<PAGE>
DEAN WITTER NEW YORK TAX-FREE INCOME FUND TWO WORLD TRADE CENTER, NEW YORK, NEW
YORK 10048
LETTER TO THE SHAREHOLDERS DECEMBER 31, 1997
DEAR SHAREHOLDER:
We are pleased to present the annual report on the operations of Dean Witter New
York Tax-Free Income Fund for the year ended December 31, 1997.
As 1997 drew to a close the securities markets were dominated by the Asian
financial crisis and its potential impact on the U.S. economy. Foreign currency
turmoil strengthened the value of the U.S. dollar and created a "flight to
quality" demand for Treasuries. Long-term interest rates fell to yields last
seen more than 20 years ago. Domestic employment conditions improved throughout
the year and the unemployment rate reached its lowest level since 1973.
Inflation remained in check despite the economy's strength. The bond market
rally was also aided by prospects of the first federal budget surplus in more
than two decades.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
BOND YIELDS 1994-1997
<S> <C> <C> <C>
30-Year Insured 30-Year U.S. Insured Municipal Revenue
Municipal Treasury Yields Yields on a
Percentage of U.S. Treasury
Revenue Yields Yields
12/31/93 5.40% 6.34% 85.17%
1/31/94 5.40% 6.24% 86.54%
2/28/94 5.80% 6.66% 87.09%
3/31/94 6.40% 7.09% 90.27%
4/29/94 6.35% 7.32% 86.75%
5/31/94 6.25% 7.43% 84.12%
6/30/94 6.50% 7.61% 85.41%
7/29/94 6.25% 7.39% 84.57%
6/31/94 6.30% 7.45% 84.56%
9/30/94 6.55% 7.81% 83.87%
10/31/94 6.75% 7.96% 84.80%
11/30/94 7.00% 8.00% 87.50%
12/30/94 6.75% 7.88% 85.66%
1/31/95 6.40% 7.70% 83.12%
2/28/95 6.15% 7.44% 82.66%
3/31/95 6.15% 7.43% 82.77%
4/28/95 6.20% 7.34% 84.47%
5/31/95 5.80% 6.66% 87.09%
6/30/95 6.10% 6.62% 92.15%
7/31/95 6.10% 6.86% 88.92%
8/31/95 6.00% 6.86% 90.09%
9/29/95 5.95% 6.48% 91.82%
10/31/95 5.75% 6.33% 90.84%
11/30/95 5.00% 6.14% 89.58%
12/29/95 5.35% 5.94% 90.07%
1/31/96 5.40% 6.03% 89.55%
2/29/96 5.60% 6.46% 88.69%
3/29/96 5.85% 6.66% 87.84%
4/30/96 5.95% 6.89% 86.36%
5/31/96 6.05% 6.99% 86.55%
6/28/96 5.90% 6.89% 85.63%
7/31/96 5.85% 6.97% 83.93%
8/30/96 5.90% 7.11% 82.98%
9/30/96 5.70% 6.93% 82.25%
10/31/96 5.65% 6.64% 85.09%
11/29/96 5.60% 6.35% 86.61%
12/31/96 5.60% 6.63% 84.46%
1/31/97 5.70% 6.79% 83.95%
2/28/97 5.65% 6.80% 83.09%
3/31/97 5.90% 7.10% 83.10%
4/30/97 5.75% 6.94% 82.85%
5/30/97 5.65% 6.91% 81.77%
6/30/97 5.60% 6.78% 82.60%
7/30/97 5.30% 6.30% 84.00%
8/31/97 5.50% 6.61% 83.00%
9/30/97 5.40% 6.40% 84.40%
10/31/97 5.35% 6.15% 86.90%
11/30/97 5.30% 6.05% 87.60%
12/31/97 5.15% 5.92% 86.90%
Source: Municipal Market Data
</TABLE>
<PAGE>
DEAN WITTER NEW YORK TAX-FREE INCOME FUND
LETTER TO THE SHAREHOLDERS DECEMBER 31, 1997, CONTINUED
MUNICIPAL MARKET CONDITIONS
The long-term insured revenue index began 1997 yielding 5.60 percent. Municipal
yields rose in the first quarter but subsequently declined in a sustained rally.
The Fed tightened monetary policy in March in a preemptive move against a
possible increase in inflation. Index yields moved as high as 5.90 percent.
However, inflation remained benign and the Asian financial crisis drove
municipal yields as low as 5.15 percent by year end.
As usually happens when interest rates change rapidly, the municipal rally
lagged the rally in Treasuries. The ratio of municipal yields to Treasury yields
improved from an historically rich 83 percent of Treasuries in March to a more
attractive 87 percent in December. A rising ratio means
that municipals have underperformed
Treasuries and have become relatively
more attractive.
Total municipal volume increased 20
percent in 1997. New-issue supply
reached $220 billion, with half the
underwritings enhanced by bond
insurance. Much of this growth came
from refunding issues sold in the
second half of the year. Overall,
refundings represented one-quarter of
total new issues.
PERFORMANCE
Dean Witter New York Tax-Free Income
Fund's Class B shares registered a
total return of 8.43
percent for the fiscal year ended
December 31, 1997.
In comparison, the Lehman Brothers
Municipal Bond Index posted a total
return of 9.19 percent and the Lipper
Analytical Services Inc. New York
Municipal Debt Funds Index produced a
total return of 8.75 percent. The net
asset value of the Fund's Class B
shares increased from $11.71 to $12.16
per share. Tax-free dividends of $0.51
per share were paid during the fiscal
year.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Growth of $10,000 -- Class
B
($ in Thousands)
Average Annual Total
Returns
1 Year 5 Years 10 Years
<S> <C> <C> <C>
8.43%(1) 6.02%(1) 7.57%(1)
3.43%(2) 5.71%(2) 7.57%(2)
Fund Lehman(4) Lipper(5)
December 31, 1987 $10,000 $10,000 $10,000
December 31, 1988 $11,091 $11,016 $11,126
December 31, 1989 $12,127 $12,205 $12,163
December 31, 1990 $12,613 $13,094 $12,780
December 31, 1991 $14,245 $14,684 $14,514
December 31, 1992 $15,485 $15,979 $15,935
December 31, 1993 $17,299 $17,941 $17,950
December 31, 1994 $15,961 $17,014 $18,620
December 31, 1995 $18,608 $19,984 $19,482
December 31, 1996 $ 19,133 $ 20,870 $ 20,038
December 31, 1997 $20,745(3) $ 22,788 $ 21,791
</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) 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%, 10 Years-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, 1997.
(4) 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.
(5) The Lipper New York Muni Debt Funds Index is an equally-weighted performance
index of the largest qualifying funds (based on net assets) in the Lipper
New York 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.
<PAGE>
DEAN WITTER NEW YORK TAX-FREE INCOME FUND
LETTER TO THE SHAREHOLDERS DECEMBER 31, 1997, CONTINUED
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
LARGEST SECTORS as of December 31, 1997
<S> <C>
(% of Net Assets)
All Other 17%
General Obligation 14%
IDR/PCR* 14%
Refunded 13%
Education 11%
Mortgage 10%
Nursing & Health 6%
Electric 5%
Hospital 5%
Transportation 5%
*Industrial Development/Pollution Control Revenue
Portfolio structure is subject to change.
CREDIT RATINGS as of December 31, 1997
(% of Total Long-Term Portfolio)
Aaa/AAA 28%
Aa/AA 10%
A/A 39%
Baa/BBB 21%
N/R 2%
As measured by Moody's Investors Service, Inc. or Standard & Poor's
Corp.
*Not rated at time of purchase; deemed by Investment
Managers to be comparable to investment-grade securities.
Portfolio structure is subject to change.
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Call Structure as of December 31,
1997
<S> <C>
(% of Total Long-Term Portfolio)
Percent Callable
1998 11%
1999 12%
2000 3%
2001 3%
2002 8%
2003 6%
2004 13%
2005 5%
2006 15%
2007 3%
2008+ 21%
</TABLE>
<PAGE>
DEAN WITTER NEW YORK TAX-FREE INCOME FUND
LETTER TO THE SHAREHOLDERS DECEMBER 31, 1997, CONTINUED
The accompanying chart illustrates the growth of a $10,000 investment in the
Fund for the 10 years
ended December 31, 1997, versus similar hypothetical investments in the issues
that comprise the Lehman Brothers Municipal Bond Index and the funds that
comprise the Lipper New York Municipal Debt Funds Index.
On July 28, 1997, the Fund began offering four classes of shares: A, B, C and D,
each with its own sales charge and distribution fee structure. A revised
prospectus, which includes complete details regarding the Fund's conversion to
multiple classes of shares, was mailed to shareholders in mid-summer.
PORTFOLIO STRUCTURE
In anticipation of tightening moves by the Federal Reserve Board, the Fund
increased its cash position, sold market-sensitive issues and retained refunded
bonds during the first half of 1997. These defensive actions reduced the Fund's
volatility. By the end of the summer, the Fund began to draw down cash and
extend maturity as market conditions improved.
At the end of 1997 the portfolio's average maturity was 16 years. The
distribution of bond call dates (illustrated in the accompanying chart) produced
an average call protection of 7 years. The Fund's net assets of $170 million
were diversified among 13 long-term sectors and 31 credits. Over 75 percent of
long-term holdings rated single "A" or better.
LOOKING AHEAD
The economic fundamentals are in place for another year of solid but less
spectacular domestic growth in 1998. Events in the Far East have strengthened
the U.S. dollar and led to lower interest rates. The Asian financial crisis
seems likely to slow U.S. growth and moderate inflationary pressures in the
economy.
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,
[SIGNATURE]
CHARLES A. FIUMEFREDDO
CHAIRMAN OF THE BOARD
<PAGE>
DEAN WITTER NEW YORK TAX-FREE INCOME FUND
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ---------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
NEW YORK TAX-EXEMPT MUNICIPAL BONDS (96.1%)
GENERAL OBLIGATION (14.4%)
Monroe County,
$ 1,000 Public Improvement Refg 1996.......... 6.00% 03/01/13 $ 1,129,320
1,000 Public Improvement Refg 1996.......... 6.00 03/01/15 1,129,120
New York City,
3,500 Various Purpose 1973.................. 3.50 05/01/01 3,425,135
2,500 Various Purpose 1973.................. 3.50 05/01/03 2,385,150
2,460 1997 Ser D............................ 6.00 08/01/06 2,522,877
New York State,
2,500 Ser 1996 A Refg....................... 6.00 07/15/08 2,807,450
3,000 Ser 1995 B Refg....................... 5.70 08/15/13 3,192,570
9,000 Puerto Rico, Public Improvement Refg Ser
1987 A................................ 3.00 07/01/06 7,955,460
------------
- ---------
24,547,082
24,960
------------
- ---------
EDUCATIONAL FACILITIES REVENUE (10.6%)
New York State Dormitory Authority,
2,150 City University Ser 1992 U............ 6.375 07/01/08 2,369,063
3,000 City University Ser 1993 A............ 5.75 07/01/09 3,266,250
3,000 State University Ser 1989 B........... 0.00 05/15/05 2,143,860
4,000 State University Ser 1993 C........... 5.375 05/15/13 4,079,400
2,000 State University Ser 1993 A........... 5.25 05/15/15 2,052,780
4,000 University of Rochester Ser 1987...... 6.50 07/01/09 4,086,960
------------
- ---------
17,998,313
18,150
------------
- ---------
ELECTRIC REVENUE (4.7%)
8,000 Puerto Rico Electric Power Authority,
Power Ser O........................... 5.00 07/01/12 7,975,520
------------
- ---------
HOSPITAL REVENUE (5.4%)
9,120 New York State Medical Care Facilities
Finance Agency, Insured Hospital &
Nursing Home - FHA Ins Mtge 1993 Ser
B..................................... 5.50 02/15/22 9,220,502
------------
- ---------
INDUSTRIAL DEVELOPMENT/POLLUTION CONTROL REVENUE (14.2%)
New York City Industrial Development
Agency,
2,000 1990 American Airlines Inc (AMT)...... 8.00 07/01/20 2,104,240
5,000 Brooklyn Navy Yard Cogeneration
Partners, LP Proj Ser 1997 (AMT)...... 5.75 10/01/36 5,060,850
900 Japan Airlines Co 1991 (AMT) (FSA).... 6.00 11/01/15 968,238
New York State Energy Research &
Development Authority,
3,000 Brooklyn Union Gas Co 1993 Ser B...... 6.368 04/01/20 3,353,940
11,000 Brooklyn Union Gas Co 1991 Ser A
(AMT)................................. 6.952 07/01/26 12,688,940
------------
- ---------
24,176,208
21,900
------------
- ---------
MORTGAGE REVENUE - MULTI-FAMILY (6.0%)
New York City Housing Development
Corporation,
2,302 East Midtown Proj - FHA Ins Sec 223... 6.50 11/15/18 2,418,654
2,318 Ruppert Proj - FHA Ins Sec 223........ 6.50 11/15/18 2,433,922
5,000 New York State Housing Finance Agency,
Housing 1996 Ser A Refg (FSA)......... 6.10 11/01/15 5,310,600
------------
- ---------
10,163,176
9,620
------------
- ---------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER NEW YORK TAX-FREE INCOME FUND
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1997, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ---------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MORTGAGE REVENUE - SINGLE FAMILY (3.7%)
New York State Mortgage Agency,
$ 4,500 Homeowner Ser 27...................... 6.90% 04/01/15 $ 4,872,780
1,400 Homeowner Ser MM-1 (AMT).............. 7.95 10/01/21 1,514,464
------------
- ---------
6,387,244
5,900
------------
- ---------
NURSING & HEALTH RELATED FACILITIES REVENUE (5.5%)
New York State Medical Care Facilities
Finance Agency,
2,295 Long-Term Health Care 1992 Ser D
(FSA)................................. 6.50 11/01/15 2,520,805
6,995 Mental Health Ser F................... 5.25 02/15/19 6,854,680
------------
- ---------
9,375,485
9,290
------------
- ---------
RESOURCE RECOVERY REVENUE (4.3%)
5,000 Hempstead Industrial Development Agency,
American REF-FUEL Co of Hempstead Ser
1997 (MBIA)........................... 5.00 12/01/09 5,114,300
2,000 Oneida-Herkimer Solid Waste Management
Authority, Ser 1992................... 6.75 04/01/14 2,157,560
------------
- ---------
7,271,860
7,000
------------
- ---------
TRANSPORTATION FACILITIES REVENUE (5.3%)
New York State Thruway Authority,
3,500 Ser A................................. 5.75 01/01/12 3,667,860
2,000 Ser C (FGIC).......................... 6.00 01/01/25 2,164,980
3,000 Puerto Rico Highway & Transportation
Authority, Refg Ser X **.............. 5.50 07/01/15 3,152,070
------------
- ---------
8,984,910
8,500
------------
- ---------
WATER & SEWER REVENUE (3.9%)
Suffolk County Industrial Development
Agency,
2,000 Southwest Sewer Ser 1994 (FGIC)....... 6.00 02/01/07 2,218,280
4,000 Southwest Sewer Ser 1994 (FGIC)....... 6.00 02/01/08 4,491,880
------------
- ---------
6,710,160
6,000
------------
- ---------
OTHER REVENUE (5.6%)
2,000 Municipal Assistance Corporation for the
City of New York, Ser E............... 6.00 07/01/06 2,230,900
2,000 New York City Transitional Finance
Authority, 1998 Ser A................. 5.00 08/15/27 1,942,720
5,000 New York Local Government Assistance
Corporation, Ser 1994 A............... 5.50 04/01/17 5,331,950
------------
- ---------
9,505,570
9,000
------------
- ---------
REFUNDED (12.5%)
1,350 New York City, 1997 Ser D............... 6.00 08/01/99+ 1,384,507
4,000 New York City Municipal Water Finance
Authority, 1990 Ser A................. 6.00 06/15/99+ 4,120,760
3,000 New York State Dormitory Authority,
Suffolk County Judicial Ser 1986 (ETM)
**.................................... 7.375 07/01/16 3,789,330
2,000 New York State Environmental Facilities
Corporation, Huntington 1989 Ser A
(AMT)................................. 7.50 10/01/99++ 2,131,260
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER NEW YORK TAX-FREE INCOME FUND
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1997, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ---------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 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+ $ 4,347,800
5,000 United Nations Development Corporation,
1992 Refg Ser A Sr Lien **............ 6.00 07/01/03+ 5,512,300
------------
- ---------
21,285,957
19,350
------------
- ---------
TOTAL NEW YORK TAX-EXEMPT MUNICIPAL BONDS
(IDENTIFIED COST $146,004,754)......................................
156,790 163,601,987
- --------- ------------
SHORT-TERM NEW YORK TAX-EXEMPT MUNICIPAL OBLIGATIONS (2.4%)
1,000 New York State Dormitory Authority,
Oxford University Press Inc Ser 1993
(Demand 01/02/98)..................... 5.10* 07/01/23 1,000,000
3,000 New York State Energy Research &
Development Authority, New York State
Electric & Gas Corp Ser 1994 D (Demand
01/02/98)............................. 5.00* 10/01/29 3,000,000
------------
- ---------
TOTAL SHORT-TERM NEW YORK TAX-EXEMPT MUNICIPAL OBLIGATIONS
(IDENTIFIED COST $4,000,000)........................................
4,000 4,000,000
- --------- ------------
</TABLE>
<TABLE>
<C> <S> <C> <C>
$160,790 TOTAL INVESTMENTS
(IDENTIFIED COST $150,004,754) (a)......................................................... 98.5 % 167,601,987
- ---------
- ---------
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES............................................. 1.5 2,500,920
------ -------------
NET ASSETS................................................................................. 100.0 % $ 170,102,907
------ -------------
------ -------------
</TABLE>
- ---------------------
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.
** All of these securities are segregated in connection with the purchase of
delayed delivery securities.
(a) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross and net unrealized appreciation is $17,597,233.
BOND INSURANCE:
FGIC Financial Guaranty Insurance Company.
FSA Financial Security Assurance Inc.
MBIA Municipal Bond Investors Assurance Corporation.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER NEW YORK TAX-FREE INCOME FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $150,004,754).............................................................. $167,601,987
Cash.......................................................................................... 407,314
Receivable for:
Interest.................................................................................. 2,670,968
Investments sold.......................................................................... 2,039,167
Shares of beneficial interest sold........................................................ 38,996
Prepaid expenses and other assets............................................................. 16,061
------------
TOTAL ASSETS............................................................................. 172,774,493
------------
LIABILITIES:
Payable for:
Investments purchased..................................................................... 2,002,403
Dividends and distributions to shareholders............................................... 302,187
Plan of distribution fee.................................................................. 115,448
Investment management fee................................................................. 84,700
Shares of beneficial interest repurchased................................................. 66,135
Accrued expenses.............................................................................. 100,713
------------
TOTAL LIABILITIES........................................................................ 2,671,586
------------
NET ASSETS............................................................................... $170,102,907
------------
------------
COMPOSITION OF NET ASSETS:
Paid-in-capital............................................................................... $152,209,493
Net unrealized appreciation................................................................... 17,597,233
Accumulated undistributed net realized gain................................................... 296,181
------------
NET ASSETS............................................................................... $170,102,907
------------
------------
CLASS A SHARES:
Net Assets.................................................................................... $94,360
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE)..................................... 7,761
NET ASSET VALUE PER SHARE................................................................ $12.16
------------
------------
MAXIMUM OFFERING PRICE PER SHARE,
(NET ASSET VALUE PLUS 4.44% OF NET ASSET VALUE)........................................ $12.70
------------
------------
CLASS B SHARES:
Net Assets.................................................................................... $169,868,395
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE)..................................... 13,967,749
NET ASSET VALUE PER SHARE................................................................ $12.16
------------
------------
CLASS C SHARES:
Net Assets.................................................................................... $108,477
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE)..................................... 8,933
NET ASSET VALUE PER SHARE................................................................ $12.14
------------
------------
CLASS D SHARES:
Net Assets.................................................................................... $31,675
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE)..................................... 2,606
NET ASSET VALUE PER SHARE................................................................ $12.15
------------
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER NEW YORK TAX-FREE INCOME FUND
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997*
<TABLE>
<S> <C>
NET INVESTMENT INCOME:
INTEREST INCOME................................................................................ $10,262,639
-----------
EXPENSES
Plan of distribution fee (Class A shares)...................................................... 60
Plan of distribution fee (Class B shares)...................................................... 1,337,215
Plan of distribution fee (Class C shares)...................................................... 210
Investment management fee...................................................................... 980,937
Transfer agent fees and expenses............................................................... 73,766
Professional fees.............................................................................. 57,147
Shareholder reports and notices................................................................ 49,530
Trustees' fees and expenses.................................................................... 18,589
Custodian fees................................................................................. 9,006
Registration fees.............................................................................. 5,634
Other.......................................................................................... 16,099
-----------
TOTAL EXPENSES............................................................................ 2,548,193
Less: expense offset........................................................................... (8,982)
-----------
NET EXPENSES.............................................................................. 2,539,211
-----------
NET INVESTMENT INCOME..................................................................... 7,723,428
-----------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain.............................................................................. 1,162,683
Net change in unrealized appreciation.......................................................... 5,299,300
-----------
NET GAIN.................................................................................. 6,461,983
-----------
NET INCREASE................................................................................... $14,185,411
-----------
-----------
</TABLE>
- ---------------------
* Class A, Class C and Class D shares were issued July 28, 1997.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER NEW YORK TAX-FREE INCOME FUND
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
DECEMBER 31, 1997* DECEMBER 31, 1996
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income................................................ $ 7,723,428 $ 9,201,559
Net realized gain (loss)............................................. 1,162,683 (866,502 )
Net change in unrealized appreciation................................ 5,299,300 (3,130,905 )
------------------ -----------------
NET INCREASE.................................................... 14,185,411 5,204,152
------------------ -----------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A shares................................................... (1,135 ) --
Class B shares................................................... (7,720,917 ) (9,254,430 )
Class C shares................................................... (1,150 ) --
Class D shares................................................... (259 ) --
Net realized gain
Class B shares................................................... -- (656,506 )
------------------ -----------------
TOTAL DIVIDENDS AND DISTRIBUTIONS............................... (7,723,461 ) (9,910,936 )
------------------ -----------------
Net decrease from transactions in shares of beneficial interest...... (28,550,770 ) (19,719,531 )
------------------ -----------------
NET DECREASE.................................................... (22,088,820 ) (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).................................................... $ 170,102,907 $ 192,191,727
------------------ -----------------
------------------ -----------------
</TABLE>
- ---------------------
* Class A, Class C and Class D shares were issued July 28, 1997.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER NEW YORK TAX-FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1997
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. On July 28, 1997,
the Fund commenced offering three additional classes of shares, with the then
current shares designated as Class B shares.
The Fund offers Class A shares, Class B shares, Class C shares and Class D
shares. The four classes are substantially the same except that most Class A
shares are subject to a sales charge imposed at the time of purchase, some Class
A shares, and most Class B shares and Class C shares are subject to a contingent
deferred sales charge imposed on shares redeemed within one year, six years and
one year, respectively. Class D shares are not subject to a sales charge.
Additionally, Class A shares, Class B shares and Class C shares incur
distribution expenses.
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.
<PAGE>
DEAN WITTER NEW YORK TAX-FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1997, CONTINUED
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. MULTIPLE CLASS ALLOCATIONS -- Investment income, expenses (other than
distribution fees), and realized and unrealized gains and losses are allocated
to each class of shares based upon the relative net asset value on the date such
items are recognized. Distribution fees are charged directly to the respective
class.
D. 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.
E. 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.
<PAGE>
DEAN WITTER NEW YORK TAX-FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1997, CONTINUED
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. The Plan
provides that the Fund will pay the Distributor a fee which is accrued daily and
paid monthly at the following annual rates: (i) Class A -- up to 0.25% of the
average daily net assets of Class A; (ii) Class B -- 0.75% of the lesser of: (a)
the average daily aggregate gross sales of the Class B shares since the
inception of the Fund (not including reinvestment of dividend or capital gain
distributions) less the average daily aggregate net asset value of the Class B
shares redeemed since the Fund's inception upon which a contingent deferred
sales charge has been imposed or waived; or (b) the average daily net assets of
Class B; and (iii) Class C -- up to 0.75% of the average daily net assets of
Class C. In the case of Class A shares, amounts paid under the Plan are paid to
the Distributor for services provided. In the case of Class B and Class C
shares, amounts paid under the Plan are paid to the Distributor for services
provided and the expenses borne by it and others in the distribution of the
shares of these Classes, including the payment of commissions for sales of these
Classes and incentive compensation to, and expenses of, the 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 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 these shares to other than current shareholders; and
preparation, printing and distribution of sales literature and advertising
materials. In addition, the Distributor may utilize fees paid pursuant to the
Plan, in the case of Class B shares, to compensate DWR and other selected
broker-dealers for their opportunity costs in advancing such amounts, which
compensation would be in the form of a carrying charge on any unreimbursed
expenses.
In the case of Class B shares, provided that the Plan continues in effect, any
cumulative expenses incurred by the Distributor but not yet recovered may be
recovered through the payment of future distribution fees from the Fund pursuant
to the Plan and contingent deferred sales charges paid by
<PAGE>
DEAN WITTER NEW YORK TAX-FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1997, CONTINUED
investors upon redemption of Class B shares. 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 $1,970,148 at December 31, 1997.
In the case of Class A shares and Class C shares, expenses incurred pursuant to
the Plan in any calendar year in excess of 0.25% or 0.75% of the average daily
net assets of Class A or Class C, respectively, will not be reimbursed by the
Fund through payments in any subsequent year, except that expenses representing
a gross sales credit to account executives may be reimbursed in the subsequent
calendar year. For the period ended December 31, 1997, the distribution fee was
accrued for Class A shares and Class C shares at the annual rate of 0.25% and
0.75%, respectively.
The Distributor has informed the Fund that for the year ended December 31, 1997,
it received contingent deferred sales charges from certain redemptions of the
Fund's Class B shares of $281,986 and received $993 in front-end sales charges
from sales of the Fund's Class A shares. The respective 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, 1997 aggregated
$17,042,682 and $37,661,135, respectively.
Dean Witter Trust FSB, an affiliate of the Investment Manager and Distributor,
is the Fund's transfer agent. At December 31, 1997, the Fund had transfer agent
fees and expenses payable of approximately $3,300.
The Fund has an unfunded noncontributory defined benefit pension plan covering
all independent Trustees of the Fund who will have served as independent
Trustees for at least five years at the time of retirement. Benefits under this
plan are based on years of service and compensation during the last five years
of service. Aggregate pension costs for the year ended December 31, 1997
included in Trustees' fees and expenses in the Statement of Operations amounted
to $2,720. At December 31, 1997, the Fund had an accrued pension liability of
$48,294 which is included in accrued expenses in the Statement of Assets and
Liabilities.
<PAGE>
DEAN WITTER NEW YORK TAX-FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1997, CONTINUED
5. 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, 1997 DECEMBER 31, 1996
---------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
----------- -------------- ----------- ------------
<S> <C> <C> <C> <C>
CLASS A SHARES*
Sold............................................................. 7,668 $ 92,057 -- --
Reinvestment of dividends........................................ 93 1,125 -- --
----------- -------------- ----------- ------------
Net increase - Class A........................................... 7,761 93,182 -- --
----------- -------------- ----------- ------------
CLASS B SHARES
Sold............................................................. 697,881 8,245,711 1,126,418 $ 13,143,567
Reinvestment of dividends and distributions...................... 366,318 4,331,957 492,455 5,712,064
Redeemed......................................................... (3,505,739) (41,360,108) (3,323,154) (38,575,162)
----------- -------------- ----------- ------------
Net decrease - Class B........................................... (2,441,540) (28,782,440) (1,704,281) (19,719,531)
----------- -------------- ----------- ------------
CLASS C SHARES*
Sold............................................................. 8,859 106,083 -- --
Reinvestment of dividends........................................ 74 891 -- --
----------- -------------- ----------- ------------
Net increase - Class C........................................... 8,933 106,974 -- --
----------- -------------- ----------- ------------
CLASS D SHARES*
Sold............................................................. 2,585 31,255 -- --
Reinvestment of dividends........................................ 21 259 -- --
----------- -------------- ----------- ------------
Net increase - Class D........................................... 2,606 31,514 -- --
----------- -------------- ----------- ------------
Net decrease in Fund............................................. (2,422,240) $ (28,550,770) (1,704,281) $(19,719,531)
----------- -------------- ----------- ------------
----------- -------------- ----------- ------------
</TABLE>
- ---------------------
* For the period July 28, 1997 (issue date) through December 31, 1997.
6. FEDERAL INCOME TAX STATUS
During the year ended, December 31, 1997, the Fund utilized its net capital loss
carryover of approximately $820,000.
<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,
----------------------------------------------------------------------------------------------------------------
1997* 1996 1995 1994 1993 1992 1991 1990 1989 1988
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS B SHARES
PER SHARE
OPERATING
PERFORMANCE:
Net asset value,
beginning of
period.......... $ 11.71 $ 11.96 $ 10.83 $ 12.50 $ 11.98 $ 11.68 $ 11.00 $ 11.25 $ 10.94 $ 10.50
---------- --------- --------- ---------- --------- --------- ---------- --------- --------- ----------
Net investment
income.......... 0.51 0.53 0.55 0.57 0.65 0.65 0.68 0.68 0.68 0.68
Net realized and
unrealized gain
(loss).......... 0.45 (0.21) 1.20 (1.51) 0.72 0.34 0.70 (0.25) 0.31 0.44
---------- --------- --------- ---------- --------- --------- ---------- --------- --------- ----------
Total from
investment
operations...... 0.96 0.32 1.75 (0.94) 1.37 0.99 1.38 0.43 0.99 1.12
---------- --------- --------- ---------- --------- --------- ---------- --------- --------- ----------
Less dividends
and
distributions
from:
Net investment
income......... (0.51) (0.53) (0.54) (0.57) (0.65) (0.65) (0.68) (0.68) (0.68) (0.67)
Net realized
gain........... -- (0.04) (0.08) (0.16) (0.20) (0.04) (0.02) -- -- (0.01)
---------- --------- --------- ---------- --------- --------- ---------- --------- --------- ----------
Total dividends
and
distributions... (0.51) (0.57) (0.62) (0.73) (0.85) (0.69) (0.70) (0.68) (0.68) (0.68)
---------- --------- --------- ---------- --------- --------- ---------- --------- --------- ----------
Net asset value,
end of period... $ 12.16 $ 11.71 $ 11.96 $ 10.83 $ 12.50 $ 11.98 $ 11.68 $ 11.00 $ 11.25 $ 10.94
---------- --------- --------- ---------- --------- --------- ---------- --------- --------- ----------
---------- --------- --------- ---------- --------- --------- ---------- --------- --------- ----------
TOTAL INVESTMENT
RETURN+.......... 8.43% 2.82% 16.59% (7.74)% 11.72% 8.70% 12.94% 4.01% 9.34% 10.91%
RATIOS TO AVERAGE
NET ASSETS:
Expenses......... 1.43%(1) 1.40%(1) 1.42%(1) 1.40% 1.27% 1.40% 1.32% 1.37% 1.37% 1.41%
Net investment
income.......... 4.33% 4.54% 4.70% 4.96% 5.20% 5.48% 6.00% 6.13% 6.09% 6.28%
SUPPLEMENTAL
DATA:
Net assets, end
of period, in
millions........ $170 $192 $217 $207 $246 $209 $182 $158 $147 $129
Portfolio
turnover rate... 10% 16% 17% 10% 25% 16% 17% 23% 4% 18%
</TABLE>
- ---------------------
* Prior to July 28, 1997, the Fund issued one class of shares. All shares of
the Fund held prior to that date have been designated Class B shares.
+ 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) Does not reflect the effect of expense offset of 0.01%
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER NEW YORK TAX-FREE INCOME FUND
FINANCIAL HIGHLIGHTS, CONTINUED
<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 28, 1997*
THROUGH
DECEMBER 31,
1997
- ----------------------------------------------------------------------------------------
<S> <C>
CLASS A SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.................................. $ 12.02
------
Net investment income................................................. 0.24
Net realized and unrealized gain...................................... 0.14
------
Total from investment operations...................................... 0.38
------
Less dividends from net investment income............................. (0.24)
------
Net asset value, end of period........................................ $ 12.16
------
------
TOTAL INVESTMENT RETURN+.............................................. 3.24%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.............................................................. 0.92%(2)
Net investment income................................................. 4.78%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands............................... $94
Portfolio turnover rate............................................... 10%
</TABLE>
<TABLE>
<S> <C>
CLASS C SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.................................. $ 12.02
------
Net investment income................................................. 0.22
Net realized and unrealized gain...................................... 0.12
------
Total from investment operations...................................... 0.34
------
Less dividends from net investment income............................. (0.22)
------
Net asset value, end of period........................................ $ 12.14
------
------
TOTAL INVESTMENT RETURN+.............................................. 2.83%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.............................................................. 1.40%(2)
Net investment income................................................. 4.12%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands............................... $108
Portfolio turnover rate............................................... 10%
</TABLE>
- ---------------------
* The date shares were first issued.
+ 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.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER NEW YORK TAX-FREE INCOME FUND
FINANCIAL HIGHLIGHTS, CONTINUED
<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 28, 1997*
THROUGH
DECEMBER 31,
1997
- ----------------------------------------------------------------------------------------
<S> <C>
CLASS D SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.................................. $ 12.02
------
Net investment income................................................. 0.26
Net realized and unrealized gain...................................... 0.13
------
Total from investment operations...................................... 0.39
------
Less dividends from net investment income............................. (0.26)
------
Net asset value, end of period........................................ $ 12.15
------
------
TOTAL INVESTMENT RETURN+.............................................. 3.27%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.............................................................. 0.66%(2)
Net investment income................................................. 5.04%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands............................... $32
Portfolio turnover rate............................................... 10%
</TABLE>
- ---------------------
* The date shares were first issued.
+ Calculated based on the net asset value as of the last business day of the
period.
(1) Not annualized.
(2) Annualized.
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, 1997, 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 periods
presented, 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 statements
presentation. We believe that our audits, which included confirmation of
securities at December 31, 1997 by correspondence with the custodian and
brokers, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036
FEBRUARY 10, 1998
1997 FEDERAL TAX NOTICE (UNAUDITED)
For the year ended December 31, 1997, all of the Fund's dividends
from net investment income were exempt interest dividends,
excludable from gross income for Federal income tax purposes.
<PAGE>
TRUSTEES
DEAN WITTER
NEW YORK
Michael Bozic TAX-FREE
Charles A. Fiumefreddo INCOME FUND
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 [PHOTO]
Dean Witter Trust FSB
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
ANNUAL REPORT
DECEMBER 31, 1997
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.
