Edgar Filing: MainStay DefinedTerm Municipal Opportunities Fund

Mainstay DefinedTerm Municipal Opportunities Fund

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT

INVESTMENT COMPANIES

Investment Company Act File Number 811-22551

MAINSTAY DEFINEDTERM

MUNICIPAL OPPORTUNITIES FUND

(Exact name of Registrant as specified in charter)

51 Madison Avenue, New York, NY 10010

(Address of principal executive offices) (Zip code)

J. Kevin Gao, Esq.

169 Lackawanna Avenue

Parsippany, New Jersey 07054

(Name and address of agent for service)

Registrant’s telephone number, including area code: (212) 576-7000

Date of fiscal year end: May 31

Date of reporting period: November 30, 2013

FORM N-CSR

Item 1.

Reports to Stockholders.

MainStay DefinedTerm Municipal Opportunities Fund

Message from the President and Semiannual Report

Unaudited | November 30, 2013 | NYSE Symbol MMD

LOGO

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Message from the President

During the six months ended November 30, 2013, the municipal market was affected by a number of factors. For several months ending in April 2013, municipal bonds had been trading in a relatively fixed range and exhibited muted price volatility. That trend changed abruptly during May 2013, when stronger-than-anticipated economic data led the media to suggest a “great rotation” from bonds to equities. In light of continuing low interest rates, this theory suggested that investors with ample cash reserves would abandon bonds to pursue higher returns in the stock market.

After addressing the Joint Economic Committee of the U.S. Congress on May 22, Federal Reserve Chairman Ben Bernanke suggested in response to questions that the Federal Open Market Committee (“FOMC”) might begin tapering its extensive bond-purchase program, widely known as quantitative easing.

Interest rates responded by moving higher, and municipal bonds underperformed U.S. Treasury securities throughout the summer. In large measure, the underperformance was due to Detroit’s Chapter 9 bankruptcy filing and Puerto Rico’s fiscal crises. The weakness resulted in substantial outflows from municipal bond funds.

Meanwhile, the FOMC decided that economic conditions did not yet warrant tapering direct bond purchases. Instead, the FOMC specified the economic conditions under which a less accommodative policy might be warranted. Throughout the reporting period, no tapering materialized and the FOMC maintained the federal funds target rate in a range between zero and 0.25%.

During the reporting period, many municipal issuers came to market, seeking to take advantage of low interest rates. As supply and demand shifted, however, the municipal market remained quite challenging for issuers and investors alike.

Through all of these market developments, the portfolio managers of MainStay DefinedTerm Municipal Opportunities Fund focused on the Fund’s investment objective and investment strategies. Using disciplined investment techniques, they sought to achieve results consistent with their mandate.

The following semiannual report contains more detailed information about the specific market events, securities and decisions that affected MainStay DefinedTerm Municipal Opportunities Fund during the six months ended November 30, 2013. Past performance is no guarantee of future results.

We thank you for choosing MainStay DefinedTerm Municipal Opportunities Fund, and we look forward to serving your financial needs over time.

Sincerely,

LOGO

Stephen P. Fisher

President

Not part of the Semiannual Report

Table of Contents


Semiannual Report

Fund Performance and Statistics			5

Portfolio Management Discussion and Analysis			7

Portfolio of Investments			9

Financial Statements			17

Notes to Financial Statements			22

Dividend Reinvestment Plan			29

Proxy Voting Policies and Procedures and Proxy Voting Record			30

Shareholder Reports and Quarterly Portfolio Disclosure			30

Certain material in this report may include statements that constitute “forward-looking statements” under the U.S. securities laws. Forward-looking statements include, among other things, projections, estimates and information about possible or future results or events related to the Fund, market or regulatory developments. The views expressed herein are not guarantees of future performance or economic results and involve certain risks, uncertainties and assumptions that could cause actual outcomes and results to differ materially from the views expressed herein. The views expressed herein are subject to change at any time based upon economic, market or other conditions and the Fund undertakes no obligation to update the views expressed herein.

Fund Performance and Statistics (Unaudited)

Performance data quoted represents past performance. Past performance is no guarantee of future results. Because of market volatility, current performance may be lower or higher than the figures shown. Index performance is shown for illustration purposes only. You cannot invest directly into an index. Investment return and principal value will fluctuate, and as a result, when shares are sold, they may be worth more or less than their original cost. For performance information current to the most recent month-end, please visit mainstayinvestments.com/mmd.

Total Returns

Six

Months

One

Year

Since Inception
6/26/12

NAV¹

–12.10

–12.28

–2.01

Market Price¹

–15.71

–20.45

–11.49

Barclays Municipal Bond Index²

–2.45

–3.51

0.47

Average Lipper general & insured municipal debt fund (leveraged)³

–7.58

–9.53

–2.03


Fund Statistics (as of November 30, 2013)

NYSE Symbol	MMD	Premium/Discount⁴		–9.42	%

CUSIP	56064K100	Total Net Assets (millions)	$	468.1

Inception Date	6/26/12	Total Managed Assets (millions)⁵	$	741.9

Market Price	$15.39	Leverage⁶		36.7	%

NAV	$16.99	Percent of AMT Bonds⁷		7.43	%

1.	Total returns assume dividends and capital gains distributions are reinvested.

The Barclays Municipal Bond Index is an unmanaged index considered representative of the broad market for investment-grade, tax-exempt bonds with a maturity of at least one year. Bonds subject to the alternative minimum tax or with floating or zero coupons are excluded. An investment cannot be made directly in an index.

The average Lipper general & insured municipal debt fund (leveraged) is representative of funds that, by portfolio practice, either invest primarily in municipal debt issues rated in the top four credit ratings or invest primarily in municipal debt issues insured as to timely payment. These funds can be leveraged via use of debt, preferred equity, and/or reverse repurchase agreements. This benchmark is a product of Lipper Inc. Lipper Inc. is an independent monitor of fund performance. Results are based on average total returns of similar funds with all dividend and capital gain distributions reinvested.

4.	Premium/Discount is the percentage (%) difference between the market price and the NAV price. When the market price exceeds the NAV, the Fund is trading at a Premium. When the market price is less than the NAV, the Fund is trading at a Discount.

5.	“Managed Assets” is defined as the Fund’s total assets, minus the sum of its accrued liabilities (other than Fund liabilities incurred for the purpose of creating effective leverage (i.e. tender option bonds) or Fund liabilities related to liquidation preference of any preferred shares issued).

6.	Leverage is based on the use of proceeds received from tender option bond transactions, issuing Preferred Shares, funds borrowed from banks or other institutions or derivative transactions, expressed as a percentage of Managed Assets.

7.	Alternative Minimum Tax (“AMT”) is a separate tax computation under the Internal Revenue Code that, in effect, eliminates many deductions and credits and creates a tax liability for an individual who would otherwise pay little or no tax.


mainstayinvestments.com			5

Portfolio Composition as of November 30, 2013† (Unaudited)


California	19.1	%
Illinois	10.7
Texas	8.1
Michigan	7.5
Florida	5.0
Virginia	4.5
New Jersey	4.1
Ohio	3.5
Pennsylvania	3.2
New York	2.8
Kansas	2.7
Nebraska	2.7
Washington	2.6
Maryland	2.5
Guam	2.2
Rhode Island	2.1
Tennessee	2.1
Louisiana	1.9
Nevada	1.7
U.S. Virgin Islands	1.6


Arizona	1.2	%
Indiana	0.9
Colorado	0.7
Iowa	0.7
Alabama	0.6
Utah	0.6
Alaska	0.5
District of Columbia	0.5
Missouri	0.3
New Hampshire	0.3
Vermont	0.3
Hawaii	0.2
Georgia	0.1
Massachusetts	0.1
Wisconsin	0.1
West Virginia	0.1
Other Assets, Less Liabilities	2.2

	100.0	%

See Portfolio of Investments beginning on page 9 for specific holdings within these categories.

Top Ten Holdings or Issuers Held as of November 30, 2013# (Unaudited)

1.	Texas Municipal Gas Acquisition & Supply Corp. III, Revenue Bonds, 5.00%, due 12/15/29–12/15/32

2.	University of California, Regents Medical Center, Revenue Bonds, 5.00%, due 5/15/43

3.	Virginia Commonwealth Transportation Board, Capital Projects, Revenue Bonds, 5.00%, due 5/15/31

4.	State of Illinois, Unlimited General Obligation, 5.25%–5.50%, due 7/1/31–7/1/38

5.	Riverside County Transportation Commission, Limited Tax, Revenue Bonds, 5.25%, due 6/1/39

6.	Chicago, Illinois Board of Education, Unlimited General Obligation, 5.50%, due 12/1/39

7.	City of Sacramento, California, Water, Revenue Bonds, 5.00%, due 9/1/42

8.	City of Orlando, Tourist Development Tax Revenue, 3rd Lien, 6th Cent Contract, Revenue Bonds, 5.50%, due 11/1/38

9.	Central Plains Energy, Project No. 3, Revenue Bonds, 5.25%, due 9/1/37

10.	Kansas Development Finance Authority, Adventist Health Sunbelt Obligated Group, Revenue Bonds, 5.00%, due 11/15/32

Credit Quality as of November 30, 2013† (Unaudited)

LOGO

Ratings apply to the underlying portfolio of bonds held by the Fund and are rated by an independent rating agency, such as Standard & Poor’s (“S&P”), Moody’s Investors Service, Inc. and/or Fitch Ratings, Inc. If ratings are provided by the ratings agencies, but differ, the higher rating will be utilized. If only one rating is provided, the available rating will be utilized. Securities that are unrated by the rating agencies are reflected as such in the breakdown. Unrated securities do not necessarily indicate low quality. S&P rates borrowers on a scale from AAA to D. AAA through BBB represent investment grade, while BB through D represent non-investment grade.

†	As a percentage of Managed Assets.

#	Some of these holdings have been transferred to a Tender Option Bond (“TOB”) Issuer in exchange for the TOB residuals and cash.


6		MainStay DefinedTerm Municipal Opportunities Fund

Portfolio Management Discussion and Analysis (Unaudited)

Questions answered by portfolio managers Robert DiMella, CFA, John Loffredo, CFA, Michael Petty, Scott Sprauer and David Dowden of MacKay Shields LLC, the Fund’s Subadvisor.

How did MainStay DefinedTerm Municipal Opportunities Fund perform relative to its benchmark and peers for the six months ended November 30, 2013?

For the six months ended November 30, 2013, MainStay DefinedTerm Municipal Opportunities Fund returned –12.10% at net asset value applicable to Common shares and –15.71% at market price. At net asset value and at market price, the Fund underperformed the –2.45% return of the Barclays Municipal Bond Index¹ and the –7.58% return of the average Lipper² general & insured municipal debt fund (leveraged) for the six months ended November 30, 2013.

What factors affected the Fund’s relative performance during the reporting period?

The Fund was positioned with a longer-maturity, lower-investment-grade rating profile than the Barclays Municipal Bond Index. As municipal mutual fund outflows increased from June through August 2013, however, the municipal yield curve³ steepened and credit spreads⁴ widened. These conditions detracted from the Fund’s performance relative to the Barclays Municipal Bond Index. On the upside, a lack of Puerto Rico bonds was a positive contributor to the Fund’s performance relative to the Barclays Municipal Bond Index, as Puerto Rico was the worst-performing sector of the Index during the reporting period. (Contributions take weightings and total returns into account.)

How was the Fund’s leverage strategy implemented during the reporting period?

The Fund’s leverage percentage stayed within a specified range during the reporting period. As of November 30, 2013, the Fund’s leverage was equal to 36.7% of the Fund’s managed assets. However, the decline in municipal prices during the summer sell-off and the corresponding higher yields allowed the Fund to take advantage of a wider spread between long-term municipal bonds and short-term floater financing costs in its tender option bonds. These factors enabled the Fund to raise its dividend, to the benefit of the Common shareholders. While yields on most municipal bonds increased during the reporting period, the Fund’s cost of borrowing on its leverage remained stable.

What was the Fund’s duration⁵ strategy during the reporting period?

As municipal rates increased substantially from June through August, we increased the Fund’s duration to be longer than that of the Barclays Municipal Bond Index. As of November 30, 2013, the Fund had a duration of 9.68 years. As of the same date, the duration of the Barclays Municipal Bond Index was 5.39 years. We continue to use a position in U.S. Treasury futures to hedge some of the Fund’s higher exposure in longer-maturity issues.

What specific factors, risks or market forces prompted significant decisions for the Fund during the reporting period?

A combination of factors affected the municipal market during the reporting period. Among these were stronger economic data, which prompted speculation about a rotation from bonds to equities, and suggestions that the Federal Reserve might taper its bond purchases. Financial difficulties in Detroit and Puerto Rico also affected the market. Together, these forces drew money away from municipal mutual funds in 2013. As a closed-end fund, MainStay DefinedTerm Municipal Opportunities Fund was not directly subject to the industrywide outflows. Nevertheless, these redemptions caused municipal yields to move materially higher and drove bond prices lower. This rapid change in market sentiment created opportunities for the Fund to reposition itself in several ways. We focused on selling securities that had fallen in value, as we sought to realize losses that could offset current and future gains in the Fund. Because we reinvested at higher yields, the transactions allowed us to increase monthly tax-exempt dividend distributions to holders of Common shares. During periods of institutional market illiquidity, we targeted the strong appetite for individual bonds among retail investors to execute sales at prices we viewed as favorable relative to the market. We used the proceeds to buy bonds that became available as a result of industry outflows.

During the reporting period, which market segments were the strongest contributors to the Fund’s performance and which market segments were particularly weak?

Relative to the Barclays Municipal Bond Index, the most significant positive contribution to the Fund’s performance came from our decision to avoid bonds issued by the Commonwealth

1.	See footnote on page 5 for more information on Barclays Municipal Bond Index.

2.	See footnote on page 5 for more information on Lipper Inc.

3.	The yield curve is a line that plots the yields of various securities of similar quality—typically U.S. Treasury issues—across a range of maturities. The U.S. Treasury yield curve serves as a benchmark for other debt and is used in economic forecasting.

4.	The term “spread” may refer to the difference in yield between a security or type of security and comparable U.S. Treasury issues. The term may also refer to the difference in yield between two specific securities or types of securities at a given time.

5.	Duration is a measure of the price sensitivity of a fixed-income investment to changes in interest rates. Duration is expressed as a number of years and is considered a more accurate sensitivity gauge than average maturity.


mainstayinvestments.com			7

of Puerto Rico. Puerto Rico bonds underperformed the general municipal market by more than 15 percentage points. The most significant detractors from the Fund’s relative performance were yield-curve positioning and credit quality. Longer-maturity municipals underperformed municipal bonds with shorter maturities, and credit spreads widened during the reporting period.

Did the Fund make any significant purchases or sales during the reporting period?

As the Fund remained focused on diversification, no individual purchase or sale was considered significant.

How did the Fund’s sector, industry or state weightings change during the reporting period?

There were no material changes to the Fund’s sector weightings during the reporting period. Sectors that we continued to favor were marginally increased, including transportation and water/sewer bonds. During the reporting period, we took the oppor-

tunity to lower the Fund’s exposure to the special tax and health care sectors. From a state perspective, we opportunistically increased the Fund’s exposure to Illinois bonds after a sell-off during the summer pushed prices lower. We also reduced exposure to Ohio and Virginia bonds.

How was the Fund positioned at the end of the reporting period?

As of November 30, 2013, the Fund was overweight relative to the Barclays Municipal Bond Index in the special tax and health care sectors. From a quality perspective, we favored credits rated A and BBB,⁶ though we increased the overall credit quality of the portfolio during the reporting period, including the percentage of AA⁷ rated credits. As of November 30, 2013, the Fund’s duration was longer than that of the Barclays Municipal Bond Index.

An obligation rated ‘A’ by Standard & Poor’s (“S&P”) is deemed by S&P to be somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher-rated categories. In the opinion of S&P, however, the obligor’s capacity to meet its financial commitment on the obligation is still strong. An obligation rated ‘BBB’ by S&P is deemed by S&P to exhibit adequate protection parameters. It is the opinion of S&P, however, 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. 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.

An obligation rated ‘AA’ by S&P is deemed by S&P to differ from the highest-rated obligations only to a small degree. In the opinion of S&P, the obligor’s capacity to meet its financial commitment on the obligation is very strong. 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.

The opinions expressed are those of the portfolio managers as of the date of this report and are subject to change. There is no guarantee that any forecast made will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment.


8		MainStay DefinedTerm Municipal Opportunities Fund

Portfolio of Investments November 30, 2013 (Unaudited)


	Principal Amount		Value

Municipal Bonds 154.7%†
Alabama 0.9% (0.6% of Managed Assets)
Birmingham Jefferson Civic Center Authority, Special Tax Series A, Insured: AMBAC 4.125%, due 7/1/14	$	250,000	$	250,118
Jefferson County, Limited Obligation School, Revenue Bonds Series A, Insured: AMBAC 4.75%, due 1/1/25		250,000		231,050
Jefferson County, Public Building Authority, Revenue Bonds Insured: AMBAC 5.00%, due 4/1/26		4,500,000		3,702,240

				4,183,408

Alaska 0.8% (0.5% of Managed Assets)
Northern Tobacco Securitization Corp., Tobacco Settlement, Asset-Backed, Revenue Bonds Series A 5.00%, due 6/1/46		5,295,000		3,606,742


Arizona 1.8% (1.2% of Managed Assets)
Phoenix Industrial Development Authority, Downtown Phoenix Student LLC, Revenue Bonds
Series A, Insured: AMBAC 4.50%, due 7/1/32		1,000,000		789,600
Series A, Insured: AMBAC 4.50%, due 7/1/42		150,000		108,224
Phoenix Industrial Development Authority, Espiritu Community Development Corp., Revenue Bonds Series A 6.25%, due 7/1/36		2,000,000		1,854,280
Pima County Industrial Development Authority, PLC Charter Schools Project, Revenue Bonds 6.75%, due 4/1/36		1,075,000		998,503
Salt Verde Financial Corp., Senior Gas, Revenue Bonds 5.00%, due 12/1/37		4,985,000		4,807,484

				8,558,091

California 30.2% (19.1% of Managed Assets)
Big Pine Unified School District, Capital Appreciation, Unlimited General Obligation Insured: AGM (zero coupon), due 8/1/40		5,050,000		1,062,621


	Principal Amount		Value

California 30.2% (19.1% of Managed Assets) (continued)
California County Tobacco Securitization Agency, Asset Backed, Revenue Bonds
Series A 5.125%, due 6/1/38	$	3,060,000	$	2,280,526
5.60%, due 6/1/36		2,575,000		1,998,689
California Municipal Finance Authority, Southwestern Law School, Revenue Bonds 6.50%, due 11/1/41		2,165,000		2,394,555
Carson Redevelopment Agency, Redevelopment Project Area 1, Tax Allocation Series B, Insured: NATL-RE (zero coupon), due 10/1/25		75,000		39,568
Ceres Unified School District, Cabs-Election, Unlimited General Obligation Series A (zero coupon), due 8/1/43		6,375,000		856,991
¨City of Sacramento, California, Water, Revenue Bonds 5.00%, due 9/1/42 (a)(b)		19,500,000		20,199,270
Fontana Unified School District, Cabs Unlimited General Obligation
Series C (zero coupon), due 8/1/34		14,000,000		4,345,740
Series C (zero coupon), due 8/1/40		10,000,000		2,071,700
Series C (zero coupon), due 8/1/41		19,700,000		3,816,481
Series C (zero coupon), due 8/1/42		18,600,000		3,377,016
Foothill-Eastern Transportation Corridor Agency, Revenue Bonds (zero coupon), due 1/15/31		5,000,000		1,611,800
Golden State Tobacco Securitization Corp., Asset Backed, Revenue Bonds
Series A, Insured: AGC, FGIC 5.00%, due 6/1/35 (a)(b)		16,110,000		15,963,238
Series A-2 5.30%, due 6/1/37		5,000,000		3,679,700
Inglewood Public Financing Authority, Cabs-Lease, Revenue Bonds
(zero coupon), due 8/1/30		2,530,000		760,138
(zero coupon), due 8/1/31		2,530,000		687,123
Lancaster Financing Authority, Subordinated Project No. 5 & 6, Redevelopment Projects, Tax Allocation Series B, Insured: NATL-RE 4.625%, due 2/1/24		215,000		198,817

†	Percentages indicated are based on Fund net assets applicable to Common Shares, unless otherwise noted.

Among the Fund’s 10 largest holdings or issuers held, as of November 30, 2013. May be subject to change daily.


The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.		mainstayinvestments.com			9

Portfolio of Investments November 30, 2013 (Unaudited) (continued)


	Principal Amount		Value

Municipal Bonds (continued)
California 30.2% (19.1% of Managed Assets) (continued)
Marysville Joint Unified School District, Capital Project, Certificates of Participation
Insured: AGM (zero coupon), due 6/1/25	$	1,850,000	$	982,331
Insured: AGM (zero coupon), due 6/1/27		2,445,000		1,126,411
Insured: AGM (zero coupon), due 6/1/33		2,800,000		843,780
Insured: AGM (zero coupon), due 6/1/34		2,820,000		800,711
Insured: AGM (zero coupon), due 6/1/38		2,820,000		611,630
Insured: AGM (zero coupon), due 6/1/39		2,820,000		571,811
Insured: AGM (zero coupon), due 6/1/40		2,820,000		535,772
Merced Union High School District, Cabs-Election, Unlimited General Obligation Series C (zero coupon), due 8/1/41		16,780,000		2,921,398
Oakland Unified School District, Election 2000, Unlimited General Obligation Insured: NATL-RE 4.50%, due 8/1/30		10,000,000		9,183,300
Oceanside, California Unified School District, Unlimited General Obligation Series C (zero coupon), due 8/1/50		20,190,000		2,069,879
Richland School District, Unlimited General Obligation Series C, Insured: AGM (zero coupon), due 8/1/49		5,000,000		547,850
¨Riverside County Transportation Commission, Limited Tax, Revenue Bonds Series A 5.25%, due 6/1/39 (a)(b)		19,100,000		20,534,397
San Bernardino City Unified School District, Unlimited General Obligation Series C, Insured: NATL-RE (zero coupon), due 8/1/31		5,000,000		1,873,550
San Joaquin Hills Transportation Corridor Agency, Revenue Bonds
Series A, Insured: NATL-RE (zero coupon), due 1/15/31		150,000		50,738
Series A, Insured: NATL-RE 5.25%, due 1/15/30		900,000		849,429


	Principal Amount		Value

California 30.2% (19.1% of Managed Assets) (continued)
Stockton Public Financing Authority, Parking & Capital Projects, Revenue Bonds
Insured: NATL-RE 4.25%, due 9/1/14	$	50,000	$	49,540
Insured: NATL-RE 4.50%, due 9/1/17		100,000		95,515
Insured: NATL-RE 4.80%, due 9/1/20		105,000		97,305
Stockton Public Financing Authority, Redevelopment Projects, Revenue Bonds
Series A, Insured: RADIAN 5.25%, due 9/1/31		630,000		460,020
Series A, Insured: RADIAN 5.25%, due 9/1/34		2,900,000		2,030,986
Stockton Public Financing Authority, Water System, Capital Improvement Projects, Revenue Bonds Series A, Insured: NATL-RE 5.00%, due 10/1/31		175,000		161,289
Stockton, California Unified School District, Unlimited General Obligation
Series D, Insured: AGM (zero coupon), due 8/1/35		4,165,000		1,132,547
Series D, Insured: AGM (zero coupon), due 8/1/40		13,930,000		2,673,724
Tobacco Securitization Authority of Southern California, Asset-Backed, Revenue Bonds Series A-1 5.00%, due 6/1/37		3,000,000		2,187,570
¨University of California, Regents Medical Center, Revenue Bonds Series J 5.00%, due 5/15/43 (a)(b)		23,260,000		23,557,016

				141,292,472

Colorado 1.1% (0.7% of Managed Assets)
Colorado Health Facilities Authority, Revenue Bonds 5.625%, due 6/1/43		5,000,000		5,047,600
E-470 Public Highway Authority, Revenue Bonds Series B, Insured: NATL-RE (zero coupon), due 9/1/29		660,000		274,765

				5,322,365

District of Columbia 0.8% (0.5% of Managed Assets)
Metropolitan Washington Airports Authority, Revenue Bonds Series C, Insured: GTY 0.00%, due 10/1/41 (c)		3,900,000		3,719,118


10		MainStay DefinedTerm Municipal Opportunities Fund		The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.


	Principal Amount		Value

Municipal Bonds (continued)
Florida 7.9% (5.0% of Managed Assets)
¨City of Orlando, Tourist Development Tax Revenue, 3rd Lien, 6th Cent Contract, Revenue Bonds Insured: GTY 5.50%, due 11/1/38	$	20,000,000	$	20,125,000
County Of Miami-Dade FL, Revenue Bonds
Series D 6.00%, due 10/1/24 (d)		1,590,000		1,771,769
Series D 6.00%, due 10/1/25 (d)		1,680,000		1,849,646
JEA Electric System, Revenue Bonds Series C 5.00%, due 10/1/37 (a)(b)		12,980,000		13,419,469

				37,165,884

Georgia 0.1% (0.1% of Managed Assets)
Marietta Development Authority, University Facilities-Life University, Inc. Project, Revenue Bonds 6.25%, due 6/15/20		440,000		446,468


Guam 3.5% (2.2% of Managed Assets)
Antonio B Won Pat International Airport Authority, Guam Airport, Revenue Bonds Series C, Insured: AGM 6.00%, due 10/1/34 (d)		3,425,000		3,529,874
Guam Economic Development & Commerce Authority, Tobacco Settlement Asset Backed, Revenue Bonds 5.625%, due 6/1/47		500,000		379,105
Guam Government Waterworks Authority, Revenue Bonds 5.50%, due 7/1/43		7,000,000		6,838,720
Guam International Airport Authority, Revenue Bonds Series C 5.00%, due 10/1/21 (d)		5,500,000		5,614,015

				16,361,714

Hawaii 0.4% (0.2% of Managed Assets)
Hawaii State Department of Budget & Finance, Hawaiian Electric Co., Revenue Bonds Series A, Insured: FGIC 4.65%, due 3/1/37 (d)		2,000,000		1,780,680


Illinois 16.8% (10.7% of Managed Assets)
¨Chicago, Illinois Board of Education, Unlimited General Obligation Series A, Insured: AGM 5.50%, due 12/1/39 (a)(b)		20,000,000		20,271,200


	Principal Amount		Value

Illinois 16.8% (10.7% of Managed Assets) (continued)
Chicago, Illinois O’ Hare International Airport, Revenue Bonds Insured: AGM 5.75%, due 1/1/38	$	5,000,000	$	5,109,700
Chicago, Unlimited General Obligation Series C 5.00%, due 1/1/40 (a)(b)		19,570,000		17,843,730
City Of Chicago Il Midway Airport Revenue, Revenue Bonds Series A 5.50%, due 1/1/30 (d)		4,500,000		4,619,520
Metropolitan Pier & Exposition Authority, McCormick Place Project, Revenue Bonds Series B 5.00%, due 6/15/52 (a)(b)		10,000,000		9,554,277
¨State Of Illinois, Unlimited General Obligation
5.25%, due 7/1/31 (a)(b)		20,000,000		20,028,748
5.50%, due 7/1/38		1,000,000		1,001,420

				78,428,595

Indiana 1.4% (0.9% of Managed Assets)
Anderson Economic Development Revenue, Anderson University Project, Revenue Bonds 5.00%, due 10/1/32		1,240,000		1,040,683
Indiana Finance Authority, Private Activity Ohio River Bridges East End Crossing Project, Revenue Bonds 5.00%, due 7/1/40 (d)		6,220,000		5,666,793

				6,707,476

Iowa 1.1% (0.7% of Managed Assets)
Coralville Urban Renewal Revenue, Tax Increment, Tax Allocation Series C 5.00%, due 6/1/47		4,220,000		3,428,328
Iowa Higher Education Loan Authority, Private College Facility, Wartburg College, Revenue Bonds Series B 5.50%, due 10/1/31		2,075,000		1,892,234

				5,320,562

Kansas 4.3% (2.7% of Managed Assets)
¨Kansas Development Finance Authority, Adventist Health Sunbelt Obligated Group, Revenue Bonds Series A 5.00%, due 11/15/32 (a)(b)		19,290,000		19,950,059


The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.		mainstayinvestments.com			11

Portfolio of Investments November 30, 2013 (Unaudited) (continued)


	Principal Amount		Value

Municipal Bonds (continued)
Louisiana 3.0% (1.9% of Managed Assets)
Louisiana Local Government Environmental Facilities & Community Development Authority, Parking Facilities Corp., Revenue Bonds Insured: AGM 4.00%, due 10/1/31	$	1,000,000	$	922,870
Louisiana Public Facilities Authority, Archdiocese of New Orleans Project, Revenue Bonds Insured: CIFG 4.50%, due 7/1/37		8,800,000		8,513,824
Louisiana Public Facilities Authority, Black & Gold Facilities Project, Revenue Bonds
Series A, Insured: CIFG 4.50%, due 7/1/38		405,000		289,931
Series A, Insured: CIFG 5.00%, due 7/1/22		1,105,000		1,047,949
Series A, Insured: CIFG 5.00%, due 7/1/24		1,200,000		1,102,464
Series A, Insured: CIFG 5.00%, due 7/1/30		2,870,000		2,400,841

				14,277,879

Maryland 4.0% (2.5% of Managed Assets)
Maryland Health & Higher Educational Facilities Authority, John Hopkins Health System Obligated Group, Revenue Bonds 5.00%, due 5/15/43 (a)(b)		18,500,000		18,862,934


Massachusetts 0.1% (0.1% of Managed Assets)
Massachusetts Development Finance Agency, Seven Hills Foundation & Affiliates, Revenue Bonds Insured: RADIAN 5.00%, due 9/1/35		435,000		377,036


Michigan 11.8% (7.5% of Managed Assets)
Detroit, Michigan Distribution State Aid, General Obligation Limited 5.25%, due 11/1/35		10,665,000		10,106,367
Detroit, Michigan Water and Sewerage Department, Senior Lien, Revenue Bonds
Series A 5.00%, due 7/1/32		1,500,000		1,356,585
Series A 5.25%, due 7/1/39		14,080,000		12,919,949
Detroit, Michigan Water Supply System, Revenue Bonds
Series A, Insured: NATL-RE 4.50%, due 7/1/31		760,000		655,705


	Principal Amount		Value

Michigan 11.8% (7.5% of Managed Assets) (continued)
Detroit, Michigan Water Supply System, Revenue Bonds (continued)
Series B, Insured: NATL-RE 5.00%, due 7/1/34	$	3,840,000	$	3,494,822
Series A 5.75%, due 7/1/37		5,000,000		4,800,400
Michigan Finance Authority, Limited Obligation, Public School Academy, University Learning, Revenue Bonds 7.375%, due 11/1/30		2,920,000		3,148,578
Michigan Finance Authority, Public School Academy, Revenue Bonds 7.50%, due 11/1/40		2,745,000		2,954,828
Michigan Public Educational Facilities Authority, Dr. Joseph F. Pollack, Revenue Bonds
8.00%, due 4/1/30		1,195,000		1,270,835
8.00%, due 4/1/40		500,000		527,525
Michigan Tobacco Settlement Finance Authority, Revenue Bonds
Series A 6.00%, due 6/1/34		5,000,000		3,987,500
Series A 6.00%, due 6/1/48		13,435,000		10,201,195

				55,424,289

Missouri 0.6% (0.3% of Managed Assets)
St. Louis County Industrial Development Authority, Nazareth Living Center, Revenue Bonds
5.875%, due 8/15/32		750,000		687,083
6.125%, due 8/15/42		2,120,000		1,927,186

				2,614,269

Nebraska 4.3% (2.7% of Managed Assets)
¨Central Plains Energy, Project No. 3, Revenue Bonds 5.25%, due 9/1/37 (a)(b)		20,000,000		20,108,000


Nevada 2.7% (1.7% of Managed Assets)
City of Sparks, Tourism Improvement District No. 1, Senior Sales Tax Anticipation, Revenue Bonds Series A 6.75%, due 6/15/28 (a)		12,500,000		12,419,500


New Hampshire 0.4% (0.3% of Managed Assets)
Manchester Housing & Redevelopment Authority, Inc., Revenue Bonds Series B, Insured: ACA (zero coupon), due 1/1/24		4,740,000		2,001,607


12		MainStay DefinedTerm Municipal Opportunities Fund		The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.


	Principal Amount		Value

Municipal Bonds (continued)
New Jersey 6.5% (4.1% of Managed Assets)
New Jersey Economic Development Authority, Continental Airlines, Inc. Project, Revenue Bonds 5.25%, due 9/15/29 (d)	$	9,120,000	$	8,488,896
New Jersey Economic Development Authority, UMM Energy Partners, Revenue Bonds
Series A 4.75%, due 6/15/32 (d)		1,000,000		900,560
Series A 5.00%, due 6/15/37 (d)		1,000,000		907,460
New Jersey State Turnpike Authority, Revenue Bonds Series A 5.00%, due 1/1/32		9,670,000		10,154,950
New Jersey Tobacco Settlement Financing Corp., Revenue Bonds Series 1A 5.00%, due 6/1/41		14,000,000		10,074,680

				30,526,546

New York 4.5% (2.8% of Managed Assets)
Onondaga Civic Development Corp., St. Joseph’s Hospital Health Center, Revenue Bonds 5.00%, due 7/1/42		2,000,000		1,685,040
Port Authority of New York & New Jersey, Revenue Bonds 4.00%, due 7/15/31 (a)(b)(d)		13,535,000		12,607,443
Riverhead Industrial Development Agency, Revenue Bonds
7.00%, due 8/1/43		5,595,000		5,621,520
7.00%, due 8/1/48		1,000,000		995,980

				20,909,983

Ohio 5.5% (3.5% of Managed Assets)
Buckeye Tobacco Settlement Financing Authority, Asset-Backed, Senior Turbo, Revenue Bonds
Series A-2 5.75%, due 6/1/34		2,425,000		1,837,932
Series A-2 5.875%, due 6/1/47		10,690,000		8,194,205
Series A-2 6.00%, due 6/1/42		5,915,000		4,588,857
Southeastern Ohio Port Authority, Hospital Facilities Revenue, Memorial Health Systems, Revenue Bonds
5.75%, due 12/1/32		6,700,000		6,423,692
6.00%, due 12/1/42		5,000,000		4,801,250

				25,845,936


	Principal Amount		Value
Pennsylvania 5.0% (3.2% of Managed Assets)
City Of Philadelphia PA Water And Wastewater Revenue, Revenue Bonds Series A 5.00%, due 1/1/36	$	2,830,000	$	2,885,694
Harrisburg Parking Authority, Packaging Revenue, Revenue Bonds
Series O, Insured: AMBAC 5.00%, due 8/1/14		145,000		144,432
Series O, Insured: AMBAC 5.00%, due 8/1/16		60,000		59,128
Harrisburg, Capital Appreciation, Unlimited General Obligation Series F, Insured: AMBAC (zero coupon), due 9/15/21		95,000		52,207
Pennsylvania Turnpike Commission, Revenue Bonds Series C 5.00%, due 12/1/43		12,570,000		12,579,804
Philadelphia Authority for Industrial Development, Please Touch Museum Project, Revenue Bonds 5.25%, due 9/1/31		2,500,000		1,174,975
Philadelphia Hospitals and Higher Education Facilities Authority, Temple University Health System, Revenue Bonds Series A 5.00%, due 7/1/34		2,000,000		1,556,160
Philadelphia, Unlimited General Obligation 6.00%, due 8/1/36		4,625,000		5,029,040

				23,481,440

Rhode Island 3.3% (2.1% of Managed Assets)
Narragansett Bay Commission Wastewater System, Revenue Bonds Series A 5.00%, due 9/1/38 (a)(b)		15,000,000		15,558,750


Tennessee 3.3% (2.1% of Managed Assets)
Chattanooga, TN, Industrial Development Board, Revenue Bonds Insured: AGM 5.00%, due 10/1/30 (a)(b)		15,000,000		15,499,500


Texas 12.8% (8.1% of Managed Assets)
Harris County Cultural Education Facilities Finance Corp., Baylor Medical College, Revenue Bonds 5.00%, due 11/15/37		6,250,000		6,223,937
Harris County-Houston Sports Authority, Revenue Bonds
Series H, Insured: NATL-RE (zero coupon), due 11/15/28		50,000		19,596


The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.		mainstayinvestments.com			13

Portfolio of Investments November 30, 2013 (Unaudited) (continued)


	Principal Amount		Value

Municipal Bonds (continued)
Texas 12.8% (8.1% of Managed Assets) (continued)
Harris County-Houston Sports Authority, Revenue Bonds (continued)
Series H, Insured: NATL-RE (zero coupon), due 11/15/30	$	8,775,000	$	2,936,203
Series H, Insured: NATL-RE (zero coupon), due 11/15/33		1,320,000		350,130
Series A, Insured: NATL-RE (zero coupon), due 11/15/34		2,520,000		686,650
Series H, Insured: NATL-RE (zero coupon), due 11/15/35		2,080,000		467,896
Series H, Insured: NATL-RE (zero coupon), due 11/15/37		6,705,000		1,286,555
Series H, Insured: NATL-RE (zero coupon), due 11/15/38		125,000		22,119
Series A, Insured: NATL-RE (zero coupon), due 11/15/38		175,000		35,450
Series A, Insured: NATL-RE (zero coupon), due 11/15/40		1,000,000		175,930
Series B, Insured: NATL-RE 5.25%, due 11/15/40		755,000		748,205
Houston Higher Education Finance Corp., Cosmos Foundation, Revenue Bonds Series A 5.00%, due 2/15/42		5,000,000		4,589,900
New Hope Cultural Education Facilities Corp., Student Housing, CHF- Stephenville Tarleton State University Project, Revenue Bonds Series A 5.375%, due 4/1/28		1,845,000		1,815,000
Newark Cultural Education Facilities Finance Corp., A. W. Brown-Fellowship Leadership Academy, Revenue Bonds
Series A 6.00%, due 8/15/32		1,130,000		1,124,847
Series A 6.00%, due 8/15/42		5,640,000		5,423,255
¨Texas Municipal Gas Acquisition & Supply Corp. III, Revenue Bonds
5.00%, due 12/15/29		3,200,000		3,117,600
5.00%, due 12/15/30		5,500,000		5,328,345
5.00%, due 12/15/32 (a)(b)		20,000,000		19,121,961
Texas State Turnpike Authority, Central Texas System, Revenue Bonds Insured: AMBAC (zero coupon), due 8/15/35		23,750,000		6,462,612

				59,936,191


	Principal Amount		Value

U.S. Virgin Islands 2.6% (1.6% of Managed Assets)
Virgin Islands Public Finance Authority, Gross Receipts Taxes Loan, Revenue Bonds Insured: AGM 5.00%, due 10/1/32	$	2,475,000	$	2,442,157
Virgin Islands Public Finance Authority, Matching Fund Loan Notes, Revenue Bonds Series A 5.00%, due 10/1/32		10,000,000		9,690,900

				12,133,057

Utah 0.9% (0.6% of Managed Assets)
Utah State University of Agriculture & Applied Science, Student Building, Revenue Bonds Series B 5.00%, due 12/1/44		4,000,000		4,184,800


Vermont 0.5% (0.3% of Managed Assets)
Vermont State Student Assistance Corp., Revenue Bonds Series A 5.10%, due 6/15/32 (d)		2,360,000		2,219,698


Virginia 7.2% (4.5% of Managed Assets)
Tobacco Settlement Financing Corp., Revenue Bonds Series B1 5.00%, due 6/1/47		10,000,000		6,456,300
¨Virginia Commonwealth Transportation Board, Capital Projects, Revenue Bonds 5.00%, due 5/15/31 (a)(b)		20,315,000		22,018,603
Virginia Small Business Financing Authority, Senior Lien, Elizabeth River Crossing, Revenue Bonds 6.00%, due 1/1/37 (d)		5,000,000		5,165,550

				33,640,453

Washington 4.2% (2.6% of Managed Assets)
Washington Health Care Facilities Authority, Multicare Health System, Revenue Bonds Series A 5.00%, due 8/15/44 (a)(b)		19,665,000		19,586,930


West Virginia 0.2% (0.1% of Managed Assets)
Ohio County, Wheeling Jesuit, Revenue Bonds Series A 5.50%, due 6/1/36		845,000		765,198


14		MainStay DefinedTerm Municipal Opportunities Fund		The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.


	Principal Amount			Value

Municipal Bonds (continued)
Wisconsin 0.2% (0.1% of Managed Assets)
Wisconsin Public Power, Inc., Revenue Bonds Series A, Insured: AGM 5.00%, due 7/1/25	$	1,000,000		$	1,076,900

Total Investments (Cost $747,495,889) (h)		154.7	%		724,294,530
Floating Rate Note Obligations (e)		(43.2	)		(202,325,000	)
Fixed Rate Municipal Term Preferred Shares, at Liquidation Value		(14.9	)		(70,000,000	)
Other Assets, Less Liabilities		3.4			16,085,228
Net Assets Applicable to Common Shares		100.0	%	$	468,054,758


	Contracts Short			Unrealized Appreciation (Depreciation) (f)
Futures Contracts 0.0%‡
United States Treasury Note March 2014 (10 Year) (g)		(625	)		$(45,289	)
Total Futures Contracts Short (Settlement Value $78,359,375)					$(45,289)

‡	Less than one-tenth of a percent.

(a)	May be sold to institutional investors only under Rule 144A or securities offered pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended.

(b)	All or portion of principal amount transferred to a Tender Option Bond (“TOB”) Issuer in exchange for TOB Residuals and cash.

(c)	Step coupon—Rate shown is the rate in effect as of November 30, 2013.

(d)	Interest on these securities is subject to alternative minimum tax.

(e)	Proceeds received from TOB transactions.

(f)	Represents the difference between the value of the contracts at the time they were opened and the value as of November 30, 2013.

(g)	As of November 30, 2013, cash in the amount of $921,875 is on deposit with a broker for futures transactions.

(h)	As of November 30, 2013, cost is $546,538,049 for federal income tax purposes and net unrealized depreciation is as follows:


Gross unrealized appreciation	$	19,511,075
Gross unrealized depreciation		(44,079,594	)

Net unrealized depreciation	$	(24,568,519	)

“Managed Assets” is defined as the Fund’s total assets, minus the sum of its accrued liabilities (other than Fund liabilities incurred for the purpose of creating effective leverage (i.e. tender option bonds) or Fund liabilities related to liquidation preference of any preferred shares issued).

The following abbreviations are used in the above portfolio:

ACA—ACA Financial Guaranty Corp.

AGC—Assured Guaranty Corp.

AGM—Assured Guaranty Municipal Corp.

AMBAC—Ambac Assurance Corp.

CIFG—CIFG Group

FGIC—Financial Guaranty Insurance Co.

GTY—Assured Guaranty Corp.

NATL-RE—National Public Finance Guarantee Corp.

RADIAN—Radian Asset Assurance, Inc.

The following is a summary of the fair valuations according to the inputs used as of November 30, 2013, for valuing the Fund’s assets and liabilities.

Asset Valuation Inputs


Description	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Investments in Securities (a)
Municipal Bonds	$	—	$	724,294,530	$	—	$	724,294,530

Total Investments in Securities	$	—	$	724,294,530	$	—	$	724,294,530


The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.		mainstayinvestments.com			15

Portfolio of Investments November 30, 2013 (Unaudited) (continued)

Liability Valuation Inputs


Description	Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Other Financial Instruments
Futures Contracts Short (b)	$	(45,289	)	$	—	$	—	$	(45,289	)

Total Other Financial Instruments	$	(45,289	)	$	—	$	—	$	(45,289	)

(a)	For a complete listing of investments and their industries, see the Portfolio of Investments.

(b)	The value listed for this security reflects unrealized appreciation (depreciation) as shown on the Portfolio of Investments.

The Fund recognizes transfers between the levels as of the beginning of the period.

For the period ended November 30, 2013, the Fund did not have any transfers between Level 1 and Level 2 fair value measurements. (See Note 2)

As of November 30, 2013, the Fund did not hold any investments with significant unobservable inputs (Level 3). (See Note 2)


16		MainStay DefinedTerm Municipal Opportunities Fund		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 November 30, 2013 (Unaudited)


Assets
Investment in securities, at value (identified cost $747,495,889)	$	724,294,530
Cash		12,672,003
Cash collateral on deposit at broker		921,875
Receivables:
Interest		11,445,907
Investment securities sold		4,550,054
Variation margin on futures contracts		68,359
Deferred offering costs (See Note 2 (M))		297,550
Other assets		13,377

Total assets		754,263,655


Liabilities
Payable for Floating Rate Note Obligations		202,325,000
Fixed Rate Municipal Term Preferred Shares, at liquidation value, Series A (a)		35,000,000
Fixed Rate Municipal Term Preferred Shares, at liquidation value, Series B (a)		35,000,000
Payables:
Investment securities purchased		12,411,419
Manager (See Note 3)		365,461
Shareholder communication		24,987
Professional fees		10,424
Transfer agent		3,095
Custodian		1,961
Interest expense and fees payable		876,719
Common share dividend payable		189,831

Total liabilities		286,208,897

Net assets applicable to Common shares	$	468,054,758

Common shares outstanding		27,554,564

Net asset value per Common share (Net assets applicable to Common shares divided by Common shares outstanding)	$	16.99


Net assets applicable to Common Shares consist of
Common shares, $0.001 par value per share, unlimited number of shares authorized	$	27,555
Additional paid-in capital		525,077,236

		525,104,791
Undistributed net investment income		3,188,130
Accumulated net realized gain (loss) on investments and futures transactions		(36,991,515	)
Net unrealized appreciation (depreciation) on investments and futures contracts		(23,246,648	)

Net assets applicable to Common shares	$	468,054,758

(a)	Unlimited authorized shares, $0.01 par value, liquidation preference of $100,000 per share (See Note 2 (J)).


The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.		mainstayinvestments.com			17

Statement of Operations for the six months ended November 30, 2013 (Unaudited)


Investment Income (Loss)
Income
Interest	$	20,767,512

Expenses
Manager (See Note 3)		2,239,704
Interest expense and fees		1,279,767
Professional fees		43,793
Shareholder communication		32,589
Transfer agent		18,395
Trustees		11,378
Custodian		6,312
Miscellaneous		72,255

Total expenses		3,704,193

Net investment income (loss)		17,063,319


Realized and Unrealized Gain (Loss) on Investments and Futures Contracts
Net realized gain (loss) on:
Security transactions		(43,902,394	)
Futures transactions		245,446

Net realized gain (loss) on investments and futures transactions		(43,656,948	)

Net change in unrealized appreciation (depreciation) on:
Investments		(39,265,296	)
Futures contracts		(1,004,352	)

Net change in unrealized appreciation (depreciation) on investments and futures contracts		(40,269,648	)

Net realized and unrealized gain (loss) on investments and futures transactions		(83,926,596	)

Net increase (decrease) in net assets to Common shares resulting from operations	$	(66,863,277	)


18		MainStay DefinedTerm Municipal Opportunities Fund		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


	Six Months ended November 30, 2013*			June 26, 2012 through May 31, 2013**
Net Increase (Decrease) in Net Assets Applicable to Common Shares
Operations:
Net investment income (loss)	$	17,063,319		$	25,313,226
Net realized gain (loss) on investments and futures transactions		(43,656,948	)		12,431,388
Net change in unrealized appreciation (depreciation) on investments and futures contracts		(40,269,648	)		17,023,000

Net increase (decrease) in net assets applicable to Common shares resulting from operations		(66,863,277	)		54,767,614

Dividends and distributions to Common shareholders:
From net investment income		(15,849,385	)		(23,745,652	)
From net realized gain on investments		—			(5,481,764	)

Total dividends and distributions to Common shareholders		(15,849,385	)		(29,227,416	)

Capital share transactions (Common shares):
Net proceeds issued to shareholders resulting from initial public offering		—			524,508,195
Net proceeds issued to shareholders from reinvestment of dividends and distributions		—			619,027

Increase (decrease) in net assets applicable to Common shares from capital share transactions		—			525,127,222

Net increase (decrease) in net assets applicable to Common shares		(82,712,662	)		550,667,420

Net Assets Applicable to Common Shares
Beginning of period		550,767,420			100,000

End of period	$	468,054,758		$	550,767,420

Undistributed net investment income at end of period	$	3,188,130		$	1,974,196

*	Unaudited.

**	Inception date.


The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.		mainstayinvestments.com			19

Statement of Cash Flows

for the six months ended November 30, 2013 (Unaudited)


Cash flows used in operating activities:
Net decrease in net assets resulting from operations	$	(66,863,277	)
Adjustments to reconcile net decrease in net assets resulting from operations to net cash provided by operating activities:
Investments purchased		(807,476,108	)
Investments sold		803,608,792
Amortization (accretion) of discount and premium, net		(2,619,625	)
Increase in investment securities sold receivable		(4,550,054	)
Increase in interest receivable		(266,517	)
Increase in cash collateral on deposit at broker		(96,875	)
Decrease in other assets		30,880
Decrease in variation margin on futures contracts		107,422
Increase in investment securities purchased payable		12,283,535
Decrease in professional fees payable		(53,477	)
Increase in custodian payable		356
Decrease in shareholder communication payable		(9,296	)
Decrease in interest expense and fees payable		(85,161	)
Decrease in due to Trustees		(625	)
Decrease in due to manager		(53,908	)
Decrease in due to transfer agent		(6,075	)
Net change in unrealized (appreciation) depreciation on investments		39,265,296
Net realized (gain) loss from investments		43,902,394

Net cash provided by operating activities		17,117,677


Cash flows from financing activities:
Proceeds from floating rate note obligations		10,945,000
Cash distributions paid		(15,773,750	)

Net cash from financing activities		(4,828,750	)

Net increase in cash:		12,288,927
Cash at beginning of period		383,076

Cash at end of period	$	12,672,003


20		MainStay DefinedTerm Municipal Opportunities Fund		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


	Six months ended November 30, 2013*			June 26, 2012** through May 31, 2013
Net asset value at beginning of period applicable to Common shares	$	19.99		$	19.06	(a)

Net investment income (loss)		0.62			0.92
Net realized and unrealized gain (loss) on investments		(3.04	)		1.11

Total from investment operations		(2.42	)		2.03

Less dividends and distributions to Common shareholders:
From net investment income		(0.58	)		(0.86	)
From net realized gain on investments		—			(0.20	)

Total dividends and distributions to Common shareholders		(0.58	)		(1.06	)

Dilution effect on net asset value from overallotment issuance		—			(0.04	)

Net asset value at end of period applicable to Common shares	$	16.99		$	19.99

Market price at end of period applicable to Common shares	$	15.39		$	18.91

Total investment return on net asset value		(12.10	%)(b)		10.52	% (b)
Total investment return on market price		(15.71	%)(b)		(0.36	%)(b)
Ratios (to average net assets of Common shareholders)/Supplemental Data:
Net investment income (loss)		7.16	% ††		5.01	% ††
Net expenses (excluding interest expense and fees)		1.02	% ††		0.89	% ††(c)
Expenses (including interest expense and fees)		1.55	% ††		1.32	% ††(c)
Interest expense and fees (d)		0.53	% ††		0.43	% ††
Portfolio turnover rate		62	%		64	%
Net assets applicable to Common shareholders end of period (in 000’s)	$	468,055		$	550,767
Preferred shares outstanding at $100,000 liquidation preference, end of period (in 000’s)	$	70,000		$	70,000
Asset coverage per Preferred share, end of period (e)	$	768,650		$	886,811
Average market value per Preferred share:
Series A	$	100,008		$	100,008
Series B	$	100,007		$	100,007

Unaudited

**	Inception date.

††	Annualized.

(a)	Net asset value at beginning of period reflects the deduction of the sales load of $0.90 per share and offering costs of $0.04 per share from the $20.00 offering price.

(b)	Total investment return is not annualized.

(c)	The Manager has agreed to reimburse all organizational expenses.

(d)	Interest expense and fees relate to the costs of tender option bond transactions (See Note 2 (I)) and the issuance of fixed rate municipal term preferred shares (See Note 2 (J)).

(e)	Calculated by subtracting the Fund’s total liabilities (not including the Preferred shares) from the Fund’s total assets, and dividing the result by the number of Preferred shares outstanding.


The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.		mainstayinvestments.com			21

Notes to Financial Statements (Unaudited)

Note 1–Organization and Business

MainStay DefinedTerm Municipal Opportunities Fund (the “Fund”) was organized as a Delaware statutory trust on April 20, 2011, pursuant to an agreement and declaration of trust, which was amended and restated on May 16, 2012 (“Declaration of Trust”). The Fund is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as a diversified, closed-end management investment company. The Fund first offered Common shares through an initial public offering on June 26, 2012.

Pursuant to the terms of the Declaration of Trust, the Fund will commence the process of liquidation and dissolution at the close of business on December 31, 2024 (the “Termination Date”) unless otherwise extended by a majority of the Board of Trustees (the “Board”) (as discussed in further detail below). During the six-month period preceding the Termination Date or Extended Termination Date (as defined below), the Board may, without shareholder approval unless such approval is required by the 1940 Act, determine to (i) merge or consolidate the Fund so long as the surviving or resulting entity is an open-end registered investment company that is managed by the same investment adviser which serves as the investment adviser to the Fund at that time or is an affiliate of such investment adviser; or (ii) convert the Fund from a closed-end fund into an open-end registered investment company. Upon liquidation and termination of the Fund, shareholders will receive an amount equal to the Fund’s net asset value (“NAV”) at that time, which may be greater or less than the price at which Common shares were issued. The Fund’s investment objectives and policies are not designed to return to investors who purchased Common shares in the initial offering of such shares their initial investment on the Termination Date and such initial investors may receive more or less than their original investment upon termination.

Prior to the commencement of the six-month period preceding the Termination Date, a majority of the Board may extend the Termination Date for a period of not more than two years or such shorter time as may be determined (the “Extended Termination Date”), upon a determination that taking such actions as described in (i) or (ii) above would not, given prevailing market conditions, be in the best interests of the Fund’s shareholders. The Termination Date may be extended an unlimited number of times by the Board prior to the first business day of the sixth month before the next occurring Extended Termination Date.

The Fund’s primary investment objective is to seek current income exempt from regular U.S. Federal income taxes (but which may be includable in taxable income for purpose of the Federal alternative minimum tax). Total return is a secondary objective.

Note 2–Significant Accounting Policies

The Fund prepares its financial statements in accordance with generally accepted accounting principles (“GAAP”) in the United States of America and follows the significant accounting policies described below.

(A) Securities Valuation. Investments are valued as of the close of regular trading on the New York Stock Exchange (“Exchange”) (generally 4:00 p.m. Eastern time) on each day the Fund is open for business (“valuation date”).

The Board has adopted procedures for the valuation of the Fund’s securities and has delegated the responsibility for valuation measurements

under those procedures to the Valuation Committee of the Fund (the “Valuation Committee”). The Board has authorized the Valuation Committee to appoint a Valuation Sub-Committee (the “Sub-Committee”) to deal in the first instance with questions that arise or cannot be resolved under these procedures. The Sub-Committee meets (in person, via electronic mail or via teleconference) on an as-needed basis. The Valuation Committee meets at a later time, as necessary, to ensure that actions taken by the Sub-Committee were appropriate. The procedures recognize that, subject to the oversight of the Board and unless otherwise noted, the responsibility for day-to-day valuation of portfolio assets (including securities for which market prices are not readily available) rests with New York Life Investment Management LLC (“New York Life Investments” or the “Manager”), aided to whatever extent necessary by the Subadvisor (as defined in Note 3(A)) to the Fund.

To assess the appropriateness of security valuations, the Manager or the Fund’s third party service provider, who is subject to oversight by the Manager, regularly compares prior day prices, prices on comparable securities and the sale prices to the prior and current day prices and challenges prices exceeding certain tolerance levels with third party pricing services or broker sources. For those securities valued through either a standardized fair valuation methodology or a fair valuation measurement, the Valuation Committee reviews and affirms the reasonableness of the valuation based on such methodologies and measurements on a regular basis after considering all relevant information that is reasonably available.

“Fair value” is defined as the price that the Fund would receive upon selling an investment in an orderly transaction to an independent buyer in the principal or most advantageous market for the investment. Fair value measurements are estimated within a framework that has established a three-tier hierarchy which maximizes the use of observable market data and minimizes the use of unobservable inputs to establish a classification of fair value measurements for disclosure purposes. “Inputs” refers broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk, such as the risk inherent in a particular valuation technique used to measure fair value using a pricing model and/or the risk inherent in the inputs for the valuation technique. Inputs may be observable or unobservable. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Fund. Unobservable inputs reflect the Fund’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the information available in the circumstances. The inputs or methodology used for valuing securities may not be an indication of the risks associated with investing in those securities. The three-tier hierarchy of inputs is summarized in the three broad Levels listed below.

•

Level 1—quoted prices in active markets for identical investments

•

Level 2—other significant observable inputs (including quoted prices for similar investments in active markets, interest rates and yield curves, prepayment speeds, credit risks, etc.)

•

Level 3—significant unobservable inputs (including the Fund’s own assumptions about the assumptions that market participants would use in measuring the fair value of investments)


22		MainStay DefinedTerm Municipal Opportunities Fund

The aggregate value by input level, as of November 30, 2013, for the Fund’s investments is included at the end of the Fund’s Portfolio of Investments.

The valuation techniques used by the Fund to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. The Fund may use third party vendor evaluations, whose prices may be derived from one or more of the following standard inputs:


• Benchmark Yields		• Reported Trades
• Broker Dealer Quotes		• Issuer Spreads
• Two-sided markets		• Benchmark securities
• Bids/Offers		• Reference Data (corporate actions or material event notices)
• Industry and economic events		• Comparable bonds
• Monthly payment information

Securities for which market values cannot be measured using the methodologies described above are valued by methods deemed in good faith by the Valuation Committee, following the procedures established by the Board, to represent fair value. Under these procedures, the Fund primarily uses a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information. The Fund may also use an income-based valuation approach in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed. For the period ended November 30, 2013, there have been no changes to the fair value methodologies.

Securities which may be valued in this manner include, but are not limited to: (i) a security for which trading has been halted or suspended; (ii) a debt security that has recently gone into default and for which there is not a current market quotation; (iii) a security of an issuer that has entered into a restructuring; (iv) a security that has been de-listed from a national exchange; (v) a security for which the market price is not available from a third party pricing source or, if so provided, does not, in the opinion of the Manager or Subadvisor reflect the security’s market value; and (vi) a security whose principal market has been temporarily closed at a time when, under normal conditions, it would be open. Securities for which market quotations or observable inputs are not readily available are generally categorized as Level 3 in the hierarchy. As of November 30, 2013, the Fund did not hold any securities that were fair valued in such a manner.

Municipal debt securities are valued at the evaluated mean prices supplied by a pricing agent or broker selected by the Manager, in consultation with the Subadvisor, whose prices reflect broker/dealer supplied valuations and electronic data processing techniques, if such prices are deemed by the Manager, in consultation with the Subadvisor, to be representative of market values, at the regular close of trading of the Exchange on each valuation date. Debt securities purchased on delayed delivery basis are marked to market daily until settlement at the forward settlement date. Municipal debt securities are generally categorized as Level 2 in the hierarchy.

Futures contracts are valued at the last posted settlement price on the market where such futures are primarily traded and are generally categorized as Level 1 in the hierarchy.

Temporary cash investments acquired in excess of 60 days to maturity are valued using the latest bid prices or using valuations based on a matrix system (which considers such factors as security prices, yields, maturities, and ratings), both as furnished by independent pricing services. Other temporary cash investments which mature in 60 days or less (“Short-Term Investments”) are valued at amortized cost. The amortized cost method involves valuing a security at its cost on the date of purchase and thereafter assuming a constant amortization to maturity of the difference between such cost and the value on maturity date. Amortized cost approximates the current fair value of a security. Securities valued at amortized cost are not valued using a quoted price in an active market. These securities are generally categorized as Level 2 in the hierarchy.

(B) Income Taxes. The Fund’s policy is to comply with the requirements of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), applicable to regulated investment companies and to distribute all of the taxable income to the shareholders of the Fund within the allowable time limits. Therefore, no federal, state and local income tax provisions are required.

Management evaluates the Fund’s tax positions to determine if the tax positions taken meet the minimum recognition threshold in connection with accounting for uncertainties in income tax positions taken or expected to be taken for the purposes of measuring and recognizing tax liabilities in the financial statements. Recognition of tax benefits of an uncertain tax position is required only when the position is “more likely than not” to be sustained assuming examination by taxing authorities. Management has analyzed the Fund’s tax positions taken on federal, state and local income tax returns for the open tax year and has concluded that no provisions for federal, state and local income tax are required in the Fund’s financial statements. The Fund’s federal, state and local income and federal excise tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and state and local departments of revenue.

Shareholders. Dividends and distributions are recorded on the ex-dividend date. The Fund intends to declare dividends of net investment income, after payment of any dividends on any outstanding Preferred shares, if any, at least monthly and declares and pays distributions of net realized capital gains, if any, at least annually. To the extent that the Fund realizes any capital gains or ordinary taxable income, it will be required to allocate such income between the Common shares and Preferred shares issued by the Fund, in proportion to the total dividends paid to each share class for the year in which the income is realized.

(D) 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 as earned using the effective interest rate method. Discounts and premiums on securities purchased, other than Short-Term Investments, for the Fund are accreted and amortized, respectively, on the effective interest rate method over the life of the respective securities or, in the case of a callable security, over


mainstayinvestments.com			23

Notes to Financial Statements (Unaudited) (continued)

the period to the first date of call. Discounts and premiums on Short-Term Investments are accreted and amortized, respectively, on the straight-line method.

The Fund may place a debt obligation on non-accrual status and reduce related interest income by ceasing current accruals and writing off interest receivables when the collection of all or a portion of interest has become doubtful based on consistently applied procedures. A debt obligation is removed from non-accrual status when the issuer resumes interest payments or when collectability of interest is reasonably assured.

(E) Expenses. Expenses of the Fund are recorded on the date the expenses are incurred. The expenses borne by the Fund, including those incurred with related parties of the Fund, are shown in the Statement of Operations.

(F) Use of Estimates. In preparing financial statements in conformity with GAAP, management makes estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.

(G) 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 financial instrument (e.g., foreign currency, interest rate, security, or securities index). The Fund is subject to interest rate risk in the normal course of investing in these transactions. During the period the futures contract is open, changes in the value of the contract are recognized as unrealized appreciation or depreciation 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 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 have minimal counterparty risk as they are conducted through regulated exchanges that guarantee the futures against default by the counterparty. In the event of a bankruptcy or insolvency of a futures commission merchant that holds margin on behalf of the Fund, the Fund may not be entitled to the return of all of the margin owed to the Fund, potentially resulting in a loss. The Fund may invest in futures contracts to help manage the duration and yield curve of the Fund while minimizing the exposure to wider bid/ask spreads in traditional bonds. The Fund’s investment in futures contracts and other derivatives may increase the volatility of the Fund’s NAV and may result in a loss to the Fund.

(H) Securities Lending. In order to realize additional income, the Fund may engage in securities lending, subject to the limitations set

forth in the 1940 Act and relevant guidance by the staff of the Securities and Exchange Commission. In the event the Fund does engage in securities lending, the Fund will lend through its custodian, State Street Bank and Trust Company (“State Street”). State Street will manage the Fund’s cash collateral in accordance with the lending agreement between the Fund and State Street, and indemnify the Fund’s portfolio against counterparty risk. The loans will be collateralized by cash or securities at least equal at all times to the market value of the securities loaned. Collateral will consist of U.S. government securities, cash equivalents or irrevocable letters of credit. 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 may also record realized gain or loss on securities deemed sold due to a borrower’s inability to return securities on loan. The Fund will receive compensation for lending its securities in the form of fees or the retention of a portion of the interest on the investment of any cash received as collateral. The Fund also will continue 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.

Although the Fund and New York Life Investments have temporarily suspended securities lending, the Fund and New York Life Investments reserve the right to reinstitute lending when deemed appropriate. The Fund did not have any portfolio securities on loan as of November 30, 2013.

(I) Tender Option Bonds. The Fund may leverage its assets through the use of proceeds received from tender option bond transactions. In a tender option bond transaction, a tender option bond trust (a “TOB Issuer”) is typically established by a third party sponsor forming a special purpose trust into which the Fund, or an agent on behalf of the Fund, transfers municipal bonds or other municipal securities (“Underlying Securities”). A TOB Issuer typically issues two classes of beneficial interests: short-term floating rate notes (“TOB Floaters”), which are sold to third party investors, and residual interest municipal tender option bonds (“TOB Residuals”), which are generally issued to the Fund. The Fund may invest in both TOB Floaters and TOB Residuals. The Fund may not invest more than 5% of its Managed Assets (as defined in Note 3(A)) in any single TOB Issuer. The Fund may invest in both TOB Floaters and TOB Residuals issued by the same TOB Issuer.

The TOB Issuer receives Underlying Securities from the Fund through the sponsor and then issues TOB Floaters to third party investors and TOB Residuals to the Fund. The Fund is paid the cash (less transaction expenses, which are borne by the Fund) received by the TOB Issuer from the sale of TOB Floaters and typically will invest the cash in additional municipal bonds or other investments permitted by its investment policies. TOB Floaters may have first priority on the cash flow from the securities held by the TOB Issuer and are enhanced with a liquidity support arrangement from a bank or an affiliate of the sponsor (the “liquidity provider”), which allows holders to tender their position back to the TOB Issuer at par (plus accrued interest). The Fund, in addition to receiving cash from the sale of TOB Floaters, also receives TOB Residuals. TOB Residuals provide the Fund with the right to (1) cause the holders of TOB Floaters to tender their notes to the TOB Issuer at par (plus accrued interest), and (2) acquire the Underlying Securities from the TOB Issuer. In addition, all voting rights and decisions to be made with respect to any other rights relating to the Underlying


24		MainStay DefinedTerm Municipal Opportunities Fund

Securities deposited in the TOB Issuer are passed through to the Fund, as the holder of TOB Residuals. Such a transaction, in effect, creates exposure for the Fund to the entire return of the Underlying Securities deposited in the TOB Issuer, with a net cash investment by the Fund that is less than the value of the Underlying Securities deposited in the TOB Issuer. This multiplies the positive or negative impact of the Underlying Securities’ return within the Fund (thereby creating leverage).

Income received by TOB Residuals will vary inversely with the short-term rate paid to holders of TOB Floaters and in most circumstances, TOB Residuals bear substantially all of the Underlying Securities’ downside investment risk and also benefits disproportionally from any potential appreciation of the Underlying Securities’ value. The amount of such increase or decrease is a function, in part, of the amount of TOB Floaters sold by the TOB Issuer of these securities relative to the amount of TOB Residuals that it sells. The greater the amount of TOB Floaters sold relative to TOB Residuals, the more volatile the income paid on TOB Residuals will be. The price of TOB Residuals will be more volatile than that of the Underlying Securities because the interest rate is dependent on not only the fixed coupon rate of the Underlying Securities but also on the short-term interest rate paid on TOB Floaters.

For TOB Floaters, generally, the interest rate earned will be based upon the market rates for municipal securities with maturities or remarketing provisions that are comparable in duration to the periodic interval of the tender option, which may vary from weekly, to monthly, to extended periods of one year or multiple years. Since the option feature has a shorter term than the final maturity or first call date of the Underlying Securities deposited in the TOB Issuer, the Fund, if it is the holder of the TOB Floaters, relies upon the terms of the agreement with the financial institution furnishing the option as well as the credit strength of that institution. As further assurance of liquidity, the terms of the TOB Issuer provide for a liquidation of the Underlying Security deposited in the TOB Issuer and the application of the proceeds to pay off the TOB Floaters.

The TOB Issuer may be terminated without the consent of the Fund upon the occurrence of certain events, such as the bankruptcy or default of the issuer of the Underlying Securities deposited in the TOB Issuer, a substantial downgrade in the credit quality of the issuer of the securities deposited in the TOB Issuer, the inability of the TOB Issuer to obtain liquidity support for the TOB Floaters, a substantial decline in the market value of the Underlying Securities deposited in the TOB Issuer, or the inability of the sponsor to remarket any TOB Floaters tendered to it by holders of the TOB Floaters. In such an event, the TOB Floaters would be redeemed by the TOB Issuer at par (plus accrued interest) out of the proceeds from a sale of the Underlying Securities deposited in the TOB Issuer. If this happens, the Fund would be entitled to the assets of the TOB Issuer, if any, that remain after the TOB Floaters have been redeemed at par (plus accrued interest). If there are insufficient proceeds from the sale of these securities to redeem all of the TOB Floaters at par (plus accrued interest), the liquidity provider or holders of the TOB Floaters would bear the losses on those securities and there would be no recourse to the Fund’s assets (unless the Fund held a recourse TOB Residual).

For financial reporting purposes, Underlying Securities that are deposited into a TOB Issuer are treated as investments of the Fund, and are presented on the Fund’s Portfolio of Investments. Outstanding TOB Floaters issued by a TOB Issuer are presented as “Payable for Floating

Rate Note Obligations” in the Fund’s Statement of Assets and Liabilities. Interest income from Underlying Securities are recorded by the Fund on an accrual basis. Interest expense incurred on the TOB Floaters and other expense related to remarketing, administration and trustee services to a TOB Issuer are recognized as a component of “Interest expense and fees” on the Statement of Operations.

At November 30, 2013, the aggregate value of the Underlying Securities transferred to the TOB Issuer and the related liability for TOB Floaters were as follows:


Underlying Securities Transferred to TOB Issuers	Liability for Floating Rate Note Obligations
$324,685,525	$	202,325,000

As of November 30, 2013, the Fund’s average TOB Floaters outstanding and the daily weighted average interest rate, including fees, were as follows:


Average Floating Rate Note Obligations Outstanding	Daily Weighted Average Interest Rate
$204,568,607		0.33	%

(J) Fixed Rate Municipal Term Preferred Shares. On October 4, 2012, the Fund issued and has outstanding, two series of Fixed Rate Municipal Term Preferred Shares (“Series A FMTP Shares” and “Series B FMTP Shares”, collectively, “FMTP Shares”), each with a liquidation preference of $100,000 per share (“Liquidation Preference”). Dividends on FMTP Shares, which are recognized as interest expense for financial reporting purposes, are paid semiannually at a fixed annual rate, subject to adjustments in certain circumstances. The FMTP Shares were issued in a private offering exempt from registration under the Securities Act of 1933, as amended. As of November 30, 2013, the number of FMTP Shares outstanding and annual interest rate were as follows:


Series	Dates of Issuance		Shares Outstanding		Annual Interest Rate
A		October 4, 2012		350		1.48	%
B		October 4, 2012		350		1.58	%

The Fund is obligated to redeem its FMTP Shares by the date as specified in its offering document (“Term Redemption”), unless earlier redeemed by the Fund. FMTP Shares are subject to optional and mandatory redemption in certain circumstances. FMTP Shares will be subject to redemption, at the option of the Fund (“Optional Redemption”), in whole or in part at any time only for the purposes of decreasing leverage of the Fund. The Fund may be obligated to redeem certain of the FMTP Shares if the Fund fails to maintain certain asset coverage and leverage ratio requirements and such failures are not cured by the applicable cure date. The Optional Redemption price per share is equal to the sum of the Liquidation Preference per share plus any accrued but unpaid dividends. As of November 30, 2013, the Term


mainstayinvestments.com			25

Notes to Financial Statements (Unaudited) (continued)

Redemption date and liquidation value for the FMTP Shares outstanding were as follows:


Series	Term Redemption Date		Liquidation Value
A		October 15, 2015	$	35,000,000
B		March 15, 2016	$	35,000,000

For financial reporting purposes only, the liquidation value of FMTP Shares is recorded as a liability on the Statement of Assets and Liabilities. Unpaid dividends on FMTP Shares are recognized as a component of “Interest expense and fees payable” on the Statement of Assets and Liabilities. Dividends accrued on FMTP Shares are recognized as a component of “Interest expense and fees” in the Statement of Operations. As of November 30, 2013, the fair value of the FMTP Shares for Series A and Series B were $35,001,750 and $35,001,400, respectively and are categorized as Level 2 in the fair value hierarchy.

(K) Statement of Cash Flows. The cash amount shown in the Fund’s Statement of Cash Flows is the amount included in the Fund’s Statement of Assets and Liabilities and represents the cash on hand at its custodian and does not include any Short-Term Investments or deposit at brokers for securities sold short or restricted cash.

(L) Concentration of Risk. The ability of issuers of debt securities held by the Fund to meet their obligations may be affected by economic or political developments in a specific country, industry or region.

(M) Offering Costs. Costs are incurred by the Fund in connection with its offering of FMTP Shares were recorded as deferred charges, which are amortized over the life of the shares. The Fund’s amortized deferred charges are recognized as “Interest expense and fees” on the Statement of Operations.

(N) Indemnifications. Under the Fund’s organizational documents, its officers and trustees are indemnified against certain liabilities that may arise out of performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts with third-party service providers that contain a variety of representations and warranties and which may provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. Based on experience, management is of the view that the risk of loss in connection with these potential indemnification obligations is remote. However, there can be no assurance that material liabilities related to such obligations will not arise in the future, which could adversely impact the Fund.

(O) Quantitative Disclosure of Derivative Holdings. The following tables show additional disclosures about the Fund’s derivative and hedging activities, including how such activities are accounted for and their effect on the Fund’s financial positions, performance and cash flows. These derivatives are not accounted for as hedging instruments.

Fair value of derivatives instruments as of November 30, 2013:

Liability Derivatives


	Statement of Assets and Liabilities Location	Interest Rate Contracts Risk			Total
Futures Contracts	Net Assets-Net unrealized appreciation (depreciation) on investments and futures contracts (a)	$	(45,289	)	$	(45,289	)

Total Fair Value		$	(45,289	)	$	(45,289	)

(a)	Includes cumulative appreciation (depreciation) of futures contracts as reported in the Portfolio of Investments. Only current day’s variation margin is reported within the Statement of Assets and Liabilities.

The effect of derivative instruments on the Statement of Operations for the period ended November 30, 2013:

Realized Gain (Loss)


	Statement of Operations Location	Interest Rate Contracts Risk		Total
Futures Contracts	Net realized gain (loss) on futures transactions	$	245,446	$	245,446

Total Realized Gain (Loss)		$	245,446	$	245,446

Change in Unrealized Appreciation (Depreciation)


	Statement of Operations Location	Interest Rate Contracts Risk			Total
Futures Contracts	Net change in unrealized appreciation (depreciation) on futures contracts	$	(1,004,352	)	$	(1,004,352	)

Total Change in Unrealized Appreciation (Depreciation)		$	(1,004,352	)	$	(1,004,352	)

Number of Contracts, Notional Amounts or Shares/Units


	Interest Rate Contracts Risk			Total
Futures Contracts Short		(625	)		(625	)

Note 3–Fees and Related Party Transactions

(A) Manager and Subadvisor. New York Life Investments, a registered investment adviser and an indirect, wholly-owned subsidiary of New York Life Insurance Company (“New York Life”), serves as the Fund’s Manager, pursuant to a Management Agreement. The Manager provides offices, conducts clerical, recordkeeping and bookkeeping


26		MainStay DefinedTerm Municipal Opportunities Fund

services, and keeps most of the financial and accounting records required to be maintained by the Fund. Except for the portion of salaries and expenses that are the responsibility of the Fund, the Manager pays the salaries and expenses of all personnel affiliated with the Fund and certain operational expenses of the Fund. The Fund reimburses New York Life Investments in an amount equal to a portion of the salary of the Chief Compliance Officer (“CCO”) of the Fund. MacKay Shields LLC (“MacKay Shields” or the “Subadvisor”), a registered investment adviser and an indirect, wholly-owned subsidiary of New York Life, serves as Subadvisor to the Fund and is responsible for the day-to-day portfolio management of the Fund. Pursuant to the terms of a Subadvisory Agreement (“Subadvisory Agreement”) between New York Life Investments and MacKay Shields, New York Life Investments pays for the services of the Subadvisor.

The Fund pays the Manager a monthly fee for services performed and facilities furnished at an annual rate of 0.60% of the “Managed Assets”. Managed Assets is defined as the Fund’s total assets, minus the sum of its accrued liabilities (other than Fund liabilities incurred for the purpose of creating effective leverage (i.e. tender option bonds) or Fund liabilities related to liquidation preference of any preferred shares issued).

For the period ended November 30, 2013, New York Life Investments earned fees from the Fund in the amount of $2,239,704.

State Street, 1 Lincoln Street, Boston, Massachusetts 02111, provides sub-administration and sub-accounting services to the Fund pursuant to an agreement with New York Life Investments. These services include calculating the daily NAV of the Fund, maintaining the general ledger and sub-ledger accounts for the calculation of the Fund’s respective NAV, and assisting New York Life Investments in conducting various aspects of the Fund’s administrative operations. For providing these services to the Fund, State Street is compensated by New York Life Investments.

(B) Transfer, Dividend Disbursing and Shareholder Servicing Agent. Computershare Trust Company, N.A. (“Computershare”), 250 Royall Street, Canton, Massachusetts, 02021, is the Fund’s transfer, dividend disbursing and shareholder servicing agent pursuant to an agreement between New York Life Investments and Computershare.

(C) Capital. As of November 30, 2013, New York Life Investment Management Holdings LLC beneficially held 5,716 Common shares of the Fund with a value and percentage of net assets applicable to Common shares of $97,115 and 0.02%, respectively.

Note 4–Federal Income Tax

The tax character of distributions paid during the period ended May 31, 2013 to Common shareholders (shown in the Statement of Changes in Net Assets) and Preferred shareholders (included as interest expense for financial statement purposes (See Note 2(J)) were as follows:


Distributions paid from:	Ordinary Income		Exempt Interest Dividends		Long-Term Capital Gain
Common shares	$	6,232,103	$	22,827,363	$	167,950
Preferred shares		186,420		581,704		3,382
Total	$	6,418,523	$	23,409,067	$	171,332

Note 5–Custodian

State Street is the custodian of the cash and the securities of the Fund. Custodial fees are charged to the Fund based on the Fund’s net assets and/or the market value of securities in the Fund and the number of certain cash transactions incurred by the Fund.

Note 6–Purchases and Sales of Securities (in 000’s)

During the period ended November 30, 2013, purchases and sales of securities, other than short-term securities, were $459,154 and $471,362, respectively.

Note 7–Capital Share Transactions


Common Shares (a):	Shares
For the period June 26, 2012 through May 31, 2013:
Common shares issued resulting from initial public offering on June 26, 2012 (b)		27,524,029
Common shares issued in reinvestment of dividends		30,535

Common shares outstanding at the end of the period		27,554,564


Preferred Shares (a):	Shares		Amount
For the period June 26, 2012 through May 31, 2013:
Series A Shares Issued		350	$	35,000,000
Series B Shares Issued		350	$	35,000,000

(a)	For the six months ended November 30, 2013, there were no new shares issued.

(b)	Includes 5,236 shares held by New York Life at inception date and 2,768,793 shares resulting from overallotment issuance on August 15, 2012.

Note 8–Subsequent Events

In connection with the preparation of the financial statements of the Fund as of and for the period November 30, 2013, events and transactions subsequent to November 30, 2013 through the date the financial statements were issued have been evaluated by the Fund’s management for possible adjustment and/or disclosure. No subsequent events requiring financial statement adjustment or disclosure have been identified, other than the following:

On October 1, 2013, the Fund declared a dividend in the amount of $0.096 per Common share, payable on December 31, 2013, to shareholders of record on December 16, 2013, respectively.

On December 12, 2013, the Fund declared a short-term capital gain and a long-term capital gain distribution in the amount of $0.32991 and $0.01786, respectively, per Common share, payable on December 31, 2013, to shareholders of record on December 16, 2013.

On December 16, 2013, the Fund paid its semiannual distribution to Series A and Series B Preferred shareholders in the amounts of $735.89 and $785.60 per Preferred share, respectively, in addition, a supplemental distribution (See Note 2(C)) of $261.42 and $279.09 per Preferred share, was paid to Series A and Series B Preferred shareholders, respectively.


mainstayinvestments.com			27

Notes to Financial Statements (Unaudited) (continued)

On January 2, 2014, the Fund declared dividends for the upcoming quarter as shown in the following schedule:

Month

Ex-Date

Record Date

Payable Date

Amount

January

01/13/2014

01/15/2014

01/31/2014

0.096

February

02/12/2014

02/14/2014

02/28/2014

0.096

March

03/12/2014

03/14/2014

03/31/2014

0.096


28		MainStay DefinedTerm Municipal Opportunities Fund

Dividend Reinvestment Plan

Pursuant to the Fund’s Dividend Reinvestment Plan (the “Plan”) shareholders whose shares are registered in their own name may “opt-in” to the Plan and elect to reinvest all or a portion of their distributions in the Common shares by providing the required enrollment notice to Com-putershare Trust Company, N.A., the Plan Administrator (“Plan Administrator”). Shareholders whose shares are held in the name of a broker or other nominee may have distributions reinvested only if such a service is provided by the broker or the nominee or if the broker or the nominee permits participation in the Plan. Shareholders whose shares are held in the name of a broker or other nominee should contact the broker or nominee for details. A shareholder may terminate participation in the Plan at any time by notifying the Plan Administrator before the record date of the next distribution through the Internet, by telephone or in writing. All distributions to shareholders who do not participate in the Plan, or have elected to terminate their participation in the Plan, will be paid by check mailed directly to the record holder by or under the direction of the Plan Administrator when the Fund declares a distribution.

When the Fund declares a dividend or other distribution (together, a “Dividend”) payable in cash, non-participants in the Plan will receive cash and participants in the Plan (i.e., those holders of Common shares who (“opt-in”) will receive the equivalent in Common shares. The Common shares will be acquired by the Plan Administrator for the participants’ accounts, depending upon the circumstances described below, either (i) through receipt of additional unissued but authorized Common shares from the Fund (“Newly Issued Common Shares”) or (ii) by purchase of outstanding Common shares on the open market (“Open-Market Purchases”) on the NYSE or elsewhere. If, on the payment date for any Dividend, the closing market price per Common share plus estimated per share fees, which include any brokerage commissions the Plan Administrator is required to pay, is equal to or greater than the NAV per Common share, the Plan Administrator will invest the Dividend amount in Newly Issued Common shares on behalf of the participants. The number of Newly Issued Common Shares to be credited to each participant’s account will be determined by dividing the dollar amount of the Dividend by the NAV per Common share on the payment date; provided that, if the NAV is less or equal to 95% of the closing market value on the payment date, the dollar amount of the Dividend will be divided by 95% of the closing market price per Common share on the payment date. If, on the payment date for any Dividend, the NAV per Common share is greater than the closing market value plus estimated per share fees, the Plan Administrator will invest the Dividend amount in Common shares acquired on behalf of the participants in Open-Market Purchases. In the event of a market discount on the payment date for any Dividend, the Plan Administrator will have until the last business day before the next date on which the Common shares trade on an “ex-dividend” basis or 30 days after the payment date for such Dividend, whichever is sooner (the “Last Purchase Date”), to invest the Dividend amount in Common shares acquired in Open-Market Purchases. It is contemplated that the Fund will pay monthly income Dividends. Therefore, the period during which Open-Market Purchases can be made will exist only from the payment date of each Dividend through the date before the next “ex-dividend” date which typically will be approximately ten days. If, before the Plan Administrator has completed its Open-Market Purchases, the market price per Common share exceeds the NAV per Common shares, the average per Common share purchase price paid by the Plan

Administrator may exceed the NAV of the Common shares, resulting in the acquisition of fewer Common shares than if the Dividend had been paid in Newly Issued Common Shares on the Dividend payment date. Because of the foregoing difficulty with respect to Open-Market Purchases, the Plan provides that if the Plan Administrator is unable to invest the full Dividend amount in Open-Market Purchases during the purchase period or if the market discount shifts to a market premium during the purchase period, the Plan Administrator may cease making Open-Market Purchases and may invest the uninvested portion of the Dividend amount in Newly Issued Common Shares at the NAV per Common share at the close of business on the Last Purchase Date provided that, if the NAV per Common share is less than or equal to 95% of the then current market price per Common share; the dollar amount of the Dividend will be divided by 95% of the market price per Common share on the payment date.

The Plan Administrator maintains all shareholders’ accounts in the Plan and furnishes written confirmation of all transactions in the accounts, including information needed by shareholders for tax records. Common shares In the account of each Plan participant will be held by the Plan Administrator on behalf of the Plan participant, and each shareholder proxy will include those shares purchased or received pursuant to the Plan The Plan Administrator will forward all proxy solicitation materials to participants and vote proxies for shares held under the Plan in accordance with the instructions of the participants.

In the case of shareholders such as banks, brokers or nominees which hold shares for others who are the beneficial owners, the Plan Administrator will administer the Plan on the basis of the number of Common shares certified from time to time by the record shareholder’s name and held for the account of beneficial owners who participate in the Plan.

There will be no charges with respect to Common shares issued directly by the Fund as a result of dividends or capital gains distributions payable either in Common shares or in cash. The Plan Administrator’s fees for the handling of the reinvestment of dividends and distributions will be paid by the Fund. However, each participant will pay a per share fee incurred in connection with Open-Market Purchases. The reinvestment of Dividends will not relieve participants of any Federal, state or local income tax that may be payable (or required to be withheld) on such dividends. See “U.S. Federal Income Tax Matters.” Participants that request a sale of shares through the Plan Administrator are subject to a $2.50 sales fee and a $.15 per share sold fee. All per share fees include any brokerage commission the Plan Administrator is required to pay.

The Fund reserves the right to amend or terminate the Plan. There is no direct service charge to participants with regard to purchases in the Plan; however, the Fund reserves the right to amend the Plan to include a service charge payable by the participants.

All correspondence or questions concerning the Plan should be directed to the Plan Administrator, Computershare Trust Company, N.A., by telephone (855) 456-9683, through the internet at www.computershare.com/investor or in writing to P.O. Box 43078, Providence, Rhode Island 02940-3078.


mainstayinvestments.com			29

Proxy Voting Policies and Procedures and Proxy Voting Record

A description of the policies and procedures that New York Life Investments uses to vote proxies related to the Fund’s securities is available without charge, upon request, (i) by visiting the Fund’s website at mainstayinvestments.com; or (ii) on the Securities and Exchange Commission’s (“SEC”) website at www.sec.gov.

The Fund is required to file with the SEC its proxy voting record for the 12-month period ending June 30 on Form N-PX. The Fund’s most recent Form N-PX is available free of charge upon request (i) by calling 800-MAINSTAY (624-6782); (ii) by visiting the Fund’s website at mainstayinvestments.com; or (iii) on the SEC’s website at www.sec.gov.

Shareholder Reports and Quarterly Portfolio Disclosure

The Fund is required to file its complete schedule of portfolio holdings with the SEC for its first and third fiscal quarters on Form N-Q. The Fund’s Form N-Q is available without charge on the SEC’s website at www.sec.gov or by calling MainStay Investments at 800-MAINSTAY (624-6782). You also can obtain and review copies of Form N-Q by visiting the SEC’s Public Reference Room in Washington, DC (information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330).


30		MainStay DefinedTerm Municipal Opportunities Fund

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Manager

New York Life Investment Management LLC

New York, New York

Subadvisor

MacKay Shields LLC¹

New York, New York

Legal Counsel

Dechert LLP

Independent Registered Public Accounting Firm

PricewaterhouseCoopers LLP

Transfer, Dividend Disbursing and Shareholder Servicing Agent

Computershare Trust Company, N.A.

P.O. Box 43078

Providence, Rhode Island, 02940-3078

(855) 456-9683

mainstayinvestments.com/mmd

1. An affiliate of New York Life Investment Management LLC.

MainStay Investments^® is a registered service mark and name under which New York Life Investment Management LLC does business. MainStay Investments, an indirect subsidiary of New York Life Insurance Company, New York, NY 10010, provides investment advisory products and services.


Not FDIC/NCUA Insured		Not a Deposit		May Lose Value		No Bank Guarantee		Not Insured by Any Government Agency


NYLIM-32359 MS358-13			MSMHI10-01/14

Item 2.

Code of Ethics.

Not applicable.

Item 3.

Audit Committee Financial Expert.

Not applicable.

Item 4.

Principal Accountant Fees and Services.

Not applicable.

Item 5.

Audit Committee of Listed Registrants

Not applicable.

Item 6.

Schedule of Investments

The Schedule of Investments is included as part of Item 1 of this report.

Item 7.

Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.

Not applicable.

Item 8.

Portfolio Managers of Closed-End Management Investment Companies.

Not applicable.

Item 9.

Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.

Not applicable.

Item 10.

Submission of Matters to a Vote of Security Holders.

There have been no material changes to the procedures by which shareholders may recommend nominees to the Registrant’s Board of Trustees.

Item 11.

Controls and Procedures.

(a) Based on an evaluation of the Registrant’s Disclosure Controls and Procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) (the “Disclosure Controls”), as of a date within 90 days prior to the filing date (the “Filing Date”) of this Form

N-CSR (the “Report”), the Registrant’s principal executive officer and principal financial officer have concluded that the Disclosure Controls are reasonably designed to ensure that information required to be disclosed by the Registrant in the Report is recorded, processed, summarized and reported by the Filing Date, including ensuring that information required to be disclosed in the Report is accumulated and communicated to the Registrant’s management, including the Registrant’s principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

(b) There were no changes in the Registrant’s internal control over financial reporting (as defined in Rule 30a-3(d)) under the Investment Company Act of 1940 that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting.

Item 12.

Exhibits.

(a)	Certifications of principal executive officer and principal financial officer as required by Rule 30a-2 under the Investment Company Act of 1940.

(b)	Certifications of principal executive officer and principal financial officer as required by Section 906 of the Sarbanes-Oxley Act of 2002.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

MAINSTAY DEFINEDTERM MUNICIPAL OPPORTUNITIES FUND


By:		/s/ Stephen P. Fisher
		Stephen P. Fisher
		President and Principal Executive Officer

Date: February 6, 2014

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.


By:		/s/ Stephen P. Fisher
		Stephen P. Fisher
		President and Principal Executive Officer

Date: February 6, 2014

By:		/s/ Jack R. Benintende
		Jack R. Benintende
		Treasurer and Principal Financial and Accounting Officer

Date: February 6, 2014

EXHIBIT INDEX

(a)(2) Certifications of principal executive officer and principal financial officer as required by Rule 30a-2 under the Investment Company Act of 1940.

(b) Certification of principal executive officer and principal financial officer as required by Section 906 of the Sarbanes-Oxley Act of 2002.