<PAGE>
MORGAN STANLEY DEAN WITTER LIMITED TERM Two World Trade Center,
MUNICIPAL TRUST New York, New York 10048
LETTER TO THE SHAREHOLDERS March 31, 1999
DEAR SHAREHOLDER:
Continued economic turmoil in Asia and Latin America, a currency crisis in
Russia and the orchestrated bailout of a major U.S. hedge fund contributed to
the volatility in the global financial markets during the second half of 1998.
These events precipitated a "flight to quality" demand for U.S. Treasury
securities. U.S. Treasury bond yields reached a 30-year low in October 1998.
During the fourth quarter, the Federal Reserve Board sought to restore
stability to the financial markets by cutting the federal-funds rate 75 basis
points in three moves, from
5.50 percent to 4.75 percent.
U.S. economic growth and employment remained strong in the first quarter of
1999. Although inflation remained subdued, concern developed that the Federal
Reserve might become more restrictive if the pace of growth did not slacken.
MUNICIPAL MARKET CONDITIONS
Municipal yields did not decline as much as U.S. Treasury yields during 1998.
At the end of December intermediate-term municipal bond yields, as measured by
10-year AA-rated general obligation bonds, were 4.25 percent. This level was
only 30 basis points lower than at the beginning of the year. In contrast,
10-year Treasury note yields fell more than 100 basis points, from 5.74 percent
to 4.65 percent. When Treasury yields reversed direction in the first quarter
of 1999 and rose nearly 60 basis points, the volatility of municipals again
lagged Treasuries and intermediate-term yields rose only 10 basis points, to
4.35 percent.
The modest rally of municipals during 1998 created a favorable relative value
relationship versus Treasuries. Municipals underperformed Treasuries, and the
ratio of intermediate municipal yields to Treasury yields climbed to 91 percent
by year-end. The higher the ratio, the more attractive municipals are relative
to Treasuries. The ratio declined to 83 percent in the first quarter of 1999 as
municipals outperformed Treasuries. The high-to-low range of municipal/Treasury
yield ratios for the past five years has averaged 87 to 74 percent annually.
<PAGE>
MORGAN STANLEY DEAN WITTER LIMITED TERM MUNICIPAL TRUST
LETTER TO THE SHAREHOLDERS March 31, 1999, continued
In addition to lagging the Treasury "flight to quality" rally in 1998,
municipals also experienced a glut of new-issue supply. Underwriting volume of
$284 billion was up 28 percent from the prior year, approaching 1993's record
level. Issuers actively refinanced at lower interest rates and refundings were
29 percent of the total volume. New-money issues set a record and included the
largest single municipal underwriting, of $3.3 billion for the Long Island
Power Authority. In the first three months of 1999 volume was
20 percent lower than it was during the first quarter of last year.
PERFORMANCE
Morgan Stanley Dean Witter Limited Term Municipal Trust's total return for the
fiscal year ended March 31, 1999, was 4.68 percent. Tax-free dividends totaling
approximately $0.39 per share were paid during the period. In addition, the
Fund's net asset value increased from $10.26 to $10.34 per share.
[LINE CHART]
Date AAA Ins Tsy % Relationship
12/31/93 4.58% 5.79% 79.10%
01/31/94 4.46 5.64 79.08%
02/28/94 4.75 6.13 77.49%
03/31/94 5.42 6.74 80.42%
04/29/94 5.54 7.04 78.69%
05/31/94 5.44 7.15 76.08%
06/30/94 5.51 7.32 75.27%
07/29/94 5.36 7.11 75.39%
08/31/94 5.39 7.17 75.17%
09/30/94 5.60 7.60 73.68%
10/31/94 5.79 7.81 74.14%
11/30/94 6.07 7.91 76.74%
12/30/94 5.92 7.82 75.70%
01/31/95 5.73 7.58 75.59%
02/28/95 5.42 7.20 75.28%
03/31/95 5.34 7.20 74.17%
04/28/95 5.37 7.05 76.17%
05/31/95 5.06 6.28 80.57%
06/30/95 5.17 6.20 83.39%
07/31/95 5.06 6.43 78.69%
08/31/95 4.96 6.28 78.98%
09/29/95 4.90 6.18 79.29%
10/31/95 4.83 6.02 80.23%
11/30/95 4.75 5.74 82.75%
12/29/95 4.74 5.57 85.10%
01/31/96 4.69 5.58 84.05%
02/29/96 4.71 6.10 77.21%
03/29/96 5.02 6.33 79.30%
04/30/96 5.11 6.67 76.61%
05/31/96 5.24 6.85 76.50%
06/28/96 5.21 6.71 77.65%
07/31/96 5.16 6.79 75.99%
08/30/96 5.17 6.94 74.50%
09/30/96 5.08 6.70 75.82%
10/31/96 5.00 6.34 78.86%
11/29/96 4.79 6.04 79.30%
12/31/96 4.88 6.42 76.01%
01/31/97 5.04 6.49 77.66%
02/28/97 4.96 6.55 75.73%
03/31/97 5.17 6.90 74.93%
04/30/97 5.16 6.72 76.79%
05/30/97 5.01 6.66 75.23%
06/30/97 4.92 6.50 75.69%
07/30/97 4.61 6.01 76.71%
08/31/97 4.83 6.34 76.18%
09/30/97 4.70 6.10 77.05%
10/31/97 4.64 5.83 79.59%
11/30/97 4.69 5.87 79.90%
12/31/97 4.52 5.74 78.75%
01/31/98 4.42 5.51 80.22%
02/28/98 4.45 5.62 79.18%
03/31/98 4.55 5.65 80.53%
04/30/98 4.65 5.67 82.01%
05/29/98 4.55 5.55 81.98%
06/30/98 4.50 5.45 82.57%
07/31/98 4.54 5.49 82.70%
08/31/98 4.39 4.98 88.15%
09/30/98 4.25 4.42 96.15%
10/31/98 4.24 4.61 92.07%
11/30/98 4.29 4.71 91.01%
12/31/98 4.24 4.65 91.22%
01/31/99 4.13 4.65 88.80%
02/28/99 4.23 5.29 80.01%
03/31/99 4.34 5.24 82.79%
2
<PAGE>
MORGAN STANLEY DEAN WITTER LIMITED TERM MUNICIPAL TRUST
LETTER TO THE SHAREHOLDERS March 31, 1999, continued
[LINE CHART]
GROWTH OF $10,000
Date Total Lehman Lipper
---- ----- ------ ------
July 12, 1993 $10,000 $10,000 $10,000
March 31, 1994 $9,891 $9,928 $9,979
March 31, 1995 $10,287 $10,674 $10,516
March 31, 1996 $11,153 $11,621 $11,243
March 31, 1997 $11,560 $12,227 $11,751
March 31, 1998 $12,450 $13,496 $12,745
March 31, 1999 $13,033(3) $14,342 $13,408
Average Annual Total Returns
1 Year 5 Years Life of Fund
------ ------- ------------
4.68(1) 5.67(1) 4.74(1)
Past performance is not predicitive of future returns
- --------------
(1) Figure shown assumes reinvestment of all distributions. There is no sales
charge.
(2) Closing value assuming a complete redemption on March 31, 1999.
(3) The Lehman Brothers 10-Year Municipal Bond Index measures the performance of
municipal bonds rated at least Baa+ by Moody's Investors Service, Inc. with
maturities ranging between 9 and 12 years. The performance of the Index does
not include any expenses, fees or charges. The Index is unmanaged and should
not be considered an investment.
(4) The Lipper Intermediate Muni Debt Funds Index is an equally-weighted
performance index of the largest qualifying funds (based on net assets) in
the Lipper Intermediate Muni Debt Funds objective. The Index, which is
adjusted for capital gains distributions and income dividends, is unmanaged
and should not be considered an investment. There are curently 30 funds
represented in this Index.
The accompanying chart illustrates the performance of a hypothetical $10,000
investment in the Fund from its inception on July 12, 1993, versus the
performance of the Lehman Brothers 10-Year Municipal Bond Index and the Lipper
Intermediate Municipal Debt Funds Index.
PORTFOLIO STRUCTURE
As of March 31, 1999, intermediate-term municipal bonds represented 91 percent
of the Fund's net assets. The Fund's short-term investment position decreased
slightly from 10 percent to 9 percent of net assets during the fiscal year. The
portfolio was diversified among 14 municipal sectors and 40 separate issuers.
The portfolio's average maturity was 7 years, and its duration 5 years.
(Duration is a measure of a bond portfolio's sensitivity to interest rate
movements.) Bonds subject to the alternative minimum tax (AMT) accounted for 23
percent of net assets. The portfolio maintained high quality with more than 76
percent of the bonds rated AA or AAA, as measured by Standard & Poor's Corp. or
Moody's Investors Service, Inc.
LOOKING AHEAD
The combination of a "flight to quality" and a flood of new municipal issues
made the municipal-to-Treasury yield relationship more favorable last year than
it has been in the previous 10 years. Although municipals have thus far
outperformed Treasuries in early 1999, we believe that municipals still offer
investors considerable value versus their historical relationship with
Treasuries.
On May 1, 1999, Mitchell M. Merin was named President of the Morgan Stanley
Dean Witter Funds. Mr. Merin is also the President and Chief Operating Officer
of Asset Management of Morgan Stanley Dean Witter & Co., and President, Chief
Executive Officer and Director of Morgan Stanley Dean Witter Advisors Inc., the
Fund's Investment Manager. He also serves as Chairman, Chief Executive Officer
and Director of the Fund's distributor and transfer agent.
3
<PAGE>
MORGAN STANLEY DEAN WITTER LIMITED TERM MUNICIPAL TRUST
LETTER TO THE SHAREHOLDERS March 31, 1999, continued
[BAR GRAPH] [PIE CHART]
LARGEST SECTORS AS OF MARCH 31, 1999 CREDIT RATINGS AS OF MARCH 31, 1999
(% OF NET ASSETS) (% OF TOTAL LONG-TERM PORTFOLIO)
GENERAL OBLIGATION 16% Aaa or AAA 41%
ELECTRIC 11% Aa or AA 35%
TRANSPORTATION 11% A or A 15%
WATER & SEWER 11% Baa or BBB 5%
EDUCATION 7% N/R 4%
MORTGAGE 7%
STUDENT LOAN 7%
HOSPITAL 5%
RESOURCE RECOVERY 5%
ALL OTHERS 20%
PORTFOLIO STRUCTURE IS SUBJECT TO AS MEASURED BY MOODY'S INVESTOR SERVICE
CHANGE. INC. OR STANDARD & POOR'S CORP.
PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE.
We appreciate your ongoing support of Morgan Stanley Dean Witter Limited Term
Municipal Trust and look forward to continuing to serve your investment needs.
Very truly yours,
/s/ Charles A. Fiumefreddo /s/ Mitchell M. Merin
CHARLES A. FIUMEFREDDO MITCHELL M. MERIN
Chairman of the Board President
4
<PAGE>
MORGAN STANLEY DEAN WITTER LIMITED TERM MUNICIPAL TRUST
PORTFOLIO OF INVESTMENTS March 31, 1999
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TAX-EXEMPT MUNICIPAL BONDS (91.2%)
General Obligation (16.1%)
$ 1,000 Connecticut, 1998 Ser C .......................................................... 5.25% 10/15/11 $ 1,061,770
1,000 Connecticut, 1998 Ser C .......................................................... 5.25 10/15/12 1,057,780
1,000 Wilmington, Delaware, Refg Ser 1993 B (FGIC) ..................................... 4.60 07/01/04 1,032,890
990 Honolulu, Hawaii, Refg Ser 1993 B ................................................ 5.00 10/01/03 1,032,887
1,000 Chicago, Illinois, Emergency Telephone Refg (FGIC) (WI) .......................... 5.00 01/01/09 1,040,450
1,000 New Hampshire, Refg Ser 1998 A ................................................... 5.25 10/01/10 1,065,610
1,000 Massillon City School District, Ohio, Refg Ser 1994 (AMBAC) ...................... 4.70 12/01/05 1,038,180
500 Puerto Rico, Public Improvement Ser 1998 ......................................... 5.25 07/01/10 528,260
1,500 Knox County, Tennessee, Public Improvement Ser 1998 .............................. 5.25 04/01/13 1,557,750
-------- -----------
8,990 9,415,577
-------- -----------
Educational Facilities Revenue (7.1%)
1,000 University of Delaware, Ser 1993** ............................................... 4.90 11/01/02 1,038,870
2,000 University of Minnesota, Ser 1993 A .............................................. 4.80 08/15/03 2,075,520
1,000 New York State Dormitory Authority, State University Ser 1993 B** ................ 5.25 05/15/05 1,054,460
-------- -----------
4,000 4,168,850
-------- -----------
Electric Revenue (11.2%)
1,000 Salt River Project Agricultural Improvement & Power District, Arizona,
Refg Ser 1993 B .................................................................. 4.75 01/01/03 1,033,210
1,505 Wyandotte County/Kansas City, Kansas, Utility Refg Ser 1998 (MBIA) ............... 5.125 09/01/13 1,547,546
2,000 Long Island Power Authority, Ser 1998 B (MBIA) ................................... 5.125 04/01/11 2,082,840
1,820 San Antonio, Texas, Electric & Gas Refg Ser 1994 ................................. 4.70 02/01/05 1,879,860
-------- -----------
6,325 6,543,456
-------- -----------
Hospital Revenue (5.3%)
1,000 Maryland Health & Higher Educational Facilities Authority, Medlantic/Helix
Issue Ser 1998 A (FSA) ........................................................... 5.25 08/15/12 1,048,950
1,000 Fairfax County Industrial Development Authority, Virginia, Inova Health System
Foundation Refg Ser 1993 A ....................................................... 4.70 08/15/04 1,028,620
1,000 Murray, Utah, IHC Hospitals Inc Refg Ser 1993 (AMBAC) ............................ 5.00 05/15/04 1,047,270
-------- -----------
3,000 3,124,840
-------- -----------
Industrial Development/Pollution Control Revenue (5.2%)
1,000 Massachusetts Industrial Finance Agency, Eastern Edison Co Refg Ser 1993** ....... 5.875 08/01/08 1,027,800
2,000 Greenwood, Wisconsin, Land O'Lakes Inc (AMT) ..................................... 5.50 09/01/03 2,033,660
-------- -----------
3,000 3,061,460
-------- -----------
Mortgage Revenue -- Multi-Family (1.7%)
1,000 Wisconsin Housing & Economic Development Authority, Ser 1993 B (AMT) ............. 5.10 11/01/03 1,023,070
-------- -----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
5
<PAGE>
MORGAN STANLEY DEAN WITTER LIMITED TERM MUNICIPAL TRUST
PORTFOLIO OF INVESTMENTS March 31, 1999, continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Mortgage Revenue -- Single Family (5.2%)
$ 1,000 Connecticut Housing Finance Authority, 1993 Subser F-1 .................... 4.90% 05/15/04 $ 1,035,920
2,000 Maryland Department of Housing & Community Development, 1999 Third Ser
-------- (AMT) ..................................................................... 4.40 04/01/07 1,988,020
-----------
3,000 3,023,940
-------- -----------
Public Facilities Revenue (0.9%)
500 Michigan Building Authority, Refg 1998 Ser 1 .............................. 5.25 10/15/13 519,270
-------- -----------
Resource Recovery Revenue (5.3%)
1,000 Hempstead Industrial Development Agency, New York, American REF-FUEL Co
of Hempstead Ser 1997 (MBIA) .............................................. 5.00 12/01/09 1,035,610
2,000 Northeast Maryland Waste Disposal Authority, Montgomery County
-------- Ser 1993 A (AMT)** ........................................................ 5.50 07/01/01 2,066,420
-----------
3,000 3,102,030
-------- -----------
Student Loan Revenue (7.0%)
2,000 Montana Higher Education Student Assistance Corporation, Senior
Ser 1993 B (AMT) .......................................................... 5.10 12/01/01 2,065,400
2,000 South Carolina Education Assistance Authority, Ser 1993 A-1 (AMT) ......... 5.00 09/01/03 2,071,160
-------- -----------
4,000 4,136,560
-------- -----------
Tax Allocation Revenue (3.2%)
1,810 Pleasanton Joint Powers Financing Authority, California, Reassessment
-------- Ser 1993 A** .............................................................. 5.60 09/02/00 1,858,888
-----------
Transportation Facilities Revenue (10.6%)
1,000 Delaware River & Bay Authority, Delaware & New Jersey, Ser 1993+ .......... 4.50 01/01/04 1,025,300
2,000 Washington Metropolitan Area Transit Authority, District of Columbia,
Maryland and Virginia, Refg Ser 1993 (FGIC)++ ............................. 4.90 01/01/05 2,086,300
1,000 Harris County, Texas, Toll Road Refg Ser 1994 (AMBAC) ..................... 4.85 08/15/05 1,043,920
2,000 Houston, Texas, Airport Sub Lien 1998 Ser B (AMT) (FGIC) .................. 5.25 07/01/12 2,070,400
-------- -----------
6,000 6,225,920
-------- -----------
Water & Sewer Revenue (10.6%)
1,000 Atlanta, Georgia, Water & Sewer Ser 1993 .................................. 4.50 01/01/04 1,024,860
1,000 City and County Honolulu, Hawaii, Wastewater Ser 1998 (FGIC) .............. 5.25 07/01/13 1,032,540
1,000 Massachusetts Water Resources Authority, Ser 1993 C** ..................... 5.25 12/01/06 1,067,480
1,000 New York City Municipal Water Finance Authority, New York, Ser 1994 B ..... 5.125 06/15/04 1,051,380
1,000 Pittsburgh Water & Sewer Authority, Pennsylvania, Refg Ser 1993 A (FGIC) .. 4.60 09/01/03 1,030,170
1,000 Southeastern Public Servic Authority, Virginia, Regional Solid Waste
-------- Refg Ser 1993 A (MBIA) .................................................... 4.70 07/01/04 1,032,320
-----------
6,000 6,238,750
-------- -----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE>
MORGAN STANLEY DEAN WITTER LIMITED TERM MUNICIPAL TRUST
PORTFOLIO OF INVESTMENTS March 31, 1999, continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Other Revenue (1.8%)
$ 1,000 Pennsylvania Intergovernmental Cooperation Authority, Special Tax
-------- Ser 1993 (FGIC)** ...................................................... 5.05% 06/15/04 $ 1,048,110
-----------
51,625 TOTAL TAX-EXEMPT MUNICIPAL BONDS
-------- (Identified Cost $52,277,153) ................................................................... 53,490,721
-----------
SHORT-TERM TAX-EXEMPT MUNICIPAL OBLIGATIONS (9.2%)
2,800 Hapeville Development Authority, Georgia, Hapeville Hotel Ltd Ser 1985
(Demand 04/01/99) ...................................................... 3.30* 11/01/15 2,800,000
2,600 Missouri Health & Educational Facilities Authority, Cox Health Care 1997
-------- (MBIA) (Demand 04/01/99) ............................................... 3.10* 06/01/15 2,600,000
-----------
5,400 TOTAL SHORT-TERM TAX-EXEMPT MUNICIPAL OBLIGATIONS
-------- (Identified Cost $5,400,000)..................................................................... 5,400,000
-----------
$ 57,025
TOTAL INVESTMENTS
(Identified Cost $57,677,153) (a).............................................. 100.4% 58,890,721
LIABILITIES IN EXCESS OF CASH AND OTHER ASSETS ................................ (0.4) (243,201)
-----------
NET ASSETS .................................................................... 100.0% $58,647,520
===========
</TABLE>
- ---------------
AMT Alternative Minimum Tax.
WI Security purchased on a "when-issued" basis.
+ Joint exemption in Delaware and New Jersey.
++ Joint exemption in District of Columbia, Maryland and Virginia.
* Current coupon of variable rate demand obligation.
** Some or all of these securities are segregated in connection with the
purchase of "when-issued" securities.
(a) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $1,331,156 and the
aggregate gross unrealized depreciation is $117,588, resulting in net
unrealized appreciation of $1,213,568.
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
7
<PAGE>
MORGAN STANLEY DEAN WITTER LIMITED TERM MUNICIPAL TRUST
PORTFOLIO OF INVESTMENTS March 31, 1999, continued
- --------------------------------------------------------------------------------
GEOGRAPHIC SUMMARY OF INVESTMENTS
Based on Market Value as a Percent of Net Assets
March 31, 1999
Arizona ............................................................. 1.8%
California .......................................................... 3.2
Connecticut ......................................................... 5.4
Delaware ............................................................ 5.3
District of Columbia ................................................ 3.6
Georgia ............................................................. 6.5
Hawaii .............................................................. 3.5
Illinois ............................................................ 1.8
Kansas .............................................................. 2.6
Maryland ............................................................ 12.3
Massachusetts ....................................................... 3.6%
Michigan ............................................................ 0.9
Minnesota ........................................................... 3.5
Missouri ............................................................ 4.4
Montana ............................................................. 3.5
New Hampshire ....................................................... 1.8
New Jersey .......................................................... 1.7
New York ............................................................ 8.9
Ohio ................................................................ 1.8
Pennsylvania ........................................................ 3.5
Puerto Rico ......................................................... 0.9%
South Carolina ...................................................... 3.5
Tennessee ........................................................... 2.7
Texas ............................................................... 8.5
Utah ................................................................ 1.8
Virginia ............................................................ 7.1
Wisconsin ........................................................... 5.2
Joint Exemptions*.................................................... (8.9)
-----
Total ............................................................... 100.4%
=====
- ---------------
* Joint exemptions have been included in each geographic location.
- --------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE>
MORGAN STANLEY DEAN WITTER LIMITED TERM MUNICIPAL TRUST
FINANCIAL STATEMENTS
<TABLE>
<S> <C>
STATEMENT OF ASSETS AND LIABILITIES
March 31, 1999
ASSETS:
Investments in securities, at value
(identified cost $57,677,153)................... $58,890,721
Cash .............................................. 234,832
Receivable for:
Interest ..................................... 712,914
Shares of beneficial interest sold ........... 87,626
Investments sold ............................. 10,367
Prepaid expenses .................................. 19,063
-----------
TOTAL ASSETS ................................. 59,955,523
-----------
LIABILITIES:
Payable for:
Investments purchased ........................ 1,045,589
Shares of beneficial interest repurchased..... 139,675
Investment management fee .................... 26,929
Dividends to shareholders .................... 11,555
Accrued expenses .................................. 84,255
-----------
TOTAL LIABILITIES ............................ 1,308,003
-----------
NET ASSETS ................................... $58,647,520
===========
COMPOSITION OF NET ASSETS:
Paid-in-capital ................................... $65,483,784
Net unrealized appreciation ....................... 1,213,568
Accumulated net realized loss ..................... (8,049,832)
-----------
NET ASSETS ................................... $58,647,520
===========
NET ASSET VALUE PER SHARE,
5,671,129 shares outstanding (unlimited
shares authorized of $.01 par value)............ $10.34
======
</TABLE>
<TABLE>
<S> <C>
STATEMENT OF OPERATIONS
For the year ended March 31, 1999
NET INVESTMENT INCOME:
INTEREST INCOME ................................... $2,676,735
----------
EXPENSES
Investment management fee ......................... 290,798
Professional fees ................................. 65,173
Shareholder reports and notices ................... 34,756
Registration fees ................................. 33,746
Transfer agent fees and expenses .................. 30,230
Trustees' fees and expenses ....................... 19,800
Organizational expenses ........................... 7,198
Custodian fees .................................... 3,744
Other ............................................. 13,864
----------
TOTAL EXPENSES ............................... 499,309
Less: expense offset .............................. (3,737)
----------
NET EXPENSES ................................. 495,572
----------
NET INVESTMENT INCOME ........................ 2,181,163
----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain ................................. 739,516
Net change in unrealized appreciation ............. (312,924)
----------
NET GAIN ..................................... 426,592
----------
NET INCREASE ...................................... $2,607,755
==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
9
<PAGE>
MORGAN STANLEY DEAN WITTER LIMITED TERM MUNICIPAL TRUST
FINANCIAL STATEMENTS, continued
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
MARCH 31, 1999 MARCH 31, 1998
- -------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income .................................... $ 2,181,163 $ 2,211,157
Net realized gain ........................................ 739,516 8,679
Net change in unrealized appreciation/depreciation ....... (312,924) 1,901,212
------------ ------------
NET INCREASE .......................................... 2,607,755 4,121,048
Dividends from net investment income ..................... (2,181,163) (2,211,157)
Net increase (decrease) from transactions in shares of
beneficial interest .................................... 720,864 (5,507,667)
------------ ------------
NET INCREASE (DECREASE) ............................... 1,147,456 (3,597,776)
NET ASSETS:
Beginning of period ...................................... 57,500,064 61,097,840
------------ ------------
END OF PERIOD ......................................... $ 58,647,520 $ 57,500,064
============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
10
<PAGE>
MORGAN STANLEY DEAN WITTER LIMITED TERM MUNICIPAL TRUST
NOTES TO FINANCIAL STATEMENTS March 31, 1999
1. ORGANIZATION AND ACCOUNTING POLICIES
Morgan Stanley Dean Witter Limited Term Municipal Trust (the "Fund"), formerly
Dean Witter Limited Term Municipal Trust, is registered under the Investment
Company Act of 1940, as amended, as a diversified, open-end management
investment company. The Fund's investment objective is to provide a high level
of current income which is exempt from federal income tax, consistent with the
preservation of capital and prescribed standards of quality and maturity. The
Fund seeks to achieve this objective by investing primarily in intermediate
term, investment grade municipal securities. The Fund was organized as a
Massachusetts business trust on February 25, 1993 and commenced operations on
July 12, 1993.
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.
11
<PAGE>
MORGAN STANLEY DEAN WITTER LIMITED TERM MUNICIPAL TRUST
NOTES TO FINANCIAL STATEMENTS March 31, 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"), formerly Dean Witter InterCapital Inc., paid the
organizational expenses of the Fund in the amount of $141,529 which were
reimbursed exclusive of $12,651 which was absorbed by the Investment Manager.
Such expenses were deferred and fully amortized as of July 11, 1998.
2. INVESTMENT MANAGEMENT AGREEMENT
Pursuant to an Investment Management Agreement, the Fund pays the Investment
Manager a management fee, accrued daily and payable monthly, by applying the
annual rate of 0.50% to the Fund's net assets determined as of the close of
each business day.
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.
3. 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 March 31, 1999 aggregated
$17,772,786 and $15,490,580, respectively.
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager
and Distributor, is the Fund's transfer agent.
12
<PAGE>
MORGAN STANLEY DEAN WITTER LIMITED TERM MUNICIPAL TRUST
NOTES TO FINANCIAL STATEMENTS March 31, 1999, continued
The Fund has an unfunded noncontributory defined benefit pension plan covering
all independent Trustees of the Fund who will have served as independent
Trustees for at least five years at the time of retirement. Benefits under this
plan are based on years of service and compensation during the last five years
of service. Aggregate pension costs for the year ended March 31, 1999 included
in Trustees' fees and expenses in the Statement of Operations amounted to
$8,952. At March 31, 1999, the Fund had an accrued pension liability of $33,246
which is included in accrued expenses in the Statement of Assets and
Liabilities.
4. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
MARCH 31, 1999 MARCH 31, 1998
---------------------------------- ----------------------------------
SHARES AMOUNT SHARES AMOUNT
--------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C>
Sold .............................. 3,554,302 $ 36,852,846 2,295,609 $ 23,451,451
Reinvestment of dividends ......... 166,102 1,716,817 170,238 1,728,340
--------- ------------- --------- -------------
3,720,404 38,569,663 2,465,847 25,179,791
Repurchased ....................... (3,654,764) (37,848,799) (3,025,601) (30,687,458)
---------- ------------- ---------- -------------
Net increase (decrease) ........... 65,640 $ 720,864 (559,754) $ (5,507,667)
========== ============= ========== =============
</TABLE>
5. FEDERAL INCOME TAX STATUS
During the year ended March 31, 1999, the Fund utilized approximately $740,000
of its net capital loss carryover. At March 31, 1999, the Fund had a net
capital loss carryover of approximately $8,050,000 which may be used to offset
future capital gains to the extent provided by regulations, which is available
through March 31 of the following years:
AMOUNT IN THOUSANDS
--------------------------------------
2003 2004 2005
---- ---- ----
$3,882 $3,941 $227
====== ====== ====
13
<PAGE>
MORGAN STANLEY DEAN WITTER LIMITED TERM MUNICIPAL TRUST
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MARCH 31,
--------------------------------------------------------------------------
1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SELECTED PER SHARE DATA:
Net asset value, beginning of period .............. $10.26 $ 9.91 $ 9.95 $ 9.56 $ 9.61
------ ------ ------ ------ ------
Income (loss) from investment operations:
Net investment income ........................... 0.39 0.40 0.40 0.41 0.42
Net realized and unrealized gain (loss) ......... 0.08 0.35 (0.04) 0.39 (0.05)
------ ------ ------ ------ ------
Total income from investment operations ........... 0.47 0.75 0.36 0.80 0.37
Less dividends from net investment income ......... (0.39) (0.40) (0.40) (0.41) (0.42)
------ ------ ------ ------ ------
Net asset value, end of period .................... $10.34 $10.26 $ 9.91 $ 9.95 $ 9.56
====== ====== ====== ====== ======
TOTAL RETURN+ ..................................... 4.68% 7.70% 3.65% 8.42% 4.01%
RATIOS TO AVERAGE NET ASSETS:
Expenses .......................................... 0.86%(1) 0.83% 0.88%(1) 0.87%(1) 0.76%
Net investment income ............................. 3.75% 3.92% 3.99% 4.09% 4.41%
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ........... $58,648 $57,500 $61,098 $72,766 $85,499
Portfolio turnover rate ........................... 29% -- -- -- 2%
</TABLE>
- ------------
+ Calculated based on the net asset value as of the last business day of the
period.
(1) Does not reflect the effect of expense offset of 0.01%.
SEE NOTES TO FINANCIAL STATEMENTS
14
<PAGE>
MORGAN STANLEY DEAN WITTER LIMITED TERM MUNICIPAL TRUST
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND TRUSTEES
OF MORGAN STANLEY DEAN WITTER LIMITED TERM 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 Limited
Term Municipal Trust (the "Fund"), formerly Dean Witter Limited Term Municipal
Trust, at March 31, 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 five years in the
period then ended, 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 March 31, 1999 by correspondence with the custodian and brokers,
provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
May 7, 1999
- --------------------------------------------------------------------------------
1999 FEDERAL TAX NOTICE (unaudited)
For the year ended March 31, 1999, all of the Fund's dividends from net
investment income were exempt interest dividends, excludable from gross
income for Federal income tax purposes.
- --------------------------------------------------------------------------------
15
<PAGE>
TRUSTEES
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
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
Katherine H. Stromberg
Vice President
Thomas F. Caloia
Treasurer
TRANSFER AGENT
Morgan Stanley Dean Witter Trust FSB
Harborside Financial Center - Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
Morgan Stanley Dean Witter Advisors Inc.
Two World Trade Center
New York, New York 10048
This report is submitted for the general information of shareholders of the
Fund. For more detailed information about the Fund, its officers and trustees,
fees, expenses and other pertinent information, please see the prospectus
of the Fund.
This report is not authorized for distribution to prospective investors in the
Fund unless preceded or accompanied by an effective prospectus.
MORGAN STANLEY
DEAN WITTER
LIMITED TERM
MUNICIPAL TRUST
[GRAPHIC]
ANNUAL REPORT
MARCH 31, 1999
