<PAGE>
Morgan Stanley Dean Witter Hawaii Municipal Trust
Two World Trade Center, New York, New York 10048
Letter to the Shareholders November 30, 1999
DEAR SHAREHOLDER:
The U.S. economy, led by consumer demand, continued to experience robust growth
during the twelve-month period ended November 30, 1999. As a result, the
fixed-income markets anticipated that the Federal Reserve Board would change
monetary policy and remove the liquidity provided during last year's
international economic difficulties. Between June and November the Fed changed
monetary policy, raising the federal-funds rate 75 basis points in three moves,
to 5.50 percent. By November long-term interest rates had risen to levels last
seen more than two years ago.
MUNICIPAL MARKET OVERVIEW
Long-term insured municipal index yields began 1999 near a record low of 5.00
percent. By the end of November, this index yield had increased 100 basis points
to 6.00 percent. Because the prices of bonds move inversely to changes in
interest rates, higher yields have led to significantly lower bond prices. The
increase in index yield translated to a 13 percent price decline for a generic
insured municipal bond with a 30-year maturity.
The municipal market outperformed U.S. Treasury bonds early in the year but
later gave ground. The ratio of municipal yields to Treasury yields declined
from 99 percent at the end of 1998 to 91 percent in May 1999, then reversed
itself by rising to 95 percent by the end of November. A declining ratio means
municipals have outperformed Treasuries, and a rising ratio indicates
underperformance by municipals. Over the past five years the ratio has ranged
from a high of 99 percent to a low of 82 percent.
Higher interest rates slowed municipal underwriting in 1999. New-issue volume
declined 20 percent in the first 11 months of 1999. Refunding activity, the most
interest-rate-sensitive component of supply, dropped 50 percent.
<PAGE>
Morgan Stanley Dean Witter Hawaii Municipal Trust
Letter to the Shareholders November 30, 1999, continued
[THE NARRATIVE AND/OR TABULAR INFORMATION BELOW IS A FAIR AND ACCURATE
DESCRIPTION OF GRAPHIC OR IMAGE MATERIAL OMITTED FOR THE
PURPOSE OF EDGAR FILING.]
30-YEAR BOND YIELDS 1994-1999
AAA AAA
Date Ins Tsy % Relationship Date Ins Tsy % Relationship
12/31/93 5.40% 6.34% 85.17% 12/31/96 5.60 6.63 84.46%
01/31/94 5.40 6.24 86.54% 01/31/97 5.70 6.79 83.95%
02/28/94 5.80 6.66 87.09% 02/28/97 5.65 6.80 83.09%
03/31/94 6.40 7.09 90.27% 03/31/97 5.90 7.10 83.10%
04/29/94 6.35 7.32 86.75% 04/30/97 5.75 6.94 82.85%
05/31/94 6.25 7.43 84.12% 05/30/97 5.65 6.91 81.77%
06/30/94 6.50 7.61 85.41% 06/30/97 5.60 6.78 82.60%
07/29/94 6.25 7.39 84.57% 07/30/97 5.30 6.30 84.13%
08/31/94 6.30 7.45 84.56% 08/31/97 5.50 6.61 83.21%
09/30/94 6.55 7.81 83.87% 09/30/97 5.40 6.40 84.38%
10/31/94 6.75 7.96 84.80% 10/31/97 5.35 6.15 86.99%
11/30/94 7.00 8.00 87.50% 11/30/97 5.30 6.05 87.60%
12/30/94 6.75 7.88 85.66% 12/31/97 5.15 5.92 86.99%
01/31/95 6.40 7.70 83.12% 01/31/98 5.15 5.80 88.79%
02/28/95 6.15 7.44 82.66% 02/28/98 5.20 5.92 87.84%
03/31/95 6.15 7.43 82.77% 03/31/98 5.25 5.93 88.53%
04/28/95 6.20 7.34 84.47% 04/30/98 5.35 5.95 89.92%
05/31/95 5.80 6.66 87.09% 05/29/98 5.20 5.80 89.66%
06/30/95 6.10 6.62 92.15% 06/30/98 5.20 5.65 92.04%
07/31/95 6.10 6.86 88.92% 07/31/98 5.18 5.71 90.72%
08/31/95 6.00 6.66 90.09% 08/31/98 5.03 5.27 95.45%
09/29/95 5.95 6.48 91.82% 09/30/98 4.95 5.00 99.00%
10/31/95 5.75 6.33 90.84% 10/31/98 5.05 5.16 97.87%
11/30/95 5.50 6.14 89.58% 11/30/98 5.00 5.06 98.81%
12/29/95 5.35 5.94 90.07% 12/31/98 5.05 5.10 99.02%
01/31/96 5.40 6.03 89.55% 01/31/99 5.00 5.09 98.23%
02/29/96 5.60 6.46 86.69% 02/28/99 5.10 5.58 91.40%
03/29/96 5.85 6.66 87.84% 03/31/99 5.15 5.63 91.47%
04/30/96 5.95 6.89 86.36% 04/30/99 5.20 5.66 91.87%
05/31/96 6.05 6.99 86.55% 05/31/99 5.30 5.83 90.91%
06/28/96 5.90 6.89 85.63% 06/30/99 5.47 5.96 91.78%
07/31/96 5.85 6.97 83.93% 07/31/99 5.55 6.10 90.98%
08/30/96 5.90 7.11 82.98% 08/31/99 5.75 6.06 94.88%
09/30/96 5.70 6.93 82.25% 09/30/99 5.85 6.05 96.69%
10/31/96 5.65 6.64 85.09% 10/31/99 6.03 6.16 97.89%
11/29/96 5.50 6.35 86.61% 11/30/99 6.00 6.29 95.39%
Source: Municipal Market Data-A Division of Thomson Financial Municipal Group
and Bloomberg L.P.
PERFORMANCE AND PORTFOLIO
In the rising interest-rate environment, Morgan Stanley Dean Witter Hawaii
Municipal Trust's net asset value (NAV) fell from $10.41 to $9.47 per share
during the fiscal year ended November 30, 1999. Based on this change plus
reinvestment of tax-free dividends totaling $0.46 per share and long-term
capital gains of $0.0609 per share, the Fund's total return was -4.20 percent.
Over the same period the Lehman Brothers Municipal Bond Index and the Lipper
Hawaii Municipal Debt Funds Average posted total returns of -1.07 percent and
- -2.93 percent, respectively.
Please note that the Fund's investment manager assumed all operating expenses
(except for brokerage and 12b-1 fees) and waived the investment management fee
to the extent that they exceed 55 basis points (.55 percent) of average net
assets for the 1999 calendar year. The investment manager has agreed to cap
expenses at 55 basis points for the 2000 calendar year as well.
2
<PAGE>
Morgan Stanley Dean Witter Hawaii Municipal Trust
Letter to the Shareholders November 30, 1999, continued
At the end of November, Morgan Stanley Dean Witter Hawaii Municipal Trust's net
assets of $7 million were diversified among 11 long-term sectors and 24 credits,
with in-state credits accounting for 92 percent of the portfolio. The
portfolio's average maturity was 20 years and its average duration, a measure of
sensitivity to interest-rate changes, was 10 years. The accompanying charts
provide current information on the portfolio's credit quality and sector
distribution. Optional call provisions by year and their respective cost yields
are also charted.
LOOKING AHEAD
The Federal Reserve Board's rate hikes during the fiscal year confirmed its
previously disclosed bias of becoming less accommodative in the face of
continued strong domestic economic growth. We anticipate that the central bank
may raise short-term interest rates further. However, we believe municipal bonds
continue to offer long-term investors considerable value, especially in relation
to Treasuries.
We appreciate your ongoing support of Morgan Stanley Dean Witter Hawaii
Municipal Trust and look forward to continuing to serve your investment needs.
Very truly yours,
/s/ Charles A. Fiumefreddo /s/ Mitchell M. Merin
CHARLES A. FIUMEFREDDO MITCHELL M. MERIN
Chairman of the Board President
3
<PAGE>
Morgan Stanley Dean Witter Hawaii Municipal Trust
Letter to the Shareholders November 30, 1999, continued
LARGEST SECTORS AS OF NOVEMBER 30, 1999
(% OF NET ASSETS)
GENERAL OBLIGATION 23%
HOSPITAL 14%
MORTGAGE 13%
IDR/PCR* 12%
TRANSPORTATION 12%
WATER & SEWER 7%
*INDUSTRIAL DEVELOPMENT/POLLUTION CONTROL REVENUE
PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE.
CREDIT RATINGS AS OF NOVEMBER 30, 1999
(% OF TOTAL LONG-TERM PORTFOLIO)
Aaa or AAA 73%
Aa or AA 2%
A or A 15%
Baa or BBB 10%
AS MEASURED BY MOODY'S INVESTORS SERVICE, INC.
OR STANDARD & POOR'S CORP.
PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE.
4
<PAGE>
Morgan Stanley Dean Witter Hawaii Municipal Trust
Letter to the Shareholders November 30, 1999, continued
CALL AND COST (BOOK) YIELD STRUCTURE*
NOVEMBER 30, 1999
PERCENT CALLABLE
YEARS BONDS
CALLABLE %
- -------- ---
2000 0
2001 5
2002 0
2003 0
2004 7
2005 13
2006 13
2007 11
2008 23
2009 25
2010+ 3
Weighted Average Call Protection: 7 Years
COST (BOOK) YIELD**
CALLABLE %
- -------- ---
2000 0
2001 4.5%
2002 0
2003 0
2004 5.7%
2005 5.7%
2006 6.1%
2007 5.4%
2008 5.3%
2009 5.3%
2010+ 5.4%
Weighted Average Book Yield: 5.4%
- ---------------
* % Based on Long-Term Portfolio
** Cost or "book" yield is the annual income earned on a portfolio investment
based on its original purchase price before Fund operating expenses. For
example, the Fund earned a book yield of 4.5% on 5% of the bonds in the
long-term portfolio that are callable in 2001.
Portfolio structure is subject to change.
5
<PAGE>
Morgan Stanley Dean Witter Hawaii Municipal Trust
Fund Performance November 30, 1999
GROWTH OF $10,000
($ in Thousands)
Date FUND LEHMAN (4) Lipper (5)
---- ---- ---------- ----------
June 16, 1995 $ 9,700 $10,000 $10,000
November 30, 1995 $10,108 $10,610 $10,541
November 30, 1996 $10,678 $11,234 $11,100
November 30, 1997 $11,418 $12,039 $11,792
November 30, 1998 $12,317 $12,974 $12,619
November 30, 1999 $11,799(3) $12,835 $12,249
Past performance is not predictive of future returns.
Average Annual Total Returns
- ----------------------------
Period Ended 11/30/99
- -----------------------
1 Year (4.20)%(1) (7.08)%(2)
Since Inception 4.49 %(1) 3.78 %(2)
- ---------------
(1) Figure shown assumes reinvestment of all distributions and does not reflect
the deduction of any sales charges.
(2) Figure shown assumes reinvestment of all distributions and the deduction of
the maximum applicable front-end sales charge (3%). See the Fund's current
prospectus for complete details on fees and sales charges.
(3) Closing value including the deduction of a 3% front-end sales charge,
assuming a complete redemption on November 30, 1999.
(4) 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 or BBB, as rated by Moody's Investor Service, Inc. or
Standard & Poor's Corp., respectively. The Index does not include any
expenses, fees or charges. The Index is unmanaged and should not be
considered an investment.
(5) The Lipper HI Municipal Debt Funds Average tracks the performance of the
funds that limit assets to those securities which are exempt from taxation
in HI state (double tax exempt) or a specified city in HI (triple
tax-exempt) as reported by Lipper, Inc.
6
<PAGE>
Morgan Stanley Dean Witter Hawaii Municipal Trust
Portfolio of Investments November 30, 1999
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------- ---------- ----------- -------------
<S> <C> <C> <C> <C>
HAWAII TAX-EXEMPT MUNICIPAL BONDS* (91.8%)
General Obligation (22.5%)
Hawaii,
$ 200 1996 Ser CM (FGIC) ...................................................... 6.00 % 12/01/12 $ 212,068
200 1997 Ser CN (FGIC) ...................................................... 5.25 03/01/17 186,436
200 1997 Ser CP (FGIC) ...................................................... 5.00 10/01/17 179,882
300 Hawaii County, 1999 Ser A (FSA) ........................................... 5.50 05/15/17 289,872
300 Honolulu City & County, Ser 1999 B (FGIC) ................................. 5.00 07/01/22 262,134
180 Kauai County, Public Improvement 1997 Ser B (MBIA) ........................ 5.25 08/01/16 169,132
250 Maui County, 1998 Ser A (FGIC) ............................................ 5.375 03/01/17 237,965
100 Puerto Rico, Public Improvement Ser 1996 .................................. 5.50 07/01/17 96,288
------ ----------
1,730 1,633,777
------ ----------
Educational Facilities Revenue (2.5%)
200 Puerto Rico Industrial Tourist, Educational, Medical & Environmental
------ Control Facilities Financing Authority, Inter American University of
Puerto Rico 1998 Ser A (MBIA) ........................................... 5.00 10/01/22 178,712
----------
Electric Revenue (1.9%)
150 Puerto Rico Electric Power Authority, Power Ser X ......................... 5.50 07/01/25 140,431
------ ----------
Hospital Revenue (14.1%)
Hawaii Department of Budget & Finance,
300 Kaiser Permanente Refg Ser 1991 A ....................................... 6.25 03/01/21 296,145
200 Kapiolani Health Care Ser 1996 .......................................... 6.25 07/01/21 197,422
100 Queens Health 1996 Ser A ................................................ 5.875 07/01/11 101,508
500 Wilcox Memorial Hospital Ser 1998 ....................................... 5.35 07/01/18 428,110
------ ----------
1,100 1,023,185
------ ----------
Industrial Development/Pollution Control Revenue (12.3%)
Hawaii Department of Budget & Finance,
500 Hawaiian Electric Co Ser 1999 B (AMT) (AMBAC) ........................... 5.75 12/01/18 484,290
100 Hawaiian Electric Co Ser 1995 A (AMT) (MBIA) ............................ 6.60 01/01/25 104,380
200 Hawaiian Electric Co Ser 1996 A (AMT) (MBIA) ............................ 6.20 05/01/26 200,458
100 Puerto Rico Ports Authority, American Airlines Inc 1996 Ser A (AMT) ....... 6.25 06/01/26 100,189
------ ----------
900 889,317
------ ----------
Mortgage Revenue - Multi-Family (8.9%)
125 Hawaii Housing Finance & Development Corporation, University of
Hawaii Faculty Ser 1995 (AMBAC) ......................................... 5.65 10/01/16 123,018
500 Honolulu, Waipahu Towers GNMA Collateralized 1995 Ser A (AMT) ............. 6.90 06/20/35 522,980
------ ----------
625 645,998
------ ----------
Mortgage Revenue - Single Family (4.0%)
300 Hawaii Housing Finance & Development Corporation, Purchase
====== 1994 Ser B (MBIA) ....................................................... 5.90 07/01/27 290,079
----------
Public Facilities Revenue (3.0%)
250 Hawaii, Kapolei State Office Building 1998 Ser A COPs (AMBAC) ............. 5.00 05/01/18 218,807
------ ----------
</TABLE>
See Notes to Financial Statements
7
<PAGE>
Morgan Stanley Dean Witter Hawaii Municipal Trust
Portfolio of Investments November 30, 1999, continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
Transportation Facilities Revenue (11.8%)
Hawaii,
$ 200 Airports Third Refg Ser 1994 (AMT) (AMBAC) ......................... 5.75 % 07/01/09 $ 204,382
200 Harbor Ser 1997 (AMT) (MBIA) ....................................... 5.75 07/01/17 194,602
500 Highway Ser 1998 (FGIC) ............................................ 5.00 07/01/16 454,750
------ ----------
900 853,734
------ ----------
Water & Sewer Revenue (6.6%)
150 Honolulu Board of Water Supply, Ser 1996 ............................. 5.80 07/01/16 150,092
Honolulu City & County,
260 Wastewater Jr Ser 1998 (FGIC) ...................................... 5.25 07/01/17 242,182
100 Wastewater Sr Ser 1998 (FGIC) ...................................... 4.75 07/01/18 85,704
------ ----------
510 477,978
------ ----------
Other Revenue (4.2%)
350 Hawaiian Department of Home Lands, Refg Ser 1999 ..................... 4.45 07/01/11 307,982
------ ----------
$7,015 TOTAL HAWAII TAX-EXEMPT MUNICIPAL BONDS (Identified Cost $7,023,769) (a) ........... 91.8% 6,660,000
======
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES ..................................... 8.2 597,378
----------
NET ASSETS ......................................................................... 100.0% $7,257,378
==========
</TABLE>
- ---------------
AMT Alternative Minimum Tax.
COPs Certificates of Participation.
* Puerto Rico issues represent 7% of net assets.
(a) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $9,311 and the
aggregate gross unrealized depreciation is $373,080, resulting in net
unrealized depreciation of $363,769.
Bond Insurance:
AMBAC AMBAC Assurance Corporation.
FGIC Financial Guaranty Insurance Company.
FSA Financial Security Assurance Inc.
MBIA Municipal Bond Investors Assurance Corporation.
See Notes to Financial Statements
8
<PAGE>
Morgan Stanley Dean Witter Hawaii Municipal Trust
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
November 30, 1999
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $7,023,769) ............................. $6,660,000
Cash ....................................................... 450,499
Interest receivable ........................................ 133,776
Deferred organizational expenses ........................... 6,514
Receivable from affiliate .................................. 24,959
Prepaid expenses ........................................... 15,089
----------
TOTAL ASSETS ............................................ 7,290,837
----------
LIABILITIES:
Payable for:
Dividends to shareholders ............................... 3,734
Plan of distribution fee ................................ 1,086
Accrued expenses and other payables ........................ 28,639
----------
TOTAL LIABILITIES ....................................... 33,459
----------
NET ASSETS .............................................. $7,257,378
==========
COMPOSITION OF NET ASSETS:
Paid-in-capital ............................................ $7,650,435
Net unrealized depreciation ................................ (363,769)
Accumulated net realized loss .............................. (29,288)
----------
NET ASSETS .............................................. $7,257,378
==========
NET ASSET VALUE PER SHARE,
766,704 shares outstanding
(unlimited shares authorized of $.01 par value) .......... $9.47
=====
MAXIMUM OFFERING PRICE PER SHARE,
(net asset value plus 3.09% of net asset value)* ......... $9.76
=====
</TABLE>
- ------------------
* On sales of $100,000 or more the offering price is reduced.
See Notes to Financial Statements
9
<PAGE>
Morgan Stanley Dean Witter Hawaii Municipal Trust
Financial Statements, continued
STATEMENT OF OPERATIONS
For the year ended November 30, 1999
<TABLE>
<S> <C>
NET INVESTMENT INCOME:
INTEREST INCOME ............................... $ 378,543
----------
EXPENSES
Professional fees ............................. 71,894
Shareholder reports and notices ............... 41,428
Investment management fee ..................... 26,168
Plan of distribution fee ...................... 14,421
Organizational expenses ....................... 11,997
Trustees' fees and expenses ................... 11,812
Custodian fees ................................ 875
Other ......................................... 4,267
----------
TOTAL EXPENSES ............................. 182,862
Less: amounts waived/reimbursed ............... (142,968)
Less: expense offset .......................... (872)
----------
NET EXPENSES ............................... 39,022
----------
NET INVESTMENT INCOME ...................... 339,521
----------
NET REALIZED AND UNREALIZED LOSS:
Net realized loss ............................. (29,288)
Net change in unrealized depreciation ......... (644,986)
----------
NET LOSS ................................... (674,274)
----------
NET DECREASE .................................. $ (334,753)
==========
</TABLE>
See Notes to Financial Statements
10
<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, 1999 NOVEMBER 30, 1998
------------------- ------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income ........................................ $ 339,521 $ 267,187
Net realized gain (loss) ..................................... (29,288) 62,866
Net change in unrealized appreciation (depreciation) ......... (644,986) 102,683
---------- ----------
NET INCREASE (DECREASE) ................................... (334,753) 432,736
---------- ----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ........................................ (339,521) (268,826)
Net realized gain ............................................ (42,705) -
---------- ----------
TOTAL DIVIDENDS AND DISTRIBUTIONS ......................... (382,226) (268,826)
---------- ----------
Net increase from transactions in shares of beneficial
interest ................................................... 976,817 2,081,837
---------- ----------
NET INCREASE .............................................. 259,838 2,245,747
NET ASSETS:
Beginning of period .......................................... 6,997,540 4,751,793
---------- ----------
END OF PERIOD ............................................. $7,257,378 $6,997,540
========== ==========
</TABLE>
See Notes to Financial Statements
11
<PAGE>
Morgan Stanley Dean Witter Hawaii Municipal Trust
Notes to Financial Statements November 30, 1999
1. ORGANIZATION AND ACCOUNTING POLICIES
Morgan Stanley Dean Witter Hawaii Municipal Trust (the "Fund") is registered
under the Investment Company Act of 1940, as amended (the "Act"), as a
non-diversified, open-end management investment company. The Fund's investment
objective is to provide a high level of current income which is exempt from both
federal and State of Hawaii income taxes consistent with the preservation of
capital. The Fund was organized as a Massachusetts business trust on March 14,
1995 and commenced operations on June 16, 1995.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual results could differ from
those estimates.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS - Portfolio securities are valued by an outside
independent pricing service approved by the Trustees. The pricing service has
informed the Fund that in valuing the portfolio securities, it uses both a
computerized matrix of tax-exempt securities and evaluations by its staff, in
each case based on information concerning market transactions and quotations
from dealers which reflect the bid side of the market each day. The portfolio
securities are thus valued by reference to a combination of transactions and
quotations for the same or other securities believed to be comparable in
quality, coupon, maturity, type of issue, call provisions, trading
characteristics and other features deemed to be relevant. Short-term debt
securities having a maturity date of more than sixty days at time of purchase
are valued on a mark-to-market basis until sixty days prior to maturity and
thereafter at amortized cost based on their value on the 61st day. Short-term
debt securities having a maturity date of sixty days or less at the time of
purchase are valued at amortized cost.
B. ACCOUNTING FOR INVESTMENTS - Security transactions are accounted for on the
trade date (date the order to buy or sell is executed). Realized gains and
losses on security transactions are determined by the identified cost method.
Discounts are accreted and premiums are amortized over the life of the
respective securities. Interest income is accrued daily.
C. FEDERAL INCOME TAX STATUS - It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable and nontaxable income to its
shareholders. Accordingly, no federal income tax provision is required.
12
<PAGE>
Morgan Stanley Dean Witter Hawaii Municipal Trust
Notes to Financial Statements November 30, 1999, continued
D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS - The Fund records dividends and
distributions to its shareholders on the record date. The amount of dividends
and distributions from net investment income and net realized capital gains are
determined in accordance with federal income tax regulations which may differ
from generally accepted accounting principles. These "book/tax" differences are
either considered temporary or permanent in nature. To the extent these
differences are permanent in nature, such amounts are reclassified within the
capital accounts based on their federal tax-basis treatment; temporary
differences do not require reclassification. Dividends and distributions which
exceed net investment income and net realized capital gains for financial
reporting purposes but not for tax purposes are reported as dividends in excess
of net investment income or distributions in excess of net realized capital
gains. To the extent they exceed net investment income and net realized capital
gains for tax purposes, they are reported as distributions of paid-in-capital.
E. ORGANIZATIONAL EXPENSES - Morgan Stanley Dean Witter Advisors Inc. (the
"Investment Manager"), paid the organizational expenses of the Fund in the
amount of approximately $60,000 of which $17,479 have been reimbursed. The
balance was absorbed by the Investment Manager. Such expenses have been deferred
and are being amortized on the straight-line method over a period not to exceed
five years from the commencement of operations.
2. INVESTMENT MANAGEMENT AGREEMENT
Pursuant to an Investment Management Agreement, the Fund pays the Investment
Manager a management fee, calculated daily and payable monthly, by applying the
annual rate of 0.35% to the Fund's daily net assets.
Under the terms of the Agreement, in addition to managing the Fund's
investments, the Investment Manager maintains certain of the Fund's books and
records and furnishes, at its own expense, office space, facilities, equipment,
clerical, bookkeeping and certain legal services and pays the salaries of all
personnel, including officers of the Fund who are employees of the Investment
Manager. The Investment Manager also bears the cost of telephone services, heat,
light, power and other utilities provided to the Fund.
Effective January 1, 1999 through December 31, 2000, the Investment Manager has
agreed to assume all operating expenses to the extent that such expenses on an
annualized basis exceed 0.55% of the daily net assets of the Fund. Prior to
January 1, 1999, the Investment Manager had assumed all operating expenses
(excluding plan of distribution fees) and waived the compensation provided for
in its Investment Management Agreement.
13
<PAGE>
Morgan Stanley Dean Witter Hawaii Municipal Trust
Notes to Financial Statements November 30, 1999, 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, 1999, the distribution
fee was accrued at the annual rate of 0.19%.
The Distributor has informed the Fund that for the year ended November 30, 1999,
it received approximately $38,200 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 TRANACTIONS 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, 1999 aggregated
$1,895,369 and $1,251,920, respectively.
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent.
5. FEDERAL INCOME TAX STATUS
At November 30, 1999, the Fund had a net capital loss carryover of approximately
$29,000 which will be available through November 30, 2007 to offset future
capital gains to the extent provided by regulations.
14
<PAGE>
Morgan Stanley Dean Witter Hawaii Municipal Trust
Notes to Financial Statements November 30, 1999, continued
6. 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, 1999 NOVEMBER 30, 1998
---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
Sold ................................................ 150,939 $1,528,240 214,234 $2,200,117
Reinvestment of dividends and distributions ......... 18,874 189,061 14,499 149,204
------- ---------- ------- ----------
169,813 1,717,301 228,733 2,349,321
Repurchased ......................................... (75,142) (740,484) (26,039) (267,484)
------- ---------- ------- ----------
Net increase ........................................ 94,671 $ 976,817 202,694 $2,081,837
======= ========== ======= ==========
</TABLE>
15
<PAGE>
Morgan Stanley Dean Witter Hawaii Municipal Trust
Financial Highlights
Selected ratios and per share data for a share of beneficial interest
outstanding thoughout each period:
<TABLE>
<CAPTION>
FOR THE PERIOD ENDED NOVEMBER 30
-----------------------------------------------------------------
1999 1998 1997 1996
-------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
SELECTED PER SHARE DATA:
Net asset value, beginning of period ................... $ 10.41 $ 10.12 $ 9.95 $ 9.91
------- ------- ------- -------
Income (loss) from investments operations:
Net investment income ................................. 0.46 0.49 0.50 0.50
Net realized and unrealized gain (loss) ............... (0.88) 0.29 0.17 0.04
------- ------- ------- -------
Total income (loss) from investment operations ......... (0.42) 0.78 0.67 0.54
------- ------- ------- -------
Less dividends and distributions from:
Net investment income ................................. (0.46) (0.49) (0.50) (0.50)
Net realized gain ..................................... (0.06) - - -
------- ------- ------- -------
Total dividends and distributions ...................... (0.52) (0.49) (0.50) (0.50)
------- ------- ------- -------
Net asset value, end of period ......................... $ 9.47 $ 10.41 $ 10.12 $ 9.95
======= ======= ======= =======
TOTAL RETURN+ ......................................... (4.20)% 7.87% 6.93% 5.64%
RATIOS TO AVERAGE NET ASSETS:
Expenses ............................................... 0.52 %(3) 0.20%(3) 0.19%(3) 0.19%(3)
Net investment income .................................. 4.54 %(3) 4.72%(3) 5.00%(3) 5.09%(3)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ................ $7,257 6,998 $4,752 $3,225
Portfolio turnover rate ................................ 18 % 26% 13% 51%
<CAPTION>
FOR THE PERIOD
JUNE 16, 1995*
THROUGH
NOVEMBER 30, 1995
----------------------
<S> <C>
SELECTED PER SHARE DATA:
Net asset value, beginning of period ................... $ 9.70
------
Income (loss) from investments operations:
Net investment income ................................. 0.19
Net realized and unrealized gain (loss) ............... 0.21
------
Total income (loss) from investment operations ......... 0.40
------
Less dividends and distributions from:
Net investment income ................................. (0.19)
Net realized gain ..................................... -
------
Total dividends and distributions ...................... (0.19)
------
Net asset value, end of period ......................... $ 9.91
======
TOTAL RETURN+ ......................................... 4.21%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ............................................... 0.20%(2)(3)
Net investment income .................................. 4.69%(2)(3)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ................ $ 1,510
Portfolio turnover rate ................................ 14%(1)
</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:
<PAGE>
<TABLE>
<CAPTION>
EXPENSE NET INVESTMENT EXPENSE
PERIOD ENDED: RATIO INCOME RATIO OFFSET
- ---------------------------- ----------- ---------------- ------------
<S> <C> <C> <C>
November 30, 1999 .......... 2.45% 2.61% 0.01%
November 30, 1998 .......... 2.42% 2.50% 0.01%
November 30, 1997 .......... 2.95% 2.24% 0.01%
November 30, 1996* ......... 2.69% 2.59% 0.03%
November 30, 1995* ......... 2.70% 2.19% 0.10%
</TABLE>
- -------------
* After application of the Fund's state expense limitation.
See Notes to Financial Statements
16
<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") at November 30, 1999, 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 four 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, 1999 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 11, 2000
1999 FEDERAL TAX NOTICE (unaudited)
During the year ended November 30, 1999, the Fund paid to shareholders
$0.46 per share from tax-exempt income.
For the year ended November 30, 1999, the Fund paid to shareholders $0.06
per share from long-term capital gains.
17
<PAGE>
TRUSTEES
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
Wayne E. Hedien
Dr. Manuel H. Johnson
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Mitchell M. Merin
President
Barry Fink
Vice President, Secretary and General Counsel
James F. Willison
Vice President
Thomas F. Caloia
Treasurer
TRANSFER AGENT
Morgan Stanley Dean Witter Trust FSB
Harborside Financial Center - Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
Morgan Stanley Dean Witter Advisors Inc.
Two World Trade Center
New York, New York 10048
This report is submitted for the general information of shareholders of the
Fund. For more detailed information about the Fund, its officers and trustees,
fees, expenses and other pertinent information, please see the prospectus of
the Fund.
This report is not authorized for distribution to prospective investors in the
Fund unless preceded or accompanied by an effective prospectus. Read the
prospectus carefully before investing.
MORGAN STANLEY
DEAN WITTER
HAWAII MUNICIPAL
TRUST
[GRAPHIC OMITTED]
ANNUAL REPORT
NOVEMBER 30, 1999
