<PAGE>
DEAN WITTER NEW YORK TAX-FREE INCOME FUND TWO WORLD TRADE CENTER, NEW YORK, NEW
YORK 10048
LETTER TO THE SHAREHOLDERS DECEMBER 31, 1995
DEAR SHAREHOLDER:
Bonds rallied significantly during 1995. Progressive tightening of monetary
policy by the Federal Reserve Board over the 12 months through February 1995
slowed economic growth and caused bonds to advance throughout the year. The
trend toward lower long-term interest rates was aided by the central bank's
easing of short-term interest rates in July and December.
MUNICIPAL MARKET CONDITIONS
Long-term municipal bond yields declined from 6.97 percent in December 1994 to
5.71 percent at the end of December 1995, as tracked by The Bond Buyer Revenue
Bond Index*. This 126 basis point drop in yield corresponded to a 10 percent
price increase for callable municipal bonds with 30-year maturities. Yields on
1-year municipal notes experienced a similar move, declining from 4.95 to 3.60
percent. At the end of the year, the yield pickup for extending maturity from
1-year (3.60%) to 30-years (5.71%) was 211 basis points.
Tax-exempt bond prices began the year by outperforming the prices of U.S.
Treasury bonds, but gradually deteriorated. The ratio of the Revenue Bond Index
yield to the 30-year U.S. Treasury bond yield moved from 89 percent in December
1994 to 84 percent by the end of February 1995. A declining ratio means that
municipal bond prices have been stronger than U.S. Treasury prices. In the
spring, the municipal market began to discount the risk of comprehensive changes
in the tax code created by flat-tax rhetoric from Washington. This caused the
yield ratio to move above 90 percent during the summer and end the year at 95
percent. Over the past 10 years, long municipal yields have averaged 89 percent
of U.S. Treasury yields.
Despite a resurgence in new issue volume in the second half of 1995, the
municipal market continued to experience consolidation. Municipal
- --------------------------------------------------------------
*THE BOND BUYER Revenue Bond Index is an arithmetic average of the yields of 25
selected municipal revenue bonds with 30-year maturities. Credit ratings of
these bonds range from Aa1 to Baa1 by Moody's Investors Service, Inc., and AA+
to A- by Standard & Poor's Corp.
<PAGE>
DEAN WITTER NEW YORK TAX-FREE INCOME FUND
LETTER TO THE SHAREHOLDERS DECEMBER 31, 1995, CONTINUED
underwriting was down 25 percent through June 1995, but ended the year only 5
percent below 1994's level. This followed a 44 percent drop in volume for all of
1994. Lower underwriting volume and diminished profitability caused several
major dealers to withdraw from the municipal business.
TAX REFORM
Flat-tax advocates have generated increased publicity for their proposals and
have influenced the municipal market since early 1995. Most tax-reform
discussions have been based on concepts containing broad assumptions and lacking
specific details. The various plans seek to simplify the tax process, but raise
questions about the fairness of changing from a progressive tax structure.
Flat-tax
[GRAPHIC]
proposals call for the elimination of
deductions of mortgage interest,
charitable contributions, property
taxes, and state and local income
taxes. As politicians have focused more
on tax reform as an issue in the 1996
elections, media coverage has expanded
from the financial page to the front
page. Municipal bonds have periodically
come under political pressure in the
past. For example, prior to passage of
major tax reform legislation in 1986,
municipal yields briefly exceeded
taxable yields.
[GRAPHIC]
Flat-tax proposals would also affect
municipal credits. If mortgage interest
and property tax deductions were
eliminated, municipalities would
experience a decline in their property
tax base. The loss of state and local
income tax deductions would increase
the relative economic disadvantage that
high-tax states already face. The flat
tax represents an attempt to shift tax
accountability from the federal level
to local governments. Taxpayer
recognition of the extent of the
changes under consideration may impede
the passage of comprehensive tax
reform.
PERFORMANCE
[GRAPHIC]
Dean Witter New York Tax-Free Income
Fund's total return for the fiscal year
ended December 31, 1995 was 16.59
percent. The Fund's net asset value
adjusted for December's capital gains
distribution increased from $10.83 to
$11.96 per share. Tax-free dividends
totaling approximately $0.54 per share
were paid during the year.
<PAGE>
DEAN WITTER NEW YORK TAX-FREE INCOME FUND
LETTER TO THE SHAREHOLDERS DECEMBER 31, 1995, CONTINUED
Since inception (April 25, 1985) the Fund has provided shareholders with an
average annual total return of 8.47 percent. The accompanying chart illustrates
the performance of a $10,000 investment in the Fund for the 10 years ended
December 31, 1995, versus the performance of a similar hypothetical investment
in the issues comprising the Lehman Brothers Municipal Bond Index.
PORTFOLIO STRUCTURE
On December 31, 1995, the Fund's $217 million in net assets was diversified
among 12 long-term municipal sectors and 35 credits. The three largest sectors -
educational facilities revenue, industrial
[GRAPHIC]
development/pollution control revenue
and general obligation bonds -
represented approximately 40 percent of
the portfolio. Bonds callable in the
next four years were reduced from 25 to
18 percent of the portfolio. As a
result, call protection improved from 7
to 8 years on average. The average
maturity of the long-term portfolio
moved from 18 to 19 years. The credit
quality of the portfolio is illustrated
at the right.
LOOKING AHEAD
[GRAPHIC]
The slower pace of economic growth in
1995 and the Federal Reserve Board's
latest interest rate moves have
improved bond-market expectations. The
decreasing supply of new issues,
combined with significant maturities
and calls for redemptions, should
continue to be positive for the
municipal market. However,
tax-reduction proposals are likely to
continue to receive publicity and cloud
the outlook for tax-exempt bonds. With
long-term municipal securities yielding
more than 90 percent of the yield on
U.S. Treasuries, the market has already
begun the process of discounting the
risk that a flat tax might eventually
become law.
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 INVESTMENT DECEMBER 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE
- -----------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
NEW YORK EXEMPT MUNICIPAL BONDS (97.0%)
GENERAL OBLIGATION (10.6%)
New York City,
$ 3,500 Various Purpose 1973.................................................................. 3.50 % 05/01/01
2,500 Various Purpose 1973.................................................................. 3.50 05/01/03
4,000 1990 Ser D............................................................................ 6.00 08/01/06
3,260 1996 Refg Ser E....................................................................... 5.50 02/15/08
3,000 New York State, Refg Ser 1995 B......................................................... 5.70 08/15/13
8,800 Puerto Rico, Pub Impr Refg Ser 1987 A................................................... 3.00 07/01/06
- -----------
25,060
- -----------
EDUCATIONAL FACILITIES REVENUE (15.2%)
New York State Dormitory Authority,
5,000 Canisius College Ser 1995 (CAPMAC).................................................... 5.60 07/01/23
2,150 City University Ser U................................................................. 6.375 07/01/08
3,000 City University Ser 1993 A............................................................ 5.75 07/01/09
5,000 City University Ser 1993 F............................................................ 5.50 07/01/12
3,000 State University Ser 1989 B........................................................... 0.00 05/15/05
10,000 State University Ser 1993 C........................................................... 5.375 05/15/13
2,000 State University Ser 1993 A........................................................... 5.25 05/15/15
4,000 University of Rochester Ser 1987...................................................... 6.50 07/01/09
- -----------
34,150
- -----------
ELECTRIC REVENUE (5.7%)
5,000 New York State Power Authority, Ser CC.................................................. 5.00 01/01/14
8,000 Puerto Rico Electric Power Authority, Power Ser O....................................... 5.00 07/01/12
- -----------
13,000
- -----------
HOSPITAL REVENUE (4.5%)
9,800 New York State Medical Care Facilities Finance Agency, Insured Hospital & Nursing
Home-FHA Ins Mtge 1993 Ser B.......................................................... 5.50 02/15/22
- -----------
INDUSTRIAL DEVELOPMENT/POLLUTION CONTROL REVENUE (14.3%)
4,500 New York City Industrial Development Agency, 1990 American Airlines Inc (AMT)........... 8.00 07/01/20
New York State Energy Research & Development Authority,
3,000 Brooklyn Union Gas Co 1993 Ser B...................................................... 6.368 04/01/20
11,000 Brooklyn Union Gas Co 1991 Ser (AMT).................................................. 6.952 07/01/26
4,000 Consolidated Edison Co of New York Inc Ser 1986 A (AMT)............................... 7.50 11/15/21
1,000 Long Island Lighting Co 1990 Ser A (AMT).............................................. 7.15 06/01/20
5,000 New York State Electric & Gas Corp 1987 Ser A (AMT) (MBIA)............................ 6.15 07/01/26
- -----------
28,500
- -----------
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- -----------
<C> <C>
$ 3,500 $ 3,163,125
2,500 2,142,575
4,000 4,024,040
3,260 3,167,155
3,000 3,117,750
8,800 7,336,736
---------------
- -----------
22,951,381
25,060
---------------
- -----------
5,000 5,033,700
2,150 2,286,934
3,000 3,079,470
5,000 4,914,900
3,000 1,813,530
10,000 9,665,200
2,000 1,929,180
4,000 4,182,840
---------------
- -----------
32,905,754
34,150
---------------
- -----------
5,000 4,844,200
8,000 7,594,640
---------------
- -----------
12,438,840
13,000
---------------
- -----------
9,800
9,785,790
---------------
- -----------
4,500 4,888,125
3,000 3,208,500
11,000 12,337,050
4,000 4,170,280
1,000 1,027,430
5,000 5,270,000
---------------
- -----------
30,901,385
28,500
---------------
- -----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER NEW YORK TAX-FREE INCOME FUND
PORTFOLIO OF INVESTMENT DECEMBER 31, 1995, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE
- -----------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
MORTGAGE REVENUE - MULTI-FAMILY (2.8%)
New York City Housing Development Corporation,
$ 2,390 East Midtown Proj-FHA Insured Sec 223................................................. 6.50 % 11/15/18
1,000 Gen Hsg Ser A (AMBAC)................................................................. 6.50 05/01/06
2,396 Ruppert Proj-FHA Insured Sec 223...................................................... 6.50 11/15/18
- -----------
5,786
- -----------
MORTGAGE REVENUE - SINGLE FAMILY (5.1%)
New York State Mortgage Agency, Homeowner
4,500 Ser 27................................................................................ 6.90 04/01/15
5,000 Ser 29 A.............................................................................. 5.25 04/01/15
1,400 Ser MM-1 (AMT)........................................................................ 7.95 10/01/21
- -----------
10,900
- -----------
NURSING & HEALTH RELATED FACILITIES REVENUE (1.2%)
2,500 New York State Medical Care Facilities Finance Authority, Long Term Health Care 1992 Ser
D (CGIC).............................................................................. 6.50 11/01/15
- -----------
RESOURCE RECOVERY REVENUE (3.9%)
3,000 Hempstead Industrial Development Agency, 1985 American REF-FUEL Co of Hempstead......... 7.40 12/01/10
3,000 New York State Environmental Facilities Corporation, Huntington
1989 Ser A (AMT)...................................................................... 7.50 10/01/12
2,000 Oneida-Herkimer Solid Waste Management Authority, Ser 1992.............................. 6.75 04/01/14
- -----------
8,000
- -----------
TRANSPORTATION FACILITIES REVENUE (9.9%)
2,500 Buffalo & Fort Erie Public Bridge Authority, Toll Bridge Ser 1995 (MBIA)................ 5.75 01/01/25
5,000 Metropolitan Transportation Authority, Commuter Sub Grand Central Terminal Redev Ser
1995-1 (FSA).......................................................................... 5.70 07/01/24
New York State Thruway Authority,
3,500 Ser A................................................................................. 5.75 01/01/12
2,000 Ser C (FGIC).......................................................................... 6.00 01/01/25
5,000 Port Authority of New York & New Jersey, Cons 100th Ser................................. 5.75 12/15/20
3,000 Puerto Rico Highway & Transportation Authority, Refg Ser X.............................. 5.50 07/01/15
- -----------
21,000
- -----------
WATER & SEWER REVENUE (8.3%)
New York City Municipal Water Finance Authority,
4,000 1990 Ser A............................................................................ 6.00 06/15/19
4,000 1994 Ser B............................................................................ 5.375 06/15/07
Suffolk County Industrial Development Agency,
5,000 Southwest Sewer Ser 1994 (FGIC)....................................................... 6.00 02/01/07
4,000 Southwest Sewer Ser 1994 (FGIC)....................................................... 6.00 02/01/08
- -----------
17,000
- -----------
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- -----------
<C> <C>
$ 2,390 $ 2,515,759
1,000 1,028,060
2,396 2,500,831
---------------
- -----------
6,044,650
5,786
---------------
- -----------
4,500 4,833,765
5,000 4,721,800
1,400 1,509,494
---------------
- -----------
11,065,059
10,900
---------------
- -----------
2,500
2,717,000
---------------
- -----------
3,000 3,124,020
3,000
3,194,880
2,000 2,079,200
---------------
- -----------
8,398,100
8,000
---------------
- -----------
2,500 2,569,800
5,000
5,067,050
3,500 3,587,885
2,000 2,103,680
5,000 5,096,600
3,000 3,028,680
---------------
- -----------
21,453,695
21,000
---------------
- -----------
4,000 4,047,080
4,000 4,084,680
5,000 5,457,050
4,000 4,351,840
---------------
- -----------
17,940,650
17,000
---------------
- -----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER NEW YORK TAX-FREE INCOME FUND
PORTFOLIO OF INVESTMENT DECEMBER 31, 1995, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE
- -----------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
OTHER REVENUE (9.0%)
$ 4,000 Municipal Assistance Corporation for the City of New York, Ser 57....................... 7.25 % 07/01/08
5,000 New York Local Government Assistance Corporation, Ser 1994 A............................ 5.50 04/01/17
10,000 United Nations Development Corporation, 1992 Refg Ser A Sr Lien......................... 6.00 07/01/26
- -----------
19,000
- -----------
REFUNDED (6.5%)
5,000 New York Local Government Assistance Corporation, Ser 1991 B............................ 7.50 04/01/01++
3,000 New York State Dormitory Authority, Suffolk County Judicial Ser 1986 (ETM).............. 7.375 07/01/16
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++
- -----------
12,000
- -----------
TOTAL NEW YORK EXEMPT MUNICIPAL BONDS (IDENTIFIED COST $194,635,966)............................................
206,696
- -----------
SHORT-TERM NEW YORK EXEMPT MUNICIPAL OBLIGATION (1.4%)
3,000 Syracuse Industrial Development Agency, Syracuse University Eggers Hall Ser 1993 (Demand
01/02/96) (Identified Cost $3,000,000)................................................ 5.90* 03/01/23
- -----------
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- -----------
<C> <C>
$ 4,000 $ 4,144,880
5,000 5,119,750
10,000 10,203,100
---------------
- -----------
19,467,730
19,000
---------------
- -----------
5,000 5,848,200
3,000 3,644,490
4,000
4,502,080
---------------
- -----------
13,994,770
12,000
---------------
- -----------
206,696 210,064,804
- ----------- ---------------
3,000
3,000,000
---------------
- -----------
$ 209,696 TOTAL INVESTMENTS (IDENTIFIED COST $197,635,966) (A)........................ 98.4% 213,064,804
- -----------
- -----------
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES.............................. 1.6 3,553,238
----- ------------
NET ASSETS.................................................................. 100.0% $216,618,042
----- ------------
----- ------------
<FN>
- ---------------------
AMT Alternative Minimum Tax.
ETM Escrowed to Maturity.
* Current coupon of variable rate security.
++ Prerefunded to call date shown.
(a) The aggregate cost for federal income tax purposes is $197,635,966; the
aggregate gross unrealized appreciation is $15,810,446 and the aggregate
gross unrealized depreciation is $381,608, resulting in net unrealized
appreciation of $15,428,838.
BOND INSURANCE:
AMBAC AMBAC Indemnity Insurance Corporation.
CAPMAC Capital Markets Assurance Corporation.
CGIC Capital Guaranty Insurance Company.
FGIC Financial Guaranty Insurance Company.
FSA Financial Security Assurance Inc.
MBIA Municipal Bond Investors Assurance Corporation.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER NEW YORK TAX-FREE INCOME FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $197,635,966)............................ $ 213,064,804
Cash........................................................ 1,074,926
Receivable for:
Interest................................................ 3,601,682
Shares of beneficial interest sold...................... 77,838
Prepaid expenses............................................ 15,147
-------------
TOTAL ASSETS........................................... 217,834,397
-------------
LIABILITIES:
Payable for:
Dividends and distributions............................. 793,064
Plan of distribution fee................................ 137,637
Investment management fee............................... 100,934
Shares of beneficial interest repurchased............... 75,137
Accrued expenses............................................ 109,583
-------------
TOTAL LIABILITIES...................................... 1,216,355
-------------
NET ASSETS:
Paid-in-capital............................................. 200,479,794
Net unrealized appreciation................................. 15,428,838
Accumulated undistributed net investment income............. 52,897
Accumulated undistributed net realized gain................. 656,513
-------------
NET ASSETS............................................. $ 216,618,042
-------------
-------------
NET ASSET VALUE PER SHARE,
18,113,570 SHARES OUTSTANDING (UNLIMITED SHARES AUTHORIZED
OF $.01 PAR VALUE)........................................
$11.96
-----------------------------
-----------------------------
</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, 1995
<TABLE>
<S> <C>
NET INVESTMENT INCOME:
INTEREST INCOME............................................. $13,117,259
-----------
EXPENSES
Plan of distribution fee.................................... 1,607,828
Investment management fee................................... 1,179,074
Transfer agent fees and expenses............................ 90,010
Professional fees........................................... 51,817
Shareholder reports and notices............................. 48,629
Trustees' fees and expenses................................. 24,535
Custodian fees.............................................. 10,401
Registration fees........................................... 8,728
Other....................................................... 12,882
-----------
TOTAL EXPENSES BEFORE EXPENSE OFFSET................... 3,033,904
LESS: EXPENSE OFFSET................................... (10,375)
-----------
TOTAL EXPENSES AFTER EXPENSE OFFSET.................... 3,023,529
-----------
NET INVESTMENT INCOME.................................. 10,093,730
-----------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain........................................... 2,568,550
Net change in unrealized depreciation....................... 20,081,778
-----------
NET GAIN............................................... 22,650,328
-----------
NET INCREASE................................................ $32,744,058
-----------
-----------
</TABLE>
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, 1995 DECEMBER 31, 1994
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income....................................... $ 10,093,730 $ 11,294,623
Net realized gain (loss).................................... 2,568,550 (487,800)
Net change in unrealized appreciation/depreciation.......... 20,081,778 (29,811,878)
----------------- -----------------
NET INCREASE (DECREASE)................................ 32,744,058 (19,005,055)
----------------- -----------------
DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income....................................... (10,054,862) (11,286,357)
Net realized gain........................................... (1,424,236) (3,193,040)
----------------- -----------------
TOTAL.................................................. (11,479,098) (14,479,397)
----------------- -----------------
Net decrease from transactions in shares of beneficial
interest.................................................. (11,693,907) (5,929,150)
----------------- -----------------
TOTAL INCREASE (DECREASE).............................. 9,571,053 (39,413,602)
NET ASSETS:
Beginning of period......................................... 207,046,989 246,460,591
----------------- -----------------
END OF PERIOD
(INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME OF
$52,897 AND $14,003, RESPECTIVELY)...................... $216,618,042 $207,046,989
----------------- -----------------
----------------- -----------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER NEW YORK TAX-FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1995
1. ORGANIZATION AND ACCOUNTING POLICIES
Dean Witter New York Tax-Free Income Fund (the "Fund") is registered under the
Investment Company Act of 1940, as amended (the "Act"), as a diversified,
open-end management investment company. The Fund's investment objective is to
provide a high level of current income which is exempt from federal, New York
State and New York City income tax, consistent with the preservation of capital.
The Fund was organized as a Massachusetts business trust on January 17, 1985 and
commenced operations on April 25, 1985.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual results could differ from
those estimates. The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- Portfolio securities are valued for the Fund by
an outside independent pricing service approved by the Trustees. The pricing
service has informed the Fund that in valuing the Fund's portfolio securities,
it uses both a computerized matrix of tax-exempt securities and evaluations by
its staff, in each case based on information concerning market transactions and
quotations from dealers which reflect the bid side of the market each day. The
Fund's portfolio securities are thus valued by reference to a combination of
transactions and quotations for the same or other securities believed to be
comparable in quality, coupon, maturity, type of issue, call provisions, trading
characteristics and other features deemed to be relevant. Short-term debt
securities having a maturity date of more than sixty days at time of purchase
are valued on a mark-to-market basis until sixty days prior to maturity and
thereafter at amortized cost based on their value on the 61st day. Short-term
debt securities having a maturity date of sixty days or less at the time of
purchase are valued at amortized cost.
B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on the
trade date (date the order to buy or sell is executed). Realized gains and
losses on security transactions are determined by the identified cost method.
The Fund amortizes premiums and accretes discounts over the life of the
respective securities. Interest income is accrued daily.
C. FEDERAL INCOME TAX STATUS -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable and nontaxable income to its
shareholders. Accordingly, no federal income tax provision is required.
<PAGE>
DEAN WITTER NEW YORK TAX-FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1995, CONTINUED
D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund records dividends and
distributions to its shareholders on the record date. The amount of dividends
and distributions from net investment income and net realized capital gains are
determined in accordance with federal income tax regulations which may differ
from generally accepted accounting principles. These "book/tax" differences are
either considered temporary or permanent in nature. To the extent these
differences are permanent in nature, such amounts are reclassified within the
capital accounts based on their federal tax-basis treatment; temporary
differences do not require reclassification. Dividends and distributions which
exceed net investment income and net realized capital gains for financial
reporting purposes but not for tax purposes are reported as dividends in excess
of net investment income or distributions in excess of net realized capital
gains. To the extent they exceed net investment income and net realized capital
gains for tax purposes, they are reported as distributions of paid-in-capital.
2. INVESTMENT MANAGEMENT AGREEMENT
Pursuant to an Investment Management Agreement with Dean Witter InterCapital
Inc. (the "Investment Manager"), the Fund pays 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
average daily net assets not exceeding $500 million and 0.525% to the portion of
average daily net assets exceeding $500 million.
Under the terms of the Agreement, in addition to managing the Fund's
investments, the Investment Manager maintains certain of the Fund's books and
records and furnishes, at its own expense, office space, facilities, equipment,
clerical, bookkeeping and certain legal services and pays the salaries of all
personnel, including officers of the Fund who are employees of the Investment
Manager. The Investment Manager also bears the cost of telephone services, heat,
light, power and other utilities provided to the Fund.
3. PLAN OF DISTRIBUTION
Shares of the Fund are distributed by Dean Witter Distributors Inc. (the
"Distributor"), an affiliate of the Investment Manager. The Fund has adopted a
Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under the Act pursuant
to which the Fund pays the Distributor compensation, accrued daily and payable
monthly, at an annual rate of 0.75% of the lesser of: (a) the average daily
aggregate gross sales of the Fund's shares since the Fund's inception (not
including reinvestment of dividend or capital gain distributions) less the
average daily aggregate net asset value of the Fund's shares redeemed since the
Fund's inception upon which a contingent deferred sales charge has been
<PAGE>
DEAN WITTER NEW YORK TAX-FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1995, CONTINUED
imposed or upon which such charge has been waived; or (b) the Fund's average
daily net assets. Amounts paid under the Plan are paid to the Distributor to
compensate it for the services provided and the expenses borne by it and others
in the distribution of the Fund's shares, including the payment of commissions
for sales of the Fund's shares and incentive compensation to, and expenses of,
account executives of Dean Witter Reynolds Inc., an affiliate of the Investment
Manager and Distributor, and other employees and selected broker-dealers, who
engage in or support distribution of the Fund's shares or who service
shareholder accounts, including overhead and telephone expenses, printing and
distribution of prospectuses and reports used in connection with the offering of
the Fund's shares to other than current shareholders and preparation, printing
and distribution of sales literature and advertising materials. In addition, the
Distributor may be compensated under the Plan for its opportunity costs in
advancing such amounts, which compensation would be in the form of a carrying
charge on any unreimbursed expenses by the Distributor.
Provided that the Plan continues in effect, any cumulative expenses incurred but
not yet recovered may be recovered through future distribution fees from the
Fund and contingent deferred sales charges from the Fund's shareholders.
The Distributor has informed the Fund that for the year ended December 31, 1995,
it received approximately $337,000 in contingent deferred sales charges from
certain redemptions of the Fund's shares. The Fund's shareholders pay such
charges which are not an expense of the Fund.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales of portfolio securities, excluding
short-term investments, for the year ended December 31, 1995 aggregated
$33,490,393 and $38,365,443, respectively.
Dean Witter Trust Company, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At December 31, 1995, the Fund had
transfer agent fees and expenses payable of approximately $11,000.
The Fund has an unfunded noncontributory defined benefit pension plan covering
all independent Trustees of the Fund who will have served as independent
Trustees for at least five years at the time of retirement. Benefits under this
plan are based on years of service and compensation during the last five years
of service. Aggregate pension costs for the year ended December 31, 1995
<PAGE>
DEAN WITTER NEW YORK TAX-FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1995, CONTINUED
included in Trustees' fees and expenses in the Statement of Operations amounted
to $3,121. At December 31, 1995, the Fund had an accrued pension liability of
$48,649 which is included in accrued expenses in the Statement of Assets and
Liabilities.
5. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE YEAR ENDED
DECEMBER 31, 1995 DECEMBER 31, 1994
---------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
----------- -------------- ----------- ------------
<S> <C> <C> <C> <C>
Sold............................................................. 1,646,704 $ 18,911,488 1,882,224 $ 21,996,590
Reinvestment of dividends and distributions...................... 580,096 6,745,389 776,114 8,847,709
----------- -------------- ----------- ------------
2,226,800 25,656,877 2,658,338 30,844,299
Repurchased...................................................... (3,239,090) (37,350,784) (3,244,785) (36,773,449)
----------- -------------- ----------- ------------
Net decrease..................................................... (1,012,290) $ (11,693,907) (586,447) $ (5,929,150)
----------- -------------- ----------- ------------
----------- -------------- ----------- ------------
</TABLE>
6. FEDERAL INCOME TAX STATUS
During the year ended December 31, 1995, the Fund utilized its net capital loss
carryover of approximately $488,000.
<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
----------------------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value,
beginning of
period.......... $ 10.83 $ 12.50 $ 11.98 $ 11.68 $ 11.00 $ 11.25 $ 10.94 $ 10.50 $ 11.57 $ 10.57
---------- --------- --------- ---------- --------- --------- ---------- --------- --------- ----------
Net investment
income.......... 0.55 0.57 0.65 0.65 0.68 0.68 0.68 0.68 0.70 0.72
Net realized and
unrealized gain
(loss).......... 1.20 (1.51) 0.72 0.34 0.70 (0.25) 0.31 0.44 (0.93) 1.09
---------- --------- --------- ---------- --------- --------- ---------- --------- --------- ----------
Total from
investment
operations...... 1.75 (0.94) 1.37 0.99 1.38 0.43 0.99 1.12 (0.23) 1.81
---------- --------- --------- ---------- --------- --------- ---------- --------- --------- ----------
Less dividends
and
distributions
from:
Net investment
income........ (0.54) (0.57) (0.65) (0.65) (0.68) (0.68) (0.68) (0.67) (0.70) (0.72)
Net realized
gain.......... (0.08) (0.16) (0.20) (0.04) (0.02) -- -- (0.01) (0.14) (0.09)
---------- --------- --------- ---------- --------- --------- ---------- --------- --------- ----------
Total dividends
and
distributions... (0.62) (0.73) (0.85) (0.69) (0.70) (0.68) (0.68) (0.68) (0.84) (0.81)
---------- --------- --------- ---------- --------- --------- ---------- --------- --------- ----------
Net asset value,
end of period... $ 11.96 $ 10.83 $ 12.50 $ 11.98 $ 11.68 $ 11.00 $ 11.25 $ 10.94 $ 10.50 $ 11.57
---------- --------- --------- ---------- --------- --------- ---------- --------- --------- ----------
---------- --------- --------- ---------- --------- --------- ---------- --------- --------- ----------
TOTAL INVESTMENT
RETURN+ 16.59% (7.74)% 11.72% 8.70% 12.94% 4.01% 9.34% 10.91% (1.89)% 17.62%
RATIOS TO AVERAGE
NET ASSETS:
Expenses......... 1.42%(1) 1.40% 1.27% 1.40% 1.32% 1.37% 1.37% 1.41% 1.40% 1.41%
Net investment
income.......... 4.70% 4.96% 5.20% 5.48% 6.00% 6.13% 6.09% 6.28% 6.44% 6.36%
SUPPLEMENTAL
DATA:
Net assets, end
of period, in
millions........ $217 $207 $246 $209 $182 $158 $147 $129 $113 $113
Portfolio
turnover rate... 17% 10% 25% 16% 17% 23% 4% 18% 40% 23%
<FN>
- ---------------------
+ Does not reflect the deduction of sales charge.
(1) The above expense ratio would have been 1.41% which reflects 0.01% effect
for custody cash credits.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER NEW YORK TAX-FREE INCOME FUND
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND TRUSTEES
OF DEAN WITTER NEW YORK TAX-FREE INCOME FUND
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Dean Witter New York Tax-Free
Income Fund (the "Fund") at December 31, 1995, 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 ten years in
the period then ended, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 1995 by correspondence with the
custodian, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036
FEBRUARY 7, 1996
- --------------------------------------------------------------------------------
1995 FEDERAL TAX NOTICE (UNAUDITED)
During the year ended December 31, 1995, the Fund paid to the
shareholders $0.54 per share from net investment income. All of
the Fund's dividends from net investment income were exempt
interest dividends, excludable from gross income for Federal
income tax purposes. For the year ended December 31, 1995, the
Fund paid to shareholders $0.08 per share from long-term capital
gains.
<PAGE>
TRUSTEES
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Dr. Manuel H. Johnson
Paul Kolton
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
Sheldon Curtis
VICE PRESIDENT, SECRETARY AND GENERAL COUNSEL
James F. Willison
VICE PRESIDENT
Thomas F. Caloia
TREASURER
TRANSFER AGENT
Dean Witter Trust Company
Harborside Financial Center - Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
Dean Witter InterCapital Inc.
Two World Trade Center
New York, New York 10048
This report is submitted for the general information of shareholders of the
Fund. For more detailed information about the Fund, its officers and trustees,
fees, expenses and other pertinent information, please see the prospectus of the
Fund.
This report is not authorized for distribution to prospective investors in the
Fund unless preceded or accompanied by an effective prospectus.
DEAN WITTER
NEW YORK
TAX-FREE
INCOME FUND
[Graphic]
ANNUAL REPORT
DECEMBER 31, 1995
<PAGE>
DEAN WITTER NEW YORK TAX-FREE INCOME FUND
GROWTH OF $10,000
DATE TOTAL LEHMAN MUNI BOND
INDEX
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
December 31, 1985 $10,000 $10,000
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
December 31, 1986 $11,762 $11,931
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
December 31, 1987 $11,540 $12,111
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
December 31, 1988 $12,799 $13,342
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
December 31, 1989 $13,994 $14,781
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
December 31, 1990 $14,556 $15,859
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
December 31, 1991 $16,439 $17,784
- -------------------------------------------------------------------------------
December 31, 1992 $17,869 $19,353
- -------------------------------------------------------------------------------
December 31, 1993 $19,964 $21,729
- -------------------------------------------------------------------------------
December 31, 1994 $18,419 $20,606
- -------------------------------------------------------------------------------
December 31, 1995 $21,474(3) $24,202
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
1 YEAR 5 YEARS 10 YEARS
------------------------------------------
------------------------------------------
16.59(1) 8.09(1) 7.94(1)
------------------------------------------
11.59(2) 7.79(2) 7.94(2)
------------------------------------------
------------------------------------------
--------------------------------
--------------------------------
Fund Lehman(4)
---- ------
--------------------------------
--------------------------------
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 contigent 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, 1995.
(4) The Lehman Brothers Municipal Bond Index tracks the performance of
municipal bonds with maturities of 2 years or greater and a minimum
credit rating of Baa or BBB, as rated by Moody's Investors Service,
Inc. or Standard & Poor's Corp. The Index does not include any
expenses, fees, or charges. The Index is unmanaged and should not be
considered an investment.
