<PAGE>
MORGAN STANLEY DEAN WITTER SELECT MUNICIPAL TWO WORLD TRADE CENTER,
REINVESTMENT FUND NEW YORK, NEW YORK 10048
LETTER TO THE SHAREHOLDERS DECEMBER 31, 1998
DEAR SHAREHOLDER:
We are pleased to present the annual report of Morgan Stanley Dean Witter Select
Municipal Reinvestment Fund for the year ended December 31, 1998.
Since our last report six months ago, global financial turmoil, including the
Russian currency crisis, continued to affect the securities markets. The
resulting flight-to-quality bond rally pushed U.S. Treasury bond yields to
30-year lows. Municipal bond yields declined but lagged the downward trend of
Treasury yields.
The deflationary impact of the international financial crisis began to temper
U.S. economic growth prior to the summer's tumultuous market activity. Lower
commodity prices, cheaper imports and improved
productivity offset the potential inflationary impact of strong domestic
employment. With inflation held in check, the Federal Reserve Board
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
BOND YIELDS 1994-1998
Insured Municipal
30-Year Yields on a
Insured 30-Year U.S. Percentage of U.S.
Municipal Yields Treasury Yields Treasury Yields
<S> <C> <C> <C>
12/31/1993 5.40% 6.34% 85.17%
1/31/1994 5.40% 6.24% 86.54%
2/28/1994 5.80% 6.66% 87.09%
3/31/1994 6.40% 7.09% 90.27%
4/29/1994 6.35% 7.32% 86.75%
5/31/1994 6.25% 7.43% 84.12%
6/30/1994 6.50% 7.61% 85.41%
7/29/1994 6.25% 7.39% 84.57%
8/31/1994 6.30% 7.45% 84.56%
9/30/1994 6.55% 7.81% 83.87%
10/31/1994 6.75% 7.96% 84.80%
11/30/1994 7.00% 8.00% 87.50%
12/30/1994 6.75% 7.88% 85.66%
1/31/1995 6.40% 7.70% 83.12%
2/28/1995 6.15% 7.44% 82.66%
3/31/1995 6.15% 7.43% 82.77%
4/28/1995 6.20% 7.34% 84.47%
5/31/1995 5.80% 6.66% 87.09%
6/30/1995 6.10% 6.62% 92.15%
7/31/1995 6.10% 6.86% 88.92%
8/31/1995 6.00% 6.66% 90.09%
9/29/1995 5.95% 6.48% 91.82%
10/31/1995 5.75% 6.33% 90.84%
11/30/1995 5.50% 6.14% 89.58%
12/29/1995 5.35% 5.94% 90.07%
1/31/1996 5.40% 6.03% 89.55%
2/29/1996 5.60% 6.46% 86.69%
3/29/1996 5.85% 6.66% 87.84%
4/30/1996 5.95% 6.89% 86.36%
5/31/1996 6.05% 6.99% 86.55%
6/28/1996 5.90% 6.89% 85.63%
7/31/1996 5.85% 6.97% 83.93%
8/30/1996 5.90% 7.11% 82.98%
9/30/1996 5.70% 6.93% 82.25%
10/31/1996 5.65% 6.64% 85.09%
11/29/1996 5.50% 6.35% 86.61%
12/31/1996 5.60% 6.63% 84.46%
1/31/1997 5.70% 6.79% 83.95%
2/28/1997 5.65% 6.80% 83.09%
3/31/1997 5.90% 7.10% 83.10%
4/30/1997 5.75% 6.94% 82.85%
5/30/1997 5.65% 6.91% 81.77%
6/30/1997 5.60% 6.78% 82.60%
7/30/1997 5.30% 6.30% 84.13%
8/31/1997 5.50% 6.61% 83.21%
9/30/1997 5.40% 6.40% 84.38%
10/31/1997 5.35% 6.15% 86.99%
11/30/1997 5.30% 6.05% 87.60%
12/31/1997 5.15% 5.92% 86.99%
1/31/1998 5.15% 5.80% 88.79%
2/28/1998 5.20% 5.92% 87.84%
3/31/1998 5.25% 5.93% 88.53%
4/30/1998 5.35% 5.95% 89.92%
5/29/1998 5.20% 5.80% 89.66%
6/30/1998 5.20% 5.65% 92.04%
7/31/1998 5.18% 5.71% 90.72%
8/31/1998 5.03% 5.27% 95.45%
9/30/1998 4.95% 5.00% 99.00%
10/31/1998 5.05% 5.16% 97.87%
11/30/1998 5.00% 5.06% 98.81%
12/31/1998 5.05% 5.10% 99.02%
Source: Municipal Market
Data
</TABLE>
<PAGE>
MORGAN STANLEY DEAN WITTER SELECT MUNICIPAL REINVESTMENT FUND
LETTER TO THE SHAREHOLDERS DECEMBER 31, 1998, CONTINUED
provided liquidity to the markets by lowering short-term interest rates. Between
the end of September and the middle of November, the Federal Reserve Open Market
Committee cut the federal funds rate 75 basis points from 5.50 percent to 4.75
percent in three separate moves.
MUNICIPAL MARKET CONDITIONS
At the end of December the long-term insured municipal bond index yield stood at
5.05 percent. This Index declined only 10 basis points from 5.15 percent over
the last 12 months. In contrast, the 30-year U.S. Treasury yield fell 80 basis
points during the same period.
As municipals lagged the rally in Treasuries, the ratio of municipal yields to
Treasury yields rose sharply to 99 percent. A rising ratio means that the
attractiveness of municipals relative to Treasuries has improved. The rise in
this ratio is similar to the jump witnessed in 1986 when a radical legislative
tax-reform proposal threatened the favorable tax advantage of municipal bonds.
The overall decline in interest rates led to a substantial increase in new money
municipal financing and stimulated the refunding of older, high cost debt. Total
underwriting of $284 billion for 1998 approached the record set in 1993. Half
the underwriting volume was enhanced with bond insurance. Refundings represented
29 percent of total new issuance.
PERFORMANCE
The Fund's net asset value (NAV) decreased from $12.47 to $12.27 per share
during the year ended December 31, 1998. Based on this NAV change plus
reinvestment of tax-free dividends of $0.56 per share and taxable capital gains
distributions of $0.30, the Fund's total return was 5.46 percent.
The accompanying chart illustrates the growth of a $10,000 investment in the
Fund from inception through the year ended December 31, 1998 versus a similar
hypothetical investment in the Lehman Brothers Municipal Bond Index or the
Lipper Analytical Services, Inc. General Municipal Debt Funds Average.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Growth of $10,000
($ in Thousands)
Average Annual Total
Returns
<S> <C> <C> <C>
1 Year 5 Years 10 Years
5.46%(1) 5.15%(1) 7.31%(1)
Fund Lehman(3) Lipper(4)
December 31, 1988 $10,000 $10,000 $10,000
December 31, 1989 $10,947 $11,079 $10,996
December 31, 1990 $11,524 $11,887 $11,656
December 31, 1991 $12,911 $13,330 $13,059
December 31, 1992 $14,058 $14,505 $14,221
December 31, 1993 $15,744 $16,287 $15,989
December 31, 1994 $14,802 $15,445 $15,023
December 31, 1995 $17,171 $18,141 $17,624
December 31, 1996 $17,780 $18,945 $18,255
December 31, 1997 $19,192 $20,686 $19,969
December 31, 1998 $20,240(2) $21,893 $21,097
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RETURNS.
(1) Figure shown assumes reinvestment of all distributions and does not reflect
the deduction of any sales charges.
(2) Closing value assuming a complete redemption on December 31, 1998.
(3) The Lehman Brothers Municipal Bond Index tracks the performance of municipal
bonds with maturities of 2 years or more and a minimum credit rating of Baa
or BBB, as measured by Moody's Investors Service, Inc. or Standard & Poor's
Corp. The Index does not include any expenses, fees, or charges. The Index
is unmanaged and should not be considered an investment.
(4) The Lipper General Municipal Debt Funds Index is an equally-weighted
performance index of the largest qualifying funds (based on net assets) in
the Lipper General Municipal 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 currently 30 funds
represented in this Index.
2
<PAGE>
MORGAN STANLEY DEAN WITTER SELECT MUNICIPAL REINVESTMENT FUND
LETTER TO THE SHAREHOLDERS DECEMBER 31, 1998, CONTINUED
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
LONG-TERM SECTORS AS OF DECEMBER 31, 1998
(% OF NET ASSETS)
<S> <C>
Transportation 22%
General Obligation 19%
Water & Sewer 15%
Hospital 12%
Education 8%
IDR/PCR* 7%
Electric 6%
Refunded 5%
All Other 6%
*INDUSTRIAL DEVELOPMENT/POLLUTION CONTROL REVENUE
PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE.
CREDIT RATINGS AS OF DECEMBER 31, 1998
(% OF LONG-TERM PORTFOLIO)
Aaa/AAA 56%
Aa/AA 25%
A/A 19%
AS MEASURED BY MOODY'S INVESTORS SERVICE, INC.
OR STANDARD & POOR'S CORP.
PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE.
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Call Structure as of December 31,
1998 Weighted Average
Call Protection: 7
(% of Total Long-Term Portfolio) Years
Percent Callable
<S> <C> <C>
1999 6%
2000 5%
2001 2%
2002 7%
2003 9%
2004 7%
2005 9%
2006 11%
2007 5%
2008 25%
2009+ 14%
Portfolio structure is subject to
change.
Years bonds Callable
</TABLE>
3
<PAGE>
MORGAN STANLEY DEAN WITTER SELECT MUNICIPAL REINVESTMENT FUND
LETTER TO THE SHAREHOLDERS DECEMBER 31, 1998, CONTINUED
PORTFOLIO STRUCTURE
The Fund remained fully invested in long-term municipal bonds during the year.
Investments were diversified among 10 long-term sectors and 48 credits. As
illustrated in the accompanying chart of bond calls, weighted average call
protection was 7 years.
At the time of issuance, municipal bonds generally have 10 years of protection
from the municipality's option to call bonds for redemption. Interest rates have
declined since the Fund's inception and we anticipate that most municipal
issuers will use their optional call provisions to refinance portfolio holdings
at lower yields.
The average maturity of the portfolio was 17 years. Average duration (a measure
of sensitivity to interest rate changes) was 7.9 years. High grade credit
quality was maintained with over 80 percent of long-term holdings rated double
or triple "A."
LOOKING AHEAD
Global economic conditions seem likely to keep inflationary pressures under
control and have contributed to lower interest rates. The fixed income markets
appear concerned about the risk of reflation as countries seek to stimulate
economic growth. However, the ability of the Fed to maintain stability by
responding with appropriate monetary policy is encouraging. With the municipal
relationship to Treasuries more favorable than it has been in the last 10 years,
we believe the outlook for municipal bonds is positive.
We appreciate your ongoing support of Morgan Stanley Dean Witter Select
Municipal Reinvestment Fund and look forward to continuing to serve your
investment needs.
Very truly yours,
/s/ Charles A. Fiumefreddo
CHARLES A. FIUMEFREDDO
CHAIRMAN OF THE BOARD
4
<PAGE>
MORGAN STANLEY DEAN WITTER SELECT MUNICIPAL REINVESTMENT FUND
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
TAX- EXEMPT MUNICIPAL BONDS (95.6%)
GENERAL OBLIGATION (19.1%)
$ 4,000 North Slope Borough, Alaska, Ser 1996 B (MBIA).................................. 0.00% 06/30/07 $ 2,772,280
2,000 California, Refg Dtd 10/01/98 (MBIA)............................................ 4.50 10/01/28 1,840,080
2,000 Los Angeles Unified School District, California, 1997 Ser B (FGIC).............. 5.00 07/01/23 1,986,040
1,700 Washington Suburban Sanitation District, Maryland, Gen Constr Refg 1994......... 5.00 06/01/14 1,730,073
1,260 New York City, New York, 1990 Ser D............................................. 6.00 08/01/07 1,278,736
2,000 Little Miami Local School District, Ohio, Ser 1998 (FGIC)....................... 4.875 12/01/23 1,942,340
2,000 Pennsylvania, First Ser 1995 (FGIC)............................................. 5.50 05/01/12 2,139,320
2,000 Shelby County, Tennessee, Refg 1995 Ser A....................................... 5.625 04/01/12 2,147,460
2,000 Washington, Ser 1994 A.......................................................... 5.80 09/01/08 2,169,920
-----------
- ---------
18,006,249
18,960
-----------
- ---------
EDUCATIONAL FACILITIES REVENUE (7.8%)
2,000 District of Columbia, Georgetown University Ser 1993............................ 5.375 04/01/23 2,043,980
1,000 Massachusetts Health & Educational Facilities Authority, Boston College Ser K... 5.25 06/01/18 1,011,890
1,500 Rutgers - The State University, New Jersey, Refg Ser R.......................... 6.50 05/01/13 1,641,825
2,000 New York State Dormitory Authority, State University Ser 1989 B................. 0.00 05/15/03 1,674,800
1,000 Ohio Higher Educational Facility Commission, Oberlin College Ser 1993........... 5.375 10/01/15 1,032,860
-----------
- ---------
7,405,355
7,500
-----------
- ---------
ELECTRIC REVENUE (6.2%)
2,000 South Carolina Public Service Authority, Santee Cooper 1997 Refg Ser A (MBIA)... 5.00 01/01/29 1,963,420
2,000 Intermountain Power Agency, Utah, Refg 1996 Ser D (Secondary FSA)............... 5.00 07/01/21 1,965,540
3,000 Washington Public Power Supply System, Proj #2 Refg Ser 1994 A (FGIC)........... 0.00 07/01/09 1,882,080
-----------
- ---------
5,811,040
7,000
-----------
- ---------
HOSPITAL REVENUE (11.8%)
2,000 Birmingham - Carraway Special Care Facilities Financing Authority, Alabama,
Carraway Methodist Health Ser 1995 A (Connie Lee)............................. 6.25 08/15/09 2,297,220
2,000 Maryland Industrial Development Financing Authority, Holy Cross Health Refg Ser
1996.......................................................................... 5.50 12/01/08 2,190,680
2,500 New Jersey Health Care Facilities Financing Authority, St Barnabas Health Care
Refg Ser 1998 B (MBIA)........................................................ 5.25 07/01/18 2,553,450
2,000 North Central Texas Health Facilities Development Corporation, University
Medical Center Ser 1996 (FSA)................................................. 5.50 04/01/10 2,165,720
2,000 Washington Health Care Facilities, Swedish Health Ser 1998 (AMBAC).............. 5.125 11/15/22 1,968,740
-----------
- ---------
11,175,810
10,500
-----------
- ---------
INDUSTRIAL DEVELOPMENT/POLLUTION CONTROL REVENUE (6.5%)
700 Connecticut Development Authority, Bridgeport Hydraulic Co Refg Ser 1990........ 7.25 06/01/20 738,577
1,000 Michigan Strategic Fund, Ford Motor Co Refg Ser 1991 A.......................... 7.10 02/01/06 1,174,510
2,000 Ohio Water Development Authority, Dayton Power & Light Co Collateralized Refg
1992 Ser A.................................................................... 6.40 08/15/27 2,146,400
1,500 Matagorda County Navigation District #1, Texas, Central Power & Light Co
Collateralized Ser 1984 A..................................................... 7.50 12/15/14 1,588,365
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
5
<PAGE>
MORGAN STANLEY DEAN WITTER SELECT MUNICIPAL REINVESTMENT FUND
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1998, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 500 Russell County Industrial Development Authority, Virginia, Appalachian
Power Co Ser G................................................................ 7.70% 11/01/07 $ 535,035
-----------
- ---------
6,182,887
5,700
-----------
- ---------
MORTGAGE REVENUE - MULTI-FAMILY (1.3%)
950 Michigan Housing Development Authority, Rental 1992 Ser A....................... 6.60 04/01/12 1,025,563
155 Pennsylvania Housing Finance Agency, Moderate Rehabilitation - Section 8
Assisted Issue B.............................................................. 9.00 08/01/01 156,194
-----------
- ---------
1,181,757
1,105
-----------
- ---------
MORTGAGE REVENUE - SINGLE FAMILY (2.2%)
2,000 Alaska Housing Finance Corporation, Governmental 1995 Ser A (MBIA).............. 5.875 12/01/24 2,108,380
-----------
- ---------
TRANSPORTATION FACILITIES REVENUE (21.6%)
2,000 Sacramento County, California, Airport PFC Sub Refg Ser 1998 B (FGIC)........... 5.00 07/01/18 2,007,820
1,500 San Francisco Bay Area Rapid Transit Authority, California, Sales Tax Ser 1998
(AMBAC)....................................................................... 4.75 07/01/23 1,439,190
2,000 Lee County, Florida, Ser 1995 (MBIA)............................................ 5.75 10/01/22 2,138,720
2,000 Kansas, Highway Refg Ser 1998................................................... 5.50 09/01/14 2,192,920
3,500 Kentucky Turnpike Authority, Resource Recovery Road 1987 Ser A BIGS............. 8.50 07/01/06 4,436,494
2,775 Massachusetts Turnpike Authority, Western 1997 Ser A (MBIA)..................... 5.55 01/01/17 2,813,156
2,000 Ohio Turnpike Commission, Ser 1998 B (FGIC)..................................... 4.50 02/15/24 1,846,980
2,500 Puerto Rico Highway & Transportation Authority, Ser A........................... 4.75 07/01/38 2,368,125
1,250 North Texas Tollway Authority, Dallas North Tollway Ser 1998 (FGIC)............. 4.75 01/01/22 1,187,913
-----------
- ---------
20,431,318
19,525
-----------
- ---------
WATER & SEWER REVENUE (14.5%)
2,000 San Francisco Public Utilities Commission, California, Water 1996 Ser A......... 5.00 11/01/21 1,981,060
2,000 Fulton County, Georgia, Water & Sewerage Ser 1998 (FGIC)........................ 4.75 01/01/28 1,909,160
1,500 Massachusetts Water Resource Authority, 1993 Ser C.............................. 5.25 12/01/08 1,611,495
2,000 Suffolk County Industrial Development Agency, New York, Southwest Sewer Ser 1994
(FGIC)........................................................................ 4.75 02/01/09 2,054,260
1,000 Columbus, Ohio, Sewerage Refg Ser 1992.......................................... 6.25 06/01/08 1,087,170
5,000 Pittsburgh Water & Sewer Authority, Pennsylvania, 1998 Ser B (FGIC)............. 0.00 09/01/28 1,093,500
Metropolitan Government of Nashville & Davidson County, Tennessee
2,000 Refg of 1986.................................................................. 5.50 01/01/16 2,000,800
2,000 Refg Ser 1998 A (FGIC)........................................................ 4.75 01/01/22 1,918,920
-----------
- ---------
13,656,365
17,500
-----------
- ---------
REFUNDED (4.6%)
2,000 Nebraska Public Power District, Power Supply 1993 Ser........................... 6.125 01/01/03+ 2,208,600
2,000 Clermont County, Ohio, Mercy Health Ser 1991 (AMBAC)............................ 6.733 09/01/01+ 2,186,140
-----------
- ---------
4,394,740
4,000
-----------
- ---------
TOTAL TAX-EXEMPT MUNICIPAL BONDS
(IDENTIFIED COST $84,135,064)......................................................................
93,790 90,353,901
- --------- -----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE>
MORGAN STANLEY DEAN WITTER SELECT MUNICIPAL REINVESTMENT FUND
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1998, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
SHORT-TERM TAX-EXEMPT MUNICIPAL OBLIGATIONS (2.7%)
$ 1,000 Parrish Industrial Development Board, Alabama, Alabama Power Co Ser 1994 (Demand
01/04/99)..................................................................... 5.00*% 06/01/15 $ 1,000,000
1,500 Lincoln County, Wyoming, Exxon Corp Ser 1984 B (Demand 01/04/99)................ 5.05* 11/01/14 1,500,000
-----------
- ---------
TOTAL SHORT-TERM TAX-EXEMPT MUNICIPAL OBLIGATIONS
(IDENTIFIED COST $2,500,000).......................................................................
2,500 2,500,000
- --------- -----------
</TABLE>
<TABLE>
<C> <S> <C> <C>
$ 96,290 TOTAL INVESTMENTS
(IDENTIFIED COST $86,635,064) (a)........................................................... 98.3 % 92,853,901
- ---------
- ---------
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES.............................................. 1.7 1,623,633
------ ------------
NET ASSETS.................................................................................. 100.0 % $ 94,477,534
------ ------------
------ ------------
</TABLE>
- ---------------------
BIGS Bond Income Growth Security
+ Prerefunded to call date shown.
* 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
$6,356,413 and the aggregate gross unrealized depreciation is
$137,576, resulting in net unrealized appreciation of $6,218,837.
BOND INSURANCE
AMBAC AMBAC Indemnity Corporation.
Connie Lee Connie Lee Insurance Company
FGIC Financial Guaranty Insurance Company.
FSA Financial Security Assurance Inc.
MBIA Municipal Bond Investors Assurance Corporation.
GEOGRAPHIC SUMMARY OF INVESTMENTS
Based on Market Value as a Percent of Net Assets
DECEMBER 31, 1998
<TABLE>
<S> <C>
Alabama........... 3.5%
Alaska............ 5.2
California........ 9.8
Connecticut....... 0.8
District of
Columbia......... 2.2
Florida........... 2.2
Georgia........... 2.0
Kansas............ 2.3%
Kentucky.......... 4.7
Maryland.......... 4.2
Massachusetts..... 5.8
Michigan.......... 2.3
Nebraska.......... 2.3
New Jersey........ 4.4%
New York.......... 5.3
Ohio.............. 10.9
Pennsylvania...... 3.6
Puerto Rico....... 2.5
South Carolina.... 2.0
Tennessee......... 6.4%
Texas............. 5.2
Utah.............. 2.1
Virginia.......... 0.6
Washington........ 6.4
Wyoming........... 1.6
---
Total............. 98.3%
---
---
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE>
MORGAN STANLEY DEAN WITTER SELECT MUNICIPAL REINVESTMENT FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $86,635,064)................................................................ $92,853,901
Cash........................................................................................... 262,896
Receivable for:
Interest................................................................................... 1,391,254
Investments sold........................................................................... 225,000
Shares of beneficial interest sold......................................................... 22,924
Prepaid expenses and other assets.............................................................. 20,537
-----------
TOTAL ASSETS.............................................................................. 94,776,512
-----------
LIABILITIES:
Payable for:
Dividends and distributions to shareholders................................................ 157,467
Shares of beneficial interest repurchased.................................................. 48,765
Investment management fee.................................................................. 40,081
Accrued expenses and other payables............................................................ 52,665
-----------
TOTAL LIABILITIES......................................................................... 298,978
-----------
NET ASSETS................................................................................ $94,477,534
-----------
-----------
COMPOSITION OF NET ASSETS:
Paid-in-capital................................................................................ $88,241,823
Net unrealized appreciation.................................................................... 6,218,837
Accumulated undistributed net realized gain.................................................... 16,874
-----------
NET ASSETS................................................................................ $94,477,534
-----------
-----------
NET ASSET VALUE PER SHARE,
7,700,369 SHARES OUTSTANDING (UNLIMITED SHARES AUTHORIZED OF $.01 PAR VALUE)................. $12.27
-----------
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE>
MORGAN STANLEY DEAN WITTER SELECT MUNICIPAL REINVESTMENT FUND
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<S> <C>
NET INVESTMENT INCOME:
INTEREST INCOME................................................................................. $5,038,511
----------
EXPENSES
Investment management fee....................................................................... 465,126
Transfer agent fees and expenses................................................................ 208,575
Professional fees............................................................................... 47,595
Shareholder reports and notices................................................................. 45,681
Registration fees............................................................................... 42,284
Trustees' fees and expenses..................................................................... 11,997
Custodian fees.................................................................................. 4,643
Other........................................................................................... 17,664
----------
TOTAL EXPENSES............................................................................. 843,565
Less: expense offset............................................................................ (4,633)
----------
NET EXPENSES............................................................................... 838,932
----------
NET INVESTMENT INCOME...................................................................... 4,199,579
----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain............................................................................... 2,233,737
Net change in unrealized appreciation........................................................... (1,505,075)
----------
NET GAIN................................................................................... 728,662
----------
NET INCREASE.................................................................................... $4,928,241
----------
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
9
<PAGE>
MORGAN STANLEY DEAN WITTER SELECT MUNICIPAL REINVESTMENT FUND
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
DECEMBER 31, 1998 DECEMBER 31, 1997
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income................................................. $ 4,199,579 $ 4,363,935
Net realized gain..................................................... 2,233,737 40,800
Net change in unrealized appreciation................................. (1,505,075) 2,564,846
------------------- -------------------
NET INCREASE..................................................... 4,928,241 6,969,581
------------------- -------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income................................................. (4,199,579) (4,363,935)
Net realized gain..................................................... (2,257,663) (170,383)
------------------- -------------------
TOTAL DIVIDENDS AND DISTRIBUTIONS................................ (6,457,242) (4,534,318)
------------------- -------------------
Net increase (decrease) from transactions in shares of beneficial
interest............................................................ 1,751,054 (367,052)
------------------- -------------------
NET INCREASE..................................................... 222,053 2,068,211
NET ASSETS:
Beginning of period................................................... 94,255,481 92,187,270
------------------- -------------------
END OF PERIOD.................................................... $ 94,477,534 $ 94,255,481
------------------- -------------------
------------------- -------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
10
<PAGE>
MORGAN STANLEY DEAN WITTER SELECT MUNICIPAL REINVESTMENT FUND
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1998
1. ORGANIZATION AND ACCOUNTING POLICIES
Morgan Stanley Dean Witter Select Municipal Reinvestment Fund (the "Fund"),
formerly Dean Witter Select Municipal Reinvestment 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. The Fund was organized as a Massachusetts
business trust on June 1, 1983 and commenced operations on September 22, 1983.
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 for the Fund by
an outside independent pricing service approved by the Trustees. The pricing
service has informed the Fund that in valuing the Fund's 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
Fund's portfolio securities are thus valued by reference to a combination of
transactions and quotations for the same or other securities believed to be
comparable in quality, coupon, maturity, type of issue, call provisions, trading
characteristics and other features deemed to be relevant. 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.
11
<PAGE>
MORGAN STANLEY DEAN WITTER SELECT MUNICIPAL REINVESTMENT FUND
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1998, CONTINUED
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 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"), formerly Dean Witter InterCapital
Inc., the Fund pays the Investment Manager a management fee, accrued daily and
payable monthly, by applying the annual rate of 0.50% to the daily net assets of
the Fund 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.
12
<PAGE>
MORGAN STANLEY DEAN WITTER SELECT MUNICIPAL REINVESTMENT FUND
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1998, CONTINUED
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 December 31, 1998 aggregated
$26,925,779 and $28,736,550, respectively.
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager, is
the Fund's transfer agent. At December 31, 1998, the Fund had transfer agent
fees and expenses payable of approximately $3,000.
4. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
DECEMBER 31, 1998 DECEMBER 31, 1997
---------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
----------- -------------- ----------- ------------
<S> <C> <C> <C> <C>
Sold............................................................. 1,927,460 $ 24,117,738 2,165,786 $ 26,487,176
Reinvestment of dividends and distributions...................... 485,655 6,019,692 345,458 4,213,763
----------- -------------- ----------- ------------
2,413,115 30,137,430 2,511,244 30,700,939
Repurchased...................................................... (2,271,402) (28,386,376) (2,547,603) (31,067,991)
----------- -------------- ----------- ------------
Net increase (decrease).......................................... 141,713 $ 1,751,054 (36,359) $ (367,052)
----------- -------------- ----------- ------------
----------- -------------- ----------- ------------
</TABLE>
13
<PAGE>
MORGAN STANLEY DEAN WITTER SELECT MUNICIPAL REINVESTMENT FUND
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------
1998 1997 1996 1995 1994
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SELECTED PER SHARE DATA:
Net asset value, beginning of
period....................... $ 12.47 $ 12.14 $ 12.48 $ 11.34 $ 12.82
---------- --------- --------- ---------- ---------
Income (loss) from investment
operations:
Net investment income...... 0.56 0.58 0.61 0.62 0.65
Net realized and unrealized
gain (loss)................ 0.10 0.35 (0.19) 1.16 (1.40)
---------- --------- --------- ---------- ---------
Total (loss) income from
investment operations........ 0.66 0.93 0.42 1.78 (0.75)
---------- --------- --------- ---------- ---------
Less dividends and
distributions from:
Net investment income...... (0.56) (0.58) (0.61) (0.62) (0.69)
Net realized gain.......... (0.30) (0.02) (0.15) (0.02) (0.04)
---------- --------- --------- ---------- ---------
Total dividends and
distributions................ (0.86) (0.60) (0.76) (0.64) (0.73)
---------- --------- --------- ---------- ---------
Net asset value, end of
period....................... $ 12.27 $ 12.47 $ 12.14 $ 12.48 $ 11.34
---------- --------- --------- ---------- ---------
---------- --------- --------- ---------- ---------
TOTAL RETURN+................. 5.46% 7.94% 3.55% 16.00% (5.98)%
RATIOS TO AVERAGE NET ASSETS:
Expenses...................... 0.91%(1) 0.95%(1) 0.94%(1) 0.97% 0.96%
Net investment income......... 4.51% 4.78% 5.01% 5.14% 5.34%
SUPPLEMENTAL DATA:
Net assets, end of period, in
thousands.................... $94,478 $94,255 $92,187 $95,231 $86,405
Portfolio turnover rate....... 31% 8% 17% 17% 18%
</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 SELECT MUNICIPAL REINVESTMENT FUND
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND TRUSTEES
OF MORGAN STANLEY DEAN WITTER SELECT MUNICIPAL REINVESTMENT FUND
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 Select
Municipal Reinvestment Fund (the "Fund"), formerly Dean Witter Select Municipal
Reinvestment Fund, at December 31, 1998, the results of its operations for the
year then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for each of the 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
December 31, 1998 by correspondence with the custodian, provide a reasonable
basis for the opinion expressed above.
PricewaterhouseCoopers LLP
1177 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036
FEBRUARY 8, 1999
1998 FEDERAL TAX NOTICE (UNAUDITED)
During the year ended December 31, 1998, the Fund paid to
shareholders $0.56 per share from net investment income. All of
these dividends from net investment income were exempt interest
dividends, excludable from gross income for Federal income tax
purposes.
For the year ended December 31, 1998, the Fund paid to
shareholders $0.29 per share from long-term capital gains. This
capital gain distribution is taxable as 20% rate gain.
15
<PAGE>
MORGAN STANLEY
DEAN WITTER
SELECT MUNICIPAL
REINVESTMENT
FUND
Annual Report
December 31, 1998
TRUSTEES
- -------------------------------------------------------------------------------
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
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
Barry Fink
VICE PRESIDENT, SECRETARY AND GENERAL COUNSEL
James F. Willison
VICE PRESIDENT
Joseph R. Arcieri
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.
