MSDW MUNICIPAL INCOME OPPORTUNITIES TRUST II, N-30D, 1999-11-05

MSDW MUNICIPAL INCOME OPPORTUNITIES TRUST II
N-30D, 1999-11-05

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<PAGE> 1

MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME OPPORTUNITIES TRUST II
Two World Trade Center
LETTER TO THE SHAREHOLDERS August 31, 1999 New York, New York 10048

DEAR SHAREHOLDER:

In the wake of 1998's international economic difficulties, the financial markets
have benefited from global healing. The turmoil included the Asian financial
crisis, the Russian debt default and the orchestrated rescue of a major hedge
fund. This precipitated a flight to quality and U.S. Treasury securities bond
yields fell to 30-year lows. The major catalyst for the return to stability was
the liquidity provided by the Federal Reserve Board's 75-basis-point reduction
in the federal-funds rate during the fourth quarter of 1998.

The U.S. economy, led by consumer demand, has continued to experience robust
growth this year. Moving into 1999, higher materials prices and wage increases
caused the fixed-income markets to focus on the possibility that the central
bank would begin to take back some of the liquidity provided during last year's
crises. By the end of August, long-term interest rates were again at levels last
seen in the spring of 1998. During the summer the Federal Reserve changed
monetary policy and, in two separate moves, raised the federal-funds rate 50
basis points to 5.25 percent.

MUNICIPAL MARKET CONDITIONS

Last year's "flight-to-quality" rally primarily benefited U.S. Treasuries. As
global turmoil subsided and interest rates began to rise, Treasury yields
increased more than municipal yields. Long-term insured municipal index yields
have risen 70 basis points, from 5.05 percent to 5.75 percent, during the first
eight months of 1999. Over the same period, Treasury yields rose nearly 100
basis points to 6.05 percent.

The ratio of long-term municipal yields to Treasury yields declined from 99
percent at the end of 1998 to 94 percent by the end of August. The ratio is a
measure of relative performance that compares long-term insured municipal index
yields to benchmark 30-year Treasury yields. A declining ratio means municipals
have outperformed Treasuries. Over the
<PAGE> 2
MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME OPPORTUNITIES TRUST II

LETTER TO THE SHAREHOLDERS August 31, 1999, continued

past five years the annual high ratio has averaged 93 percent and the annual low
ratio 84 percent of Treasuries.

Municipal performance was also aided by a slowdown in the pace of underwritings.
New-issue volume declined 22 percent in the first eight months of 1999.
Refunding activity, the most interest-rate-sensitive component of supply, was
down 51 percent.
<TABLE>
<CAPTION>
30-YEAR U.S. 30-YEAR INSURED INSURED MUNICIPAL YIELDS
TREASURY YIELDS MUNICIPAL YIELDS AS A PERCENT OF U.S. TREASURY YIELDS
<S> <C> <C> <C>

1994 6.34 5.40 85.17
6.24 5.40 85.17
6.66 5.80 87.09
7.09 6.40 90.27
7.32 6.35 86.75
7.43 6.25 84.12
7.61 6.50 85.41
7.39 6.25 84.57
7.45 6.30 84.56
7.81 6.55 83.87
7.96 6.75 84.80
8.00 7.00 87.50
7.88 6.75 85.66
1995 7.70 6.40 83.12
7.44 6.15 82.66
7.43 6.15 82.77
7.34 6.20 84.47
6.66 5.80 87.09
6.62 6.10 92.15
6.86 6.10 88.92
6.66 6.00 90.09
6.48 5.95 91.82
6.33 5.75 90.84
6.14 5.50 89.58
5.94 5.35 90.07
1996 6.03 5.40 89.55
6.46 5.60 86.69
6.66 5.85 87.84
6.89 5.95 86.36
6.99 6.05 86.55
6.89 5.90 85.63
6.97 5.85 83.93
7.11 5.90 82.98
6.93 5.70 82.25
6.64 5.65 85.09
6.35 5.50 86.61
6.63 5.60 84.46
1997 6.79 5.70 83.95
6.80 5.65 83.09
7.10 5.90 83.10
6.94 5.75 82.85
6.91 5.65 81.77
6.78 5.60 82.60
6.30 5.30 84.13
6.61 5.50 83.21
6.40 5.40 84.38
6.15 5.35 86.99
6.05 5.30 87.60
5.92 5.15 86.99
1998 5.80 5.15 88.79
5.92 5.20 87.84
5.93 5.25 88.53
5.95 5.35 89.92
5.80 5.20 89.66
5.65 5.20 92.04
5.71 5.18 90.72
5.27 5.03 95.45
5.00 4.95 99.00
5.16 5.05 97.87
5.06 5.00 98.81
5.10 5.05 99.02
1999 5.09 5.00 98.23
5.58 5.10 91.40
5.63 5.15 91.47
5.66 5.20 91.87
5.83 5.30 90.91
5.96 5.47 91.78
6.10 5.55
6.06 5.75
</TABLE>

Source: Municipal Market Data - A Division of Thomson Financial Municipal Group
and Bloomberg L.P.

PERFORMANCE

The net asset value (NAV) of Morgan Stanley Dean Witter Municipal Income
Opportunities Trust II (OIB) declined from $9.05 to $8.68 per share during the
six-month period ended August 31, 1999. This change plus reinvestment of
tax-free dividends of $0.26 per share produced a total return based on NAV of
- -1.00 percent. OIB's value on the New York Stock Exchange (NYSE) fell from
$8.6875 to $7.8125 per share during the same period. This market change plus
reinvestment of tax-free dividends produced a total return based on market value
of -7.25 percent. On August 31, 1999, OIB's NYSE market price was at a 10
percent discount to its NAV.

2
<PAGE> 3
MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME OPPORTUNITIES TRUST II

LETTER TO THE SHAREHOLDERS August 31, 1999, continued

[LARGEST TERM SECTORS BAR GRAPH]

LARGEST SECTORS AS OF AUGUST 31, 1999
(% OF NET ASSETS)
<TABLE>
<CAPTION>
RETIREMENT
NURSING & & LIFE PUBLIC
IDR/PCR* HEALTH MORTGAGE CARE HOSPITAL EDUCATION FACILITIES TRANSPORTATION
-------- --------- -------- ---------- -------- --------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
21.00% 14.00% 13.00% 11.00% 9.00% 8.00% 5.00% 5.00%
</TABLE>

*INDUSTRIAL DEVELOPMENT/POLLUTION CONTROL REVENUE
PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE.

[CREDIT RATINGS PIE CHART]

CREDIT RATINGS AS OF AUGUST 31, 1999
(% OF TOTAL LONG-TERM PORTFOLIO)

AS MEASURED BY MOODY'S INVESTORS SERVICE, INC. OR
STANDARD & POOR'S CORP.
PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE.

GEOGRAPHIC SUMMARY OF INVESTMENTS
Based on Market Value as a Percent of Net Assets
August 31, 1999

<TABLE>
<S> <C>
Alabama.................. 1.1%
Alaska................... 2.4
Arizona.................. 1.3
Arkansas................. 2.4
California............... 8.1
Colorado................. 5.1
Connecticut.............. 1.2
District of Columbia..... 0.7
Florida.................. 3.6
Illinois................. 3.0
Iowa..................... 5.0
Kentucky................. 1.2
Louisiana................ 0.8
Maine.................... 2.2
Massachusetts............ 7.9
Michigan................. 8.9
Missouri................. 2.1
New Hampshire............ 3.7
New Jersey............... 6.8
New York................. 6.5
Ohio..................... 7.0
Pennsylvania............. 5.9
Texas.................... 1.6
Utah..................... 2.7
Vermont.................. 1.2
Virginia................. 7.6
West Virginia............ 1.3
Wyoming.................. 0.3
Joint Exemptions*........ (1.8)
----

Total.................... 99.8%
====
</TABLE>

- ---------------------
* Joint exemptions have been included in each geographic location.
Portfolio structure is subject to change.

3
<PAGE> 4
MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME OPPORTUNITIES TRUST II
LETTER TO THE SHAREHOLDERS August 31, 1999, continued

CALL AND COST (BOOK) YIELD STRUCTURE*
AUGUST 31, 1999

[CALL STRUCTURE BAR GRAPH]

CALL STRUCTURE

WEIGHTED AVERAGE
CALL PROTECTION: 6 YEARS

YEARS BONDS CALLABLE

[CALL STRUCTURE BAR CHART]

COST (BOOK) YIELD**

WEIGHTED AVERAGE
BOOK YIELD: 7.23%

* % BASED ON LONG-TERM PORTFOLIO.

** COST OR "BOOK" YIELD IS THE ANNUAL INCOME EARNED ON A PORTFOLIO INVESTMENT
BASED ON ITS ORIGINAL PURCHASE PRICE BEFORE FUND OPERATING EXPENSES. FOR
EXAMPLE, THE FUND EARNED A BOOK YIELD OF 9.4% ON 9% OF THE LONG-TERM
PORTFOLIO THAT IS CALLABLE IN 2000.

PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE.

4
<PAGE> 5

MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME OPPORTUNITIES TRUST II

LETTER TO THE SHAREHOLDERS August 31, 1999, continued

Monthly dividends for the fourth quarter of 1999, declared in September, were
unchanged at 0.0425 per share. The Fund's level of undistributed net investment
income was $0.117 per share on August 31, 1999, versus $0.101 per share six
months ago.

PORTFOLIO STRUCTURE

The Fund's net assets of $171.7 million were diversified among 15 long-term
sectors and 70 credits. At the end of August the portfolio's average maturity
was 21 years. Average duration, a measure of sensitivity to interest-rate
changes, was 7.3 years. Nonrated securities comprise more than half of OIB's
assets. The bonds of one issuer representing 2.3 percent of net assets, were
currently not accruing interest. An additional 2 percent of net assets were
accruing income but may experience difficulty with future debt service payments.
The accompanying charts provide current information on the portfolio's credit
quality, sector distribution and geographic diversification. Optional call
provisions by year with their respective cost (book) yields are also shown.

LOOKING AHEAD

The Federal Reserve Board's recent interest-rate increases confirmed its
previously signaled intention of becoming less accommodative in the face of
continued strong domestic economic growth. It is anticipated that the central
bank may raise short-term interest rates further. However, we believe municipal
bonds continue to offer long-term investors good value, especially in
relationship to Treasuries.

The Fund's procedure for reinvestment of all dividends and distributions on
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, which ever is
lower at the time of purchase. During the six-month period ended August 31,
1999, the Fund purchased and retired 168,800 shares of common stock at a
weighted average market discount of 8.83 percent.

5
<PAGE> 6

MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME OPPORTUNITIES TRUST II

LETTER TO THE SHAREHOLDERS August 31, 1999, continued

On May 1, 1999, Mitchell M. Merin was named President of the Morgan Stanley Dean
Witter Funds. Mr. Merin is the President and Chief Operating Officer of Asset
Management for Morgan Stanley Dean Witter & Co. and President, Chief Executive
Officer and Director of Morgan Stanley Dean Witter Advisors Inc. He also serves
as Chairman, Chief Executive Officer and Director of Morgan Stanley Dean Witter
Distributors Inc. and Morgan Stanley Dean Witter Trust FSB.

In conclusion, we would like to take this opportunity to notify shareholders
that in July 1999, Julie Morrone was named co-manager of the Fund. Ms. Morrone
joined Morgan Stanley Dean Witter Advisors in 1993, where she has worked as a
senior municipal analyst for the Fund's management team.

We appreciate your ongoing support of Morgan Stanley Dean Witter Municipal
Income Opportunities Trust II and look forward to continuing to serve your
investment needs.

Very truly yours,

/s/ CHARLES A. FIUMEFREDDO /s/ MITCHELL M. MERIN
CHARLES A. FIUMEFREDDO MITCHELL M. MERIN
Chairman of the Board President

6
<PAGE> 7

MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME OPPORTUNITIES TRUST II

RESULTS OF ANNUAL MEETING (unaudited)

* * *

On June 22, 1999, an annual meeting of the Fund's shareholders was held for the
purpose of voting on two separate matters, the results of which were as follows:

(1) ELECTION OF TRUSTEES:

<TABLE>
<S> <C>
Edwin J. Garn
For......................................................... 16,742,074
Withheld.................................................... 281,123

Michael E. Nugent
For......................................................... 16,742,169
Withheld.................................................... 281,028

Philip J. Purcell
For......................................................... 16,753,051
Withheld.................................................... 270,146
</TABLE>

The following Trustees were not standing for reelection at this meeting:
Michael Bozic, Charles A. Fiumefreddo, Wayne E. Hedien, Dr. Manuel H. Johnson,
and John L. Schroeder.

(2) RATIFICATION OF THE SELECTION OF PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT
ACCOUNTANTS:

<TABLE>
<S> <C>
For......................................................... 16,625,785
Against..................................................... 74,748
Abstain..................................................... 322,664
</TABLE>

7
<PAGE> 8

MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME OPPORTUNITIES TRUST II

PORTFOLIO OF INVESTMENTS August 31, 1999 (unaudited)

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
TAX-EXEMPT MUNICIPAL BONDS (95.9%)
General Obligation (1.2%)
$ 2,000 New York City, New York, 1994 Ser D......................... 5.75% 08/15/10 $ 2,049,500
- -------- -----------

Educational Facilities Revenue (7.6%)
1,600 ABAG Finance Authority for Nonprofit Corporations,
California, National Center for International Schools COPs. 7.50 05/01/11 1,699,648
2,000 San Diego County, California, Burnham Institute COPs........ 6.25 09/01/29 1,989,260
2,000 Volusia County Educational Facilities Authority, Florida,
Embry-Riddle Aeronautical University Ser 1996 A............ 6.125 10/15/26 2,007,440
3,000 South Berwick, Maine, Berwick Academy Ser 1998.............. 5.55 08/01/23 2,765,340
New Hampshire Higher Educational & Health Facilities
1,500 Authority, Brewster Academy Ser 1995....................... 6.75 06/01/25 1,547,730
2,000 Colby-Sawyer College Ser 1996.............................. 7.50 06/01/26 2,130,340
1,000 New York State Dormitory Authority, State University 1993
Ser A...................................................... 5.25 05/15/15 972,820
- -------- -----------
13,100 13,112,578
- -------- -----------

Electric Revenue (2.6%)
Intermountain Power Agency, Utah, Refg 1996 Ser D (Secondary
5,000 FSA)....................................................... 5.00 07/01/21 4,468,100
- ----------- -----------

Hospital Revenue (8.5%)
2,000 Baxter County, Arkansas, Baxter County Regional Hospital
Impr & Refg Ser 1999 B..................................... 5.625 09/01/28 1,806,480
Massachusetts Health & Educational Facilities Authority,
2,000 Dana Farber Cancer Institute Ser G-1....................... 6.25 12/01/14 2,075,380
3,000 Dana Farber Cancer Institute Ser G-1....................... 6.25 12/01/22 3,061,590
3,000 Michigan Hospital Finance Authority, Sinai Hospital of
Greater Detroit Refg Ser 1995.............................. 6.70 01/01/26 2,945,070
New Hampshire Higher Educational & Health Facilities
Authority,
1,000 Littleton Hospital Association Ser 1998 B.................. 5.80 05/01/18 918,770
2,000 Littleton Hospital Association Ser 1998 B.................. 5.90 05/01/28 1,830,200
2,000 New Jersey Health Care Facilities Financing Authority,
Raritan Bay Medical Center Ser 1994........................ 7.25 07/01/27 2,001,840
- -------- -----------
15,000 14,639,330
- -------- -----------

Industrial Development/Pollution Control Revenue (21.1%)
1,115 Metropolitan Washington Airports Authority, District of
Columbia & Virginia, CaterAir International Corp Ser 1991
(AMT)++.................................................... 10.125 09/01/11 1,133,230
1,500 Iowa Finance Authority, ISPCO Inc Ser 1997 (AMT)............ 6.00 06/01/27 1,538,760
2,000 Perry County, Kentucky, TJ International Inc Ser 1997
(AMT)...................................................... 6.55 04/15/27 2,075,940
2,600 Holyoke, Massachusetts, McCormack/Partyka Ser 1990 (AMT).... 4.00 08/15/10 2,028,078
3,000 Massachusetts Industrial Finance Agency, Eastern Edison Co
Refg Ser 1993.............................................. 5.875 08/01/08 2,989,560
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS

8
<PAGE> 9
MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME OPPORTUNITIES TRUST II

PORTFOLIO OF INVESTMENTS August 31, 1999 (unaudited) (continued)

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Lapeer Economic Development Corporation, Michigan,
$ 2,005 Dott Manufacturing Co Ser 1989 B (AMT)..................... 9.00% 11/15/19 $ 1,303,250
1,965 Dott Manufacturing Co Ser 1989 A (AMT)..................... 10.625 11/15/19 1,277,250
Michigan Strategic Fund,
1,332 Kasle Steel Corp Ser 1989 (AMT)............................ 9.375 10/01/06 1,359,848
5,207 Kasle Steel Corp Ser 1989 (AMT)............................ 9.50 10/01/14 5,314,493
1,365 Sanilac County Economic Development Corporation, Michigan,
Dott Manufacturing Co Ser 1989 (AMT)....................... 10.625 08/15/19 887,250
2,000 New Jersey Economic Development Authority, Kapkowski Road
Landfill Ser 1998 A........................................ 6.375 04/01/31 2,003,520
2,000 Suffolk County Industrial Development Agency, New York,
Nissequogue Cogen Partners Ser 1998 (AMT).................. 5.50 01/01/23 1,860,900
3,500 Cleveland, Ohio, Continental Airlines Inc Ser 1990 (AMT).... 9.00 12/01/19 3,596,145
1,500 Dayton, Ohio, Emery Air Freight Corp Refg Ser 1998 A........ 5.625 02/01/18 1,401,300
2,000 Beaver County Industrial Development Authority,
Pennsylvania,
Toledo Edison Co Collateralized Ser 1995 B................. 7.75 05/01/20 2,204,860
3,000 Pittsylvania County Industrial Development Authority,
Virginia, Multi-Trade LP Ser 1994 A (AMT).................. 7.55 01/01/19 3,201,780
2,000 Upshur County, West Virginia, TJ International Inc Ser 1995
(AMT)...................................................... 7.00 07/15/25 2,155,440
- -------- -----------
38,089 36,331,604
- -------- -----------

Mortgage Revenue - Multi-Family (3.7%)
3,065 Boulder County, Colorado, Village Place at Longmont Ser 1989
A (AMT).................................................... 10.125 07/15/19 3,068,280
Alexandria Redevelopment & Housing Authority, Virginia,
2,000 Courthouse Commons Apts Ser 1990 A (AMT)................... 10.00 01/01/21 2,027,180
10,594 Courthouse Commons Apts Ser 1990 B (AMT)................... 0.00 01/01/21 1,329,473
- -------- -----------
15,659 6,424,933
- -------- -----------

Mortgage Revenue - Single Family (8.9%)
4,000 Alaska Housing Finance Corporation, 1997 Ser A (MBIA)....... 6.00 06/01/27 4,040,720
3,300 Colorado Housing Finance Authority, 1998 Ser B-3............ 6.55 05/01/25 3,503,082
1,500 Chicago, Illinois, GNMA-Backed 1998 Ser A-1 (AMT)........... 6.45 09/01/29 1,569,120
960 Maine Housing Authority, Purchase 1990 Ser A-4 (AMT)........ 6.40 11/15/23 968,314
4,990 Ohio Housing Finance Agency, Residential GNMA-Collateralized
1996 Ser B-2 (AMT)......................................... 6.10 09/01/28 5,014,999
Utah Housing Finance Agency,
100 Ser 1990 A-2 (AMT)......................................... 7.80 07/01/10 101,743
75 Ser 1990 A-2 (AMT)......................................... 7.875 07/01/22 76,178
- -------- -----------
14,925 15,274,156
- -------- -----------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS

9
<PAGE> 10
MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME OPPORTUNITIES TRUST II

PORTFOLIO OF INVESTMENTS August 31, 1999 (unaudited) (continued)

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Nursing & Health Related Facilities Revenue (13.8%)
$ 2,255 Arkansas Development Finance Authority, Wynwood Nursing
Center Ser 1989 (AMT).. ................................... 10.50% 11/01/19 $ 2,336,608
3,000 Iowa Health Facilities Development Financing Authority, Care
Initiatives Ser 1996....................................... 9.25 07/01/25 3,793,680
3,195 Marion, Iowa, AHF/Kentucky-Iowa Inc Ser 1990................ 10.25 01/01/20 3,315,643
1,200 Westside Habilitation Center, Louisiana, Intermediate Care
Facility for the Mentally Retarded Refg Ser 1993........... 8.375 10/01/13 1,300,416
1,000 Massachusetts Development Finance Agency, New England Center
for Children Ser 1998...................................... 5.875 11/01/18 936,110
1,100 Massachusetts Industrial Finance Agency, May Institute for
Autistic Children Inc 1990 Issue........................... 9.75 06/01/10 1,145,111
1,000 Mount Vernon Industrial Development Agency, New York,
Meadowview at the Wartburg Civic Facility Ser 1999......... 6.15 06/01/19 973,160
3,000 Allegheny County Hospital Development Authority,
Pennsylvania, Allegheny Valley School Ser 1990............. 8.50 02/01/15 3,082,380
4,768 Chester County Industrial Development Authority,
Pennsylvania, RHA/PA Nursing Homes Inc Ser 1989 (b)........ 10.125 05/01/19 3,942,755
Tarrant County Health Facilities Development Corporation,
Texas,
2,500 3927 Foundation Inc Ser 1989............................... 10.125 09/01/09 2,577,475
235 3927 Foundation Inc Ser 1989............................... 10.00 09/01/99 235,000
- -------- -----------
23,253 23,638,338
- -------- -----------

Public Facilities Revenue (3.5%)
1,000 Orange County Community Facilities District #86-2,
California, 1998 Ser A..................................... 5.55 08/15/17 939,420
2,000 San Diego County, California, San Diego Natural History
Museum COPs................................................ 5.70 02/01/28 1,826,380
3,000 Saint Louis Industrial Development Authority, Missouri, Kiel
Center
Refg Ser 1992 (AMT)........................................ 7.75 12/01/13 3,176,190
- -------- -----------
6,000 5,941,990
- -------- -----------

Retirement & Life Care Facilities Revenue (11.0%)
1,980 Pima County Industrial Development Authority, Arizona,
Country Club at La Cholla Ser 1990 (AMT)................... 8.50 07/01/20 2,174,040
1,500 Massachusetts Development Finance Agency, Loomis Communities
Ser 1999 A................................................. 5.75 07/01/23 1,371,210
New Jersey Economic Development Authority,
1,500 Fellowship Village Refg Ser 1998 A......................... 5.50 01/01/25 1,342,005
2,000 Franciscan Oaks Ser 1997................................... 5.75 10/01/23 1,900,040
1,500 United Methodist Homes Ser 1998............................ 5.125 07/01/25 1,261,395
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS

10
<PAGE> 11
MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME OPPORTUNITIES TRUST II

PORTFOLIO OF INVESTMENTS August 31, 1999 (unaudited) (continued)

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 2,000 Glen Cove Housing Authority, New York, Mayfair at Glen Cove
Ser 1996 (AMT)............................................. 8.25% 10/01/26 $ 2,192,120
2,000 Lorain County, Ohio, Laurel Lakes Ser 1993.................. 7.125 12/15/18 2,087,280
2,000 Vermont Economic Development Authority, Wake Robin Corp Ser
1999 A..................................................... 6.75 03/01/29 1,990,120
4,936 Chesterfield County Industrial Development Authority,
Virginia, Brandermill Woods Ser 1998....................... 6.50 01/01/28 4,575,925
- -------- -----------
19,416 18,894,135
- -------- -----------

Tax Allocation Revenue (1.9%)
895 Bridgeview, Illinois, Tax Increment Refg Ser 1995........... 9.00 01/01/11 1,001,550
315 Madison Heights Tax Increment Finance Authority, Michigan,
Ser 1991................................................... 8.50 03/15/01 325,650
1,905 Muskegon Downtown Development Authority, Michigan, 1989 Ser
A-1 (a).................................................... 9.75 06/01/18 1,982,114
- -------- -----------
3,115 3,309,314
- -------- -----------

Transportation Facilities Revenue (4.8%)
4,000 Foothill/Eastern Transportation Corridor Agency, California,
Ser 1999................................................... 0.00 01/15/27 2,118,840
5,000 E-470 Public Highway Authority, Colorado, Ser 1997 B
(MBIA)..................................................... 0.00 09/01/14 2,167,750
2,000 Mid-Bay Bridge Authority, Florida, Sr Lien Crossover Refg
Ser 1993 A (AMBAC)......................................... 5.85 10/01/13 2,065,800
2,000 Pocahontas Parkway Association, Virginia, Route 895
Connector 1998 Ser A....................................... 5.50 08/15/28 1,830,160
- -------- -----------
13,000 8,182,550
- -------- -----------

Water & Sewer Revenue (1.8%)
2,000 Northern Palm Beach County Improvement District, Florida,
Water Control & Improvement #9A Ser 1996 A................. 7.30 08/01/27 2,145,280
6,000 Pittsburgh Water & Sewer Authority, Pennsylvania, 1998 Ser B
(FGIC)..................................................... 0.00 09/01/30 977,700
- -------- -----------
8,000 3,122,980
- -------- -----------

Other Revenue (4.5%)
2,000 Capistrano Unified School District, California, Community
Facilities District #98-2 Ladera Special Tax Ser 1999...... 5.75 09/01/29 1,880,660
2,000 Sacramento Financing Authority, California, Convention
Center Hotel 1999 Ser A.................................... 6.25 01/01/30 1,920,640
Mashantucket (Western) Pequot Tribe, Connecticut,
1,010 Special 1996 Ser A (a)..................................... 6.40 09/01/11 1,057,793
1,000 Special 1997 Ser B (a)..................................... 5.75 09/01/27 946,890
2,000 West Jefferson Amusement & Public Park Authority, Alabama,
VisionLand Ser 1999........................................ 6.375 02/01/29 1,889,920
- -------- -----------
8,010 7,695,903
- -------- -----------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS

11
<PAGE> 12
MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME OPPORTUNITIES TRUST II

PORTFOLIO OF INVESTMENTS August 31, 1999 (unaudited) (continued)

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Refunded (1.0%)
$ 2,000 Foothill/Eastern Transportation Corridor Agency, California,
Sr Lien Toll Road Ser 1995 A............................... 0.00% 01/01/10+ $ 1,678,860
- -------- -----------
186,567 TOTAL TAX-EXEMPT MUNICIPAL BONDS (Identified Cost $167,002,241)................. 164,764,271
- -------- -----------

SHORT-TERM TAX-EXEMPT MUNICIPAL OBLIGATIONS (3.9%)
2,500 Illinois Health Facilities Authority, Central Dupage
Hospital Association Ser 1990 (Demand 09/01/99)............ 3.00* 11/01/20 2,500,000
500 Missouri Health & Educational Facilities Authority, Cox
Health Ser 1997 (Demand 09/01/99).......................... 3.00* 06/01/15 500,000
3,150 Port Authority of New York & New Jersey, Ser 2 (Demand
09/01/99)++................................................ 2.60* 05/01/19 3,150,000
500 Converse County, Wyoming, Pacificorp Ser 1994 (AMBAC)
(Demand 09/01/99).......................................... 3.00* 11/01/24 500,000
- -------- -----------
6,650 TOTAL SHORT-TERM TAX-EXEMPT MUNICIPAL OBLIGATIONS (Identified Cost
$6,650,000).................................................................... 6,650,000
- -------- -----------

$193,217 TOTAL INVESTMENTS (Identified Cost $173,652,241) (c)................... 99.8% 171,414,271
========

CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES........................... 0.2 276,977
----- -----------

NET ASSETS.............................................................. 100.0% $171,691,248
====== ============

</TABLE>

- ---------------------

AMT Alternative Minimum Tax.
COPs Certificates of Participation.
+ Prerefunded to call date shown. Converts to 7.15% coupon on
01/01/05.
++ Joint exemption in locations shown.
* Current coupon of variable rate demand obligation.
(a) Resale is restricted to qualified institutional investors.
(b) Non-income producing security; bond in default.
(c) The aggregate cost for federal income tax purposes
approximates identified cost. The aggregate gross unrealized
appreciation is $4,796,751 and the aggregate gross
unrealized depreciation is $7,034,721, resulting in net
unrealized depreciation of $2,237,970.

Bond Insurance:
- -----------------
AMBAC AMBAC Assurance Corporation.
FGIC Financial Guaranty Insurance Company.
FSA Financial Security Assurance Inc.
MBIA Municipal Bond Investors Assurance Corporation.

SEE NOTES TO FINANCIAL STATEMENTS

12
<PAGE> 13

MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME OPPORTUNITIES TRUST II

FINANCIAL STATEMENTS

<TABLE>
<S> <C>
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1999 (unaudited)

ASSETS:
Investments in securities, at value
(identified cost $173,652,241).......... $171,414,271
Cash..................................... 3,218,862
Receivable for:
Interest............................. 2,791,847
Investments sold..................... 1,689,699
Prepaid expenses and other assets........ 16,617
------------

TOTAL ASSETS......................... 179,131,296
------------

LIABILITIES:
Payable for:
Investments purchased................ 7,162,873
Investment advisory fee.............. 75,894
Shares of beneficial interest
repurchased......................... 47,080
Administration fee................... 45,536
Accrued expenses and other payables...... 108,665
------------
TOTAL LIABILITIES.................... 7,440,048
------------

NET ASSETS........................... $171,691,248
============
COMPOSITION OF NET ASSETS:
Paid-in-capital.......................... $185,469,051
Net unrealized depreciation.............. (2,237,970)
Accumulated undistributed net investment
income.................................. 2,315,767
Accumulated net realized loss............ (13,855,600)
------------

NET ASSETS........................... $171,691,248
============

NET ASSET VALUE PER SHARE,
19,774,707 shares outstanding (unlimited
shares authorized of $.01 par value).... $8.68
=====

<CAPTION>
STATEMENT OF OPERATIONS
For the six months ended August 31, 1999 (unaudited)
<S> <C>
NET INVESTMENT INCOME:
INTEREST INCOME........................... $ 6,157,093
-----------

EXPENSES
Investment advisory fee................... 447,628
Administration fee........................ 268,577
Professional fees......................... 48,803
Transfer agent fees and expenses.......... 28,855
Registration fees......................... 10,841
Shareholder reports and notices........... 10,452
Trustees' fees and expenses............... 8,927
Custodian fees............................ 4,488
Other..................................... 9,704
-----------
TOTAL EXPENSES........................ 838,275
Less: expense offset...................... (4,477)
-----------

NET EXPENSES.......................... 833,798
-----------

NET INVESTMENT INCOME................. 5,323,295
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain......................... 625,312
Net change in unrealized appreciation..... (8,271,982)
-----------

NET LOSS.............................. (7,646,670)
-----------

NET DECREASE.............................. $(2,323,375)
===========
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS

13
<PAGE> 14

MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME OPPORTUNITIES TRUST II

FINANCIAL STATEMENTS, continued

<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX
MONTHS ENDED FOR THE YEAR
AUGUST 31, ENDED
1999 FEBRUARY 28, 1999
- ----------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:

OPERATIONS:
Net investment income....................................... $ 5,323,295 $ 10,829,646
Net realized gain........................................... 625,312 3,329,621
Net change in unrealized appreciation....................... (8,271,982) (4,169,622)
------------ ------------

NET INCREASE (DECREASE)................................. (2,323,375) 9,989,645

Dividends from net investment income........................ (5,080,603) (10,525,594)
Net decrease from transactions in shares of beneficial
interest................................................... (1,349,427) (242,062)
------------ ------------

NET DECREASE............................................ (8,753,405) (778,011)

NET ASSETS:
Beginning of period......................................... 180,444,653 181,222,664
------------ ------------

END OF PERIOD
(Including undistributed net investment income of
$2,315,767 and $2,073,075, respectively)................ $171,691,248 $180,444,653
============ ============
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS

14
<PAGE> 15

MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME OPPORTUNITIES TRUST II

NOTES TO FINANCIAL STATEMENTS August 31, 1999 (unaudited)

1. ORGANIZATION AND ACCOUNTING POLICIES

Morgan Stanley Dean Witter Municipal Income Opportunities Trust II (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 current income exempt from federal income tax. The Fund
was organized as a Massachusetts business trust on March 8, 1989 and commenced
operations on June 30, 1989.

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.

The following is a summary of significant accounting policies:

A. VALUATION OF INVESTMENTS -- Portfolio securities are valued by an outside
independent pricing service approved by the Trustees. The pricing service has
informed the Fund that in valuing the portfolio securities, it uses both a
computerized 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 bid side of the market each day. 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. 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. Interest income is accrued daily except where collection
is not expected.

C. FEDERAL INCOME TAX STATUS -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable and nontaxable income to its
shareholders. Accordingly, no federal income tax provision is required.

D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund records dividends and
distributions to its shareholders on the ex-dividend date. The amount of
dividends and distributions from net investment

15
<PAGE> 16
MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME OPPORTUNITIES TRUST II

NOTES TO FINANCIAL STATEMENTS August 31, 1999 (unaudited) continued

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 financial reporting purposes but not for tax purposes are
reported as dividends in excess of net investment income or distributions in
excess of net realized capital gains. To the extent they exceed net investment
income and net realized capital gains for tax purposes, they are reported as
distributions of paid-in-capital.

2. INVESTMENT ADVISORY AGREEMENT

Pursuant to an Investment Advisory Agreement with Morgan Stanley Dean Witter
Advisors Inc. (the "Investment Advisor"), the Fund pays the Investment Advisor
an advisory fee, calculated weekly and payable monthly, by applying the annual
rate of 0.50% to the Fund's weekly net assets.

Under the terms of the Advisory Agreement, in addition to managing the Fund's
investments, the Investment Advisor pays the salaries of all personnel,
including officers of the Fund, who are employees of the Investment Advisor.

3. ADMINISTRATION AGREEMENT

Pursuant to an Administration Agreement with Morgan Stanley Dean Witter Services
Company Inc. (the "Administrator"), an affiliate of the Investment Advisor, the
Fund pays an administration fee, calculated weekly and payable monthly, by
applying the annual rate of 0.30% to the Fund's weekly net assets.

Under the terms of the Administration Agreement, the Administrator maintains
certain of the Fund's books and records and furnishes, at its own expense,
office space, facilities, equipment, clerical, bookkeeping and certain legal
services and pays the salaries of all personnel, including officers of the Fund
who are employees of the Administrator. The Administrator also bears the cost of
telephone services, heat, light, power and other utilities provided to the Fund.

16
<PAGE> 17
MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME OPPORTUNITIES TRUST II

NOTES TO FINANCIAL STATEMENTS August 31, 1999 (unaudited) continued

4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES

The cost of purchases and proceeds from sales of portfolio securities, excluding
short-term investments, for the six months ended August 31, 1999 aggregated
$19,856,880 and $16,716,621, respectively.

Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Advisor and
Administrator, is the Fund's transfer agent.

The Fund has an unfunded noncontributory defined benefit pension plan covering
all 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 years of service and compensation during the last five years
of service. Aggregate pension costs for the six months ended August 31, 1999
included in Trustees' fees and expenses in the Statement of Operations amounted
to $2,863. At August 31, 1999, the Fund had an accrued pension liability of
$51,886 which is included in accrued expenses in the Statement of Assets and
Liabilities.

5. SHARES OF BENEFICIAL INTEREST

Transactions in shares of beneficial interest were as follows:

<TABLE>
<CAPTION>
CAPITAL
PAID IN
PAR VALUE EXCESS OF
SHARES OF SHARES PAR VALUE
---------- --------- ------------
<S> <C> <C> <C>
Balance, February 28, 1998.................................. 19,971,607 $199,717 $186,855,356
Treasury shares purchased and retired (weighted average
discount 7.00%)*........................................... (28,100) (281) (241,781)
Reclassification due to permanent book/tax differences...... -- -- 5,467
---------- -------- ------------
Balance, February 28, 1999.................................. 19,943,507 199,436 186,619,042
Treasury shares purchased and retired (weighted average
discount 8.83%)*........................................... (168,800) (1,688) (1,347,739)
---------- -------- ------------
Balance, August 31, 1999.................................... 19,774,707 $197,748 $185,271,303
========== ======== ============
</TABLE>

- ---------------------
* The Trustees have voted to retire the shares purchased.

17
<PAGE> 18
MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME OPPORTUNITIES TRUST II

NOTES TO FINANCIAL STATEMENTS August 31, 1999 (unaudited) continued

6. DIVIDENDS

The Fund declared the following dividends from net investment income:

<TABLE>
<CAPTION>
DECLARATION AMOUNT RECORD PAYABLE
DATE PER SHARE DATE DATE
- ------------------ --------- ------------------ ------------------
<S> <C> <C> <C>
June 29, 1999 $0.0425 September 3, 1999 September 17, 1999
September 28, 1999 $0.0425 October 8, 1999 October 22, 1999
September 28, 1999 $0.0425 November 5, 1999 November 19, 1999
September 28, 1999 $0.0425 December 3, 1999 December 17, 1999
</TABLE>

7. FEDERAL INCOME TAX STATUS

At February 28, 1999, the Fund had a net capital loss carryover of approximately
$14,969,000, which may be used to offset future capital gains to the extent
provided by regulations which is available through February 28 of the following
years:

<TABLE>
<CAPTION>
AMOUNT IN THOUSANDS
- ------------------------------------------------------
2003 2004 2005 2006
-------- -------- -------- --------
<S> <C> <C> <C>
$7,049 $2,826 $4,292 $802
====== ====== ====== ====
</TABLE>

18
<PAGE> 19

MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME OPPORTUNITIES TRUST II

FINANCIAL HIGHLIGHTS

Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:

<TABLE>
<CAPTION>
FOR THE SIX FOR THE YEAR ENDED FEBRUARY 28*
MONTHS ENDED ----------------------------------------------------
AUGUST 31, 1999 1999 1998 1997 1996** 1995
- ---------------------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C> <C> <C> <C>
SELECTED PER SHARE DATA:

Net asset value, beginning of period..................... $ 9.05 $ 9.07 $ 8.79 $ 8.88 $8.66 $8.74
------ ------ ------ ------ ----- -----

Income (loss) from investment operations:
Net investment income................................... 0.27 0.55 0.57 0.60 0.66 0.64
Net realized and unrealized gain (loss)................. (0.39) (0.04) 0.29 (0.05) 0.18 (0.12)
------ ------ ------ ------ ----- -----

Total income (loss) from investment operations........... (0.12) 0.51 0.86 0.55 0.84 0.52
------ ------ ------ ------ ----- -----

Less dividends from net investment income................ (0.26) (0.53) (0.58) (0.64) (0.62) (0.60)
------ ------ ------ ------ ----- -----

Anti-dilutive effect of acquiring treasury shares........ 0.01 -- -- -- -- --
------ ------ ------ ------ ----- -----

Net asset value, end of period........................... $ 8.68 $ 9.05 $ 9.07 $ 8.79 $8.88 $8.66
====== ====== ====== ====== ===== =====

Market value, end of period.............................. $7.813 $8.688 $9.063 $8.625 $8.75 $8.00
====== ====== ====== ====== ===== =====

TOTAL RETURN+............................................ (7.25)%(1) 1.77% 12.08% 5.94% 17.87% 6.36%

RATIOS TO AVERAGE NET ASSETS:
Expenses................................................. 0.94%(2)(3) 0.94% 0.95%(3) 1.01%(3) 1.01%(3) 1.01%

Net investment income.................................... 5.95%(2) 5.99% 6.37% 6.87% 7.50% 7.60%

SUPPLEMENTAL DATA:
Net assets, end of period, in thousands.................. $171,691 $180,445 $181,223 $175,573 $177,447 $175,038

Portfolio turnover rate.................................. 10%(1) 20% 12% 21% 18% 5%
</TABLE>

- ---------------------
* The per share amounts were computed using an average number of shares
outstanding during the period.
** For the year ended February 29.
+ Total investment return is based upon the current market value on the last
day of each period reported. Dividends and distributions are assumed to be
reinvested at prices obtained under the Fund's dividend reinvestment plan.
Total investment return does not reflect brokerage commissions.
(1) Not annualized.
(2) Annualized.
(3) Does not reflect the effect of expense offset of 0.01%.

SEE NOTES TO FINANCIAL STATEMENTS

19
<PAGE> 20

TRUSTEES
- ----------------------------------
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
Wayne E. Hedien
Dr. Manuel H. Johnson
Michael E. Nugent
Philip J. Purcell
John L. Schroeder

OFFICERS
- ----------------------------------
Charles A. Fiumefreddo
Chairman and Chief Executive Officer

Mitchell M. Merin
President

Barry Fink
Vice President, Secretary and General Counsel

James F. Willison
Vice President

Julie C. Morrone
Vice President

Thomas F. Caloia
Treasurer

TRANSFER AGENT
- ----------------------------------
Morgan Stanley Dean Witter Trust FSB
Harborside Financial Center -- Plaza Two
Jersey City, New Jersey 07311

INDEPENDENT ACCOUNTANTS
- ----------------------------------
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036

INVESTMENT MANAGER
- ----------------------------------
Morgan Stanley Dean Witter Advisors Inc.
Two World Trade Center
New York, New York 10048

The financial statements included herein have been taken from the records of
the Fund without examination by the independent accountants and accordingly
they do not express an opinion thereon.

MORGAN STANLEY
DEAN WITTER
MUNICIPAL
INCOME
OPPORTUNITIES
TRUST II

Semiannual Report
April 30, 1999