<PAGE>
MORGAN STANLEY DEAN WITTER HAWAII MUNICIPAL TRUST Two World Trade Center,
LETTER TO THE SHAREHOLDERS May 31, 1999 New York, New York 10048
DEAR SHAREHOLDER:
We are pleased to present the semiannual report on the operations of Morgan
Stanley Dean Witter Hawaii Municipal Trust for the period ended May 31, 1999.
The financial markets have begun to recover from last year's global economic
difficulties. The turmoil which included the Asian crisis, the Russian debt
default and the near collapse of a major U.S. hedge fund has given way to more
normal financial conditions. The major catalyst for this return to stability
was the liquidity provided by the Federal Reserve Board's 75-basis-point
reduction in the federal-funds rate during the fourth quarter of 1998.
These international economic problems precipitated a "flight to quality" rally
in fixed-income securities and U.S. Treasury yields reached 30-year lows in
October 1998. As the world markets recovered, foreign investors repatriated
funds and Treasury yields began to rise. Interest rates also rose in response
to surprisingly robust domestic economic growth reported over the second half
of 1998. The bond market became concerned that the central bank might become
more restrictive by taking back some of the liquidity provided during the
crisis. On June 30, 1999 the Federal Reserve Board raised the Federal funds
rate 25 basis points to 5.00 percent.
MUNICIPAL MARKET CONDITIONS
During 1998 municipal yields were less volatile than Treasury yields. This
pattern of stability continued into 1999. Long-term insured municipal index
yields stood at 5.30 percent at the end of May only 30 basis points higher than
November 1998. In contrast, Treasury bond yields rose 80 basis points from 5.05
to 5.85 percent. During the past six months, the yield pickup for extending
tax-exempt maturities from one to 30 years averaged 225 basis points.
The modest rally of municipals during 1998 created a more favorable
relationship relative to Treasuries. Municipals underperformed Treasuries and
the ratio of municipal yields to Treasury yields climbed to 99 percent
<PAGE>
MORGAN STANLEY DEAN WITTER HAWAII MUNICIPAL TRUST
LETTER TO THE SHAREHOLDERS May 31, 1999, continued
by December. The higher the ratio, the more attractive municipals are relative
to Treasuries. Municipals have outperformed Treasuries this year and the ratio
declined to 91 percent by May. The high-to-low annual range of
municipal/Treasury yields for the past five years has averaged from 93 to 84
percent.
In addition to lagging 1998's Treasury rally, municipals also experienced a
glut of new-issue supply. Underwriting volume of $284 billion was up 28 percent
from the prior year and approached 1993's record. Issuers actively refinanced
at lower interest rates and refundings were 29 percent of total volume. This
year's rise in interest rates has reduced the amount of refunding activity.
Refunding volume was down 45 percent in the first five months of 1999. Total
underwriting declined 24 percent.
PERFORMANCE
The Fund's net asset value (NAV) fell from $10.41 to $10.13 per share for the
six-month period ended May 31, 1999. Based on this change plus reinvestment of
tax-free dividends totaling $0.23 per share and long-term capital gains of
approximately $0.044 per share, the Fund's total return was -0.03 percent.
Over the same period the Lipper Hawaii Municipal Debt Funds average and the
Lehman Brothers Municipal Bond Index posted total returns of 0.38 percent and
0.81 percent, respectively.
30-YEAR BOND YIELDS 1994-1999
[LINE GRAPH]
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%
12/31/98 5.05 5.10 99.02%
01/31/99 5.00 5.09 98.23%
02/28/99 5.10 5.58 91.40%
03/31/99 5.15 5.63 91.47%
04/30/99 5.20 5.66 91.87%
05/31/99 5.30 5.83 90.91%
Source: Municipal Market Data - A division of Thomson Financial Municipal Group
2
<PAGE>
MORGAN STANLEY DEAN WITTER HAWAII MUNICIPAL TRUST
LETTER TO THE SHAREHOLDERS May 31, 1999, continued
LARGEST SECTORS AS OF MAY 31, 1999 CREDIT ENHANCEMENTS AS OF MAY 31, 1999
(% OF NET ASSETS) (% OF TOTAL LONG-TERM PORTFOLIO)
GENERAL OBLIGATION 19% Aaa/AAA 69%
MORTGAGE 17% Aa/AA 6%
HOSPITAL 16% A/A 15%
TRANSPORTATION 12% Baa/BBB 10%
IDR/PCR* 7%
WATER & SEWER 7%
PUBLIC FACILITIES 6%
*INDUSTRIAL DEVELOPMENT/POLLUTION AS MEASURED BY MOODY'S INVESTOR SERVICE,
CONTROL REVENUE. INC. OR STANDARD & POOR'S CORP.
PORTFOLIO STRUCTURE IS SUBJECT TO PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE.
CHANGE.
<TABLE>
<CAPTION>
CALL STRUCTURE AS OF MAY 31, 1999
(% OF TOTAL LONG-TERM PORTFOLIO) WEIGHTED AVERAGE
PERCENT CALLABLE CALL PROTECTION: 8 YEARS
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010+
0% 0% 4% 0% 0% 7% 14% 13% 13% 29% 15% 5%
YEARS BONDS CALLABLE
PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE.
</TABLE>
3
<PAGE>
MORGAN STANLEY DEAN WITTER HAWAII MUNICIPAL TRUST
LETTER TO THE SHAREHOLDERS May 31, 1999, continued
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.
PORTFOLIO STRUCTURE
As of May 31, 1999, the Fund's net assets of $7.8 million were diversified
among 11 long-term sectors and 26 credits. In-state credits accounted for 89
percent of the portfolio. At the end of May, the portfolio's average maturity
was 22 years. Average duration, a measure of sensitivity to interest rate
changes, was 8.7 years. The accompanying charts provide current information on
the Fund's call structure, largest sectors and distribution of credit ratings.
LOOKING AHEAD
The combination of a "flight to quality" and the flood of new municipal issues
made the municipal-to-Treasury yield relationship more favorable late last year
than it had been in the previous 10 years. Although municipals have
outperformed Treasuries thus far in 1999, we believe that municipals still
offer investors considerable value versus their historical relationship with
Treasuries.
On May 1, 1999, Mitchell M. Merin was named President of the Morgan Stanley
Dean Witter Funds. Mr. Merin is also the President and Chief Operating Officer
of Asset Management for Morgan Stanley Dean Witter & Co. and President, Chief
Executive Officer and Director of Morgan Stanley Dean Witter Advisors Inc., the
Fund's investment manager. He also serves as Chairman, Chief Executive Officer
and Director of the Fund's distributor and transfer agent.
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 /s/ MITCHELL M. MERIN
CHARLES A. FIUMEFREDDO MITCHELL M. MERIN
Chairman of the Board President
4
<PAGE>
MORGAN STANLEY DEAN WITTER HAWAII MUNICIPAL TRUST
PORTFOLIO OF INVESTMENTS May 31, 1999 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
HAWAII TAX-EXEMPT MUNICIPAL BONDS* (92.7%)
General Obligation (18.5%)
Hawaii,
$ 200 1996 Ser CM (FGIC) ...................................................... 6.00% 12/01/12 $ 222,598
200 1997 Ser CN (FGIC) ...................................................... 5.25 03/01/17 200,740
200 1997 Ser CP (FGIC) ...................................................... 5.00 10/01/17 195,526
300 Honolulu City & County, Ser 1996 A (FGIC) ............................... 5.00 07/01/22 288,852
180 Kauai County, Public Improvement 1997 Ser B (MBIA) ...................... 5.25 08/01/16 181,967
250 Maui County, 1998 Ser A (FGIC) .......................................... 5.375 03/01/17 253,755
100 Puerto Rico, Public Improvement Ser 1996 ................................ 5.50 07/01/17 103,612
-------- ----------
1,430 1,447,050
-------- ----------
Educational Facilities Revenue (2.5%)
200 Puerto Rico Industrial Tourist, Educational, Medical & Environmental
-------- Control Facilities Financing Authority, Inter American University of
Puerto Rico 1998 Ser A (MBIA) ........................................... 5.00 10/01/22 195,408
----------
Electric Revenue (3.8%)
Puerto Rico Electric Power Authority,
150 Power Ser GG (FSA) ...................................................... 4.75 07/01/21 141,564
150 Power Ser X ............................................................. 5.50 07/01/25 152,785
-------- ----------
300 294,349
-------- ----------
Hospital Revenue (16.0%)
Hawaii Department of Budget & Finance,
300 Kaiser Permanente Refg Ser 1991 A ....................................... 6.25 03/01/21 311,298
200 Kapiolani Health Care Ser 1996 .......................................... 6.25 07/01/21 214,600
100 Queens Health 1996 Ser A ................................................ 5.875 07/01/11 107,687
150 Queens Health 1998 Ser B (MBIA) ......................................... 5.00 07/01/28 141,449
500 Wilcox Memorial Hospital Ser 1998 ....................................... 5.35 07/01/18 472,545
-------- ----------
1,250 1,247,579
-------- ----------
Industrial Development/Pollution Control Revenue (6.9%)
Hawaii Department of Budget & Finance,
100 Hawaiian Electric Co Ser 1995 A (AMT) (MBIA) ............................ 6.60 01/01/25 109,755
200 Hawaiian Electric Co Ser 1996 A (AMT) (MBIA) ............................ 6.20 05/01/26 217,270
100 Hawaiian Electric Co Ser 1997 A (AMT) (MBIA) ............................ 5.65 10/01/27 103,783
100 Puerto Rico Ports Authority, American Airlines Inc 1996 Ser A (AMT) ..... 6.25 06/01/26 107,030
-------- ----------
500 537,838
-------- ----------
Mortgage Revenue -- Multi-Family (9.8%)
Hawaii Housing Finance & Development Corporation,
95 Affordable Rental 1995 Ser A ............................................ 6.10 07/01/30 98,426
125 University of Hawaii Faculty Ser 1995 (AMBAC) ........................... 5.65 10/01/16 129,887
500 Honolulu, Waipahu Towers GNMA Collateralized 1995 Ser A (AMT) ........... 6.90 06/20/35 540,685
-------- ----------
720 768,998
-------- ----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
5
<PAGE>
MORGAN STANLEY DEAN WITTER HAWAII MUNICIPAL TRUST
PORTFOLIO OF INVESTMENTS May 31, 1999 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Mortgage Revenue -- Single Family (7.2%)
Hawaii Housing Finance & Development Corporation,
$ 300 Purchase 1994 Ser B (MBIA) ...................................... 5.90 % 07/01/27 $ 312,849
150 1997 Ser A (AMT) ................................................ 5.75 07/01/30 153,566
100 Puerto Rico Housing Finance Corporation, Homeownership GNMA-Gtd
------ 1998 Ser A (AMT) ................................................ 5.10 12/01/31 98,919
----------
550 565,334
------ ----------
Public Facilities Revenue (5.6%)
250 Hawaii, Kapolei State Office Building 1998 Ser A COPs (AMBAC) ..... 5.00 05/01/18 239,655
200 Puerto Rico Infrastructure Financing Authority, Ser A (AMBAC) ..... 5.00 07/01/28 194,318
------ ----------
450 433,973
------ ----------
Transportation Facilities Revenue (11.6%)
Hawaii,
200 Airports Third Refg Ser 1994 (AMT) (AMBAC) ...................... 5.75 07/01/09 211,050
200 Harbor Ser 1997 (AMT) (MBIA) .................................... 5.75 07/01/17 208,064
500 Highway Ser 1998 (FGIC) ......................................... 5.00 07/01/16 489,295
------ ----------
900 908,409
------ ----------
Water & Sewer Revenue (6.5%)
150 Honolulu Board of Water Supply, Ser 1996 .......................... 5.80 07/01/16 159,061
Honolulu City & County,
260 Wastewater Jr Ser 1998 (FGIC) ................................... 5.25 07/01/17 259,085
100 Wastewater Sr Ser 1998 (FGIC) ................................... 4.75 07/01/18 93,898
------ ----------
510 512,044
------ ----------
Other Revenue (4.3%)
350 Hawaiian Department of Home Lands, Refg Ser 1999 .................. 4.45 07/01/11 332,308
------ ----------
$7,160 TOTAL HAWAII TAX-EXEMPT MUNICIPAL BONDS (Identified Cost $7,165,640) (a)...... 92.7% 7,243,290
======
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES ............................... 7.3 572,510
----------
NET ASSETS ................................................................... 100.0% $7,815,800
==========
</TABLE>
- ---------------
AMT Alternative Minimum Tax.
COPs Certificates of Participation.
* Puerto Rico issues represent 13% of net assets.
(a) The aggregate cost for federal income tax purposes approximates
identified cost. The aggregate gross unrealized appreciation is
$150,871 and the aggregate gross unrealized depreciation is
$73,221, resulting in net unrealized appreciation of $77,650.
Bond Insurance:
- ---------------
AMBAC AMBAC Assurance Corporation.
FGIC Financial Guaranty Insurance Company.
FSA Financial Security Assurance Inc.
MBIA Municipal Bond Investors Assurance Corporation.
SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE>
MORGAN STANLEY DEAN WITTER HAWAII MUNICIPAL TRUST
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
May 31, 1999 (unaudited)
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $7,165,640)....................................... $ 7,243,290
Cash ................................................................ 383,801
Receivable for:
Interest ......................................................... 140,725
Shares of beneficial interest sold ............................... 2,911
Deferred organizational expenses .................................... 12,529
Receivable from affiliate ........................................... 11,950
Prepaid expenses .................................................... 50,541
-----------
TOTAL ASSETS ..................................................... 7,845,747
-----------
LIABILITIES:
Payable for:
Dividends to shareholders ........................................ 1,891
Plan of distribution fee ......................................... 1,326
Accrued expenses and other payables ................................. 26,730
-----------
TOTAL LIABILITIES ................................................ 29,947
-----------
NET ASSETS ....................................................... $ 7,815,800
===========
COMPOSITION OF NET ASSETS:
Paid-in-capital ..................................................... $ 7,698,351
Net unrealized appreciation ......................................... 77,650
Undistributed net investment income ................................. 2,836
Accumulated undistributed net realized gain ......................... 36,963
-----------
NET ASSETS ....................................................... $ 7,815,800
===========
NET ASSET VALUE PER SHARE,
771,614 shares outstanding (unlimited shares authorized of $.01 par
value) ............................................................ $10.13
======
MAXIMUM OFFERING PRICE PER SHARE,
(net asset value plus 3.09% of net asset value)* .................. $10.44
======
</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 six months ended May 31, 1999 (unaudited)
<TABLE>
<S> <C>
NET INVESTMENT INCOME:
INTEREST INCOME ............................... $ 186,399
----------
EXPENSES
Professional fees ............................. 24,176
Shareholder reports and notices ............... 20,531
Investment management fee ..................... 13,001
Plan of distribution fee ...................... 7,105
Organizational expenses ....................... 5,982
Trustees' fees and expenses ................... 5,399
Transfer agent fees and expenses .............. 2,196
Custodian fees ................................ 440
Other ......................................... 2,430
----------
TOTAL EXPENSES ............................. 81,260
Less: amounts waived/reimbursed ............... (62,490)
Less: expense offset .......................... (439)
----------
NET EXPENSES ............................... 18,331
----------
NET INVESTMENT INCOME ...................... 168,068
----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain ............................. 24,184
Net change in unrealized appreciation ......... (203,567)
----------
NET LOSS ................................... (179,383)
----------
NET DECREASE .................................. $ (11,315)
==========
</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 SIX FOR THE YEAR
MONTHS ENDED ENDED
MAY 31, 1999 NOVEMBER 30, 1998
- ----------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income ................................ $ 168,068 $ 267,187
Net realized gain .................................... 24,184 62,866
Net change in unrealized appreciation ................ (203,567) 102,683
---------- ----------
NET INCREASE (DECREASE) ........................... (11,315) 432,736
---------- ----------
DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income ................................ (165,232) (268,826)
Net realized gain .................................... (29,926) --
---------- ----------
TOTAL DIVIDENDS AND DISTRIBUTIONS ................. (195,158) (268,826)
---------- ----------
Net increase from transactions in shares of beneficial
interest ........................................... 1,024,733 2,081,837
---------- ----------
NET INCREASE ...................................... 818,260 2,245,747
NET ASSETS:
Beginning of period .................................. 6,997,540 4,751,793
---------- ----------
END OF PERIOD
(Including undistributed net investment income of
$2,836 and $0, respectively)....................... $7,815,800 $6,997,540
========== ==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
9
<PAGE>
MORGAN STANLEY DEAN WITTER HAWAII MUNICIPAL TRUST
NOTES TO FINANCIAL STATEMENTS May 31, 1999 (unaudited)
1. ORGANIZATION AND ACCOUNTING POLICIES
Morgan Stanley 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'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 May 31, 1999 (unaudited) 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"), 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 $42,521. 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.
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. Prior to
January 1, 1999, the Investment Manager had assumed all operating expenses
(excluding plan of distribution fees) and waived the compensation provided for
in its Investment Management Agreement.
11
<PAGE>
MORGAN STANLEY DEAN WITTER HAWAII MUNICIPAL TRUST
NOTES TO FINANCIAL STATEMENTS May 31, 1999 (unaudited) 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 six months ended May 31, 1999, the distribution
fee was accrued at the annual rate of 0.19%.
The Distributor has informed the Fund that for the six months ended May 31,
1999, it received approximately $27,500 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 six months ended May 31, 1999
aggregated $1,105,840 and $378,516, respectively.
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager
and Distributor, is the Fund's transfer agent. At May 31, 1999, the Fund had
transfer agent fees and expenses payable of approximately $700.
12
<PAGE>
MORGAN STANLEY DEAN WITTER HAWAII MUNICIPAL TRUST
NOTES TO FINANCIAL STATEMENTS May 31, 1999 (unaudited) continued
5. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
MAY 31, 1999 NOVEMBER 30, 1998
---------------------------- ----------------------------
(unaudited)
SHARES AMOUNT SHARES AMOUNT
------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
Sold ................................................ 111,629 $1,149,572 214,234 $2,200,117
Reinvestment of dividends and distributions ......... 10,539 108,398 14,499 149,204
------- ---------- ------- ----------
122,168 1,257,970 228,733 2,349,321
Repurchased ......................................... (22,587) (233,237) (26,039) (267,484)
------- ---------- ------- ----------
Net increase ........................................ 99,581 $1,024,733 202,694 $2,081,837
======= ========== ======= ==========
</TABLE>
13
<PAGE>
MORGAN STANLEY DEAN WITTER HAWAII MUNICIPAL TRUST
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a share of beneficial interest
outstanding thoughout each period:
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX FOR THE YEAR ENDED NOVEMBER 30 JUNE 16, 1995*
MONTHS ENDED ---------------------------------- THROUGH
MAY 31, 1999 1998 1997 1996 NOVEMBER 30, 1995
- --------------------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C> <C> <C>
SELECTED PER SHARE DATA:
Net asset value, beginning of period ............... $10.41 $10.12 $9.95 $9.91 $9.70
------ ------ ------ ----- -----
Income (loss) from investments operations:
Net investment income ............................. 0.23 0.49 0.50 0.50 0.19
Net realized and unrealized gain (loss) ........... (0.24) 0.29 0.17 0.04 0.21
------ ------ ------ ----- -----
Total income (loss) from investment operations ..... (0.01) 0.78 0.67 0.54 0.40
------ ------ ------ ----- -----
Less dividends and distributions from:
Net investment income ............................. (0.23) (0.49) (0.50) (0.50) (0.19)
Net realized gain ................................. (0.04) -- -- -- --
------ ------ ------ ----- -----
Total dividends and distributions .................. (0.27) (0.49) (0.50) (0.50) (0.19)
------ ------ ------ ----- -----
Net asset value, end of period ..................... $10.13 $10.41 $10.12 $9.95 $9.91
====== ====== ====== ===== =====
TOTAL RETURN+ ...................................... (0.03)%(1) 7.87% 6.93% 5.64% 4.21%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ........................................... 0.49%(2)(3) 0.20%(3) 0.19%(3) 0.19%(3) 0.20%(2)(3)
Net investment income .............................. 4.52%(2)(3) 4.72%(3) 5.00%(3) 5.09%(3) 4.69%(2)(3)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ............ $7,816 $6,998 $4,752 $3,225 $1,510
Portfolio turnover rate ............................ 5%(1) 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>
May 31, 1999 ............... 2.19% 2.82% 0.01%
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>
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<PAGE>
TRUSTEES
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
Wayne E. Hedien
Dr. Manuel H. Johnson
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Mitchell M. Merin
President
Barry Fink
Vice President, Secretary and General Counsel
James F. Willison
Vice President
Thomas F. Caloia
Treasurer
TRANSFER AGENT
Morgan Stanley Dean Witter Trust FSB
Harborside Financial Center - Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
Morgan Stanley Dean Witter Advisors Inc.
Two World Trade Center
New York, New York 10048
The financial statements included herein have been taken from the records of
the Fund without examination by the independent accountants and accordingly
they do not express an opinion thereon.
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]
SEMIANNUAL REPORT
May 31, 1999
