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Filed Pursuant to Rule 497(e)
Registration File No.: 33-58175
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DEAN WITTER
HAWAII MUNICIPAL TRUST
PROSPECTUS -- DECEMBER 20, 1995
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DEAN WITTER HAWAII MUNICIPAL TRUST (THE "FUND") IS AN OPEN-END,
NON-DIVERSIFIED MANAGEMENT INVESTMENT COMPANY, WHOSE INVESTMENT OBJECTIVE IS
TO PROVIDE A HIGH LEVEL OF CURRENT INCOME EXEMPT FROM BOTH FEDERAL AND STATE
OF HAWAII INCOME TAXES, CONSISTENT WITH THE PRESERVATION OF CAPITAL. THE FUND
SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY INVESTING PRINCIPALLY IN
TAX-EXEMPT, INVESTMENT GRADE MUNICIPAL OBLIGATIONS OF ISSUERS IN THE STATE OF
HAWAII AND IN U.S. GOVERNMENTAL TERRITORIES AND POSSESSIONS. (SEE "INVESTMENT
OBJECTIVE AND POLICIES.")
Shares of the Fund are offered at net asset value plus a sales charge of 3.0%
of the offering price, scaled down on purchases of $100,000 or more. In
addition, pursuant to a Rule 12b-1 Plan of Distribution under the Investment
Company Act of 1940, the Fund may reimburse the Distributor, in an amount
equal to payments not exceeding the annual rate of 0.20 of 1% of the average
daily net assets of the Fund, for specific expenses incurred in promoting the
distribution of the Fund's shares.
This Prospectus sets forth concisely the information you should know before
investing in the Fund. It should be read and retained for future reference.
Additional information about the Fund is contained in the Statement of
Additional Information, dated December 20, 1995, which has been filed with
the Securities and Exchange Commission, and which is available at no charge
upon request of the Fund at the address or telephone numbers listed on this
page. The Statement of Additional Information is incorporated herein by
reference.
TABLE OF CONTENTS
Prospectus Summary .................................................... 2
Summary of Fund Expenses .............................................. 3
Financial Highlights .................................................. 4
The Fund and its Management ........................................... 5
Investment Objective and Policies ..................................... 5
Risk Considerations .................................................. 8
Investment Restrictions ............................................... 9
Purchase of Fund Shares ............................................... 10
Shareholder Services .................................................. 12
Redemptions and Repurchases ........................................... 14
Dividends, Distributions and Taxes .................................... 14
Performance Information ............................................... 16
Additional Information ................................................ 16
Financial Statements--November 30, 1995 ............................... 18
Report of Independent Accounts ........................................ 24
Appendix .............................................................. 25
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND THE SHARES ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY
OTHER AGENCY.
DEAN WITTER
HAWAII MUNICIPAL TRUST
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(212) 392-2550 OR (800) 869-NEWS (TOLL FREE)
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
Dean Witter Distributors Inc., Distributor
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PROSPECTUS SUMMARY
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The Fund The Fund is organized as a Trust, commonly known as a Massachusetts
business trust, and is an open-end, non-diversified management investment
company investing principally in tax-exempt, investment grade municipal
obligations of issuers in the State of Hawaii and in U.S. governmental
territories and possessions (see page 4).
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Shares Offered Shares of beneficial interest with $0.01 par value (see page 16).
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Offering The price of the shares offered by this prospectus varies with the changes
Price in the value of the Fund's investments. The offering price, determined once
daily as of 4:00 p.m., New York time, on each day that the New York Stock
Exchange is open, is equal to the net asset value plus a sales charge of
3.0% of the offering price, scaled down on purchases of $100,000 or over
(see pages 10-11).
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Minimum Minimum initial purchase is $1,000; minimum subsequent purchase is $100
Purchase (see page 10).
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Investment The investment objective of the Fund is to provide a high level of current
Objective income exempt from both federal and State of Hawaii income taxes,
consistent with the preservation of capital (see page 4).
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Investment Dean Witter InterCapital Inc. ("InterCapital"), the Investment Manager of
Manager the Fund, and its wholly-owned subsidiary, Dean Witter Services Company
Inc., serve in various investment management, advisory, management and
administrative capacities to ninety-four investment companies and other
portfolios with assets of approximately $78.9 billion at November 30, 1995
(see page 4).
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Management The Investment Manager receives a monthly fee at the annual rate of 0.35%
Fee of average daily net assets of the Fund. (see page 4).
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Dividends and Income dividends are declared daily and paid monthly; capital gains, if
Capital Gains any, may be distributed annually or retained for reinvestment by the Fund.
Distributions Dividends and distributions are automatically reinvested in additional
shares at net asset value (without sales charge), unless the shareholder
elects to receive cash (see page 14).
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Plan of The Fund is authorized to reimburse Dean Witter Distributors Inc. (the
Distribution "Distributor") for specific expenses incurred in promoting the distribution
of the Fund's shares pursuant to a Plan of Distribution pursuant to Rule
12b-1 under the Investment Company Act of 1940. Reimbursement may in no
event exceed an amount equal to payments at the annual rate of 0.20 of 1%
of average daily net assets. (see page 11).
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Sales Charge 3.0% of offering price (3.09% of amount invested); reduced charges on
purchases of $100,000 or more (see pages 10-11).
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Redemption Shares redeemable by the shareholder at net asset value. An account may be
involuntarily redeemed if shares owned have a net asset value of less than
$100 (see page 14).
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Risks The value of the Fund's portfolio securities, and therefore the Fund's net
asset value per share, may increase or decrease due to various factors,
principally changes in prevailing interest rates and the ability of the
issuers of the Fund's portfolio securities to pay interest and principal on
such obligations. Additionally, because the Fund is a non-diversified
investment company, a relatively high percentage of the Fund's assets may
be invested in a limited number of issuers within the State of Hawaii,
thereby causing a greater fluctuation of the Fund's net asset value as a
result of changes in the financial condition or in the market's assessment
of the various issuers. Also, since the Fund concentrates its investments
in tax-exempt securities of municipal issuers in the State of Hawaii, the
Fund will be affected by any political, economic or regulatory developments
affecting the ability of the issuers in the State to pay interest or repay
principal. During periods of significant economic slowdowns, the securities
of certain municipal issuers in the State may be subject to a greater
degree of credit risk in which the ratings of such securities have been or
may be downgraded or placed on a credit watch, thereby affecting their
market value (see page 8 and the Appendix). The Fund may purchase
when-issued and delayed delivery securities (see page 8). The Fund may also
invest in futures and options, which may be considered speculative in
nature and which may involve greater risks than those customarily assumed
by certain other investment companies which do not invest in such
instruments (see pages 8-9). Certain of the tax-exempt securities in which
the Fund may invest without limit may subject certain investors to the
federal and any State of Hawaii alternative minimum tax.
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The above is qualified in its entirety by the detailed information appearing
elsewhere in the Prospectus
and in the Statement of Additional Information.
2
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SUMMARY OF FUND EXPENSES
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The following table illustrates all expenses and fees that a shareholder of
the Fund will incur. The expenses and fees set forth in the table are for the
fiscal period ending November 30, 1996.
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SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases ................................ 3.0%
(as a percentage of offering price)
Maximum Sales Charge Imposed on Reinvested Dividends ..................... None
Deferred Sales ........................................................... None
Redemption Fees .......................................................... None
Exchange Fee ............................................................. None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fee* .......................................................... 0.00%
12-1 Fee** ............................................................... 0.20%
Other Expenses ........................................................... 0.00%
Total Fund Operating Expenses* ........................................... 0.20%
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"Management Fees" (after fee waiver), "12b-1 fees" and "Other Expenses"
(after expense assumptions) as shown above are based upon estimated amounts
of management fees, 12b-1 fees and other expenses of the Fund for the fiscal
year ending November 30, 1996.
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* The Investment Manager had undertaken to assume all expenses (except for
any brokerage and 12b-1 fees) and to waive the compensation provided for
in its Management Agreement until such time as the Fund had $50 million
of net assets or until six months from the date of commencement of the
Fund's operations, whichever occurred first. The Investment Manager has
undertaken to continue to assume all expenses (except for brokerage and
12b-1 fees) and to waive the compensation provided for in its Management
Agreement until December 31, 1996. "Total Fund Operating Expenses," as
shown above, is based upon the sum of the 12b-1 Fee, Management Fee and
estimated "Other Expenses," which may be incurred by the Fund. For the
fiscal period ended November 30, 1995, the Fund's total operating
expenses, consisting only of 12b-1 fees, amounted to 0.20% of the Fund's
daily net assets.
** The 12b-1 fee is characterized as a service fee within the meaning of
National Association of Securities Dealers, Inc. ("NASD") guidelines
(see "Purchase of Fund Shares").
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EXAMPLE 1 YEAR 3 YEARS
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You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of each time period: ................ $32 $49
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THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR PERFORMANCE. ACTUAL EXPENSES OF THE FUND MAY BE GREATER OR
LESS THAN THOSE SHOWN.
It is estimated that Total Fund Operating Expenses for the Fund for the
fiscal year ending November 30, 1996, assuming no waiver of management fees
or assumption of expenses would be:
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Management Fees ............... 0.35%
12b-1 Fees .................... 0.20%
Other Expenses ................ 2.15%
Total Fund Operating Expenses 2.70%
</TABLE>
The purpose of this table is to assist the investor in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. For a more complete description of these costs and expenses, see
"The Fund and its Management" and "Purchase of Fund Shares." There are
reduced sales charges on purchases of $100,000 or more (see "Purchase of Fund
Shares").
Long-term shareholders of the Fund may pay more in sales charges and
distribution fees than the economic equivalent of the maximum front-end sales
charges permitted by the NASD.
3
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FINANCIAL HIGHLIGHTS
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The following ratios and per share data for a share of beneficial interest
outstanding for the period June 16, 1995 (commencement of operations) through
November 30, 1995 have been audited by Price Waterhouse LLP, independent
accountants. The financial highlights should be read in conjunction with the
financial statements, notes thereto and the unqualified report of independent
accountants which are contained in this Prospectus commencing on page 21.
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FOR THE PERIOD
JUNE 16, 1995*
THROUGH
NOVEMBER 30, 1995
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PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ........................... $ 9.70
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Net investment income .......................................... 0.19
Realized and unrealized gain ................................... 0.21
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Total from investment operations ............................... 0.40
Less dividends from net investment income ...................... (0.19)
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Net asset value, end of period ................................. $ 9.91
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TOTAL INVESTMENT RETURN+ ....................................... 4.21%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses before expense offset and after amounts waived/assumed 0.20%(2)(3)
Net investment income .......................................... 4.69%(2)(3)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ........................ $1,510
Portfolio turnover rate ........................................ 14%(1)
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* Commencement of operations.
+ Does not reflect the deduction of sales load.
(1) Not annualized.
(2) Annualized.
(3) If the Fund had not assumed all expenses and waived the management fee,
the ratios of expense and net investment income to average net assets,
after application of the Fund's state expense limitation, would have
been 2.70% and 2.19%, respectively, which reflects 0.10% effect for
expense offset.
</TABLE>
See Notes to Financial Statements
4
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THE FUND AND ITS MANAGEMENT
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Dean Witter Hawaii Municipal Trust (the "Fund") is an open-end,
non-diversified management investment company. The Fund is a trust of the
type commonly known as a "Massachusetts business trust" and was organized
under the laws of the Commonwealth of Massachusetts on March 14, 1995.
Dean Witter InterCapital Inc. ("InterCapital" or the "Investment
Manager"), whose address is Two World Trade Center, New York, New York 10048,
is the Fund's Investment Manager. The Investment Manager, which was
incorporated in July, 1992, is a wholly-owned subsidiary of Dean Witter,
Discover & Co. ("DWDC"), a balanced financial services organization providing
a broad range of nationally marketed credit and investment products.
InterCapital and its wholly-owned subsidiary, Dean Witter Services Company
Inc., serve in various investment management, advisory, management and
administrative capacities to a total of ninety-four investment companies,
thirty of which are listed on the New York Stock Exchange, with combined
total net assets of approximately $76.4 billion as of November 30, 1995. The
Investment Manager also manages portfolios of pension plans, other
institutions and individuals which aggregated approximately $2.5 billion at
such date.
The Fund has retained the Investment Manager to provide administrative
services, manage its business affairs and manage the investment of the Fund's
assets, including the placing of orders for the purchase and sale of
portfolio securities. InterCapital has retained Dean Witter Services Company
Inc. to perform the aforementioned administrative services for the Fund.
The Fund's Trustees review the various services provided by or under the
direction of the Investment Manager to ensure that the Fund's general
investment policies and programs are being properly carried out and that
administrative services are being provided to the Fund in a satisfactory
manner.
As full compensation for the services and facilities furnished to the Fund
and for expenses of the Fund assumed by the Investment Manager, the Fund pays
the Investment Manager monthly compensation calculated daily at an annual
rate of 0.35% of the daily net assets of the Fund.
The Fund's expenses include: the fee of the Investment Manager; taxes;
certain legal, transfer agent, custodian and auditing fees; and printing and
other expenses relating to the Fund's operations which are not expressly
assumed by the Investment Manager under its Investment Management Agreement
with the Fund. The Investment Manager had undertaken to assume all expenses
(except for brokerage and 12b-1 fees) and waive the compensation provided for
in its Investment Management Agreement until such time as the Fund had $50
million of net assets or until six months from the date of commencement of
the Fund's operations, whichever occurred first. The Investment Manager has
undertaken to continue to assume all expenses (except for brokerage and 12b-1
fees) and to waive the compensation provided from its Management Agreement
until December 31, 1996.
INVESTMENT OBJECTIVE AND POLICIES
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The investment objective of the Fund is to provide a high level of current
income exempt from both federal and State of Hawaii income taxes consistent
with preservation of capital. This investment objective may not be changed
without the approval of the holders of a majority of the shares of the Fund.
There is no assurance that the Fund's investment objective will be achieved.
The Fund seeks to achieve its investment objective by investing, under
normal circumstances, at least 80% of its total assets in tax-exempt,
investment grade securities the interest on which is exempt from both federal
and State of Hawaii income taxes. The Fund's assets will be principally
invested in investment grade municipal obligations of issuers in the State of
Hawaii and in U.S. governmental entities and territories such as Puerto Rico,
Guam, Northern Mariana Islands and the Virgin Islands, the interest on which
is exempt from both federal and State of Hawaii income taxes. Tax-exempt
Municipal Obligations primarily consist of Municipal Bonds, Municipal Notes
and Municipal Commercial Paper.
The Fund may only invest in (a) Municipal Bonds which are rated at the
time of purchase within the four highest grades by either Moody's Investors
Service Inc. ("Moody's") or Standard & Poor's Corporation ("S&P"); (b)
Municipal Notes which at the time of purchase are rated in the two highest
grades by either Moody's or S&P, or, if not rated, have outstanding one or
more issues of Municipal Bonds rated as set forth in clause (a) above; (c)
Municipal Commercial Paper which at the time of purchase is rated P-1 by
Moody's or A-1 by S&P; and (d) unrated securities which at the time of
purchase are judged by the Investment Manager to be of comparable quality to
the securities described in this paragraph. A description of the ratings
referred to above is contained in the Appendix to the Statement of Additional
Information.
5
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Certain of the tax-exempt securities in which the Fund may invest without
limit may subject certain investors to the federal alternative minimum tax or
any applicable state alternative minimum tax and, therefore, a substantial
portion of the income produced by the Fund may be taxable to such investors
under any federal or any applicable state alternative minimum tax. The Fund,
therefore, may not be a suitable investment for investors who are subject to
the alternative minimum tax. The suitability of the Fund for these investors
will depend upon a comparison of the after-tax yield likely to be provided
from the Fund to comparable tax-exempt investments not subject to such tax
and also to comparable fully taxable investments in light of each investor's
tax position. See "Dividends, Distributions and Taxes."
Up to 20% of the total assets of the Fund may be invested in taxable money
market instruments, tax-exempt securities of other states and municipalities
and options and futures. With respect to tax-exempt securities of other
states, only investment grade securities which satisfy the standards
enumerated above for Municipal Bonds, Notes and Paper, will be purchased. The
Fund may invest more than 20% of its total assets in taxable money market
instruments and the tax-exempt securities of other states and municipalities
in order to maintain a temporary "defensive" position, when, in the opinion
of the Investment Manager, prevailing market or financial conditions
(including unavailability of securities of requisite quality) so warrant.
With respect to the purchase of tax-exempt securities of other states for
defensive purposes, only the highest grade Municipal Bonds, Notes and Paper,
will be purchased. The types of taxable money market instruments in which the
Fund may invest are limited to the following short-term fixed income
securities (maturing in one year or less from the time of purchase): (i)
obligations of the United States Government, its agencies, instrumentalities
or authorities; (ii) commercial paper rated P-1 by Moody's or A-1 by S&P;
(iii) certificates of deposit of domestic banks with assets of $1 billion or
more; and (iv) repurchase agreements with respect to any of the securities in
which the Fund may invest.
Municipal Bonds and Municipal Notes are debt obligations of a state, and
its agencies and municipalities which generally have maturities, at the time
of their issuance, of either one year or more (Bonds) or from six months to
three years (Notes). Municipal Commercial Paper refers to short-term
obligations of municipalities which may be issued at a discount and are
sometimes referred to as Short-Term Discount Notes. Any Municipal Bond or
Municipal Note which depends directly or indirectly on the credit of the
Federal Government, its agencies or instrumentalities shall be considered to
have a Moody's rating of Aaa. An obligation shall be considered a Municipal
Bond, Municipal Note or Municipal Commercial Paper only if, in the opinion of
bond counsel to the issuer at the time of issuance, the interest payable
therefrom is exempt from both regular federal income tax and the regular
personal income tax of a designated State. The Fund may also purchase
Municipal Obligations which had originally been issued by the same issuer as
two separate series of the same issue with different interest rates, but
which are now linked together to form one series.
The foregoing percentage and rating limitations apply at the time of
acquisition of a security based on the last previous determination of the
Fund's net asset value. Any subsequent change in any rating by a rating
service or change in percentages resulting from market fluctuations or other
changes in total assets of the Fund will not require elimination of any
security from the Fund's portfolio. Therefore, the Fund may hold securities
which have been downgraded to ratings of Ba or BB or lower by Moody's or S&P.
However such investments may not exceed 5% of the Fund's net assets. Any
investments which exceed this limitation will be eliminated from the
portfolio within a reasonable period of time (such time as the Investment
Manager determines that it is practicable to sell the investment without
undue market or tax consequences to the Fund). Municipal Obligations rated
below investment grade by Moody's or S&P are considered to be speculative
investments, some of which may not be currently paying any interest and may
have extremely poor prospects of ever attaining any real investment standing.
Investments in Municipal Bonds rated either BBB by S&P or Baa by Moody's
(investment grade bonds--the lowest rated permissible investments by the
Fund) have speculative characteristics and, therefore, changes in economic
conditions or other circumstances are more likely to weaken their capacity to
make principal and interest payments than would be the case with investments
in securities with higher credit ratings.
The ratings assigned by Moody's and S&P represent their opinions as to the
quality of the securities which they undertake to rate (see the Appendix to
the Statement of Additional Information). It should be emphasized, however,
that the ratings are general and not absolute standards of quality.
There are no restrictions on the maturities of most of the tax-exempt
securities that may be purchased by the Fund and therefore the average
portfolio maturity of the Fund is not subject to any limit. As a general
matter, the longer the average portfolio maturity, the greater will be the
impact of fluctuations in interest rates on the value of the Fund's portfolio
securities and the Fund's net asset value per share.
The Fund is classified as a non-diversified investment company under the
Investment Company Act of 1940
6
<PAGE>
("the Act") and as such is not limited by the Act in the proportion of its
assets that it may invest in the obligations of a single issuer. However, the
Fund intends to conduct its operations so as to qualify as a "regulated
investment company" under Subchapter M of the Internal Revenue Code (the
"Code"). See "Dividends, Distributions and Taxes." In order to qualify, among
other requirements, the Fund will limit its investments so that at the close
of each quarter of the taxable year, (i) not more than 25% of the market
value of the total assets of the Fund will be invested in the securities of a
single issuer, and (ii) with respect to 50% of the market value of its total
assets not more than 5% of the value of its total assets will be invested in
the securities of a single issuer, and the Fund will not own more than 10% of
the outstanding voting securities of a single issuer. (Since the types of
securities ordinarily purchased by the Fund are nonvoting securities, there
is generally no limit on the percentage of an issuer's obligations that the
Fund may own.) To the extent that these requirements permit a relatively high
percentage of the Fund's assets to be invested in the obligations of a
limited number of issuers within the State of Hawaii, the value of the Fund's
portfolio securities will be more susceptible to any single economic,
political or regulatory occurrence than the portfolio securities of a
diversified investment company. Additionally, the Fund's net asset value will
fluctuate to a greater extent than that of a diversified investment company
as a result of changes in the financial condition or in the market's
assessment of the various issuers. The tax limitations described in this
paragraph are not fundamental policies and may be revised to the extent
applicable Federal income tax requirements are revised.
The Fund may invest more than 25% of the total assets in Municipal
Obligations known as private activity bonds. Such Obligations include health
facility obligations, housing obligations, industrial revenue obligations
(including pollution control obligations), electric utility obligations and
water and sewer obligations, provided that the percentage of the Fund's total
assets in private activity bonds in any one category does not exceed 25% of
the total assets of the Fund. The ability of issuers of such obligations to
make timely payments of principal and interest will be affected by events and
conditions affecting these projects such as cyclicality of revenues and
earnings, regulatory and environmental restrictions and economic downturns,
which may result generally in a lowered need for such facilities and a
lowered ability of such users to pay for the use of such facilities. The Fund
may purchase Municipal Obligations which had originally been issued by the
same issuer as two separate series of the same issue with different interest
rates, but which are now linked together to form one series.
The two principal classifications of Municipal Obligations are "general
obligation" and "revenue" bonds, notes or commercial paper. General
obligation bonds, notes or commercial paper are secured by the issuer's
pledge of its faith, credit and taxing power for the payment of principal and
interest. Issuers of general obligation bonds, notes or commercial paper
include a state, its counties, cities, towns and other governmental units.
Revenue bonds, notes or commercial paper are payable from the revenues
derived from a particular facility or class of facilities or, in some cases,
from specific revenue sources. Revenue bonds, notes or commercial paper are
issued for a wide variety of purposes, including the financing of electric,
gas, water and sewer systems and other public utilities; industrial
development and pollution control facilities; single and multi-family housing
units; public buildings and facilities; air and marine ports, transportation
facilities such as toll roads, bridges and tunnels; and health and
educational facilities such as hospitals and dormitories. They rely primarily
on user fees to pay debt service, although the principal revenue source is
often supplemented by additional security features which are intended to
enhance the creditworthiness of the issuer's obligations.
Included within the revenue bonds category are participations in lease
obligations or installment purchase contracts (hereinafter collectively
called "lease obligations") of municipalities. State and local agencies or
authorities issue lease obligations to acquire equipment and facilities.
Lease obligations may have risks not normally associated with general
obligation or other revenue bonds. Leases, and installment purchase or
conditional sale contracts (which may provide for title to the leased asset
to pass eventually to the issuer), have developed as a means for governmental
issuers to acquire property and equipment without the necessity of complying
with the constitutional and statutory requirements generally applicable for
the issuance of debt. Certain lease obligations contain "non-appropriation"
clauses that provide that the governmental issuer has no obligation to make
future payments under the lease or contract unless money is appropriated for
such purpose by the appropriate legislative body on an annual or other
periodic basis. Consequently, continued lease payments on those lease
obligations containing "non-appropriation" clauses are dependent on future
legislative actions. If such legislative actions do not occur, the holders of
the lease obligation may experience difficulty in exercising their rights,
including disposition of the property.
In addition, lease obligations represent a relatively new type of
financing that has not yet developed the depth of marketability associated
with more conventional municipal obligations, and, as a result, certain of
such lease obligations may be considered illiquid securities. To determine
whether or not the Fund will consider such
7
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securities to be illiquid (the Fund may not invest more than 15% of its net
assets in illiquid securities), the Trustees of the Fund have established
guidelines to be utilized by the Fund in determining the liquidity of a lease
obligation. The factors to be considered in making the determination include:
1) the frequency of trades and quoted prices for the obligation; 2) the
number of dealers willing to purchase or sell the security and the number of
other potential purchasers; 3) the willingness of dealers to undertake to
make a market in the security; and 4) the nature of the marketplace trades,
including, the time needed to dispose of the security, the method of
soliciting offers, and the mechanics of the transfer.
VARIABLE RATE OBLIGATIONS. The interest rates payable on certain Municipal
Bonds and Municipal Notes are not fixed and may fluctuate based upon changes
in market rates. Municipal obligations of this type are called "variable
rate" obligations. The interest rate payable on a variable rate obligation is
adjusted either at predesigned periodic intervals or whenever there is a
change in the market rate of interest on which the interest rate payable is
based.
Since the Fund concentrates its investments in Municipal Obligations of
the State of Hawaii and its authorities and municipalities, the Fund is
affected by any political, economic or regulatory developments affecting the
ability of issuers in the State of Hawaii to make timely payments of interest
and principal. For a more detailed discussion of the risks associated with
investments in the State of Hawaii, see "Special Considerations Relating to
the State of Hawaii" in the Appendix at the back of this Prospectus and in
the Statement of Additional Information.
RISK CONSIDERATIONS AND INVESTMENT
PRACTICES
The value of the Fund's portfolio securities and, therefore, the Fund's net
asset value per share, may increase or decrease due to various factors,
principally changes in prevailing interest rates and the ability of the
issuers of the Fund's portfolio securities to pay interest and principal on
such obligations on a timely basis. Generally, a rise in interest rates will
result in a decrease in the Fund's net asset value per share, while a drop in
interest rates will result in an increase in the Fund's net asset value per
share.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. The Fund may purchase tax-exempt
securities on a when-issued or delayed delivery basis; i.e., the price is
fixed at the time of commitment but delivery and payment can take place a
month or more after the date of the transaction. These securities are subject
to market fluctuation and no interest accrues to the purchaser prior to
settlement. At the time the Fund makes the commitment to purchase such
securities, it will record the transaction and thereafter reflect the value
each day of such security in determining its net asset value. There is no
overall limit on the percentage of the Fund's assets which may be committed
to the purchase of securities on a when-issued, delayed delivery or forward
commitment basis. An increase in the percentage of the Fund's assets
committed to the purchase of securities on a when-issued, delayed delivery or
forward commitment basis may increase the volatility of the Fund's net asset
value.
FINANCIAL FUTURES CONTRACTS AND OPTIONS ON FUTURES. The Fund may enter into
financial futures contracts ("futures contracts"), options on such futures
and municipal bond index futures contracts for hedging purposes. The Fund may
sell a futures contract or a call option thereon or purchase a put option on
such futures contract, if the Investment Manager anticipates interest rates
to rise, as a hedge against a decrease in the value of the Fund's portfolio
securities. If the Investment Manager anticipates that interest rates will
decline, the Fund may purchase a futures contract or a call option thereon or
sell a put option on such futures contract to protect against an increase in
the price of the securities the Fund intends to purchase. These futures
contracts and related options thereon will be used only as a hedge against
anticipated interest rate changes.
Unlike a futures contract, which requires the parties to buy and sell a
security on a set date, an option on such a futures contract entitles its
holder to decide on or before a future date whether to enter into such a
contract (a long position in the case of a call option and a short position
in the case of a put option). If the holder decides not to enter into the
contract, the premium paid for the option on the contract is lost. Since the
value of the option is fixed at the point of sale, there are no daily
payments of cash to reflect the change in the value of the under-lying
contract as there is by a purchaser or seller of a futures contract. The
value of the option does change and is reflected in the Fund's net asset
value.
A risk in employing futures contracts to protect against the price
volatility of portfolio securities is that the prices of securities subject
to such futures contracts may correlate imperfectly with the behavior of the
cash prices of the Fund's portfolio securities. The risk of imperfect
correlation will be increased by the fact that the futures contracts in which
the Fund may invest are on taxable securities rather than tax-exempt
securities, and there is no guarantee that the prices of taxable securities
will move in a similar manner to the prices of tax-exempt securities.
8
<PAGE>
Another risk is that the Investment Manager could be incorrect in its
expectations as to the direction or extent of various interest rate movements
or the time span within which the movements take place. For example, if the
Fund sold futures contracts for the sale of securities in anticipation of an
increase in interest rates, and then interest rates went down instead,
causing bond prices to rise, the Fund would lose money on the sale.
In addition to the risks that apply to all options transactions (see the
Statement of Additional Information for a description of the characteristics
of, and the risks of investing in, options on debt securities), there are
several special risks relating to options on futures. In particular, the
ability to establish and close out positions on such options will be subject
to the development and maintenance of a liquid secondary market. It is not
certain that this market will develop or be maintained.
MUNICIPAL BOND INDEX FUTURES. The Fund may utilize municipal bond index
futures contracts for hedging purposes. The strategies in employing such
contracts will be similar to that discussed above with respect to financial
futures and options thereon. A municipal bond index is a method of reflecting
in a single number the market value of many different municipal bonds and is
designed to be representative of the municipal bond market generally. The
index fluctuates in response to changes in the market values of the bonds
included within the index. Unlike futures contracts on particular financial
instruments, transactions in futures on a municipal bond index will be
settled in cash, if held until the close of trading in the contract. However,
like any other futures contract, a position in the contract may be closed out
by a purchase or sale of an offsetting contract for the same delivery month
prior to expiration of the contract.
The Fund may not enter into futures contracts or related options thereon
if immediately thereafter the amount committed to margin plus the amount paid
for option premiums exceeds 5% of the value of the Fund's total assets. The
Fund may not purchase or sell futures contracts or related options if
immediately thereafter more than one-third of the Fund's net assets would be
hedged.
PORTFOLIO MANAGEMENT
The Fund's portfolio is managed by the Investment Manager with a view to
achieving its investment objective. The Fund is managed within InterCapital's
Tax-Exempt Income Group, which manages 40 tax-exempt municipal funds and fund
portfolios, with approximately $10.6 billion in assets as of October 31,
1995. James F. Willison, Senior Vice President of InterCapital and Manager of
InterCapital's Tax-Exempt Income Group, has been the primary portfolio
manager of the Fund since its inception and has been a portfolio manager at
InterCapital for over five years. Securities are purchased and sold
principally in response to the Investment Manager's current evaluation of an
issuer's ability to meet its debt obligations in the future, and the
Investment Manager's current assessment of future changes in the levels of
interest rates on tax-exempt securities of varying maturities.
Securities purchased by the Fund are, generally, sold by dealers acting as
principal for their own accounts. Pursuant to an order issued by the
Securities and Exchange Commission, the Fund may effect principal
transactions in certain taxable money market instruments with Dean Witter
Reynolds Inc. ("DWR"), a broker-dealer affiliate of the Investment Manager.
In addition, the Fund may incur brokerage commissions on transactions
conducted through DWR. Brokerage commissions are not normally charged on
purchases and sales of municipal obligations, but such transactions may
involve transaction costs in the form of spreads between bid and asked
prices. It is anticipated that the Fund's annual portfolio turnover rate will
not exceed 100%.
INVESTMENT RESTRICTIONS
- -----------------------------------------------------------------------------
The investment restrictions listed below are among the restrictions which
have been adopted by the Fund as fundamental policies. Under the Act, a
fundamental policy may not be changed without the vote of a majority of the
outstanding voting securities of the Fund, as defined in the Act.
For purposes of the investment policies and restrictions of the Fund: (a)
an "issuer" of a security is the entity whose assets and revenues are
committed to the payment of interest and principal on that particular
security, provided that the guarantee of a security will be considered a
separate security; (b) a "taxable security" is any security the interest on
which is subject to regular federal income tax; and (c) all percentage
limitations apply immediately after a purchase or initial investment, and any
subsequent change in any applicable percentage resulting from market
fluctuations or other changes in total assets does not require elimination of
any security from the portfolio.
The Fund may not:
1. Make loans of money or securities, except: (a) by the purchase of
debt obligations in which the Fund may invest consistent with its
investment objective and policies;
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<PAGE>
(b) by investment in repurchase agreements; and (c) by lending its
portfolio securities.
2. Invest 25% or more of the value of its total assets in securities
of issuers in any one industry. This restriction does not apply to
obligations issued or guaranteed by the United States Government, its
agencies or instrumentalities or to municipal obligations, including those
issued by the State of Hawaii or its political subdivisions.
PURCHASE OF FUND SHARES
- -----------------------------------------------------------------------------
The Fund offers its shares for sale to the public on a continuous basis.
Pursuant to a Distribution Agreement between the Fund and Dean Witter
Distributors Inc. (the "Distributor"), an affiliate of the Investment
Manager, shares of the Fund are distributed by the Distributor and offered by
DWR and other dealers who have entered into agreements with the Distributor
("Selected Broker-Dealers"). The principal executive office of the
Distributor is located at Two World Trade Center, New York, New York 10048.
The minimum initial purchase is $1,000. Subsequent purchases of $100 or
more may be made by sending a check, payable to Dean Witter Hawaii Municipal
Trust, directly to Dean Witter Trust Company (the "Transfer Agent") at P.O.
Box 1040, Jersey City, N.J. 07303 or by contacting a DWR or other Selected
Broker-Dealer account executive.
In the case of purchases made pursuant to systematic payroll deduction
plans (including individual retirement plans), the Fund, in its discretion,
may accept such purchases without regard to any minimum amounts which would
otherwise be required if the Fund has reason to believe that additional
purchases will increase the amount of the purchase of shares in all accounts
under such plans to at least $1,000. Certificates for shares purchased will
not be issued unless a request is made by the shareholder in writing to the
Transfer Agent. The offering price will be the net asset value per share next
determined following receipt of an order (see "Determination of Net Asset
Value" below), plus a sales charge (expressed as a percentage of the offering
price) on a single transaction as shown in the following table:
<TABLE>
<CAPTION>
SALES CHARGE
-------------------------------
PERCENTAGE OF APPROXIMATE
AMOUNT OF PUBLIC PERCENTAGE OF
SINGLE TRANSACTION OFFERING PRICE AMOUNT INVESTED
- ------------------------ -------------- ---------------
<S> <C> <C>
Less than $100,000 ...... 3.00% 3.09%
$100,000 but less than
$250,000 ............... 2.50 2.56
$250,000 but less than
$500,000 ............... 2.00 2.04
$500,000 but less than
$1,000,000 ............. 1.25 1.27
$1,000,000 but less than
$2,500,000 ............. 0.50 0.50
$2,500,000 but less than
$5,000,000 ............. 0.25 0.25
$5,000,000 and over .... -0- -0-
</TABLE>
Upon notice to all Selected Broker-Dealers, the Distributor may reallow up
to the full applicable sales charge as shown in the above schedule during
periods specified in such notice. During periods when substantially the
entire sales charge is reallowed, such Selected Broker-Dealers may be deemed
to be underwriters as that term is defined in the Securities Act of 1933, as
amended.
The above schedule of sales charges is applicable to purchases in a single
transaction by, among others: (a) an individual; (b) an individual, his or
her spouse and their children under the age of 21 purchasing shares for his
or her own accounts; (c) a trustee or other fiduciary purchasing shares for a
single trust estate or a single fiduciary account; (d) a pension,
profit-sharing or other employee benefit plan qualified or non-qualified
under Section 401 of the Internal Revenue Code; (e) tax-exempt organizations
enumerated in Section 501(c)(3) or (13) of the Internal Revenue Code; (f)
employee benefit plans qualified under Section 401 of the Internal Revenue
Code of a single employer or of employers who are "affiliated persons" of
each other within the meaning of Section 2(a)(3)(c) of the Act; or (g) any
other organized group of persons, whether incorporated or not, provided the
organization has been in existence for at least six months and has some
purpose other than the purchase of redeemable securities of a registered
investment company at a discount.
Sales personnel are compensated for selling shares of the Fund at the time
of their sale by the Distributor and/or Selected Broker-Dealer. In addition,
some sales personnel of the Selected Broker-Dealer will receive various types
of non-cash compensation as special sales incentives, including trips,
educational and/or business seminars and merchandise.
Shares of the Fund are sold through the Distributor on a normal three
business day settlement basis; that is, payment generally is due on or before
the third business day after the order is placed with the Distributor. Shares
of the Fund purchased through the Distributor are entitled to dividends
beginning on the next business day following settlement date. Since DWR and
other Selected Broker-Dealers forward investors' funds on settlement date,
they will benefit from the temporary use of the funds where payment is made
prior thereto. Shares purchased through the Transfer Agent are entitled to
dividends beginning on the next business day following
10
<PAGE>
receipt of an order. As noted above, orders placed directly with the Transfer
Agent must be accompanied by payment. Investors will be entitled to receive
capital gains distributions if their order is received by the close of
business on the day prior to the record date for such distributions. The Fund
and/or the Distributor reserve the right to reject any purchase order.
REDUCED SALES CHARGES
COMBINED PURCHASE PRIVILEGE. Investors may have the benefit of reduced sales
charges in accordance with the above schedule by combining purchases of
shares of the Fund in single transactions with the purchase of shares of Dean
Witter Tax-Exempt Securities Trust, Dean Witter High Yield Securities Inc.
and of Dean Witter Funds which are sold with a contingent deferred sales
charge ("CDSC funds"). The sales charge payable on the purchase of shares of
the Fund, Dean Witter Tax-Exempt Securities Trust, and Dean Witter High Yield
Securities Inc. will be at their respective rates applicable to the total
amount of the combined concurrent purchases of the Fund, Dean Witter
Tax-Exempt Securities Trust, Dean Witter High Yield Securities Inc. and CDSC
funds.
RIGHT OF ACCUMULATION. Investors may benefit from a reduction of the sales
charges in accordance with the above schedule if the cumulative net asset
value of shares of the Fund purchased in a single transaction, together with
shares previously purchased which are held at the time of such transaction,
amounts to $100,000 or more.
The Distributor must be notified by the shareholder at the time a purchase
order is placed that the purchase qualifies for the reduced charge under the
Right of Accumulation. Similar notification must be made in writing by the
shareholder when such an order is placed by mail. The reduced sales charge
will not be granted if: (a) such notification is not furnished at the time of
the order; or (b) a review of the records of the Distributor or the Transfer
Agent fails to confirm the investor's represented holdings.
LETTER OF INTENT. The foregoing schedule of reduced sales charges will also
be available to investors who enter into a written Letter of Intent providing
for the purchase, within a thirteen-month period, of shares of the Fund from
the Distributor. The cost of shares of the Fund which were previously
purchased at a price including a front-end sales charge during the 90-day
period prior to the date of receipt by the Distributor of the Letter of
Intent, which are still owned by the shareholder, may also be included in
determining the applicable reduction.
PLAN OF DISTRIBUTION
The Fund has entered into a Plan of Distribution pursuant to Rule 12b-1 under
the Act, whereby the expenses of certain activities and services by DWR and
others who engage in or support distribution of Fund Shares or who service
shareholder accounts, including overhead and telephone expenses incurred in
connection with the distribution of the Fund's shares, are reimbursed.
Reimbursements for these expenses will be made in monthly payments by the
Fund to the Distributor, which will in no event exceed an amount equal to a
payment at the annual rate of 0.20 of 1% of the average daily net assets of
the Fund. This fee is characterized as a service fee within the meaning of
NASD guidelines. Expenses incurred by the Distributor pursuant to the Plan in
any fiscal year will not be reimbursed by the Fund through payments accrued
in any subsequent fiscal year. No interest or other financing charges will be
incurred on any distribution expense incurred by the Distributor under the
Plan or on any unreimbursed expenses due to the Distributor pursuant to the
Plan. The fee payable pursuant to the Plan, equal to 0.20% of the Fund's
average daily net assets, is characterized as a service fee within the
meaning of NASD guidelines. For the fiscal period ended November 30, 1995,
the Fund accrued a total of $939 under the Plan. This accrual is an amount
equal to 0.20% of the daily net assets of the Fund.
DETERMINATION OF NET ASSET VALUE
The net asset value per share of the Fund is determined once daily at 4:00
p.m., New York time (or, on days when the New York Stock Exchange closes
prior to 4:00 p.m., at such earlier time), on each day that the New York
Stock Exchange is open by taking the value of all assets of the Fund,
subtracting its liabilities, dividing by the number of shares outstanding and
adjusting to the nearest cent. The net asset value per share will not be
determined on Good Friday and on such other federal and non-federal holidays
as are observed by the New York Stock Exchange.
Portfolio securities (other than short-term taxable debt securities,
futures and options) are valued for the Fund by an outside independent
pricing service approved by the Fund's Trustees. The service utilizes a
computerized grid matrix of tax-exempt securities and evaluations by its
staff in determining what it believes is the fair value of the Fund's
portfolio securities. The Board believes that timely and reliable market
quotations are generally not readily available to the Fund for purposes of
valuing tax-exempt securities and that the valuations supplied by the pricing
services are more likely to approximate the fair value of such securities.
Short-term taxable debt securities with remaining maturities of 60 days or
less at time of purchase are valued at amortized cost, unless the Board
determines such does not reflect the securities' fair value, in which
11
<PAGE>
case these securities will be valued at their market value as determined by
the Board of Trustees. Other taxable short-term debt securities with
maturities of more than 60 days will be valued on a mark to market basis
until such time as they reach a maturity of 60 days, whereupon they will be
valued at amortized cost using their value on the 61st day unless the
Trustees determine such does not reflect the securities' fair value, in which
case these securities will be valued at their fair market value as determined
by the Board of Trustees. Listed options on debt securities are valued at the
latest sale price on the exchange on which they are listed unless no sales of
such options have taken place that day, in which case, they will be valued at
the mean between their closing bid and asked prices. Unlisted options on debt
securities are valued at the mean between their latest bid and asked price.
Futures are valued at the latest sale price on the commodities exchange on
which they trade unless the Board of Trustees determines that such price does
not reflect their fair value, in which case they will be valued at their fair
market value as determined by the Board of Trustees. All other securities and
other assets are valued at their fair value as determined in good faith under
procedures established by and under the supervision of the Board of Trustees.
SHAREHOLDER SERVICES
- -----------------------------------------------------------------------------
AUTOMATIC INVESTMENT OF DIVIDENDS AND DISTRIBUTIONS. All income dividends
and capital gains distributions are automatically paid in full and fractional
shares of the Fund (or, if specified by the shareholder, any other open-end
investment company for which InterCapital serves as investment manager
(collectively, with the Fund, the "Dean Witter Funds")), unless the
shareholder requests that they be paid in cash. Each purchase of shares of
the Fund is made upon the condition that the Transfer Agent is thereby
automatically appointed as agent of the investor to receive all dividends and
capital gains distributions on shares owned by the investor. Such dividends
and distributions will be paid in shares of the Fund (or in cash if the
shareholder so requests) at the net asset value per share (without sales
charge) on the monthly payment date, which will be no later than the last
business day of the month for which the dividend or distribution is payable.
Processing of dividend checks begins immediately following the monthly
payment date. Shareholders who have requested to receive dividends in cash
will normally receive their monthly dividend checks during the first ten days
of the following month.
EASYINVEST. (SERVICE MARK) Shareholders may subscribe to EasyInvest, an
automatic purchase plan which provides for any amount from $100 to $5,000 to
be transferred automatically from a checking or savings account, on a
semi-monthly, monthly or quarterly basis, to the Transfer Agent for
investment in shares of the Fund.
SYSTEMATIC WITHDRAWAL PLAN. A withdrawal plan is available for shareholders
who own or purchase shares of the Fund having a minimum value of $10,000
based upon the then current net asset value. The plan provides for monthly or
quarterly (March, June, September, December) checks in any dollar amount, not
less than $25, or in any whole percentage of the account balance, on an
annualized basis.
Withdrawal plan payments should not be considered as dividends, yields or
income. If periodic withdrawal plan payments continuously exceed net
investment income and net capital gains, the shareholder's original
investment will be correspondingly reduced and ultimately exhausted.
Each withdrawal constitutes a redemption of shares and any gain or loss
realized must be recognized for federal income tax purposes. Although the
shareholder may make additional investments of $2,500 or more under the
Systematic Withdrawal Plan, withdrawals made concurrently with purchases of
additional shares are inadvisable because of the sales charges applicable to
the purchase of additional shares.
Shareholders should contact their DWR or other Selected Broker-Dealer
account executive or the Transfer Agent for further information about any of
the above services.
EXCHANGE PRIVILEGE. The Fund makes available to its shareholders an "Exchange
Privilege" allowing the exchange of shares of the Fund for shares of other
Dean Witter Funds sold with a front-end (at time of purchase) sales charge
("FESC" funds), Dean Witter Funds sold with a contingent deferred sales
charge ("CDSC funds"), five Dean Witter Funds which are money market funds
and Dean Witter Short-Term U.S. Treasury Trust, Dean Witter Short-Term Bond
Fund, Dean Witter Limited Term Municipal Trust, Dean Witter Balanced Income
Fund, Dean Witter Balanced Growth Fund and Dean Witter Intermediate Term U.S.
Treasury Trust (the foregoing eleven non-CDSC or FESC funds are hereinafter
collectively referred to in this section as the "Exchange Funds"). Exchanges
may be made after the shares of the Fund acquired by purchase (not by
exchange or dividend reinvestment) have been held for thirty days. There is
no holding period for exchanges of shares acquired by
12
<PAGE>
exchange or dividend reinvestment. However, shares of CDSC funds, including
shares acquired in exchange for shares of FESC funds, may not be exchanged
for shares of FESC funds. Thus, shareholders who exchange their Fund shares
for shares of CDSC funds may subsequently exchange those shares for shares of
other CDSC funds or money market funds but may not reacquire FESC fund shares
by exchange.
An exchange to another FESC fund, to a CDSC fund, or to any Exchange Fund
that is not a money market fund is on the basis of the next calculated net
asset value per share of each fund after the exchange order is received. When
exchanging into a money market fund from the Fund, shares of the Fund are
redeemed out of the Fund at their next calculated net asset value and the
proceeds of the redemption are used to purchase shares of the money market
fund at their net asset value determined the following business day.
Subsequent exchanges between any of the Exchange Funds, FESC funds and CDSC
funds can be effected on the same basis (except that CDSC fund shares may not
be exchanged for shares of FESC funds). Shares of a CDSC fund acquired in
exchange for shares of an FESC fund (or in exchange for shares of other Dean
Witter Funds for which shares of an FESC fund have been exchanged) are not
subject to any contingent deferred sales charge upon their redemption.
Purchases and exchanges should be made for investment purposes only. A
pattern of frequent exchanges may be deemed by the Investment Manager to be
abusive and contrary to the best interests of the Fund's other shareholders
and, at the Investment Manager's discretion, may be limited by the Fund's
refusal to accept additional purchases and/or exchanges from the investor.
Although the Fund does not have any specific definition of what constitutes a
pattern of frequent exchanges, and will consider all relevant factors in
determining whether a particular situation is abusive and contrary to the
best interests of the Fund and its other shareholders, investors should be
aware that the Fund and each of the other Dean Witter Funds may in their
discretion limit or otherwise restrict the number of times this Exchange
Privilege may be exercised by any investor. Any such restriction will be made
by the Fund on a prospective basis only, upon notice to the shareholder not
later than ten days following such shareholder's most recent exchange.
The Exchange Privilege may be terminated or revised at any time by the
Fund and/or any of such Dean Witter Funds for which shares of the Fund may be
exchanged, upon such notice as may be required by applicable regulatory
agencies. Shareholders maintaining margin accounts with DWR or another
Selected Broker-Dealer are referred to their account executive regarding
restrictions on exchange of shares of the Fund pledged in their margin
account.
The current prospectus for each fund describes its investment objectives
and policies, and shareholders should obtain one and read it carefully before
investing. Exchanges are subject to the minimum investment requirement and
other conditions imposed by each fund. In the case of any shareholder holding
a share certificate or certificates, no exchanges may be made until the share
certificate(s) have been received by the Transfer Agent and deposited in the
shareholder's account. An exchange will be treated for federal income tax
purposes as a redemption or repurchase of shares, on which the shareholder
may realize a capital gain or loss. However, the ability to deduct capital
losses on an exchange is limited in situations where there is an exchange of
shares within ninety days after the shares are purchased. There are also
limits on the deduction of losses after the payment of exempt-interest
dividends for shares held for less than six months (see "Dividends,
Distributions and Taxes"). The Exchange Privilege is only available in states
where an exchange may legally be made.
If DWR or another Selected Broker-Dealer is the current dealer of record
and its account numbers are part of the account information, shareholders may
initiate an exchange of shares of the Fund for shares of any of the Dean
Witter Funds (for which the Exchange Privilege is available) pursuant to this
Exchange Privilege by contacting their DWR or other Selected Broker-Dealer
account executive (no Exchange Privilege Authorization Form is required).
Other shareholders (and those shareholders who are clients of DWR or another
Selected Broker-Dealer but who wish to make exchanges directly by writing or
telephoning the Transfer Agent) must complete and forward to the Transfer
Agent an Exchange Privilege Authorization form, copies of which may be
obtained from the Transfer Agent, to initiate an exchange. If the
Authorization Form is used, exchanges may be made by contacting the Transfer
Agent at (800) 869-NEWS (toll-free). The Fund will employ reasonable
procedures to confirm that exchange instructions communicated over the
telephone are genuine. Such procedures may include requiring various forms of
personal identification such as name, mailing address, social security or
other tax identification number and DWR or other Selected Broker-Dealer
account number (if any). Telephone instructions may also be recorded. If such
procedures are not employed, the Fund may be liable for any losses due to
unauthorized or fraudulent instructions.
Telephone exchange instructions will be accepted if received by the
Transfer Agent between 9:00 a.m. and 4:00 p.m. New York time, on any day the
New York Stock Exchange is open. Any shareholder wishing to make an
13
<PAGE>
exchange who has previously filed an Exchange Privilege Authorization Form
and who is unable to reach the Fund by telephone should contact his or her
DWR or other Selected Broker-Dealer account executive, if appropriate, or
make a written exchange request (see "Redemptions and Repurchases").
Shareholders are advised that during periods of drastic economic or market
changes, it is possible that the telephone exchange procedures may be
difficult to implement, although this has not been the case with the Dean
Witter Funds in the past.
For further information regarding the Exchange Privilege, shareholders
should contact their DWR or other Selected Broker-Dealer account executive or
the Transfer Agent.
REDEMPTIONS AND REPURCHASES
- -----------------------------------------------------------------------------
REDEMPTION. Shares of the Fund can be redeemed for cash at any time at the
net asset value per share next determined (without any redemption or other
charge). If shares are held in a shareholder's account without a share
certificate, a written request for redemption is required. If certificates
are held by the shareholder(s), the shares may be redeemed by surrendering
the certificate(s) with a written request for redemption, along with any
additional information required by the Transfer Agent.
REPURCHASE. DWR and other Selected Broker-Dealers are authorized to
repurchase shares represented by a share certificate which is delivered to
any of their offices. Shares held in a shareholder's account without a share
certificate may also be repurchased by DWR and other Selected Broker-Dealers
upon the telephonic request of the shareholder. The repurchase price is the
net asset value next determined (see "Purchase of Fund Shares-- Determination
of Net Asset Value") after such repurchase order is received by DWR or other
Selected Broker- Dealer. Payment for shares repurchased may be made by the
Fund to the Distributor for the account of the shareholder. The offers by DWR
and other Selected Broker-Dealers to repurchase shares from shareholders may
be suspended by them at any time. In that event, shareholders may redeem
their shares through the Fund's Transfer Agent as set forth above under
"Redemption."
PAYMENT FOR SHARES REDEEMED OR REPURCHASED. Payment for shares presented for
repurchase or redemption will be made by check within seven days after
receipt by the Transfer Agent of the certificate and/or written request in
good order. Such payment may be postponed or the right of redemption
suspended at times when normal trading is not taking place on the New York
Stock Exchange. If the shares to be redeemed have recently been purchased by
check, payment of the redemption proceeds may be delayed for the minimum time
needed to verify that the check used for investment has been honored (not
more than fifteen days from the time of investment of the check by the
Transfer Agent). Shareholders maintaining margin accounts with DWR or another
Selected Broker-Dealer are referred to their account executive regarding
restrictions on redemption of shares of the Fund pledged in the margin
account.
REINSTATEMENT PRIVILEGE. A shareholder who has had his or her shares redeemed
or repurchased and has not previously exercised this reinstatement privilege
may, within 30 days after the date of the redemption or repurchase, reinstate
any portion or all of the proceeds of such redemption or repurchase in shares
of the Fund at their net asset value (without a sales charge) next determined
after a reinstatement request, together with the proceeds, is received by the
Transfer Agent.
INVOLUNTARY REDEMPTION. The Fund reserves the right, on sixty days notice, to
redeem at their net asset value, the shares of any shareholder whose shares
have a value of less than $100 as a result of redemptions or repurchases, or
such lesser amount as may be fixed by the Board of Trustees. However, before
the Fund redeems such shares and sends the proceeds to the shareholder, it
will notify the shareholder that the value of the shares is less than $100
and allow the shareholder to make an additional investment in an amount which
will increase the value of the account to $100 or more before the redemption
is processed. No charge will be imposed on any involuntary redemption.
DIVIDENDS, DISTRIBUTIONS AND TAXES
- -----------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS. The Fund declares dividends from net investment
income on each day the New York Stock Exchange is open for business (see
"Purchase of Fund Shares"). Such dividends are paid monthly. The Fund intends
to distribute all of the Fund's net investment income on an annual basis.
The Fund will distribute at least once each year all net realized
short-term capital gains in excess of any realized net long-term capital
losses, if any. The Fund intends to distribute all of its realized net
long-term capital gains, if any, in excess of any realized net short-term
capital losses and any available net capital loss
14
<PAGE>
carryovers, at least once per fiscal year, although it may elect to retain
all or part of such gains for reinvestment. Taxable capital gains may be
generated by the sale of portfolio securities and by transactions in options
and futures contracts engaged in by the Fund. All dividends and capital gains
distributions will be paid in additional Fund shares (without sales charge)
and automatically credited to the shareholder's account without issuance of a
share certificate unless the shareholder requests in writing that all
dividends be paid in cash and such request is received by the close of
business on the day prior to the record date for such distributions (see
"Shareholder Services--Automatic Investment of Dividends and Distributions").
Any dividends declared in the last quarter of any calendar year which are
paid in the following calendar year prior to February 1 will be deemed
received by the shareholder in the prior year.
TAXES--FEDERAL. Because the Fund intends to distribute all of its net
investment income and capital gains to shareholders and intends to otherwise
continue to qualify as a regulated investment company under Subchapter M of
the Internal Revenue Code, it is not expected that the Fund will be required
to pay any federal income tax.
The Fund intends to qualify to pay "exempt-interest dividends" to its
shareholders by maintaining, as of the close of each quarter of its taxable
year, at least 50% of the value of its total assets in tax-exempt securities.
If the Fund satisfies such requirement, distributions from net investment
income to shareholders, whether taken in cash or reinvested in additional
shares, will be excludable from gross income for federal income tax purposes
to the extent net investment income is represented by interest on tax-exempt
securities. Exempt-interest dividends are included, however, in determining
what portion, if any, of a person's Social Security benefits are subject to
federal income tax. The Internal Revenue Code may subject interest received
on certain otherwise tax-exempt securities to an alternative minimum tax.
This alternative minimum tax may be incurred due to interest received on
certain "private activity bonds" (in general, bonds that benefit
non-government entities) issued after August 7, 1986 which, although
tax-exempt, are used for purposes other than those generally performed by
government units (e.g., bonds used for commercial or housing purposes).
Income received on such bonds is classified as a "tax preference item," under
the alternative minimum tax, for both individual and corporate investors. The
Fund anticipates that a portion of its investments will be made in such
"private activity bonds," with the result that a portion of the
exempt-interest dividends paid by the Fund will be an item of tax preference
to shareholders subject to the alternative minimum tax. In addition, certain
corporations which are subject to the alternative minimum tax may also have
to include exempt-interest dividends in calculating their alternative minimum
taxable income in situations where the "adjusted current earnings" of the
corporation exceeds its alternative minimum taxable income.
Under the Revenue Reconciliation Act of 1993, all or a portion of the
Fund's gain from the sale or redemption of tax-exempt obligations purchased
at a market discount after April 30, 1993 will be treated as ordinary income
rather than capital gain. This rule may increase the amount of ordinary
income dividends received by shareholders.
Within sixty days after the end of its fiscal year, the Fund will mail to
its shareholders a statement indicating the percentage of the dividend
distributions for such fiscal year which constitutes exempt-interest
dividends and the percentage, if any, that is taxable, and the percentage, if
any, of the exempt-interest dividends which constitutes an item of tax
preference.
Shareholders will normally be subject to federal income tax on dividends
paid from interest income derived from taxable securities and on
distributions of net short-term capital gains, if any. Distributions of
long-term capital gains, if any, are taxable as long-term capital gains,
regardless of how long the shareholder has held the Fund shares and
regardless of whether the distribution is received in additional shares or in
cash. To avoid being subject to a 31% federal backup withholding tax on
taxable dividends, capital gains distributions and proceeds of redemptions or
repurchases, shareholders' taxpayer identification numbers must be furnished
and certified as to accuracy.
Any loss on the sale or exchange of shares of the Fund which are held for
six months or less is disallowed to the extent of the amount of any
exempt-interest dividend paid with respect to such shares. Treasury
Regulations may provide for a reduction in such required holding periods. If
a shareholder receives a distribution that is taxed as a long-term capital
gain on shares held for six months or less and sells those shares at a loss,
the loss will be treated as a long-term capital loss.
Interest on indebtedness incurred by shareholders to purchase or carry
shares of an investment company paying exempt-interest dividends, such as the
Fund, will not be deductible by the investor for federal income tax purposes.
The exemption of interest income for federal income tax purposes does not
necessarily result in exemption under the income or other tax laws of any
state or local taxing authority. Thus, shareholders of the Fund may be
subject to state and local taxes on exempt-interest dividends.
15
<PAGE>
TAXES--STATE OF HAWAII
- -----------------------------------------------------------------------------
The Fund, and dividends and distributions made by the Fund to Hawaii
residents, will generally be treated for Hawaii income tax purposes in the
same manner as they are treated under the Code for Federal income tax
purposes. Under Hawaii law, however, interest derived from obligations of
states (and their political subdivisions) other than Hawaii will not be
exempt from Hawaii income taxation. (Interest derived from bonds or
obligations issued by or under the authority of the following is exempt from
Hawaii income taxation: Guam, Northern Mariana Islands, Puerto Rico, and the
Virgin Islands).
Interest on Hawaii obligations, tax-exempt obligations of states other
than Hawaii and their political subdivisions, and obligations of the United
States or its possessions is not exempt from the Hawaii Franchise Tax, which
applies to banks, building and loan associations, financial services loan
companies, financial corporations, and small business investment companies.
Persons or entities who are not Hawaii residents should not be subject to
Hawaii income taxation on dividends and distributions made by the Fund but
may be subject to other state and local taxes.
Shareholders should consult their tax advisers as to the applicability of
the above to their own tax situation.
PERFORMANCE INFORMATION
- -----------------------------------------------------------------------------
From time to time the Fund may quote its "yield" and/or its "total return"
in advertisements and sales literature. Both the yield and the total return
of the Fund are based on historical earnings and are not intended to indicate
future performance. The yield of the Fund is computed by dividing the Fund's
net investment income over a 30-day period by an average value (using the
average number of shares entitled to receive dividends and the maximum
offering price per share at the end of the period), all in accordance with
applicable regulatory requirements. Such amount is compounded for six months
and then annualized for a twelve-month period to derive the Fund's yield. The
Fund may also quote tax-equivalent yield, which is calculated by determining
the pre-tax yield which, after being taxed at a stated rate, would be
equivalent to the yield determined as described above.
The "average annual total return" of the Fund refers to a figure
reflecting the average annualized percentage increase (or decrease) in the
value of an initial investment of $1,000 over periods of one, five and ten
years, or over the life of the Fund. Average annual total return reflects all
income earned by the Fund, any appreciation or depreciation of the Fund's
assets, all expenses incurred by the Fund and all sales charges incurred by
shareholders, for the stated periods. It also assumes reinvestment of all
dividends and distributions paid by the Fund.
In addition to the foregoing, the Fund may advertise its total return over
different periods of time by means of aggregate, average, year-by-year or
other types of total return figures. Such calculations may or may not reflect
the imposition of the front-end sales charge which, if reflected, would
reduce the performance quoted. The Fund may also advertise the growth of
hypothetical investments of $10,000, $50,000 or $100,000 in shares of the
Fund by adding 1 to the Fund's aggregate total return to date and multiplying
by $9,700, $48,500 or $97,500 ($10,000, $50,000 or $100,000 adjusted for
3.00%, 3.00% and 2.50% sales charges, respectively). The Fund from time to
time may also advertise its performance relative to certain performance
rankings and indexes compiled by independent organizations (such as mutual
fund performance rankings of Lipper Analytical Services, Inc.).
ADDITIONAL INFORMATION
- -----------------------------------------------------------------------------
VOTING RIGHTS. All shares of beneficial interest of the Fund are of $0.01 par
value and are equal as to earnings, assets and voting privileges.
The Fund is not required to hold Annual Meetings of Shareholders and in
ordinary circumstances the Fund does not intend to hold such meetings. The
Trustees may call Special Meetings of Shareholders for action by shareholder
vote as may be required by the Act or the Declaration of Trust. Under certain
circumstances the Trustees may be removed by action of the Trustees or by the
shareholders.
Under Massachusetts law, shareholders of a business trust may, under
certain circumstances, be held personally liable as partners for the
obligations of the Fund. However, the Declaration of Trust contains an
express disclaimer of shareholder liability for acts or obligations of the
Fund, requires that Fund obligations include such disclaimer, and provides
for indemnification and reimbursement of expenses out of the Fund's property
for any shareholder held personally liable for the obligations of the Fund.
Thus, the risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which the Fund itself
would be unable to meet its
16
<PAGE>
obligations. Given the above limitations on shareholder personal liability
and the nature of the Fund's assets and operations, the possibility of the
Fund's being unable to meet its obligations is remote and, in the opinion of
Massachusetts counsel to the Fund, the risk to Fund shareholders of personal
liability is remote.
CODE OF ETHICS. Directors, officers and employees of InterCapital, Dean
Witter Services Company Inc. and the Distributor are subject to a strict Code
of Ethics adopted by those companies. The Code of Ethics is intended to
ensure that the interests of shareholders and other clients are placed ahead
of any personal interest, that no undue personal benefit is obtained from a
person's employment activities and that actual and potential conflicts of
interest are avoided. To achieve these goals and comply with regulatory
requirements, the Code of Ethics requires, among other things, that personal
securities transactions by employees of the companies be subject to an
advance clearance process to monitor that no Dean Witter Fund is engaged at
the same time in a purchase or sale of the same security. The Code of Ethics
bans the purchase of securities in an initial public offering, and also
prohibits engaging in futures and options transactions and profiting on
short-term trading (that is, a purchase within 60 days of a sale or a sale
within 60 days of a purchase) of a security. In addition, investment
personnel may not purchase or sell a security for their personal account
within 30 days before or after any transaction in any Dean Witter Fund
managed by them. Any violations of the Code of Ethics are subject to
sanctions, including reprimand, demotion or suspension or termination of
employment. The Code of Ethics comports with regulatory requirements and the
recommendations in the recent report by the Investment Company Institute
Advisory Group on Personal Investing.
SHAREHOLDER INQUIRIES. All inquiries regarding the Fund should be directed to
the Fund at the telephone numbers or address set forth on the front cover of
this Prospectus.
17
<PAGE>
DEAN WITTER HAWAII MUNICIPAL TRUST
PORTFOLIO OF INVESTMENTS November 30, 1995
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
HAWAII EXEMPT MUNICIPAL BONDS+ (92.2%)
General Obligation (16.2%)
$ 50 Guam, 1993 Ser A ............................................... 5.375% 11/15/13 $ 46,024
100 Hawaii, 1993 Ser CH ............................................ 6.00 11/01/10 108,879
40 Honolulu, 1993 Ser C ........................................... 4.875 09/01/11 38,258
50 Puerto Rico, Pub Impr Ser 1995 (MBIA) .......................... 5.75 07/01/24 50,929
- ----------- ------------
240 244,090
- ----------- ------------
Educational Facilities Revenue (3.2%)
50 University of Puerto Rico, Ser M (MBIA) ........................ 5.25 06/01/25 48,899
- ----------- ------------
Electric Revenue (3.4%)
50 Puerto Rico Electric Power Authority, Power Ser X .............. 6.00 07/01/15 51,213
- ----------- ------------
Hospital Revenue (9.9%)
Hawaii Department of Budget & Finance,
40 Kapiolani Health Care Ser 1993 ................................ 6.30 07/01/08 42,082
50 Queens Medical Center Refg Ser 1989 (FGIC) .................... 7.00 07/01/08 53,960
50 Puerto Rico Industrial, Tourist, Educational, Medical &
Environmental Control Facilities Financing Authority, Hospital
Auxilio Mutuo 1995 Ser A (MBIA) ............................... 6.25 07/01/24 53,422
- ----------- ------------
140 149,464
- ----------- ------------
Industrial Development/Pollution Control Revenue (7.1%)
100 Hawaii Department of Budget & Finance, Hawaiian Electric Co Ser
1995 A
- -----------
(AMT) (MBIA) .................................................. 6.60 01/01/25 107,302
------------
Mortgage Revenue - Multi-Family (16.8%)
Hawaii Housing Finance & Development Corporation,
100 Affordable Rental 1995 Ser A .................................. 6.10 07/01/30 100,241
150 University of Hawaii Faculty Ser 1995 (AMBAC) ................. 5.65 10/01/16 153,500
- ----------- ------------
250 253,741
- ----------- ------------
Mortgage Revenue - Single Family (6.0%)
50 Hawaii Housing Finance & Development Corporation, Purchase 1994
Ser B ......................................................... 5.70 07/01/13 49,614
40 Puerto Rico Housing Bank & Finance Agency, GNMA/FNMA
Collateralized Portfolio 1 (AMT) .............................. 6.10 10/01/15 40,783
- ----------- ------------
90 90,397
- ----------- ------------
Transportation Facilities Revenue (19.2%)
40 Hawaii, Airports Second Lien Ser 1991 (AMT) (MBIA) ............. 6.50 07/01/03 44,075
50 Hawaii Department of Transportation, Highway Ser A ............. 5.00 07/01/11 48,369
200 Puerto Rico Highway & Transportation Authority, Refg Ser V ..... 5.75 07/01/18 197,994
- ----------- ------------
290 290,438
- ----------- ------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
18
<PAGE>
DEAN WITTER HAWAII MUNICIPAL TRUST
PORTFOLIO OF INVESTMENTS November 30, 1995, continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Water & Sewer Revenue (3.0%)
$ 40 Puerto Rico Aqueduct & Sewer Authority, Ser 1988 A ............. 7.875% 07/01/17 $ 44,440
- ----------- ------------
Other Revenue (3.7%)
Puerto Rico Telephone Authority,
30 Refg Ser M .................................................... 5.40 01/01/08 30,668
25 Ser N ......................................................... 5.40 01/01/08 25,796
- ----------- ------------
55 56,464
- ----------- ------------
Refunded (3.7%)
50 Maui County, 1990 Ser A (AMBAC) ................................ 6.80 12/01/05 56,097
- ----------- ------------
$1,355 TOTAL HAWAII EXEMPT MUNICIPAL BONDS (Identified Cost $1,357,293) (a) .... 92.2% 1,392,545
===========
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES .......................... 7.8 117,623
------------
NET ASSETS .............................................................. 100.0% $1,510,168
============
<FN>
- ------------
AMT Alternative Minimum Tax.
+ Puerto Rico exemption represents 36.0% of net assets.
(a) The aggregate cost for federal income tax purposes is $1,357,293;
the aggregate gross unrealized appreciation is $35,327 and the
aggregate gross unrealized depreciation is $75, resulting in net
unrealized appreciation $35,252.
Bond Insurance:
- ---------------
AMBAC AMBAC Indemnity Corporation.
FGIC Financial Guaranty Insurance Company.
MBIA Municipal Bond Investors Assurance Corporation.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
19
<PAGE>
DEAN WITTER HAWAII MUNICIPAL TRUST
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1995
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $1,357,293) .................... $1,392,545
Cash ............................................. 36,837
Receivable for:
Shares of beneficial interest sold ............. 55,611
Interest ....................................... 25,804
Receivable from affiliate ........................ 3,289
Deferred organizational expenses ................. 54,532
------------
TOTAL ASSETS ................................... 1,568,618
------------
LIABILITIES:
Payable for:
Dividends to shareholders ...................... 404
Plan of distribution fee ....................... 225
Organizational expenses .......................... 54,532
Accrued expenses and other payables .............. 3,289
------------
TOTAL LIABILITIES .............................. 58,450
------------
NET ASSETS:
Paid-in-capital .................................. 1,474,531
Net unrealized appreciation ...................... 35,252
Accumulated undistributed net realized gain ..... 385
------------
NET ASSETS ..................................... $1,510,168
============
NET ASSET VALUE PER SHARE,
152,421 shares outstanding (unlimited shares
authorized of $.01 par value) ................... $9.91
=======
MAXIMUM OFFERING PRICE PER SHARE,
(net asset value plus 3.09% of net asset value)* $10.22
=======
<FN>
- ------------
* On sales of $100,000 or more, the offering price is reduced.
</TABLE>
STATEMENT OF OPERATIONS
FOR THE PERIOD JUNE 16, 1995* THROUGH NOVEMBER 30, 1995
<TABLE>
<CAPTION>
<S> <C>
NET INVESTMENT INCOME:
INTEREST INCOME ........................... $ 22,970
----------
EXPENSES
Professional fees ......................... 19,591
Organizational expenses ................... 5,468
Investment management fee ................. 1,644
Plan of distribution fee .................. 939
Transfer agent fees and expenses .......... 545
Custodian fees ............................ 510
Registration fees ......................... 481
Other ..................................... 933
----------
TOTAL EXPENSES BEFORE EXPENSE OFFSET AND
AMOUNTS WAIVED/ASSUMED .................... 30,111
LESS: AMOUNTS WAIVED/ASSUMED ............ (28,673)
LESS: EXPENSE OFFSET .................... (499)
----------
TOTAL EXPENSES AFTER EXPENSE OFFSET AND
AMOUNTS WAIVED/ASSUMED .................... 939
----------
NET INVESTMENT INCOME ................... 22,031
----------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain ......................... 385
Net unrealized appreciation ............... 35,252
----------
NET GAIN ................................ 35,637
----------
NET INCREASE .............................. $ 57,668
==========
<FN>
- ------------
* Commencement of operations.
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE PERIOD
JUNE 16, 1995*
THROUGH NOVEMBER
30, 1995
- -------------------------------------------------------------- -----------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income ......................................... $ 22,031
Net realized gain ............................................. 385
Net unrealized appreciation ................................... 35,252
-----------------
NET INCREASE ................................................ 57,668
Dividends from net investment income .......................... (22,031)
Net increase from transactions in shares of beneficial
interest ..................................................... 1,374,524
-----------------
TOTAL INCREASE .............................................. 1,410,161
NET ASSETS
Beginning of period ........................................... 100,007
-----------------
END OF PERIOD ............................................... $1,510,168
=================
<FN>
- ------------
* Commencement of operations.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
20
<PAGE>
DEAN WITTER HAWAII MUNICIPAL TRUST
NOTES TO FINANCIAL STATEMENTS November 30, 1995
1. ORGANIZATION AND ACCOUNTING POLICIES
Dean Witter Hawaii Municipal Trust (the "Fund") is registered under the
Investment Company Act of 1940, as amended (the "Act"), as a non-diversified,
open-end management investment company. The Fund was organized as a
Massachusetts business trust on March 14, 1995 and had no operations other
than those relating to organizational matters and the issuance of 10,310
shares of beneficial interest for $100,007 to Dean Witter InterCapital Inc.
("the Investment Manager") to effect the Fund's initial capitalization. The
Fund commenced operations on June 16, 1995.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- Portfolio securities are valued for the Fund
by an outside independent pricing service approved by the Trustees. The
pricing service has informed the Fund that in valuing the Fund's 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 Fund's 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.
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 record date. 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 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.
E. ORGANIZATIONAL EXPENSES -- The Investment Manager paid the organizational
expenses of the Fund in the amount of approximately $60,000 which will be
reimbursed for the full amount thereof, exclusive of amounts assumed of
$5,468. Such expenses have been deferred and are being amortized by the Fund
on the straight line method over a period not to exceed five years from the
commencement of operations.
21
<PAGE>
DEAN WITTER HAWAII MUNICIPAL TRUST
NOTES TO FINANCIAL STATEMENTS November 30, 1995, continued
2. INVESTMENT MANAGEMENT AGREEMENT
Pursuant to an Investment Management Agreement, the Fund pays a management
fee, calculated daily and payable monthly, by applying the annual rate of
0.35% to the Fund's average daily net assets.
Under the terms of the Agreement, in addition to managing the Fund's
investments, the Investment Manager 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 Investment Manager. The Investment Manager also bears the cost of
telephone services, heat, light, power and other utilities provided to the
Fund.
The Investment Manager has undertaken to assume all operating expenses
(except brokerage and
12b-1 fees) and waive the compensation provided for in its Investment
Management Agreement until such time as the Fund has $50 million of net
assets or until December 16, 1996, whichever occurs first.
3. PLAN OF DISTRIBUTION
Dean Witter Distributors Inc. (the "Distributor"), an affiliate of the
Investment Manager, is the distributor of the Fund's shares and in accordance
with a Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under the Act
finances certain expenses in connection therewith.
Under the Plan, the Distributor bears the expense of all promotional and
distribution related activities on behalf of the Fund, except for expenses
that the Trustees determine to reimburse, as described below. The following
activities and services may be provided by the Distributor, Dean Witter
Reynolds Inc. ("DWR"), an affiliate of the Investment Manager and
Distributor, other employees and selected broker-dealers with the Distributor
under the Plan: (1) compensation to, and expenses of, account executives of
DWR, other employees and selected broker-dealers, including overhead and
telephone expenses; (2) sales incentives and bonuses to sales representatives
and to marketing personnel in connection, with promoting sales of the Fund's
shares; (3) expenses incurred in connection with promoting sales of the
Fund's shares; (4) preparation, printing and distributing sales literature;
and (5) providing advertising and promotional activities, including direct
mail solicitation and television, radio, newspaper, magazine and other media
advertisements.
The Fund is authorized to reimburse the Distributor for specific expenses the
Distributor incurs or plans to incur in promoting the distribution of the
Fund's shares. The amount of each monthly reimbursement payment may in no
event exceed an amount equal to a payment at the annual rate of 0.20% of the
Fund's average daily net assets during the month. Expenses incurred by the
Distributor pursuant to the Plan in any fiscal year will not be reimbursed by
the Fund through payments accrued in any subsequent fiscal year. For the period
ended November 30, 1995, the distribution fee was accrued at the annual rate of
0.20%.
Shares of the Fund are distributed by Dean Witter Distributors Inc., (the
"Distributor"), an affiliate of the Investment Manager. The Distributor has
informed the Fund that for the period ended November 30, 1995, it received
approximately $38,000 in commissions from the sale of shares of the Fund's
capital stock. Such commissions are deducted from the proceeds of the capital
stock shares and are not an expense of the Fund.
22
<PAGE>
DEAN WITTER HAWAII MUNICIPAL TRUST
NOTES TO FINANCIAL STATEMENTS November 30, 1995, 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 period ended November 30, 1995
aggregated $1,491,392 and $133,365, respectively.
Dean Witter Trust Company, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At November 30, 1995, the Fund had
transfer agent fees and expenses payable of approximately $300.
5. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD
JUNE 16, 1995* THROUGH
NOVEMBER 30, 1995
-----------------------
SHARES AMOUNT
--------- ------------
<S> <C> <C>
Sold ...................... 141,805 $1,371,598
Reinvestment of dividends 1,510 14,596
--------- ------------
143,315 1,386,194
Repurchased ............... (1,204) (11,670)
--------- ------------
Net increase .............. 142,111 $1,374,524
========= ============
<FN>
- ------------
</TABLE>
* Commencement of operations.
6. SELECTED PER SHARE DATA AND RATIOS
See the "Financial Highlights" table on page 4 of this prospectus.
23
<PAGE>
DEAN WITTER HAWAII MUNICIPAL TRUST
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND TRUSTEES
OF DEAN WITTER HAWAII MUNICIPAL TRUST
In our opinion, the accompanying statement of assets and liabilities,
including the portfolio of investments, and the related statements of
operations and of changes in net assets and the financial highlights (which
appear under the heading "Financial Highlights" on page 4 of this Prospectus)
present fairly, in all material respects, the financial position of Dean
Witter Hawaii Municipal Trust (the "Fund") at November 30, 1995, and the
results of its operations, the changes in its net assets and the financial
highlights for the period June 16, 1995 (commencement of operations) through
November 30, 1995, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audit. We conducted our audit of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and evaluating
the overall financial statement presentation. We believe that our audit,
which included confirmation of securities at November 30, 1995 by
correspondence with the custodian, provides a reasonable basis for the
opinion expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
December 15, 1995
1995 FEDERAL TAX NOTICE
During the period ended November 30, 1995, the Fund paid to the
shareholders $0.19 per share from net investment income. All of the Fund's
dividends from net investment income were exempt interest dividends,
excludable from gross income for Federal income tax purposes.
24
<PAGE>
APPENDIX
- -----------------------------------------------------------------------------
SPECIAL CONSIDERATIONS RELATING TO THE
STATE OF HAWAII
The Fund will be affected by any political, economic, or regulatory
developments having a bearing on the ability of Hawaii issuers to pay
interest or repay principal on their obligations.
The information set forth herein is derived from official statements
prepared in connection with the issuance of obligations of the State of
Hawaii ("State") and its political subdivisions and other sources that are
generally available to investors. The information is provided as general
information intended to give a recent historical description and is not
intended to indicate further or continuing trends in the financial or other
positions of the State and its political subdivisions.
Hawaii was admitted as the 50th state on August 21, 1959 and is an
archipelago of eight major islands, seven of which are inhabited, plus 124
named islets, totalling 6,425 square miles in land area. It is located in the
Pacific Ocean in the northern hemisphere about 2,400 statute miles from San
Francisco. In terms of area, Hawaii is the 47th of the 50 states. According
to the 1990 U.S. Census, the total population was 1,115,274, making Hawaii
the 41st most populous state of the United States. According to the 1990 U.S.
Census, about 75% of the population of Hawaii lives on the island of Oahu.
The City and County of Honolulu consists of the island of Oahu, plus some
minor islets; its land area is 596.3 square miles; and it is the capital of
the State and its principal port.
Hawaii's economy experienced an expansion in the latter part of the 1980s
due in part to extensive Japanese investment. Since 1990, however, Hawaii's
economy has experienced marginal growth. As a result, construction spending
has decreased, real estate prices have dropped, and personal income in 1993
after adjusting for inflation was just 1.4% higher than that for 1990.
The State Constitution empowers the Legislature to authorize the issuance
of four types of bonds: general obligation bonds; bonds issued under special
improvement statutes; revenue bonds; and special purpose revenue bonds.
Under the Constitution general obligation bonds may be issued by the State
if such bonds at the time of issuance would not cause the total amount of
principal and interest payable on such bonds to exceed a level that is
related to the General Fund revenues of the State in the three fiscal years
immediately preceding such issuance. The Constitution provides that the
Legislature must establish a General Fund expenditure ceiling that limits the
rate of growth of General Fund appropriations to the estimated rate of growth
of the State's economy. Appropriations from the General Fund for each year of
the fiscal biennium or each supplementary budget fiscal year are not to
exceed the expenditure ceiling for the fiscal year.
Maximum limits for operating expenditures are established for each fiscal
year by legislative appropriations, but monies can be withheld by the
Department of Budget and Finance to insure solvency.
The Constitution requires a Council of Revenues to prepare revenue
estimates for State government and report such estimates to the Governor and
the Legislature.
The executive budget for the fiscal biennium 1995-1997 was submitted to
the Legislature as statutorily required on December 19, 1994. The revenue
growth forecasts upon which the budget was based were those issued by the
Council of Revenues on September 9, 1994. After preparation of the budget,
however, the Council lowered its revenue growth rates, and the impact of the
revised revenue estimates on the executive budget submission resulted in an
approximately $350 million projected shortfall during the fiscal biennium. In
response, the Legislature reduced or eliminated various tax credits and made
program spending cuts to maintain the General Fund expenditure ceiling within
the limits required by the Constitution. Subsequent thereto, the Council has
further lowered its revenue growth estimates. Because the Legislature only
establishes maximum limits for operating expenditures and monies can be
withheld by the Department of Budget and Finance to insure solvency, the
State administration has implemented further program spending cuts, left
vacant positions unfilled, and laid off employees in response to the
Council's lowered revenue estimates. The State administration will be
submitting a supplementary budget reflecting the Council's reduced revenue
projections for the Legislature's consideration. It is uncertain what form of
budget and what revenue measures or combination of measures will ultimately
be enacted. The State administration has indicated that it is committed to
developing and maintaining financial policies and budgetary action to insure
a positive General Fund balance and financial plan.
Funds for State expenditures are also affected by State obligations for
the benefit of native Hawaiians.
The State has agreed to resolve a dispute concerning the wrongful use or
withdrawal by Territorial and State Executive actions of lands set aside
originally for the rehabilitation of native Hawaiians by the transfer of
certain usable State-owned lands to the Department of Hawaiian Home Lands and
the funding of $600 million in equal amounts over a period of 20 years to
allow for the appropriate planning and development of such lands.
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Legislation has been enacted to implement the settlement, with funds
authorized and appropriated for the first two years of the settlement.
In addition, 20 percent of the gross proprietary revenues derived from
"ceded lands" (defined below) that are utilized by the State are required by
State law to be paid to the Office of Hawaiian Affairs, which administers
such funds for the benefit of native Hawaiians. "Ceded lands" are those
portions of lands now constituting State-owned lands that were ceded by the
Republic of Hawaii to the United States and subsequently conveyed by the
United States to the State following the State's admission to the Union. The
payments to the Office of Hawaiian Affairs are made directly out of State
revenues, including revenues from revenue producing activities such as the
Harbors and Airports Divisions of the Department of Transportation.
For further discussion of special considerations relating to the State of
Hawaii, see the Statement of Additional Information.
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DEAN WITTER
HAWAII MUNICIPAL TRUST
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
TRUSTEES
Jack F. Bennett
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Manuel H. Johnson
Paul Kolton
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Sheldon Curtis
Vice President, Secretary and
General Counsel
James F. Willison
Vice President
Thomas F. Caloia
Treasurer
CUSTODIAN
The Bank of New York
90 Washington Street
New York, New York 10286
TRANSFER AGENT AND
DIVIDEND DISBURSING AGENT
Dean Witter Trust Company
Harborside Financial Center
Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
Dean Witter InterCapital Inc.
