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: 811-05597
Morgan Stanley Municipal Income Opportunities Trust
(Exact name of registrant as specified in charter)
522 Fifth Avenue, New York, New York 10036
(Address of principal executive offices) (Zip code)
Ronald E. Robison
522 Fifth Avenue, New York, New York 10036
(Name and address of agent for service)
Registrant's telephone number, including area code: 212-296-6990
Date of fiscal year end: May 31, 2008
Date of reporting period: November 30, 2007
Item 1 - Report to Shareholders
Welcome, Shareholder:
In this report, you'll learn about how your investment in Morgan Stanley
Municipal Income Opportunities Trust performed during the semiannual period. We
will provide an overview of the market conditions, and discuss some of the
factors that affected performance during the reporting period. In addition, this
report includes the Fund's financial statements and a list of Fund investments.
MARKET FORECASTS PROVIDED IN THIS REPORT MAY NOT NECESSARILY COME TO PASS. THERE
IS NO ASSURANCE THAT THE FUND WILL ACHIEVE ITS INVESTMENT OBJECTIVE. THE FUND IS
SUBJECT TO MARKET RISK, WHICH IS THE POSSIBILITY THAT MARKET VALUES OF
SECURITIES OWNED BY THE FUND WILL DECLINE AND, THEREFORE, THE VALUE OF THE
FUND'S SHARES MAY BE LESS THAN WHAT YOU PAID FOR THEM. ACCORDINGLY, YOU CAN LOSE
MONEY INVESTING IN THIS FUND.
INCOME EARNED BY CERTAIN SECURITIES IN THE PORTFOLIO MAY BE SUBJECT TO THE
FEDERAL ALTERNATIVE MINIMUM TAX (AMT).
FUND REPORT
For the six months ended November 30, 2007
MARKET CONDITIONS
Contagion from the troubled subprime mortgage sector led to an illiquid and
volatile market that persisted throughout the reporting period, causing
investors to become increasingly risk averse. As a result, demand for high-
yielding, lower-rated bonds waned, prices declined, and credit spreads widened.
This was a complete reversal from earlier in 2007 when demand for higher-
yielding securities was strong and spreads were unusually tight. The challenging
environment fueled a flight to quality that led Treasury bonds to outperform all
other sectors of the fixed income market.
In an effort to help ease the liquidity and credit crunch, the Federal Open
Market Committee (the "Fed") elected to cut the target federal funds rate by 50
basis points in September and another 25 basis points in October, bringing the
rate to 4.50 percent. Although this intervention helped stabilize the market
somewhat and enhance liquidity, market conditions overall remained difficult and
municipal bonds continued to underperform Treasuries. As a result, the 30-year
municipal-to-Treasury ratio, which measures the relative attractiveness of these
two sectors, rose from 85 percent at the start of the reporting period to 98
percent at the end of the period, indicating that municipals underperformed
Treasuries while at the same time becoming cheaper (more attractive) on a
relative basis.
In general, municipal bond yields ended the period higher, but most of the yield
increases occurred in the intermediate-to-long maturity portion of the high
yield sector. Representative yields on 30-year AAA rated municipal bonds rose
from 4.25 percent on May 31, 2007 to 4.32 percent by the end of November. Short-
term municipal bond yields, however, ended the period lower with yields on one-
year bonds falling from 3.63 percent to 3.20 percent. Accordingly, the spread
between long-term and short-term yields, which began the period at 62 basis
points, widened to 112 basis points by the end of the period, causing the slope
of the municipal yield curve to steepen.
PERFORMANCE ANALYSIS
For the six-month period ended November 30, 2007, the net asset value (NAV) of
Morgan Stanley Municipal Income Opportunities Trust (OIA) decreased from $8.28
to $7.76 per share. Based on this change plus reinvestment of tax-free dividends
totaling $0.2575 per share, the Fund's total NAV return was -3.43 percent. OIA's
value on the New York Stock Exchange (NYSE) moved from $9.68 to $7.66 per share
during the same period. Based on this change plus reinvestment of dividends, the
Fund's total market return was -18.46 percent. OIA's NYSE market price was at a
1.29 percent discount to its NAV. During the fiscal period, the Fund purchased
and retired 6,400 shares of common stock at a weighted average market discount
of 4.34 percent. Past performance is no guarantee of future results.
Monthly dividends for the fourth quarter of 2007, declared in September,
decreased from $0.045 to $0.03875 per share. The dividend reflects the current
level of the Fund's net investment income. OIA's level of undistributed net
investment income was $0.05 per share on November 30, 2007 versus $0.08 per
share six months earlier.(1)
The Fund invests primarily in higher yielding municipal bonds. Given the
relative outperformance of the
2
investment-grade segment of the market during the period, the Fund's high-yield
allocation detracted from performance. We slightly increased the Fund's exposure
to these below-investment-grade and non-rated bonds during the period as
widening spreads created a unique opportunity to invest at very attractive
values, a strategy which we believe may ultimately prove beneficial to the
Fund's performance over time. The Fund's exposure to the single family housing
and tobacco sectors also detracted from overall performance. These were among
the hardest hit sectors of the market during the period and the considerable
spread widening that occurred in each dampened performance. We did, however,
modestly reduce the Fund's holdings in single family housing bonds during the
period. Conversely, the Fund's pre-refunded* holdings, representing
approximately 8 percent of net assets as of the end of the period, contributed
positively to performance. These shorter maturity securities did not experience
the sell off that longer maturity bonds did as the yield curve steepened.
Overall, the Fund's investments remained well-diversified across a broad range
of municipal market sectors. As of the end of the period, life care, industrial
development revenue/pollution control revenue (IDR/PCR), and hospital bonds
represented the Fund's largest sector weightings.
OIA's procedure for reinvesting all dividends and distributions in common shares
is through purchases in the open market. This method helps support the market
value of the Fund's shares. In addition, we would like to remind you that the
Trustees have approved a procedure whereby the Fund may, when appropriate,
purchase shares in the open market or in privately negotiated transactions at a
price not above market value or net asset value, whichever is lower at the time
of purchase.
--------------------------------------------------------------------------------
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF
FUTURE RESULTS, AND CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE FIGURES
SHOWN. INVESTMENT RETURN, NET ASSET VALUE AND COMMON SHARE MARKET PRICE WILL
FLUCTUATE AND FUND SHARES, WHEN SOLD, MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST.
There is no guarantee that any sectors mentioned will continue to perform as
discussed herein or that securities in such sectors will be held by the Fund in
the future.
(1) Income earned by certain securities in the portfolio may be subject to the
federal alternative minimum tax (AMT).
* Pre-refunding, or advance refunding, is a financing structure under which new
bonds are issued to repay an outstanding bond issue on its first call date.
3
TOP FIVE SECTORS
Life Care 24.3%
IDR/PCR* 14.3
Hospital 10.0
Refunded 7.8
Housing 7.3
LONG-TERM CREDIT ANALYSIS
Aaa/AAA 2.5%
Aa/AA 5.3
Baa/BBB 16.1
Ba/BB or Less 10.1
NR 66.0
* Industrial Development/Pollution Control Revenue
Data as of November 30, 2007. Subject to change daily. All percentages for top
five sectors are as a percentage of total investments and all percentages for
long-term credit analysis are as a percentage of total long-term investments.
These data are provided for informational purposes only and should not be deemed
a recommendation to buy or sell the securities mentioned. Morgan Stanley is a
full-service securities firm engaged in securities trading and brokerage
activities, investment banking, research and analysis, financing and financial
advisory services.
FOR MORE INFORMATION ABOUT PORTFOLIO HOLDINGS
EACH MORGAN STANLEY FUND PROVIDES A COMPLETE SCHEDULE OF PORTFOLIO HOLDINGS IN
ITS SEMIANNUAL AND ANNUAL REPORTS WITHIN 60 DAYS OF THE END OF THE FUND'S SECOND
AND FOURTH FISCAL QUARTERS. THE SEMIANNUAL REPORTS AND THE ANNUAL REPORTS ARE
FILED ELECTRONICALLY WITH THE SECURITIES AND EXCHANGE COMMISSION (SEC) ON FORM
N-CSRS AND FORM N-CSR, RESPECTIVELY. MORGAN STANLEY ALSO DELIVERS THE SEMIANNUAL
AND ANNUAL REPORTS TO FUND SHAREHOLDERS AND MAKES THESE REPORTS AVAILABLE ON ITS
PUBLIC WEB SITE, WWW.MORGANSTANLEY.COM. EACH MORGAN STANLEY FUND ALSO FILES A
COMPLETE SCHEDULE OF PORTFOLIO HOLDINGS WITH THE SEC FOR THE FUND'S FIRST AND
THIRD FISCAL QUARTERS ON FORM N-Q. MORGAN STANLEY DOES NOT DELIVER THE REPORTS
FOR THE FIRST AND THIRD FISCAL QUARTERS TO SHAREHOLDERS, NOR ARE THE REPORTS
POSTED TO THE MORGAN STANLEY PUBLIC WEB SITE. YOU MAY, HOWEVER, OBTAIN THE FORM
N-Q FILINGS (AS WELL AS THE FORM N-CSR AND N-CSRS FILINGS) BY ACCESSING THE
SEC'S WEB SITE, HTTP://WWW.SEC.GOV. YOU MAY ALSO REVIEW AND COPY THEM AT THE
SEC'S PUBLIC REFERENCE ROOM IN WASHINGTON, DC. INFORMATION ON THE OPERATION OF
THE SEC'S PUBLIC REFERENCE ROOM MAY BE OBTAINED BY CALLING THE SEC AT (800) SEC-
0330. YOU CAN ALSO REQUEST COPIES OF THESE MATERIALS, UPON PAYMENT OF A
DUPLICATING FEE, BY ELECTRONIC REQUEST AT THE SEC'S E-MAIL ADDRESS
(PUBLICINFO@SEC.GOV) OR BY WRITING THE PUBLIC REFERENCE SECTION OF THE SEC,
WASHINGTON, DC 20549-0102.
4
DISTRIBUTION BY MATURITY
(% of Long-Term Portfolio) As of November 30, 2007
WEIGHTED AVERAGE MATURITY: 21 YEARS(A)
0-5 13
6-10 6
11-15 3
16-20 14
21-25 17
26-30 35
31+ 12
(a) Where applicable maturities reflect mandatory tenders, puts and call dates.
Portfolio structure is subject to change.
Summary of Investments by State Classification as of November 30, 2007
Florida............. 14.0% Tennessee...... 2.3% North Carolina..................... 1.0%
Pennsylvania........ 8.6 Virginia....... 2.3 Indiana............................ 0.7
California.......... 7.6 Maryland....... 2.2 Alabama............................ 0.7
New York............ 7.4 Hawaii......... 2.1 Idaho.............................. 0.7
Missouri............ 6.5 Iowa........... 1.9 Washington......................... 0.6
Illinois............ 5.8 Connecticut.... 1.8 Alaska............................. 0.5
Texas............... 5.5 Michigan....... 1.7 District of Columbia............... 0.2
-----
New Jersey.......... 5.5 Minnesota...... 1.5 Total Long Term Investments*....... 104.5
New Hampshire....... 5.0 South 1.4 Short-Term Investment.............. 0.2
Carolina.......
Colorado............ 4.0 Nevada......... 1.3 Liability for Floating Rate Note
Ohio................ 3.1 Georgia........ 1.2 Obligations........................ (6.6)
Massachusetts....... 2.7 North Dakota... 1.2 Other Assets in Excess of 1.9
Liabilities........................ -----
Arizona............. 2.5 Vermont........ 1.0 Net Assets......................... 100.0%
=====
---------
* Does not include open short futures contracts with underlying face amount of
$3,046,875 with unrealized appreciation of $13,741.
5
CALL AND COST (BOOK) YIELD STRUCTURE
(Based on Long-Term Portfolio) As of November 30, 2007
YEARS BONDS CALLABLE -- WEIGHTED AVERAGE CALL PROTECTION: 6 YEARS
2007(a) 0
2008 14
2009 7
2010 3
2011 8
2012 6
2013 7
2014 5
2015 14
2016 15
2017+ 21
COST (BOOK) YIELD(C) -- WEIGHTED AVERAGE BOOK YIELD: 6.6%
2007(a) 10.3
2008 7.2
2009 6.3
2010 7.0
2011 7.1
2012 6.6
2013 6.7
2014 6.2
2015 7.0
2016 6.0
2017+ 6.1
(a) May include issues initially callable in previous years.
(b) Less than 1%.
(c) Cost or "book" yield is the annual income earned on a portfolio investment
based on its original purchase price before the Fund's operating expenses.
For example, the Fund is earning a book yield of 10.3% on 0% of the long-
term portfolio that is callable in 2007.
Portfolio structure is subject to change.
6
Morgan Stanley Municipal Income Opportunities Trust
PORTFOLIO OF INVESTMENTS - NOVEMBER 30, 2007 (UNAUDITED)
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
-------------------------------------------------------------------------------------------
Tax-Exempt Municipal Bonds (104.5%)
Alabama (0.7%)
$ 1,000 Colbert County - Northwest Health Care
Authority, Helen Keller Hospital Ser
2003.................................... 5.75 % 06/01/27 $ 1,019,250
------------
Alaska (0.5%)
1,000 Northern Tobacco Securitization
Corporation, Asset Backed Ser 2006 A.... 5.00 06/01/46 829,270
------------
Arizona (2.5%)
800 Pima County Arizona Industrial Development
Authority, Water & Wastewater Ser 2007
(AMT)................................... 6.55 12/01/37 793,560
2,900 Salt Verde Financial Corp Ser 2007 @@..... 5.25 12/01/24 2,967,324
------------
3,760,884
------------
California (7.6%)
1,955 California County Tobacco Securitization
Agency, Gold County Settlement Funding
Corp Ser 2006........................... 0.00 06/01/33 346,152
500 California Housing Finance Agency, RITES
PA 1417 Ser 2006 (AMT).................. 6.417## 08/01/31 394,590
500 California Housing Finance Agency, RITES
PA 1417 Ser 2006 (AMT).................. 6.567## 08/01/36 367,940
2,000 California Statewide Community - Baptist
University - Ser 2007 A................. 5.50 11/01/38 1,943,480
4,000 Golden State Tobacco Securitization
Corporation, Asset Backed Refg Ser 2007
A-1@@................................... 5.125 06/01/47 3,385,780
2,000 Sacramento Financing Authority, Convention
Center Hotel 1999 Ser A................. 6.25 01/01/30 1,999,620
1,000 Santa Ana Unified School District
Community Facilities, District # 2004-1,
Central Park Ser 2005................... 5.10 09/01/35 905,820
1,000 San Diego County, San Diego Natural
History Museum COPs..................... 5.70 02/01/28 963,840
1,000 San Marcos Community Facilities District #
2002-01, University Commons Ser 2004.... 5.95 09/01/35 1,007,490
13,000 Silicon Valley Tobacco Securitization
Authority, Santa Clara Tobacco
Securitization Corp Ser 2007 C.......... 0.00 06/01/56 349,700
------------
11,664,412
------------
Colorado (4.0%)
25 Colorado Housing & Finance Authority, 1996
Ser B-1 (AMT)........................... 7.65 11/01/26 25,432
340 Colorado Housing & Finance Authority, Ser
1998 D-2 (AMT).......................... 6.35 11/01/29 356,068
1,000 Colorado Health Facilities Authority,
Christian Living Communities Ser 2006
A....................................... 5.75 01/01/37 962,420
1,000 Copperleaf Metropolitan District # 2 Ser
2006.................................... 5.95 12/01/36 862,150
See Notes to Financial Statements
7
Morgan Stanley Municipal Income Opportunities Trust
PORTFOLIO OF INVESTMENTS - NOVEMBER 30, 2007 (UNAUDITED) continued
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
-------------------------------------------------------------------------------------------
$ 2,000 Elk Valley Public Improvement Corporation
Ser 2001 A.............................. 7.35 % 09/01/31 $ 2,072,660
2,000 Northwest Metropolitan District #3 Ser
2005.................................... 6.25 12/01/35 1,800,060
------------
6,078,790
------------
Connecticut (1.8%)
2,000 Georgetown Special Taxing District Ser
2006 A (a).............................. 5.125 10/01/36 1,728,220
1,000 Mashantucket (Western) Pequot Tribe,
Special 1997 Ser B (a).................. 5.75 09/01/27 1,000,310
------------
2,728,530
------------
District of Columbia (0.2%)
260 Metropolitan Washington Airports
Authority, District of Columbia &
Virginia, CaterAir International Corp
Ser 1991 (AMT)++........................ 10.125 09/01/11 260,291
------------
Florida (14.0%)
500 Alachua County Florida Industrial
Development, North Florida Retirement
Village Ser 2007........................ 5.25 11/15/17 481,595
800 Alachua County Florida Industrial
Development, North Florida Retirement
Village Ser 2007........................ 5.875 11/15/36 784,160
2,000 Beacon Lakes, Community Development
District Ser 2003 A..................... 6.90 05/01/35 2,011,660
960 Bellalago Educational Facilities Benefits
District, Bellalago Charter School Ser
2004 B.................................. 5.80 05/01/34 961,219
3,550 Escambia County, Pensacola Care
Development Centers Ser 1989............ 10.25 07/01/11 3,559,798
820 Escambia County, Pensacola Care
Development Centers Ser 1989 A.......... 10.25 07/01/11 822,263
1,000 Fiddler's Creek Community Development
District #1 Ser 2005.................... 6.00 05/01/38 908,930
500 Fountainbleau Lakes Florida Community
Development District Ser 2007 B (a)..... 6.00 05/01/15 477,660
750 Grand Bay at Doral Community Development
District Ser 2007 A..................... 6.00 05/01/39 672,952
1,000 Lee County Florida Industrial Development
Authority Ser 2007 A.................... 5.375 06/15/37 896,870
1,415 Mid-Bay Bridge Authority Development
District Sr Lien Crossover Refg Ser 1993
A (AMBAC Insd).......................... 5.85 10/01/13 1,498,754
1,000 Midtown Miami Community Development
District, Parking Garage Ser 2004 A..... 6.25 05/01/37 934,550
500 Orange County Health Facilities Authority,
Orlando Lutheran Towers, Inc Ser 2005*.. 5.70 07/01/26 487,125
2,000 Orange County Health Facilities Authority,
Orlando Lutheran Towers, Inc Ser 2007... 5.50 07/01/32 1,877,060
1,000 Orange County Health Facilities Authority,
Westminister Community Care Services Inc
Ser 1999................................ 6.75 04/01/34 1,023,410
1,000 Pinellas County Health Facilities
Authority, Oaks of Clearwater Ser 2004.. 6.25 06/01/34 1,040,750
980 Renaissance Commons Community Development
District, 2005 Ser A.................... 5.60 05/01/36 859,999
500 Split Pine Community Development District
Ser 2007 A.............................. 5.25 05/01/39 404,525
See Notes to Financial Statements
8
Morgan Stanley Municipal Income Opportunities Trust
PORTFOLIO OF INVESTMENTS - NOVEMBER 30, 2007 (UNAUDITED) continued
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
-------------------------------------------------------------------------------------------
$ 1,000 St Johns County Industrial Development
Authority, Glenmoor Ser 1999 A.......... 8.00 % 01/01/10+ $ 1,110,590
600 Tolomato Community Development District,
Special Assessment Ser 2007............. 6.55 05/01/27 593,148
------------
21,407,018
------------
Georgia (1.2%)
2,000 Atlanta, Georgia, Eastside Ser 2005 B..... 5.60 01/01/30 1,909,020
------------
Hawaii (2.1%)
1,000 Hawaii Department of Budget & Finance,
Kahala Nui 2003 Ser A................... 8.00 11/15/33 1,128,550
2,000 Hawaii Department of Budget & Finance,
Kuakini Health Ser 2002 A............... 6.375 07/01/32 2,090,120
------------
3,218,670
------------
Idaho (0.7%)
1,000 Idaho Health Facilities Authority, Valley
Vista Care Corp Refg Ser 2007........... 6.125 11/15/27 1,007,000
------------
Illinois (5.8%)
1,000 Bolingbrook Sales Tax Ser 2005............ 0.00@ 01/01/24 1,032,080
2,000 Chicago, Lake Shore East Ser 2002......... 6.75 12/01/32 2,089,960
1,000 Illinois Finance Authority, Landing at
Plymouth Ser 2005 A..................... 6.00 05/15/37 983,680
1,000 Illinois Finance Authority, Luther Oaks
Ser 2006 A.............................. 6.00 08/15/39 981,120
1,650 Illinois Finance Authority, Montgomery
Place Ser 2006 A........................ 5.75 05/15/38 1,581,442
725 Lincolnshire, Illinois, Service Area
#1 - Sedgebrook Ser 2004................ 6.25 03/01/34 739,340
1,000 Yorkville Illinois, Cannonball/Beecher
Road Ser 2007........................... 5.75 03/01/28 931,500
500 Village of Hampshire, Kane County Special
Service Area #18 Crown Development Tamms
Farm Ser 2007 A......................... 6.00 03/01/44 483,830
------------
8,822,952
------------
Indiana (0.7%)
1,000 Indiana Health Facility Financing
Authority, Riverview Hospital Ser 2002.. 6.125 08/01/31 1,045,330
------------
Iowa (1.9%)
1,000 Iowa Finance Authority, Bethany Life
Communities Refg Ser 2006 A............. 5.55 11/01/41 926,890
750 Iowa Financial Authority Health Care
Facilities, Madrid Homes Ser 2007....... 5.90 11/15/37 725,445
785 Jefferson County Iowa Hospital Ser 2007
C....................................... 5.95 08/01/37 769,920
525 Washington County Hospital Ser 2006....... 5.375 07/01/26 499,795
------------
2,922,050
------------
See Notes to Financial Statements
9
Morgan Stanley Municipal Income Opportunities Trust
PORTFOLIO OF INVESTMENTS - NOVEMBER 30, 2007 (UNAUDITED) continued
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
-------------------------------------------------------------------------------------------
Maryland (2.2%)
$ 1,000 Maryland Economic Development Corporation,
Chesapeake Bay Conference Center Ser
2006 A.................................. 5.00 % 12/01/31 $ 892,880
500 Maryland Health & Higher Educational
Facilities Authority, Edenwald Ser 2006
A....................................... 5.40 01/01/31 482,715
750 Maryland Health & Higher Educational
Facilities Authority, King Farm
Presbyterian Community 2007 Ser A....... 5.30 01/01/37 664,560
800 Maryland Health & Higher Educational
Facilities Authority, Washington
Christian Academy Ser 2006.............. 5.50 07/01/38 771,872
500 Maryland Industrial Development Financing
Authority, Our Lady of Good Counsel High
School Ser 2005 A....................... 6.00 05/01/35 507,285
------------
3,319,312
------------
Massachusetts (2.7%)
1,500 Massachusetts Development Finance Agency,
Loomis Communities Ser 1999 A........... 5.75 07/01/23 1,521,945
1,625 Massachusetts Development Finance Agency,
New England Center for Children Ser
1998.................................... 5.875 11/01/18 1,634,214
1,000 Massachusetts Health & Educational
Facilities Authority, The Learning
Center for Deaf Children Ser 1999 C..... 6.125 07/01/29 1,011,940
------------
4,168,099
------------
Michigan (1.7%)
600 Gaylord Hospital Financing Authority,
Otsego Memorial Hospital Ser 2004....... 6.50 01/01/37 613,944
2,000 Michigan Tobacco Settlement Finance
Authority, Asset Backed Ser 2007........ 6.00 06/01/48 1,948,140
------------
2,562,084
------------
Minnesota (1.5%)
750 North Oaks, Minnesota, Presbyterian Homes
Ser 2007................................ 6.125 10/01/39 751,568
1,500 St Paul Housing & Redevelopment Authority,
HealthEast Ser 2005..................... 6.00 11/15/35 1,524,585
------------
2,276,153
------------
Missouri (6.5%)
750 Branson Hills Community Improvement
District Ser 2007 A..................... 5.50 04/01/27 699,645
500 Branson, Missouri Regional Airport
Transportation Development District Ser
2007 B (AMT)............................ 6.00 07/01/37 474,640
2,000 Des Peres, Missouri, West County Center
Ser 2002................................ 5.75 04/15/20 2,014,820
3,850 Fenton, Missouri, Gravois Bluffs
Redevelopment Refg Ser 2001 A........... 7.00 10/01/11+ 4,393,813
See Notes to Financial Statements
10
Morgan Stanley Municipal Income Opportunities Trust
PORTFOLIO OF INVESTMENTS - NOVEMBER 30, 2007 (UNAUDITED) continued
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
-------------------------------------------------------------------------------------------
$ 1,500 Kansas City Industrial Development Agency,
Bishop Spencer 2004 Ser A............... 6.50 % 01/01/35 $ 1,531,845
750 St Louis County Industrial Development
Authority, St Andrews Resources for
Seniors Ser 2007 A...................... 6.375 12/01/41 741,772
------------
9,856,535
------------
Nevada (1.3%)
1,050 Mesquite Nevada Special Improvement
District #07-01 Anthem at Mesquite Ser
2007.................................... 6.00 08/01/23 1,045,149
1,000 Nevada Department of Business & Industry,
Las Vegas Monorail 2nd Tier Ser 2000.... 7.375 01/01/40 940,410
------------
1,985,559
------------
New Hampshire (5.0%)
1,500 New Hampshire Higher Educational & Health
Facilities Authority, Littleton Hospital
Association Ser 1998 A.................. 6.00 05/01/28 1,504,590
12,670 New Hampshire Housing Finance Authority,
Residential Ser 1983 B.................. 0.00 01/01/15 6,096,297
------------
7,600,887
------------
New Jersey (5.5%)
1,000 New Jersey Economic Development Authority,
Cedar Crest Village Inc Ser 2001 A...... 7.25 11/15/11+ 1,149,190
1,000 New Jersey Economic Development Authority,
Franciscan Oaks Ser 1997................ 5.70 10/01/17 1,008,380
730 New Jersey Economic Development Authority,
Lions Gate Ser 2005 A................... 5.875 01/01/37 718,459
1,000 New Jersey Economic Development Authority,
The Presbyterian Home at Montgomery Ser
2001 A.................................. 6.375 11/01/31 1,015,920
700 New Jersey Economic Development Authority,
Seashore Gardens Living Center Ser
2006.................................... 5.375 11/01/36 650,181
2,000 New Jersey Economic Development Authority,
United Methodist Homes of New Jersey Ser
1998.................................... 5.125 07/01/25 1,827,580
2,000 New Jersey Health Care Facilities
Financing Authority, Raritan Bay Medical
Center Ser 1994......................... 7.25 07/01/27 2,032,020
------------
8,401,730
------------
New York (7.4%)
3,000 Brookhaven Industrial Development Agency,
Woodcrest Estates Ser 1998 A (AMT)...... 6.375 12/01/37 3,041,970
415 Mount Vernon Industrial Development
Agency, Meadowview at the Wartburg Ser
1999.................................... 6.00 06/01/09 417,212
2,000 New York City Industrial Development
Agency, 7 World Trade Center LLC Ser
2005 A.................................. 6.50 03/01/35 2,078,160
2,000 New York City Industrial Development
Agency, American Airlines Inc Ser 2005
(AMT)................................... 7.75 08/01/31 2,206,400
See Notes to Financial Statements
11
Morgan Stanley Municipal Income Opportunities Trust
PORTFOLIO OF INVESTMENTS - NOVEMBER 30, 2007 (UNAUDITED) continued
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
-------------------------------------------------------------------------------------------
$ 1,000 New York Liberty Development Corp,
National Sports Museum, Ser 2006 A...... 6.125% 02/15/19 $ 1,006,030
1,500 Suffolk County Industrial Development
Agency, Medford Hamlet Ser 2006......... 6.375 01/01/39 1,465,215
1,000 Westchester County Industrial Development
Agency, Guiding Eyes for The Blind Inc
Ser 2004................................ 5.375 08/01/24 1,028,170
------------
11,243,157
------------
North Carolina (1.0%)
1,000 North Carolina Medical Care Commission,
Presbyterian Homes Ser 2006............. 5.50 10/01/31 972,110
500 North Carolina Medical Care Commission,
Southminster Ser 2007 A................. 5.75 10/01/37 490,860
------------
1,462,970
------------
North Dakota (1.2%)
1,500 Grand Forks, North Dakota, 4000 Valley
Square Ser 2006......................... 5.30 12/01/34 1,341,195
500 Ward County, North Dakota, Trinity Ser
2006.................................... 5.125 07/01/29 491,010
------------
1,832,205
------------
Ohio (3.1%)
3,300 Buckeye Tobacco Settlement Financing
Authority, Asset Backed Ser 2007A-2 @@.. 5.875 06/01/30 3,215,674
850 Cuyahoga County Ohio Health Care and
Independent Living Facilities Ser 2007
A....................................... 5.75 05/15/27 818,219
650 Tuscarawas County Ohio Hospital Facilities
Ser 2007................................ 6.35 11/01/37 638,008
125 Zanesville-Muskingum County Port
Authority, Anchor Glass Container Corp
Ser 1989 B (AMT)........................ 10.25 12/01/08 125,339
------------
4,797,240
------------
Pennsylvania (8.6%)
4,000 Allegheny County Development Authority,
West Penn Allegheny Health Ser 2007 A
@@...................................... 5.375 11/15/40 3,650,600
1,500 Bucks County Industrial Development
Authority, Ann's Choice Ser 2005 A...... 6.125 01/01/25 1,530,765
2,120 Carbon County Industrial Development
Authority, Panther Creek Partners Refg
2000 Ser (AMT).......................... 6.65 05/01/10 2,169,205
1,000 Chester County Health & Educational
Facilities Authority, Jenner's Pond Inc
Ser 2002................................ 7.625 07/01/12+ 1,192,270
500 Fulton County Industrial Development
Authority, Fulton County Medical Center
Ser 2006................................ 5.875 07/01/31 489,665
1,000 Harrisburg Authority, Harrisburg
University of Science & Technology Ser
2007 B.................................. 6.00 09/01/36 999,210
1,000 Montgomery County Industrial Development
Authority, Whitemarsh Community Ser
2005.................................... 6.25 02/01/35 1,012,550
See Notes to Financial Statements
12
Morgan Stanley Municipal Income Opportunities Trust
PORTFOLIO OF INVESTMENTS - NOVEMBER 30, 2007 (UNAUDITED) continued
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
-------------------------------------------------------------------------------------------
$ 1,000 Pennsylvania Economic Development
Financing Authority, Reliant Energy Inc
Ser 2001 A (AMT)........................ 6.75 % 12/01/36 $ 1,063,980
1,000 Washington County,Victory Centre/Tanger
Outlet Redevelopment Authority Ser 2006
A....................................... 5.45 07/01/35 967,410
------------
13,075,655
------------
South Carolina (1.4%)
1,000 Myrtle Beach, South Carolina, Air Force
Base Redevelopment Ser 2006 A........... 5.30 11/01/35 889,120
750 South Carolina Jobs-Economic Development
Authority, Wesley Commons Ser 2006...... 5.30 10/01/36 653,018
625 South Carolina Jobs-Economic Development
Authority, Woodlands at Furman Ser 2007
A....................................... 6.00 11/15/37 608,881
------------
2,151,019
------------
Tennessee (2.3%)
2,000 Chattanooga Health, Educational & Housing
Facilities Board, Student Housing Refg
Ser 2005 A.............................. 5.00 10/01/25 1,888,200
500 Shelby County Health, Educational &
Housing Facilities Board, Trezevant
Manor Ser 2006 A........................ 5.75 09/01/37 486,755
750 Shelby County Health, Educational &
Housing Facilities Board, Village at
Germantown Ser 2003 A................... 7.25 12/01/34 747,705
500 Shelby County Health, Educational &
Housing Facilities Board, Village at
Germantown Ser 2006..................... 6.25 12/01/34 439,730
------------
3,562,390
------------
Texas (5.5%)
2,000 Austin Convention Enterprises Inc,
Convention Center Hotel Ser 2000 A...... 6.70 01/01/11+ 2,200,680
2,000 Austin Convention Enterprises Inc,
Convention Center Hotel Ser 2006 B...... 5.75 01/01/34 1,908,060
1,000 Brazos River Authority, Texas Utilities
Electric Co Refg Ser 1999 A (AMT)....... 7.70 04/01/33 1,042,180
1,000 Decatur Hospital Authority, Wise Regional
Health Ser 2004 A....................... 7.125 09/01/34 1,049,150
1,250 HFDC Central Texas Inc, Legacy at Willow
Bend, Ser 2006 A........................ 5.75 11/01/36 1,176,312
1,000 Lubbock Health Facilities Development
Corporation, Carillon Senior Lifecare
Ser 2005 A.............................. 6.50 07/01/26 1,028,640
------------
8,405,022
------------
Vermont (1.0%)
1,500 Vermont Economic Development Authority,
Wake Robin Corp Ser 1999 A.............. 6.75 03/01/09+ 1,587,390
------------
See Notes to Financial Statements
13
Morgan Stanley Municipal Income Opportunities Trust
PORTFOLIO OF INVESTMENTS - NOVEMBER 30, 2007 (UNAUDITED) continued
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
-------------------------------------------------------------------------------------------
Virginia (2.3%)
$ 2,000 Peninsula Ports Authority of Virginia,
Baptist Homes Ser 2006 C................ 5.40 % 12/01/33 $ 1,865,360
700 Peninsula Town Center Community
Development Authority Ser 2007.......... 6.45 09/01/37 715,407
1,000 Virginia Beach Development Authority,
Westminster-Canterbury Refg Ser 2005 A.. 5.25 11/01/26 974,220
------------
3,554,987
------------
Washington (0.6%)
1,000 Washington Housing Finance Commission,
Skyline at First Hill Ser 2007 A........ 5.625 01/01/38 952,670
------------
Total Tax-Exempt Municipal Bonds (Cost $161,413,312).......... 159,468,531
------------
NUMBER OF
SHARES (000)
------------
Short-Term Investment (b) (0.2%)
Investment Company
336 Morgan Stanley Institutional Liquidity Tax-Exempt
Portfolio - Institutional Class (Cost $336,093)............. 336,093
------------
Total Investments (Cost $161,749,405)......................... 159,804,624
------------
PRINCIPAL
AMOUNT IN
THOUSANDS
---------
Floating Rate Note and Dealer Trusts Obligations Related to
Securities Held (-6.6%)
$(10,040) Notes with interest rates ranging from 3.64% to
3.73% at November 30, 2007 and contractual
maturities of collateral ranging from 12/01/24 to
06/01/47+++ (Cost $(10,040,000))................. (10,040,000)
------------
Total Net Investments (Cost $151,709,405) (c) (d).. 98.1% 149,764,624
Other Assets in Excess of Liabilities.............. 1.9 2,876,394
----- ------------
Net Assets......................................... 100.0% $152,641,018
===== ============
See Notes to Financial Statements
14
Morgan Stanley Municipal Income Opportunities Trust
PORTFOLIO OF INVESTMENTS - NOVEMBER 30, 2007 (UNAUDITED) continued
----------
AMT Alternative Minimum Tax.
COPs Certificates of Participation.
RITES Residual Interest Tax-Exempt Security.
+ Prerefunded to call date shown.
++ Joint exemption.
+++ Floating rate note and dealer trusts obligations related to
securities held. The interest rates shown reflect the rates in
effect at November 30, 2007.
@ Security is a "step-up" bond where the coupon increases on a
predetermined future date.
@@ Underlying security related to inverse floater entered into by the
Fund. (See Note 1D).
## Current coupon rate for inverse floating rate municipal obligation
(See Note 8). This rate resets periodically as the auction rate on
the related security changes. Positions in inverse floating rate
municipal obligations have a total value of $762,530, which
represents 0.5% of net assets.
* A portion of this security has been physically segregated in
connection with open futures contracts in the amount of $39,000.
(a) Resale is restricted to qualified institutional investors.
(b) See Note 3 to the financial statements regarding investments in
Morgan Stanley Institutional Liquidity Tax-Exempt
Portfolio - Institutional Class.
(c) Securities have been designated as collateral in the amount equal to
$3,021,688 in connection with open futures contracts.
(d) The aggregate cost for federal income tax purposes approximates the
aggregate cost for book purposes. The aggregate gross unrealized
appreciation is $3,680,187 and the aggregate gross unrealized
depreciation is $5,624,968, resulting in net unrealized depreciation
of $1,944,781.
Bond Insurance:
---------------
AMBAC AMBAC Assurance Corporation
FUTURES CONTRACTS OPEN AT NOVEMBER 30, 2007
NUMBER OF DESCRIPTION, DELIVERY UNDERLYING FACE UNREALIZED
CONTRACTS LONG/SHORT MONTH AND YEAR AMOUNT AT VALUE APPRECIATION
-----------------------------------------------------------------------------------------
26 Short U.S. Treasury Bonds 20 Year $(3,046,875) $13,741
March 2008 ======
See Notes to Financial Statements
15
Morgan Stanley Municipal Income Opportunities Trust
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
November 30, 2007 (unaudited)
Assets
Investments in securities, at value
(cost $161,413,312).......................................... $159,468,531
Investments in affiliate, at value
(cost $336,093).............................................. 336,093
Receivable for:
Interest.................................................... 2,573,359
Investments sold............................................ 475,601
Variation margin............................................ 16,250
Dividends from affiliate.................................... 2,352
Prepaid expenses and other assets.............................. 9,419
------------
Total Assets................................................ 162,881,605
------------
Liabilities
Floating rate note and dealer trusts obligations............... 10,040,000
Payable to bank................................................ 21,937
Payable for:
Investment advisory fee..................................... 73,689
Administration fee.......................................... 11,827
Transfer agent fee.......................................... 1,697
Accrued expenses and other payables............................ 91,437
------------
Total Liabilities........................................... 10,240,587
------------
Net Assets.................................................. $152,641,018
============
Composition of Net Assets:
Paid-in-capital................................................ $173,966,937
Net unrealized depreciation.................................... (1,931,040)
Accumulated undistributed net investment income................ 979,362
Accumulated net realized loss.................................. (20,374,241)
------------
Net Assets.................................................. $152,641,018
============
Net Asset Value per Share
19,678,643 shares outstanding
(unlimited shares authorized of $.01 par value)................ $7.76
=====
See Notes to Financial Statements
16
Morgan Stanley Municipal Income Opportunities Trust
FINANCIAL STATEMENTS continued
Statement of Operations
For the six months ended November 30, 2007 (unaudited)
Net Investment Income:
Income
Interest..................................... $ 5,220,937
Dividends from affiliate..................... 33,877
-----------
Total Income................................. 5,254,814
-----------
Expenses
Investment advisory fee...................... 394,902
Interest and residual trust expenses......... 219,994
Administration fee........................... 63,184
Professional fees............................ 24,502
Shareholder reports and notices.............. 16,438
Listing fees................................. 11,010
Transfer agent fees and expenses............. 6,890
Custodian fees............................... 4,345
Trustees' fees and expenses.................. 4,094
Other........................................ 17,325
-----------
Total Expenses............................ 762,684
Less: amounts waived/reimbursed.............. (956)
Less: expense offset......................... (4,268)
-----------
Net Expenses.............................. 757,460
-----------
Net Investment Income..................... 4,497,354
-----------
Net Realized and Unrealized Gain (Loss):
Net Realized Gain (Loss):
Investment................................... 378,680
Futures contracts............................ (621,720)
Swap contract................................ 148,154
-----------
Net Realized Loss......................... (94,886)
-----------
Net Change in Unrealized
Appreciation/Depreciation on:
Investment................................... (9,576,459)
Futures contracts............................ (19,650)
Swap contract................................ (50,854)
-----------
Net Change in Unrealized
Appreciation/Depreciation................. (9,646,963)
-----------
Net Loss.................................. (9,741,849)
-----------
Net Decrease................................. $(5,244,495)
===========
See Notes to Financial Statements
17
Morgan Stanley Municipal Income Opportunities Trust
FINANCIAL STATEMENTS continued
Statements of Changes in Net Assets
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
NOVEMBER 30, 2007 MAY 31, 2007
----------------- ------------
(unaudited)
Increase (Decrease) in Net Assets:
Operations:
Net investment income.............................. $ 4,497,354 $ 9,524,302
Net realized loss.................................. (94,886) (8,551,492)
Net change in unrealized
appreciation/depreciation........................ (9,646,963) 14,749,972
------------ ------------
Net Increase (Decrease)......................... (5,244,495) 15,722,782
Dividends to shareholders from net investment
income........................................... (5,068,869) (10,648,870)
Decrease from transactions in shares of beneficial
interest......................................... (47,420) --
------------ ------------
Net Increase (Decrease)......................... (10,360,784) 5,073,912
Net Assets:
Beginning of period................................ 163,001,802 157,927,890
------------ ------------
End of period
(Including accumulated undistributed net investment
income of $979,362 and $1,550,877, respectively)... $152,641,018 $163,001,802
============ ============
See Notes to Financial Statements
18
Morgan Stanley Municipal Income Opportunities Trust
NOTES TO FINANCIAL STATEMENTS - NOVEMBER 30, 2007 (UNAUDITED)
1. Organization and Accounting Policies
Morgan Stanley Municipal Income Opportunities Trust (the "Fund") is registered
under the Investment Company Act of 1940, as amended, as a diversified, closed-
end management investment company. The Fund's investment objective is to provide
a high level of current income which is exempt from federal income tax. The Fund
was organized as a Massachusetts business trust on June 22, 1988 and commenced
operations on September 19, 1988.
The following is a summary of significant accounting policies:
A. Valuation of Investments -- (1) portfolio securities are valued by an outside
independent pricing service approved by the Trustees. The pricing service uses
both a computerized grid matrix of tax-exempt securities and evaluations by its
staff, in each case based on information concerning market transactions and
quotations from dealers which reflect the mean between the last reported bid and
asked price. The portfolio securities are thus valued by reference to a
combination of transactions and quotations for the same or other securities
believed to be comparable in quality, coupon, maturity, type of issue, call
provisions, trading characteristics and other features deemed to be relevant.
The Trustees believe that timely and reliable market quotations are generally
not readily available for purposes of valuing tax-exempt securities and that the
valuations supplied by the pricing service are more likely to approximate the
fair value of such securities; (2) futures are valued at the latest sale price
on the commodities exchange on which they trade unless it is determined that
such price does not reflect their market value, in which case they will be
valued at their fair value as determined in good faith under procedures
established by and under the supervision of the Trustees; (3) interest rate
swaps are marked-to-market daily based upon quotations from market makers; (4)
investments in open-end mutual funds, including the Morgan Stanley Institutional
Liquidity Funds, are valued at the net asset value as of the close of each
business day; and (5) short-term debt securities having a maturity date of more
than sixty days at time of purchase are valued on a mark-to-market basis until
sixty days prior to maturity and thereafter at amortized cost based on their
value on the 61st day. Short-term debt securities having a maturity date of
sixty days or less at the time of purchase are valued at amortized cost.
B. Accounting for Investments -- Security transactions are accounted for on the
trade date (date the order to buy or sell is executed). Realized gains and
losses on security transactions are determined by the identified cost method.
Discounts are accreted and premiums are amortized over the life of the
respective securities and are included in interest income. Interest income is
accrued daily except where collection is not expected.
19
Morgan Stanley Municipal Income Opportunities Trust
NOTES TO FINANCIAL STATEMENTS - NOVEMBER 30, 2007 (UNAUDITED) continued
C. Federal Income Tax Policy -- It is the Fund's policy to comply with the
requirements of the Subchapter M of the Internal Revenue Code applicable to
regulated investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no federal income tax provision
is required. The Fund files tax returns with the U.S. Internal Revenue Service
and various states. Generally, the tax authorities can examine all tax returns
filed for the last three years. If applicable, the Fund recognizes interest
accrued related to unrecognized tax benefits in interest expense and penalties
in other expenses in the Statement of Operations. The Fund adopted the
provisions of the Financial Accounting Standards Board's (FASB) Interpretation
number 48 Accounting for Uncertainty in Income Taxes, on June 30, 2007. As of
November 30, 2007, this did not result in an impact to the Fund's financial
statements.
D. Floating Rate Note and Dealer Trusts Obligations Related to Securities
Held -- The Fund enters into transactions in which it transfers to Dealer Trusts
("Dealer Trusts"), fixed rate bonds in exchange for cash and residual interests
in the Dealer Trusts' assets and cash flows, which are in the form of inverse
floating rate investments. The Dealer Trusts fund the purchases of the fixed
rate bonds by issuing floating rate notes to third parties and allowing the Fund
to retain residual interest in the bonds. The Fund enters into shortfall
agreements with the Dealer Trusts which commit the Fund to pay the Dealer
Trusts, in certain circumstances, the difference between the liquidation value
of the fixed rate bonds held by the Dealer Trusts and the liquidation value of
the floating rate notes held by third parties, as well as any shortfalls in
interest cash flows. The residual interests held by the Fund (inverse floating
rate investments) include the right of the Fund (1) to cause the holders of the
floating rate notes to tender their notes at par at the next interest rate reset
date, and (2) to transfer the municipal bond from the Dealer Trusts to the Fund,
thereby collapsing the Dealer Trusts. The Fund accounts for the transfer of
bonds to the Dealer Trusts as secured borrowings, with the securities
transferred remaining in the Fund's investment assets, and the related floating
rate notes reflected as Fund liabilities under the caption "floating rate note
and dealer trusts obligations" on the Statement of Assets and Liabilities. The
Fund records the interest income from the fixed rate bonds under the caption
"Interest Income" and records the expenses related to floating rate note
obligations and any administrative expenses of the Dealer Trusts under the
caption "Interest and residual trust expenses" in the Fund's Statement of
Operations. The notes issued by the Dealer Trusts have interest rates that reset
weekly and the floating rate note holders have the option to tender their notes
to the Dealer Trusts for redemption at par at each reset date. At November 30,
2007, Fund investments with a value of $13,219,378 are held by the Dealer Trusts
and serve as collateral for the $10,040,000 in floating rate note obligations
outstanding at that date. Contractual maturities of the floating rate note
obligations and interest rates in effect at November 30, 2007 are presented in
the Portfolio of Investments.
20
Morgan Stanley Municipal Income Opportunities Trust
NOTES TO FINANCIAL STATEMENTS - NOVEMBER 30, 2007 (UNAUDITED) continued
E. Interest Rate Swaps -- Interest rate swaps involve the exchange of
commitments to pay and receive interest based on a notional principal amount.
Net periodic interest payments to be received or paid are accrued daily and are
recorded as realized gains or losses in the Statement of Operations.
F. Futures Contracts -- A futures contract is an agreement between two parties
to buy and sell financial instruments or contracts based on financial indices at
a set price on a future date. Upon entering into such a contract, the Fund is
required to pledge to the broker cash, U.S. Government securities or other
liquid portfolio securities equal to the minimum initial margin requirements of
the applicable futures exchange. Pursuant to the contract, 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 known as
variation margin are recorded by the Fund as unrealized gains and losses. Upon
closing of the contract, the Fund realizes a gain or loss equal to the
difference between the value of the contract at the time it was opened and the
value at the time it was closed.
G. Dividends and Distributions to Shareholders -- Dividends and distributions to
shareholders are recorded on the ex-dividend date.
H. Use of Estimates -- The preparation of financial statements in accordance
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts and disclosures.
Actual results could differ from those estimates.
2. Investment Advisory/Administration Agreements
Pursuant to an Investment Advisory Agreement with Morgan Stanley Investment
Advisors Inc. (the "Investment Adviser"), the Fund pays an advisory fee,
calculated weekly and payable monthly, by applying the annual rate of 0.50% to
the Fund's weekly net assets.
Pursuant to an Administration Agreement with Morgan Stanley Services Company
Inc. (the "Administrator"), an affiliate of the Investment Adviser, the Fund
pays an administration fee, calculated weekly and payable monthly, by applying
the annual rate of 0.08% to the Fund's weekly net assets.
Under an agreement between the Administrator and State Street Bank and Trust
Company ("State Street"), State Street provides certain administrative services
to the Fund. For such services, the Administrator pays State Street a portion of
the fee the Administrator receives from the Fund.
21
Morgan Stanley Municipal Income Opportunities Trust
NOTES TO FINANCIAL STATEMENTS - NOVEMBER 30, 2007 (UNAUDITED) continued
3. Security Transactions and Transactions with Affiliates
The Fund invests in Morgan Stanley Institutional Liquidity Tax-Exempt
Portfolio -- Institutional Class, an open-end management investment company
managed by the Investment Adviser. Investment advisory fees paid by the Fund are
reduced by an amount equal to the advisory and administrative services fees paid
by Morgan Stanley Institutional Liquidity Tax-Exempt Portfolio -- Institutional
Class with respect to assets invested by the Fund in Morgan Stanley
Institutional Liquidity Tax-Exempt Portfolio -- Institutional Class. For the six
months ended November 30, 2007, advisory fees paid were reduced by $956 relating
to the Fund's investment in Morgan Stanley Institutional Liquidity Tax-Exempt
Portfolio -- Institutional Class. Income distributions earned by the Fund are
recorded as dividends from affiliate in the Statement of Operations and totaled
$33,877 for the six months ended November 30, 2007. During the six months ended
November 30, 2007, cost of purchases and sales of investments in Morgan Stanley
Institutional Liquidity Tax-Exempt Portfolio -- Institutional Class aggregated
$22,975,684 and $22,639,591, respectively.
The cost of purchases and proceeds from sales of portfolio securities, excluding
short-term investments, for the six months ended November 30, 2007 aggregated
$38,332,168 and $41,327,944, respectively. Included in the aforementioned
transactions is a sale of $1,099,995 with another Morgan Stanley fund including
a net realized loss of $208,542.
Effective September 28, 2007, the transfer agent services previously provided to
the Fund by Morgan Stanley Trust was assumed by Computershare Trust Company,
N.A. (the "Transfer Agent").
The Fund has an unfunded noncontributory defined benefit pension plan covering
certain independent Trustees of the Fund who will have served as independent
Trustees for at least five years at the time of retirement. Benefits under this
plan are based on factors which include years of service and compensation. The
Trustees voted to close the plan to new participants and eliminate the future
benefits growth due to increases to compensation after July 31, 2003. Aggregate
pension costs for the six months ended November 30, 2007 included in Trustees'
fees and expenses in the Statement of Operations amounted to $3,001. At November
30, 2007, the Fund had an accrued pension liability of $61,661 which is included
in accrued expenses in the Statement of Assets and Liabilities.
The Fund has an unfunded Deferred Compensation Plan (the "Compensation Plan")
which allows each independent Trustee to defer payment of all, or a portion, of
the fees he or she receives for serving on the Board of Trustees. Each eligible
Trustee generally may elect to have the deferred amounts credited with a return
equal to the total return on one or more of the Morgan Stanley funds that are
offered as investment options under the Compensation Plan.
Appreciation/depreciation and distributions received from these investments are
recorded with an offsetting increase/decrease in the deferred compensation
obligation and do not affect the net asset value of the Fund.
22
Morgan Stanley Municipal Income Opportunities Trust
NOTES TO FINANCIAL STATEMENTS - NOVEMBER 30, 2007 (UNAUDITED) continued
4. Shares of Beneficial Interest
Transactions in shares of beneficial interest were as follows:
CAPITAL
PAID IN
PAR VALUE EXCESS OF
SHARES OF SHARES PAR VALUE
---------- --------- ------------
Balance, May 31, 2005........................... 19,693,243 $196,932 $174,267,222
Treasury shares purchased and retired (weighted
average discount 0.54%)*...................... (8,200) (82) (64,628)
Reclassification due to permanent book/tax
differences................................... -- -- (413,264)
---------- -------- ------------
Balance, May 31, 2006 and May 31, 2007.......... 19,685,043 196,850 173,789,330
Treasury shares purchased and retired (weighted
average discount 4.34%)*...................... (6,400) (64) (19,179)
---------- -------- ------------
Balance November 30, 2007....................... 19,678,643 $196,786 $173,770,151
========== ======== ============
----------
* The Trustees have voted to retire the shares purchased.
5. Dividends
The Fund declared the following dividends from net investment income:
DECLARATION AMOUNT RECORD PAYABLE
DATE PER SHARE DATE DATE
------------------ --------- ---------------- -----------------
September 25, 2007 $0.03875 December 7, 2007 December 21, 2007
December 31, 2007 $0.03875 January 11, 2008 January 25, 2008
December 31, 2007 $0.03875 February 8, 2008 February 22, 2008
December 31, 2007 $0.03875 March 7, 2008 March 20, 2008
6. Federal Income Tax Status
The amount of dividends and distributions from net investment income and net
realized capital gains are determined in accordance with federal income tax
regulations which may differ from generally accepted accounting principles.
These "book/tax" differences are either considered temporary or permanent in
nature. To the extent these differences are permanent in nature, such amounts
are reclassified within the capital accounts based on their federal tax-basis
treatment; temporary differences do not require reclassification. Dividends and
distributions which exceed net investment income and net realized capital gains
for tax purposes are reported as distributions of paid-in-capital.
As of May 31, 2007, the Fund had a net capital loss carryforward of $10,670,588
of which $3,930,059 will expire on May 31, 2009, $1,864,080 will expire on May
31, 2011 and $4,876,449 will expire on May 31, 2013 to offset future capital
gains to extend provided by regulations.
23
Morgan Stanley Municipal Income Opportunities Trust
NOTES TO FINANCIAL STATEMENTS - NOVEMBER 30, 2007 (UNAUDITED) continued
As of May 31, 2007, the Fund had temporary book/tax differences primarily
attributable to post-October losses (capital losses incurred after October 31
within the taxable year which are deemed to arise on the first business day of
the Fund's next taxable year), book amortization of discounts on debt securities
and mark-to-market of open futures contracts.
7. Expense Offset
The expense offset represents a reduction of the fees and expenses for interest
earned on cash balances maintained by the Fund with the transfer agent and
custodian.
8. Purposes of and Risks Relating to Certain Financial Instruments
The Fund may invest a portion of its assets in inverse floating rate
instruments, either through outright purchases of inverse floating rate
securities or through the transfer of bonds to a Dealer Trust in exchange for
cash and residual interests in the Dealer Trust. These investments are typically
used by the Fund in seeking to enhance the yield of the portfolio. These
instruments typically involve greater risks than a fixed rate municipal bond. In
particular, these instruments are acquired through leverage or may have leverage
embedded in them and therefore involve many of the risks associated with
leverage. Leverage is a speculative technique that may expose the Fund to
greater risk and increased costs. Leverage may cause the Fund's net asset value
to be more volatile than if it had not been leveraged because leverage tends to
magnify the effect of any increases or decreases in the value of the Fund's
portfolio securities. The use of leverage may also cause the Fund to liquidate
portfolio positions when it may not be advantageous to do so in order to satisfy
its obligations with respect to inverse floating rate instruments.
To hedge against adverse interest rate changes, the Fund may invest in financial
futures contracts or municipal bond index futures contracts ("futures
contracts").
These futures contracts involve elements of market risk in excess of the amount
reflected in the Statement of Assets and Liabilities. The Fund bears the risk of
an unfavorable change in the value of the underlying securities. Risks may also
arise upon entering into these contracts from the potential inability of the
counterparties to meet the terms of their contracts.
The Fund may enter into interest rate swaps and may purchase or sell interest
rate caps, floors and collars. The Fund expects to enter into these transactions
primarily to manage interest rate risk, hedge portfolio positions and preserve a
return or spread on a particular investment or portion of its portfolio. The
Fund may also enter into these transactions to protect against any increase in
the price of securities the Fund anticipates purchasing at a later date.
Interest rate swap transactions are
24
Morgan Stanley Municipal Income Opportunities Trust
NOTES TO FINANCIAL STATEMENTS - NOVEMBER 30, 2007 (UNAUDITED) continued
subject to market risk, risk of default by the other party to the transaction,
risk of imperfect correlation and manager risk. Such risks may exceed the
related amounts shown in the Statement of Assets and Liabilities.
9. Accounting Pronouncement
In September 2006, Statement of Financial Accounting Standards No. 157, Fair
Value Measurements (SFAS 157), was issued and is effective for fiscal years
beginning after November 15, 2007. SFAS 157 defines fair value, establishes a
framework for measuring fair value and expands disclosures about fair value
measurements. Management is currently evaluating the impact the adoption of SFAS
157 will have on the Fund's financial statement disclosures.
25
Morgan Stanley Municipal Income Opportunities Trust
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
FOR THE SIX FOR THE YEAR ENDED MAY 31,
MONTHS ENDED ----------------------------------------------------
NOVEMBER 30, 2007 2007 2006 2005 2004 2003
----------------- -------- -------- -------- -------- --------
(unaudited)
Selected Per Share Data:
Net asset value, beginning of the period..... $8.28 $8.02 $8.00 $7.67 $7.91 $7.88
----- ----- ----- ----- ----- -----
Income (loss) from investment operations:
Net investment income*.................... 0.23 0.48 0.54 0.53 0.52 0.54
Net realized and unrealized gain (loss)... (0.49) 0.32 0.01 0.29 (0.26) 0.04
------ ----- ----- ----- ------- -----
Total income (loss) from investment
operations.................................. (0.26) 0.80 0.55 0.82 0.26 0.58
------ ----- ----- ----- ----- -----
Less dividends from net investment income.... (0.26) (0.54) (0.53) (0.50) (0.50) (0.55)
------ ------ ------ ------ ------ ------
Anti-dilutive effect of acquiring treasury
shares*..................................... 0.00(5) 0.00 0.00 0.01 0.00 0.00
----- ----- ----- ----- ----- -----
Net asset value, end of period............... $7.76 $8.28 $8.02 $8.00 $7.67 $7.91
===== ===== ===== ===== ===== =====
Market value, end of period.................. $7.66 $9.68 $8.76 $7.97 $7.09 $7.76
===== ===== ===== ===== ===== =====
Total Return+................................ (18.46)%(1) 16.99% 17.04% 20.12% (2.34)% 3.09%
Ratios to Average Net Assets:
Total expenses (before expense offset)....... 0.96 %(2)(3)(4)0.80%(4) 0.71% 0.83% 0.94 % 0.93%(4)
Total expenses (before expense offset,
exclusive of interest and residual trust
expenses)................................... 0.68 %(2)(3)(4)0.72%(4) 0.71% 0.83% 0.94 % 0.93%(4)
Net investment income........................ 5.69 %(2) 5.88% 6.78% 6.76% 6.63 % 6.85%
Supplemental Data:
Net assets, end of period, in thousands...... $152,641 $163,002 $157,928 $157,594 $156,265 $164,208
Portfolio turnover rate...................... 23 %(1) 26% 19% 12% 10 % 8%
----------
* The per share amounts were computed using an average number of shares
outstanding during the period.
+ Total return is based upon the current market value on the last day of
each period reported. Dividends are assumed to be reinvested at the prices
obtained under the Fund's dividend reinvestment plan. Total return does
not reflect brokerage commissions.
(1) Not annualized.
(2) Annualized.
(3) Reflects waivers of certain Fund expenses in connection with the
investments in Morgan Stanley Institutional Liquidity Tax-Exempt
Portfolio -- Institutional Class during the period. As a result of such
waivers the expenses as a percentage of its net assets had an effect of
less than 0.005%
(4) Does not reflect the effect of expense offset of 0.01%.
(5) Includes anti-dilutive effect of acquiring treasury shares of less than
$0.01.
See Notes to Financial Statements
26
Morgan Stanley Municipal Income Opportunities Trust
PORTFOLIO MANAGEMENT/REVISED INVESTMENT POLICY (UNAUDITED)
Portfolio Management
As of the date of this report, the Fund is managed within the Morgan Stanley
Municipals team. The team consists of portfolio managers and analysts. Current
members of the team jointly and primarily responsible for the day-to-day
management of the Fund's portfolio are Wayne Godlin, a Managing Director of the
Investment Adviser, Gerald J. Lian, an Executive Director of the Investment
Adviser, and Robert Stryker, a Vice President of the Investment Adviser.
Mr. Godlin has been associated with the investment Adviser in a investment
management capacity since July 2001 and began managing the Fund in October 2001.
Mr. Lian has been associated with the Investment Adviser in an investment
management capacity since December 1991 and began managing the Fund in May 2003.
Mr. Stryker has been associated with the Adviser in an investment management
capacity since February 1994 and began managing the Fund in September 2007.
Revised Investment Policy
To the extent permitted by applicable law and the Fund's investment objectives,
policies, and restrictions, the Fund may invest all or some of its short-term
cash investments in any money market fund advised or managed by the Investment
Adviser or its affiliates. In connection with any such investments, the Fund, to
the extent permitted by the Investment Company Act, will pay its share of all
expenses (other than advisory and administrative fees) of a money market fund in
which it invests which may result in the Fund bearing some additional expenses.
The Board of Trustees Approved a Clarification in the Investment Policies
Discussed Below
The Fund may invest in put and call options and futures on its portfolio
securities. The Fund may use options and futures to protect against a decline in
the Fund's securities or an increase in prices of securities that may be
purchased or to adjust the Fund's yield curve exposure.
If the Fund invests in options and/or futures, its participation in these
markets would subject the Fund's portfolio to certain risks. If the Investment
Adviser's predictions of movements in the direction of the markets are
inaccurate, the adverse consequences to the Fund (e.g., a reduction in the
Fund's net asset value or a reduction in the amount of income available for
distribution) may leave the Fund in a worse position than if these strategies
were not used. Other risks inherent in the use of options and futures include,
for example, the possible imperfect correlation between the price of options and
futures contracts and movements in the prices of the securities being hedged.
With respect to futures contracts, this correlation may be further distorted
since the futures contracts that are being used to hedge are not based on
municipal obligations. There is also the possibility of an absence of a liquid
secondary market for any particular instrument. Certain
27
Morgan Stanley Municipal Income Opportunities Trust
PORTFOLIO MANAGEMENT/REVISED INVESTMENT POLICY (UNAUDITED) continued
options may be over-the-counter options which are options negotiated with
dealers; there is no secondary market for these investments and therefore may be
difficult to value. If the Fund uses an option or futures transaction as an
alternative to purchasing or selling an underlying instrument in order to obtain
desired exposure, the Fund will be exposed to the same risks as are incurred in
purchasing and selling the underlying instrument directly.
28
Morgan Stanley Municipal Income Opportunities Trust
DIVIDEND REINVESTMENT PLAN (UNAUDITED)
The dividend reinvestment plan (the "Plan") offers you a prompt and simple way
to reinvest your dividends and capital gains distributions into additional
shares of the Fund. Under the Plan, the money you earn from dividends and
capital gains distributions will be reinvested automatically in more shares of
the Fund, allowing you to potentially increase your investment over time. All
shareholders in the Fund are automatically enrolled in the Plan when shares are
purchased.
PLAN BENEFITS
- ADD TO YOUR ACCOUNT
You may increase your shares in the Fund easily and automatically with the Plan.
- LOW TRANSACTION COSTS
Transaction costs are low because the new shares are bought in blocks and the
brokerage commission is shared among all participants.
- CONVENIENCE
You will receive a detailed account statement from Computershare Trust Company,
N.A., which administers the Plan, whenever shares are reinvested for you. The
statement shows your total distributions, date of investment, shares acquired,
and price per share, as well as the total number of shares in your reinvestment
account. You can also access your account via the Internet. To do this, please
go to morganstanley.com.
- SAFEKEEPING
Computershare Trust Company, N.A. will hold the shares it has acquired for you
in safekeeping.
HOW TO PARTICIPATE IN THE PLAN
If you own shares in your own name, you can participate directly in the Plan. If
your shares are held in "street name" -- in the name of your brokerage firm,
bank, or other financial institution -- you must instruct that entity to
participate on your behalf. If they are unable to participate on your behalf,
you may request that they reregister your shares in your own name so that you
may enroll in the Plan.
If you choose to participate in the Plan, whenever the Fund declares a dividend
or capital gains distributions, it will be invested in additional shares of your
Fund that are purchased in the open market.
HOW TO ENROLL
To enroll in the Plan, please read the Terms and Conditions in the Plan
brochure. You can obtain a copy of the Plan Brochure and enroll in the Plan by
visiting morganstanley.com, calling toll-free (888) 421-4015 or notifying us in
writing at Morgan Stanley Closed-End Funds, Computershare Trust Company, N.A.,
P.O. Box 43078, Providence, RI 02940-3078. Please include the Fund name and
29
Morgan Stanley Municipal Income Opportunities Trust
DIVIDEND REINVESTMENT PLAN (UNAUDITED) continued
account number and ensure that all shareholders listed on the account sign these
written instructions. Your participation in the Plan will begin with the next
dividend or capital gains distribution payable after Computershare Trust
Company, N.A. receives your authorization, as long as they receive it before the
"record date," which is generally ten business days before the dividend is paid.
If your authorization arrives after such record date, your participation in the
Plan will begin with the following dividend or distribution.
COSTS OF THE PLAN
There is no direct charge to you for reinvesting dividends and capital gains
distributions because the Plan's fees are paid by the Fund. However, when
applicable, you will pay your portion of any brokerage commissions incurred when
the new shares are purchased on the open market. These brokerage commissions are
typically less than the standard brokerage charges for individual transactions,
because shares are purchased for all participants in blocks, resulting in lower
commissions for each individual participant. Any brokerage commissions or
service fees are averaged into the purchase price.
TAX IMPLICATIONS
The automatic reinvestment of dividends and capital gains distributions does not
relieve you of any income tax that may be due on dividends or distributions. You
will receive tax information annually to help you prepare your federal and state
income tax returns.
Morgan Stanley does not offer tax advice. The tax information contained herein
is general and is not exhaustive by nature. It was not intended or written to be
used, and it cannot be used by any taxpayer, for avoiding penalties that may be
imposed on the taxpayer under U.S. federal tax laws. Federal and state tax laws
are complex and constantly changing. Shareholders should always consult a legal
or tax advisor for information concerning their individual situation.
HOW TO WITHDRAW FROM THE PLAN
To withdraw from the Plan, please visit morganstanley.com or call (888) 421-4015
or notify us in writing at the address below.
Morgan Stanley Closed-End Funds
Computershare Trust Company, N.A.
P.O. Box 43078
Providence, RI 02940-3078
30
Morgan Stanley Municipal Income Opportunities Trust
DIVIDEND REINVESTMENT PLAN (UNAUDITED) continued
All shareholders listed on the account must sign any written withdrawal
instructions. If you withdraw, you have three options with regard to the shares
held in your account:
1. If you opt to continue to hold your non-certificated shares, they will be
held by Computershare Trust Company, N.A.
2. If you opt to sell your shares through Morgan Stanley, we will sell all full
and fractional shares and send the proceeds via check to your address of
record after deducting brokerage commissions.
3. You may sell your shares through your financial advisor through the Direct
Registration System ("DRS"). DRS is a service within the securities industry
that allows Fund shares to be held in your name in electronic format. You
retain full ownership of your shares, without having to hold a stock
certificate.
The Fund and Computershare Trust Company, N.A. may amend or terminate the Plan.
Participants will receive written notice at least 30 days before the effective
date of any amendment. In the case of termination, Participants will receive
written notice at least 30 days before the record date for the payment of any
dividend or capital gains distribution by the Fund. In the case of amendment or
termination necessary or appropriate to comply with applicable law or the rules
and policies of the Securities and Exchange Commission or any other regulatory
authority, such written notice will not be required.
TO OBTAIN A COMPLETE COPY OF THE DIVIDEND REINVESTMENT PLAN, PLEASE CALL OUR
CLIENT RELATIONS DEPARTMENT AT 888-421-4015 OR VISIT MORGANSTANLEY.COM.
31
Morgan Stanley Municipal Income Opportunities Trust
MORGAN STANLEY ADVISOR CLOSED END FUNDS
AN IMPORTANT NOTICE CONCERNING OUR U.S. PRIVACY POLICY
We are required by federal law to provide you with a copy of our Privacy Policy
annually.
The following Policy applies to current and former individual investors in
Morgan Stanley Advisor closed end funds. This Policy is not applicable to
partnerships, corporations, trusts or other non-individual clients or account
holders. Please note that we may amend this Policy at any time, and will inform
you of any changes to this Policy as required by law.
WE RESPECT YOUR PRIVACY
We appreciate that you have provided us with your personal financial
information. We strive to maintain the privacy of such information while we help
you achieve your financial objectives. This Policy describes what non-public
personal information we collect about you, why we collect it, and when we may
share it with others. We hope this Policy will help you understand how we
collect and share non-public personal information that we gather about you.
Throughout this Policy, we refer to the non-public information that personally
identifies you or your accounts as "personal information."
1. WHAT PERSONAL INFORMATION DO WE COLLECT ABOUT YOU?
To serve you better and manage our business, it is important that we collect and
maintain accurate information about you. We may obtain this information from
applications and other forms you submit to us, from your dealings with us, from
consumer reporting agencies, from our Web sites and from third parties and other
sources.
FOR EXAMPLE:
- We may collect information such as your name, address, e-mail address,
telephone/fax numbers, assets, income and investment objectives through
applications and other forms you submit to us.
- We may obtain information about account balances, your use of account(s) and
the types of products and services you prefer to receive from us through your
dealings and transactions with us and other sources.
- We may obtain information about your creditworthiness and credit history from
consumer reporting agencies.
- We may collect background information from and through third-party vendors to
verify representations you have made and to comply with various regulatory
requirements.
- If you interact with us through our public and private Web sites, we may
collect information that you provide directly through online communications
(such as an e-mail address). We may also collect information about your
Internet service provider, your domain name, your computer's operating system
and Web browser, your use of our Web sites and your product and service
preferences,
32
through the use of "cookies." "Cookies" recognize your computer each time you
return to one of our sites, and help to improve our sites' content and
personalize your experience on our sites by, for example, suggesting offerings
that may interest you. Please consult the Terms of Use of these sites for more
details on our use of cookies.
2. WHEN DO WE DISCLOSE PERSONAL INFORMATION WE COLLECT ABOUT YOU?
To provide you with the products and services you request, to serve you better
and to manage our business, we may disclose personal information we collect
about you to our affiliated companies and to non-affiliated third parties as
required or permitted by law.
A. INFORMATION WE DISCLOSE TO OUR AFFILIATED COMPANIES. We do not disclose
personal information that we collect about you to our affiliated companies
except to enable them to provide services on our behalf or as otherwise required
or permitted by law.
B. INFORMATION WE DISCLOSE TO THIRD PARTIES. We do not disclose personal
information that we collect about you to non-affiliated third parties except to
enable them to provide services on our behalf, to perform joint marketing
agreements with other financial institutions, or as otherwise required or
permitted by law. For example, some instances where we may disclose information
about you to nonaffiliated third parties include: for servicing and processing
transactions, to offer our own products and services, to protect against fraud,
for institutional risk control, to respond to judicial process or to perform
services on our behalf. When we share personal information with these companies,
they are required to limit their use of personal information to the particular
purpose for which it was shared and they are not allowed to share personal
information with others except to fulfill that limited purpose.
3. HOW DO WE PROTECT THE SECURITY AND CONFIDENTIALITY OF PERSONAL INFORMATION WE
COLLECT ABOUT YOU?
We maintain physical, electronic and procedural security measures to help
safeguard the personal information we collect about you. We have internal
policies governing the proper handling of client information. Third parties that
provide support or marketing services on our behalf may also receive personal
information, and we require them to adhere to confidentiality standards with
respect to such information.
33
(This Page Intentionally Left Blank)
(This Page Intentionally Left Blank)
TRUSTEES
Frank L. Bowman
Michael Bozic
Kathleen A. Dennis
James F. Higgins
Dr. Manuel H. Johnson
Joseph J. Kearns
Michael F. Klein
Michael E. Nugent
W. Allen Reed
Fergus Reid
OFFICERS
Michael E. Nugent
Chairperson of the Board
Ronald E. Robison
President and Principal Executive Officer
J. David Germany
Vice President
Dennis F. Shea
Vice President
Amy R. Doberman
Vice President
Carsten Otto
Chief Compliance Officer
Stefanie V. Chang Yu
Vice President
Francis J. Smith
Treasurer and Chief Financial Officer
Mary E. Mullin
Secretary
TRANSFER AGENT
Computershare Trust Company, N.A.
P.O. Box 43078
Providence, RI 02940-3078
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP
Two World Financial Center
New York, New York 10281
LEGAL COUNSEL
Clifford Chance US LLP
31 West 52nd Street
New York, New York 10019
COUNSEL TO THE INDEPENDENT TRUSTEES
Kramer Levin Naftalis & Frankel LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT ADVISER
Morgan Stanley Investment Advisors Inc.
522 Fifth Avenue
New York, New York 10036
The financial statements included herein have been taken from the records of the
Fund without examination by the independent auditors and accordingly they do not
express an opinion thereon.
(c) 2007 Morgan Stanley
[MORGAN STANLEY LOGO]
MORGAN STANLEY FUNDS
Morgan Stanley
Municipal Income
Opportunities Trust
Semiannual Report
November 30, 2007
[MORGAN STANLEY LOGO]
01ASAN
IU08-00250P-Y11/07
Item 2. Code of Ethics.
Not applicable for semiannual reports.
Item 3. Audit Committee Financial Expert.
Not applicable for semiannual reports.
Item 4. Principal Accountant Fees and Services
Not applicable for semiannual reports.
Item 5. Audit Committee of Listed Registrants.
Not applicable for semiannual reports.
Item 6.
Refer to Item 1.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable for semiannual reports.
Item 8. Portfolio Managers of Closed-End Management Investment Companies
Applicable only to reports covering periods ending on or after December 31,
2005.
Item 9. Closed-End Fund Repurchases
REGISTRANT PURCHASE OF EQUITY SECURITIES
(d) Maximum Number
(or Approximate
(c) Total Number of Dollar Value) of
Shares (or Units) Shares (or Units)
Purchased as Part that May Yet Be
(a) Total Number of (b) Average Price of Publicly Purchased Under
Shares (or Units) Paid per Share Announced Plans or the Plans or
Period Purchased (or Unit) Programs Programs
----------- ------------------- ----------------- ------------------- ------------------
November 1
November 30 6,400 7.40 N/A N/A
N/A N/A
N/A N/A
N/A N/A
N/A N/A
N/A N/A
----- ---- --- ---
Total 6,400 7.40 N/A N/A
===== ==== === ===
Item 10. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 11. Controls and Procedures
(a) The Fund's principal executive officer and principal financial officer have
concluded that the Trust's/Fund's disclosure controls and procedures are
sufficient to ensure that information required to be disclosed by the Fund in
this Form N-CSR was recorded, processed, summarized and reported within the time
periods specified in the Securities and Exchange Commission's rules and forms,
based upon such officers' evaluation of these controls and procedures as of a
date within 90 days of the filing date of the report.
2
(b) There were no changes in the registrant's internal control over financial
reporting 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) Code of Ethics - Not applicable for semiannual reports.
(b) A separate certification for each principal executive officer and principal
financial officer of the registrant are attached hereto as part of EX-99.CERT.
3
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.
Morgan Stanley Municipal Income Opportunities Trust
/s/ Ronald E. Robison
Ronald E. Robison
Principal Executive Officer
January 17, 2008
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed by the following
persons on behalf of the registrant and in the capacities and on the dates
indicated.
/s/ Ronald E. Robison
Ronald E. Robison
Principal Executive Officer
January 17, 2008
/s/ Francis Smith
Francis Smith
Principal Financial Officer
January 17, 2008
4