<PAGE> 1
DEAN WITTER NEW YORK TAX-FREE INCOME FUND Two World Trade Center,
LETTER TO THE SHAREHOLDERS June 30, 1997 New York, New York 10048
DEAR SHAREHOLDER:
We are pleased to present the semiannual report on the operations of Dean Witter
New York Tax-Free Income Fund for the six-month period ended June 30, 1997.
A consumer-led acceleration in economic activity in late 1996 carried into the
first quarter of 1997. This contributed to a rise in interest rates between
December 1996 and April 1997. On March 25, 1997, the Federal Reserve Board
raised the federal-funds rate 25 basis points to 5.50 percent in a preemptive
move against a possible increase in the rate of inflation. The bond market
recognized that additional rate hikes by the central bank were possible, but
began to rally when short-term interest rates remained unchanged in May.
MUNICIPAL MARKET CONDITIONS
Municipal yields followed the trend of U.S. Treasury yields, but with less
volatility. Long-term insured revenue bond yields rose from 5.45 percent at the
end of November 1996 to a high of 5.85 percent in mid April 1997 before
declining to 5.50 percent in June.
<TABLE>
<CAPTION>
BOND YIELDS 1994-1997
30-Year Insured 30-Year U.S. Treasury Insured Municipal Revenue Yields
Municipal Revenue Yields Yields as a Percentage of U.S. Treasury Yields
<S> <C> <C> <C>
Dec '93 5.45 6.35 0.8586
5.29 6.24 0.8481
5.64 6.66 0.8468
6.19 7.09 0.8728
6.24 7.31 0.854
6.23 7.43 0.8387
Jun '94 6.31 7.61 0.8293
6.15 7.4 0.8314
6.17 7.45 0.828
6.42 7.82 0.8212
6.66 7.97 0.8356
6.99 8 0.8738
Dec '94 6.65 7.88 0.8438
6.42 7.7 0.834
6.12 7.44 0.8222
6.07 7.43 0.8167
6.05 7.34 0.8245
5.84 6.65 0.8784
Jun '95 6 6.62 0.9066
5.99 6.85 0.875
5.98 6.65 0.8997
5.97 6.5 0.9184
5.79 6.33 0.915
5.61 6.13 0.9151
Dec '95 5.49 5.95 0.923
5.42 6.03 0.8989
5.55 6.47 0.8577
5.89 6.67 0.8835
5.94 6.91 0.8601
5.99 6.99 0.8571
Jun '96 5.86 6.87 0.8529
5.77 6.97 0.8278
5.82 7.12 0.8176
5.71 6.92 0.8248
5.6 6.64 0.8431
5.45 6.35 0.8583
Dec '96 5.56 6.64 0.8372
5.63 6.79 0.8293
5.53 6.8 0.8129
5.83 7.1 0.8216
5.74 6.96 0.8251
5.58 6.91 0.8081
Jun '97 5.49 6.78 0.8092
Source: Bloomberg L.P.
</TABLE>
<PAGE> 2
DEAN WITTER NEW YORK TAX-FREE INCOME FUND
LETTER TO THE SHAREHOLDERS June 30, 1997, continued
<TABLE>
<CAPTION>
LARGEST SECTORS AS OF JUNE 30, 1997
(% OF NET ASSETS)
<S> <C>
General Obligation 14%
IDR/PCR* 13%
Education 10%
Mortgage 9%
Refunded 9%
Water & Sewer 6%
All Others 39%
</TABLE>
* Industrial Development/Pollution Control Revenue
Portfolio structure is subject to change.
<TABLE>
<CAPTION>
CREDIT RATINGS AS OF JUNE 30, 1997
(% OF TOTAL LONG-TERM PORTFOLIO)
<S> <C>
Aaa or AAA 28%
Aa or AA 9%
A or A 33%
Baa or BBB 27%
NR* 3%
</TABLE>
As measured by Moody's Investor Service, Inc. or Standard & Poor's Corp.
* Not rated at time of purchase; deemed by investment manager to be comparable
to investment-grade securities.
Portfolio structure is subject to change.
<TABLE>
<CAPTION>
CALL STRUCTURE as of June 30, 1997 WEIGHTED AVERAGE
(% of Total Long-Term Portfolio) CALL PROTECTION: 6.3 YEARS
Percent Callable
YEARS BONDS CALLABLE
<S> <C>
1997 12.7%
1998 0%
1999 12.2%
2000 2.7%
2001 6.5%
2002 8.1%
2003 5.8%
2004 13.0%
2005 4.4%
2006 15.6%
2007+ 19.0%
</TABLE>
<PAGE> 3
DEAN WITTER NEW YORK TAX-FREE INCOME FUND
LETTER TO THE SHAREHOLDERS June 30, 1997, continued
The ratio of 30-year insured revenue bond yields to 30-year U.S. Treasury yields
declined from 86 percent at the end of November 1996 to 81 percent in June 1997.
A declining ratio means that municipals have outperformed Treasuries, but have
become relatively less attractive. The annual range of the ratio averaged
between 80 percent and 92 percent over the past three years.
Relative to last year, new-issue municipal volume was ahead only two percent for
the first six months of 1997. Estimated underwriting volume of $180 billion for
the full year is expected to exceed bond maturities and redemptions of $130
billion.
PERFORMANCE
Dean Witter New York Tax-Free Income Fund's total return for the six-month
period ended June 30, 1997 was 2.42 percent. The Fund's net asset value
increased slightly from $11.71 to $11.74 per share. Tax-free dividends totaling
$0.25 per share were paid during the period. Tax-free dividends continued to be
the major component of total return. The Fund's net assets were in excess of
$176 million.
PORTFOLIO STRUCTURE
The Fund's cash and short-term investment position during the first half of 1997
increased from six to seven percent of net assets. Refunded bonds added another
nine percent to the defensive position of the portfolio. Bond sales involved
market-sensitive discount and current-coupon issues. The portfolio's average
maturity was 16 years. The distribution of bond call dates produced an average
call protection of 6.3 years. Investments were diversified among 13 long-term
sectors and 30 credits. Almost 70 percent of the portfolio's long-term holdings
were rated single "A" or better.
LOOKING AHEAD
Since the election-year collapse of flat-tax proposals, municipal bonds have
outperformed U.S. Treasury securities. Tax-free yields are currently somewhat
less attractive in their historical relationship with Treasury yields. However,
the long-term benefits of tax-exempt income remain intact and have fostered
demand for municipal bonds.
On June 30, 1997, the Fund's Board of Trustees approved a proposal to adopt a
multiple class share structure. Through this arrangement the Fund will offer
four classes of shares with various sales charges, ongoing fees and other
features. This conversion occurred on July 28, 1997. Existing shares were
designated Class B. A revised prospectus, which includes complete details
regarding this change, was mailed with your June 1997 statement.
<PAGE> 4
DEAN WITTER NEW YORK TAX-FREE INCOME FUND
LETTER TO THE SHAREHOLDERS June 30, 1997, continued
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,
/s/ CHARLES A. FIUMEFREDDO
CHARLES A. FIUMEFREDDO
Chairman of the Board
<PAGE> 5
DEAN WITTER NEW YORK TAX-FREE INCOME FUND
RESULTS OF SPECIAL MEETING (unaudited)
* * *
On May 21, 1997, a special meeting of the Fund's shareholders was held for the
purpose of voting on four separate matters, the results of which were as
follows:
(1) APPROVAL OF A NEW INVESTMENT MANAGEMENT AGREEMENT BETWEEN THE FUND AND
DEAN WITTER INTERCAPITAL INC. IN CONNECTION WITH THE MERGER OF
MORGAN STANLEY GROUP INC. WITH DEAN WITTER, DISCOVER & CO.:
<TABLE>
<S> <C>
For....................................................................... 8,273,763
Against................................................................... 202,323
Abstain................................................................... 570,965
</TABLE>
(2) ELECTION OF TRUSTEES:
<TABLE>
<S> <C>
Michael Bozic
For..................... 8,691,157
Withheld................ 355,894
Charles A. Fiumefreddo
For..................... 8,680,263
Withheld................ 366,788
Edwin J. Garn
For..................... 8,671,112
Withheld................ 375,939
John R. Haire
For..................... 8,678,735
Withheld................ 368,316
Wayne E. Hedien
For..................... 8,686,498
Withheld................ 360,553
Dr. Manuel H. Johnson
For..................... 8,693,324
Withheld................ 353,727
Michael E. Nugent
For..................... 8,691,838
Withheld................ 355,213
Philip J. Purcell
For..................... 8,693,121
Withheld................ 353,930
John L. Schroeder
For..................... 8,681,110
Withheld................ 365,941
</TABLE>
(3) APPROVAL OF A NEW INVESTMENT POLICY WITH RESPECT TO INVESTMENTS IN CERTAIN
OTHER INVESTMENT COMPANIES:
<TABLE>
<S> <C>
For....................................................................... 7,966,145
Against................................................................... 353,381
Abstain................................................................... 727,525
</TABLE>
(4) RATIFICATION OF PRICE WATERHOUSE LLP AS INDEPENDENT ACCOUNTANTS:
<TABLE>
<S> <C>
For....................................................................... 8,425,609
Against................................................................... 100,424
Abstain................................................................... 521,018
</TABLE>
<PAGE> 6
DEAN WITTER NEW YORK TAX-FREE INCOME FUND
PORTFOLIO OF INVESTMENTS June 30, 1997 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
NEW YORK TAX-EXEMPT MUNICIPAL BONDS (92.0%)
General Obligation (14.3%)
Monroe County,
$ 1,000 Public Improvement Refg 1996........................................... 6.00% 03/01/13 $ 1,079,350
1,000 Public Improvement Refg 1996........................................... 6.00 03/01/15 1,079,580
New York City,
3,500 Various Purpose 1973................................................... 3.50 05/01/01 3,374,210
2,500 Various Purpose 1973................................................... 3.50 05/01/03 2,326,500
4,000 1990 Ser D............................................................. 6.00 08/01/06 4,054,400
New York State,
2,500 Ser 1996 A Refg........................................................ 6.00 07/15/08 2,690,300
3,000 Ser 1995 B Refg........................................................ 5.70 08/15/13 3,048,210
9,000 Puerto Rico, Public Improvement Refg Ser 1987 A......................... 3.00 07/01/06 7,608,239
- -------- ------------
26,500 25,260,789
- -------- ------------
Educational Facilities Revenue (10.2%)
New York State Dormitory Authority,
2,150 City University Ser 1992 U............................................. 6.375 07/01/08 2,264,488
3,000 City University Ser 1993 A............................................. 5.75 07/01/09 3,062,610
3,000 State University Ser 1989 B............................................ 0.00 05/15/05 1,996,260
5,000 State University Ser 1993 C............................................ 5.375 05/15/13 4,771,100
2,000 State University Ser 1993 A............................................ 5.25 05/15/15 1,901,940
4,000 University of Rochester Ser 1987....................................... 6.50 07/01/09 4,086,400
- -------- ------------
19,150 18,082,798
- -------- ------------
Electric Revenue (4.3%)
8,000 Puerto Rico Electric Power Authority, Power Ser O....................... 5.00 07/01/12 7,555,920
- -------- ------------
Hospital Revenue (5.0%)
9,280 New York State Medical Care Facilities Finance Agency, Insured Hospital
- -------- & Nursing Home - FHA Ins Mtge 1993 Ser B............................... 5.50 02/15/22 8,881,610
------------
Industrial Development/Pollution Control Revenue (12.7%)
New York City Industrial Development Agency,
2,000 1990 American Airlines Inc (AMT)....................................... 8.00 07/01/20 2,113,480
1,000 Japan Airlines Co 1991 (AMT) (FSA)..................................... 6.00 11/01/15 1,032,300
New York State Energy Research & Development Authority,
3,000 Brooklyn Union Gas Co 1993 Ser B....................................... 6.368 04/01/20 3,135,150
11,000 Brooklyn Union Gas Co 1991 Ser A (AMT)................................. 6.952 07/01/26 12,123,430
4,000 Consolidated Edison Co of New York Inc Ser 1986 A (AMT)................ 7.50 11/15/21 4,088,920
- -------- ------------
21,000 22,493,280
- -------- ------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 7
DEAN WITTER NEW YORK TAX-FREE INCOME FUND
PORTFOLIO OF INVESTMENTS June 30, 1997 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
<C> <S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
Mortgage Revenue - Multi-Family (5.7%)
New York City Housing Development Corporation,
$ 2,326 East Midtown Proj - FHA Ins Sec 223.................................... 6.50% 11/15/18 $ 2,430,821
2,339 Ruppert Proj - FHA Ins Sec 223......................................... 6.50 11/15/18 2,406,714
5,000 New York State Housing Finance Agency, Housing 1996 Ser A Refg (FSA).... 6.10 11/01/15 5,155,501
- -------- ------------
9,665 9,993,036
- -------- ------------
Mortgage Revenue - Single Family (3.6%)
New York State Mortgage Agency,
4,500 Homeowner Ser 27....................................................... 6.90 04/01/15 4,835,250
1,400 Homeowner Ser MM-1 (AMT)............................................... 7.95 10/01/21 1,483,482
- -------- ------------
5,900 6,318,732
- -------- ------------
Nursing & Health Related Facilities Revenue (5.0%)
New York State Medical Care Facilities Finance Agency,
2,295 Long-Term Health Care 1992 Ser D (FSA)................................. 6.50 11/01/15 2,477,223
6,995 Mental Health Ser F.................................................... 5.25 02/15/19 6,451,069
- -------- ------------
9,290 8,928,292
- -------- ------------
Resource Recovery Revenue (3.9%)
5,000 Hempstead Industrial Development Agency, American REF-FUEL Co of
Hempstead Ser 1997 (MBIA).............................................. 5.00 12/01/09 4,882,350
2,000 Oneida-Herkimer Solid Waste Management Authority, Ser 1992.............. 6.75 04/01/14 2,095,820
- -------- ------------
7,000 6,978,170
- -------- ------------
Transportation Facilities Revenue (4.9%)
New York Sate Thruway Authority,
3,500 Ser A.................................................................. 5.75 01/01/12 3,556,840
2,000 Ser C (FGIC)........................................................... 6.00 01/01/25 2,065,760
3,000 Puerto Rico Highway & Transportation Authority, Refg Ser X.............. 5.50 07/01/15 2,976,300
- -------- ------------
8,500 8,598,900
- -------- ------------
Water & Sewer Revenue (6.0%)
4,000 New York City Municipal Water Finance Authority, 1990 Ser A............. 6.00 06/15/19 4,019,600
Suffolk County Industrial Development Agency,
2,000 Southwest Sewer Ser 1994 (FGIC)........................................ 6.00 02/01/07 2,165,000
4,000 Southwest Sewer Ser 1994 (FGIC)........................................ 6.00 02/01/08 4,332,360
- -------- ------------
10,000 10,516,960
- -------- ------------
Other Revenue (7.5%)
3,000 Municipal Assistance Corporation for the City of New York, Ser E........ 6.00 07/01/06 3,235,650
5,000 New York Local Government Assistance Corporation, Ser 1994 A............ 5.50 04/01/17 5,011,500
5,000 United Nations Development Corporation, 1992 Refg Ser A Sr Lien......... 6.00 07/01/26 5,031,500
- -------- ------------
13,000 13,278,650
- -------- ------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 8
DEAN WITTER NEW YORK TAX-FREE INCOME FUND
PORTFOLIO OF INVESTMENTS June 30, 1997 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Refunded (8.9%)
$ 5,000 New York Local Government Assistance Corporation, Ser 1991 B............ 7.50% 04/01/01++ $ 5,633,850
3,000 New York State Dormitory Authority, Suffolk County Judicial Ser 1986
(ETM).................................................................. 7.375 07/01/16 3,600,570
2,000 New York State Environmental Facilities Corporation, Huntington 1989 Ser
A (AMT)................................................................ 7.50 10/01/99++ 2,148,760
4,000 New York State Medical Care Facilities Finance Agency, St
Lukes - Roosevelt Hospital Center - FHA Ins Mtge 1989 Ser B............ 7.40 02/15/00++ 4,381,200
- -------- ------------
14,000 15,764,380
- -------- ------------
161,285 TOTAL NEW YORK TAX-EXEMPT MUNICIPAL BONDS (Identified Cost $150,315,473)....................... 162,651,517
- -------- ------------
SHORT-TERM NEW YORK TAX-EXEMPT MUNICIPAL OBLIGATIONS (6.5%)
4,500 New York State Dormitory Authority, Oxford University Press Inc Ser 1993
(Demand 07/01/97)...................................................... 4.55* 07/01/23 4,500,000
7,000 New York State Energy Research & Development Authority, New York State
- -------- Electric & Gas Corp Ser 1994 D (Demand 07/01/97)....................... 5.40* 10/01/29 7,000,000
------------
11,500 TOTAL SHORT-TERM NEW YORK TAX-EXEMPT MUNICIPAL OBLIGATIONS
- -------- (Identified Cost $11,500,000)................................................................. 11,500,000
------------
$172,785 TOTAL INVESTMENTS (Identified Cost $161,815,473) (a).................................. 98.5% 174,151,517
========
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES.......................................... 1.5 2,582,327
------ ------------
NET ASSETS............................................................................. 100.0% $176,733,844
====== ============
</TABLE>
- ---------------------
<TABLE>
<C> <S>
AMT Alternative Minimum Tax.
ETM Escrowed to Maturity.
++ Prerefunded to call date shown.
++ Refunded on call date shown by forward delivery contract.
* 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 $12,869,258 and the aggregate gross unrealized depreciation is $533,214,
resulting in net unrealized appreciation of $12,336,044.
Bond Insurance:
- -------------------------------------------------------------------------------------------------------------------------
FGIC Financial Guaranty Insurance Company.
FSA Financial Security Assurance Inc.
MBIA Municipal Bond Investors Assurance Corporation.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 9
DEAN WITTER NEW YORK TAX-FREE INCOME FUND
FINANCIAL STATEMENTS
<TABLE>
<S> <C>
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1997 (unaudited)
ASSETS:
Investments in securities, at value
(identified cost $161,815,473)....................................... $174,151,517
Cash.................................................................. 76,578
Receivable for:
Interest.......................................................... 2,862,717
Shares of beneficial interest sold................................ 292,642
Prepaid expenses and other assets..................................... 21,460
------------
TOTAL ASSETS...................................................... 177,404,914
------------
LIABILITIES:
Payable for:
Shares of beneficial interest repurchased......................... 305,788
Plan of distribution fee.......................................... 113,340
Dividends to shareholders......................................... 86,390
Investment management fee......................................... 83,116
Accrued expenses...................................................... 82,436
------------
TOTAL LIABILITIES................................................. 671,070
------------
NET ASSETS:
Paid-in-capital....................................................... 164,947,492
Net unrealized appreciation........................................... 12,336,044
Accumulated net realized loss......................................... (549,692)
------------
NET ASSETS........................................................ $176,733,844
============
NET ASSET VALUE PER SHARE,
15,051,706 shares outstanding (unlimited shares authorized of $.01
par value)........................................................... $11.74
======
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 10
DEAN WITTER NEW YORK TAX-FREE INCOME FUND
FINANCIAL STATEMENTS, continued
<TABLE>
<S> <C>
STATEMENT OF OPERATIONS
For the six months ended June 30, 1997 (unaudited)
NET INVESTMENT INCOME:
INTEREST INCOME......................................................... $5,304,373
----------
EXPENSES
Plan of distribution fee................................................ 682,468
Investment management fee............................................... 500,477
Shareholder reports and notices......................................... 37,291
Transfer agent fees and expenses........................................ 36,231
Professional fees....................................................... 25,879
Trustees' fees and expenses............................................. 8,981
Custodian fees.......................................................... 2,044
Other................................................................... 9,178
----------
TOTAL EXPENSES...................................................... 1,302,549
LESS: EXPENSE OFFSET................................................ (2,031)
----------
NET EXPENSES........................................................ 1,300,518
----------
NET INVESTMENT INCOME............................................... 4,003,855
----------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain....................................................... 316,811
Net change in unrealized appreciation................................... 38,111
----------
NET GAIN............................................................ 354,922
----------
NET INCREASE............................................................ $4,358,777
===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 11
DEAN WITTER NEW YORK TAX-FREE INCOME FUND
FINANCIAL STATEMENTS, continued
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
JUNE 30, 1997 DECEMBER 31, 1996
- ---------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income.............................. $ 4,003,855 $ 9,201,559
Net realized gain (loss)........................... 316,811 (866,502)
Net change in unrealized appreciation.............. 38,111 (3,130,905)
----------- -----------
NET INCREASE................................... 4,358,777 5,204,152
----------- -----------
DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income.............................. (4,003,889) (9,254,430)
Net realized gain.................................. -- (656,506)
----------- -----------
TOTAL.......................................... (4,003,889) (9,910,936)
----------- -----------
Net decrease from transactions in shares of
beneficial interest............................... (15,812,771) (19,719,531)
----------- -----------
NET DECREASE................................... (15,457,883) (24,426,315)
NET ASSETS:
Beginning of period................................ 192,191,727 216,618,042
----------- -----------
END OF PERIOD
(Including undistributed net investment income
of $0 and $26, respectively)...................... $176,733,844 $ 192,191,727
============ =============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 12
DEAN WITTER NEW YORK TAX-FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS June 30, 1997 (unaudited)
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's investment objective is to
provide a high level of current income which is exempt from federal, New York
State and New York City income tax, consistent with the preservation of capital.
The Fund was organized as a Massachusetts business trust on January 17, 1985 and
commenced operations on April 25, 1985.
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.
The Fund amortizes premiums and accretes discounts 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.
<PAGE> 13
DEAN WITTER NEW YORK TAX-FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS June 30, 1997 (unaudited) continued
D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund records dividends and
distributions to its shareholders on the record date. The amount of dividends
and distributions from net investment income and net realized capital gains are
determined in accordance with federal income tax regulations which may differ
from generally accepted accounting principles. These "book/tax" differences are
either considered temporary or permanent in nature. To the extent these
differences are permanent in nature, such amounts are reclassified within the
capital accounts based on their federal tax-basis treatment; temporary
differences do not require reclassification. Dividends and distributions which
exceed net investment income and net realized capital gains for financial
reporting purposes but not for tax purposes are reported as dividends in excess
of net investment income or distributions in excess of net realized capital
gains. To the extent they exceed net investment income and net realized capital
gains for tax purposes, they are reported as distributions of paid-in-capital.
2. INVESTMENT MANAGEMENT AGREEMENT
Pursuant to an Investment Management Agreement with Dean Witter InterCapital
Inc. (the "Investment Manager"), the Fund pays the Investment Manager a
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 million.
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
<PAGE> 14
DEAN WITTER NEW YORK TAX-FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS June 30, 1997 (unaudited) continued
gain 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. ("DWR"), an affiliate of the Investment Manager and Distributor,
and others, 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 utilized fees paid pursuant to the
Plan to compensate DWR and other selected broker-dealer for their opportunity
costs in advancing such amounts, which compensation would be in the form of a
carrying charge on any unreimbursed distribution expenses.
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.
Although there is no legal obligation for the Fund to pay expenses incurred in
excess of payments made to the Distributor under the Plan and the proceeds of
contingent deferred sales charges paid by investors upon redemption of shares,
if for any reason the Plan is terminated, the Trustees will consider at that
time the manner in which to treat such expenses. The Distributor has advised the
Fund that such excess amounts, including carrying charges, totaled $2,321,812 at
June 30, 1997.
The Distributor has informed the Fund that for the six month June 30, 1997, it
received approximately $161,000 in contingent deferred sales charges from
certain redemptions of the Fund's shares.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales of portfolio securities, excluding
short-term investments, for the six months ended June 30, 1997 aggregated
$10,001,818 and $25,245,835, respectively.
<PAGE> 15
DEAN WITTER NEW YORK TAX-FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS June 30, 1997 (unaudited) continued
Dean Witter Trust Company, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At June 30, 1997, the Fund had
transfer agent fees and expenses payable of approximately $5,000.
The Fund has an unfunded noncontributory defined benefit pension plan covering
all independent Trustees of the Fund who will have served as independent
Trustees for at least five years at the time of retirement. Benefits under this
plan are based on years of service and compensation during the last five years
of service. Aggregate pension costs for the six months ended June 30, 1997
included in Trustees' fees and expenses in the Statement of Operations amounted
to $1,189. At June 30, 1997, the Fund had an accrued pension liability of
$47,548 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 SIX
MONTHS ENDED FOR THE YEAR
JUNE 30, 1997 ENDED
--------------------------- DECEMBER 31, 1996
(unaudited) ---------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold.......................................................... 359,041 $ 4,186,805 1,126,418 $ 13,143,567
Reinvestment of dividends and distributions................... 186,332 2,167,830 492,455 5,712,064
---------- ------------ ---------- ------------
545,373 6,354,635 1,618,873 18,855,631
Repurchased................................................... (1,902,956) (22,167,406) (3,323,154) (38,575,162)
---------- ------------ ---------- ------------
Net decrease.................................................. (1,357,583) $(15,812,771) (1,704,281) $(19,719,531)
========== ============ ========== ============
</TABLE>
6. FEDERAL INCOME TAX STATUS
At December 31, 1996, the Fund had a net capital loss carryover of approximately
$820,000, which will be available through December 31, 2004 to offset future
capital gains to the extent provided by regulations.
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 $46,000 during fiscal 1996.
<PAGE> 16
DEAN WITTER NEW YORK TAX-FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS June 30, 1997 (unaudited) continued
As of December 31, 1996, the Fund had temporary book/tax differences primarily
attributable to post-October losses.
7. SUBSEQUENT EVENT
On June 30, 1997, the Fund's Board of Trustees approved a proposal to adopt a
multiple class share structure. Through this arrangement, the Fund will offer
four classes of shares with various sales charges, ongoing fees and other
features. This conversion occurred on July 28, 1997.
<PAGE> 17
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 SIX
MONTHS ENDED FOR THE YEAR ENDED DECEMBER 31,
JUNE 30, --------------------------------------------------
1997 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period..................... $11.71 $11.96 $10.83 $12.50
------ ------ ------ ------
Net investment income.................................... 0.25 0.53 0.55 0.57
Net realized and unrealized gain (loss).................. 0.03 (0.21) 1.20 (1.51)
------ ------ ------ ------
Total from investment operations......................... 0.28 0.32 1.75 (0.94)
------ ------ ------ ------
Less dividends and distributions from:
Net investment income................................. (0.25) (0.53) (0.54) (0.57)
Net realized gain..................................... -- (0.04) (0.08) (0.16)
------ ------ ------ ------
Total dividends and distributions........................ (0.25) (0.57) (0.62) (0.73)
------ ------ ------ ------
Net asset value, end of period........................... $11.74 $11.71 $11.96 $10.83
====== ====== ====== ======
TOTAL INVESTMENT RETURN+................................. 2.42%(1) 2.82% 16.59% (7.74)%
RATIOS TO AVERAGE NET ASSETS:
Expenses................................................. 1.43%(2)(3) 1.40%(3) 1.42%(3) 1.40%
Net investment income.................................... 4.40%(2)(3) 4.54% 4.70% 4.96%
SUPPLEMENTAL DATA:
Net assets, end of period, in millions................... $177 $192 $217 $207
Portfolio turnover rate.................................. 6%(1) 16% 17% 10%
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
-------------------------------
1993 1992
- --------------------------------------------------------- -------------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period..................... $11.98 $11.68
------ ------
Net investment income.................................... 0.65 0.65
Net realized and unrealized gain (loss).................. 0.72 0.34
------ ------
Total from investment operations......................... 1.37 0.99
------ ------
Less dividends and distributions from:
Net investment income................................. (0.65) (0.65)
Net realized gain..................................... (0.20) (0.04)
------ ------
Total dividends and distributions........................ (0.85) (0.69)
------ ------
Net asset value, end of period........................... $12.50 $11.98
====== ======
TOTAL INVESTMENT RETURN+................................. 11.72% 8.70%
RATIOS TO AVERAGE NET ASSETS:
Expenses................................................. 1.27% 1.40%
Net investment income.................................... 5.20% 5.48%
SUPPLEMENTAL DATA:
Net assets, end of period, in millions................... $246 $209
Portfolio turnover rate.................................. 25% 16%
</TABLE>
- ---------------------
+ Does not reflect the deduction of sales charge. Calculated based on the net
asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
(3) Does not reflect the effect of expense offset of 0.01%.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 18
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<PAGE> 19
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<PAGE> 20
TRUSTEES
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
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
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
The financial statements included herein have been taken from the records of
the Fund without examination by the independent accountants and accordingly
they do not express an opinion thereon.
This report is submitted for the general information of shareholders of the
Fund. For more detailed information about the Fund, its officers and
trustees, fees, expenses and other pertinent information, please see the
prospectus of the Fund.
This report is not authorized for distribution to prospective investors in the
Fund unless preceded or accompanied by an effective prospectus.
DEAN WITTER
NEW YORK
TAX-FREE
INCOME FUND
[PHOTO]
Semiannual Report
June 30, 1997
