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-two funds (collectively referred to as the "Funds"). These financial
statements and notes relate only to MainStay California Tax Free Fund (the "Fund").
The Fund currently offers three classes of shares. Class A shares, whose distribution commenced on October 1, 1991, are
offered at net asset value per share plus an initial sales charge. 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 January 3, 1995 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 invests substantially all of its assets in debt obligations issued by political subdivisions and authorities in the
State of California and the Commonwealth of Puerto Rico. The issuer's ability to meet its obligations may be affected by
economic and political developments in the State of California and the Commonwealth of Puerto Rico.
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 is calculated on each day the New
York Stock Exchange (the "E