<PAGE>
MORGAN STANLEY DEAN WITTER LIMITED TERM Two World Trade Center,
MUNICIPAL TRUST New York, New York 10048
LETTER TO THE SHAREHOLDERS March 31, 2000
DEAR SHAREHOLDER:
The U.S. economy continued its unprecedented expansion into the new year with
strong growth sustaining full employment. Rising commodity prices, led by oil,
which moved above $30 per barrel, heightened concern about inflation. The
Federal Reserve Board reacted by raising the federal funds rate by 25 basis
points in February and again in March. These moves marked the fourth and fifth
times in less than a year that the central bank had increased short-term rates.
Economic growth and a less accommodative monetary policy caused long-term
interest rates to rise through 1999 and into January. In February the U.S.
Treasury announced a plan to use the federal budget surplus to retire debt,
precipitating a rally in long Treasury securities.
MUNICIPAL MARKET CONDITIONS
Municipal bond yields began 1999 near recent historic lows. Intermediate-term
yields, as measured by 10-year AA-rated general obligation bonds, stood at 4.25
percent in early January 1999 but increased to 5.20 percent by year-end.
Intermediate yields continued to edge upward at the start of this year,
reaching 5.35 percent in late January, but then stabilized in February and
moved lower in March to finish the quarter at 5.10 percent. Because bond prices
generally move inversely to changes in interest rates, higher yields caused
bond prices to decline significantly during 1999 before recovering moderately
in the first quarter of 2000. The magnitude of the increase in interest rates
during 1999 would translate into a price decline of approximately 7 percent for
a bond with a 10-year maturity.
The ratio of intermediate-term municipal yields to Treasury yields was
unchanged at 85 percent between September 1999 and March 2000, after having
fallen from 91 percent at the end of 1998. The ratio is used as a measure of
relative value. A stable ratio means that municipals are performing in line
with Treasuries. Over the past five years the ratio has ranged between an
average annual high of 87 percent and an average annual low of 76 percent.
<PAGE>
MORGAN STANLEY DEAN WITTER LIMITED TERM MUNICIPAL TRUST
LETTER TO THE SHAREHOLDERS March 31, 2000, continued
Higher interest rates reduced municipal market underwriting in 1999, with
new-issue volume declining 20 percent. Refunding activity, the most
interest-rate-sensitive component of supply, was down more than 50 percent. In
the first three months of this year, volume was 30 percent lower than in the
same period last year.
[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.]
10-YEAR BOND YIELDS 1994-2000
U.S. TREASURY YIELDS
MUNICIPAL YIELDS*
MUNICIPAL YIELDS AS A PERCENTAGE OF U.S. TREASURY YIELDS
1994 1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ---- ----
79.10% 75.70% 85.10% 76.01% 78.75% 91.22% 80.41%
79.08 75.59 84.05 77.66 80.22 88.80 80.57
77.49 75.28 77.21 75.73 79.18 80.01 82.70
80.42 74.17 79.30 74.93 80.53 82.79 85.28
78.69 76.17 76.61 76.79 82.01 81.68 70.00
76.08 80.57 76.50 75.23 81.98 80.78 70.00
75.27 83.39 77.65 75.69 82.57 84.43 70.00
75.39 78.69 75.99 76.71 82.70 82.03 70.00
75.17 78.98 74.50 76.18 88.15 83.75 70.00
73.68 79.29 75.82 77.05 96.15 84.86 70.00
74.14 80.23 78.86 79.59 92.07 86.32 70.00
76.74 82.75 79.30 79.90 91.01 81.57 70.00
SOURCE: BLOOMBERG L.P.
* DOUBLE "A" RATED GENERAL OBLIGATION BONDS
PERFORMANCE
For the 12-month period ended March 31, 2000, Morgan Stanley Dean Witter
Limited Term Municipal Trust's total return was 0.08 percent, compared to 0.48
percent for the Lehman Brothers 10-Year Municipal Bond Index. Tax-free
dividends totaling approximately $0.38 per share were paid during the period.
The Fund's net asset value decreased from $10.34 to $9.96 per share. The
accompanying chart compares the Fund's performance to that of the Lehman
Brothers 10-Year Municipal Bond Index.
2
<PAGE>
MORGAN STANLEY DEAN WITTER LIMITED TERM MUNICIPAL TRUST
LETTER TO THE SHAREHOLDERS March 31, 2000, continued
PORTFOLIO STRUCTURE
As of March 31, 2000, intermediate-term municipal bonds represented 87 percent
of the Fund's net assets. The Fund's short-term investment position increased
from 9 percent to 11 percent of net assets during the fiscal year. The
portfolio was diversified among 12 specific municipal sectors and 32 separate
issuers. The portfolio's average maturity was 6.0 years, and its duration, a
measure of sensitivity to interest-rate changes, was 4.7 years. Bonds subject
to the alternative minimum tax (AMT) accounted for 22 percent of net assets.
The portfolio maintained high quality with more than 81 percent of the bonds
rated AA or AAA as measured by Standard & Poor's Corporation or Moody's
Investors Service, Inc. The accompanying charts provide current information on
the portfolio's credit quality and sector distribution.
LOOKING AHEAD
The Federal Reserve Board has been expressing concern over prices and rising
consumer wealth. We anticipate that the central bank will continue to increase
short-term interest rates in an effort to slow the economy. We believe
municipal bonds continue to offer tax-conscious investors good long-term value.
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
3
<PAGE>
MORGAN STANLEY DEAN WITTER LIMITED TERM MUNICIPAL TRUST
LETTER TO THE SHAREHOLDERS March 31, 2000, 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 MARCH 31, 2000
(% OF NET ASSETS)
------------------------------------
GENERAL OBLIGATION 16%
WATER & SEWER 14%
ELECTRIC 12%
MORTGAGE 9%
EDUCATION 7%
IDR/PCR* 7%
RESOURCE RECOVERY 7%
TRANSPORTATION 7%
*INDUSTRIAL DEVELOPMENT/POLLUTION CONTROL REVENUE
PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE.
CREDIT RATINGS AS OF MARCH 31, 2000
(% OF TOTAL LONG-TERM PORTFOLIO)
-----------------------------------
Aa or AA 43%
Aaa or AAA 38%
A or A 14%
NR 5%
AS MEASURED BY MOODY'S INVESTORS SERVICE, 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
MARCH 31, 2000
ARIZONA ...................... 2.3%
CONNECTICUT .................. 6.8
DELAWARE ..................... 4.5
DISTRICT OF COLUMBIA ......... 2.3
GEORGIA ...................... 2.3
HAWAII ....................... 2.2
ILLINOIS ..................... 2.2
KANSAS ....................... 3.3
MARYLAND ..................... 13.4
MASSACHUSETTS ................ 4.5
MICHIGAN ..................... 5.2
MINNESOTA .................... 4.5
MONTANA ...................... 4.6
NEW HAMPSHIRE ................ 2.3
NEW JERSEY ................... 2.2
NEW YORK ..................... 6.6
OHIO ......................... 2.2
PENNSYLVANIA ................. 2.2
PUERTO RICO .................. 1.1
TENNESSEE .................... 7.0
TEXAS ........................ 9.9
VIRGINIA ..................... 6.7
WISCONSIN .................... 6.8
JOINT EXEMPTIONS* ............ (6.7)
------
TOTAL ........................ 98.4%
======
---------------
* JOINT EXEMPTIONS HAVE BEEN INCLUDED IN EACH GEOGRAPHIC LOCATION.
PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE.
4
<PAGE>
MORGAN STANLEY DEAN WITTER LIMITED TERM MUNICIPAL TRUST
FUND PERFORMANCE March 31, 2000
[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.]
GROWTH OF $10,000
($ in Thousands)
FUND LEHMAN(3)
July 12, 1993 $10,000 $10,000
------- -------
March 31, 1994 $ 9.891 $ 9.928
March 31, 1995 10.287 10.674
March 31, 1996 11.153 11.621
March 31, 1997 11.560 12.227
March 31, 1998 12.450 13.496
March 31, 1999 13.033 14.342
March 31, 2000 13.043 14.411
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RETURNS. INVESTMENT RETURN AND
PRINCIPAL VALUE WILL FLUCTUATE. WHEN YOU SELL FUND SHARES, THEY MAY BE WORTH
MORE OR LESS THAN THEIR ORIGINAL COST.
AVERAGE ANNUAL TOTAL RETURNS
---------------------------------------------
PERIOD ENDED 3/31/00
---------------------------
1 Year 0.08%(1)
5 Year 4.86%(1)
Since Inception (7/12/93) 4.03%(1)
---------------
(1) Figure shown assumes reinvestment of all distributions. There are no
sales charges.
(2) Closing value assuming a complete redemption on March 31, 2000.
(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.
5
<PAGE>
MORGAN STANLEY DEAN WITTER LIMITED TERM MUNICIPAL TRUST
PORTFOLIO OF INVESTMENTS March 31, 2000
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
----------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
TAX-EXEMPT MUNICIPAL BONDS (87.1%)
General Obligation (15.8%)
Connecticut,
$ 1,000 1998 Ser C .................................................................. 5.25 % 10/15/11 $ 1,012,900
1,000 1998 Ser C .................................................................. 5.25 10/15/12 1,006,410
1,000 Chicago, Illinois, Emergency Telephone Refg (FGIC) ........................... 5.00 01/01/09 987,380
1,000 New Hampshire, Refg Ser 1998 A ............................................... 5.25 10/01/10 1,009,650
1,000 Massillon City School District, Ohio, Refg Ser 1994 (AMBAC) .................. 4.70 12/01/05 988,780
500 Puerto Rico, Public Improvement Ser 1998 ..................................... 5.25 07/01/10 503,900
1,500 Knox County, Tennessee, Public Improvement Ser 1998 .......................... 5.25 04/01/13 1,490,235
-------- -----------
7,000 6,999,255
-------- -----------
Educational Facilities Revenue (6.8%)
1,000 University of Delaware, Ser 1993 ............................................. 4.90 11/01/02 1,004,770
2,000 University of Minnesota, Ser 1993 A .......................................... 4.80 08/15/03 1,995,580
-------- -----------
3,000 3,000,350
-------- -----------
Electric Revenue (11.9%)
1,000 Salt River Project Agricultural Improvement & Power District, Arizona,
Refg Ser 1993 B ............................................................. 4.75 01/01/03 1,000,700
1,505 Wyandotte County/Kansas City, Kansas, Utility Refg Ser 1998 (MBIA) ........... 5.125 09/01/13 1,470,265
1,000 Long Island Power Authority, Ser 1998 B (MBIA) ............................... 5.125 04/01/11 989,650
1,820 San Antonio, Texas, Electric & Gas Refg Ser 1994 ............................. 4.70 02/01/05 1,793,319
-------- -----------
5,325 5,253,934
-------- -----------
Hospital Revenue (4.5%)
1,000 Maryland Health & Higher Educational Facilities Authority, Medlantic/Helix
Ser 1998 A (FSA) ............................................................ 5.25 08/15/12 1,001,460
1,000 Fairfax County Industrial Development Authority, Virginia, Inova Health
Refg Ser 1993 A ............................................................. 4.70 08/15/04 977,560
-------- -----------
2,000 1,979,020
-------- -----------
Industrial Development/Pollution Control Revenue (6.7%)
1,000 Massachusetts Industrial Finance Agency, Eastern Edison Co Refg Ser 1993 5.875 08/01/08 972,980
2,000 Greenwood, Wisconsin, Land O'Lakes Inc (AMT) ................................. 5.50 09/01/03 1,979,400
-------- -----------
3,000 2,952,380
-------- -----------
Mortgage Revenue - Multi-Family (2.3%)
1,000 Wisconsin Housing & Economic Development Authority, Ser 1993 B (AMT) 5.10 11/01/03 996,530
-------- -----------
Mortgage Revenue - Single Family (6.5%)
1,000 Connecticut Housing Finance Authority, 1993 Subser F-1 ....................... 4.90 05/15/04 996,700
2,000 Maryland Department of Housing & Community Development, 1999
Third Ser (AMT) ............................................................. 4.40 04/01/07 1,896,760
-------- -----------
3,000 2,893,460
-------- -----------
Public Facilities Revenue (1.1%)
500 Michigan Building Authority, Refg 1998 Ser 1 ................................. 5.25 10/15/13 494,740
-------- -----------
</TABLE>
See Notes to Financial Statements
6
<PAGE>
MORGAN STANLEY DEAN WITTER LIMITED TERM MUNICIPAL TRUST
PORTFOLIO OF INVESTMENTS March 31, 2000, continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
----------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
Resource Recovery Revenue (6.8%)
$ 1,000 Hempstead Industrial Development Agency, New York, American
REF-FUEL Co of Hempstead Ser 1997 (MBIA) .................................... 5.00 % 12/01/09 $ 982,650
2,000 Northeast Maryland Waste Disposal Authority, Montgomery County
Ser 1993 A (AMT) ............................................................ 5.50 07/01/01 2,017,120
------- -----------
3,000 2,999,770
------- -----------
Student Loan Revenue (4.5%)
2,000 Montana Higher Education Student Assistance Corporation, Senior
------- Ser 1993 B (AMT) ............................................................ 5.10 12/01/01 2,013,860
-----------
Transportation Facilities Revenue (6.7%)
1,000 Delaware River & Bay Authority, Delaware & New Jersey, Ser 1993+ ............. 4.50 01/01/04 987,730
1,000 Washington Metropolitan Area Transit Authority, District of Columbia,
Maryland and Virginia, Refg Ser 1993 (FGIC)++ ............................... 4.90 01/01/05 998,330
1,000 Houston, Texas, Airport Sub Lien 1998 Ser B (AMT) (FGIC) ..................... 5.25 07/01/12 976,970
------- -----------
3,000 2,963,030
------- -----------
Water & Sewer Revenue (13.5%)
1,000 Atlanta, Georgia, Water & Wastewater Ser 1999 A (FGIC) ....................... 5.50 11/01/11 1,031,080
1,000 Honolulu City & County, Hawaii, Wastewater Jr Ser 1998 (FGIC) ................ 5.25 07/01/13 986,780
1,000 Massachusetts Water Resources Authority, Ser 1993 C .......................... 5.25 12/01/06 1,015,090
960 New York City Municipal Water Finance Authority, New York, Ser 1994 B ........ 5.125 06/15/04 966,595
1,000 Pittsburgh Water & Sewer Authority, Pennsylvania, Refg Ser 1993 A (FGIC)...... 4.60 09/01/03 990,880
1,000 Southeastern Public Service Authority, Virginia, Regional Solid Waste Refg
Ser 1993 A (MBIA) ........................................................... 4.70 07/01/04 991,050
------- -----------
5,960 5,981,475
------- -----------
38,785 TOTAL TAX-EXEMPT MUNICIPAL BONDS (Identified Cost $39,439,267) ............... 38,527,804
------- -----------
SHORT-TERM TAX-EXEMPT MUNICIPAL OBLIGATIONS (11.3%)
1,800 Delta County Economic Development Corporation, Michigan, Mead-Escanaba
Paper Co Ser 1985 E (Demand 04/03/00) ....................................... 3.95* 12/01/13 1,800,000
1,600 Chattanooga-Hamilton County Hospital Authority, Tennessee, Erlanger
Medical Center Ser 1987 (Demand 04/03/00) ................................... 4.00* 10/01/17 1,600,000
1,000 North Central Texas Health Facilities Development Corporation, Texas,
Presbyterian Medical Center Ser 1985 D (MBIA) (Demand 04/03/00) ............. 4.10* 12/01/15 1,000,000
600 Texas Water Development Board, Revolving Fund Ser 1992-A
(Demand 04/03/00) ........................................................... 4.00* 03/01/15 600,000
------- -----------
5,000 TOTAL SHORT-TERM TAX-EXEMPT MUNICIPAL OBLIGATIONS (Identified Cost $5,000,000) 5,000,000
------- -----------
$43,785 TOTAL INVESTMENTS (Identified Cost $44,439,267) (a) ................................... 98.4% 43,527,804
=======
OTHER ASSETS IN EXCESS OF LIABILITIES ................................................. 1.6 709,184
----- -----------
NET ASSETS ............................................................................ 100.0% $44,236,988
===== ===========
</TABLE>
See Notes to Financial Statements
7
<PAGE>
MORGAN STANLEY DEAN WITTER LIMITED TERM MUNICIPAL TRUST
PORTFOLIO OF INVESTMENTS March 31, 2000, continued
---------------
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 $73,477
and the aggregate gross unrealized depreciation is $984,940, resulting in
net unrealized depreciation of $911,463.
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
MARCH 31, 2000
ASSETS:
Investments in securities, at value
(identified cost $44,439,267)................... $43,527,804
Cash .............................................. 79,412
Receivable for:
Interest ..................................... 571,416
Shares of beneficial interest sold ........... 156,241
Prepaid expenses .................................. 34,709
-----------
TOTAL ASSETS .................................. 44,369,582
-----------
LIABILITIES:
Payable for:
Investment management fee .................... 18,787
Shares of beneficial interest repurchased..... 18,191
Dividends to shareholders .................... 9,491
Accrued expenses .................................. 86,125
-----------
TOTAL LIABILITIES ............................. 132,594
-----------
NET ASSETS .................................... $44,236,988
===========
COMPOSITION OF NET ASSETS:
Paid-in-capital ................................... $53,016,384
Net unrealized depreciation ....................... (911,463)
Accumulated net realized loss ..................... (7,867,933)
-----------
NET ASSETS .................................... $44,236,988
===========
NET ASSET VALUE PER SHARE,
4,441,049 shares outstanding
(unlimited shares authorized of $.01 par
value) ......................................... $ 9.96
===========
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 2000
NET INVESTMENT INCOME:
INTEREST INCOME ............................... $2,329,329
----------
EXPENSES
Investment management fee ..................... 247,150
Professional fees ............................. 81,705
Shareholder reports and notices ............... 37,316
Registration fees ............................. 31,351
Transfer agent fees and expenses .............. 26,972
Trustees' fees and expenses ................... 15,805
Custodian fees ................................ 3,774
Other ......................................... 7,360
----------
TOTAL EXPENSES ............................ 451,433
Less: expense offset .......................... (3,768)
----------
NET EXPENSES .............................. 447,665
----------
NET INVESTMENT INCOME ..................... 1,881,664
----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain ............................. 181,899
Net change in unrealized appreciation ......... (2,125,031)
----------
NET LOSS .................................. (1,943,132)
----------
NET DECREASE .................................. $ (61,468)
==========
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, 2000 MARCH 31, 1999
---------------- ---------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income ................................ $ 1,881,664 $ 2,181,163
Net realized gain .................................... 181,899 739,516
Net change in unrealized appreciation ................ (2,125,031) (312,924)
------------ -----------
NET INCREASE (DECREASE) ........................... (61,468) 2,607,755
Dividends from net investment income ................. (1,881,664) (2,181,163)
Net increase (decrease) from transactions in shares of
beneficial interest ................................ (12,467,400) 720,864
------------ -----------
NET INCREASE (DECREASE) ........................... (14,410,532) 1,147,456
NET ASSETS:
Beginning of period .................................. 58,647,520 57,500,064
------------ -----------
END OF PERIOD ..................................... $ 44,236,988 $58,647,520
============ ===========
</TABLE>
See Notes to Financial Statements
10
<PAGE>
MORGAN STANLEY DEAN WITTER LIMITED TERM MUNICIPAL TRUST
NOTES TO FINANCIAL STATEMENTS March 31, 2000
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
11
<PAGE>
MORGAN STANLEY DEAN WITTER LIMITED TERM MUNICIPAL TRUST
NOTES TO FINANCIAL STATEMENTS March 31, 2000, 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.
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, 2000 aggregated
$1,402,140 and $14,367,243, 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 year ended March 31, 2000 included
in Trustees' fees and expenses in the Statement of Operations amounted to
$4,825. At March 31, 2000, the Fund had an accrued pension liability of $35,315
which is included in accrued expenses in the Statement of Assets and
Liabilities.
12
<PAGE>
MORGAN STANLEY DEAN WITTER LIMITED TERM MUNICIPAL TRUST
NOTES TO FINANCIAL STATEMENTS March 31, 2000, continued
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, 2000 MARCH 31, 1999
---------------------------------- ----------------------------------
SHARES AMOUNT SHARES AMOUNT
--------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C>
Sold .............................. 5,120,592 $ 51,143,930 3,554,302 $ 36,852,846
Reinvestment of dividends ......... 141,616 1,419,848 166,102 1,716,817
--------- ------------ --------- ------------
5,262,208 52,563,778 3,720,404 38,569,663
Repurchased ....................... (6,492,288) (65,031,178) (3,654,764) (37,848,799)
---------- ------------ ---------- ------------
Net increase (decrease) ........... (1,230,080) $(12,467,400) 65,640 $ 720,864
========== ============ ========== ============
</TABLE>
5. FEDERAL INCOME TAX STATUS
During the year ended March 31, 2000, the Fund utilized approximately $217,000
of its net capital loss carryover. At March 31, 2000, the Fund had a net
capital loss carryover of approximately $7,832,000 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:
AMOUNTS IN THOUSANDS
---------------------------------
2003 2004 2005
----------- --------- -------
$3,664 $3,941 $227
====== ====== ====
Capital losses incurred after October 31 ("post-October" losses) within the
taxable year are deemed to arise on the first business day of the Fund's next
taxable year. The Fund incurred and will elect to defer net capital losses of
approximately $36,000 during fiscal 2000.
As of March 31, 2000, the Fund had temporary book/tax differences primarily
attributable to post-October losses.
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,
------------------------------------------------------------------------
2000 1999 1998 1997 1996
------------ ------------- ----------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
SELECTED PER SHARE DATA:
Net asset value, beginning of period .............. $10.34 $10.26 $ 9.91 $ 9.95 $ 9.56
------ ------ ------ ------ ------
Income (loss) from investment operations:
Net investment income ........................... 0.38 0.39 0.40 0.40 0.41
Net realized and unrealized gain (loss) ......... (0.38) 0.08 0.35 (0.04) 0.39
------ ------ ------ ------ ------
Total income from investment operations ........... - 0.47 0.75 0.36 0.80
------ ------ ------ ------ ------
Less dividends from net investment income ......... (0.38) (0.39) (0.40) (0.40) (0.41)
------ ------ ------ ------ ------
Net asset value, end of period .................... $ 9.96 $10.34 $10.26 $ 9.91 $ 9.95
====== ====== ====== ====== ======
TOTAL RETURN+ ..................................... 0.08% 4.68% 7.70% 3.65% 8.42%
RATIOS TO AVERAGE NET ASSETS:
Expenses .......................................... 0.91% 0.86%(1) 0.83% 0.88%(1) 0.87%(1)
Net investment income ............................. 3.81% 3.75% 3.92% 3.99% 4.09%
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ........... $44,237 $58,648 $57,500 $61,098 $72,766
Portfolio turnover rate ........................... 3% 29% - - -
</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") at March 31, 2000, 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 accounting
principles generally accepted in the United States. 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 auditing standards
generally accepted in the United States, 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, 2000 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
May 9, 2000
2000 FEDERAL TAX NOTICE (unaudited)
For the year ended March 31, 2000, 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.
Read the prospectus carefully before investing.
Morgan Stanley Dean Witter Distributors Inc., member NASD.
MORGAN STANLEY DEAN WITTER LIMITED TERM MUNICIPAL TRUST
[GRAPHIC OMITTED]
ANNUAL REPORT
March 31, 2000
