<PAGE>
DEAN WITTER NEW YORK TAX-FREE INCOME FUND
Two World Trade Center
New York, New York 10048
DEAR SHAREHOLDER:
- --------------------------------------------------------------------------------
MARKET CONDITIONS
Interest rates moved higher throughout 1994 as the fixed-income markets
focused on the strong pace of economic growth and the potential for higher
inflation. Satisfied that economic growth would be sustained, the Federal
Reserve Board began to tighten monetary policy to one of neutrality. Between
February and November, the central bank raised the federal-funds rate from 3.00
percent to 5.50 percent in six stages. This led to a severe bear market in
bonds.
Municipal yields, as tracked by THE BOND BUYER Revenue Bond Index,* began
1994 at 5.52 percent, nearly a record low. The Index peaked at 7.37 percent in
November and ended the year at 6.97 percent. The 145 basis point yield increase
during the year was equivalent to an 18 percent price decline for a bond with a
30 year maturity. In contrast, over the
six-year period between 1987 and 1993, yields
fell from 9.00 percent to 5.50 percent and
bond prices appreciated 24 percent.
The municipal bond market's weakness
paralleled trends in other fixed-income
sectors. The 30-year U.S. Treasury bond's
yield increased 160 basis points and closed
1994 at 7.84 percent. During the year, the
ratio of Revenue Bond Index yields to 30-year
U.S. Treasury bond yields ranged from a low
of 85 percent to a high of 92 percent and
ended the year at 89 percent. (At higher
ratios, municipals are more attractive
relative to taxable investments.)
The fiscal year was also marked by
periods of supply/ demand imbalance in
municipals. Between February and May, dealer
inventories reached near-record levels as
long-term bonds were sold to pay taxes and
increase cash. A semblance of stability
returned to the market between June and
August. However, after Labor Day the market
was again subject to a renewed round of bond
sales as fund redemptions mounted and
tax-loss selling accelerated. Market
conditions improved in December as the
"January effect"--the reinvestment of
coupons, redemptions and maturities at a time
of seasonally scarce supply--was anticipated.
This seasonal pattern more than offset market
uncertainty caused by the Orange County,
California bankruptcy filing. On December 6,
1994, Orange County, one of the most affluent
areas in the country, was forced to seek
protection after its pooled investment fund
faced unprecedented losses.
Higher interest rates slowed state and
local government debt issuance. New-issue
volume dropped 44 percent to $163 billion in
1994. The driving force behind this sharp
decline
- --------------------------------------------------------------------------------
* THE BOND BUYER Revenue Bond Index is an arithmetic average of the yields of 25
selected municipal revenue bonds with 30-year maturities. Credit ratings of
these bonds range from Aa1 to Baa1 by Moody's and AA+ to A- by Standard &
Poor's.
<PAGE>
was the virtual halt in refunding issues, which plummeted 74 percent. In
comparison, New York volume--#2 in the nation at $19 million--declined 40
percent. Last year the level of redemptions from maturing debt and refunding
calls reached $191 billion and exceeded the supply of new issues coming to
market. This marked the decline in the amount of municipal securities
outstanding. A repeat of this supply scarcity is expected in 1995 and bodes well
for the municipal market's relative performance of municipals.
PERFORMANCE
Dean Witter New York Tax-Free Income Fund's total return for the year ended
December 31, 1994 was -7.74 percent. Tax free dividends totaling $0.57 per share
were paid during the year. At year end, the Fund's net assets totaled $207
million. Since inception the Fund has provided shareholders with an average
annual total return of 7.67 percent. The accompanying chart illustrates the
performance of a $10,000 investment in the Fund from inception (April 25, 1985)
through the fiscal year ended December 31, 1994, versus the performance of a
similar investment in the Lehman Brothers Municipal Bond Index.
INVESTMENT STRATEGY
During a year of rapidly rising interest rates, the Fund benefited from its
established mix of older high-coupon bonds. At the end of the fiscal year, the
portfolio held 11 percent of its net assets in refunded issues, which were
secured by U.S. government securities held in escrow to redeem these issues on
their first call dates. The Fund also increased its short-term investment and
cash position to 8 percent of net assets in 1994.
On December 31, 1994, the portfolio's long-term investments were diversified
among 13 specific municipal sectors and 32 credits. The three largest sectors
were industrial development/pollution control, water & sewer and educational
facilities revenue bonds, representing 42 percent of net assets. The average
maturity and call protection of the Fund's long-term holdings were 18 years and
7 years, respectively. Bonds subject to the alternative minimum tax (AMT)
comprised approximately 14 percent of net assets. The credit-quality ratings of
the long-term portfolio are summarized below:
<TABLE>
<CAPTION>
MOODY'S OR STANDARD & POOR'S RATING PERCENT
- ---------------------------------------------------------- -------------
<S> <C>
Aaa or AAA................................................ 24%
Aa or AA.................................................. 14
A or A.................................................... 41
Baa or BBB................................................ 19
Not rated................................................. 2
</TABLE>
LOOKING AHEAD
Moving into 1995, the Fund plans to reduce its defensive positions,
including refunded bonds, as the pace of economic growth and inflationary
expectations moderate. New investments will continue to stress credit quality
and essential service sectors. However, even with the move to higher yields that
occurred last year, the Fund cannot obtain the yield of many older investments
that may be called or sold in the next few years.
We appreciate your ongoing support of Dean Witter New York Tax-Free Income
Fund and look forward to continuing to serve your investment needs.
Very truly yours,
[SIG]
Charles A. Fiumefreddo
CHAIRMAN OF THE BOARD
<PAGE>
DEAN WITTER NEW YORK TAX-FREE INCOME FUND
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- -------- ------- ---------- ------------
<C> <S> <C> <C> <C>
NEW YORK EXEMPT MUNICIPAL BONDS (90.1%)
GENERAL OBLIGATION (7.0%)
New York City,
$ 3,500 Various Purpose 1973............................ 3.50% 05/01/01 $ 2,807,105
2,500 Various Purpose 1973............................ 3.50 05/01/03 1,881,900
4,000 1990 Ser D...................................... 6.00 08/01/06 3,721,760
8,800 Puerto Rico, Pub Impr Refg Ser 1987 A............. 3.00 07/01/06 6,139,144
- -------- ------------
18,800 14,549,909
- -------- ------------
EDUCATIONAL FACILITIES REVENUE (11.8%)
New York State Dormitory Authority,
2,150 City University Ser U........................... 6.375 07/01/08 2,070,084
3,000 City University Ser 1993 A...................... 5.75 07/01/09 2,666,790
5,000 City University Ser 1993 F...................... 5.50 07/01/12 4,205,300
3,000 State University Ser 1989 B..................... 0.00 05/15/05 1,549,830
10,000 State University Ser 1993 C..................... 5.375 05/15/13 8,261,500
2,000 State University Ser 1993 A..................... 5.25 05/15/15 1,615,480
4,000 University of Rochester Ser 1987................ 6.50 07/01/09 3,981,400
- -------- ------------
29,150 24,350,384
- -------- ------------
ELECTRIC REVENUE (5.1%)
5,000 New York State Power Authority, Ser CC............ 5.00 01/01/14 4,038,800
8,000 Puerto Rico Electric Power Authority, Power Ser
O............................................... 5.00 07/01/12 6,567,840
- -------- ------------
13,000 10,606,640
- -------- ------------
HOSPITAL REVENUE (6.1%)
New York State Medical Care Facilities Finance
Agency,
10,000 Insured Hospital & Nursing Home-FHA Insured Mtge
1993 Ser B...................................... 5.50 02/15/22 8,399,000
4,000 St Lukes-Roosevelt Hospital Center-FHA Insured
Mtge 1989 Ser B (Prerefunded)................... 7.40 02/15/09 4,317,200
- -------- ------------
14,000 12,716,200
- -------- ------------
INDUSTRIAL DEVELOPMENT/POLLUTION CONTROL REVENUE (17.2%)
4,500 New York City Industrial Development Agency,
1990 American Airlines Inc (AMT)................ 8.00 07/01/20 4,580,055
New York State Energy Research & Development
Authority,
7,000 Brooklyn Union Gas Co 1993 Ser B................ 6.368 04/01/20 6,288,590
15,000 Brooklyn Union Gas Co 1991 Ser B (AMT).......... 6.952 07/01/26 14,321,850
4,000 Consolidated Edison Co of New York Inc Ser 1986
A (AMT)......................................... 7.50 11/15/21 4,040,720
2,500 Long Island Lighting Co 1990 Ser A (AMT)........ 7.15 06/01/20 2,290,425
4,000 Niagara Mohawk Power Corp 1985 Ser I............ 8.875 11/01/25 4,206,320
- -------- ------------
37,000 35,727,960
- -------- ------------
</TABLE>
<PAGE>
DEAN WITTER NEW YORK TAX-FREE INCOME FUND
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1994 (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- -------- ------- ---------- ------------
<C> <S> <C> <C> <C>
MORTGAGE REVENUE - MULTI-FAMILY (2.6%)
New York City Housing Development Corporation,
$ 2,429 East Midtown Proj-FHA Insured Sec 223........... 6.50% 11/15/18 $ 2,226,310
1,000 Gen Hsg Ser A (AMBAC Insured)................... 6.50 05/01/06 1,024,880
2,430 Ruppert Proj-FHA Insured Sec 223................ 6.50 11/15/18 2,227,109
- -------- ------------
5,859 5,478,299
- -------- ------------
MORTGAGE REVENUE - SINGLE FAMILY (4.8%)
New York State Mortgage Agency,
4,500 Homeowner Ser 27................................ 6.90 04/01/15 4,499,325
5,000 Homeowner Ser 29 A.............................. 5.25 04/01/15 4,032,050
1,400 Ser MM-1 (AMT).................................. 7.95 10/01/21 1,466,878
- -------- ------------
10,900 9,998,253
- -------- ------------
NURSING & HEALTH RELATED FACILITIES REVENUE (1.2%)
New York State Medical Care Facilities Finance
Authority, Long Term Health Care 1992 Ser D
(CGIC).......................................... 6.50 11/01/15 2,449,425
2,500
- --------
------------
PUBLIC FACILITIES REVENUE (3.6%)
3,000 New York State Dormitory Authority, Suffolk County
Judicial
Ser 1986 (ETM).................................. 7.375 07/01/16 3,255,930
3,750 New York State Urban Development Corporation,
Correctional Ser 3 (Prerefunded)................ 7.375 01/01/18 4,156,688
- -------- ------------
6,750 7,412,618
- -------- ------------
RESOURCE RECOVERY REVENUE (3.8%)
3,000 Hempstead Industrial Development Agency, 1985
American REF-FUEL Co of Hempstead............... 7.40 12/01/10 3,051,210
3,000 New York State Environmental Facilities
Corporation,
Huntington 1989 Ser A (AMT)..................... 7.50 10/01/12 3,009,000
2,000 Oneida-Herkimer Solid Waste Management Authority,
Ser 1992........................................ 6.75 04/01/14 1,797,640
- -------- ------------
8,000 7,857,850
- -------- ------------
TRANSPORTATION REVENUE (3.0%)
3,400 Port Authority of New York & New Jersey, Cons 53rd
Ser............................................. 8.70 07/15/20 3,599,852
3,000 Puerto Rico Highway & Transportation Authority,
Refg Ser X...................................... 5.50 07/01/15 2,545,680
- -------- ------------
6,400 6,145,532
- -------- ------------
WATER & SEWER REVENUE (12.9%)
New York City Municipal Water Finance Authority,
4,000 1994 Ser B...................................... 5.375 06/15/07 3,556,840
3,000 1991 Ser C (Prerefunded)........................ 7.375 06/15/14 3,306,240
4,000 1990 Ser A...................................... 6.00 06/15/19 3,586,040
</TABLE>
<PAGE>
DEAN WITTER NEW YORK TAX-FREE INCOME FUND
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1994 (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- -------- ------- ---------- ------------
<C> <S> <C> <C> <C>
Suffolk County Industrial Development Agency,
$ 5,000 Southwest Sewer Ser 1994 (FGIC Insured)......... 6.00% 02/01/07 $ 4,907,150
4,000 Southwest Sewer Ser 1994 (FGIC Insured)......... 6.00 02/01/08 3,883,480
7,000 Puerto Rico Aqueduct & Sewer Authority, Ser 1988
A............................................... 7.90 07/01/07 7,434,560
- -------- ------------
27,000 26,674,310
- -------- ------------
OTHER REVENUE (11.0%)
4,000 Municipal Assistance Corporation for the City of
New York, Ser 57................................ 7.25 07/01/08 4,161,400
New York Local Government Assistance Corporation,
5,000 Ser 1994 A...................................... 5.50 04/01/17 4,239,100
5,000 Ser 1991 B (Prerefunded)........................ 7.50 04/01/20 5,548,500
10,000 United Nations Development Corporation, 1992 Refg
Ser A
Sr Lien......................................... 6.00 07/01/26 8,757,600
- -------- ------------
24,000 22,706,600
- -------- ------------
</TABLE>
<TABLE>
<C> <S> <C> <C> <C>
TOTAL NEW YORK EXEMPT MUNICIPAL BONDS
203,359 (IDENTIFIED COST $191,612,547).................. 186,673,980
- -------- ------------
NEW YORK EXEMPT SHORT-TERM MUNICIPAL OBLIGATIONS (8.2%)
New York State Dormitory Authority,
7,500 Cornell University Ser 1990 B (Tender
01/03/95)....................................... 5.75* 07/01/25 7,500,000
5,000 The Metropolitan Museum of Art Ser 1987
(Prerefunded 07/01/95)........................ 7.625 07/01/15 5,223,850
4,200 New York State Energy Research & Development
Authority, Niagara Mohawk Power Corp Ser 1987 A
(Tender 01/03/95)............................... 5.85* 03/01/27 4,200,000
- -------- ------------
TOTAL NEW YORK EXEMPT SHORT-TERM MUNICIPAL
OBLIGATIONS (IDENTIFIED COST $16,638,223).........
16,700
- -------- 16,923,850
------------
$220,059 TOTAL INVESTMENTS (IDENTIFIED COST $208,250,770) (A)(B) 98.3% 203,597,830
- -------- CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES.... 1.7 3,449,159
- --------
---------- ------------
NET ASSETS........................................ 100.0% $207,046,989
---------- ------------
---------- ------------
<FN>
- ----------------
AMT ALTERNATIVE MINIMUM TAX.
ETM ESCROW TO MATURITY.
* VARIABLE OR FLOATING RATE SECURITIES. COUPON RATE REFLECTS CURRENT RATE.
(A) THE AGGREGATE COST FOR FEDERAL INCOME TAX PURPOSES IS $208,250,770; THE AGGREGATE GROSS
UNREALIZED APPRECIATION IS $6,862,338 AND THE AGGREGATE GROSS UNREALIZED DEPRECIATION IS
$11,515,278, RESULTING IN NET UNREALIZED DEPRECIATION OF $4,652,940.
(B) INVESTMENTS WITHIN NEW YORK AND PUERTO RICO REPRESENT 79.1% AND 11.0% OF NET ASSETS,
RESPECTIVELY.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER NEW YORK TAX-FREE INCOME FUND
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $208,250,770).......... $ 203,597,830
Cash...................................... 258,809
Receivable for:
Interest................................ 4,000,448
Shares of beneficial interest sold...... 59,681
Prepaid expenses and other assets......... 15,882
-------------
TOTAL ASSETS...................... 207,932,650
-------------
LIABILITIES:
Payable for:
Dividends to shareholders............... 394,414
Plan of distribution fee................ 156,994
Shares of beneficial interest
repurchased........................... 124,272
Investment management fee............... 96,452
Accrued expenses and other payables....... 113,529
-------------
TOTAL LIABILITIES................. 885,661
-------------
NET ASSETS:
Paid-in-capital........................... 212,173,701
Net unrealized depreciation............... (4,652,940)
Accumulated undistributed net investment
income.................................. 14,003
Accumulated net realized loss............. (487,775)
-------------
NET ASSETS........................ $ 207,046,989
-------------
-------------
NET ASSET VALUE PER SHARE, 19,125,860
shares outstanding (unlimited shares
authorized of $.01 par value)...........
$10.83
-------------
-------------
</TABLE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1994
<TABLE>
<S> <C>
NET INVESTMENT INCOME:
INTEREST INCOME......................... $ 14,477,416
-------------
EXPENSES
Plan of distribution fee.............. 1,687,792
Investment management fee............. 1,254,070
Transfer agent fees and expenses...... 97,490
Shareholder reports and notices....... 50,785
Professional fees..................... 49,010
Trustees' fees and expenses........... 27,736
Registration fees..................... 4,298
Other................................. 11,612
-------------
TOTAL EXPENSES.................... 3,182,793
-------------
NET INVESTMENT INCOME........... 11,294,623
-------------
NET REALIZED AND UNREALIZED LOSS:
Net realized loss..................... (487,800)
Net change in unrealized
appreciation........................ (29,811,878)
-------------
NET LOSS.......................... (30,299,678)
-------------
NET DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS..... $ (19,005,055)
-------------
-------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE YEAR ENDED
DECEMBER 31, 1994 DECEMBER 31, 1993
------------------ ------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income................................................ $ 11,294,623 $ 11,996,748
Net realized gain (loss)............................................. (487,800) 6,322,958
Net change in unrealized appreciation................................ (29,811,878) 6,844,389
------------------ ------------------
Net increase (decrease).......................................... (19,005,055) 25,164,095
------------------ ------------------
Dividends and distributions to shareholders from:
Net investment income................................................ (11,286,357) (11,996,748)
Net realized gain.................................................... (3,193,040) (3,940,210)
------------------ ------------------
Total............................................................ (14,479,397) (15,936,958)
Net increase (decrease) from transactions in shares of beneficial
interest.............................................................. (5,929,150) 28,717,907
------------------ ------------------
Total increase (decrease)........................................ (39,413,602) 37,945,044
NET ASSETS:
Beginning of period.................................................... 246,460,591 208,515,547
------------------ ------------------
END OF PERIOD (including undistributed net investment income of
$14,003 and $5,763, respectively)..................................... $ 207,046,989 $ 246,460,591
------------------ ------------------
------------------ ------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER NEW YORK TAX-FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. ORGANIZATION AND ACCOUNTING POLICIES -- Dean Witter New York Tax-Free Income
Fund (the "Fund") is registered under the Investment Company Act of 1940, as
amended (the "Act"), as a diversified, open-end management investment company.
The Fund was organized as a Massachusetts business trust on January 17, 1985 and
commenced operations on April 25, 1985.
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 on the identified cost
method. The Fund amortizes premiums and discounts on securities purchased
over the life of the respective securities. Interest income is accrued daily
except where collection is not expected.
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 Dean Witter InterCapital Inc. (the "Investment Manager"), the
Fund pays its Investment Manager a
<PAGE>
DEAN WITTER NEW YORK TAX-FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
management fee, accrued daily and payable monthly, by applying the following
annual rates to the Fund's net assets determined as of the close of each
business day: 0.55% to the portion of daily net assets not exceeding $500
million and 0.525% to the portion of daily net assets exceeding $500.
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. PLAN OF DISTRIBUTION -- Shares of the Fund are distributed by Dean Witter
Distributors Inc. (the "Distributor"), an affiliate of the Investment Manager.
The Fund has adopted a Plan of Distribution (the "Plan") pursuant to Rule 12b-1
under the Act pursuant to which the Fund pays the Distributor compensation,
accrued daily and payable monthly, at an annual rate of 0.75% of the lesser of:
(a) the average daily aggregate gross sales of the Fund's shares since the
Fund's inception (not including reinvestment of dividend or capital gains
distributions) less the average daily aggregate net asset value of the Fund's
shares redeemed since the Fund's inception upon which a contingent deferred
sales charge has been imposed or upon which such charge has been waived; or (b)
the Fund's average daily net assets. Amounts paid under the Plan are paid to the
Distributor to compensate it for the services provided and the expenses borne by
it and others in the distribution of the Fund's shares, including the payment of
commissions for sales of the Fund's shares and incentive compensation to and
expenses of account executives of Dean Witter Reynolds Inc., an affiliate of the
Investment Manager and Distributor, and other employees and selected
broker-dealers, who engage in or support distribution of the Fund's shares or
who service shareholder accounts, including overhead and telephone expenses,
printing and distribution of prospectuses and reports used in connection with
the offering of the Fund's shares to other than current shareholders and
preparation, printing and distribution of sales literature and advertising
materials. In addition, the Distributor may be compensated under the Plan for
its opportunity costs in advancing such amounts, which compensation would be in
the form of a carrying charge on any unreimbursed expenses by the Distributor.
Provided that the Plan continues in effect, any cumulative expenses incurred
but not yet recovered may be recovered through future distribution fees from the
Fund and contingent deferred sales charges from the Fund's shareholders.
The Distributor has informed the Fund that for the year ended December 31,
1994, it received approximately $312,000 in contingent deferred sales charges
from certain redemptions of the Fund's shares. The Fund's shareholders pay such
charges which are not an expense of the Fund.
4. 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, 1994 aggregated $20,781,910 and
$41,430,851, respectively.
Dean Witter Trust Company, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At December 31, 1994, the Fund had
transfer agent fees and expenses payable of approximately $11,000.
<PAGE>
DEAN WITTER NEW YORK TAX-FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
On April 1, 1991, the Fund established 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 December 31, 1994, included in Trustees' fees and expenses in the
Statement of Operations amounted to $8,278. At December 31, 1994, the Fund had
an accrued pension liability of $47,002 which is included in accrued expenses in
the Statement of Assets and Liabilities.
5. SHARES OF BENEFICIAL INTEREST -- Transactions in shares of beneficial
interest were as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER FOR THE YEAR ENDED DECEMBER
31, 1994 31, 1993
----------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
------------ --------------- ------------ ---------------
<S> <C> <C> <C> <C>
Sold........................................ 1,882,224 $ 21,996,590 3,452,052 $ 43,018,205
Reinvestment of dividends and
distributions.............................. 776,114 8,847,709 802,145 10,012,352
------------ --------------- ------------ ---------------
2,658,338 30,844,299 4,254,197 53,030,557
Repurchased................................. (3,244,785) (36,773,449) (1,950,896) (24,312,650)
------------ --------------- ------------ ---------------
Net increase (decrease)..................... (586,447) $ (5,929,150) 2,303,301 $ 28,717,907
------------ --------------- ------------ ---------------
------------ --------------- ------------ ---------------
</TABLE>
6. FEDERAL INCOME TAX STATUS -- At December 31, 1994, the Fund had net capital
loss carryovers of approximately $488,000, which will be available through
December 31, 2002 to offset future capital gains to the extent provided by
regulations.
<PAGE>
DEAN WITTER NEW YORK TAX-FREE INCOME 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,
-------------------------------------------------------------------------------------------------
1994 1993 1992 1991 1990 1989 1988 1987 1986
--------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value,
beginning of period..... $ 12.50 $ 11.98 $ 11.68 $ 11.00 $ 11.25 $ 10.94 $ 10.50 $ 11.57 $ 10.57
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Net investment income.... 0.57 0.65 0.65 0.68 0.68 0.68 0.68 0.70 0.72
Net realized and
unrealized gain (loss)
on investment........... (1.51) 0.72 0.34 0.70 (0.25) 0.31 0.44 (0.93) 1.09
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Total from investment
operations.............. (0.94) 1.37 0.99 1.38 0.43 0.99 1.12 (0.23) 1.81
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Less dividends and
distributions from:
Net investment
income................ (0.57) (0.65) (0.65) (0.68) (0.68) (0.68) (0.67) (0.70) (0.72)
Net realized gain...... (0.16) (0.20) (0.04) (0.02) -- -- (0.01) (0.14) (0.09)
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Total dividends and
distributions........... (0.73) (0.85) (0.69) (0.70) (0.68) (0.68) (0.68) (0.84) (0.81)
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Net asset value, end of
period.................. $ 10.83 $ 12.50 $ 11.98 $ 11.68 $ 11.00 $ 11.25 $ 10.94 $ 10.50 $ 11.57
--------- --------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- --------- ---------
TOTAL INVESTMENT
RETURN+................. (7.74)% 11.72% 8.70% 12.94% 4.01% 9.34% 10.91% (1.89)% 17.62%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands).......... $ 207,047 $ 246,461 $ 208,516 $ 181,714 $ 158,075 $ 147,363 $ 128,600 $ 112,795 $ 113,321
Ratios to average net
assets:
Expenses............... 1.40% 1.27% 1.40% 1.32% 1.37% 1.37% 1.41% 1.40% 1.41%
Net investment
income................ 4.96% 5.20% 5.48% 6.00% 6.13% 6.09% 6.28% 6.44% 6.36%
Portfolio turnover
rate.................... 10% 25% 16% 17% 23% 4% 18% 40% 23%
<CAPTION>
FOR THE PERIOD
APRIL 25, 1985*
THROUGH
DECEMBER 31,
1985
---------------
<S> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value,
beginning of period..... $ 10.00
---------------
Net investment income.... 0.51
Net realized and
unrealized gain (loss)
on investment........... 0.57
---------------
Total from investment
operations.............. 1.08
---------------
Less dividends and
distributions from:
Net investment
income................ (0.51)
Net realized gain...... --
---------------
Total dividends and
distributions........... (0.51 )
---------------
Net asset value, end of
period.................. $ 10.57
---------------
---------------
TOTAL INVESTMENT
RETURN+................. 11.04%(1)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands).......... $ 73,408
Ratios to average net
assets:
Expenses............... 1.16%(2)(3)
Net investment
income................ 7.02%(2)(3)
Portfolio turnover
rate.................... 24%(1)
<FN>
- --------------------
* COMMENCEMENT OF OPERATIONS.
+ DOES NOT REFLECT THE DEDUCTION OF SALES CHARGE.
(1) NOT ANNUALIZED.
(2) ANNUALIZED.
(3) IF THE FUND HAD BORNE ALL ITS EXPENSES THAT WERE ASSUMED OR WAIVED BY THE
INVESTMENT MANAGER AND THE DISTRIBUTOR, THE ABOVE EXPENSE AND NET
INVESTMENT INCOME RATIOS WOULD HAVE BEEN 1.58% AND 6.60%, RESPECTIVELY.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER NEW YORK TAX-FREE INCOME FUND
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Trustees of Dean Witter New York Tax-Free Income 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 Dean Witter New York Tax-Free
Income Fund (the "Fund") at December 31, 1994, 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 nine years in
the period then ended and for the period April 25, 1985 (commencement of
operations) through December 31, 1985, 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 owned at December 31, 1994 by correspondence with the
custodian, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
New York, New York
February 13, 1995
1994 FEDERAL TAX NOTICE (UNAUDITED)
During the year ended December 31, 1994, the Fund paid to the shareholders
$0.572 per share from net investment income. All of the Fund's dividends
from net investment income were exempt interest dividends, excludable from
gross income for Federal income tax purposes. For the year ended December
31, 1994, the Fund paid to shareholders $0.158 per share from long-term
capital gains.
<PAGE>
TRUSTEES
Jack F. Bennett
Michael Bozic Dean Witter
Charles A. Fiumefreddo New York
Edwin J. Garn Tax-Free
John R. Haire Income Fund
Dr. Manuel H. Johnson
Paul Kolton
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Sheldon Curtis
Vice President, Secretary and General Counsel
James F. Willison
Vice President
Thomas F. Caloia
Treasurer
TRANSFER AGENT
Dean Witter Trust Company
Harborside Financial Center - Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
Dean Witter InterCapital 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 ANNUAL REPORT
accompanied by an effective prospectus. DECEMBER 31, 1994
<PAGE>
DEAN WITTER NEW YORK TAX-FREE INCOME FUND
GROWTH OF $10,000
($ IN THOUSANDS)
<TABLE>
<CAPTION>
DATE TOTAL LEHMAN MUNI BOND INDEX
<S> <C> <C>
April 25, 1985 $10,000 $10,000
December 31, 1985 $11,104 $11,131
December 31, 1986 $13,061 $13,280
December 31, 1987 $12,814 $13,481
December 31, 1988 $14,212 $14,851
December 31, 1989 $15,540 $16,453
December 31, 1990 $16,163 $17,652
December 31, 1991 $18,254 $19,795
December 31, 1992 $19,842 $21,541
December 31, 1993 $22,168 $24,187
December 31, 1994 $20,453 $22,936
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
1 YEAR 5 YEARS LIFE OF FUND
<S> <C> <C>
- 7.74(1) 5.65(1) 7.67(1)
-12.06(2) 5.34(2) 7.67(2)
Fund Lehman (4)
-------- --------
Past performance is not predictive of future returns.
<FN>
- ---------------------------------------
(1) Figure shown assumes reinvestment of all distributions and does not reflect
the deduction of any sales charges.
(2) Figure shown assumes reinvestment of all distributions and the deduction of
the maximum applicable contingent deferred sales charge (CDSC) (1 year-5%,
5 years-2%, since inception-0%). See the Fund's current prospectus for
complete details on fees and sales charges.
(3) Closing value, assuming a complete redemption on December 31, 1994.
(4) The Lehman Brothers Municipal Bond Index tracks the performance of
municipal bonds with maturities of 2 years or greater and a minimum credit
rating of Baa or BBB, as rated by Moody's Investors Service, Inc. or
Standard & Poor's Corp. The Index does not include any expenses, fees, or
charges.
</TABLE>
