MORGAN STANLEY DEAN WITTER HAWAII MUNICIPAL TRUST, 485BPOS, 1999-03-29

MORGAN STANLEY DEAN WITTER HAWAII MUNICIPAL TRUST
485BPOS, 1999-03-29

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<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 29, 1999
REGISTRATION NOS.: 33-58175
811-7263

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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

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FORM N-1A

REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933 [X]
PRE-EFFECTIVE AMENDMENT NO. [ ]
POST-EFFECTIVE AMENDMENT NO. 5 [X]
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 [X]
AMENDMENT NO. 6 [X]

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MORGAN STANLEY DEAN WITTER HAWAII MUNICIPAL TRUST
(FORMERLY NAMED DEAN WITTER HAWAII MUNICIPAL TRUST)
(A MASSACHUSETTS BUSINESS TRUST)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)

TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 392-1600

BARRY FINK, ESQ.
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(NAME AND ADDRESS OF AGENT FOR SERVICE)

Copy to:
DAVID M. BUTOWSKY, ESQ.
GORDON ALTMAN BUTOWSKY
WEITZEN SHALOV & WEIN
114 WEST 47TH STREET
NEW YORK, NEW YORK 10036

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APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:

As soon as practicable after this Post-Effective Amendment becomes effective.
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK APPROPRIATE BOX)

immediately upon filing pursuant to paragraph (b)
----
X on March 30, 1999 pursuant to paragraph (b)
----
60 days after filing pursuant to paragraph (a)
----
on (date) pursuant to paragraph (a) of rule 485.
----

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AMENDING THE PROSPECTUS AND UPDATING FINANCIAL STATEMENTS

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<PAGE>

MORGAN STANLEY DEAN WITTER HAWAII MUNICIPAL TRUST

CROSS-REFERENCE SHEET
FORM N-1A

ITEM CAPTION
-------------- -----------------------------------------------
<S> <C> <C>
PART A PROSPECTUS
1. ............. Cover Page; Back Cover
2. ............. Investment Objective; Principal Investment
Strategies, Principal Risks, Past Performance
3. ............. Fees and Expenses
4. ............. Investment Objective; Additional Investment
Strategy Information; Additional Risk
Information
5. ............. Not Applicable
6. ............. Fund Management
7. ............. Pricing Fund Shares; How to Buy Shares; How to
Exchange Shares; How to Sell Shares;
Distributions; Tax Consequences
8. ............. Share Arrangements
9. ............. Financial Highlights

</TABLE>

PART B STATEMENT OF ADDITIONAL INFORMATION

Information required to be included in Part B is set forth under the
appropriate caption in Part B of this Registration Statement.

PART C

Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C of this Registration Statement.

<PAGE>

PROSPECTUS - MARCH 30, 1999

Morgan Stanley Dean Witter

HAWAII MUNICIPAL TRUST

A MUTUAL FUND THAT SEEKS TO PROVIDE A HIGH LEVEL OF CURRENT INCOME EXEMPT FROM
BOTH FEDERAL AND HAWAII STATE INCOME TAXES CONSISTENT WITH THE PRESERVATION OF
CAPITAL

The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this Prospectus. Any representation
to the contrary is a criminal offense.

<PAGE>

CONTENTS

The Fund Investment Objective............................. 1
Principal Investment Strategies.................. 1
Principal Risks.................................. 1
Past Performance................................. 3
Fees and Expenses................................ 4
Additional Investment Strategy Information....... 4
Additional Risk Information...................... 5
Fund Management.................................. 6
Shareholder Information Pricing Fund Shares.............................. 7
How to Buy Shares................................ 7
How to Exchange Shares........................... 10
How to Sell Shares............................... 12
Distributions.................................... 13
Tax Consequences................................. 13

Financial Highlights ................................................ 15
Our Family of Funds ................................. Inside Back Cover

This Prospectus contains important information about
the Fund. Please read it carefully and keep it for
future reference.

</TABLE>

FUND CATEGORY
-------------
[ ] Growth

[ ] Growth and Income

[X] INCOME

[ ] Money Market

<PAGE>

THE FUND

[GRAPHIC OMITTED]

INVESTMENT OBJECTIVE
- --------------------
Morgan Stanley Dean Witter Hawaii Municipal Trust is a non-diversified mutual
fund that seeks to provide a high level of current income exempt from both
federal and Hawaii state income taxes consistent with the preservation of
capital. There is no guarantee that the Fund will achieve this objective.

[GRAPHIC OMITTED]

PRINCIPAL INVESTMENT STRATEGIES
- -------------------------------
INCOME

An investment objective having the goal of selecting securities to pay out
income rather than rise in value.

The Fund will invest at least 80% of its assets in securities that pay interest
normally exempt from federal and Hawaii state income taxes. The Fund's
"Investment Manager," Morgan Stanley Dean Witter Advisors Inc., generally
invests in investment grade, municipal obligations of issuers in Hawaii and
obligations of U.S. Governmental territories such as Puerto Rico. The municipal
obligations may be rated investment grade by Moody's Investors Service or
Standard & Poor's Corporation or, if unrated, judged to be of comparable
quality by the Investment Manager at the time of purchase. There are no
maturity limitations on the Fund's portfolio securities.

The Fund may invest any amount of its assets in securities that pay interest
income subject to the "alternative minimum tax," and some taxpayers may have to
pay tax on a Fund distribution of this income. The Fund therefore may not be a
suitable investment for these investors. See the "Tax Consequences" section for
more details.

Municipal obligations are securities issued by state and local governments.
These securities typically are "general obligation" or "revenue" bonds, notes
or commercial paper. The general obligation securities are secured by the
issuer's faith and credit, as well as its taxing power, for payment of
principal and interest. Revenue bonds, however, are generally payable from a
specific revenue source. They are issued for a wide variety of projects such as
financing public utilities, housing units, airports and highways, and schools.
The Fund's municipal obligation investments may include zero coupon
securities,which are purchased at a discount and make no interest payments
until maturity.

In pursuing the Fund's investment objective, the Investment Manager has
considerable leeway in deciding which investments it buys, holds or sells on a
day-to-day basis -- and which investment strategies it uses. For example, the
Investment Manager in its discretion may determine to use some permitted
investment strategies while not using others. In addition to the securities
described above, the Fund may make other investments. For more information
about the Fund's investments, see the "Additional Investment Strategy
Information" section.

[GRAPHIC OMITTED]

PRINCIPAL RISKS
- ---------------
The Fund's share price will fluctuate with changes in the market value of the
Fund's portfolio securities. When you sell Fund shares, they may be worth less
than what you paid for them and, accordingly, you can lose money investing in
this Fund.

CREDIT AND INTEREST RATE RISKS. A principal risk of investing in the Fund is
associated with its municipal investments, particularly its concentration in
municipal obligations of a single state. Municipal obligations, as with all
debt securities, are subject to two types of risks: credit risk and interest
rate risk.

<PAGE>

Credit risk refers to the possibility that the issuer of a security will be
unable to make interest payments and repay the principal on its debt. However,
unlike most fixed-income mutual funds, the Fund is subject to the added credit
risk of concentrating its investments in a single state -- Hawaii -- and its
municipalities, as well as certain U.S. territories such as Puerto Rico.
Because the Fund concentrates its investments in securities issued by Hawaii
state and local governments and certain U.S. territories, the Fund could be
affected by political, economic and regulatory developments concerning these
issuers. Should any difficulties develop concerning Hawaii or the U.S.
territories' issuers ability to pay principal and/or interest on their debt
obligations, the Fund's value and yield could be adversely affected.

BOND INSURANCE RISK. Many of the municipal obligations the Fund invests in will
be covered by insurance at the time of issuance or at a later date. Such
insurance covers the remaining term of the security. Insured municipal
obligations would generally be assigned a lower rating if the rating were based
primarily on the credit quality of the issuer without regard to the insurance
feature. If the claims-paying ability of the insurer were downgraded, the
ratings on the municipal obligations it insures may also be downgraded.

In addition, the Fund may invest in securities with the lowest investment grade
rating. These securities may have speculative characteristics.

Interest rate risk refers to fluctuations in the value of a fixed-income
security resulting from changes in the general level of interest rates. When
the general level of interest rates goes up, the prices of most fixed-income
securities go down. When the general level of interest rates goes down, the
prices of most fixed-income securities go up. (Zero coupon securities are
typically subject to greater price fluctuations than comparable securities that
pay interest.) As merely illustrative of the relationship between fixed-income
securities and interest rates, the following table shows how interest rates
affect bond prices.

HOW INTEREST RATES AFFECT BOND PRICES

PRICE PER $1,000 OF A MUNICIPAL BOND IF INTEREST RATES:
-------------------------------------------------------
INCREASE* DECREASE**
--------- ----------
<S> <C> <C> <C> <C> <C> <C>
YEARS TO BOND
MATURITY MATURITY COUPON 1% 2% 1% 2%
1 1999 3.00% $990 $981 $1,010 $1,020
5 2003 3.75% $956 $914 $1,046 $1,095
10 2008 4.10% $922 $852 $1,085 $1,180
20 2018 4.90% $883 $785 $1,138 $1,302
30 2028 4.95% $861 $749 $1,175 $1,396
</TABLE>

Source: Municipal Market Data: "Aaa" yield curve as of 12/31/98
* Assumes no effect from market discount calculation.
** Assumes bonds are non-callable.

In addition, the table is an illustration and does not represent expected
yields or share price changes of any Morgan Stanley Dean Witter mutual fund.

<PAGE>

The Fund is not limited as to the maturities of the securities in which it may
invest. Thus, a rise in the general level of interest rates may cause the price
of the Fund's portfolio securities to fall substantially.

NON-DIVERSIFIED STATUS. The Fund is classified as a "non-diversified" mutual
fund. The Fund therefore is permitted to have a relatively high percentage of
its assets invested in the securities of a limited number of issuers within the
state of Hawaii, and the value of its portfolio securities may be more
susceptible to any single economic, political or regulatory event than a
"diversified" mutual fund.

OTHER RISKS. The performance of the Fund also will depend on whether the
Investment Manager is successful in pursuing the Fund's investment strategy.
The Fund is also subject to other risks from its permissible investments. For
more information about these risks, see the "Additional Risk Information"
section.

Shares of the Fund are not bank deposits and are not guaranteed or insured by
any bank, governmental entity, or the FDIC.

[GRAPHIC OMITTED]

PAST PERFORMANCE
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The bar chart and table below provide some indication of the risks of investing
in the Fund. The Fund's past performance does not indicate how the Fund will
perform in the future.

ANNUAL TOTAL RETURNS -- CALENDAR YEARS

1995* 1996 1997 1998
----- ---- ---- ----
5.78% 3.73% 9.29% 6.12%

* For the period June 16, 1995 through December 21, 1995.

ANNUAL TOTAL RETURNS

This chart shows how the performance of the Fund's shares has varied from year
to year during the life of the Fund.

AVERAGE ANNUAL TOTAL RETURNS

This table compares the Fund's average annual returns with those of a broad
measure of market performance over time. The Fund's returns include the maximum
applicable front-end sales charge.

During the periods shown in the bar chart, the highest return for a calendar
quarter was 5.47% (quarter ended December 31, 1995) and the lowest return for a
calendar quarter was -2.32% (quarter ended March 31, 1996).

AVERAGE ANNUAL TOTAL RETURNS (FOR THE PERIODS ENDED THE 1998 CALENDAR YEAR)

PAST 1 YEAR LIFE OF FUND
----------- ------------
<S> <C> <C>
Hawaii Municipal Trust1 2.94% 6.12%
Lehman Brothers Municipal Bond Index2 6.48% 7.80%
Lipper Hawaii Municipal Debt Funds Average3 5.77% 7.04%

</TABLE>

1 The Fund's returns include the maximum applicable front-end sales charge.

2 The Lehman Brothers Municipal Bond Index tracks the performance of municipal
bonds with maturities of 2 years or greater and a minimum credit rating of Baa
by Moody's or BBB by S&P. The performance of the Index does not include
expenses or fees, is unmanaged and should not be considered an investment.

3 The Lipper Hawaii Municipal Debt Funds Average tracks the performance of
mutual funds that invest in securities that are exempt from Hawaii state
taxation or taxation by a specified city in Hawaii.

<PAGE>

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FEES AND EXPENSES
- -----------------
The table below briefly describes the fees and expenses that you may pay if you
buy and hold shares of the Fund. The Fund does not charge account or exchange
fees.

SHAREHOLDER FEES
These fees are paid directly from your investment.

ANNUAL FUND OPERATING EXPENSES
These expenses are deducted from the Fund's assets and are based on expenses
paid for the fiscal year ended November 30, 1998, restated to reflect a
management fee and operating expense reduction.

<TABLE>

<S> <C>
SHAREHOLDER FEES

Maximum sales charge (load) imposed on purchases (as a percentage of
offering price) 3.0%

Maximum deferred sales charge (load) (as a percentage based on the
lesser of the offering price or net asset value at redemption) None

ANNUAL FUND OPERATING EXPENSES1

Management fee 0.35%

Distribution and service (12b-1) fees 0.20%

Other expenses 1.87%

Total annual Fund operating expenses 2.42%
</TABLE>

1 Restated to reflect that from January 1, 1999 through December 31, 1999, the
Investment Manager has undertaken to continue to assume all operating expenses
(except for any brokerage fees) and to waive the compensation provided for in
its Management Agreement to the extent that they exceed 0.55% of the Fund's
daily net assets.

EXAMPLE

This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds.

The example assumes that you invest $10,000 in the Fund, your investment has a
5% return each year, and the Fund's operating expenses remain the same.
Although your actual costs may be higher or lower, the table below shows your
costs at the end of each period based on these assumptions.

EXPENSES OVER TIME
<S> <C> <C> <C>

1 YEAR 3 Years 5 Years 10 Years
------ ------- ------- --------
$ 355 $471 $598 $969

</TABLE>

[GRAPHIC OMITTED]

ADDITIONAL INVESTMENT STRATEGY INFORMATION
- ------------------------------------------
This section provides additional information concerning the Fund's principal
investment strategies.

PRIVATE ACTIVITY BONDS. The Fund may invest more than 25% of its assets in
municipal obligations known as private activity bonds. These securities
include, for example, housing, industrial and pollution control revenue,
electric utility, manufacturing, and transportation facilities.

LEASE OBLIGATIONS. Included within the revenue bonds category are
participations in lease obligations or installment purchase contracts of
municipalities. Generally, state and local agencies or authorities issue lease
obligations to acquire equipment and facilities.

FUTURES. The Fund may invest in put and call futures with respect to financial
instruments and municipal bond index futures. Futures may be used to seek to
hedge against interest rate changes.

<PAGE>

DEFENSIVE INVESTING. The Fund may take temporary "defensive" positions in
attempting to respond to adverse market conditions. The Fund may invest any
amount of its assets in taxable money market instruments or the highest grade,
municipal obligations issued in other states in a defensive posture when the
Investment Manager believes it is advisable to do so. Municipal obligations of
other states pay interest that is exempt from federal income tax but not from
Hawaii state tax. Defensive investing could have the effect of reducing the
Fund's ability to provide tax-exempt income.

[GRAPHIC OMITTED]

ADDITIONAL RISK INFORMATION
- ---------------------------
As discussed in the "Principal Risks" section, a principal risk of investing in
the Fund is associated with its fixed-income securities investments. This
section provides additional information regarding the principal risks of
investing in the Fund.

PRIVATE ACTIVITY BONDS. The issuers of private activity bonds in which the Fund
may invest may be negatively impacted by conditions affecting either the
general credit of the user of the private activity project or the project
itself. Conditions such as regulatory and environmental restrictions and
economic downturns may lower the need for these facilities and the ability of
users of the project to pay for the facilities. This could cause a decline in
the Fund's value. The Fund's private activity bond holdings also may pay
interest subject to the alternative minimum tax. See the "Tax Consequences"
section for more details.

LEASE OBLIGATIONS. 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 that
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 these legislative actions do not occur, the holders of the lease
obligation may experience difficulty in exercising their rights, including
disposition of the property.

INDUSTRIAL DEVELOPMENT AND POLLUTION CONTROL BONDS. The Fund may invest in
industrial development and pollution control bonds (two kinds of tax-exempt
municipal bonds) whether or not the users of facilities financed by these bonds
are in the same industry. In cases where these users are in the same industry,
there may be additional risk to the Fund in the event of an economic downturn
in the industry, which may result generally in a lowered need for the
facilities and a lowered ability of the users to pay for the use of the
facilities.

FUTURES. If the Fund invests in futures, its participation in these markets
would subject the Fund's portfolio to certain risks. The Investment Manager's
predictions of movements in the direction of interest rate markets may be
inaccurate, and the adverse consequences to the Fund (e.g., a reduction in the
Fund's net asset value or a reduction in the amount of income available for
distribution) may leave the Fund in a

<PAGE>

worse position than if these strategies were not used. Other risks inherent in
the use of futures include, for example, the possible imperfect correlation
between the price of futures contracts and movements in the prices of the
securities being hedged, and the possible absence of a liquid secondary market
for any particular instrument. The risk of imperfect correlations may be
increased by the fact that futures contracts in which the Fund may invest are
taxable securities rather than tax-exempt securities. The prices of taxable
securities may not move in a similar manner to prices of tax-exempt securities.

YEAR 2000. The Fund could be adversely affected if the computer systems
necessary for the efficient operation of the Investment Manager, the Fund's
other service providers and the markets and individual and governmental issuers
in which the Fund invests do not properly process and calculate date-related
information from and after January 1, 2000. While year 2000-related computer
problems could have a negative effect on the Fund, the Investment Manager and
affiliates are working hard to avoid any problems and to obtain assurances from
their service providers that they are taking similar steps.

[GRAPHIC OMITTED]

FUND MANAGEMENT
- ---------------
The Fund has retained the Investment Manager -- Morgan Stanley Dean Witter
Advisors Inc. -- to provide administrative services, manage its business
affairs and invest its assets, including the placing of orders for the purchase
and sale of portfolio securities. The Investment Manager is a wholly-owned
subsidiary of Morgan Stanley Dean Witter & Co., a preeminent global financial
services firm that maintains leading market positions in each of its three
primary businesses: securities, asset management and credit services. Its main
business office is located at Two World Trade Center, New York, New York 10048.

MORGAN STANLEY DEAN WITTER ADVISORS INC.

The Investment Manager is widely recognized as a leader in the mutual fund
industry and together with Morgan Stanley Dean Witter Services Company Inc.,
its wholly-owned subsidiary, has more than $126.2 billion in assets under
management or administration as of February 28, 1999.

The Fund's portfolio is managed within the Investment Manager's Tax-Exempt
Fixed-Income Group. James F. Willison, a Senior Vice President of the
Investment Manager has been the primary portfolio manager of the Fund since its
inception and has been a portfolio manager with the Investment Manager for over
five years.

The Fund pays the Investment Manager a monthly management fee as full
compensation for the services and facilities furnished to the Fund, and for
Fund expenses assumed by the Investment Manager. The fee is based on the Fund's
average daily net assets. For the fiscal year ended November 30, 1998, the Fund
accrued total compensation to the Investment Manager amounting to 0.35% of the
Fund's average daily net assets. The Investment Manager has undertaken, from
January 1, 1999 through December 31, 1999, to continue to assume all operating
expenses (except for any brokerage fees) and to waive the compensation provided
for in its management agreement to the extent they exceed 0.55% of the Fund's
daily net assets.

<PAGE>

SHAREHOLDER INFORMATION

[GRAPHIC OMITTED]

PRICING FUND SHARES
- -------------------
The price of Fund shares (excluding sales charges), called "net asset value,"
is based on the value of the Fund's portfolio securities.

The net asset value per share of the Fund is determined once daily at 4:00 p.m.
Eastern time, on each day that the New York Stock Exchange is open (or, on days
when the New York Stock Exchange closes prior to 4:00 p.m., at such earlier
time). Shares will not be priced on days that the New York Stock Exchange is
closed.

The value of the Fund's portfolio securities (except for short-term taxable
debt securities and certain other investments) are valued by an outside
independent pricing service. The service uses a computerized grid matrix of
tax-exempt securities and its evaluations in determining what it believes is
the fair value of the portfolio securities. The Fund's Board of Trustees
believes that timely and reliable market quotations are generally not readily
available to the Fund to value tax-exempt securities and the valuations that
the pricing service supplies are more likely to approximate the fair value of
the securities.

Short-term debt portfolio securities with remaining maturities of sixty days or
less at the time of purchase are valued at amortized cost. However, if the cost
does not reflect the securities' market value, these securities will be valued
at their fair value.

[GRAPHIC OMITTED]

HOW TO BUY SHARES
- -----------------
You may open a new account to buy Fund shares or buy additional Fund shares for
an existing account by contacting your Morgan Stanley Dean Witter Financial
Advisor or other authorized financial representative. Your Financial Advisor
will assist you, step-by-step, with the procedures to invest in the Fund. You
may also purchase shares directly by calling the Fund's transfer agent and
requesting an application.

CONTACTING A FINANCIAL ADVISOR

If you are new to the Morgan Stanley Dean Witter Family of Funds and would like
to contact a Financial Advisor, call (800) THE-DEAN for the telephone number of
the Morgan Stanley Dean Witter office nearest you. You may also access our
office locator on our Internet site at: www.deanwitter.com/funds

When you buy Fund shares, the shares are purchased at the next share price
calculated (less any applicable front-end sales charge) after we receive your
investment order in proper form. We reserve the right to reject any order for
the purchase of Fund shares.

MINIMUM INVESTMENT AMOUNTS

MINIMUM INVESTMENT
------------------
INVESTMENT OPTIONS INITIAL ADDITIONAL
- ------------------ ------- ----------
<S> <C> <C> <C>

Regular accounts: $1,000 $100

EasyInvestSM (Automatically from your
checking or savings account
or Money Market Fund) $ 100* $100*
</TABLE>

* Provided your schedule of investments totals $1,000 in twelve months.

There is no minimum investment amount if you purchase Fund shares through: (1)
the Investment Manager's mutual fund asset allocation plan, (2) a program,
approved by the Fund's distributor, in which you pay an asset-based fee for
advisory, administrative and/or brokerage services, or (3) employer-sponsored
employee benefit plan accounts.

<PAGE>

THREE DAY SETTLEMENT. Fund shares are sold through the Fund's distributor,
Morgan Stanley Dean Witter Distributors Inc., on a normal three business day
basis; that is, your payment for Fund shares is due on the third business day
(settlement day) after you place a purchase order.

EASYINVESTSM

A purchase plan that allows you to transfer money automatically from your
checking or savings account or from a Money Market Fund on a semi-monthly,
monthly or quarterly basis. Contact your Morgan Stanley Dean Witter Financial
Advisor for further information about this service.

SUBSEQUENT INVESTMENTS SENT DIRECTLY TO THE FUND. In addition to buying
additional Fund shares for an existing account by contacting your Morgan
Stanley Dean Witter Financial Advisor, you may send a check directly to the
Fund. To buy additional shares in this manner:

o Write a "letter of instruction" to the Fund specifying the name(s) on the
account, the account number, the social security or tax identification
number, and the investment amount (which would include any applicable
front-end sales charge). The letter must be signed by the account owner(s).

o Make out a check for the total amount payable to: Morgan Stanley Dean Witter
Hawaii Municipal Trust.

o Mail the letter and check to Morgan Stanley Dean Witter Trust FSB at P.O. Box
1040, Jersey City, NJ 07303.

SALES CHARGES. Shares of the Fund are sold at net asset value plus an initial
sales charge of up to 3.0%. The initial sales charge is reduced for purchases
of $100,000 or more according to the schedule below. The Fund's shares are also
subject to a distribution (12b-1) fee of up to 0.20% of the average daily net
assets of the Fund.

The offering price of Fund shares includes a sales charge (expressed as a
percentage of the offering price) on a single transaction as shown in the
following table:

FRONT-END SALES CHARGE OR FSC

An initial sales charge you pay when purchasing the Fund's shares that is based
on a percentage of the offering price. The percentage declines based upon the
dollar value of the Fund's shares you purchase. We offer three ways to reduce
your sales charges - the Combined Purchase Privilege, Right of Accumulation and
Letter of Intent.

FRONT-END SALES CHARGE
----------------------
PERCENTAGE OF APPROXIMATE PERCENTAGE
AMOUNT OF SINGLE TRANSACTION PUBLIC OFFERING PRICE OF 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 million 1.25% 1.27%
$1 million but less than $2.5 million 0.50% 0.50%
$2.5 million but less than $5 million 0.25% 0.25%
$5 million and over 0 0
</TABLE>

The reduced sales charge schedule is applicable to purchases of Fund shares in
a single transaction by:

o A single account (including an individual, trust or fiduciary account).

o Family member accounts (limited to husband, wife and children under the age
of 21).

o Tax-Exempt Organizations.

o Pension, profit sharing or other employee benefit plans of companies and
their affiliates.

<PAGE>

o Groups organized for a purpose other than to buy mutual fund shares.

COMBINED PURCHASE PRIVILEGE. You also will have the benefit of reduced sales
charges by combining purchases of shares of the Fund in a single transaction
with purchases of Class A shares of Multi-Class Funds and shares of other FSC
Funds.

RIGHT OF ACCUMULATION. You also may benefit from a reduction of sales charges
if the cumulative net asset value of shares of the Fund purchased in a single
transaction, together with shares of other Funds you currently own which were
previously purchased at a price including a front-end sales charge (including
shares acquired through reinvestment of distributions), amounts to $25,000 or
more.

You must notify your Morgan Stanley Dean Witter Financial Advisor or other
authorized financial representative (or Morgan Stanley Dean Witter Trust FSB if
you purchase directly through the Fund), 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 when an order is
placed by mail. The reduced sales charge will not be granted if: (1)
notification is not furnished at the time of the order; or (2) a review of the
records of Dean Witter Reynolds or other authorized dealer of Fund shares or
the Fund's transfer agent does not confirm your represented holdings.

LETTER OF INTENT. The schedule of reduced sales charges for larger purchases
also will be available to you if you enter into a written "letter of intent." A
letter of intent provides for the purchase of shares of the Fund or Multi-Class
Funds or shares of other FSC Funds within a thirteen-month period. The initial
purchase under a letter of intent must be at least 5% of the stated investment
goal. To determine the applicable sales charge reduction, you may also include:
(1) the cost of shares of other Morgan Stanley Dean Witter Funds which were
previously purchased at a price including a front-end sales charge during the
90-day period prior to the distributor receiving the letter of intent, and (2)
the cost of shares of other Funds you currently own acquired in exchange for
shares of Funds purchased during that period at a price including a front-end
sales charge. You can obtain a letter of intent by contacting your Morgan
Stanley Dean Witter Financial Advisor or other authorized financial
representative, or by calling (800) 869-NEWS. If you do not achieve the stated
investment goal within the thirteen-month period, you are required to pay the
difference between the sales charges otherwise applicable and sales charges
actually paid.

SALES CHARGE WAIVERS. Your purchase of Fund shares is not subject to sales
charge if your account qualifies under one of the following categories:

o Current or retired Directors/Trustees of the Morgan Stanley Dean Witter
Funds, such persons' spouses and children under the age of 21, and trust
accounts for which any of such individuals is a beneficiary.

o Current or retired directors, officers and employees of Morgan Stanley Dean
Witter & Co. and any of its subsidiaries, such persons' spouses and children
under the age of 21, and trust accounts for which any of such individuals is
a beneficiary.

<PAGE>

PLAN OF DISTRIBUTION The Fund has adopted a Plan of Distribution in accordance
with Rule 12b-1 under the Investment Company Act of 1940. The Plan allows the
Fund to pay distribution fees of 0.20% for the distribution of these shares. It
also allows the Fund to pay for services to shareholders. Because these fees
are paid out of the Fund's assets on an ongoing basis, over time these fees
will increase the cost of your investment and may cost you more than paying
other types of sales charges.

[GRAPHIC OMITTED]

HOW TO EXCHANGE SHARES
- ----------------------
PERMISSIBLE FUND EXCHANGES. You may exchange shares of the Fund, a FSC Fund,
for Class A shares of any continuously offered Multi-Class Fund, or for shares
of a No-Load Fund, Money Market Fund or Short-Term U.S. Treasury Trust, without
the imposition of an exchange fee. See the inside back cover of this Prospectus
for each Morgan Stanley Dean Witter Fund's designation as a Multi-Class Fund,
No-Load Fund or Money Market Fund. If a Morgan Stanley Dean Witter Fund is not
listed, consult the inside back cover of that Fund's Prospectus for its
designation. For purposes of exchanges, shares of FSC Funds (subject to a
front-end sales charge) are treated as Class A shares of a Multi-Class Fund.

Exchanges may be made after shares of the Fund acquired by purchase have been
held for thirty days. There is no waiting period for exchanges of shares
acquired by exchange or dividend reinvestment. The current Prospectus for each
fund describes its investment objective(s), policies and investment minimums,
and should be read before investment.

EXCHANGE PROCEDURES. You can process an exchange by contacting your Morgan
Stanley Dean Witter Financial Advisor or other authorized financial
representative. Otherwise, you must forward an exchange privilege authorization
form to the Fund's transfer agent -- Morgan Stanley Dean Witter Trust FSB -and
then write the transfer agent or call (800) 869-NEWS to place an exchange
order. You can obtain an exchange privilege authorization form by contacting
your Financial Advisor or other authorized financial representative, or by
calling (800) 869-NEWS. If you hold share certificates, no exchanges may be
processed until we have received all applicable share certificates.

An exchange to any Morgan Stanley Dean Witter Fund (except a Money Market Fund)
is made on the basis of the next calculated net asset values of the Funds
involved after the exchange instructions are accepted. When exchanging into a
Money Market Fund, the Fund's shares are sold at their next calculated net
asset value and the Money Market Fund's shares are purchased at their net asset
value on the following business day.

The Fund may terminate or revise the exchange privilege upon required notice.
Certain services normally available to shareholders of Money Market Funds,
including the check writing privilege, are not available for Money Market Fund
shares you acquire in an exchange.

TELEPHONE EXCHANGES. For your protection when calling Morgan Stanley Dean
Witter Trust FSB, we will employ reasonable procedures to confirm that exchange
instructions communicated over the telephone are genuine. These procedures may

<PAGE>

include requiring various forms of personal identification such as name,
mailing address, social security or other tax identification number. Telephone
instructions also may be recorded.

Telephone instructions will be accepted if received by the Fund's transfer
agent between 9:00 a.m. and 4:00 p.m. Eastern time, on any day the New York
Stock Exchange is open for business. 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 Fund in
the past.

MARGIN ACCOUNTS. If you have pledged your Fund shares in a margin account,
contact your Morgan Stanley Dean Witter Financial Advisor or other authorized
financial representative regarding restrictions on the exchange of such shares.

TAX CONSIDERATIONS OF EXCHANGES. If you exchange shares of the Fund for shares
of another Morgan Stanley Dean Witter Fund there are important tax
considerations. For tax purposes, the exchange out of the Fund is considered a
sale of Fund shares -- and the exchange into the other Fund is considered a
purchase. As a result, you may realize a capital gain or loss.

You should review the "Tax Consequences" section and consult your own tax
professional about the tax consequences of an exchange.

FREQUENT EXCHANGES. A pattern of frequent exchanges may result in the Fund
limiting or prohibiting, at its discretion, additional purchases and/or
exchanges. The Fund will notify you in advance of limiting your exchange
privileges.

For further information regarding exchange privileges, you should contact your
Morgan Stanley Dean Witter Financial Advisor or call (800) 869-NEWS.

<PAGE>

[GRAPHIC OMITTED]

HOW TO SELL SHARES
- ------------------
You can sell some or all of your Fund shares at any time. Your shares will be
sold at the next price calculated after we receive your order in proper form.

OPTIONS PROCEDURES
- -------------------- ----------------------------------------------------------------------------------
Contact Your To sell your shares, simply call your Morgan Stanley Dean Witter Financial
Financial Advisor Advisor or other authorized financial representative.
----------------------------------------------------------------------------------
[GRAPHIC OMITTED]

Payment will be sent to the address to which the account
is registered or deposited in your brokerage account.
- -------------------- ----------------------------------------------------------------------------------
By Letter You can also sell your shares by writing a "letter of instruction" that includes:

[GRAPHIC OMITTED] o your account number;

o the dollar amount or the number of shares you wish to sell; and

o the signature of each owner as it appears on the account.
----------------------------------------------------------------------------------
If you are requesting payment to anyone other than the registered owner(s)
or that payment be sent to any address other than the address of the
registered owner(s) or pre-designated bank account, you will need a
signature guarantee. You can generally obtain a signature guarantee from
an eligible guarantor acceptable to Morgan Stanley Dean Witter Trust FSB.
(You should contact Morgan Stanley Dean Witter Trust FSB at (800) 869-NEWS
for determination as to whether a particular institution is an eligible
guarantor.) A notary public cannot provide a signature guarantee.
Additional documentation may be required for shares held by a corporation,
partnership, trustee or executor.
----------------------------------------------------------------------------------
Mail the letter to Morgan Stanley Dean Witter Trust FSB at P.O. Box 983,
Jersey City, New Jersey 07303. If you hold share certificates, you must
return the certificates, along with the letter and any required additional
documentation.
----------------------------------------------------------------------------------
A check will be mailed to the name(s) and address in which the account is
registered, or otherwise according to your instructions.
----------------------------------------------------------------------------------
SYSTEMATIC If your investment in all of the Morgan Stanley Dean Witter Family of
WITHDRAWAL PLAN Funds has Withdrawal Plan a total market value of at least $10,000, you
may elect to withdraw amounts of $25 or more, or in any whole percentage
[GRAPHIC OMITTED] of a Fund's balance (provided the amount is at least $25), on a monthly,
quarterly, semi-annual or annual basis, from any Fund with a balance of at
least $1,000. Each time you add a Fund to the plan, you must meet the plan
requirements.
----------------------------------------------------------------------------------
To sign up for the Systematic Withdrawal Plan, contact your Morgan Stanley
Dean Witter Financial Advisor or call (800) 869-NEWS. You may terminate or
suspend your plan at any time. Please remember that withdrawals from the
plan are sales of shares, not Fund "distributions," and ultimately may
exhaust your account balance. The Fund may terminate or revise the plan at
any time.
----------------------------------------------------------------------------------
</TABLE>

SYSTEMATIC WITHDRAWAL PLAN

This plan allows you to withdraw money automatically from your Fund account at
regular intervals. Contact your Morgan Stanley Dean Witter Financial Advisor
for more details.

PAYMENT FOR SOLD SHARES. After we receive your complete instructions to sell as
described above, a check will be mailed to you within seven days, although we
will attempt to make payment within one business day. Payment may also be sent
to your brokerage account.

Payment may be postponed or the right to sell your shares suspended under
unusual circumstances. If you request to sell shares that were recently
purchased by check, payment of the sale proceeds may be delayed for the minimum
time needed to verify that the check has been honored (not more than fifteen
days from the time we receive the check).

REINSTATEMENT PRIVILEGE. If you sell Fund shares and have not previously
exercised the reinstatement privilege, you may, within 35 days after the date
of sale, invest any portion of the proceeds in Fund shares at their net asset
value.

<PAGE>

INVOLUNTARY SALES. The Fund reserves the right, on sixty days' notice, to sell
the shares of any shareholder (other than shares held in an IRA or 403(b)
Custodial Account) whose shares, due to sales by the shareholder, have a value
below $100, or in the case of an account opened through EasyInvestSM, if after
12 months the shareholder has invested less than $1,000 in the account.

However, before the Fund sells your shares in this manner, we will notify you
and allow you sixty days to make an additional investment in an amount that
will increase the value of your account to at least the required amount before
the sale is processed.

MARGIN ACCOUNTS. Certain restrictions may apply to Fund shares pledged in
margin accounts with Dean Witter Reynolds or another authorized broker-dealer
of Fund shares. If you hold Fund shares in this manner, please contact your
Morgan Stanley Dean Witter Financial Advisor or other authorized financial
representative for more details.

[GRAPHIC OMITTED]

DISTRIBUTIONS
- -------------
The Fund passes substantially all of its earnings from income and capital gains
along to its investors as "distributions." The Fund earns interest from
fixed-income investments. These amounts are passed along to Fund shareholders
as "income dividend distributions." The Fund realizes capital gains whenever it
sells securities for a higher price than it paid for them. These amounts may be
passed along as "capital gain distributions."

TARGETED DIVIDENDSSM

You may select to have your Fund distributions automatically invested in
another Morgan Stanley Dean Witter Fund that you own. Contact your Morgan
Stanley Dean Witter Financial Advisor for further information about this
service.

Normally, income dividends are declared on each day the New York Stock Exchange
is open for business and income dividends are distributed to shareholders
monthly. Any capital gains are distributed in December; if a second capital
gain distribution is necessary, it is usually paid in January of the following
year. The Fund, however, may retain and reinvest any long-term capital gains.
The Fund may at times make payments from sources other than income or capital
gains that represent a return of a portion of your investment.

Distributions are reinvested automatically in additional shares of the Fund and
automatically credited to your account, unless you request in writing that all
distributions be paid in cash. If you elect the cash option, processing of your
dividend checks begins immediately following the monthly payment date, and the
Fund will mail a monthly dividend check to you normally during the first seven
days of the following month. No interest will accrue on uncashed checks. If you
wish to change how your distributions are paid, your request should be received
by the Fund's transfer agent, Morgan Stanley Dean Witter Trust FSB, at least
five business days prior to the record date of the distributions.

[GRAPHIC OMITTED]

TAX CONSEQUENCES
- ----------------
As with any investment, you should consider how your Fund investment will be
taxed. The tax information in this Prospectus is provided as general
information. You should consult your own tax professional about the tax
consequences of an investment in the Fund.

<PAGE>

You need to be aware of the possible tax consequences when:

o The Fund makes distributions; and

o You sell Fund shares, including an exchange to another Morgan Stanley Dean
Witter Fund.

TAXES ON DISTRIBUTIONS. Your income dividend distributions are normally exempt
from federal and Hawaii state income's personal taxes -- to the extent they are
derived from Hawaii municipal obligations or obligations of U.S. Governmental
territories. Income derived from other portfolio securities may be subject to
federal, state and/or local income taxes.

Income derived from some municipal securities is subject to the federal
"alternative minimum tax." Certain tax-exempt securities whose proceeds are
used to finance private, for-profit organizations are subject to this special
tax system that ensures that individuals pay at least some federal taxes.
Although interest on these securities is generally exempt from federal income
tax, some taxpayers who have many tax deductions or exemptions nevertheless may
have to pay tax on the income.

If the Fund makes any capital gain distributions, those distributions will
normally be subject to federal and state income tax when they are paid, whether
you take them in cash or reinvest them in Fund shares. Any short-term capital
gain distributions are taxable to you as ordinary income. Any long-term capital
gain distributions are taxable to you as long-term capital gains, no matter how
long you have owned shares in the Fund.

The Fund may derive gains in part from municipal obligations the Fund purchased
below their principal or face values. All, or a portion, of these gains may be
taxable to you as ordinary income rather than capital gains.

Every January, you will be sent a statement (IRS Form 1099-DIV) showing the
distributions paid to you in the previous year. The statement provides full
information on your dividends and capital gains for tax purposes.

TAXES ON SALES. Your sale of Fund shares normally is subject to federal and
state income tax and may result in a taxable gain or loss to you. A sale also
may be subject to local income tax. Your exchange of Fund shares for shares of
another Morgan Stanley Dean Witter Fund is treated for tax purposes like a sale
of your original shares and a purchase of your new shares. Thus, the exchange
may, like a sale, result in a taxable gain or loss to you and will give you a
new tax basis for your new shares.

When you open your Fund account, you should provide your social security or tax
identification number on your investment application. By providing this
information, you will avoid being subject to a federal backup withholding tax
of 31% on taxable distributions and sale proceeds. Any withheld amount would be
sent to the IRS as an advance tax payment.

<PAGE>

FINANCIAL HIGHLIGHTS

The financial highlights table is intended to help you understand the Fund's
financial performance for the past 5 years of the Fund. Certain information
reflects financial results for a single Fund share. The total returns in the
table represent the rate an investor would have earned or lost on an investment
in the Fund (assuming reinvestment of all dividends and distributions).

This information has been audited by PricewaterhouseCoopers LLP, whose report,
along with the Fund's financial statements, is included in the annual report,
which is available upon request.

FOR THE PERIOD
JUNE 16, 1995*
THROUGH
FOR THE YEAR ENDED NOVEMBER 30 NOVEMBER 30,
----------------------------------------- ------------
1998 1997 1996 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>

<S> <C> <C> <C>
EXPENSE NET INVESTMENT EXPENSE
PERIOD ENDED RATIO INCOME RATIO OFFSET
- -------------------------------------------------------------------

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.

<PAGE>

NOTES

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

<PAGE>

NOTES

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

<PAGE>

MORGAN STANLEY DEAN WITTER
FAMILY OF FUNDS

The Morgan Stanley Dean Witter Family of Funds
offers investors a wide range of investment choices.
Come on in and meet the family!

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

<TABLE>
<S> <C> <C>
GROWTH FUNDS GROWTH FUNDS Health Sciences Trust
Aggressive Equity Fund Information Fund
American Value Fund Natural Resource Development Securities
Capital Appreciation Fund Precious Metals and Minerals Trust
Capital Growth Securities GLOBAL/INTERNATIONAL FUNDS
Developing Growth Securities Competitive Edge Fund - "Best Ideas" Portfolio
Equity Fund European Growth Fund
Growth Fund Fund of Funds - International Portfolio
Market Leader Trust Global Dividend Growth Securities
Mid-Cap Growth Fund International SmallCap Fund
Special Value Fund Japan Fund
Value Fund Pacific Growth Fund
THEME FUNDS
Financial Services Trust
- --------------------------------------------------------------------------------

GROWTH & INCOME FUNDS Balanced Growth Fund S&P 500 Select Fund
Balanced Income Fund S&P 500 Index Fund
Convertible Securities Trust Strategist Fund
Dividend Growth Securities Value-Added Market Series/Equity Portfolio
Fund of Funds - Domestic Portfolio THEME FUNDS
Income Builder Fund Global Utilities Fund
Mid-Cap Dividend Growth Securities Real Estate Fund
Utilities Fund
- --------------------------------------------------------------------------------

INCOME FUNDS GOVERNMENT INCOME FUNDS GLOBAL INCOME FUNDS
Federal Securities Trust World Wide Income Trust
Short-Term U.S. Treasury Trust TAX-FREE INCOME FUNDS
U.S. Government Securities Trust California Tax-Free Income Fund
DIVERSIFIED INCOME FUNDS Hawaii Municipal Trust(FSC)
Diversified Income Trust Limited Term Municipal Trust(NL)
CORPORATE INCOME FUNDS Multi-State Municipal Series Trust(FSC)
High Yield Securities New York Tax-Free Income Fund
Intermediate Income Securities Tax-Exempt Securities Trust
Short-Term Bond Fund(NL)
- --------------------------------------------------------------------------------
MONEY MARKET FUNDS TAXABLE MONEY MARKET FUNDS TAX-FREE MONEY MARKET FUNDS
Liquid Asset Fund(MM) California Tax-Free Daily Income Trust(MM)
U.S. Government Money Market Trust(MM) N.Y. Municipal Money Market Trust(MM)
Tax-Free Daily Income Trust(MM)
- --------------------------------------------------------------------------------
</TABLE>

NEW FUNDS
There may be funds created after this Prospectus was published. Please consult
the inside front cover of a new Fund's prospectus for its designation, e.g.,
Multi-Class Fund or Money Market Fund.

Unless otherwise noted, each listed Morgan Stanley Dean Witter Fund, except for
Short-Term U.S. Treasury Trust, is a Multi-Class Fund. A Multi-Class Fund is a
mutual fund offering multiple Classes of shares. The other types of Funds are:
NL -- No-Load (Mutual) Fund; MM -- Money Market Fund; FSC -- A mutual fund sold
with a front-end sales charge and a distribution (12b-1) fee.

<PAGE>

MORGAN STANLEY DEAN WITTER
HAWAII MUNICIPAL TRUST

Additional information about the Fund's investments is available in the Fund's
Annual and Semi-Annual Reports to Shareholders. In the Fund's Annual Report,
you will find a discussion of the market conditions and investment strategies
that significantly affected the Fund's performance during its last fiscal year.
The Fund's Statement of Additional Information also provides additional
information about the Fund. The Statement of Additional Information is
incorporated herein by reference (legally is part of this Prospectus). For a
free copy of any of these documents, to request other information about the
Fund, or to make shareholder inquiries, please call:

(800) 869-NEWS

TICKER SYMBOL:

DWHIX
- -------

You also may obtain information about the Fund by calling your Morgan Stanley
Dean Witter Financial Advisor or by visiting our Internet site at:

WWW.DEANWITTER.COM/FUNDS

Information about the Fund (including the Statement of Additional Information)
can be viewed and copied at the Securities and Exchange Commission's Public
Reference Room in Washington, DC. Information about the Reference Room's
operations may be obtained by calling the SEC at (800) SEC-0330. Reports and
other information about the Fund are available on the SEC's Internet site at
(www.sec.gov), and copies of this information may be obtained, upon payment of
a duplicating fee, by writing the Public Reference Section of the SEC,
Washington, DC 20549-6009.

(INVESTMENT COMPANY ACT FILE NO. 811-7263)

<PAGE>

STATEMENT OF ADDITIONAL INFORMATION MORGAN STANLEY DEAN WITTER
HAWAII MUNICIPAL TRUST

MARCH 30, 1999

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

This Statement of Additional Information is not a Prospectus. The
Prospectus (dated March 30, 1999) for the Morgan Stanley Dean Witter Hawaii
Municipal Trust may be obtained without charge from the Fund at its address or
telephone number listed below or from Dean Witter Reynolds at any of its branch
offices.

Morgan Stanley Dean Witter Hawaii Municipal Trust
Two World Trade Center
New York, New York 10048
(800) 869-NEWS

<PAGE>

TABLE OF CONTENTS
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
I. Fund History ................................................................. 4
II. Description of the Fund and Its Investments and Risks ....................... 4
A. Classification ............................................................ 4
B. Investment Strategies and Risks ........................................... 4
C. Fund Policies/Investment Restrictions ..................................... 13
III. Management of the Fund ..................................................... 14
A. Board of Trustees ......................................................... 14
B. Management Information .................................................... 15
C. Compensation .............................................................. 19
IV. Control Persons and Principal Holders of Securities ......................... 21
V. Investment Management and Other Services ..................................... 22
A. Investment Manager ........................................................ 22
B. Principal Underwriter ..................................................... 22
C. Services Provided by the Investment Manager and Fund Expenses Paid by Third
Parties ................................................................... 22
D. Dealer Reallowances ....................................................... 23
E. Rule 12b-1 Plan ........................................................... 23
F. Other Service Providers ................................................... 25
VI. Brokerage Allocation and Other Practices .................................... 26
A. Brokerage Transactions .................................................... 26
B. Commissions ............................................................... 26
C. Brokerage Selection ....................................................... 27
D. Directed Brokerage ........................................................ 27
E. Regular Broker-Dealers .................................................... 28
VII. Capital Stock and Other Securities ......................................... 28
VIII. Purchase, Redemption and Pricing of Shares ................................ 28
A. Purchase/Redemption of Shares ............................................. 28
B. Offering Price ............................................................ 29
IX. Taxation of the Fund and Shareholders ....................................... 29
X. Underwriters ................................................................. 31
XI. Calculation of Performance Data ............................................. 32
XII. Financial Statements ....................................................... 33
Appendix -- Ratings of Investments ................................................. 45
</TABLE>

2
<PAGE>

GLOSSARY OF SELECTED DEFINED TERMS

The terms defined in this glossary are frequently used in this Statement
of Additional Information (other terms used occasionally are defined in the
text of the document).

"Custodian" -- The Bank of New York is the Custodian of the Fund's assets.

"Dean Witter Reynolds" -- Dean Witter Reynolds Inc., a wholly-owned
broker-dealer subsidiary of MSDW.

"Distributor" -- Morgan Stanley Dean Witter Distributors Inc., a
wholly-owned broker-dealer subsidiary of MSDW.

"Financial Advisors" -- Morgan Stanley Dean Witter authorized financial
services representatives.

"Fund" -- Morgan Stanley Dean Witter Hawaii Municipal Trust, a registered
open-end investment company.

"Investment Manager" -- Morgan Stanley Dean Witter Advisors Inc., a
wholly-owned investment advisor subsidiary of MSDW.

"Independent Trustees" -- Trustees who are not "interested persons" (as
defined by the Investment Company Act) of the Fund.

"Morgan Stanley & Co." -- Morgan Stanley & Co. Incorporated, a
wholly-owned broker-dealer subsidiary of MSDW.

"Morgan Stanley Dean Witter Funds" -- Registered investment companies (i)
for which the Investment Manager serves as the investment advisor and (ii) that
hold themselves out to investors as related companies for investment and
investor services.

"MSDW" -- Morgan Stanley Dean Witter & Co., a preeminent global financial
services firm.

"MSDW Services Company" -- Morgan Stanley Dean Witter Services Company
Inc., a wholly-owned fund services subsidiary of the Investment Manager.

"Transfer Agent" -- Morgan Stanley Dean Witter Trust FSB, a wholly-owned
transfer agent subsidiary of MSDW.

"Trustees" -- The Board of Trustees of the Fund.

3
<PAGE>

I. FUND HISTORY
- --------------------------------------------------------------------------------

The Fund was organized as a Massachusetts business trust, under a
Declaration of Trust, on March 14, 1995, with the name Dean Witter Hawaii
Municipal Trust. Effective June 22, 1998, the Fund's name was changed to Morgan
Stanley Dean Witter Hawaii Municipal Trust.

II. DESCRIPTION OF THE FUND AND ITS INVESTMENTS AND RISKS
- --------------------------------------------------------------------------------

A. CLASSIFICATION

The Fund is an open-end, non-diversified management investment company
whose investment objective is to provide a high a level of current income
exempt from both federal and Hawaii state income tax, consistent with the
preservation of capital.

B. INVESTMENT STRATEGIES AND RISKS

The following discussion of the Fund's investment strategies and risks
should be read with the sections of the Fund's Prospectus titled "Principal
Investment Strategies," "Principal Risks," "Additional Investment Strategy
Information," and "Additional Risk Information."

TAXABLE SECURITIES. The Fund may invest up to 20% of its total assets in
taxable money market instruments, investment grade tax-exempt securities of
other states and municipalities and futures and options. Investments in taxable
money market instruments would generally be made under any one of the following
circumstances: (a) pending investment of proceeds of the sale of each of the
Fund's shares or of portfolio securities, (b) pending settlement of purchases
of portfolio securities and (c) to maintain liquidity for the purpose of
meeting anticipated redemptions. Only those tax-exempt securities of other
states which satisfy the standards established for the tax-exempt securities of
the State of Hawaii may be purchased by the Fund.

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 Investors Services, Inc. ("Moody's") or
A-1 by Standard & Poor's Corporation ("S&P"); (iii) certificates of deposit of
domestic banks with assets of $1 billion or more; and (iv) repurchase
agreements with respect to portfolio securities.

VARIABLE RATE AND FLOATING RATE OBLIGATIONS. The Fund may invest in
Municipal Bonds and Municipal Notes ("Municipal Obligations") of the type
called variable rate obligations. The interest rate payable on a variable rate
obligation is adjusted either at predesignated periodic intervals or whenever
there is a change in the market rate of interest on which the interest rate
payable is based. Other features may include the right whereby the Fund may
demand prepayment of the principal amount of the obligation prior to its stated
maturity (a "demand feature") and the right of the issuer to prepay the
principal amount prior to maturity. The principal benefit of a variable rate
obligation is that the interest rate adjustment minimizes changes in the market
value of the obligation. The principal benefit to the Fund of purchasing
obligations with a demand feature is that liquidity, and the ability of the
Fund to obtain repayment of the full principal amount of an obligation prior to
maturity, is enhanced. The Fund may also invest in third-party put agreements.

LENDING OF PORTFOLIO SECURITIES. The Fund may lend portfolio securities to
brokers, dealers and financial institutions provided that cash equal to at
least 100% of the market value of the securities loaned is deposited by the
borrower with the Fund and is maintained each business day in a segregated
account pursuant to applicable regulations. The collateral value of the loaned
securities will be marked-to-market daily. While such securities are on loan,
the borrower will pay the Fund any income accruing thereon, and the Fund may
invest the cash collateral in portfolio securities, thereby earning additional
income. Loans will be subject to termination by the Fund, in the normal
settlement time, currently five business days after notice, or by the borrower
on one day's notice. Borrowed securities must be returned when the loan is
terminated. Any gain or loss in the market price of the borrowed securities
which occurs during the term of the loan inures to the Fund and its
shareholders. The Fund

4
<PAGE>

may pay reasonable finders, borrowers, administrative, and custodial fees in
connection with a loan. The creditworthiness of firms to which the Fund lends
its portfolio securities will be monitored on an ongoing basis.

OPTIONS AND FUTURES TRANSACTIONS. The Fund may engage in transactions in
listed options. Listed options are issued or guaranteed by the exchange on
which they are traded or by a clearing corporation such as the Options Clearing
Corporation ("OCC"). Ownership of a listed call option gives the Fund the right
to buy from the OCC (in the U.S.) or other clearing corporation or exchange,
the underlying security covered by the option at the stated exercise price (the
price per unit of the underlying security) by filing an exercise notice prior
to the expiration date of the option. The writer (seller) of the option would
then have the obligation to sell to the OCC (in the U.S.) or other clearing
corporation or exchange, the underlying security at that exercise price prior
to the expiration date of the option, regardless of its then current market
price. Ownership of a listed put option would give the Fund the right to sell
the underlying security to the OCC (in the U.S.) or other clearing corporation
or exchange, at the stated exercise price. Upon notice of exercise of the put
option, the writer of the put would have the obligation to purchase the
underlying security from the OCC (in the U.S.) or other clearing corporation or
exchange, at the exercise price.

Presently there are no options on tax-exempt securities traded on national
securities exchanges. The Fund will not invest in options on debt securities in
the coming year or until such time as they become available on national
securities exchanges.

Covered Call Writing. The Fund is permitted to write covered call options
on portfolio securities. The Fund may not write covered call options in an
amount exceeding 20% of the value of its total assets. The Fund will receive
from the purchaser, in return for a call it has written, a "premium"; i.e., the
price of the option. Receipt of these premiums may better enable the Fund to
earn a higher level of current income than it would earn from holding the
underlying securities alone. Moreover, the premium received will offset a
portion of the potential loss incurred by the Fund if the securities underlying
the option decline in value.

The Fund may be required, at any time during the option period, to deliver
the underlying security against payment of the exercise price on any calls it
has written. This obligation is terminated upon the expiration of the option
period or at such earlier time when the writer effects a closing purchase
transaction. A closing purchase transaction is accomplished by purchasing an
option of the same series as the option previously written. However, once the
Fund has been assigned an exercise notice, the Fund will be unable to effect a
closing purchase transaction.

Options written by the Fund normally have expiration dates of from up to
eighteen months from the date written. The exercise price of a call option may
be below, equal to or above the current market value of the underlying security
at the time the option is written.

Covered Put Writing. As a writer of a covered put option, the Fund incurs
an obligation to buy the security underlying the option from the purchaser of
the put, at the option's exercise price at any time during the option period,
at the purchaser's election. Through the writing of a put option, the Fund
would receive income from the premium paid by purchasers. The potential gain on
a covered put option is limited to the premium received on the option (less the
commissions paid on the transaction). During the option period, the Fund may be
required, at any time, to make payment of the exercise price against delivery
of the underlying security. The Fund may not write covered put options in an
amount exceeding 20% of the value of its total assets. The operation of and
limitations on covered put options in other respects are substantially
identical to those of call options.

Purchasing Call and Put Options. The Fund may purchase listed call and put
options in amounts equaling up to 10% of its total assets. The purchase of a
call option would enable the Fund, in return for the premium paid to lock in a
purchase price for a security during the term of the option. The purchase of a
put option would enable the Fund, in return for a premium paid, to lock in a
price at which it may sell a security during the term of the option.

5
<PAGE>

Risks of Options Transactions. The successful use of options depends on
the ability of the Investment Manager to forecast correctly interest rates
and/or market movements. If the market value of the portfolio securities upon
which call options have been written increases, the Fund may receive a lower
total return from the portion of its portfolio upon which calls have been
written than it would have had such calls not been written. During the option
period, the covered call writer has, in return for the premium on the option,
given up the opportunity for capital appreciation above the exercise price
should the market price of the underlying security increase, but has retained
the risk of loss should the price of the underlying security decline. The
covered put writer also retains the risk of loss should the market value of the
underlying security decline below the exercise price of the option less the
premium received on the sale of the option. In both cases, the writer has no
control over the time when it may be required to fulfill its obligation as a
writer of the option. Prior to exercise or expiration, an option position can
only be terminated by entering into a closing purchase or sale transaction.
Once an option writer has received an exercise notice, it cannot effect a
closing purchase transaction in order to terminate its obligation under the
option and must deliver or receive the underlying securities at the exercise
price.

The Fund's ability to close out its position as a writer of an option is
dependent upon the existence of a liquid secondary market on option exchanges.
There is no assurance that such a market will exist.

In the event of the bankruptcy of a broker through which the Fund engages
in transactions in options, the Fund could experience delays and/or losses in
liquidating open positions purchased or sold through the broker and/or incur a
loss of all or part of its margin deposits with the broker.

Each of the exchanges has established limitations governing the maximum
number of call or put options on the same underlying security which may be
written by a single investor, whether acting alone or in concert with others
(regardless of whether such options are written on the same or different
exchanges or are held or written on one or more accounts or through one or more
brokers). An exchange may order the liquidation of positions found to be in
violation of these limits and it may impose other sanctions or restrictions.
These position limits may restrict the number of listed options which the Fund
may write.

The hours of trading for options may not conform to the hours during which
the underlying securities are traded. To the extent that the option markets
close before the markets for the underlying securities, significant price and
rate movements can take place in the underlying markets that cannot be
reflected in the option markets.

There can be no assurance that a liquid secondary market will exist for a
particular option at any specific time.

Futures Contracts. The Fund may purchase and sell interest rate futures
contracts that are traded on U.S. commodity exchanges on such underlying
securities as U.S. Treasury Bills and Bonds, U.S. Treasury Notes with
maturities between 61/2 and 10 years, Certificates of the Government National
Mortgage Association, Bank Certificates of Deposit and on a municipal bond
index. The Fund may invest in interest rate futures contracts covering these
types of financial instruments as well as in new types of contracts that become
available in the future.

A futures contract purchaser incurs an obligation to take delivery of a
specified amount of the obligation underlying the contract at a specified time
in the future for a specified price. A seller of a futures contract incurs an
obligation to deliver the specified amount of the underlying obligation at a
specified time in return for an agreed upon price. The purchase of a futures
contract enables the Fund, during the term of the contract, to lock in a price
at which it may purchase a security and protect against a rise in prices
pending purchase of portfolio securities. The sale of a futures contract
enables the Fund to lock in a price at which it may sell a security and protect
against declines in the value of portfolio securities.

Although most futures contracts call for actual delivery or acceptance of
securities, the contracts usually are closed out before the settlement date
without the making or taking of delivery. Index futures contracts provide for
the delivery of an amount of cash equal to a specified dollar amount times the
difference between the index value at the open or close of the last trading day
of the contract and the futures contract price. A futures contract sale is
closed out by effecting a futures contract purchase for

6
<PAGE>

the same aggregate amount of the specific type of security and the same
delivery date. If the sale price exceeds the offsetting purchase price, the
seller would be paid the difference and would realize a gain. If the offsetting
purchase price exceeds the sale price, the seller would pay the difference and
would realize a loss. Similarly, a futures contract purchase is closed out by
effecting a futures contract sale for the same aggregate amount of the specific
type of security and the same delivery date. If the offsetting sale price
exceeds the purchase price, the purchaser would realize a gain, whereas if the
purchase price exceeds the offsetting sale price, the purchaser would realize a
loss. There is no assurance that the Fund will be able to enter into a closing
transaction.

Margin. If the Fund enters into a futures contract, it is initially
required to deposit an "initial margin" of cash or U.S. Government securities
or other liquid portfolio securities ranging from approximately 2% to 5% of the
contract amount. Initial margin requirements are established by the exchanges
on which futures contracts trade and may, from time to time, change. In
addition, brokers may establish margin deposit requirements in excess of those
required by the exchanges.

Initial margin in futures transactions is different from margin in
securities transactions in that initial margin does not involve the borrowing
of funds by a broker's client but is, rather, a good faith deposit on the
futures contract which will be returned to the Fund upon the proper termination
of the futures contract. The margin deposits made are marked to market daily
and the Fund may be required to make subsequent deposits of cash or U.S.
Government securities, called "variation margin," which are reflective of price
fluctuations in the futures contract.

Options on Futures Contracts. The Fund may purchase and write call and put
options on futures contracts and enter into closing transactions with respect
to such options to terminate an existing position. An option on a futures
contract gives the purchaser the right (in return for the premium paid), and
the writer the obligation, to assume a position in a futures contract (a long
position if the option is a call and a short position if the option is a put)
at a specified exercise price at any time during the term of the option. Upon
exercise of the option, the delivery of the futures position by the writer of
the option to the holder of the option is accompanied by delivery of the
accumulated balance in the writer's futures margin account, which represents
the amount by which the market price of the futures contract at the time of
exercise exceeds, in the case of a call, or is less than, in the case of a put,
the exercise price of the option on the futures contract.

The writer of an option on a futures contract is required to deposit
initial and variation margin pursuant to requirements similar to those
applicable to futures contracts. Premiums received from the writing of an
option on a futures contract are included in initial margin deposits.

Limitations on Futures Contracts and Options on Futures. The Fund may not
enter into futures contracts or purchase related options thereon if,
immediately thereafter, the amount committed to margin plus the amount paid for
premiums for unexpired options on futures contracts exceeds 5% of the value of
the Fund's total assets, after taking into account unrealized gains and
unrealized losses on such contracts it has entered into, provided, however,
that in the case of an option that is in-the-money (the exercise price of the
call (put) option is less (more) than the market price of the underlying
security) at the time of purchase, the in-the-money amount may be excluded in
calculating the 5%. However, there is no overall limitation on the percentage
of the Fund's net assets which may be subject to a hedge position.

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.

7
<PAGE>

Risks of Transactions in Futures Contracts and Related Options. The prices
of securities and indexes subject to futures contracts (and thereby the futures
contract prices) may correlate imperfectly with the behavior of the cash prices
of the Fund's portfolio securities. Also, prices of futures contracts may not
move in tandem with the changes in prevailing interest rates and market
movements against which the Fund seeks a hedge. A correlation may also be
distorted (a) temporarily, by short-term traders' seeking to profit from the
difference between a contract or security price objective and their cost of
borrowed funds; (b) by investors in futures contracts electing to close out
their contracts through offsetting transactions rather than meet margin deposit
requirements; (c) by investors in futures contracts opting to make or take
delivery of underlying securities rather than engage in closing transactions,
thereby reducing liquidity of the futures market; and (d) temporarily, by
speculators who view the deposit requirements in the futures markets as less
onerous than margin requirements in the cash market. Due to the possibility of
price distortion in the futures market and because of the possible imperfect
correlation between movements in the prices of securities and movements in the
prices of futures contracts, a correct forecast of interest rate and/or market
movement trends by the Investment Manager may still not result in a successful
hedging transaction.

There is no assurance that a liquid secondary market will exist for
futures contracts and related options in which the Fund may invest. In the
event a liquid market does not exist, it may not be possible to close out a
futures position and, in the event of adverse price movements, the Fund would
continue to be required to make daily cash payments of variation margin. In
addition, limitations imposed by an exchange or board of trade on which futures
contracts are traded may compel or prevent the Fund from closing out a contract
which may result in reduced gain or increased loss to the Fund. The absence of
a liquid market in futures contracts might cause the Fund to make or take
delivery of the underlying securities at a time when it may be disadvantageous
to do so.

Exchanges limit the amount by which the price of a futures contract may
move on any day. If the price moves equal the daily limit on successive days,
then it may prove impossible to liquidate a futures position until the daily
limit moves have ceased. In the event of adverse price movements, the Fund
would continue to be required to make daily cash payments of variation margin
on open futures positions. In these situations, if the Fund has insufficient
cash, it may have to sell portfolio securities to meet daily variation margin
requirements at a time when it may be disadvantageous to do so. In addition,
the Fund may be required to take or make delivery of the instruments underlying
interest rate futures contracts it holds at a time when it is disadvantageous
to do so. The inability to close out options and futures positions could also
have an adverse impact on the Fund's ability to effectively hedge its
portfolio.

In the event of the bankruptcy of a broker through which the Fund engages
in transactions in futures or options thereon, the Fund could experience delays
and/or losses in liquidating open positions purchased or sold through the
broker and/or incur a loss of all or part of its margin deposits with the
broker.

REPURCHASE AGREEMENTS. The Fund may invest in repurchase agreements. When
cash may be available for only a few days, it may be invested by the Fund in
repurchase agreements until such time as it may otherwise be invested or used
for payments of obligations of the Fund. These agreements, which may be viewed
as a type of secured lending by the Fund, typically involve the acquisition by
the Fund of debt securities from a selling financial institution such as a
bank, savings and loan association or broker-dealer. The agreement provides
that the Fund will sell back to the institution, and that the institution will
repurchase, the underlying security serving as collateral at a specified price
and at a fixed time in the future, usually not more than seven days from the
date of purchase. The collateral will be marked-to-market daily to determine
that the value of the collateral, as specified in the agreement, does not
decrease below the purchase price plus accrued interest. If such decrease
occurs, additional collateral will be requested and, when received, added to
the account to maintain full collateralization. The Fund will accrue interest
from the institution until the time when the repurchase is to occur. Although
this date is deemed by the Fund to be the maturity date of a repurchase
agreement, the maturities of securities subject to repurchase agreements are
not subject to any limits.

While repurchase agreements involve certain risks not associated with
direct investments in debt securities, the Fund follows procedures designed to
minimize such risks. These procedures include

8
<PAGE>

effecting repurchase transactions only with large, well-capitalized and
well-established financial institutions whose financial condition will be
continually monitored by the Investment Manager subject to procedures
established by the Trustees. In addition, as described above, the value of the
collateral underlying the repurchase agreement will be at least equal to the
repurchase price, including any accrued interest earned on the repurchase
agreement. In the event of a default or bankruptcy by a selling financial
institution, the Fund will seek to liquidate such collateral. However, the
exercising of the Fund's right to liquidate such collateral could involve
certain costs or delays and, to the extent that proceeds from any sale upon a
default of the obligation to repurchase were less than the repurchase price,
the Fund could suffer a loss. It is the current policy of the Fund not to
invest in repurchase agreements that do not mature within seven days if any
such investment, together with any other illiquid asset held by the Fund,
amount to more than 15% of its net assets.

WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. From time to time the Fund
may purchase tax-exempt securities on a when-issued or delayed delivery basis.
When these transactions are negotiated, the price is fixed at the time of the
commitment, but delivery and payment can take place a month or more after the
date of commitment. While the Fund will only purchase securities on a
when-issued, delayed delivery with the intention of acquiring the securities,
the Fund may sell the securities before the settlement date, if it is deemed
advisable. The securities so purchased or sold are subject to market
fluctuation and no interest or dividends accrue to the purchaser prior to the
settlement date.

At the time the Fund makes the commitment to purchase or sell securities
on a when-issued, delayed delivery, it will record the transaction and
thereafter reflect the value, each day, of such security purchased, or if a
sale, the proceeds to be received, in determining its net asset value. At the
time of delivery of the securities, their value may be more or less than the
purchase or sale price. An increase in the percentage of the Fund's assets
committed to the purchase of securities on a when-issued, delayed delivery may
increase the volatility of its net asset value. The Fund will also establish a
segregated account on the Fund's books in which it will continually maintain
cash or cash equivalents or other liquid portfolio securities equal in value to
commitments to purchase securities on a when-issued or delayed delivery basis.

WHEN, AS AND IF ISSUED SECURITIES. The Fund may purchase securities on a
"when, as and if issued" basis under which the issuance of the security depends
upon the occurrence of a subsequent event, such as approval of a merger,
corporate reorganization or debt restructuring. The commitment for the purchase
of any such security will not be recognized in the portfolio of the Fund until
the Investment Manager determines that issuance of the security is probable. At
that time, the Fund will record the transaction and, in determining its net
asset value, will reflect the value of the security daily. At that time, the
Fund will also establish a segregated account on the Fund's books in which it
will maintain cash or cash equivalents or other liquid portfolio securities
equal in value to recognized commitments for such securities.

The value of the Fund's commitments to purchase the securities of any one
issuer, together with the value of all securities of such issuer owned by the
Fund, may not exceed 5% of the value of the Fund's total assets at the time the
initial commitment to purchase such securities is made. An increase in the
percentage of the Fund's [total or net] assets committed to the purchase of
securities on a "when, as and if issued" basis may increase the volatility of
its net asset value. The Fund may also sell securities on a "when, as and if
issued" basis provided that the issuance of the security will result
automatically from the exchange or conversion of a security owned by the Fund
at the time of sale.

YEAR 2000. The investment management services provided to the Fund by the
Investment Manager and the services provided to shareholders by the Distributor
and the Transfer Agent depend on the smooth functioning of their computer
systems. Many computer software systems in use today cannot recognize the year
2000, but revert to 1900 or some other date, due to the manner in which dates
were encoded and calculated. That failure could have a negative impact on the
handling of securities trades, pricing and account services. The Investment
Manager, the Distributor and the Transfer Agent have been

9
<PAGE>

actively working on necessary changes to their own computer systems to prepare
for the year 2000 and expect that their systems will be adapted before that
date, but there can be no assurance that they will be successful, or that
interaction with other non-complying computer systems will not impair their
services at that time.

In addition, it is possible that the markets for securities in which the
Fund invests may be detrimentally affected by computer failures throughout the
financial services industry beginning January 1, 2000. Improperly functioning
trading systems may result in settlement problems and liquidity issues. In
addition, corporate and governmental data processing errors may result in
production problems for individual companies and overall economic
uncertainties. Earnings of individual issuers will be affected by remediation
costs, which may be substantial and may be reported inconsistently in U.S. and
foreign financial statements. Accordingly, the Fund's investments may be
adversely affected.

THE STATE OF HAWAII--SPECIAL INVESTMENT CONSIDERATIONS. The Fund may 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
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, totaling 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 partly to extensive Japanese investment. Since 1990, however, Hawaii's
economy has experienced marginal growth. Through 1997 Hawaii's economic
recovery was slow, and in 1998 economic signals were mixed, with unemployment
and personal income rates and tax revenues improving but wages, job growth,
visitor arrivals, and private construction continuing to be weak. Economic
growth in Hawaii has historically depended on the economic health of the U.S.
Mainland, particularly the State of California, and Japan. Although economic
growth on the U.S. Mainland appears to be strong, the Asian economic crisis and
particularly Japan's economic problems will continue to negatively impact
Hawaii.

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 special purpose revenue bonds can only be authorized or issued
to finance facilities of or for, or to lend the proceeds of such bonds to
assist, manufacturing, processing, or industrial enterprises; utilities serving
the general public; health care facilities provided to the general public by
not-for-profit corporations; or low and moderate income government housing
programs.

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 and on all outstanding general
obligation bonds in the current or any future fiscal year, whichever is higher,
to exceed a sum equal to 18.5% of the average of 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

10
<PAGE>

supplementary budget fiscal year are not to exceed the expenditure ceiling for
that fiscal year. The expenditure ceiling is determined by considering the
fiscal year 1978-1979 General Fund appropriations as the base appropriation
amount and adjusting such amount by the applicable "state growth." State growth
is established by averaging the annual percentage change in total State
personal income for the three calendar years immediately preceding the fiscal
year for which appropriations from the General Fund are to be made.

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. Expenditure plans are
prepared at the beginning of each fiscal year by the respective State
departments. After the expenditure plans are evaluated by the Department of
Budget and Finance, quarterly allotments are made to each department. Although
the State has a biennial budget, appropriations are made for individual fiscal
years and may not generally be expended interchangeably.

The Constitution requires the establishment of a Council on Revenues to
prepare revenue estimates to be used by the Governor in budget preparation and
by the Legislature in appropriating funds and enacting revenue measures. The
Council consists of three members appointed by the Governor and two members
each appointed by the President of the Senate and the Speaker of the House. The
Council reports its estimates and revisions each June 1, September 10, January
10, and March 15. The Council also revises its estimates when it determines
that such revisions are necessary or upon request of the Governor or the
Legislature.

In a report dated September 10, 1998, the Council on Revenues forecast a
0.6% increase in General Fund tax revenues for fiscal year 1999 over that of
fiscal year 1998. In its prior report, the Council on Revenues had reduced
General Fund revenue forecasts from a prior estimate of 1.0% increase to 0.9%
decrease for fiscal year 1999. The State administration restricted expenditures
in fiscal year 1998 as part of its goal to maintain an approximate balance of
$50 million at the end of each fiscal year. The restrictions were based on
reductions of departmental appropriations except for certain items such as
educational programs, welfare payments, employees' retirement and health
insurance, children's mental health programs, and correctional facilities. The
budget proposed by the State administration for fiscal year 1999 reflects the
Council on Revenues' projection of a growth rate of 0.6% for fiscal year 1999
over fiscal year 1998.

The Legislature convened on January 20, 1999. It is uncertain what form of
budget and what revenue measures or combination of measures will ultimately be
enacted.

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.

Under the Hawaiian Homes Commission Act of 1920, Congress set aside
approximately 203,500 acres of public lands as "Hawaiian home lands" for the
rehabilitation of native Hawaiians, and the State undertook the trust
responsibility under the Hawaii Admission Act to carry out the mandate of the
Hawaiian Homes Commission Act. Since 1920 several thousand acres of lands
subject to the trust created by the Hawaiian Homes Commission Act were either
wrongfully used or withdrawn by Territorial and State executive actions. The
State waived sovereign immunity for breaches of such trust for the period from
and after July 1, 1998. The State has undertaken a series of actions to
compensate for such breaches, and in an effort to end the controversy over such
claims, the State has agreed to a final resolution of all disputes by the $600
million cash compensation described above.

Legislation has been enacted to implement the above described settlement
by the establishment of the Hawaiian Home Lands Trust Fund into which the $600
million must be paid by annual payments of

11
<PAGE>

$30 million for 20 years beginning in fiscal year 1995-1996. No determination
as to the source of all future payments has been made, and such payments could
be made from the General Fund, proceeds from the issuance of general obligation
bonds, and/or transfer of land or other consideration valued at fair market
value at time of transfer.

In addition, the Legislature established a separate process for resolving
claims unique to individual beneficiaries of the Hawaiian Home Lands Trust Fund
for actual economic damages arising from breaches of trust caused by the State
between the date Hawaii became a state (August 21, 1959) through June 30, 1988.
The Hawaiian Home Lands Trust Individual Claims Review Panel ("Panel") is to
provide the Legislature with findings and advisory opinions concerning such
claims, and claimants who are not satisfied with such advisory opinions or the
Legislature's response thereto may file civil actions between October 1, 1999
and December 31, 1999. The Legislature has received reports on only 165 of the
4,327 claims filed, and the Panel has recommended monetary damages for the 165
claims totaling $6,793,805. The 1997 Legislature declined to act on such
recommendations. Instead, the Legislature enacted legislation that required the
State's Attorney General, Director of Budget and Finance, Chair of the Hawaiian
Homes Commission, and Chair of the Panel (the "Working Group") to develop
criteria and formula necessary to qualify and resolve all such claims except
for the 165 claims. The Legislature also extended statutory deadlines so that
the final report of the Panel does not have to be submitted until prior to the
1999 session of the Legislature. On November 18, 1997, certain beneficiaries of
the Hawaiian Home Lands Trust initiated litigation for injunctive relief
against the recommendations developed by the Working Group. On July 24, 1998,
the trial court hearing the action ruled that the composition of the Working
Group created a significant appearance that the fairness of the claims review
process had been abrogated. The trial court held that due process of law had
not been satisfied and deemed the 1997 legislation unconstitutional. The
Working Group has indicated that it will be appealing this ruling. Given these
circumstances, it is uncertain what monetary amounts may ultimately be
recommended by the Panel, proffered by the Legislature, or awarded by any
court.

Portions of lands now constituting State-owned lands that were ceded by
the Republic of Hawaii to the United States in 1898 and subsequently conveyed
by the United States to the State following the State's admission into the
Union are commonly referred to as "ceded lands." Twenty percent of gross
proprietary revenues derived from ceded lands that are utilized by the State
are required by State law to be paid to the Office of Hawaiian Affairs ("OHA").
OHA administers such funds for the benefit of native Hawaiians. The payments
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.

OHA has initiated litigation against the State alleging that the State has
failed to account for and pay to OHA its proper pro rata share of proceeds and
income. On October 24, 1996, the trial court hearing the action denied the
State's motion to dismiss, granted OHA's four motions for partial summary
judgment, and deferred establishing the amounts owed to OHA for further
proceedings. The State has taken an interlocutory appeal of the trial court's
order, and all proceedings in the litigation have been stayed pending
disposition by the Hawaii Supreme Court of the State's appeal. The Hawaii
Supreme Court heard oral argument in the appeal on April 20, 1998, but on July
28, 1998, it granted a motion to stay all proceedings in the appeal until
December 1, 1998 to allow OHA and the State to negotiate a settlement.
Legislation was enacted in 1997 to resolve all controversies relating to the
ceded lands by the establishment of a task force that was allowed two years in
which to identify and consider all issues and controversies relating thereto
and to prepare recommendations for the Legislature to implement. The
legislation also fixed the amount of proceeds and income that OHA will receive
during the two fiscal periods at $15.1 million per year and requires the
completion, continued maintenance, and use of a comprehensive inventory of the
ceded lands. Among the controversies specifically identified by the legislation
for the task force's consideration and recommendation are the lawsuits
initiated by OHA.

As a result of the foregoing, the State's potential liability may be
determined by (i) ruling of the Hawaii Supreme Court on the State's
interlocutory appeal, and if such ruling is adverse to the State, the
conclusion of any subsequent trial and related appeals, (ii) the negotiations
between OHA and the State, or (iii) legislation enacted as a result of the 1997
legislation. The State has indicated that regardless of the form of resolution,
it is unable to predict with reasonable certainty the potential magnitude of
its

12
<PAGE>

liability, if any. The potential liability of the State relating to OHA's four
partial summary judgment motions for the years 1981-1991 (but not thereafter)
has been estimated by Deloitte & Touche LLP, which has retained by OHA as its
expert witness, to be at least $178 million. The Airlines Committee of Hawaii,
amicus curiae in the trial court and Hawaii Supreme Court proceedings, has
estimated the potential liability of the State with respect to airport related
proceeds and income, under a worst case analysis, to be as great at $1.2
billion. The State concedes that resolution of OHA's claims against the State
could have a material adverse effect on the State's financial condition.

The State's operations, like those of many governmental and business
entities, including infrastructure providers, vendors, financial institutions,
servicers, and others whose performance can affect the operations of the State,
may be impacted by the "Year 2000 problem" in which computer hardware and
software programs allocate only two digits to the data filed for "year," assume
that the first two digits will be "19," and thereby are unable to process data
correctly after December 31, 1999, causing system failures or miscalculations.

The State indicates that it is in the process of evaluating and correcting
its Year 2000 problem. The State's goal is to be Year 2000 compliant by
September 30, 1999, but it states that it cannot guarantee that it will be
compliant by that date. Specific factors that might delay compliance include
the availability and cost of trained personnel, the ability to locate and
correct all computer codes, and reliance on manufacturers' representations with
respect to Year 2000 compliance. Any failure by the State to be in compliance
could adversely affect the operations of the State. The State indicates that it
has solicited information from some of the infrastructure providers, vendors,
financial institutions, servicers, and others whose Year 2000 compliance could
affect the State regarding the status of their assessment, testing, and
remediation of their computer applications, and generally, those persons have
indicated that they are working on the Year 2000 problem. Any failure by some
or all of such persons to be in compliance could adversely affect the
operations of the State.

C. FUND POLICIES/INVESTMENT RESTRICTIONS

The investment objective, policies and restrictions listed below have been
adopted by the Fund as fundamental policies. Under the Investment Company Act
of 1940 (the "Investment Company Act"), a fundamental policy may not be changed
without the vote of a majority of the outstanding voting securities of the
Fund. The Investment Company Act defines a majority as the lesser of (a) 67% or
more of the shares present at a meeting of shareholders, if the holders of 50%
of the outstanding shares of the Fund are present or represented by proxy; or
(b) more than 50% of the outstanding shares of the Fund. For purposes of the
following restrictions: (i) all percentage limitations apply immediately after
a purchase or initial investment; and (ii) any subsequent change in any
applicable percentage resulting from market fluctuations or other changes in
total or net assets does not require elimination of any security from the
portfolio.

In addition, for purposes of the following restrictions: (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 and provided
further that a guarantee of a security shall not be deemed a security issued by
the guarantor if the value of all securities guaranteed by the guarantor and
owned by the Fund does not exceed 10% of the value of the total assets of the
Fund; (b) a "taxable security" is any security the interest on which is subject
to 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 or net assets does not require elimination of any security from the
portfolio.

The Fund will:

1. Seek to provide a high level of current income exempt from both
Federal and Hawaii State income taxes consistent with the
preservation of capital.

The Fund may not:

1. Invest in common stock.

13
<PAGE>

2. Write, purchase or sell puts, calls, or combinations thereof,
except for options on futures contracts or options on debt
securities.

3. 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 Hawaii or its political subdivisions.

4. Invest in securities of any issuer if, to the knowledge of the
Fund, any officer or trustee of the Fund or of the Investment
Manager owns more than 1/2 of 1% of the outstanding securities of
the issuer, and the officers and trustees who own more than 1/2 of
1% own in the aggregate more than 5% of the outstanding securities
of the issuer.

5. Purchase or sell real estate or interests therein, although the
Fund may purchase securities secured by real estate or interests
therein.

6. Purchase or sell commodities except that the Fund may purchase or
sell financial futures contracts and related options thereon.

7. Borrow money, except that the Fund may borrow from a bank for
temporary or emergency purposes in amounts not exceeding 5% (taken
at the lower of cost or current value) of the value of its total
assets (not including the amount borrowed).

8. Pledge its assets or assign or otherwise encumber them except to
secure permitted borrowing. However, for the purpose of this
restriction, collateral arrangements with respect to the writing of
options and collateral arrangements with respect to initial margin
for futures are not deemed to be pledges of assets.

9. Issue senior securities as defined in the Investment Company Act,
except insofar as the Fund may be deemed to have issued a senior
security by reason of: (a) entering into any repurchase agreement;
(b) purchasing any securities on a when-issued or delayed delivery
basis; (c) purchasing or selling any financial futures contracts;
(d) borrowing money in accordance with the restrictions described
above; or (e) lending portfolio securities.

10. 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; (b) by investment in repurchase
agreements; and (c) by lending its portfolio securities.

11. Make short sales of securities.

12. Purchase securities on margin, except for such short-term loans as
are necessary for the clearance of purchases of portfolio
securities.

13. Engage in the underwriting of securities, except insofar as the
Fund may be deemed an underwriter under the Securities Act in
disposing of a portfolio security.

14. Invest for the purpose of exercising control or management of any
other issuer.

15. Purchase oil, gas or other mineral leases, rights or royalty
contracts, or exploration or development programs.

16. Purchase securities of other investment companies, except in
connection with a merger, consolidation, reorganization or
acquisition of assets. This restriction does not apply to an
investment by the Fund of all or substantially all of its assets in
another registered investment company having the same investment
objective and policies and substantially the same investment
restrictions as the Fund.

III. MANAGEMENT OF THE FUND
- --------------------------------------------------------------------------------

A. BOARD OF TRUSTEES

The Board of Trustees of the Fund oversees the management of the Fund but
does not itself manage the Fund. The Trustees review various services provided
by or under the direction of the Investment Manager to ensure that the Fund's
general investment policies and programs are properly carried out. The Trustees
also conduct their review to ensure that administrative services are provided
to the Fund in a satisfactory manner.

14
<PAGE>

Under state law, the duties of the Trustees are generally characterized as
a duty of loyalty and a duty of care. The duty of loyalty requires a Trustee to
exercise his or her powers in the interest of the Fund and not the Trustee's
own interest or the interest of another person or organization. A Trustee
satisfies his or her duty of care by acting in good faith with the care of an
ordinarily prudent person and in a manner the Trustee reasonably believes to be
in the best interest of the Fund and its shareholders.

B. MANAGEMENT INFORMATION

TRUSTEES AND OFFICERS. The Board of the Fund consists of nine (9)
Trustees. These same individuals also serve as directors or trustees for all of
the Morgan Stanley Dean Witter Funds. Seven Trustees (77% of the total number)
have no affiliation or business connection with the Investment Manager or any
of its affiliated persons and do not own any stock or other securities issued
by the Investment Manager's parent company, MSDW. These are the
"non-interested" or "independent" Trustees. The other two Trustees (the
"management Trustees") are affiliated with the Investment Manager. All of the
Independent Trustees also serve as Independent Trustees of "Discover Brokerage
Index Series," a mutual fund for which the Investment Manager is the investment
advisor. Four of the seven Independent Trustees are also Independent Trustees
of certain other mutual funds, referred to as the "TCW/DW Funds," for which
MSDW Services Company is the manager and TCW Funds Management, Inc. is the
investment advisor.

The Trustees and executive officers of the Fund, their principal business
occupations during the last five years and their affiliations, if any, with the
Investment Manager, and with the 85 Morgan Stanley Dean Witter Funds, the 11
TCW/DW Funds and Discover Brokerage Index Series, are shown below.

<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ------------------------------------------- ---------------------------------------------------
<S> <C>
Michael Bozic (58) ........................ Vice Chairman of Kmart Corporation (since
Trustee December, 1998); Director or Trustee of the Morgan
c/o Kmart Corporation Stanley Dean Witter Funds; Trustee of Discover
3100 West Big Beaver Road Brokerage Index Series; formerly Chairman and
Troy, Michigan Chief Executive Officer of Levitz Furniture
Corporation (November, 1995-November, 1998)
and President and Chief Executive Officer of Hills
Department Stores (May, 1991-July, 1995); formerly
variously Chairman, Chief Executive Officer,
President and Chief Operating Officer (1987-1991)
of the Sears Merchandise Group of Sears, Roebuck
and Co.; Director of Eaglemark Financial Services,
Inc. and Weirton Steel Corporation.

Charles A. Fiumefreddo* (65) .............. Chairman, Director or Trustee, President and Chief
Chairman of the Board, President, Executive Officer of the Morgan Stanley Dean
Chief Executive Officer and Trustee Witter Funds; Chairman, Chief Executive Officer
Two World Trade Center and Trustee of the TCW/DW Funds; Trustee of
New York, New York Discover Brokerage Index Series; formerly
Chairman, Chief Executive Officer and Director of
the Investment Manager, the Distributor and MSDW
Services Company; Executive Vice President and
Director of Dean Witter Reynolds; Chairman and
Director of the Transfer Agent; formerly Director
and/or officer of various MSDW subsidiaries (until
June, 1998).
</TABLE>

15
<PAGE>

<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ------------------------------------------- --------------------------------------------------------
<S> <C>
Edwin J. Garn (66) ........................ Director or Trustee of the Morgan Stanley Dean
Trustee Witter Funds; Trustee of Discover Brokerage Index
c/o Huntsman Corporation Series; formerly United States Senator
500 Huntsman Way (R-Utah)(1974-1992) and Chairman, Senate
Salt Lake City, Utah Banking Committee (1980-1986); formerly Mayor
of Salt Lake City, Utah (1971-1974); formerly
Astronaut, Space Shuttle Discovery (April 12-19,
1985); Vice Chairman, Huntsman Corporation;
Director of Franklin Covey (time management
BMW Bank of North America, Inc. insurance),
United Space Alliance (joint venture between
Lockheed Martin and the Boeing Company) and
Nuskin Asia Pacific (multilevel marketing);
member of the board of various civic and
charitable organizations.

John R. Haire (74) ........................ Chairman of the Audit Committee and Director or
Trustee Trustee of the Morgan Stanley Dean Witter Funds;
Two World Trade Center Chairman of the Audit Committee and Trustee of
New York, New York the TCW/DW Funds; Chairman of the Audit
Committee and Chairman of the Audit Committee
and Trustee of Discover Brokerage Index Series;
formerly Chairman of the Independent Directors or
Trustees of the Morgan Stanley Dean Witter Funds
and the TCW/DW Funds (until June, 1998);
formerly President, Council for Aid to Education
(1978-1989) and Chairman and Chief Executive
Officer of Anchor Corporation, an investment
advisor (1964-1978).

Wayne E. Hedien (65) ...................... Retired; Director or Trustee of the Morgan Stanley
Trustee Dean Witter Funds; Trustee of Discover Brokerage
c/o Gordon Altman Butowsky Index Series; Director of The PMI Group, Inc. (private
Weitzen Shalov & Wein mortgage insurance); Trustee and Vice Chairman of
Counsel to the Independent Trustees The Field Museum of Natural History; formerly
114 West 47th Street associated with the Allstate Companies (1966-1994),
New York, New York most recently as Chairman of The Allstate Corporation
(March, 1993-December, 1994) and Chairman and
Chief Executive Officer of its wholly-owned subsidiary,
Allstate Insurance Company (July, 1989-December,
1994); director of various other business and
charitable organizations.
</TABLE>

16
<PAGE>

<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ------------------------------------------- ----------------------------------------------------
<S> <C>
Dr. Manuel H. Johnson (50) ................ Senior Partner, Johnson Smick International, Inc.,
Trustee a consulting firm; Co-Chairman and a founder of
c/o Johnson Smick International, Inc. the Group of Seven Council (G7C), an international
1133 Connecticut Avenue, N.W. economic commission; Director or Trustee of the
Washington, D.C. Morgan Stanley Dean Witter Funds; Trustee of the
TCW/DW Funds; Trustee of Discover Brokerage
Index Series; Director of NASDAQ (since June,
1995); Director of Greenwich Capital Markets, Inc.
(broker-dealer) and NVR, Inc. (home construction);
Chairman and Trustee of the Financial Accounting
Foundation (oversight organization of the Financial
Accounting Standards Board); formerly Vice
Chairman of the Board of Governors of the Federal
Reserve System (1986-1990) and Assistant
Secretary of the U.S. Treasury.

Michael E. Nugent (62) .................... General Partner, Triumph Capital, L.P., a private
Trustee investment partnership; Director or Trustee of the
c/o Triumph Capital, L.P. Morgan Stanley Dean Witter Funds; Trustee of the
237 Park Avenue TCW/DW Funds; Trustee of Discover Brokerage
New York, New York Index Series; formerly Vice President, Bankers
Trust Company and BT Capital Corporation
(1984-1988); director of various business
organizations.

Philip J. Purcell* (55) ................... Chairman of the Board of Directors and Chief
Trustee Executive Officer of MSDW, Dean Witter Reynolds
1585 Broadway and Novus Credit Services Inc.; Director of the
New York, New York Distributor; Director or Trustee of the Morgan
Stanley Dean Witter Funds; Trustee of Discover
Brokerage Index Series; Director and/or officer of
various MSDW subsidiaries.

John L. Schroeder (68) .................... Retired; Director or Trustee of the Morgan Stanley
Trustee Dean Witter Funds; Trustee of the TCW/DW Funds;
c/o Gordon Altman Butowsky Trustee of Discover Brokerage Index Series;
Weitzen Shalov & Wein Director of Citizens Utilities Company; formerly
Counsel to the Independent Trustees Executive Vice President and Chief Investment
114 West 47th Street Officer of the Home Insurance Company (August,
New York, New York 1991-September, 1995).
</TABLE>

17
<PAGE>

<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- --------------------------------------------- ----------------------------------------------------
<S> <C>
Barry Fink (44) ............................. Senior Vice President (since March, 1997) and
Vice President, Secretary and General Counsel Secretary and General Counsel (since February,
Two World Trade Center 1997) and Director (since July, 1998) of the
New York, New York Investment Manager and MSDW Services
Company; Senior Vice President (since March,
1997) and Assistant Secretary and Assistant
General Counsel (since February, 1997) of the
Distributor; Assistant Secretary of Dean Witter
Reynolds (since August, 1996); Vice President,
Secretary and General Counsel of the Morgan
Stanley Dean Witter Funds and the TCW/DW
Funds (since February, 1997); Vice President,
Secretary and General Counsel of Discover
Brokerage Index Series; previously First Vice
President (June, 1993-February, 1997), Vice
President and Assistant Secretary and Assistant
General Counsel of the Investment Manager and
MSDW Services Company and Assistant Secretary
of the Morgan Stanley Dean Witter Funds and the
TCW/DW Funds.

James F. Willison (56) ...................... Senior Vice President of the Investment Manager;
Vice President Vice President of various Morgan Stanley Dean
Two World Trade Center Witter Funds.
New York, New York

Thomas F. Caloia (53) ....................... First Vice President and Assistant Treasurer of the
Treasurer Investment Manager and MSDW Services
Two World Trade Center Company; Treasurer of the Morgan Stanley Dean
New York, New York Witter Funds, the TCW/DW Funds and Discover
Brokerage Index Series.
</TABLE>

- ----------
* Denotes Trustees who are "interested persons" of the Fund as defined by the
Investment Company Act.

In addition, Mitchell M. Merin, President and Chief Operating Officer of
Asset Management of MSDW, President, Chief Executive Officer and Director of
the Investment Manager and MSDW Services Company, Chairman and Director of the
Distributor and the Transfer Agent, Executive Vice President and Director of
Dean Witter Reynolds, and Director of various MSDW subsidiaries, Ronald E.
Robison, Executive Vice President, Chief Administrative Officer and Director of
the Investment Manager and MSDW Services Company, Robert S. Giambrone, Senior
Vice President of the Investment Manager, MSDW Services Company, the
Distributor and the Transfer Agent and Director of the Transfer Agent, Joseph
J. McAlinden, Executive Vice President and Chief Investment Officer of the
Investment Manager and Director of the Transfer Agent, and Peter M. Avelar,
Kevin Hurley and Jonathan R. Page, Senior Vice Presidents of the Investment
Manager, and Joseph R. Arcieri, Gerard J. Lian and Katherine H. Stromberg, Vice
Presidents of the Investment Manager, are Vice Presidents of the Fund.

In addition, Frank Bruttomesso, Marilyn K. Cranney, Lou Anne D. McInnis,
Carsten Otto and Ruth Rossi, First Vice Presidents and Assistant General
Counsels of the Investment Manager and MSDW Services Company, and Todd Lebo,
Vice President and Assistant General Counsel of the Investment Manager and MSDW
Services Company, are Assistant Secretaries of the Fund.

INDEPENDENT TRUSTEES AND THE COMMITTEES. Law and regulation establish both
general guidelines and specific duties for the Independent Trustees. The Morgan
Stanley Dean Witter Funds seek as Independent Trustees individuals of
distinction and experience in business and finance, government service or
academia; these are people whose advice and counsel are in demand by others and
for whom

18
<PAGE>

there is often competition. To accept a position on the Funds' Boards, such
individuals may reject other attractive assignments because the Funds make
substantial demands on their time. Indeed, by serving on the Funds' Boards,
certain Trustees who would otherwise be qualified and in demand to serve on
bank boards would be prohibited by law from doing so. All of the Independent
Trustees serve as members of the Audit Committee. Three of them also serve as
members of the Derivatives Committee. In addition, three of the Trustees,
including two Independent Trustees, serve as members of the Insurance
Committee.

The Independent Trustees are charged with recommending to the full Board
approval of management, advisory and administration contracts, Rule 12b-1 plans
and distribution and underwriting agreements; continually reviewing Fund
performance; checking on the pricing of portfolio securities, brokerage
commissions, transfer agent costs and performance, and trading among Funds in
the same complex; and approving fidelity bond and related insurance coverage
and allocations, as well as other matters that arise from time to time. The
Independent Trustees are required to select and nominate individuals to fill
any Independent Trustee vacancy on the Board of any Fund that has a Rule 12b-1
plan of distribution. Most of the Morgan Stanley Dean Witter Funds have a Rule
12b-1 plan.

The Audit Committee is charged with recommending to the full Board the
engagement or discharge of the Fund's independent accountants; directing
investigations into matters within the scope of the independent accountants'
duties, including the power to retain outside specialists; reviewing with the
independent accountants the audit plan and results of the auditing engagement;
approving professional services provided by the independent accountants and
other accounting firms prior to the performance of the services; reviewing the
independence of the independent accountants; considering the range of audit and
non-audit fees; reviewing the adequacy of the Fund's system of internal
controls; and preparing and submitting Committee meeting minutes to the full
Board.

The Board of each Fund has a Derivatives Committee to approve parameters
for and monitor the activities of the Fund with respect to derivative
investments, if any, made by the Fund.

Finally, the Board of each Fund has formed an Insurance Committee to
review and monitor the insurance coverage maintained by the Fund.

ADVANTAGES OF HAVING SAME INDIVIDUALS AS INDEPENDENT TRUSTEES FOR ALL
MORGAN STANLEY DEAN WITTER FUNDS. The Independent Trustees and the Funds'
management believe that having the same Independent Trustees for each of the
Morgan Stanley Dean Witter Funds avoids the duplication of effort that would
arise from having different groups of individuals serving as Independent
Trustees for each of the Funds or even of sub-groups of Funds. They believe
that having the same individuals serve as Independent Trustees of all the Funds
tends to increase their knowledge and expertise regarding matters which affect
the Fund complex generally and enhances their ability to negotiate on behalf of
each Fund with the Fund's service providers. This arrangement also precludes
the possibility of separate groups of Independent Trustees arriving at
conflicting decisions regarding operations and management of the Funds and
avoids the cost and confusion that would likely ensue. Finally, having the same
Independent Trustees serve on all Fund Boards enhances the ability of each Fund
to obtain, at modest cost to each separate Fund, the services of Independent
Trustees, of the caliber, experience and business acumen of the individuals who
serve as Independent Trustees of the Morgan Stanley Dean Witter Funds.

TRUSTEE AND OFFICER INDEMNIFICATION. The Fund's Declaration of Trust
provides that no Trustee, officer, employee or agent of the Fund is liable to
the Fund or to a shareholder, nor is any Trustee, officer, employee or agent
liable to any third persons in connection with the affairs of the Fund, except
as such liability may arise from his/her or its own bad faith, willful
misfeasance, gross negligence or reckless disregard of his/her or its duties.
It also provides that all third persons shall look solely to the Fund property
for satisfaction of claims arising in connection with the affairs of the Fund.
With the exceptions stated, the Declaration of Trust provides that a Trustee,
officer, employee or agent is entitled to be indemnified against all liability
in connection with the affairs of the Fund.

C. COMPENSATION

The Fund pays each Independent Trustee an annual fee of $800 plus a per
meeting fee of $50 for meetings of the Board of Trustees, the Independent
Trustees or Committees of the Board of Trustees

19
<PAGE>

attended by the Trustee (the Fund pays the Chairman of the Audit Committee an
additional annual fee of $750). If a Board meeting and a meeting of the
Independent Trustees or a Committee meeting, or a meeting of the Independent
Trustees and/or more than one Committee meeting, take place on a single day,
the Trustees are paid a single meeting fee by the Fund. The Fund also
reimburses such Trustees for travel and other out-of-pocket expenses incurred
by them in connection with attending such meetings. Trustees and officers of
the Fund who are or have been employed by the Investment Manager or an
affiliated company receive no compensation or expense reimbursement from the
Fund for their services as Trustee. Mr. Haire currently serves as Chairman of
the Audit Committee. Prior to June 1, 1998, Mr. Haire also served as Chairman
of the Independent Trustees for which services the Fund paid him an additional
annual fee of $1,200.

The following table illustrates the compensation that the Fund paid to its
Independent Trustees for the fiscal year ended November 30, 1998.

FUND COMPENSATION

<TABLE>
<CAPTION>
AGGREGATE
COMPENSATION
NAME OF INDEPENDENT TRUSTEE FROM THE FUND
- ------------------------------- --------------
<S> <C>
Michael Bozic ................. $1,450
Edwin J. Garn ................. 1,600
John R. Haire ................. 2,850
Wayne E. Hedien ............... 1,550
Dr. Manuel H. Johnson ......... 1,550
Michael E. Nugent ............. 1,600
John L. Schroeder ............. 1,600
</TABLE>

The following table illustrates the compensation paid to the Fund's
Independent Trustees for the calendar year ended December 31, 1998 for services
to the 85 Morgan Stanley Dean Witter Funds and, in the case of Messrs. Haire,
Johnson, Nugent and Schroeder, the 11 TCW/DW Funds that were in operation at
December 31, 1998. Mr. Haire serves as Chairman of the Audit Committee of each
Morgan Stanley Dean Witter Fund and each TCW/DW Fund and, prior to June 1,
1998, also served as Chairman of the Independent Directors or Trustees of those
Funds. With respect to Messrs. Haire, Johnson, Nugent and Schroeder, the TCW/DW
Funds are included solely because of a limited exchange privilege between those
Funds and five Morgan Stanley Dean Witter Money Market Funds. No compensation
was paid to the Fund's Independent Trustees by Discover Brokerage Index Series
for the calendar year ended December 31, 1998.

CASH COMPENSATION FROM MORGAN STANLEY DEAN WITTER FUNDS AND TCW/DW FUNDS

<TABLE>
<CAPTION>
FOR SERVICE FOR SERVICE AS FOR SERVICE AS TOTAL CASH
AS DIRECTOR OR CHAIRMAN OF CHAIRMAN OF COMPENSATION
TRUSTEE AND INDEPENDENT INDEPENDENT FOR SERVICES TO
COMMITTEE FOR SERVICE AS DIRECTORS/TRUSTEES TRUSTEES AND 85 MORGAN
MEMBER OF TRUSTEE AND AND AUDIT AUDIT STANLEY DEAN
85 MORGAN COMMITTEE COMMITTEES OF 85 COMMITTEES OF WITTER FUNDS AND
NAME OF STANLEY DEAN MEMBER OF 11 MORGAN STANLEY 11 TCW/DW 11 TCW/DW
INDEPENDENT TRUSTEE WITTER FUNDS TCW/DW FUNDS DEAN WITTER FUNDS FUNDS FUNDS
- -------------------------- ---------------- ---------------- -------------------- ---------------- -----------------
<S> <C> <C> <C> <C> <C>
Michael Bozic ............ $120,150 -- -- -- $120,150
Edwin J. Garn ............ 132,450 -- -- -- 132,450
John R. Haire ............ 136,450 $66,931 $101,338 $14,725 319,444
Wayne E. Hedien .......... 132,350 -- -- -- 132,350
Dr. Manuel H. Johnson 128,400 62,331 -- -- 190,731
Michael E. Nugent ........ 132,450 62,131 -- -- 194,581
John L. Schroeder ........ 132,450 64,731 -- -- 197,181
</TABLE>

As of the date of this Statement of Additional Information, 55 of the
Morgan Stanley Dean Witter Funds, not including the Fund, have adopted a
retirement program under which an Independent Trustee who retires after serving
for at least five years (or such lesser period as may be determined by the
Board)

20
<PAGE>

as an Independent Director or Trustee of any Morgan Stanley Dean Witter Fund
that has adopted the retirement program (each such Fund referred to as an
"Adopting Fund" and each such Trustee referred to as an "Eligible Trustee") is
entitled to retirement payments upon reaching the eligible retirement age
(normally, after attaining age 72). Annual payments are based upon length of
service.

Currently, upon retirement, each Eligible Trustee is entitled to receive
from the Adopting Fund, commencing as of his or her retirement date and
continuing for the remainder of his or her life, an annual retirement benefit
(the "Regular Benefit") equal to 30.22% of his or her Eligible Compensation
plus 0.5036667% of such Eligible Compensation for each full month of service as
an Independent Director or Trustee of any Adopting Fund in excess of five years
up to a maximum of 60.44% after ten years of service. The foregoing percentages
may be changed by the Board.(1) "Eligible Compensation" is one-fifth of the
total compensation earned by such Eligible Trustee for service to the Adopting
Fund in the five year period prior to the date of the Eligible Trustee's
retirement. Benefits under the retirement program are not secured or funded by
the Adopting Funds.

The following table illustrates the retirement benefits accrued to the
Fund's Independent Trustees by the 55 Morgan Stanley Dean Witter Funds (not
including the Fund) for the fiscal year ended December 31, 1998, and the
estimated retirement benefits for the Independent Trustees, to commence upon
their retirement, from the 55 Morgan Stanley Dean Witter Funds as of December
31, 1998.

RETIREMENT BENEFITS FROM THE MORGAN STANLEY DEAN WITTER FUNDS

<TABLE>
<CAPTION>
FOR ALL ADOPTING FUNDS
-------------------------------
ESTIMATED
CREDITED YEARS ESTIMATED
OF SERVICE AT PERCENTAGE RETIREMENT BENEFITS ESTIMATED ANNUAL BENEFITS
NAME OF RETIREMENT OF ELIGIBLE ACCRUED AS EXPENSES UPON RETIREMENT FROM
INDEPENDENT TRUSTEE (MAXIMUM 10) COMPENSATION BY ALL ADOPTING FUNDS ALL ADOPTING FUNDS(2)
- --------------------------- ---------------- -------------- ----------------------- --------------------------
<S> <C> <C> <C> <C>
Michael Bozic ............. 10 60.44% $ 22,377 $ 52,250
Edwin J. Garn ............. 10 60.44 35,225 52,250
John R. Haire ............. 10 60.44 (12,211)(3) 134,705
Wayne E. Hedien ........... 9 51.37 41,979 44,413
Dr. Manuel H. Johnson ..... 10 60.44 14,047 52,250
Michael E. Nugent ......... 10 60.44 25,336 52,250
John L. Schroeder ......... 8 50.37 45,117 44,343
</TABLE>

- ----------
(1) An Eligible Trustee may elect alternative payments of his or her
retirement benefits based upon the combined life expectancy of the
Eligible Trustee and his or her spouse on the date of such Eligible
Trustee's retirement. In addition, the Eligible Trustee may elect that the
surviving spouse's periodic payment of benefits will be equal to a lower
percentage of the periodic amount when both spouses were alive. The amount
estimated to be payable under this method, through the remainder of the
later of the lives of the Eligible Trustee and spouse, will be the
actuarial equivalent of the Regular Benefit.

(2) Based on current levels of compensation. Amount of annual benefits also
varies depending on the Trustee's elections described in Footnote (1)
above.

(3) This number reflects the effect of the extension of Mr. Haire's term as
Director or Trustee until May 1, 1999.

IV. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
- --------------------------------------------------------------------------------

The following persons owned 5% or more Shares of the Fund as of March 1,
1999: Frances Ayako Sano TTEE F/T Frances Ayako Sano RV TR 8/30/89, 1314
Kalakaua Avenue 301, Honolulu, HI 96826-1901 -- 9.003%; Mr. Mackay U.
Yanagisawa & Mrs. Ellen S. Yanagisawa JT TEN, 6152 Summer Street, Honolulu, HI
96821-2343 -- 6.862%; Mary O. Aiton, Trustee for the May Osterloh Aiton Trust
U/A DTD 7-21-82, 2736 Puuhonua Street, Honolulu HI 96822-1762 -- 6.484%.

As of the date of this Statement of Additional Information, the aggregate
number of shares of beneficial interest of the Fund owned by the Fund's
officers and Trustees as a group was less than 1% of the Fund's shares of
beneficial interest outstanding.

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<PAGE>

V. INVESTMENT MANAGEMENT AND OTHER SERVICES
- --------------------------------------------------------------------------------

A. INVESTMENT MANAGER

The Investment Manager to the Fund is Morgan Stanley Dean Witter Advisors
Inc., a Delaware corporation, whose address is Two World Trade Center, New
York, New York 10048. The Investment Manager is a wholly-owned subsidiary of
MSDW, a Delaware corporation. MSDW is a preeminent global financial services
firm that maintains leading market positions in each of its three primary
businesses: securities, asset management and credit services.

Pursuant to an Investment Management Agreement (the "Management
Agreement") with the Investment Manager, the Fund has retained the Investment
Manager to provide administrative services and manage the investment of the
Fund's assets, including the placing of orders for the purchase and sale of
portfolio securities. The Fund pays the Investment Manager monthly compensation
calculated daily by applying the annual rate of 0.35% to the net assets of the
Fund determined as of the close of each business day.

For the fiscal years ended November 30, 1996, 1997 and 1998, the
Investment Manager accrued total compensation under the Management Agreement in
the amounts of $8,265, $13,705 and $19,831, respectively. However, the
compensation for the years 1996, 1997 and 1998 was waived by the Investment
Manager undertaking to assume expenses (except brokerage and 12b-1 fees) and
waiving the compensation provided for in its Management Agreement until
December 31, 1998. In addition, the Investment Manager has undertaken, from
January 1, 1999 through December 31, 1999, to continue to assume all operating
expenses (except for any Brokerage fees) and waive the compensation provided
for in its Management Agreement to the extent they exceed 0.55% of the Fund's
daily net assets.

The Investment Manager has retained its wholly-owned subsidiary, MSDW
Services Company, to perform administrative services for the Fund.

B. PRINCIPAL UNDERWRITER

The Fund's principal underwriter is the Distributor (which has the same
address as the Investment Manager). In this capacity, the Fund's shares are
distributed by the Distributor. The Distributor has entered into a selected
dealer agreement with Dean Witter Reynolds, which through its own sales
organization sells shares of the Fund. In addition, the Distributor may enter
into similar agreements with other selected broker-dealers. The Distributor, a
Delaware corporation, is a wholly-owned subsidiary of MSDW.

The Distributor bears all expenses it may incur in providing services
under the Distribution Agreement. These expenses include the payment of
commissions for sales of the Fund's shares and incentive compensation to
Financial Advisors. The Distributor also pays certain expenses in connection
with the distribution of the Fund's shares, including the costs of preparing,
printing and distributing advertising or promotional materials, and the costs
of printing and distributing prospectuses and supplements thereto used in
connection with the offering and sale of the Fund's shares. The Fund bears the
costs of initial typesetting, printing and distribution of prospectuses and
supplements thereto to shareholders. The Fund also bears the costs of
registering the Fund and its shares under federal and state securities laws and
pays filing fees in accordance with state securities laws.

The Fund and the Distributor have agreed to indemnify each other against
certain liabilities, including liabilities under the Securities Act. Under the
Distribution Agreement, the Distributor uses its best efforts in rendering
services to the Fund, but in the absence of willful misfeasance, bad faith,
gross negligence or reckless disregard of its obligations, the Distributor is
not liable to the Fund or any of its shareholders for any error of judgment or
mistake of law or for any act or omission or for any losses sustained by the
Fund or its shareholders.

C. SERVICES PROVIDED BY THE INVESTMENT MANAGER AND FUND EXPENSES PAID BY THIRD
PARTIES

The Investment Manager manages the investment of the Fund's assets,
including the placing of orders for the purchase and sale of portfolio
securities. The Investment Manager obtains and evaluates

22
<PAGE>

the information and advice relating to the economy, securities markets, and
specific securities as it considers necessary or useful to continuously manage
the assets of the Fund in a manner consistent with its investment objective.

Under the terms of the Management 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, the office space,
facilities, equipment, clerical help, bookkeeping and certain legal services as
the Fund may reasonably require in the conduct of its business, including the
preparation of prospectuses, proxy statements and reports required to be filed
with federal and state securities commissions (except insofar as the
participation or assistance of independent accountants and attorneys is, in the
opinion of the Investment Manager, necessary or desirable). In addition, the
Investment Manager 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 service, heat, light, power and other
utilities provided to the Fund.

Expenses not expressly assumed by the Investment Manager under the
Management Agreement or by the Distributor, will be paid by the Fund. These
expenses include, but are not limited to: expenses of the Plan of Distribution
pursuant to Rule 12b-1; charges and expenses of any registrar, custodian, stock
transfer and dividend disbursing agent; brokerage commissions; taxes; engraving
and printing share certificates; registration costs of the Fund and its shares
under federal and state securities laws; the cost and expense of printing,
including typesetting, and distributing prospectuses of the Fund and
supplements thereto to the Fund's shareholders; all expenses of shareholders'
and Trustees' meetings and of preparing, printing and mailing of proxy
statements and reports to shareholders; fees and travel expenses of Trustees or
members of any advisory board or committee who are not employees of the
Investment Manager or any corporate affiliate of the Investment Manager; all
expenses incident to any dividend, withdrawal or redemption options; charges
and expenses of any outside service used for pricing of the Fund's shares; fees
and expenses of legal counsel, including counsel to the Trustees who are not
interested persons of the Fund or of the Investment Manager (not including
compensation or expenses of attorneys who are employees of the Investment
Manager); fees and expenses of the Fund's independent accountants; membership
dues of industry associations; interest on Fund borrowings; postage; insurance
premiums on property or personnel (including officers and Trustees) of the Fund
which inure to its benefit; extraordinary expenses (including, but not limited
to, legal claims and liabilities and litigation costs and any indemnification
relating thereto); and all other costs of the Fund's operation.

The Management Agreement provides that in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations thereunder, the Investment Manager is not liable to the Fund or any
of its investors for any act or omission by the Investment Manager or for any
losses sustained by the Fund or its investors.

The Management Agreement will remain in effect from year to year, provided
continuance of the Management Agreement is approved at least annually by the
vote of the holders of a majority, as defined in the Investment Company Act, of
the outstanding shares of the Fund, or by the Trustees; provided that in either
event such continuance is approved annually by the vote of a majority of the
Trustees.

D. DEALER REALLOWANCES

Upon notice to selected broker-dealers, the Distributor may reallow up to
the full applicable front-end sales charge during periods specified in such
notice. During periods when 90% or more of the sales charge is reallowed, such
selected broker-dealers may be deemed to be underwriters as that term is
defined in the Securities Act.

E. RULE 12B-1 PLAN

In accordance with a Plan of Distribution pursuant to Rule 12b-1 under the
Investment Company Act between the Fund and the Distributor, the Distributor
provides certain services in connection with the promotion of sales of Fund
shares (the "Plan").

23
<PAGE>

The Distributor receives the proceeds of front-end sales charges ("FSCs")
imposed on most sales of the Fund's shares. The Distributor has informed the
Fund that it has received approximately $58,000, $44,000 and $50,000,
respectively in sales charges on sales of the Fund's shares for the fiscal
years ended November 30, 1996, 1997 and 1998.

The Plan provides that 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 under the
Plan: (1) compensation to and expenses of Dean Witter Reynolds' Financial
Advisors and other Selected Broker-Dealers' account executives and other
employees, 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) preparing 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 specific expenses incurred or to be
incurred in promoting the distribution of the Fund's shares. Reimbursement is
made through payments at the end of each month. The amount of each monthly
payment may in no event exceed an amount equal to a payment at the annual rate
of 0.20 of 1% of the Fund's average daily net assets during the month. No
interest or other financing charges will be incurred for which reimbursement
payments under the Plan will be made. In addition, no interest charges, if any,
incurred on any distribution expenses will be reimbursable under the Plan. In
the case of all expenses other than expenses representing a residual to
Financial Advisors and other authorized financial representatives, such amounts
shall be determined at the beginning of each calendar quarter by the Trustees,
including a majority of the Independent 12b-1 Trustees. Expenses representing a
residual to Financial Advisors and other authorized financial representatives,
may be reimbursed without prior determination. In the event that the
Distributor proposes that monies shall be reimbursed for other than such
expenses, then in making quarterly determinations of the amounts that may be
expended by the Fund, the Investment Manager provides and the Trustees review a
quarterly budget of projected incremental distribution expenses to be incurred
on behalf of the Fund, together with a report explaining the purposes and
anticipated benefits of incurring such expenses. The Trustees determine which
particular expenses, and the portions thereof, that may be borne by the Fund,
and in making such a determination shall consider the scope of the
Distributor's commitment to promoting the distribution of the Fund's shares.

The Fund accrued a total of $11,085 pursuant to the Plan of Distribution
for the fiscal year ended November 30, 1998. It is estimated that the amounts
paid by the Fund for distribution were for expenses which relate to
compensation of sales personnel and associated overhead expenses.

Under the Plan, the Distributor uses its best efforts in rendering
services to the Fund, but in the absence of willful misfeasance, bad faith,
gross negligence or reckless disregard of its obligations, the Distributor is
not liable to the Fund or any of its shareholders for any error of judgment or
mistake of law or for any act or omission or for any losses sustained by the
Fund or its shareholders.

Under the Plan, the Distributor provides the Fund, for review by the
Trustees, and the Trustees review, promptly after the end of each calendar
quarter, a written report regarding the incremental distribution expenses
incurred on behalf of the Fund during such calendar quarter, which report
includes (1) an itemization of the types of expenses and the purposes
therefore; (2) the amounts of such expenses; and (3) a description of the
benefits derived by the Fund. In the Trustees' quarterly review of the Plan
they consider its continued appropriateness and the level of compensation
provided therein.

With respect the Fund's shares, Dean Witter Reynolds compensates its
Financial Advisors by paying them, from proceeds of the FSC, commissions for
the sale of the shares, currently a gross sales credit of up to 3.0% of the
amount sold (except as provided in the following sentence) and an annual
residual commission, currently a residual of up to 0.20% of the current value
of the respective accounts for which they are the Financial Advisors or dealers
of record in all cases. On orders of $1 million or more (for which no sales
charge was paid) or net asset value purchases by employer-sponsored employee

24
<PAGE>

benefit plans, whether or not qualified under the Internal Revenue Code, for
which the Transfer Agent serves as Trustee or Dean Witter Reynolds Retirement
Plan Services serves as recordkeeper pursuant to a written Recordkeeping
Services Agreement ("MSDW Eligible Plans"), the Investment Manager compensates
Financial Advisors by paying them, from its own funds, a gross sales credit of
1.0% of the amount sold.

The gross sales credit is a charge which reflects commissions paid by Dean
Witter Reynolds to its Financial Advisors and Dean Witter Reynolds's
Fund-associated distribution-related expenses, including sales compensation,
and overhead and other branch office distribution-related expenses including
(a) the expenses of operating Dean Witter Reynolds's branch offices in
connection with the sale of Fund shares, including lease costs, the salaries
and employee benefits of operations and sales support personnel, utility costs,
communications costs and the costs of stationery and supplies, (b) the costs of
client sales seminars, (c) travel expenses of mutual fund sales coordinators to
promote the sale of Fund shares and (d) other expenses relating to branch
promotion of Fund sales.

No interested person of the Fund nor any Independent Trustee has any
direct financial interest in the operation of the Plan except to the extent
that the Distributor, the Investment Manager, Dean Witter Reynolds, MSDW
Services Company or certain of their employees may be deemed to have such an
interest as a result of benefits derived from the successful operation of the
Plan or as a result of receiving a portion of the amounts expended thereunder
by the Fund.

On an annual basis, the Trustees, including a majority of the Independent
Trustees, consider whether the Plan should be continued. Prior to approving the
last continuation of the Plan, the Trustees requested and received from the
Distributor and reviewed all the information which they deemed necessary to
arrive at an informed determination. In making their determination to continue
the Plan, the Trustees considered: (1) the Fund's experience under the Plan and
whether such experience indicates that the Plan is operating as anticipated;
(2) the benefits the Fund had obtained, was obtaining and would be likely to
obtain under the Plan, including that: (a) the Plan is essential in order to
give Fund investors a choice of alternatives for payment of distribution and
service charges and to enable the Fund to continue to grow and avoid a pattern
of net redemptions which, in turn, are essential for effective investment
management; and (b) without the compensation to individual brokers and the
reimbursement of distribution and account maintenance expenses of Dean Witter
Reynolds's branch offices made possible by the 12b-1 fees, Dean Witter Reynolds
could not establish and maintain an effective system for distribution,
servicing of Fund shareholders and maintenance of shareholder accounts; and (3)
what services had been provided and were continuing to be provided under the
Plan to the Fund and its shareholders. Based upon their review, the Trustees,
including each of the Independent Trustees, determined that continuation of the
Plan would be in the best interest of the Fund and would have a reasonable
likelihood of continuing to benefit the Fund and its shareholders. In the
Trustees' quarterly review of the Plan, they will consider its continued
appropriateness and the level of compensation provided therein.

The Plan may not be amended to increase materially the amount to be spent
for the services described therein without approval by the shareholders of the
Fund, and all material amendments to the Plan must also be approved by the
Trustees in the manner described above. The Plan may be terminated at any time,
without payment of any penalty, by vote of a majority of the Independent
Trustees or by a vote of a majority of the outstanding voting securities of the
Fund (as defined in the Investment Company Act) on not more than thirty days'
written notice to any other party to the Plan. So long as the Plan is in
effect, the election and nomination of Independent Trustees shall be committed
to the discretion of the Independent Trustees.

F. OTHER SERVICE PROVIDERS

(1) TRANSFER AGENT/DIVIDEND-PAYING AGENT

Morgan Stanley Dean Witter Trust FSB is the Transfer Agent for the Fund's
shares and the Dividend Disbursing Agent for payment of dividends and
distributions on Fund shares and Agent for shareholders under various
investment plans. The principal business address of the Transfer Agent is
Harborside Financial Center, Plaza Two, Jersey City, New Jersey 07311.

25
<PAGE>

(2) CUSTODIAN AND INDEPENDENT ACCOUNTANTS

The Bank of New York, 90 Washington Street, New York, New York 10286 is
the Custodian for the Fund's assets. Any of the Fund's cash balances with the
Custodian in excess of $100,000 are unprotected by federal deposit insurance.
These balances may, at times, be substantial.

PricewaterhouseCoopers LLP, 1177 Avenue of the Americas, New York, New
York 10036, serves as the independent accountants of the Fund. The independent
accountants are responsible for auditing the annual financial statements of the
Fund.

(3) AFFILIATED PERSONS

The Transfer Agent is an affiliate of the Investment Manager, and of the
Distributor. As Transfer Agent and Dividend Disbursing Agent, the Transfer
Agent's responsibilities include maintaining shareholder accounts, disbursing
cash dividends and reinvesting dividends, processing account registration
changes, handling purchase and redemption transactions, mailing prospectuses
and reports, mailing and tabulating proxies, processing share certificate
transactions, and maintaining shareholder records and lists. For these
services, the Transfer Agent receives a per shareholder account fee from the
Fund.

VI. BROKERAGE ALLOCATION AND OTHER PRACTICES
- --------------------------------------------------------------------------------

A. BROKERAGE TRANSACTIONS

Subject to the general supervision of the Trustees, the Investment Manager
is responsible for decisions to buy and sell securities for the Fund, the
selection of brokers and dealers to effect the transactions, and the
negotiation of brokerage commissions, if any. The Fund expects that the primary
market for the securities in which it intends to invest will generally be the
over-the-counter market. Securities are generally traded in the
over-the-counter market on a "net" basis with dealers acting as principal for
their own accounts without a stated commission, although the price of the
security usually includes a profit to the dealer. The Fund also expects that
securities will be purchased at times in underwritten offerings where the price
includes a fixed amount of compensation, generally referred to as the
underwriter's concession or discount. On occasion the Fund may also purchase
certain money market instruments directly from an issuer, in which case no
commissions or discounts are paid.

During the fiscal years ended November 30, 1996, 1997 and 1998, the Fund
paid no such brokerage commissions or concessions.

B. COMMISSIONS

Pursuant to an order of the SEC, the Fund may effect principal
transactions in certain money market instruments with Dean Witter Reynolds. The
Fund will limit its transactions with Dean Witter Reynolds to U.S. Government
and Government Agency Securities, Bank Money Instruments (i.e. Certificates of
Deposit and Bankers' Acceptances) and Commercial Paper (not including
Tax-Exempt Municipal Paper). The transactions will be effected with Dean Witter
Reynolds only when the price available from Dean Witter Reynolds is better than
that available from other dealers.

During the fiscal years ended November 30, 1996, 1997 and 1998, the Fund
did not effect any principal transactions with Dean Witter Reynolds.

Consistent with the policy described above, brokerage transactions in
securities listed on exchanges or admitted to unlisted trading privileges may
be effected through Dean Witter Reynolds, Morgan Stanley & Co. and other
affiliated brokers and dealers. In order for an affiliated broker or dealer to
effect any portfolio transactions on an exchange for the Fund, the commissions,
fees or other remuneration received by the affiliated broker or dealer must be
reasonable and fair compared to the commissions, fees or other remuneration
paid to other brokers in connection with comparable transactions involving
similar securities being purchased or sold on an exchange during a comparable
period of time. This standard would allow the affiliated broker or dealer to
receive no more than the remuneration which would be expected to be received by
an unaffiliated broker in a commensurate arm's-length transaction. Furthermore,
the Trustees, including the Independent Trustees, have adopted procedures which
are

26
<PAGE>

reasonably designed to provide that any commissions, fees or other remuneration
paid to an affiliated broker or dealer are consistent with the foregoing
standard. The Fund does not reduce the management fee it pays to the Investment
Manager by any amount of the brokerage commissions it may pay to an affiliated
broker or dealer.

During the fiscal years ended November 30, 1996, 1997 and 1998, the Fund
paid no brokerage commissions to an affiliated broker or dealer.

C. BROKERAGE SELECTION

The policy of the Fund regarding purchases and sales of securities for its
portfolio is that primary consideration will be given to obtaining the most
favorable prices and efficient executions of transactions.

In seeking to implement the Fund's policies, the Investment Manager
effects transactions with those brokers and dealers who the Investment Manager
believes provide the most favorable prices and are capable of providing
efficient executions. If the Investment Manager believes the prices and
executions are obtainable from more than one broker or dealer, it may give
consideration to placing portfolio transactions with those brokers and dealers
who also furnish research and other services to the Fund or the Investment
Manager. The services may include, but are not limited to, any one or more of
the following: information as to the availability of securities for purchase or
sale; statistical or factual information or opinions pertaining to investment;
wire services; and appraisals or evaluations of portfolio securities.

The information and services received by the Investment Manager from
brokers and dealers may be of benefit to the Investment Manager in the
management of accounts of some of its other clients and may not in all cases
benefit the Fund directly. While the receipt of such information and services
is useful in varying degrees and would generally reduce the amount of research
or services otherwise performed by the Investment Manager and thereby reduce
its expenses, it is of indeterminable value and the Fund does not reduce the
management fee it pays to the Investment Manager by any amount that may be
attributable to the value of such services.

Subject to the principle of obtaining best price and execution, the
Investment Manager may consider a broker-dealer's sales of shares of the Fund
as a factor in selecting from among those broker-dealers qualified to provide
comparable prices and execution on the Fund's portfolio transactions. The Fund
does not, however, require a broker-dealer to sell shares of the Fund in order
for it to be considered to execute portfolio transactions, and will not enter
into any arrangement whereby a specific amount or percentage of the Fund's
transactions will be directed to a broker which sells shares of the Fund to
customers. The Trustees review, periodically, the allocation of brokerage
orders to monitor the operation of these policies.

The Investment Manager currently serves as investment manager to a number
of clients, including other investment companies, and may in the future act as
investment manager or advisor to others. It is the practice of the Investment
Manager to cause purchase and sale transactions to be allocated among the Fund
and others whose assets it manages in such manner as it deems equitable. In
making such allocations among the Fund and other client accounts, various
factors may be considered, including the respective investment objectives, the
relative size of portfolio holdings of the same or comparable securities, the
availability of cash for investment, the size of investment commitments
generally held and the opinions of the persons responsible for managing the
portfolios of the Fund and other client accounts. In the case of certain
initial and secondary public offerings, the Investment Manager utilizes a pro
rata allocation process based on the size of the Morgan Stanley Dean Witter
Funds involved and the number of shares available from the public offering.

D. DIRECTED BROKERAGE

During the fiscal year ended November 30, 1998, the Fund did not pay any
brokerage commissions to brokers because of research services provided.

27
<PAGE>

E. REGULAR BROKER-DEALERS

During the fiscal year ended November 30, 1998, the Fund did not purchase
securities issued by brokers or dealers that were among the ten brokers or the
ten dealers which executed transactions for or with the Fund in the largest
dollar amounts during the year. At November 30, 1998, the Fund did not own any
securities issued by any of such issuers.

VII. CAPITAL STOCK AND OTHER SECURITIES
- --------------------------------------------------------------------------------

The shareholders of the Fund are entitled to a full vote for each full
share of beneficial interest held. The Fund is authorized to issue an unlimited
number of shares of beneficial interest. 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's Declaration of Trust permits the Trustees to authorize the
creation of additional series of shares (the proceeds of which would be
invested in separate, independently managed portfolios) and additional Classes
of shares within any series. The Trustees have not presently authorized any
such additional series or Classes of shares other than as set forth in the
Prospectus.

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 Investment Company 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 limited 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 notice of such Fund obligations include such disclaimer, and
provides for indemnification 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
obligations. Given the above limitations on shareholder personal liability, and
the nature of the Fund's assets and operations, the possibility of the Fund
being unable to meet its obligations is remote and thus, in the opinion of
Massachusetts counsel to the Fund, the risk to Fund shareholders of personal
liability is remote.

All of the Trustees have been elected by the shareholders of the Fund,
most recently at a Special Meeting of Shareholders held on May 21, 1997. The
Trustees themselves have the power to alter the number and the terms of office
of the Trustees (as provided for in the Declaration of Trust), and they may at
any time lengthen or shorten their own terms or make their terms of unlimited
duration and appoint their own successors, provided that always at least a
majority of the Trustees has been elected by the shareholders of the Fund.

VIII. PURCHASE, REDEMPTION AND PRICING OF SHARES
- --------------------------------------------------------------------------------

A. PURCHASE/REDEMPTION OF SHARES

Information concerning how Fund shares are offered to the public (and how
they are redeemed and exchanged) is provided in the Fund's Prospectus.

TRANSFER AGENT AS AGENT. With respect to the redemption or repurchase of
Fund shares, the application of proceeds to the purchase of new shares in the
Fund or any other Morgan Stanley Dean Witter Funds and the general
administration of the exchange privilege, the Transfer Agent acts as agent for
the Distributor and for the shareholder's authorized broker-dealer, if any, in
the performance of such functions. With respect to exchanges, redemptions or
repurchases, the Transfer Agent shall be liable for its own negligence and not
for the default or negligence of its correspondents or for losses in transit.
The Fund shall not be liable for any default or negligence of the Transfer
Agent, the Distributor or any authorized broker-dealer.

28
<PAGE>

The Distributor and any authorized broker-dealer have appointed the
Transfer Agent to act as their agent in connection with the application of
proceeds of any redemption of Fund shares to the purchase of shares of any
other Morgan Stanley Dean Witter Fund and the general administration of the
exchange privilege. No commission or discounts will be paid to the Distributor
or any authorized broker-dealer for any transaction pursuant to the exchange
privilege.

B. OFFERING PRICE

The price of Fund shares, called "net asset value," is based on the value
of the Fund's portfolio securities.

Portfolio securities (other than short-term debt securities and futures
and options) are valued for the Fund by an outside independent pricing service
approved by the Board of Trustees. The pricing service has informed the Fund
that in valuing the Fund's portfolio securities it uses both a computerized
grid matrix of tax-exempt securities and evaluations by its staff, in each case
based on information concerning market transactions and quotations from dealers
which reflect the 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. The Board of Trustees
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 service, using the procedures outlined
above and subject to periodic review, are more likely to approximate the fair
value of such securities. The Investment Manager will periodically review and
evaluate the procedures, methods and quality of services provided by the
pricing service then being used by the Fund and may, from time to time,
recommend to the Board of Trustees the use of other pricing services or
discontinuance of the use of any pricing service in whole or part. The Board
may determine to approve such recommendation or take other provisions for
pricing of the Fund's portfolio 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' market value, in which case
these securities will be valued at their fair 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.

IX. TAXATION OF THE FUND AND SHAREHOLDERS
- --------------------------------------------------------------------------------

The Fund generally will make three basic types of distributions: tax
exempt dividends, ordinary dividends and long-term capital gain distributions.
These types of distributions are reported differently on a shareholder's income
tax return and they are also subject to different rates of tax. The tax
treatment of the investment activities of the Fund will affect the amount and
timing and character of the distributions made by the Fund. Shareholders are
urged to consult their own tax professionals regarding specific questions as to
federal, state or local taxes.

INVESTMENT COMPANY TAXATION. The Fund intends to remain qualified as a
regulated investment company under Subchapter M of the Internal Revenue Code of
1986. As such, the Fund will not be

29
<PAGE>

subject to federal income tax on its net investment income and capital gains,
if any, to the extent that it distributes such income and capital gains to its
shareholders.

The Fund generally intends to distribute sufficient income and gains so
that the Fund will not pay corporate income tax on its earnings. The Fund also
generally intends to distribute to its shareholders in each calendar year a
sufficient amount of ordinary income and capital gains to avoid the imposition
of a 4% excise tax. However, the Fund may instead determine to retain all or
part of any ordinary income or capital gains in any year for reinvestment. In
such event, the Fund will pay federal income tax (and possibly excise tax) on
such retained gains.

Gains or losses on sales of securities by the Fund will be long-term
capital gains or losses if the securities have a tax holding period of more
than one year. Gains or losses on the sale of securities with a tax holding
period of one year or less will be short-term gains or losses.

In computing net investment income, the Fund will amortize any premiums
and original issue discounts on securities owned, if applicable. Capital gains
or losses realized upon sale or maturity of such securities will be based on
their amortized cost.

All or a portion of any of the Fund's gain from tax-exempt obligations
purchased at a market discount may be treated as ordinary income rather than
capital gain.

From time to time, proposals have been introduced before Congress for the
purpose of restricting or eliminating the federal income tax exemption for
interest on municipal securities. Similar proposals may be introduced in the
future. If such a proposal were enacted, the availability of municipal
securities for investment by the Fund could be affected. In that event, the
Fund would re-evaluate its investment objective and policies.

TAXATION OF DIVIDENDS AND DISTRIBUTIONS. The Fund intends to qualify to
pay "exempt-interest dividends" to its shareholders by maintaining, as of the
close of each of its taxable years, at least 50% of the value of its assets in
tax-exempt securities. An exempt-interest dividend is that part of the dividend
distributions made by the Fund which consists of interest received by the Fund
on tax-exempt securities upon which the shareholder incurs no federal income
taxes. 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 Fund intends to invest a portion of its assets in certain "private
activity bonds". As a result, 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. 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.

Shareholders will 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. Such dividends and distributions are taxable to the
shareholder as ordinary dividend income regardless of whether the shareholder
receives such distributions in additional shares or in cash. 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. Since
the Fund's income is expected to be derived entirely from interest rather than
dividends, it is anticipated that no portion of such dividend distributions
will be eligible for the federal dividends received deduction available to
corporations.

Shareholders are generally taxed on any ordinary dividend or capital gain
distributions from the Fund in the year they are actually distributed. However,
if any such dividends or distributions are declared in October, November or
December and paid in January then such amounts will be treated for tax purposes
as received by the shareholders on December 31, to shareholders of record of
such month.

Shareholders who are not citizens or residents of the United States and
certain foreign entities may be subject to withholding of United States tax on
distributions made by the Fund of any taxable interest income and short term
capital gains.

30
<PAGE>

After the end of each calendar year, shareholders will be sent full
information on their dividends and capital gain distributions for tax purposes,
including the portion taxable as ordinary income, the portion taxable as
long-term capital gains and the percentage of any distributions which
constitute an item of tax preference for purposes of the alternative minimum
tax.

PURCHASES AND REDEMPTIONS AND EXCHANGES OF FUND SHARES. Any dividend or
capital gains distribution received by a shareholder from the Fund will have
the effect of reducing the net asset value of the shareholder's stock in the
Fund by the exact amount of the dividend or capital gains distribution.
Furthermore, capital gains distributions and some portion of the dividends may
be subject to federal income taxes. If the net asset value of the shares should
be reduced below a shareholder's cost as a result of the payment of dividends
or the distribution of realized long-term capital gains, such payment or
distribution would be in part a return of the shareholder's investment but
nonetheless would be taxable to the shareholder. Therefore, an investor should
consider the tax implications of purchasing Fund shares immediately prior to a
distribution record date.

In general, a sale of shares results in capital gain or loss, and for
individual shareholders, is taxable at a federal rate dependent upon the length
of time the shares were held. A redemption of a shareholder's Fund shares is
normally treated as a sale for tax purposes. Fund shares held for a period of
one year or less will, for tax purposes, generally result in short-term gains
or losses and those held for more than one year generally result in long-term
gain or loss. Any loss realized by shareholders upon a redemption of shares
within six months of the date of their purchase will be treated as a long-term
capital loss to the extent of any distributions of net long-term capital gains
with respect to such shares during the six-month period.

Gain or loss on the sale or redemption of shares in the Fund is measured
by the difference between the amount received and the tax basis of the shares.
Shareholders should keep records of investments made (including shares acquired
through reinvestment of dividends and distributions) so they can compute the
tax basis of their shares. Under certain circumstances a shareholder may
compute and use an average cost basis in determining the gain or loss on the
sale or redemption of shares.

Exchanges of Fund shares for shares of another fund, including shares of
other Morgan Stanley Dean Witter Funds, are also subject to similar tax
treatment. Such an exchange is treated for tax purposes as a sale of the
original shares in the first fund, followed by the purchase of shares in the
second fund.

If a shareholder realizes a loss on the redemption or exchange of a fund's
shares and reinvests in that fund's shares within 30 days before or after the
redemption or exchange, the transactions may be subject to the "wash sale"
rules, resulting in a postponement of the recognition of such loss for tax
purposes.

Interest on indebtedness incurred by shareholders to purchase or carry
shares of the Fund is not deductible. Furthermore, entities or persons who are
"substantial users" (or related persons) of facilities financed by industrial
development bonds should consult their tax advisers before purchasing shares of
the Fund. "Substantial user" is defined generally by Income Tax Regulation
1.103-11(b) as including a "non-exempt person" who regularly uses in a trade or
business a part of a facility financed from the proceeds of industrial
development bonds.

X. UNDERWRITERS
- --------------------------------------------------------------------------------

The Fund's shares are offered to the public on a continuous basis. The
Distributor, as the principal underwriter of the shares, has certain
obligations under the Distribution Agreement concerning the distribution of the
shares. These obligations and the compensation the Distributor receives are
described above in the sections titled "Principal Underwriter" and "Rule 12b-1
Plans."

31
<PAGE>

XI. CALCULATION OF PERFORMANCE DATA
- --------------------------------------------------------------------------------

From time to time the Fund may quote its "yield" and/or its "total return"
in advertisements and sales literature.

Yield is calculated for any 30-day period as follows: the amount of
interest income for each security in the Fund's portfolio is determined as
described below; the total for the entire portfolio constitutes the Fund's
gross income for the period. Expenses accrued during the period are subtracted
to arrive at "net investment income." The resulting amount is divided by the
product of the maximum offering price per share on the last day of the period
(reduced by any undeclared earned income per share that is expected to be
declared shortly after the end of the period) multiplied by the average number
of Fund shares outstanding during the period that were entitled to dividends.
This amount is added to 1 and raised to the sixth power. 1 is then subtracted
from the result and the difference is multiplied by 2 to arrive at the
annualized yield.

To determine interest income from debt obligations, a yield-to-maturity,
expressed as a percentage, is determined for obligations held at the beginning
of the period, based on the current market value of the security plus accrued
interest, generally as of the end of the month preceding the 30-day period, or,
for obligations purchased during the period, based on the cost of the security
(including accrued interest). The yield-to-maturity is multiplied by the market
value (plus accrued interest) for each security and the result is divided by
360 and multiplied by 30 days or the number of days the security was held
during the period, if less. Modifications are made for determining
yield-to-maturity on certain tax-exempt securities. For the 30-day period ended
November 30, 1998, the Fund's yield, calculated pursuant to the formula
described above was 4.57%. During this period, the Investment Manager waived
its management fee and assumed certain expenses of the Fund. Had the Fund borne
these expenses and paid the management fee for the period, the yield for the
30-day period would have been 2.70%.

The Fund may also quote a "tax-equivalent yield" determined by dividing
the tax-exempt portion of quoted yield by 1 minus the stated income tax rate
and adding the result to the portion of the yield that is not tax-exempt. The
Fund's tax-equivalent yield, based upon a Federal personal income tax bracket
of [45.6]% for the 30-day period ended November 30, 1998 was 8.41% based upon
the yield calculated above. Without the waiver of the management fee or the
assumption of certain expenses, the Fund's tax-equivalent yield for the period
would have been 4.97%.

The Fund's "average annual total return" represents an annualization of
the Fund's total return over a particular period and is computed by finding the
annual percentage rate which will result in the ending redeemable value of a
hypothetical $1,000 investment made at the beginning of a one, five or ten year
period, or for the period from the date of commencement of the Fund's
operations, if shorter than any of the foregoing. For the purpose of this
calculation, it is assumed that all dividends and distributions are reinvested.
The formula for computing the average annual total return involves a percentage
obtained by dividing the ending redeemable value by the amount of the initial
investment (which is reduced by the initial sales charge), taking a root of the
quotient (where the root is equivalent to the number of years in the period)
and subtracting 1 from the result. The average annual total return of the Fund
for the fiscal year ended November 30, 1998 and for the period June 16, 1995
(commencement of operations) through November 30, 1998 was 4.64% and 6.21%,
respectively. During this period, the Investment Manager waived its management
fee and assumed certain expenses of the Fund. Had the fund borne these expenses
and paid these fees during the stated periods, the average annual total return
for the periods would have been 2.83% and 4.89%, respectively.

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 calculation may or may not reflect the
imposition of the maximum front-end sales charge which, if reflected, would
reduce the performance quoted. For example, the average annual total return of
the Fund may be calculated in the manner described in the preceding paragraph,
but without the deduction for any applicable sales charge. Based on this
calculation, the Fund's total return for the fiscal year ended November 30,
1998 and for the period June 16, 1995 through November 30, 1998 was 7.87% and
7.15%, respectively.

32
<PAGE>

In addition, the Fund may compute its aggregate total return for specified
periods by determining the aggregate percentage rate which will result in the
ending value of a hypothetical $1,000 investment made at the beginning of the
period. For the purpose of this calculation, it is assumed that all dividends
and distributions are reinvested. The formula for computing aggregate total
return involves a percentage obtained by dividing the ending value (without
reduction for any sales charge) by the initial $1,000 investment and
subtracting 1 from the result. Based on the foregoing calculation, the Fund's
total return for the fiscal year ended November 30, 1998 and for the period
June 16, 1995 (commencement of operations) through November 30, 1998 was 7.87%
and 26.97%, respectively.

The Fund may also advertise the growth of hypothetical investments of
$10,000, $50,000 and $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 a 3.0%, 3.0% or 2.50% sales charge,
respectively). Investments of $10,000, $50,000 and $100,000 in the Fund since
inception would have grown to $12,317, $61,580, and $123,796, respectively, at
November 30, 1998.

XII. FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

EXPERTS. The financial statements of the Fund for the fiscal year ended
November 30, 1998 included in this Statement of Additional Information and
incorporated by reference in the Prospectus have been so included and
incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.

* * * * *

This Statement of Additional Information and the Prospectus do not contain
all of the information set forth in the Registration Statement the Fund has
filed with the SEC. The complete Registration Statement may be obtained from
the SEC.

33
<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
34
<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
35
<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
36
<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
37
<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
38
<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.

39
<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.

40
<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.

41
<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.

42
<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
43
<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.

44
<PAGE>

APPENDIX
- --------------------------------------------------------------------------------
RATINGS OF INVESTMENTS

MOODY'S INVESTORS SERVICE INC. ("MOODY'S")

MUNICIPAL BOND RATINGS

Aaa Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position
of such issues.

Aa Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high
grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other
elements present which make the long-term risks appear somewhat larger
than in Aaa securities.

A Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment sometime in
the future.

Baa Bonds which are rated Baa are considered as medium grade obligation; i.e.,
they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable
over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.

Bonds rated Aaa, Aa, A and Baa are considered investment grade bonds.

Ba Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate, and therefore not
well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.

B Bonds which are rated B generally lack characteristics of a desirable
investment. Assurance of interest and principal payments or of maintenance
of other terms of the contract over any long period of time may be small.

Caa Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to
principal or interest.

Ca Bonds which are rated Ca present obligations which are speculative in a
high degree. Such issues are often in default or have other marked
shortcomings.

C Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.

Conditional Rating: Bonds for which the security depends upon the
completion of some act of the fulfillment of some condition are rated
conditionally. These are bonds secured by (a) earnings of projects under
construction, (b) earnings of projects unseasoned in operation experience, (c)
rentals which begin when facilities are completed, or (d) payments to which
some other limiting condition attaches. Parenthetical rating denotes probable
credit stature upon completion of construction or elimination of basis of
condition.

Rating Refinements: Moody's may apply numerical modifiers, 1, 2 and 3 in
each generic rating classification from Aa through B in its municipal bond
rating system. The modifier 1 indicates a mid- range ranking; and a modifier 3
indicates that the issue ranks in the lower end of its generic rating category.

45
<PAGE>

MUNICIPAL NOTE RATINGS

Moody's ratings for state and municipal notes and other short-term loans
are designated Moody's Investment Grade (MIG). MIG 1 denotes best quality and
means there is present strong protection from established cash flows, superior
liquidity support or demonstrated broad-based access to the market for
refinancing. MIG 2 denotes high quality and means that margins of protection
are ample although not as large as in MIG 1. MIG 3 denotes favorable quality
and means that all security elements are accounted for but that the undeniable
strength of the previous grades, MIG 1 and MIG 2, is lacking. MIG 4 denotes
adequate quality and means that the protection commonly regarded as required of
an investment security is present and that while the notes are not distinctly
or predominantly speculative, there is specific risk.

VARIABLE RATE DEMAND OBLIGATIONS

A short-term rating, in addition to the Bond or MIG ratings, designated
VMIG may also be assigned to an issue having a demand feature. The assignment
of the VMIG symbol reflects such characteristics as payment upon periodic
demand rather than fixed maturity dates and payment relying on external
liquidity. The VMIG rating criteria are identical to the MIG criteria discussed
above.

COMMERCIAL PAPER RATINGS

Moody's Commercial Paper ratings are opinions of the ability to repay
punctually promissory obligations not having an original maturity in excess of
nine months. These ratings apply to Municipal commercial Paper as well as
taxable Commercial Paper. Moody's employs the following three designations, all
judged to be investment grade, to indicate the relative repayment capacity of
rated issuers: Prime-1, Prime-2, Prime-3.

Issuers rated Prime-1 have a superior capacity for repayment of short-term
promissory obligations. Issuers rated Prime-2 have a strong capacity for
repayment of short-term promissory obligations; and Issuers rated Prime-3 have
an acceptable capacity for repayment of short-term promissory obligations.
Issuers rated Not Prime do not fall within any of the Prime rating categories.

STANDARD & POOR'S CORPORATION ("STANDARD & POOR'S")

MUNICIPAL BOND RATINGS

A Standard & Poor's municipal rating is a current assessment of the
creditworthiness of an obligor with respect to a specific obligation. This
assessment may take into consideration obligors such as guarantors, insurers,
or lessees.

The ratings are based on current information furnished by the issuer or
obtained by Standard & Poor's from other sources it considers reliable. The
ratings are based, in varying degrees, on the following considerations: (1)
likelihood of default-capacity and willingness of the obligor as to the timely
payment of interest and repayment of principal in accordance with the terms of
the obligation; (2) nature of and provisions of the obligation; and (3)
protection afforded by, and relative position of, the obligation in the event
of bankruptcy, reorganization or other arrangement under the laws of bankruptcy
and other laws affecting creditors' rights.

Standard & Poor's does not perform an audit in connection with any rating
and may, on occasion, rely on unaudited financial information. The ratings may
be changed, suspended or withdrawn as a result of changes in, or unavailability
of, such information, or for other reasons.

AAA Debt rated "AAA" has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.

AA Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the highest-rated issues only in small degree.

46
<PAGE>

A Debt rated "A" has a strong capacity to pay interest and repay principal
although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher-rated
categories.

BBB Debt rated "BBB" is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal
for debt in this category than for debt in higher-rated categories.

Bonds rated AAA, AA, A and BBB are considered investment grade bonds.

BB Debt rated "BB" has less near-term vulnerability to default than other
speculative grade debt. However, it faces major ongoing uncertainties or
exposure to adverse business, financial or economic conditions which could
lead to inadequate capacity to meet timely interest and principal payment.

B Debt rated "B" has a greater vulnerability to default but presently has the
capacity to meet interest payments and principal repayments. Adverse
business, financial or economic conditions would likely impair capacity or
willingness to pay interest and repay principal.

CCC Debt rated "CCC" has a current identifiable vulnerability to default, and
is dependent upon favorable business, financial and economic conditions to
meet timely payments of interest and repayments of principal. In the event
of adverse business, financial or economic conditions, it is not likely to
have the capacity to pay interest and repay principal.

CC The rating "CC" is typically applied to debt subordinated to senior debt
which is assigned an actual or implied "CCC" rating.

C The rating "C" is typically applied to debt subordinated to senior debt
which is assigned an actual or implied "CCC" debt rating.

Cl The rating "Cl" is reserved for income bonds on which no interest is being
paid.

D Debt rated "D" is in payment default. The `D' rating category is used when
interest payments or principal payments are not made on the date due even
if the applicable grace period has not expired, unless S&P believes that
such payments will be made during such grace period. The `D' rating also
will be used upon the filing of a bankruptcy petition if debt service
payments are jeopardized.

NR Indicates that no rating has been requested, that there is insufficient
information on which to base a rating or that Standard & Poor's does not
rate a particular type of obligation as a matter of policy.

Bonds rated "BB", "B", "CCC", "CC" and "C" are regarded as having
predominantly speculative characteristics with respect to capacity to pay
interest and repay principal. "BB" indicates the least degree of
speculation and "C" the highest degree of speculation. While such debt
will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to adverse
conditions.

Plus (+) or minus (-): The ratings from "AA" to "CCC" may be modified by
the addition of a plus or minus sign to show relative standing within the
major ratings categories.

The foregoing ratings are sometimes followed by a "p" which indicates that
the rating is provisional. A provisional rating assumes the successful
completion of the project being financed by the bonds being rated and
indicates that payment of debt service requirements is largely or entirely
dependent upon the successful and timely completion of the project. This
rating, however, while addressing credit quality subsequent to completion
of the project, makes no comment on the likelihood or risk of default upon
failure of such completion.

47
<PAGE>

MUNICIPAL NOTE RATINGS

Commencing on July 27, 1984, Standard & Poor's instituted a new rating
category with respect to certain municipal note issues with a maturity of less
than three years. The new note ratings denote the following:

SP-1 denotes a very strong or strong capacity to pay principal and
interest. Issues determined to possess overwhelming safety
characteristics are given a plus (+) designation (SP-1+).

SP-2 denotes a satisfactory capacity to pay principal and interest.

SP-3 denotes a speculative capacity to pay principal and interest.

COMMERCIAL PAPER RATINGS

Standard and Poor's commerical paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more
than 365 days. The commercial paper rating is not a recommendation to purchase
or sell a security. The ratings are based upon current information furnished by
the issuer or obtained by S&P from other sources it considers reliable. The
ratings may be changed, suspended, or withdrawn as a result of changes in or
unavailability of such information. Ratings are graded into group categories,
ranging from "A" for the highest quality obligations to "D" for the lowest.
Ratings are applicable to both taxable and tax-exempt commercial paper. The
categories are as follows:

Issues assigned A ratings are regarded as having the greatest capacity for
timely payment. Issues in this category are further refined with the
designation 1, 2 and 3 to indicate the relative degree of safety.

A-1 indicates that the degree of safety regarding timely payments is very
strong.

A-2 indicates capacity for timely payment on issues with this designation is
strong. However, the relative degree of safety is not as overwhelming as for
issues designated "A-1".

A-3 indicates a satisfactory capacity for timely payment. Obligations carrying
this designation are, however, somewhat more vulnerable to the adverse effects
of changes in circumstances than obligations carrying the higher designations.

<PAGE>

MORGAN STANLEY DEAN WITTER HAWAII MUNICIPAL TRUST

PART C OTHER INFORMATION

Item 23. Exhibits
--------

10. Consent of Independent Accountants.

14. Financial Data Schedule as of November 30, 1998.

All other exhibits were previously filed via EDGAR and are hereby incorporated
by reference.

Item 24. Persons Controlled by or Under Common Control With the Fund.
------------------------------------------------------------

None

Item 25. Indemnification
---------------

Pursuant to Section 5.3 of the Registrant's Declaration of Trust and
under Section 4.8 of the Registrant's By-Laws, the indemnification of the
Registrant's trustees, officers, employees and agents is permitted if it is
determined that they acted under the belief that their actions were in or not
opposed to the best interest of the Registrant, and, with respect to any
criminal proceeding, they had reasonable cause to believe their conduct was not
unlawful. In addition, indemnification is permitted only if it is determined
that the actions in question did not render them liable by reason of willful
misfeasance, bad faith or gross negligence in the performance of their duties
or by reason of reckless disregard of their obligations and duties to the
Registrant. Trustees, officers, employees and agents will be indemnified for
the expense of litigation if it is determined that they are entitled to
indemnification against any liability established in such litigation. The
Registrant may also advance money for these expenses provided that they give
their undertakings to repay the Registrant unless their conduct is later
determined to permit indemnification.

Pursuant to Section 5.2 of the Registrant's Declaration of Trust and
paragraph 8 of the Registrant's Investment Management Agreement, neither the
Investment Manager nor any trustee, officer, employee or agent of the
Registrant shall be liable for any action or failure to act, except in the case
of bad faith, willful misfeasance, gross negligence or reckless disregard of
duties to the Registrant.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to trustees, officers and
controlling persons of the Registrant pursuant to the foregoing provisions or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a trustee, officer,
or controlling person of the Registrant in connection with the successful
defense of any action, suit or proceeding) is asserted against the Registrant
by such trustee, officer or controlling person in connection with the shares
being registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act, and will be governed by the
final adjudication of such issue.

The Registrant hereby undertakes that it will apply the
indemnification provision of its by-laws in a manner consistent with Release
11330 of the Securities and Exchange Commission under the Investment Company
Act of 1940, so long as the interpretation of Sections 17(h) and 17(i) of such
Act remains in effect.

1
<PAGE>

Registrant, in conjunction with the Investment Manager, Registrant's
Trustees, and other registered investment management companies managed by the
Investment Manager, maintains insurance on behalf of any person who is or was a
Trustee, officer, employee, or agent of Registrant, or who is or was serving at
the request of Registrant as a trustee, director, officer, employee or agent of
another trust or corporation, against any liability asserted against him and
incurred by him or arising out of his position. However, in no event will
Registrant maintain insurance to indemnify any such person for any act for
which Registrant itself is not permitted to indemnify him.

Item 26. Business and Other Connections of Investment Advisor
----------------------------------------------------

See "The Fund and Its Management" in the Prospectus regarding the
business of the investment advisor. The following information is given
regarding officers of Morgan Stanley Dean Witter Advisors Inc. ("MSDW
Advisors"). MSDW Advisors is a wholly-owned subsidiary of Morgan Stanley Dean
Witter & Co. The principal address of the Morgan Stanley Dean Witter Funds is
Two World Trade Center, New York, New York 10048.

The term "Morgan Stanley Dean Witter Funds" refers to the following
registered investment companies:

Closed-End Investment Companies
- -------------------------------
(1) Morgan Stanley Dean Witter California Insured Municipal Income Trust
(2) Morgan Stanley Dean Witter California Quality Municipal Securities
(3) Morgan Stanley Dean Witter Government Income Trust
(4) Morgan Stanley Dean Witter High Income Advantage Trust
(5) Morgan Stanley Dean Witter High Income Advantage Trust II
(6) Morgan Stanley Dean Witter High Income Advantage Trust III
(7) Morgan Stanley Dean Witter Income Securities Inc.
(8) Morgan Stanley Dean Witter Insured California Municipal Securities
(9) Morgan Stanley Dean Witter Insured Municipal Bond Trust
(10) Morgan Stanley Dean Witter Insured Municipal Income Trust
(11) Morgan Stanley Dean Witter Insured Municipal Securities
(12) Morgan Stanley Dean Witter Insured Municipal Trust
(13) Morgan Stanley Dean Witter Municipal Income Opportunities Trust
(14) Morgan Stanley Dean Witter Municipal Income Opportunities Trust II
(15) Morgan Stanley Dean Witter Municipal Income Opportunities Trust III
(16) Morgan Stanley Dean Witter Municipal Income Trust
(17) Morgan Stanley Dean Witter Municipal Income Trust II
(18) Morgan Stanley Dean Witter Municipal Income Trust III
(19) Morgan Stanley Dean Witter Municipal Premium Income Trust
(20) Morgan Stanley Dean Witter New York Quality Municipal Securities
(21) Morgan Stanley Dean Witter Prime Income Trust
(22) Morgan Stanley Dean Witter Quality Municipal Income Trust
(23) Morgan Stanley Dean Witter Quality Municipal Investment Trust
(24) Morgan Stanley Dean Witter Quality Municipal Securities

Open-end Investment Companies
- ------------------------------
(1) Active Assets California Tax-Free Trust
(2) Active Assets Government Securities Trust
(3) Active Assets Money Trust
(4) Active Assets Tax-Free Trust
(5) Morgan Stanley Dean Witter Aggressive Equity Fund
(6) Morgan Stanley Dean Witter American Value Fund

2
<PAGE>

(7) Morgan Stanley Dean Witter Balanced Growth Fund
(8) Morgan Stanley Dean Witter Balanced Income Fund
(9) Morgan Stanley Dean Witter California Tax-Free Daily Income Trust
(10) Morgan Stanley Dean Witter California Tax-Free Income Fund
(11) Morgan Stanley Dean Witter Capital Growth Securities
(12) Morgan Stanley Dean Witter Competitive Edge Fund, "Best Ideas Portfolio"
(13) Morgan Stanley Dean Witter Convertible Securities Trust
(14) Morgan Stanley Dean Witter Developing Growth Securities Trust
(15) Morgan Stanley Dean Witter Diversified Income Trust
(16) Morgan Stanley Dean Witter Dividend Growth Securities Inc.
(17) Morgan Stanley Dean Witter Equity Fund
(18) Morgan Stanley Dean Witter European Growth Fund Inc.
(19) Morgan Stanley Dean Witter Federal Securities Trust
(20) Morgan Stanley Dean Witter Financial Services Trust
(21) Morgan Stanley Dean Witter Fund of Funds
(22) Morgan Stanley Dean Witter Global Dividend Growth Securities
(23) Morgan Stanley Dean Witter Global Utilities Fund
(24) Morgan Stanley Dean Witter Growth Fund
(25) Morgan Stanley Dean Witter Hawaii Municipal Trust
(26) Morgan Stanley Dean Witter Health Sciences Trust
(27) Morgan Stanley Dean Witter High Yield Securities Inc.
(28) Morgan Stanley Dean Witter Income Builder Fund
(29) Morgan Stanley Dean Witter Information Fund
(30) Morgan Stanley Dean Witter Intermediate Income Securities
(31) Morgan Stanley Dean Witter International SmallCap Fund
(32) Morgan Stanley Dean Witter Japan Fund
(33) Morgan Stanley Dean Witter Limited Term Municipal Trust
(34) Morgan Stanley Dean Witter Liquid Asset Fund Inc.
(35) Morgan Stanley Dean Witter Market Leader Trust
(36) Morgan Stanley Dean Witter Mid-Cap Dividend Growth Securities
(37) Morgan Stanley Dean Witter Mid-Cap Growth Fund
(38) Morgan Stanley Dean Witter Multi-State Municipal Series Trust
(39) Morgan Stanley Dean Witter Natural Resource Development Securities Inc.
(40) Morgan Stanley Dean Witter New York Municipal Money Market Trust
(41) Morgan Stanley Dean Witter New York Tax-Free Income Fund
(42) Morgan Stanley Dean Witter Pacific Growth Fund Inc.
(43) Morgan Stanley Dean Witter Precious Metals and Minerals Trust
(44) Morgan Stanley Dean Witter Real Estate Fund
(45) Morgan Stanley Dean Witter S&P 500 Index Fund
(46) Morgan Stanley Dean Witter S&P 500 Select Fund
(47) Morgan Stanley Dean Witter Select Dimensions Investment Series
(48) Morgan Stanley Dean Witter Select Municipal Reinvestment Fund
(49) Morgan Stanley Dean Witter Short-Term Bond Fund
(40) Morgan Stanley Dean Witter Short-Term U.S. Treasury Trust
(51) Morgan Stanley Dean Witter Special Value Fund
(25) Morgan Stanley Dean Witter Strategist Fund
(53) Morgan Stanley Dean Witter Tax-Exempt Securities Trust
(54) Morgan Stanley Dean Witter Tax-Free Daily Income Trust
(55) Morgan Stanley Dean Witter U.S. Government Money Market Trust
(56) Morgan Stanley Dean Witter U.S. Government Securities Trust
(57) Morgan Stanley Dean Witter Utilities Fund
(58) Morgan Stanley Dean Witter Value-Added Market Series

<PAGE>

(59) Morgan Stanley Dean Witter Value Fund
(60) Morgan Stanley Dean Witter Variable Investment Series
(61) Morgan Stanley Dean Witter World Wide Income Trust

The term "TCW/DW Funds" refers to the following registered investment
companies:

Open-End Investment Companies
- -----------------------------
(1) TCW/DW Emerging Markets Opportunities Trust
(2) TCW/DW Global Telecom Trust
(3) TCW/DW Income and Growth Fund
(4) TCW/DW Latin American Growth Fund
(5) TCW/DW Mid-Cap Equity Trust
(6) TCW/DW North American Government Income Trust
(7) TCW/DW Small Cap Growth Fund
(8) TCW/DW Total Return Trust

Closed-End Investment Companies
(1) TCW/DW Term Trust 2000
(2) TCW/DW Term Trust 2002
(3) TCW/DW Term Trust 2003

NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
- ---------------------- ------------------------------------------------
<S> <C>
Mitchell M. Merin President and Chief Operating Officer of Asset
President, Chief Management of Morgan Stanley Dean Witter & Co.
Executive Officer and ("MSDW); Chairman, Chief Executive Officer and Director
Director of Morgan Stanley Dean Witter Distributors Inc. ("MSDW
Distributors") and Morgan Stanley Dean Witter Trust FSB
("MSDWTrust"); President, Chief Executive Officer and
Director of Morgan Stanley Dean Witter Services Company Inc.
("MSDW Services"); Vice President of the Morgan Stanley
Dean Witter Funds, TCW/DW Funds and Discover Brokerage Index
Series; Executive Vice President and Director of Dean Witter
Reynolds Inc. ("DWR"); Director of various MSDW subsidiaries.

Joseph J. McAlinden Vice President of the Morgan Stanley Dean Witter Funds
Executive Vice President and Discover Brokerage Index Series; Director of MSDW Trust.
and Chief Investment
Officer

Ronald E. Robison Executive Vice President, Chief Administrative Officer and
Executive Vice President, Director of MSDW Services; Vice President of the Morgan
Chief Administrative Stanley Dean Witter Funds, TCW/DW Funds and Discover
Officer and Director Brokerage Index Series.

Edward C. Oelsner, III
Executive Vice President

4
<PAGE>

John Van Heuvelen President of MSDW Trust.
Executive Vice President

Barry Fink Assistant Secretary of DWR; Senior Vice President,
Senior Vice President, Secretary, General Counsel and Director of MSDW
Secretary, General Services; Senior Vice President, Assistant Secretary and Counsel
and Director Assistant General Counsel of MSDW Distributors; Vice
President, Secretary and General Counsel of the Morgan
Stanley Dean Witter Funds, TCW/DW Funds and Discover
Brokerage Index Series.

Peter M. Avelar Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.

Mark Bavoso Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.

Douglas Brown
Senior Vice President

Rosalie Clough
Senior Vice President
and Director of Marketing

Richard Felegy
Senior Vice President

Edward F. Gaylor Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.

Robert S. Giambrone Senior Vice President of MSDW Services, MSDW
Senior Vice President Distributors and MSDW Trust and Director of MSDW Trust;
Vice President of the Morgan Stanley Dean Witter Funds,
TCW/DW Funds and Discover Brokerage Index Series.

Rajesh K. Gupta Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.

Kenton J. Hinchliffe Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds and Discover Brokerage Index Series.

Kevin Hurley Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.

Margaret Iannuzzi
Senior Vice President

Jenny Beth Jones Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.

<PAGE>

Michelle Kaufman Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.

John B. Kemp, III President of MSDW Distributors.
Senior Vice President

Anita H. Kolleeny Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.

Jonathan R. Page Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.

Ira N. Ross Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.

Guy G. Rutherfurd, Jr. Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.

Rochelle G. Siegel Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.

James Solloway
Senior Vice President

Jayne M. Stevlingson Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.

Paul D. Vance Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.

Elizabeth A. Vetell
Senior Vice President
and Director of Shareholder
Communication

James F. Willison Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.

Frank Bruttomesso First Vice President and Assistant Secretary of MSDW
First Vice President and Services; Assistant Secretary of MSDW Distributors, the Assistant
Secretary Morgan Stanley Dean Witter Funds, TCW/DW Funds and
Discover Brokerage Index Series.

Toby Burroughs
First Vice President

6
<PAGE>

Thomas F. Caloia First Vice President and Assistant Treasurer of
First Vice President MSDW Services; Assistant Treasurer of MSDW
and Assistant Distributors; Treasurer and Chief Financial and Accounting
Treasurer Officer of the Morgan Stanley Dean Witter Funds, TCW/DW
Funds and Discover Brokerage Index Series.

Thomas Chronert
First Vice President

Marilyn K. Cranney Assistant Secretary of DWR; First Vice President and
First Vice President Assistant Secretary of MSDW Services; Assistant
and Assistant Secretary Secretary of MSDW Distributors, the Morgan Stanley Dean Witter Funds,
TCW/DW Funds and Discover Brokerage Index Series.

Salvatore DeSteno First Vice President of MSDW Services.
First Vice President

Peter W. Gurman
First Vice President

Michael Interrante First Vice President and Controller of MSDW Services; First
Vice President Assistant Treasurer of MSDW Distributors; First Vice and
Controller President and Treasurer of MSDW Trust.

David Johnson
First Vice President

Stanley Kapica
First Vice President

Lou Anne D. McInnis First Vice President and Assistant Secretary of MSDW
First Vice President and Services; Assistant Secretary of MSDW Distributors, the Assistant
Secretary Morgan Stanley Dean Witter Funds, TCW/DW Funds and
Discover Brokerage Index Series.

Carsten Otto First Vice President and Assistant Secretary of MSDW
First Vice President Services; Assistant Secretary of MSDW Distributors, the
and Assistant Secretary Morgan Stanley Dean Witter Funds, TCW/DW Funds and Discover Brokerage
Index Series.

Ruth Rossi First Vice President and Assistant Secretary of MSDW
First Vice President and Services; Assistant Secretary of MSDW Distributors the Assistant
Secretary Morgan Stanley Dean Witter Funds, TCW/DW Funds and
Discover Brokerage Index Series.

7
<PAGE>

James P. Wallin
First Vice President

Robert Zimmerman
First Vice President

Dale Albright
Vice President

Joan G. Allman
Vice President

Andrew Arbenz
Vice President

Joseph Arcieri Vice President of various Morgan Stanley Dean Witter
Vice President Funds.

Armon Bar-Tur
Vice President

Raymond Basile
Vice President

Nancy Belza
Vice President

Maurice Bendrihem
Vice President and
Assistant Controller

Dale Boettcher
Vice President

Ronald Caldwell
Vice President

Joseph Cardwell
Vice President

Liam Carroll
Vice President

Philip Casparius
Vice President

Aaron Clark
Vice President

8
<PAGE>

William Connerly
Vice President

David Dineen
Vice President

Sheila Finnerty
Vice President

Jeffrey D. Geffen
Vice President

Sandra Gelpieryn
Vice President

Michael Geringer
Vice President

Gail Gerrity
Vice President

Ellen Gold
Vice President

Stephen Greenhut
Vice President

Matthew Haynes Vice President of various Morgan Stanley Dean Witter
Vice President Funds.

Peter Hermann Vice President of various Morgan Stanley Dean Witter
Vice President Funds.

David T. Hoffman
Vice President

Christopher Jones
Vice President

Kevin Jung
Vice President

Carol Espejo-Kane
Vice President

Nancy Kennedy
Vice President

9
<PAGE>

Doug Ketterer
Vice President

Paula LaCosta Vice President of various Morgan Stanley Dean Witter
Vice President Funds.

Kimberly LaHart
Vice President

Thomas Lawlor
Vice President

Todd Lebo Vice President and Assistant Secretary of MSDW
Vice President and Services; Assistant Secretary of MSDW Distributors, the
Assistant Secretary Morgan Stanley Dean Witter Funds, TCW/DW Funds and
Discover Brokerage Index Series.

Gerard J. Lian Vice President of various Morgan Stanley Dean Witter
Vice President Funds.

Nancy Login
Vice President

Sharon Loguercio
Vice President

Steven MacNamara
Vice President

Catherine Maniscalco Vice President of Morgan Stanley Dean Witter Natural
Vice President Resource Development Securities Inc.

Albert McGarity
Vice President

Teresa McRoberts Vice President of Morgan Stanley Dean Witter S&P 500
Vice President Select Fund.

Mark Mitchell
Vice President

Julie Morrone
Vice President

Mary Beth Mueller
Vice President

David Myers Vice President of Morgan Stanley Dean Witter Natural
Vice President Resource Development Securities Inc.

<PAGE>

James Nash
Vice President

Richard Norris
Vice President

George Paoletti Vice President of various Morgan Stanley Dean Witter
Vice President Funds.

Anne Pickrell Vice President of various Morgan Stanley Dean Witter
Vice President Funds.

Dawn Rorke
Vice President

John Roscoe Vice President of Morgan Stanley Dean Witter
Vice President Real Estate Fund.

Hugh Rose
Vice President

Robert Rossetti Vice President of various Morgan Stanley Dean Witter
Vice President Funds.

Carl F. Sadler
Vice President

Deborah Santaniello
Vice President

Patrice Saunders
Vice President

Howard A. Schloss Vice President of Morgan Stanley Dean Witter Federal
Vice President Securities Trust.

Peter J. Seeley Vice President of various Morgan Stanley Dean Witter
Vice President Funds.

Robert Stearns
Vice President

Naomi Stein
Vice President

Michael Strayhorn
Vice President

11
<PAGE>

Kathleen H. Stromberg Vice President of various Morgan Stanley Dean Witter
Vice President Funds.

Marybeth Swisher
Vice President

Stuart Taylor
Vice President

Michael Thayer
Vice President

Robert Vanden Assem
Vice President

Alice Weiss Vice President of various Morgan Stanley Dean Witter
Vice President Funds.

John Wong
Vice President

</TABLE>

Item 27. Principal Underwriters
----------------------

(a) Morgan Stanley Dean Witter Distributors Inc. ("MSDW Distributors"), a
Delaware corporation, is the principal underwriter of the Registrant. MSDW
Distributors is also the principal underwriter of the following investment
companies:

(1) Active Assets California Tax-Free Trust
(2) Active Assets Government Securities Trust
(3) Active Assets Money Trust
(4) Active Assets Tax-Free Trust
(5) Morgan Stanley Dean Witter Aggressive Equity Fund
(6) Morgan Stanley Dean Witter American Value Fund
(7) Morgan Stanley Dean Witter Balanced Growth Fund
(8) Morgan Stanley Dean Witter Balanced Income Fund
(9) Morgan Stanley Dean Witter California Tax-Free Daily Income Trust
(10) Morgan Stanley Dean Witter California Tax-Free Income Fund
(11) Morgan Stanley Dean Witter Capital Growth Securities
(12) Morgan Stanley Dean Witter Competitive Edge Fund, "Best Ideas Portfolio"
(13) Morgan Stanley Dean Witter Convertible Securities Trust
(14) Morgan Stanley Dean Witter Developing Growth Securities Trust
(15) Morgan Stanley Dean Witter Diversified Income Trust
(16) Morgan Stanley Dean Witter Dividend Growth Securities Inc.
(17) Morgan Stanley Dean Witter Equity Fund
(18) Morgan Stanley Dean Witter European Growth Fund Inc.
(19) Morgan Stanley Dean Witter Federal Securities Trust
(20) Morgan Stanley Dean Witter Financial Services Trust
(21) Morgan Stanley Dean Witter Fund of Funds
(22) Morgan Stanley Dean Witter Global Dividend Growth Securities

<PAGE>

(23) Morgan Stanley Dean Witter Global Utilities Fund
(24) Morgan Stanley Dean Witter Growth Fund
(25) Morgan Stanley Dean Witter Hawaii Municipal Trust
(26) Morgan Stanley Dean Witter Health Sciences Trust
(27) Morgan Stanley Dean Witter High Yield Securities Inc.
(28) Morgan Stanley Dean Witter Income Builder Fund
(29) Morgan Stanley Dean Witter Information Fund
(30) Morgan Stanley Dean Witter Intermediate Income Securities
(31) Morgan Stanley Dean Witter International SmallCap Fund
(32) Morgan Stanley Dean Witter Japan Fund
(33) Morgan Stanley Dean Witter Limited Term Municipal Trust
(34) Morgan Stanley Dean Witter Liquid Asset Fund Inc.
(35) Morgan Stanley Dean Witter Market Leader Trust
(36) Morgan Stanley Dean Witter Mid-Cap Dividend Growth Securities
(37) Morgan Stanley Dean Witter Mid-Cap Growth Fund
(38) Morgan Stanley Dean Witter Multi-State Municipal Series Trust
(39) Morgan Stanley Dean Witter Natural Resource Development Securities Inc.
(40) Morgan Stanley Dean Witter New York Municipal Money Market Trust
(41) Morgan Stanley Dean Witter New York Tax-Free Income Fund
(42) Morgan Stanley Dean Witter Pacific Growth Fund Inc.
(43) Morgan Stanley Dean Witter Precious Metals and Minerals Trust
(44) Morgan Stanley Dean Witter Prime Income Trust
(45) Morgan Stanley Dean Witter Real Estate Fund
(46) Morgan Stanley Dean Witter S&P 500 Index Fund
(47) Morgan Stanley Dean Witter S&P 500 Select Fund
(48) Morgan Stanley Dean Witter Short-Term Bond Fund
(49) Morgan Stanley Dean Witter Short-Term U.S. Treasury Trust
(50) Morgan Stanley Dean Witter Special Value Fund
(51) Morgan Stanley Dean Witter Strategist Fund
(52) Morgan Stanley Dean Witter Tax-Exempt Securities Trust
(53) Morgan Stanley Dean Witter Tax-Free Daily Income Trust
(54) Morgan Stanley Dean Witter U.S. Government Money Market Trust
(55) Morgan Stanley Dean Witter U.S. Government Securities Trust
(56) Morgan Stanley Dean Witter Utilities Fund
(57) Morgan Stanley Dean Witter Value-Added Market Series
(58) Morgan Stanley Dean Witter Value Fund
(59) Morgan Stanley Dean Witter Variable Investment Series
(60) Morgan Stanley Dean Witter World Wide Income Trust
(1) TCW/DW Emerging Markets Opportunities Trust
(2) TCW/DW Global Telecom Trust
(3) TCW/DW Income and Growth
(4) TCW/DW Latin American Growth Fund
(5) TCW/DW Mid-Cap Equity Trust
(6) TCW/DW North American Government Income Trust
(7) TCW/DW Small Cap Growth Fund
(8) TCW/DW Total Return Trust

13
<PAGE>

(b) The following information is given regarding directors and officers of MSDW
Distributors not listed in Item 26 above. The principal address of MSDW
Distributors is Two World Trade Center, New York, New York 10048. Other than
Mr. Purcell, who is a Trustee of the Registrant, none of the following persons
has any position or office with the Registrant.

Name Positions and Office with MSDW Distributors
- ---- -------------------------------------------
<S> <C>
Christine A. Edwards Executive Vice President, Secretary, Director and Chief Legal Officer.

Michael T. Gregg Vice President and Assistant Secretary.

James F. Higgins Director

Fredrick K. Kubler Senior Vice President, Assistant Secretary and Chief Compliance
Officer.

Philip J. Purcell Director

John Schaeffer Director

Charles Vadala Senior Vice President and Financial Principal.

</TABLE>

Item 28. Location of Accounts and Records
--------------------------------

All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the Rules thereunder
are maintained by the Investment Manager at its offices, except records
relating to holders of shares issued by the Registrant, which are maintained by
the Registrant's Transfer Agent, at its place of business as shown in the
prospectus.

Item 29. Management Services
-------------------

Registrant is not a party to any such management-related service
contract.

Item 30. Undertakings
------------

None.

14
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
Post-Effective Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York
and State of New York on the 29th day of March, 1999.

MORGAN STANLEY DEAN WITTER HAWAII MUNICIPAL TRUST

By: /s/ Barry Fink
--------------------------------
Barry Fink
Vice President and Secretary

Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 5 has been signed below by the following persons
in the capacities and on the dates indicated.

SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
(1) Principal Executive Officer President, Chief
Executive Officer,
Trustee and Chairman 3/29/99

By: /s/ Charles A. Fiumefreddo
----------------------
Charles A. Fiumefreddo

(2) Principal Financial Officer Treasurer and Principal
Accounting Officer

By: /s/ Thomas F. Caloia 3/29/99
----------------
Thomas F. Caloia

(3) Majority of the Trustees

Charles A. Fiumefreddo (Chairman)
Philip J. Purcell

By: /s/ Barry Fink 3/29/99
---------
Barry Fink
Attorney-in-Fact

Michael Bozic Manuel H. Johnson
Edwin J. Garn Michael E. Nugent
John R. Haire John L. Schroeder
Wayne E. Hedien

By: /s/ David M. Butowsky 3/29/99
-----------------
David M. Butowsky
Attorney-in-Fact

</TABLE>

<PAGE>

MORGAN STANLEY DEAN WITTER HAWAII MUNICIPAL TRUST
EXHIBIT INDEX

10. Consent of Independent Accountants.

14. Financial Data Schedule as of November 30, 1998.

<PAGE>

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 5 to the registration
statement on Form N-1A (the "Registration Statement") of our report dated
January 8, 1999, relating to the financial statements and financial highlights
of Morgan Stanley Dean Witter Hawaii Municipal Trust, formerly Dean Witter
Hawaii Municipal Trust, which appears in such Statement of Additional
Information, and to the incorporation by reference of our report into the
Prospectus which constitutes part of this Registration Statement. We also
consent to the references to us under the headings "Custodian and Independent
Accountants" and "Experts" in such Statement of Additional Information and to
the reference to us under the heading "Financial Highlights" in such Prospectus.

PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
March 29, 1999

<PAGE>

<ARTICLE> 6

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1998
<PERIOD-START> DEC-01-1997
<PERIOD-END> NOV-30-1998
<INVESTMENTS-AT-COST> 6,418,574
<INVESTMENTS-AT-VALUE> 6,699,791
<RECEIVABLES> 152,390
<ASSETS-OTHER> 200,278
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 7,052,459
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 54,919
<TOTAL-LIABILITIES> 54,919
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 6,673,618
<SHARES-COMMON-STOCK> 672,033
<SHARES-COMMON-PRIOR> 469,339
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 42,705
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 281,217
<NET-ASSETS> 6,997,540
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 278,272
<OTHER-INCOME> 0
<EXPENSES-NET> 11,085
<NET-INVESTMENT-INCOME> 267,187
<REALIZED-GAINS-CURRENT> 62,866
<APPREC-INCREASE-CURRENT> 102,683
<NET-CHANGE-FROM-OPS> 432,736
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (268,826)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 214,234
<NUMBER-OF-SHARES-REDEEMED> (26,039)
<SHARES-REINVESTED> 14,499
<NET-CHANGE-IN-ASSETS> 2,245,747
<ACCUMULATED-NII-PRIOR> 1,639
<ACCUMULATED-GAINS-PRIOR> (20,161)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 19,831
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 136,881
<AVERAGE-NET-ASSETS> 5,665,980
<PER-SHARE-NAV-BEGIN> 10.12
<PER-SHARE-NII> 0.49
<PER-SHARE-GAIN-APPREC> 0.29
<PER-SHARE-DIVIDEND> (0.49)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.41
<EXPENSE-RATIO> .20
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>