                 Series A
                 9.50%, due 5/15/07........       17,432,000          10,807,840
                Petro Stopping Centers
                 Holdings, L.P.
                 Series B
                 (zero coupon), due 8/1/08
                 15.00%, beginning
                 8/1/04....................       22,805,000           9,834,656
                Plains Exploration &
                 Production Co.
                 8.75%, due 7/1/12 (c).....       6,000,000            6,240,000
                Texas Gas Transmission
                 Corp.
                 8.625%, due 4/1/04........       10,045,000           9,994,775
                Transcontinental Gas
                 Pipeline Corp.
                 Series B
                 7.00%, due 8/15/11........         475,000              432,250
                 8.875%, due 7/15/12 (c)...         555,000              555,000
                Vintage Petroleum, Inc.
                 8.25%, due 5/1/12.........       29,905,000          31,101,200
                                                                ----------------
                                                                      94,922,551
                                                                ----------------
                PAPER & FOREST PRODUCTS (1.7%)
                Fort James Corp.
                 6.625%, due 9/15/04.......       8,115,000            7,871,550
                Georgia-Pacific Corp.
                 7.25%, due 6/1/28.........          430,000             331,100
                 8.25%, due 3/1/23.........        3,245,000           2,628,450
                 8.875%, due 5/15/31.......        5,000,000           4,300,000
                 9.50%, due 5/15/22........        8,050,000           7,124,250
                 9.625%, due 3/15/22.......       10,915,000           9,768,925
                 9.875%, due 11/1/21.......       19,190,000          17,271,000
                Pope & Talbot, Inc.
                 8.375%, due 6/1/13........       7,240,000            6,280,700
                                                                ----------------
                                                                      55,575,975
                                                                ----------------
                PERSONAL PRODUCTS (1.2%)
                Herbalife International,
                 Inc.
                 11.75%, due 7/15/10 (c)...       11,475,000          11,460,657



                                                PRINCIPAL
                                                 AMOUNT               VALUE
                                              -----------------------------------
                    PERSONAL PRODUCTS (CONTINUED)
                    Jafra Cosmetics
                     International, Inc.
                     11.75%, due 5/1/08........ $          26,275,000         $     27,194,625
                                                                              ----------------
                                                                                    38,655,282
                                                                              ----------------
                    PHARMACEUTICALS (0.1%)
                    MedPartners, Inc.
                     7.375%, due 10/1/06.......             2,246,000                2,290,920
                                                                              ----------------

                    REAL ESTATE (3.6%)
                    CB Richard Ellis Services,
                     Inc.
                     11.25%, due 6/15/11.......            25,180,000                 23,165,600
                    Crescent Real Estate
                     Equities L.P.
                     7.50%, due 9/15/07........            45,772,000                 44,398,840
                    LNR Property Corp.
                     Series B
                     9.375%, due 3/15/08.......            14,186,000                 13,902,280
                     10.50%, due 1/15/09.......             7,050,000                  7,120,500
                    MeriStar Hospitality Corp.
                     9.00%, due 1/15/08........             2,225,000                  1,958,000
                    Omega Healthcare Investors,
                     Inc.
                     6.95%, due 8/1/07.........            14,320,000                 12,198,822
                    Senior Housing Properties
                     Trust
                     8.625%, due 1/15/12.......            16,615,000               16,365,775
                                                                              ----------------
                                                                                   119,109,817
                                                                              ----------------
                    SEMICONDUCTOR EQUIPMENT & PRODUCTS (0.2%)
                    ON Semiconductor Corp.
                     12.00%, due 5/15/08 (c)...     10,470,000                       7,695,450
                                                                              ----------------

                    SPECIALTY RETAIL (0.6%)
                    Gap, Inc. (The)
                     5.625%, due 5/1/03........               205,000                  205,513
                     6.90%, due 9/15/07........            18,466,000               18,004,350
                                                                              ----------------
                                                                                    18,209,863
                                                                              ----------------
                    WIRELESS TELECOMMUNICATION SERVICES (2.6%)
                    Alamosa (Delaware), Inc.
                     12.50%, due 2/1/11........      6,925,000                         2,077,500
                    Alamosa PCS Holdings, Inc.
                     (zero coupon), due 2/15/10
                     12.875%, beginning
                     2/15/05...................     44,085,000                         7,935,300
                    AT&T Wireless Services,
                     Inc.
                     8.125%, due 5/1/12........      6,185,000                         6,215,925
                     8.75%, due 3/1/31.........     12,755,000                        12,499,900
                    COLO.COM
                     13.875%, due 3/15/10
                     (c)(f)(g)(m)(o2)..........         15,895                           635,800
                    Dobson Communications Corp.
                     10.875%, due 7/1/10.......     16,545,000                        13,980,525
                    Loral CyberStar, Inc.
                     10.00%, due 7/15/06.......     34,610,000                        12,805,700
                    PageMart Nationwide, Inc.
                     15.00%, due 2/1/05
                     (e)(f)(g)(m)..............     19,425,000                              1,943




                                                         17

The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial
statements.
MainStay High Yield Corporate Bond Fund

                                               PRINCIPAL
                                                AMOUNT               VALUE
                                             -----------------------------------
               CORPORATE BONDS (CONTINUED)
               WIRELESS TELECOMMUNICATION SERVICES (CONTINUED)
               PageMart Wireless, Inc.
                (zero coupon), due 2/1/08
                11.25%, beginning 2/1/03
                (e)(f)(g)(m).............. $ 30,445,000        $          3,045
               TSI Telecommunication
                Services, Inc.
                Series B
                12.75%, due 2/1/09........     31,825,000            28,324,250
               US Unwired, Inc.
                Series B
                (zero coupon), due 11/1/09
                13.375%, beginning
                11/1/04...................     23,800,000             1,428,000
                                                               ----------------
                                                                     85,907,888
                                                               ----------------
               Total Corporate Bonds
                (Cost $2,385,101,553).....                        1,892,297,187
                                                               ----------------
               FOREIGN BONDS (6.0%)

               AIR FREIGHT & LOGISTICS (0.0%) (B)
               Pegasus Shipping (Hellas)
                Ltd.
                Promissory Note
                8.30%, due 1/31/04
                (e)(f)(l)(m)..............        585,483                    59
                                                               ----------------

               CHEMICALS (0.1%)
               Acetex Corp.
                10.875%, due 8/1/09.......      3,745,000             3,969,700
                                                               ----------------

               COMMERCIAL SERVICES & SUPPLIES (1.0%)
               Quebecor Media, Inc.
                (zero coupon), due 7/15/11
                13.75%, beginning
                7/15/06...................     37,150,000            21,036,188
                11.125%, due 7/15/11......      9,230,000             8,503,138
               Xerox Capital (Europe) PLC
                5.875%, due 5/15/04.......      2,455,000             2,344,525
                                                               ----------------
                                                                     31,883,851
                                                               ----------------
               COMMUNICATIONS EQUIPMENT (0.7%)
               Marconi Corp. PLC
                5.625%, due 3/30/05 (f)... E    1,000,000               157,410
                7.75%, due 9/15/10 (f).... $ 11,975,000               1,856,125
                8.375%, due 9/15/30 (f)...     28,470,000             4,412,850
               Nortel Networks Ltd.
                6.125%, due 2/15/06.......     22,350,000            14,974,500
                                                               ----------------
                                                                     21,400,885
                                                               ----------------
               DIVERSIFIED FINANCIALS (1.3%)
               Hollinger Participation
                Trust
                12.125%, due 11/15/10
                (c)(n)....................     36,531,635            34,339,737



                                               PRINCIPAL
                                                AMOUNT               VALUE
                                             -----------------------------------
                    DIVERSIFIED FINANCIALS (CONTINUED)
                    Pacific & Atlantic
                     (Holdings), Inc.
                     10.50%, due 12/31/07
                     (c)(e)(f)(h).............. $ 24,736,692                  $      9,925,598
                                                                              ----------------
                                                                                    44,265,335
                                                                              ----------------
                    HOUSEHOLD DURABLES (0.0%) (B)
                    Amatek Industries Property
                     Ltd.
                     14.50%, due 2/15/09
                     (c)(e)(n).................                    381                     419
                                                                              ----------------

                    MARINE (0.1%)
                    Navigator Gas Transport PLC
                     10.50%, due 6/30/07
                     (c)(e)(f).................            10,425,000                3,153,563
                                                                              ----------------

                    MEDIA (1.0%)
                    Cablevision S.A.
                     12.50%, due 3/2/03
                     (c)(f)....................               685,000                    164,400
                    CanWest Media, Inc.
                     10.625%, due 5/15/11......             5,986,000                  6,390,055
                    Supercanal Holdings, S.A.
                     11.50%, due 5/15/05
                     (c)(e)(f).................             3,845,000                     96,125
                    TDL Infomedia Group PLC
                     12.125%, due 10/15/09
                     (p).......................        L   12,755,000                 22,020,721
                    United Pan-Europe
                     Communications N.V.
                     11.25%, due 2/1/10 (f)....        E    9,643,000                    505,968
                     Series B
                     (zero coupon), due 11/1/09
                     13.375%, beginning 11/1/04
                     (f).......................        $   47,920,000                  2,875,200
                     Series B
                     (zero coupon), due 2/1/10
                     13.75%, beginning 2/1/05
                     (f).......................             7,800,000                  468,000
                                                                              ----------------
                                                                                    32,520,469
                                                                              ----------------
                    MULTI-UTILITIES & UNREGULATED POWER (0.5%)
                    Calpine Canada Energy
                     Finance ULC
                     8.50%, due 5/1/08.........     36,325,000                      15,801,375
                                                                              ----------------

                    OIL & GAS (0.4%)
                    Baytex Energy Ltd.
                     10.50%, due 2/15/11.......            13,955,000               14,652,750
                                                                              ----------------

                    ROAD & RAIL (0.5%)
                    Grupo Transportacion
                     Ferroviaria Mexicana, S.A.
                     de C.V.
                     12.50%, due 6/15/12 (c)...            16,240,000               16,402,400
                                                                              ----------------

                    TRANSPORTATION INFRASTRUCTURE (0.3%)
                    Stena AB
                     9.625%, due 12/1/12 (c)...     10,150,000                      10,479,875
                                                                              ----------------




18
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial
statements.
Portfolio of Investments December 31, 2002 (continued)

                                                PRINCIPAL
                                                 AMOUNT               VALUE
                                              -----------------------------------
                FOREIGN BONDS (CONTINUED)
                WIRELESS TELECOMMUNICATION SERVICES (0.1%)
                Rogers Wireless
                 Communications, Inc.
                 9.625%, due 5/1/11........ $    4,687,000      $      4,429,215
                                                                ----------------
                Total Foreign Bonds
                 (Cost $295,706,273).......                          198,959,896
                                                                ----------------
                LOAN ASSIGNMENTS & PARTICIPATIONS (4.0%)

                AUTO COMPONENTS (0.1%)
                Global Motorsport Group,
                 Inc.
                 Bank debt, Tranche B
                 9.25%, due 10/31/05
                 (e)(k)(l).................       4,776,692            3,104,850
                                                                ----------------

                CHEMICALS (0.0%)(B)
                United Industries Corp.
                 Bank debt, Term Loan
                 4.67%, due 1/20/05
                 (e)(k)(l).................         970,778              962,890
                                                                ----------------
                CONTAINERS & PACKAGING (0.8%)
                Crown Cork & Seal Co., Inc.
                 Bank debt, Revolver
                 3.4666%, due 12/8/03
                 (e)(k)(l)(q)..............      27,440,011           25,742,161
                 5.05%, due 12/8/03
                 (e)(k)(l)(q).............. E       145,680              143,417
                 5.9935%, due 12/8/03
                 (e)(k)(l)(q).............. L       771,477            1,165,152
                                                                ----------------
                                                                      27,050,730
                                                                ----------------
                DIVERSIFIED TELECOMMUNICATION SERVICES (0.2%)
                GT Group Telecom Services
                 Corp.
                 Bank debt, Term Loan A
                 6.5625%, due 6/30/08
                 (e)(f)(k)(l).............. $ 16,936,744               1,185,572
                 Bank debt, Term Loan B
                 6.625%, due 6/30/08
                 (e)(f)(k)(l)..............     12,103,256               847,228
                Qwest Services Corp.
                 Bank debt, Revolver
                 4.995%, due 5/3/05
                 (e)(k)(l)(q)..............      5,962,492             5,473,568
                                                                ----------------
                                                                       7,506,368
                                                                ----------------
                LEISURE EQUIPMENT & PRODUCTS (0.1%)
                Spalding Holdings Corp.
                 Bank debt, Revolver
                 8.0952%, due 9/30/03
                 (e)(f)(k)(l)(q)...........      4,844,308             1,792,394
                                                                ----------------



                                                PRINCIPAL
                                                 AMOUNT               VALUE
                                              -----------------------------------
                MACHINERY (0.8%)
                Thermadyne Holdings Corp.
                 Bank debt, Revolver
                     4.17%, due 5/22/04
                     (e)(k)(l).................        $   15,110,723         $       12,541,900
                     Bank debt, Term Loan A
                     4.17%, due 5/22/04
                     (e)(k)(l).................             5,680,666                  4,714,953
                     Bank debt, Term Loan B
                     4.42%, due 5/22/05
                     (e)(k)(l).................             5,768,397                  4,787,769
                     Bank debt, Term Loan C
                     4.67%, due 5/22/06
                     (e)(k)(l).................             5,768,397                4,787,769
                                                                              ----------------
                                                                                    26,832,391
                                                                              ----------------
                    MEDIA (0.2%)
                    Maxwell Communications
                     Corp., PLC
                     Facility A (e)(f)(l)(m)...             9,973,584                    304,194
                     Facility B (e)(f)(l)(m)...        L    1,131,066                     55,173
                    Supercanal Holdings, S.A.
                     Bank debt
                     6.50%, due 11/12/04
                     (e)(f)(l).................        $    1,433,218                     71,661
                    Ziff Davis Media, Inc.
                     Bank debt, Term Loan
                     6.18%, due 3/31/07
                     (e)(k)(l).................             8,928,378                7,410,554
                                                                              ----------------
                                                                                     7,841,582
                                                                              ----------------
                    MULTI-UTILITIES & UNREGULATED POWER (1.2%)
                    Pacific Gas & Electric Co.
                     Bank debt, Revolver
                     8.00%, due 12/30/06
                     (e)(l)....................     41,398,440                      39,535,510
                                                                              ----------------

                    OFFICE ELECTRONICS (0.6%)
                    Xerox Corp.
                     Bank debt, Term Loan B
                     5.93%, due 4/30/05
                     (e)(k)(l)(q)..............             2,807,143                  2,666,786
                     Bank debt, Term Loan A
                     6.1589%, due 4/30/05
                     (e)(k)(l).................             8,421,429                  7,831,929
                     Bank debt, Revolver
                     6.2113%, due 4/30/05
                     (e)(k)(l)(q)..............             8,365,286                7,221,032
                                                                              ----------------
                                                                                    17,719,747
                                                                              ----------------
                    Total Loan Assignments &
                     Participations
                     (Cost $151,101,973).......                                    132,346,462
                                                                              ----------------
                    MORTGAGE-BACKED SECURITIES (0.3%)

                    COMMERCIAL MORTGAGE LOANS
                     (COLLATERALIZED MORTGAGE OBLIGATIONS) (0.3%)
                    Commercial Trust I
                     Series 1993-KA Class A2
                     7.63%, due 12/15/13 (l)...      6,966,298                         2,229,215




                                                           19

The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial
statements.
MainStay High Yield Corporate Bond Fund

                                              PRINCIPAL
                                               AMOUNT               VALUE
                                            -----------------------------------
               MORTGAGE-BACKED SECURITIES (CONTINUED)
               COMMERCIAL MORTGAGE LOANS
                (COLLATERALIZED MORTGAGE OBLIGATIONS) (CONTINUED)
               Debit Securitized Lease
                Trust
                Series 1993-K1 Class A1
                6.66%, due 8/15/10........ $    2,570,946      $      1,414,020
                Series 1994-K1 Class A1
                7.60%, due 8/15/07........      3,855,102             2,120,306
                Series 1994-K1 Class A2
                8.38%, due 8/15/15........      8,365,000             4,098,850
                Series 1994-K1 Class A3
                8.55%, due 8/15/19........        140,000                68,600
                                                               ----------------
                                                                      9,930,991
                                                               ----------------
               Total Mortgage-Backed
                Securities
                (Cost $12,983,144)........                            9,930,991
                                                               ----------------
               U.S. GOVERNMENT (0.4%)

               U.S. TREASURY BOND (0.4%)
                5.25%, due 2/15/29 (d)....     13,170,000            13,762,136
                                                               ----------------
               Total U.S. Government
                (Cost $11,621,215)........                           13,762,136
                                                               ----------------
               YANKEE BONDS (7.7%)

               CHEMICALS (0.2%)
               Marsulex, Inc.
                9.625%, due 7/1/08........      6,355,000             6,355,000
                                                               ----------------
               COMMUNICATIONS EQUIPMENT (0.0%)(B)
               Northern Telecom, Ltd.
                6.875%, due 9/1/23........      3,000,000             1,530,000
                                                               ----------------

               DISTRIBUTORS (0.0%)(B)
               Semi-Tech Corp.
                11.50%, due 8/15/03
                (f)(g)(m).................      4,175,000                   418
                                                               ----------------

               DIVERSIFIED TELECOMMUNICATION SERVICES (0.3%)
               Call-Net Enterprises, Inc.
                10.625%, due 12/31/08.....     15,084,605             8,145,687
                                                               ----------------

               ENERGY EQUIPMENT & SERVICES (0.4%)
               Petroleum Geo-Services ASA
                6.25%, due 11/19/03.......      6,640,000             2,456,800
                6.625%, due 3/30/08.......        495,000               143,550
                7.125%, due 3/30/28.......     36,130,000             9,393,800
                7.50%, due 3/31/07........      3,150,000               945,000
                8.15%, due 7/15/29........      1,760,000               475,200
                                                               ----------------
                                                                     13,414,350
                                                               ----------------



                                               PRINCIPAL
                                                AMOUNT               VALUE
                                             -----------------------------------
               HOUSEHOLD DURABLES (0.3%)
               Amatek Industries Property
                     Ltd.
                     14.50%, due 2/15/09
                     (e)(n)....................        $    9,559,823         $     10,515,806
                                                                              ----------------

                    MARINE (0.5%)
                    Sea Containers Ltd., Series
                     B
                     7.875%, due 2/15/08.......            13,256,000                8,616,400
                     10.75%, due 10/15/06......             7,820,000                6,256,000
                                                                              ----------------
                                                                                    14,872,400
                                                                              ----------------
                    MEDIA (2.5%)
                    British Sky Broadcasting
                     Group PLC
                     6.875%, due 2/23/09.......             8,465,000                  8,655,463
                    Cablevision S.A.
                     Series 10, Tranche 1
                     13.75%, due 4/30/07 (f)...            41,130,000                  9,871,200
                    Comcast UK Cable Partners
                     Ltd.
                     11.20%, due 11/15/07......            60,380,000                 42,567,900
                    Rogers Cablesystem, Ltd.
                     10.00%, due 12/1/07.......               285,000                    290,700
                     11.00%, due 12/1/15.......             7,185,000                  7,436,475
                    TV Azteca S.A. de C.V.
                     Series B
                     10.50%, due 2/15/07.......             5,015,000                  4,532,306
                    United Pan-Europe
                     Communications N.V.,
                     Series B
                     (zero coupon), due 8/1/09
                     12.50%, beginning 8/1/04
                     (f).......................            46,170,000                2,770,200
                     10.875%, due 8/1/09 (f)...            14,080,000                1,056,000
                     11.25%, due 2/1/10 (f)....            50,915,000                3,818,625
                     11.50%, due 2/1/10 (f)....             9,150,000                  686,250
                                                                              ----------------
                                                                                    81,685,119
                                                                              ----------------
                    METALS & MINING (0.5%)
                    Algoma Steel, Inc.
                     11.00%, due 12/31/09
                     (f).......................            23,265,000               17,477,831
                                                                              ----------------

                    PAPER & FOREST PRODUCTS (0.9%)
                    Abitibi-Consolidated, Inc.
                     8.85%, due 8/1/30.........             7,500,000                  8,065,208
                    Doman Industries Ltd.
                     12.00%, due 7/1/04........            22,875,000               21,073,594
                                                                              ----------------
                                                                                    29,138,802
                                                                              ----------------
                    ROAD & RAIL (0.1%)
                    Grupo Transportacion
                     Ferroviaria Mexicana, S.A.
                     de C.V.
                     11.75%, due 6/15/09.......             4,065,000                3,983,700
                                                                              ----------------

                    TRANSPORTATION INFRASTRUCTURE (0.4%)
                    Ermis Maritime Holdings
                     Ltd.
                     12.50%, due 3/15/04
                     (e)(l)(m).................     16,785,899                      14,294,872
                                                                              ----------------




20
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial
statements.
Portfolio of Investments December 31, 2002 (continued)

                                                PRINCIPAL
                                                 AMOUNT               VALUE
                                              -----------------------------------
                YANKEE BONDS (CONTINUED)
                WIRELESS TELECOMMUNICATION SERVICES (1.6%)
                360networks, Inc.
                 13.00%, due 5/1/08
                 (e)(f).................... $ 19,340,000        $          1,934
                Millicom International
                 Cellular S.A.
                 13.50%, due 6/1/06........     81,538,000            39,953,620
                Rogers Cantel, Inc.
                 9.75%, due 6/1/16.........      6,160,000             5,559,400
                Telesystem International
                 Wireless, Inc.
                 14.00%, due 12/30/03
                 (n).......................      8,427,000             7,162,950
                                                                ----------------
                                                                      52,677,904
                                                                ----------------
                Total Yankee Bonds
                 (Cost $434,443,934).......                          254,091,889
                                                                ----------------
                Total Long-Term Bonds
                 (Cost $3,615,408,198).....                        2,769,727,673
                                                                ----------------
                                                 SHARES
                                              -------------
                COMMON STOCKS (4.7%)
                COMMERCIAL SERVICES & SUPPLIES (0.0%)(B)
                Colorado Prime Corp.
                 (a)(e)(l)(m)..............        332,373                 3,324
                Intertek Testing
                 Services PLC (a)(e)(r)....        129,495               843,277
                                                                ----------------
                                                                         846,601
                                                                ----------------
                CONTAINERS & PACKAGING (0.3%)
                Owens-Illinois, Inc. (a)...         630,150            9,187,587
                                                                ----------------

                DIVERSIFIED TELECOMMUNICATION SERVICES (1.6%)
                BellSouth Corp. ...........        320,000             8,278,400
                Call-Net Enterprises, Inc.
                 (a).......................        724,948               449,468
                Call-Net Enterprises, Inc.
                 (a)(s)....................        117,849                78,327
                ICO Global Communications
                 Holdings Ltd. (a)(e)......      2,341,519             2,985,437
                 Class A (a)(e)(l).........      1,578,948             1,105,264
                Nextel International, Inc.
                 (a)(e)....................      1,806,649            21,228,126
                SBC Communications,
                 Inc. .....................        314,315             8,521,080
                Verizon Communications,
                 Inc. .....................        249,910             9,684,012
                                                                ----------------
                                                                      52,330,114
                                                                ----------------
                ELECTRICAL EQUIPMENT (0.0%) (B)
                Morris Material Handling,
                 Inc. (a)(e)(l)(m).........          69,236              366,951
                                                                ----------------

                FOOD & DRUG RETAILING (0.0%) (B)
                TLC Beatrice International
                 Holdings, Inc. (a)........          25,000               50,000
                                                                ----------------
                                 SHARES             VALUE
                              -------------     -------------
FOOD PRODUCTS (0.2%)
Chiquita Brands
 International, Inc. (a)...        445,323     $      5,904,983
                                               ----------------

HEALTH CARE PROVIDERS & SERVICES (1.1%)
Apria Healthcare Group,
 Inc. (a)..................      1,117,540          24,854,089
Genesis Health Ventures,
 Inc. (a)(e)...............        683,094           10,553,802
                                               ----------------
                                                     35,407,891
                                               ----------------
INTERNET SOFTWARE & SERVICES (0.0%) (B)
Globix Corp.
 (a)(e)(l)(m)..............      1,037,277            1,037,277
                                               ----------------

MACHINERY (0.3%)
Joy Global, Inc. (a).......        848,978            9,559,492
                                               ----------------

MEDIA (0.2%)
Alliance Entertainment
 Corp. (a)(e)(l)(m)........      1,095,395             832,500
Charter Communications,
 Inc. (a)..................        381,520             450,194
Medianews Group, Inc.
 (a).......................           28,000         2,590,000
United Artists Theatre
 Circuit, Inc.
 (a)(e)(l)(m)..............        371,083            5,195,162
                                               ----------------
                                                      9,067,856
                                               ----------------
METALS & MINING (0.5%)
Algoma Steel, Inc.
 (a)(s)....................      2,114,640            4,484,140
Placer Dome, Inc. .........      1,067,560           12,276,940
                                               ----------------
                                                     16,761,080
                                               ----------------
PAPER & FOREST PRODUCTS (0.3%)
Abitibi-Consolidated, Inc.
 (s).......................      1,465,965           11,302,590
                                               ----------------

WIRELESS TELECOMMUNICATION SERVICES (0.2%)
Celcaribe S.A. (a)(c)......        751,212               7,512
Minorplanet Systems
 USA, Inc. (a).............      5,784,123            4,974,346
                                               ----------------
                                                      4,981,858
                                               ----------------
Total Common Stocks
 (Cost $288,579,519).......                         156,804,280
                                               ----------------
CONVERTIBLE PREFERRED STOCKS (0.6%)

AEROSPACE & DEFENSE (0.0%) (B)
Titan Capital Trust Corp.
 5.75%.....................           22,625            995,500
                                               ----------------

DIVERSIFIED FINANCIALS (0.1%)
Pacific & Atlantic
 (Holdings), Inc.
 7.50%, Class A
 (e)(h)(l).................      1,384,974            2,769,948
                                               ----------------
                                                         21

The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial
statements.
MainStay High Yield Corporate Bond Fund

                                               SHARES               VALUE
                                            -----------------------------------
               CONVERTIBLE PREFERRED STOCKS (CONTINUED)
               DIVERSIFIED TELECOMMUNICATION SERVICES (0.1%)
               NEON Communications, Inc.
                12.00% (e)(h)(l)(m).......        212,404      $      2,389,545
                                                               ----------------

               ENERGY EQUIPMENT & SERVICES (0.3%)
               El Paso Energy Capital
                Trust I
                4.75%.....................        554,155           10,085,621
                                                              ----------------

               HEALTH CARE PROVIDERS & SERVICES (0.0%) (B)
               Genesis Health Ventures,
                Inc.
                6.00% (e)(h)(l)(m)........          6,819              651,214
                                                              ----------------

               PAPER & FOREST PRODUCTS (0.1%)
               Paperboard Industries
                International, Inc.
                5.00%, Class A
                (c)(e)(l)(s)..............       170,552             2,580,876
                                                              ----------------
               Total Convertible Preferred
                Stocks
                (Cost $38,579,030)........                          19,472,704
                                                              ----------------
               PREFERRED STOCKS (1.8%)

               COMMERCIAL SERVICES & SUPPLIES (0.1%)
               Colorado Prime Corp.
                (a)(e)(l)(m)..............          7,820            2,041,145
                                                              ----------------

               HEALTH CARE PROVIDERS & SERVICES (0.0%) (B)
               Bergen Capital Trust I
                7.80%.....................          7,100              162,590
                                                              ----------------

               MEDIA (0.3%)
               Alliance Entertainment
                Corp.
                Series A1 (a)(e)(l)(m)....           447                91,237
                Series A2 (a)(e)(l)(m)....           503               108,075
               Mediaone Financing Trust
                III
                9.04%.....................       391,900             9,679,930
               Paxson Communications Corp.
                13.25% (h)................           492             2,558,400
               Ziff Davis Media, Inc.
                10.00%, Series E-1
                (a)(m)....................         4,240                    42
                                                              ----------------
                                                                    12,437,684
                                                              ----------------
               REAL ESTATE (1.2%)
               Sovereign Real Estate
                Investment Corp.
                12.00%, Series A (c)......        34,758            38,581,380
                                                              ----------------
               TRANSPORTATION INFRASTRUCTURE (0.0%) (B)
               Ermis Maritime
                Holdings Ltd.
                (a)(e)(l)(m)..............        435,930                4,359
                                                              ----------------
                                                    SHARES               VALUE
                                                 -----------------------------------
                    WIRELESS TELECOMMUNICATION SERVICES (0.2%)
                    Rural Cellular Corp.
                     11.375%, Series B (h).....         23,508      $      5,877,000
                                                                    ----------------
                    Total Preferred Stocks
                     (Cost $89,134,437)........                           59,104,158
                                                                    ----------------
                    RIGHTS (0.0%) (B)

                    HOUSEHOLD DURABLES (0.0%) (B)
                    Amatek Industries Property
                     Ltd.
                     Common Rights (a)(e)......                 6,000                       60
                     Preferred Rights (a)(e)...             1,422,154                  711,077
                                                                              ----------------
                                                                                       711,137
                                                                              ----------------
                    MULTI-UTILITIES & UNREGULATED POWER (0.0%) (B)
                    AES Corp. (The)
                     Contingent Value Rights
                     (a)(e)(m).................         23,755                         427,590
                                                                              ----------------
                    Total Rights
                     (Cost $1,155,093).........                                      1,138,727
                                                                              ----------------
                    WARRANTS (0.0%) (B)

                    DIVERSIFIED FINANCIALS (0.0%) (B)
                    ASAT Finance LLC
                     Expire 11/1/06
                     (a)(c)(e).................                  8,680                   8,680
                                                                              ----------------

                    DIVERSIFIED TELECOMMUNICATION SERVICES (0.0%) (B)
                    ICO Global Communications
                     Holdings Ltd.
                     Expire 5/16/06 (a)(e).....        587,902                 5,879
                    Loral Space &
                     Communications Ltd.
                     Expire 12/26/06 (a)(e)....        341,253                20,475
                    NEON Communications, Inc.
                     Class A
                     Expire 12/2/12
                     (a)(e)(l)(m)..............      1,062,401                10,624
                     Redeemable Preferred
                     Expire 12/2/12
                     (a)(e)(l)(m)..............      1,274,805                12,747
                                                                    ----------------
                                                                              49,725
                                                                    ----------------
                    HEALTH CARE PROVIDERS & SERVICES (0.0%) (B)
                    Harborside Healthcare Corp.
                     Class A
                     Expire 8/1/09 (a)(e)(l)...      1,461,802                73,090
                                                                    ----------------

                    HOTELS, RESTAURANTS & LEISURE (0.0%) (B)
                    Windsor Woodmont Black Hawk
                     Resort Corp.
                     Expire 3/15/10
                     (a)(c)(e)(m)..............          8,500                              85
                                                                              ----------------

                    MEDIA (0.0%) (B)
                    Ono Finance PLC
                     Expire 2/15/11
                     (a)(c)(e).................                 40,495                        405




22
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial
statements.
Portfolio of Investments December 31, 2002 (continued)

                                                  SHARES               VALUE
                                               -----------------------------------
                WARRANTS (CONTINUED)
                MEDIA (CONTINUED)
                Ziff Davis Media, Inc.
                 Expire 8/12/12 (a)(c).....          777,370     $          7,774
                                                                 ----------------
                                                                            8,179
                                                                 ----------------
                OIL & GAS (0.0%) (B)
                Petro Stopping Centers
                 Holdings L.P.
                 Expire 8/1/08
                 (a)(c)(e)(m)..............           24,460               24,460
                                                                 ----------------
                TOBACCO (0.0%) (B)
                North Atlantic Trading Co.
                 Expire 6/15/07
                 (a)(c)(e).................               66                    1
                                                                 ----------------
                WIRELESS TELECOMMUNICATION SERVICES (0.0%) (B)
                Occidente y Caribe Celular,
                 S.A.
                 Expire 3/15/04
                 (a)(c)(e).................         28,380                    284
                Ubiquitel Operating Co.
                 Expire 4/15/10
                 (a)(c)(e).................         14,230                  3,558
                                                                 ----------------
                                                                            3,842
                                                                 ----------------
                Total Warrants
                 (Cost $9,226,235).........                               168,062
                                                                 ----------------
                                               PRINCIPAL
                                                AMOUNT
                                             -------------
                SHORT-TERM INVESTMENTS (7.4%)

                COMMERCIAL PAPER (2.5%)
                American Express Credit
                 Corp.
                 1.35%, due 1/10/03........    $   20,000,000          19,993,249
                Lloyds Bank PLC
                 1.31%, due 1/9/03.........        29,500,000          29,491,404
                UBS Finance Delaware LLC
                 1.20%, due 1/2/03.........        32,325,000          32,323,922
                                                                 ----------------
                                                                       81,808,575
                                                                 ----------------
                Total Commercial Paper
                 (Cost $81,808,575)........                            81,808,575
                                                                 ----------------



                                                  SHARES               VALUE
                                               -----------------------------------
                COMMERCIAL PAPER (CONTINUED)
                INVESTMENT COMPANY (2.1%)
                Merrill Lynch Premier
                 Institutional Fund........        68,369,578    $     68,369,578
                                                                 ----------------
                Total Investment Company
                 (Cost $68,369,578)........                            68,369,578
                                                                 ----------------
                                                 PRINCIPAL
                                                  AMOUNT
                                               -------------
                SHORT-TERM BOND (0.0%) (B)
                MEDIA (0.0%) (B)
                    Continental Cablevision,
                     Inc.
                     8.625%, due 8/15/03.......        $        700,000                717,315
                                                                              ----------------
                    Total Short-Term Bond
                     (Cost $705,675)...........                                        717,315
                                                                              ----------------

                    SHORT-TERM LOAN ASSIGNMENT & PARTICIPATION (0.4%)
                    BUILDING PRODUCTS (0.4%)
                    Owens Corning, Inc.
                     Bank debt, Revolver
                     3.62%, due 1/1/04
                     (e)(f)(l).................     22,006,692            13,286,540
                                                                    ----------------
                    Total Short-Term Loan
                     Assignment & Participation
                     (Cost $14,660,897)........                           13,286,540
                                                                    ----------------




                                                           23

The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial
statements.
MainStay High Yield Corporate Bond Fund

                                             PRINCIPAL
                                              AMOUNT               VALUE
                                           -----------------------------------
              SHORT-TERM INVESTMENTS (CONTINUED)
              U.S. GOVERNMENT (2.4%)
              United States Treasury Bill
               1.39%, due 1/16/03........ $ 40,000,000        $     39,976,782
               1.40%, due 1/23/03........     40,000,000            39,973,400
                                                              ----------------
              Total U.S. Government
               (Cost $79,942,484)........                           79,950,182
                                                              ----------------
              Total Short-Term
               Investments
               (Cost $245,487,209).......                          244,132,190
                                                              ----------------
              Total Investments
               (Cost $4,287,569,721)
               (t).......................           98.5%        3,250,547,794(u)
              Cash and Other Assets,
               Less Liabilities..........            1.5            48,394,576
                                           -------------      ----------------
              Net Assets.................          100.0%     $ 3,298,942,370
                                           =============      ================



                 -------
                 (a)   Non-income producing security.
                 (b)   Less than one tenth of a percent.
                 (c)   May be sold to institutional investors only.
                 (d)   Partially segregated for unfunded loan commitments.
                 (e)   Illiquid security.
                 (f)   Issue in default.
                 (g)   Issuer in bankruptcy.
                 (h)   PIK ('Payment in Kind')--interest or dividend payment
                       is made with additional securities.
                 (i)   Yankee bond.
                 (j)   Eurobond--Bond denominated in U.S. dollars or other
                       currencies and sold to investors outside the country
                       whose currency is used.
                 (k)   Floating rate. Rate shown is the rate in effect at
                       December 31, 2002.
                 (l)   Restricted security.
                 (m)   Fair valued security
                 (n)   CIK ('Cash in Kind")--interest payment is made with
                       cash or additional securities.
                 (o1) 22,253 Units--Each unit reflects $1,000 principal
                       amount of 15.00% Senior Secured Notes plus 0.1923
                       shares of Series A preferred stock.
                 (o2) 15,895 Units--Each unit reflects $1,000 principal
                       amount of 13.875% Senior Notes plus 1 warrant to
                       acquire 19.9718 shares of common stock at $0.01 per
                       share at a future date.
                 (p)   Partially segregated as collateral for foreign currency
                       forward contracts.
                 (q)   Multiple tranche facilities.
                 (r)   British security
                 (s)   Canadian security
                 (t)   The cost for federal income tax purposes is
                       $4,366,142,983.
                 (u)   At December 31, 2002, net unrealized depreciation was
                       $1,115,595,189, 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 $141,810,925 and
                       aggregate gross unrealized depreciation for all
                       investments on which there was an excess of cost over
                       market value of $1,257,406,114.
                 (v)   The following abbreviations are used in the above
                       portfolio:
                             E   --Euro.
                             L   --Pound Sterling.




24
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial
statements.
Statement of Assets and Liabilities as of December 31, 2002

       ASSETS:
       Investment in securities, at value (identified cost
         $4,287,569,721)...........................................    $3,250,547,794
       Cash denominated in foreign currencies (identified cost
         $2,869,619)...............................................        2,909,886
       Cash........................................................          215,540
       Receivables:
         Dividends and interest....................................        64,250,864
         Fund shares sold..........................................        11,635,003
       Unrealized appreciation on foreign currency forward
         contracts.................................................            96,173
       Other assets................................................            66,306
                                                                       --------------
                Total assets........................................    3,329,721,566
                                                                       --------------
       LIABILITIES:
       Payables:
         Investment securities purchased...........................        16,312,695
         Fund shares redeemed......................................         7,988,356
         NYLIFE Distributors.......................................         2,241,845
         Manager...................................................         1,572,140
         Transfer agent............................................           950,999
         Trustees..................................................            33,616
         Custodian.................................................            23,569
       Accrued expenses............................................           509,955
       Unrealized depreciation on foreign currency forward
         contracts.................................................         1,146,021
                                                                       --------------
                Total liabilities...................................       30,779,196
                                                                       --------------
       Net assets..................................................    $3,298,942,370
                                                                       ==============
       COMPOSITION OF NET ASSETS:
       Shares of beneficial interest outstanding (par value of $.01
         per share) unlimited number of shares authorized:
         Class A...................................................    $    1,719,437
         Class B...................................................         4,475,512
         Class C...................................................           479,250
       Additional paid-in capital..................................     4,928,590,914
       Accumulated net investment loss.............................       (27,634,616)
       Accumulated net realized loss on investments................      (570,755,831)
       Net unrealized depreciation on investments..................    (1,037,021,927)
       Net unrealized depreciation on translation of other assets
         and liabilities in foreign currencies and foreign currency
         forward contracts.........................................          (910,369)
                                                                       --------------
       Net assets..................................................    $3,298,942,370
                                                                       ==============
       CLASS A
       Net assets applicable to outstanding shares.................    $ 850,898,549
                                                                       ==============
       Shares of beneficial interest outstanding...................       171,943,678
                                                                       ==============
       Net asset value per share outstanding.......................    $         4.95
       Maximum sales charge (4.50% of offering price)..............              0.23
                                                                       --------------
       Maximum offering price per share outstanding................    $         5.18
                                                                       ==============
       CLASS B
       Net assets applicable to outstanding shares.................    $2,211,252,702
                                                                       ==============
       Shares of beneficial interest outstanding...................       447,551,206
                                                                       ==============
       Net asset value and offering price per share outstanding....    $         4.94
                                                                       ==============
       CLASS C
       Net assets applicable to outstanding shares.................    $ 236,791,119
                                                                       ==============
       Shares of beneficial interest outstanding...................        47,924,967
                                                                       ==============
       Net asset value and offering price per share outstanding....    $         4.94
                                                                                          ==============




                                                         25

The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial
statements.
Statement of Operations for the year ended December 31, 2002

         INVESTMENT INCOME:
         Income:
           Interest..................................................                      $ 340,487,060
           Dividends (a).............................................                         11,794,545
                                                                                           -------------
              Total income............................................                       352,281,605
                                                                                           -------------
         Expenses:
           Manager...................................................                         18,638,403
           Distribution--Class B.....................................                         17,483,256
           Distribution--Class C.....................................                          1,625,609
           Service--Class A..........................................                          1,859,907
           Service--Class B..........................................                          5,827,749
           Service--Class C..........................................                            541,873
           Transfer agent............................................                          5,855,164
           Professional..............................................                            968,189
           Shareholder communication.................................                            708,711
           Custodian.................................................                            369,712
           Recordkeeping.............................................                            355,849
           Trustees..................................................                            152,424
           Registration..............................................                            106,457
           Miscellaneous.............................................                            118,058
                                                                                           -------------
             Total expenses before waiver............................                         54,611,361
         Fees waived by Manager and Subadvisor.......................                           (283,439)
                                                                                           -------------
              Net expenses............................................                        54,327,922
                                                                                           -------------
         Net investment income.......................................                        297,953,683
                                                                                           -------------
         REALIZED AND UNREALIZED LOSS ON INVESTMENTS AND FOREIGN
           CURRENCY TRANSACTIONS:
         Net realized loss from:
           Security transactions.....................................                       (241,887,241)
           Foreign currency transactions.............................                         (7,560,063)
                                                                                           -------------
         Net realized loss on investments and foreign currency
           transactions..............................................                       (249,447,304)
                                                                                           -------------
         Net change in unrealized appreciation (depreciation) on:
           Security transactions.....................................                         (84,262,377)
           Translation of other assets and liabilities in foreign
             currencies and foreign currency forward contracts.......                         (3,006,951)
                                                                                           -------------
         Net unrealized loss on investments and foreign currency
           transactions..............................................                        (87,269,328)
                                                                                           -------------
         Net realized and unrealized loss on investments and foreign
           currency transactions.....................................                       (336,716,632)
                                                                                           -------------
         Net decrease in net assets resulting from operations........                      $ (38,762,949)
                                                                                           =============




(a) Dividends recorded net of foreign withholding taxes of $88,847.

26
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial
statements.
Statement of Changes in Net Assets

                                                                               Year ended            Year ended
                                                                              December 31,          December 31,
                                                                                  2002                  2001
                                                                             ---------------       --------------
 INCREASE (DECREASE) IN NET ASSETS:
 Operations:
   Net investment income.....................................                $    297,953,683     $   344,248,294
   Net realized loss on investments and foreign currency
     transactions............................................                    (249,447,304)        (245,072,570)
   Net change in unrealized appreciation (depreciation) on
     investments and foreign currency transactions...........                    (87,269,328)         (42,344,482)
                                                                             ---------------       --------------
   Net increase (decrease) in net assets resulting from
     operations..............................................                    (38,762,949)          56,831,242
                                                                             ---------------       --------------
 Dividends and distributions to shareholders:
   From net investment income:
     Class A.................................................                     (74,335,867)         (67,322,739)
     Class B.................................................                    (214,539,114)        (266,278,087)
     Class C.................................................                     (20,249,937)         (15,595,388)
   Return of capital:
     Class A.................................................                     (6,742,285)          (4,620,721)
     Class B.................................................                    (19,458,762)         (18,276,093)
     Class C.................................................                     (1,836,675)          (1,070,395)
                                                                             ---------------       --------------
        Total dividends and distributions to shareholders.....                  (337,162,640)        (373,163,423)
                                                                             ---------------       --------------
 Capital share transactions:
   Net proceeds from sale of shares:
     Class A.................................................                    1,409,215,356        738,375,706
     Class B.................................................                      430,111,828        459,704,381
     Class C.................................................                      175,254,924        144,653,972
   Net asset value of shares issued to shareholders in
     reinvestment of dividends and distributions:
     Class A.................................................                     42,735,569           38,570,525
     Class B.................................................                    142,980,666          176,786,334
     Class C.................................................                      9,763,262            7,822,129
                                                                             ---------------       --------------
                                                                               2,210,061,605        1,565,913,047
   Cost of   shares redeemed:
     Class   A.................................................               (1,241,244,596)        (463,262,854)
     Class   B.................................................                 (557,477,978)        (530,124,371)
     Class   C.................................................                  (95,917,677)         (69,544,882)
                                                                             ---------------       --------------
        Increase in net assets derived from capital share
         transactions.........................................                   315,421,354          502,980,940
                                                                             ---------------       --------------
        Net increase (decrease) in net assets.................                   (60,504,235)         186,648,759

 NET ASSETS:
 Beginning of year...........................................                  3,359,446,605       3,172,797,846
                                                                             ---------------      --------------
 End of year.................................................                $ 3,298,942,370      $3,359,446,605
                                                                             ===============      ==============
 Accumulated net investment loss at end of year..............                $   (27,634,616)     $ (25,658,807)
                                                                             ===============      ==============




                                                         27

The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial
statements.
Financial Highlights selected per share data and ratios

                                                                                                 Class A
                                                               --------------------------------------------------
                                                                                        Year ended December 31,
                                                               --------------------------------------------------
                                                                  2002            2001             2000
                                                               ----------      ----------      ----------       --
Net asset value at beginning of period...............          $     5.56      $     6.10      $      7.41      $
                                                               ----------      ----------      ----------       --
Net investment income................................                0.51            0.65(c)          0.80
Net realized and unrealized gain (loss) on
 investments.........................................                (0.54)          (0.50)(c)         (1.25)
Net realized and unrealized gain (loss) on foreign
 currency transactions...............................               (0.02)           0.00(b)           0.02
                                                               ----------      ----------        ----------     --
Total from investment operations.....................               (0.05)           0.15             (0.43)
                                                               ----------      ----------        ----------     --
Less dividends and distributions:
 From net investment income..........................               (0.51)          (0.65)            (0.83)
 From net realized gain on investments...............                  --              --             (0.05)
 Return of capital...................................               (0.05)          (0.04)               --
                                                               ----------      ----------        ----------     --
Total dividends and distributions....................               (0.56)          (0.69)            (0.88)
                                                               ----------      ----------        ----------     --
Net asset value at end of period.....................          $     4.95      $     5.56        $     6.10     $
                                                               ==========      ==========        ==========     ==
Total investment return (a)..........................               (0.78%)          2.49%            (6.48%)
Ratios (to average net assets)/
 Supplemental Data:
   Net investment income.............................                 9.63%          10.84%(c)         11.35%
   Net expenses......................................                 1.07%           1.04%             1.03%
   Expenses (before waiver)..........................                 1.08%           1.08%             1.07%
Portfolio turnover rate..............................                   50%             51%               54%
Net assets at end of period (in 000's)...............          $   850,899     $   710,205       $   456,770    $




                    *    Class C shares were first offered on September 1, 1998.
                    +    Annualized.
                   (a)   Total return is calculated exclusive of sales charges and is
                         not annualized.
                   (b)   Less than one cent per share.
                   (c)   As required, effective January 1, 2001, the Fund has adopted
                         the provisions of the AICPA Audit and Accounting Guide for
                         Investment Companies and began amortizing premium on debt
                         securities. The effect of this change for the year ended
                         December 31, 2001 is shown below. Per share ratios and
                         supplemental data for periods prior to January 1, 2001 have
                         not been restated to reflect this change in presentation.



                                                                        CLASS A   CLASS B   CLASS C
                                                                        -------   -------   -------
 Decrease net investment income..............................           ($0.00)(b) ($0.00)(b) ($0.00)(b)
 Increase net realized and unrealized gains and losses.......             0.00(b)   0.00(b)   0.00(b)
 Decrease ratio of net investment income.....................            (0.04%)   (0.04%)   (0.04%)




                                                          28
                           Class B                                                        Class C
--------------------------------------------------------------       ----------------------------------------

                   Year ended December 31,                                        Year ended December 31,
--------------------------------------------------------------       ----------------------------------------
   2002         2001          2000         1999        1998             2002         2001          2000
----------   ----------    ----------   ----------  ----------       ----------   ----------    ----------   -
$     5.55   $     6.09    $     7.40   $     7.53  $     8.15       $     5.55   $     6.09    $     7.40   $
----------   ----------    ----------   ----------  ----------       ----------   ----------    ----------   -
      0.46         0.61(c)         0.74       0.73        0.69             0.46         0.61(c)         0.74
     (0.53)       (0.50)(c)      (1.25)      (0.06)      (0.57)           (0.53)       (0.50)(c)      (1.25)
     (0.02)        0.00(b)         0.02       0.02       (0.01)           (0.02)        0.00(b)         0.02
----------   ----------    ----------   ----------  ----------       ----------   ----------    ----------   -
     (0.09)        0.11         (0.49)        0.69        0.11            (0.09)        0.11         (0.49)
----------   ----------    ----------   ----------  ----------       ----------   ----------    ----------   -
     (0.48)       (0.61)        (0.77)       (0.79)      (0.69)           (0.48)       (0.61)        (0.77)
        --           --         (0.05)       (0.03)      (0.04)              --           --         (0.05)
     (0.04)       (0.04)            --          --          --            (0.04)       (0.04)            --
----------   ----------    ----------   ----------  ----------       ----------   ----------    ----------   -
     (0.52)       (0.65)        (0.82)       (0.82)      (0.73)           (0.52)       (0.65)        (0.82)
----------   ----------    ----------   ----------  ----------       ----------   ----------    ----------   -
$     4.94   $     5.55    $     6.09   $     7.40  $     7.53       $     4.94   $     5.55    $     6.09   $
==========   ==========    ==========   ==========  ==========       ==========   ==========    ==========   =
     (1.53%)       1.72%        (7.20%)       9.51%       1.31%           (1.53%)       1.72%        (7.20%)

      8.88%        10.09%(c)    10.60%         9.61%         8.65%          8.88%         10.09%(c)     10.60%
      1.82%         1.79%        1.78%         1.75%         1.75%          1.82%          1.79%         1.78%
      1.83%         1.83%        1.82%         1.79%         1.79%          1.83%          1.83%         1.82%
        50%           51%          54%           83%          128%            50%            51%           54%
$2,211,253    $2,475,037   $2,609,320    $3,294,427    $3,309,389    $   236,791    $   174,205   $   106,709    $

    Class C
 -------------
 September 1*
    through
  December 31
     1998
 -------------
  $     7.43
  ----------
        0.27
        0.15
       (0.01)
  ----------
        0.41
  ----------
       (0.27)
       (0.04)
           --
  ----------
       (0.31)
  ----------
  $     7.53
  ==========
        5.58%
        8.65%+
        1.75%+
        1.79%+
          128%
  $   10,025




                                                 29
MainStay High Yield Corporate Bond Fund

NOTE 1--ORGANIZATION AND BUSINESS:

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-four funds (collectively referred to as the "Funds").
These financial statements and notes relate only to MainStay High Yield Corporate Bond Fund (the "Fund"), a
diversified fund.

The Fund currently offers three classes of shares. Class A shares, whose distribution commenced on January 3,
1995, 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. Distribution of Class B shares and Class C shares commenced on May 1, 1986
and September 1, 1998, respectively. Class A shares, Class B shares and Class C shares bear the same voting
(except for issues that relate solely to one class), dividend, liquidation and other rights and conditions except that
the Class B shares and Class C shares are subject to higher distribution fee rates. Each class of shares bears
distribution and/or service fee payments under a distribution plan pursuant to Rule 12b-1 under the 1940 Act.

The Fund's investment objective is to seek maximum income through investment in a diversified portfolio of high
yield debt securities. Capital appreciation is a secondary objective.

The Fund principally invests in high yield securities (sometimes called "junk bonds"), which are generally
considered speculative because they present a greater risk of loss, including default, than higher quality debt
securities. These securities pay a premium--a high interest rate or yield--because of the increased risk of loss.
These securities can also be subject to greater price volatility.

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 currency fluctuations, future adverse political and
economic developments and possible imposition of currency exchange blockages or other foreign governmental
laws or restrictions. These risks are likely to be greater in emerging markets than in developed markets. The
ability of issuers of debt securities held by the Fund to meet their obligations may be affected by economic and
political developments in a specific country, industry or region.

                                                           30
Notes to Financial Statements

NOTE 2--SIGNIFICANT ACCOUNTING POLICIES:

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 of the 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 of the Fund 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 number of 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 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 closing bid price supplied
through such system, (d) by appraising over-the-counter securities not quoted on the NASDAQ system at prices
supplied by a pricing agent or brokers selected by the Fund's Manager or Subadvisor, 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 or brokers selected by the Fund's Manager or Subadvisor, whose
prices reflect broker/dealer supplied valuations and electronic data processing techniques if such prices are
deemed by the Fund's Manager or Subadvisor 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 posted settlement price on the
market where such options 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 and debt
securities for which prices are supplied by a pricing agent but are not deemed by the Fund's Manager or
Subadvisor 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 Trust's Board of Trustees. 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. Foreign currency forward contracts are valued at
their fair market values determined on the basis of the mean between the last current bid and asked prices based
on dealer or exchange quotations.

                                                            31
MainStay High Yield Corporate Bond Fund

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 Fund's calculation of net asset values unless the Fund's Manager
or Subadvisor deems that the particular event would materially affect the Fund's net asset value, in which case an
adjustment may be made.

REPURCHASE AGREEMENTS. The Fund's custodian and other banks acting in a sub-custodian capacity take
possession of the collateral pledged for investments in repurchase agreements. The underlying collateral is valued
daily on a mark-to-market basis to determine that the value, including accrued interest, exceeds the repurchase
price. In the event of the seller's default of the obligation to repurchase, the Funds have the right to liquidate the
collateral and apply the proceeds in satisfaction of the obligation. Under certain circumstances, in the event of
default or bankruptcy by the other party to the agreement, realization and/or retention of the collateral may be
subject to legal proceedings.

FOREIGN CURRENCY FORWARD CONTRACTS. A foreign currency forward 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.
The Fund enters into foreign currency forward contracts primarily to hedge its foreign currency denominated
investments and receivables and payables against adverse movements in future foreign exchange rates.

The use of foreign currency 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 the
Fund's involvement in these financial instruments. Risks arise from the possible movements in the foreign exchange
rates underlying these instruments. The unrealized appreciation on forward contracts reflects the Fund's exposure
at year end to credit loss in the event of a counterparty's failure to perform its obligations.

                                                         32
Notes to Financial Statements (continued)

Foreign currency forward contracts open at December 31, 2002:

                                                                             Contract           Contract           Unrealized
                                                                              Amount             Amount          Appreciation/
                                                                               Sold             Purchased        (Depreciation
                                                                            -----------        -----------       -------------
Foreign Currency Sale Contracts
------------------------------------------------------------
Pound Sterling vs. U.S. Dollar, expiring 1/15/03............                L14,320,000        $21,882,392        $(1,146,021)




                                                                             Contract           Contract
                                                                              Amount             Amount
                                                                             Purchased            Sold
                                                                            -----------        -----------
Foreign Currency Buy Contracts
------------------------------------------------------------
Pound Sterling vs. U.S. Dollar, expiring 1/15/03............                L 1,800,000        $ 2,798,460             96,173
                                                                                                                  -----------
Net unrealized depreciation on foreign currency forward
  contracts.................................................                                                      $(1,049,848)
                                                                                                                  ===========




SECURITIES SOLD SHORT. The Fund may engage in short sales as a method of hedging declines in the value
of securities owned. When the Fund enters into a short sale, it must segregate the security sold short, or securities
equivalent in kind and amount to the securities sold, as collateral for its obligation to deliver the security upon
conclusion of the sale. A gain, limited to the price at which the Fund sold the security short, or a loss, unlimited as
to dollar amount, will be recognized upon termination of a short sale if the market price on the date the short
position is closed out is less or greater, respectively, than the proceeds originally received. Any such gain or loss
may be offset, completely or in part, by the change in the value of the hedged investments.

At December 31, 2002 there were no open short sales.

RESTRICTED SECURITIES. A restricted security is a security which has been purchased through a private
offering and cannot be resold to the general public without prior registration under the Securities Act of 1933 (the
"1933 Act"). The Fund does not have the right to demand that such securities be registered. Disposal of these
securities may involve time-consuming negotiations and expense, and prompt sale at an acceptable price may be
difficult.

                                                          33
MainStay High Yield Corporate Bond Fund

RESTRICTED SECURITIES (CONTINUED):
Restricted securities held at December 31, 2002:

                                                                    Principal
                                                Date(s) of           Amount/                                12/31/02
Security                                        Acquisition          Shares               Cost               Value
----------------------------------------     -----------------   ---------------      ------------        -----------
Alliance Entertainment Corp.
  Common Stock..........................          12/2/99                 1,095,395   $    4,213,596      $      832,50
  Series A1, Preferred Stock............      5/19/99-12/2/99                   447          446,889              91,23
  Series A2, Preferred Stock............          12/2/99                       503          956,239             108,07
Colorado Prime Corp.
  Common Stock..........................      5/6/97-11/10/99               332,373            3,324               3,32
  Preferred Stock.......................      5/6/97-11/10/99                 7,820       24,924,148           2,041,14
Commercial Trust I
  Series 1993-KA Class A2
  7.63%, due 12/15/13...................            1/23/02          $ 6,966,298           4,029,984           2,229,21
Crown Cork & Seal Co., Inc.
  Bank debt, Revolver
  3.4666%, due 12/8/03..................     12/17/01-12/13/02           27,440,011       23,423,690          25,742,16
  5.05%, due 12/8/03....................     12/17/01-12/13/02       E      145,680          149,643             143,41
  5.9935%, due 12/8/03..................     12/17/01-12/13/02       L      771,477        1,129,172           1,165,15
Ermis Maritime Holdings Ltd.
  12.50%, due 3/15/04...................     12/14/98-2/16/01        $16,785,899          15,644,823          14,294,87
  Preferred Stock.......................      12/9/98-2/6/01             435,930                   0(b)             4,3
FRI-MRD Corp.
  12.00%, due 1/31/05 (c)...............      8/12/97-7/31/02            42,766,286       42,555,813          23,949,12
Genesis Health Ventures, Inc.
  Convertible Preferred Stock
  6.00%.................................     11/1/99-12/31/01                 6,819          714,592             651,21
Global Motorsport Group, Inc.
  Bank debt, Tranche B
  9.25%, due 10/31/05...................           12/15/98               4,776,692        4,776,692           3,104,85
Globix Corp.
  Common Stock..........................           10/15/02               1,037,277          245,760           1,037,27
GT Group Telecom Services Corp.
  Bank debt, Term Loan A
  6.5625%, due 6/30/08 (d)..............            1/30/01              16,936,744        8,655,569           1,185,57
  Bank debt, Term Loan B
  6.625%, due 6/30/08 (d)...............            1/30/01              12,103,256        6,218,803             847,22
Harborside Healthcare Corp.
  (zero coupon), due 8/1/07
  12.00%, beginning 8/1/04..............      8/20/99-6/30/00            52,015,000       29,183,358          27,307,87
  Class A Warrants, Expire 8/1/09.......      8/17/99-6/27/00             1,461,802        4,409,277              73,09
ICO Global Communications
  Holdings Ltd.
  Common Stock
  Class A...............................            5/10/00               1,578,948       16,500,007           1,105,26
Maxwell Communications Corp., PLC
  Facility A (d)........................     4/29/94-11/22/94          9,973,584                   0(b)           304,1
  Facility B (d)........................     4/29/94-11/22/94        L 1,131,066                   0(b)            55,1
Morris Material Handling, Inc.
  Common Stock..........................     3/11/99-10/30/01                69,236           36,341             366,95




                                                   34
Notes to Financial Statements (continued)

RESTRICTED SECURITIES (CONTINUED):

                                                                   Principal
                                               Date(s) of           Amount/                                12/31/02
Security                                       Acquisition          Shares               Cost               Value
----------------------------------------    -----------------   ---------------      ------------        -----------
NEON Communications, Inc.
  Convertible Preferred Stock
  12.00% (c)............................        11/25/02            $      212,404   $    2,366,169      $    2,389,54
  Class A Warrants, Expire 12/2/12......        11/25/02                 1,062,401           10,624              10,62
  Redeemable Preferred Warrants, Expire
    12/2/12.............................        11/25/02                 1,274,805           12,748              12,74
Owens Corning, Inc.
  Bank debt, Revolver
  3.62%, due 1/1/04 (d).................    9/26/01-10/15/02        $22,006,692          14,660,897          13,286,54
Pacific & Atlantic (Holdings), Inc.
  Convertible Preferred Stock
  7.50%, Class A (c)....................     5/21/98-6/28/02             1,384,974       11,155,214           2,769,94
Pacific Gas & Electric Co.
  Bank debt, Revolver
  8.00%, due 12/30/06...................     4/12/02-10/8/02            41,398,440       41,216,657          39,535,51
Paperboard Industries
  International, Inc.
  Convertible Preferred Stock
  5.00%, Class A........................         5/5/98                    170,552        2,833,141           2,580,87
Pegasus Shipping (Hellas) Ltd.
  Promissory Note
  8.30%, due 1/31/04....................         5/31/02                   585,483                0(b)
Qwest Services Corp.
  Bank debt, Revolver
  4.995%, due 5/3/05....................        11/14/02                 5,962,492        5,052,741           5,473,56
Spalding Holdings Corp.
  Bank debt, Revolver
  8.0952%, due 9/30/03..................     2/5/02-11/20/02             4,844,308        4,066,003           1,792,39
Supercanal Holdings, S.A.
  Bank debt
  6.50%, due 11/12/04 (d)...............         5/26/00                 1,433,218        1,139,737              71,66
Thermadyne Holdings Corp.
  Bank debt, Revolver
  4.17%, due 5/22/04....................    10/16/01-4/15/02            15,110,723       13,288,215          12,541,90
  Bank debt, Term Loan A
  4.17%, due 5/22/04....................    10/16/01-6/13/02             5,680,666        5,240,921           4,714,95
  Bank debt, Term Loan B
  4.42%, due 5/22/05....................     10/5/01-3/20/02             5,768,397        5,116,062           4,787,76
  Bank debt, Term Loan C
  4.67%, due 5/22/06....................     10/5/01-3/20/02             5,768,397        5,050,909           4,787,76
United Artists Theatre Circuit, Inc.
  Common Stock..........................         2/1/01                    371,083          339,579           5,195,16
United Industries Corp.
  Bank debt, Term Loan
  4.67%, due 1/20/05....................         3/26/01                   970,778          912,923             962,89




                                                 35
MainStay High Yield Corporate Bond Fund

RESTRICTED SECURITIES (CONTINUED):

                                                                           Principal
                                                     Date(s) of             Amount/                             12/31/02
Security                                             Acquisition            Shares                Cost           Value
----------------------------------------          -----------------     ---------------       ------------    -----------
Xerox Corp.
  Bank debt, Term Loan B
  5.93%, due 4/30/05....................           6/21/02-7/30/02           $ 2,807,143      $   2,685,664   $      2,666,78
  Bank debt, Term Loan A
  6.1589%, due 4/30/05..................           6/21/02-7/30/02                8,421,429       8,056,163          7,831,92
  Bank debt, Revolver
  6.2113%, due 4/30/05..................           6/21/02-7/30/02                8,365,286       8,001,989          7,221,03
Ziff Davis Media, Inc.
  Bank debt, Term Loan
  6.18%, due 3/31/07....................           6/5/01-12/17/01                8,928,378      6,920,422       7,410,55
                                                                                              ------------    -----------
                                                                                              $326,344,498    $232,687,48
                                                                                              ============    ===========




(a) Less than one tenth of a percent.
(b) Less than one dollar.
(c) PIK ("Payment In Kind")--Interest payment is made with additional shares.
(d) Issue in default.

COMMITMENTS AND CONTINGENCIES. As of December 31, 2002, the Fund had unfunded loan
commitments pursuant to the following loan agreements:

                                                                                         Unfunded
              Borrower                                                                  Commitment
              ------------------------------------------------------------              -----------
              Crown Cork & Seal Co., Inc..................................              $ 9,088,947
              Owens Corning, Inc. ........................................                1,448,391
              Spalding Holdings Corp. ....................................                  155,569
              Thermadyne Holdings Corp. ..................................                  394,469
              United Industries Corp. ....................................                2,749,035
              Xerox Corp. ................................................                   56,143
                                                                                        -----------
                                                                                        $13,892,554
                                                                                        ===========




These commitments are available until maturity date of the respective security.

FINANCIAL INSTRUMENTS WITH CREDIT RISK. The Fund invests in Loan Participations. When the
Fund purchases a Loan Participation, the Fund typically enters into a contractual relationship with the lender or
third party selling such Participation ("Selling Participant"), but not with the Borrower. As a result, the Fund
assumes the credit risk of the Borrower, the Selling Participant and any other persons interpositioned between the
Fund and the Borrower ("Intermediate Participants"). The Fund may not directly benefit from the collateral
supporting the Senior Loan in which it has purchased the Loan Participation.

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

                                                        36
Notes to Financial Statements (continued)

shareholders of the Fund within the allowable time limits. Therefore, no federal income or excise tax provision is
required.

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

DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions are recorded on
the ex-dividend date. The Fund intends to declare and pay dividends monthly and capital gain distributions, if any,
are declared and paid annually. 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.

The following table discloses the current year reclassifications between accumulated net investment loss,
accumulated net realized loss on investments and accumulated net realized loss on foreign currency transactions
arising from permanent differences; net assets at December 31, 2002, are not affected.

                                                                       ACCUMULATED NET
                                                ACCUMULATED NET        REALIZED LOSS ON
                          ACCUMULATED NET       REALIZED LOSS ON       FOREIGN CURRENCY
                          INVESTMENT LOSS         INVESTMENTS            TRANSACTIONS
                          ---------------       ----------------       ----------------
                            $9,195,426            $(16,755,489)           $7,560,063




The reclassifications for the Fund are primarily due to foreign currency gain
(loss), premium amortization adjustments and bond reorganizations.

The tax character of distributions paid during the years ended December 31, 2002 and December 31, 2001 was
as follows:

                                                                                    2002           2001
                                                                                ------------   ------------
      Distributions paid from:
        Ordinary Income........................................                 $309,124,918   $349,196,214
        Return of Capital......................................                   28,037,722     23,967,209
                                                                                ------------   ------------
                                                                                $337,162,640   $373,163,423
                                                                                ============   ============




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

                                                        37
MainStay High Yield Corporate Bond Fund

method. Dividend income is recognized on the ex-dividend date and interest income is accrued daily. Discounts
and premiums on securities, other than short-term securities, purchased for the Fund are accreted and amortized,
respectively, on the constant yield method over the life of the respective securities or, in the case of callable
securities, over the period to the first date of call. Discounts and premiums on short-term securities are accreted
and amortized, respectively, on the straight line method.

Income from payment-in-kind securities is recorded daily based on the effective interest method of accrual.

EXPENSES. Expenses of the Trust are allocated to the individual Funds in proportion to the net assets of the
respective Funds when the expenses are incurred except where direct allocations of expenses can be made.

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 assets on the date the income is earned or expenses and realized and unrealized gains and losses
are incurred. Dividends on short positions are recorded as an expense of the Fund on the ex-dividend date.

FOREIGN CURRENCY TRANSACTIONS. The books and records of the Fund 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) purchases and sales of investment securities, 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 year. The
realized and unrealized changes in net assets arising from fluctuations in exchange rates and market prices of
securities are not separately presented. Accordingly, gains and losses from foreign currency transactions are
included in the reported net realized gain (loss) on investment transactions.

Net realized gain (loss) on foreign currency transactions represents net gains and losses on foreign currency
forward contracts, net currency gains or losses realized as a result of differences between the amounts of
securities sale proceeds or purchase cost, dividends, interest and withholding taxes as recorded on the Fund's
books, and the U.S. dollar equivalent amount actually received or paid. Net currency gains or losses from valuing
such foreign currency denominated assets and liabilities, other

                                                           38
Notes to Financial Statements (continued)

than investments, at year end exchange rates are reflected in unrealized foreign exchange gains or losses.

Foreign currency held at December 31, 2002:

                        Currency                                                            Cost                Value
---------------------------------------------------------                                -----------         -----------
Euro.....................................................              E   1,253,769     $1,278,169          $1,315,706
Pound Sterling...........................................              L     990,236      1,591,450           1,594,180
                                                                                         ----------          ----------
                                                                                         $2,869,619          $2,909,886
                                                                                         ==========          ==========




USE OF ESTIMATES. The preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America 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.

NOTE 3--FEES AND RELATED PARTY TRANSACTIONS:

MANAGER AND SUBADVISOR. New York Life Investment Management LLC ("NYLIM" or the
"Manager"), an indirect wholly-owned subsidiary of New York Life Insurance Company ("New York Life"),
serves as the Fund's manager. The Manager provides offices, conducts clerical, record-keeping and
bookkeeping services, and keeps most of the financial and accounting records required for the Fund. The
Manager also pays the salaries and expenses of all personnel affiliated with the Fund and all the operational
expenses that are not the responsibility of the Fund. The Manager has delegated its portfolio management
responsibilities to MacKay Shields LLC (the "Subadvisor"), a registered investment advisor and indirect wholly-
owned subsidiary of New York Life. 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 0.60% of the Fund's average daily net assets. Through March 11, 2002, the
Manager had voluntarily established a fee breakpoint of 0.55% on assets in excess of $500 million. Effective
March 12, 2002, the Manager established contractual fee breakpoints for its management fee of 0.60% annually
on assets up to $500 million and 0.55% annually on assets in excess of $500 million. For the year ended
December 31, 2002, the Manager earned from the Fund $18,638,403 and waived $283,439 of its fees.

Pursuant to the terms of a Sub-Advisory Agreement between NYLIM and MacKay Shields, the Manager paid
the Subadvisor a monthly fee at an annual rate of 0.30% of the average daily net assets of the Fund. To the extent
that the Manager has established a fee breakpoint, the Subadvisor has agreed to do so proportionately.

                                                        39
MainStay High Yield Corporate Bond Fund

DISTRIBUTION AND SERVICE FEES. The Trust, on behalf of the Fund, has a Distribution Agreement with
NYLIFE Distributors Inc. (the "Distributor"), an indirect wholly-owned subsidiary of New York Life. The Fund,
with respect to each class of 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.

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.

SALES CHARGES. The Fund was advised by the Distributor that the amount of sales charges retained on sales
of Class A shares was $184,140 for the year ended December 31, 2002. The Fund was also advised that the
Distributor retained contingent deferred sales charges for redemption of Class A, Class B and Class C shares of
$117,056, $3,070,148 and $128,783, respectively, for the year ended December 31, 2002.

TRANSFER, DIVIDEND DISBURSING AND SHAREHOLDER SERVICING AGENT. NYLIM Service
Company LLC, ("NYLIM Service"), an affiliate of NYLIM, is the Fund's transfer, dividend disbursing and
shareholder servicing agent. NYLIM Service has entered into an agreement with Boston Financial Data Services
("BFDS") pursuant to which BFDS will perform certain of the services for which NYLIM Service is responsible.
Transfer agent expenses accrued to NYLIM Service for the year ended December 31, 2002 amounted to
$5,855,164.

TRUSTEES FEES. Trustees, other than those currently affiliated with NYLIM, are paid an annual fee of
$45,000, $2,000 for each Board meeting, $1,000 for each Committee meeting and $500 for each Valuation
Subcommittee telephonic meeting attended plus reimbursement for travel and out-of-pocket expenses. The Lead
Non-Interested 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, included in Professional fees as shown on the Statement of
Operations, provided to the Fund by the Office of General Counsel of NYLIM amounted to $64,801 for the
year ended December 31, 2002.

                                                        40
Notes to Financial Statements (continued)

The Fund pays the Manager a monthly fee for recordkeeping services provided under the Accounting Agreement
at the annual rate of 1/20 of 1% for the first $20 million of average monthly net assets, 1/30 of 1% of the next
$80 million of average monthly net assets and 1/100 of 1% of any amount in excess of $100 million of average
monthly net assets. Fees for recordkeeping services provided to the Fund by the Manager amounted to
$355,849 for the year ended December 31, 2002.

NOTE 4--FEDERAL INCOME TAX:

As of December 31, 2002, the components of accumulated loss on a tax basis were as follows:

                        ACCUMULATED CAPITAL          UNREALIZED           TOTAL ACCUMULATED
                         AND OTHER LOSSES           DEPRECIATION                LOSS
                        -------------------        ---------------        -----------------
                           $(475,140,476)          $(1,143,302,421)        $(1,618,442,897)




The difference between book-basis and tax-basis unrealized appreciation (depreciation) is primarily due to wash
sales deferrals, premium amortization adjustments and bond reorganizations.

At December 31, 2002, for federal income tax purposes, capital loss carryforwards of $475,140,476 were
available as shown in the table below, to the extent provided by the regulations to offset future realized gains
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.

                                      CAPITAL LOSS                                        AMOUNT
                                   AVAILABLE THROUGH                                     (000'S)
                                   -----------------                                     --------
                    2008..................................................               $ 21,946
                    2009..................................................                284,075
                    2010..................................................                169,119
                                                                                         --------
                                                                                         $475,140
                                                                                         ========




In addition, the Fund intends to elect to treat for federal income tax purposes $17,376,345 of qualifying capital
losses and $503,501 of qualifying foreign exchange losses that arose after October 31, 2002 as if they arose on
January 1, 2003.

NOTE 5--PURCHASES AND SALES OF SECURITIES (IN 000'S):

During the year ended December 31, 2002, purchases and sales of U.S. Government securities were $43,382
and $46,097, respectively. Purchases and sales of securities, other than U.S. Government and short-term
securities, were $1,676,178 and $1,445,510, respectively.

NOTE 6--LINE OF CREDIT:

The Fund and certain affiliated funds maintain a line of credit of $160,000,000 with a syndicate of banks in order
to secure a source of funds for temporary purposes to meet unanticipated or excessive

                                                          41
MainStay High Yield Corporate Bond Fund

shareholder redemption requests. The funds pay a commitment fee, at an annual rate of .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 among 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, 2002.

NOTE 7--CAPITAL SHARE TRANSACTIONS (IN 000'S):

                                                    YEAR ENDED                          YEAR ENDED
                                                 DECEMBER 31, 2002                  DECEMBER 31, 2001
                                           -----------------------------       ----------------------------
                                           CLASS A    CLASS B    CLASS C       CLASS A   CLASS B   CLASS C
                                           --------   --------   -------       -------   -------   --------
Shares sold.........................        280,014     82,864    33,375       124,738    77,264    24,445
Shares issued in reinvestment of
  dividends and distributions.......          8,345      27,828      1,909       6,600     30,203      1,339
                                           --------    --------    -------     -------    -------    -------
                                            288,359     110,692     35,284     131,338    107,467     25,784
Shares redeemed.....................       (244,150)   (109,057)   (18,744)    (78,508)   (90,191)   (11,935)
                                           --------    --------    -------     -------    -------    -------
Net increase........................         44,209       1,635     16,540      52,830     17,276     13,849
                                           ========    ========    =======     =======    =======    =======




                                                     42
Report of Independent Accountants

To the Board of Trustees of The MainStay Funds and Shareholders of MainStay High Yield Corporate Bond
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 High Yield Corporate Bond Fund (one of the funds
constituting The MainStay Funds, hereafter referred to as the "Fund") at December 31, 2002, the results of its
operations for the year then ended, 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, 2002 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, 2003

                                                         43
Trustees and Officers

Following are the Trustees and Officers of The MainStay Funds, along with a brief description of their principal
occupations during the past five years.

Each Trustee serves until his/her successor is elected and qualified or until his/her resignation, death, or removal.
Officers serve a term of one year and are elected annually by the Trustees.

The business address of each Trustee and Officer is 51 Madison Avenue, New York, New York 10010.

                                                                                     NUMBER OF
                                                                                     PORTFOLIOS
                           POSITION(S)                                                IN FUND
                          HELD WITH FUND                                              COMPLEX
        NAME AND          AND LENGTH OF            PRINCIPAL OCCUPATION(S)            OVERSEEN    OTHER D
     DATE OF BIRTH         TIME SERVED              DURING PAST FIVE YEARS           BY TRUSTEE     HELD
---------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEES(1)
---------------------------------------------------------------------------------------------------------
Gary E. Wendlandt         Chairman since   Chief Executive Officer, Chairman, and         43
10/8/50                   January 1,       Manager, New York Life Investment
                          2002, and        Management LLC (including predecessor
                          Trustee since    advisory organizations) and New York
                          2000             Life Investment Management Holdings LLC;
                                           Executive Vice President, New York Life
                                           Insurance Company; Director, NYLIFE
                                           Distributors, Inc.; Vice Chairman and
                                           Manager, McMorgan & Company LLC;
                                           Manager, MacKay Shields LLC; Executive
                                           Vice President, New York Life Insurance
                                           and Annuity Corporation; Chairman, Chief
                                           Executive Officer, and Director,
                                           MainStay VP Series Fund, Inc. (19
                                           portfolios); Executive Vice President
                                           and Chief Investment Officer, MassMutual
                                           Life Insurance Company (1993 to 1999).
---------------------------------------------------------------------------------------------------------
Stephen C. Roussin        President,       President, Chief Operating Officer, and        45
7/12/63                   Chief            Manager, New York Life Investment
                          Executive        Management LLC (including predecessor
                          Officer, and     advisory organizations) and New York
                          Trustee since    Life Investment Management Holdings LLC;
                          1997             Senior Vice President, New York Life
                                           Insurance Company; Director, NYLIFE
                                           Securities, Inc.; Chairman and Director,
                                           NYLIFE Distributors Inc.; Manager,
                                           McMorgan & Company LLC; Chairman,
                                           President, and Trustee, Eclipse Funds,
                                           (4 portfolios); Chairman, President and
                                           Director, Eclipse Funds Inc. (14
                                           portfolios); Chairman and Trustee, New
                                           York Life Investment Management
                                           Institutional Funds (3 portfolios);
                                           Senior Vice President, Smith Barney
                                           (1994 to 1997).
---------------------------------------------------------------------------------------------------------
1 Certain Trustees are considered to be interested persons of the Trust within the meaning of the 1940 Ac
  their affiliation with New York Life Insurance Company, New York Life Investment Management LLC, MacKay
  LLC, McMorgan & Company LLC, Eclipse Funds, Eclipse Funds Inc., MainStay VP Series Fund, Inc., New York
  Investment Management Institutional Funds, NYLIFE Securities Inc., and/or NYLIFE Distributors Inc., as
  detail in the column "Principal Occupation(s) During Past Five Years."




44

INFORMATION ON THIS PAGE HAS NOT BEEN AUDITED.
                                                                                     NUMBER OF
                                                                                     PORTFOLIOS
                           POSITION(S)                                                IN FUND
                          HELD WITH FUND                                              COMPLEX
         NAME AND         AND LENGTH OF            PRINCIPAL OCCUPATION(S)            OVERSEEN    OTHER D
     DATE OF BIRTH         TIME SERVED              DURING PAST FIVE YEARS           BY TRUSTEE     HELD
---------------------------------------------------------------------------------------------------------
Harry G. Hohn             Trustee since    Retired. Chairman and Chief Executive          24      Directo
3/1/32                    1996             Officer, New York Life Insurance Company               Corpora
                                           (1990 to 1997); Chairman of the Board,
                                           Life Insurance Council of New York (1996
                                           to 1997); Director, Million Dollar
                                           Roundtable Foundation (1996 to 1997).
---------------------------------------------------------------------------------------------------------
Donald K. Ross            Trustee since    Retired. Chairman, Chief Executive             24      Manager
7/1/25                    1991             Officer, and President, New York Life                  Shields
                                           Insurance Company (1981 to 1990).
---------------------------------------------------------------------------------------------------------
NON-INTERESTED TRUSTEES
---------------------------------------------------------------------------------------------------------
Charlynn Goins            Trustee since    Retired. Consultant to U.S. Commerce           24
9/15/42                   2001             Department, Washington, DC (1998 to
                                           2000); Senior Vice President and
                                           Director of International Marketing,
                                           Prudential Mutual Funds and Annuities
                                           (1990 to 1997).
---------------------------------------------------------------------------------------------------------
Edward J. Hogan           Trustee since    Rear Admiral U.S. Navy (Retired);              24
8/17/32                   1996             Independent Management Consultant.
---------------------------------------------------------------------------------------------------------
Terry L. Lierman          Trustee since    Partner, Health Ventures LLC; Vice             24
1/4/48                    1991             Chair, Employee Health Programs;
                                           Partner, TheraCom (1994 to 2001);
                                           President, Capitol Associates, Inc.
                                           (1984 to 2001).
---------------------------------------------------------------------------------------------------------
John B. McGuckian         Trustee since    Chairman, Ulster Television Plc; Pro           24      Chairma
11/13/39                  1997             Chancellor, Queen's University (1985 to                Norther
                                           2001).                                                 Plc; No
                                                                                                  Directo
                                                                                                  Irish B
                                                                                                  Non-Exe
                                                                                                  Directo
                                                                                                  Plc (en
                                                                                                  Non-Exe
                                                                                                  Directo
                                                                                                  Contine
                                                                                                  Plc (sh
---------------------------------------------------------------------------------------------------------
Donald E. Nickelson       Trustee since    Retired. Vice Chairman, Harbour Group          24      Directo
12/9/32                   1994 and Lead    Industries, Inc. (leveraged buyout                     Carey &
                          Non-             firm).
                          Interested
                          Trustee
---------------------------------------------------------------------------------------------------------
Richard S. Trutanic       Trustee since    Managing Director, The Carlyle Group           24
2/13/52                   1994             (private investment firm); Chairman and
                                           Chief Executive Officer, Somerset Group
                                           (financial advisory firm); Senior
                                           Managing Director, Groupe Arnault
                                           (private investment firm) (1999 to
                                           2001).
---------------------------------------------------------------------------------------------------------




                                               45

INFORMATION ON THIS PAGE HAS NOT BEEN AUDITED.
                                                                                     NUMBER OF
                                                                                     PORTFOLIOS
                           POSITION(S)                                                IN FUND
                          HELD WITH FUND                                              COMPLEX
         NAME AND         AND LENGTH OF            PRINCIPAL OCCUPATION(S)            OVERSEEN    OTHER D
     DATE OF BIRTH         TIME SERVED              DURING PAST FIVE YEARS           BY TRUSTEE     HELD
---------------------------------------------------------------------------------------------------------
OFFICERS WHO ARE NOT TRUSTEES
---------------------------------------------------------------------------------------------------------
Jefferson C. Boyce        Senior Vice      Senior Managing Director, New York Life       N/A
9/17/57                   President        Investment Management LLC (including
                          since 1995       predecessor advisory organizations);
                                           Senior Vice President, New York Life
                                           Insurance Company; Senior Vice
                                           President, Eclipse Funds and Eclipse
                                           Funds Inc.; Director, NYLIFE
                                           Distributors, Inc.
---------------------------------------------------------------------------------------------------------
Patrick J. Farrell        Chief            Managing Director, New York Life              N/A
9/27/59                   Financial and    Investment Management LLC (including
                          Accounting       predecessor advisory organizations);
                          Officer,         Treasurer, Chief Financial and
                          Treasurer, and   Accounting Officer, Eclipse Funds Inc.,
                          Vice President   Eclipse Funds, MainStay VP Series Fund,
                          since 2001       Inc., and New York Life Investment
                                           Management Institutional Funds; Chief
                                           Financial Officer and Assistant
                                           Treasurer, McMorgan Funds.
---------------------------------------------------------------------------------------------------------
Robert A. Anselmi         Secretary        Senior Managing Director, General             N/A
10/19/46                  since 2001       Counsel, and Secretary, New York Life
                                           Investment Management LLC (including
                                           predecessor advisory organizations);
                                           Secretary, New York Life Investment
                                           Management Holdings LLC; Senior Vice
                                           President, New York Life Insurance
                                           Company; Vice President and Secretary,
                                           McMorgan & Company LLC; Secretary,
                                           NYLIFE Distributors, Inc.; Secretary,
                                           MainStay VP Series Fund, Inc., Eclipse
                                           Funds Inc., Eclipse Funds and New York
                                           Life Investment Management Institutional
                                           Funds; Managing Director and Senior
                                           Counsel, Lehman Brothers Inc., (October
                                           1998 to December 1999); General Counsel
                                           and Managing Director, JP Morgan
                                           Investment Management Inc. (1986 to
                                           September 1998).
---------------------------------------------------------------------------------------------------------
Richard W. Zuccaro        Tax Vice         Vice President, New York Life Insurance       N/A
12/12/49                  President        Company; Vice President, New York Life
                          since 1991       Insurance and Annuity Corporation,
                                           NYLIFE Insurance Company of Arizona,
                                           NYLIFE LLC, NYLIFE Securities Inc., and
                                           NYLIFE Distributors Inc.; Tax Vice
                                           President, New York Life International,
                                           LLC; Tax Vice President, Eclipse Funds,
                                           Eclipse Funds Inc., MainStay VP Series
                                           Fund, Inc., and New York Life Investment
                                           Management Institutional Funds.
---------------------------------------------------------------------------------------------------------




46
INFORMATION ON THIS PAGE HAS NOT BEEN AUDITED.
THE MAINSTAY(R) FUNDS

EQUITY FUNDS
MainStay Select 20 Equity Fund
MainStay Small Cap Growth Fund
MainStay Small Cap Value Fund(1)
MainStay Mid Cap Growth Fund
MainStay Capital Appreciation Fund
MainStay Blue Chip Growth Fund
MainStay Equity Index Fund(2)
MainStay U.S. Large Cap Equity Fund

EQUITY & INCOME FUNDS
MainStay Growth Opportunities Fund
MainStay Equity Income Fund
MainStay MAP Fund
MainStay Research Value Fund
MainStay Value Fund
MainStay Strategic Value Fund
MainStay Convertible Fund
MainStay Total Return Fund

INCOME FUNDS
MainStay High Yield Corporate Bond Fund
MainStay Strategic Income Fund
MainStay Government Fund
MainStay Tax Free Bond Fund
MainStay Money Market Fund

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

INVESTMENT ADVISOR

NEW YORK LIFE INVESTMENT MANAGEMENT LLC
Parsippany, New Jersey

INVESTMENT SUBADVISORS

MACKAY SHIELDS LLC(3)
New York, New York

DALTON, GREINER, HARTMAN, MAHER & CO.
New York, New York

FUND ASSET MANAGEMENT, L.P.
d/b/a Mercury Advisors
Plainsboro, New Jersey

GABELLI ASSET MANAGEMENT COMPANY
Rye, New York

JENNISON ASSOCIATES LLC
New York, New York

MARKSTON INTERNATIONAL, LLC
White Plains, New York

MCMORGAN & COMPANY LLC(3)
San Francisco, California


1 Closed to new investors as of December 1, 2001. 2 Closed to new purchases as of January 1, 2002. 3 An
affiliate of New York Life Investment Management LLC.

                                                    47
Trustees and Officers(1)

                         GARY E. WENDLANDT             Chairman and Trustee
                         STEPHEN C. ROUSSIN            President, Chief Executive
                                                       Officer, and Trustee
                         CHARLYNN GOINS                Trustee
                         EDWARD J. HOGAN               Trustee
                         HARRY G. HOHN                 Trustee
                         TERRY L. LIERMAN              Trustee
                         JOHN B. McGUCKIAN             Trustee
                         DONALD E. NICKELSON           Trustee
                         DONALD K. ROSS                Trustee
                         RICHARD S. TRUTANIC           Trustee
                         JEFFERSON C. BOYCE            Senior Vice President
                         PATRICK J. FARRELL            Chief Financial and
                                                       Accounting Officer,
                                                       Treasurer, and
                                                       Vice President
                         ROBERT A. ANSELMI             Secretary
                         RICHARD W. ZUCCARO            Tax Vice President




DECHERT
Legal Counsel

PRICEWATERHOUSECOOPERS LLP
Independent Accountants

1 As of December 31, 2002.

[MAINSTAY LOGO]

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


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

NYLIFE DISTRIBUTORS INC.
NYLIM Center
169 Lackawanna Avenue
Parsippany, New Jersey 07054

www.mainstayfunds.com

This report may only be distributed when preceded or accompanied by a current Fund prospectus.

(C)2003 NYLIFE Distributors Inc. All rights reserved. MSHY11- 02/03

                                                    08

[RECYCLE GRAPHIC]

                                   [MAINSTAY FUNDS GRAPHIC]

MainStay(R) High Yield
Corporate Bond Fund

                                           ANNUAL REPORT

                                          DECEMBER 31, 2002
[MAINSTAY LOGO]
                Table of Contents

President's Letter                              3
$10,000 Invested in MainStay Global High
Yield Fund versus J.P. Morgan EMBI Global
Diversified Composite--Class A, Class B, and
Class C Shares                                  4
Portfolio Management Discussion and Analysis    6
Year-by-Year Performance                        7
Returns and Lipper Rankings as of 12/31/02     11
Portfolio of Investments                       12
Financial Statements                           16
Notes to Financial Statements                  22
Report of Independent Accountants              32
Trustees and Officers                          34
The MainStay(R) Funds                          37
This page intentionally left blank

                                     2
President's Letter

In many respects, 2002 was a difficult year for investors. From the start, geopolitical tensions, homeland security
concerns, corporate accounting scandals, and rising unemployment all contributed to market uncertainty. Early
hopes for a sustained economic recovery eventually gave way to more realistic expectations, and stock prices fell
to progressive lows in August and October. When all was said and done, the U.S. stock market recorded its
third consecutive annual decline--something investors had not seen in more than 60 years. International stocks
were also weak, with most developed foreign markets providing double-digit negative returns in U.S. dollar
terms.

Weakness in the equity markets increased demand for bonds--both domestic and foreign--as investors sought a
potentially "safer haven" for their assets. In the absence of a 30-year U.S. Treasury auction, longer-term Treasury
bonds were particularly strong throughout the year. Investment-grade corporate debt also provided impressive
returns, but lower-rated issues suffered from continuing credit-quality concerns.

The economy provided mixed signals, with weak business investment and relatively strong consumer spending
throughout much of the year. Low interest rates stimulated the housing market and contributed to high levels of
mortgage refinancing. Gross domestic product continued to advance, surging ahead in the third quarter of 2002,
but growing at a slower pace in the fourth quarter.

Regardless of how the markets or the economy may move, each MainStay Fund adheres to a disciplined
investment process suited to its individual investment objective. We believe that in challenging markets, consistent
application of sound investment principles makes it easier for our shareholders to understand performance and
make appropriate portfolio adjustments.

The report that follows explains the market forces and management decisions that affected your MainStay Fund
during 2002. Your registered representative can help you with any questions you may have about this report or
your MainStay investments. As you look to the future, we hope you will remain optimistic and focused on the
potential benefits of long-term investing.

Sincerely,

                                            /s/ STEPHEN C. ROUSSIN
                                            Stephen C. Roussin
                                            January 2003




                                                         3
$10,000 Invested in MainStay Global
High Yield Fund versus J.P. Morgan
EMBI Global Diversified Composite

CLASS A SHARES Total Returns: 1 Year 6.01%, Since Inception 5.89%
[PERFORMANCE GRAPH]

                                                                             MAINSTAY GLOBAL HIGH YIELD           J.P.
                                                                                        FUND                      DIVE
                                                                             --------------------------           ----
6/1/98                                                                                 9550.00
12/98                                                                                  7986.00
12/99                                                                                  9435.00
12/00                                                                                 10313.00
12/01                                                                                 11715.00
12/02                                                                                 13004.00




CLASS B SHARES Total Returns: 1 Year 5.33%, Since Inception 5.82%
[PERFORMANCE GRAPH]

                                                                             MAINSTAY GLOBAL HIGH YIELD           J.P.
                                                                                        FUND                      DIVE
                                                                             --------------------------           ----
6/1/98                                                                                10000.00
12/98                                                                                  8318.00
12/99                                                                                  9733.00
12/00                                                                                 10568.00
12/01                                                                                 11909.00
12/02                                                                                 12962.00




CLASS C SHARES Total Returns: 1 Year 9.33%, Since Inception 6.13%
[PERFORMANCE GRAPH]

                                                                             MAINSTAY GLOBAL HIGH YIELD           J.P.
                                                                                        FUND                      DIVE
                                                                             --------------------------           ----
6/1/98                                                                                10000.00
12/98                                                                                  8318.00
12/99                                                                                  9733.00
12/00                                                                                 10568.00
12/01                                                                                 11909.00
12/02                                                                                 13140.00




4

The disclosure and footnotes on the following page are an integral part of these graphs and should be carefully
read in conjunction with them.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. DUE TO MARKET
VOLATILITY, CURRENT PERFORMANCE MAY BE LESS THAN THAT SHOWN. INVESTMENT
RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND SHARES, UPON REDEMPTION, MAY
BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. Performance tables and graphs do not
reflect the deduction of taxes that a shareholder would pay on distributions or Fund-share redemptions. Total
returns reflect change in share price, reinvestment of dividend and capital gain distributions, and maximum
applicable sales charges explained in this paragraph. Performance figures reflect certain fee waivers and/or
expense limitations, without which total return figures may have been lower. Fee waivers and/or expense
limitations are voluntary and may be discontinued at any time. The graphs assume an initial investment of $10,000
and reflect deduction of all sales charges that would have applied for the period of investment. Class A share
performance reflects the effect of the maximum 4.5% initial sales charge. Class B shares are subject to a
contingent deferred sales charge (CDSC) of up to 5% if redeemed within the first six years of purchase. Class B
share performance reflects a CDSC of 2%, which would apply for the period shown. Class C share performance
includes the historical performance of the Class B shares for periods from 6/1/98 through 8/31/98. Class C
shares would be subject to a CDSC of 1% if redeemed within one year of purchase.

1 The J.P. Morgan EMBI Global Diversified Composite is an unmanaged, uniquely weighted version of The J.P.
Morgan Emerging Markets Bond Index--the EMBI--which, in turn, is an unmanaged, market-capitalization
weighted, total-return index tracking the traded market for U.S. dollar denominated Brady bonds. The EMBI
Global Diversified Composite limits the weights of those index countries with larger total debt obligations by only
including specified portions of these countries' eligible current face amounts of outstanding debt. Results assume
reinvestment of all income and capital gains. An investment cannot be made directly into an index or a composite.

                                                         5
Portfolio Management Discussion and Analysis

As 2002 began, it appeared that the United States economy was on the road to recovery. In the emerging
markets, investors managed to shrug off Argentina's huge default, and emerging-market debt rallied during the
first half of 2002. By the end of the second quarter, however, investors began to see cracks in the plaster that
was holding the global economy together.

In the United States, a series of corporate accounting scandals and major bankruptcies were making headlines
around the world. Some investors began to worry about the possibility of a double-dip recession, and stock
market performance was doing little to calm their concerns.

At first, emerging markets held their own, despite rising corporate defaults in Argentina and fiscal problems in
Brazil and Mexico. Tensions mounted, how-ever, as Brazil's presidential and congressional elections approached.
After a strong rally in the first half of 2002, U.S. dollar denominated Brazilian debt underperformed in the summer
months. In November 2002, the Federal Reserve sought to stimulate the U.S. economy by lowering the targeted
federal funds rate 50 basis points to 1.25%. With corporate governance becoming a major investment issue, the
U.S. government's strong policy response helped to stabilize the markets.

Toward the end of the year, individual investors and money managers needed to reevaluate the global economic
situation and to assess how much bad news had been priced into the market. Although investors have remained
cautious, they appear to have moved back into riskier asset classes, including U.S. stocks and emerging market
debt, seeking higher return potential than is typically offered by investments with lower risk profiles.

PERFORMANCE REVIEW

For the year ended December 31, 2002, MainStay Global High Yield Fund returned 11.01% for Class A shares
and 10.33% for Class B and Class C shares, excluding all sales charges. All share classes underperformed the
11.26% return of the average Lipper(1) emerging markets debt fund over the same period. All share classes also
underperformed the 13.65% return of the J.P. Morgan EMBI Global Diversified Composite(2) for the year
ended December 31, 2002.

A combination of factors contributed to the Fund's performance relative to its peers and its benchmark. Although
the Fund was relatively aggressive in its country weightings, such as Brazil, it also maintained a relatively large
exposure to corporate credits, which underperformed sovereign debt for most of 2002.
As of December 31, 2002, all share classes of MainStay Global High Yield Fund received an overall rating of
five stars out of 116 international bond funds by Morningstar.(3) All share classes were rated five starts out of
116 international bond funds for the three-year period then ended.

6
1 See footnote and table on page 11 for more information about Lipper Inc. 2 See footnote on page 5 for more
information about the J.P. Morgan EMBI Global Diversified Composite.
3 For each fund with at least a three-year history, Morningstar calculates a Morningstar Rating(TM) based on a
Morningstar Risk-Adjusted Return measure that accounts for variation in a fund's monthly performance (including
the effects of sales charges, loads, and redemption fees), placing more emphasis on downward variations and
rewarding consistent performance. The top 10% of funds in each category receive five stars, the next 22.5%
receive four stars, the middle 35% receive three stars, the next 22.5% receive two stars, and the bottom 10%
receive one star. The Overall Morningstar Rating(TM) for a fund is derived from a weighted average of the
performance figures associated with its three-, five- and 10-year (if applicable) Morningstar Rating(TM) metrics.
YEAR-BY-YEAR PERFORMANCE

CLASS A SHARES
[BAR CHART]

                                                                                               CLASS A SHARES
                                                                                               --------------
    12/98                                                                                          -16.38
    12/99                                                                                           18.15
    12/00                                                                                            9.30
    12/01                                                                                           13.59
    12/02                                                                                           11.01




CLASS B AND CLASS C SHARES
[BAR CHART]

                                                                                    CLASS B AND CLASS C SHARES
                                                                                    --------------------------
12/98                                                                                         -16.82
12/99                                                                                          17.01
12/00                                                                                           8.58
12/01                                                                                          12.69
12/02                                                                                          10.33




STRATEGIC POSITIONING

Early in 2002, we viewed Brazilian debt as offering strong potential, if the nation could resolve its political
difficulties. As the year wore on, however, the currency weakened and we reduced our weighting in Brazil. The
move allowed us to reevaluate the Fund's position after a left-of-center government was elected. When we
became more comfortable with the bonds, we elected to once again increase exposure to Brazilian debt.

We anticipate that the first quarter of 2003 will be a strong period for Brazil, as the honeymoon will continue for
this government for a time. We also expect to see movement on social security reform and central bank
independence. If these

                                                         7
two issues are not addressed, we may once again decide to reduce the Fund's commitment to Brazilian debt. In
our opinion, Brazil and Turkey are likely to be key drivers of the Fund's performance in 2003.

Turkey also made headlines in 2002. For the first time in the postwar era, Turkey has a majority government with
the Justice and Development Party (AKP--Adalet ve Kalkinma Partisi) having gained nearly two-thirds of the
seats in parliament. That was the good news. The bad news is that the party is the legacy of an outlawed Islamic
fundamentalist party. Despite its roots, however, the new government has taken a pro-European Union stance,
which suggests that it may pursue prudent fiscal and economic policies. The challenge facing the AKP will be to
balance the needs of the people and the military, while remaining true to its Islamic roots. Because Turkey is
strategically located, it has played an important role in the war on terrorism and may also be a valuable ally in the
pending showdown with Iraq. As a result, we expect the United States to back financial aid for the republic.

Oil has been a key theme in the Fund during 2002. At beginning of the year, we favored oil when it was priced
well below $25 per barrel. We continued to overweight oil credits in Algeria, Russia, and Venezuela, among
others. Later in the year, we developed an interest in Colombia and Ecuador, and we expect these nations to
hold our attention well into 2003.

As Fund managers, we view each of these oil-related credits on its own merits. While we have continued to
overweight Russian debt, our reasons have extended beyond oil. Even so, we have expanded the Fund's holdings
in Russia to include additional privately owned oil and telecommunications companies. Algeria is still strong in our
eyes, since the nation continues to pay down its debt while increasing its foreign-exchange reserves.

We added Colombia to the Fund's portfolio on the belief that the nation's bonds were inexpensive relative to
Colombia's credit rating and credit characteristics. The fact that the United States is providing military and
financial support to combat leftist insurgents in Colombia helps us feel more comfortable with the nation's debt. At
year-end spreads of some 1600 basis points, Ecuador's debt appears to us to merit at least a market weighting in
the Fund's portfolio. High oil prices, strong tax revenues, and falling inflation have kept the Fund invested in
Ecuador. If the new Ecuadorian President does not negotiate with the IMF, however, or if lax fiscal policies
return, we may be quick to sell any Fund holdings issued by Ecuador.

We believe that emerging-market corporate bonds bear special attention. For most of the year, we have been
seeking specific types of corporate-bond opportunities and have restricted the Fund's corporate holdings to
bonds that fit our desired profile. As a result, while we remain open to opportunistic trading, we have few core
holdings in the corporate sector. Specifically, we have been buying corporate credits only when we believe that
they are inexpensive relative to comparable government securities and that they have strong

                                                         8
potential to outperform over the short-to-medium term. Certain corporate bonds in Argentina, such as YPF, are
still making payments, despite the nation's default. The Fund has also purchased and held corporate bonds in
Brazil, Mexico, and Russia.

We have reduced the Fund's exposure in Asia by selling the portfolio's holdings in Malaysia. The Fund continues
to hold credits in the Philippines, but we believe that spreads in Malaysia are no longer appropriate for our
investment tastes. While Malaysia remains a strong credit, we decided to seek more attractive opportunities
elsewhere. If spreads improve, however, we would be willing to reconsider buying Malaysian bonds for the
Fund.

LOOKING AHEAD

We remain firmly convinced that emerging-market debt has strong investment potential. We believe that the
current low interest-rate environment is unlikely to pass until at least late in 2003, when the U.S. economy may
show signs of sustainable strengthening and the Federal Reserve may begin to tighten monetary policy.

With extraordinarily wide yield spreads over Treasuries, however, emerging- market debt may begin to draw
crossover buyers, such as traditional high-yield bond investors. In our opinion, this may help cause spreads to
compress. Although the market is currently focused on larger, more-volatile markets such as Brazil, Turkey, and
Venezuela, we continue to anticipate progress across emerging markets as a whole, which may lead to improving
credit fundamentals.

If the world economy begins to stabilize, we expect that emerging markets will benefit from improving global
growth. The Fund's investment process, however, is not dependent solely on global growth. We will continue to
focus on each country's economic and political fundamentals in an effort to avoid trouble spots. Wherever the
markets or the global economy may move, the Fund will continue to seek to provide maximum current income by
investing primarily in high-yield debt securities of non-U.S. issuers. Capital appreciation will remain a secondary
objective.

Joseph Portera
Portfolio Manager
MacKay Shields LLC

Foreign securities may be subject to greater risks than U.S. investments, including currency fluctuations, less-
liquid trading markets, greater price volatility, political and economic instability, less publicly available information,
and changes in tax or currency laws or monetary policy. These risks are likely to be greater in emerging markets
than in developed markets. High-yield securities ("junk bonds") are generally considered speculative because they
present a great risk of loss than higher-quality debt securities and may be subject to

                                                            9
greater price volatility. The Fund may invest in derivatives, which may increase the volatility of the Fund's net
asset value and may result in a loss to the Fund.

                                      TARGETED DIVIDEND POLICY

MainStay Global High Yield Fund seeks to maintain a fixed dividend, with changes made only on an infrequent
basis. In June 2002, the Fund reduced its dividend to reflect lower Treasury-bond yields and tighter emerging-
market bond spreads. Since the Fund's managers did not alter their trading strategies to provide dividends, the
Fund's portfolio turnover rate and transaction costs were not affected. Shareholders should refer to their 2002
Form 1099-DIV for the total amount of their distributions in 2002.

                                                         10
Returns and Lipper Rankings as of 12/31/02
FUND TOTAL RETURNS (WITHOUT SALES CHARGES)(1)

                                                  1 YEAR       SINCE INCEPTION THROUGH 12/31/02
                Class A                           11.01%                     6.96%
                Class B                           10.33%                     6.13%
                Class C                           10.33%                     6.13%




                              FUND RETURNS (WITH SALES CHARGES)(1)

                                                  1 YEAR       SINCE INCEPTION THROUGH 12/31/02
                Class A                            6.01%                     5.89%
                Class B                            5.33%                     5.82%
                Class C                            9.33%                     6.13%




       FUND LIPPER(2) RANKINGS AND LIPPER CATEGORY RETURNS AS OF 12/31/02

                                                  1   YEAR     SINCE INCEPTION THROUGH 12/31/02
                Class A                          31   out of                 19 out of
                                                 52   funds                  42 funds
                Class B                          37   out of                 24 out of
                                                 52   funds                  42 funds
                Class C                          37   out of                 32 out of
                                                 52   funds                  44 funds
                Average Lipper emerging
                markets debt fund                 11.26%                      5.94%




   FUND PER-SHARE NET ASSET VALUES AND DISTRIBUTIONS FOR THE YEAR ENDED
                                  12/31/02

                                         NAV 12/31/02      INCOME      CAPITAL GAINS
                              Class A       $8.89          $0.7433        $0.0000
                              Class B       $8.86          $0.6766        $0.0000
                              Class C       $8.86          $0.6766        $0.0000




1 PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. DUE TO MARKET
VOLATILITY,
CURRENT PERFORMANCE MAY BE LESS THAN THAT SHOWN. INVESTMENT RETURN AND
PRINCIPAL VALUE WILL FLUCTUATE, AND SHARES, UPON REDEMPTION, MAY BE WORTH
MORE OR LESS THAN THEIR ORIGINAL COST. PERFORMANCE TABLES AND GRAPHS DO
NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON
DISTRIBUTIONS OR FUND-SHARE REDEMPTIONS. Total returns reflect change in share price and
reinvestment of all dividend and capital gain distributions. Performance figures reflect certain fee waivers and/or
expense limitations, without which total return figures may have been lower. Fee waivers and/or expense
limitations are voluntary and may be discontinued at any time.

Class A shares are sold with a maximum initial sales charge of 4.5%. Class B shares are subject to a CDSC of
up to 5% if shares are redeemed within the first six years of purchase. Class C shares are subject to a CDSC of
1% if redeemed within one year of purchase. Performance figures for this class include the historical performance
of the Class B shares for periods from the Fund's inception on 6/1/98 through 8/31/98. Performance figures for
the two classes vary after 8/31/98, based on differences in their sales charges.

2 Lipper Inc. is an independent monitor of mutual fund performance. Rankings are based on total returns with all
dividend and capital gain distributions reinvested. Results do not reflect any deduction of sales charges. Lipper
averages are not class specific. Since-inception rankings reflect the performance of each share class from its initial
offering date through 12/31/02. Class A and Class B shares were first offered to the public on 6/1/98, and Class
C shares on 9/1/98. Since-inception return for the average Lipper peer fund is for the period from 6/1/98 through
12/31/02.

INFORMATION ON THIS PAGE AND THE PRECEDING PAGES HAS NOT BEEN AUDITED.

                                                       11
MainStay Global High Yield Fund

                                                      PRINCIPAL
                                                       AMOUNT            VALUE
                                                     ----------------------------
                LONG-TERM BONDS (92.2%)+
                BRADY BONDS (12.1%)

                BRAZIL (6.0%)
                Republic of Brazil
                 Series 20 year
                 8.00%, due 4/15/14 (b).........     $4,340,720      $ 2,843,558
                                                                     -----------
                MEXICO (1.0%)
                United Mexican States
                 Series B
                 6.25%, due 12/31/19............         500,000          486,251
                                                                      -----------
                NIGERIA   (1.4%)
                Central   Bank of Nigeria
                 Series   WW
                 6.25%,   due 11/15/20............   1,000,000            679,500
                                                                      -----------

                PERU (0.9%)
                Republic of Peru
                 Series 20 year
                 4.00%, due 3/7/17 (c)..........         600,000          426,020
                                                                      -----------

                VENEZUELA (2.1%)
                Republic of Venezuela
                 Series DL
                 2.3125%, due 12/18/07 (d)......     1,309,524          1,008,607
                                                                      -----------

                VIETNAM (0.7%)
                Socialist Republic of Vietnam
                 Series 30 year
                 3.50%, due 3/12/28.............         500,000          320,000
                                                                      -----------
                Total Brady Bonds
                 (Cost $5,565,181)..............                        5,763,936
                                                                      -----------
                CORPORATE BONDS (12.0%)

                ARGENTINA (0.4%)
                Compania Internacional de
                 Telecomunicaciones S.A.
                 10.375%, due 8/1/04 (a)........     ARS1,450,000         173,483
                                                                      -----------
                BRAZIL (1.1%)
                Cia Brasileira de Bebidas
                 10.50%, due 12/15/11...........     $   400,000         362,000
                Globo Communicacoes e
                 Participacoes S.A.
                 Series REGS
                 10.625%, due 12/5/08 (e).......         224,000          58,244



                                                      PRINCIPAL
                                                       AMOUNT            VALUE
                                                     ----------------------------
                BRAZIL (CONTINUED)
                Trikem S.A.
                 Series REGS
                 10.625%, due 7/24/07...........     $   214,000     $   100,578
                                                                     -----------
                                                                         520,822
                                                                     -----------
                CAYMAN ISLANDS (0.5%)
                Independent News & Media Finance
                      5.75%, due 5/17/09 (f).........         E   300,000             219,657
                                                                                  -----------

                     CHILE (0.4%)
                     Empresa Nacional de Electricidad
                      S.A.
                      Series B
                      8.50%, due 4/1/09..............         $   170,000             170,531
                                                                                  -----------

                     GERMANY (0.4%)
                     Kyivstar GSM Bonds
                      12.75%, due 11/21/05 (a).......             200,000             202,000
                                                                                  -----------

                     MEXICO (1.2%)
                     Corporacion Durango S.A. de CV
                      13.125%, due 7/15/09 (a)(e)....             300,000              105,000
                     Grupo Transportacion Ferroviaria
                      Mexicana, S.A. de C.V.
                      12.50%, due 6/15/12 (a)........             450,000             454,500
                                                                                  -----------
                                                                                      559,500
                                                                                  -----------
                     PHILIPPINES (1.1%)
                     Globe Telecom, Inc.
                      9.75%, due 4/15/12.............             250,000              260,000
                     Philippine Long Distance
                      Telephone Co. 11.375%, due
                      5/15/12........................             300,000             273,000
                                                                                  -----------
                                                                                      533,000
                                                                                  -----------
                     RUSSIA (3.2%)
                     AO Siberian Oil Co.
                      11.50%, due 2/13/07............             250,000              260,750
                     AO VimpelCom BV
                      10.45%, due 4/26/05 (a)........             260,000              267,800
                     Oblast Nizhniy Novorod
                      Series REGS
                      8.75%, due 4/3/05..............             537,177              495,546
                     Tyumen Oil Co.
                      11.00%, due 11/6/07 (a)........             500,000             515,625
                                                                                  -----------
                                                                                    1,539,721
                                                                                  -----------
                     UNITED STATES (3.7%)
                     Adelphia Communications Corp.
                      10.25%, due 6/15/11 (e)........             100,000               38,500




12 The notes to the financial statements are an integral part of, and should be read in conjunction with, the
financial statements.
Portfolio of Investments* December 31, 2002

                                                       PRINCIPAL
                                                        AMOUNT            VALUE
                                                      ----------------------------
                 CORPORATE BONDS (CONTINUED)
                 UNITED STATES (CONTINUED)
                 AT&T Wireless Services, Inc.
                  7.35%, due 3/1/06..............     $   400,000     $   412,000
                 FrontierVision Operating
                  Partners, L.P.
                  11.00%, due 10/15/06 (e).......         100,000          78,500
                 PEMEX Master Trust
                  Series REGS
                  8.625%, due 2/1/22.............         880,000         928,400
                 Qwest Services Corp.
                  13.50%, due 12/15/10 (a).......         300,000          312,000
                                                                       -----------
                                                                         1,769,400
                                                                       -----------
                 Total Corporate Bonds
                  (Cost $5,869,567)..............                        5,688,114
                                                                       -----------
                 GOVERNMENTS & FEDERAL AGENCIES (64.1%)

                 BRAZIL (9.2%)
                 Banco Nacional de Desenvolvi
                  Series REGS
                  20.369%, due 6/16/08 (d).......         370,000         320,100
                 Brazil Development Fund
                  9.625%, due 12/12/11 (a).......         605,000         450,725
                 Republic of Brazil
                  9.375%, due 4/7/08.............       600,000            420,000
                  10.125%, due 5/15/27...........       450,000            270,000
                  11.00%, due 8/17/40............     2,605,000          1,621,612
                  11.50%, due 3/12/08............       850,000            646,000
                  12.25%, due 3/6/30.............       500,000            347,500
                  14.50%, due 10/15/09...........       350,000            290,500
                                                                       -----------
                                                                         4,366,437
                                                                       -----------
                 BULGARIA (1.5%)
                 Republic of Bulgaria
                  Series REGS
                  8.25%, due 1/15/15.............         660,000          720,225
                                                                       -----------

                 COLOMBIA   (3.4%)
                 Republic   of Colombia
                  8.625%,   due 4/1/08.............     250,000            250,000
                  10.00%,   due 1/23/12............   1,050,000          1,060,500
                  11.75%,   due 2/25/20............     300,000            321,000
                                                                       -----------
                                                                         1,631,500
                                                                       -----------
                 DOMINICAN REPUBLIC (0.7%)
                 Dominican Republic
                  9.50%, due 9/27/06 (a).........         320,000          339,200
                                                                       -----------
                 ECUADOR (1.6%)
                 Republic of Ecuador
                  Series REGS
                  6.00%, due 8/15/30 (b).........     1,250,000           504,976



                                                       PRINCIPAL
                                                        AMOUNT            VALUE
                                                      ----------------------------
                 ECUADOR (CONTINUED)
                  Series REGS
                  12.00%, due 11/15/12...........     $   200,000     $   108,485
                  12.00%, due 11/15/12 (a).......         225,000         126,000
                                                                                   -----------
                                                                                       739,461
                                                                                   -----------
                     EGYPT (1.4%)
                     Arab Republic of Egypt
                      Series REGS
                      8.75%, due 7/11/11.............             610,000              667,950
                                                                                   -----------

                     EL SALVADOR    (0.8%)
                     Republic of    El Salvador
                      7.75%, due    1/24/23 (a).........          150,000              149,250
                      8.25%, due    4/10/32 (a).........          250,000              237,500
                                                                                   -----------
                                                                                       386,750
                                                                                   -----------
                     IVORY COAST (0.8%)
                     Republic of Ivory Coast
                      Series 20 year
                      2.00%, due 3/29/18 (c)(e)......           1,400,000               175,000
                      Series FRF
                      2.00%, due 3/29/18 (c)(e)......         FF10,000,000             208,774
                                                                                   -----------
                                                                                       383,774
                                                                                   -----------
                     LEBANON (0.5%)
                     Republic of Lebanon
                      Series 11
                      10.25%, due 3/5/05.............         $   200,000              206,500
                                                                                   -----------

                     MEXICO (5.0%)
                     United Mexican States
                      7.50%, due 1/14/12.............             600,000               642,750
                      8.125%, due 12/30/19...........           1,434,000             1,512,870
                      Series MTN
                      8.30%, due 8/15/31.............             200,000              211,000
                                                                                   -----------
                                                                                     2,366,620
                                                                                   -----------
                     PAKISTAN (0.4%)
                     Republic of Pakistan
                      Series REGS
                      10.00%, due 12/13/05...........             187,500              201,094
                                                                                   -----------

                     PANAMA (3.3%)
                     Republic of Panama
                      8.25%, due 4/22/08.............             210,000              217,875
                      8.875%, due 9/30/27............             500,000              495,000
                      9.625%, due 2/8/11.............             770,000              841,225
                                                                                   -----------
                                                                                     1,554,100
                                                                                   -----------




                                                         13

The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial
statements.
MainStay Global High Yield Fund

                                                   PRINCIPAL
                                                    AMOUNT            VALUE
                                                  ----------------------------
                GOVERNMENTS & FEDERAL AGENCIES (CONTINUED)
                PERU (2.5%)
                Republic of Peru
                 9.125%, due 1/15/08............ $ 550,000         $   555,500
                 9.125%, due 2/21/12............     650,000           637,000
                                                                   -----------
                                                                     1,192,500
                                                                   -----------
                PHILIPPINES (3.0%)
                Republic of Philippines
                 9.375%, due 1/18/17............     200,000           205,500
                 9.875%, due 1/15/19............     200,000           198,000
                 10.625%, due 3/16/25 (b).......   1,000,000         1,030,000
                                                                   -----------
                                                                     1,433,500
                                                                   -----------
                RUSSIA (18.5%)
                Ministry of Finance
                 Series VI
                 3.00%, due 5/14/06.............   1,030,000           910,262
                Russian Federation
                 Series REGS
                 5.00%, due 3/31/30 (b).........   6,569,750         5,190,103
                 5.00%, due 3/31/30 (a).........      28,205            22,352
                 Series REGS
                 8.25%, due 3/31/10 (b).........     816,251           863,594
                 8.25%, due 3/31/10 (a).........       3,289             3,478
                 Series REGS
                 10.00%, due 6/26/07............   1,067,000         1,215,046
                 Series REGS
                 11.00%, due 7/24/18............     500,000           597,750
                                                                   -----------
                                                                     8,802,585
                                                                   -----------
                SOUTH AFRICA (2.2%)
                Republic of South Africa
                 7.375%, due 4/25/12............     950,000         1,028,375
                                                                   -----------
                TURKEY (4.0%)
                Republic of Turkey
                 10.50%, due 1/13/08............     360,000           372,600
                 11.875%, due 1/15/30...........     850,000           892,500
                 12.375%, due 6/15/09...........     600,000           649,500
                                                                   -----------
                                                                     1,914,600
                                                                   -----------
                UKRAINE (1.1%)
                Ukraine Government
                 Series REGS
                 11.00%, due 3/15/07............     498,120           515,554
                                                                   -----------

                URUGUAY (0.9%)
                Republic of Uruguay
                 7.875%, due 11/18/03...........     200,000           169,000
                 Series REGS
                 8.375%, due 9/26/06............     500,000            275,757
                                                                    -----------
                                                                        444,757
                                                                    -----------



                                                    PRINCIPAL
                                                     AMOUNT            VALUE
                                                   ----------------------------
                VENEZUELA (3.3%)
                Republic of Venezuela
                      9.25%, due 9/15/27.............         $2,288,000          $ 1,555,840
                                                                                  -----------
                     Total Governments & Federal
                      Agencies (Cost $28,468,531)....                              30,451,322
                                                                                  -----------
                     LOAN PARTICIPATIONS (1.0%)

                     ALGERIA (0.8%)
                     Republic of Algeria
                      Tranche 1
                      2.625%, due 9/4/06 (d)(g)(h)...            153,846               143,846
                      Tranche 3
                      2.625%, due 3/4/10 (d)(g)(h)...            250,000              226,250
                                                                                  -----------
                                                                                      370,096
                                                                                  -----------
                     MOROCCO (0.2%)
                     Kingdom of Morocco
                      Tranche A
                      2.5625%, due 1/2/09
                      (d)(g)(h)......................            140,643              126,579
                                                                                  -----------
                     Total Loan Participations
                      (Cost $482,458)................                                 496,675
                                                                                  -----------
                     YANKEE BONDS (3.0%)

                     ARGENTINA (0.7%)
                     Cablevision S.A.
                      Series 10, Tranche 1
                      13.75%, due 4/30/07 (e)........             50,000                12,000
                      Series 5, Tranche 1
                      13.75%, due 5/1/09 (e).........            200,000                48,000
                     Multicanal S.A.
                      13.125%, due 4/15/09 (e).......            200,000                52,000
                     YPF Sociedad Anonima
                      9.125%, due 2/24/09............            225,000              200,250
                                                                                  -----------
                                                                                      312,250
                                                                                  -----------
                     CANADA (0.6%)
                     Abitibi-Consolidated, Inc.
                      8.85%, due 8/1/30..............            250,000              268,840
                                                                                  -----------

                     MEXICO (1.7%)
                     Grupo Elektra S.A. de C.V.
                      12.00%, due 4/1/08.............            300,000               268,500
                     Grupo Transportacion Ferroviaria
                      Mexicana, S.A. de C.V.
                      11.75%, due 6/15/09............            100,000                98,000
                     Innova S. de R.L.
                      12.875%, due 4/1/07............            300,000               261,000




14 The notes to the financial statements are an integral part of, and should be read in conjunction with, the
financial statements.
Portfolio of Investments December 31, 2002 (continued)

                                                    PRINCIPAL
                                                     AMOUNT            VALUE
                                                   ----------------------------
                YANKEE BONDS (CONTINUED)
                MEXICO (CONTINUED)
                Vicap S.A.
                 11.375%, due 5/15/07...........   $     225,000   $   202,500
                                                                   -----------
                                                                       830,000
                                                                   -----------
                Total Yankee Bonds
                 (Cost $1,714,159)..............                      1,411,090
                                                                    -----------
                Total Long-Term Bonds
                 (Cost $42,099,896).............                     43,811,137
                                                                    -----------
                SHORT-TERM INVESTMENTS (19.0%)

                COMMERCIAL PAPER (15.3%)

                UNITED STATES (15.3%)
                Atlantic Assets Securities Corp.
                 1.5717%, due 1/3/03 (i)........    1,920,000        1,919,835
                Bryant Park Funding LLC
                 1.6229%, due 1/2/03 (i)........    2,203,000        2,202,902
                National Australia Funding
                 1.34%, due 1/3/03..............    1,000,000          999,926
                UBS Finance Delaware LLC
                 1.20%, due 1/2/03..............    2,150,000         2,149,928
                                                                    -----------
                Total Commercial Paper
                 (Cost $7,272,591)..............                      7,272,591
                                                                    -----------
                                                     SHARES
                                                   -----------
                INVESTMENT COMPANY (1.0%)
                AIM International Funds
                 Group (i)......................         458,040        458,040
                                                                    -----------
                Total Investment Company
                 (Cost $458,040)................                        458,040
                                                                    -----------
                                                    PRINCIPAL
                                                     AMOUNT            VALUE
                                                   ----------------------------
                MASTER NOTE (2.7%)
                Bank of America
                 Securities LLC
                 1.4374%, due 1/2/03 (i)........   $1,300,000      $ 1,300,000
                                                                   -----------
                Total Master Note
                 (Cost $1,300,000)..............                      1,300,000
                                                                    -----------
                Total Short-Term Investments
                 (Cost $9,030,631)..............                      9,030,631
                                                                    -----------
                Total Investments
                 (Cost $51,130,527) (j).........          111.2%    52,841,768(k)
                Liabilities in Excess of
                 Cash and Other Assets..........        (11.2)      (5,319,783)
                                                   -----------     -----------
                Net Assets......................        100.0%     $47,521,985
                                                   ===========     ===========



                  -------
                  (a) May be sold to institutional investors only.
                  (b) Represents security of which a portion is out on loan.
                  (c) FLIRB (Floating Loaded Interest Rate Bond) carries a
                       fixed, below market interest rate which rises
                            incrementally over the initial 5 to 7 years of the life
                            of the bond, and is then replaced by a floating rate
                            coupon for the remaining life of the bond.
                      (d)   Floating rate. Rate shown is the rate in effect at
                            December 31, 2002.
                      (e)   Issue in default.
                      (f)   Partially segregated as collateral for foreign currency
                            forward contracts.
                      (g)   Restricted security.
                      (h)   Illiquid security.
                      (i)   Represents security, or portion thereof, purchased with
                            cash collateral received for securities on loan.
                      (j)   The cost for federal income tax purposes is $51,401,389.
                      (k)   At December 31, 2002 net unrealized appreciation for
                            securities was $1,440,379, 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
                            $2,837,371 and aggregate gross unrealized depreciation
                            for all investments on which there was an excess of cost
                            over market value of $1,396,992.
                      (l)   The following abbreviations are used in the above
                            portfolio:
                            ARS--Argentinian Pesos
                            E--Euro
                            FF--French Francs




                                                         15

The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial
statements.
Statement of Assets and Liabilities as of December 31, 2002

         ASSETS:
         Investment in securities, at value (identified cost
           $51,130,527) including $5,430,340 of
           securities loaned.........................................   $52,841,768
         Cash........................................................       109,896
         Deposits with brokers for securities loaned.................         6,629
         Receivables:
           Interest..................................................     1,173,059
           Fund shares sold..........................................       641,253
         Unamortized organization expense............................         5,633
         Other assets................................................        12,927
                                                                        -----------
           Total assets..............................................    54,791,165
                                                                        -----------
         LIABILITIES:
         Securities lending collateral (Note 2)......................       5,887,406
         Payables:
           Investment securities purchased...........................       1,210,539
           Fund shares redeemed......................................          35,479
           Transfer agent............................................          25,981
           NYLIFE Distributors.......................................          24,311
           Manager...................................................          21,812
           Custodian.................................................           2,593
           Trustees..................................................             447
         Accrued expenses............................................          31,940
         Unrealized depreciation on foreign currency forward
           contracts.................................................        28,672
                                                                        -----------
           Total liabilities.........................................     7,269,180
                                                                        -----------
         Net assets..................................................   $47,521,985
                                                                        ===========
         COMPOSITION OF NET ASSETS:
         Shares of beneficial interest outstanding (par value of $.01
           per share) unlimited number of shares authorized:
           Class A...................................................   $   25,593
           Class B...................................................       18,868
           Class C...................................................        9,102
         Additional paid-in capital..................................   47,804,037
         Accumulated net investment loss.............................      (25,106)
         Accumulated net realized loss on investments................   (1,995,628)
         Net unrealized appreciation on investments..................    1,711,241
         Net unrealized depreciation on translation of other assets
           and liabilities in foreign currencies and foreign currency
           forward contracts.........................................       (26,122)
                                                                        -----------
         Net assets..................................................   $47,521,985
                                                                        ===========
         CLASS A
         Net assets applicable to outstanding shares.................   $22,754,189
                                                                        ===========
         Shares of beneficial interest outstanding...................     2,559,338
                                                                        ===========
         Net asset value per share outstanding.......................   $      8.89
         Maximum sales charge (4.50% of offering price)..............          0.42
                                                                        -----------
         Maximum offering price per share outstanding................   $      9.31
                                                                        ===========
         CLASS B
         Net assets applicable to outstanding shares.................   $16,708,138
                                                                        ===========
         Shares of beneficial interest outstanding...................     1,886,817
                                                                        ===========
         Net asset value and offering price per share outstanding....   $      8.86
                                                                        ===========
         CLASS C
         Net assets applicable to outstanding shares.................   $ 8,059,658
                                                                        ===========
         Shares of beneficial interest outstanding...................       910,172
                                                                        ===========
         Net asset value and offering price per share outstanding....   $      8.86
                                                                                           ===========




16 The notes to the financial statements are an integral part of, and should be read in conjunction with, the
financial statements.
Statement of Operations for the year ended December 31, 2002

              INVESTMENT INCOME:
              Income:
                Dividends.................................................                $   12,749
                Interest (a)..............................................                 3,113,058
                                                                                          ----------
                   Total income............................................                3,125,807
                                                                                          ----------
              Expenses:
                Manager...................................................                   214,804
                Transfer agent............................................                   129,400
                Distribution--Class B.....................................                    86,371
                Distribution--Class C.....................................                    34,401
                Service--Class A..........................................                    36,459
                Service--Class B..........................................                    28,790
                Service--Class C..........................................                    11,467
                Professional..............................................                    35,389
                Registration..............................................                    33,448
                Shareholder communication.................................                    21,217
                Custodian.................................................                    16,568
                Recordkeeping.............................................                    14,111
                Amortization of organization expense......................                    13,490
                Trustees..................................................                     5,157
                Miscellaneous.............................................                    27,278
                                                                                          ----------
                  Total expenses before waiver and reimbursement..........                   708,350
              Fees waived and reimbursed by Manager and Subadvisor........                   (65,911)
                                                                                          ----------
                   Net expenses............................................                  642,439
                                                                                          ----------
              Net investment income.......................................                 2,483,368
                                                                                          ----------
              REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND
                FOREIGN CURRENCY TRANSACTIONS:
              Net realized loss from:
                  Security transactions...................................                  (160,278)
                  Foreign currency transactions...........................                   (31,016)
                                                                                          ----------
              Net realized loss on investments and foreign currency
                transactions..............................................                  (191,294)
                                                                                          ----------
              Net change in unrealized appreciation on:
                  Security transactions...................................                    908,840
                  Translation of other assets and liabilities in foreign
                   currencies and foreign currency forward contracts......                   (26,122)
                                                                                          ----------
              Net unrealized gain on investments and foreign currency
                transactions..............................................                   882,718
                                                                                          ----------
              Net realized and unrealized gain on investments and foreign
                currency transactions.....................................                   691,424
                                                                                          ----------
              Net increase in net assets resulting from operations........                $3,174,792
                                                                                          ==========




                            (a)   Includes securities lending income of $10,881.




                                                         17

The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial
statements.
Statement of Changes in Net Assets

                                                                                Year ended        Year ended
                                                                               December 31,      December 31,
                                                                                   2002              2001
                                                                               ------------      ------------
    INCREASE IN NET ASSETS:
    Operations:
      Net investment income.....................................               $ 2,483,368       $ 1,522,013
      Net realized loss on investments and foreign currency
        transactions............................................                   (191,294)         (294,199)
      Net change in unrealized appreciation on investments and
        foreign currency transactions...........................                   882,718           748,497
                                                                               ------------      -----------
       Net increase in net assets resulting from operations......                3,174,792         1,976,311
                                                                               ------------      -----------
    Dividends to shareholders:
      From net investment income:
        Class A.................................................                (1,251,113)         (922,042)
        Class B.................................................                  (915,778)         (548,666)
        Class C.................................................                  (365,897)          (64,692)
                                                                               ------------      -----------
            Total dividends to shareholders.......................              (2,532,788)       (1,535,400)
                                                                               ------------      -----------
    Capital share transactions:
      Net proceeds from sale of shares:
        Class A.................................................                28,308,395          1,260,763
        Class B.................................................                12,560,634          2,718,483
        Class C.................................................                 8,031,949            906,505
      Net asset value of shares issued to shareholders in
        reinvestment of dividends:
        Class A.................................................                   347,107           113,433
        Class B.................................................                   559,957           323,707
        Class C.................................................                   261,504            18,398
                                                                               ------------      -----------
                                                                                50,069,546         5,341,289
       Cost of   shares redeemed:
         Class   A.................................................            (16,260,403)         (563,382)
         Class   B.................................................             (3,289,731)       (1,986,993)
         Class   C.................................................             (1,205,832)         (449,978)
                                                                               ------------      -----------
            Increase in net assets derived from capital share
             transactions.........................................              29,313,580         2,340,936
                                                                               ------------      -----------
          Net increase in net assets............................                29,955,584         2,781,847
    NET ASSETS:
    Beginning of year...........................................                17,566,401        14,784,554
                                                                               ------------      -----------
    End of year.................................................               $47,521,985       $17,566,401
                                                                               ============      ===========
    Accumulated undistributed net investment income (loss) at
      end of year...............................................               $   (25,106)      $     1,800
                                                                               ============      ===========




18 The notes to the financial statements are an integral part of, and should be read in conjunction with, the
financial statements.
This page intentionally left blank

                                     19
Financial Highlights selected per share data and ratios

                                                                                                         Class A
                                                                             -----------------------------------------

                                                                                        Year ended December 31,
                                                                             -----------------------------------------
                                                                              2002         2001         2000          1
                                                                             -------      -------      -------        -
Net asset value at beginning of period......................                 $ 8.72       $ 8.49       $ 8.58       $
                                                                             -------      -------      -------      --
Net investment income.......................................                    0.73         0.85(f)      0.85
Net realized and unrealized gain (loss) on investments......                    0.19         0.24(f)     (0.08)
Net realized and unrealized gain (loss) on foreign currency
 transactions...............................................                   (0.01)             --          (0.00)(b)
                                                                             -------         -------        -------          --
Total from investment operations............................                    0.91            1.09           0.77
                                                                             -------         -------        -------          --
Less dividends from net investment income...................                   (0.74)          (0.86)         (0.86)
                                                                             -------         -------        -------          --
Net asset value at end of period............................                 $ 8.89          $ 8.72         $ 8.49           $
                                                                             =======         =======        =======          ==
Total investment return (c).................................                   11.01%          13.59%          9.30%
Ratios (to average net assets)/
 Supplemental Data:
   Net investment income....................................                    8.49%          10.11%(f)      10.05%
   Net expenses.............................................                    1.70%           1.70%          1.71%(d)
   Expenses (before waiver and reimbursement)...............                    1.91%           2.27%          2.53%
Portfolio turnover rate.....................................                      92%            111%            96%
Net assets at end of period (in 000's)......................                 $22,754         $ 9,894        $ 8,827          $




                    *    Commencement of Operations.
                   **    Class C shares were first offered on September 1, 1998.
                    +    Annualized.
                   (a)   Per share data based on average shares outstanding during
                         the period.
                   (b)   Less than one cent per share.
                   (c)   Total return is calculated exclusive of sales charges and is
                         not annualized.
                   (d)   The effect of non-reimbursable interest expense on the
                         expense ratio was 0.01%.
                   (e)   Less than one thousand dollars.
                   (f)   As required, effective January 1, 2001, the Fund has adopted
                         the provisions of the AICPA Audit and Accounting Guide for
                         Investment Companies and began amortizing premium on debt
                         securities. The effect of this change for the year ended
                         December 31, 2001 is shown below. Per share ratios and
                         supplemental data for periods prior to January 1, 2001 have
                         not been restated to reflect this change in presentation.



                                                                               Class A         Class B          Class C
                                                                               -------         -------          -------
Decrease net investment income..............................                   ($0.00)(b)      ($0.00)(b)       ($0.00)(b)
Increase net realized and unrealized gains and losses.......                     0.00(b)        (0.00)(b)        (0.00)(b)
Decrease ratio of net investment income.....................                    (0.04%)         (0.04%)          (0.04%)




20 The notes to the financial statements are an integral part of, and should be read in conjunction with, the
financial statements.
                        Class B                                                               Class C
----------------------------------------------------               --------------------------------------------------
                                                June 1*                                                             September
        Year ended December 31,                 through                    Year ended December 31,                     through
-------------------------------------         December 31,         -------------------------------------            December 3
 2002       2001       2000        1999           1998              2002        2001        2000         1999            1998
-------    -------    -------      ----       ------------         -------    -------     -------        ----       ----------
$ 8.68     $ 8.46     $ 8.54      $ 7.98        $ 10.00            $ 8.68     $ 8.46      $ 8.54       $ 7.98          $ 7.18
-------    -------    -------     -------       -------            -------    -------     -------      -------         -------
   0.67       0.79(f)     0.79       0.71          0.32(a)            0.67        0.79(f)      0.79        0.71            0.27
   0.20       0.23(f)    (0.08)      0.56         (2.01)              0.20        0.23(f)     (0.08)       0.56            0.81
  (0.01)         --     (0.00)(b)       0.01      (0.01)             (0.01)          --      (0.00)(b)        0.01        (0.01
-------    -------    -------     -------       -------            -------    -------     -------      -------         -------
   0.86       1.02       0.71        1.28         (1.70)              0.86        1.02        0.71         1.28            1.07
-------    -------    -------     -------       -------            -------    -------     -------      -------         -------
  (0.68)     (0.80)     (0.79)      (0.72)        (0.32)             (0.68)      (0.80)      (0.79)       (0.72)          (0.27
-------    -------    -------     -------       -------            -------    -------     -------      -------         -------
$ 8.86     $ 8.68     $ 8.46      $ 8.54        $ 7.98             $ 8.86     $ 8.68      $ 8.46       $ 8.54          $ 7.98
=======    =======    =======     =======       =======            =======    =======     =======      =======         =======
  10.33%     12.69%      8.58%      17.01%       (16.82%)            10.33%      12.69%       8.58%       17.01%          14.99
   7.74%      9.36%(f)      9.30%     8.82%        6.65%+             7.74%       9.36%(f)       9.30%      8.82%          6.65
   2.45%      2.45%      2.46%(d)       2.45%       4.14%+            2.45%       2.45%       2.46%(d)        2.45%         4.1
   2.66%      3.02%      3.28%       3.53%         4.34%+             2.66%       3.02%       3.28%        3.53%           4.34
      92%      111%         96%       104%           96%                 92%       111%          96%        104%              96
$16,708    $ 6,715    $ 5,498     $ 3,756       $ 2,532            $ 8,060    $    957    $    460     $      79       $      --




                                                         21

The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial
statements.
MainStay Global High Yield Fund

NOTE 1--ORGANIZATION AND BUSINESS:

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-four funds (collectively referred to as the "Funds").
These financial statements and notes relate only to MainStay Global High Yield Fund (the "Fund").

The Fund currently offers three classes of shares. Distribution of Class A shares and Class B shares commenced
on June 1, 1998. Class C shares were initially offered on September 1, 1998. 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 A shares, Class B shares and Class C shares bear the same voting (except for issues that relate
solely to one class), dividend, liquidation and other rights and conditions except that the Class B shares and Class
C shares are subject to higher distribution fee rates. Each class of shares bears distribution and/or service fee
payments under a distribution plan pursuant to Rule 12b-1 under the 1940 Act.

The Fund's investment objective is to seek to provide maximum current income by investing primarily in high yield
debt securities of non-U.S. issuers. Capital appreciation is a secondary objective. MainStay Global High Yield
Fund is "non-diversified," which means that it may invest a greater percentage of its assets than diversified funds in
a particular issuer. This may make it more susceptible than diversified funds to risks associated with an individual
issuer, and to single economic, political or regulatory occurrences.

The Fund principally invests in high yield securities (sometimes called "junk bonds"), which are generally
considered speculative because they present a greater risk of loss, including default, than higher quality debt
securities. These securities pay a premium -- a high interest rate or yield -- because of the increased risk of loss.
These securities can also be subject to greater price volatility.

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 currency fluctuations, future adverse political and
economic developments and possible imposition of currency exchange blockages or other foreign governmental
laws or restrictions. These risks are likely to be greater in emerging markets than in developed markets. The
ability of issuers of debt securities held by the Fund to meet their obligations may be affected by economic and
political developments in a specific country, industry or region.

                                                           22
Notes to Financial Statements

NOTE 2--SIGNIFICANT ACCOUNTING POLICIES:

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 of the 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 of the Fund 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 number of outstanding shares of that class.

SECURITIES VALUATION. Portfolio securities of the Fund are stated at value determined (a) by appraising
debt securities at prices supplied by a pricing agent selected by the Fund's Manager or Subadvisor, whose prices
reflect broker/dealer supplied valuations and electronic data processing techniques if those prices are deemed by
the Fund's Manager or Subadvisor to be representative of market values at the regular close of business of the
Exchange, and (b) by appraising all other securities and other assets, including debt securities for which prices are
supplied by a pricing agent or brokers but are not deemed by the Fund's Manager or Subadvisor 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 Trust's Board of Trustees. 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. Foreign currency forward contracts are valued at their fair market
values determined on the basis of the mean between the last current bid and asked prices based on dealer or
exchange quotations.

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 Fund's calculation of net asset values unless the Fund's Manager
or Subadvisor deems that the particular event would materially affect the Fund's net asset value, in which case an
adjustment may be made.

FOREIGN CURRENCY FORWARD CONTRACTS. A foreign currency forward 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.
The Fund may enter into foreign currency forward contracts primarily to

                                                            23
MainStay Global High Yield Fund

hedge its foreign currency denominated investments and receivables and payables against adverse movements in
future foreign exchange rates or to try to enhance the Fund's returns.

The use of foreign currency 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 the
Fund's involvement in these financial instruments. Risks arise from the possible movements in the foreign exchange
rates underlying these instruments. The unrealized appreciation on forward contracts reflects the Fund's exposure
at year end to credit loss in the event of a counterparty's failure to perform its obligations.

Foreign currency forward contracts open at December 31, 2002:

                                                                            CONTRACT       CONTRACT
                                                                             AMOUNT         AMOUNT          UNREALIZED
                                                                              SOLD         PURCHASED       DEPRECIATION
                                                                            --------       ---------       ------------
FOREIGN CURRENCY SALE CONTRACTS
Euro vs. U.S. Dollar, expiring 1/15/03......................                E 73,628       $ 72,818           $ (4,352)
Euro vs. U.S. Dollar, expiring 3/31/03......................                E406,091       $400,000            (24,320)
                                                                                                              --------
Net unrealized depreciation on foreign currency forward
  contracts:                                                                                                  $(28,672)
                                                                                                              ========




PURCHASED AND WRITTEN OPTIONS. The Fund may write covered call and put options on its portfolio
securities or foreign currencies. Premiums are received and are recorded as liabilities. The liabilities are
subsequently adjusted to reflect the current value of the options written. Premiums received from writing options
which expire are treated as realized gains. Premiums received from writing options which are exercised or are
cancelled in closing purchase transactions are added to the proceeds or netted against the amount paid on the
transaction to determine the realized gain or loss. By writing a covered call option, the Fund foregoes in exchange
for the premium the opportunity for capital appreciation above the exercise price should the market price of the
underlying security or foreign currency increase. By writing a covered put option, the Fund, in exchange for the
premium, accepts the risk of a decline in the market value of the underlying security or foreign currency below the
exercise price.

The Fund may purchase call and put options on its portfolio securities. The Fund may purchase call options to
protect against an increase in the price of the security it anticipates purchasing. The Fund may purchase put
options on its securities to protect against a decline in the value of the security or to close out covered written put
positions. The Fund may also purchase options to seek to enhance returns. Risks may arise from an imperfect
correlation between the change in market value of the securities held by the Fund and the prices of options
relating to the securities purchased or sold by the Fund and from the possible lack of a liquid secondary market
for an option. The maximum exposure to loss for any purchased option is limited to the premium initially paid for
the option.

                                                          24
Notes to Financial Statements (continued)

SECURITIES LENDING. The Fund may lend its securities to broker-dealers and financial institutions. The loans
are collateralized by 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.

RESTRICTED SECURITIES. A restricted security is a security which has been purchased through a private
offering and cannot be resold to the general public without prior registration under the Securities Act of 1933 (the
"1933 Act"). The Fund does not have the right to demand that such securities be registered. Disposal of these
securities may involve time-consuming negotiations and expense, and prompt sale at an acceptable price may be
difficult.

Restricted securities held at December 31, 2002:

                                                                                                             PERCENT
                                               DATE(S) OF          PRINCIPAL                   12/31/02         OF
             SECURITY                          ACQUISITION          AMOUNT         COST         VALUE       NET ASSETS
             --------                        ---------------       ---------     --------      --------     ----------
Kingdom of Morocco
  Tranche A
  2.5625%, due 1/1/09..............          11/30/99-1/6/00       $140,643      $130,845      $126,579         0.2%
Republic of Algeria
  Tranche 1
  2.625%, due 9/4/06...............           8/13/99-1/6/00        153,846       130,344       143,846         0.3
  Tranche 3 2.625%, due 3/4/10.....                  10/3/02        250,000       221,270       226,250         0.5
                                                                                 --------      --------         ---
                                                                                 $482,459      $496,675         1.0%
                                                                                 ========      ========         ===




FINANCIAL INSTRUMENTS WITH CREDIT RISK. The Fund invests in Loan Participations. When the
Fund purchases a Loan Participation, the Fund typically enters into a contractual relationship with the lender or
third party selling such Participation ("Selling Participant"), but not with the Borrower. As a result, the Fund
assumes the credit risk of the Borrower, the Selling Participant and any other persons interpositioned between the
Fund and the Borrower ("Intermediate Participants"). The Fund may not directly benefit from the collateral
supporting the Senior Loan in which it has purchased the Loan Participation.

ORGANIZATION COSTS. Costs incurred in connection with the Fund's initial organization and registration
totalled approximately $67,460 and are being amortized over 60 months beginning at the commencement of
operations.

                                                         25
MainStay Global High Yield Fund

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 or excise tax provision is required.

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

DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions are recorded on
the ex-dividend date. The Fund intends to declare and pay dividends monthly and capital gain distributions, if any,
are declared and paid annually. 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.

The following table discloses the current year reclassifications between accumulated net investment loss,
accumulated net realized loss on investments, accumulated net realized loss on foreign currency transactions and
additional paid-in capital arising from permanent differences; net assets at December 31, 2002, are not affected.

                                                              ACCUMULATED
                                                             NET REALIZED
                                        ACCUMULATED             LOSS ON
                    ACCUMULATED         NET REALIZED            FOREIGN
                   NET INVESTMENT         LOSS ON              CURRENCY         ADDITIONAL
                        LOSS            INVESTMENTS          TRANSACTIONS     PAID-IN CAPITAL
                   --------------      --------------        -------------    ---------------
                      $22,514             $41,178               $31,016          $(94,708)




The reclassifications for the Fund are primarily due to foreign currency gain
(loss), non deductible expenses (organization), premium amortization adjustments and reclassification of
distributions.

The tax character of distributions paid during the years ended December 31, 2002 and December 31, 2001 was
as follows:

                                                                                2002                 2001
                                                                             -----------          -----------
   Distributions paid from ordinary income                                   $2,532,788           $1,535,400




                                                        26
Notes to Financial Statements (continued)

SECURITY TRANSACTIONS AND INVESTMENT INCOME. The Fund records security transactions on
the trade date. Realized gains and losses on security transactions are determined using the identified cost method.
Interest income is accrued daily. Discounts and premiums on securities, other than short-term securities,
purchased for the Fund are accreted and amortized, respectively, on the constant yield method over the life of the
respective securities, or, if applicable, over the period to the first date of call. Discounts and premiums on short-
term securities are accreted and amortized, respectively, on the straight line method.

EXPENSES. Expenses of the Trust are allocated to the individual Funds in proportion to the net assets of the
respective Funds when the expenses are incurred except where direct allocations of expenses can be made.

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 assets on the date the income is earned or expenses and realized and unrealized gains and losses
are incurred.

FOREIGN CURRENCY TRANSACTIONS. The books and records of the Fund 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) purchases and sales of investment securities, 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 year. The
realized and unrealized changes in net assets arising from fluctuations in exchange rates and market prices of
securities are not separately presented. Accordingly, gains and losses from foreign currency transactions are
included in the reported net realized gain (loss) on investment transactions.

Net realized gain (loss) on foreign currency transactions represents net gains and losses on foreign currency
forward contracts, net currency gains or losses realized as a result of differences between the amounts of
securities sale proceeds or purchase cost, dividends, interest and withholding taxes as recorded on the Fund's
books, and the U.S. dollar equivalent amount actually received or paid. Net currency gains or losses from valuing
foreign currency denominated assets and liabilities, other than investments, at year end exchange rates are
reflected in unrealized foreign exchange gains or losses.

USE OF ESTIMATES. The preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America requires management to make estimates and

                                                           27
MainStay Global High Yield Fund

assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ
from those estimates.

NOTE 3--FEES AND RELATED PARTY TRANSACTIONS:

MANAGER AND SUBADVISOR. New York Life Investment Management LLC ("NYLIM" or the
"Manager"), an indirect wholly-owned subsidiary of New York Life Insurance Company ("New York Life"),
serves as the Fund's Manager. The Manager provides offices, conducts clerical, record-keeping and
bookkeeping services, and keeps most of the financial and accounting records required for the Fund. The
Manager also pays the salaries and expenses of all personnel affiliated with the Fund and all the operational
expenses that are not the responsibility of the Fund. The Manager has delegated its portfolio management
responsibilities to MacKay Shields LLC (the "Subadvisor"), a registered investment advisor and indirect wholly-
owned subsidiary of New York Life. 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 0.70% of the Fund's average daily net assets. Through March 11, 2002 the
Manager had voluntarily agreed to reduce its fee payable to an annual percentage of 0.50% of the Fund's
average daily net assets. In addition, the Manager had voluntarily agreed to reimburse the expenses of the Fund
through March 11, 2002, to the extent that operating expenses would exceed on an annualized basis 1.70%,
2.45% and 2.45% of the average daily net assets of the Class A, Class B and Class C shares, respectively.
Effective March 12, 2002, the Manager voluntarily agreed to reimburse the expenses of the Fund to the extent
that operating expenses would exceed on an annualized basis 1.70%, 2.45% and 2.45% of the average daily net
assets of the Class A, Class B and Class C shares, respectively. For the year ended December 31, 2002, the
Manager earned from the Fund $214,804. The fees waived and expenses reimbursed by the Manager total
$7,278 and $58,633 respectively.

Pursuant to the terms of a Sub-Advisory Agreement between NYLIM and MacKay Shields, the Manager paid
the Subadvisor a monthly fee at an annual rate of 0.35% of the average daily net assets of the Fund.

To the extent that the Manager has agreed to voluntarily reduce its fee, the Subadvisor has voluntarily agreed to
do so proportionately.

DISTRIBUTION AND SERVICE FEES. The Trust, on behalf of the Fund, has a Distribution Agreement with
NYLIFE Distributors Inc. (the "Distributor"), an indirect wholly-owned subsidiary of New York Life. The Fund,
with respect to each class of 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

                                                         28
Notes to Financial Statements (continued)

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.

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.

SALES CHARGES. The Fund was advised by the Distributor that the amount of sales charges retained on sales
of Class A shares was $16,834 for the year ended December 31, 2002. The Fund was also advised that the
Distributor retained contingent deferred sales charges on redemptions of Class A, Class B and Class C shares of
$8,488, $20,010 and $3,164 respectively, for the year ended December 31, 2002.

TRANSFER, DIVIDEND DISBURSING AND SHAREHOLDER SERVICING AGENT. NYLIM Service
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") pursuant to which BFDS will perform certain of the services for which
NYLIM Service is responsible. Transfer agent expenses to NYLIM Service for the year ended December 31,
2002 amounted to $129,400.

TRUSTEES FEES. Trustees, other than those currently affiliated with NYLIM, are paid an annual fee of
$45,000, $2,000 for each Board meeting, $1,000 for each Committee meeting and $500 for each Valuation
Subcommittee telephonic meeting attended plus reimbursement for travel and out-of-pocket expenses. The Lead
Non-Interested 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.

CAPITAL. At December 31, 2002, New York Life held shares of Class A and Class B with net asset values of
$8,001,000 and $886,000, respectively. This represents 35.16% and 5.30%, respectively, of the net assets at
period end for Class A and B shares.

OTHER. Fees for the cost of legal services, included in Professional fees as shown on the Statement of
Operations, provided to the Fund by the Office of General Counsel of New York Life amounted to $655 for the
year ended December 31, 2002.

The Fund pays the Manager a monthly fee for recordkeeping services provided under the Accounting Agreement
at the annual rate of 1/20 of 1% for the first $20 million of average monthly net assets, 1/30 of 1% of the next
$80 million of average monthly net assets and 1/100 of 1% of any amount in excess of $100 million of average
monthly net assets. Fees for recordkeeping services provided to the Fund by the Manager amounted to $14,111
for the year ended December 31, 2002.

                                                        29
MainStay Global High Yield Fund

NOTE 4--FEDERAL INCOME TAX:

As of December 31, 2002, the components of accumulated loss on a tax basis were as follows:

                          ACCUMULATED CAPITAL         UNREALIZED        TOTAL ACCUMULATED
                           AND OTHER LOSSES          APPRECIATION             LOSS
                          -------------------        ------------       -----------------
                              $(1,707,429)            $1,419,934            $(287,495)




The difference between book-basis and tax-basis unrealized appreciation (depreciation) is primarily due to wash
sales deferrals, interest written off and mark-to-market of foreign currency forward transactions.

At December 31, 2002, for federal income tax purposes, capital loss carryforwards of $1,707,429 were
available as shown in the table below, to the extent provided by the regulations to offset future realized gains
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.

                                       CAPITAL LOSS                                       AMOUNT
                                    AVAILABLE THROUGH                                     (000'S)
                                    -----------------                                     -------
                    2006...................................................               $ 377
                    2007...................................................                1,059
                    2009...................................................                  271
                                                                                          ------
                                                                                          $1,707
                                                                                          ======




In addition, the Fund intends to elect to treat for federal income tax purposes $17,538 of qualifying capital losses
and $30,582 of qualifying foreign exchange losses that arose after October 31, 2002 as if they arose on January
1, 2003.

The Fund utilized $145,793 of capital loss carryforward during the year ended December 31, 2002.

NOTE 5--PURCHASES AND SALES OF SECURITIES (IN 000'S):

During the year ended December 31, 2002, purchases and sales of securities, other than short-term securities,
were $53,262 and $25,944, respectively.

As of December 31, 2002, the Fund had securities on loan with an aggregate market value of $5,430,340. The
Fund received $5,887,406 in cash as collateral for securities on loan which was used to purchase highly liquid
short-term investments in accordance with the Fund's securities lending procedures.

NOTE 6--LINE OF CREDIT:

The Fund and certain affiliated funds maintain a line of credit of $160,000,000 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 .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 among the funds based upon net assets and other

                                                          30
Notes to Financial Statements (continued)

factors. Interest on any revolving credit loan is charged based upon the Federal Funds Advances rate. There
were no borrowings on this line of credit during the year ended December 31, 2002.

NOTE 7--CAPITAL SHARE TRANSACTIONS (IN 000'S):

                                                             YEAR ENDED                          YEAR ENDED
                                                          DECEMBER 31, 2002                   DECEMBER 31, 2001
                                                     ---------------------------        -----------------------------
                                                     CLASS A   CLASS B   CLASS C        CLASS A   CLASS B    CLASS C
                                                     -------   -------   -------        -------   -------   ---------
Shares sold.................................          3,271     1,436      909            147       322        106
Shares issued in reinvestment of
  dividends.................................             40          65        31          13         37        2
                                                     ------       -----      ----         ---       ----      ---
                                                      3,311       1,501       940         160        359      108
Shares redeemed.............................         (1,887)       (387)     (140)        (65)      (236)     (52)
                                                     ------       -----      ----         ---       ----      ---
Net increase................................          1,424       1,114       800          95        123       56
                                                     ======       =====      ====         ===       ====      ===




                                                      31
Report of Independent Accountants

To the Board of Trustees of The MainStay Funds and Shareholders of MainStay Global High Yield 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 Global High Yield Fund (one of the funds constituting The
MainStay Funds, hereafter referred to as the "Fund") at December 31, 2002, the results of its operations for the
year then ended, 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, 2002 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, 2003

                                                         32
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                                     33
Trustees and Officers

Following are the Trustees and Officers of The MainStay Funds, along with a brief description of their principal
occupations during the past five years.

Each Trustee serves until his/her successor is elected and qualified or until his/her resignation, death, or removal.
Officers serve a term of one year and are elected annually by the Trustees.

The business address of each Trustee and Officer is 51 Madison Avenue, New York, New York 10010.

                                                                                     NUMBER OF
                                                                                     PORTFOLIOS
                           POSITION(S)                                                IN FUND
                          HELD WITH FUND                                              COMPLEX
        NAME AND          AND LENGTH OF            PRINCIPAL OCCUPATION(S)            OVERSEEN    OTHER D
     DATE OF BIRTH         TIME SERVED              DURING PAST FIVE YEARS           BY TRUSTEE     HELD
---------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEES(1)
---------------------------------------------------------------------------------------------------------
Gary E. Wendlandt         Chairman since   Chief Executive Officer, Chairman, and         43
10/8/50                   January 1,       Manager, New York Life Investment
                          2002, and        Management LLC (including predecessor
                          Trustee since    advisory organizations) and New York
                          2000             Life Investment Management Holdings LLC;
                                           Executive Vice President, New York Life
                                           Insurance Company; Director, NYLIFE
                                           Distributors, Inc.; Vice Chairman and
                                           Manager, McMorgan & Company LLC;
                                           Manager, MacKay Shields LLC; Executive
                                           Vice President, New York Life Insurance
                                           and Annuity Corporation; Chairman, Chief
                                           Executive Officer, and Director,
                                           MainStay VP Series Fund, Inc. (19
                                           portfolios); Executive Vice President
                                           and Chief Investment Officer, MassMutual
                                           Life Insurance Company (1993 to 1999).
---------------------------------------------------------------------------------------------------------
Stephen C. Roussin        President,       President, Chief Operating Officer, and        45
7/12/63                   Chief            Manager, New York Life Investment
                          Executive        Management LLC (including predecessor
                          Officer, and     advisory organizations) and New York
                          Trustee since    Life Investment Management Holdings LLC;
                          1997             Senior Vice President, New York Life
                                           Insurance Company; Director, NYLIFE
                                           Securities, Inc.; Chairman and Director,
                                           NYLIFE Distributors Inc.; Manager,
                                           McMorgan & Company LLC; Chairman,
                                           President, and Trustee, Eclipse Funds,
                                           (4 portfolios); Chairman, President and
                                           Director, Eclipse Funds Inc. (14
                                           portfolios); Chairman and Trustee, New
                                           York Life Investment Management
                                           Institutional Funds (3 portfolios);
                                           Senior Vice President, Smith Barney
                                           (1994 to 1997).
---------------------------------------------------------------------------------------------------------
1 Certain Trustees are considered to be interested persons of the Trust within the meaning of the 1940 Ac
  their affiliation with New York Life Insurance Company, New York Life Investment Management LLC, MacKay
  LLC, McMorgan & Company LLC, Eclipse Funds, Eclipse Funds Inc., MainStay VP Series Fund, Inc., New York
  Investment Management Institutional Funds, NYLIFE Securities Inc., and/or NYLIFE Distributors Inc., as
  detail in the column "Principal Occupation(s) During Past Five Years."




34 INFORMATION ON THIS PAGE HAS NOT BEEN AUDITED.
                                                                                     NUMBER OF
                                                                                     PORTFOLIOS
                           POSITION(S)                                                IN FUND
                          HELD WITH FUND                                              COMPLEX
         NAME AND         AND LENGTH OF            PRINCIPAL OCCUPATION(S)            OVERSEEN    OTHER D
     DATE OF BIRTH         TIME SERVED              DURING PAST FIVE YEARS           BY TRUSTEE     HELD
---------------------------------------------------------------------------------------------------------
Harry G. Hohn             Trustee since    Retired. Chairman and Chief Executive          24      Directo
3/1/32                    1996             Officer, New York Life Insurance Company               Corpora
                                           (1990 to 1997); Chairman of the Board,
                                           Life Insurance Council of New York (1996
                                           to 1997); Director, Million Dollar
                                           Roundtable Foundation (1996 to 1997).
---------------------------------------------------------------------------------------------------------
Donald K. Ross            Trustee since    Retired. Chairman, Chief Executive             24      Manager
7/1/25                    1991             Officer, and President, New York Life                  Shields
                                           Insurance Company (1981 to 1990).
---------------------------------------------------------------------------------------------------------
NON-INTERESTED TRUSTEES
---------------------------------------------------------------------------------------------------------
Charlynn Goins            Trustee since    Retired. Consultant to U.S. Commerce           24
9/15/42                   2001             Department, Washington, DC (1998 to
                                           2000); Senior Vice President and
                                           Director of International Marketing,
                                           Prudential Mutual Funds and Annuities
                                           (1990 to 1997).
---------------------------------------------------------------------------------------------------------
Edward J. Hogan           Trustee since    Rear Admiral U.S. Navy (Retired);              24
8/17/32                   1996             Independent Management Consultant.
---------------------------------------------------------------------------------------------------------
Terry L. Lierman          Trustee since    Partner, Health Ventures LLC; Vice             24
1/4/48                    1991             Chair, Employee Health Programs;
                                           Partner, TheraCom (1994 to 2001);
                                           President, Capitol Associates, Inc.
                                           (1984 to 2001).
---------------------------------------------------------------------------------------------------------
John B. McGuckian         Trustee since    Chairman, Ulster Television Plc; Pro           24      Chairma
11/13/39                  1997             Chancellor, Queen's University (1985 to                Norther
                                           2001).                                                 Plc; No
                                                                                                  Directo
                                                                                                  Irish B
                                                                                                  Non-Exe
                                                                                                  Directo
                                                                                                  Plc (en
                                                                                                  Non-Exe
                                                                                                  Directo
                                                                                                  Contine
                                                                                                  Plc (sh
---------------------------------------------------------------------------------------------------------
Donald E. Nickelson       Trustee since    Retired. Vice Chairman, Harbour Group          24      Directo
12/9/32                   1994 and Lead    Industries, Inc. (leveraged buyout                     Carey &
                          Non-             firm).
                          Interested
                          Trustee
---------------------------------------------------------------------------------------------------------
Richard S. Trutanic       Trustee since    Managing Director, The Carlyle Group           24
2/13/52                   1994             (private investment firm); Chairman and
                                           Chief Executive Officer, Somerset Group
                                           (financial advisory firm); Senior
                                           Managing Director, Groupe Arnault
                                           (private investment firm) (1999 to
                                           2001).
---------------------------------------------------------------------------------------------------------




                                               35

INFORMATION ON THIS PAGE HAS NOT BEEN AUDITED.
                                                                                     NUMBER OF
                                                                                     PORTFOLIOS
                           POSITION(S)                                                IN FUND
                          HELD WITH FUND                                              COMPLEX
         NAME AND         AND LENGTH OF            PRINCIPAL OCCUPATION(S)            OVERSEEN    OTHER D
     DATE OF BIRTH         TIME SERVED              DURING PAST FIVE YEARS           BY TRUSTEE     HELD
---------------------------------------------------------------------------------------------------------
OFFICERS WHO ARE NOT TRUSTEES
---------------------------------------------------------------------------------------------------------
Jefferson C. Boyce        Senior Vice      Senior Managing Director, New York Life       N/A
9/17/57                   President        Investment Management LLC (including
                          since 1995       predecessor advisory organizations);
                                           Senior Vice President, New York Life
                                           Insurance Company; Senior Vice
                                           President, Eclipse Funds and Eclipse
                                           Funds Inc.; Director, NYLIFE
                                           Distributors, Inc.
---------------------------------------------------------------------------------------------------------
Patrick J. Farrell        Chief            Managing Director, New York Life              N/A
9/27/59                   Financial and    Investment Management LLC (including
                          Accounting       predecessor advisory organizations);
                          Officer,         Treasurer, Chief Financial and
                          Treasurer, and   Accounting Officer, Eclipse Funds Inc.,
                          Vice President   Eclipse Funds, MainStay VP Series Fund,
                          since 2001       Inc., and New York Life Investment
                                           Management Institutional Funds; Chief
                                           Financial Officer and Assistant
                                           Treasurer, McMorgan Funds.
---------------------------------------------------------------------------------------------------------
Robert A. Anselmi         Secretary        Senior Managing Director, General             N/A
10/19/46                  since 2001       Counsel, and Secretary, New York Life
                                           Investment Management LLC (including
                                           predecessor advisory organizations);
                                           Secretary, New York Life Investment
                                           Management Holdings LLC; Senior Vice
                                           President, New York Life Insurance
                                           Company; Vice President and Secretary,
                                           McMorgan & Company LLC; Secretary,
                                           NYLIFE Distributors, Inc.; Secretary,
                                           MainStay VP Series Fund, Inc., Eclipse
                                           Funds Inc., Eclipse Funds and New York
                                           Life Investment Management Institutional
                                           Funds; Managing Director and Senior
                                           Counsel, Lehman Brothers Inc., (October
                                           1998 to December 1999); General Counsel
                                           and Managing Director, JP Morgan
                                           Investment Management Inc. (1986 to
                                           September 1998).
---------------------------------------------------------------------------------------------------------
Richard W. Zuccaro        Tax Vice         Vice President, New York Life Insurance       N/A
12/12/49                  President        Company; Vice President, New York Life
                          since 1991       Insurance and Annuity Corporation,
                                           NYLIFE Insurance Company of Arizona,
                                           NYLIFE LLC, NYLIFE Securities Inc., and
                                           NYLIFE Distributors Inc.; Tax Vice
                                           President, New York Life International,
                                           LLC; Tax Vice President, Eclipse Funds,
                                           Eclipse Funds Inc., MainStay VP Series
                                           Fund, Inc., and New York Life Investment
                                           Management Institutional Funds.
---------------------------------------------------------------------------------------------------------




36 INFORMATION ON THIS PAGE HAS NOT BEEN AUDITED.
THE MAINSTAY FUNDS

EQUITY FUNDS
MainStay Select 20 Equity Fund
MainStay Small Cap Growth Fund
MainStay Small Cap Value Fund(1)
MainStay Mid Cap Growth Fund
MainStay Capital Appreciation Fund
MainStay Blue Chip Growth Fund
MainStay Equity Index Fund(2)
MainStay U.S. Large Cap Equity Fund

EQUITY & INCOME FUNDS
MainStay Growth Opportunities Fund
MainStay Equity Income Fund
MainStay MAP Fund
MainStay Research Value Fund
MainStay Value Fund
MainStay Strategic Value Fund
MainStay Convertible Fund
MainStay Total Return Fund

INCOME FUNDS
MainStay High Yield Corporate Bond Fund
MainStay Strategic Income Fund
MainStay Government Fund
MainStay Tax Free Bond Fund
MainStay Money Market Fund

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

INVESTMENT ADVISOR

NEW YORK LIFE INVESTMENT MANAGEMENT LLC
Parsippany, New Jersey

INVESTMENT SUBADVISORS

MacKAY SHIELDS LLC(3)
New York, New York

DALTON, GREINER, HARTMAN, MAHER & CO.
New York, New York

FUND ASSET MANAGEMENT, L.P.
D/B/A MERCURY ADVISORS
Plainsboro, New Jersey

GABELLI ASSET MANAGEMENT COMPANY
Rye, New York

JENNISON ASSOCIATES LLC
New York, New York

MARKSTON INTERNATIONAL, LLC
White Plains, New York

McMORGAN & COMPANY LLC(3)
San Francisco, California


1 Closed to new investors as of December 1, 2001. 2 Closed to new purchases as of January 1, 2002. 3 An
affiliate of New York Life Investment Management LLC.

                                                    37

INFORMATION ON THIS PAGE HAS NOT BEEN AUDITED.
This page intentionally left blank

                                     38
[THIS IS A TRUE BLANK PAGE]
Trustees and Officers(1)

                         GARY E. WENDLANDT             Chairman and Trustee
                         STEPHEN C. ROUSSIN            President, Chief Executive
                                                       Officer, and Trustee
                         CHARLYNN GOINS                Trustee
                         EDWARD J. HOGAN               Trustee
                         HARRY G. HOHN                 Trustee
                         TERRY L. LIERMAN              Trustee
                         JOHN B. McGUCKIAN             Trustee
                         DONALD E. NICKELSON           Trustee
                         DONALD K. ROSS                Trustee
                         RICHARD S. TRUTANIC           Trustee
                         JEFFERSON C. BOYCE            Senior Vice President
                         PATRICK J. FARRELL            Chief Financial and
                                                       Accounting Officer,
                                                       Treasurer, and
                                                       Vice President
                         ROBERT A. ANSELMI             Secretary
                         RICHARD W. ZUCCARO            Tax Vice President




DECHERT
Legal Counsel

PRICEWATERHOUSECOOPERS LLP
Independent Accountants

1 As of December 31, 2002.

[MAINSTAY LOGO]

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


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

NYLIFE DISTRIBUTORS INC.
NYLIM Center
169 Lackawanna Avenue
Parsippany, New Jersey 07054

www.mainstayfunds.com

This report may only be distributed when preceded or accompanied by a current Fund prospectus.

(C)2003 NYLIFE Distributors Inc. All rights reserved. MSGH11- 02/03

                                                    20

RECYCLE LOGO

                                     [MAINSTAY FUNDS LOGO]

MainStay(R) Global
High Yield Fund

                                          ANNUAL REPORT
                                          DECEMBER 31, 2002

                                          [MAINSTAY LOGO]
                Table of Contents

President's Letter                              3
$10,000 Invested in MainStay Equity
Index Fund versus S&P 500(R) Index and
Inflation                                       4
Portfolio Management Discussion and Analysis    5
Year-by-Year Performance                        6
Returns and Lipper Rankings as of 12/31/02      9
Portfolio of Investments                       10
Financial Statements                           17
Notes to Financial Statements                  21
Report of Independent Accountants              27
Trustees and Officers                          28
The MainStay(R) Funds                          31
This page intentionally left blank

                                     2
President's Letter

In many respects, 2002 was a difficult year for investors. From the start, geopolitical tensions, homeland security
concerns, corporate accounting scandals, and rising unemployment all contributed to market uncertainty. Early
hopes for a sustained economic recovery eventually gave way to more realistic expectations, and stock prices fell
to progressive lows in August and October. When all was said and done, the U.S. stock market recorded its
third consecutive annual decline--something investors had not seen in more than 60 years. International stocks
were also weak, with most developed foreign markets providing double-digit negative returns in U.S. dollar
terms.

Weakness in the equity markets increased demand for bonds--both domestic and foreign--as investors sought a
potentially "safer haven" for their assets. In the absence of a 30-year U.S. Treasury auction, longer-term Treasury
bonds were particularly strong throughout the year. Investment-grade corporate debt also provided impressive
returns, but lower-rated issues suffered from continuing credit-quality concerns.

The economy provided mixed signals, with weak business investment and relatively strong consumer spending
throughout much of the year. Low interest rates stimulated the housing market and contributed to high levels of
mortgage refinancing. Gross domestic product continued to advance, surging ahead in the third quarter of 2002,
but growing at a slower pace in the fourth quarter.

Regardless of how the markets or the economy may move, each MainStay Fund adheres to a disciplined
investment process suited to its individual investment objective. We believe that
in challenging markets, consistent application of sound investment principles makes it
easier for our shareholders to understand performance and make appropriate portfolio
adjustments.

The report that follows explains the market forces and management decisions that affected your MainStay Fund
during 2002. Your registered representative can help you with any questions you may have about this report or
your MainStay investments. As you look to the future, we hope you will remain optimistic and focused on the
potential benefits of long-term investing.

Sincerely,

                                            /s/ STEPHEN C. ROUSSIN
                                            Stephen C. Roussin
                                            January 2003




                                                         3
$10,000 Invested in MainStay
Equity Index Fund versus
S&P 500(R) Index and Inflation

CLASS A SHARES Total Returns: 1 Year -25.02%, 5 Years -1.95%, 10 Years 8.09%

                                                [LINE GRAPH]

                                                            MAINSTAY EQUITY INDEX
                                                                    FUND                       S&P 500 INDEX(1)
                                                            ---------------------              ----------------
12/92                                                              9700.00                         10000.00
12/93                                                             10575.00                         11008.00
12/94                                                             10628.00                         11153.00
12/95                                                             14444.00                         15343.00
12/96                                                             17627.00                         18866.00
12/97                                                             23315.00                         25163.00
12/98                                                             29771.00                         32354.00
12/99                                                             35723.00                         39163.00
12/00                                                             32253.00                         35604.00
12/01                                                             28172.00                         31373.00
12/02                                                             21776.00                         24441.00




PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. DUE TO MARKET
VOLATILITY, CURRENT PERFORMANCE MAY BE LESS THAN THAT SHOWN. INVESTMENT
RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND SHARES, UPON REDEMPTION, MAY
BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. Performance tables and graphs do not
reflect the deduction of taxes that a shareholder would pay on distributions or Fund-share redemptions. Total
returns reflect change in share price, reinvestment of dividend and capital gain distributions, and maximum sales
charges. Performance figures reflect certain historical fee waivers and/or expense limitations, without which total
return figures may have been lower. The graph assumes an initial investment of $10,000 and reflects the effect of
the maximum 3.0% initial sales charge.

1 "S&P 500(R)" and "S&P(R)" are trademarks of The McGraw-Hill Companies, Inc. and have been licensed for
use. Standard & Poor's does not sponsor, endorse, sell, or promote the Fund or represent the advisability of
investing in the Fund. The S&P 500 is an unmanaged index and is widely regarded as the standard for measuring
large-cap U.S. stock market performance. Results assume the reinvestment of all income and capital gains. An
investment cannot be made directly into an index.

2 Inflation is measured by the Consumer Price Index (CPI), which is a commonly used measure of the rate of
inflation and shows the changes in the cost of selected goods. The rate of inflation does not represent an
investment return.

                                                        4
Portfolio Management Discussion and Analysis

At the beginning of 2002, the U.S. economy appeared to be on its way from a mild recession to a modest
recovery. What started out as subdued optimism, however, quickly turned into disappointment as a series of
high-profile accounting scandals and major bankruptcies rocked the market. Major Wall Street and accounting
firms faced conflict-of-interest investigations, and allegations of insider trading made headline news.

The year will likely be remembered for disappointing corporate earnings, layoffs, geopolitical instability, rising
energy prices, and a lack of business investment. For the U.S. stock market, the result was a third straight year of
losses--a phenomenon investors had not seen in over 60 years.

On the positive side, consumer spending remained strong throughout most of 2002, buoyed by low interest rates
that brought buyers to the housing market and caused mortgage refinancing to blossom. Unfortunately, with
consumers providing the only visible support for the economy, both the economy and the stock market found
themselves on shaky ground.

The Dow Jones Industrial Average(1) fell 15.01% in 2002, its steepest decline since 1977. The S&P 500(R)
Index(2) fell 22.10% in 2002, its worst performance since 1974. Astonishingly, the total value of the U.S. stock
market fell to approximately $10 trillion at the end of 2002, down from $17 trillion at its peak in March 2000.

PERFORMANCE REVIEW

For the year ended December 31, 2002, MainStay Equity Index Fund Class A shares returned -22.70%,
excluding all sales charges. The Fund underperformed the -22.60% return of the average Lipper(3) S&P 500
Index objective fund over the same period. The Fund also underperformed the -22.10% return of the S&P 500
Index for the year ended December 31, 2002. Since the Fund incurs actual expenses that a hypothetical index
does not, there will be times when the Fund lags the Index.

STRONG PERFORMERS

The top-performing industry in the S&P 500 Index for 2002, based on total return alone, was leisure equipment
& products (+7.12%),(4) followed by containers & packaging (+4.86%), and household products (+0.37%).
Although food products (-0.99%) had a negative return, it was the fourth-best performing industry in the Index,
followed by road & rail (-2.03%) in fifth place.
When both total returns and weightings were taken into account, the only difference in the top-five contributors to
the performance of the Index was that

                                                           5

1 The Dow Jones Industrial Average is an unmanaged price-weighted average of 30 actively traded blue-chip
stocks, primarily industrials, but also including financial, leisure, and other service-oriented firms. An investment
cannot be made directly into an index or an average.
2 See footnote on page 4 for more information about the S&P 500 Index. 3 See footnote and table on page 9
for more information about Lipper Inc. 4 Unless otherwise indicated, total returns are for the 12-month period
ended December 31, 2002.
YEAR-BY-YEAR PERFORMANCE

CLASS A SHARES

                                     [PERFORMANCE BAR GRAPH]

                                                                                              CLASS A SHARES
                                                                                              --------------
    12/92                                                                                           6.19
    12/93                                                                                           9.01
    12/94                                                                                           0.50
    12/95                                                                                          35.91
    12/96                                                                                          22.04
    12/97                                                                                          32.26
    12/98                                                                                          27.69
    12/99                                                                                          19.99
    12/00                                                                                          -9.71
    12/01                                                                                         -12.65
    12/02                                                                                         -22.70




See footnote 1 on page 8 for more information on performance.

trading companies & distributors (-5.42%) took fourth place--replacing the road & rail industry, which failed to
rank among the top-five industries when both total returns and weightings were included in the assessment. The
other industries mentioned retained their same positions among the five top- performing industries when both total
returns and Index weightings were taken into account. The fact that industries with negative returns ranked among
the top-five contributors to the performance of the Index in 2002 suggests the level of difficulty equity investors
faced.

Based on total returns alone, the five top-performing stocks in the S&P 500 Index for the year ended December
31, 2002, were Providian Financial (+82.82%), Boston Scientific (+76.29%), Newmont Mining (+51.91%),
Ball (+44.81%), and Halliburton (+42.82%). During the same period, several stocks with lower returns but
higher weightings in the Index made a larger positive contribution to the performance of the S&P 500 Index when
both total returns and weightings were taken into account. On this basis, the leader was Bank of America
(+10.52%), followed by Procter & Gamble (+9.45%), Boston Scientific (+76.29%), Wachovia (+16.20%), and
Wells Fargo (+7.82%).

WEAK PERFORMERS

Based on total returns alone, the worst-performing industry in the S&P 500 Index was multi-utilities &
unregulated power (-69.53%), followed by wireless telecommunication services (-59.70%), IT consulting &
services (-57.07%), electronic equipment & instruments (-51.88%), and semiconductor equipment & products
(-49.49%). Taking both total returns and weightings into account, the industry that had the greatest negative
impact on the performance of the Index

                                                        6
was industrial conglomerates (-41.84%), followed by pharmaceuticals (-21.56%), semiconductor equipment &
products (-49.49%), diversified financials (-23.17%), and software (-27.26%).

Measured on the basis of total returns alone, the worst-performing stocks in the S&P 500 Index over the annual
period were Dynegy (-95.37%), Williams (-89.42%), Mirant (-88.33%), El Paso (-84.40%), and NVIDIA (-
82.80%). The company whose stock had the greatest negative impact on the performance of the Index, taking
both weightings and total returns into account, was General Electric (-39.25%), followed by Intel (-50.49%),
AOL Time Warner (-59.19%), Tyco International (-71.00%), and Microsoft (-21.96%).

INDEX ADJUSTMENTS

From time to time, Standard & Poor's adjusts the makeup of the Index following corporate actions, such as
mergers, acquisitions, spin-offs, and similar events. In addition, Standard & Poor's may adjust the makeup of the
Index to reflect its changing assessment of which businesses and industries are having a major impact on the U.S.
economy. During 2002, there were 24 additions to and 24 deletions from the S&P 500 Index, compared to 30
additions and 30 deletions in 2001.

To name just a few changes, WorldCom was deleted from the S&P 500 Index on May 14, 2002. WorldCom
was replaced by Apollo Group, a firm providing higher education programs for working adults. The third quarter
saw a major change to the S&P 500 Index, as seven non-U.S. companies were removed from the benchmark
and replaced with U.S. companies, effective after the close of trading on July 19, 2002. The deleted stocks
included companies domiciled in Europe and Canada, such as Nortel Networks, Unilever, Royal Dutch
Petroleum, Barrick Gold, and Placer Dome, that had been "grandfathered" in this domestic index. The change
generated some controversy, since there are other companies headquartered in Bermuda, such as Tyco
International, which remained in the Index. Among the U.S. companies added on July 19, 2002, was eBay, a
leading online auctioneer.

LOOKING AHEAD

It is still difficult to envision a dramatic turnaround for the U.S. economy in the near future. Disappointing retail
sales during the 2002 holiday season and heightened geopolitical tensions have raised the level of caution in the
equity markets. A general strike in Venezuela, the prospect of war in Iraq, and ongoing concerns about North
Korea's nuclear program appear to have moved many investors away from equities and onto the sidelines until a
greater sense of global stability can be achieved.

                                                          7
As index investors, we do not evaluate or respond to changing economic conditions or concern ourselves with
market psychology. Whatever the markets or the economy may bring, the Fund will continue to seek to provide
invest- ment results that correspond to the total return performance (and reflect reinvestment of dividends) of
publicly traded common stocks represented by the S&P 500 Index.

Jefferson C. Boyce
Stephen B. Killian
Portfolio Managers
New York Life Investment Management LLC

MainStay Equity Index Fund was closed to new purchases as of January 1, 2002.

                                                       8
Returns and Lipper Rankings as of 12/31/02
FUND TOTAL RETURNS (WITHOUT SALES CHARGES)(1)

                                                                                  SINCE INCEPTION
                                          1 YEAR         5 YEARS     10 YEARS     THROUGH 12/31/02
               Class A                    -22.70%        -1.36%        8.42%           9.72%




                         FUND TOTAL RETURNS (WITH SALES CHARGES)(1)

                                                                                  SINCE INCEPTION
                                          1 YEAR         5 YEARS     10 YEARS     THROUGH 12/31/02
               Class A                    -25.02%        -1.95%        8.09%           9.44%




       FUND LIPPER(2) RANKINGS AND LIPPER CATEGORY RETURNS AS OF 12/31/02

                                                                                  SINCE INCEPTION
                                          1 YEAR         5 YEARS     10 YEARS     THROUGH 12/31/02
               Equity Index Fund        120 out of      72 out of    28 out of       12 out of
                                         175 funds      86 funds     29 funds         12 funds
               Average Lipper S&P
               500 Index
               objective fund             -22.60%        -1.08%        8.93%            10.38%




   FUND PER-SHARE NET ASSET VALUES AND DISTRIBUTIONS FOR THE YEAR ENDED
                                  12/31/02

                                                  NAV 12/31/02     INCOME      CAPITAL GAINS
                       Class A                       $28.87        $0.3043        $1.1140




1 PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. DUE TO MARKET
VOLATILITY, CURRENT PERFORMANCE MAY BE LESS THAN THAT SHOWN. INVESTMENT
RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND SHARES, UPON REDEMPTION, MAY
BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. Performance tables and graphs do not
reflect the deduction of taxes that a shareholder would pay or distributions or Fund-share redemptions. Total
returns reflect change in share price and reinvestment of all dividend and capital gain distributions. Performance
figures reflect certain historical fee waivers and/or expense limitations, without which total return figures may have
been lower.

MainStay Equity Index Fund is offered as Class A shares only. Class A shares are sold with a maximum initial
sales charge of 3.0%.

2 Lipper Inc. is an independent monitor of mutual fund performance. Rankings are based on total returns with all
dividend and capital gain distributions reinvested. Results do not reflect any deduction of sales charges. Since-
inception Fund ranking and since-inception return for the average Lipper peer fund are for the period from
12/20/90 through 12/31/02.

INFORMATION ON THIS PAGE AND THE PRECEDING PAGES HAS NOT BEEN AUDITED.

                                                          9
MainStay Equity Index Fund

                                                    SHARES            VALUE
                                                  -----------------------------
                COMMON STOCKS (100.1%)+

                AEROSPACE & DEFENSE (1.9%)
                Boeing Co. (The)...............      60,510       $   1,996,225
                General Dynamics Corp. ........      14,505           1,151,262
                Goodrich Corp. ................       8,349             152,954
                Honeywell International,
                 Inc. .........................      60,211          1,445,064
                Lockheed Martin Corp. .........      33,131          1,913,315
                Northrop Grumman Corp. ........      13,097          1,270,409
                Raytheon Co. ..................      29,678            912,598
                Rockwell Collins, Inc. ........      13,507            314,173
                United Technologies Corp. .....      34,336          2,126,772
                                                                  ------------
                                                                    11,282,772
                                                                  ------------
                AIR FREIGHT & LOGISTICS (1.1%)
                FedEx Corp. ...................      21,634           1,172,996
                Ryder System, Inc. ............       4,537             101,810
                United Parcel Service, Inc.
                 Class B.......................      80,975          5,107,903
                                                                  ------------
                                                                     6,382,709
                                                                  ------------
                AIRLINES (0.2%)
                AMR Corp. (a)..................      11,172             73,735
                Delta Air Lines, Inc. .........       9,243            111,840
                Southwest Airlines Co. ........      56,756            788,909
                                                                  ------------
                                                                       974,484
                                                                  ------------
                AUTO COMPONENTS (0.2%)
                Cooper Tire & Rubber Co. ......       5,592             85,781
                Dana Corp. ....................      11,537            135,675
                Delphi Corp. ..................      41,549            334,470
                Goodyear Tire & Rubber Co.
                 (The).........................      11,791             80,297
                Johnson Controls, Inc. ........       6,530            523,510
                Visteon Corp. .................       9,920             69,043
                                                                  ------------
                                                                     1,228,776
                                                                  ------------
                AUTOMOBILES (0.6%)
                Ford Motor Co. ................     134,296          1,248,953
                General Motors Corp. ..........      40,390          1,488,775
                Harley-Davidson, Inc. .........      22,269          1,028,828
                                                                  ------------
                                                                     3,766,556
                                                                  ------------
                BANKS (7.4%)
                AmSouth Bancorp. ..............      25,835             496,032
                Bank of America Corp. .........     108,604           7,555,580
                Bank of New York Co., Inc.
                 (The).........................      52,341           1,254,090
                Bank One Corp. ................      84,525           3,089,389
                BB&T Corp. ....................      34,520           1,276,895
                Charter One Financial, Inc. ...      16,903             485,623
                Comerica, Inc. ................      12,928             559,007
                FifthThird Bancorp.............      42,077           2,463,608
                First Tennessee National
                 Corp. ........................       9,276             333,379
                FleetBoston Financial Corp. ...      76,182           1,851,223
                Golden West Financial Corp. ...      11,154             800,969
                Huntington Bancshares, Inc. ...      17,716             331,466
                KeyCorp........................      30,855             775,695
                Marshall & Ilsley Corp. .......      15,527             425,129
                Mellon Financial Corp. ........      31,311             817,530
                National City Corp. ...........      44,958           1,228,253
                                    SHARES            VALUE
                                  -----------------------------
BANKS (CONTINUED)
North Fork Bancorp, Inc. ......      12,000       $    404,880
Northern Trust Corp. ..........      16,307            571,560
PNC Financial Services Group,
 Inc. (The)....................      20,842            873,280
Regions Financial Corp. .......      16,280            543,101
SouthTrust Corp. ..............      25,467            632,855
SunTrust Banks, Inc. ..........      20,583          1,171,584
Synovus Financial Corp. .......      21,795            422,823
U.S. Bancorp...................     139,057          2,950,790
Union Planters Corp. ..........      14,407            405,413
Wachovia Corp. ................      98,745          3,598,268
Washington Mutual, Inc. .......      68,748          2,373,868
Wells Fargo Co. ...............     122,833          5,757,183
Zions Bancorp..................       6,818            268,282
                                                  ------------
                                                    43,717,755
                                                  ------------
BEVERAGES (3.0%)
Anheuser-Busch Cos., Inc. .....      62,151           3,008,108
Brown-Forman Corp. Class B.....       5,124             334,905
Coca-Cola Co. (The) (c)........     179,936           7,884,795
Coca-Cola Enterprises, Inc. ...      32,982             716,369
Coors (Adolph) Co. Class B.....       2,712             166,110
Pepsi Bottling Group, Inc.
 (The).........................      20,393            524,100
PepsiCo, Inc. .................     125,407          5,294,684
                                                  ------------
                                                    17,929,071
                                                  ------------
BIOTECHNOLOGY (1.1%)
Amgen, Inc. (a)................      93,420          4,515,923
Biogen, Inc. (a)...............      11,050            442,663
Chiron Corp. (a)...............      13,934            523,918
Genzyme Corp. (a)..............      15,729            465,107
MedImmune, Inc. (a)............      18,296            497,102
                                                  ------------
                                                     6,444,713
                                                  ------------
BUILDING PRODUCTS (0.2%)
American Standard Cos., Inc.
 (a)...........................       5,305            377,398
Crane Co. .....................       4,614             91,957
Masco Corp. ...................      35,683            751,127
                                                  ------------
                                                     1,220,482
                                                  ------------
CHEMICALS (1.6%)
Air Products & Chemicals,
 Inc. .........................      16,748             715,977
Dow Chemical Co. (The).........      66,177           1,965,457
E.I. du Pont de Nemours &
 Co. ..........................      72,158           3,059,499
Eastman Chemical Co. ..........       5,819             213,965
Ecolab, Inc. ..................       9,424             466,488
Englehard Corp. ...............       9,443             211,051
Great Lakes Chemical Corp. ....       3,664              87,496
Hercules, Inc. (a).............       7,578              66,686
International Flavors &
 Fragrances, Inc. .............       7,164            251,456
Monsanto Co. ..................      19,126            368,176
PPG Industries, Inc. ..........      12,432            623,465
Praxair, Inc. .................      11,933            689,369
Rohm & Haas Co. ...............      16,308            529,684



    -------
    + Percentages indicated are based on Fund net assets.
10 The notes to the financial statements are an integral part of, and should be read in conjunction with, the
financial statements.
Portfolio of Investments December 31, 2002

                                                     SHARES            VALUE
                                                   -----------------------------
                 COMMON STOCKS (CONTINUED)
                 CHEMICALS (CONTINUED)
                 Sigma-Aldrich Corp. ...........       5,405       $    263,224
                                                                   ------------
                                                                      9,511,993
                                                                   ------------
                 COMMERCIAL SERVICES & SUPPLIES (1.9%)
                 Allied Waste Industries, Inc.
                  (a)...........................      14,200            142,000
                 Apollo Group, Inc. Class A
                  (a)...........................      12,728            560,032
                 Automatic Data Processing,
                  Inc. .........................      43,193          1,695,325
                 Avery Dennison Corp. ..........       8,138            497,069
                 Block (H&R), Inc. .............      13,277            533,735
                 Cendant Corp. (a)..............      75,235            788,463
                 Cintas Corp. ..................      12,567            574,940
                 Concord EFS, Inc. (a)..........      37,336            587,669
                 Convergys Corp. (a)............      12,767            193,420
                 Deluxe Corp. ..................       4,661            196,228
                 Donnelley (R.R.) & Sons Co. ...       8,523            185,546
                 Equifax, Inc. .................      10,662            246,719
                 First Data Corp. ..............      54,199          1,919,187
                 Fiserv, Inc. (a)...............      13,848            470,140
                 Paychex, Inc. .................      27,639            771,128
                 Pitney Bowes, Inc. ............      17,586            574,359
                 Robert Half International, Inc.
                  (a)...........................      13,328            214,714
                 Sabre Holdings Corp. (a).......      10,595            191,875
                 Waste Management, Inc. (a).....      43,884          1,005,821
                                                                   ------------
                                                                     11,348,370
                                                                   ------------
                 COMMUNICATIONS EQUIPMENT (2.1%)
                 ADC Telecommunications, Inc.
                  (a)...........................      57,571            120,323
                 Andrew Corp. (a)...............       5,962             61,289
                 Avaya, Inc. (a)................      26,609             65,192
                 CIENA Corp. (a)................      31,455            161,679
                 Cisco Systems, Inc. (a)........     524,438          6,870,138
                 Comverse Technology, Inc.
                  (a)...........................      13,721            137,485
                 Corning, Inc. (a)..............      83,292            275,697
                 JDS Uniphase Corp. (a).........      98,110            242,332
                 Lucent Technologies, Inc.
                  (a)...........................     253,066            318,863
                 Motorola, Inc. ................     165,911          1,435,130
                 QUALCOMM, Inc. (a).............      56,985          2,073,684
                 Scientific-Atlanta, Inc. ......      12,019            142,545
                 Tellabs, Inc. (a)..............      30,585            222,353
                                                                   ------------
                                                                     12,126,710
                                                                   ------------
                 COMPUTERS & PERIPHERALS (3.6%)
                 Apple Computer, Inc. (a).......      25,789            369,556
                 Dell Computer Corp. (a)........     188,000          5,027,120
                 EMC Corp. (a)..................     159,719            980,675
                 Gateway, Inc. (a)..............      24,077             75,602
                 Hewlett-Packard Co. ...........     221,479          3,844,875
                 International Business Machines
                  Corp. ........................     122,702          9,509,405
                 Lexmark International, Inc.
                  (a)...........................       9,276            561,198
                 NCR Corp. (a)..................       7,176            170,358
                 Network Appliance, Inc. (a)....      24,499            244,990



                                                    SHARES            VALUE
                                 -----------------------------
COMPUTERS & PERIPHERALS (CONTINUED)
Sun Microsystems, Inc. (a).....     224,598       $    698,500
                                                  ------------
                                                    21,482,279
                                                  ------------
CONSTRUCTION & ENGINEERING (0.0%) (B)
Fluor Corp. ...................       5,675            158,900
McDermott International,
 Inc. .........................       4,500             19,710
                                                  ------------
                                                       178,610
                                                  ------------
CONSTRUCTION MATERIALS (0.1%)
Vulcan Materials Co. ..........       7,688            288,300
                                                  ------------

CONTAINERS & PACKAGING (0.2%)
Ball Corp. ....................      4,183            214,128
Bemis Co., Inc. ...............      3,920            194,549
Pactiv Corp. (a)...............     11,795            257,839
Sealed Air Corp. (a)...........      6,381            238,011
Temple-Inland, Inc. ...........      3,870            173,415
                                                 ------------
                                                    1,077,942
                                                 ------------
DIVERSIFIED FINANCIALS (7.8%)
American Express Co. ..........     95,364          3,371,117
Bear Stearns Cos., Inc.
 (The).........................      6,984            414,850
Capital One Financial Corp. ...     16,280            483,842
Charles Schwab Corp. (The).....     96,840          1,050,714
Citigroup, Inc. ...............    372,792         13,118,550
Countrywide Financial Corp. ...      9,289            479,777
Fannie Mae.....................     72,196          4,644,369
Franklin Resources, Inc. ......     19,137            652,189
Freddie Mac....................     50,477          2,980,667
Goldman Sachs Group, Inc.
 (The).........................     34,438          2,345,228
Household International,
 Inc. .........................     34,119            948,849
Janus Capital Group, Inc.
 (The).........................     16,861            220,373
JP Morgan Chase & Co. .........    144,933          3,478,392
Lehman Brothers Holdings,
 Inc. .........................     17,156            914,243
MBNA Corp. ....................     92,091          1,751,571
Merrill Lynch & Co., Inc. .....     62,719          2,380,186
Moody's Corp. .................     10,971            452,993
Morgan Stanley.................     78,785          3,145,097
Principal Financial Group (The)
 (a)...........................     24,283            731,647
Providian Financial Corp. .....     21,471            139,347
SLM Corp. .....................     11,083          1,151,080
State Street Corp. ............     23,857            930,423
T.Rowe Price Group, Inc. ......      9,003            245,602
                                                 ------------
                                                   46,031,106
                                                 ------------
DIVERSIFIED TELECOMMUNICATION SERVICES (3.8%)
ALLTEL Corp. ..................      22,536         1,149,336
AT&T Corp. ....................      55,537         1,450,071
BellSouth Corp. ...............     134,890         3,489,604
CenturyTel, Inc. ..............      10,514           308,902
Citizens Communications Co.
 (a)...........................      19,440           205,092
Qwest Communications
 International, Inc. ..........     123,104           615,520
SBC Communications, Inc. ......     240,984         6,533,076
Sprint Corp. (FON Group).......      65,581           949,613



    -------
    + Percentages indicated are based on Fund net assets.
                                                         11

The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial
statements.
MainStay Equity Index Fund

                                                  SHARES            VALUE
                                                -----------------------------
                COMMON STOCKS (CONTINUED)
                DIVERSIFIED TELECOMMUNICATION SERVICES (CONTINUED)
                Verizon Communications,
                 Inc. .........................     198,568       $ 7,694,510
                                                                  ------------
                                                                    22,395,724
                                                                  ------------
                ELECTRIC UTILITIES (2.2%)
                Allegheny Energy, Inc. ........       9,059             68,486
                Ameren Corp. ..................      11,054            459,515
                American Electric Power Co.,
                 Inc. .........................      25,032            684,125
                CenterPoint Energy, Inc. ......      21,913            186,260
                Cinergy Corp. .................      11,984            404,100
                CMS Energy Corp. ..............       9,720             91,757
                Consolidated Edison, Inc. .....      15,723            673,259
                Constellation Energy Group,
                 Inc. .........................      12,095            336,483
                Dominion Resources, Inc. ......      22,084          1,212,451
                DTE Energy Co. ................      12,258            568,771
                Edison International, Inc.
                 (a)...........................      23,684            280,655
                Entergy Corp. .................      16,143            735,959
                Exelon Corp. ..................      23,681          1,249,646
                FirstEnergy Corp. .............      21,913            722,472
                FPL Group, Inc. ...............      13,464            809,590
                PG&E Corp. (a).................      29,311            407,423
                Pinnacle West Capital Corp. ...       6,350            216,471
                PPL Corp. .....................      11,892            412,415
                Progress Energy, Inc. .........      17,086            740,678
                Public Service Enterprise
                 Group, Inc. ..................      16,086            516,361
                Southern Co. (The).............      52,247          1,483,292
                TECO Energy, Inc. .............      12,748            197,212
                TXU Corp. .....................      23,416            437,411
                Xcel Energy, Inc. .............      29,006            319,066
                                                                  ------------
                                                                    13,213,858
                                                                  ------------
                ELECTRICAL EQUIPMENT (0.4%)
                American Power Conversion Corp.
                 (a)...........................      14,522            220,008
                Cooper Industries, Ltd. Class
                 A.............................       7,117            259,415
                Emerson Electric Co. ..........      30,365          1,544,060
                Power-One, Inc. (a)............       5,398             30,607
                Rockwell Automation, Inc. .....      13,886            287,579
                Thomas & Betts Corp. (a).......       4,387             74,140
                                                                  ------------
                                                                     2,415,809
                                                                  ------------
                ELECTRONIC EQUIPMENT & INSTRUMENTS (0.4%)
                Agilent Technologies, Inc.
                 (a)...........................      33,749            606,132
                Jabil Circuit, Inc. (a)........      14,131            253,227
                Millipore Corp. ...............       3,372            114,648
                Molex, Inc. ...................      14,238            328,044
                PerkinElmer, Inc. .............       9,009             74,324
                Sanmina-SCI Corp. (a)..........      38,371            172,286
                Solectron Corp. (a)............      59,271            210,412
                Symbol Technologies, Inc. .....      16,209            133,238
                Tektronix, Inc. (a)............       6,308            114,742
                Thermo Electron Corp. (a)......      11,839            238,201
                Waters Corp. (a)...............       9,660            210,395
                                                                  ------------
                                                                     2,455,649
                                                                  ------------
                                                        SHARES            VALUE
                                                      -----------------------------
                     ENERGY EQUIPMENT & SERVICES (0.8%)
                     Baker Hughes, Inc. ............      24,700       $    795,093
                     BJ Services Co. (a)............      11,585            374,311
                     Halliburton Co. ...............      31,666            592,471
                     Nabors Industries, Ltd. (a)....      10,367            365,644
                     Noble Corp. (a)................       9,782            343,837
                     Rowan Co., Inc. (a)............       7,007            159,059
                     Schlumberger Ltd. .............      42,489          1,788,362
                     Transocean, Inc. ..............      23,553            546,430
                                                                       ------------
                                                                          4,965,207
                                                                       ------------
                     FOOD & DRUG RETAILING (1.2%)
                     Albertson's, Inc. .............      27,362            609,078
                     CVS Corp. .....................      28,839            720,110
                     Kroger Co. (The) (a)...........      55,728            860,997
                     Safeway, Inc. (a)..............      31,953            746,422
                     SUPERVALU, Inc. ...............       9,862            162,822
                     SYSCO Corp. ...................      47,343          1,410,348
                     Walgreen Co. ..................      73,863          2,156,061
                     Winn-Dixie Stores, Inc. .......      11,078            169,272
                                                                       ------------
                                                                          6,835,110
                                                                       ------------
                     FOOD PRODUCTS (1.4%)
                     Archer-Daniels-Midland Co. ....      47,928            594,307
                     Campbell Soup Co. .............      30,243            709,804
                     ConAgra Foods, Inc. ...........      39,011            975,665
                     General Mills, Inc. ...........      27,048          1,269,904
                     Heinz (H.J.) Co. ..............      25,836            849,230
                     Hershey Foods Corp. ...........      10,059            678,379
                     Kellogg Co. ...................      30,036          1,029,334
                     Sara Lee Corp. ................      56,199          1,265,040
                     Wm. Wrigley Jr. Co. ...........      16,595            910,734
                                                                       ------------
                                                                          8,282,397
                                                                       ------------
                     GAS UTILITIES (0.3%)
                     KeySpan Corp. .................       9,971            351,378
                     Kinder Morgan, Inc. ...........       9,170            387,616
                     Nicor, Inc. ...................       3,543            120,568
                     NiSource, Inc. ................      17,652            353,040
                     Peoples Energy Corp. ..........       2,711            104,780
                     Sempra Energy..................      15,480            366,102
                                                                       ------------
                                                                          1,683,484
                                                                       ------------
                     HEALTH CARE EQUIPMENT & SUPPLIES (1.9%)
                     Applera Corp. Applied
                      Biosystems Group..............      15,662            274,711
                     Bard (C.R.), Inc. .............       3,780            219,240
                     Bausch & Lomb, Inc. ...........       4,023            144,828
                     Baxter International, Inc. ....      42,817          1,198,876
                     Becton, Dickinson & Co. .......      18,885            579,581
                     Biomet, Inc. (a)...............      18,866            540,700
                     Boston Scientific Corp. (a)....      29,701          1,262,886
                     Guidant Corp. (a)..............      22,564            696,099
                     Medtronic, Inc. ...............      88,558          4,038,245
                     St. Jude Medical, Inc. (a).....      12,876            511,435
                     Stryker Corp. .................      14,492            972,703



                          -------
                          + Percentages indicated are based on Fund net assets.




12 The notes to the financial statements are an integral part of, and should be read in conjunction with, the
financial statements.
Portfolio of Investments December 31, 2002 (continued)

                                                     SHARES            VALUE
                                                   -----------------------------
                 COMMON STOCKS (CONTINUED)
                 HEALTH CARE EQUIPMENT & SUPPLIES (CONTINUED)
                 Zimmer Holdings, Inc. (a)......      14,419       $    598,677
                                                                   ------------
                                                                     11,037,981
                                                                   ------------
                 HEALTH CARE PROVIDERS & SERVICES (1.8%)
                 Aetna, Inc. ...................      11,082             455,692
                 AmerisourceBergen Corp. .......       7,789             423,021
                 Anthem, Inc. (a)...............      10,451             657,368
                 Cardinal Health, Inc. .........      31,888           1,887,451
                 CIGNA Corp. ...................      10,337             425,057
                 HCA, Inc. .....................      36,962           1,533,923
                 Health Management Associates,
                  Inc. (a)......................      17,765            317,993
                 HEALTHSOUTH Corp. (a)..........      29,231            122,770
                 Humana, Inc. (a)...............      12,675            126,750
                 IMS Health, Inc. ..............      20,896            334,336
                 Manor Care, Inc. (a)...........       7,015            130,549
                 McKesson Corp. ................      21,328            576,496
                 Quest Diagnostics, Inc. (a)....       7,100            403,990
                 Quintiles Transnational Corp.
                  (a)...........................       8,824             106,771
                 Tenet Healthcare Corp. (a).....      35,977             590,023
                 UnitedHealth Group, Inc. (a)...      22,069           1,842,761
                 WellPoint Health Networks, Inc.
                  (a)...........................      10,806            768,955
                                                                   ------------
                                                                     10,703,906
                                                                   ------------
                 HOTELS, RESTAURANTS & LEISURE (1.1%)
                 Carnival Corp. ................         42,586        1,062,521
                 Darden Restaurants, Inc. ......         12,593          257,527
                 Harrah's Entertainment, Inc.
                  (a)...........................          8,190         324,324
                 Hilton Hotels Corp. ...........         27,567         350,371
                 International Game Technology
                  (a)...........................         6,402          486,040
                 Marriott International, Inc.
                  Class A.......................         17,241          566,712
                 McDonald's Corp. ..............         91,516        1,471,577
                 Starbucks Corp. (a)............         28,438          579,566
                 Starwood Hotels & Resorts
                  Worldwide, Inc. ..............         14,460         343,280
                 Wendy's International, Inc. ...          8,484         229,662
                 Yum! Brands, Inc. (a)..........         21,574         522,522
                                                                   ------------
                                                                      6,194,102
                                                                   ------------
                 HOUSEHOLD DURABLES (0.6%)
                 American Greetings Corp. Class
                  A.............................          4,930          77,894
                 Black & Decker Corp. (The).....          6,045         259,270
                 Centex Corp. ..................          4,543         228,059
                 Fortune Brands, Inc. ..........         10,960         509,750
                 KB Home........................          3,772         161,630
                 Leggett & Platt, Inc. .........         14,404         323,226
                 Maytag Corp. ..................          5,891         167,893
                 Newell Rubbermaid, Inc. .......         19,648         595,924
                 Pulte Homes, Inc. .............          4,373         209,335
                 Snap-on, Inc. .................          4,502         126,551
                 Stanley Works (The)............          6,684         231,133



                                                     SHARES            VALUE
                                                   -----------------------------
                 HOUSEHOLD DURABLES (CONTINUED)
                 Tupperware Corp. ..............         4,435     $     66,880
                     Whirlpool Corp. ...............               4,982               260,160
                                                                                  ------------
                                                                                     3,217,705
                                                                                  ------------
                     HOUSEHOLD PRODUCTS (2.1%)
                     Clorox Co. (The)...............              15,868               654,555
                     Colgate-Palmolive Co. .........              39,117             2,050,904
                     Kimberly-Clark Corp. ..........              37,129             1,762,514
                     Procter & Gamble Co. (The).....              94,282             8,102,595
                                                                                  ------------
                                                                                    12,570,568
                                                                                  ------------
                     INDUSTRIAL CONGLOMERATES (4.1%)
                     3M Co. ........................              28,299             3,489,267
                     General Electric Co. (c).......             722,323            17,588,565
                     Textron, Inc. .................              10,136               435,747
                     Tyco International Ltd. .......             144,655             2,470,707
                                                                                  ------------
                                                                                    23,984,286
                                                                                  ------------
                     INSURANCE (4.9%)
                     ACE, Ltd. .....................              19,223                564,003
                     AFLAC, Inc. ...................              37,438              1,127,633
                     Allstate Corp. (The)...........              50,701              1,875,430
                     Ambac Financial Group, Inc. ...               7,849                441,428
                     American International Group,
                      Inc. .........................             189,283            10,950,021
                     Aon Corp. .....................              22,090               417,280
                     Chubb Corp. (The)..............              12,639               659,756
                     Cincinnati Financial Corp. ....              11,961               449,136
                     Hartford Financial Services
                      Group, Inc. (The).............              18,414                836,548
                     Jefferson-Pilot Corp. .........              10,443                397,983
                     John Hancock Financial
                      Services, Inc. ...............              21,372                596,278
                     Lincoln National Corp. ........              12,802                404,287
                     Loews Corp. ...................              13,755                611,547
                     Marsh & McLennan Cos., Inc. ...              38,745              1,790,406
                     MBIA, Inc. ....................              10,493                460,223
                     MetLife, Inc. .................              50,452              1,364,222
                     MGIC Investment Corp. .........               7,543                311,526
                     Progressive Corp. (The)........              16,050                796,562
                     Prudential Financial, Inc.
                      (a)...........................              40,836              1,296,135
                     SAFECO Corp. ..................               9,980                346,007
                     St. Paul Cos., Inc. (The)......              16,442                559,850
                     Torchmark Corp. ...............               8,748                319,564
                     Travelers Property Casualty
                      Corp. Class B (a).............              73,552             1,077,537
                     UNUMProvident Corp. ...........              17,750               311,335
                     XL Capital Ltd. Class A........               9,899               764,698
                                                                                  ------------
                                                                                    28,729,395
                                                                                  ------------
                     INTERNET & CATALOG RETAIL (0.3%)
                     eBay, Inc. (a).................              22,489             1,525,204
                                                                                  ------------

                     INTERNET SOFTWARE & SERVICES (0.1%)
                     Yahoo!, Inc. (a)...............              42,923               701,791
                                                                                  ------------



                           -------
                           + Percentages indicated are based on Fund net assets.




                                                         13

The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial
statements.
MainStay Equity Index Fund

                                                    SHARES            VALUE
                                                  -----------------------------
                COMMON STOCKS (CONTINUED)
                IT CONSULTING & SERVICES (0.3%)
                Computer Sciences Corp. (a)....       12,577      $    433,278
                Electronic Data Systems
                 Corp. ........................       35,244           649,547
                SunGard Data Systems, Inc.
                 (a)...........................       20,679           487,197
                Unisys Corp. (a)...............       23,058           228,274
                                                                  ------------
                                                                     1,798,296
                                                                  ------------
                LEISURE EQUIPMENT & PRODUCTS (0.3%)
                Brunswick Corp. ...............        6,660           132,268
                Eastman Kodak Co. .............       21,487           752,904
                Hasbro, Inc. ..................       12,881           148,776
                Mattel, Inc. ..................       31,688           606,825
                                                                  ------------
                                                                     1,640,773
                                                                  ------------
                MACHINERY (1.2%)
                Caterpillar, Inc. .............       25,277          1,155,664
                Cummins, Inc. .................        3,290             92,548
                Danaher Corp. .................       11,100            729,270
                Deere & Co. ...................       17,437            799,486
                Dover Corp. ...................       14,940            435,650
                Eaton Corp. ...................        5,214            407,266
                Illinois Tool Works, Inc. .....       22,226          1,441,578
                Ingersoll-Rand Co. Class A.....       12,463            536,657
                ITT Industries, Inc. ..........        6,649            403,528
                Navistar International Corp.
                 (a)...........................        4,748           115,424
                PACCAR, Inc. ..................        8,600           396,718
                Pall Corp. ....................        9,385           156,542
                Parker-Hannifin Corp. .........        8,624           397,825
                                                                  ------------
                                                                     7,068,156
                                                                  ------------
                MEDIA (4.0%)
                AOL Time Warner, Inc. (a)......       324,433         4,250,072
                Clear Channel Communications,
                 Inc. (a)......................        44,153         1,646,465
                Comcast Corp. Class A (a)......       167,543         3,948,989
                Dow Jones & Co., Inc. .........         6,327           273,516
                Gannett Co., Inc. .............        19,555         1,404,049
                Interpublic Group Cos., Inc.
                 (The).........................       27,705           390,086
                Knight-Ridder, Inc. ...........        6,082           384,687
                McGraw-Hill Cos., Inc. (The)...       14,018           847,248
                Meredith Corp. ................        3,611           148,448
                New York Times Co. (The) Class
                 A.............................       11,295            516,520
                Omnicom Group, Inc. ...........       13,681            883,793
                TMP Worldwide, Inc. (a)........        7,879             89,112
                Tribune Co. ...................       22,070          1,003,302
                Univision Communications, Inc.
                 Class A (a)...................        16,952          415,324
                Viacom, Inc. Class B (a).......       127,796        5,208,965
                Walt Disney Co. (The)..........       148,226        2,417,566
                                                                  ------------
                                                                    23,828,142
                                                                  ------------
                METALS & MINING (0.5%)
                Alcoa, Inc. ...................       60,850          1,386,163
                Allegheny Technologies,
                 Inc. .........................        6,328            39,423



                                                   SHARES             VALUE
                                                            -----------------------------
                     METALS & MINING (CONTINUED)
                     Freeport-McMoRan Copper & Gold,
                      Inc. Class B (a)..............             10,649          $     178,690
                     Newmont Mining Corp. ..........             29,584                858,824
                     Nucor Corp. ...................              5,765                238,095
                     Phelps Dodge Corp. (a).........              6,570                207,941
                     United States Steel Corp. .....              6,575                 86,264
                     Worthington Industries,
                      Inc. .........................              6,535                99,593
                                                                                 ------------
                                                                                    3,094,993
                                                                                 ------------
                     MULTILINE RETAIL (4.0%)
                     Big Lots, Inc. (a).............              8,353                110,510
                     Costco Wholesale Corp. (a).....             33,367                936,278
                     Dillard's, Inc. Class A........              6,240                 98,966
                     Dollar General Corp. ..........             25,018                298,965
                     Family Dollar Stores, Inc. ....             12,691                396,086
                     Federated Department Stores,
                      Inc. (a)......................             14,277                410,607
                     J.C. Penney Co., Inc. Holding
                      Co. ..........................             19,706                453,435
                     Kohl's Corp. (a)...............             24,286              1,358,802
                     May Department Stores Co.
                      (The).........................             21,079               484,395
                     Nordstrom, Inc. ...............             10,225               193,968
                     Sears, Roebuck & Co. ..........             23,231               556,383
                     Target Corp. ..................             65,825             1,974,750
                     Wal-Mart Stores, Inc. .........            320,421            16,184,465
                                                                                 ------------
                                                                                   23,457,610
                                                                                 ------------
                     MULTI-UTILITIES & UNREGULATED POWER (0.3%)
                     AES Corp. (The) (a)............      39,441                      119,112
                     Calpine Corp. (a)..............      27,474                       89,565
                     Duke Energy Corp. .............      65,401                    1,277,936
                     Dynegy, Inc. Class A...........      25,979                       30,655
                     El Paso Corp. .................      42,699                      297,185
                     Mirant Corp. (a)...............      29,693                       56,120
                     Williams Cos., Inc. (The)......      38,055                      102,748
                                                                                 ------------
                                                                                    1,973,321
                                                                                 ------------
                     OFFICE ELECTRONICS (0.1%)
                     Xerox Corp. (a)................             53,444               430,224
                                                                                 ------------

                     OIL & GAS (5.2%)
                     Amerada Hess Corp. ............              6,664                 366,853
                     Anadarko Petroleum Corp. ......             18,272                 875,229
                     Apache Corp. ..................             10,585                 603,239
                     Ashland, Inc. .................              5,420                 154,632
                     Burlington Resources, Inc. ....             14,942                 637,276
                     ChevronTexaco Corp. ...........             77,542               5,154,992
                     ConocoPhillips.................             49,161               2,378,901
                     Devon Energy Corp. ............             11,533                 529,365
                     EOG Resources, Inc. ...........              8,342                 333,013
                     ExxonMobil Corp. ..............            488,445              17,066,268
                     Kerr-McGee Corp. ..............              7,394                 327,554
                     Marathon Oil Corp. ............             22,906                 487,669
                     Occidental Petroleum Corp. ....             27,397                 779,445
                     Sunoco, Inc. ..................              5,587                 185,377



                          -------
                          + Percentages indicated are based on Fund net assets.




14 The notes to the financial statements are an integral part of, and should be read in conjunction with, the
financial statements.
Portfolio of Investments December 31, 2002 (continued)

                                                     SHARES            VALUE
                                                   -----------------------------
                 COMMON STOCKS (CONTINUED)
                 OIL & GAS (CONTINUED)
                 Unocal Corp. ..................         18,974    $    580,225
                                                                   ------------
                                                                     30,460,038
                                                                   ------------
                 PAPER & FOREST PRODUCTS (0.5%)
                 Boise Cascade Corp. ...........          4,204         106,025
                 Georgia-Pacific Corp. .........         18,196         294,047
                 International Paper Co. .......         34,539       1,207,829
                 Louisiana-Pacific Corp. (a)....          7,910          63,755
                 MeadWestvaco Corp. ............         14,745         364,349
                 Weyerhaeuser Co. ..............         16,091         791,838
                                                                   ------------
                                                                      2,827,843
                                                                   ------------
                 PERSONAL PRODUCTS (0.6%)
                 Alberto-Culver Co. Class B.....          4,161         209,714
                 Avon Products, Inc. ...........         17,073         919,723
                 Gillette Co. (The).............         76,603       2,325,667
                                                                   ------------
                                                                      3,455,104
                                                                   ------------
                 PHARMACEUTICALS (10.1%)
                 Abbott Laboratories............         113,428      4,537,120
                 Allergan, Inc. ................           9,493        546,987
                 Bristol-Myers Squibb Co. ......         140,603      3,254,959
                 Forest Laboratories, Inc.
                  (a)...........................          13,282      1,304,558
                 Johnson & Johnson..............         215,588     11,579,232
                 King Pharmaceuticals, Inc.
                  (a)...........................          18,134        311,723
                 Lilly (Eli) & Co. .............          81,452      5,172,202
                 Merck & Co., Inc. .............         162,965      9,225,449
                 Pfizer, Inc. ..................         447,270     13,673,044
                 Pharmacia Corp. ...............          93,534      3,909,721
                 Schering-Plough Corp. .........         106,450      2,363,190
                 Watson Pharmaceuticals, Inc.
                  (a)...........................          7,595         214,711
                 Wyeth..........................         96,246       3,599,600
                                                                   ------------
                                                                     59,692,496
                                                                   ------------
                 REAL ESTATE (0.3%)
                 Equity Office Properties
                  Trust.........................         29,888         746,602
                 Equity Residential.............         20,075         493,444
                 Plum Creek Timber Co., Inc. ...         13,797         325,609
                 Simon Property Group, Inc. ....         13,504         460,081
                                                                   ------------
                                                                      2,025,736
                                                                   ------------
                 ROAD & RAIL (0.5%)
                 Burlington Northern Santa Fe
                  Corp. ........................         27,392         712,466
                 CSX Corp. .....................         15,897         450,044
                 Norfolk Southern Corp. ........         28,609         571,894
                 Union Pacific Corp. ...........         18,583       1,112,564
                                                                   ------------
                                                                      2,846,968
                                                                   ------------
                 SEMICONDUCTOR EQUIPMENT & PRODUCTS (2.8%)
                 Advanced Micro Devices, Inc.
                  (a)...........................      25,546            165,027
                 Altera Corp. (a)...............      28,637            353,094
                 Analog Devices, Inc. (a).......      26,962            643,583
                 Applied Materials, Inc. (a)....     118,822          1,548,251
                 Applied Micro Circuits Corp.
                  (a)...........................      21,891             80,778
Broadcom Corp. Class A (a).....     20,017            301,456



                                   SHARES            VALUE
                                 -----------------------------
SEMICONDUCTOR EQUIPMENT & PRODUCTS (CONTINUED)
Intel Corp. ...................     480,881       $ 7,487,317
KLA-Tencor Corp. (a)...........      13,835            489,344
Linear Technology Corp. .......      22,649            582,532
LSI Logic Corp. (a)............      26,674            153,909
Maxim Integrated Products, Inc.
 (a)...........................      23,228            767,453
Micron Technology, Inc. (a)....      44,122            429,748
National Semiconductor Corp.
 (a)...........................      12,692            190,507
Novellus Systems, Inc. (a).....      10,479            294,250
NVIDIA Corp. (a)...............      10,654            122,628
PMC-Sierra, Inc. (a)...........      12,131             67,448
QLogic Corp. (a)...............       6,818            235,289
Teradyne, Inc. (a).............      13,396            174,282
Texas Instruments, Inc. .......     125,753          1,887,553
Xilinx, Inc. (a)...............      24,600            506,760
                                                  ------------
                                                    16,481,209
                                                  ------------
SOFTWARE (4.9%)
Adobe Systems, Inc. ...........      17,490            433,770
Autodesk, Inc. ................       8,014            114,600
BMC Software, Inc. (a).........      17,076            292,170
Citrix Systems, Inc. (a).......      13,353            164,509
Computer Associates
 International, Inc. ..........      42,709            576,572
Compuware Corp. (a)............      27,193            130,527
Electronic Arts, Inc. (a)......      10,295            512,382
Intuit, Inc. (a)...............      14,808            694,791
Mercury Interactive Corp.
 (a)...........................       5,891            174,668
Microsoft Corp. (a)(c).........     388,069         20,063,167
Novell, Inc. (a)...............      24,445             81,646
Oracle Corp. (a)...............     388,772          4,198,738
Parametric Technology Corp.
 (a)...........................      21,272             53,606
PeopleSoft, Inc. (a)...........      22,464            411,091
Rational Software Corp. (a)....      14,361            149,211
Siebel Systems, Inc. (a).......      34,267            256,317
VERITAS Software Corp. (a).....      30,189            471,552
                                                  ------------
                                                    28,779,317
                                                  ------------
SPECIALTY RETAIL (2.1%)
AutoZone, Inc. (a).............       7,179            507,196
Bed Bath & Beyond, Inc. (a)....      21,458            740,945
Best Buy Co., Inc. (a).........      23,369            564,361
Circuit City Stores, Inc. .....      15,373            114,068
Gap, Inc. (The)................      63,732            989,120
Home Depot, Inc. (The).........     168,859          4,045,862
Limited Brands, Inc. ..........      38,332            533,965
Lowe's Cos., Inc. .............      56,688          2,125,800
Office Depot, Inc. (a).........      21,929            323,672
RadioShack Corp. ..............      12,795            239,778
Sherwin-Williams Co. (The).....      11,076            312,897
Staples, Inc. (a)..............      33,919            620,718
Tiffany & Co. .................      11,118            265,831
TJX Cos., Inc. (The)...........      38,117            744,044
Toys "R" Us, Inc. (a)..........      14,578            145,780
                                                  ------------
                                                    12,274,037
                                                  ------------



    -------
    + Percentages indicated are based on Fund net assets.
                                                         15

The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial
statements.
MainStay Equity Index Fund

                                                   SHARES            VALUE
                                                 -----------------------------
               COMMON STOCKS (CONTINUED)
               TEXTILES, APPAREL & LUXURY GOODS (0.3%)
               Jones Apparel Group, Inc.
                (a)...........................       9,505       $    336,857
               Liz Claiborne, Inc. ...........       8,266            245,087
               NIKE, Inc. Class B.............      19,232            855,247
               Reebok International Ltd.
                (a)...........................       4,227            124,274
               V.F. Corp. ....................       8,240            297,052
                                                                 ------------
                                                                    1,858,517
                                                                 ------------
               TOBACCO (1.2%)
               Philip Morris Cos., Inc. ......     150,112           6,084,039
               R.J. Reynolds Tobacco Holdings,
                Inc. .........................       6,500            273,715
               UST, Inc. .....................      12,284            410,654
                                                                 ------------
                                                                    6,768,408
                                                                 ------------
               TRADING COMPANIES & DISTRIBUTORS (0.1%)
               Genuine Parts Co. .............      12,779            393,593
               Grainger (W.W.), Inc. .........       6,625            341,519
                                                                 ------------
                                                                      735,112
                                                                 ------------
               WIRELESS TELECOMMUNICATION SERVICES (0.4%)
               AT&T Wireless Services, Inc.
                (a)...........................     195,347           1,103,710
               Nextel Communications, Inc.
                Class A (a)...................      69,469            802,367
               Sprint Corp. (PCS Group) (a)...      73,073            320,060
                                                                 ------------
                                                                    2,226,137
                                                                 ------------
               Total Common Stocks (Cost
                $632,266,218).................                    589,627,241(d)
                                                                 ------------
                                                  PRINCIPAL
                                                   AMOUNT
                                                 -----------
               SHORT-TERM INVESTMENTS (0.3%)

               U.S. GOVERNMENT (0.3%)
               United States Treasury Bills
                1.52%, due 1/9/03 (c).........   $ 300,000       $    299,899
                1.62%, due 1/16/03 (c)........    1,700,000         1,699,578
                                                                 ------------
               Total U.S. Government
                (Cost $1,999,477).............                      1,999,477
                                                                 ------------
               Total Short-Term Investments
                (Cost $1,999,477).............                      1,999,477
                                                                 ------------
               Total Investments
                (Cost $634,265,695) (e).......       100.4%       591,626,718(f)
               Liabilities in excess of Cash
                and Other Assets..............         (0.4)       (2,593,065)
                                                 -----------     ------------
               Net Assets.....................        100.0%     $589,033,653
                                                 ===========     ============



                                                            UNREALIZED
                                             CONTRACTS     APPRECIATION/
                                               LONG      (DEPRECIATION)(G)
                                             -----------------------------
                    FUTURES CONTRACTS (-0.0%)(B)
                         Standard & Poor's 500
                          Index
                          March 2003............              4            $ (15,125)
                          Mini March 2003.......              3                  230
                                                                           ---------
                         Total Futures Contracts
                          (Settlement Value
                          $1,010,735) (d).......                           $ (14,895)
                                                                           =========



                     -------
                     (a) Non-income producing security.
                     (b) Less than one tenth of a percent.
                     (c) Segregated as collateral for futures contracts.
                     (d) The combined market value of common stocks and settlement
                          value of Standard & Poor's 500 Index futures contracts
                          represents 100.3% of net assets.
                     (e) The cost for federal income tax purposes is $638,463,228.
                     (f) At December 31, 2002 net unrealized depreciation was
                          $46,836,510 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 $97,308,373 and
                          aggregate gross unrealized depreciation for all
                          investments on which there was an excess of cost over
                          market value of $144,144,883.
                     (g) Represents the difference between the value of the
                          contracts at the time they were opened and the value at
                          December 31, 2002.




16 The notes to the financial statements are an integral part of, and should be read in conjunction with, the
financial statements.
Statement of Assets and Liabilities as of December 31, 2002

          ASSETS:
          Investment in securities, at value (identified cost
            $634,265,695).............................................                      $591,626,718
          Cash........................................................                            87,945
          Receivables:
            Dividends.................................................                           932,299
            Investment securities sold................................                           817,922
            Fund shares sold..........................................                             8,758
            Variation margin on futures contracts.....................                             2,049
          Other assets................................................                             8,041
                                                                                            ------------
                    Total assets........................................                     593,483,732
                                                                                            ------------
          LIABILITIES:
          Payables:
            Investment securities purchased...........................                         1,874,318
            Fund shares redeemed......................................                         1,814,636
            Manager...................................................                           265,443
            Transfer agent............................................                           224,078
            NYLIFE Distributors.......................................                           129,008
            Custodian.................................................                            14,628
            Trustees..................................................                             6,981
          Accrued expenses............................................                           120,987
                                                                                            ------------
                    Total liabilities...................................                       4,450,079
                                                                                            ------------
          Net assets..................................................                      $589,033,653
                                                                                            ============
          COMPOSITION OF NET ASSETS:
          Shares of beneficial interest outstanding (par value of $.01
            per share) unlimited number of shares authorized..........                      $    204,019
          Additional paid-in capital..................................                       731,357,315
          Accumulated net investment loss.............................                        (1,845,752)
          Accumulated net realized loss on investments................                       (98,028,057)
          Net unrealized depreciation on investments and futures
            transactions..............................................                       (42,653,872)
                                                                                            ------------
          Net assets applicable to outstanding shares.................                      $589,033,653
                                                                                            ============
          Shares of beneficial interest outstanding...................                        20,401,933
                                                                                            ============
          Net asset value per share outstanding.......................                      $      28.87
          Maximum sales charge (3.00% of offering price)..............                              0.89
                                                                                            ------------
          Maximum offering price per share outstanding................                      $      29.76
                                                                                            ============




                                                         17

The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial
statements.
Statement of Operations for the year ended December 31, 2002

            INVESTMENT INCOME:
            Income:
              Dividends (a).............................................               $  11,795,570
              Interest..................................................                     263,994
                                                                                       -------------
                 Total income............................................                 12,059,564
                                                                                       -------------
            Expenses:
              Manager...................................................                   3,750,311
              Distribution..............................................                   1,875,155
              Transfer agent............................................                   1,356,974
              Shareholder communication.................................                     202,599
              Professional..............................................                     132,258
              Custodian.................................................                     108,150
              Recordkeeping.............................................                     101,674
              Trustees..................................................                      37,331
              Registration..............................................                      19,642
              Miscellaneous.............................................                      59,741
                                                                                       -------------
                 Total expenses..........................................                  7,643,835
                                                                                       -------------
            Net investment income.......................................                   4,415,729
                                                                                       -------------
            REALIZED AND UNREALIZED LOSS ON INVESTMENTS:
            Net realized loss from:
              Security transactions.....................................                 (95,558,057)
              Futures transactions......................................                  (1,749,009)
                                                                                       -------------
            Net realized loss on investments............................                 (97,307,066)
                                                                                       -------------
            Net change in unrealized appreciation (depreciation) on
              investments:
              Security transactions.....................................                (107,695,105)
              Futures transactions......................................                     129,076
                                                                                       -------------
            Net unrealized loss on investments..........................                (107,566,029)
                                                                                       -------------
            Net realized and unrealized loss on investments.............                (204,873,095)
                                                                                       -------------
            Net decrease in net assets resulting from operations........               $(200,457,366)
                                                                                       =============




(a) Dividends recorded net of foreign withholding taxes of $48,360.

18 The notes to the financial statements are an integral part of, and should be read in conjunction with, the
financial statements.
Statement of Changes in Net Assets

                                                                               Year ended          Year ended
                                                                              December 31,        December 31,
                                                                                  2002                2001
                                                                              -------------      --------------
  DECREASE IN NET ASSETS:
  Operations:
    Net investment income.....................................                $ 4,415,729        $     3,907,673
    Net realized gain (loss) on investments...................                 (97,307,066)           32,930,154
    Net change in unrealized appreciation (depreciation) on
      investments and futures transactions....................                (107,566,029)        (183,942,572)
                                                                              -------------      --------------
     Net decrease in net assets resulting from operations......               (200,457,366)        (147,104,745)
                                                                              -------------      --------------
  Dividends and distributions to shareholders:
    From net investment income................................                  (6,252,221)          (4,112,722)
    From net realized gain on investments.....................                 (22,887,901)         (29,560,108)
                                                                              -------------      --------------
       Total dividends and distributions to shareholders.......                (29,140,122)         (33,672,830)
                                                                              -------------      --------------
  Capital share transactions:
    Net proceeds from sale of shares..........................                   2,705,651           217,166,770
    Net asset value of shares issued to shareholders in
      reinvestment of dividends and distributions.............                  28,209,897           32,653,836
                                                                              -------------      --------------
                                                                                30,915,548          249,820,606
     Cost of shares redeemed...................................               (163,946,815)        (254,008,155)
                                                                              -------------      --------------
       Decrease in net assets derived from capital share
        transactions...........................................               (133,031,267)          (4,187,549)
                                                                              -------------      --------------
      Net decrease in net assets..............................                (362,628,755)        (184,965,124)
  NET ASSETS:
  Beginning of year...........................................                 951,662,408        1,136,627,532
                                                                              -------------      --------------
  End of year.................................................                $589,033,653       $ 951,662,408
                                                                              =============      ==============
  Accumulated undistributed net investment income (loss) at
    end of year...............................................                $ (1,845,752)      $       33,913
                                                                              =============      ==============




                                                         19

The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial
statements.
Financial Highlights selected per share data and ratios

                                                                                          Year ended December 31,
                                                                   -------------------------------------------------
                                                                     2002          2001            2000            19
                                                                   --------      --------       ----------      -----
Net asset value at beginning of year..................             $ 37.35       $ 42.76        $    47.36      $
                                                                   --------      --------       ----------      -----
Net investment income.................................                 0.22          0.16             0.12
Net realized and unrealized gain (loss) on
  investments.........................................                (8.70)           (5.57)            (4.72)
                                                                   --------         --------         ----------     -----
Total from investment operations......................                (8.48)           (5.41)            (4.60)
                                                                   --------         --------         ----------     -----
Less dividends and distributions:
From net investment income............................                (0.30)           (0.16)            (0.12)
From net realized gain on investments.................                (1.12)           (1.17)            (1.44)
                                                                   --------         --------         ----------     -----
Total dividends and distributions.....................                (1.42)           (1.33)            (1.56)
                                                                   --------         --------         ----------     -----
Reverse share split...................................                 1.42             1.33               1.56
                                                                   --------         --------         ----------     -----
Net asset value at end of year........................             $ 28.87          $ 37.35          $    42.76     $
                                                                   ========         ========         ==========     =====
Total investment return (a)...........................               (22.70%)         (12.65%)            (9.71%)
Ratios (to average net assets)/
  Supplemental Data:
    Net investment income.............................                  0.59%           0.38%              0.26%
    Net expenses......................................                  1.02%           0.97%              0.92%
    Expenses (before reimbursement)...................                  1.02%           0.97%              0.92%
Portfolio turnover rate...............................                     4%              4%                 9%
Net assets at end of year (in 000's)..................              $589,034        $951,662         $1,136,628     $1,25




                       (a)   Total return is calculated exclusive of sales charge.




20 The notes to the financial statements are an integral part of, and should be read in conjunction with, the
financial statements.
Notes to Financial Statements

NOTE 1--ORGANIZATION AND BUSINESS:

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-four funds (collectively referred to as the "Funds").
These financial statements and notes relate only to MainStay Equity Index Fund (the "Fund"). The Board of
Trustees of the Trust approved the closure of the Fund to new share purchases effective January 1, 2002.
Existing shareholders may continue to maintain share positions held in the Fund, elect or continue to reinvest
distributions, and NYLIFE LLC will continue to honor the unconditional guarantee associated with the Fund (see
Note 8).

The Fund's investment objective is to seek to provide investment results that correspond to the total return
performance (and reflect reinvestment of dividends) of publicly traded common stocks represented by the
Standard & Poor's 500 Composite Stock Price Index. MainStay Equity Index Fund is "non-diversified," which
means that it may invest a greater percentage of its assets than diversified funds in a particular issuer. This may
make it more susceptible than diversified funds to risks associated with an individual issuer, and to single
economic, political or regulatory occurrences.

NOTE 2--SIGNIFICANT ACCOUNTING POLICIES:

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

VALUATION OF FUND SHARES. The net asset value per share 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 is determined by taking the current market value of total assets attributable to the shares,
subtracting the liabilities attributable to the shares, and dividing the result by the number of outstanding shares.

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 price and asked price, (b) by appraising common and preferred
stocks traded on other United States national 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 closing bid price supplied
through such system, (d) by appraising over-the-counter securities not quoted on the NASDAQ system at prices
supplied by a pricing agent selected by the Fund's Manager, if such prices are deemed to be representative of
market values at the regular close of business of the Exchange, (e) by appraising options and futures contracts at
the last sale price on the market where such options or futures are principally traded, and (f) by appraising all
other securities and other assets, including over-the-counter common and preferred stocks not quoted on the
NASDAQ system, 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

                                                         21
MainStay Equity Index Fund

value in accordance with procedures approved by the Trust's Board of Trustees. 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 Fund's calculation of net asset value unless the Fund's Manager
deems that the particular event would materially affect the Fund's net asset value, in which case an adjustment
may be made.

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. The Fund invests in stock index futures contracts to gain full exposure to changes in stock market prices
to fulfill its investment objective.

The use of futures contracts involves, to varying degrees, elements of market risk in excess of the amount
recognized in the Statement of Assets and Liabilities. The contract or notional amounts and variation margin
reflect the extent of the Fund's involvement in open futures positions. Risks arise from the 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, the Fund's activities in futures
contracts are conducted through regulated exchanges which minimize counterparty credit risks.

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 or excise tax provision is required.

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

DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions are recorded on
the ex-dividend date. The Fund intends to declare and pay dividends and capital gain distributions annually.

                                                         22
Notes to Financial Statements (continued)

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.

The following table discloses the current year reclassifications between accumulated net investment loss and
accumulated net realized loss on investments arising from permanent differences; net assets at December 31,
2002, are not affected.

                                                              ACCUMULATED
                                          ACCUMULATED         NET REALIZED
                                         NET INVESTMENT         LOSS ON
                                              LOSS            INVESTMENTS
                                         --------------      --------------
                                           $(43,173)            $43,173




The reclassifications for the Fund are due to real estate investment trust distributions.

Dividends to shareholders from net investment income and distributions to shareholders from net realized gains
shown in the Statement of Changes in Net Assets for the years ended December 31, 2002 and December 31,
2001 represent tax-based distributions from ordinary income of $6,679,103 and $4,112,722 and net long-term
capital gain of $22,461,019 and $29,560,108, respectively.

The Fund declared a dividend which was paid on December 19, 2002, and also underwent a reverse share split
on that day. The reverse share split rate was 0.9511 per share outstanding calculated on fund shares outstanding
immediately after reinvestment of dividends.

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. Discounts and
premiums on short-term securities are accreted and amortized, respectively, on the straight line method.

EXPENSES. Expenses of the Trust are allocated to the individual Funds in proportion to the net assets of the
respective Funds where the expenses are incurred except when direct allocations of expenses can be made.

USE OF ESTIMATES. The preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America 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.

                                                          23
MainStay Equity Index Fund

NOTE 3--FEES AND RELATED PARTY TRANSACTIONS:

MANAGER. New York Life Investment Management LLC ("NYLIM" or the "Manager"), an indirect wholly-
owned subsidiary of New York Life Insurance Company ("New York Life"), serves as the Fund's manager. The
Manager provides offices, conducts clerical, record-keeping and bookkeeping services, and keeps most of the
financial and accounting records required for the Fund. The Manager also pays the salaries and expenses of all
personnel affiliated with the Fund and all the operational expenses that are not the responsibility of the Fund. The
Fund is advised by the Manager directly, without a Subadviser.

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 0.50% of the Fund's average daily net assets. For the year ended December 31,
2002, the Manager earned from the Fund $3,750,311.

DISTRIBUTION FEES. The Trust, on behalf of the Fund, has a Distribution Agreement with NYLIFE
Distributors Inc. (the "Distributor"), an indirect wholly-owned subsidiary of New York Life. The Fund has
adopted a distribution plan (the "Plan") in accordance with the provisions of Rule 12b-1 under the 1940 Act.

Pursuant to the Plan, the Distributor receives payments from the Fund at an annual rate of 0.25% of the Fund's
average daily net assets, which is an expense of the Fund for distribution or service activities as designated by the
Distributor.

The Plan provides 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.

SALES CHARGE. The Fund was advised that the amount of sales charges retained by the Distributor was
$14,731 for the year ended December 31, 2002. The Fund was also advised that the Distributor retained
contingent deferred sales charges on redemption of Class A shares of $10,524 for the year ended December 31,
2002.

TRANSFER, DIVIDEND DISBURSING AND SHAREHOLDER SERVICING AGENT. NYLIM Service
Company LLC, ("NYLIM Service"), an affiliate of NYLIM, is the Fund's transfer, dividend disbursing and
shareholder servicing agent. NYLIM Service has entered into an agreement with Boston Financial Data Services
("BFDS") pursuant to which BFDS will perform certain of the services for which NYLIM Service is responsible.
Transfer agent expenses accrued to NYLIM Service for the year ended December 31, 2002 amounted to
$1,356,974.

TRUSTEES FEES. Trustees, other than those affiliated with NYLIM, are paid an annual fee of $45,000, $2,000
for each Board meeting, $1,000 for each Committee meeting and $500 for each Valuation Subcommittee
telephonic meeting attended plus reimbursement for travel and out-of-pocket expenses.

                                                         24
Notes to Financial Statements (continued)

The Lead Non-Interested 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, included in Professional fees as shown in the Statement of
Operations, provided to the Fund by the Office of General Counsel of NYLIM amounted to $14,199 for the
year ended December 31, 2002.

The Fund pays the Manager a monthly fee for recordkeeping services provided under the Accounting Agreement
at the annual rate of 1/20 of 1% for the first $20 million of average monthly net assets, 1/30 of 1% of the next
$80 million of average monthly net assets and 1/100 of 1% of any amount in excess of $100 million of average
monthly net assets. Fees for recordkeeping services provided to the Fund by the Manager amounted to
$101,674 for the year ended December 31, 2002.

NOTE 4--FEDERAL INCOME TAX:

The Fund has changed its year-end to November 30, 2002 for federal income tax purposes. As of November
30, 2002, the components of accumulated loss on a tax basis were as follows:

          Ordinary   Undistributed          Accumulated Capital        Unrealized   Total Accumulated
           Income   Long-Term Gains*         and Other Losses         Depreciation        Loss
          -------- ----------------         -------------------       ------------ -----------------
          $4,375,079   $22,461,019             $(89,852,496)          $(12,735,768)   $(75,752,166)




* Includes $22,461,019 of capital gain distributions that were paid on December 19, 2002 from taxable gains
through the prior fiscal tax year end.

The difference between book-basis and tax-basis unrealized depreciation is primarily due to wash sales deferrals
and real estate investment trust distributions.

At November 30, 2002, for federal income tax purposes, capital loss carryforwards of $89,852,496 were
available, to the extent provided by the regulations to offset future realized gains through 2010. 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.

NOTE 5--PURCHASES AND SALES OF SECURITIES (IN 000'S):

During the year ended December 31, 2002, purchases and sales of securities, other than short-term securities,
were $32,896 and $147,690, respectively.

NOTE 6--LINE OF CREDIT:

The Fund and certain affiliated funds maintain a line of credit of $160,000,000 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 .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 among the funds based upon net assets and other

                                                          25
MainStay Equity Index Fund

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, 2002.

NOTE 7--CAPITAL SHARE TRANSACTIONS (IN 000'S):

                                                                     YEAR ENDED                   YEAR ENDED
                                                                  DECEMBER 31, 2002            DECEMBER 31, 2001
                                                                  -----------------            -----------------
Shares sold...........................................                     75                        5,689
Shares issued in reinvestment of dividends and
  distributions.......................................                   1,022                          911
                                                                        ------                       ------
                                                                         1,097                        6,600
Shares redeemed.......................................                  (5,120)                      (6,760)
Reduction of shares due to reverse share split........                  (1,056)                        (940)
                                                                        ------                       ------
Net decrease..........................................                  (5,079)                      (1,100)
                                                                        ======                       ======




NOTE 8--GUARANTEE:

NYLIFE LLC ("NYLIFE"), a wholly-owned subsidiary of New York Life, will guarantee unconditionally and
irrevocably pursuant to a Guaranty Agreement between NYLIFE and the Equity Index Fund (the "Guarantee")
that if, on the business day immediately after ten years from the date of purchase (the "Guarantee Date"), the net
asset value ("NAV") of a Fund share plus the value of all dividends and distributions paid, including cumulative
reinvested dividends and distributions attributable to such share paid during that ten-year period ("Guaranteed
Share"), is less than the price initially paid for the Fund share ("Guaranteed Amount"), NYLIFE will pay
shareholders an amount equal to the difference between the Guaranteed Amount for each such share and the net
asset value of each such Guaranteed Share outstanding and held by shareholders as of the close of business on
the Guarantee Date. There is no charge to the Fund or its shareholders for the Guarantee.

                                                        26
Report of Independent Accountants

To the Board of Trustees of The MainStay Funds and Shareholders of MainStay Equity Index 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 Equity Index Fund (one of the funds constituting The
MainStay Funds, hereafter referred to as the "Fund") at December 31, 2002, the results of its operations for the
year then ended, 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, 2002 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, 2003

                                                         27
Trustees and Officers

Following are the Trustees and Officers of The MainStay Funds, along with a brief description of their principal
occupations during the past five years.

Each Trustee serves until his/her successor is elected and qualified or until his/her resignation, death, or removal.
Officers serve a term of one year and are elected annually by the Trustees.

The business address of each Trustee and Officer is 51 Madison Avenue, New York, New York 10010.

                                                                                     NUMBER OF
                                                                                     PORTFOLIOS
                           POSITION(S)                                                IN FUND
                          HELD WITH FUND                                              COMPLEX
        NAME AND          AND LENGTH OF            PRINCIPAL OCCUPATION(S)            OVERSEEN    OTHER D
     DATE OF BIRTH         TIME SERVED              DURING PAST FIVE YEARS           BY TRUSTEE     HELD
---------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEES(1)
---------------------------------------------------------------------------------------------------------
Gary E. Wendlandt         Chairman since   Chief Executive Officer, Chairman, and         43
10/8/50                   January 1,       Manager, New York Life Investment
                          2002, and        Management LLC (including predecessor
                          Trustee since    advisory organizations) and New York
                          2000             Life Investment Management Holdings LLC;
                                           Executive Vice President, New York Life
                                           Insurance Company; Director, NYLIFE
                                           Distributors, Inc.; Vice Chairman and
                                           Manager, McMorgan & Company LLC;
                                           Manager, MacKay Shields LLC; Executive
                                           Vice President, New York Life Insurance
                                           and Annuity Corporation; Chairman, Chief
                                           Executive Officer, and Director,
                                           MainStay VP Series Fund, Inc. (19
                                           portfolios); Executive Vice President
                                           and Chief Investment Officer, MassMutual
                                           Life Insurance Company (1993 to 1999).
---------------------------------------------------------------------------------------------------------
Stephen C. Roussin        President,       President, Chief Operating Officer, and        45
7/12/63                   Chief            Manager, New York Life Investment
                          Executive        Management LLC (including predecessor
                          Officer, and     advisory organizations) and New York
                          Trustee since    Life Investment Management Holdings LLC;
                          1997             Senior Vice President, New York Life
                                           Insurance Company; Director, NYLIFE
                                           Securities, Inc.; Chairman and Director,
                                           NYLIFE Distributors Inc.; Manager,
                                           McMorgan & Company LLC; Chairman,
                                           President, and Trustee, Eclipse Funds,
                                           (4 portfolios); Chairman, President and
                                           Director, Eclipse Funds Inc. (14
                                           portfolios); Chairman and Trustee, New
                                           York Life Investment Management
                                           Institutional Funds (3 portfolios);
                                           Senior Vice President, Smith Barney
                                           (1994 to 1997).
---------------------------------------------------------------------------------------------------------
1 Certain Trustees are considered to be interested persons of the Trust within the meaning of the 1940 Ac
  their affiliation with New York Life Insurance Company, New York Life Investment Management LLC, MacKay
  LLC, McMorgan & Company LLC, Eclipse Funds, Eclipse Funds Inc., MainStay VP Series Fund, Inc., New York
  Investment Management Institutional Funds, NYLIFE Securities Inc., and/or NYLIFE Distributors Inc., as
  detail in the column "Principal Occupation(s) During Past Five Years."




28 INFORMATION ON THIS PAGE HAS NOT BEEN AUDITED.
                                                                                     NUMBER OF
                                                                                     PORTFOLIOS
                           POSITION(S)                                                IN FUND
                          HELD WITH FUND                                              COMPLEX
         NAME AND         AND LENGTH OF            PRINCIPAL OCCUPATION(S)            OVERSEEN    OTHER D
     DATE OF BIRTH         TIME SERVED              DURING PAST FIVE YEARS           BY TRUSTEE     HELD
---------------------------------------------------------------------------------------------------------
Harry G. Hohn             Trustee since    Retired. Chairman and Chief Executive          24      Directo
3/1/32                    1996             Officer, New York Life Insurance Company               Corpora
                                           (1990 to 1997); Chairman of the Board,
                                           Life Insurance Council of New York (1996
                                           to 1997); Director, Million Dollar
                                           Roundtable Foundation (1996 to 1997).
---------------------------------------------------------------------------------------------------------
Donald K. Ross            Trustee since    Retired. Chairman, Chief Executive             24      Manager
7/1/25                    1991             Officer, and President, New York Life                  Shields
                                           Insurance Company (1981 to 1990).
---------------------------------------------------------------------------------------------------------
NON-INTERESTED TRUSTEES
---------------------------------------------------------------------------------------------------------
Charlynn Goins            Trustee since    Retired. Consultant to U.S. Commerce           24
9/15/42                   2001             Department, Washington, DC (1998 to
                                           2000); Senior Vice President and
                                           Director of International Marketing,
                                           Prudential Mutual Funds and Annuities
                                           (1990 to 1997).
---------------------------------------------------------------------------------------------------------
Edward J. Hogan           Trustee since    Rear Admiral U.S. Navy (Retired);              24
8/17/32                   1996             Independent Management Consultant.
---------------------------------------------------------------------------------------------------------
Terry L. Lierman          Trustee since    Partner, Health Ventures LLC; Vice             24
1/4/48                    1991             Chair, Employee Health Programs;
                                           Partner, TheraCom (1994 to 2001);
                                           President, Capitol Associates, Inc.
                                           (1984 to 2001).
---------------------------------------------------------------------------------------------------------
John B. McGuckian         Trustee since    Chairman, Ulster Television Plc; Pro           24      Chairma
11/13/39                  1997             Chancellor, Queen's University (1985 to                Norther
                                           2001).                                                 Plc; No
                                                                                                  Directo
                                                                                                  Irish B
                                                                                                  Non-Exe
                                                                                                  Directo
                                                                                                  Plc (en
                                                                                                  Non-Exe
                                                                                                  Directo
                                                                                                  Contine
                                                                                                  Plc (sh
---------------------------------------------------------------------------------------------------------
Donald E. Nickelson       Trustee since    Retired. Vice Chairman, Harbour Group          24      Directo
12/9/32                   1994 and Lead    Industries, Inc. (leveraged buyout                     Carey &
                          Non-             firm).
                          Interested
                          Trustee
---------------------------------------------------------------------------------------------------------
Richard S. Trutanic       Trustee since    Managing Director, The Carlyle Group           24
2/13/52                   1994             (private investment firm); Chairman and
                                           Chief Executive Officer, Somerset Group
                                           (financial advisory firm); Senior
                                           Managing Director, Groupe Arnault
                                           (private investment firm) (1999 to
                                           2001).
---------------------------------------------------------------------------------------------------------




                                               29

INFORMATION ON THIS PAGE HAS NOT BEEN AUDITED.
                                                                                     NUMBER OF
                                                                                     PORTFOLIOS
                           POSITION(S)                                                IN FUND
                          HELD WITH FUND                                              COMPLEX
         NAME AND         AND LENGTH OF            PRINCIPAL OCCUPATION(S)            OVERSEEN    OTHER D
     DATE OF BIRTH         TIME SERVED              DURING PAST FIVE YEARS           BY TRUSTEE     HELD
---------------------------------------------------------------------------------------------------------
OFFICERS WHO ARE NOT TRUSTEES
---------------------------------------------------------------------------------------------------------
Jefferson C. Boyce        Senior Vice      Senior Managing Director, New York Life       N/A
9/17/57                   President        Investment Management LLC (including
                          since 1995       predecessor advisory organizations);
                                           Senior Vice President, New York Life
                                           Insurance Company; Senior Vice
                                           President, Eclipse Funds and Eclipse
                                           Funds Inc.; Director, NYLIFE
                                           Distributors, Inc.
---------------------------------------------------------------------------------------------------------
Patrick J. Farrell        Chief            Managing Director, New York Life              N/A
9/27/59                   Financial and    Investment Management LLC (including
                          Accounting       predecessor advisory organizations);
                          Officer,         Treasurer, Chief Financial and
                          Treasurer, and   Accounting Officer, Eclipse Funds Inc.,
                          Vice President   Eclipse Funds, MainStay VP Series Fund,
                          since 2001       Inc., and New York Life Investment
                                           Management Institutional Funds; Chief
                                           Financial Officer and Assistant
                                           Treasurer, McMorgan Funds.
---------------------------------------------------------------------------------------------------------
Robert A. Anselmi         Secretary        Senior Managing Director, General             N/A
10/19/46                  since 2001       Counsel, and Secretary, New York Life
                                           Investment Management LLC (including
                                           predecessor advisory organizations);
                                           Secretary, New York Life Investment
                                           Management Holdings LLC; Senior Vice
                                           President, New York Life Insurance
                                           Company; Vice President and Secretary,
                                           McMorgan & Company LLC; Secretary,
                                           NYLIFE Distributors, Inc.; Secretary,
                                           MainStay VP Series Fund, Inc., Eclipse
                                           Funds Inc., Eclipse Funds and New York
                                           Life Investment Management Institutional
                                           Funds; Managing Director and Senior
                                           Counsel, Lehman Brothers Inc., (October
                                           1998 to December 1999); General Counsel
                                           and Managing Director, JP Morgan
                                           Investment Management Inc. (1986 to
                                           September 1998).
---------------------------------------------------------------------------------------------------------
Richard W. Zuccaro        Tax Vice         Vice President, New York Life Insurance       N/A
12/12/49                  President        Company; Vice President, New York Life
                          since 1991       Insurance and Annuity Corporation,
                                           NYLIFE Insurance Company of Arizona,
                                           NYLIFE LLC, NYLIFE Securities Inc., and
                                           NYLIFE Distributors Inc.; Tax Vice
                                           President, New York Life International,
                                           LLC; Tax Vice President, Eclipse Funds,
                                           Eclipse Funds Inc., MainStay VP Series
                                           Fund, Inc., and New York Life Investment
                                           Management Institutional Funds.
---------------------------------------------------------------------------------------------------------




30 INFORMATION ON THIS PAGE HAS NOT BEEN AUDITED.
THE MAINSTAY FUNDS

EQUITY FUNDS
MainStay Select 20 Equity Fund
MainStay Small Cap Growth Fund
MainStay Small Cap Value Fund(1)
MainStay Mid Cap Growth Fund
MainStay Capital Appreciation Fund
MainStay Blue Chip Growth Fund
MainStay Equity Index Fund(2)
MainStay U.S. Large Cap Equity Fund

EQUITY & INCOME FUNDS
MainStay Growth Opportunities Fund
MainStay Equity Income Fund
MainStay MAP Fund
MainStay Research Value Fund
MainStay Value Fund
MainStay Strategic Value Fund
MainStay Convertible Fund
MainStay Total Return Fund

INCOME FUNDS
MainStay High Yield Corporate Bond Fund
MainStay Strategic Income Fund
MainStay Government Fund
MainStay Tax Free Bond Fund
MainStay Money Market Fund

INTERNATIONAL FUNDS
MainStay International Equity Fund
MainStay Global High Yield Fund
MainStay International Bond Fund
INVESTMENT ADVISOR

NEW YORK LIFE INVESTMENT MANAGEMENT LLC
Parsippany, New Jersey

INVESTMENT SUBADVISORS

MACKAY SHIELDS LLC(3)
New York, New York

DALTON, GREINER, HARTMAN, MAHER & CO.
New York, New York

FUND ASSET MANAGEMENT, L.P.
d/b/a Mercury Advisors
Plainsboro, New Jersey

GABELLI ASSET MANAGEMENT COMPANY
Rye, New York

JENNISON ASSOCIATES LLC
New York, New York

MARKSTON INTERNATIONAL, LLC
White Plains, New York
MCMORGAN & COMPANY LLC(3)
San Francisco, California


1 Closed to new investors as of December 1, 2001. 2 Closed to new purchases as of January 1, 2002. 3 An
affiliate of New York Life Investment Management LLC.

                                                    31

INFORMATION ON THIS PAGE HAS NOT BEEN AUDITED.
Trustees and Officers(1)

                         GARY E. WENDLANDT             Chairman and Trustee
                         STEPHEN C. ROUSSIN            President, Chief Executive
                                                       Officer, and Trustee
                         CHARLYNN GOINS                Trustee
                         EDWARD J. HOGAN               Trustee
                         HARRY G. HOHN                 Trustee
                         TERRY L. LIERMAN              Trustee
                         JOHN B. MCGUCKIAN             Trustee
                         DONALD E. NICKELSON           Trustee
                         DONALD K. ROSS                Trustee
                         RICHARD S. TRUTANIC           Trustee
                         JEFFERSON C. BOYCE            Senior Vice President
                         PATRICK J. FARRELL            Chief Financial and
                                                       Accounting Officer,
                                                       Treasurer, and
                                                       Vice President
                         ROBERT A. ANSELMI             Secretary
                         RICHARD W. ZUCCARO            Tax Vice President




DECHERT
Legal Counsel

PRICEWATERHOUSECOOPERS LLP
Independent Accountants
1 As of December 31, 2002.

[MAINSTAY.LOGO]

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


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

NYLIFE DISTRIBUTORS INC.
NYLIM Center
169 Lackawanna Avenue
Parsippany, New Jersey 07054

www.mainstayfunds.com

This report may only be distributed when preceded or accompanied by a current Fund prospectus.

(C)2003 NYLIFE Distributors Inc. All rights reserved. MSEI11- 02/03

                                                    06

[RECYCLE.LOGO]

                                     [MAINSTAY FUNDS LOGO]

MainStay(R)
Equity Index Fund

                                          ANNUAL REPORT
                                          DECEMBER 31, 2002

                                          [MAINSTAY.LOGO]
                Table of Contents

President's Letter                              3
$10,000 Invested in MainStay Equity Income
Fund versus Russell 1000(R) Value Index and
Inflation--Class A, Class B, and Class C
Shares                                          4
Portfolio Management Discussion and Analysis    6
Year-by-Year Performance                        7
Returns and Lipper Rankings as of 12/31/02      9
Portfolio of Investments                       10
Financial Statements                           13
Notes to Financial Statements                  18
Report of Independent Accountants              24
Trustees and Officers                          25
The MainStay(R) Funds                          28
This page intentionally left blank

                                     2
President's Letter

In many respects, 2002 was a difficult year for investors. From the start, geopolitical tensions, homeland security
concerns, corporate accounting scandals, and rising unemployment all contributed to market uncertainty. Early
hopes for a sustained economic recovery eventually gave way to more realistic expectations, and stock prices fell
to progressive lows in August and October. When all was said and done, the U.S. stock market recorded its
third consecutive annual decline--something investors had not seen in more than 60 years. International stocks
were also weak, with most developed foreign markets providing double-digit negative returns in U.S. dollar
terms.

Weakness in the equity markets increased demand for bonds--both domestic and foreign--as investors sought a
potentially "safer haven" for their assets. In the absence of a 30-year U.S. Treasury auction, longer-term Treasury
bonds were particularly strong throughout the year. Investment-grade corporate debt also provided impressive
returns, but lower-rated issues suffered from continuing credit-quality concerns.

The economy provided mixed signals, with weak business investment and relatively strong consumer spending
throughout much of the year. Low interest rates stimulated the housing market and contributed to high levels of
mortgage refinancing. Gross domestic product continued to advance, surging ahead in the third quarter of 2002,
but growing at a slower pace in the fourth quarter.

Regardless of how the markets or the economy may move, each MainStay Fund adheres to a disciplined
investment process suited to its individual investment objective. We believe that
in challenging markets, consistent application of sound investment principles makes it
easier for our shareholders to understand performance and make appropriate portfolio
adjustments.

The report that follows explains the market forces and management decisions that affected your MainStay Fund
during 2002. Your registered representative can help you with any questions you may have about this report or
your MainStay investments. As you look to the future, we hope you will remain optimistic and focused on the
potential benefits of long- term investing.

Sincerely,

                                            /s/ STEPHEN C. ROUSSIN
                                            Stephen C. Roussin
                                            January 2003




                                                         3
$10,000 Invested in MainStay Equity
Income Fund versus Russell 1000(R) Value Index and Inflation

CLASS A SHARES Total Returns: 1 Year -18.42%, Since Inception 7.05%
[PERFORMANCE GRAPH]

                                                          MAINSTAY EQUITY INCOME          RUSSELL 1000 VALUE INDEX
                                                                   FUND                              (1)
                                                          ----------------------          ------------------------
6/1/98                                                            9450.00                         10000.00
12/98                                                             9829.00                         10442.00
12/99                                                            12296.00                         11210.00
12/00                                                            15099.00                         11997.00
12/01                                                            15836.00                         11326.00
12/02                                                            13671.00                          9568.00




CLASS B SHARES Total Returns: 1 Year -18.61%, Since Inception 7.23%
[PERFORMANCE GRAPH]

                                                          MAINSTAY EQUITY INCOME          RUSSELL 1000 VALUE INDEX
                                                                   FUND                              (1)
                                                          ----------------------          ------------------------
6/1/98                                                           10000.00                         10000.00
12/98                                                            10356.00                         10442.00
12/99                                                            12857.00                         11210.00
12/00                                                            15663.00                         11997.00
12/01                                                            16317.00                         11326.00
12/02                                                            13775.00                          9568.00




CLASS C SHARES Total Returns: 1 Year -15.20%, Since Inception 7.57%
[PERFORMANCE GRAPH]

                                                          MAINSTAY EQUITY INCOME          RUSSELL 1000 VALUE INDEX
                                                                   FUND                              (1)
                                                          ----------------------          ------------------------
6/1/98                                                           10000.00                         10000.00
12/98                                                            10356.00                         10442.00
12/99                                                            12857.00                         11210.00
12/00                                                            15663.00                         11997.00
12/01                                                            16317.00                         11326.00
12/02                                                            13975.00                          9568.00




4
The disclosure and footnotes on the following page are an integral part of these graphs and should be carefully
read in conjunction with them.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. DUE TO MARKET
VOLATILITY, CURRENT PERFORMANCE MAY BE LESS THAN THAT SHOWN. INVESTMENT
RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND SHARES, UPON REDEMPTION, MAY
BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. Performance tables and graphs do not
reflect the deduction of taxes that a shareholder would pay on distributions or Fund-share redemptions. Total
returns reflect change in share price, reinvestment of dividend and capital gain distributions, and maximum
applicable sales charges explained in this paragraph. Performance figures reflect certain fee waivers and/or
expense limitations, without which total return figures may have been lower. Fee waivers and/or expense
limitations are voluntary and may be discontinued at any time. The graphs assume an initial investment of $10,000
and reflect deduction of all sales charges that would have applied for the period of investment. Class A share
performance reflects the effect of the maximum 5.5% initial sales charge. Class B shares are subject to a
contingent deferred sales charge (CDSC) of up to 5% if shares are redeemed within the first six years of
purchase. Class B share performance reflects a CDSC of 2%, which would apply for the period shown. Class C
share performance includes the historical performance of the Class B shares for periods from 6/1/98 through
8/31/98. Class C shares would be subject to a CDSC of 1% if redeemed within one year of purchase.

1 The Russell 1000(R) Value Index is an unmanaged index that measures the performance of those Russell 1000
companies with lower price-to-book ratios and lower forecasted growth values. The Russell 1000(R) Index is an
unmanaged index that measures the performance of the 1,000 largest U.S. companies based on total market
capitalization. Results assume reinvestment of all income and capital gains. An investment cannot be made directly
into an index.

2 Inflation is measured by the Consumer Price Index (CPI), which is a commonly used measure of the rate of
inflation and shows the changes in the cost of selected goods. The rate of inflation does not represent an
investment return.

                                                        5
Portfolio Management Discussion and Analysis

During 2002, the economic outlook changed, causing significant shifts in investor confidence. Money flows in the
equity markets tended to reflect the mood of investors, which started strong, but suffered severe setbacks when
corporate accounting scandals and other forms of misconduct captured headlines throughout the year.
Geopolitical tensions also took a toll on investor confidence, with concerns over Iraq and North Korea increasing
as the fourth quarter progressed.

By year-end, the stock market had recorded its third consecutive annual decline. We believe that the economy is
unlikely to show astounding results in the near future. On the other hand, we feel that stimulative fiscal and
monetary measures may lead to gradual economic improvement. The Federal Reserve's decision to lower the
targeted federal funds rate in November clearly had a positive impact on stock prices. In recent weeks, we have
been encouraged by positive economic data points that we have observed.

PERFORMANCE REVIEW

For the year ended December 31, 2002, MainStay Equity Income Fund returned -13.67% for Class A shares
and -14.35% for Class B and Class C shares, excluding all sales charges. All share classes outperformed the -
16.33% return of the average Lipper(1) equity income fund over the same period and all share classes
outperformed the -15.52% return of the Russell 1000(R) Value Index(2) for the year ended December 31,
2002.

During the first half of the year, consumer stocks were among the Fund's strongest performers. In the third
quarter, we began increasing the Fund's positions in other cyclical industries. Among the most compelling
opportunities we saw were truck-related machinery companies and paper & forest products companies. During
the year, we increased the Fund's commitment to capital-goods companies by approximately 50% and basic-
materials companies by about 30%.

Materials and industrials are two sectors where the Fund remained overweighted as of December 31, 2002. As
of that date, the Fund was also overweighted relative to the Russell 1000 Value Index in the energy and health
care sectors. The overweighted positions resulted from market performance and from initiating new positions in
stocks we believed to be undervalued.

The Fund's increased exposure to cyclical stocks hindered performance in the second half of 2002, particularly in
the third quarter. Nevertheless, we continue to believe that shareholders will benefit from the Fund's current
holdings. Not only do the Fund's cyclical holdings have improving fundamentals and attractive valuations, they
also meet our margin-of-safety requirements and have catalysts that could lead to price appreciation over time.

6


1 See footnote and table on page 9 for more information about Lipper Inc.

2 See footnote on page 5 for more information about the Russell 1000 Value Index.
YEAR-BY-YEAR PERFORMANCE

CLASS A SHARES
[BAR GRAPH]

                                                                                               CLASS A SHARES
                                                                                               --------------
    12/98                                                                                            4.01
    12/99                                                                                           25.11
    12/00                                                                                           22.79
    12/01                                                                                            4.88
    12/02                                                                                          -13.67




CLASS B AND CLASS C SHARES
[BAR GRAPH]

                                                                                    CLASS B AND CLASS C SHARES
                                                                                    --------------------------
12/98                                                                                           3.56
12/99                                                                                          24.16
12/00                                                                                          21.83
12/01                                                                                           4.17
12/02                                                                                         -14.35




Other sectors had fewer attractive stocks, and some suffered from questionable fundamentals. We believe that
cyclical consumer discretionary stocks tend to be overvalued and lack the pent-up demand that is typical in a
postrecessionary period. Few stocks in the consumer staples sector appear to be attractively valued. Finally, we
believe that financial stocks may face difficulties in the aftermath of the lending and expansion craze of the late
1990s. As of December 31, 2002, the Fund was underweighted in each of these sectors.

                                                         7
STRONG AND WEAK PERFORMERS

The strongest contributor to the Fund's performance in 2002 was Boston Scientific (+76.3%), a coronary-stent
manufacturer that saw its stock price rise when the company's new products enjoyed favorable clinical results.(3)
TRW (+39.4%) benefited from an acquisition by Northrop Grumman that drove its stock price higher. Fortune
Brands (+17.5%), a conglomerate with interests in golf equipment, building materials, and alcoholic beverages,
benefited from strong earnings. Finally, Agco (+40.1%), a stock that the Fund has held for some time, benefited
from improving agricultural fundamentals in 2002.

Our stringent review process helped us identify deteriorating fundamentals in several of the Fund's weakest-
performing stocks and eliminate the positions from the portfolio. Sears, Roebuck (-49.7%) saw credit quality
rapidly decline as an important finance subsidiary and was sold during the year. TXU Corp. (-60.4%), the
largest-holding company of Texas utilities, shocked the market when its European operations virtually imploded
without any warning. Allegheny Energy (-78.0%), is another aspiring energy merchant that suffered reversals in
2002. Phoenix Companies (-58.6%) is an insurance and money management firm that suffered when the bear
market took a toll on its various businesses. We reduced each of these Fund positions prior to their final sale, but
not enough to avoid a negative impact on performance. Since each of these stocks declined after its position was
eliminated, all of the sales were prudent.
One underperforming stock that the Fund continues to hold is Navistar (-38.5%). We remain confident in the
future of this truck and engine manufacturer and increased the size of the Fund's position during a period of
weakness late in the year at prices that we believed were attractive. As of year-end, Navistar was the Fund's
largest holding.

LOOKING AHEAD

We remain optimistic about the outlook for value stocks and the opportunities we are finding in the marketplace.
Although past performance is no guarantee of future results, we believe that value stocks may outperform, as has
been typical in postrecessionary periods. We also feel that improving fundamentals may strengthen the price
performance of the Fund's holdings over time.

While geopolitical events are difficult to predict, we believe that some negative scenarios may already be priced
into stock values. Whatever the market or the economy may bring, the Fund will continue to seek to realize
maximum long-term total return from a combination of capital appreciation and income.

Michael C. Sheridan
Richard A. Rosen
Portfolio Managers
MacKay Shields LLC

8


3 Unless otherwise indicated, returns are for the year ended December 31, 2002.
Returns and Lipper Rankings as of 12/31/02
FUND TOTAL RETURNS (WITHOUT SALES CHARGES)(1)

                                                                           SINCE INCEPTION
                                                       1 YEAR             THROUGH 12/31/02
                       Class A                         -13.67%                  8.38%
                       Class B                         -14.35%                  7.57%
                       Class C                         -14.35%                  7.57%




                         FUND TOTAL RETURNS (WITH SALES CHARGES)(1)

                                                                           SINCE INCEPTION
                                                       1 YEAR             THROUGH 12/31/02
                       Class A                         -18.42%                  7.05%
                       Class B                         -18.61%                  7.23%
                       Class C                         -15.20%                  7.57%




       FUND LIPPER(2) RANKINGS AND LIPPER CATEGORY RETURNS AS OF 12/31/02

                                                                          SINCE INCEPTION
                                                    1 YEAR               THROUGH 12/31/02
                      Class A                 54 out of 199 funds        2 out of 143 funds
                      Class B                 67 out of 199 funds        3 out of 143 funds
                      Class C                 67 out of 199 funds        3 out of 148 funds
                      Average Lipper
                      equity income fund              -16.33%                  -1.84%




   FUND PER-SHARE NET ASSET VALUES AND DISTRIBUTIONS FOR THE YEAR ENDED
                                  12/31/02

                                         NAV 12/31/02      INCOME      CAPITAL GAINS
                              Class A       $11.51         $0.0557        $0.0648
                              Class B       $11.42         $0.0000        $0.0648
                              Class C       $11.42         $0.0000        $0.0648




1 PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. DUE TO MARKET
VOLATILITY,
CURRENT PERFORMANCE MAY BE LESS THAN THAT SHOWN. INVESTMENT RETURN AND
PRINCIPAL VALUE WILL FLUCTUATE, AND SHARES, UPON REDEMPTION, MAY BE WORTH
MORE OR LESS THAN THEIR ORIGINAL COST. Performance tables and graphs do not reflect the
deduction of taxes that a shareholder would pay on distributions or Fund-share redemptions. Total returns reflect
change in share price and reinvestment of all dividend and capital gain distributions. Performance figures reflect
certain fee waivers and/or expense limitations, without which total return figures may have been lower. Fee
waivers and/or expense limitations are voluntary and may be discontinued at any time.

Class A shares are sold with a maximum initial sales charge of 5.5%. Class B shares are subject to a CDSC of
up to 5% if shares are redeemed within the first six years of purchase. Class C shares are subject to a CDSC of
1% if redeemed within one year of purchase. Performance figures for this class include the historical performance
of the Class B shares for periods from the Fund's inception on 6/1/98 through 8/31/98. Performance figures for
the two classes vary after 8/31/98, based on differences in their sales charges.

2 Lipper Inc. is an independent monitor of mutual fund performance. Rankings are based on total returns with all
dividend and capital gains distributions reinvested. Results do not reflect any deduction of sales charges. Lipper
averages are not class specific. Since-inception rankings reflect the performance of each share class from its initial
offering date through 12/31/02. Class A and Class B shares were first offered to the public on 6/1/98, and Class
C shares on 9/1/98. Since-inception return for the average Lipper peer fund is for the period from 6/1/98 through
12/31/02.
INFORMATION ON THIS PAGE AND THE PRECEDING PAGES HAS NOT BEEN AUDITED.

                                     9
Mainstay Equity Income Fund

                                                     SHARES           VALUE
                                                   ----------------------------
                 COMMON STOCKS (93.9%)+

                 AEROSPACE & DEFENSE (1.5%)
                 Raytheon Co. ..................    114,442       $ 3,519,092
                                                                  ------------
                 AIRLINES (0.1%)
                 Delta Air Lines, Inc. .........     16,197             195,984
                                                                   ------------
                 AUTO COMPONENTS (1.2%)
                 Delphi Corp. ..................    361,900           2,913,295
                                                                   ------------

                 BANKS (8.3%)
                 BB&T Corp. ....................     77,000          2,848,230
                 Compass Bancshares, Inc. ......    133,414          4,171,856
                 Hibernia Corp. Class A.........     68,557          1,320,408
                 M&T Bank Corp. ................     27,000          2,142,450
                 Marshall & Ilsley Corp. .......     47,043          1,288,037
                 PNC Financial Services Group,
                  Inc. .........................     23,457             982,848
                 SouthTrust Corp. ..............    170,674           4,241,249
                 Sovereign Bancorp, Inc. .......    199,521           2,803,270
                                                                   ------------
                                                                     19,798,348
                                                                   ------------
                 BUILDING PRODUCTS (1.5%)
                 American Standard Cos., Inc.
                  (a)...........................     51,883           3,690,957
                                                                   ------------
                 CHEMICALS (5.1%)
                 Air Products & Chemicals,
                  Inc. .........................     70,503          3,014,003
                 Arch Chemicals, Inc. ..........    181,882          3,319,346
                 Crompton Corp. ................    160,100            952,595
                 IMC Global, Inc. ..............     25,100            267,817
                 Imperial Chemicals Industries
                  PLC ADR (b)...................    216,300           3,112,557
                 Olin Corp. ....................     95,525           1,485,414
                                                                   ------------
                                                                     12,151,732
                                                                   ------------
                 COMMERCIAL SERVICES & SUPPLIES (2.0%)
                 Imagistics International, Inc.
                  (a)...........................      9,796             195,920
                 Pitney Bowes, Inc. ............    136,511           4,458,449
                                                                   ------------
                                                                      4,654,369
                                                                   ------------
                 COMMUNICATIONS EQUIPMENT (0.3%)
                 Tellabs, Inc. (a)..............    101,636             738,894
                                                                   ------------

                 CONTAINERS & PACKAGING (3.6%)
                 Smurfit-Stone Container Corp.
                  (a)...........................    242,800           3,736,935
                 Temple-Inland, Inc. ...........    106,500           4,772,265
                                                                   ------------
                                                                      8,509,200
                                                                   ------------
                 DIVERSIFIED FINANCIALS (1.9%)
                 Lehman Brothers Holdings,
                  Inc. .........................     87,288           4,651,578
                                                                   ------------

                 DIVERSIFIED TELECOMMUNICATION SERVICES (1.1%)
                 ALLTEL Corp. ..................     50,613           2,581,263
                                                                   ------------
                                    SHARES           VALUE
                                  ----------------------------
ELECTRIC UTILITIES (8.6%)
DTE Energy Co. ................      109,779     $   5,093,746
Entergy Corp. .................       54,187         2,470,385
FirstEnergy Corp. .............       58,588         1,931,646
PG&E Corp. (a).................      553,953         7,699,947
PPL Corp. .....................       98,400         3,412,512
                                                  ------------
                                                    20,608,236
                                                  ------------
ELECTRICAL EQUIPMENT (0.9%)
Energizer Holdings, Inc. (a)...      75,695          2,111,891
                                                  ------------

ENERGY EQUIPMENT & SERVICES (5.0%)
ENSCO International, Inc. .....      132,022         3,888,048
GlobalSantaFe Corp. ...........      106,756         2,596,306
Hanover Compressor Co. (a).....      120,900         1,109,862
Pride International, Inc.
 (a)...........................      224,000         3,337,600
Transocean, Inc. ..............       48,300         1,120,560
                                                  ------------
                                                    12,052,376
                                                  ------------
FOOD PRODUCTS (1.0%)
Del Monte Foods Co. (a)........      28,979            223,138
Heinz (H.J.) Co. ..............      64,888          2,132,869
                                                  ------------
                                                     2,356,007
                                                  ------------
HEALTH CARE EQUIPMENT & SUPPLIES (6.2%)
Bausch & Lomb, Inc. ...........    241,971           8,710,956
Becton, Dickinson & Co. .......     42,955           1,318,289
Boston Scientific Corp. (a)....    110,026           4,678,305
                                                  ------------
                                                    14,707,550
                                                  ------------
HEALTH CARE PROVIDERS & SERVICES (0.9%)
Apria Healthcare Group, Inc.
 (a)...........................     98,300           2,186,192
                                                  ------------

HOTELS, RESTAURANTS & LEISURE (3.2%)
Ameristar Casinos, Inc. (a)....     37,400            527,340
Park Place Entertainment Corp.
 (a)...........................    502,900           4,224,360
Yum! Brands, Inc. (a)..........    118,964           2,881,308
                                                  ------------
                                                     7,633,008
                                                  ------------
HOUSEHOLD DURABLES (0.9%)
Fortune Brands, Inc. ..........      46,939          2,183,133
                                                  ------------

HOUSEHOLD PRODUCTS (0.7%)
Clorox Co. ....................      41,719          1,720,909
                                                  ------------

INSURANCE (1.9%)
Hartford Financial Services
 Group, Inc. ..................      99,847          4,536,049
                                                  ------------

IT CONSULTING & SERVICES (1.2%)
Computer Sciences Corp. (a)....      82,352          2,837,026
                                                  ------------



   -------
   + Percentages indicated are based on Fund net assets.
10
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial
statements.
Portfolio of Investments December 31, 2002

                                                      SHARES           VALUE
                                                    ----------------------------
                  COMMON STOCKS (CONTINUED)
                  LEISURE EQUIPMENT & PRODUCTS (1.3%)
                  Callaway Golf Co. .............    227,241       $ 3,010,943
                                                                   ------------

                  MACHINERY (9.0%)
                  AGCO Corp. (a).................    352,183          7,783,244
                  Cummins, Inc. .................     95,525          2,687,118
                  Ingersoll-Rand Co. Class A.....     33,993          1,463,739
                  Navistar International Corp.
                   (a)...........................    394,702           9,595,206
                                                                    ------------
                                                                      21,529,307
                                                                    ------------
                  MULTILINE RETAIL (0.7%)
                  Federated Department Stores,
                   Inc. (a)......................     60,041           1,726,779
                                                                    ------------
                  OIL & GAS (9.4%)
                  Burlington Resources, Inc. ....    117,200           4,998,580
                  Kerr-McGee Corp. ..............    100,800           4,465,440
                  Premcor, Inc. (a)..............    106,300           2,363,049
                  Sunoco, Inc. ..................    151,259           5,018,774
                  Unocal Corp. ..................    151,576           4,635,194
                  Valero Energy Corp. ...........     24,200             893,948
                                                                    ------------
                                                                      22,374,985
                                                                    ------------
                  PAPER & FOREST PRODUCTS (6.2%)
                  Boise Cascade Corp. ...........    131,200           3,308,864
                  Bowater, Inc. .................     82,400           3,456,680
                  MeadWestvaco Corp. ............    327,355           8,088,942
                                                                    ------------
                                                                      14,854,486
                                                                    ------------
                  REAL ESTATE (6.0%)
                  Developers Diversified Realty
                   Corp. ........................    123,591          2,717,766
                  Health Care Property Investors,
                   Inc. .........................     72,421          2,773,724
                  Healthcare Realty Trust,
                   Inc. .........................    104,508           3,056,859
                  Highwoods Properties, Inc. ....    106,963           2,363,882
                  Mack-Cali Realty Corp. ........    110,820           3,357,846
                                                                    ------------
                                                                      14,270,077
                                                                    ------------
                  ROAD & RAIL (2.3%)
                  Burlington Northern Santa Fe
                   Corp. ........................    134,995           3,511,220
                  CSX Corp. .....................     68,461           1,938,131
                                                                    ------------
                                                                       5,449,351
                                                                    ------------
                  SEMICONDUCTOR EQUIPMENT & PRODUCTS (0.8%)
                  Advanced Micro Devices, Inc.
                   (a)...........................    298,700           1,929,602
                                                                    ------------



                                                      SHARES           VALUE
                                                    ----------------------------
                  SPECIALTY RETAIL (1.1%)
                  Payless ShoeSource, Inc. (a)...     50,503       $ 2,599,389
                                                                   ------------
                  Total Common Stocks
                   (Cost $240,388,374)...........                    224,082,008
                                                                    ------------
                      CONVERTIBLE PREFERRED STOCKS (0.3%)

                      PAPER & FOREST PRODUCTS (0.1%)
                      International Paper Capital
                       Trust
                       5.25%, 7/20/25 Series.........              5,370              250,377
                                                                                 ------------

                      REAL ESTATE (0.2%)
                      General Growth Properties, Inc.
                       7.25%, 7/15/08 Series (c).....             14,318              476,646
                                                                                 ------------
                      Total Convertible Preferred
                       Stocks
                       (Cost $614,368)...............                                 727,023
                                                                                 ------------
                                                              PRINCIPAL
                                                                AMOUNT
                                                              ----------
                      LONG-TERM BONDS (0.2%)
                      CORPORATE BONDS (0.2%)

                      DIVERSIFIED FINANCIALS (0.2%)
                      Caithness Coso Funding Corp.
                       Series B
                       9.05%, due 12/15/09...........         $ 408,385               400,217
                                                                                 ------------
                      Total Long-Term Bonds
                       (Cost $359,399)...............                                 400,217
                                                                                 ------------
                      SHORT-TERM INVESTMENTS (5.1%)

                      COMMERCIAL PAPER (1.1%)
                      UBS Finance (Delaware) LLC
                       1.20%, due 1/2/03.............         2,535,000             2,534,915
                                                                                 ------------
                      Total Commercial Paper
                       (Cost $2,534,915).............                               2,534,915
                                                                                 ------------




                                                         11

The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial
statements.
MainStay Equity Income Fund

                                                              SHARES           VALUE
                                                            ----------------------------
                    INVESTMENT COMPANY (4.0%)
                    Merrill Lynch Premier
                     Institutional Fund............         9,626,717          $ 9,626,717
                                                                               ------------
                    Total Investment Company
                     (Cost $9,626,717).............                                9,626,717
                                                                                ------------
                    Total Short-Term Investments
                     (Cost $12,161,632)............                               12,161,632
                                                                                ------------
                    Total Investments
                     (Cost $253,523,773) (d).......               99.5%          237,370,880(e)
                    Cash and Other Assets,
                     Less Liabilities..............               0.5             1,278,115
                                                            ----------         ------------
                    Net Assets.....................             100.0%         $238,648,995
                                                            ==========         ============




(a) Non-income producing security.
(b) ADR-American Depository Receipt.
(c) PIERS-Preferred Income Equity Redeemable Stock.
(d) The cost for federal income tax purposes is $253,971,216.
(e) At December 31, 2002 net unrealized depreciation was $16,600,336, 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 $7,479,994, and aggregate gross unrealized depreciation for all investments
on which there was an excess of cost over market value of $24,080,330.

12
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial
statements.
Statement of Assets and Liabilities as of December 31, 2002

          ASSETS:
          Investment in securities, at value (identified cost
            $253,523,773).............................................                      $237,370,880
          Cash........................................................                             2,687
          Receivables:
            Investment securities sold................................                           911,462
            Fund shares sold..........................................                           845,454
            Dividends.................................................                           451,379
          Other assets................................................                            16,937
                                                                                            ------------
                    Total assets........................................                     239,598,799
                                                                                            ------------
          LIABILITIES:
          Payables:
            Fund shares redeemed......................................                           415,416
            Transfer agent............................................                           164,064
            NYLIFE Distributors.......................................                           150,855
            Manager...................................................                           140,977
            Custodian.................................................                             5,237
            Trustees..................................................                             2,474
          Accrued expenses............................................                            70,781
                                                                                            ------------
                    Total liabilities...................................                         949,804
                                                                                            ------------
          Net assets..................................................                      $238,648,995
                                                                                            ============
          COMPOSITION OF NET ASSETS:
          Shares of beneficial interest outstanding (par value of $.01
            per share) unlimited number of shares authorized:
            Class A...................................................                      $     69,861
            Class B...................................................                           113,826
            Class C...................................................                            24,669
          Additional paid-in capital..................................                       271,306,280
          Accumulated net investment loss.............................                          (125,073)
          Accumulated net realized loss on investments................                       (16,587,675)
          Net unrealized depreciation on investments..................                       (16,152,893)
                                                                                            ------------
          Net assets..................................................                      $238,648,995
                                                                                            ============
          CLASS A
          Net assets applicable to outstanding shares.................                      $ 80,441,670
                                                                                            ============
          Shares of beneficial interest outstanding...................                         6,986,125
                                                                                            ============
          Net asset value per share outstanding.......................                      $      11.51
          Maximum sales charge (5.50% of offering price)..............                              0.67
                                                                                            ------------
          Maximum offering price per share outstanding................                      $      12.18
                                                                                            ============
          CLASS B
          Net assets applicable to outstanding shares.................                      $130,024,185
                                                                                            ============
          Shares of beneficial interest outstanding...................                        11,382,554
                                                                                            ============
          Net asset value and offering price per share outstanding....                      $      11.42
                                                                                            ============
          CLASS C
          Net assets applicable to outstanding shares.................                      $ 28,183,140
                                                                                            ============
          Shares of beneficial interest outstanding...................                         2,466,857
                                                                                            ============
          Net asset value and offering price per share outstanding....                      $      11.42
                                                                                            ============




                                                         13

The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial
statements.
Statement of Operations for the year ended December 31, 2002

             INVESTMENT INCOME:
             Income:
               Dividends (a).............................................                $  4,494,566
               Interest..................................................                     229,326
                                                                                         ------------
                  Total income............................................                  4,723,892
                                                                                         ------------
             Expenses:
               Manager...................................................                   1,500,247
               Distribution--Class B.....................................                     974,792
               Distribution--Class C.....................................                     159,337
               Transfer agent............................................                     854,117
               Service--Class A..........................................                     157,760
               Service--Class B..........................................                     324,931
               Service--Class C..........................................                      53,112
               Shareholder communication.................................                      90,141
               Professional..............................................                      54,857
               Registration..............................................                      50,551
               Recordkeeping.............................................                      48,098
               Custodian.................................................                      47,515
               Trustees..................................................                      13,805
               Miscellaneous.............................................                      24,108
                                                                                         ------------
                  Total expenses..........................................                  4,353,371
                                                                                         ------------
             Net investment income.......................................                     370,521
                                                                                         ------------
             REALIZED AND UNREALIZED LOSS ON INVESTMENTS:
             Net realized loss on investments............................                 (16,417,265)
             Net change in unrealized appreciation on investments........                 (22,869,402)
                                                                                         ------------
             Net realized and unrealized loss on investments.............                 (39,286,667)
                                                                                         ------------
             Net decrease in net assets resulting from operations........                $(38,916,146)
                                                                                         ============




                             Dividends recorded net of foreign withholding taxes of
                       (a)   $3,516.




14
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial
statements.
Statement of Changes in Net Assets

                                                                                Year ended         Year ended
                                                                               December 31,       December 31,
                                                                                   2002               2001
                                                                               ------------       ------------
    INCREASE IN NET ASSETS:
    Operations:
      Net investment income.....................................               $   370,521        $    520,904
      Net realized gain (loss) on investments...................               (16,417,265)          6,274,177
      Net change in unrealized appreciation on investments......               (22,869,402)         (2,240,520)
                                                                               ------------       ------------
      Net increase (decrease) in net assets resulting from
        operations..............................................               (38,916,146)          4,554,561
                                                                               ------------       ------------
    Dividends and distributions to shareholders:
      From net investment income:
        Class A.................................................                   (328,297)           (345,009)
        Class B.................................................                         --            (166,447)
        Class C.................................................                         --             (12,543)
      From net realized gain on investments:
        Class A.................................................                   (446,252)          (550,888)
        Class B.................................................                   (729,043)        (1,436,957)
        Class C.................................................                   (157,334)          (142,699)
                                                                                ------------      ------------
           Total dividends and distributions to shareholders.....                (1,660,926)        (2,654,543)
                                                                                ------------      ------------
    Capital share transactions:
      Net proceeds from sale of shares:
        Class A.................................................                 79,196,510           31,563,044
        Class B.................................................                 88,864,443           69,126,492
        Class C.................................................                 27,200,106            9,528,951
      Net asset value of shares issued to shareholders in
        reinvestment of dividends and distributions:
        Class A.................................................                   628,017             699,740
        Class B.................................................                   646,444           1,394,741
        Class C.................................................                   120,713             129,388
                                                                               ------------       ------------
                                                                               196,656,233         112,442,356
      Cost of   shares redeemed:
        Class   A.................................................             (28,346,039)        (24,755,991)
        Class   B.................................................             (40,257,593)        (16,884,222)
        Class   C.................................................              (5,251,703)         (2,034,483)
                                                                               ------------       ------------
           Increase in net assets derived from capital share
            transactions.........................................              122,800,898          68,767,660
                                                                               ------------       ------------
          Net increase in net assets............................                82,223,826          70,667,678
    NET ASSETS:
    Beginning of year...........................................               156,425,169          85,757,491
                                                                               ------------       ------------
    End of year.................................................               $238,648,995       $156,425,169
                                                                               ============       ============
    Accumulated net investment loss at end of year..............               $ (125,073)        $         --
                                                                               ============       ============




                                                         15

The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial
statements.
Financial Highlights selected per share data and ratios

                                                                                                    Class A
                                                                        ----------------------------------------------

                                                                                   Year ended December 31,
                                                                        ----------------------------------------------
                                                                         2002         2001         2000         1999
                                                                        -------      -------      -------      -------
Net asset value at beginning of period...............                   $ 13.47      $ 13.14      $ 11.81      $ 10.25
                                                                        -------      -------      -------      -------
Net investment income................................                      0.06         0.12         0.21         0.22
Net realized and unrealized gain (loss) on
  investments........................................                     (1.90)           0.52            2.44           2.30
                                                                        -------         -------         -------        -------
Total from investment operations.....................                     (1.84)           0.64            2.65           2.52
                                                                        -------         -------         -------        -------
Less dividends and distributions:
From net investment income...........................                     (0.06)          (0.12)          (0.21)         (0.22
From net realized gain on investments................                     (0.06)          (0.19)          (1.02)         (0.74
In excess of net realized gain on investments........                        --              --           (0.09)            --
                                                                        -------         -------         -------        -------
Total dividends and distributions....................                     (0.12)          (0.31)          (1.32)         (0.96
                                                                        -------         -------         -------        -------
Net asset value at end of period.....................                   $ 11.51         $ 13.47         $ 13.14        $ 11.81
                                                                        =======         =======         =======        =======
Total investment return (a)..........................                    (13.67%)          4.88%          22.79%         25.11
Ratios (to average net assets)
  Supplemental Data:
    Net investment income............................                      0.71%           0.95%           1.66%          1.94
    Net expenses.....................................                      1.50%           1.53%           1.59%          1.65
    Expenses (before reimbursement)..................                      1.50%           1.53%           1.59%          1.82
Portfolio turnover rate..............................                        46%            100%            148%           193
Net assets at end of period (in 000's)...............                   $80,442         $40,692         $32,782        $18,764




                    *    Commencement of Operations.
                   **    Class C shares were first offered on September 1, 1998.
                    +    Annualized.
                         Total return is calculated exclusive of sales charges and is
                   (a)   not annualized.
                   (b)   Less than one thousand.




16
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial
statements.
                         Class B                                                             Class C
------------------------------------------------------                ------------------------------------------------
                                             June 1*                                                         September
          Year ended December 31,            through                         Year ended December 31,            throug
---------------------------------------    December 31,               ------------------------------------   December
  2002         2001      2000      1999        1998                     2002       2001      2000     1999        1998
--------     --------   -------   -------  ------------               --------    -------   ------   ------  ---------
$ 13.41      $ 13.09    $ 11.78   $ 10.24     $10.00                  $ 13.41     $ 13.09   $11.78   $10.24     $ 9.06
--------     --------   -------   -------     ------                  --------    -------   ------   ------     ------
  (0.01)         0.03      0.12      0.15       0.04                    (0.01)       0.03     0.12     0.15        0.04
  (1.92)         0.51      2.42      2.28       0.31                    (1.92)       0.51     2.42     2.28        1.25
--------     --------   -------   -------     ------                  --------    -------   ------   ------     ------
  (1.93)         0.54      2.54      2.43       0.35                    (1.93)       0.54     2.54     2.43        1.29
--------     --------   -------   -------     ------                  --------    -------   ------   ------     ------
       --      (0.03)    (0.12)     (0.15)     (0.04)                        --    (0.03)   (0.12)    (0.15)      (0.04
  (0.06)       (0.19)    (1.02)     (0.74)     (0.07)                   (0.06)     (0.19)   (1.02)    (0.74)      (0.07
       --           --   (0.09)         --        --                         --         --  (0.09)       --          --
--------     --------   -------   -------     ------                  --------    -------   ------   ------     ------
  (0.06)       (0.22)    (1.23)     (0.89)     (0.11)                   (0.06)     (0.22)   (1.23)    (0.89)      (0.11
--------     --------   -------   -------     ------                  --------    -------   ------   ------     ------
$ 11.42      $ 13.41    $ 13.09   $ 11.78     $10.24                  $ 11.42     $ 13.41   $13.09   $11.78     $10.24
========     ========   =======   =======     ======                  ========    =======   ======   ======     ======
  (14.35%)       4.17%    21.83%    24.16%      3.56%                   (14.35%)     4.17%   21.83%   24.16%      14.30
   (0.04%)       0.20%     0.91%     1.19%      0.45%+                   (0.04%)     0.20%    0.91%    1.19%       0.45
    2.25%        2.28%     2.34%     2.40%      3.86%+                    2.25%      2.28%    2.34%    2.40%       3.86
    2.25%        2.28%     2.34%     2.57%      3.86%+                    2.25%      2.28%    2.34%    2.57%       3.86
       46%        100%      148%      193%       270%                        46%      100%     148%     193%        270
$130,024     $105,146   $50,172   $23,803     $4,166                  $ 28,183    $10,586   $2,803   $ 824      $    --




                                                         17

The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial
statements.
MainStay Equity Income Fund

NOTE 1--ORGANIZATION AND BUSINESS:

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-four funds (collectively referred to as the "Funds").
These financial statements and notes relate only to MainStay Equity Income Fund (the "Fund"), a diversified fund.

The Fund currently offers three classes of shares. Distribution of Class A shares and Class B shares commenced
on June 1, 1998. Class C shares were initially offered on September 1, 1998. 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 A shares, Class B shares and Class C shares bear the same voting (except for issues that relate
solely to one class), dividend, liquidation and other rights and conditions except that the Class B shares and Class
C shares are subject to higher distribution fee rates. Each class of shares bears distribution and/or service fee
payments under a distribution plan pursuant to Rule 12b-1 under the 1940 Act.

The Fund's investment objective is to realize maximum long-term total return from a combination of capital
appreciation and income.

NOTE 2--SIGNIFICANT ACCOUNTING POLICIES:

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 of the 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 of the Fund 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 number of 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 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-

                                                            18
Notes to Financial Statements

the-counter securities quoted on the National Association of Securities Dealers ("NASDAQ") system (but not
listed on the National Market System) at the closing bid price supplied through such system, (d) by appraising
over-the-counter securities not quoted on the NASDAQ system at prices supplied by a pricing agent selected by
the Fund's Manager or Subadvisor, 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 the Fund's subadvisor, whose prices reflect broker/dealer supplied valuations and electronic data processing
techniques if those prices are deemed by the Fund's subadvisor to be representative of market values at the
regular close of business of the Exchange, and (f) by appraising all other securities and other assets, including
over-the-counter common and preferred stocks not quoted on the NASDAQ system and debt securities for
which prices are supplied by a pricing agent but are not deemed by the Fund's subadvisor 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 Trust's Board of Trustees. 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 Fund's calculation of net asset values unless the Fund's Manager
or Subadvisor deems that the particular event would materially affect the Fund's 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 or excise tax provision is required.

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

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 and capital gain distributions,
if any, are declared and paid annually. 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.

                                                        19
MainStay Equity Income Fund

The following table discloses the current year reclassifications between accumulated net investment loss,
accumulated net realized loss on investments and additional paid-in capital arising from permanent differences; net
assets at December 31, 2002, are not affected.

                                                   ACCUMULATED
                                ACCUMULATED        NET REALIZED
                               NET INVESTMENT        LOSS ON            ADDITIONAL
                                    LOSS           INVESTMENTS        PAID-IN CAPITAL
                               --------------      ------------       ---------------
                                  (167,297)          212,650              (45,353)




The reclassifications for the Fund are primarily due to real estate investment trust distributions.

The tax character of distributions paid during the years ended December 31, 2002 and December 31, 2001 was
as follows:

                                                                          2002                  2001
                                                                       -----------           -----------
             Distributions paid from:
               Ordinary income                                         $ 328,297             $ 523,999
               Long-term capital gain                                   1,332,629             2,130,544
                                                                       ----------            ----------
                                                                       $1,660,926            $2,654,543
                                                                       ==========            ==========




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. Discounts and
premiums on securities, other than short-term securities, purchased for the Fund are accreted and amortized,
respectively, 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. Discounts and premiums on short-term securities are accreted
and amortized, respectively, on the straight line method.

EXPENSES. Expenses of the Trust are allocated to the individual Funds in proportion to the net assets of the
respective Funds when the expenses are incurred except where direct allocations of expenses can be made.

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 assets on the date the income is earned or expenses and realized and unrealized gains and losses
are incurred.

                                                          20
Notes to Financial Statements (continued)

USE OF ESTIMATES. The preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America 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.

NOTE 3--FEES AND RELATED PARTY TRANSACTIONS:

MANAGER AND SUBADVISOR. New York Life Investment Management LLC ("NYLIM" or the
"Manager"), an indirect wholly-owned subsidiary of New York Life Insurance Company ("New York Life"),
serves as the Fund's manager. The Manager provides offices, conducts clerical, record-keeping and
bookkeeping services, and keeps most of the financial and accounting records required for the Fund. The
Manager also pays the salaries and expenses of all personnel affiliated with the Fund and all the operational
expenses that are not the responsibility of the Fund. The Manager has delegated its portfolio management
responsibilities to MacKay Shields LLC (the "Subadvisor"), a registered investment advisor and indirect wholly-
owned subsidiary of New York Life. 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 0.70% of the Fund's average daily net assets. The Manager has voluntarily agreed
to reimburse the expenses of the Fund to the extent that operating expenses would exceed on an annualized basis
1.65%, 2.40% and 2.40% of the average daily net assets of the Class A, Class B and Class C shares,
respectively. For the year ended December 31, 2002, the Manager earned from the Fund $1,500,247. It was
not necessary for the Manager to reimburse the Fund for expenses for the year ended December 31, 2002.

Pursuant to the terms of a Sub-Advisory Agreement between NYLIM and the Subadvisor, the Manager paid the
Subadvisor a monthly fee at an annual rate of 0.35% of the average daily net assets of the Fund.

DISTRIBUTION AND SERVICE FEES. The Trust, on behalf of the Fund, has a Distribution Agreement with
NYLIFE Distributors Inc. (the "Distributor"), an indirect wholly-owned subsidiary of New York Life. The Fund,
with respect to each class of 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.

                                                        21
MainStay Equity Income Fund

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.

SALES CHARGES. The Fund was advised by the Distributor that the amount of sales charges retained on sales
of Class A shares was $47,915 for the year ended December 31, 2002. The Fund was also advised that the
Distributor retained contingent deferred sales charges on redemptions of Class A, Class B and Class C shares of
$2,440, $543,726 and $14,292, respectively, for the year ended December 31, 2002.

TRANSFER, DIVIDEND DISBURSING AND SHAREHOLDER SERVICING AGENT. NYLIM Service
Company LLC, ("NYLIM Service"), an affiliate of NYLIM, is the Fund's transfer, dividend disbursing and
shareholder servicing agent. NYLIM Service has entered into an agreement with Boston Financial Data Services
("BFDS") pursuant to which BFDS will perform certain of the services for which NYLIM Service is responsible.
Transfer agent expenses accrued to NYLIM Service for the year ended December 31, 2002 amounted to
$854,117.

TRUSTEES FEES. Trustees, other than those affiliated with NYLIM, are paid an annual fee of $45,000, $2,000
for each Board meeting, $1,000 for each Committee meeting and $500 for each Valuation Subcommittee
telephonic meeting attended plus reimbursement for travel and out-of-pocket expenses. The Lead Non-
Interested 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, included in Professional fees as shown on the Statement of
Operations, provided to the Fund by the Office of General Counsel of NYLIM amounted to $4,558 for the year
ended December 31, 2002.

The Fund pays the Manager a monthly fee for recordkeeping services provided under the Accounting Agreement
at the annual rate of 1/20 of 1% for the first $20 million of average monthly net assets, 1/30 of 1% of the next
$80 million of average monthly net assets and 1/100 of 1% of any amount in excess of $100 million of average
monthly net assets. Fees for recordkeeping services provided to the Fund by the Manager amounted to $48,098
for the year ended December 31, 2002.

NOTE 4--FEDERAL INCOME TAX:

As of December 31, 2002, the components of accumulated loss on a tax basis were as follows:

                         ACCUMULATED CAPITAL        UNREALIZED       TOTAL ACCUMULATED
                          AND OTHER LOSSES         DEPRECIATION            LOSS
                         -------------------       ------------      -----------------
                            $(11,108,126)          $(16,600,336)       $(27,708,462)




The difference between book-basis and tax-basis unrealized depreciation is primarily due to wash sales deferrals
and real estate investment trust distributions.

                                                        22
Notes to Financial Statements (continued)

At December 31, 2002, for federal income tax purposes, capital loss carryforwards of $10,983,053 were
available, to the extent provided by regulations to offset future realized gains of the Fund through 2010. To the
extent that these carryforwards are used to offset future capital gains, it is probable that the capital gains so offset
will not be distributed to shareholders.

In addition, the Fund intends to elect to treat for federal income tax purposes $5,157,179 of qualifying capital
losses that arose after October 31, 2002 as if they arose on January 1, 2003.

NOTE 5--PURCHASES AND SALES OF SECURITIES (IN 000'S):

During the year ended December 31, 2002, purchases and sales of securities, other than short-term securities,
were $211,534 and $91,882, respectively.

NOTE 6--LINE OF CREDIT:

The Fund and certain affiliated funds maintain a line of credit of $160,000,000 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 .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 among 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, 2002.

NOTE 7--CAPITAL SHARE TRANSACTIONS (IN 000'S):

                                                                 YEAR ENDED                            YEAR ENDED
                                                              DECEMBER 31, 2002                     DECEMBER 31, 2001
                                                         ---------------------------           ---------------------------
                                                         CLASS A   CLASS B   CLASS C           CLASS A   CLASS B   CLASS C
                                                         -------   -------   -------           -------   -------   -------
Shares sold.................................              6,186     6,744     2,094             2,381     5,212      723
Shares issued in reinvestment of dividends
  and distributions.........................                 54           57          11           53         106         10
                                                         ------       ------       -----       ------      ------      -----
                                                          6,240        6,801       2,105        2,434       5,318        733
Shares redeemed.............................             (2,275)      (3,261)       (428)      (1,908)     (1,307)      (157)
                                                         ------       ------       -----       ------      ------      -----
Net increase................................              3,965        3,540       1,677          526       4,011        576
                                                         ======       ======       =====       ======      ======      =====




                                                          23
Report of Independent Accountants

To the Board of Trustees of The MainStay Funds and Shareholders of MainStay Equity Income 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 Equity Income Fund (one of the funds constituting The
MainStay Funds, hereafter referred to as the "Fund") at December 31, 2002, the results of its operations for the
year then ended, 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, 2002 by correspondence with the custodian, provide a reasonable basis for our
opinion.

PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York
February 19, 2003

                                                         24
Trustees and Officers

Following are the Trustees and Officers of The MainStay Funds, along with a brief description of their principal
occupations during the past five years.

Each Trustee serves until his/her successor is elected and qualified or until his/her resignation, death, or removal.
Officers serve a term of one year and are elected annually by the Trustees.

The business address of each Trustee and Officer is 51 Madison Avenue, New York, New York 10010.

                                                                                     NUMBER OF
                                                                                     PORTFOLIOS
                           POSITION(S)                                                IN FUND
                          HELD WITH FUND                                              COMPLEX
        NAME AND          AND LENGTH OF            PRINCIPAL OCCUPATION(S)            OVERSEEN    OTHER D
     DATE OF BIRTH         TIME SERVED              DURING PAST FIVE YEARS           BY TRUSTEE     HELD
---------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEES(1)
---------------------------------------------------------------------------------------------------------
Gary E. Wendlandt         Chairman since   Chief Executive Officer, Chairman, and         43
10/8/50                   January 1,       Manager, New York Life Investment
                          2002, and        Management LLC (including predecessor
                          Trustee since    advisory organizations) and New York
                          2000             Life Investment Management Holdings LLC;
                                           Executive Vice President, New York Life
                                           Insurance Company; Director, NYLIFE
                                           Distributors, Inc.; Vice Chairman and
                                           Manager, McMorgan & Company LLC;
                                           Manager, MacKay Shields LLC; Executive
                                           Vice President, New York Life Insurance
                                           and Annuity Corporation; Chairman, Chief
                                           Executive Officer, and Director,
                                           MainStay VP Series Fund, Inc. (19
                                           portfolios); Executive Vice President
                                           and Chief Investment Officer, MassMutual
                                           Life Insurance Company (1993 to 1999).
---------------------------------------------------------------------------------------------------------
Stephen C. Roussin        President,       President, Chief Operating Officer, and        45
7/12/63                   Chief            Manager, New York Life Investment
                          Executive        Management LLC (including predecessor
                          Officer, and     advisory organizations) and New York
                          Trustee since    Life Investment Management Holdings LLC;
                          1997             Senior Vice President, New York Life
                                           Insurance Company; Director, NYLIFE
                                           Securities, Inc.; Chairman and Director,
                                           NYLIFE Distributors Inc.; Manager,
                                           McMorgan & Company LLC; Chairman,
                                           President, and Trustee, Eclipse Funds,
                                           (4 portfolios); Chairman, President and
                                           Director, Eclipse Funds Inc. (14
                                           portfolios); Chairman and Trustee, New
                                           York Life Investment Management
                                           Institutional Funds (3 portfolios);
                                           Senior Vice President, Smith Barney
                                           (1994 to 1997).
---------------------------------------------------------------------------------------------------------
1 Certain Trustees are considered to be interested persons of the Trust within the meaning of the 1940 Ac
  their affiliation with New York Life Insurance Company, New York Life Investment Management LLC, MacKay
  LLC, McMorgan & Company LLC, Eclipse Funds, Eclipse Funds Inc., MainStay VP Series Fund, Inc., New York
  Investment Management Institutional Funds, NYLIFE Securities Inc., and/or NYLIFE Distributors Inc., as
  detail in the column "Principal Occupation(s) During Past Five Years."




                                                          25

INFORMATION ON THIS PAGE HAS NOT BEEN AUDITED.
                                                                                     NUMBER OF
                                                                                     PORTFOLIOS
                           POSITION(S)                                                IN FUND
                          HELD WITH FUND                                              COMPLEX
         NAME AND         AND LENGTH OF            PRINCIPAL OCCUPATION(S)            OVERSEEN    OTHER D
     DATE OF BIRTH         TIME SERVED              DURING PAST FIVE YEARS           BY TRUSTEE     HELD
---------------------------------------------------------------------------------------------------------
Harry G. Hohn             Trustee since    Retired. Chairman and Chief Executive          24      Directo
3/1/32                    1996             Officer, New York Life Insurance Company               Corpora
                                           (1990 to 1997); Chairman of the Board,
                                           Life Insurance Council of New York (1996
                                           to 1997); Director, Million Dollar
                                           Roundtable Foundation (1996 to 1997).
---------------------------------------------------------------------------------------------------------
Donald K. Ross            Trustee since    Retired. Chairman, Chief Executive             24      Manager
7/1/25                    1991             Officer, and President, New York Life                  Shields
                                           Insurance Company (1981 to 1990).
---------------------------------------------------------------------------------------------------------
NON-INTERESTED TRUSTEES
---------------------------------------------------------------------------------------------------------
Charlynn Goins            Trustee since    Retired. Consultant to U.S. Commerce           24
9/15/42                   2001             Department, Washington, DC (1998 to
                                           2000); Senior Vice President and
                                           Director of International Marketing,
                                           Prudential Mutual Funds and Annuities
                                           (1990 to 1997).
---------------------------------------------------------------------------------------------------------
Edward J. Hogan           Trustee since    Rear Admiral U.S. Navy (Retired);              24
8/17/32                   1996             Independent Management Consultant.
---------------------------------------------------------------------------------------------------------
Terry L. Lierman          Trustee since    Partner, Health Ventures LLC; Vice             24
1/4/48                    1991             Chair, Employee Health Programs;
                                           Partner, TheraCom (1994 to 2001);
                                           President, Capitol Associates, Inc.
                                           (1984 to 2001).
---------------------------------------------------------------------------------------------------------
John B. McGuckian         Trustee since    Chairman, Ulster Television Plc; Pro           24      Chairma
11/13/39                  1997             Chancellor, Queen's University (1985 to                Norther
                                           2001).                                                 Plc; No
                                                                                                  Directo
                                                                                                  Irish B
                                                                                                  Non-Exe
                                                                                                  Directo
                                                                                                  Plc (en
                                                                                                  Non-Exe
                                                                                                  Directo
                                                                                                  Contine
                                                                                                  Plc (sh
---------------------------------------------------------------------------------------------------------
Donald E. Nickelson       Trustee since    Retired. Vice Chairman, Harbour Group          24      Directo
12/9/32                   1994 and Lead    Industries, Inc. (leveraged buyout                     Carey &
                          Non-             firm).
                          Interested
                          Trustee
---------------------------------------------------------------------------------------------------------
Richard S. Trutanic       Trustee since    Managing Director, The Carlyle Group           24
2/13/52                   1994             (private investment firm); Chairman and
                                           Chief Executive Officer, Somerset Group
                                           (financial advisory firm); Senior
                                           Managing Director, Groupe Arnault
                                           (private investment firm) (1999 to
                                           2001).
---------------------------------------------------------------------------------------------------------




26

INFORMATION ON THIS PAGE HAS NOT BEEN AUDITED.
                                                                                     NUMBER OF
                                                                                     PORTFOLIOS
                           POSITION(S)                                                IN FUND
                          HELD WITH FUND                                              COMPLEX
         NAME AND         AND LENGTH OF            PRINCIPAL OCCUPATION(S)            OVERSEEN    OTHER D
     DATE OF BIRTH         TIME SERVED              DURING PAST FIVE YEARS           BY TRUSTEE     HELD
---------------------------------------------------------------------------------------------------------
OFFICERS WHO ARE NOT TRUSTEES
---------------------------------------------------------------------------------------------------------
Jefferson C. Boyce        Senior Vice      Senior Managing Director, New York Life       N/A
9/17/57                   President        Investment Management LLC (including
                          since 1995       predecessor advisory organizations);
                                           Senior Vice President, New York Life
                                           Insurance Company; Senior Vice
                                           President, Eclipse Funds and Eclipse
                                           Funds Inc.; Director, NYLIFE
                                           Distributors, Inc.
---------------------------------------------------------------------------------------------------------
Patrick J. Farrell        Chief            Managing Director, New York Life              N/A
9/27/59                   Financial and    Investment Management LLC (including
                          Accounting       predecessor advisory organizations);
                          Officer,         Treasurer, Chief Financial and
                          Treasurer, and   Accounting Officer, Eclipse Funds Inc.,
                          Vice President   Eclipse Funds, MainStay VP Series Fund,
                          since 2001       Inc., and New York Life Investment
                                           Management Institutional Funds; Chief
                                           Financial Officer and Assistant
                                           Treasurer, McMorgan Funds.
---------------------------------------------------------------------------------------------------------
Robert A. Anselmi         Secretary        Senior Managing Director, General             N/A
10/19/46                  since 2001       Counsel, and Secretary, New York Life
                                           Investment Management LLC (including
                                           predecessor advisory organizations);
                                           Secretary, New York Life Investment
                                           Management Holdings LLC; Senior Vice
                                           President, New York Life Insurance
                                           Company; Vice President and Secretary,
                                           McMorgan & Company LLC; Secretary,
                                           NYLIFE Distributors, Inc.; Secretary,
                                           MainStay VP Series Fund, Inc., Eclipse
                                           Funds Inc., Eclipse Funds and New York
                                           Life Investment Management Institutional
                                           Funds; Managing Director and Senior
                                           Counsel, Lehman Brothers Inc., (October
                                           1998 to December 1999); General Counsel
                                           and Managing Director, JP Morgan
                                           Investment Management Inc. (1986 to
                                           September 1998).
---------------------------------------------------------------------------------------------------------
Richard W. Zuccaro        Tax Vice         Vice President, New York Life Insurance       N/A
12/12/49                  President        Company; Vice President, New York Life
                          since 1991       Insurance and Annuity Corporation,
                                           NYLIFE Insurance Company of Arizona,
                                           NYLIFE LLC, NYLIFE Securities Inc., and
                                           NYLIFE Distributors Inc.; Tax Vice
                                           President, New York Life International,
                                           LLC; Tax Vice President, Eclipse Funds,
                                           Eclipse Funds Inc., MainStay VP Series
                                           Fund, Inc., and New York Life Investment
                                           Management Institutional Funds.
---------------------------------------------------------------------------------------------------------




                                               27

INFORMATION ON THIS PAGE HAS NOT BEEN AUDITED.
THE MAINSTAY FUNDS

EQUITY FUNDS
MainStay Select 20 Equity Fund
MainStay Small Cap Growth Fund
MainStay Small Cap Value Fund(1)
MainStay Mid Cap Growth Fund
MainStay Capital Appreciation Fund
MainStay Blue Chip Growth Fund
MainStay Equity Index Fund(2)
MainStay U.S. Large Cap Equity Fund

EQUITY & INCOME FUNDS
MainStay Growth Opportunities Fund
MainStay Equity Income Fund
MainStay MAP Fund
MainStay Research Value Fund
MainStay Value Fund
MainStay Strategic Value Fund
MainStay Convertible Fund
MainStay Total Return Fund

INCOME FUNDS
MainStay High Yield Corporate Bond Fund
MainStay Strategic Income Fund
MainStay Government Fund
MainStay Tax Free Bond Fund
MainStay Money Market Fund

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

INVESTMENT ADVISOR

NEW YORK LIFE INVESTMENT MANAGEMENT LLC
Parsippany, New Jersey

INVESTMENT SUBADVISORS

MACKAY SHIELDS LLC(3)
New York, New York

DALTON, GREINER, HARTMAN, MAHER & CO.
New York, New York

FUND ASSET MANAGEMENT, L.P.
D/B/A MERCURY ADVISORS
Plainsboro, New Jersey

GABELLI ASSET MANAGEMENT COMPANY
Rye, New York

JENNISON ASSOCIATES LLC
New York, New York

MARKSTON INTERNATIONAL, LLC
White Plains, New York

McMORGAN & COMPANY LLC(3)
San Francisco, California


1 Closed to new investors as of December 1, 2001. 2 Closed to new purchases as of January 1, 2002. 3 An
affiliate of New York Life Investment Management LLC.

                                                    28
This page intentionally left blank
This page intentionally left blank
Trustees and Officers(1)

                         GARY E. WENDLANDT             Chairman and Trustee
                         STEPHEN C. ROUSSIN            President, Chief Executive
                                                       Officer, and Trustee
                         CHARLYNN GOINS                Trustee
                         EDWARD J. HOGAN               Trustee
                         HARRY G. HOHN                 Trustee
                         TERRY L. LIERMAN              Trustee
                         JOHN B. MCGUCKIAN             Trustee
                         DONALD E. NICKELSON           Trustee
                         DONALD K. ROSS                Trustee
                         RICHARD S. TRUTANIC           Trustee
                         JEFFERSON C. BOYCE            Senior Vice President
                         PATRICK J. FARRELL            Chief Financial and
                                                       Accounting Officer,
                                                       Treasurer, and
                                                       Vice President
                         ROBERT A. ANSELMI             Secretary
                         RICHARD W. ZUCCARO            Tax Vice President




DECHERT
Legal Counsel

PRICEWATERHOUSECOOPERS LLP
Independent Accountants

1 As of December 31, 2002.

[MAINSTAY LOGO]

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


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

NYLIFE DISTRIBUTORS INC.
NYLIM Center
169 Lackawanna Avenue
Parsippany, New Jersey 07054

www.mainstayfunds.com

This report may only be distributed when preceded or accompanied by a current Fund prospectus.

(C)2003 NYLIFE Distributors Inc. All rights reserved. MSEN11- 02/03

                                                    19

[RECYCLE LOGO]

                                     [MAINSTAY FUNDS LOGO]

MainStay(R)
Equity Income Fund

                                           ANNUAL REPORT

                                          DECEMBER 31, 2002
[MAINSTAY LOGO]
                Table of Contents

President's Letter                              2
$10,000 Invested in MainStay U.S. Large Cap
Equity Fund versus S&P 500(R) Index and
Inflation--Class A, Class B, and Class C
Shares                                          3
Portfolio Management Discussion and Analysis    5
Performance for the Year Ended 12/31/02         6
Returns and Lipper Rankings as of 12/31/02      9
Portfolio of Investments                       10
Financial Statements                           13
Notes to Financial Statements                  17
Report of Independent Accountants              23
Trustees and Officers                          24
The MainStay(R) Funds                          27
2 President's Letter

In many respects, 2002 was a difficult year for investors. From the start, geopolitical tensions, homeland security
concerns, corporate accounting scandals, and rising unemployment all contributed to market uncertainty. Early
hopes for a sustained economic recovery eventually gave way to more realistic expectations, and stock prices fell
to progressive lows in August and October. When all was said and done, the U.S. stock market recorded its
third consecutive annual decline--something investors had not seen in more than 60 years. International stocks
were also weak, with most developed foreign markets providing double-digit negative returns in U.S. dollar
terms.

Weakness in the equity markets increased demand for bonds--both domestic and foreign--as investors sought a
potentially "safer haven" for their assets. In the absence of a 30-year U.S. Treasury auction, longer-term Treasury
bonds were particularly strong throughout the year. Investment-grade corporate debt also provided impressive
returns, but lower-rated issues suffered from continuing credit-quality concerns.

The economy provided mixed signals, with weak business investment and relatively strong consumer spending
throughout much of the year. Low interest rates stimulated the housing market and contributed to high levels of
mortgage refinancing. Gross domestic product continued to advance, surging ahead in the third quarter of 2002,
but growing at a slower pace in the fourth quarter.

Regardless of how the markets or the economy may move, each MainStay Fund adheres to a disciplined
investment process suited to its individual investment objective. We believe that
in challenging markets, consistent application of sound investment principles makes it
easier for our shareholders to understand performance and make appropriate portfolio
adjustments.

The report that follows explains the market forces and management decisions that affected your MainStay Fund
during 2002. Your registered representative can help you with any questions you may have about this report or
your MainStay investments. As you look to the future, we hope you will remain optimistic and focused on the
potential benefits of long-term investing.

Sincerely,

                                            /s/ STEPHEN C. ROUSSIN
                                            Stephen C. Roussin
                                            January 2003
                                                        3

The disclosure and footnotes on the following page are an integral part of these graphs and should be carefully
read in conjunction with them.

$10,000 Invested in MainStay
U.S. Large Cap Equity Fund versus
S&P 500(R) Index and Inflation

CLASS A SHARES Total Return: 1 Year -30.39%
[LINE GRAPH]

                                                            MAINSTAY U.S. LARGE CAP
                                                                  EQUITY FUND                    S+P 500 INDEX
                                                            -----------------------              -------------
1/2/02                                                              9450.00                        10000.00
12/02                                                               6961.00                         7790.00




CLASS B SHARES Total Return: 1 Year -30.45%
[LINE GRAPH]

                                                            MAINSTAY U.S. LARGE CAP
                                                                  EQUITY FUND                    S+P 500 INDEX
                                                            -----------------------              -------------
1/2/02                                                             10000.00                        10000.00
12/02                                                               6955.00                         7790.00




CLASS C SHARES Total Return: 1 Year -27.52%
[LINE GRAPH]

                                                            MAINSTAY U.S. LARGE CAP
                                                                  EQUITY FUND                    S+P 500 INDEX
                                                            -----------------------              -------------
1/2/02                                                             10000.00                        10000.00
12/02                                                               7248.00                         7790.00
4


PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. DUE TO MARKET
VOLATILITY, CURRENT PERFORMANCE MAY BE LESS THAN THAT SHOWN. INVESTMENT
RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND SHARES, UPON REDEMPTION, MAY
BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. Performance tables and graphs do not
reflect the deduction of taxes that a shareholder would pay on distributions or Fund-share redemptions. Total
returns reflect change in share price, reinvestment of dividend and capital gain distributions, and maximum
applicable sales charges explained in this paragraph. The graphs assume an initial investment of $10,000 and
reflect deduction of all sales charges that would have applied for the period of investment. Class A share
performance reflects the effect of the maximum 5.5% initial sales charge. Class B shares are subject to a
contingent deferred sales charge (CDSC) of up to 5% if shares are redeemed within the first six years of
purchase. Class B share performance reflects a CDSC of 5%, which would apply for the period shown. Class C
shares would be subject to a CDSC of 1% if redeemed within one year of purchase.

1 "S&P 500(R)" is a trademark of The McGraw-Hill Companies, Inc. The S&P 500 is an unmanaged index and
is widely regarded as the standard for measuring large-cap U.S. stock market performance. Results assume
reinvestment of all income and capital gains. An investment cannot be made directly into an index.

2 Inflation is measured by the Consumer Price Index (CPI), which is a commonly used measure of the rate of
inflation and shows the changes in the cost of selected goods. The rate of inflation does not represent an
investment return.
                                                         5

1 See footnote and table on page 9 for more information about Lipper Inc. 2 See footnote on page 4 for more
information about the S&P 500 Index.

Portfolio Management Discussion and Analysis

The year 2002 was a difficult one for large-capitalization stocks. Although the economy continued to advance, its
progress was weakened by a number of factors. Corporate accounting scandals, other boardroom misconduct,
and conflict-of-interest investigations captured the headlines throughout much of the year, all of which weighed
heavily on the stock market.

Many investors began the year anticipating a strong recovery in the second half of 2002. As the year progressed,
however, corporate earnings failed to climb and corporate spending was particularly weak. Consumer spending,
on the other hand, remained relatively strong through most of the year, thanks to lower interest rates and
widespread mortgage refinancing. In November, the Federal Reserve moved to stimulate the weakening
economy by lowering the targeted federal funds rate by 50 basis points to an unusually low 1.25%. The Fed's
move was followed by a modest stock market rally, but geopolitical tensions, rising unemployment, homeland-
security concerns, and a prolonged stock market decline had all taken a toll on consumer confidence. Together
these factors contributed to weak consumer spending during the holiday-shopping season.

At the end of 2002, the stock market was down for the third consecutive year-- something investors hadn't seen
in over six decades. Yet market declines weren't the only difficulty. A military engagement with Iraq appeared
increasingly likely. The U.S. budget surplus had given way to deficit spending. North Korea had announced that it
was making nuclear weapons. Terrorism was rearing its ugly head in country after country, and the United
Nations was seeking peaceful resolutions to problems around the globe.

PERFORMANCE REVIEW

For the year ended December 31, 2002, MainStay U.S. Large Cap Equity Fund Class A shares returned -
26.34% and Class B and Class C shares returned -26.79%, excluding all sales charges. All share classes
underperformed the -23.49% return of the average Lipper(1) large-cap core fund over the same period. All
share classes also underperformed the -22.10% return of the S&P 500(R) Index(2) for the one-year period
ended December 31, 2002.

The Fund's relative underperformance was largely a result of Tyco International, which detracted from the
portfolio's results. We had also positioned the Fund with an overweighted position in larger-capitalization issues,
which we believed would be the primary beneficiaries of a global economic recovery. As it happened, however,
the recovery wasn't forthcoming and larger-capitalization issues underperformed. The Fund also emphasized
stocks in the technology area, which were particularly weak when capital spending failed to rebound.
6

PERFORMANCE FOR THE YEAR ENDED 12/31/02
[BAR CHART]

                                                                                          CLASS A                        CL
                                                                                          -------                        --
12/02                                                                                      -26.34




On the positive side, the portfolio was overweighted in stocks in the financials, health care, and energy sectors, all
of which outperformed the overall market in 2002. The portfolio also owns several stocks that provide attractive
yields, and this positioning added to overall return.

STRATEGIC POSITIONING

Portfolio turnover was low during the Fund's first year of operations. The biggest changes involved upgrading the
quality of the companies held in the Fund's portfolio. Several companies with deteriorating characteristics were
eliminated, such as ADC Telecommunications, Conexant Systems, Nortel Networks, Sun Microsystems, and
WorldCom. Higher-quality stocks in the technology sector, such as Cisco Systems, VERITAS Software, and
International Business Machines, were purchased. Some of the Fund's holdings in larger, slower-growing health
care companies were trimmed, while faster-growing companies, such as Genentech and Cardinal Health, were
purchased. Overall, the portfolio closed its first year fairly evenly split between growth and value stocks.

BEST AND WORST PERFORMERS

The Fund benefited from several of its holdings. Bank of America advanced on the strong relative performance of
regional banks compared to money center banks. Since regional banks have less exposure to capital markets,
they were less affected by lower trading volumes and investment banking activities. Bank of America performed
well in an environment that favored consumer banking activities, such as checking and savings deposits, mortgage
financing, and credit cards. Wachovia also benefited from the same regional banking trends.
                                                         7

UnitedHealth, the nation's largest publicly traded health maintenance organization, was able to take advantage of
better pricing and a lower cost structure to improve earnings in a difficult environment. Exelon and Entergy are
two utility holding companies that stuck to what they do best and benefited--despite the weakness in the energy
and utilities sectors that resulted from the Enron collapse.

As already noted, Tyco International was the Fund's weakest performing security during the year. The company
suffered from a failed reorganization attempt, a $170 million corporate-funds siphoning scandal, and other
accounting irregularities. These major surprises caused the stock to lose more than 75% of its value during 2002.
Other weak points in the portfolio reflected the overall underperformance of large-cap issues.

PURCHASES AND SALES

Among the Fund's significant purchases during 2002 was biotechnology company Genentech, which we believe
has much stronger earnings-growth potential than the overall market or large-cap pharmaceutical companies. The
purchase reflected our desire to increase growth potential among the Fund's health care holdings. We also
purchased Cardinal Health, a distributor of drugs and health care products. The company is well positioned to
benefit from an aging U.S. population and the increased reliance on prescription medications that will naturally
follow this demographic trend. Cardinal Health's role as a distributor may help to insulate the company from
pricing pressures facing major drug manufacturers. The Fund trimmed its position in Bristol-Myers Squibb and
Schering-Plough, two slower-growing drug companies, to put money into faster-growing health care companies.

The Fund also established a position in Washington Mutual, a company focused on providing financial services to
individuals and small businesses. Washington Mutual benefited from a booming housing market and widespread
mortgage refinancing when consumers sought to take advantage of low interest rates.

During the year, we added to the Fund's initial position in Allstate, a leading insurance company serving both
individuals and corporations. We believe that pricing in the insurance industry has become favorable, premiums
are up significantly, and good earnings growth should follow.

During 2002, we sold the Fund's positions in ADC Telecommunications and Nortel Networks as part of our
effort to upgrade portfolio holdings in the information technology sector. The Fund benefited by eliminating these
weaker companies and adding to the Fund's position in Cisco Systems, which we believe is a higher-quality
company with stronger earnings potential.
8 WEIGHTING CHANGES

Weightings across sectors were not changed significantly during the Fund's first year. The Fund emphasized
holdings in health care, information technology, and energy, but underweighted positions in the consumer
discretionary sector. We believe that the health care sector should continue to benefit from the aging of America
and increased spending on health care products and services.

Information technology spending is down significantly, but earnings appear to be leveraged for a rebound in
capital spending. When the economy turns around, earnings for information technology companies may rebound
significantly. Energy earnings should benefit from high oil prices. The potential for conflict with Iraq has pushed oil
prices to levels that are likely higher than dictated by current economic conditions. Even so, we believe these
fundamentals may lead to better near-term earnings for energy companies. In our opinion, the consumer
discretionary sector looks fully priced at this time. We have underweighted the sector, since we believe it offers
limited opportunity potential.

LOOKING AHEAD

Our outlook is for the economy to expand at a reasonable, yet less-than-historic inflation-adjusted growth rate of
2% to 3%. We see little evidence to suggest that a double-dip recession will occur, but there are some downside
risks. One of these risks is geopolitical. The possibility of a war with Iraq continues to weigh on the market, as
does the continuing threat of terrorist activity. We believe that inflation may remain subdued, but may also have
bottomed. As we see it, the Federal Reserve is likely to maintain low short interest rates until clear evidence of a
self-sustaining recovery develops.

Whatever the economy or the markets may bring, the Fund will continue to seek to realize above average total
return consistent with reasonable risk.

Portfolio Management Team
McMorgan & Company LLC
                                                        9

Returns and Lipper Rankings as of 12/31/02
FUND TOTAL RETURNS (WITHOUT SALES CHARGES)(1)

                                                                     1 YEAR
                                     Class A                        -26.34%
                                     Class B                        -26.79%
                                     Class C                        -26.79%




                        FUND TOTAL RETURNS (WITH SALES CHARGES)(1)

                                                                     1 YEAR
                                     Class A                        -30.39%
                                     Class B                        -30.45%
                                     Class C                        -27.52%




       FUND LIPPER(2) RANKINGS AND LIPPER CATEGORY RETURNS AS OF 12/31/02

                                                                1 YEAR
                                 Class A                 735 out of 933 funds
                                 Class B                 765 out of 933 funds
                                 Class C                 765 out of 933 funds

                                 Average Lipper
                                 large-cap core fund            -23.49%




   FUND PER-SHARE NET ASSET VALUES AND DISTRIBUTIONS FOR THE YEAR ENDED
                                  12/31/02

                                   NAV 12/31/02                   INCOME                   CAPITAL GAINS
       Class A                        $7.32                       $0.0465                     $0.0000
       Class B                        $7.31                       $0.0108                     $0.0000
       Class C                        $7.31                       $0.0108                     $0.0000




   1 PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. DUE TO MARKET

VOLATILITY, CURRENT PERFORMANCE MAY BE LESS THAN THAT SHOWN. INVESTMENT
RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND SHARES, UPON REDEMPTION, MAY
BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. Performance tables and graphs do not
reflect the deduction of taxes that a shareholder would pay on distributions or Fund-share redemptions. Total
returns reflect change in share price and reinvestment of all dividend and capital gain distributions. Performance
figures reflect certain fee waivers and/or expense limitations, without which total return figures may have been
lower. Fee waivers and/or expense limitations are voluntary and may be discontinued at any time.

Class A shares are sold with a maximum initial sales charge of 5.5%. Class B shares are subject to a CDSC of
up to 5% if shares are redeemed within the first six years of purchase. Class C shares are subject to a CDSC of
1% if redeemed within one year of purchase.

2 Lipper Inc. is an independent monitor of mutual fund performance. Rankings are based on total returns with all
dividend and capital gain distributions reinvested. Results do not reflect any deduction of sales charges. Lipper
averages are not class specific. Class A shares, Class B shares, and Class C shares were first offered to the
public on 1/2/02.

INFORMATION ON THIS PAGE AND THE PRECEDING PAGES HAS NOT BEEN AUDITED.
10

MainStay U.S. Large Cap Equity Fund

                                                       SHARES         VALUE
                                                       -----------------------
                  COMMON STOCKS (98.9%)+

                  AEROSPACE & DEFENSE (0.8%)
                  Honeywell International, Inc. ....   7,400      $   177,600
                                                                  -----------
                  AUTOMOBILES (1.0%)
                  Ford Motor Co. ...................   10,000           93,000
                  General Motors Corp. .............   2,900           106,894
                                                                   -----------
                                                                       199,894
                                                                   -----------
                  BANKS (6.9%)
                  Bank of America Corp. ............   9,450           657,437
                  Bank One Corp. ...................   3,300           120,615
                  U.S. Bancorp......................   12,500          265,250
                  Wachovia Corp. ...................   7,500           273,300
                  Washington Mutual, Inc. ..........   3,400           117,402
                                                                   -----------
                                                                     1,434,004
                                                                   -----------
                  BEVERAGES (2.2%)
                  Anheuser-Busch Cos., Inc. ........   3,900           188,760
                  PepsiCo, Inc. ....................   6,500           274,430
                                                                   -----------
                                                                       463,190
                                                                   -----------
                  BIOTECHNOLOGY (0.8%)
                  Genentech, Inc. (a)...............   4,900           162,484
                                                                   -----------

                  CHEMICALS (2.5%)
                  Dow Chemical Co. (The)............   5,000           148,500
                  E.I. du Pont de Nemours & Co. ....   4,100           173,840
                  PPG Industries, Inc. .............   3,800           190,570
                                                                   -----------
                                                                       512,910
                                                                   -----------
                  COMMERCIAL SERVICES & SUPPLIES (1.0%)
                  Automatic Data Processing,
                   Inc. ............................ 3,400             133,450
                  Paychex, Inc. .................... 2,400              66,960
                                                                   -----------
                                                                       200,410
                                                                   -----------
                  COMMUNICATIONS EQUIPMENT (3.1%)
                  Cisco Systems, Inc. (a)...........   33,000          432,300
                  Comverse Technology, Inc. (a).....   4,800            48,096
                  JDS Uniphase Corp. (a)............   9,100            22,477
                  Lucent Technologies, Inc. (a).....   9,200            11,592
                  Motorola, Inc. ...................   15,400          133,210
                                                                   -----------
                                                                       647,675
                                                                   -----------
                  COMPUTERS & PERIPHERALS (5.8%)
                  Dell Computer Corp. (a)...........   5,400          144,396
                  EMC Corp. (a).....................   11,300          69,382
                  Hewlett-Packard Co. ..............   19,838         344,388
                  International Business Machines
                   Corp. ...........................   8,550           662,625
                                                                   -----------
                                                                     1,220,791
                                                                   -----------



                                                       SHARES         VALUE
                                                       -----------------------
                  DIVERSIFIED FINANCIALS (9.9%)
                       Citigroup, Inc. ..................          23,600        $   830,484
                       Fannie Mae........................          11,900            765,527
                       J.P. Morgan Chase & Co. ..........          19,400            465,600
                                                                                 -----------
                                                                                   2,061,611
                                                                                 -----------
                       DIVERSIFIED TELECOMMUNICATION SERVICES (3.1%)
                       AT&T Corp. ....................... 1,140                       29,765
                       SBC Communications, Inc. ......... 12,600                     341,586
                       Verizon Communications, Inc. ..... 7,050                      273,188
                                                                                 -----------
                                                                                     644,539
                                                                                 -----------
                       ELECTRIC UTILITIES (2.4%)
                       Entergy Corp. ....................          3,700             168,683
                       Exelon Corp. .....................          4,600             242,742
                       TXU Corp. ........................          4,350              81,258
                                                                                 -----------
                                                                                     492,683
                                                                                 -----------
                       ELECTRICAL EQUIPMENT (1.2%)
                       Emerson Electric Co. .............          4,850             246,622
                                                                                 -----------

                       ELECTRONIC EQUIPMENT & INSTRUMENTS (0.3%)
                       Agilent Technologies, Inc. (a).... 1,800                       32,328
                       Solectron Corp. (a)............... 7,000                       24,850
                                                                                 -----------
                                                                                      57,178
                                                                                 -----------
                       ENERGY EQUIPMENT & SERVICES (0.9%)
                       Schlumberger Ltd. ................          4,500             189,405
                                                                                 -----------

                       FOOD & DRUG RETAILING (2.4%)
                       Albertson's, Inc. ................          8,000             178,080
                       Kroger Co. (The) (a)..............          8,600             132,870
                       Walgreen Co. .....................          6,700             195,573
                                                                                 -----------
                                                                                     506,523
                                                                                 -----------
                       FOOD PRODUCTS (1.1%)
                       Sara Lee Corp. ...................          10,000            225,100
                                                                                 -----------

                       HEALTH CARE EQUIPMENT & SUPPLIES (1.1%)
                       Baxter International, Inc. ....... 6,700                      187,600
                       Zimmer Holdings, Inc. (a)......... 1,200                       49,824
                                                                                 -----------
                                                                                     237,424
                                                                                 -----------
                       HEALTH CARE PROVIDERS & SERVICES (3.0%)
                       Cardinal Health, Inc. ............ 2,500                      147,975
                       HCA, Inc. ........................ 3,500                      145,250
                       UnitedHealth Group, Inc. ......... 4,000                      334,000
                                                                                 -----------
                                                                                     627,225
                                                                                 -----------
                       HOUSEHOLD PRODUCTS (1.7%)
                       Kimberly-Clark Corp. .............          2,500             118,675
                       Procter & Gamble Co. (The)........          2,800             240,632
                                                                                 -----------
                                                                                     359,307
                                                                                 -----------



                           -------
                           + 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.
Portfolio of Investments December 31, 2002

                                               11

                                                        SHARES         VALUE
                                                        -----------------------
                   COMMON STOCKS (CONTINUED)
                   INDUSTRIAL CONGLOMERATES (6.0%)
                   3M Co. ...........................   2,150      $    265,095
                   General Electric Co. .............   27,800          676,930
                   Tyco International Ltd. ..........   17,650          301,462
                                                                    -----------
                                                                      1,243,487
                                                                    -----------
                   INSURANCE (4.0%)
                   Allstate Corp. (The)..............   5,200          192,348
                   American International Group,
                    Inc. ............................   6,800          393,380
                   Chubb Corp. (The).................   3,800          198,360
                   Travelers Property Casualty Corp.
                    Class A (a)......................   1,002            14,679
                    Class B (a)......................   2,059            30,165
                                                                    -----------
                                                                        828,932
                                                                    -----------
                   IT CONSULTING & SERVICES (0.2%)
                   Electronic Data Systems Corp. ....   2,400            44,232
                                                                    -----------
                   LEISURE EQUIPMENT & PRODUCTS (0.2%)
                   Eastman Kodak Co. ................ 1,000              35,040
                                                                    -----------

                   MEDIA (2.5%)
                   AOL Time Warner, Inc. (a).........   11,900          155,890
                   Comcast Corp. Class A (a).........   1,843            43,439
                   Knight-Ridder, Inc. ..............   3,600           227,700
                   Walt Disney Co. (The).............   5,800            94,598
                                                                    -----------
                                                                        521,627
                                                                    -----------
                   METALS & MINING (0.9%)
                   Alcoa, Inc. ......................   8,500           193,630
                                                                    -----------
                   MULTILINE RETAIL (3.3%)
                   Costco Wholesale Corp. (a)........   3,700           103,822
                   May Department Stores Co. (The)...   4,900           112,602
                   Penney (J.C.) Co., Inc. ..........   3,400            78,234
                   Sears, Roebuck & Co. .............   5,100           122,145
                   Wal-Mart Stores, Inc. ............   5,450           275,279
                                                                    -----------
                                                                        692,082
                                                                    -----------
                   MULTI-UTILITIES & UNREGULATED POWER (0.1%)
                   El Paso Corp. .................... 4,100              28,536
                                                                    -----------

                   OIL & GAS (5.8%)
                   BP PLC ADR (b)....................   5,500          223,575



                                                        SHARES         VALUE
                                                        -----------------------
                   OIL & GAS (CONTINUED)
                   Burlington Resources, Inc.........   2,200      $     93,830
                   ChevronTexaco Corp. ..............   5,900           392,232
                   Exxon Mobil Corp. ................   11,200          391,328
                   Royal Dutch Petroleum Co. ........   2,400           105,648
                                                                    -----------
                                                                      1,206,613
                                                                    -----------
                   PAPER & FOREST PRODUCTS (0.2%)
                       Georgia-Pacific Corp. ............          3,200              51,712
                                                                                 -----------
                       PHARMACEUTICALS (11.4%)
                       Bristol-Myers Squibb Co. .........          5,300             122,695
                       Eli Lilly & Co. ..................          4,500             285,750
                       Johnson & Johnson.................          10,350            555,899
                       Merck & Co., Inc. ................          7,200             407,592
                       Pfizer, Inc. .....................          18,100            553,317
                       Pharmacia Corp. ..................          5,800             242,440
                       Schering-Plough Corp. ............          9,300             206,460
                                                                                 -----------
                                                                                   2,374,153
                                                                                 -----------
                       ROAD & RAIL (0.5%)
                       CSX Corp. ........................          3,900             110,409
                                                                                 -----------

                       SEMICONDUCTOR EQUIPMENT & PRODUCTS (3.3%)
                       Agere Systems, Inc.
                        Class A (a)......................     99                         143
                        Class B (a)...................... 2,433                        3,406
                       Applied Materials, Inc. (a)....... 6,300                       82,089
                       Intel Corp. ...................... 24,200                     376,794
                       Novellus Systems, Inc. (a)........ 1,700                       47,736
                       Teradyne, Inc. (a)................    700                       9,107
                       Texas Instruments, Inc. .......... 9,100                      136,591
                       Xilinx, Inc. (a).................. 1,800                       37,080
                                                                                 -----------
                                                                                     692,946
                                                                                 -----------
                       SOFTWARE (4.5%)
                       BMC Software, Inc. (a)............          4,000              68,440
                       Microsoft Corp. (a)...............          13,900            718,630
                       Parametric Technology Corp. (a)...          7,100              17,892
                       VERITAS Software Corp. (a)........          8,800             137,456
                                                                                 -----------
                                                                                     942,418
                                                                                 -----------
                       SPECIALTY RETAIL (1.0%)
                       Home Depot, Inc. (The)............          9,200             220,432
                                                                                 -----------

                       TOBACCO (2.7%)
                       Philip Morris Cos., Inc. .........          13,800            559,314
                                                                                 -----------




The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial
statements.
MainStay U.S. Large Cap Equity Fund

12

                                                                 SHARES         VALUE
                                                                 -----------------------
                     COMMON STOCKS (CONTINUED)
                     WIRELESS TELECOMMUNICATION SERVICES (1.1%)
                     AT&T Wireless Services, Inc.
                      (a).............................. 1,800                  $     10,170
                     Vodafone Group PLC ADR (b)........ 11,900                      215,628
                                                                                -----------
                                                                                    225,798
                                                                                -----------
                     Total Investments
                      (Cost $27,109,408) (c)...........           98.9%          20,637,936(d)
                     Cash and Other Assets, Less
                      Liabilities......................            1.1             227,696
                                                                 ------        -----------
                     Net Assets........................          100.0%        $20,865,632
                                                                 ======        ===========



                     -------
                     (a) Non-income producing security.
                     (b) ADR--American Depositary Receipt.
                     (c) The cost for federal income tax purposes is $27,309,003.
                     (d) At December 31, 2002, net unrealized depreciation was
                          $6,671,067 based on cost for federal income tax purposes.
                          This consisted of aggregated gross unrealized
                          appreciation for all investments on which there was an
                          excess of market value over cost of $294,014 and
                          aggregate gross unrealized depreciation for all
                          investments on which there was an excess of cost over
                          market value of $6,965,081.




The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial
statements.
                                                         13

Statement of Assets and Liabilities as of December 31, 2002

           ASSETS:
           Investment in securities, at value (identified cost
             $27,109,408)..............................................                     $20,637,936
           Cash........................................................                         215,453
           Receivables:
             Dividends.................................................                          42,288
             Fund shares sold..........................................                          19,137
           Other assets................................................                          14,200
                                                                                            -----------
                    Total assets........................................                     20,929,014
                                                                                            -----------
           LIABILITIES:
           Payables:
             Shareholder communication.................................                          18,718
             Transfer agent............................................                          15,280
             Manager...................................................                           9,969
             Professional..............................................                           8,419
             NYLIFE Distributors.......................................                           5,438
             Trustees..................................................                             242
             Custodian.................................................                             224
           Accrued expenses............................................                           5,092
                                                                                            -----------
                    Total liabilities...................................                         63,382
                                                                                            -----------
           Net assets..................................................                     $20,865,632
                                                                                            ===========
           COMPOSITION OF NET ASSETS:
           Shares of beneficial interest outstanding (par value of $.01
             per share) unlimited number of shares authorized:
             Class A...................................................                     $    26,278
             Class B...................................................                           2,019
             Class C...................................................                             200
           Additional paid-in capital..................................                      27,922,709
           Accumulated undistributed net investment income.............                           2,870
           Net realized loss on investments............................                        (616,972)
           Net unrealized depreciation on investments..................                      (6,471,472)
                                                                                            -----------
           Net assets..................................................                     $20,865,632
                                                                                            ===========
           CLASS A
           Net assets applicable to outstanding shares.................                     $19,244,192
                                                                                            ===========
           Shares of beneficial interest outstanding...................                       2,627,842
                                                                                            ===========
           Net asset value per share outstanding.......................                     $      7.32
           Maximum sales charge (5.50% of offering price)..............                            0.43
                                                                                            -----------
           Maximum offering price per share outstanding................                     $      7.75
                                                                                            ===========
           CLASS B
           Net assets applicable to outstanding shares.................                     $ 1,475,643
                                                                                            ===========
           Shares of beneficial interest outstanding...................                         201,943
                                                                                            ===========
           Net asset value and offering price per share outstanding....                     $      7.31
                                                                                            ===========
           CLASS C
           Net assets applicable to outstanding shares.................                     $   145,797
                                                                                            ===========
           Shares of beneficial interest outstanding...................                          19,952
                                                                                            ===========
           Net asset value and offering price per share outstanding....                     $      7.31
                                                                                            ===========




The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial
statements.
14

Statement of Operations for the year ended December 31, 2002

              INVESTMENT INCOME:
              Income:
                Dividends (a).............................................               $   416,899
                Interest..................................................                     7,247
                                                                                         -----------
                  Total income............................................                   424,146
                                                                                         -----------
              Expenses:
                Manager...................................................                   145,611
                Transfer agent............................................                    59,884
                Service--Class A..........................................                    53,508
                Service--Class B..........................................                     2,161
                Service--Class C..........................................                       335
                Offering costs............................................                    41,853
                Professional..............................................                    27,504
                Shareholder communication.................................                    26,029
                Registration..............................................                    15,422
                Recordkeeping.............................................                    12,000
                Pricing service...........................................                     9,228
                Custodian.................................................                     8,120
                Distribution--Class B.....................................                     6,483
                Distribution--Class C.....................................                     1,004
                Trustees..................................................                       897
                Miscellaneous.............................................                    15,274
                                                                                         -----------
                  Total expenses before reimbursement.....................                   425,313
              Expense reimbursement by Manager............................                   (81,798)
                                                                                         -----------
                  Net expenses............................................                   343,515
                                                                                         -----------
              Net investment income.......................................                    80,631
                                                                                         -----------
              REALIZED AND UNREALIZED LOSS ON INVESTMENTS:
              Net realized loss on investments............................                  (616,972)
              Net unrealized depreciation on investments..................                (6,471,472)
                                                                                         -----------
              Net realized and unrealized loss on investments.............                (7,088,444)
                                                                                         -----------
              Net decrease in net assets resulting from operations........               $(7,007,813)
                                                                                         ===========




                             Dividends recorded net of foreign withholding taxes of
                       (a)   $1,737.




The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial
statements.
                                                         15

Statement of Changes in Net Assets

                                                                                         Year ended
                                                                                      December 31, 2002
                                                                                      -----------------
           INCREASE IN NET ASSETS:
           Operations:
             Net investment income.....................................                   $    80,631
             Net realized loss on investments..........................                      (616,972)
             Net unrealized depreciation on investments................                    (6,471,472)
                                                                                          -----------
             Net decrease in net assets resulting from operations......                    (7,007,813)
                                                                                          -----------
             Dividends to shareholders:
               From net investment income:
               Class A.................................................                      (121,363)
               Class B.................................................                        (2,044)
               Class C.................................................                          (213)
                                                                                          -----------
                  Total dividends to shareholders.......................                     (123,620)
                                                                                          -----------
           Capital share transactions:
             Net proceeds from sale of shares:
               Class A.................................................                    27,504,249
               Class B.................................................                     1,975,216
               Class C.................................................                       231,188
             Net asset value of shares issued to shareholders in
               reinvestments of dividends:
               Class A.................................................                         5,352
               Class B.................................................                         1,799
               Class C.................................................                           103
                                                                                          -----------
                                                                                           29,717,907
             Cost of   shares redeemed:
               Class   A.................................................                  (1,445,274)
               Class   B.................................................                    (229,325)
               Class   C.................................................                     (46,243)
                                                                                          -----------
                  Increase in net assets derived from capital share
                   transactions.........................................                   27,997,065
                                                                                          -----------
                 Net increase in net assets............................                    20,865,632
           NET ASSETS:
           Beginning of year...........................................                            --
                                                                                          -----------
           End of year.................................................                   $20,865,632
                                                                                          ===========
           Accumulated undistributed net investment income at end of
             year......................................................                   $     2,870
                                                                                          ===========




The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial
statements.
16

Financial Highlights selected per share data and ratios

                                                                              Class A        Class B        Class C
                                                                            -----------    -----------    -----------
                                                                                  Year ended December 31, 2002
                                                                            -----------------------------------------
Net asset value at beginning of year........................                  $ 10.00        $ 10.00        $ 10.00
                                                                              -------        -------        -------
Net investment income (loss) (a)............................                     0.03          (0.02)         (0.02)
Net realized and unrealized loss on investments.............                    (2.66)         (2.66)         (2.66)
                                                                              -------        -------        -------
Total from investment operations............................                    (2.63)         (2.68)         (2.68)
                                                                              -------        -------        -------
     Less dividends to shareholders:
       From net investment income..............................                 (0.05)            (0.01)             (0.01)
                                                                              -------           -------            -------
Total dividends to shareholders.............................                    (0.05)            (0.01)             (0.01)
                                                                              -------           -------            -------
Net asset value at end of period............................                  $ 7.32            $ 7.31             $ 7.31
                                                                              =======           =======            =======
Total investment return (b).................................                   (26.34%)          (26.79%)           (26.79%)
Ratios (to average net assets)
  Supplemental Data:
    Net investment income (loss)............................                     0.39%           (0.36)%            (0.36)%
    Net expenses............................................                     1.50%             2.25%              2.25%
    Expenses (before reimbursement).........................                     1.86%             2.61%              2.61%
Portfolio turnover rate.....................................                        6%                6%                 6%
Net assets at end of year (in 000's)........................                  $19,244           $ 1,476            $   146




                         Per share data based on average shares outstanding during
                   (a)   the year.
                         Total return is calculated exclusive of sales charges and is
                   (b)   not annualized.




The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial
statements.
                                                            17

Notes to Financial Statements

NOTE 1--ORGANIZATION AND BUSINESS:

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-four funds (collectively referred to as the "Funds").
These financial statements and notes relate only to MainStay U.S. Large Cap Equity Fund (the "Fund"), a
diversified fund.

The Fund currently offers three classes of shares. On December 28, 2001, the Fund sold Class A, Class B and
Class C shares to NYLIFE Distributors Inc. (the "Distributor"), an indirect wholly-owned subsidiary of New
York Life Insurance Company ("New York Life"), at a net asset value of $10.00. The Fund commenced
investment operations the following business day on January 2, 2002. Class A shares are offered at net asset
value per share plus an initial sales charge. No sales charge applies on invest-
ments 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 A shares, Class B shares and Class C shares bear the same voting
(except for issues that relate solely to one class), dividend, liquidation and other rights and conditions except that
the Class B shares and Class C shares are subject to higher distribution fee rates. Each class of shares bears
distribution and/or service fee payments under a distribution plan pursuant to Rule 12b-1 under the 1940 Act.

The Fund's investment objective is to realize above average total return consistent with reasonable risk.

NOTE 2--SIGNIFICANT ACCOUNTING POLICIES:

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 of the 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 of the Fund 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 number of 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 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,
MainStay U.S. Large Cap Equity Fund

18

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 closing bid price supplied through
such system, (d) by appraising over-the-counter securities not quoted on the NASDAQ system at prices
supplied by a pricing agent selected by the Fund's Manager or Subadvisor, if such prices are deemed to be
represen- tative of market values at the regular close of business of the Exchange, and
(e) by appraising all other securities and other assets, including over-the-counter common and preferred stocks
not quoted on the NASDAQ system, 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 Trust's Board of Trustees. 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 deter-
mined and the close of the Exchange will not be reflected in the Fund's calculation of net asset values unless the
Fund's Manager or Subadvisor deems that the particular event would materially affect the Fund's net asset value,
in which case an adjustment may be made.

OFFERING COSTS. Costs incurred in connection with the initial offering of the Fund, in the amount of
$41,853, were amortized over a period of 12 months beginning with the commencement of operations on
January 2, 2002.

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 or excise tax provision is required.

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

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 and capital gain distribu-
tions, if any, are declared and paid annually. 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
Notes to Financial Statements (continued)

                                                        19

reclassified within the capital accounts based on their federal tax basis treatment; temporary differences do not
require reclassification.

The following table discloses the current year reclassifications between accumulated undistributed net investment
income and additional paid-in-capital arising from permanent differences: net assets at December 31, 2002, are
not affected.

                                        ACCUMULATED
                                       UNDISTRIBUTED
                                       NET INVESTMENT       ADDITIONAL
                                           INCOME         PAID-IN CAPITAL
                                       --------------     ---------------
                                          $45,859            $(45,859)




The reclassifications for the Fund are primarily due to non-deductible expenses (offering costs).

Dividends to shareholders from net investment income shown in the Statement of Changes in Net Assets for the
year ended December 31, 2002 represent tax-based distributions of ordinary income.

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 where 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 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 accounting principles
generally accepted in the United States of America 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.

NOTE 3--FEES AND RELATED PARTY TRANSACTIONS:

MANAGER AND SUBADVISOR. New York Life Investment Management LLC ("NYLIM" or the
"Manager"), an indirect wholly-owned subsidiary of New York Life, serves as the Fund's manager. The Manager
provides offices, conducts clerical, record keeping and bookkeeping services, and keeps most of the financial
and accounting records required for the Fund. The Manager also pays the salaries and
MainStay U.S. Large Cap Equity Fund

20

expenses of all personnel affiliated with the Fund and all the operational expenses that are not the responsibility of
the Fund. The Manager has delegated its portfolio management responsibilities to McMorgan & Company LLC
(the "Subadvisor"), a registered investment Advisor and indirect wholly-owned subsidiary of New York Life.
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, pays the Manager a monthly fee for services performed and the facilities
furnished at an annual rate of 0.65% of the Fund's average daily net assets. The Manager has voluntarily agreed
to reimburse the expenses of the Fund to the extent that operating expenses would exceed on an annualized basis
1.50%, 2.25% and 2.25% of the average daily net assets of the Class A, Class B and Class C shares,
respectively. For the year ended December 31, 2002, the Manager earned from the Fund $145,611 and
reimbursed the Fund $81,798.

Pursuant to the terms of a Sub-Advisory Agreement between NYLIM and the Subadvisor, the Manager pays
the Subadvisor a monthly fee at an annual rate of 0.325% of the average daily net assets of the Fund.

DISTRIBUTION AND SERVICE FEES. The Trust, on behalf of the Fund, has a Distribution Agreement with
the Distributor. The Fund, with respect to each class of 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.

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.

SALES CHARGES. The Fund was advised by the Distributor that the amount of sales charges retained on sales
of Class A shares was $396 for the year ended December 31, 2002. The Fund was also advised that the
Distributor retained contingent deferred sales charges on redemptions of Class B and Class C shares of $971
and $62, respectively, for the year ended December 31, 2002.
Notes to Financial Statements (continued)

                                                         21

TRANSFER, DIVIDEND DISBURSING AND SHAREHOLDER SERVICING AGENT. NYLIM Service
Company LLC, ("NYLIM Service"), an affiliate of NYLIM, is the Fund's transfer, dividend disbursing and
shareholder servicing agent. NYLIM Service has entered into an agreement with Boston Financial Data Services
("BFDS") pursuant to which BFDS will perform certain of the services for which NYLIM Service is responsible.
Transfer agent expenses accrued for the year ended December 31, 2002 amounted to $59,884.

TRUSTEES FEES. Trustees, other than those currently affiliated with NYLIM, are paid an annual fee of
$45,000, $2,000 for each Board meeting, $1,000 for each Committee meeting and $500 for each Valuation
Subcommittee telephonic meeting attended plus reimbursement for travel and out-of-pocket expenses. The Lead
Non-Interested 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.

CAPITAL. At December 31, 2002, New York Life held shares of Class A, Class B and Class C with a net
asset value of $18,153,600, $73,100 and $73,100, respectively. This represents 94.3%, 5.0% and 50.1% of the
Class A, Class B and Class C of the net assets at year end.

OTHER. Fees for the cost of legal services, included in Professional fees as shown on the Statement of
Operations, provided to the Fund by the Office of General Counsel of NYLIM amounted to $439 for the year
ended December 31, 2002.

The Fund pays the Manager a monthly fee for recordkeeping services provided under the Accounting Agreement
at the annual rate of 1/20 of 1% for the first $20 million of average monthly net assets, 1/30 of 1% of the next
$80 million of average monthly net assets and 1/100 of 1% of any amount in excess of $100 million of average
monthly net assets. Fees for recordkeeping services provided to the Fund by the Manager amounted to $12,000
for the year ended December 31, 2002.

NOTE 4--FEDERAL INCOME TAX:

As of December 31, 2002, the components of accumulated loss on a tax basis were as follows:

                     ORDINARY    ACCUMULATED CAPITAL       UNREALIZED      TOTAL ACCUMULATED
                      INCOME      AND OTHER LOSSES        DEPRECIATION           LOSS
                     --------    -------------------      ------------     -----------------
                     $2,870          $(200,215)           $(6,671,067)       $(6,868,412)




The difference between book-basis and tax-basis unrealized depreciation is due to wash sales deferrals.

At December 31, 2002, for federal income tax purposes, capital loss carryforwards of $200,215 were available
to the extent provided by the regulations to offset future realized gains through 2010. 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.

In addition, the Fund intends to elect to treat for federal income tax purposes $217,162 of qualifying capital
losses that arose after October 31, 2002 as if they arose on January 1, 2003.
MainStay U.S. Large Cap Equity Fund

22

NOTE 5--PURCHASES AND SALES OF SECURITIES (IN 000'S):

During the year ended December 31, 2002, purchases and sales of securities, other than short-term securities,
were $29,070 and $1,344, respectively.

NOTE 6--LINE OF CREDIT:

The Fund and certain affiliated funds maintain a line of credit of $160,000,000 with a syndicate of banks in order
to secure a source of funds for temporary purposes to meet unanticipated or excessive share- holder redemption
requests. The funds pay a commitment fee, at an annual rate of .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 among 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, 2002.

NOTE 7--CAPITAL SHARE TRANSACTIONS (IN 000'S):

                                                                                      YEAR ENDED
                                                                                   DECEMBER 31, 2002
                                                                              ---------------------------
                                                                              CLASS A   CLASS B   CLASS C
                                                                              -------   -------   -------
     Shares sold.................................................              2,820      232       26
     Shares issued in reinvestment of dividends..................                  1       --(a)    --(a)
                                                                               -----      ---       --
                                                                               2,821      232       26
     Shares redeemed.............................................               (193)     (30)      (6)
                                                                               -----      ---       --
     Net increase................................................              2,628      202       20
                                                                               =====      ===       ==




                                        (a)   Less than one thousand.
                                                         23

Report of Independent Accountants

To the Board of Trustees of The MainStay Funds and Shareholders of MainStay U.S. Large Cap 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 U.S. Large Cap Equity Fund (one of the funds constituting
The MainStay Funds, hereafter referred to as the "Fund") at December 31, 2002, and the results of its
operations, the changes in its net assets and the financial highlights for the year then ended, 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 audit. We conducted our audit
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 audit, which included confirmation of securities at December 31, 2002 by correspondence with the
custodian, provides a reasonable basis for our opinion.

PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York
February 19, 2003
24

Trustees and Officers

Following are the Trustees and Officers of The MainStay Funds, along with a brief description of their principal
occupations during the past five years.

Each Trustee serves until his/her successor is elected and qualified or until his/her resignation, death, or removal.
Officers serve a term of one year and are elected annually by the Trustees.

The business address of each Trustee and Officer is 51 Madison Avenue, New York, New York 10010.

                                                                                     NUMBER OF
                                                                                     PORTFOLIOS
                           POSITION(S)                                                IN FUND
                          HELD WITH FUND                                              COMPLEX
        NAME AND          AND LENGTH OF            PRINCIPAL OCCUPATION(S)            OVERSEEN    OTHER D
     DATE OF BIRTH         TIME SERVED              DURING PAST FIVE YEARS           BY TRUSTEE     HELD
---------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEES(1)
---------------------------------------------------------------------------------------------------------
Gary E. Wendlandt         Chairman since   Chief Executive Officer, Chairman, and         43
10/8/50                   January 1,       Manager, New York Life Investment
                          2002, and        Management LLC (including predecessor
                          Trustee since    advisory organizations) and New York
                          2000             Life Investment Management Holdings LLC;
                                           Executive Vice President, New York Life
                                           Insurance Company; Director, NYLIFE
                                           Distributors, Inc.; Vice Chairman and
                                           Manager, McMorgan & Company LLC;
                                           Manager, MacKay Shields LLC; Executive
                                           Vice President, New York Life Insurance
                                           and Annuity Corporation; Chairman, Chief
                                           Executive Officer, and Director,
                                           MainStay VP Series Fund, Inc. (19
                                           portfolios); Executive Vice President
                                           and Chief Investment Officer, MassMutual
                                           Life Insurance Company (1993 to 1999).
---------------------------------------------------------------------------------------------------------
Stephen C. Roussin        President,       President, Chief Operating Officer, and        45
7/12/63                   Chief            Manager, New York Life Investment
                          Executive        Management LLC (including predecessor
                          Officer, and     advisory organizations) and New York
                          Trustee since    Life Investment Management Holdings LLC;
                          1997             Senior Vice President, New York Life
                                           Insurance Company; Director, NYLIFE
                                           Securities, Inc.; Chairman and Director,
                                           NYLIFE Distributors Inc.; Manager,
                                           McMorgan & Company LLC; Chairman,
                                           President, and Trustee, Eclipse Funds,
                                           (4 portfolios); Chairman, President and
                                           Director, Eclipse Funds Inc. (14
                                           portfolios); Chairman and Trustee, New
                                           York Life Investment Management
                                           Institutional Funds (3 portfolios);
                                           Senior Vice President, Smith Barney
                                           (1994 to 1997).
---------------------------------------------------------------------------------------------------------
1 Certain Trustees are considered to be interested persons of the Trust within the meaning of the 1940 Ac
  their affiliation with New York Life Insurance Company, New York Life Investment Management LLC, MacKay
  LLC, McMorgan & Company LLC, Eclipse Funds, Eclipse Funds Inc., MainStay VP Series Fund, Inc., New York
  Investment Management Institutional Funds, NYLIFE Securities Inc., and/or NYLIFE Distributors Inc., as
  detail in the column "Principal Occupation(s) During Past Five Years."




INFORMATION ON THIS PAGE HAS NOT BEEN AUDITED.
                                               25

                                                                                     NUMBER OF
                                                                                     PORTFOLIOS
                           POSITION(S)                                                IN FUND
                          HELD WITH FUND                                              COMPLEX
         NAME AND         AND LENGTH OF            PRINCIPAL OCCUPATION(S)            OVERSEEN    OTHER D
     DATE OF BIRTH         TIME SERVED              DURING PAST FIVE YEARS           BY TRUSTEE     HELD
---------------------------------------------------------------------------------------------------------
Harry G. Hohn             Trustee since    Retired. Chairman and Chief Executive          24      Directo
3/1/32                    1996             Officer, New York Life Insurance Company               Corpora
                                           (1990 to 1997); Chairman of the Board,
                                           Life Insurance Council of New York (1996
                                           to 1997); Director, Million Dollar
                                           Roundtable Foundation (1996 to 1997).
---------------------------------------------------------------------------------------------------------
Donald K. Ross            Trustee since    Retired. Chairman, Chief Executive             24      Manager
7/1/25                    1991             Officer, and President, New York Life                  Shields
                                           Insurance Company (1981 to 1990).
---------------------------------------------------------------------------------------------------------
NON-INTERESTED TRUSTEES
---------------------------------------------------------------------------------------------------------
Charlynn Goins            Trustee since    Retired. Consultant to U.S. Commerce           24
9/15/42                   2001             Department, Washington, DC (1998 to
                                           2000); Senior Vice President and
                                           Director of International Marketing,
                                           Prudential Mutual Funds and Annuities
                                           (1990 to 1997).
---------------------------------------------------------------------------------------------------------
Edward J. Hogan           Trustee since    Rear Admiral U.S. Navy (Retired);              24
8/17/32                   1996             Independent Management Consultant.
---------------------------------------------------------------------------------------------------------
Terry L. Lierman          Trustee since    Partner, Health Ventures LLC; Vice             24
1/4/48                    1991             Chair, Employee Health Programs;
                                           Partner, TheraCom (1994 to 2001);
                                           President, Capitol Associates, Inc.
                                           (1984 to 2001).
---------------------------------------------------------------------------------------------------------
John B. McGuckian         Trustee since    Chairman, Ulster Television Plc; Pro           24      Chairma
11/13/39                  1997             Chancellor, Queen's University (1985 to                Norther
                                           2001).                                                 Plc; No
                                                                                                  Directo
                                                                                                  Irish B
                                                                                                  Non-Exe
                                                                                                  Directo
                                                                                                  Plc (en
                                                                                                  Non-Exe
                                                                                                  Directo
                                                                                                  Contine
                                                                                                  Plc (sh
---------------------------------------------------------------------------------------------------------
Donald E. Nickelson       Trustee since    Retired. Vice Chairman, Harbour Group          24      Directo
12/9/32                   1994 and Lead    Industries, Inc. (leveraged buyout                     Carey &
                          Non-             firm).
                          Interested
                          Trustee
---------------------------------------------------------------------------------------------------------
Richard S. Trutanic       Trustee since    Managing Director, The Carlyle Group           24
2/13/52                   1994             (private investment firm); Chairman and
                                           Chief Executive Officer, Somerset Group
                                           (financial advisory firm); Senior
                                           Managing Director, Groupe Arnault
                                           (private investment firm) (1999 to
                                           2001).
---------------------------------------------------------------------------------------------------------




INFORMATION ON THIS PAGE HAS NOT BEEN AUDITED.
26

                                                                                     NUMBER OF
                                                                                     PORTFOLIOS
                           POSITION(S)                                                IN FUND
                          HELD WITH FUND                                              COMPLEX
         NAME AND         AND LENGTH OF            PRINCIPAL OCCUPATION(S)            OVERSEEN    OTHER D
     DATE OF BIRTH         TIME SERVED              DURING PAST FIVE YEARS           BY TRUSTEE     HELD
---------------------------------------------------------------------------------------------------------
OFFICERS WHO ARE NOT TRUSTEES
---------------------------------------------------------------------------------------------------------
Jefferson C. Boyce        Senior Vice      Senior Managing Director, New York Life       N/A
9/17/57                   President        Investment Management LLC (including
                          since 1995       predecessor advisory organizations);
                                           Senior Vice President, New York Life
                                           Insurance Company; Senior Vice
                                           President, Eclipse Funds and Eclipse
                                           Funds Inc.; Director, NYLIFE
                                           Distributors, Inc.
---------------------------------------------------------------------------------------------------------
Patrick J. Farrell        Chief            Managing Director, New York Life              N/A
9/27/59                   Financial and    Investment Management LLC (including
                          Accounting       predecessor advisory organizations);
                          Officer,         Treasurer, Chief Financial and
                          Treasurer, and   Accounting Officer, Eclipse Funds Inc.,
                          Vice President   Eclipse Funds, MainStay VP Series Fund,
                          since 2001       Inc., and New York Life Investment
                                           Management Institutional Funds; Chief
                                           Financial Officer and Assistant
                                           Treasurer, McMorgan Funds.
---------------------------------------------------------------------------------------------------------
Robert A. Anselmi         Secretary        Senior Managing Director, General             N/A
10/19/46                  since 2001       Counsel, and Secretary, New York Life
                                           Investment Management LLC (including
                                           predecessor advisory organizations);
                                           Secretary, New York Life Investment
                                           Management Holdings LLC; Senior Vice
                                           President, New York Life Insurance
                                           Company; Vice President and Secretary,
                                           McMorgan & Company LLC; Secretary,
                                           NYLIFE Distributors, Inc.; Secretary,
                                           MainStay VP Series Fund, Inc., Eclipse
                                           Funds Inc., Eclipse Funds and New York
                                           Life Investment Management Institutional
                                           Funds; Managing Director and Senior
                                           Counsel, Lehman Brothers Inc., (October
                                           1998 to December 1999); General Counsel
                                           and Managing Director, JP Morgan
                                           Investment Management Inc. (1986 to
                                           September 1998).
---------------------------------------------------------------------------------------------------------
Richard W. Zuccaro        Tax Vice         Vice President, New York Life Insurance       N/A
12/12/49                  President        Company; Vice President, New York Life
                          since 1991       Insurance and Annuity Corporation,
                                           NYLIFE Insurance Company of Arizona,
                                           NYLIFE LLC, NYLIFE Securities Inc., and
                                           NYLIFE Distributors Inc.; Tax Vice
                                           President, New York Life International,
                                           LLC; Tax Vice President, Eclipse Funds,
                                           Eclipse Funds Inc., MainStay VP Series
                                           Fund, Inc., and New York Life Investment
                                           Management Institutional Funds.
---------------------------------------------------------------------------------------------------------




INFORMATION ON THIS PAGE HAS NOT BEEN AUDITED.
                                          27

THE MAINSTAY FUNDS

EQUITY FUNDS
MainStay Select 20 Equity Fund
MainStay Small Cap Growth Fund
MainStay Small Cap Value Fund(1)
MainStay Mid Cap Growth Fund
MainStay Capital Appreciation Fund
MainStay Blue Chip Growth Fund
MainStay Equity Index Fund(2)
MainStay U.S. Large Cap Equity Fund

EQUITY & INCOME FUNDS
MainStay Growth Opportunities Fund
MainStay Equity Income Fund
MainStay MAP Fund
MainStay Research Value Fund
MainStay Value Fund
MainStay Strategic Value Fund
MainStay Convertible Fund
MainStay Total Return Fund

INCOME FUNDS
MainStay High Yield Corporate Bond Fund
MainStay Strategic Income Fund
MainStay Government Fund
MainStay Tax Free Bond Fund
MainStay Money Market Fund

INTERNATIONAL FUNDS
MainStay International Equity Fund
MainStay Global High Yield Fund
MainStay International Bond Fund
INVESTMENT ADVISOR

NEW YORK LIFE INVESTMENT MANAGEMENT LLC
Parsippany, New Jersey

INVESTMENT SUBADVISORS

MACKAY SHIELDS LLC(3)
New York, New York

DALTON, GREINER, HARTMAN, MAHER & CO.
New York, New York

FUND ASSET MANAGEMENT, L.P.
d/b/a Mercury Advisors
Plainsboro, New Jersey

GABELLI ASSET MANAGEMENT COMPANY
Rye, New York

JENNISON ASSOCIATES LLC
New York, New York

MARKSTON INTERNATIONAL, LLC
White Plains, New York

MCMORGAN & COMPANY LLC(3)
San Francisco, California


1 Closed to new investors as of December 1, 2001. 2 Closed to new purchases as of January 1, 2002. 3 An
affiliate of New York Life Investment Management LLC.
Trustees and Officers(1)

                         GARY E. WENDLANDT             Chairman and Trustee
                         STEPHEN C. ROUSSIN            President, Chief Executive
                                                       Officer, and Trustee
                         CHARLYNN GOINS                Trustee
                         EDWARD J. HOGAN               Trustee
                         HARRY G. HOHN                 Trustee
                         TERRY L. LIERMAN              Trustee
                         JOHN B. MCGUCKIAN             Trustee
                         DONALD E. NICKELSON           Trustee
                         DONALD K. ROSS                Trustee
                         RICHARD S. TRUTANIC           Trustee
                         JEFFERSON C. BOYCE            Senior Vice President
                         PATRICK J. FARRELL            Chief Financial and
                                                       Accounting Officer,
                                                       Treasurer, and
                                                       Vice President
                         ROBERT A. ANSELMI             Secretary
                         RICHARD W. ZUCCARO            Tax Vice President




DECHERT
Legal Counsel

PRICEWATERHOUSECOOPERS LLP
Independent Accountants
1 As of December 31, 2002.

[MAINSTAY LOGO]

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


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

NYLIFE DISTRIBUTORS INC.
NYLIM Center
169 Lackawanna Avenue
Parsippany, New Jersey 07054

www.mainstayfunds.com

This report may only be distributed when preceded or accompanied by a current Fund prospectus.

(C)2003 NYLIFE Distributors Inc. All rights reserved. MSLE11- 02/03

                                                    31

[RECYCLE GRAPHIC]

                                   [MAINSTAY FUNDS GRAPHIC]

MainStay(R) U.S. Large Cap
Equity Fund

                                           ANNUAL REPORT

                                          DECEMBER 31, 2002

                                          [MAINSTAY LOGO]