A portion of the Fund's income may be subject to state and local taxes or the alternative minimum tax. 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. Funds that invest in bonds are subject to interest-rate risk and can lose principal value when interest rates rise.
MainStay High Yield Municipal Bond Fund: High yield municipal bonds may be subject to increased liquidity risk as compared to other high yield debt securities. There may be little or no active trading market for certain high yield municipal bonds, which may make it difficult for the Fund to sell such securities at or near their perceived value. In such cases, the value of a high yield municipal bond may decline dramatically, even during periods of declining interest rates. The high yield municipal bonds in which the Fund intends to invest may be more likely to pay interest that is includable in taxable income for purposes of the Federal alternative minimum tax.
The Fund may invest more heavily in bonds from certain cities, states or regions than others, which may increase the Fund's exposure to losses resulting from economic, political, or regulatory occurrences impacting these particular cities, states or regions. To be tax exempt, municipal bonds must meet certain regulatory requirements. If a municipal bond fails to meet such requirements, the interest received by the Fund from its investment in such bonds and distributed to shareholders may be taxable. It is possible that interest on a municipal bond may be declared taxable after the issuance of the bond, and this determination may apply retroactively to the date of the issuance of the bond, which could cause a portion of prior distributions made by the Fund to be taxable to shareholders in the year of receipt.
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. High-yield securities ("junk bonds") are generally considered speculative because they present a greater risk of loss than higher-quality debt securities; these securities may also be subject to greater price volatility. Funds that invest in bonds are subject to interest-rate risk and can lose principal value when interest rates rise.
Effective 10/16/09, MacKay Shields was appointed subadvisor for the Fund. Previously, the Fund was managed by another subadvisor.
Effective 6/30/09, the Fund's primary benchmark index was changed from the Barclays Capital (formerly Lehman Brothers) 3-15 Year Municipal Bond Index to the Barclays Capital (formerly Lehman Brothers) Municipal Bond Index because it is believed to be more reflective of the Fund's investment style. The Fund's investment objective and principal investment strategies remain unchanged.
Average annual total returns include the change in share price and reinvestment of dividends and capital gain distributions. Performance for Class A and C shares, first offered 1/3/95 and 9/1/98, respectively, includes the historical performance of Class B shares from inception (5/1/86) through 12/31/94 for Class A and through 8/31/98 for Class C, adjusted to reflect the applicable sales charge (or CDSC) and fees and expenses for such shares. Performance for Investor Class shares, first offered 2/28/08, includes the historical performance of Class A shares from Fund inception (5/1/86) through 2/27/08 adjusted to reflect the applicable fees and expenses for such shares. MainStay Tax Free Bond Fund is not available in Retirement Services products.
The information contained on the video reflects, as of the date hereof, the views of MacKay Municipal Managers. No representation of warranty is made concerning the accuracy of any data compiled herein. In addition, there can be no guarantee that any projection, forecast, or opinion in these materials will be realized. The views expressed herein may change at any time subsequent to the date of issue hereof. These materials are provided for informational purposes only.
Please note that the investment objectives may not be met as the underlying investment options may be subject to market risk and will fluctuate in value. Investment objectives may not be met.
Definitions
A yield curve is graphic representation that displays the relationship between yields and maturity dates for a set of similar bonds, at a given point in time. For example, the U.S. dollar interest rates paid on U.S. Treasury securities for various maturities, such as short-term and long-term, are commonly plotted on a graph called a "yield curve."
Ultra High Grade refers to high grade bonds with natural AAA and AA+ ratings. Credit rating is a published ranking, based on detailed financial analysis by a credit bureau, of one's financial history, specifically as it relates to one's ability to meet debt obligations. The highest rating is usually AAA, and the lowest is D.
Five-year credits refer to bonds that have a maturity date of five years. Revenue bonds are bonds issued by governments, authorities, or public benefit corporations that are guaranteed by the revenue flow of the issuing agency.
Build America Bonds (BABs) are taxable municipal bonds that carry special tax credits and federal subsidies for either the bond issuer or the bondholder. Build America Bonds were created under the American Recovery and Reinvestment Act that U.S. President Barack Obama signed into law on February 17, 2009.
Credit spreads is the spread between Treasury securities and non-Treasury securities that are identical in all respects except for quality rating.
Duration is a measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. Duration is expressed as a number of years. Rising interest rates mean falling bond prices, while declining interest rates mean rising bond prices. The bigger the duration number, the greater the interest-rate risk or reward for bond prices.
The duration of a financial asset, specifically a bond, is a measure of average maturity that incorporates a bond's yield, coupon, final maturity and call features into one measurement. Duration measures the sensitivity of the asset's price to interest rate movements. It broadly corresponds to the length of time before the asset is due to be repaid.
Diversification refers to investing in a wide variety of stocks, bonds, and other securities. Diversifying among many holdings can help lower the risk that is associated with investing in a single security. While diversification can help to manage risk, it does not guarantee earnings growth or eliminate the risk of investment losses.
Alpha is a risk-adjusted measure of the so-called "excess return" on an investment. It is a common measure of assessing an active manager's performance as it is the return in excess of a benchmark index or "risk-free" investment.
Market Changes Risk: The value of the Fund's investments may change because of broad changes in the markets in which the Fund invests or poor security selection, which could cause the Fund to underperform other funds with similar objectives.
"Credits" is another word for securities or bonds.
M3 refers to the MacKay Municipal Managers Team of MacKay Shields which is co-headed by portfolio managers John Loffredo and Robert DiMella. The Team's relative value research-driven approach focuses on 1) active management of the portfolio in an effort to capitalize on market inefficiencies, consistently build a yield advantage, and seek an attractive after-tax total return 2) reduced volatility through a disciplined investment process and 3) fundamental, bottom-up credit research.
Sources
For comment regarding high borrowing rates prior to introduction of Build America Bonds: JPMorgan's DataQuery database, 2008. Database shows the ratio of AAA municipal rates to Treasuries (for 5, 10 and 30 year maturities). During 2008, this ratio increased to between 150% and 200%. This made it difficult for municipal issuers to come to market, and if they did, borrowing rates were very high. Since this time, rates have come down, and are now more in line with historical averages.
For comment regarding spread differential between institutional and retail rates: Journal of Financial Economics, July 2007, Richard C. Green, Burton Hollifield and Norman Schurtoff from "Dealer Intermediation and Price Behavior in the Aftermarket for New Bond Issues." Study determined that investors served by managers with institutional scale tend to pay only a portion of the trading costs associated with laddered portfolios.
About the Barron's Ranking
A fund family must have at least three funds in Lipper's general U.S.-stock category, one in world equity (which combines global and international funds), one mixed-equity fund (which holds stocks and bonds), at least two taxable-bond funds, and one tax exempt offering. Each fund's returns are adjusted for 12b-1 fees. Sales charges are not included in the calculation of returns. Each fund's return is measured against those of all funds in its Lipper category, leading to a percentile ranking, with 100 the highest and 1 the lowest, which is then weighted by asset size, relative to the fund family's other assets in its general classification. If a family's biggest funds do well, that boosts its overall ranking while poor performance in a big fund would have the opposite effect. Finally, the score is multiplied by the weighting of its general classification, as determined by the entire Lipper universe of funds. The category weightings for the one-year results: U.S. equity, 41.4%; world equity, 14.5%; mixed equity, 16.3%; taxable bond, 23.2%; tax-exempt bond, 4.7%. The scoring: Say a company has a fund in the general U.S. equity category, that the fund has $50 million in assets and that it accounts for half of the company's assets in that category. Its ranking is in the 75th percentile. The first calculation would be 75 X 0.50, which comes to 37.5. That score is then multiplied by 41.4%, U.S. equity's overall weighting in Lipper's universe. So it would be 37.5 X 0.414, which totals 15.5. Similar calculations are done for each fund in the study. Then, all the numbers are added up for a total score. The fund family with the highest score wins, both for every category and overall. The same process is repeated for the five-and 10-year rankings. Ranking data from Lipper.
Source: Barron's, 2/1/10. MainStay Funds ranked 34 for the one-year period, nine for the five-year period, and three for the 10-year period ended December 31, 2009, out of 61, 54, and 48 fund families, respectively. Past performance is no guarantee of future results.
New York Life Investments is a service mark used by New York Life Investment Management Holdings LLC and its subsidiary, New York Life Investment Management LLC. MainStay Investments, an indirect subsidiary of New York Life Insurance Company, New York, NY 10010, provides investment advisory products and services.
This mutual fund may be offered and sold only to persons in the United States. Please contact your investment professional or call 800-MAINSTAY (624-6782) for a prospectus or download it now. Please consider the investment objectives, risks, and charges and expenses of the investment carefully before investing. The prospectus contains this and other information about the investment company. Please read it carefully before you invest.
NYLIFE Distributors LLC, 169 Lackawanna Avenue, Parsippany, NJ 07054.
These products are not federally insured or guaranteed by the U.S. government, the Federal Deposit Insurance Corporation, or similar agency.
