<PAGE> 1
MORGAN STANLEY DEAN WITTER NEW YORK TAX-FREE INCOME FUND Two World Trade Center
LETTER TO THE SHAREHOLDERS June 30, 1999 New York, New York 10048
DEAR SHAREHOLDER:
We are pleased to present the semiannual report on the operations of Morgan
Stanley Dean Witter New York Tax-Free Income Fund for the period ended June 30,
1999.
After last year's global economic difficulties, the financial markets have
experienced a period of global healing. The turmoil, which included the Asian
financial crisis, the Russian debt default and the near collapse of a major
hedge fund, has given way to improved financial conditions. A major catalyst for
this return to stability was the liquidity provided by the Federal Reserve
Board's 75-basis-point reduction in the fed funds rate during the fourth quarter
of 1998.
The U.S. economy, led by consumer demand, continued to experience robust growth
in the first half of 1999. Higher materials prices and wage increases caused the
fixed-income markets to focus on the possibility that the Federal Reserve would
begin to take back some of the liquidity provided during last year's financial
crisis. Long-term interest rates reached 30-year lows in 1998 but have begun to
rise. In June, the central bank raised the fed funds rate 25 basis points to
5.00 percent in its first tightening move since early 1997.
MUNICIPAL MARKET CONDITIONS
Municipal securities outperformed U.S. Treasuries in the first six months of
1999. This is in contrast to last year's flight to quality rally, that primarily
benefited Treasuries. As global turmoil subsided, Treasury yields increased more
than municipal yields. Since the beginning of the year, Treasury bond yields
rose 85 basis points from 5.10 to 5.95 percent. Long-term insured municipal
index yields rose only 45 basis points from 5.05 to 5.50 percent. The ratio of
long-term municipal yields to Treasury yields, a widely followed indicator of
relative performance, declined from 99 to 92 percent. A declining ratio means
municipals have outperformed Treasuries.
Municipal performance was also aided by a decline in underwriting. New-issue
volume declined 23 percent in the first half of 1999. Higher interest rates
caused a 47 percent in refunding activity. Total New York volume was down 49
percent.
<PAGE> 2
MORGAN STANLEY DEAN WITTER NEW YORK TAX-FREE INCOME FUND
LETTER TO THE SHAREHOLDERS June 30, 1999, continued
30-YEAR BOND YIELDS 1994-1999
<TABLE>
<CAPTION>
Insured U.S. Insured Municipal Yields as a
Municipal Yields Treasury Yields Percentage of U.S. Treasury Yields
<S> <C> <C> <C>
1994 5.40% 6.34% 85.17%
5.40 6.24 86.54
5.80 6.66 87.09
6.40 7.09 90.27
6.35 7.32 86.75
6.25 7.43 84.12
6.50 7.61 85.41
6.25 7.39 84.57
6.30 7.45 84.56
6.55 7.81 83.87
6.75 7.96 84.80
7.00 8.00 87.50
6.75 7.88 85.66
1995 6.40 7.70 83.12
6.15 7.44 82.66
6.15 7.43 82.77
6.20 7.34 84.47
5.80 6.66 87.09
6.10 6.62 92.15
6.10 6.86 88.92
6.00 6.66 90.09
5.95 6.48 91.82
5.75 6.33 90.84
5.50 6.14 89.58
5.35 5.94 90.07
1996 5.40 6.03 89.55
5.60 6.46 86.69
5.85 6.66 87.84
5.95 6.89 86.36
6.05 6.99 86.55
5.90 6.89 85.63
5.85 6.97 83.93
5.90 7.11 82.98
5.70 6.93 82.25
5.65 6.64 85.09
5.50 6.35 86.61
5.60 6.63 84.46
1997 5.70 6.79 83.95
5.65 6.80 83.09
5.90 7.10 83.10
5.75 6.94 82.85
5.65 6.91 81.77
5.60 6.78 82.60
5.30 6.30 84.13
5.50 6.61 83.21
5.40 6.40 84.38
5.35 6.15 86.99
5.30 6.05 87.60
5.15 5.92 86.99
1998 5.15 5.80 88.79
5.20 5.92 87.84
5.25 5.93 88.53
5.35 5.95 89.92
5.20 5.80 89.66
5.20 5.65 92.04
5.18 5.71 90.72
5.03 5.27 95.45
4.95 5.00 99.00
5.05 5.16 97.87
5.00 5.06 98.81
5.05 5.10 99.02
1999 5.00 5.09 98.23
5.10 5.58 91.40
5.15 5.63 91.47
5.20 5.66 91.87
5.30 5.83 90.91
5.47 5.96 91.78
Source: Municipal Market Data - A Division of Thomson Financial Municipal Group
</TABLE>
PERFORMANCE
For the six-month period ended June 30, 1999, the Fund's Class A, B, C and D
shares produced total returns of -1.55 percent, -1.75 percent, -1.84 percent and
- -1.39 percent, respectively. Performance of the Fund's shares varies because of
differing expenses. Over the same period, the Lehman Brothers Municipal Bond
Index and the Lipper New York Municipal Debt Funds Index registered total
returns of -0.89 percent and -1.75 percent, respectively.
PORTFOLIO STRUCTURE
Short-term investments and cash were increased to 5 percent of net assets in
response to market volatility during the first half of 1999. Average duration, a
measure of sensitivity to interest rate changes, was 8.1 years at the end of
June. The Fund's average-weighted maturity was 17 years. The Fund's net assets
of $150 million were diversified among 13 long-term sectors and 32 individual
credits. The accompanying charts provide current information on the portfolio's
credit quality, sector diversification and optional redemption (call)
provisions.
2
<PAGE> 3
MORGAN STANLEY DEAN WITTER NEW YORK TAX-FREE INCOME FUND
LETTER TO THE SHAREHOLDERS June 30, 1999, continued
[LARGEST LONG-TERM SECTORS BAR GRAPH]
LARGEST LONG-TERM SECTORS AS OF JUNE 30, 1999
(% OF NET ASSETS)
<TABLE>
<S> <C>
GENERAL OBLIGATION 14%
IDR/PCR* 14%
EDUCATION 13%
MORTGAGE 10%
ELECTRIC 8%
TRANSPORTATION 7%
HOSPITAL 6%
WATER & SEWER 6%
NURSING & HEALTH 5%
</TABLE>
*INDUSTRIAL DEVELOPMENT/POLLUTION CONTROL REVENUE
PORTOFLIO STRUCTURE IS SUBJECT TO CHANGE.
[CREDIT RATINGS PIE CHART]
CREDIT RATINGS as of June 30, 1999
(% OF TOTAL LONG-TERM PORTFOLIO)
<TABLE>
<S> <C>
AAA or Aaa 32%
Aa or AA 8%
A or A 45%
Baa or BBB 12%
N/R 3%
</TABLE>
AS MEASURED BY MOODY'S INVESTORS SERVICE, INC. OR STANDARD & POOR'S CORP.
PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE.
[CALL STRUCTURE BAR GRAPH]
CALL STRUCTURE as of June 30, 1999
(% of Total Long-Term Portfolio)
WEIGHTED AVERAGE
CALL PROTECTION: 7 YEARS
<TABLE>
<CAPTION>
YEARS BONDS CALLABLE PERCENT CALLABLE
<S> <C>
1999 1%
2000 11%
2001 2%
2002 6%
2003 2%
2004 13%
2005 4%
2006 15%
2007 0%
2008 24%
2009 6%
2010+ 16%
</TABLE>
PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE.
3
<PAGE> 4
MORGAN STANLEY DEAN WITTER NEW YORK TAX-FREE INCOME FUND
LETTER TO THE SHAREHOLDERS June 30, 1999, continued
LOOKING AHEAD
The Federal Reserve Board raised interest rates in June, this confirmed its
previously signaled intention of becoming less accommodative in the face of
continued strong domestic economic growth. It is anticipated that the central
bank may raise the fed funds rate further in an effort to take back the
liquidity it provided in the fall of 1998. However, we believe municipal bonds
continue to offer long-term investors good value, especially in relationship to
Treasuries.
On May 1, 1999, Mitchell M. Merin was named President of the Morgan Stanley Dean
Witter Funds. Mr. Merin is the President and Chief Operating Officer of Asset
Management for Morgan Stanley Dean Witter & Co. and President, Chief Executive
Officer and Director of Morgan Stanley Dean Witter Advisors Inc., the Fund's
investment manager. He also serves as Chairman, Chief Executive Officer and
Director of the Fund's distributor and transfer agent.
We appreciate your ongoing support of Morgan Stanley Dean New York Tax-Free
Income Fund and look forward to continuing to serve your investment needs.
Very truly yours,
/S/ CHARLES A. FIUMEFREDDO /S/ MITCHELL M. MERIN
CHARLES A. FIUMEFREDDO MITCHELL M. MERIN
Chairman of the Board President
4
<PAGE> 5
MORGAN STANLEY DEAN WITTER NEW YORK TAX-FREE INCOME FUND
FUND PERFORMANCE June 30, 1999
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
- ---------------------------------------------------------------------------------------------------------
CLASS A SHARES* CLASS B SHARES+
- ---------------------------------------------- ----------------------------------------------
<S> <C> <C> <C> <C> <C>
PERIOD ENDED 6/30/99 PERIOD ENDED 6/30/99
- ------------------------- -------------------------
1 Year 1.89(1) -2.44(2) 1 Year 1.34(1) -3.38(2)
Since Inception (7/28/97) 3.79(1) 1.47(2) 5 Years 5.72(1) 5.40(2)
10 Years 6.16(1) 6.16(2)
</TABLE>
<TABLE>
<CAPTION>
CLASS C SHARES++ CLASS D SHARES#
- ---------------------------------------------- ----------------------------------------------
<S> <C> <C> <C> <C>
PERIOD ENDED 6/30/99 PERIOD ENDED 6/30/99
- ------------------------- -------------------------
1 Year 1.24(1) 0.30(2) 1 Year 2.10(1)
Since Inception (7/28/97) 3.22(1) 3.22(2) Since Inception (7/28/97) 4.11(1)
</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 sales charge. See
the Fund's current prospectus for complete details on fees
and sales charges.
* The maximum front-end sales charge for Class A is 4.25%.
+ The maximum CDSC for Class B is 5.0%. The CDSC declines to
0% after six years.
++ The maximum CDSC for Class C shares is 1% for shares
redeemed within one year of purchase.
# Class D shares have no sales charge.
5
<PAGE> 6
MORGAN STANLEY DEAN WITTER NEW YORK TAX-FREE INCOME FUND
PORTFOLIO OF INVESTMENTS June 30, 1999 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
NEW YORK TAX- EXEMPT MUNICIPAL BONDS (91.0%)
General Obligation (14.2%)
Monroe County,
$ 1,000 Public Improvement Refg 1996............................... 6.00 % 03/01/13 $ 1,086,700
1,000 Public Improvement Refg 1996............................... 6.00 03/01/15 1,088,310
New York City,
2,300 Various Purpose 1973....................................... 3.50 05/01/01 2,278,817
2,500 Various Purpose 1973....................................... 3.50 05/01/03 2,427,275
1,565 1997 Ser D................................................. 6.00 08/01/06 1,567,942
New York State,
2,500 Ser 1996 A Refg............................................ 6.00 07/15/08 2,689,425
3,000 Ser 1995 B Refg............................................ 5.70 08/15/13 3,104,940
8,000 Puerto Rico, Public Improvement Refg Ser 1987 A............. 3.00 07/01/06 7,134,481
- -------- -----------
21,865 21,377,890
- -------- -----------
Educational Facilities Revenue (12.8%)
New York State Dormitory Authority,
965 City University Ser 1992 A................................. 6.375 07/01/08 1,026,007
3,000 City University Ser 1993 A................................. 5.75 07/01/09 3,101,400
2,000 City University Ser 1998 A (AMBAC)......................... 5.00 07/01/23 1,885,400
2,000 Ithaca College Ser 1998 (AMBAC)............................ 5.00 07/01/21 1,897,720
1,000 New York University Ser 1998 A (MBIA)...................... 5.75 07/01/15 1,061,490
3,000 State University Ser 1989 B................................ 0.00 05/15/05 2,269,080
4,000 State University Ser 1993 C................................ 5.375 05/15/13 3,993,920
2,000 State University 1993 Ser A................................ 5.25 05/15/15 1,989,220
2,000 University of Rochester, Ser 1998 A (MBIA)................. 5.00 07/01/23 1,885,400
- -------- -----------
19,965 19,109,637
- -------- -----------
Electric Revenue (7.8%)
4,000 Long Island Power Authority, Ser 1998 A (FSA)............... 5.125 12/01/22 3,823,880
8,000 Puerto Rico Electric Power Authority, Power Ser O........... 5.00 07/01/12 7,828,000
- -------- -----------
12,000 11,651,880
- -------- -----------
Hospital Revenue (6.3%)
1,000 New York State Dormitory Authority, Long Island Jewish
Medical Center
Ser 1998 A (MBIA).......................................... 5.00 07/01/25 933,880
8,545 New York State Medical Care Facilities Finance Agency,
Hospital & Nursing Home - FHA Insured Mtge 1993 Ser B...... 5.50 02/15/22 8,533,464
- -------- -----------
9,545 9,467,344
- -------- -----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE> 7
MORGAN STANLEY DEAN WITTER NEW YORK TAX-FREE INCOME FUND
PORTFOLIO OF INVESTMENTS June 30, 1999 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Industrial Development/Pollution Control Revenue (13.8%)
New York City Industrial Development Agency,
$ 4,000 Brooklyn Navy Yard Cogeneration Partners LP Ser 1997
(AMT).................................................... 5.75 % 10/01/36 $ 4,001,240
900 Japan Airlines Co 1991 (AMT) (FSA)......................... 6.00 11/01/15 939,069
New York State Energy Research & Development Authority,
3,000 Brooklyn Union Gas Co 1993 Ser D-1 & 2 (AMT)............... 6.368 04/01/20 3,294,960
11,000 Brooklyn Union Gas Co 1991 Ser A (AMT)..................... 6.952 07/01/26 12,415,480
- -------- -----------
18,900 20,650,749
- -------- -----------
Mortgage Revenue - Multi-Family (6.7%)
New York City Housing Development Corporation,
2,228 East Midtown Proj - FHA Ins Sec 223........................ 6.50 11/15/18 2,340,262
2,250 Ruppert Proj - FHA Ins Sec 223............................. 6.50 11/15/18 2,363,099
4,935 New York State Housing Finance Agency, Mortgage 1996 Ser A
Refg (FSA)................................................. 6.10 11/01/15 5,282,128
- -------- -----------
9,413 9,985,489
- -------- -----------
Mortgage Revenue - Single Family (3.2%)
4,500 New York State Mortgage Agency, Homeowner Ser 27............ 6.90 04/01/15 4,858,335
- -------- -----------
Nursing & Health Related Facilities (4.9%)
1,000 New York State Dormitory Authority, Mental Health Refg Ser
1999 C (MBIA).............................................. 5.125 08/15/15 975,830
New York State Medical Care Facilities Finance Authority,
2,295 Long Term Health Care 1992 Ser D (FSA)..................... 6.50 11/01/15 2,461,043
4,000 Mental Health Ser F........................................ 5.25 02/15/19 3,848,120
- -------- -----------
7,295 7,284,993
- -------- -----------
Public Facilities Revenue (1.2%)
2,000 New York State Urban Development Corporation, Correctional
- -------- 1998 Ser B (AMBAC)......................................... 4.75 01/01/28 1,788,000
-----------
Transportation Facilities Revenue (6.9%)
3,000 New York State Thruway Authority, Local Highway & Bridge Ser
1998 A (MBIA).............................................. 5.00 04/01/18 2,859,330
2,000 Triborough Bridge & Tunnel Authority, Refg Ser 1998 A
(MBIA)..................................................... 4.75 01/01/24 1,799,440
Puerto Rico Highway & Transportation Authority,
3,000 Refg Ser X................................................. 5.50 07/01/15 3,067,440
3,000 Ser 1998 A................................................. 4.75 07/01/38 2,648,880
- -------- -----------
11,000 10,375,090
- -------- -----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE> 8
MORGAN STANLEY DEAN WITTER NEW YORK TAX-FREE INCOME FUND
PORTFOLIO OF INVESTMENTS June 30, 1999 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Water & Sewer Revenue (5.9%)
$ 3,000 New York City Municipal Water Finance Authority, 1998 Ser
D.......................................................... 4.75 % 06/15/25 $ 2,660,610
2,000 New York State Environmental Facilities Corporation, Clean
Drinking Water
Ser 1998 C................................................. 5.00 06/15/19 1,893,600
4,000 Suffolk Country Industrial Development Agency, Southwest
Sewer Ser 1994 (FGIC)...................................... 6.00 02/01/08 4,287,800
- -------- ------------
9,000 8,842,010
- -------- ------------
Other Revenue (4.9%)
2,000 Municipal Assistance Corporation for the City of New York,
Ser E...................................................... 6.00 07/01/06 2,148,680
5,000 New York Local Government Assistance Corporation, Refg Ser
1993 C..................................................... 5.50 04/01/17 5,131,100
- -------- ------------
7,000 7,279,780
- -------- ------------
Refunded (2.4%)
3,000 New York State Dormitory Authority, Suffolk County Judicial
Ser 1986 (ETM)............................................. 7.375 07/01/16 3,598,800
- -------- ------------
135,483 TOTAL NEW YORK TAX-EXEMPT MUNICIPAL BONDS (Identified Cost $127,772,094)........ 136,269,997
- -------- ------------
SHORT-TERM NEW YORK TAX-EXEMPT MUNICIPAL OBLIGATIONS (7.3%)
7,500 Nassau County Industrial Development Agency, 1999 Cold
Spring Harbor Laboratory (Demand 07/01/99)................. 3.35* 07/01/23 7,500,000
3,400 Port Authority of New York & New Jersey, Ser 2 (Demand
07/01/99).................................................. 3.60* 05/01/19 3,400,000
- -------- ------------
10,900 TOTAL SHORT-TERM NEW YORK TAX-EXEMPT MUNICIPAL OBLIGATIONS (Identified Cost 10,900,000
$10,900,000)...................................................................
- -------- ------------
$146,383 TOTAL INVESTMENTS (Identified Cost $138,672,094) (a)................... 98.3% 147,169,997
========
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES........................... 1.7 2,558,581
----- ------------
NET ASSETS.............................................................. 100.0% $149,728,578
===== ============
</TABLE>
- ---------------------
<TABLE>
<C> <S>
AMT Alternative Minimum Tax.
ETM Escrowed to maturity.
* 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 $9,476,213 and the aggregate gross
unrealized depreciation is $978,310, resulting in net
unrealized appreciation of $8,497,903.
Bond Insurance
- -------------------------------------------------------------------
AMBAC AMBAC Assurance Corporation.
FGIC Financial Guaranty Insurance Company.
FSA Financial Security Assurance Inc.
MBIA Municipal Bond Investors Assurance Corporation.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE> 9
MORGAN STANLEY DEAN WITTER NEW YORK TAX-FREE INCOME FUND
FINANCIAL STATEMENTS
<TABLE>
<S> <C>
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1999 (unaudited)
ASSETS:
Investments in securities, at value
(identified cost $138,672,094)............................. $147,169,997
Cash........................................................ 555,628
Receivable for:
Interest................................................ 2,194,169
Shares of beneficial interest sold...................... 134,536
Prepaid expenses and other assets........................... 9,254
------------
TOTAL ASSETS............................................ 150,063,584
------------
LIABILITIES:
Payable for:
Plan of distribution fee................................ 102,146
Investment management fee............................... 75,094
Dividends and distributions to shareholders............. 32,530
Shares of beneficial interest repurchased............... 14,300
Accrued expenses............................................ 110,936
------------
TOTAL LIABILITIES....................................... 335,006
------------
NET ASSETS.............................................. $149,728,578
============
COMPOSITION OF NET ASSETS:
Paid-in-capital............................................. $141,089,970
Net unrealized appreciation................................. 8,497,903
Accumulated undistributed net investment income............. 20,996
Accumulated undistributed net realized gain................. 119,709
------------
NET ASSETS.............................................. $149,728,578
============
CLASS A SHARES:
Net Assets.................................................. $431,604
Shares Outstanding (unlimited authorized, $.01 par value)... 37,726
NET ASSET VALUE PER SHARE............................... $11.44
============
MAXIMUM OFFERING PRICE PER SHARE,
(net asset value plus 4.44% of net asset value)........ $11.95
============
CLASS B SHARES:
Net Assets.................................................. $148,412,349
Shares Outstanding (unlimited authorized, $.01 par value)... 12,944,214
NET ASSET VALUE PER SHARE............................... $11.47
============
CLASS C SHARES:
Net Assets.................................................. $796,769
Shares Outstanding (unlimited authorized, $.01 par value)... 69,628
NET ASSET VALUE PER SHARE............................... $11.44
============
CLASS D SHARES:
Net Assets.................................................. $87,856
Shares Outstanding (unlimited authorized, $.01 par value)... 7,667
NET ASSET VALUE PER SHARE............................... $11.46
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
9
<PAGE> 10
MORGAN STANLEY DEAN WITTER NEW YORK TAX-FREE INCOME FUND
FINANCIAL STATEMENTS, continued
<TABLE>
<S> <C>
STATEMENT OF OPERATIONS
For the six months ended June 30, 1999 (unaudited)
NET INVESTMENT INCOME:
INTEREST INCOME............................................. $ 4,219,167
-----------
EXPENSES
Plan of distribution fee (Class A shares)................... 325
Plan of distribution fee (Class B shares)................... 582,977
Plan of distribution fee (Class C shares)................... 2,953
Investment management fee................................... 431,069
Shareholder reports and notices............................. 36,158
Professional fees........................................... 35,091
Transfer agent fees and expenses............................ 33,079
Trustees' fees and expenses................................. 9,223
Registration fees........................................... 5,469
Custodian fees.............................................. 4,080
Other....................................................... 7,028
-----------
TOTAL EXPENSES.......................................... 1,147,452
Less: expense offset........................................ (4,070)
-----------
NET EXPENSES............................................ 1,143,382
-----------
NET INVESTMENT INCOME................................... 3,075,785
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain........................................... 119,711
Net change in unrealized appreciation....................... (5,889,080)
-----------
NET LOSS................................................ (5,769,369)
-----------
NET DECREASE................................................ $(2,693,584)
===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
10
<PAGE> 11
MORGAN STANLEY DEAN WITTER NEW YORK TAX-FREE INCOME FUND
FINANCIAL STATEMENTS, continued
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
<S> <C> <C>
FOR THE SIX
MONTHS ENDED FOR THE YEAR
JUNE 30, ENDED
1999 DECEMBER 31, 1998
<CAPTION>
- --------------------------------------------------------------------------------------
<S> <C> <C>
(unaudited)
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income............................... $ 3,075,785 $ 6,578,491
Net realized gain................................... 119,711 5,147,298
Net change in unrealized appreciation............... (5,889,080) (3,210,250)
------------ ------------
NET INCREASE (DECREASE)......................... (2,693,584) 8,515,539
------------ ------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A shares.................................. (9,407) (14,967)
Class B shares.................................. (3,028,097) (6,537,411)
Class C shares.................................. (15,322) (23,538)
Class D shares.................................. (1,963) (2,575)
Net realized gain
Class A shares.................................. (720) (12,473)
Class B shares.................................. (247,643) (5,154,681)
Class C shares.................................. (1,330) (23,959)
Class D shares.................................. (146) (2,529)
------------ ------------
TOTAL DIVIDENDS AND DISTRIBUTIONS............... (3,304,628) (11,772,133)
------------ ------------
Net decrease from transactions in shares of
beneficial interest................................ (8,173,161) (2,946,362)
------------ ------------
NET DECREASE.................................... (14,171,373) (6,202,956)
NET ASSETS:
Beginning of period................................. 163,899,951 170,102,907
------------ ------------
END OF PERIOD
(Including undistributed net investment income
of $20,996 and $0, respectively)................ $149,728,578 $163,899,951
============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
11
<PAGE> 12
MORGAN STANLEY DEAN WITTER NEW YORK TAX-FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS June 30, 1999 (unaudited)
1. ORGANIZATION AND ACCOUNTING POLICIES
Morgan Stanley 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 converted to a multiple class share structure.
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 and 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.
12
<PAGE> 13
MORGAN STANLEY DEAN WITTER NEW YORK TAX-FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS June 30, 1999 (unaudited) 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 Morgan Stanley Dean Witter
Advisors Inc. (the "Investment Manager"), the Fund pays the Investment Manager a
management fee, accrued daily and payable monthly, by applying the 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
13
<PAGE> 14
MORGAN STANLEY DEAN WITTER NEW YORK TAX-FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS June 30, 1999 (unaudited) continued
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 Morgan Stanley 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 (1)
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 Morgan Stanley
Dean Witter Financial Advisors and others who engage in or support distribution
of the shares or who service shareholder accounts, including overhead and
telephone expenses; (2) printing and distribution of prospectuses and reports
used in connection with the offering of these shares to other than current
shareholders; and (3) 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 Dean Witter
Reynolds Inc. ("DWR"), an affiliate of the Investment Manager and Distributor,
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 investors upon
redemption of Class B shares. Although there is no legal obligation for the Fund
to pay
14
<PAGE> 15
MORGAN STANLEY DEAN WITTER NEW YORK TAX-FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS June 30, 1999 (unaudited) continued
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 $1,339,343 at June 30, 1999.
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 Morgan Stanley Dean Witter Financial Advisors or other
selected broker-dealer representatives may be reimbursed in the subsequent
calendar year. For the six months ended June 30, 1999, 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 six months ended June 30,
1999, it received contingent deferred sales charges from certain redemptions of
the Fund's Class B shares of $80,005 and received $2,099 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 six months ended June 30, 1999 aggregated
$2,050,960 and $16,117,308, respectively.
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent.
The Fund has an unfunded noncontributory defined benefit pension plan covering
all independent Trustees of the Fund who will have served as independent
Trustees for at least five years at the time of retirement. Benefits under this
plan are based on years of service and compensation during the last five years
of service. Aggregate pension costs for the six months ended June 30, 1999
included in Trustees' fees and expenses in the Statement of Operations amounted
to $2,888. At June 30, 1999, the Fund had an accrued pension liability of
$50,901 which is included in accrued expenses in the Statement of Assets and
Liabilities.
15
<PAGE> 16
MORGAN STANLEY DEAN WITTER NEW YORK TAX-FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS June 30, 1999 (unaudited) continued
5. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
JUNE 30, 1999 DECEMBER 31, 1998
------------------------- -------------------------
(unaudited)
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
CLASS A SHARES
Sold........................................................ 4,216 $ 49,936 24,896 $ 303,943
Reinvestment of dividends and distributions................. 471 5,481 1,176 14,161
Redeemed.................................................... -- -- (794) (9,600)
---------- ------------ ---------- ------------
Net increase - Class A...................................... 4,687 55,417 25,278 308,504
---------- ------------ ---------- ------------
CLASS B SHARES
Sold........................................................ 445,289 5,269,220 1,006,690 12,318,855
Reinvestment of dividends and distributions................. 159,456 1,874,172 615,659 7,414,619
Redeemed.................................................... (1,305,185) (15,443,980) (1,945,444) (23,713,938)
---------- ------------ ---------- ------------
Net decrease - Class B...................................... (700,440) (8,300,588) (323,095) (3,980,464)
---------- ------------ ---------- ------------
CLASS C SHARES
Sold........................................................ 4,577 54,418 54,107 658,172
Reinvestment of dividends and distributions................. 1,174 13,761 3,588 43,105
Redeemed.................................................... (432) (5,126) (2,319) (28,264)
---------- ------------ ---------- ------------
Net increase - Class C...................................... 5,319 63,053 55,376 673,013
---------- ------------ ---------- ------------
CLASS D SHARES
Sold........................................................ 1,001 11,888 3,958 48,389
Reinvestment of dividends and distributions................. 141 1,662 349 4,196
Redeemed.................................................... (388) (4,593) -- --
---------- ------------ ---------- ------------
Net increase - Class D...................................... 754 8,957 4,307 52,585
---------- ------------ ---------- ------------
Net decrease in Fund........................................ (689,680) $ (8,173,161) (238,134) $ (2,946,362)
========== ============ ========== ============
</TABLE>
16
<PAGE> 17
MORGAN STANLEY 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 FOR THE YEAR ENDED DECEMBER 31,
MONTHS ENDED -------------------------------------------------------------------
JUNE 30, 1999 1998 1997* 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C> <C> <C> <C>
CLASS B SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning of period..... $11.92 $12.16 $11.71 $11.96 $10.83 $12.50
------ ------ ------ ------ ------ ------
Income (loss) from investment operations:
Net investment income................... 0.23 0.49 0.51 0.53 0.55 0.57
Net realized and unrealized gain
(loss)................................ (0.43) 0.15 0.45 (0.21) 1.20 (1.51)
------ ------ ------ ------ ------ ------
Total income (loss) from investment
operations.............................. (0.20) 0.64 0.96 0.32 1.75 (0.94)
------ ------ ------ ------ ------ ------
Less dividends and distributions from:
Net investment income................... (0.23) (0.49) (0.51) (0.53) (0.54) (0.57)
Net realized gain....................... (0.02) (0.39) -- (0.04) (0.08) (0.16)
------ ------ ------ ------ ------ ------
Total dividends and distributions........ (0.25) (0.88) (0.51) (0.57) (0.62) (0.73)
------ ------ ------ ------ ------ ------
Net asset value, end of period........... $11.47 $11.92 $12.16 $11.71 $11.96 $10.83
====== ====== ====== ====== ====== ======
TOTAL RETURN+............................ (1.75)%(2) 5.32% 8.43% 2.82% 16.59% (7.74)%
RATIOS TO AVERAGE NET ASSETS:
Expenses................................. 1.47%(1)(3)(4) 1.44%(1)(4) 1.43%(1) 1.40%(1) 1.42%(1) 1.40%
Net investment income.................... 3.92%(3)(4) 3.99%(4) 4.33% 4.54% 4.70% 4.96%
SUPPLEMENTAL DATA:
Net assets, end of period, in millions... $148 $163 $170 $192 $217 $207
Portfolio turnover rate.................. 1%(2) 24% 10% 16% 17% 10%
</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%
(2) Not annualized.
(3) Annualized.
(4) Reflects overall Fund ratios for investment income and non-class specific
expenses.
SEE NOTES TO FINANCIAL STATEMENTS
17
<PAGE> 18
MORGAN STANLEY DEAN WITTER NEW YORK TAX-FREE INCOME FUND
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX FOR THE YEAR JULY 28, 1997*
MONTHS ENDED ENDED THROUGH
JUNE 30, 1999 DECEMBER 31, 1998 DECEMBER 31, 1997
- --------------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C>
CLASS A SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning of period........................ $11.90 $12.16 $12.02
------ ------ ------
Income (loss) from investment operations:
Net investment income...................................... 0.82 0.55 0.24
Net realized and unrealized gain (loss).................... (1.00) 0.13 0.14
------ ------ ------
Total income (loss) from investment operations.............. (0.18) 0.68 0.38
------ ------ ------
Less dividends and distribution from:
Net investment income...................................... (0.26) (0.55) (0.24)
Net realized gain.......................................... (0.02) (0.39) --
------ ------ ------
Total dividends and distributions........................... (0.28) (0.94) (0.24)
------ ------ ------
Net asset value, end of period.............................. $11.44 $11.90 $12.16
====== ====== ======
TOTAL RETURN+............................................... (1.55)%(2) 5.68% 3.24%(2)
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................... 0.88%(1)(3)(4) 0.93%(4) 0.92%(3)
Net investment income....................................... 4.51%(1)(3)(4) 4.50%(4) 4.78%(3)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands..................... $432 $393 $94
Portfolio turnover rate..................................... 1%(2) 24% 10%
CLASS C SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning of period........................ $11.90 $12.14 $12.02
------ ------ ------
Income (loss) from investment operations:
Net investment income...................................... 0.53 0.48 0.22
Net realized and unrealized gain (loss).................... (0.74) 0.15 0.12
------ ------ ------
Total income (loss) from investment operations.............. (0.21) 0.63 0.34
------ ------ ------
Less dividends and distribution from:
Net investment income...................................... (0.23) (0.48) (0.22)
Net realized gain.......................................... (0.02) (0.39) --
------ ------ ------
Total dividends and distributions........................... (0.25) (0.87) (0.22)
------ ------ ------
Net asset value, end of period.............................. $11.44 $11.90 $12.14
====== ====== ======
TOTAL RETURN+............................................... (1.84)%(2) 5.30% 2.83%(2)
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................... 1.47%(1)(3)(4) 1.44%(4) 1.40%(3)
Net investment income....................................... 3.92%(1)(3)(4) 3.99%(4) 4.12%(3)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands..................... $797 $765 $108
Portfolio turnover rate..................................... 1%(2) 24% 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) Does not reflect the effect of expense offset of 0.01%.
(2) Not annualized.
(3) Annualized.
(4) Reflects overall Fund ratios for investment income and non-class specific
expenses.
SEE NOTES TO FINANCIAL STATEMENTS
18
<PAGE> 19
MORGAN STANLEY DEAN WITTER NEW YORK TAX-FREE INCOME FUND
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX FOR THE YEAR JULY 28, 1997*
MONTHS ENDED ENDED THROUGH
JUNE 30, 1999 DECEMBER 31, 1998 DECEMBER 31, 1997
- ---------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C>
CLASS D SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning of period........................ $11.91 $12.15 $12.02
------ ------ ------
Income (loss) from investment operations:
Net investment income...................................... 3.01 0.58 0.26
Net realized and unrealized gain (loss).................... (3.17) 0.15 0.13
------ ------ ------
Total income (loss) investment operations................... (0.16) 0.73 0.39
------ ------ ------
Less dividends and distribution from:
Net investment income...................................... (0.27) (0.58) (0.26)
Net realized gain.......................................... (0.02) (0.39) --
------ ------ ------
Total dividends and distributions........................... (0.29) (0.97) (0.26)
------ ------ ------
Net asset value, end of period.............................. $11.46 $11.91 $12.15
====== ====== ======
TOTAL RETURN+............................................... (1.39)%(2) 6.12% 3.27%(2)
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................... 0.72%(1)(3)(4) 0.69%(1)(4) 0.66%(3)
Net investment income....................................... 4.67%(1)(3)(4) 4.74%(4) 5.04%(3)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands..................... $88 $82 $32
Portfolio turnover rate..................................... 1%(2) 24% 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) Does not reflect the effect of expense offset of 0.01%.
(2) Not annualized.
(3) Annualized.
(4) Reflects overall Fund ratios for investment income and non-class specific
expenses.
SEE NOTES TO FINANCIAL STATEMENTS
19
<PAGE> 20
TRUSTEES
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
Wayne E. Hedien
Dr. Manuel H. Johnson
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
Charles E. Fiumefreddo
Chairman and Chief Executive Officer
Mitchell M. Merin
President
Barry Fink
Vice President, Secretary and General Counsel
James F. Willison
Vice President
Joseph R. Arcieri
Vice President
Thomas F. Caloia
Treasurer
TRANSFER AGENT
Morgan Stanley Dean Witter Trust FSB
Harborside Financial Center -- Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
Morgan Stanley Dean Witter Advisors Inc.
Two World Trade Center
New York, New York 10048
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. Read the
prospectus carefully before investing.
MORGAN STANLEY
DEAN WITTER
NEW YORK
TAX-FREE
INCOME FUND
[PHOTO]
SEMIANNUAL REPORT
JUNE 30, 1999
