<PAGE>
MORGAN STANLEY DEAN WITTER HAWAII MUNICIPAL TRUST Two World Trade Center,
LETTER TO THE SHAREHOLDERS November 30, 1998 New York, New York 10048
DEAR SHAREHOLDER:
We are pleased to present the annual report of Morgan Stanley Dean Witter
Hawaii Municipal Trust for the fiscal year ended November 30, 1998.
Since our last report six months ago, global financial turmoil, including the
Russian currency crisis, continued to affect the securities markets. The
resulting flight-to-quality bond rally pushed U.S. Treasury bond yields to
30-year lows. Municipal bond yields declined but lagged the downward trend of
Treasury yields.
The deflationary impact of the international financial crisis began to temper
U.S. economic growth prior to the summer's tumultuous market activity. Lower
commodity prices, cheaper imports and improved productivity offset the
potential inflationary impact of strong domestic employment. With inflation
held in check, the Federal Reserve Board provided liquidity to the markets by
lowering short-term interest rates. Between the end of September and the middle
of November, the Federal Reserve Open Market Committee cut the federal-funds
rate 75 basis points from 5.50 percent to 4.75 percent in three separate moves.
[THE NARRATIVE AND/OR TABULAR INFORMATION BELOW IS A FAIR AND ACCURATE
DESCRIPTION OF GRAPHIC OR IMAGE MATERIAL OMITTED FOR THE
PURPOSE OF EDGAR FILING.]
[LINE CHART]
Date AAA Ins Tsy % Relationship
---- ------- --- --------------
12/31/93 5.40% 6.34% 85.17%
01/31/94 5.40 6.24 86.54%
02/28/94 5.80 6.66 87.09%
03/31/94 6.40 7.09 90.27%
04/29/94 6.35 7.32 86.75%
05/31/94 6.25 7.43 84.12%
06/30/94 6.50 7.61 85.41%
07/29/94 6.25 7.39 84.57%
08/31/94 6.30 7.45 84.56%
09/30/94 6.55 7.81 83.87%
10/31/94 6.75 7.96 84.80%
11/30/94 7.00 8.00 87.50%
12/30/94 6.75 7.88 85.66%
01/31/95 6.40 7.70 83.12%
02/28/95 6.15 7.44 82.66%
03/31/95 6.15 7.43 82.77%
04/28/95 6.20 7.34 84.47%
05/31/95 5.80 6.66 87.09%
06/30/95 6.10 6.62 92.15%
07/31/95 6.10 6.86 88.92%
08/31/95 6.00 6.66 90.09%
09/29/95 5.95 6.48 91.82%
10/31/95 5.75 6.33 90.84%
11/30/95 5.50 6.14 89.58%
12/29/95 5.35 5.94 90.07%
01/31/96 5.40 6.03 89.55%
02/29/96 5.60 6.46 86.69%
03/29/96 5.85 6.66 87.84%
04/30/96 5.95 6.89 86.36%
05/31/96 6.05 6.99 86.55%
06/28/96 5.90 6.89 85.63%
07/31/96 5.85 6.97 83.93%
08/30/96 5.90 7.11 82.98%
09/30/96 5.70 6.93 82.25%
10/31/96 5.65 6.64 85.09%
11/29/96 5.50 6.35 86.61%
12/31/96 5.60 6.63 84.46%
01/31/97 5.70 6.79 83.95%
02/28/97 5.65 6.80 83.09%
03/31/97 5.90 7.10 83.10%
04/30/97 5.75 6.94 82.85%
05/30/97 5.65 6.91 81.77%
06/30/97 5.60 6.78 82.60%
07/30/97 5.30 6.30 84.13%
08/31/97 5.50 6.61 83.21%
09/30/97 5.40 6.40 84.38%
10/31/97 5.35 6.15 86.99%
11/30/97 5.30 6.05 87.60%
12/31/97 5.15 5.92 86.99%
01/31/98 5.15 5.80 88.79%
02/28/98 5.20 5.92 87.84%
03/31/98 5.25 5.93 88.53%
04/30/98 5.35 5.95 89.92%
05/29/98 5.20 5.80 89.66%
06/30/98 5.20 5.65 92.04%
07/31/98 5.18 5.71 90.72%
08/31/98 5.03 5.27 95.45%
09/30/98 4.95 5.00 99.00%
10/31/98 5.05 5.16 97.87%
11/30/98 5.00 5.06 98.81%
<PAGE>
MORGAN STANLEY DEAN WITTER HAWAII MUNICIPAL TRUST
LETTER TO THE SHAREHOLDERS November 30, 1998, continued
[THE NARRATIVE AND/OR TABULAR INFORMATION BELOW IS A FAIR AND ACCURATE
DESCRIPTION OF GRAPHIC OR IMAGE MATERIAL OMITTED FOR THE
PURPOSE OF EDGAR FILING.]
[PIE CHART] [PIE CHART]
LARGEST SECTORS AS OF CREDIT RATINGS AS OF
NOVEMBER 30, 1998 NOVEMBER 30, 1998
(% OF NET ASSETS) (% OF TOTAL LONG-TERM PORTFOLIO)
IDR/PCR 9% Aaa/AAA 72%
MORTGAGE 18% Aa/AA 6%
TRANSPORTATION 13% A/A 11%
GENERAL OBLIGATION 19% Baa/BBB 11%
HOSPITAL 19% 100%
PUBLIC FACILITIES 8%
ALL OTHER 14% AS MEASURED BY MOODY'S INVESTORS
TOTAL 100% SERVICE INC. OR STANDARD & POOR'S
CORP.
PORTFOLIO STRUCTURE IS SUBJECT PORTFOLIO STRUCTURE IS SUBJECT
TO CHANGE TO CHANGE
[BAR GRAPH]
CALL STRUCTURE AS OF NOVEMBER 30, 1998 Weighted Average
(% OF TOTAL LONG-TERM PORTFOLIO) Call Protection: 8 Years
PERCENT CALLABLE
1999 0%
2000 0%
2001 5%
2002 2%
2003 0%
2004 8%
2005 16%
2006 16%
2007 14%
2008 32%
2009+ 7%
100%
PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE
2
<PAGE>
MORGAN STANLEY DEAN WITTER HAWAII MUNICIPAL TRUST
LETTER TO THE SHAREHOLDERS November 30, 1998, continued
[THE NARRATIVE AND/OR TABULAR INFORMATION BELOW IS A FAIR AND ACCURATE
DESCRIPTION OF GRAPHIC OR IMAGE MATERIAL OMITTED FOR THE
PURPOSE OF EDGAR FILING.]
[LINE CHART]
GROWTH OF $10,000
Date Total LEHMAN Lipper
- ----------------------------------------------------------------
June 16, 1995 $9,700 $10,000 $10,000
November 30, 1995 $10,108 $10,610 $10,551
November 30, 1996 $10,678 $11,234 $11,121
November 30, 1997 $11,418 $12,039 $11,824
November 30, 1998 $12,317(3) $12,973 $12,655
AVERAGE ANNUAL TOTAL RETURNS
1 Year Since Inception
--------------------------------
7.87(1) 7.15(1)
4.64(2) 6.21(2)
Past performance is not predicitive of future returns
- -------------------------------------------------------------------------------
1) Figure shown assumes reinvestment of all distributions and does not
reflect the deduction of any sales charges.
2) Figure shown assumes reinvestment of all distribution and the deduction
of the maximum applicable front-end sales charge (3%). See the Fund's
current prospectus for complete details on fees and sales charges.
3) Closing value including the deduction of a 3% front-end sales charge,
assuming a complete redemption on November 30, 1998.
4) The Lehman Brothers Municipal Bond Index tracks the performace of
municipal bonds with maturities of 2 years or greater and a minimum
credit rating of Baa or BBB, as rated by Moody's Investor Service, Inc.
or Standard & Poor's Corp., respectively. The Index does not include any
expenses, fees or charges. The Index is unmanaged and should not be
considered an investment.
5) The Lipper HI Municipal Debt Funds Average tracks the performance of the
funds that limit assets to those securities which are exempt from
taxation in HI state (double tax exempt) or a specified city in HI
(triple tax-exempt) as reported by Lipper Analytical Services.
MUNICIPAL MARKET CONDITIONS
At the end of November the long-term insured municipal bond index yield stood
at 5.00 percent. This index yield declined 30 basis points from 5.30 percent
over the last 12 months. In contrast, the 30-year U.S. Treasury bond yield fell
100 basis points during the same period.
As municipals lagged the rally in Treasuries, the ratio of municipal yields to
Treasury yields rose sharply to 99 percent. A rising ratio means that the
attractiveness of municipals relative to Treasuries has improved. The rise in
this ratio is similar to the jump witnessed in 1986 when a radical legislative
proposal threatened the favorable tax advantage of municipal bonds.
The overall decline in interest rates led to a substantial increase in
new-issue municipal volume. Municipal issuance was on a pace to challenge
1993's record of $292 billion. Total municipal volume through November of $255
billion was ahead 28 percent versus the same period last year. Half the
underwriting volume was enhanced with bond insurance. Refundings represented 29
percent of total new issuance.
PERFORMANCE
Morgan Stanley Dean Witter Hawaii Municipal Trust's net asset value (NAV)
increased from $10.12 to $10.41 per share during the fiscal year. Based on this
NAV change plus reinvestment of tax-free dividends of $0.49 per share, the
Fund's total return was 7.87 percent.
The accompanying chart illustrates the growth of a $10,000 investment in the
Fund from inception through
3
<PAGE>
MORGAN STANLEY DEAN WITTER HAWAII MUNICIPAL TRUST
LETTER TO THE SHAREHOLDERS November 30, 1998, continued
the fiscal year ended November 30, 1998 versus a similar hypothetical
investment in either the Lehman Brothers Municipal Bond Index or the Lipper
Analytical Services, Inc. Hawaii Municipal Debt Funds Average.
PORTFOLIO STRUCTURE
The Fund's net assets of $7 million were diversified among 10 long-term sectors
and 22 credits at the end of the fiscal year. In-state credits represented over
80 percent of the portfolio. Average maturity and call protection of the
portfolio was 23 and 8 years, respectively. Credit quality remained a major
focus with over 70 percent of long-term holdings rated triple "A."
The Fund's Investment Manager, Morgan Stanley Dean Witter Advisors Inc., has
agreed to cap all expenses at 55 basis points (hundredths of a percent) for the
1999 calendar year.
LOOKING AHEAD
Global economic conditions have kept inflationary pressures under control and
have contributed to lower interest rates. The fixed income markets appear
concerned about the risk of reflation as countries seek to stimulate economic
growth. However, the ability of the Fed to maintain stability by responding
with appropriate monetary policy is encouraging. With the municipal
relationship to Treasuries more favorable than it has been in 10 years, the
outlook for municipal bonds is positive.
We appreciate your ongoing support of Morgan Stanley Dean Witter Hawaii
Municipal Trust and look forward to continuing to serve your investment needs.
Very truly yours,
/s/ Charles A. Fiumefreddo
CHARLES A. FIUMEFREDDO
Chairman of the Board
4
<PAGE>
MORGAN STANLEY DEAN WITTER HAWAII MUNICIPAL TRUST
PORTFOLIO OF INVESTMENTS November 30, 1998
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
HAWAII TAX-EXEMPT MUNICIPAL BONDS* (95.7%)
General Obligation (19.3%)
Hawaii,
$ 200 1996 Ser CM (FGIC) ...................................................... 6.00% 12/01/12 $ 228,672
200 1997 Ser CN (FGIC) ...................................................... 5.25 03/01/17 205,736
200 1997 Ser CP (FGIC) ...................................................... 5.00 10/01/17 200,650
150 Honolulu City & County, Ser 1996 A (FGIC) ............................... 5.50 09/01/15 158,808
180 Kauai County, Public Improvement 1997 Ser B (MBIA) ...................... 5.25 08/01/16 188,174
250 Maui County, 1998 Ser A (FGIC) .......................................... 5.375 03/01/17 261,847
100 Puerto Rico, Public Improvement Ser 1996 ................................ 5.50 07/01/17 105,796
-------- ----------
1,280 1,349,683
-------- ----------
Educational Facilities Revenue (2.9%)
200 Puerto Rico Industrial Tourist, Educational, Medical & Environmental
--------
Control Facilities Financing Authority, Inter American University of
Puerto Rico 1998 Ser A (MBIA) ........................................... 5.00 10/01/22 200,340
----------
Electric Revenue (4.3%)
Puerto Rico Electric Power Authority,
150 Power Ser GG (FSA) ...................................................... 4.75 07/01/21 146,740
150 Power Ser X ............................................................. 5.50 07/01/25 154,837
-------- ----------
300 301,577
-------- ----------
Hospital Revenue (18.5%)
Hawaii Department of Budget & Finance,
300 Kaiser Permanente Refg Ser 1991 A ....................................... 6.25 03/01/21 315,273
200 Kapiolani Health Care Ser 1996 .......................................... 6.25 07/01/21 218,496
100 Queens Health 1996 Ser A ................................................ 5.875 07/01/11 109,634
150 Queens Health 1998 Ser B (MBIA) ......................................... 5.00 07/01/28 147,716
500 Wilcox Memorial Hospital Ser 1998 ....................................... 5.35 07/01/18 500,405
-------- ----------
1,250 1,291,524
-------- ----------
Industrial Development/Pollution Control Revenue (9.4%)
Hawaii Department of Budget & Finance,
100 Hawaiian Electric Co Ser 1992 (AMT) (MBIA) .............................. 6.55 12/01/22 110,269
100 Hawaiian Electric Co Ser 1995 A (AMT) (MBIA) ............................ 6.60 01/01/25 111,604
200 Hawaiian Electric Co Ser 1996 A (AMT) (MBIA) ............................ 6.20 05/01/26 220,148
100 Hawaiian Electric Co Ser 1997 A (AMT) (MBIA) ............................ 5.65 10/01/27 106,853
100 Puerto Rico Ports Authority, American Airlines Inc 1996 Ser A (AMT) ..... 6.25 06/01/26 107,523
-------- ----------
600 656,397
-------- ----------
Mortgage Revenue -- Multi-Family (11.2%)
Hawaii Housing Finance & Development Corporation,
100 Affordable Rental 1995 Ser A ............................................ 6.10 07/01/30 104,753
125 University of Hawaii Faculty Ser 1995 (AMBAC) ........................... 5.65 10/01/16 132,760
500 Honolulu, Waipahu Towers GNMA Collateralized 1995 Ser A (AMT) ........... 6.90 06/20/35 546,525
-------- ----------
725 784,038
-------- ----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
5
<PAGE>
MORGAN STANLEY DEAN WITTER HAWAII MUNICIPAL TRUST
PORTFOLIO OF INVESTMENTS November 30, 1998, continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Mortgage Revenue -- Single Family (6.7%)
Hawaii Housing Finance & Development Corporation,
$ 300 Purchase 1994 Ser B (MBIA) ........................................ 5.90% 07/01/27 $ 316,278
150 1997 Ser A (AMT) .................................................. 5.75 07/01/30 155,654
------ ----------
450 471,932
------ ----------
Public Facilities Revenue (7.8% )
250 Hawaii, Kapolei State Office Building 1998 Ser A COPs (AMBAC) ..... 5.00 05/01/18 248,455
300 Puerto Rico Infrastructure Financing Authority, Ser A (AMBAC) ..... 5.00 07/01/28 300,492
------ ----------
550 548,947
------ ----------
Transportation Facilities Revenue (13.3%)
Hawaii,
200 Airports Third Refg Ser 1994 (AMT) (AMBAC) ........................ 5.75 07/01/09 216,268
200 Harbor Ser 1997 (AMT) (MBIA) ...................................... 5.75 07/01/17 214,072
500 Highway Ser 1998 (FGIC) ........................................... 5.00 07/01/16 503,040
------ ----------
900 933,380
------ ----------
Water & Sewer Revenue (2.3% )
150 Honolulu Board of Water Supply, Ser 1996 .......................... 5.80 07/01/16 161,973
------ ----------
$6,405
TOTAL HAWAII TAX-EXEMPT MUNICIPAL BONDS (Identified Cost $6,418,574) (a)... 95.7% 6,699,791
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES ............................. 4.3 297,749
----------
NET ASSETS ................................................................. 100.0% $6,997,540
==========
</TABLE>
- ---------------
AMT Alternative Minimum Tax.
COPs Certificates of Participation.
* Puerto Rico issues represent 15% of net assets.
(a) The aggregate cost for federal income tax purposes approximates
identified cost. The aggregate gross unrealized appreciation is
$282,787 and the aggregate gross unrealized depreciation is
$1,570, resulting in net unrealized appreciation of $281,217.
Bond Insurance:
- ---------------
AMBAC AMBAC Indemnity Corporation.
FGIC Financial Guaranty Insurance Company.
FSA Financial Security Assurance Inc.
MBIA Municipal Bond Investors Assurance Corporation.
SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE>
MORGAN STANLEY DEAN WITTER HAWAII MUNICIPAL TRUST
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
November 30, 1998
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $6,418,574).................................. $ 6,699,791
Cash ........................................................... 176,165
Interest receivable ............................................ 127,390
Deferred organizational expenses ............................... 18,511
Receivable from affiliate ...................................... 25,000
Prepaid expenses and other assets .............................. 5,602
-----------
TOTAL ASSETS ................................................ 7,052,459
-----------
LIABILITIES:
Payable for:
Dividends to shareholders .................................... 4,620
Plan of distribution fee ..................................... 1,177
Organizational expenses ........................................ 18,511
Accrued expenses and other payables ............................ 30,611
-----------
TOTAL LIABILITIES ........................................... 54,919
-----------
NET ASSETS .................................................. $ 6,997,540
===========
COMPOSITION OF NET ASSETS:
Paid-in-capital ................................................ $ 6,673,618
Net unrealized appreciation .................................... 281,217
Accumulated undistributed net realized gain .................... 42,705
-----------
NET ASSETS .................................................. $ 6,997,540
===========
NET ASSET VALUE PER SHARE,
672,033 shares outstanding (unlimited shares authorized of $.01
par value) ................................................... $ 10.41
===========
MAXIMUM OFFERING PRICE PER SHARE,
(net asset value plus 3.09% of net asset value)* .............. $ 10.73
===========
</TABLE>
- --------------
* On sales of $100,000 or more the offering price is reduced.
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE>
MORGAN STANLEY DEAN WITTER HAWAII MUNICIPAL TRUST
FINANCIAL STATEMENTS, continued
STATEMENT OF OPERATIONS
For the year ended November 30, 1998
<TABLE>
<S> <C>
NET INVESTMENT INCOME:
INTEREST INCOME ............................... $ 278,272
----------
EXPENSES
Professional fees ............................. 44,544
Shareholder reports and notices ............... 34,273
Investment management fee ..................... 19,831
Organizational expenses ....................... 11,998
Plan of distribution fee ...................... 11,085
Transfer agent fees and expenses .............. 6,294
Registration fees ............................. 1,212
Custodian fees ................................ 633
Other ......................................... 7,011
----------
TOTAL EXPENSES ............................. 136,881
Less: amounts waived/reimbursed ............... (125,167)
Less: expense offset .......................... (629)
----------
NET EXPENSES ............................... 11,085
----------
NET INVESTMENT INCOME ...................... 267,187
----------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain ............................. 62,866
Net change in unrealized appreciation ......... 102,683
----------
NET GAIN ................................... 165,549
----------
NET INCREASE .................................. $ 432,736
==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE>
MORGAN STANLEY DEAN WITTER HAWAII MUNICIPAL TRUST
FINANCIAL STATEMENTS, continued
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
NOVEMBER 30, 1998 NOVEMBER 30, 1997
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income ................................ $ 267,187 $ 195,839
Net realized gain (loss) ............................. 62,866 (2,033)
Net change in unrealized appreciation ................ 102,683 87,760
---------- ----------
NET INCREASE ...................................... 432,736 281,566
Dividends from net investment income ................. (268,826) (194,952)
Net increase from transactions in shares of beneficial
interest ........................................... 2,081,837 1,440,194
---------- ----------
NET INCREASE ...................................... 2,245,747 1,526,808
NET ASSETS:
Beginning of period .................................. 4,751,793 3,224,985
---------- ----------
END OF PERIOD
(Including undistributed net investment income of
$0 and $1,639, respectively)....................... $6,997,540 $4,751,793
========== ==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
9
<PAGE>
MORGAN STANLEY DEAN WITTER HAWAII MUNICIPAL TRUST
NOTES TO FINANCIAL STATEMENTS November 30, 1998
1. ORGANIZATION AND ACCOUNTING POLICIES
Morgan Stanley Dean Witter Hawaii Municipal Trust (the "Fund"), formerly Dean
Witter Hawaii Municipal Trust, is registered under the Investment Company Act
of 1940, as amended (the "Act"), as a non-diversified, open-end management
investment company. The Fund's investment objective is to provide a high level
of current income which is exempt from both federal and State of Hawaii income
taxes consistent with the preservation of capital. The Fund was organized as a
Massachusetts business trust on March 14, 1995 and commenced operations on June
16, 1995.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts and disclosures. Actual results could differ
from those estimates.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- Portfolio securities are valued by an outside
independent pricing service approved by the Trustees. The pricing service has
informed the Fund that in valuing the portfolio securities, it uses both a
computerized matrix of tax-exempt securities and evaluations by its staff, in
each case based on information concerning market transactions and quotations
from dealers which reflect the bid side of the market each day. The portfolio
securities are thus valued by reference to a combination of transactions and
quotations for the same or other securities believed to be comparable in
quality, coupon, maturity, type of issue, call provisions, trading
characteristics and other features deemed to be relevant. Short-term debt
securities having a maturity date of more than sixty days at time of purchase
are valued on a mark-to-market basis until sixty days prior to maturity and
thereafter at amortized cost based on their value on the 61st day. Short-term
debt securities having a maturity date of sixty days or less at the time of
purchase are valued at amortized cost.
B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on the
trade date (date the order to buy or sell is executed). Realized gains and
losses on security transactions are determined by the identified cost method.
Discounts are accreted and premiums are amortized over the life of the
respective securities. Interest income is accrued daily.
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.
10
<PAGE>
MORGAN STANLEY DEAN WITTER HAWAII MUNICIPAL TRUST
NOTES TO FINANCIAL STATEMENTS November 30, 1998, continued
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 -- Morgan Stanley Dean Witter Advisors Inc. (the
"Investment Manager"), formerly Dean Witter InterCapital Inc., 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 $41,489. Such expenses have been deferred and are being amortized on
the straight-line method over a period not to exceed five years from the
commencement of operations.
2. INVESTMENT MANAGEMENT AGREEMENT
Pursuant to an Investment Management Agreement, the Fund pays the Investment
Manager a management fee, calculated daily and payable monthly, by applying the
annual rate of 0.35% to the Fund's 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
(excluding plan of distribution fees) and waive the compensation provided for
in its Investment Management Agreement until December 31, 1998. Effective
January 1, 1999 through December 31, 1999, the Investment Manager has agreed to
assume all operating expenses to the extent that such expenses on an annualized
basis exceed 0.55% of the daily net assets of the Fund.
11
<PAGE>
MORGAN STANLEY DEAN WITTER HAWAII MUNICIPAL TRUST
NOTES TO FINANCIAL STATEMENTS November 30, 1998, continued
3. PLAN OF DISTRIBUTION
Morgan Stanley 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 expenses of certain activities and services provided by
Dean Witter Reynolds Inc. ("DWR"), an affiliate of the Investment Manager and
Distributor, and others who engage in or support distribution of the Fund's
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 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 year ended November 30, 1998, the distribution
fee was accrued at the annual rate of 0.20%.
The Distributor has informed the Fund that for the year ended November 30,
1998, it received approximately $50,100 in commissions from the sale of shares
of the Fund's beneficial interest. Such commissions are deducted from the
proceeds of the shares and are not an expense of the Fund.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales of portfolio securities,
excluding short-term investments, for the year ended November 30, 1998
aggregated $3,351,338 and $1,352,235, respectively.
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager
and Distributor, is the Fund's transfer agent. At November 30, 1998, the Fund
had transfer agent fees and expenses payable of approximately $44.
12
<PAGE>
MORGAN STANLEY DEAN WITTER HAWAII MUNICIPAL TRUST
NOTES TO FINANCIAL STATEMENTS November 30, 1998, continued
5. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
NOVEMBER 30, NOVEMBER 30,
1998 1997
--------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
------------ -------------- ------------ -------------
<S> <C> <C> <C> <C>
Sold .............................. 214,234 $2,200,117 157,613 $1,563,409
Reinvestment of dividends ......... 14,499 149,204 10,917 108,219
------- ---------- ------- ----------
228,733 2,349,321 168,530 1,671,628
Repurchased ....................... (26,039) (267,484) (23,316) (231,434)
------- ---------- ------- ----------
Net increase ...................... 202,694 $2,081,837 145,214 $1,440,194
======= ========== ======= ==========
</TABLE>
6. FEDERAL INCOME TAX STATUS
During the year ended November 30, 1998, the Fund utilized its net capital loss
carryover of approximately $20,200.
13
<PAGE>
MORGAN STANLEY DEAN WITTER HAWAII MUNICIPAL TRUST
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR ENDED NOVEMBER 30 JUNE 16, 1995*
-------------------------------------------------- THROUGH
1998 1997 1996 NOVEMBER 30, 1995
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SELECTED PER SHARE DATA :
Net asset value, beginning of period .............. $ 10.12 $ 9.95 $ 9.91 $ 9.70
-------- -------- -------- ----------
Income from investments operations:
Net investment income ............................ 0.49 0.50 0.50 0.19
Net realized and unrealized gain ................. 0.29 0.17 0.04 0.21
-------- -------- -------- ----------
Total income from investment operations ........... 0.78 0.67 0.54 0.40
-------- -------- -------- ----------
Less dividends from net investment income ......... (0.49) (0.50) (0.50) (0.19)
-------- -------- -------- ----------
Net asset value, end of period .................... $ 10.41 $ 10.12 $ 9.95 $ 9.91
======== ======== ======== ==========
TOTAL RETURN+ ..................................... 7.87% 6.93% 5.64% 4.21%(1)
RATIOS TO AVERAGE NET ASSETS :
Expenses .......................................... 0.20%(3) 0.19%(3) 0.19%(3) 0.20%(2)(3)
Net investment income ............................. 4.72%(3) 5.00%(3) 5.09%(3) 4.69%(2)(3)
SUPPLEMENTAL DATA :
Net assets, end of period, in thousands ........... $ 6,998 $ 4,752 $ 3,225 $ 1,510
Portfolio turnover rate ........................... 26% 13% 51% 14%(1)
</TABLE>
- -------------
* Commencement of operations.
+ Does not reflect the deduction of sales charge. Calculated based on the
net asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
(3) If the Investment Manager had not assumed expenses and waived the
management fee, the expense and net investment income ratios would have
been as follows, which reflect the effect of expense offsets as follows:
<TABLE>
<CAPTION>
EXPENSE NET INVESTMENT EXPENSE
PERIOD ENDED RATIO INCOME RATIO OFFSET
- ------------ ----- ------------ ------
<S> <C> <C> <C>
November 30, 1998 .......... 2.42% 2.50% 0.01%
November 30, 1997 .......... 2.95% 2.24% 0.01%
November 30, 1996* ......... 2.69% 2.59% 0.03%
November 30, 1995* ......... 2.70% 2.19% 0.10%
</TABLE>
- -------------
* After application of the Fund's state expense limitation.
SEE NOTES TO FINANCIAL STATEMENTS
14
<PAGE>
MORGAN STANLEY DEAN WITTER HAWAII MUNICIPAL TRUST
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND TRUSTEES
OF MORGAN STANLEY 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 present fairly, in all
material respects, the financial position of Morgan Stanley Dean Witter Hawaii
Municipal Trust (the "Fund"), formerly Dean Witter Hawaii Municipal Trust, at
November 30, 1998, the results of its operations for the year then ended, the
changes in its net assets for each of the two years in the period then ended
and the financial highlights for each of the three years in the period then
ended and 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 audits. We conducted our audits 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 audits, which included confirmation of
securities at November 30, 1998 by correspondence with the custodian, provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
January 8, 1999
- -------------------------------------------------------------------------------
1998 FEDERAL TAX NOTICE (unaudited)
For the year ended November 30, 1998, all of the Fund's dividends from
net investment income were exempt interest dividends, excludable from
gross income for Federal income tax purposes.
- -------------------------------------------------------------------------------
15
<PAGE>
TRUSTEES
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Wayne E. Hedien
Dr. Manuel H. Johnson
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Barry Fink
Vice President, Secretary and General Counsel
James F. Willison
Vice President
Thomas F. Caloia
Treasurer
TRANSFER AGENT
Morgan Stanley Dean Witter Trust FSB
Harborside Financial Center - Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
Morgan Stanley Dean Witter Advisors Inc.
Two World Trade Center
New York, New York 10048
This report is submitted for the general information of shareholders of the
Fund. For more detailed information about the Fund, its officers and trustees,
fees, expenses and other pertinent information, please see the prospectus
of the Fund.
This report is not authorized for distribution to prospective investors in the
Fund unless preceded or accompanied by an effective prospectus.
MORGAN STANLEY
DEAN WITTER
HAWAII MUNICIPAL
TRUST
[GRAPHIC]
ANNUAL REPORT
NOVEMBER 30, 1998
