<PAGE>
MORGAN STANLEY DEAN WITTER LIMITED TERM MUNICIPAL TRUST
Letter to the Shareholders September 30, 1999 continued
Two World Trade Center
New York, New York 10048
DEAR SHAREHOLDER:
The U.S. economy, led by consumer demand, continued to experience robust growth
during the six-month period ended September 30, 1999. In early 1999, higher
materials prices and wage increases caused concern in the fixed-income markets
that the Fed might begin to take back some of the liquidity provided during
last year's crises. These concerns proved to be justified when, in two separate
moves during the summer, the Fed raised the federal funds rate 50 basis points,
to 5.25 percent. By the end of September long-term interest rates had returned
to levels last seen in the spring of 1998.
MUNICIPAL MARKET OVERVIEW
In the wake of 1998's international economic difficulties, the financial
markets have continued to experience volatility. Last year's flight-to-quality
rally primarily benefited Treasuries. As global turmoil subsided and interest
rates began to rise, Treasury yields increased more than municipal yields.
Intermediate-term municipal bond yields rose 75 basis points, to 5.00 percent,
during the first nine months of 1999. Over the same period Treasury yields rose
more than 120 basis points to 5.88 percent.
The ratio of intermediate-term municipal yields to Treasury yields declined
from 91 percent at the end of 1998 to 85 percent by the end of September. This
ratio is a measure of relative performance that compares high-quality municipal
yields to the benchmark 10-year Treasury yield. A declining ratio means
municipals are outperforming Treasuries. Over the past five years the annual
high ratio has averaged 89 percent, the annual low ratio 75 percent.
The municipal market's performance was also aided by a slowdown in the pace of
underwriting. New-issue volume declined 20 percent in the first nine months of
1999. Refunding activity, which is the most interest-rate-sensitive component
of supply, was down 50 percent.
<PAGE>
MORGAN STANLEY DEAN WITTER LIMITED TERM MUNICIPAL TRUST
Letter to the Shareholders September 30, 1999 continued
10-YEAR BOND YIELDS 1994-1999
DATE MUNICIPAL YIELDS U.S. TREASURY YIELDS % RELATIONSHIP
---- ---------------- -------------------- --------------
December 1993 4.58 5.79 79.10
January 1994 4.46 5.64 79.08
February 1994 4.75 6.13 77.49
March 1994 5.42 6.74 80.42
April 1994 5.54 7.04 78.69
May 1994 5.44 7.15 76.08
June 1994 5.51 7.32 75.27
July 1994 5.36 7.11 75.39
August 1994 5.39 7.17 75.17
September 1994 5.60 7.60 73.68
October 1994 5.79 7.81 74.14
November 1994 6.07 7.91 76.74
December 1994 5.92 7.82 75.70
January 1995 5.73 7.58 75.59
February 1995 5.42 7.20 75.28
March 1995 5.34 7.20 74.17
April 1995 5.37 7.05 76.17
May 1995 5.06 6.28 80.57
June 1995 5.17 6.20 83.39
July 1995 5.06 6.43 78.69
August 1995 4.96 6.28 78.98
September 1995 4.90 6.18 79.29
October 1995 4.83 6.02 80.23
November 1995 4.75 5.74 82.75
December 1995 4.74 5.57 85.10
January 1996 4.69 5.58 84.05
February 1996 4.71 6.10 77.21
March 1996 5.02 6.33 79.30
April 1996 5.11 6.67 76.61
May 1996 5.24 6.85 76.50
June 1996 5.21 6.71 77.65
July 1996 5.16 6.79 75.99
August 1996 5.17 6.94 74.50
September 1996 5.08 6.70 75.82
October 1996 5.00 6.34 78.86
November 1996 4.79 6.04 79.30
December 1996 4.88 6.42 76.01
January 1997 5.04 6.49 77.66
February 1997 4.96 6.55 75.73
March 1997 5.17 6.90 74.93
April 1997 5.16 6.72 76.79
May 1997 5.01 6.66 75.23
June 1997 4.92 6.50 75.69
July 1997 4.61 6.01 76.71
August 1997 4.83 6.34 76.18
September 1997 4.70 6.10 77.05
October 1997 4.64 5.83 79.59
November 1997 4.69 5.87 79.90
December 1997 4.52 5.74 78.75
January 1998 4.42 5.51 80.22
February 1998 4.45 5.62 79.18
March 1998 4.55 5.65 80.53
April 1998 4.65 5.67 82.01
May 1998 4.55 5.55 81.98
June 1998 4.50 5.45 82.57
July 1998 4.54 5.49 82.70
August 1998 4.39 4.98 88.15
September 1998 4.25 4.42 96.15
October 1998 4.24 4.61 92.07
November 1998 4.29 4.71 91.01
December 1998 4.24 4.65 91.22
January 1999 4.13 4.65 88.80
February 1999 4.23 5.29 80.01
March 1999 4.34 5.24 82.79
April 1999 4.37 5.35 81.68
May 1999 4.54 5.62 80.78
June 1999 4.88 5.78 84.43
July 1999 4.84 5.90 82.03
August 1999 5.00 5.97 83.75
September 1999 4.99 5.88 84.86
Source: Bloomberg L.P.
*Double "A"-rated General Obligation Bonds
PERFORMANCE
For the six-month period ended September 30, 1999, Morgan Stanley Dean Witter
Limited Term Municipal Trust posted a total return of -1.42 percent, compared
to -2.16 percent for the Lehman Brothers 10-Year Municipal Bond Index and -1.61
percent for the Lipper Intermediate Municipal Debt Funds Index. Total return
consisted of tax-free dividends totaling $0.19 per share and a decrease in net
asset value from $10.34 to $10.00 per share.
2
<PAGE>
MORGAN STANLEY DEAN WITTER LIMITED TERM MUNICIPAL TRUST
Letter to the Shareholders September 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.]
LARGEST SECTORS AS OF SEPTEMBER 30, 1999
(% OF NET ASSETS)
GENERAL OBLIGATION 14%
ELECTRIC 13%
WATER & SEWER 12%
EDUCATION 8%
MORTGAGE 8%
IDR/PCR* 6%
RESOURCE RECOVERY 6%
STUDENT LOAN 6%
TRANSPORTATION 6%
*INDUSTRIAL DEVELOPMENT/POLLUTION CONTROL REVENUE
PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE.
CREDIT RATINGS AS OF SEPTEMBER 30, 1999
(% OF TOTAL LONG-TERM PORTFOLIO)
Aaa or AAA 37%
Aa or AA 40%
A or A 16%
Baa or BBB 2%
N/R 5%
AS MEASURED BY MOODY'S INVESTORS SERVICES, INC. OR STANDARD & POOR'S CORP.
PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE.
GEOGRAPHIC SUMMARY OF INVESTMENTS
Based on Market Value as a Percent of Net Assets
September 30, 1999
Arizona ...................... 2.0%
Connecticut .................. 6.1
Delaware ..................... 4.1
District of Columbia ......... 2.0
Georgia ...................... 6.9
Hawaii ....................... 2.0
Illinois ..................... 2.0
Kansas ....................... 2.9
Louisiana .................... 4.9
Maryland ..................... 12.0%
Massachusetts ................ 4.1
Michigan ..................... 1.0
Minnesota .................... 4.1
Montana ...................... 4.1
New Hampshire ................ 2.0
New Jersey ................... 2.0
New York ..................... 10.0
Ohio ......................... 2.0
Pennsylvania ................. 4.5%
Puerto Rico .................. 1.0
South Carolina ............... 2.0
Tennessee .................... 6.2
Texas ........................ 5.6
Virginia ..................... 6.1
Wisconsin .................... 6.1
Joint Exemptions* ............ (6.1)
----
Total ........................ 99.6%
====
------------
* Joint exemptions have been included in each geographic location.
Portfolio structure is subject to change.
3
<PAGE>
MORGAN STANLEY DEAN WITTER LIMITED TERM MUNICIPAL TRUST
Letter to the Shareholders September 30, 1999 continued
PORTFOLIO STRUCTURE
As of September 30, 1999, intermediate-term municipal bonds represented 84
percent of the Fund's net assets. The Fund's short-term investment position
increased from 9 percent to 15 percent of net assets during the six-month
period. The portfolio was diversified among 13 long-term sectors and 34
separate issuers. The portfolio's average maturity was 6 years and its average
duration, a measure of sensitivity to interest rate changes, was 4.9 years.
Bonds subject to the alternative minimum tax (AMT) accounted for 22 percent of
net assets. The portfolio maintained its high quality, with 77 percent of its
bonds rated AA or AAA as measured by Standard & Poor's Corp. or Moody's
Investors Service, Inc. The accompanying charts provide current information on
the portfolio's credit quality and sector distribution.
LOOKING AHEAD
The recent interest rate moves by the Fed have confirmed its previously
disclosed bias of becoming less accommodative in the face of continued strong
domestic economic growth. We anticipate that the Fed may raise short-term
interest rates further. However, we believe municipal bonds continue to offer
long-term investors good value, especially in relation to Treasuries.
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
Fund Performance September 30, 1999
Average Annual Total Returns
- ----------------------------
Period Ended 9/30/99
- --------------------
1 year (0.27)%(1)
5 years 5.30 %(1)
Since Inception (7/12/93) 4.11 %(1)
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RETURNS.
- ---------------
(1) Figure shown assumes reinvestment of all distributions. There is no sales
charge.
5
<PAGE>
MORGAN STANLEY DEAN WITTER LIMITED TERM MUNICIPAL TRUST
Portfolio of Investments September 30, 1999 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------- ---------- ---------- -------------
<S> <C> <C> <C> <C>
TAX-EXEMPT MUNICIPAL BONDS (84.3%)
General Obligation (14.1%)
$ 1,000 Connecticut, 1998 Ser C .................................................... 5.25% 10/15/11 $ 1,010,000
1,000 Connecticut, 1998 Ser C .................................................... 5.25 10/15/12 1,002,470
1,000 Chicago, Illinois, Emergency Telephone Refg (FGIC) ......................... 5.00 01/01/09 992,620
1,000 New Hampshire, Refg Ser 1998 A ............................................. 5.25 10/01/10 1,011,670
1,000 Massillon City School District, Ohio, Refg Ser 1994 (AMBAC) ................ 4.70 12/01/05 1,004,300
500 Puerto Rico, Public Improvement Ser 1998 ................................... 5.25 07/01/10 504,870
1,500 Knox County, Tennessee, Public Improvement Ser 1998 ........................ 5.25 04/01/13 1,481,445
-------- -----------
7,000 7,007,375
-------- -----------
Educational Facilities Revenue (8.2%)
1,000 University of Delaware, Ser 1993 ........................................... 4.90 11/01/02 1,016,840
2,000 University of Minnesota, Ser 1993 A ........................................ 4.80 08/15/03 2,026,600
1,000 New York State Dormitory Authority, State University Ser 1993 B ............ 5.25 05/15/05 1,024,370
-------- -----------
4,000 4,067,810
-------- -----------
Electric Revenue (12.7%)
1,000 Salt River Project Agricultural Improvement & Power District, Arizona,
Refg Ser 1993 ............................................................ 4.75 01/01/03 1,009,830
1,505 Wyandotte County/Kansas City, Kansas, Utility Refg Ser 1998 (MBIA) ......... 5.125 09/01/13 1,453,514
2,000 Long Island Power Authority, Ser 1998 B (MBIA) ............................. 5.125 04/01/11 1,982,020
1,820 San Antonio, Texas, Electric & Gas Refg Ser 1994 ........................... 4.70 02/01/05 1,822,621
-------- -----------
6,325 6,267,985
-------- -----------
Hospital Revenue (4.0%)
1,000 Maryland Health & Higher Educational Facilities Authority, Medlantic/Helix
Issue Ser 1998 A (FSA) .................................................... 5.25 08/15/12 979,790
1,000 Fairfax County Industrial Development Authority, Virginia, Inova Health
System Foundation Refg Ser 1993 A ......................................... 4.70 08/15/04 1,001,330
-------- -----------
2,000 1,981,120
-------- -----------
Industrial Development/Pollution Control Revenue (6.0%)
1,000 Massachusetts Industrial Finance Agency, Eastern Edison Co Refg
Ser 1993 .................................................................. 5.875 08/01/08 990,420
2,000 Greenwood, Wisconsin, Land O'Lakes Inc (AMT) ............................... 5.50 09/01/03 2,001,240
-------- -----------
3,000 2,991,660
-------- -----------
Mortgage Revenue - Multi-Family (2.0%)
1,000 Wisconsin Housing & Economic Development Authority, Ser 1993 B (AMT)........ 5.10 11/01/03 998,280
-------- -----------
Mortgage Revenue - Single Family (5.9%)
1,000 Connecticut Housing Finance Authority, 1993 Subser F-1 ..................... 4.90 05/15/04 1,007,180
2,000 Maryland Department of Housing & Community Development,
1999 Third Ser (AMT) ...................................................... 4.40 04/01/07 1,906,420
-------- -----------
3,000 2,913,600
-------- -----------
Public Facilities Revenue (1.0%)
500 Michigan Building Authority, Refg 1998 Ser 1 ............................... 5.25 10/15/13 490,740
-------- -----------
</TABLE>
See Notes to Financial Statements
6
<PAGE>
MORGAN STANLEY DEAN WITTER LIMITED TERM MUNICIPAL TRUST
Portfolio of Investments September 30, 1999 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------- ------------ ---------- -------------
<S> <C> <C> <C> <C>
Resource Recovery Revenue (6.1%)
$ 1,000 Hempstead Industrial Development Agency, New York, American
REF-FUEL Co of Hempstead Ser 1997 (MBIA) ................................... 5.00 % 12/01/09 $ 992,070
2,000 Northeast Maryland Waste Disposal Authority, Montgomery County
Ser 1993 A (AMT) ........................................................... 5.50 07/01/01 2,029,820
------- -----------
3,000 3,021,890
------- -----------
Student Loan Revenue (6.2%)
2,000 Montana Higher Education Student Assistance Corporation, Senior
Ser 1993 B (AMT) ........................................................... 5.10 12/01/01 2,033,520
1,000 South Carolina Education Assistance Authority, Ser 1993 A-1 (AMT) ........... 5.00 09/01/03 1,011,660
------- -----------
3,000 3,045,180
------- -----------
Transportation Facilities Revenue (6.0%)
1,000 Delaware River & Bay Authority, Delaware & New Jersey, Ser 1993+ ............ 4.50 01/01/04 999,550
1,000 Washington Metropolitan Area Transit Authority, District of Columbia,
Maryland & Virginia, Refg Ser 1993 (FGIC)++ ................................ 4.90 01/01/05 1,010,530
1,000 Houston, Texas, Airport Sub Lien 1998 Ser B (AMT) (FGIC) .................... 5.25 07/01/12 970,970
------- -----------
3,000 2,981,050
------- -----------
Water & Sewer Revenue (12.1%)
1,000 Atlanta, Georgia, Water & Wastewater Ser 1999 A (FGIC) ...................... 5.50 11/01/11 1,024,810
1,000 City and County Honolulu, Hawaii, Wastewater Ser 1998 (FGIC) ................ 5.25 07/01/13 968,510
1,000 Massachusetts Water Resources Authority, Ser 1993 C ......................... 5.25 12/01/06 1,023,300
960 New York City Municipal Water Finance Authority, New York, Ser 1994 B ....... 5.125 06/15/04 982,272
1,000 Pittsburgh Water & Sewer Authority, Pennsylvania, Refg Ser 1993 A
(FGIC) ..................................................................... 4.60 09/01/03 1,006,590
1,000 Southeastern Public Service Authority, Virginia, Regional Solid Waste
Refg Ser 1993 A (MBIA) ..................................................... 4.70 07/01/04 1,005,520
------- -----------
5,960 6,011,002
------- -----------
41,785 TOTAL TAX-EXEMPT MUNICIPAL BONDS
=======
(Identified Cost $42,494,214)...................................................................... 41,777,692
-----------
SHORT-TERM TAX-EXEMPT MUNICIPAL OBLIGATIONS (15.3%)
1,200 Delaware County Industrial Development Authority, Pennsylvania, British
Petroleum Co Ser 1985 (Demand 09/01/99) .................................... 3.95* 12/01/09 1,200,000
2,400 Hapeville Development Authority, Georgia, Hapeville Hotel Ltd Ser 1985
(Demand 09/01/99) .......................................................... 3.95* 11/01/15 2,400,000
2,400 East Baton Rouge Parish, Louisiana, Exxon Corp Ser 1993
(Demand 09/01/99) .......................................................... 3.90* 03/01/22 2,400,000
1,600 Metropolitan Nashville Airport Authority, Tennesse, American Airlines Inc
Refg Ser 1995 B (Demand 09/01/99) .......................................... 3.80* 10/01/12 1,600,000
------- -----------
7,600 TOTAL SHORT-TERM TAX-EXEMPT MUNICIPAL OBLIGATIONS
=======
(Identified Cost $7,600,000)....................................................................... 7,600,000
-----------
</TABLE>
See Notes to Financial Statements
7
<PAGE>
MORGAN STANLEY DEAN WITTER LIMITED TERM MUNICIPAL TRUST
Portfolio of Investments September 30, 1999 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ----------- ------------
<S> <C> <C> <C>
$ 49,385 TOTAL INVESTMENTS (Identified Cost $50,094,214) (a). 99.6% $49,377,692
========
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES ... 0.4 206,764
----- -----------
NET ASSETS ....................................... 100.0% $49,584,456
===== ===========
</TABLE>
- ---------------
AMT Alternative Minimum Tax.
+ Joint exemption in Delaware and New Jersey.
++ Joint exemption in District of Columbia, Maryland and Virginia.
* Current coupon of variable rate demand obligation.
(a) The aggregate cost for federal income tax purposes approximates
identified cost. The aggregate gross unrealized appreciation is
$297,634 and the aggregate gross unrealized depreciation is $1,014,156,
resulting in net unrealized depreciation of $716,522.
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 LIMITED TERM MUNICIPAL TRUST
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1999 (unaudited)
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $50,094,214)........................... $49,377,692
Cash ..................................................... 291,887
Receivable for:
Interest .............................................. 629,905
Shares of beneficial interest sold .................... 8,661
Prepaid expenses ......................................... 34,503
------------
TOTAL ASSETS ............................................. 50,342,648
------------
LIABILITIES:
Payable for:
Shares of beneficial interest repurchased .............. 658,010
Investment management fee .............................. 19,904
Dividends to shareholders .............................. 10,385
Accrued expenses ......................................... 69,893
------------
TOTAL LIABILITIES ........................................ 758,192
------------
NET ASSETS ............................................... $49,584,456
===========
COMPOSITION OF NET ASSETS:
Paid-in-capital .......................................... $58,133,350
Net unrealized depreciation .............................. (716,522)
Accumulated net realized loss ............................ (7,832,372)
------------
NET ASSETS ............................................. $49,584,456
===========
NET ASSET VALUE PER SHARE,
4,957,807 shares outstanding
(unlimited shares authorized of $.01 par value)......... $ 10.00
===========
</TABLE>
See Notes to Financial Statements
9
<PAGE>
MORGAN STANLEY DEAN WITTER LIMITED TERM MUNICIPAL TRUST
Financial Statements, continued
STATEMENT OF OPERATIONS
For the six months ended September 30, 1999 (unaudited)
<TABLE>
<S> <C>
NET INVESTMENT INCOME:
INTEREST INCOME ............................... $ 1,208,287
-----------
EXPENSES
Investment management fee ..................... 129,033
Professional fees ............................. 36,533
Shareholder reports and notices ............... 18,094
Registration fees ............................. 15,507
Transfer agent fees and expenses .............. 14,269
Trustees' fees and expenses ................... 7,590
Custodian fees ................................ 1,967
Other ......................................... 4,596
-----------
TOTAL EXPENSES ............................. 227,589
Less: expense offset .......................... (1,965)
-----------
NET EXPENSES ............................... 225,624
-----------
NET INVESTMENT INCOME ...................... 982,663
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain ............................. 217,460
Net change in unrealized appreciation ......... (1,930,090)
-----------
NET LOSS ................................... (1,712,630)
-----------
NET DECREASE .................................. $ (729,967)
===========
</TABLE>
See Notes to Financial Statements
10
<PAGE>
MORGAN STANLEY DEAN WITTER LIMITED TERM MUNICIPAL TRUST
Financial Statements, continued
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
SEPTEMBER 30, 1999 MARCH 31, 1999
------------------ --------------
(unaudited)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income ................................ $ 982,663 $ 2,181,163
Net realized gain .................................... 217,460 739,516
Net change in unrealized appreciation ................ (1,930,090) (312,924)
----------- -----------
NET INCREASE (DECREASE) ........................... (729,967) 2,607,755
Dividends from net investment income ................. (982,663) (2,181,163)
Net increase (decrease) from transactions in shares of
beneficial interest ................................ (7,350,434) 720,864
----------- -----------
NET INCREASE (DECREASE) ........................... (9,063,064) 1,147,456
NET ASSETS:
Beginning of period .................................. 58,647,520 57,500,064
----------- -----------
END OF PERIOD ..................................... $49,584,456 $58,647,520
=========== ===========
</TABLE>
See Notes to Financial Statements
11
<PAGE>
MORGAN STANLEY DEAN WITTER LIMITED TERM MUNICIPAL TRUST
Notes to Financial Statements September 30, 1999 (unaudited)
1. ORGANIZATION AND ACCOUNTING POLICIES
Morgan Stanley Dean Witter Limited Term Municipal Trust (the "Fund") 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.
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
12
<PAGE>
MORGAN STANLEY DEAN WITTER LIMITED TERM MUNICIPAL TRUST
Notes to Financial Statements September 30, 1999 (unaudited) continued
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.
2. INVESTMENT MANAGEMENT AGREEMENT
Pursuant to an Investment Management Agreement with Morgan Stanley Dean Witter
Advisors Inc. (the "Investment Manager"), 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 six months ended September 30, 1999
aggregated $1,402,140 and $11,375,143, respectively.
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager,
is the Fund's transfer agent.
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 six months ended September 30, 1999
included in Trustees' fees and expenses in the Statement of Operations amounted
to $2,100. At September 30, 1999, the Fund had an accrued pension liability of
$33,823 which is included in accrued expenses in the Statement of Assets and
Liabilities.
13
<PAGE>
MORGAN STANLEY DEAN WITTER LIMITED TERM MUNICIPAL TRUST
Notes to Financial Statements September 30, 1999 (unaudited) continued
4. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
SEPTEMBER 30, 1999 MARCH 31, 1999
---------------------------------- ----------------------------------
(unaudited)
SHARES AMOUNT SHARES AMOUNT
--------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C>
Sold .............................. 1,555,766 $ 15,718,836 3,554,302 $ 36,852,846
Reinvestment of dividends ......... 73,463 744,885 166,102 1,716,817
--------- ------------ --------- ------------
1,629,229 16,463,721 3,720,404 38,569,663
Repurchased ....................... (2,342,551) (23,814,155) (3,654,764) (37,848,799)
---------- ------------ ---------- ------------
Net increase (decrease) ........... (713,322) $ (7,350,434) 65,640 $ 720,864
========= ============ ========= ============
</TABLE>
5. FEDERAL INCOME TAX STATUS
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
======== ====== ====
14
<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 SIX
MONTHS ENDED
SEPTEMBER 30, 1999
-------------------
<S> <C>
(unaudited)
SELECTED PER SHARE DATA:
Net asset value, beginning of period ............... $10.34
-------
Income (loss) from investment operations:
Net investment income ............................. 0.19
Net realized and unrealized gain (loss) ........... (0.34)
-------
Total income (loss) from investment operations ..... (0.15)
-------
Less dividends from net investment income .......... (0.19)
-------
Net asset value, end of period ..................... $10.00
=======
TOTAL RETURN+ ..................................... (1.42)%(2)
RATIOS TO AVERAGE NET ASSETS:
Expenses ........................................... 0.88 %(1)(3)
Net investment income .............................. 3.81 %(3)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ............ $49,584
Portfolio turnover rate ............................ 3 %(2)
<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 (loss) 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%.
(2) Not annualized.
(3) Annualized.
See Notes to Financial Statements
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 Stanely Dean Witter Advisors Inc.
Two World Trade Center
New York, New York 10048
The financial statements included herein have been taken from the records
of the Fund without examination by the independent accountants and
accordingly they do not express an opinion thereon.
This report is submitted for the general information of shareholders
of the Fund. For more detailed information about the Fund, its officers
and trustees, fees, expenses and other pertinent information, please see
the prospectus of the Fund.
This report is not authorized for distribution to prospective investors
in the Fund unless preceded or accompanied by an effective prospectus.
Read the prospectus carefully before investing.
MORGAN STANLEY
DEAN WITTER
LIMITED TERM
MUNICIPAL TRUST
SEMIANNUAL REPORT
SEPTEMBER 30, 1999
