DEAN WITTER TAX FREE DAILY INCOME TRUST, 485BPOS, 1995-02-23

DEAN WITTER TAX FREE DAILY INCOME TRUST
485BPOS, 1995-02-23

Previous: FIDELITY ADVISOR SERIES VII, 485BPOS, 1995-02-23

Next: NUVEEN TAX EXEMPT UNIT TRUST SERIES 168 NATIONAL TRUST 168, 485BPOS, 1995-02-23

<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 23, 1995

REGISTRATION NOS.: 811-3031,
2-67087

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM N-1A

REGISTRATION STATEMENT

UNDER THE SECURITIES ACT OF 1933
[X]

PRE-EFFECTIVE AMENDMENT NO.
[ ]

POST-EFFECTIVE AMENDMENT NO. 19
[X]

AND/OR

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY

ACT OF 1940
[X]

AMENDMENT NO. 20
[X]

DEAN WITTER TAX-FREE DAILY INCOME TRUST

(A MASSACHUSETTS BUSINESS TRUST)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)

TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048

(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 392-1600

SHELDON CURTIS, ESQ.
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048

(NAME AND ADDRESS OF AGENT FOR SERVICE)

COPY TO

DAVID M. BUTOWSKY, ESQ.
GORDON, ALTMAN, BUTOWSKY
WEITZEN, SHALOV & WEIN
114 WEST 47TH STREET
NEW YORK, NEW YORK 10036

APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:

As soon as practicable after this Post-Effective Amendment becomes effective.

IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK APPROPRIATE BOX)

<PAGE>

immediately upon filing pursuant to paragraph (b)
X on February 24, 1995 pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)
on (date) pursuant to paragraph (a) of rule 485.

The Registrant has registered an indefinite number of its shares under the
Securities Act of 1933 pursuant to Section (a)(1) of Rule 24f-2 under the
Investment Company Act of 1940. The Registrant has filed the Rule 24f-2
Notice, for its fiscal year ended December 31, 1994, with the Securities and
Exchange Commission on February 21, 1995.

AMENDING THE PROSPECTUS AND UPDATING FINANCIAL STATEMENTS

<PAGE>

DEAN WITTER TAX-FREE DAILY INCOME TRUST

CROSS-REFERENCE SHEET

FORM N-1A

<TABLE>
<CAPTION>
ITEM CAPTION
- ------------- -------------------------------------------------------------------
<S> <C> <C>
Part A Prospectus
1. .... Cover Page
2. .... Prospectus Summary; Summary of Fund Expenses
3. .... Financial Highlights; Financial Statements; Performance Information
Investment Objective and Policies; Risk Considerations; The Fund
and its Management; Cover Page; Investment Restrictions; Financial
4. .... Highlights; Prospectus Summary
The Fund and Its Management; Back Cover; Investment Objective and
5. .... Policies
6. .... Dividends, Distributions and Taxes; Additional Information
7. .... Purchase of Fund Shares; Shareholder Services
8. .... Redemption of Fund Shares; Shareholder Services
9. .... Not applicable
</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C>
Part B Statement of Additional Information
10. .... Cover Page
11. .... Table of Contents
12. .... The Fund and Its Management
13. .... Investment Practices and Policies; Investment Restrictions;
Portfolio Transactions and Brokerage
14. .... The Fund and Its Management; Trustees and Officers
15. .... Trustees and Officers
16. .... The Fund and Its Management; Purchase of Fund Shares;
Shareholder Services; Custodian and Transfer Agent;
Independent Accountants
17. .... Portfolio Transactions and Brokerage
18. .... Description of Shares
19. .... How Net Asset Value is Determined; Purchase of Fund Shares;
Redemption of Fund Shares; Financial Statements; Shareholder
Services
20. .... Dividends, Distributions and Taxes; Performance Information
21. .... Purchase of Fund shares
22. .... Performance Information
23. .... Experts; Financial Statements
</TABLE>

PART C

Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C of this Registration Statement.

<PAGE>

PROSPECTUS- FEBRUARY 24, 1995
- -----------------------------------------------------------------------------

Dean Witter Tax-Free Daily Income Trust (the "Fund") is a no-load, open-end,
diversified management investment company whose investment objective is to
provide as high a level of daily income exempt from federal income tax as is
consistent with stability of principal and liquidity. The fund has a Rule
12b-1 Plan of distribution (see below). The Fund seeks to achieve its
objective by investing primarily in high quality tax-exempt securities with
short-term maturities, including Municipal Bonds, Municipal Notes and
Municipal Commercial Paper. (See "Investment Objective and Policies.")

AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. THERE IS NO ASSURANCE THAT THE FUND WILL BE ABLE TO MAINTAIN A
STABLE NET ASSET VALUE OF $1.00 PER SHARE.

In accordance with a Plan of Distribution with Dean Witter Distributors Inc.
pursuant to Rule 12b-1 under the Investment Company Act of 1940, the Fund is
authorized to reimburse specific expenses incurred in promoting the
distribution of the Fund's shares. Reimbursement may in no event exceed an
amount equal to payments at the annual rate of 0.15% of the average daily net
assets of the Fund.

This Prospectus sets forth concisely the information you should know before
investing in the Fund. It should be read and retained for future reference.
Additional information about the Fund is contained in the Statement of
Additional Information, dated February 24, 1995, which has been filed with
the Securities and Exchange Commission, and which is available at no charge
upon request of the Fund at its address or at one of its telephone numbers
listed on this cover page. The Statement of Additional Information is
incorporated herein by reference.

<TABLE>
<CAPTION>
<S> <C>
Minimum initial investment ..$5,000
Minimum additional investment $ 100
</TABLE>

For information on opening an account, registration of shares, and other
information relating to a specific account, call Dean Witter Trust Company at
800-526-3143 (toll-free).
Table of Contents

Prospectus Summary .................................................... 2

Summary of Fund Expenses .............................................. 3

Financial Highlights .................................................. 4

The Fund and its Management ........................................... 4

Investment Objective and Policies ..................................... 5

Investment Restrictions ............................................... 8

Purchase of Fund Shares ............................................... 8

Shareholder Services .................................................. 10

Redemption of Fund Shares ............................................. 13

Dividends, Distributions and Taxes .................................... 15

Additional Information ................................................ 17

Financial Statements--December 31, 1994 ............................... 18

Report of Independent Accountants ..................................... 26

Dean Witter Tax-Free Daily Income Trust
Two World Trade Center
New York, New York 10048
(212) 392-2550
For information about the Fund, call:
O 800-869-FUND (toll-free)
O In New York State at 212-392-2550
O For dividend information only (when calling from outside New York State)
800-869-RATE (toll-free).

<PAGE>

Shares of the fund are not deposits or obligations of, or guaranteed or
endorsed by, any bank, and the shares are not federally insured by the
Federal Deposit Insurance Corporation, Federal Reserve Board, or any other
agency.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EX-CHANGE COMMISSION OR ANY STATE SECURI-TIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPEC-TUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.

DEAN WITTER DISTRIBUTORS INC.
DISTRIBUTOR

<PAGE>

PROSPECTUS SUMMARY
- -----------------------------------------------------------------------------

<TABLE>
<CAPTION>
<S> <C>
The Fund The Fund is organized as a Trust, commonly known as a Massachusetts
business trust, and is an open-end, diversified management investment
company investing principally in short-term securities which are exempt
from federal income tax.
- -----------------------------------------------------------------------------
Shares Offered Shares of beneficial interest with $0.01 par value (see page 17).
- -----------------------------------------------------------------------------
Purchase of Investment may be made: o By wire o By mail o Through Dean Witter
Shares Reynolds Inc. account executives or other Selected Broker-Dealers.
Purchases are at net asset value, without a sales charge. Minimum initial
investment: $5,000. Subsequent investments: $100 or more (by wire or by
mail); $1,000 or more (through account executives) or $100 to $5,000 (by
EasyInvest(Trademark)). Orders for purchase of shares are effective on day
of receipt of payment in Federal funds if payment is received by the Fund's
transfer agent before 12:00 noon New York time (see p. 9).
- -----------------------------------------------------------------------------
Investment To provide as high a level of daily income exempt from federal income tax
Objective as is consistent with stability of principal and liquidity (see p. 5).
- -----------------------------------------------------------------------------
Investment A diversified portfolio of tax-exempt fixed-income securities with
Policy short-term maturities (see p. 5).
- -----------------------------------------------------------------------------
Investment Dean Witter InterCapital Inc. ("InterCapital"), the Investment Manager of
Manager the Fund, and its wholly-owned subsidiary, Dean Witter Services Company
Inc., serve in various investment management, advisory, management and
administrative capacities to ninety-one investment companies and other
portfolios with assets of approximately $66.9 billion at December 31, 1994
(see page 4). The monthly fee is at an annual rate of 1/2 of 1% of average
daily net assets, scaled down on assets over $500 million (see p. 4-5).
- -----------------------------------------------------------------------------
Distributor Dean Witter Distributors Inc. (the "Distributor") sells shares of the Fund
through Dean Witter Reynolds Inc. and other Selected Broker-Dealers
pursuant to selected dealer agreements. Other than the reimbursement to the
Distributor pursuant to the Rule 12b-1 Distribution Plan, the Distributor
receives no distribution fees (see page 9).
- -----------------------------------------------------------------------------
Plan of The Fund is authorized to reimburse specific expenses incurred in promoting
Distribution the distribution of the Fund's shares pursuant to a Plan of Distribution
with the Distributor pursuant to Rule 12b-1 under the Investment Company
Act of 1940. Reimbursement may in no event exceed an amount equal to
payments at the annual rate of 0.15 of 1% of average daily net assets of
the Fund (see page 10).
- -----------------------------------------------------------------------------
Management Fee The monthly fee is at an annual rate of 1/2 of 1% of average daily net
assets, scaled down on assets over $500 million (see p. 5).
- -----------------------------------------------------------------------------
Dividends Declared and automatically reinvested daily in additional shares; cash
payments of dividends available monthly (see p. 15).
- -----------------------------------------------------------------------------
Reports Individual periodic account statements; annual and semi-annual Fund
financial statements.
- -----------------------------------------------------------------------------
Redemption of Shares are redeemable by the shareholder at net asset value without any
Shares charge (see p. 13-15): o By check o By telephone or wire instructions,
with proceeds wired or mailed to a predesignated bank account o By mail A
shareholder's account is subject to possible involuntary redemption if its
value falls below $1,000 (see p. 14).
- -----------------------------------------------------------------------------
Risks The Fund invests principally in high quality, short-term fixed income
securities issued or guaranteed by state and local governments which are
subject to minimal risk of loss of income and principal. However, the
investor is directed to the discussions concerning "variable rate
obligations" and "when-issued and delayed delivery securities" on p. 7 of
the Prospectus and on page 14 of the Statement of Additional Information
and the discussions concerning "repurchase agreements" and "puts" on pages
14 and 15 of the Statement of Additional Information, concerning any risks
associated with such portfolio securities and management techniques.
- -----------------------------------------------------------------------------

</TABLE>

The above is qualified in its entirety by the detailed information appearing
elsewhere in the Prospectus
and in the Statement of Additional Information.

<PAGE>

SUMMARY OF FUND EXPENSES
- -----------------------------------------------------------------------------

The following table illustrates all expenses and fees that a shareholder
of the Fund will incur. The expenses and fees set forth in the table are for
the fiscal year ended December 31, 1994.

<TABLE>
<CAPTION>
<S> <C>
Shareholder Transaction Expenses
Maximum Sales Charge Imposed on Purchases ................................ None
Maximum Sales Charge Imposed on Reinvested Dividends ..................... None
Deferred Sales Charge .................................................... None
Redemption Fees .......................................................... None
Exchange Fee ............................................................. None
Annual Fund Operating Expenses (as a Percentage of Average Net Assets)
Management Fees .......................................................... 0.49%
12b-1 Fees ............................................................... 0.10%
Other Expenses ........................................................... 0.12%
Total Fund Operating Expenses ............................................ 0.71%

</TABLE>

<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------- --------- --------- ----------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and
(2) redemption at the end of each time period: . $7 $23 $40 $88
</TABLE>

THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR PERFORMANCE. ACTUAL EXPENSES OF THE FUND MAY BE GREATER OR
LESS THAN THOSE SHOWN.

The purpose of this table is to assist the investor in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. For a more complete description of these costs and expenses, see
"The Fund and Its Management", "Purchase of Fund Shares--Plan of
Distribution" in this Prospectus.

<PAGE>

FINANCIAL HIGHLIGHTS
- -----------------------------------------------------------------------------

The following ratios and per share data for a share of beneficial interest
outstanding throughout each period have been audited by Price Waterhouse LLP,
independent accountants. The financial highlights should be read in
conjunction with the financial statements, notes thereto and the unqualified
report of the independent accountants which are contained in this Prospectus
commencing on page 18.

<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------------------------------------------
1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value,
beginning of period .. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------- --------- -------- --------- -------- --------- -------- --------- --------- --------
Net investment income . 0.022 0.018 0.024 0.039 0.053 0.058 0.048 0.041 0.043 0.050
Less dividends from net
investment income ..... (0.022) (0.018) (0.024) (0.039) (0.053) (0.058) (0.048) (0.041) (0.043) (0.050)
--------- --------- -------- --------- -------- --------- -------- --------- --------- --------
Net asset value, end of
period ................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ========= ======== ========= ======== ========= ======== ========= ========= ========
TOTAL INVESTMENT RETURN 2.25 % 1.85 % 2.39 % 4.02 % 5.48 % 5.96 % .88 % 4.18 % 4.35 % 5.09 %
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of
period (in thousands) $543,583 $567,687 $669,623 $823,046 896,598 $873,112 $946,208 $835,239 $978,194 $608,510
Ratios to average net
assets:
Expenses .............. 0.71 % 0.71 % 0.68 % 0.68 % 0.64 % 0.61 % 0.62 % 0.62 % 0.61 % 0.68 %
Net investment income 2.22 % 1.83 % 2.37 % 3.95 % 5.30 % 5.82 % 4.78 % 4.09 % 4.22 % 4.95 %
</TABLE>

See Notes to Financial Statements

THE FUND AND ITS MANAGEMENT
- -----------------------------------------------------------------------------

Dean Witter Tax-Free Daily Income Trust (the "Fund") is an open-end,
diversified management investment company incorporated in Maryland on March
24, 1980. The Fund was reorganized as a trust of the type commonly known as a
"Massachusetts business trust" on April 30, 1987. Prior to February 19, 1993,
the Fund's name was Dean Witter/Sears Tax-Free Daily Income Trust.

Dean Witter InterCapital Inc., ("InterCapital" or the "Investment
Manager") whose address is Two World Trade Center, New York, New York 10048,
is the Fund's Investment Manager. The Investment Manager, which was
incorporated in July, 1992, is a wholly-owned subsidiary of Dean Witter,
Discover & Co. ("DWDC"), a balanced financial services organization providing
a broad range of nationally marketed credit and investment products.

InterCapital and its wholly-owned subsidiary, Dean Witter Services Company
Inc., serve in various investment management, advisory, management and
administrative capacities to a total of ninety-one investment companies,
thirty of which are listed on the New York Stock Exchange, with combined
total assets including this Fund of approximately $64.9 billion as of
December 31, 1994. The Investment Manager also manages portfolios of pension
plans, other institutions and individuals which aggregated approximately $2.0
billion at such date.

<PAGE>

The Fund has retained the Investment Manager to provide administrative
services, manage its business affairs and manage the investment of the Fund's
assets, including the placing of orders for the purchase and sale of
portfolio securities. InterCapital has retained Dean Witter Services Company
Inc. to perform the aforementioned administrative services for the Fund. The
Fund's Board of Trustees reviews the various services provided by or under
the direction of the Investment Manager to ensure that the Fund's general
investment policies and programs are being properly carried out and that
administrative services are being provided to the Fund in a satisfactory
manner.

As full compensation for the services and facilities furnished to the Fund
and for expenses of the Fund assumed by the Investment Manager, the Fund pays
the Investment Manager monthly compensation calculated daily at the annual
rate of 0.50% of the daily net assets of the Fund up to $500 million, scaled
down at various asset levels to 0.25% on assets over $3 billion. For the
fiscal year ended December 31, 1994, the Fund accrued total compensation to
the Investment Manager amounting to 0.49% of the Fund's average daily net
assets and the Fund's total expenses amounted to 0.71% of the Fund's average
daily net assets.

INVESTMENT OBJECTIVE AND POLICIES
- -----------------------------------------------------------------------------

The investment objective of the Fund is to provide as high a level of
daily income exempt from federal income tax as is consistent with stability
of principal and liquidity. It is a fundamental policy of the Fund that at
least 80% of its total assets will be invested in securities the interest on
which is exempt from federal income tax. This policy and the Fund's
investment objective may not be changed without a vote of a majority of the
Fund's outstanding voting securities, as defined in the Investment Company
Act of 1940, as amended (the "Act"). There is no assurance that the objective
will be achieved.

The Fund seeks to achieve its investment objective by investing primarily
in high quality tax-exempt securities with short-term maturities as follows:
(i) Municipal Bonds, Municipal Notes and Municipal Commercial Paper with
remaining maturities of thirteen months or less which are rated at the time
of purchase in one of the two highest rating categories for debt obligations
by at least two nationally recognized statistical rating organizations
("NRSROs") primarily Moody's Investors Service, Inc. ("Moody's") or Standard
and Poor's Corporation ("S&P"), or one NRSRO if the obligation is rated by
only one NRSRO. Unrated obligations may be purchased if they are determined
to be of comparable quality by the Fund's Board of Trustees.

Up to 20% of the Fund's total assets may be invested in tax-exempt
securities subject to the alternative minimum tax ("AMT") (tax-exempt
securities which are subject to the AMT will not be included in the 80% total
referred to above).

Inclusive of the 20% total referred to above, up to 20% of the Fund's
total assets may be invested in taxable securities. In addition, the Fund may
temporarily invest more than 20% of its total assets in taxable securities,
or in tax-exempt securities subject to the federal AMT for individual
shareholders, to maintain a "defensive" posture when, in the opinion of the
Investment Manager, it is advisable to do so because of market conditions.
The types of taxable securities in which the Fund may temporarily invest are
limited to the following short-term fixed-income securities (maturing in one
year or less from the time of purchase): (i) obligations of the United States
Government or its agencies, instrumentalities or authorities; (ii) commercial
paper rated P-1 by Moody's or A-1 by S&P; (iii) certificates of deposit of
domestic banks with assets of $1 billion or more; and (iv) repurchase
agreements with respect to any of the foregoing portfolio securities.

Municipal Bonds and Municipal Notes are debt obligations of a state, its
cities, municipalities and municipal agencies which generally have
maturities, at the time of their issuance, of either one year or more (Bonds)
or from six months to three years

<PAGE>

(Notes). Municipal Commercial Paper refers to short-term obligations of
municipalities which may be issued at a discount and are sometimes referred
to as Short-Term Discount Notes. Any Municipal Bond or Municipal Note which
depends directly or indirectly on the credit of the Federal Government, its
agencies or instrumentalities shall be considered to have a Moody's rating of
Aaa.

The foregoing percentage and rating limitations apply at the time of
acquisition of a security based on the last previous determination of the
Fund's net asset value. Any subsequent change in any rating by a rating
service or change in percentages resulting from market fluctuations will not
require elimination of any security from the Fund's portfolio. However, in
accordance with procedures adopted by the Fund's Trustees pursuant to federal
securities regulations governing money market funds, if the Investment
Manager becomes aware that a portfolio security has received a new rating
from an NRSRO that is below the second highest rating, then unless the
security is disposed of within five days, the Investment Manager will perform
a creditworthiness analysis of any such downgraded securities, which analysis
will be reported to the Trustees who will, in turn, determine whether the
securities continue to present minimal credit risks to the Fund.

The ratings assigned by NRSROs represent their opinions as to the quality
of the securities which they undertake to rate (see the Appendix to the
Statement of Additional Information). It should be emphasized, however, that
the ratings are general and not absolute standards of quality.

The two principal classifications of Municipal Bonds, Notes and Commercial
Paper are "general obligation" and "revenue" bonds, notes or commercial
paper. General obligation bonds, notes or commercial paper are secured by the
issuer's pledge of its faith, credit and taxing power for the payment of
principal and interest. Issuers of general obligation bonds, notes or
commercial paper include a state, its counties, cities, towns and other
governmental units. Revenue bonds, notes or commercial paper are payable from
the revenues derived from a particular facility or class of facilities or, in
some cases, from specific revenue sources. Revenue bonds, notes or commercial
paper are issued for a wide variety of purposes, including the financing of
electric, gas, water and sewer systems and other public utilities; industrial
development and pollution control facilities; single and multi-family housing
units; public buildings and facilities; air and marine ports, transportation
facilities such as toll roads, bridges and tunnels; and health and
educational facilities such as hospitals and dormitories. They rely primarily
on user fees to pay debt service, although the principal revenue source is
often supplemented by additional security features which are intended to
enhance the creditworthiness of the issuer's obligations. In some cases,
particularly revenue bonds issued to finance housing and public buildings, a
direct or implied "moral obligation" of a governmental unit may be pledged to
the payment of debt service. In other cases, a special tax or other charge
may augment user fees.

Included within the revenue bonds category are participations in lease
obligations or installment purchase contracts (hereinafter collectively
called "lease obligations") of municipalities. State and local governments
issue lease obligations to acquire equipment and facilities.

Lease obligations may have risks not normally associated with general
obligation or other revenue bonds. Leases and installment purchase or
conditional sale contracts (which may provide for title to the leased asset
to pass eventually to the issuer) have developed as a means for governmental
issuers to acquire property and equipment without the necessity of complying
with the constitutional and statutory requirements generally applicable for
the issuance of debt. Certain lease obligations contain "non-appropriation"
clauses that provide that the governmental issuer has no obligation to make
future payments under the lease or contract unless money is appropriated for
such purpose by the appropriate legislative body on an annual or other
periodic basis. Consequently, continued lease payments on those lease
obligations containing "non-appropriation" clauses are dependent on future
leg-

<PAGE>

islative actions. If such legislative actions do not occur, the holders of
the lease obligation may experience difficulty in exercising their rights,
including disposition of the property.

Lease obligations represent a relatively new type of financing that has
not yet developed the depth of marketability associated with more
conventional municipal obligations, and, as a result, certain of such lease
obligations may be considered illiquid securities. To determine whether or
not the Fund will consider such securities to be illiquid (the Fund may not
invest more than ten percent of its net assets in illiquid securities), the
Trustees of the Fund have established guidelines to be utilized by the Fund
in determining the liquidity of a lease obligation. The factors to be
considered in making the determination include: 1) the frequency of trades
and quoted prices for the obligation; 2) the number of dealers willing to
purchase or sell the security and the number of other potential purchasers;
3) the willingness of dealers to undertake to make a market in the security;
and 4) the nature of the marketplace trades, including, the time needed to
dispose of the security, the method of soliciting offers, and the mechanics
of the transfer.

The Fund does not generally intend to invest more than 25% of its total
assets in securities of governmental units located in any one state,
territory or possession of the United States. The Fund may invest more than
25% of its total assets in industrial development and pollution control bonds
(two kinds of tax-exempt Municipal Bonds) whether or not the users of
facilities financed by such bonds are in the same industry. In cases where
such users are in the same industry, there may be additional risk to the Fund
in the event of an economic downturn in such industry, which may result
generally in a lowered need for such facilities and a lowered ability of such
users to pay for the use of such facilities.

The high quality, short-term fixed income securities in which the Fund
principally invests are guar-anteed by state and local governments and are
subject to minimal risk of loss of income and principal.

PORTFOLIO MANAGEMENT

Although the Fund will generally acquire securities for investment with
the intent of holding them to maturity and will not seek profits through
short-term trading, the Fund may dispose of any security prior to its
maturity to meet redemption requests. Securities may also be sold when the
Fund's Investment Manager believes such dispositon to be advisable on the
basis of a revised evaluation of the issuer or based upon relevant market
considerations. There may be occasions when, as a result of maturities of
portfolio securities or sales of Fund shares, or in order to meet anticipated
redemption requests, the Fund may hold cash which is not earning income.

The Fund anticipates that the average weighted maturity of the portfolio
will be 90 days or less. The relatively short-term nature of the Fund's
portfolio is expected to result in a lower yield than portfolios comprised of
longer-term tax-exempt securities.

Variable Rate and Floating Rate Obligations. The interest rates payable on
certain Municipal Bonds and Municipal Notes are not fixed and may fluctuate
based upon changes in market rates. Municipal obligations of this type are
called "variable rate" or "floating rate" obligations. The interest rate
payable on a variable rate obligation is adjusted either at predesignated
periodic intervals or whenever there is a change in the market rate of
interest on which the interest rate payable is based.

When-Issued and Delayed Delivery Securities. The Fund may purchase
tax-exempt securities on a when-issued or delayed delivery basis; i.e.,
delivery and payment can take place a month or more after the date of the
transaction. These securities are subject to market fluctuation and no
interest accrues to the purchaser prior to settlement. At the time the Fund
makes the commitment to purchase such securities, it will record the
transaction and thereafter reflect the value, each day, of such securities in
determining its net asset value.

Brokerage Allocation. Brokerage commissions are not normally charged on
purchases and sales of

<PAGE>

short-term municipal obligations, but such transactions may involve
transaction costs in the form of spreads between bid and asked prices.
Pursuant to an order of the Securities and Exchange Commission, the Fund may
effect principal transactions in certain money market instruments with DWR.
In addition, the Fund may incur brokerage commissions on transactions
conducted through DWR.

INVESTMENT RESTRICTIONS
- -----------------------------------------------------------------------------

The investment restrictions listed below are among the restrictions which
have been adopted by the Fund as fundamental policies. Under the Act, a
fundamental policy may not be changed without the vote of a majority of the
outstanding voting securities of the Fund, as defined in the Act.

For purposes of the following restrictions: (a) an "issuer" of a security
is the entity whose assets and revenues are committed to the payment of
interest and principal on that particular security, provided that the
guarantee of a security will be considered a separate security and provided
further that a guarantee of a security shall not be deemed a security issued
by the guarantor if the value of all securities issued or guaranteed by the
guarantor and owned by the Fund does not exceed 10% of the value of the total
assets of the Fund; (b) a "taxable security" is any security the interest on
which is subject to federal income tax; and (c) all percentage limitations
apply immediately after a purchase or initial investment, and any subsequent
change in any applicable percentage resulting from market fluctuations does
not require elimination of any security from the portfolio.

The Fund may not:

1. Invest more than 5% of the value of its total assets in the securities
of any one issuer (other than obligations issued, or guaranteed by, the
United States Government, its agencies or instrumentalities).

2. Purchase more than 10% of all outstanding taxable debt securities of
any one issuer (other than debt securities issued, or guaranteed as to
principal and interest by, the United States Government, its agencies or
instrumentalities).

3. Invest more than 25% of the value of its total assets in taxable
securities of issuers in any one industry (industrial development and
pollution control bonds are grouped into industries based upon the business
in which the issuers of such obligations are engaged). This restriction does
not apply to obligations issued or guaranteed by the United States
Government, its agencies or instrumentalities or to cash equivalents.

4. Invest more than 5% of the value of its total assets in taxable
securities of issuers having a record, together with predecessors, of less
than three years of continuous operation. This restriction shall not apply to
any obligation of the Unites States Government, its agencies or
instrumentalities.

PURCHASE OF FUND SHARES
- -----------------------------------------------------------------------------

The Fund offers its own shares for sale to the public on a continuous
basis, without a sales charge. Pursuant to a Distribution Agreement between
the Fund and Dean Witter Distributors Inc. ("the Distributor"), an affiliate
of the Investment Manager, shares of the Fund are distributed by the
Distributor and offered by DWR and other dealers who have entered into
agreements with the Distributor ("Selected Broker-Dealers"). The principal
executive office of the Distributor is located at Two World Trade Center, New
York, New York 10048. The offering price will be the net asset value next
determined (see "Determination of Net Asset Value" below) after receipt of a
purchase order and acceptance by the Fund's transfer agent, Dean Witter Trust
Company (the "Transfer Agent") in proper form and accompanied by payment in
Federal Funds (i.e., monies of member banks within the Federal Reserve System
held on deposit at a Federal Reserve Bank) available to the Fund for
investment. Shares commence earning income on the day following the date of
purchase. Share certificates

<PAGE>

will not be issued unless requested in writing by the shareholder.

To initiate purchase by mail or wire, a completed Investment Application
(contained in the Prospectus) must be sent to Dean Witter Trust Company at
P.O. Box 1040, Jersey City, N.J. 07303. Checks should be made payable to the
Dean Witter Tax-Free Daily Income Trust and sent to Dean Witter Trust Company
at the same address. Purchases by wire must be preceded by a call to the
Transfer Agent advising it of the purchase (see Investment Application or the
front cover of this Prospectus for instructions and telephone numbers) and
must be wired to The Bank of New York, for credit to the Account of Dean
Witter Trust Company, Harborside Financial Center, Plaza Two, Jersey City,
New Jersey, Account No. 8900188413. Wire purchase instructions must include
the name of the Fund and the Shareholder's account number. Purchases made by
check are normally effective within two business days for checks drawn on
Federal Reserve System member banks, and longer for most other checks. Wire
purchases received by the Transfer Agent prior to 12 noon New York time are
normally effective that day and wire purchases received after 12 noon New
York time are normally effective the next business day. Initial investments
must be at least $5,000, although the Fund, at its discretion, may accept
initial investments of smaller amounts, not less than $1,000. Subsequent
investments must be $100 or more and may be made through the Transfer Agent.
The Fund reserves the right to reject any purchase order.

Sales personnel are compensated for selling shares of the Fund at the time
of their sale by the Distributor and/or the Selected Broker-Dealer. In
addition, some sales personnel of the Selected Broker-Dealer will receive
various types of non-cash compensation as special sales incentives, including
trips, educational and/or business seminars and merchandise.

Orders for the purchase of Fund shares placed by customers through DWR or
another Selected Broker-Dealer with payment in clearing house funds will be
transmitted to the Fund with payment in Federal Funds on the business day
following the day the order is placed by the customer with DWR or another
Selected Broker-Dealer. Investors desiring same day effectiveness should wire
Federal Funds directly to the Transfer Agent. An order procedure exists
pursuant to which customers can, upon request: (a) have the proceeds from the
sale of listed securities invested in shares of the Fund on the day following
the day the customer receives such proceeds in his or her DWR or other
Selected Broker-Dealer brokerage account; and (b) pay for the purchase of
certain listed securities by automatic liquidation of Fund shares owned by
the customer. In addition, there is an automatic purchase procedure whereby
consenting DWR or other Selected Broker-Dealer customers who are shareholders
of the Fund will have free cash credit balances in their DWR or other
Selected Broker-Dealer brokerage accounts as of the close of business (4:00
P.M., New York time) on the last business day of each week (where such
balances do not exceed $5,000) automatically invested in shares of the Fund
the next following business day. Investors with free cash credit balances
(i.e., immediately available funds) in brokerage accounts at DWR or another
Selected Broker-Dealer will not have any of such funds invested in the Fund
until the business day after the customer places an order with DWR or another
Selected Broker-Dealer to purchase shares of the Fund and will not receive
the daily dividend which would have been received had such funds been
invested in the Fund on the day the order was placed with DWR or other
Selected Broker-Dealers. Accordingly, DWR or other Selected Broker-Dealers
may have the use of such free credit balances during such period.

PLAN OF DISTRIBUTION

The Fund has entered into a Plan of Distribution with the Distributor
pursuant to Rule 12b-1 under the Act whereby the expenses of certain
activities in connection with the distribution of Fund shares are reimbursed.
The principal activities and services which may be provided by the
Distributor, DWR, its affiliates or any other Selected Broker-Dealers under
the Plan include: (1) compensation to and

<PAGE>

expenses of, DWR's and other Selected Broker-Dealers' account executives and
other employees including overhead and telephone expenses; (2) sales
incentives and bonuses to sales representatives and to marketing personnel in
connection with promoting sales of the Fund's shares; (3) expenses incurred
in connection with promoting sales of the Fund's shares; (4) preparing and
distributing sales literature; and (5) providing advertising and promotional
activities, including direct mail solicitation and television, radio,
newspaper, magazine and other media advertisements. Reimbursements for these
services will be made in monthly payments by the Fund, which will in no event
exceed an amount equal to a payment at the annual rate of .15 of 1% of the
Fund's average daily net assets. For the fiscal year ended December 31, 1994,
the fee accrued was equal to payment at an annual rate of 0.10 of 1% of the
Fund's average daily net assets. Expenses incurred pursuant to the Plan in
any fiscal year will not be reimbursed by the Fund through payments accrued
in any subsequent fiscal year.

DETERMINATION OF NET ASSET VALUE

The net asset value per share of the Fund is determined as of the close of
trading (presently 4:00 p.m. New York time) on each day that the New York
Stock Exchange is open by taking the value of all assets of the Fund,
subtracting its liabilities and dividing by the number of shares outstanding.
The net asset value per share will not be determined on Good Friday and on
such other federal and non-federal holidays as are observed by the New York
Stock Exchange.

The Fund utilizes the amortized cost method in valuing its portfolio
securities, which method involves valuing a security at its cost adjusted by
a constant amortization to maturity of any discount or premium, regardless of
the impact of fluctuating interest rates on the market value of the
instrument. The purpose of this method of calculation is to facilitate the
maintenance of a constant net asset value per share of $1.00. However, there
can be no assurance that the $1.00 net asset value will be maintained.

SHAREHOLDER SERVICES
- -----------------------------------------------------------------------------

Systematic Cash Withdrawal. A systematic withdrawal plan is available for
shareholders who own or purchase shares of the Fund having a minimum value of
at least $5,000. The plan provides for monthly or quarterly (March, June,
September, December) checks in any dollar amount, not less than $25, or in
any whole percentage of the account balance, on an annualized basis. The
shares will be redeemed at their net asset value, determined at the
shareholder's option, on the tenth or twenty-fifth (or next business day) of
the relevant month or quarter and normally a check for the proceeds will be
mailed by the Transfer Agent, or amounts credited to a shareholder's DWR or
other Selected Broker-Dealer brokerage account, within five days after the
date of redemption. A shareholder wishing to make this election should do so
on the Investment Application. The withdrawal plan may be terminated at any
time by the Fund.

EasyInvest(TM). Shareholders may subscribe to EasyInvest, an automatic
purchase plan which provides for any amount from $100 to $5,000 to be
transferred automatically from a checking or savings account, on a
semi-monthly, monthly or quarterly basis, to the Transfer Agent for
investment in shares of the Fund. Shares purchased through EasyInvest will be
added to the shareholder's existing account at the net asset value calculated
the next business day after the transfer of funds is effected.

Shareholders should contact their DWR or other Selected Broker-Dealer
account executive or the Transfer Agent for further information about any of
the above services.

EXCHANGE PRIVILEGE

An "Exchange Privilege," that is, the privilege of exchanging shares of
certain Dean Witter Funds for shares of the Fund, exists whereby shares of
various Dean Witter Funds which are open-end investment companies sold with
either a front-end (at time of purchase) sales charge ("FESC funds") or a
contingent deferred (at time of redemption) sales

<PAGE>

charge ("CDSC funds"), may be exchanged for shares of the Fund, Dean Witter
U.S. Government Money Market Trust, Dean Witter California Tax-Free Daily
Income Trust, Dean Witter New York Municipal Money Market and Dean Witter
Liquid Asset Fund Inc. (which five Funds are hereinafter called "money market
funds"), and for shares of Dean Witter Short-Term U.S. Treasury Trust, Dean
Witter Limited Term Municipal Trust and Dean Witter Short-Term Bond Fund
(which eight Funds, including the Fund, are referred to herein as the
"Exchange Funds"). When exchanging into a money market fund from an FESC fund
or a CDSC fund, shares of the FESC fund or the CDSC fund are redeemed at
their next calculated net asset value and exchanged for shares of the money
market fund at their net asset value determined the following business day.
An exchange from an FESC fund or a CDSC fund to an Exchange Fund that is not
a money market fund is on the basis of the next calculated net asset value
per share of each fund after the exchange order is received. Subsequently,
shares of the Exchange Fund received in an exchange for shares of an FESC
fund (regardless of the type of fund originally purchased) may be redeemed
and exchanged for shares of the other Exchange Funds, FESC funds or CDSC
funds (however, shares of CDSC funds, including shares acquired in exchange
for (i) shares of FESC funds or (ii) shares of the Exchange Funds which were
acquired in exchange for shares of FESC funds, may not be exchanged for
shares of FESC funds). Additionally, shares of the Exchange Funds received in
an exchange for shares of a CDSC fund (regardless of the type of fund
originally purchased) may be redeemed and exchanged for shares of the other
Exchange Funds or CDSC funds. Ultimately, any applicable contingent deferred
sales charge ("CDSC") will have to be paid upon redemption of shares
originally purchased from a CDSC fund. (If shares of the Exchange Funds
received in exchange for shares originally purchased from a CDSC fund are
exchanged for shares of another CDSC fund having a different CDSC schedule
than that of the CDSC fund from which the Exchange Fund shares were acquired,
the shares will be subject to the higher CDSC schedule). During the period of
time the shares originally purchased from a CDSC fund remain in the Exchange
Fund (calculated from the last day of the month in which the Exchange Fund
shares were acquired), the holding period (for the purpose of determining the
rate of the CDSC) is frozen. If those shares are subsequently reexchanged for
shares of a CDSC fund, the holding period previously frozen when the first
exchange was made resumes on the last day of the month in which shares of a
CDSC fund are reacquired. Thus, the CDSC is based upon the time (calculated
as described above) the shareholder was invested in a CDSC fund. However, in
the case of shares exchanged into an Exchange Fund on or after April 23,
1990, upon a redemption of shares which results in a CDSC being imposed, a
credit (not to exceed the amount of the CDSC) will be given in an amount
equal to the Exchange Fund 12b-1 distribution fees incurred on or after that
date which are attributable to those shares (see "Purchase of Fund
Shares--Plan of Distribution" in the respective Exchange Funds Prospectuses
for a description of Exchange Fund distribution fees). Exchanges involving
FESC funds or CDSC funds may be made after the shares of the FESC fund or
CDSC fund acquired by purchase (not by exchange or dividend reinvestment)
have been held for thirty days. There is no waiting period for exchanges of
shares acquired by exchange or dividend reinvestment.

Exchange Privilege accounts may also be maintained for shareholders of the
money market funds who acquired their shares in exchange for shares of
various TCW/DW Funds, a group of funds distributed by the Distributor for
which TCW Funds Management, Inc. serves as Adviser, under the terms and
conditions described in the Prospectus and Statement of Additional
Information of each TCW/DW Fund.

Purchases and exchanges should be made for investment purposes only. A
pattern of frequent exchanges may be deemed by the Investment Manager to be
abusive and contrary to the best interests of the Fund's other shareholders
and, at the Invest-

<PAGE>

ment Manager's discretion, may be limited by the Fund's refusal to accept
additional purchases and/or exchanges from the investor. Although the Fund
does not have any specific definition of what constitutes a pattern of
frequent exchanges, and will consider all relevant factors in determining
whether a particular situation is abusive and contrary to the best interests
of the Fund and its other shareholders, investors should be aware that the
Fund and each of the other Funds may in their discretion limit or otherwise
restrict the number of times this Exchange Privilege may be exercised by any
investor. Any such restriction will be made by the Fund on a prospective
basis only, upon notice to the shareholder not later than ten days following
such shareholder's most recent exchange.

The Exchange Privilege may be terminated or revised at any time by the
Fund and/or any of such Dean Witter Funds for which shares of the Fund may be
exchanged, upon such notice as may be required by applicable regulatory
agencies (presently sixty days prior written notice for termination or
material revision), provided that six months prior written notice of
termination will be given to the shareholders who hold shares of the Exchange
Funds, TCW/DW North American Government Income Trust, TCW/DW Income and
Growth Fund, TCW/DW Balanced Fund and TCW/DW North American Intermediate
Income Trust pursuant to the Exchange Privilege, and provided further that
the Exchange Privilege may be terminated or materially revised without notice
under certain unusual circumstances described in the Statement of Additional
Information. Shareholders maintaining margin accounts with DWR or other
Selected Broker-Dealers are referred to their account executive regarding
restrictions on exchanges of shares of the Fund pledged in their margin
account.

The current prospectus for each fund describes its investment objective(s)
and policies, and shareholders should obtain one and read it carefully before
investing. Exchanges are subject to the minimum investment requirement and
any other conditions imposed by each fund. In the case of any shareholder
holding a share certificate or certificates, no exchanges may be made until
all applicable share certificates have been received by the Transfer Agent
and deposited in the shareholder's account. An exchange will be treated for
federal income tax purposes the same as a repurchase or redemption of shares
on which the shareholder has realized a capital gain or loss. However, the
ability to deduct capital losses on an exchange may be limited in situations
where there is an exchange of shares within ninety days after the shares are
purchased. The Exchange Privilege is only available in states where an
exchange may legally be made.

If DWR or another Selected Broker-Dealer is the current dealer of record
and its account numbers are part of the account information, shareholders may
initiate an exchange of shares of the Fund for shares of any of the above
Funds pursuant to this Exchange Privilege by contacting their DWR or another
Selected Broker-Dealer account executive (no Exchange Privilege Authorization
Form is required). Other shareholders (and those shareholders who are clients
of DWR or another Selected Broker-Dealer but who wish to make exchanges
directly by writing or telephoning the Transfer Agent) must complete and
forward to the Transfer Agent an Exchange Privilege Authorization Form,
copies of which may be obtained from the Transfer Agent, to initiate an
exchange. If the Authorization Form is used, exchanges may be made in writing
or by contacting the Transfer Agent at (800) 526-3143 (toll free). The Fund
will employ reasonable procedures to confirm that exchange instructions
communicated over the telephone are genuine. Such procedures may include
requiring various forms of personal identification such as name, mailing
address, social security or other tax identification number and DWR or other
Selected Broker-Dealer account number (if any). Telephone instructions may
also be recorded. If such procedures are not employed, the Fund may be liable
for any losses due to unauthorized or fraudulent instructions.

Telephone exchange instructions will be accepted if received by the
Transfer Agent between 9:00 a.m. and 4:00 p.m. New York time, on any day the
New York Stock Exchange is open. Any share-

<PAGE>

holder wishing to make an exchange who has previously filed an Exchange
Privilege Authorization Form and who is unable to reach the Fund by telephone
should contact his or her DWR or other Selected Broker-Dealer account
executive, if appropriate, or make a written exchange request. Shareholders
are advised that during periods of drastic economic or market changes, it is
possible that the telephone exchange procedures may be difficult to
implement, although this has not been the experience of this Fund and the
other Dean Witter Funds in the past.

Shareholders should contact their DWR or other Selected Broker-Dealer
account executive or the Transfer Agent, for further information about the
Exchange Privilege.

REDEMPTION OF FUND SHARES
- -----------------------------------------------------------------------------

A shareholder may withdraw all or any of his or her investments at any
time, without penalty or charge, by redeeming shares through the Transfer
Agent at the net asset value per share next determined (see "Purchase of Fund
Shares--Determination of Net Asset Value") after the receipt of a redemption
request meeting the applicable requirements as follows (all of which are
subject to the General Redemption Requirements set forth below):

1. BY CHECK

The Transfer Agent will supply blank checks to any shareholder who has
requested them on an Investment Application. The shareholder may make checks
payable to the order of anyone in any amount not less than $500 (checks
written in amounts under $500 will not be honored by the Transfer Agent).
Shareholders must sign checks exactly as their shares are registered. If the
account is a joint account, the check may contain one signature unless the
joint owners have specified on an Investment Application that all owners are
required to sign checks. Only shareholders having accounts in which no share
certificates have been issued will be permitted to redeem shares by check.

Shares will be redeemed at their net asset value next determined (see
"Purchase of Fund Shares--Determination of Net Asset Value") after receipt by
the Transfer Agent of a check which does not exceed the value of the account.
Payment of the proceeds of a check will normally be made on the next business
day after receipt by the Transfer Agent of the check in proper form. Shares
purchased by check (including a certified or bank cashier's check) are not
normally available to cover redemption checks until fifteen days after
receipt of the check used for investment by the Transfer Agent. The Transfer
Agent will not honor a check in an amount exceeding the value of the account
at the time the check is presented for payment.

2. BY TELEPHONE OR WIRE INSTRUCTIONS WITH
PAYMENT TO PREDESIGNATED BANK ACCOUNT

A shareholder may redeem shares by telephoning or sending wire
instructions to the Transfer Agent. Payment will be made by the Transfer
Agent to the shareholder's bank account at any commercial bank designated by
the shareholder in an Investment Application, by wire if the amount is $1,000
or more and the shareholder so requests, and otherwise by mail. Normally, the
Transfer Agent will transmit payment the next business day following receipt
of a request for redemption in proper form. Only shareholders having accounts
in which no share certificates have been issued will be permitted to redeem
shares by telephone or wire instructions.

DWR and other participating Selected Broker-Dealers have informed the
Distributor and the Fund that, on behalf of and as agent for their customers
who are shareholders of the Fund, they will transmit to the Fund requests for
redemption of shares owned by their customers. In such cases, the Transfer
Agent will wire proceeds of redemptions to DWR's or another Selected
Broker-Dealer's bank account for credit to the shareholders' accounts the
following business day. DWR and other participating Selected Broker-Dealers
have also informed the Distributor and the Fund that they do not charge for
this service.

<PAGE>

Redemption instructions must include the share-holder's name and account
number and be wired or called to the Transfer Agent:

--800-526-3143 (Toll-Free)

--Telex No. 125076

3. BY MAIL

A shareholder may redeem shares by sending a letter to Dean Witter Trust
Company, P.O. Box 983, Jersey City, NJ 07303, requesting redemption and
surrendering share certificates if any have been issued.

Redemption proceeds will be mailed to the shareholder at his or her
registered address or mailed or wired to his or her predesignated bank
account, as he or she may request. Proceeds of redemption may also be sent to
some other person, as requested by the shareholder.

GENERAL REDEMPTION REQUIREMENTS

Written requests for redemption must be signed by the registered
shareholder(s). If the proceeds are to be paid to anyone other than the
registered shareholder(s) or sent to any address other than the shareholder's
registered address or predesignated bank account, signatures must be
guaranteed by an eligible guarantor acceptable to the Transfer Agent
(shareholders should contact the Transfer Agent for a determination as to
whether a particular institution is an eligible guarantor), except in the
case of redemption by check. Additional documentation may be required where
shares are held by a corporation, partnership, trustee or executor. With
regard to shares of the Fund acquired pursuant to the Exchange Privilege, any
applicable contingent deferred sales charge will be imposed upon the
redemption of such shares (see "Purchase of Fund Shares--Exchange
Privilege").

If shares to be redeemed are represented by a share certificate, the
request for redemption must be accompanied by the share certificate and a
share assignment form signed by the registered share-holder(s) exactly as the
account is registered. Shareholders are advised, for their own protection, to
send the share certificate and assignment form in separate envelopes (if they
are being mailed and not hand delivered) to the Transfer Agent. Signatures
must be guaranteed by an eligible guarantor acceptable to the Transfer Agent
(see above). Additional documentation may be required where shares are held
by a corporation, partnership, trustee or executor.

All requests for redemption, all share certificates and all share
assignments should be sent to Dean Witter Trust Company, P.O. Box 983, Jersey
City, NJ 07303.

Generally, the Fund will attempt to make payment for all redemptions
within one business day, but in no event later than seven days after receipt
of such redemption request in proper form. However, if the shares being
redeemed were purchased by check (including a certified or bank cashier's
check), payment may be delayed for the minimum time needed to verify that the
check used for investment has been honored (not more than fifteen days from
the time of investment of the check by the Transfer Agent). In addition, the
Fund may postpone redemptions at certain times when normal trading is not
taking place on the New York Stock Exchange.

The Fund reserves the right, on sixty days notice, to redeem at net asset
value the shares of any shareholder (other than shares held in an Individual
Retirement Account or custodial account under Section 403(b)(7) of the
Internal Revenue Code) whose shares due to redemptions by the shareholder
have a value of less than $1,000, or such lesser amount as may be fixed by
the Board of Trustees.

AUTOMATIC REDEMPTION PROCEDURE

The Distributor has instituted an automatic redemption procedure which it
may utilize to satisfy amounts due by a shareholder maintaining a brokerage
account with DWR or another Selected Broker-Dealer, as a result of purchases
of securities or other transactions in the shareholder's brokerage account.
Under this procedure, if the shareholder elects to participate by so
notifying DWR or other

<PAGE>

Selected Broker-Dealer, the shareholder's DWR or other Selected Broker-Dealer
brokerage account will be scanned each business day prior to the close of
business (4:00 p.m., New York time). After application of any cash balances
in the account, a sufficient number of Fund shares may be redeemed at the
close of business to satisfy any amounts for which the shareholder is
obligated to make payment to DWR or another Selected Broker-Dealer.
Redemptions will be effected on the business day preceding the date the
shareholder is obligated to make such payment, and DWR or another Selected
Broker-Dealer will receive the redemption proceeds on the day following the
redemption date. Shareholders will receive all dividends declared and
reinvested through the date of redemption.

DIVIDENDS, DISTRIBUTIONS AND TAXES
- -----------------------------------------------------------------------------

Dividends and Distributions. The Fund declares dividends, payable on each
day the New York Stock Exchange is open for business, of all of its daily net
investment income to shareholders of record as of the close of business the
preceding business day. Dividends from net short-term capital gains, if any,
will be paid periodically. Dividends from net long-term capital gains, if
any, will be paid annually. The amount of dividend may fluctuate from day to
day and may be omitted on some days if net realized losses on portfolio
securities exceed the Fund's net investment income. Dividends are declared
and automatically reinvested daily in additional full and fractional shares
of the Fund (rounded to the last 1/100 of a share) at the net asset value per
share at the close of business on that day. Any dividends declared in the
last quarter of any calendar year which are paid in the following calendar
year prior to February 1 will be deemed received by the shareholder in the
prior year.

Shareholders may instruct the Transfer Agent (in writing) to have their
dividends paid out monthly in cash. For such shareholders, the shares
reinvested and credited to their account during the month will be redeemed as
of the close of business on the monthly payment date (which will be no later
than the last business day of the month) and the proceeds will be paid to
them by check. Processing of dividend checks begins immediately following the
monthly payment date. Shareholders who have requested to receive dividends in
cash will normally receive their monthly dividend check during the first ten
days of the following month.

Share certificates for dividends or distributions will not be issued
unless a shareholder requests in writing that a certificate be issued for a
specific number of shares.

Taxes. Because the Fund intends to distribute substantially all of its net
investment income and net capital gains, if any, to shareholders, and intends
to otherwise comply with all the provisions of Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"), to qualify as a regulated
investment company, it is not expected that the Fund will be required to pay
any federal income tax.

The Fund intends to qualify to pay "exempt-in-terest dividends" to its
shareholders by maintaining, as of the close of each quarter of its taxable
year, at least 50% of the value of its total assets in tax-exempt securities.
If the Fund satisfies such requirement, distributions from net investment
income to shareholders, whether taken in cash or reinvested in additional
Fund shares, will be excludable from gross income for federal income tax
purposes to the extent net interest income is represented by interest on
tax-exempt securities. Exempt-interest dividends are included, however, in
determining what portion, if any, of a person's Social Security benefits are
subject to federal income tax.

The Code subjects interest received on certain otherwise tax-exempt
securities to an alternative minimum tax. This alternative minimum tax
applies to interest received on "private activity bonds" (in general, bonds
that benefit non-governmental entities) issued after August 7, 1986 which,
although tax-exempt, are used for purposes other than those

<PAGE>

generally performed by governmental units (e.g., bonds used for commercial or
housing purposes). Income received on such bonds is classified as a "tax
preference item", under the alternative minimum tax, for both individual and
corporate investors. A portion of the Fund's investments may be made in such
"private activity bonds," with the result that a portion of the
exempt-interest dividends paid by the Fund may be an item of tax preference
to shareholders subject to the alternative minimum tax. In addition, certain
corporations which are subject to the alternative minimum tax may have to
include a portion of exempt-interest dividends in calculating their
alternative minimum taxable income in situations where the "adjusted current
earnings" of the corporation exceeds its alternative minimum tax-able income.

After the end of its calendar year, the shareholders will be sent a
statement indicating the percentage of the dividend distributions for such
taxable year which constitutes exempt-interest dividends and the percentage,
if any, that is taxable and the percentage, if any, of the exempt-interest
dividends which constitute an item of tax preference. This percentage should
be applied uniformly to any distributions made during the taxable year to
determine the proportion of dividends that is tax-exempt. The percentage may
differ from the percentage of tax-exempt dividend distributions for any
particular month.

Shareholders will be subject to federal income tax on dividends paid from
interest income derived from taxable securities and on distributions of net
short-term capital gains, if any. Such dividends and distributions are
taxable to the shareholder as ordinary income. Distributions of net long-term
capital gains, if any, are taxable as net long-term capital gains, regardless
of how long the shareholder has held the Fund's shares and regardless of
whether the distribution is received in additional shares or in cash. No
portion of such dividends or distributions will be eligible for the federal
dividends received deduction for corporations.

The Fund advises its shareholders annually as to the federal income tax
status of distributions paid during each calendar year. To avoid being
subject to a 31% federal withholding tax on taxable dividends, capital gains
distributions and proceeds of redemptions, shareholders' taxpayer
identification numbers must be furnished and certified as to accuracy.

Shareholders should consult their tax advisers as to the applicability of
the above to their own tax situation.

CURRENT AND EFFECTIVE YIELD

From time to time the Fund advertises its "yield" and "effective yield".
Both yield figures are based on historical earnings and are not intended to
indicate future performance. The "yield" of the Fund refers to the income
generated by an investment in the Fund over a given seven-day period (which
period will be stated in the advertisement). This income is then
"annualized." That is, the amount of income generated by investment during
that seven-day period is assumed to be generated each seven-day period within
a 365-day period and is shown as a percentage of the investment. The
"effective yield" for a seven-day period is calculated similarly but, when
annualized, the income earned by an investment in the Fund is assumed to be
reinvested each week within a 365-day period. The "effective yield" will be
slightly higher than the "yield" because of the compounding effect of this
assumed reinvestment. The Fund may also quote tax-equivalent yield which is
calculated by determining the pre-tax yield which, after being taxed at a
stated rate, would be equivalent to the yield determined as described above.

The Fund may also advertise the growth of hypothetical investments of
$10,000, $50,000 and $100,000 in shares of the Fund.

<PAGE>

ADDITIONAL INFORMATION
- -----------------------------------------------------------------------------

Voting Rights. All shares of beneficial interest of the Fund are of $0.01
par value and are equal as to earnings, assets and voting privileges.

The Fund is not required to hold Annual Meetings of Shareholders and, in
ordinary circumstances the Fund does not intend to hold such meetings. The
Trustees may call Special Meetings of Shareholders for action by shareholder
vote as may be required by the Act or the Declaration of Trust. Under certain
circumstances, the Trustees may be removed by action of the Trustees or by
the shareholders.

Under Massachusetts law, shareholders of a business trust may, under
certain circumstances, be held personally liable as partners for obligations
of the Fund. However, the Declaration of Trust contains an express disclaimer
of shareholder liability for acts or obligations of the Fund, requires that
notice of such disclaimer be given in each instrument entered into or
executed by the Fund and provides for indemnification and reimbursement of
expenses out of the Fund's property for any shareholder held personally
liable for the obligations of the Fund. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is limited to
circumstances in which the Fund itself would be unable to meet its
obligations. Given the above limitations on shareholder personal liability
and the nature of the Fund's assets and operations, the possibility of the
Fund being unable to meet its obligations is remote and, in the opinion of
Massachusetts counsel to the Fund, the risk to Fund shareholders is remote.

Code of Ethics. Directors, officers and employees of InterCapital, Dean
Witter Services Company Inc. and the Distributor are subject to a strict Code
of Ethics adopted by those companies. The Code of Ethics is intended to
ensure that the interests of shareholders and other clients are placed ahead
of any personal interest, that no undue personal benefit is obtained from a
person's employment activities and that actual and potential conflicts of
interest are avoided. To achieve these goals and comply with regulatory
requirements, the Code of Ethics requires, among other things, that personal
securities transactions by employees of the companies be subject to an
advance clearance process to monitor that no Dean Witter Fund is engaged at
the same time in a purchase or sale of the same security. The Code of Ethics
bans the purchase of securities in an initial public offering and prohibits
engaging in futures and option transactions and profiting on short-term
trading (that is, a purchase within sixty days of a sale or a sale within
sixty days of a purchase) of a security. In addition, investment personnel
may not purchase or sell a security for their personal account within thirty
days before or after any transaction in any Dean Witter Fund managed by them.
Any violations of the Code of Ethics are subject to sanctions, including
reprimand, demotion or suspension or termination of employment. The Code of
Ethics comports with regulatory requirements and the recommendations in the
recent report by the Investment Company Institute Advisory Group on Personal
Investing.

Shareholder Inquiries. All inquiries regarding the Fund should be directed
to the Fund or the Transfer Agent at one of its telephone numbers or at its
address, as are set forth on the front cover of this Prospectus.

<PAGE>

DEAN WITTER TAX-FREE DAILY INCOME TRUST
FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------

STATEMENT OF ASSETS AND LIABILITIES
December 31, 1994
- -----------------------------------------------------------------------------

<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments in securities, at value
(amortized cost $536,306,539) ............... $536,306,539
Cash ......................................... 681,966
Receivable for:
Investments sold ............................ 10,000,000
Interest .................................... 3,817,022
Shares of beneficial interest sold ......... 3,144
Prepaid expenses and other assets ............ 42,221
--------------
TOTAL ASSETS .............................. 550,850,892
--------------
LIABILITIES:
Payable for: Shares of beneficial interest
repurchased ................................. 6,843,469
Investment management fee ................... 239,283
Plan of distribution fee .................... 49,050
Accrued expenses ............................. 136,407
--------------
TOTAL LIABILITIES ......................... 7,268,209
--------------
NET ASSETS:
Paid-in-capital .............................. 543,604,140
Accumulated net realized loss ................ (22,082)
Accumulated undistributed net investment
income ...................................... 625
--------------
NET ASSETS ................................ $543,582,683
==============
NET ASSET VALUE PER SHARE, 543,604,140 shares
outstanding (unlimited shares authorized of
$.01 par value) ............................. $ 1.00
==============
</TABLE>

STATEMENT OF OPERATIONS
For the year ended December 31, 1994
- -----------------------------------------------------------------------------

<TABLE>
<CAPTION>
<S> <C>
NET INVESTMENT INCOME:
INTEREST INCOME .................. $17,798,784
-------------
EXPENSES
Investment management fee ...... 2,964,072
Plan of distribution fee ........ 590,384
Transfer agent fees and expenses 503,147
Registration fees ............... 101,543
Professional fees ............... 50,190
Shareholder reports and notices 36,601
Trustees' fees and expenses .... 27,940
Custodian fees .................. 6,894
Other ........................... 12,564
-------------
TOTAL EXPENSES ................ 4,293,335
-------------
NET INVESTMENT INCOME ........ 13,505,449
NET REALIZED LOSS: ................ (4,609)
-------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS .. $13,500,840
=============
</TABLE>

STATEMENT OF CHANGES IN NET ASSETS
- -----------------------------------------------------------------------------

<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED DECEMBER ENDED DECEMBER
31, 1994 31, 1993
----------------- -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income ..................................................... $13,505,449 $11,924,708
Net realized gain (loss) .................................................. (4,609) 5,416
----------------- -----------------
Net increase ............................................................. 13,500,840 11,930,124

FOR THE YEAR FOR THE YEAR
ENDED DECEMBER ENDED DECEMBER
31, 1994 31, 1993
----------------- -----------------
----------------- -----------------
Dividends to shareholders from net investment income ....................... (13,504,824) (11,924,985)
Net decrease from transactions in shares of beneficial interest ........... (24,100,363) (101,941,025)
----------------- -----------------
Total decrease ........................................................... (24,104,347) (101,935,886)
NET ASSETS:
Beginning of period ........................................................ 567,687,030 669,622,916
----------------- -----------------
END OF PERIOD (including undistributed net investment income of $625 and
-0-, respectively) ........................................................ $543,582,683 $ 567,687,030
================= =================
</TABLE>
See Notes to Financial Statements

<PAGE>

DEAN WITTER TAX-FREE DAILY INCOME TRUST
NOTES TO FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------

1. ORGANIZATION AND ACCOUNTING POLICIES --Dean Witter Tax-Free Daily Income
Trust (the "Fund") is registered under the Investment Company Act of 1940, as
amended (the "Act"), as a diversified, open-end management investment
company. The Fund was incorporated in Maryland in 1980, reorganized as a
Massachusetts business trust on April 30, 1987 and commenced operations on
February 20, 1981.

The following is a summary of significant accounting policies:

A. Valuation of Investments -Portfolio securities are valued at amortized
cost, which approximates market value.

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 discounts on securities purchased 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.

D. Dividends and Distributions to Shareholders -The Fund records dividends
and distributions to shareholders as of the close of each business day.

2. INVESTMENT MANAGEMENT AGREEMENT --Pursuant to an Investment Management
Agreement with Dean Witter InterCapital Inc. (the "Investment Manager"), the
Fund pays its Investment Manager a management fee, accrued daily and payable
monthly, by applying the following annual rates to the net assets of the Fund
determined as of the close of each business day: 0.50% to the portion of the
daily net assets not exceeding $500 million; 0.425% to the portion of the
daily net assets exceeding $500 million but not exceeding $750 million;
0.375% to the portion of the daily net assets exceeding $750 million but not
exceeding $1 billion; 0.35% to the portion of the daily net assets exceeding
$1 billion but not exceeding $1.5 billion; 0.325% to the portion of the daily
net assets exceeding $1.5 billion but not exceeding $2 billion; 0.30% to the
portion of the daily net assets exceeding $2 billion but not exceeding $2.5
billion; 0.275% to the portion of the daily net assets exceeding $2.5 billion
but not exceeding $3 billion; and 0.25% to the portion of the daily net
assets exceeding $3 billion.

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 --Dean Witter Distributors Inc. (the "Distributor"),
an affiliate of the Investment Manager, is the distributor of the Fund's
shares and, in accordance with a Plan of Distribution (the "Plan") pursuant
to Rule 12b-1 under the Act, finances certain expenses in connection
therewith.

Under the Plan, the Distributor bears the expense of all promotional and
distribution related activities on behalf of the Fund, except for expenses
that the Trustees determine to reimburse, as described below. The following
activities and services may be provided by the Distributor and other
broker-dealers under the Plan: (1) compensation to and expenses of the
Distributor and other broker-dealers; (2) sales incentives and

<PAGE>

DEAN WITTER TAX-FREE DAILY INCOME TRUST
NOTES TO FINANCIAL STATEMENTS (continued)
- -----------------------------------------------------------------------------

bonuses to sales representatives and to marketing personnel in connection
with promoting sales of the Fund's shares; (3) expenses incurred in
connection with promoting sales of the Fund's shares; (4) preparing and
distributing sales literature; and (5) providing advertising and promotional
activities, including direct mail solicitation and television, radio,
newspaper, magazine and other media advertisements.

The Fund is authorized to reimburse the Distributor for specific expenses
the Distributor incurs or plans to incur in promoting the distribution of the
Fund's shares. The amount of each monthly reimbursement payment may in no
event exceed an amount equal to a payment at the annual rate of 0.15% of the
Fund's average daily net assets during the month. Expenses incurred by the
Distributor pursuant to the Plan in any fiscal year will not be reimbursed by
the Fund through payments accrued in any subsequent fiscal year. For the year
ended December 31, 1994, the distribution fee was accrued at the average
annual rate of 0.10%.

4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES --The cost of
purchases and proceeds from sales/maturities of portfolio securities for the
year ended December 31, 1994 aggregated $913,619,728 and $942,360,369,
respectively.

Dean Witter Trust Company, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At December 31, 1994, the Fund had
transfer agent fees and expenses payable of approximately $45,000 which is
included in accrued expenses in the Statement of Assets and Liabilities.

On April 1, 1991, the Fund established an unfunded noncontributory defined
benefit pension plan covering all independent Trustees of the Fund who will
have served as independent Trustees for at least five years at the time of
retirement. Benefits under this plan are based on years of service and
compensation during the last five years of service. Aggregate pension costs
for the year ended December 31, 1994, included in Trustees' fees and expenses
in the Statement of Operations amounted to $2,703. At December 31, 1994, the
Fund had an accrued pension liability of $41,767 which is included in accrued
expenses in the Statement of Assets and Liabilities.

5. SHARES OF BENEFICIAL INTEREST --Transactions in shares of beneficial
interest, at $1.00 per share, were as follows:

<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED DECEMBER ENDED DECEMBER
31, 1994 31, 1993
----------------- -----------------
<S> <C> <C>
Sold ............................... 1,349,415,609 1,430,859,924
Reinvestment of dividends .......... 13,504,824 11,924,985
----------------- -----------------
1,362,920,433 1,442,784,909
Repurchased ........................ (1,387,020,796) (1,544,725,934)
----------------- -----------------
Net decrease in shares outstanding (24,100,363) (101,941,025)
================= =================
</TABLE>

6. FEDERAL INCOME TAX STATUS --At December 31, 1994, the Fund had approximate
net capital loss carryovers of $22,100 of which $5,800 will be available
through December 31, 1995, $11,700 will be available through December 31,1999
and $4,600 will be available through December 31, 2002 to offset future
capital gains to the extent provided by regulations.

7. SELECTED PER SHARE DATA AND RATIOS --See the "Financial Highlights" table
on page 4 of this Prospectus.

<PAGE>

DEAN WITTER TAX-FREE DAILY INCOME TRUST
PORTFOLIO OF INVESTMENTS December 31, 1994
- -----------------------------------------------------------------------------

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN CURRENT
THOUSANDS) YIELD VALUE
- ----------- -------------------------------------------------------------------------- ------------ --------------
<S> <C> <C> <C>
SHORT-TERM VARIABLE RATE MUNICIPAL OBLIGATIONS* (75.9%)
ALABAMA
$ 4,700 Birmingham Medical Clinic Board, University of Alabama Health Services
Foundation Ser 1991, 5.95% due 1/3/95 ................................... 5.95% $ 4,700,000
CALIFORNIA
9,000 California Housing Finance Agency, 1994 Ser 1, 4.15% due 5/1/95 .......... 4.15 9,000,000
6,000 California Public Capital Improvements Financing Authority, Pooled Ser
1988 C, 4.25% due 3/15/95 ............................................... 4.25 6,000,000
5,000 San Diego County Regional Transportation Commission, Second Senior Sales
Tax 1994 Ser A (FGIC Insured), 5.75% due 1/4/95 ......................... 5.75 5,000,000
COLORADO
8,000 Arapahoe County, Highway E-470 Ser 1986 F, 3.90% due 2/28/95 ............. 3.90 8,000,000
9,000 Colorado Health Facilities Authority, Kaiser Permanente 1994 Ser A, 5.45%
due 1/4/95 .............................................................. 5.45 9,000,000
CONNECTICUT
5,000 Connecticut Housing Finance Authority, 1994 Subser H-1, 4.30% due 9/1/95 . 4.30 5,000,000
DISTRICT OF COLUMBIA
5,000 The American University Ser 1985, 5.55% due 1/4/95 ........................ 5.55 5,000,000
FLORIDA ...................................................................
11,500 Dade County, Water & Sewer System Ser 1994 (FGIC Insured), 4.95% due
1/4/95 .................................................................. 4.95 11,500,000
18,500 Dade County Industrial Development Authority, Dolphins Stadium Ser 1985 A,
5.50% due 1/3/95 ........................................................ 5.50 18,500,000
7,000 Orlando Utilities Commission, Water & Electric Ser 1991 BANs, 5.25% due
1/5/95 .................................................................. 5.25 7,000,000
7,750 Sarasota County Health Facilities Authority, Venice Hospital, 6.05% due
1/3/95 .................................................................. 6.05 7,750,000
11,800 Volusia County Health Facilities Authority, Pooled Ser 1985 (FGIC
Insured), 5.50% due 1/4/95 .............................................. 5.50 11,800,000
GEORGIA
7,700 Burke County Development Authority, Oglethorpe Power Corp Vogtle Proj Ser
1993 A (FGIC Insured), 4.95% due 1/4/95 ................................. 4.95 7,700,000
11,500 Georgia Municipal Association, Pool Ser 1990 COPs (MBIA Insured), 5.40%
due 1/5/95 .............................................................. 5.40 11,500,000
7,900 Hapeville Development Authority, Hapeville Hotel Ltd Partnership Ser 1985,
6.05% due 1/3/95 ........................................................ 6.05 7,900,000
HAWAII
10,000 Hawaii Department of Budget & Finance, Kaiser Permanente (Semiannual
Tender) Ser 1984 B, 3.60% due 3/1/95 .................................... 3.60 10,000,000

<PAGE>

DEAN WITTER TAX-FREE DAILY INCOME TRUST
PORTFOLIO OF INVESTMENTS December 31, 1994 (continued)
- -----------------------------------------------------------------------------------------------------------------

PRINCIPAL
AMOUNT (IN CURRENT
THOUSANDS) YIELD VALUE
- ----------- -------------------------------------------------------------------------- ------------ --------------
IDAHO
$10,000 Idaho Health Facilities Authority, Pooled Ser 1985, 5.50% due 1/3/95 ..... 5.50% $10,000,000
ILLINOIS
5,000 Chicago, Tender Notes Ser 1994 A, 4.15% due 7/19/95 ....................... 4.15 5,000,000
10,000 Illinois Educational Facilities Authority, Northwestern University Ser
1988, 5.60% due 1/4/95 .................................................. 5.60 10,000,000
Illinois Health Facilities Authority,
6,090 Evangelical Hospitals Corp Ser 1985 A, 5.50% due 1/4/95 .................. 5.50 6,090,000
5,000 Lutheran General Health Care System Ser 1985 B, 3.75% due 1/3/95 ........ 3.75 5,000,000
10,000 Oak Forest, Homewood South Suburban Mayors & Managers Assn Ser 1989, 5.70%
due 1/4/95 .............................................................. 5.70 10,000,000
KENTUCKY
9,500 Mason County, East Kentucky Power Co-op Inc Ser 1984 (NRU-CFC Gtd), 5.55%
due 1/4/95 .............................................................. 5.55 9,500,000
LOUISIANA
5,320 Louisiana Offshore Terminal Authority, LOOP Inc Ser 1992 A, 5.45% due
1/4/95 .................................................................. 5.45 5,320,000
20,700 New Orleans Aviation Board, Ser 1993 B (MBIA Insured), 5.40% due 1/4/95 .. 5.40 20,700,000
MASSACHUSETTS
5,000 Massachusetts Bay Transportation Authority, 1984 Ser A, 3.75% due 3/1/95 . 3.75 5,000,000
5,000 Massachusetts Municipal Wholesale Electric Co, Power Supply System 1994
Ser C, 5.25% due 1/4/95 ................................................. 5.25 5,000,000
MINNESOTA
4,105 Minnesota Housing Finance Agency, Single Family 1994 Ser T, 4.85% due
12/14/95 ................................................................ 4.85 4,105,000
8,000 University of Minnesota Regents, Ser 1985 F, 3.60% due 2/1/95 ............ 3.60 8,000,000
MISSOURI
5,000 Missouri Economic Development Export & Infrastructure Board, Pub Entity
Advance Fdg Ser 1994 C, 3.95% due 8/1/95 ................................ 3.95 5,000,000
Missouri Health & Educational Facilities Authority,
10,000 Sisters of Mercy Health System, St Louis Inc Ser 1989 A, 5.20% due 1/5/95 5.20 10,000,000
9,500 St Anthony's Medical Center Ser 1989 C, 5.55% due 1/3/95 ................. 5.55 9,500,000
NEBRASKA
7,600 Nebraska Higher Education Loan Program Inc, 1985 Ser A (MBIA Insured),
5.45% due 1/4/95 ........................................................ 5.45 7,600,000
NEVADA
6,000 Clark County, Airport System Refg Ser 1993 A (MBIA Insured), 4.95% due
1/4/95 .................................................................. 4.95 6,000,000

<PAGE>

PRINCIPAL
AMOUNT (IN CURRENT
THOUSANDS) YIELD VALUE
- ----------- -------------------------------------------------------------------------- ------------ --------------
NEW JERSEY
$ 4,000 Gloucester County, Mobil Oil Refining Corp Ser 1993 A, 5.00% due 1/4/95 .. 5.00% $ 4,000,000
NEW YORK
2,000 New York Local Government Assistance Corporation, Ser 1993 A, 5.10% due
1/4/95 .................................................................. 5.10 2,000,000
NORTH CAROLINA
North Carolina Medical Care Commission,
10,000 Baptist Hospitals Ser 1992 B, 5.45% due 1/5/95 ........................... 5.45 10,000,000
5,000 Duke University Hospital Ser 1985 B, 5.45% due 1/5/95 .................... 5.45 5,000,000
OHIO
2,250 The Ohio State University, General Receipts Ser 1992 B, 5.40% due 1/5/95 . 5.40 2,250,000
OKLAHOMA
4,500 Oklahoma Water Resources Board, State Loan Prog Ser 1992 A, 3.85% due
3/1/95 .................................................................. 3.85 4,500,000
PENNSYLVANIA
10,000 Emmaus General Authority, Local Govt Ser 1989 F, 5.70% due 1/4/95 ........ 5.70 10,000,000
RHODE ISLAND
5,000 Rhode Island Industrial Facilities Corporation, Handy & Harman Electrical
Materials Corp Ser 1984, 4.40% due 1/5/95 ............................... 4.40 5,000,000
TEXAS
3,500 Angelina & Neches River Authority, TEEC Inc Ser 1984 D, 6.00% due 1/3/95 . 6.00 3,500,000
Harris County Health Facilities Development Corporation,
13,900 Memorial Hospital System Ser 1994, 5.45% due 1/4/95 ...................... 5.45 13,900,000
9,700 Methodist Hospital Ser 1994, 5.85% due 1/3/95 ............................ 5.85 9,700,000
5,000 Lower Neches Valley Authority, Chevron USA Inc Ser 1987, 3.50% due 2/15/95 3.50 5,000,000
UTAH
10,000 Intermountain Power Agency, Ser 1985 E, 3.75% due 3/15/95 ................. 3.75 10,000,000
2,900 Utah Housing Finance Agency, Single Family Mortgage 1994 Ser 1, 5.70% due
1/4/95 .................................................................. 5.70 2,900,000
VIRGINIA
10,000 Virginia Housing Development Authority, Ser 1993 A, 4.25% due 7/12/95 .... 4.25 10,000,000
WEST VIRGINIA
9,375 Kanawha County Building Commission, Charleston Area Medical Center Refg
1989 Ser B, 5.60% due 1/4/95 ............................................ 5.60 9,375,000
5,000 Pleasants County Commission, American Cyanamid Co Ser 1985, 5.80% due
1/4/95 .................................................................. 5.80 5,000,000

<PAGE>

PRINCIPAL
AMOUNT (IN CURRENT
THOUSANDS) YIELD VALUE
- ----------- -------------------------------------------------------------------------- ------------ --------------
WISCONSIN
$10,000 Wisconsin Health Facilities Authority, Franciscan Health Care Inc Ser 1985
A-1, 5.40% due 1/4/95 ................................................... 5.40 % $ 10,000,000
WYOMING
3,000 Platte County, Tri-State Generation and Transmission Ser 1984 A, 6.00% due
1/3/95 .................................................................. 6.00 3,000,000
--------------
TOTAL SHORT-TERM VARIABLE RATE MUNICIPAL OBLIGATIONS (AMORTIZED COST
$412,290,000) ........................................................... 412,290,000
--------------
Yield to
Maturity on
Date of
Purchase
------------
TAX-EXEMPT COMMERCIAL PAPER (11.2%)
COLORADO
10,000 Platte River Authority, Electric Subordinate Lien Ser S-1, 3.50% due
2/14/95 ................................................................. 3.50 10,000,000
FLORIDA
8,000 Jacksonville Electric Authority, 4.20% due 3/13/95 ........................ 4.20 8,000,000
GEORGIA
3,900 Burke County Development Authority, Oglethorpe Power Corp Ser 1992 A,
3.80% due 2/7/95 ........................................................ 3.80 3,900,000
LOUISIANA
12,000 St James Parish, Texaco Inc Ser 1988 B, 3.95% due 2/9/95 .................. 3.95 12,000,000
MICHIGAN
10,000 Michigan Building Authority, Ser 1, 3.80% due 1/26/95 ..................... 3.80 10,000,000
NEW YORK
5,000 New York City Municipal Water Finance Authority, Ser 1994, 3.75% due
2/8/95 .................................................................. 3.75 5,000,000
TEXAS
2,950 Brazos River Harbor Navigation District, Dow Chemical Co Ser 1990, 3.65%
due 2/8/95 .............................................................. 3.65 2,950,000
Lower Colorado River Authority, Ser C
5,000 3.40% due 2/23/95 ........................................................ 3.40 5,000,000
4,000 3.60% due 2/24/95 ........................................................ 3.60 4,000,000
--------------
TOTAL TAX-EXEMPT COMMERCIAL PAPER (AMORTIZED COST $60,850,000) ........... 60,850,000
--------------
SHORT-TERM MUNICIPAL NOTES (11.6%)
CALIFORNIA
8,000 Alameda County, 1994-95 TRANs, dtd 7/21/94 4.75% due 8/11/95 ............. 4.20 8,025,651
</TABLE>

<PAGE>

DEAN WITTER TAX-FREE DAILY INCOME TRUST
PORTFOLIO OF INVESTMENTS December 31, 1994 (continued)
- -----------------------------------------------------------------------------

<TABLE>
<CAPTION>
YIELD TO
PRINCIPAL MATURITY ON
AMOUNT (IN DATE OF
THOUSANDS) PURCHASE VALUE
- ----------- ----------------------------------------------------------------------- ------------ -------------
<S> <C> <C> <C>
$ 5,000 California School Cash Reserve Program Authority, 1994 Contingency Ser
A, dtd 7/5/94 4.50% due 6/28/95 ...................................... 3.85% $ 5,015,350
10,000 California Statewide Communities Development Authority, 1994 Ser A
TRANs, dtd 7/6/94 4.50% due 7/17/95 .................................. 3.65 10,044,445
7,000 Los Angeles County, Local Educational Agencies Pooled 1994-95 Ser A
TRANs, dtd 7/7/94 4.50% due 7/6/95 ................................... 3.75 7,025,892
ILLINOIS
10,000 Illinois GO Certificates Ser 1994, dtd 8/24/94 4.75% due 5/15/95 ...... 3.97 10,028,074
INDIANA
5,000 Indiana Bond Bank Advance Funding Notes Ser 1994 A-2, dtd 1/18/94 3.03%
due 1/17/95 .......................................................... 2.75 5,000,633
7,225 Indianapolis Local Public Improvement Bond Bank Notes, dtd 12/21/94
5.25% due 7/14/95 .................................................... 4.85 7,239,982
IOWA
10,750 Iowa School Corporations, Warrant Certificates Ser A 1994 (CGIC), dtd
6/29/94 4.25% due 7/17/95 ............................................ 3.60 10,786,512
-------------
TOTAL SHORT-TERM MUNICIPAL NOTES (AMORTIZED COST $63,166,539) ......... 63,166,539
-------------
TOTAL INVESTMENTS (AMORTIZED COST $536,306,539) (A) .................... 98.7 % 536,306,539
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES ......................... 1.3 7,276,144
------------ -------------
NET ASSETS ............................................................. 100.0 % $543,582,683
============ =============
</TABLE>
- ---------------
BANs Bond Anticipation Notes.
COPs Certificates of Participation.
TRANs Tax and Revenue Anticipation Notes.
* The due date reflects the next rate change.
(a) Cost is the same for federal income tax purposes.

See Notes to Financial Statements

<PAGE>

DEAN WITTER TAX-FREE DAILY INCOME TRUST
REPORT OF INDEPENDENT ACCOUNTANTS
- -----------------------------------------------------------------------------

To the Shareholders and Trustees of Dean Witter Tax-Free Daily Income Trust

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
(appearing in the "Financial Highlights" table on page 4 of this Prospectus)
present fairly, in all material respects, the financial position of Dean
Witter Tax-Free Daily Income Trust (the "Fund") at December 31, 1994, the
results of its operations for the year then ended, the changes in its net
assets for each of the two years in the period then ended and the financial
highlights for each of the 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 owned at
December 31, 1994 by correspondence with the custodian, provide a reasonable
basis for the opinion expressed above.

PRICE WATERHOUSE LLP
New York, New York
February 13, 1995

1994 FEDERAL TAX NOTICE (unaudited)

During the year ended December 31, 1994, the Fund paid to the shareholders
$0.022246 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.

<PAGE>

2 1 0 -

for office use only

Dean Witter
Tax-Free Daily
Income Trust

APPLICATION

DEAN WITTER TAX-FREE DAILY INCOME TRUST

Send to: Dean Witter Trust Company (the "Transfer Agent"), P.O. Box 1040,
Jersey City, NJ 07303
- -----------------------------------------------------------------------------
INSTRUCTIONS For assistance in completing this application, telephone Dean
Witter Trust Company at (800) 526-3142 (Toll-Free).
- -----------------------------------------------------------------------------
TO REGISTER
SHARES
(please print)
1. First NameLast Name - As joint tenants,
use line 1 & 2
2. First Name Last Name
(Joint tenants with rights of survivorship unless otherwise specified)
Social Security Number
- -As custodian
for a minor,
use lines 1 & 3
3. Minor's Name
Minor's Social Security Number
Under the Uniform Gifts to Minors Act
State of Residence of Minor
- -In the name of a
corporation,
trust,
partnership
or other
institutional
investors,
use line 4
4. Name of Corporation, Trust (including trustee name(s)) or Other Organization

Tax Identification Number
If Trust, Date of Trust Instrument:
- -----------------------------------------------------------------------------

ADDRESS

City State Zip Code
- -----------------------------------------------------------------------------
TO PURCHASE
SHARES:
Minimum Initial
Investment:
$5,000
[ ] CHECK (enclosed) $ (Make Payable to Dean Witter Tax-Free Daily
Income Trust)
[ ] WIRE* On ______ MF* ______
(Date)(Control number, this transaction)
Name of Bank Branch
Address
Telephone Number
* For an initial investment made by wiring funds, obtain a control number by
calling: (800) 526-3143 (Toll Free)
Your bank should wire to:
Bank of New York for credit to account of Dean Witter Trust Company
Account Number: 8900188413
Re: Dean Witter Tax-Free Daily Income Trust
Account Of:
(Investor's Account as Registered at the Transfer Agent)
Control or Account Number:
(Assigned by Telephone)
- -----------------------------------------------------------------------------

OPTIONAL SERVICES

- -----------------------------------------------------------------------------
NOTE: If you are a current shareholder of Dean Witter Tax-Free Daily Income
Trust, please indicate your fund account number here.
210-
- -----------------------------------------------------------------------------
DIVIDENDS All dividends will be reinvested daily in additional shares, unless

<PAGE>

the following option is selected:
[ ] Pay income dividends by check at the end of each month.
- -----------------------------------------------------------------------------
WRITE YOUR
OWN
CHECK [ ] Send an initial supply of checks.
FOR JOINT ACCOUNTS:
[ ] Check this box if all owners are required to sign checks.
- -----------------------------------------------------------------------------
SYSTEMATIC
WITHDRAWAL
PLAN
Minimum
Account Value:
$5,000 [ ] Systematic Withdrawal Plan ($25 minimum)
[ ] Percentage of
balance (annualized basis)
$ [ ] Monthly or [ ] Quarterly% [ ] Monthly [ ] Quarterly
[ ] 10th or [ ] 25th of Month/Quarter [ ] 10th or [ ] 25th of Month/Quarter
[ ] Pay shareholder(s) at address of record.
[ ] Pay to the following: (If this payment option is selected a signature
guarantee is required)
Name
Address
City State Zip Code

<PAGE>

- -----------------------------------------------------------------------------
PAYMENT TO
PREDESIGNATED
BANK ACCOUNT
Bank Account must be in
same name as shares are
registered
Minimum Amount:
$1,000 [ ]Dean Witter Trust Company is hereby authorized to honor telephonic
or other instructions, without signature guarantee, from any person for the
redemption of any or all shares of Dean Witter Tax-Free Daily Income Trust
held in my (our) account provided that proceeds are transmitted only to the
following bank account. (Absent its own negligence, neither Dean Witter
Tax-Free Daily Income Trust nor Dean Witter Trust Company (the "Transfer
Agent") shall be liable for any redemption caused by unauthorized
instruction(s)):
Name & Bank Account Number Bank's Routing Transmit Code
(Ask Your Bank)
Name of Bank
( )
Telephone Number of Bank
- -----------------------------------------------------------------------------

SIGNATURE AUTHORIZATION

- -----------------------------------------------------------------------------
FOR ALL ACCOUNTS NOTE:
RETAIN A COPY OF THIS DOCUMENT FOR YOUR RECORDS. ANY MODIFICATION OF THE
INFORMATION BELOW WILL REQUIRE AN AMENDMENT TO THIS FORM. THIS DOCUMENT IS IN
FULL FORCE AND EFFECT UNTIL ANOTHER DULY EXECUTED FORM IS RECEIVED BY THE
TRANSFER AGENT.
The "Transfer Agent" is hereby authorized to act as agent for the registered
owner of shares of Dean Witter Tax-Free Daily Income Trust (the "Fund") in
effecting redemptions of shares and is authorized to recognize the
signature(s) below in payment of funds resulting from such redemptions on
behalf of the registered owners of such shares. The Transfer Agent shall be
liable only for its own negligence and not for default or negligence of its
correspondents, or for losses in transit. The Fund shall not be liable for
any default or negligence of the Transfer Agent.
I (we) certify to my (our) legal capacity, or the capacity of the investor
named above, to invest in and redeem shares of, and I (we) acknowledge
receipt of a current prospectus of Dean Witter Tax-Free Daily Income Trust
and (we) further certify my (our) authority to sign and act for and on behalf
of the investor.
Under penalties of perjury, I certify (1) that the number shown on this form
is my correct taxpayer identification number and (2) that I am not subject to
backup withholding either because I have not been notified that I am subject
to backup withholding as a result of a failure to report all interest or
dividends, or the Internal Revenue Service has notified me that I am no
longer subject to backup withholding. (Note: You must cross out item (2)
above if you have been notified by IRS that you are currently subject to
backup withholding because of underreporting interest or dividends on your
tax return.)
For Individual, Joint and Custodial Accounts for Minors, Check Applicable
Box:
I am a United States Citizen. [ ] I am not a United States Citizen.
Name(s) must be signed ex-
actly the same as shown on
lines 1 to 4 on the reverse
side of this application
SIGNATURE(S) (IF JOINT TENANTS, ALL MUST SIGN)
SIGNED THIS DAY OF , 19.
FOR CORPORATIONS, TRUSTS, PARTNERSHIPS AND OTHER ORGANIZATIONS
The following named persons are currently officers/trustees/general
partners/other authorized signatories of the Registered Owner, and any * of
them ("Authorized Person(s)") is/are currently authorized under the
applicable governing document to act with full power to sell, assign or
transfer securities of the Fund for the Registered Owner and to execute and
deliver any instrument necessary to effectuate the authority hereby
conferred:
In addition, complete
Section A or B below.
NAME/TITLE SIGNATURE
SIGNED THIS DAY OF , 19.
The Transfer Agent may, without inquiry, act only upon the instruction of ANY
PERSON(S) purporting to be (an) Authorized Person(s) as named in the
Certification Form last received by the Transfer Agent. The Transfer Agent
and the Fund shall not be liable for any claims, expenses (including legal
fees) or losses resulting from the Transfer Agent having acted upon any
instruction reasonably believed genuine.
*INSERT A NUMBER. UNLESS OTHERWISE INDICATED, THE TRANSFER AGENT MAY HONOR
INSTRUCTIONS OF ANY ONE OF THE PERSONS NAMED ABOVE.
- -----------------------------------------------------------------------------

<PAGE>

SECTION [A]
CORPORATIONS AND
INCORPORATED
ASSOCIATIONS ONLY.
SIGN ABOVE AND
COMPLETE THIS
SECTION
SIGNATURE
GUARANTEE**
(or Corporate Seal)
SIGNATURE
GUARANTEE**
(or Corporate Seal)
NOTE: EITHER A SIGNATURE GUARANTEE OR CORPORATE SEAL IS REQUIRED.
I, , Secretary of the Registered Owner, do hereby certify that at a
meeting on at which a quorum was present throughout, the Board of Directors of
the corporation/the officers of the association duly adopted a resolution, which
is in full force and effect and in accordance with the Registered Owner's
charter and by-laws, which resolution did the following: (1) empowered the
above-named Authorized Person(s) to effect securities transactions for the
Registered Owner on the terms described above; (2) authorized the Secretary
to certify, from time to time, the names and titles of the officers of the
Registered Owner and to notify the Transfer Agent when changes in office
occur; and (3) authorized the Secretary to certify that such a resolution has
been duly adopted and will remain in full force and effect until the Transfer
Agent receives a duly executed amendment to the Certification Form.
Witness my hand on behalf of the corporation/association this day of , 19 .
Secretary**
The undersigned officer (other than the Secretary) hereby certifies that the
foregoing instrument has been signed by the Secretary of the
corporation/association.
Certifying Officer of the Corporation or Incorporated Association**
- -----------------------------------------------------------------------------
SECTION [B]
ALL OTHER
INSTITUTIONAL
INVESTORS
SIGNATURE
GUARANTEE**
SIGN ABOVE AND
COMPLETE THIS
SECTION
NOTE: A SIGNATURE GUARANTEE IS REQUIRED.
Certifying
Trustee(s)/General Partner(s)Other(s)**
Certifying
Trustee(s)/General Partner(s)/Other(s)**
- -----------------------------------------------------------------------------
**SIGNATURE(S) MUST BE GUARANTEED BY AN ELIGIBLE GUARANTOR
- -----------------------------------------------------------------------------
DEALER
(if any)
Completion by dealer
only
Above signature(s) guaranteed. Prospectus has been delivered by
undersigned to above-named applicant(s).
Firm Name
Address
City, State, Zip Code
Office Number-Account Number at Dealer-A/E Number
Account Executive's Last Name
Branch Office
* 1994 Dean Witter Distributors Inc.

<PAGE>

THE DEAN WITTER FAMILY OF FUNDS

MONEY MARKET FUNDS
Dean Witter Liquid Asset Fund Inc.
Dean Witter Tax-Free Daily Income Trust
Dean Witter U.S. Government Money Market Trust
Dean Witter California Tax-Free Daily Income Trust
Dean Witter New York Municipal Money Market Trust

EQUITY FUNDS
Dean Witter American Value Fund
Dean Witter Natural Resource Development Securities Inc.
Dean Witter Dividend Growth Securities Inc.
Dean Witter Developing Growth Securities Trust
Dean Witter World Wide Investment Trust
Dean Witter Value-Added Market Series
Dean Witter Utilities Fund
Dean Witter Capital Growth Securities
Dean Witter European Growth Fund Inc.
Dean Witter Precious Metals and Minerals Trust
Dean Witter Pacific Growth Fund Inc.
Dean Witter Health Sciences Trust
Dean Witter Global Dividend Growth Securities
Dean Witter Global Utilities Fund
Dean Witter International SmallCap Fund
Dean Witter Mid-Cap Growth Fund

FIXED-INCOME FUNDS
Dean Witter High Yield Securities Inc.
Dean Witter Tax-Exempt Securities Trust
Dean Witter U.S. Government Securities Trust
Dean Witter Federal Securities Trust
Dean Witter Convertible Securities Trust
Dean Witter California Tax-Free Income Fund
Dean Witter New York Tax-Free Income Fund
Dean Witter World Wide Income Trust
Dean Witter Intermediate Income Securities
Dean Witter Global Short-Term Income Fund Inc.
Dean Witter Multi-State Municipal Series Trust
Dean Witter Premier Income Trust
Dean Witter Short-Term U.S. Treasury Trust
Dean Witter Diversified Income Trust
Dean Witter Limited Term Municipal Trust
Dean Witter Short-Term Bond Fund
Dean Witter High Income Securities
Dean Witter National Municipal Trust

DEAN WITTER RETIREMENT SERIES
Liquid Asset Series
U.S. Government Money Market Series
U.S. Government Securities Series
Intermediate Income Securities Series
American Value Series
Capital Growth Series
Dividend Growth Series
Strategist Series
Utilities Series
Value-Added Market Series
Global Equity Series

ASSET ALLOCATION FUNDS
Dean Witter Managed Assets Trust
Dean Witter Strategist Fund
Dean Witter Global Asset Allocation Fund

ACTIVE ASSETS ACCOUNT PROGRAM
Active Assets Money Trust
Active Assets Tax-Free Trust
Active Assets California Tax-Free Trust
Active Assets Government Securities Trust

<PAGE>

Dean Witter
Tax-Free Daily Income Trust
Two World Trade Center
New York, New York 10048

TRUSTEES
Jack F. Bennett
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

Katherine H. Stromberg
Vice President

Thomas F. Caloia
Treasurer

CUSTODIAN
The Bank of New York
90 Washington Street
New York, New York 10286

TRANSFER AGENT AND
DIVIDEND DISBURSING 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.

Dean Witter
Tax-Free Daily
Income Trust

Prospectus February , 1995

<PAGE>

STATEMENT OF ADDITIONAL INFORMATION
FEBRUARY 24, 1995
DEAN WITTER
TAX-FREE DAILY
INCOME TRUST
- -----------------------------------------------------------------------------

Dean Witter Tax-Free Daily Income Trust (the "Fund") is an open-end,
diversified management investment company whose investment objective is to
provide as high a level of daily income exempt from federal income tax as is
consistent with stability of principal and liquidity. The Fund seeks to
achieve its objective by investing primarily in high quality tax-exempt
securities with short-term maturities, including Municipal Bonds, Municipal
Notes and Municipal Commercial Paper. (See "Investment Practices and
Policies".)

The Fund is authorized to reimburse specific expenses incurred in
promoting the distribution of the Fund's shares pursuant to a Plan of
Distribution pursuant to Rule 12b-1 under the Investment Company Act of 1940
(the "Act"). Reimbursement may in no event exceed an amount equal to payments
at the annual rate of 0.15% of the average daily net assets of the Fund.

A Prospectus for the Fund dated February 24, 1995, which provides the
basic information you should know before investing in the Fund, may be
obtained without charge by request of the Fund at its address or at the
telephone number listed below. This Statement of Additional Information
contains information in addition to and more detailed than that set forth in
the Prospectus. It is intended to provide additional information regarding
the activities and operations of the Fund, and should be read in conjunction
with the Prospectus.

Dean Witter Tax-Free Daily Income Trust
Two World Trade Center
New York, New York 10048
(800) 869-FUND (toll-free)

<PAGE>

TABLE OF CONTENTS
- -----------------------------------------------------------------------------

<TABLE>
<CAPTION>
<S> <C>
The Fund and its Management ......... 3
Trustees and Officers ............... 6

Investment Practices and Policies .. 13
Investment Restrictions ............. 16
Portfolio Transactions and Brokerage 17
Purchase of Fund Shares ............. 19
How Net Asset Value is Determined .. 24
Redemption of Fund Shares ........... 27
Dividends, Distributions and Taxes . 28
Description of Shares ............... 30
Custodian and Transfer Agent ....... 30
Reports to Shareholders ............. 31
Independent Accountants ............. 31
Legal Counsel ....................... 31
Experts ............................. 31
Registration Statement .............. 31
Financial Statements ................ 31
Appendix ............................ 32
</TABLE>

<PAGE>

THE FUND AND ITS MANAGEMENT
- -----------------------------------------------------------------------------

THE FUND

The Fund was incorporated in the state of Maryland on March 24, 1980 under
the name InterCapital Reserve Cash Management Inc. From May 19, 1980 to
August 15, 1980, the Fund was engaged in operations as a publicly held,
open-end investment company of the type commonly known as a money market
fund. On August 15, 1980, the Fund terminated its operations as a money
market fund in response to changes in regulations promulgated by the Federal
Reserve Board. At that time, substantially all of the Fund's assets were
transferred to lnterCapital Liquid Asset Fund Inc., another money market
fund, as part of an offer of exchange made to the Fund's shareholders. On
October 13, 1980 the Fund's sole remaining shareholder, Dean Witter Reynolds
InterCapital Inc. ("InterCapital"), approved a change in the Fund's name to
lnterCapital Tax-Free Daily Income Fund Inc. and an amendment to the Fund's
investment objective and fundamental investment policies to those set forth
in the Prospectus and this Statement of Additional Information. The Fund
offered its shares for sale to the public, commencing on February 20, 1981.
On March 21, 1983 the Fund's name was changed to Dean Witter/Sears Tax-Free
Daily Income Fund Inc. On April 30, 1987, the Fund reorganized as a
Massachusetts business trust with the name Dean Witter/Sears Tax-Free Daily
Income Trust. On February 19, 1993, the Fund's name was changed to its
current name, Dean Witter Tax-Free Daily Income Trust.

As of December 31, 1994 no shareholder was known to own beneficially or of
record as much as 5% of the outstanding shares of the Fund. The percentage of
ownership of shares of the Fund changes from time to time depending on
purchases and redemptions by shareholders and the total number of shares
outstanding.

THE INVESTMENT MANAGER

Dean Witter InterCapital Inc., a Delaware corporation (the "Investment
Manager" or "InterCapital"), whose address is Two World Trade Center, New
York, New York 10048, is the Fund's Investment Manager. InterCapital is a
wholly-owned subsidiary of Dean Witter, Discover & Co. ("DWDC"), a Delaware
corporation. In an internal reorganization which took place in January, 1993,
InterCapital assumed the investment advisory, administrative and management
activities previously performed by the InterCapital Division of Dean Witter
Reynolds Inc. ("DWR"), a broker-dealer affiliate of InterCapital. (As
hereinafter used in this Statement of Additional Information, the terms
"InterCapital" and "Investment Manager" refer to DWR's InterCapital Division
prior to the internal reorganization and to Dean Witter InterCapital Inc.
thereafter.) The daily management of the Fund and research relating to the
Fund's portfolio is conducted by or under the direction of officers of the
Fund and of the Investment Manager, subject to review of investments by the
Fund's Board of Trustees. In addition, Trustees of the Fund provide guidance
on economic factors and interest rate trends. Information as to these
Trustees and Officers is contained under the caption "Trustees and Officers."

InterCapital is also the investment manager or investment adviser of the
following investment companies: Dean Witter Liquid Asset Fund Inc.,
InterCapital Income Securities Inc., Dean Witter High Yield Securities Inc.,
Dean Witter Tax-Exempt Securities Trust, Dean Witter Developing Growth
Securities Trust, Dean Witter American Value Fund, Dean Witter Dividend
Growth Securities Inc., Dean Witter Natural Resource Development Securities
Inc., Dean Witter U.S. Government Money Market Trust, Dean Witter California
Tax-Free Income Fund, Dean Witter Variable Investment Series, Dean Witter
Select Dimensions Investment Series, Dean Witter World Wide Investment Trust,
Dean Witter Select Municipal Reinvestment Fund, Dean Witter U.S. Government
Securities Trust, Dean Witter New York Tax-Free Income Fund, Dean Witter
Convertible Securities Trust, Dean Witter Federal Securities Trust, Dean
Witter Value-Added Market Series, High Income Advantage Trust, High Income
Advantage Trust II, High Income Advantage Trust III, Dean Witter Government
Income Trust, Dean Witter California Tax-Free Daily Income Trust, Dean Witter
Utilities Fund, Dean Witter Managed Assets Trust, Dean Witter Strategist
Fund, Dean Witter World Wide Income Trust, Dean Witter Intermediate Income
Securities, Dean Witter Capital Growth Securities, Dean Witter European
Growth Fund Inc., Dean Witter Pacific

<PAGE>

Growth Fund Inc., Dean Witter Precious Metals and Minerals Trust, Dean Witter
Global Short-Term Income Fund Inc., Dean Witter Multi-State Municipal Series
Trust, Dean Witter New York Municipal Money Market Trust, InterCapital
Quality Municipal Investment Trust, Dean Witter Premier Income Trust, Dean
Witter Short-Term U.S. Treasury Trust, InterCapital Insured Municipal Bond
Trust, InterCapital Insured Municipal Trust, InterCapital Quality Municipal
Income Trust, Dean Witter Diversified Income Trust, Dean Witter Health
Sciences Trust, Dean Witter Retirement Series, InterCapital Quality Municipal
Securities, InterCapital California Quality Municipal Securities,
InterCapital New York Quality Municipal Securities, Dean Witter Global
Dividend Growth Securities, Dean Witter Limited Term Municipal Trust, Dean
Witter Short-Term Bond Fund, Dean Witter Global Utilities Fund, Dean Witter
National Municipal Trust, Dean Witter High Income Securities, Dean Witter
International SmallCap Fund, Dean Witter Mid-Cap Growth Fund, Dean Witter
Global Asset Allocation Fund, InterCapital Insured Municipal Securities,
InterCapital Insured California Municipal Securities, InterCapital Insured
Municipal Income Trust, InterCapital California Insured Municipal Income
Trust, Active Assets Money Trust, Active Assets California Tax-Free Trust,
Active Assets Tax-Free Trust, Active Assets Government Securities Trust,
Municipal Income Trust, Municipal Income Trust II, Municipal Income Trust
III, Municipal Income Opportunities Trust, Municipal Income Opportunities
Trust II, Municipal Income Opportunities Trust III, Municipal Premium Income
Trust and Prime Income Trust. The foregoing investment companies, together
with the Fund, are collectively referred to as the Dean Witter Funds.

In addition, Dean Witter Services Company Inc. ("DWSC"), a wholly-owned
subsidiary of InterCapital, serves as manager for the following companies for
which TCW Funds Management, Inc. is the investment adviser: TCW/DW Core
Equity Trust, TCW/DW North American Government Income Trust, TCW/DW Latin
American Growth Fund, TCW/DW Income and Growth Fund, TCW/DW Small Cap Growth
Fund, TCW/DW Balanced Fund, TCW/DW Term Trust 2000, TCW/DW Term Trust 2002,
TCW/DW Term Trust 2003, TCW/DW North American Intermediate Income Trust,
TCW/DW Emerging Markets Opportunities Trust, TCW/DW Global Convertible Trust
and TCW/DW Total Return Trust (the "TCW/DW Funds"). InterCapital also serves
as: (i) sub-adviser to Templeton Global Opportunities Trust, an open-end
investment company; (ii) administrator of The BlackRock Strategic Term Trust
Inc., a closed-end investment company; and (iii) sub-administrator of
MassMutual Participation Investors and Templeton Global Governments Income
Trust, closed-end investment companies.

The Investment Manager also serves as an investment adviser for Dean
Witter World Wide Investment Fund, an investment company organized under the
laws of Luxembourg, shares of which are not available for purchase in the
United States or by American citizens outside the United States.

Pursuant to an Investment Management Agreement (the "Agreement") with the
Investment Manager, the Fund has retained the Investment Manager to manage
the investment of the Fund's assets, including the placing of orders for the
purchase and sale of portfolio securities. The Investment Manager obtains and
evaluates such information and advice relating to the economy, securities
markets, and specific securities as it considers necessary or useful to
continuously manage the assets of the Fund in a manner consistent with its
investment objective and policies.

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 expense, such office space, facilities,
equipment, clerical help, bookkeeping and certain legal services as the Fund
may reasonably require in the conduct of its business, including the
preparation of prospectuses, proxy statements and reports required to be
filed with federal and state securities commissions (except insofar as the
participation or assistance of independent accountants and attorneys is, in
the opinion of the Investment Manager, necessary or desirable). In addition,
the Investment Manager 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 service, heat, light, power and
other utilities provided to the Fund and the cost of printing (in excess of
costs borne by the Fund) and distributing prospectuses and supplements
thereto of the Fund used for sales purposes.

Effective December 31, 1993, pursuant to a Services Agreement between
InterCapital and DWSC, DWSC began to provide the administrative services to
the Fund which were previously performed

<PAGE>

directly by InterCapital. The foregoing internal reorganization did not
result in any change in the nature or scope of the administrative services
being provided to the Fund or any of the fees being paid by the Fund for the
overall services being performed under the terms of the existing Management
Agreement.

Expenses not expressly assumed by the Investment Manager under the
Agreement or by the Distributor of the Fund's shares, Dean Witter
Distributors Inc. ("Distributors" or the "Distributor"), (see "Purchase of
Fund Shares") will be paid by the Fund. The expenses borne by the Fund
include, but are not limited to: the distribution fee under the Plan pursuant
to Rule 12b-1 (see "Purchase of Fund Shares"); charges and expenses of any
registrar, custodian and stock transfer and dividend disbursing agent;
brokerage commissions; taxes; engraving and printing of share certificates,
registration costs of the Fund and its shares under federal and state
securities laws; the cost and expense of printing, including typesetting, and
distributing prospectuses of the Fund and supplements thereto to the Fund's
shareholders; all expenses of shareholders' and Trustees meetings and of
preparing, printing, including typesetting, and mailing of proxy statements
and reports to shareholders; fees and travel expenses of Trustees or members
of any advisory board or committee who are not employees of the Investment
Manager or any corporate affiliate of the Investment Manager; all expenses
incident to any dividend, distribution, withdrawal or redemption options;
charges and expenses of any outside service used for pricing of the Fund's
shares; fees and expenses of legal counsel, including counsel to the Trustees
who are not interested persons of the Fund or of the Investment Manager (not
including compensation or expenses of attorneys who are employees of the
Investment Manager) and independent accountants; membership dues of Industry
associations; interest on Fund borrowings; postage; insurance premiums on
property or personnel (including officers and Trustees) of the Fund which
inure to its benefit; extraordinary expenses (including, but not limited to,
legal claims and liabilities and litigation costs and any indemnification
relating thereto); and all other costs of the Fund's operation.

As full compensation for the services and facilities furnished to the Fund
and expenses of the Fund assumed by the Investment Manager, the Fund pays the
Investment Manager monthly compensation calculated daily by applying the
following annual rates to the net assets of the Fund, determined as of the
close of each business day: 0.50% of the portion of the daily net assets not
exceeding $500 million; 0.425% of the portion of the daily net assets
exceeding $500 million but not exceeding $750 million; 0.375% of the portion
of the daily net assets exceeding $750 million but not exceeding $1 billion;
0.35% of the portion of the daily net assets exceeding $1 billion but not
exceeding $1.5 billion; 0.325% of the portion of the daily net assets
exceeding $1.5 billion but not exceeding $2 billion; 0.30% of the portion of
the daily net assets exceeding $2 billion but not exceeding $2.5 billion;
0.275% of the portion of the daily net assets exceeding $2.5 billion but not
exceeding $3 billion; and 0.25% of the portion of the daily net assets
exceeding $3 billion. For the fiscal years ended December 31, 1992, December
31, 1993 and December 31, 1994, the Fund accrued to the Investment Manager
total compensation of $3,637,722, $3,143,839 and $2,964,072, respectively.

Pursuant to the Agreement, total operating expenses of the Fund are
subject to applicable limitations under rules and regulations of states where
the Fund is authorized to sell its shares. Therefore, operating expenses are
effectively subject to the most restrictive of such limitations as the same
may be amended from time to time. Presently, the most restrictive limitation
is as follows: If, in any fiscal year, the Fund's total operating expenses,
including the investment management fee and the compensation paid to the
Investment Manager pursuant to the Plan and Agreement of Distribution
described below, and exclusive of taxes, interest, brokerage fees and
extraordinary expenses (to the extent permitted by applicable state
securities laws and regulations), exceed 2.5% of the first $30,000,000 of the
average daily net assets, 2% of the next $70,000,000 of average daily net
assets and 1.5% of any excess over $100,000,000, the Investment Manager will
reimburse the Fund for the amount of such excess. Such amount, if any, will
be calculated daily and credited on a monthly basis. During the fiscal years
ended December 31, 1992, 1993 and 1994, the Fund's expenses did not exceed
such expense limitation.

The Agreement provides that in the absence of willful misfeasance, bad
faith, gross negligence or reckless disregard of its obligations thereunder,
the Investment Manager is not liable to the Fund or any of its investors for
any act or omission by the Investment Manager or for any losses sustained by
the Fund or its investors. The Agreement in no way restricts the Investment
Manager from acting as investment manager or adviser to others.

<PAGE>

The Agreement was initially approved by the Trustees on October 22, 1992,
and by the shareholders of the Fund at a Special Meeting of Shareholders held
on January 12, 1993. The Agreement is substantially identical to two prior
investment management agreements; one which was initially approved by the
Board of Trustees on April 15, 1987 and by the shareholders, in connection
with the reorganization of the Fund as a Massachusetts business trust, on
April 21, 1987 and the other which was initially approved in 1983 and which
was in effect up to the reorganization of the Fund in 1987 as a Massachusetts
business trust. The Agreement may be terminated at any time, without penalty,
on thirty days notice, by the Board of Trustees of the Fund, by the holders
of a majority, as defined in the Investment Company Act of 1940, as amended
(the "Act"), of the outstanding shares of the Fund, or by the Investment
Manager. The Agreement took effect on June 30, 1993, upon the spin-off by
Sears, Roebuck and Co. of its remaining shares of DWDC.

Under its terms, the Agreement had an initial term ending April 30, 1994,
and provides that it will continue in effect from year to year thereafter,
provided continuance of the Agreement is approved at least annually by the
vote of the holders of a majority (as defined in the Act) of the outstanding
shares of the Fund, or by the Board of Trustees of the Fund; provided that in
either event such continuance is approved annually by the vote of a majority
of the Trustees of the Fund who are not parties to the Agreement or
"interested persons" (as defined in the Act) of any such party (the
"Independent Trustees"), which vote must be cast in person at a meeting
called for the purpose of voting on such approval. At its meeting held on
April 8, 1994, the Fund's Board of Trustees, including all of the Independent
Trustees, approved continuation of the Agreement until April 30, 1995.

The Fund has acknowledged that the name "Dean Witter" is a property right
of DWR. The Fund has agreed that DWR or its parent company may use, or at any
time, permit others to use, the name "Dean Witter". The Fund has also agreed
that in the event the Agreement is terminated, or if the affiliation between
InterCapital and its parent is terminated, the Fund will eliminate the name
"Dean Witter" from its name if DWR or its parent shall so request.

TRUSTEES AND OFFICERS
- -----------------------------------------------------------------------------

The Trustees and Executive Officers of the Fund, their principal business
occupations during the last five years and their affiliations, if any, with
InterCapital, and with the 74 Dean Witter Funds and the 13 TCW/DW Funds, are
shown below.

<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- -------------------------------------------- --------------------------------------------------------
<S> <C>
Jack F. Bennett (71) Retired; Director or Trustee of the Dean Witter Funds; formerly
Trustee Senior Vice President and Director of Exxon Corporation;
c/o Gordon Altman Butowsky (1975-January, 1989) and Under Secretary of the U.S. Treasury
Weitzen Shalov & Wein for Monetary Affairs (1974-1975); Director of Philips
Counsel to the Independent Trustees Electronics N.V., Tandem Computers Inc. and Massachusetts
114 West 47th Street New York, New York Mutual Insurance Company; director or trustee
of various not-for-profit and business organizations.

Michael Bozic (54) President and Chief Executive Officer of Hills Department
Trustee Stores (since May, 1991); formerly Chairman and Chief Executive
c/o Hills Stores Inc. Officer (January, 1987-August, 1990) and President and Chief
15 Dan Road Operating Officer (August, 1990-February, 1991) of the Sears
Canton, Massachusetts Merchandise Group of Sears, Roebuck and Co.; Director or Trustee
of the Dean Witter Funds; Director of Eaglemark Financial
Services, Inc., the United Negro College Fund and Domain Inc.
(home decor retailer).

<PAGE>

NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- -------------------------------------------- --------------------------------------------------------
Charles A. Fiumefreddo* (61) Chairman, Chief Executive Officer and Director of InterCapital,
Trustee, Chairman, President and Chief Distributors and DWSC; Executive Vice President and Director
Executive Officer of DWR; Chairman, Director or Trustee, President and Chief
Two World Trade Center Executive Officer of the Dean Witter Funds; Chairman, Chief
New York, New York Executive Officer and Trustee of the TCW/DW Funds; Chairman
and Director of Dean Witter Trust Company ("DWTC"); Director
and/or officer of various DWDC subsidiaries; formerly Executive
Vice President and Director of DWDC (until February, 1993).
Edwin J. Garn (62) Director or Trustee of the Dean Witter Funds; formerly United
Trustee States Senator (R-Utah) (1974-1992) and Chairman, Senate
c/o Huntsman Chemical Corporation Banking Committee (1980-1986); formerly Mayor of Salt Lake
2000 Eagle Gate Tower City, Utah (1971-1974); formerly Astronaut, Space Shuttle
Salt Lake City, Utah Discovery (April 12-19, 1985); Vice Chairman, Huntsman Chemical
Corporation (since January, 1993); Member of the board of
various civic and charitable organizations.
John R. Haire (70) Chairman of the Audit Committee and Chairman of the Committee
Trustee of Independent Directors or Trus- tees and Director or Trustee
Two World Trade Center of the Dean Witter Funds; Trustee of the TCW/DW Funds; formerly
New York, New York President, Council for Aid to Education (1978-October, 1989)
and Chairman and Chief Executive Officer of Anchor Corporation,
an Investment Adviser (1964-1978); Director of Washington
National Corporation (insurance).
Dr. Manuel H. Johnson (46) Senior Partner, Johnson Smick International, Inc., a consulting
Trustee firm; Koch Professor of International Economics and Director
c/o Johnson Smick International, Inc. of the Center for Global Market Studies at George Mason
1133 Connecticut Avenue, N.W. University (since September, 1990); Co-Chairman and a founder
Washington, D.C. of the Group of Seven Council (G7C), an international economic
commission (since September, 1990); Director or Trustee of
the Dean Witter Funds; Trustee of the TCW/DW Funds; Director
of Greenwich Capital Markets Inc. (broker-dealer); formerly
Vice Chairman of the Board of Governors of the Federal Reserve
System (February, 1986-August, 1990) and Assistant Secretary
of the U.S. Treasury (1982-1986).

<PAGE>

NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- -------------------------------------------- --------------------------------------------------------
Paul Kolton (71) Director or Trustee of the Dean Witter Funds; Chairman of
Trustee the Audit Committee and Chairman of the Committee of the
c/o Gordon Altman Butowsky Independent Trustees and Trustee of the TCW/DW Funds; formerly
Weitzen Shalov & Wein Chairman of the Financial Accounting Standards Advisory Council
Counsel to the Independent Trustees and Chairman and Chief Executive Officer of the American Stock
114 West 47th Street Exchange; Director of UCC Investors Holding Inc. (Uniroyal
New York, New York Chemical Company, Inc.); director or trustee of various
not-for-profit organizations.
Michael E. Nugent (58) General Partner, Triumph Capital, L.P., a private investment
Trustee partnership (since 1988); Director or Trustee of the Dean
c/o Triumph Capital, L.P. Witter Funds; Trustee of the TCW/DW Funds; formerly Vice
237 Park Avenue President, Bankers Trust Company and BT Capital Corporation
New York, New York (1984-1988); Director of various business organizations.
Philip J. Purcell* (51) Chairman of the Board of Directors and Chief Executive Officer
Trustee of DWDC, DWR and Novus Credit Services Inc.; Director of
Two World Trade Center InterCapital, DWSC and Distributors; Director or Trustee of
New York, New York the Dean Witter Funds; Director and/or officer of various
DWDC subsidiaries.
John L. Schroeder (64) Executive Vice President and Chief Investment Officer of the
Trustee Home Insurance Company (since August, 1991); Director or Trustee
c/o The Home Insurance Company of the Dean Witter Funds; Director of Citizens Utilities Company;
59 Maiden Lane formerly Chairman and Chief Investment Officer of Axe-Houghton
New York, New York Management and the Axe-Houghton Funds (April, 1983-June, 1991)
and President of USF&G Financial Services, Inc. (June,
1990-June, 1991).
Sheldon Curtis (63) Senior Vice President, Secretary and General Counsel of
Vice President, Secretary InterCapital and DWSC; Senior Vice President and Secretary
and General Counsel of DWTC; Senior Vice President, Assistant Secretary and
Two World Trade Center Assistant General Counsel of Distributors; Assistant Secretary
New York, New York of DWR; Vice President, Secretary and General Counsel of the
Dean Witter Funds and the TCW/DW Funds.

<PAGE>

NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- -------------------------------------------- --------------------------------------------------------
Katherine H. Stromberg (46) Vice President of InterCapital; Vice President of various
Vice President Dean Witter Funds, formerly, Vice President of Kidder Peabody
Two World Trade Center Asset Management (from September, 1985-October, 1991).
New York, New York
Thomas F. Caloia (48) First Vice President (since May, 1991) and Assistant Treasurer
Treasurer (since January, 1993) of InterCapital; First Vice President
Two World Trade Center and Assistant Treasurer of DWSC and Treasurer of the Dean
New York, New York Witter Funds and the TCW/DW Funds; previously Vice President
of InterCapital.
</TABLE>

* "Interested persons", as defined in the Act.

In addition, Robert M. Scanlan, President and Chief Operating Officer of
InterCapital and DWSC, Executive Vice President of Distributors and DWTC and
Director of DWTC, David A. Hughey, Executive Vice President and Chief
Administrative Officer of InterCapital, DWSC, Distributors and DWTC and
Director of DWTC, Edmund C. Puckhaber, Executive Vice President of
InterCapital and Director of DWTC, and Peter M. Avelar, Joseph Arcieri and
Jonathan R. Page, Senior Vice Presidents of InterCapital, are Vice Presidents
of the Fund. Marilyn K. Cranney and Barry Fink, First Vice Presidents and
Assistant General Counsels of InterCapital, and Lawrence S. Lafer, LouAnne D.
McInnis and Ruth Rossi, Vice Presidents and Assistant General Counsels of
InterCapital and DWSC, are Assistant Secretaries of the Fund.

BOARD OF TRUSTEES; RESPONSIBILITIES AND COMPENSATION OF INDEPENDENT TRUSTEES

As mentioned above under the caption "The Fund and its Management," the
Fund is one of the Dean Witter Funds, a group of investment companies managed
by InterCapital. As of the date of this Statement of Additional Information,
there are a total of 74 Dean Witter Funds, comprised of 114 portfolios. As of
December 31, 1994, the Dean Witter Funds had total net assets of
approximately $59.59 billion and more than five million shareholders.

The Board of Directors or Trustees, consisting of ten (10) directors or
trustees, is the same for each of the Dean Witter Funds. Some of the Funds
are organized as business trusts, others as corporations, but the functions
and duties of directors and trustees are the same. Accordingly, directors and
trustees of the Dean Witter Funds are referred to in this section as
Trustees.

Eight Trustees, that is, 80% of the total number, have no affiliation or
business connection with InterCapital or any of its affiliated persons and do
not own any stock or other securities issued by InterCapital's parent
company, DWDC. These are the "disinterested" or "independent" Trustees. Four
of the eight Independent Trustees are also Independent Trustees of the TCW/DW
Funds. As of the date of this Statement of Additional Information, there are
a total of 13 TCW/DW Funds. Two of the Funds' Trustees, that is, the
management Trustees, are affiliated with InterCapital.

As noted in a federal court ruling, "[T]he independent directors . . . are
expected to look after the interests of shareholders by 'furnishing an
independent check upon management,' especially with respect to fees paid to
the investment company's sponsor." In addition to their general "watchdog"
duties, the Independent Trustees are charged with a wide variety of
responsibilities under the Act. In order to perform their duties effectively,
the Independent Trustees are required to review and understand large amounts
of material, often of a highly technical and legal nature.

The Dean Witter Funds seek as Independent Trustees individuals of
distinction and experience in business and finance, government service or
academia; that is, people whose advice and counsel are valuable and in demand
by others and for whom there is often competition. To accept a position on
the Funds' Boards, such individuals may reject other attractive assignments
because of the demands made on their time by the Funds. Indeed, to serve on
the Funds' Boards, certain Trustees who would be qualified and in demand to
serve on bank boards would be prohibited by law from serving at the same time
as a director of a national bank and as a Trustee of a Fund.

<PAGE>

The Independent Trustees are required to select and nominate individuals
to fill any Independent Trustee vacancy on the Board of any Fund that has a
Rule 12b-1 plan of distribution. Since most of the Dean Witter Funds have
such a plan, and since all of the Funds' Boards have the same members, the
Independent Trustees effectively control the selection of other Independent
Trustees of all the Dean Witter Funds.

GOVERNANCE STRUCTURE OF THE DEAN WITTER FUNDS

While the regulatory system establishes both general guidelines and
specific duties for the Independent Trustees, the governance arrangements
from one investment company group to another vary significantly. In some
groups the Independent Trustees perform their role by attendance at periodic
meetings of the board of directors with study of materials furnished to them
between meetings. At the other extreme, an investment company complex may
employ a full-time staff to assist the Independent Trustees in the
performance of their duties.

The governance structure of the Dean Witter Funds lies between these two
extremes. The Independent Trustees and the Funds' Investment Manager alike
believe that these arrangements are effective and serve the interests of the
Funds' shareholders. All of the Independent Trustees serve as members of the
Audit Committee and the Committee of the Independent Trustees. Three of them
also serve as members of the Derivatives Committee.

The Committee of the Independent Trustees is charged with recommending to
the full Board approval of management, advisory and administration contracts,
Rule 12b-1 plans and distribution and underwriting agreements, continually
reviewing Fund performance, checking on the pricing of portfolio securities,
brokerage commissions, transfer agent costs and performance, and trading
among Funds in the same complex, and approving fidelity bond and related
insurance coverage and allocations, as well as other matters that arise from
time to time.

The Audit Committee is charged with recommending to the full Board the
engagement or discharge of the Fund's independent accountants; directing
investigations into matters within the scope of the independent accountants'
duties, including the power to retain outside specialists; reviewing with the
independent accountants the audit plan and results of the auditing
engagement; approving professional services provided by the independent
accountants and other accounting firms prior to the performance of such
services; reviewing the independence of the independent accountants;
considering the range of audit and non-audit fees; reviewing the adequacy of
the Fund's system of internal controls; advising the independent accountants
and Management personnel that they have direct access to the Committee at all
times; and preparing and submitting Committee meeting minutes to the full
Board.

Finally, the Board of each Fund has established a Derivatives Committee to
establish parameters for and oversee the activities of the Fund with respect
to derivative investments, if any, made by the Fund.

During the calendar year ended December 31, 1994, the three Committees
held a combined total of eleven meetings. The Committee meetings are
sometimes held away from the offices of InterCapital and sometimes in the
Board room of InterCapital. These meetings are held without management
directors or officers being present, unless and until they may be invited to
the meeting for purposes of furnishing information or making a report. These
separate meetings provide the Independent Trustees an opportunity to explore
in depth with their own independent legal counsel, independent auditors and
other independent consultants, as needed, the issues they believe should be
addressed and resolved in the interests of the Funds' shareholders.

DUTIES OF CHAIRMAN OF COMMITTEES

The Chairman of the Committees maintains an office at the Funds'
headquarters in New York. He is responsible for keeping abreast of regulatory
and industry developments and the Funds' operations and management. He
screens and/or prepares written materials and identifies critical issues for
the Independent Trustees to consider, develops agendas for Committee
meetings, determines the type and amount of information that the Committees
will need to form a judgment on the issues, and arranges to have the
information furnished. He also arranges for the services of independent
experts to be provided to the Committees and consults with them in advance of
meetings to help refine reports and to focus on critical issues. Members of
the Committees believe that the person who serves as Chairman of all three
Committees and guides their efforts is pivotal to the effective functioning
of the Committees.

<PAGE>

The Chairman of the Committees also maintains continuous contact with the
Funds' management, with independent counsel to the Independent Trustees and
with the Funds' independent auditors. He arranges for a series of special
meetings involving the annual review of investment management and other
operating contracts of the Funds and, on behalf of the Committees, conducts
negotiations with the Investment Manager and other service providers. In
effect, the Chairman of the Committees serves as a combination of chief
executive and support staff of the Independent Trustees.

The Chairman of the Committees is not employed by any other organization
and devotes his time primarily to the services he performs as Committee
Chairman and Independent Trustee of the Dean Witter Funds and as an
Independent Trustee of the TCW/DW Funds. The current Committee Chairman has
had more than 35 years experience as a senior executive in the investment
company industry.

VALUE OF HAVING SAME INDIVIDUALS AS INDEPENDENT TRUSTEES FOR ALL DEAN WITTER
FUNDS

The Independent Trustees and the Funds' management believe that having the
same Independent Trustees for each of the Dean Witter Funds is in the best
interests of all the Funds' shareholders. This arrangement avoids the
duplication of effort that would arise from having different groups of
individuals serving as Independent Trustees for each of the Funds or even of
sub-groups of Funds. It is believed that having the same individuals serve as
Independent Trustees of all the Funds tends to increase their knowledge and
expertise regarding matters which affect the Fund complex generally and
enhances their ability to negotiate on behalf of each Fund with the Fund's
service providers. This arrangement also precludes the likelihood of separate
groups of Independent Trustees arriving at conflicting decisions regarding
operations and management of the Funds and avoids the cost and confusion that
would likely ensue. Finally, it is believed that having the same Independent
Trustees serve on all Fund Boards enhances the ability of each Fund to
obtain, at modest cost to each separate Fund, the services of Independent
Trustees, and a Chairman of their Committees, of the caliber, experience and
business acumen of the individuals who serve as Independent Trustees of the
Dean Witter Funds.

COMPENSATION OF INDEPENDENT TRUSTEES

The Fund pays each Independent Trustee an annual fee of $1,200 plus a per
meeting fee of $50 for meetings of the Board of Trustees or committees of the
Board of Trustees attended by the Trustee (the Fund pays the Chairman of the
Audit Committee an annual fee of $1,000 and pays the Chairman of the
Committee of the Independent Trustees an additional annual fee of $2,400, in
each case inclusive of the Committee meeting fees). The Fund also reimburses
such Trustees for travel and other out-of-pocket expenses incurred by them in
connection with attending such meetings. Trustees and officers of the Fund
who are or have been employed by the Investment Manager or an affiliated
company receive no compensation or expense reimbursement from the Fund.

The Fund has adopted a retirement program under which an Independent
Trustee who retires after serving for at least five years (or such lesser
period as may be determined by the Board) as an Independent Director or
Trustee of any Dean Witter Fund that has adopted the retirement program (each
such Fund referred to as an "Adopting Fund" and each such Trustee referred to
as an "Eligible Trustee") is entitled to retirement payments upon reaching
the eligible retirement age (normally, after attaining age 72). Annual
payments are based upon length of service. Currently, upon retirement, each
Eligible Trustee is entitled to receive from the Fund, commencing as of his
or her retirement date and continuing for the remainder of his or her life,
an annual retirement benefit (the "Regular Benefit") equal to 28.75% of his
or her Eligible Compensation plus 0.4791666% of such Eligible Compensation
for each full month of service as an Independent Director or Trustee of any
Adopting Fund in excess of five years up to a maximum of 57.50% after ten
years of service. The foregoing percentages may be changed by the Board.((1))
"Eligible Compensation" is one-fifth of the total compensation earned by such
Eligible Trustee for service to the Fund in the five year period prior to the
date of the Eligible Trustee's retirement. Benefits under the retirement
program are not secured or funded by the Fund. As of the date of this
Statement of Additional Information, 58 Dean Witter Funds have adopted the
retirement program.

((1)) An Eligible Trustee may elect alternate payments of his or her
retirement benefits based upon the combined life expectancy of such
Eligible Trustee and his or her spouse on the date of such Eligible
Trustee's retirement. The amount estimated to be payable under this
method, through the remainder of the later of the lives of such
Eligible Trustee and spouse, will be the actuarial equivalent of the
Regular Benefit. In addition, the Eligible Trustee may elect that the
surviving spouse's periodic payment of benefits will be equal to
either 50% or 100% of the previous periodic amount, an election that,
respectively, increases or decreases the previous periodic amount so
that the resulting payments will be the actuarial equivalent of the
Regular Benefit.

<PAGE>

The following table illustrates the compensation paid and the retirement
benefits accrued to the Fund's Independent Trustees by the Fund for the
fiscal year ended December 31, 1994 and the estimated retirement benefits for
the Fund's Independent Trustees as of December 31, 1994.

<TABLE>
<CAPTION>
FUND COMPENSATION ESTIMATED RETIREMENT BENEFITS
-------------------------------- ---------------------------------------------------------------
ESTIMATED
RETIREMENT CREDITED YEARS ESTIMATED ESTIMATED
AGGREGATE BENEFITS OF SERVICE AT PERCENTAGE OF ESTIMATED ANNUAL
NAME OF INDEPENDENT COMPENSATION ACCRUED AS FUND RETIREMENT ELIGIBLE ELIGIBLE BENEFITS UPON
TRUSTEE FROM THE FUND EXPENSES (MAXIMUM 10) COMPENSATION COMPENSATION((2)) RETIREMENT((3))
- -------------------------- --------------- --------------- -------------- --------------- --------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Jack F. Bennett ........... $1,900 $ 620 8 46.0% $2,209 $1,016
Michael Bozic ............. 1,227 0 10 57.5 1,950 1,121
Edwin J. Garn ............. 1,900 440 10 57.5 1,950 1,121
John R. Haire ............. 4,900(4) 1,536 10 57.5 5,093 2,929
Dr. Manuel H. Johnson .... 1,850 184 10 57.5 1,950 1,121
Paul Kolton ............... 1,950 701 9 51.3 2,370 1,215
Michael E. Nugent ......... 1,750 309 10 57.5 1,950 1,121
John L. Schroeder ......... 1,277 0 8 47.9 1,950 934

<FN>
((2)) Based on current levels of compensation.

((3)) Based on current levels of compensation. Amount of annual benefits
also varies depending on the Trustee's elections described in
Footnote (1) above.

((4)) Of Mr. Haire's compensation from the Fund, $3,400 is paid to him as
Chairman of the Committee of the Independent Trustees ($2,400) and as
Chairman of the Audit Committee ($1,000).
</TABLE>

CASH COMPENSATION FROM DEAN WITTER FUNDS AND TCW/DW FUNDS

The following table illustrates the compensation paid to the Fund's
Independent Trustees for the calendar year ended December 31, 1994 for
services to the 73 Dean Witter Funds and, in the case of Messrs. Haire,
Johnson, Kolton and Nugent, the 13 TCW/DW Funds that were in operation at
December 31, 1994. With respect to Messrs. Haire, Johnson, Kolton and Nugent,
the TCW/DW Funds are included solely because of a limited exchange privilege
between those Funds and five Dean Witter Money Market Funds.

<TABLE>
<CAPTION>
FOR SERVICE AS
FOR SERVICE AS CHAIRMAN OF TOTAL CASH
DIRECTOR OR FOR SERVICE AS COMMITTEES OF COMPENSATION
TRUSTEE AND TRUSTEE AND INDEPENDENT FOR SERVICES TO
COMMITTEE MEMBER COMMITTEE MEMBER DIRECTORS/ 73 DEAN WITTER
NAME OF INDEPENDENT OF 73 DEAN WITTER OF 13 TCW/DW TRUSTEES AND FUNDS AND 13
TRUSTEE FUNDS FUNDS AUDIT COMMITTEES TCW/DW FUNDS
- -------------------------- ----------------- ---------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Jack F. Bennett ........... $125,761 -- -- $125,761
Michael Bozic ............. 82,637 -- -- 82,637
Edwin J. Garn ............. 125,711 -- -- 125,711
John R. Haire ............. 101,061 $66,950 $225,563((5)) 393,574
Dr. Manuel H. Johnson .... 122,461 60,750 -- 183,211
Paul Kolton ............... 128,961 51,850 34,200((6)) 215,011
Michael E. Nugent ......... 115,761 52,650 -- 168,411
John L. Schroeder ......... 85,938 -- -- 85,938
<FN>
((5)) For the 73 Dean Witter Funds.

((6)) For the 13 TCW/DW Funds.
</TABLE>

As of the date of this Statement of Additional Information, the aggregate
number of shares of beneficial interest of the Fund owned by the Fund's
officers and Trustees as a group was less than 1 percent of the Fund's shares
of beneficial interest outstanding.

<PAGE>

INVESTMENT PRACTICES AND POLICIES
- -----------------------------------------------------------------------------

Municipal Bonds. Municipal Bonds, as referred to in the Prospectus, are
debt obligations of states, cities, municipalities and municipal agencies
(all of which are generally referred to as "municipalities") which generally
have a maturity at the time of their issuance of one year or more. They are
issued to raise funds for various public purposes, such as construction of a
wide range of public facilities, to refund outstanding obligations and to
obtain funds for general operating expenses or to loan to other public
institutions and facilities. In addition, certain types of industrial
development bonds and pollution control bonds are issued by or on behalf of
public authorities to provide funding for various privately operated
facilities.

Municipal Notes. Municipal Notes are short-term obligations of
municipalities, generally with a maturity, at the time of issuance, ranging
from six months to three years the interest from which is, in the opinion of
bond counsel, exempt from federal income tax. The principal types of
Municipal Notes include tax anticipation notes, bond anticipation notes,
revenue anticipation notes and project notes, although there are other types
of Municipal Notes in which the Fund may invest. Notes sold in anticipation
of collection of taxes, a bond sale, or receipt of other revenues are usually
general obligations of the issuing municipality or agency. Project Notes are
issued by local agencies and are guaranteed by the United States Department
of Housing and Urban Development. Such notes are secured by the full faith
and credit of the United States. Project notes are not currently being
issued.

Municipal Commercial Paper. Municipal Commercial Paper refers to
short-term obligations of municipalities the interest from which is, in the
opinion of bond counsel, exempt from federal income tax, and which may be
issued at discount and are sometimes referred to as Short-Term Discount
Notes. They are likely to be used to meet seasonal working capital needs of a
municipality or interim construction financing and to be paid from general
revenues of the municipality or refinanced with long-term debt. In most
cases, Municipal Commercial Paper is backed by letters of credit, lending
agreements, note repurchase agreements or other credit facility agreements
offered by banks or other institutions.

The two principal classifications of Municipal Bonds, Municipal Notes and
Municipal Commercial Paper are "general obligation" and "revenue" bonds,
notes or commercial paper. General obligation bonds, notes and commercial
paper are secured by the issuer's pledge of its faith, credit and taxing
power for the payment of principal and interest. Issuers of general
obligation bonds, notes and commercial paper include states, counties,
cities, towns and other governmental units. Revenue bonds, notes and
commercial paper are payable from the revenues derived from a particular
facility or class of facilities and, in some cases, from specific revenue
sources. Revenue bonds, notes and commercial paper are issued for a wide
variety of purposes, including the financing of electric, gas, water and
sewer systems and other public utilities; industrial development and
pollution control facilities; single and multi-family housing units; public
buildings and facilities; air and marine ports; transportation facilities
such as toll roads, bridges and tunnels; and health and educational
facilities such as hospitals and dormitories. They rely primarily on user
fees to pay debt service, although the principal revenue source is often
supplemented by additional security features which are intended to enhance
the creditworthiness of the issuer's obligations. In some cases, particularly
in the instance of revenue bonds issued to finance housing and public
buildings, a direct or implied "moral obligation" of a governmental unit may
be pledged to the payment of debt service. In other cases, a special tax or
other charge may augment user fees.

Obligations of issuers of Municipal Bonds, Municipal Notes and Municipal
Commercial Paper are subject to the provisions of bankruptcy, insolvency and
other laws affecting the rights and remedies of creditors, such as the
Federal Bankruptcy Act, and laws, if any, which may be enacted by Congress or
state legislatures to extend the time for payment of principal or interest,
or both, or to impose other constraints upon enforcement of such obligations
or upon municipalities to levy taxes. There is also the possibility that, as
a result of litigation or other conditions, the power or ability of any one
or more issuer to pay, when due, principal of and interest on its, or their,
Municipal Bonds, Municipal Notes and Municipal Commercial Paper may be
materially affected.

<PAGE>

PORTFOLIO MANAGEMENT

Variable Rate and Floating Rate Obligations. As stated in the Prospectus,
the Fund may invest in Municipal Bonds and Municipal Notes ("Municipal
Obligations") of the type called variable rate and floating rate obligations.
The interest rate payable on a variable rate obligation is adjusted either at
predesignated periodic intervals and, on a floating rate obligation, whenever
there is a change in the market rate of interest on which the interest rate
payable is based. Other features may include the right whereby the Fund may
demand prepayment of the principal amount of the obligation prior to its
stated maturity (a "demand feature") and the right of the issuer to prepay
the principal amount prior to maturity. The principal benefit of a variable
rate obligation is that the interest rate adjustment minimizes changes in the
market value of the obligation. As a result, the purchase of variable rate
and floating rate obligations could enhance the ability of the Fund to
maintain a stable net asset value per share (see "Purchase of Fund
Shares--Determination of Net Asset Value" in the Prospectus) and to sell
obligations prior to maturity at a price approximately the full principal
amount of the obligations. The principal benefit to the Fund of purchasing
obligations with a demand feature is that liquidity, and the ability of the
Fund to obtain repayment of the full principal amount of an obligation prior
to maturity, is enhanced. The payment of principal and interest by issuers of
certain obligations purchased by the Fund may be guaranteed by letters of
credit or other credit facilities offered by banks or other financial
institutions. Such guarantees will be considered in determining whether an
obligation meets the Fund's investment quality requirements.

When-Issued and Delayed Delivery Securities. As stated in the Prospectus,
the Fund may purchase tax-exempt securities on a when-issued or delayed
delivery basis. When such transactions are negotiated, the price is fixed at
the time of commitment, but delivery and payment can take place a month or
more after the date of the commitment. While the Fund will only purchase
securities on a when-issued or delayed delivery basis with the intention of
acquiring the securities, the Fund may sell the securities before the
settlement date, if it is deemed advisable. The securities so purchased or
sold are subject to market fluctuation and no interest accrues to the
purchaser during this period. At the time the Fund makes the commitment to
purchase a Municipal Obligation on a when-issued or delayed delivery basis,
it will record the transaction and thereafter reflect the value, each day, of
the Municipal Obligation in determining its net asset value. The Fund will
also establish a segregated account with its custodian bank in which it will
maintain cash, cash equivalents or other Municipal Obligations equal in value
to commitments for such when-issued or delayed delivery securities. The Fund
does not believe that its net asset value or income will be adversely
affected by its purchase of Municipal Obligations on a when-issued or delayed
delivery basis.

Repurchase Agreements. When cash may be available for only a few days, it
may be invested by the Fund in repurchase agreements until such time as it
may otherwise be invested or used for payments of obligations of the Fund.
These agreements, which may be viewed as a type of secured lending by the
Fund, typically involve the acquisition by the Fund of debt securities from a
selling financial institution such as a bank, savings and loan association or
broker-dealer. The agreement provides that the Fund will sell back to the
institution, and that the institution will repurchase, the underlying
security ("collateral"), which is held by the Fund's Custodian, at a
specified price and at a fixed time in the future, which is usually not more
than seven days from the date of purchase. The Fund will accrue interest from
the institution until the time when the repurchase is to occur. Although such
date is deemed by the Fund to be the maturity date of a repurchase agreement,
the maturities of securities subject to repurchase agreements are not subject
to any limits and may exceed one year.

While the repurchase agreements involve certain risks not associated with
direct investments in debt securities, the Fund follows procedures designed
to minimize such risks. These procedures include effecting repurchase
transactions only with large, well capitalized and well established financial
institutions, whose financial condition will be continually monitored by the
Investment Manager. In addition, the value of the collateral underlying the
repurchase agreement will always be at least equal to the repurchase price,
including any accrued interest earned on the repurchase agreement. Such
collateral will consist of Government Securities or "Eligible Securities" (as
described below under the

<PAGE>

caption "How Net Asset Value is Determined") rated by a nationally recognized
statistical rating organization (an "NRSRO") whose ratings qualify the
collateral security as an Eligible Security. In the event of a default or
bankruptcy by a selling financial institution, the Fund will seek to
liquidate such collateral. However, the exercise of the Fund's right to
liquidate such collateral could involve certain costs or delays and, to the
extent that proceeds from any sale upon a default of the obligation to
repurchase were less than the repurchase price, the Fund could suffer a loss.
It is the current policy of the Fund not to invest in repurchase agreements
that do not mature within seven days if any such investment, together with
any other liquid asset held by the Fund, amount to more than 10% of its total
assets. The Fund's investments in repurchase agreements may, at times, be
substantial when, in the view of the Investment Manager, liquidity or other
considerations warrant. However, during the fiscal year ended December 31,
1994, the Fund did not enter into any repurchase agreements and the Fund does
not intend to enter into any repurchase agreements during the foreseeable
future.

Put Options. The Fund may purchase securities together with the right to
resell them to the seller at an agreed upon price or yield within a specified
period prior to the maturity date of such securities. Such a right to resell
is commonly known as a "put," and the aggregate price which the Fund pays for
securities with puts may be higher than the price which otherwise would be
paid for the securities. Consistent with the Fund's investment objectives and
subject to the supervision of the Board of Trustees, the primary purpose of
this practice is to permit the Fund to be fully invested in securities the
interest on which is exempt from Federal income tax while preserving the
necessary flexibility and liquidity to purchase securities on a when-issued
basis, or to meet unusually large redemptions and to purchase at a later date
securities other than those subject to the put. The Fund's policy is,
generally, to exercise the puts on their expiration date, when the exercise
price is higher than the current market price for the related securities.
Puts may be exercised prior to the expiration date in order to fund
obligations to purchase other securities or to meet redemption requests.
These obligations may arise during the periods in which proceeds from sales
of Fund shares and from recent sales of portfolio securities are insufficient
to meet such obligations or when the funds available are otherwise allocated
for investment. In addition, puts may be exercised prior to their expiration
date in the event the Investment Manager revises its evaluation of the
creditworthiness of the issuer of the underlying security. In determining
whether to exercise puts prior to their expiration date and in selecting
which puts to exercise in such circumstances, the Investment Manager
considers, among other things, the amount of cash available to the Fund, the
expiration dates of the available puts, any future commitments for securities
purchases, the yield, quality and maturity dates of the underlying
securities, alternative investment opportunities and the desirability of
retaining the underlying securities in the Fund's portfolio.

The Fund values securities which are subject to puts at their amortized
cost and values the put, apart from the security, at zero. Thus, the cost of
the put will be carried on the Fund's books as an unrealized loss from the
date of acquisition and will be reflected in realized gain or loss when the
put is exercised or expires. Since the value of the put is dependent on the
ability of the put writer to meet its obligation to repurchase, the Fund's
policy is to enter into put transactions only with municipal securities
dealers who are approved by the Fund's Board of Trustees. Each dealer will be
approved on its own merits and it is the Fund's general policy to enter into
put transactions only with those dealers which are determined to present
minimal credit risks. In connection with such determination, the Board of
Trustees will review, among other things, the ratings, if available, of
equity and debt securities of such municipal securities dealers, their
reputations in the municipal securities markets, the net worth of such
dealers and their efficiency in consummating transactions. Bank dealers
normally will be members of the Federal Reserve System, and other dealers
will be members of the National Association of Securities Dealers, Inc. or
members of a national securities exchange. The Board has directed the
Investment Manager not to enter into put transactions with, and to exercise
outstanding puts of, any municipal securities dealer which, in the judgment
of the Investment Manager, ceases at any time to present a minimal credit
risk. In the event that a dealer should default on its obligation to
repurchase an underlying security, the Fund is unable to predict whether all
or any portion of any loss sustained could be subsequently recovered from
such dealer. During the fiscal year ended December 31, 1994, the Fund did not
purchase any put options and it has no intention to purchase such securities
during the foreseeable future.

<PAGE>

It is the position of the staff of the Securities and Exchange Commission
that certain provisions of the Act may be deemed to prohibit the Fund from
purchasing puts from broker-dealers without an exemptive order. Until such an
order is obtained, the Fund will purchase puts only from commercial banks.
There is no assurance such an order, if applied for, will be obtained. The
duration of puts, which will not exceed 60 days, will not be a factor in
determining the weighted average maturity of the Fund's portfolio securities.

In the Revenue Ruling 82-144, the Internal Revenue Service stated that,
under certain circumstances, a purchaser of tax-exempt obligations which are
subject to puts will be considered the owner of the obligations for Federal
income tax purposes. In connection therewith, the Fund has received an
opinion of counsel to the effect that interest on Municipal Obligations
subject to puts will be tax-exempt to the Fund.

INVESTMENT RESTRICTIONS
- -----------------------------------------------------------------------------

In addition to the investment restrictions enumerated in the Prospectus,
the investment restrictions listed below have been adopted by the Fund as
fundamental policies, except as otherwise indicated. Under the Act, a
fundamental policy may not be changed without the vote of the holders of a
majority of the outstanding voting securities of the Fund, as defined in the
Act. Such a majority is defined in the Act as the lesser of (a) 67% or more
of the shares present at a Meeting of Shareholders of the Fund, if the
holders of more than 50% of the outstanding shares of the Fund are present or
represented by proxy at the meeting, or (b) more than 50% of the outstanding
shares of the Fund. For purposes of the following restrictions and those
recited in the Prospectus: (a) an "issuer" of a security is the entity whose
assets and revenues are committed to the payment of interest and principal on
that particular security, provided that the guarantee of a security will be
considered a separate security, and provided further that a guarantee of a
security shall not be deemed to be a security issued by the guarantor if the
value of all securities issued or guaranteed by the guarantor and owned by
the Fund does not exceed 10% of the value of the total assets of the Fund;
(b) a "taxable security" is any security the interest on which is subject to
federal income tax; and (c) all percentage limitations apply immediately
after a purchase or initial investment, and any subsequent change in any
applicable percentage resulting from market fluctuations or other changes in
total or net assets does not require elimination of any security from the
portfolio.

The Fund may not:

1. Invest in common stock.

2. Invest in securities of any issuer if, to the knowledge of the
Fund, any officer or trustee of the Fund or any officer or director of the
Investment Manager owns more than 1/2 of 1% of the outstanding securities
of such issuer, and such officers, trustees and directors who own more
than 1/2 of 1% own in the aggregate more than 5% of the outstanding
securities of such issuer.

3. Purchase or sell real estate or interests therein, although it may
purchase securities secured by real estate or interests therein.

4. Purchase or sell commodities or commodity futures contracts.

5. Purchase oil, gas or other mineral leases, rights or royalty
contracts, or exploration or development programs.

6. Write, purchase or sell puts, calls, or combinations thereof except
that it may acquire rights to resell Municipal Obligations at an agreed
upon price and at or within an agreed upon time.

7. Purchase securities of other investment companies, except in
connection with a merger, consolidation, reorganization or acquisition of
assets.

8. Borrow money, except that the Fund may borrow from a bank for
temporary or emergency purposes in amounts not exceeding 5% (taken at the
lower of cost or current value) of the value of its total assets (not
including the amount borrowed).

<PAGE>

9. Pledge its assets or assign or otherwise encumber them except to
secure borrowings effected within the limitations set forth in restriction
(8). To meet the requirements of regulations in certain states, the Fund,
as a matter of operating policy but not as fundamental policy, will limit
any pledge of its assets to 10% of its net assets so long as shares of the
Fund are being sold in those states.

10. Issue senior securities as defined in the Act except insofar as
the Fund may be deemed to have issued a senior security by reason of: (a)
entering into any repurchase agreement; (b) purchasing any securities on a
when-issued or delayed delivery basis; or (c) borrowing money in
accordance with restrictions described above.

11. Make loans of money or securities, except: (a) by the purchase of
debt obligations in which the Fund may invest consistent with its
investment objective and policies; and (b) by investment in repurchase
agreements.

12. Make short sales of securities.

13. Purchase securities on margin, except for such short-term loans as
are necessary for the clearance of purchases of portfolio securities.

14. Engage in the underwriting of securities, except insofar as the
Fund may be deemed an underwriter under the Securities Act of 1933 in
disposing of a portfolio security.

15. Invest for the purpose of exercising control or management of any
other issuer.

PORTFOLIO TRANSACTIONS AND BROKERAGE
- -----------------------------------------------------------------------------

Subject to the general supervision of the Board of Trustees, the
Investment Manager is responsible for decisions to buy and sell securities
for the Fund, the selection of brokers and dealers to effect the
transactions, and the negotiation of brokerage commissions, if any. The Fund
expects that the primary market for the securities in which it intends to
invest will generally be the over-the-counter market. Securities are
generally traded in the over-the-counter market on a "net" basis with dealers
acting as principal for their own accounts without a stated commission,
although the price of the security usually includes a profit to the dealer.
The Fund also expects that securities will be purchased at times in
underwritten offerings where the price includes a fixed amount of
compensation, generally referred to as the underwriter's concession or
discount. On occasion the Fund may also purchase certain money market
instruments directly from an issuer, in which case no commissions or
discounts are paid. The Fund has never paid any brokerage commissions.

The Investment Manager currently serves as investment manager to a number
of clients, including other investment companies, and may in the future act
as investment manager or adviser to others. It is the practice of the
Investment Manager to cause purchase and sale transactions to be allocated
among the Fund and others whose assets it manages in such manner as it deems
equitable. In making such allocations among the Fund and other client
accounts, the main factors considered are the respective investment
objectives, the relative size of portfolio holdings of the same or comparable
securities, the availability of cash for investment, the size of investment
commitments generally held and the opinions of the persons responsible for
managing the portfolios of the Fund and other client accounts.

The policy of the Fund, regarding purchases and sale of securities for its
portfolio, is that primary consideration be given to obtaining the most
favorable prices and efficient execution of transactions. Consistent with
this policy, when securities transactions are effected on a stock exchange,
the Fund's policy is to pay commissions which are considered fair and
reasonable without necessarily determining that the lowest possible
commissions are paid in all circumstances. The Fund believes that a
requirement always to seek the lowest possible commission cost could impede
effective portfolio management and preclude the Fund and the Investment
Manager from obtaining a high quality of brokerage and research services. In
seeking to determine the reasonableness of brokerage commissions paid in any
transaction, the Investment Manager relies upon its experience and knowledge
regarding commissions generally charged by various brokers and on its
judgment in evaluating the

<PAGE>

brokerage and research services received from the broker effecting the
transaction. Such determinations are necessarily subjective and imprecise, as
in most cases an exact dollar value for those services is not ascertainable.

In seeking to implement the Fund's policies, the Investment Manager
effects transactions with those brokers and dealers who the Investment
Manager believes provide the most favorable prices and are capable of
providing efficient executions. If the Investment Manager believes such price
and execution are obtainable from more than one broker or dealer, it may give
consideration to placing portfolio transactions with those brokers and
dealers who also furnish research and other services to the Fund or the
Investment Manager. Such services may include, but are not limited to, any
one or more of the following: information as to the availability of
securities for purchase or sale; statistical or factual information or
opinions pertaining to investment; wire services; and appraisals or
evaluations of portfolio securities.

The information and services received by the Investment Manager from
brokers and dealers may be of benefit to the Investment Manager in the
management of accounts of some of its other clients and may not in all cases
benefit the Fund directly. While the receipt of such information and services
is useful in varying degrees and would generally reduce the amount of
research or services otherwise performed by the Investment Manager and
thereby reduce its expenses, it is of indeterminable value and the Fund does
not reduce the management fee it pays to the Investment Management by any
amount that may be attributable to the value of such services.

Pursuant to an order of the Securities and Exchange Commission, the Fund
may effect principal transactions in certain money market instruments with
DWR. The Fund will limit its transactions with DWR to U.S. Government and
Government Agency Securities, Bank Money Instruments (i.e. Certificates of
Deposit and Bankers' Acceptances) and Commercial Paper (not including
Tax-Exempt Municipal Paper). Such transactions will be effected with DWR only
when the price available from DWR is better than that available from other
dealers. During the fiscal years ended December 31, 1992, 1993 and 1994, the
Fund did not effect any principal transaction with DWR.

Consistent with the policy described above, brokerage transactions in
securities listed on exchanges or admitted to unlisted trading privileges may
be effected through DWR. In order for DWR to effect portfolio transactions
for the Fund, the commissions, fees or other remuneration received by DWR
must be reasonable and fair compared to the commission, fees or other
remuneration paid to other brokers in connection with comparable transactions
involving similar securities being purchased or sold on an exchange during a
comparable period of time. This standard would allow DWR to receive no more
than the remuneration which would be expected to be received by an
unaffiliated broker in a commensurate arm's-length transaction. Furthermore,
the Trustees of the Fund, including a majority of the Trustees who are not
"interested" Trustees (as defined in the Act), have adopted procedures which
are reasonably designed to provide that any commissions, fees or other
remuneration paid to DWR are consistent with the foregoing standard. During
the fiscal years ended December 31, 1992, December 31, 1993 and December 31,
1994, the Fund paid no brokerage commissions to DWR.

Subject to the principle of obtaining best price and execution, the
Investment Manager may consider a broker-dealer's sales of shares of the Fund
as a factor in selecting from among those broker-dealers qualified to provide
comparable prices and execution on the Fund's portfolio transactions. The
Fund does not, however, require a broker-dealer to sell shares of the Fund in
order for it to be considered to execute portfolio transactions, and will not
enter into any arrangement whereby a specific amount or percentage of the
Fund's transactions will be directed to a broker which sells shares of the
Fund to customers. The Board of Trustees reviews, periodically, the
allocation of brokerage orders to monitor the operation of these policies.

Portfolio turnover rate is defined as the lesser of the value of the
securities purchased or securities sold, excluding all securities whose
maturities at time of acquisition were one year or less, divided by the
average monthly value of such securities owned during the year. Because the
Fund's portfolio consists of municipal obligations maturing within one year,
the Fund is unable to predict its turnover rate as so defined. However,
because of the short-term nature of the Fund's portfolio securities, it is
anticipated that

<PAGE>

the number of purchases and sales of maturities of such securities will be
substantial. Brokerage commissions are not normally charged on purchases and
sales of short-term municipal obligations, but such transactions may involve
transaction costs in the form of spreads between bid and asked prices.

PURCHASE OF FUND SHARES
- -----------------------------------------------------------------------------

As discussed in the Prospectus, the Fund offers its shares for sale to the
public on a continuous basis, without a sales charge. Pursuant to a
Distribution Agreement between the Fund and Dean Witter Distributors Inc.
(the "Distributor"), an affiliate of the Investment Manager and a
wholly-owned subsidiary of DWDC, shares of the Fund are distributed by the
Distributor and through certain selected broker-dealers who have entered into
agreements with the Distributor ("Selected Broker-Dealer") at an offering
price equal to the net asset value per share next determined following
receipt of an effective purchase order (accompanied by Federal Funds).
Dealers in the securities markets in which the Fund will invest usually
require immediate payment in Federal Funds. Since the payment by a Fund
shareholder for his or her other shares cannot be invested until it is
converted into and available to the Fund in Federal Funds, the Fund requires
such payments to be so available before a share purchase order can be
considered effective. All checks submitted for payment are accepted subject
to collection at full face value in United States funds and must be drawn in
United States dollars in a United States bank.

The Board of Trustees of the Fund, including a majority of the Trustees
who are not and were not at the time of their vote "Interested persons" (as
defined in the Act) of either party to the Distribution Agreement (the
"Independent Trustees"), approved, at its meeting held on October 30, 1992,
the current Distribution Agreement appointing the Distributor exclusive
distributor of the Fund's shares and providing for the Distributor to bear
distribution expenses not borne by the Fund. The Distribution Agreement took
effect on June 30, 1993 upon the spin-off by Sears, Roebuck and Co. of its
remaining shares of DWDC. By its terms, the Distribution Agreement had an
initial term ending April 30, 1994, and provides that it will remain in
effect from year to year thereafter if approved by the Board. At its meeting
held on April 8, 1994, the Fund's Board of Trustees, including all of the
Independent Trustees, approved continuation of the Distribution Agreement
until April 30, 1995.

SHAREHOLDER INVESTMENT ACCOUNT

Upon the purchase of shares of the Fund, a Shareholder Investment Account
is opened for the investor on the books of the Fund, maintained by the Fund's
Transfer Agent, Dean Witter Trust Company (the "Transfer Agent"). This is an
open account in which shares owned by the investor are credited by the
Transfer Agent in lieu of issuance of a share certificate. If a share
certificate is desired, it must be requested in writing for each transaction.
Certificates are issued only for full shares and may be redeposited in the
account at any time. There is no charge to the investor for issuance of a
certificate. Whenever a shareholder instituted transaction takes place in the
Shareholder Investment Account directly through the Transfer Agent, the
shareholder will be mailed a written confirmation of such transaction.

Direct Investments Through Transfer Agent. A shareholder may make
additional investments in Fund shares at any time through the Shareholder
Investment Account by sending a check payable to Dean Witter Tax-Free Daily
Income Trust in any amount, not less than $100, directly to the Transfer
Agent. The shares so purchased will be credited to the Shareholder Investment
Account.

Account Statements. All purchases of Fund shares will be credited to the
shareholder in a Shareholder Investment Account maintained for the
shareholder by the Transfer Agent in full and fractional shares of the Fund
(rounded to the nearest 1/100 of a share with the exception of purchases made
through reinvestment of dividends). A statement of the account will be mailed
to the shareholder after each shareholder instituted purchase or redemption
transaction effected through the Transfer Agent. A quarterly statement of the
account is sent to all shareholders. Share certificates will not be issued
unless requested in writing by the shareholder. No certificates will be
issued for fractional shares or to shareholders who have elected the checking
account or predesignated bank account methods of withdrawing cash from their
accounts.

<PAGE>

The Fund reserves the right to reject any order for the purchase of its
shares. In addition, the offering of Fund shares may be suspended at any time
and resumed at any time thereafter.

EXCHANGE PRIVILEGE

As discussed in the Prospectus under the caption "Exchange Privilege", an
Exchange Privilege exists whereby investors who have purchased shares of any
of the Dean Witter Funds sold with either a front-end sales charge ("FESC
funds") or a contingent deferred sales charge ("CDSC funds") will be
permitted, after the shares of the fund acquired by purchase (not by exchange
or dividend reinvestment) have been held for thirty days, to redeem all or
part of their shares in that fund, have the proceeds invested in shares of
the Fund, Dean Witter Liquid Asset Fund Inc., Dean Witter U.S. Government
Money Market Trust, Dean Witter New York Municipal Money Market Trust, or
Dean Witter California Tax-Free Daily Income Trust (these five funds are
hereinafter called "money market funds") or Dean Witter Short-Term U.S.
Treasury Trust, Dean Witter Limited Term Municipal Trust and Dean Witter
Short-Term Bond Fund (these eight funds, including the Fund, are hereinafter
referred to as the "Exchange Funds"). There is no waiting period for
exchanges of shares acquired by exchange or dividend reinvestment.
Subsequently, shares of the Exchange Funds received in an exchange for shares
of an FESC fund (regardless of the type of fund originally purchased) may be
redeemed and exchanged for shares of the other Exchange Funds, FESC funds or
CDSC funds (however, shares of CDSC funds, including shares acquired in
exchange of (i) shares of FESC funds or (ii) shares of the Exchange Funds
which were acquired in exchange for shares of FESC funds, may not be
exchanged for shares of FESC funds). Additionally, shares of the Exchange
Funds received in an exchange for shares of a CDSC fund (regardless of the
type of fund originally purchased) may be redeemed and exchanged for shares
of the other Exchange Funds, or CDSC funds. Ultimately, any applicable
contingent deferred sales charge will have to be paid upon redemption of
shares originally purchased from a CDSC fund. An exchange will be treated for
federal income tax purposes the same as a repurchase or redemption of shares,
on which the shareholder may realize a capital gain or loss.

Any new account established through the Exchange Privilege will have the
same registration and cash dividend or dividend reinvestment plan as the
present account, unless the Transfer Agent receives written notification to
the contrary. For telephone exchanges, the exact registration of the existing
account and the account number must be provided.

Any shares held in certificate form cannot be exchanged but must be
forwarded to the Transfer Agent and deposited into the shareholder's account
before being eligible for exchange. (Certificates mailed in for deposit
should not be endorsed.)

When shares of any CDSC fund are exchanged for shares of the Fund or any
other Exchange Fund, the exchange is executed at no charge to the
shareholder, without the imposition of the contingent deferred sales charge
("CDSC") at the time of the exchange. During the period of time the
shareholder remains in the Exchange Fund (calculated from the last day of the
month in which the Exchange Fund shares were acquired), the holding period or
"year since purchase payment made" is frozen. When shares are redeemed out of
the Exchange Fund, they will be subject to a CDSC which would be based upon
the period of time the shareholder actually held shares in a CDSC fund.
However, in the case of shares of a CDSC fund exchanged into an Exchange Fund
on or after April 23, 1990, upon redemption of shares which results in a CDSC
being imposed, a credit (not to exceed the amount of the CDSC) will be given
in an amount equal to the 12b-1 distribution fees incurred on or after that
date which are attributable to those shares. Shareholders acquiring shares of
an Exchange Fund pursuant to this exchange privilege may exchange those
shares back into a CDSC fund from the Exchange Fund, with no CDSC being
imposed on such exchange. The holding period previously frozen when shares
were first exchanged for shares of the Exchange Fund resumes on the last day
of the month in which shares of a CDSC fund are reacquired. A CDSC is imposed
only upon an ultimate redemption, based upon the time (calculated as
described above) the shareholder was invested in a CDSC fund. Shares of a
CDSC fund acquired in exchange for shares of an FESC fund (or in exchange for
shares of other Dean Witter Funds for which shares of a FESC fund have been
exchanged) are not subject to any CDSC upon their redemption.

<PAGE>

When shares initially purchased in a CDSC fund are exchanged for shares of
another CDSC fund or for shares of an Exchange Fund, the date of purchase of
the shares of the fund exchanged into, for purposes of the CDSC upon
redemption, will be the last day of the month in which the shares being
exchanged were originally purchased. In allocating the purchase payments
between funds for purposes of the CDSC, the amount which represents the
current net asset value of shares at the time of the exchange which were (i)
purchased more than three or six years (depending on the CDSC schedule
applicable to the shares) prior to the exchange, (ii) originally acquired
through reinvestment of dividends or distributions and (iii) acquired in
exchange for shares of FESC funds, or for shares of other Dean Witter Funds
for which shares of FESC funds have been exchanged (all such shares called
"Free Shares"), will be exchanged first. Shares of Dean Witter American Value
Fund acquired prior to April 30, 1984, shares of Dean Witter Dividend Growth
Securities Inc. and Dean Witter Natural Resource Development Securities Inc.
acquired prior to July 2, 1984, and shares of Dean Witter Strategist Fund
acquired prior to November 8, 1989, are also considered Free Shares and will
be the first Free Shares to be exchanged. After an exchange, all dividends
earned on shares in the Exchange Fund will be considered Free Shares. If the
exchanged amount exceeds the value of such Free Shares, an exchange is made,
on a block-by-block basis, of non-Free Shares held for the longest period of
time (except that if shares held for identical periods of time but subject to
different CDSC schedules are held in the same Exchange Privilege account, the
shares of that block that are subject to a lower CDSC rate will be exchanged
prior to the shares of that block that are subject to a higher CDSC rate).
Shares equal to any appreciation in the value of non-Free Shares exchanged
will be treated as Free Shares, and the amount of the purchase payments for
the non-Free Shares of the fund exchanged into will be equal to the lesser of
(a) the purchase payments for, or (b) the current net asset value of, the
exchanged non-Free Shares. If an exchange between funds would result in
exchange of only part of a particular block of non-Free Shares, then shares
equal to any appreciation in the value of the block (up to the amount of the
exchange) will be treated as Free Shares and exchanged first, and the
purchase payment for that block will be allocated on a pro rata basis between
the non-Free Shares of that block to be retained and the non-Free Shares to
be exchanged. The prorated amount of such purchase payment attributable to
the retained non-Free Shares will remain as the purchase payment for such
shares, and the amount of purchase payment for the exchanged non-Free Shares
will be equal to the lesser of (a) the prorated amount of the purchase
payment for, or (b) the current net asset value of, those exchanged non-Free
Shares. Based upon the exchange procedures described in the CDSC fund
Prospectus under the caption "Contingent Deferred Sales Charge", any
applicable CDSC will be imposed upon the ultimate redemption of shares of any
fund, regardless of the number of exchanges since those shares were
originally purchased.

The Transfer Agent acts as agent for shareholders of the Fund in effecting
redemption of Fund shares and in applying the proceeds to the purchase of
other fund shares. In the absence of negligence on its part, neither the
Transfer Agent nor the Fund shall be liable for any redemption of Fund shares
caused by unauthorized telephone instructions. Accordingly, in such event,
the investor shall bear the risk of loss. The staff of the Securities and
Exchange Commission is currently considering the propriety of such a policy.

With respect to the redemption or repurchase of shares of the Fund, the
application of proceeds to the purchase of new shares in the Fund or any
other of the funds and the general administration of the Exchange Privilege,
the Transfer Agent acts as agent for DWR and for the shareholder's Selected
Broker-Dealer, if any, in the performance of such functions. With respect to
exchanges, redemptions or repurchases, the Transfer Agent shall be liable for
its own negligence and not for the default or negligence of its
correspondents or for losses in transit. The Fund shall not be liable for any
default or negligence of the Transfer Agent, Distributor, or any Selected
Broker-Dealer.

<PAGE>

The Distributor and any Selected Broker-Dealer have authorized and
appointed the Transfer Agent to act as their agent in connection with the
application of proceeds of any redemption of Fund shares to the purchase of
the shares of any other fund and the general administration of the Exchange
Privilege. No commission or discounts will be paid to DWR or any Selected
Broker-Dealer for any transactions pursuant to this Exchange Privilege.

Shares of the Fund acquired pursuant to the Exchange Privilege will be
held by the Fund's transfer agent in an Exchange Privilege Account distinct
from any account of the same shareholder who may have acquired shares of the
Fund directly. A shareholder of the Fund will not be permitted to make
additional investments in such Exchange Privilege Account except through the
exchange of additional shares of the fund in which the shareholder had
initially invested, and the proceeds of any shares redeemed from such Account
may not thereafter be placed back into that Account. If such a shareholder
desires to make any additional investments in the Fund, a separate account
will be maintained for receipt of such investments. The Fund will have
additional costs for account maintenance if a shareholder has more than one
account with the Fund.

The Fund also maintains Exchange Privilege Accounts for shareholders who
acquired their shares of the Fund pursuant to exchange privileges offered by
other investment companies with which the Investment Manager is not
affiliated. The Fund also expects to make available such exchange privilege
accounts to other investment companies that may hereafter be managed by the
Investment Manager.

Exchanges are subject to the minimum investment requirement and any other
conditions imposed by each fund. (The minimum initial investment is $10,000
for Dean Witter Short-Term U.S. Treasury Trust (although that fund may, in
its discretion, accept initial purchases of as low as $5,000) and $5,000 for
the Fund, Dean Witter Liquid Asset Fund Inc., Dean Witter California Tax-Free
Daily Income Trust and Dean Witter New York Municipal Money Market Trust,
although those funds may, at their discretion, accept initial investments of
as low as $1,000. The minimum initial investment for all other Dean Witter
Funds for which the Exchange Privilege is available is $1,000.) Upon exchange
into an Exchange Fund, the shares of that fund will be held in a special
Exchange Privilege Account separately from accounts of those shareholders who
have acquired their shares directly from that fund. As a result, certain
services normally available to shareholders of money market funds, including
the check writing feature, will not be available for funds held in that
account.

The Fund and each of the other Dean Witter Funds may limit the number of
times this Exchange Privilege may be exercised by any investor within a
specified period of time. Also, the Exchange Privilege may be terminated or
revised at any time by any of the Dean Witter Funds, upon such notice as may
be required by applicable regulatory agencies (presently sixty days prior
written notice for termination or material revision), provided that six
months prior written notice of termination will be given to the shareholders
who hold shares of Exchange Funds, TCW/DW North American Government Income
Trust, TCW/DW Income and Growth Fund, TCW/DW Balanced Fund and TCW/DW North
American Intermediate Income Trust pursuant to this Exchange Privilege, and
provided further that the Exchange Privilege may be terminated or materially
revised at times (a) when the New York Stock Exchange is closed for other
than customary weekends and holidays, (b) when trading on the Exchange is
restricted, (c) when an emergency exists as a result of which disposal by the
Fund of securities owned by it is not reasonably practicable or it is not
reasonably practicable for the Fund fairly to determine the value of its net
assets, (d) during any other period when the Securities and Exchange
Commission by order so permits (provided that applicable rules and
regulations of the Securities and Exchange Commission shall govern as to
whether the conditions prescribed in (b) or (c) exist), or (e) if the Fund
would be unable to invest amounts effectively in accordance with its
investment objective(s), policies and restrictions.

The current prospectus for each fund describes its investment objective(s)
and policies, and shareholders should obtain a copy and examine it carefully
before investing. An exchange will be treated for federal income tax purposes
the same as a repurchase or redemption of shares, on which the shareholder
may realize a capital gain or loss. However, the ability to deduct capital
losses on an exchange may be limited in situations where there is an exchange
of shares within ninety days after the

<PAGE>

shares are purchased. The Exchange Privilege is only available in states
where an exchange may legally be made. For further information regarding the
Exchange Privilege, shareholders should contact their DWR or other Selected
Broker-Dealer account executive or the Transfer Agent.

PLAN OF DISTRIBUTION

In accordance with a Plan of Distribution pursuant to Rule 12b-1 under the
Act between the Fund and Dean Witter Distributors Inc. (the "Distributor"),
the Distributor provides certain services in connection with the promotion of
sales of Fund shares. (The "Plan" refers to the Plan and Agreement of
Distribution prior to the reorganization and to the Plan of Distribution
after the reorganization.) The Plan was initially approved by the Board of
Trustees on April 15, 1987 and by the Fund's shareholders on April 20, 1987.
The Plan is substantially identical to the agreement of distribution adopted
by the Fund in 1983 and which was in effect until the reorganization of the
Fund in 1987 as a Massachusetts business trust. The vote of the Trustees
included a majority of the Trustees who are not and were not at the time of
their voting interested persons of the Fund and who have and had at the time
of their votes no direct or indirect financial interest in the operation of
the Plan (the "Independent Trustees"), cast in person at a meeting called for
the purpose of voting on such Plan.

The Plan provides that the Distributor bears the expense of all
promotional and distribution related activities on behalf of the Fund, except
for expenses that the Trustees determine to reimburse, as described below.
The following activities and services may be provided by the Distributor
under the Plan: (1) compensation to and expenses of DWR's and other Selected
Broker-Dealers' account executives and other employees, including overhead
and telephone expenses; (2) sales incentives and bonuses to sales
representatives and to marketing personnel in connection with promoting sales
of the Fund's shares; (3) expenses incurred in connection with promoting
sales of the Fund's shares; (4) preparing and distributing sales literature;
and (5) providing advertising and promotional activities, including direct
mail solicitation and television, radio, newspaper, magazine and other media
advertisements.

The Fund is authorized to reimburse specific expenses incurred or to be
incurred in promoting the distribution of the Fund's shares. Reimbursement is
made through monthly payments in amounts determined in advance of each
calendar quarter by the Trustees, including a majority of the Independent
Trustees. The amount of each monthly payment may in no event exceed an amount
equal to a payment at the annual rate of 0.15 of 1% of the Fund's average
daily net assets during the month. No interest or other financing charges
will be incurred by DWR or other Selected Broker-Dealers for which
reimbursements under the Plan will be made. In addition, no interest charges,
if any, incurred on any distribution expense incurred pursuant to the Plan
will be reimbursable under the Plan. In making quarterly determinations of
the amounts that may be expended by the Fund, the Investment Manager provides
and the Trustees review, a quarterly budget of projected incremental
distribution expenses to be incurred on behalf of the Fund, together with a
report explaining the purposes and anticipated benefits of incurring such
expenses. The Trustees determine which particular expenses, and the portions
thereof, that may be borne by the Fund, and in making such a determination
shall consider the scope of the Distributor's commitment to promoting the
distribution of the Fund's shares.

The Fund accrued $590,384 to the Distributor, pursuant to the Plan of
Distribution as then in effect, for its fiscal year ended December 31, 1994.
The amount accrued is equivalent to an annual rate of 0.10 of 1% of the
Fund's average daily net assets for its fiscal year ended December 31, 1994.
Based upon the total amounts spent by the Distributor during the period, it
is estimated that the amount paid by the Fund to the Distributor for
distribution was spent in approximately the following ways: (i)
advertising--$-0-; (ii) printing and mailing prospectuses to other than
current shareholders--$-0-; (iii) compensation to underwriters--$-0-; (iv)
compensation to dealers--$-0-; (v) compensation to sales personnel--$-0-; and
(vi) other, which accrued for expenses relating to compensation of sales
personnel and other miscellaneous expenses--$590,384. No payments under the
Plan were made for overhead, interest, carrying or other financing charges.

Under the Plan, the Distributor uses its best efforts in rendering
services to the Fund, but in the absence of willful misfeasance, bad faith,
gross negligence or reckless disregard of its obligations, the Distributor is
not liable to the Fund or any of its shareholders for any error of judgment
or mistake of law or for any act or omission or for any losses sustained by
the Fund or its shareholders.

<PAGE>

The Plan will continue in effect from year to year, provided such
continuance is approved annually by a vote of the Trustees, including a
majority of the Independent Trustees. An amendment to increase materially the
maximum amount authorized to be spent under the Plan must be approved by the
shareholders of the Fund, and all material amendments to the Plan must be
approved by the Trustees in the manner described above. The Plan may be
terminated at any time, without payment of any penalty, by vote of the
holders of a majority of the Independent Trustees or by a vote of a majority
of the outstanding voting securities of the Fund (as defined in the Act) on
not more than 30 days written notice to any other party to the Plan. So long
as the Plan is in effect, the selection or nomination of the Independent
12b-1 Trustees is committed to the discretion of the 12b-1 Trustees.

Under the Plan, the Distributor provides the Fund, for review by the
Trustees, and the Trustees review, promptly after the end of each calendar
quarter, a written report regarding the incremental distribution expenses
incurred on behalf of the Fund during such calendar quarter, which report
includes (1) an itemization of the types of expenses and the purposes
therefore; (2) the amounts of such expenses; and (3) a description of the
benefits derived by the Fund. In the Trustees' quarterly review of the Plan,
they consider its continued appropriateness and the level of compensation
provided therein.

At their meeting held on October 30, 1992, the Trustees of the Fund,
including all of the Independent 12b-1 Trustees, approved certain amendments
to the Plan which took effect in January, 1993 and were designed to reflect
the fact that upon the reorganization described above, the share distribution
activities, theretofore performed by the Fund or for the Fund by DWR were
assumed by the Distributor and DWR's, sales activities are now being
performed pursuant to the terms of a selected dealer agreement between the
Distributor and DWR. The amendments provide that payments under the Plan will
be made to the Distributor rather than to the Investment Manager as before
the amendment, and that the Distributor in turn is authorized to make
payments to DWR, its affiliates or other Selected Broker-Dealers (or direct
that the Fund pay such entities directly). The Distributor is also authorized
to retain part of such fee as compensation for its own distribution-related
expenses.

At their meeting held on April 8, 1994, the Board of Trustees approved the
Plan until April 30, 1995. In making their determination to continue the Plan
until April 30, 1995, the Board of Trustees, including all of the Independent
Trustees, arrived at the conclusion that the Plan had benefited the Fund.
This conclusion was based upon the Investment Manager's belief that the
expenditures made pursuant to the Plan had tended to arrest the decline of
Fund assets by meeting the competitive efforts of other, similar financial
products, and had encouraged the account executives employed by DWR and other
Selected Broker-Dealers to increase their efforts in selling shares of the
Fund. The Board of Trustees, including the Independent Trustees, also
concluded that, in their judgment, there is a reasonable likelihood that the
Plan will continue to benefit the Fund and its shareholders.

No interested person of the Fund nor any Trustee of the Fund who is not an
interested person of the Fund, as defined in the Act, had any direct or
indirect financial interest in the operation of the Plan and Agreement except
to the extent that the Distributor, DWR or the Investment Manager or certain
of its employees may be deemed to have such an interest as a result of
benefits derived from the successful operation of the Plan or as a result of
receiving a portion of the amounts expended thereunder by the Fund.

HOW NET ASSET VALUE IS DETERMINED
- -----------------------------------------------------------------------------

As discussed in the Prospectus, the net asset value of the Fund is
determined as of the close of trading on each day that the New York Stock
Exchange is open. The New York Stock Exchange currently observes the
following holidays: New Year's Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.

The Fund utilizes the amortized cost method in valuing its portfolio
securities for purposes of determining the net asset value of shares of the
Fund. The Fund utilizes the amortized cost method in valuing its portfolio
securities even though the portfolio securities may increase or decrease in
market value, generally, in connection with changes in interest rates. The
amortized cost method of valuation involves valuing a security at its cost
adjusted by a constant amortization to maturity of any discount or

<PAGE>

premium, regardless of the impact of fluctuating interest rates on the market
value of the instrument. While this method provides certainty in valuation,
it may result in periods during which value, as determined by amortized cost,
is higher or lower than the price the Fund would receive if it sold the
instrument. During such periods, the yield to investors in the Fund may
differ somewhat from that obtained in a similar company which uses mark to
market values for all its portfolio securities. For example, if the use of
amortized cost resulted in a lower (higher) aggregate portfolio value on a
particular day, a prospective investor in the Fund would be able to obtain a
somewhat higher (lower) yield than would result from investment in such a
similar company and existing investors would receive less (more) investment
income. The purpose of this method of calculation is to facilitate the
maintenance of a constant net asset value per share of $1.00.

The Fund's use of the amortized cost method to value its portfolio
securities and the maintenance of the per share net asset value of $1.00 is
permitted pursuant to Rule 2a-7 of the Act (the "Rule") and pursuant to an
order of exemption granted to the Fund by the Securities and Exchange
Commission, dated February 18, 1981 (the "Order"), and is conditioned on its
compliance with various conditions contained in the Rule including: (a) the
Fund's Board of Trustees is obligated, as a particular responsibility within
the overall duty of care owed to the Fund's shareholders, to establish
procedures reasonably designed, taking into account current market conditions
and the Fund's investment objective, to stabilize the net asset value per
share as computed for the purpose of distribution and redemption at $1.00 per
share; (b) (i) the procedures include calculation, at such intervals as are
reasonable in light of current market conditions, of the deviation, if any
between net asset value per share using amortized cost to value portfolio
securities and net asset value per share based upon available market
quotations with respect to such portfolio securities (for the purpose of
determining market value, securities as to which the Trust has a "put" will
be valued at the higher of market value or exercise price); (ii) periodic
review by the Trustees of the amount of deviation as well as methods used to
calculate it, and (iii) maintenance of written records of the procedures, the
Trustees considerations made pursuant to them and any actions taken upon such
consideration; the Trustees will consider what steps should be taken, if any,
in the event of a difference of more than 1/2 of 1% between the two methods
of valuation; and (c) the Trustees should take such action as they deem
appropriate to eliminate or reduce, to the extent reasonably practicable,
material dilution or other unfair results to investors or existing
shareholders. Such action may include: selling portfolio instruments prior to
maturity to realize capital gains or losses or to shorten the average
portfolio maturity of the Trust; withholding dividends; utilizing a net asset
value per share as determined by using available market quotations or
reducing the number of its outstanding shares. Any reduction of outstanding
shares will be effected by having each shareholder proportionately contribute
to the Trust's capital a number of shares which represent the difference
between the amortized cost valuation and market valuation of the portfolio.
Each shareholder will be deemed to have agreed to such contribution by his or
her investment in the Trust.

The Rule further requires that the Fund limit its investments to U.S.
dollar-denominated instruments which the Board of Trustees determines present
minimal credit risks and which are Eligible Securities as defined below. The
Rule also requires the Fund to maintain a dollar weighted average portfolio
maturity (not more than 90 days) appropriate to the objective of maintaining
a stable net asset value of $1.00 per share and precludes the purchase of any
instrument with a remaining maturity of more than thirteen months. Should the
disposition of a portfolio security result in a dollar weighted average
portfolio maturity of more than 90 days, the Fund would be required to invest
its available cash in such a manner as to reduce such maturity to 90 days or
less as soon as is reasonably practicable.

At the time the Fund makes the commitment to purchase a Municipal
Obligation on a when-issued or delayed delivery basis, it will record the
transaction and thereafter reflect the value, each day, of the Municipal
Obligation in determining its net asset value. Repurchase agreements are
valued at the face value of the repurchase agreement plus any accrued
interest thereon to date.

Generally, for purposes of the procedures adopted under the Rule, the
maturity of a portfolio instrument is deemed to be the period remaining
(calculated from the trade date or such other date on which the Trust's
interest in the instrument is subject to market action) until the date noted
on the face of the instrument as the date on which the principal amount must
be paid, or in the case of an instrument called for redemption, the date on
which the redemption payment must be made.

<PAGE>

A variable rate obligation that is subject to a demand feature is deemed
to have a maturity equal to the longer of the period remaining until the next
readjustment of the interest rate or the period remaining until the principal
amount can be recovered through demand. A floating rate instrument that is
subject to a demand feature is deemed to have a maturity equal to the period
remaining until the principal amount can be recovered through demand.

An Eligible Security is defined in the Rule to mean a security which: (a)
has a remaining maturity of thirteen months or less; (b)(i) is rated in the
two highest short-term rating categories by any two NRSRO's that have issued
a short-term rating with respect to the security or class of debt obligations
of the issuer, or (ii) if only one NRSRO has issued a short-term rating with
respect to the security, then by that NRSRO; (c) was a long-term security at
the time of issuance whose issuer has outstanding a short-term debt
obligation which is comparable in priority and security and has a rating as
specified in clause (b) above; or (d) if no rating is assigned by any NRSRO
as provided in clauses (b) and (c) above, the unrated security is determined
by the Board to be of comparable quality to any such rated security.

As permitted by the Rule, the Board has delegated to the Fund's Investment
Manager, subject to the Board's oversight pursuant to guidelines and
procedures adopted by the Board, the authority to determine which securities
present minimal credit risks and which unrated securities are comparable in
quality to rated securities.

Also, as required by the Rule, the Fund will limit its investments in
securities, other than Government securities, so that, at the time of
purchase: (a) except as further limited in (b) below with regard to certain
securities, no more than 5% of its total assets will be invested in the
securities of any one issuer; and (b) with respect to Eligible Securities
that have received a rating in less than the highest category by any one of
the NRSROs whose ratings are used to qualify the security as an Eligible
Security, or are determined to be of comparable quality: (i) no more than 5%
in the aggregate of the Fund's total assets in all such securities, and (ii)
no more than the greater of 1% of total assets, or $1 million, in the
securities of any one issuer.

The Rule further requires that the Fund limit its investments to U.S.
dollar-denominated instruments which the Directors determine present minimal
credit risks and which are Eligible Securities. The Rule also requires the
Fund to maintain a dollar-weighted average portfolio maturity (not more than
90 days) appropriate to its objective of maintaining a stable net asset value
of $1.00 per share and precludes the purchase of any instrument with a
remaining maturity of more than 397 days. Should the disposition of a
portfolio security result in a dollar-weighted average portfolio maturity of
more than 90 days, the Fund will invest its available cash in such a manner
as to reduce such maturity to 90 days or less as soon as is reasonably
practicable.

If the Board determines that it is no longer in the best interests of the
Trust and its shareholders to maintain a stable price of $1 per share or if
the Board believes that maintaining such price no longer reflects a
market-based net asset value per share, the Board has the right to change
from an amortized cost basis of valuation to valuation based on market
quotations. The Trust will notify shareholders of any such changes.

In determining the "maturity" of variable rate Municipal Obligations, the
Board of Trustees of the Fund has adopted procedures under which the longer
of (i) the date upon which the Fund may obtain prepayment of the principal
amount of an obligation (provided demand for prepayment may be made on not
more than seven days' notice) or (ii) the date upon which the interest rate
of a variable rate obligation is required to be next adjusted, may in certain
circumstances be considered as the maturity date of the obligation. In
addition, the presence of a line of credit or other credit facility offered
by a bank or other financial institution which guarantees the payment
obligation of the issuer of a Municipal Obligation may be taken into account
by the Board of Trustees in determining whether an investment is of "high
quality."

The Fund will manage its portfolio in an effort to maintain a constant
$1.00 per share price, but it cannot assure that the value of its shares will
never deviate from this price. Since dividends from net investment income are
declared and reinvested on a daily basis, the net asset value per share,
under ordinary circumstances, is likely to remain constant. Realized and
unrealized gains and losses will not

<PAGE>

be distributed on a daily basis but will be reflected in the Fund's net asset
value. The amounts of such gains and losses will be considered by the Board
of Trustees in determining the action to be taken to maintain the Fund's
$1.00 per share net asset value. Such action may include distribution at any
time of part or all of the then accumulated undistributed net realized
capital gains, or reduction or elimination of daily dividends by an amount
equal to part or all of the then accumulated net realized capital losses.
However, if realized losses should exceed the sum of net investment income
plus realized gains on any day, the net asset value per share on that day
might decline below $1.00 per share. In such circumstances, the Fund may
reduce or eliminate the payment of daily dividends for a period of time in an
effort to restore the Fund's $1.00 per share net asset value. A decline in
prices of securities could result in significant unrealized depreciation on a
mark to market basis. Under these circumstances the Fund may reduce or
eliminate the payment of dividends and utilize a net asset value per share as
determined by using available market quotations or reduce the number of its
shares outstanding.

REDEMPTION OF FUND SHARES
- -----------------------------------------------------------------------------

As discussed in the Prospectus, shares of the Fund may be redeemed at net
asset value at any time. When a redemption is made by check and a check is
presented to the Transfer Agent for payment, the Transfer Agent will redeem a
sufficient number of full and fractional shares in the shareholder's account
to cover the amount of the check. This enables the shareholder to continue
earning daily income dividends until the check has cleared.

A check drawn by a shareholder against his or her account in the Fund
constitutes a request for redemption of a number of shares sufficient to
provide proceeds equal to the amount of the check. Payment of the proceeds of
a check will normally be made on the next business day after receipt by the
Transfer Agent of the check in proper form. Subject to the foregoing, if a
check is presented for payment to the Transfer Agent by a shareholder or
payee in person, the Transfer Agent will make payment by means of a check
drawn on the Fund's account or, in the case of a shareholder payee, to the
shareholder's predesignated bank account, but will not make payment in cash.

The Fund reserves the right to suspend redemptions or postpone the date of
payment (1) for any periods during which the New York Stock Exchange is
closed (other than for customary weekend and holiday closings), (2) when
trading on that Exchange is restricted or an emergency exists, as determined
by the Securities and Exchange Commission, so that disposal of the Fund's
investments or determination of the Fund's net asset value is not reasonably
practicable, or (3) for such other periods as the Commission by order may
permit for the protection of the Fund's investors.

As discussed in the Prospectus, due to the relatively high cost of
handling small investments, the Fund reserves the right to redeem, at net
asset value, the shares of any shareholder (other than shares held in an
Individual Retirement Account or custodial account under Section 403(b)(7) of
the Internal Revenue Code) whose shares due to redemptions by the
shareholders have a value of less than $1,000 or such lesser amounts as may
be fixed by the Board of Trustees. However, before the Fund redeems such
shares and sends the proceeds to the shareholder, it will notify the
shareholder that the value of his or her shares is less than $1,000 and allow
him or her sixty days to make an additional investment in an amount which
will increase the value of his or her account to $1,000 or more before the
redemption is processed.

Systematic Withdrawal Plan. As discussed in the Prospectus, a systematic
withdrawal plan is available for shareholders who own or purchase shares of
the Fund having a minimum value of at least $5,000, which provides for
monthly or quarterly checks in any dollar amount not less than $25, or in any
whole percentage of the account balance, on an annualized basis. The Transfer
Agent acts as agent for the shareholder in tendering to the Fund for
redemption sufficient full and fractional shares to provide the amount of the
periodic withdrawal payment designated in the application. The shares will be
redeemed at their net asset value determined, at the shareholder's option, on
the tenth or twenty-fifth day (or next business day) of the relevant month or
quarter and normally a check for the proceeds will be mailed by the Transfer
Agent within five days after the date of redemption. The withdrawal plan may
be terminated at any time by the Fund.

<PAGE>

Any shareholder who wishes to have payments under the withdrawal plan made
to a third party, or sent to an address other than the one listed on the
account, must send complete written instructions to the Transfer Agent to
enroll in the withdrawal plan. The shareholder's signature on such
instructions must be guaranteed by an eligible guarantor acceptable to the
Transfer Agent (shareholders should contact the Transfer Agent for a
determination as to whether a particular institution is such an eligible
guarantor). A shareholder may, at any time, change the amount and interval of
withdrawal payments through his or her Account Executive or by written
notification to the Transfer Agent. In addition, the party and/or the address
to which checks are mailed may be changed by written notification to the
Transfer Agent, with signature guarantees required in the manner described
above. The shareholder may also terminate the withdrawal plan at any time by
written notice to the Transfer Agent. In the event of such termination, the
account will be continued as a regular shareholder investment account. The
shareholder may also redeem all or part of the shares held in the withdrawal
plan account (see "Redemption of Fund Shares" in the Prospectus) at any time.
If the number of shares redeemed is greater than the number of shares paid as
dividends, such redemptions may, of course, eventually result in liquidation
of all the shares in the account. The automatic cash withdrawal method of
redemption is not available for shares held in an Exchange Privilege Account.

DIVIDENDS, DISTRIBUTIONS AND TAXES
- -----------------------------------------------------------------------------

As discussed in the Prospectus, the Fund intends to declare dividends,
payable on each day the New York Stock Exchange is open for business and
distribute all of its daily net investment income to shareholders of record
as of the close of business the preceding business day.

In computing net investment income, the Fund will amortize any premiums
and original issue discount on securities owned, if applicable. Capital gains
or losses realized upon sale or maturity of such securities will be based on
their amortized cost.

Gains or losses on the sales of securities by the Fund will be long-term
capital gains or losses if the securities have been held by the Fund for more
than twelve months. Gains or losses on the sale of securities held for twelve
months or less will be short-term capital gains or losses.

The Fund has qualified and intends to remain qualified as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986
(the "Code"). If so qualified, the Fund will not be subject to federal income
tax on its net investment income and capital gains, if any, realized during
any fiscal year to the extent that it distributes such income and capital
gains to its shareholders.

As discussed in the Prospectus, the Fund intends to qualify to pay
"exempt-interest dividends" to its shareholders by maintaining, as of the
close of each quarter of its taxable year, at least 50% of the value of its
assets in tax-exempt securities. An exempt-interest dividend is that part of
a dividend distribution made by the Fund which consists of interest received
by the Fund on tax-exempt securities upon which the shareholder incurs no
federal income taxes. Exempt-interest dividends are included, however, in
determining what portion, if any, of a person's Social Security benefits are
subject to federal income tax.

Within 60 days after the end of its fiscal year, the Fund will mail to
shareholders a statement indicating the percentage of the dividend
distributions for such fiscal year which constitutes exempt-interest
dividends and the percentage, if any, that is taxable, and to what extent the
taxable portion is long-term capital gains, short-term capital gains or
ordinary income. This percentage should be applied uniformly to all monthly
distributions made during the fiscal year to determine what proportion of the
dividends paid is tax-exempt. The percentage may differ from the percentage
of tax-exempt dividend distributions for any particular month.

Shareholders will be subject to federal income tax on dividends paid from
interest income derived from taxable securities and on distributions of net
short-term gains. Such interest and realized net short-term capital gains
dividends and distributions are taxable to the shareholder as ordinary
dividend income regardless of whether the shareholder receives such
distributions in additional shares or in cash. Distributions of long-term
capital gains, if any, are taxable as long-term capital gains, regardless of
how long the shareholder has held the Fund shares and regardless of whether
the distribution is received in

<PAGE>

additional shares or cash. Since the Fund's income is expected to be derived
entirely from interest rather than dividends, it is anticipated that none of
such dividend distributions will be eligible for the federal dividends
received deduction available to corporations. Realized net long-term capital
gains distributions, which are taxable as long-term capital gains, are not
eligible for the dividends received deduction.

Any loss on the sale or exchange of shares of the Fund which are held for
6 months or less is disallowed to the extent of the amount of any
exempt-interest dividend paid with respect to such shares. Treasury
Regulations may provide for a reduction in such required holding periods. If
a shareholder receives a dividend that is taxed as a long-term capital gain
on shares held for six months or less and sells those shares at a loss, the
loss will be treated as a long-term capital loss.

Interest on indebtedness incurred or continued by a shareholder to
purchase or carry shares of the Fund is not deductible. Furthermore, entities
or persons who are "substantial users" (or related persons) of facilities
financed by industrial development bonds should consult their tax advisers
before purchasing shares of the Fund. "Substantial user" is defined generally
by Income Tax Regulation 1.103-11(b) as including a "non-exempt person" who
regularly uses in trade or business a part of a facility financed from the
proceeds of industrial development bonds.

From time to time, proposals have been introduced before Congress for the
purpose of restricting or eliminating the federal income tax exemption for
interest on municipal securities. Similar proposals may be introduced in the
future. If such a proposal were enacted, the availability of municipal
securities for investment by the Fund could be affected. In that event, the
Fund would re-evaluate its investment objective and policies.

The exemption of interest income for federal income tax purposes does not
necessarily result in exemption under the income or other tax laws of any
state or local taxing authority. Thus, shareholders of the Fund may be
subject to state and local taxes on exempt-interest dividends. Shareholders
should consult their tax advisers about the status of dividends from the Fund
in their own states and localities. The Fund will report annually to
shareholders the percentage of interest income earned by the Fund during the
preceding year on tax-exempt obligations, indicating, on a state-by-state
basis, the source of such income.

Any dividends or capital gains distributions received by a shareholder
from any investment company will have the effect of reducing the net asset
value of the shareholder's stock in that fund by the exact amount of the
dividend or capital gains distribution. Furthermore, capital gains
distributions are, and some portion of the dividends may be, subject to
income tax. If the net asset value of the shares should be reduced below a
shareholder's cost as a result of the payment of taxable dividends or the
distribution of realized net long-term capital gains, such payment or
distribution would be in part a return of capital but nonetheless would be
taxable to the shareholder. Therefore, an investor should consider the tax
implications of purchasing Fund shares immediately prior to a distribution
record date.

Shareholders are urged to consult their attorneys or tax advisers
regarding specific questions as to federal, state or local taxes.

INFORMATION ON COMPUTATION OF YIELD

The Fund's current yield for the seven days ending December 31, 1994 was
4.25%. The effective annual yield on December 31, 1994 was 4.34%, assuming
daily compounding.

The Fund's annualized "current yield" as may be quoted from time to time
in advertisements and other communications to shareholders and potential
investors, is computed by determining, for a stated seven-day period, the net
change, exclusive of capital changes and including the value of additional
shares purchased with dividends and any dividends declared therefrom (which
reflect deductions of all expenses of the Fund such as management fees), in
the value of a hypothetical pre-existing account having a balance of one
share at the beginning of the period, and dividing the difference by the
value of the account at the beginning of the base period to obtain the base
period return, and then multiplying the base period return by (365/7).

<PAGE>

The Fund's annualized effective yield, as may be quoted from time to time
in advertisements and other communications to shareholders and potential
investors, is computed by determining (for the same stated seven-day period
as the current yield), the net change, exclusive of capital changes and
including the value of additional shares purchased with dividends and any
dividends declared therefrom (which reflect deductions of all expenses of the
Fund such as management fees), in the value of a hypothetical pre-existing
account having a balance of one share at the beginning of the period, and
dividing the difference by the value of the account at the beginning of the
base period to obtain the base period return, and then compounding the base
period return by adding 1, raising the sum to a power equal to 365 divided by
7, and subtracting 1 from the result.

The yields quoted in any advertisement or other communication should not
be considered a representation of the yields of the Fund in the future since
the yield is not fixed. Actual yields will depend not only on the type,
quality and maturities of the investments held by the Fund and changes in
interest rates on such investments, but also on changes in the Fund's
expenses during the period. The income used in all calculation of yields are
comprised totally of tax-exempt income.

Yield information may be useful in reviewing the performance of the Fund
and for providing a basis for comparison with other investment alternatives.
However, unlike bank deposits or other investments which typically pay a
fixed yield for a stated period of time, the Fund's yield fluctuates.

Based upon a Federal personal income tax bracket of 39.6% (the highest
current individual marginal tax rate), the Fund's tax-equivalent yield for
the seven days ending December 31, 1994 was 7.04%.

Tax-equivalent yield is computed by dividing that portion of the current
yield (calculated as described above) which is tax-exempt by 1 minus a stated
tax rate and adding the quotient to that portion, if any, of the yield of the
Fund that is not tax-exempt.

The Fund may also advertise the growth of hypothetical investments of
$10,000, $50,000 and $100,000 in shares of the Fund by adding the sum of all
distributions on 10,000, 50,000 or 100,000 shares of the Fund since inception
to $10,000, $50,000 and $100,000, as the case may be. Investments of $10,000,
$50,000 and $100,000 in the Fund at inception would have grown to $18,709,
$93,545 and $187,090, respectively, at December 31, 1994.

DESCRIPTION OF SHARES
- -----------------------------------------------------------------------------

The shareholders of the Fund are entitled to a full vote for each full
share of beneficial interest held. The Fund is authorized to issue an
unlimited number of shares of beneficial interest. The shareholders of the
Fund are entitled to a full vote for each full share held. All of the
Trustees, except for Messrs. Bozic, Purcell and Schroeder, have been elected
by the shareholders of the Fund, most recently at a Special Meeting of
Shareholders held on January 12, 1993. Messrs. Bozic, Purcell and Schroeder
were elected by the other Trustees of the Fund on April 8, 1994.

The Declaration of Trust further provides that no Trustee, officer,
employee or agent of the Fund is liable to the Fund or to a shareholder, nor
is any Trustee, officer, employee or agent liable to any third persons in
connection with the affairs of the Fund, except as such liability may arise
from his/her or its own bad faith, willful misfeasance, gross negligence, or
reckless disregard of his duties. It also provides that all third persons
shall look solely to the Fund property for satisfaction of claims arising in
connection with the affairs of the Fund. With the exceptions stated, the
Declaration of Trust provides that a Trustee, officer, employee or agent is
entitled to be indemnified against all liability in connection with the
affairs of the Fund.

The Fund shall be of unlimited duration subject to the provisions in the
Declaration of Trust concerning termination by action of the shareholders or
the Trustees.

CUSTODIAN AND TRANSFER AGENT
- -----------------------------------------------------------------------------

The Bank of New York, 90 Washington Street, New York, New York 10286 is
the Custodian of the Fund's assets. Any of the Fund's cash balances in excess
of $100,000 are unprotected by federal deposit insurance. Such balances may,
at times, be substantial.

<PAGE>

Dean Witter Trust Company, Harborside Financial Center, Plaza Two, Jersey
City, New Jersey 07311 is the Transfer Agent of the Fund's shares and
Dividend Disbursing Agent for payment of dividends and distributions on Fund
shares and Agent for shareholders under various investment plans described
herein. Dean Witter Trust Company is an affiliate of Dean Witter InterCapital
Inc., the Fund's Investment Manager, and Dean Witter Distributors Inc., the
Fund's Distributor. As Transfer Agent and Dividend Disbursing Agent, Dean
Witter Trust Company's responsibilities include maintaining shareholder
accounts; disbursing cash dividends and reinvesting dividends; processing
account registration changes; handling purchase and redemption transactions;
mailing prospectuses and reports; mailing and tabulating proxies; processing
share certificate transactions; and maintaining shareholder records and
lists. For these services Dean Witter Trust Company receives a per
shareholder account fee from the Fund.

REPORTS TO SHAREHOLDERS
- -----------------------------------------------------------------------------

The Fund will send to shareholders, at least semi-annually, reports
showing the Fund's portfolio and other information. An annual report,
containing financial statements audited by independent accountants, will be
sent to shareholders each year.

The Fund's fiscal year is the calendar year. The financial statements of
the Fund must be audited at least once a year by independent accountants
whose selection is made annually by the Fund's Board of Trustees.

INDEPENDENT ACCOUNTANTS
- -----------------------------------------------------------------------------

Price Waterhouse LLP serves as the independent accountants of the Fund.
The independent accountants are responsible for auditing the annual financial
statements of the Fund.

LEGAL COUNSEL
- -----------------------------------------------------------------------------

Sheldon Curtis, Esq., who is an officer and the General Counsel of the
Investment Manager, is an officer and the General Counsel of the Fund.

EXPERTS
- -----------------------------------------------------------------------------

The financial statements of the Fund included in the Prospectus and
incorporated by reference in this Statement of Additional Information have
been so included and incorporated in reliance on the report of Price
Waterhouse LLP, independent accountants, given on the authority of said firm
as experts in auditing and accounting.

REGISTRATION STATEMENT
- -----------------------------------------------------------------------------

This Statement of Additional Information and the Prospectus do not contain
all of the information set forth in the Registration Statement the Fund has
filed with the Securities and Exchange Commission. The complete Registration
Statement may be obtained from the Securities and Exchange Commission upon
payment of the fee prescribed by the rules and regulations of the Commission.

FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------

The audited financial statements of the Fund for the fiscal year ended
December 31, 1994, and the report of the independent accountants thereon, are
set forth in the Fund's Prospectus, and are incorporated herein by reference.

<PAGE>

APPENDIX

RATING OF INVESTMENTS
- -----------------------------------------------------------------------------

Moody's Investors Service Inc. ("Moody's")

MUNICIPAL BOND RATINGS

<TABLE>
<CAPTION>
<S> <C>
Aaa Bonds which are rated Aaa are judged to be of the best quality. They carry the smallest degree of investment
risk and are generally referred to as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various protective elements are likely to
change, such changes as can be visualized are most unlikely to impair the fundamentally strong position
of such issues.
Aa Bonds which are Aa are judged to be of high quality by all standards. Together with the Aaa group they
comprise what are generally known as high grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities or fluctuation of protective elements may
be of greater amplitude or there may be other elements present which make the long-term risks appear somewhat
larger than in Aaa securities.
A Bonds which are rated A possess many favorable investment attributes and are to be considered as upper
medium grade obligations. Factors giving security to principal and interest are considered adequate, but
elements may be present which suggest a susceptibility to impairment sometime in the future.
Baa Bonds which are rated Baa are considered as medium grade obligations; i.e., they are neither highly protected
nor poorly secured. Interest payments and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as
well. Bonds rated Aaa, Aa, A and Baa are considered investment grade bonds.
Ba Bonds which are rated Ba are judged to have speculative elements; their future cannot be considered as
well assured. Often the protection of interest and principal payments may be very moderate, and therefore
not well safeguarded during both good and bad times in the future. Uncertainty of position characterizes
bonds in this class.
B Bonds which are rated B generally lack characteristics of the desirable investment. Assurance of interest
and principal payments or of maintenance of other terms of the contract over any long period of time may
be small.
Caa Bonds which are rated Caa are of poor standing. Such issues may be in default or there may be present elements
of danger with respect to principal or interest.
Ca Bonds which are rated Ca present obligations which are speculative in a high degree. Such issues are often
in default or have other marked shortcomings.
C Bonds which are rated C are the lowest rated class of bonds, and issues so rated can be regarded as having
extremely poor prospects of ever attaining any real investment standing.
</TABLE>

Conditional Rating: Bonds for which the security depends upon the
completion of some act or the fulfillment of some condition are rated
conditionally. These bonds secured by (a) earnings of projects under
construction, (b) earnings of projects unseasoned in operation experience,
(c) rentals which begin when facilities are completed or (d) payments to
which some other limiting condition attaches. Parenthetical rating denotes
probable credit stature upon completion of construction or elimination of
basis of condition.

Rating Refinements: Moody's may apply numerical modifiers, 1, 2, and 3 in
each generic rating classification from Aa through B in its municipal bond
rating system. The modifier 1 indicates that the security ranks in the higher
end of its generic rating category; the modifier 2 indicates a mid-range
ranking; and a modifier 3 indicates that the issue ranks in the lower end of
its generic rating category.

<PAGE>

MUNICIPAL NOTE RATINGS

Moody's ratings for state and municipal note and other short-term loans
are designated Moody's Investment Grade (MIG). MIG 1 denotes best quality and
means there is present strong protection from established cash flows,
superior liquidity support or demonstrated broad-based access to the market
for refinancing. MIG 2 denotes high quality and means that margins of
protection are ample although not as large as in MIG 1. MIG 3 denotes
favorable quality and means that all security elements are accounted for but
that the undeniable strength of the previous grades, MIG 1 and MIG 2, is
lacking. MIG 4 denotes adequate quality and means that the protection
commonly regarded as required of an investment security is present and that
while the notes are not distinctly or predominantly speculative, there is
specific risk.

VARIABLE RATE DEMAND OBLIGATIONS

A short-term rating, in addition to the Bond or MIG ratings, designated
VMIG may also be assigned to an issue having a demand feature. The assignment
of the VMIG symbol reflects such characteristics as payment upon periodic
demand rather than fixed maturity dates and payment relying on external
liquidity. The VMIG rating criteria are identical to the MIG criteria
discussed above.

COMMERCIAL PAPER RATINGS

Moody's Commercial Paper ratings are opinions of the ability to repay
punctually promissory obligations not having an original maturity in excess
of nine months. These ratings apply to Municipal Commercial Paper as well as
taxable Commercial Paper. Moody's employs the following three designations,
all judged to be investment grade, to indicate the relative repayment
capacity of rated issuers: Prime-1, Prime-2, Prime-3.

Issuers rated Prime-1 have a superior capacity for repayment of short-term
promissory obligations; Issuers rated Prime-2 have a strong capacity for
repayment of short-term promissory obligations; and Issuers rated Prime-3
have an acceptable capacity for repayment of short-term promissory
obligations. Issuers rated Not Prime do not fall within any of the Prime
rating categories.

STANDARD & POOR'S CORPORATION ("STANDARD & POOR'S")
MUNICIPAL BOND RATINGS

A Standard & Poor's municipal bond rating is a current assessment of the
creditworthiness of an obligor with respect to a specific obligation. This
assessment may take into consideration obligors such as guarantors, insurers
or lessees.

The ratings are based on current information furnished by the issuer or
obtained by Standard & Poor's from other sources it considers reliable. The
ratings are based, in varying degrees, on the following considerations: (1)
likelihood of default-capacity and willingness of the obligor as to the
timely payment of interest and repayment of principal in accordance with the
terms of the obligation; (2) nature of and provisions of the obligation; and
(3) protection afforded by, and relative position of the obligation in the
event of bankruptcy, reorganization or other arrangement under the laws of
bankruptcy and other laws affecting creditors' rights.

Standard & Poor's does not perform an audit in connection with any rating
and may, on occasion, rely on unaudited financial information. The ratings
may be changed, suspended or withdrawn as a result of changes in, or
unavailability of, such information, or for other reasons.

<TABLE>
<CAPTION>
<S> <C>
AAA Debt rated "AAA" has the highest rating assigned by Standard & Poor's. Capacity to pay interest and repay
principal is extremely strong.
AA Debt rated "AA" has a very strong capacity to pay interest and repay principal and differs from the highest-rated
issues only in small degree.
A Debt rated "A" has a strong capacity to pay interest and repay principal although they are somewhat more susceptible
to the adverse effects of changes in circumstances and economic conditions than debt in higher-rated categories.

<PAGE>

BBB Debt rated "BBB" is regarded as having an adequate capacity to pay interest and repay principal. Whereas it
normally exhibits adequate protection parameters, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to pay interest and repay principal for debt in this category than
for debt in higher-rated categories. Bonds rated AAA, AA, A and BBB are considered investment grade bonds.
BB Debt rated "BB" has less near-term vulnerability to default than other speculative grade debt. However, it
faces major ongoing uncertainties or exposure to adverse business, financial or economic conditions which
would lead to inadequate capacity or willingness to pay interest and repay principal.
B Debt rated "B" has a greater vulnerability to default but presently has the capacity to meet interest payments
and principal repayments. Adverse business, financial or economic conditions would likely impair capacity
or willingness to pay interest and repay principal.
CCC Debt rated "CCC" has a current identifiable vulnerability to default, and is dependent upon favorable business,
financial and economic conditions to meet timely payments of interest and repayments of principal. In the
event of adverse business, financial or economic conditions, it is not likely to have the capacity to pay
interest and repay principal.
CC The rating "CC" is typically applied to debt subordinated to senior debt which is assigned an actual or "CCC"
rating.
C The rating "C" is typically applied to debt subordinated to senior debt which is assigned an actual or implied
"CCC-'' debt rating.
CI The rating "Cl" is reserved for income bonds on which no interest is being paid.
NR Indicates that no rating has been requested, that there is insufficient information on which to base a rating
or that Standard & Poor's does not rate a particular type of obligation as a matter of policy. Bonds rated
"BB", "B", "CCC" and "C" are regarded as having predominantly speculative characteristics with respect to
capacity to pay interest and repay principal. "BB" indicates the least degree of speculation and "C" the highest
degree of speculation. While such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse conditions. Plus (+) or minus (-):
The ratings from "AA" or "CCC" may be modified by the addition of a plus or minus sign to show relative standing
within the major ratings categories. The foregoing ratings are sometimes followed by a "p" which indicates
that the rating is provisional. A provisional rating assumes the successful completion of the project being
financed by the bonds being rated and indicates that payment of debt service requirements is largely or entirely
dependent upon the successful and timely completion of the project. This rating, however, while addressing
credit quality subsequent to completion of the project, makes no comment on the likelihood or risk of default
upon failure of such completion.
</TABLE>

MUNICIPAL NOTE RATINGS

Commencing on July 27, 1984, Standard & Poor's instituted a new rating
category with respect to certain municipal note issues with a maturity of
less than three years. The new note ratings denote the following:

SP-1 denotes a very strong or strong capacity to pay principal and
interest. Issues determined to possess overwhelming safety characteristics
are given a plus (+) designation (SP-1 +).

SP-2 denotes a satisfactory capacity to pay principal and interest.

SP-3 denotes a speculative capacity to pay principal and interest.

<PAGE>

COMMERCIAL PAPER RATINGS

Standard and Poor's commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more
than 365 days. The commercial paper rating is not a recommendation to
purchase or sell a security. The ratings are based upon current information
furnished by the issuer or obtained by S&P from other sources it considers
reliable. The ratings may be changed, suspended or withdrawn as a result of
changes in or unavailability of such information. Ratings are graded into
group categories, ranging from "A" for the highest quality obligations to "D"
for the lowest. Ratings are applicable to both taxable and tax-exempt
commercial paper. The categories are as follows:

Issuers assigned A ratings are regarded as having the greatest capacity for
timely payment. Issues in this category are further refined with the
designation 1, 2 and 3 to indicate the relative degree of safety.

A-1 indicates that the degree of safety regarding timely payment is
very strong.

A-2 indicates capacity for timely payment on issues with this
designation is strong. However, the relative degree of safety is not as
overwhelming as for issues designated "A-1".

A-3 indicates a satisfactory capacity for timely payment. Obligations
carrying this designation are, however, somewhat more vulnerable to the
adverse effects of changes in circumstances than obligations carrying the
higher designations.

DEAN WITTER TAX-FREE DAILY INCOME TRUST

PART C OTHER INFORMATION
Item 24. Financial Statements and Exhibits

(a) Financial Statements
(1) Financial statements and schedules, included
in Prospectus (Part A): Page in
Prospectus

Financial highlights for the fiscal years ended
December 31, 1985, 1986, 1987, 1988, 1989, 1990,
1991, 1992, 1993 and 1994............................. 4

Statement of assets and liabilities at
December 31, 1994.....................................18

Statement of operations for the year ended
December 31, 1994.....................................18

Statement of changes in net assets for the
years ended December 31, 1993 and 1994................18

Notes to Financial Statements.........................19

Portfolio of Investments at December 31, 1994.........21

(2) Financial statements included in the Statement of
Additional Information (Part B):

None

(3) Financial statements included in Part C:

None

(b) Exhibits:

2. - Amended and Restated By-Laws of the Registrant

11. - Consent of Independent Accountants

16. - Schedules for Computation of Performance Quotations

27. - Financial Data Schedule

Other - Powers of Attorney

- ---------------
All other exhibits previously filed and incorporated
by reference.

Item 25. Persons Controlled by or Under Common Control With Registrant.

None

Item 26. Number of Holders of Securities.

(1) (2)
Number of Record Holders
Title of Class at February 3, 1995
-------------- -------------------------
Shares of Beneficial Interest 28,794

Item 27. Indemnification

Pursuant to Section 5.3 of the Registrant's Declaration of
Trust and under Section 4.8 of the Registrant's By-Laws, the
indemnification of the Registrant's trustees, officers, employees and
agents is permitted if it is determined that they acted under the belief
that their actions were in or not opposed to the best interest of the
Registrant, and, with respect to any criminal proceeding, they had
reasonable cause to believe their conduct was not unlawful. In addition,
indemnification is permitted only if it is determined that the actions in
question did not render them liable by reason of willful misfeasance, bad
faith or gross negligence in the performance of their duties or by reason
of reckless disregard of their obligations and duties to the Registrant.
Trustees, officers, employees and agents will be indemnified for the
expense of litigation if it is determined that they are entitled to
indemnification against any liability established in such litigation. The
Registrant may also advance money for these expenses provided that they
give their undertakings to repay the Registrant unless their conduct is
later determined to permit indemnification.

Pursuant to Section 5.2 of the Registrant's Declaration of Trust
and paragraph 8 of the Registrant's Investment Management Agreement,
neither the Investment Manager nor any trustee, officer, employee or agent
of the Registrant shall be liable for any action or failure to act, except
in the case of bad faith, willful misfeasance, gross negligence or reckless
disregard of duties to the Registrant.

Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to trustees, officers
and controlling persons of the Registrant pursuant to the foregoing
provisions or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred
or paid by a trustee, officer, or controlling person of the Registrant in
connection with the successful defense of any action, suit or proceeding)
is asserted against the Registrant by such trustee, officer or controlling
person in connection with the shares being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by

controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act, and will be governed by the final adjudication of
such issue.

The Registrant hereby undertakes that it will apply the
indemnification provision of its by-laws in a manner consistent with
Release 11330 of the Securities and Exchange Commission under the
Investment Company Act of 1940, so long as the interpretation of Sections
17(h) and 17(i) of such Act remains in effect.

Registrant, in conjunction with the Investment Manager,
Registrant's Trustees, and other registered investment management companies
managed by the Investment Manager, maintains insurance on behalf of any
person who is or was a Trustee, officer, employee, or agent of Registrant,
or who is or was serving at the request of Registrant as a trustee,
director, officer, employee or agent of another trust or corporation,
against any liability asserted against him and incurred by him or arising
out of his position. However, in no event will Registrant maintain
insurance to indemnify any such person for any act for which Registrant
itself is not permitted to indemnify him.

Item 28. Business and Other Connections of Investment Adviser.

See "The Fund and Its Management" in the Prospectus regarding the
business of the investment adviser. The following information is given
regarding officers of Dean Witter InterCapital Inc. InterCapital is a
wholly-owned subsidiary of Dean Witter, Discover & Co. The principal
address of the Dean Witter Funds is Two World Trade Center, New York, New
York 10048.

The term "Dean Witter Funds" used below refers to the following registered
investment companies:

Closed-End Investment Companies
(1) InterCapital Income Securities Inc.
(2) High Income Advantage Trust
(3) High Income Advantage Trust II
(4) High Income Advantage Trust III
(5) Municipal Income Trust
(6) Municipal Income Trust II
(7) Municipal Income Trust III
(8) Dean Witter Government Income Trust
(9) Municipal Premium Income Trust
(10) Municipal Income Opportunities Trust
(11) Municipal Income Opportunities Trust II
(12) Municipal Income Opportunities Trust III
(13) Prime Income Trust
(14) InterCapital Insured Municipal Bond Trust
(15) InterCapital Quality Municipal Income Trust
(16) InterCapital Quality Municipal Investment Trust

(17) InterCapital Insured Municipal Income Trust
(18) InterCapital California Insured Municipal Income Trust
(19) InterCapital Insured Municipal Trust
(20) InterCapital Quality Municipal Securities
(21) InterCapital New York Quality Municipal Securities
(22) InterCapital California Quality Municipal Securities
(23) InterCapital Insured California Municipal Securities
(24) InterCapital Insured Municipal Securities

Open-end Investment Companies:
(1) Dean Witter Short-Term Bond Fund
(2) Dean Witter Tax-Exempt Securities Trust
(3) Dean Witter Tax-Free Daily Income Trust
(4) Dean Witter Dividend Growth Securities Inc.
(5) Dean Witter Convertible Securities Trust
(6) Dean Witter Liquid Asset Fund Inc.
(7) Dean Witter Developing Growth Securities Trust
(8) Dean Witter Retirement Series
(9) Dean Witter Federal Securities Trust
(10) Dean Witter World Wide Investment Trust
(11) Dean Witter U.S. Government Securities Trust
(12) Dean Witter Select Municipal Reinvestment Fund
(13) Dean Witter High Yield Securities Inc.
(14) Dean Witter Intermediate Income Securities
(15) Dean Witter New York Tax-Free Income Fund
(16) Dean Witter California Tax-Free Income Fund
(17) Dean Witter Health Sciences Trust
(18) Dean Witter California Tax-Free Daily Income Trust
(19) Dean Witter Managed Assets Trust
(20) Dean Witter American Value Fund
(21) Dean Witter Strategist Fund
(22) Dean Witter Utilities Fund
(23) Dean Witter World Wide Income Trust
(24) Dean Witter New York Municipal Money Market Trust
(25) Dean Witter Capital Growth Securities
(26) Dean Witter Precious Metals and Minerals Trust
(27) Dean Witter European Growth Fund Inc.
(28) Dean Witter Global Short-Term Income Fund Inc.
(29) Dean Witter Pacific Growth Fund Inc.
(30) Dean Witter Multi-State Municipal Series Trust
(31) Dean Witter Premier Income Trust
(32) Dean Witter Short-Term U.S. Treasury Trust
(33) Dean Witter Diversified Income Trust
(34) Dean Witter U.S. Government Money Market Trust
(35) Dean Witter Global Dividend Growth Securities
(36) Active Assets California Tax-Free Trust
(37) Dean Witter Natural Resource Development Securities Inc.
(38) Active Assets Government Securities Trust
(39) Active Assets Money Trust
(40) Active Assets Tax-Free Trust
(41) Dean Witter Limited Term Municipal Trust
(42) Dean Witter Variable Investment Series
(43) Dean Witter Value-Added Market Series

(44) Dean Witter Global Utilities Fund
(45) Dean Witter High Income Securities
(46) Dean Witter National Municipal Trust
(47) Dean Witter International SmallCap Fund
(48) Dean Witter Mid-Cap Growth Fund
(49) Dean Witter Select Dimensions Investment Series
(50) Dean Witter Global Asset Allocation Fund

The term "TCW/DW Funds" refers to the following registered investment
companies:

Open-End Investment Companies
(1) TCW/DW Core Equity Trust
(2) TCW/DW North American Government Income Trust
(3) TCW/DW Latin American Growth Fund
(4) TCW/DW Income and Growth Fund
(5) TCW/DW Small Cap Growth Fund
(6) TCW/DW Balanced Fund
(7) TCW/DW North American Intermediate Income Trust
(8) TCW/DW Global Convertible Trust
(9) TCW/DW Total Return Trust

Closed-End Investment Companies
(1) TCW/DW Term Trust 2000
(2) TCW/DW Term Trust 2002
(3) TCW/DW Term Trust 2003
(4) TCW/DW Emerging Markets Opportunities Trust

Name and Position Other Substantial Business, Profession, Vocation
with Dean Witter or Employment, including Name, Principal Address
InterCapital Inc. and Nature of Connection
- ---------------------- ------------------------------------------------
Charles A. Fiumefreddo Executive Vice President and Director of Dean
Chairman, Chief Witter Reynolds Inc. ("DWR"); Chairman, Chief
Executive Officer and Executive Officer and Director of Dean Witter
Director Distributors Inc. ("Distributors") and Dean
Witter Services Company Inc. ("DWSC"); Chairman
and Director of Dean Witter Trust Company
("DWTC"); Chairman, Director or Trustee, President
and Chief Executive Officer of the Dean Witter
Funds and Chairman, Chief Executive Officer and
Trustee of the TCW/DW Funds; Formerly Executive
Vice President and Director of Dean Witter,
Discover & Co. ("DWDC"); Director and/or officer
of various DWDC subsidiaries.

Philip J. Purcell Chairman, Chief Executive Officer and Director of
Director of DWDC and DWR; Director of DWSC and
Distributors; Director or Trustee of the Dean
Witter Funds; Director and/or officer of various
DWDC subsidiaries.

James F. Higgins Executive Vice President of DWDC; President and
Director Chief Operating Officer of Dean Witter Financial;
Director of DWR, DWSC, Distributors and DWTC.

Thomas C. Schneider Executive Vice President and Chief Financial
Executive Vice Officer of DWDC, DWR, DWSC and Distributors;
President, Chief Director of DWR, DWSC and Distributors.
Financial Officer and
Director

Christine A. Edwards Executive Vice President, Secretary and General
Director Counsel of DWDC and DWR; Executive Vice President,
Secretary and Chief Legal Officer of Distributors;
Director of DWR, DWSC and Distributors.

Robert M. Scanlan President and Chief Operating Officer of DWSC,
President and Chief Executive Vice President of Distributors;
Operating Officer Executive Vice President and Director of DWTC;
Vice President of the Dean Witter Funds and the
TCW/DW Funds.

David A. Hughey Executive Vice President and Chief Administrative
Executive Vice Officer of DWSC, Distributors and DWTC; Director
President and Chief of DWTC; Vice President of the Dean Witter Funds
Administrative Officer and the TCW/DW Funds.

Edmund C. Puckhaber Director of DWTC; Vice President of the Dean
Executive Vice Witter Funds.
President

John Van Heuvelen President, Chief Operating Officer and Director
Executive Vice of DWTC.
President

Sheldon Curtis Assistant Secretary of DWR; Senior Vice President,
Senior Vice President, Secretary and General Counsel of DWSC; Senior Vice
General Counsel and President, Assistant General Counsel and Assistant
Secretary Secretary of Distributors; Senior Vice President
and Secretary of DWTC; Vice President, Secretary
and General Counsel of the Dean Witter Funds and
the TCW/DW Funds.

Mark Bavoso
Senior Vice President Vice President of various Dean Witter Funds.

Thomas H. Connelly
Senior Vice President Vice President of various Dean Witter Funds.

Edward Gaylor
Senior Vice President Vice President of various Dean Witter Funds.

Rajesh K. Gupta
Senior Vice President Vice President of various Dean Witter Funds.

Kenton J. Hinchcliffe
Senior Vice President Vice President of various Dean Witter Funds.

Kevin Hurley
Senior Vice President Vice President of various Dean Witter Funds.

John B. Kemp, III Director of the Provident Savings Bank, Jersey
Senior Vice President City, New Jersey.

Anita Kolleeny
Senior Vice President Vice President of various Dean Witter Funds.

Jonathan R. Page
Senior Vice President Vice President of various Dean Witter Funds.

Ira Ross
Senior Vice President Vice President of various Dean Witter Funds.

Rochelle G. Siegel
Senior Vice President Vice President of various Dean Witter Funds.

Paul D. Vance
Senior Vice President Vice President of various Dean Witter Funds.

Elizabeth A. Vetell
Senior Vice President

James F. Willison
Senior Vice President Vice President of various Dean Witter Funds.

Ronald J. Worobel
Senior Vice President Vice President of various Dean Witter Funds.

Marilyn K. Cranney Assistant Secretary of DWR; First Vice President
First Vice President and Assistant Secretary of DWSC; Assistant
and Assistant Secretary Secretary of the Dean Witter Funds and the TCW/DW
Funds.

Barry Fink First Vice President and Assistant Secretary of
First Vice President DWSC; Assistant Secretary of the Dean Witter
and Assistant Secretary Funds and the TCW/DW Funds.

Michael Interrante First Vice President and Controller of DWSC;
First Vice President Assistant Treasurer of Distributors; First Vice
and Controller President and Treasurer of DWTC.

Robert Zimmerman
First Vice President

Joan Allman
Vice President

Joseph Arcieri
Vice President Vice President of various Dean Witter Funds.

Stephen Brophy
Vice President

Terence P. Brennan, II
Vice President

Douglas Brown
Vice President

Thomas Chronert
Vice President

Rosalie Clough
Vice President

Patricia A. Cuddy
Vice President Vice President of various Dean Witter Funds.

B. Catherine Connelly
Vice President

Frank J. DeVito
Vice President Vice President of DWSC.

Dwight Doolan
Vice President

Bruce Dunn
Vice President

Jeffrey D. Geffen
Vice President

Deborah Genovese
Vice President

Peter W. Gurman
Vice President

Russell Harper
Vice President

John Hechtlinger
Vice President

David Hoffman
Vice President

David Johnson
Vice President

Christopher Jones
Vice President

Stanley Kapica
Vice President

Konrad J. Krill
Vice President Vice President of various Dean Witter Funds.

Paul LaCosta
Vice President Vice President of various Dean Witter Funds.

Lawrence S. Lafer Vice President and Assistant Secretary of DWSC;
Vice President and Assistant Secretary of the Dean Witter Funds and
Assistant Secretary the TCW/DW Funds.

Thomas Lawlor
Vice President

Sharon K. Milligan
Vice President

James Nash
Vice President

Richard Norris
Vice President

Hugh Rose
Vice President

Ruth Rossi Vice President and Assistant Secretary of DWSC;
Vice President and Assistant Secretary of the Dean Witter Funds and
Assistant Secretary the TCW/DW Funds.

Carl F. Sadler
Vice President

Rafael Scolari
Vice President Vice President of Prime Income Trust

Diane Lisa Sobin
Vice President Vice President of various Dean Witter Funds.

Kathleen Stromberg
Vice President Vice President of various Dean Witter Funds.

Vinh Q. Tran
Vice President Vice President of various Dean Witter Funds.

Alice Weiss
Vice President Vice President of various Dean Witter Funds.

Jayne M. Wolff
Vice President Vice President of various Dean Witter Funds.

Marianne Zalys
Vice President

Item 29. Principal Underwriters

(a) Dean Witter Distributors Inc. ("Distributors"), a Delaware
corporation, is the principal underwriter of the Registrant.
Distributors is also the principal underwriter of the following
investment companies:

(1) Dean Witter Liquid Asset Fund Inc.
(2) Dean Witter Tax-Free Daily Income Trust
(3) Dean Witter California Tax-Free Daily Income Trust
(4) Dean Witter Retirement Series
(5) Dean Witter Dividend Growth Securities Inc.
(6) Dean Witter Natural Resource Development Securities Inc.
(7) Dean Witter World Wide Investment Trust
(8) Dean Witter Capital Growth Securities
(9) Dean Witter Convertible Securities Trust
(10) Active Assets Tax-Free Trust
(11) Active Assets Money Trust
(12) Active Assets California Tax-Free Trust
(13) Active Assets Government Securities Trust
(14) Dean Witter Short-Term Bond Fund
(15) Dean Witter Federal Securities Trust
(16) Dean Witter U.S. Government Securities Trust
(17) Dean Witter High Yield Securities Inc.
(18) Dean Witter New York Tax-Free Income Fund
(19) Dean Witter Tax-Exempt Securities Trust
(20) Dean Witter California Tax-Free Income Fund
(21) Dean Witter Managed Assets Trust
(22) Dean Witter Limited Term Municipal Trust
(23) Dean Witter World Wide Income Trust
(24) Dean Witter Utilities Fund
(25) Dean Witter Strategist Fund
(26) Dean Witter New York Municipal Money Market Trust
(27) Dean Witter Intermediate Income Securities
(28) Prime Income Trust
(29) Dean Witter European Growth Fund Inc.
(30) Dean Witter Developing Growth Securities Trust
(31) Dean Witter Precious Metals and Minerals Trust
(32) Dean Witter Pacific Growth Fund Inc.
(33) Dean Witter Multi-State Municipal Series Trust
(34) Dean Witter Premier Income Trust
(35) Dean Witter Short-Term U.S. Treasury Trust
(36) Dean Witter Diversified Income Trust
(37) Dean Witter Health Sciences Trust
(38) Dean Witter Global Dividend Growth Securities
(39) Dean Witter American Value Fund
(40) Dean Witter U.S. Government Money Market Trust
(41) Dean Witter Global Short-Term Income Fund Inc.
(42) Dean Witter Variable Investment Series
(43) Dean Witter Value-Added Market Series
(44) Dean Witter Global Utilities Fund
(45) Dean Witter High Income Securities
(46) Dean Witter National Municipal Trust
(47) Dean Witter International SmallCap Fund

(48) Dean Witter Mid-Cap Growth Fund
(49) Dean Witter Global Asset Allocation Fund
(1) TCW/DW Core Equity Trust
(2) TCW/DW North American Government Income Trust
(3) TCW/DW Latin American Growth Fund
(4) TCW/DW Income and Growth Fund
(5) TCW/DW Small Cap Growth Fund
(6) TCW/DW Balanced Fund
(7) TCW/DW North American Intermediate Income Trust
(8) TCW/DW Global Convertible Trust
(9) TCW/DW Total Return Trust

(b) The following information is given regarding directors and officers
of Distributors not listed in Item 28 above. The principal address of
Distributors is Two World Trade Center, New York, New York 10048. None
of the following persons has any position or office with the Registrant.

Positions and
Office with
Name Distributors

Fredrick K. Kubler Senior Vice President, Assistant
Secretary and Chief Compliance
Officer.

Michael T. Gregg Vice President and Assistant
Secretary.

Item 30. Location of Accounts and Records

All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the Rules thereunder
are maintained by the Investment Manager at its offices, except records
relating to holders of shares issued by the Registrant, which are maintained
by the Registrant's Transfer Agent, at its place of business as shown in the
prospectus.

Item 31. Management Services

Registrant is not a party to any such management-related service
contract.

Item 32. Undertakings

Not applicable.

fr\tfday\partc.95

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this Post-
Effective Amendment to the Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of New York and
State of New York on the 22nd day of February, 1995.

DEAN WITTER TAX-FREE DAILY INCOME TRUST

By /s/ Sheldon Curtis
-----------------------------------
Sheldon Curtis
Vice President and Secretary

Pursuant to the requirements of the Securities Act of 1933, this Post-
Effective Amendment No. 19 has been signed below by the following persons in
the capacities and on the dates indicated.

Signatures Title Date
----------- ----- ----

(1) Principal Executive Officer Chairman, President,
Chief Executive Officer
and Trustee
By /s/ Charles A. Fiumefreddo 02/22/95
----------------------------
Charles A. Fiumefreddo

(2) Principal Financial Officer Treasurer and Principal
Accounting Officer

By /s/ Thomas F. Caloia 02/22/95
----------------------------
Thomas F. Caloia

(3) Majority of the Trustees

Charles A. Fiumefreddo
Philip J. Purcell

By /s/ Sheldon Curtis 02/22/95
----------------------------
Sheldon Curtis
Attorney-in-Fact

Jack F. Bennett Paul Kolton
John R. Haire Michael E. Nugent
Manuel H. Johnson Edwin J. Garn
Michael Bozic John L. Schroeder

By /s/ David M. Butowsky 02/22/95
----------------------------
David M. Butowsky
Attorney-in-Fact

DEAN WITTER TAX-FREE DAILY INCOME TRUST

EXHIBIT INDEX

2. -- Amended and Restated By-Laws of the Registrant

11. -- Consent of Independent Accountants

16. -- Schedule for Computation of Performance Quotations

27. -- Financial Data Schedule

Other -- Powers of Attorney

<PAGE>

BY-LAWS

DEAN WITTER TAX-FREE DAILY INCOME TRUST
(AMENDED AND RESTATED AS OF JANUARY 25, 1995)

ARTICLE I
DEFINITIONS

The terms "Commission", "Declaration", "Distributor", "Investment
Adviser", "Majority Shareholder Vote", "1940 Act", "Shareholder", "Shares",
"Transfer Agent", "Trust", "Trust Property", and "Trustees" have the
respective meanings given them in the Declaration of Trust of Dean Witter
Tax-Free Daily Income Trust (formerly known as Dean Witter/Sears Tax-Free
Daily Income Trust) dated April 6, 1987, as amended from time to time.

ARTICLE II
OFFICES

SECTION 2.1. Principal Office. Until changed by the Trustees, the
principal office of the Trust in the Commonwealth of Massachusetts shall be
in the City of Boston, County of Suffolk.

SECTION 2.2. Other Offices. In addition to its principal office in the
Commonwealth of Massachusetts, the Trust may have an office or offices in the
City of New York, State of New York, and at such other places within and
without the Commonwealth as the Trustees may from time to time designate or
the business of the Trust may require.

ARTICLE III
SHAREHOLDERS' MEETINGS

SECTION 3.1. Place of Meetings. Meetings of Shareholders shall be held at
such place, within or without the Commonwealth of Massachusetts, as may be
designated from time to time by the Trustees.

SECTION 3.2. Meetings. Meetings of Shareholders of the Trust shall be held
whenever called by the Trustees or the President of the Trust and whenever
election of a Trustee or Trustees by Shareholders is required by the
provisions of Section 16(a) of the 1940 Act, for that purpose. Meetings of
Shareholders shall also be called by the Secretary upon the written request
of the holders of Shares entitled to vote not less than twenty-five percent
(25%) of all the votes entitled to be cast at such meeting except to the
extent otherwise required by Section 16(c) of the 1940 Act, as made
applicable to the Trust by the provisions of Section 2.3 of the Declaration.
Such request shall state the purpose or purposes of such meeting and the
matters proposed to be acted on thereat. The Secretary shall inform such
Shareholders of the reasonable estimated cost of preparing and mailing such
notice of the meeting, and upon payment to the Trust of such costs, the
Secretary shall give notice stating the purpose or purposes of the meeting to
all entitled to vote at such meeting. No meeting need be called upon the
request of the holders of Shares entitled to cast less than a majority of all
votes entitled to be cast at such meeting, to consider any matter which is
substantially the same as a matter voted upon at any meeting of Shareholders
held during the preceding twelve months.

SECTION 3.3. Notice of Meetings. Written or printed notice of every
Shareholders' meeting stating the place, date, and purpose or purposes
thereof, shall be given by the Secretary not less than ten (10) nor more than
ninety (90) days before such meeting to each Shareholder entitled to vote at
such meeting. Such notice shall be deemed to be given when deposited in the
United States mail, postage prepaid, directed to the Shareholder at his
address as it appears on the records of the Trust.

<PAGE>

SECTION 3.4. Quorum and Adjournment of Meetings. Except as otherwise
provided by law, by the Declaration or by these By-Laws, at all meetings of
Shareholders the holders of a majority of the Shares issued and outstanding
and entitled to vote thereat, present in person or represented by proxy,
shall be requisite and shall constitute a quorum for the transaction of
business. In the absence of a quorum, the Shareholders present or represented
by proxy and entitled to vote thereat shall have power to adjourn the meeting
from time to time. Any adjourned meeting may be held as adjourned without
further notice. At any adjourned meeting at which a quorum shall be present,
any business may be transacted as if the meeting had been held as originally
called.

SECTION 3.5. Voting Rights, Proxies. At each meeting of Shareholders, each
holder of record of Shares entitled to vote thereat shall be entitled to one
vote in person or by proxy, executed in writing by the Shareholder or his
duly authorized attorney-in-fact, for each Share of beneficial interest of
the Trust and for the fractional portion of one vote for each fractional
Share entitled to vote so registered in his name on the records of the Trust
on the date fixed as the record date for the determination of Shareholders
entitled to vote at such meeting. No proxy shall be valid after eleven months
from its date, unless otherwise provided in the proxy. At all meetings of
Shareholders, unless the voting is conducted by inspectors, all questions
relating to the qualification of voters and the validity of proxies and the
acceptance or rejection of votes shall be decided by the chairman of the
meeting. Pursuant to a resolution of a majority of the Trustees, proxies may
be solicited in the name of one or more Trustees or Officers of the Trust.

SECTION 3.6. Vote Required. Except as otherwise provided by law, by the
Declaration of Trust, or by these By-Laws, at each meeting of Shareholders at
which a quorum is present, all matters shall be decided by Majority
Shareholder Vote.

SECTION 3.7. Inspectors of Election. In advance of any meeting of
Shareholders, the Trustees may appoint Inspectors of Election to act at the
meeting or any adjournment thereof. If Inspectors of Election are not so
appointed, the chairman of any meeting of Shareholders may, and on the
request of any Shareholder or his proxy shall, appoint Inspectors of Election
of the meeting. In case any person appointed as Inspector fails to appear or
fails or refuses to act, the vacancy may be filled by appointment made by the
Trustees in advance of the convening of the meeting or at the meeting by the
person acting as chairman. The Inspectors of Election shall determine the
number of Shares outstanding, the Shares represented at the meeting, the
existence of a quorum, the authenticity, validity and effect of proxies,
shall receive votes, ballots or consents, shall hear and determine all
challenges and questions in any way arising in connection with the right to
vote, shall count and tabulate all votes or consents, determine the results,
and do such other acts as may be proper to conduct the election or vote with
fairness to all Shareholders. On request of the chairman of the meeting, or
of any Shareholder or his proxy, the Inspectors of Election shall make a
report in writing of any challenge or question or matter determined by them
and shall execute a certificate of any facts found by them.

SECTION 3.8. Inspection of Books and Records. Shareholders shall have such
rights and procedures of inspection of the books and records of the Trust as
are granted to Shareholders under the Corporations and Associations Law of
the State of Maryland.

SECTION 3.9. Action by Shareholders Without Meeting. Except as otherwise
provided by law, the provisions of these By-Laws relating to notices and
meetings to the contrary notwithstanding, any action required or permitted to
be taken at any meeting of Shareholders may be taken without a meeting if a
majority of the Shareholders entitled to vote upon the action consent to the
action in writing and such consents are filed with the records of the Trust.
Such consent shall be treated for all purposes as a vote taken at a meeting
of Shareholders.

ARTICLE IV
TRUSTEES

SECTION 4.1. Meetings of the Trustees. The Trustees may in their
discretion provide for regular or special meetings of the Trustees. Regular
meetings of the Trustees may be held at such time and place as shall be
determined from time to time by the Trustees without further notice. Special
meetings of the Trustees may be called at any time by the President and shall
be called by the President or the Secretary upon the written request of any
two (2) Trustees.

<PAGE>

SECTION 4.2. Notice of Special Meetings. Written notice of special
meetings of the Trustees, stating the place, date and time thereof, shall be
given not less than two (2) days before such meeting to each Trustee,
personally, by telegram, by mail, or by leaving such notice at his place of
residence or usual place of business. If mailed, such notice shall be deemed
to be given when deposited in the United States mail, postage prepaid,
directed to the Trustee at his address as it appears on the records of the
Trust. Subject to the provisions of the 1940 Act, notice or waiver of notice
need not specify the purpose of any special meeting.

SECTION 4.3. Telephone Meetings. Subject to the provisions of the 1940
Act, any Trustee, or any member or members of any committee designated by the
Trustees, may participate in a meeting of the Trustees, or any such
committee, as the case may be, by means of a conference telephone or similar
communications equipment if all persons participating in the meeting can hear
each other at the same time. Participation in a meeting by these means
constitutes presence in person at the meeting.

SECTION 4.4. Quorum, Voting and Adjournment of Meetings. At all meetings
of the Trustees, a majority of the Trustees shall be requisite to and shall
constitute a quorum for the transaction of business. If a quorum is present,
the affirmative vote of a majority of the Trustees present shall be the act
of the Trustees, unless the concurrence of a greater proportion is expressly
required for such action by law, the Declaration or these By-Laws. If at any
meeting of the Trustees there be less than a quorum present, the Trustees
present thereat may adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum shall have been
obtained.

SECTION 4.5. Action by Trustees Without Meeting. The provisions of these
By-Laws covering notices and meetings to the contrary notwithstanding, and
except as required by law, any action required or permitted to be taken at
any meeting of the Trustees may be taken without a meeting if a consent in
writing setting forth the action shall be signed by all of the Trustees
entitled to vote upon the action and such written consent is filed with the
minutes of proceedings of the Trustees.

SECTION 4.6. Expenses and Fees. Each Trustee may be allowed expenses, if
any, for attendance at each regular or special meeting of the Trustees, and
each Trustee who is not an officer or employee of the Trust or of its
investment manager or underwriter or of any corporate affiliate of any of
said persons shall receive for services rendered as a Trustee of the Trust
such compensation as may be fixed by the Trustees. Nothing herein contained
shall be construed to preclude any Trustee from serving the Trust in any
other capacity and receiving compensation therefor.

SECTION 4.7. Execution of Instruments and Documents and Signing of Checks
and Other Obligations and Transfers. All instruments, documents and other
papers shall be executed in the name and on behalf of the Trust and all
checks, notes, drafts and other obligations for the payment of money by the
Trust shall be signed, and all transfer of securities standing in the name of
the Trust shall be executed, by the Chairman, the President, any Vice
President or the Treasurer or by any one or more officers or agents of the
Trust as shall be designated for that purpose by vote of the Trustees;
notwithstanding the above, nothing in this Section 4.7 shall be deemed to
preclude the electronic authorization, by designated persons, of the Trust's
Custodian (as described herein in Section 9.1) to transfer assets of the
Trust, as provided for herein in Section 9.1.

SECTION 4.8. Indemnification of Trustees, Officers, Employees and
Agents. (a) The Trust shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending, or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Trust) by
reason of the fact that he is or was a Trustee, officer, employee, or agent
of the Trust. The indemnification shall be against expenses, including
attorneys' fees, judgments, fines, and amounts paid in settlement, actually
and reasonably incurred by him in connection with the action, suit, or
proceeding, if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the Trust, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the person
did not act in good faith and in a manner which he reasonably believed to be
in or not opposed to the best interests of the Trust, and, with respect to
any criminal action or proceeding, had reasonable cause to believe that his
conduct was unlawful.

<PAGE>

(b) The Trust shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action
or suit by or on behalf of the Trust to obtain a judgment or decree in its
favor by reason of the fact that he is or was a Trustee, officer, employee,
or agent of the Trust. The indemnification shall be against expenses,
including attorneys' fees actually and reasonably incurred by him in
connection with the defense or settlement of the action or suit, if he acted
in good faith and in a manner he reasonably believed to be in or not opposed
to the best interests of the Trust; except that no indemnification shall be
made in respect of any claim, issue, or matter as to which the person has
been adjudged to be liable for negligence or misconduct in the performance of
his duty to the Trust, except to the extent that the court in which the
action or suit was brought, or a court of equity in the county in which the
Trust has its principal office, determines upon application that, despite the
adjudication of liability but in view of all circumstances of the case, the
person is fairly and reasonably entitled to indemnity for those expenses
which the court shall deem proper, provided such Trustee, officer, employee
or agent is not adjudged to be liable by reason of his willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in
the conduct of his office.

(c) To the extent that a Trustee, officer, employee, or agent of the Trust
has been successful on the merits or otherwise in defense of any action, suit
or proceeding referred to in subsection (a) or (b) or in defense of any
claim, issue or matter therein, he shall be indemnified against expenses,
including attorneys' fees, actually and reasonably incurred by him in
connection therewith.

(d) (1) Unless a court orders otherwise, any indemnification under
subsections (a) or (b) of this section may be made by the Trust only as
authorized in the specific case after a determination that indemnification of
the Trustee, officer, employee, or agent is proper in the circumstances
because he has met the applicable standard of conduct set forth in
subsections (a) or (b).

(2) The determination shall be made:

(i) By the Trustees, by a majority vote of a quorum which consists
of Trustees who were not parties to the action, suit or proceeding; or

(ii) If the required quorum is not obtainable, or if a quorum of
disinterested Trustees so directs, by independent legal counsel in a
written opinion; or

(iii) By the Shareholders.

(3) Notwithstanding any provision of this Section 4.8, no person
shall be entitled to indemnification for any liability, whether or not
there is an adjudication of liability, arising by reason of willful
misfeasance, bad faith, gross negligence, or reckless disregard of duties
as described in Section 17(h) and (i) of the Investment Company Act of
1940 ("disabling conduct"). A person shall be deemed not liable by reason
of disabling conduct if, either:

(i) a final decision on the merits is made by a court or other body
before whom the proceeding was brought that the person to be indemnified
("indemnitee") was not liable by reason of disabling conduct; or

(ii) in the absence of such a decision, a reasonable determination,
based upon a review of the facts, that the indemnitee was not liable by
reason of disabling conduct, is made by either--

(A) a majority of a quorum of Trustees who are neither
"interested persons" of the Trust, as defined in Section 2(a)(19) of
the Investment Company Act of 1940, nor parties to the action, suit
or proceeding, or

(B) an independent legal counsel in a written opinion.

(e) Expenses, including attorneys' fees, incurred by a Trustee, officer,
employee or agent of the Trust in defending a civil or criminal action, suit
or proceeding may be paid by the Trust in advance of the final disposition
thereof if:

(1) authorized in the specific case by the Trustees; and

(2) the Trust receives an undertaking by or on behalf of the
Trustee, officer, employee or agent of the Trust to repay the advance if
it is not ultimately determined that such person is entitled to be
indemnified by the Trust; and

<PAGE>

(3) either, (i) such person provides a security for his
undertaking, or

(ii) the Trust is insured against losses by reason of any lawful
advances, or

(iii) a determination, based on a review of readily available
facts, that there is reason to believe that such person ultimately
will be found entitled to indemnification, is made by either--

(A) a majority of a quorum which consists of Trustees who are
neither "interested persons" of the Trust, as defined in Section
2(a)(19) of the 1940 Act, nor parties to the action, suit or
proceeding, or

(B) an independent legal counsel in a written opinion.

(f) The indemnification provided by this Section shall not be deemed
exclusive of any other rights to which a person may be entitled under any
by-law, agreement, vote of Shareholders or disinterested Trustees or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding the office, and shall continue as to a person
who has ceased to be a Trustee, officer, employee, or agent and inure to the
benefit of the heirs, executors and administrators of such person; provided
that no person may satisfy any right of indemnity or reimbursement granted
herein or to which he may be otherwise entitled except out of the property of
the Trust, and no Shareholder shall be personally liable with respect to any
claim for indemnity or reimbursement or otherwise.

(g) The Trust may purchase and maintain insurance on behalf of any person
who is or was a Trustee, officer, employee, or agent of the Trust, against
any liability asserted against him and incurred by him in any such capacity,
or arising out of his status as such. However, in no event will the Trust
purchase insurance to indemnify any officer or Trustee against liability for
any act for which the Trust itself is not permitted to indemnify him.

(h) Nothing contained in this Section shall be construed to protect any
Trustee or officer of the Trust against any liability to the Trust or to its
security holders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office.

ARTICLE V
COMMITTEES

SECTION 5.1. Executive and Other Committees. The Trustees, by resolution
adopted by a majority of the Trustees, may designate an Executive Committee
and/or committees, each committee to consist of two (2) or more of the
Trustees of the Trust and may delegate to such committees, in the intervals
between meetings of the Trustees, any or all of the powers of the Trustees in
the management of the business and affairs of the Trust. In the absence of
any member of any such committee, the members thereof present at any meeting,
whether or not they constitute a quorum, may appoint a Trustee to act in
place of such absent member. Each such committee shall keep a record of its
proceedings.

The Executive Committee and any other committee shall fix its own rules or
procedure, but the presence of at least fifty percent (50%) of the members of
the whole committee shall in each case be necessary to constitute a quorum of
the committee and the affirmative vote of the majority of the members of the
committee present at the meeting shall be necessary to take action.

All actions of the Executive Committee shall be reported to the Trustees
at the meeting thereof next succeeding to the taking of such action.

SECTION 5.2. Advisory Committee. The Trustees may appoint an advisory
committee which shall be composed of persons who do not serve the Trust in
any other capacity and which shall have advisory functions with respect to
the investments of the Trust but which shall have no power to determine that
any security or other investment shall be purchased, sold or otherwise
disposed of by the Trust. The number of persons constituting any such
advisory committee shall be determined from time to time by the Trustees. The
members of any such advisory committee may receive compensation for their
services and may be allowed such fees and expenses for the attendance at
meetings as the Trustees may from time to time determine to be appropriate.

<PAGE>

SECTION 5.3. Committee Action Without Meeting. The provisions of these
By-Laws covering notices and meetings to the contrary notwithstanding, and
except as required by law, any action required or permitted to be taken at
any meeting of any Committee of the Trustees appointed pursuant to Section
5.1 of these By-Laws may be taken without a meeting if a consent in writing
setting forth the action shall be signed by all members of the Committee
entitled to vote upon the action and such written consent is filed with the
records of the proceedings of the Committee.

ARTICLE VI
OFFICERS

SECTION 6.1. Executive Officers. The executive officers of the Trust shall
be a Chairman, a President, one or more Vice Presidents, a Secretary and a
Treasurer. The Chairman shall be selected from among the Trustees but none of
the other executive officers need be a Trustee. Two or more offices, except
those of President and any Vice President, may be held by the same person,
but no officer shall execute, acknowledge or verify any instrument in more
than one capacity. The executive officers of the Trust shall be elected
annually by the Trustees and each executive officer so elected shall hold
office until his successor is elected and has qualified.

SECTION 6.2. Other Officers and Agents. The Trustees may also elect one or
more Assistant Vice Presidents, Assistant Secretaries and Assistant
Treasurers and may elect, or may delegate to the President the power to
appoint, such other officers and agents as the Trustees shall at any time or
from time to time deem advisable.

SECTION 6.3. Term and Removal and Vacancies. Each officer of the Trust
shall hold office until his successor is elected and has qualified. Any
officer or agent of the Trust may be removed by the Trustees whenever, in
their judgment, the best interests of the Trust will be served thereby, but
such removal shall be without prejudice to the contractual rights, if any, of
the person so removed.

SECTION 6.4. Compensation of Officers. The compensation of officers and
agents of the Trust shall be fixed by the Trustees, or by the President to
the extent provided by the Trustees with respect to officers appointed by the
President.

SECTION 6.5. Power and Duties. All officers and agents of the Trust, as
between themselves and the Trust, shall have such authority and perform such
duties in the management of the Trust as may be provided in or pursuant to
these By-Laws, or to the extent not so provided, as may be prescribed by the
Trustees; provided, that no rights of any third party shall be affected or
impaired by any such By-Law or resolution of the Trustees unless he has
knowledge thereof.

SECTION 6.6. The Chairman. The Chairman shall preside at all meetings of
the Shareholders and of the Trustees, shall be a signatory on all Annual and
Semi-Annual Reports as may be sent to shareholders, and he shall perform such
other duties as the Trustees may from time to time prescribe.

SECTION 6.7 The President. (a) The President shall be the chief executive
officer of the Trust; he shall have general and active management of the
business of the Trust, shall see that all orders and resolutions of the Board
of Trustees are carried into effect, and, in connection therewith, shall be
authorized to delegate to one or more Vice Presidents such of his powers and
duties at such times and in such manner as he may deem advisable.

(b) In the absence of the Chairman, the President shall preside at all
meetings of the shareholders and the Board of Trustees; and he shall perform
such other duties as the Board of Trustees may from time to time prescribe.

SECTION 6.8. The Vice Presidents. The Vice Presidents shall be of such
number and shall have such titles as may be determined from time to time by
the Trustees. The Vice President, or, if there be more than one, the Vice
Presidents in the order of their seniority as may be determined from time to
time by the Trustees or the President, shall, in the absence or disability of
the President, exercise the powers and perform the duties of the President,
and he or they shall perform such other duties as the Trustees or the
President may from time to time prescribe.

<PAGE>

SECTION 6.9. The Assistant Vice Presidents. The Assistant Vice President,
or, if there be more than one, the Assistant Vice Presidents, shall perform
such duties and have such powers as may be assigned them from time to time by
the Trustees or the President.

SECTION 6.10. The Secretary. The Secretary shall attend all meetings of
the Trustees and all meetings of the Shareholders and record all the
proceedings of the meetings of the Shareholders and of the Trustees in a book
to be kept for that purpose, and shall perform like duties for the standing
committees when required. He shall give, or cause to be given, notice of all
meetings of the Shareholders and special meetings of the Trustees, and shall
perform such other duties and have such powers as the Trustees, or the
President, may from time to time prescribe. He shall keep in safe custody the
seal of the Trust and affix or cause the same to be affixed to any instrument
requiring it, and, when so affixed, it shall be attested by his signature or
by the signature of an Assistant Secretary.

SECTION 6.11. The Assistant Secretaries. The Assistant Secretary, or, if
there be more than one, the Assistant Secretaries in the order determined by
the Trustees or the President, shall, in the absence or disability of the
Secretary, perform the duties and exercise the powers of the Secretary and
shall perform such duties and have such other powers as the Trustees or the
President may from time to time prescribe.

SECTION 6.12. The Treasurer. The Treasurer shall be the chief financial
officer of the Trust. He shall keep or cause to be kept full and accurate
accounts of receipts and disbursements in books belonging to the Trust, and
he shall render to the Trustees and the President, whenever any of them
require it, an account of his transactions as Treasurer and of the financial
condition of the Trust; and he shall perform such other duties as the
Trustees, or the President, may from time to time prescribe.

SECTION 6.13. The Assistant Treasurers. The Assistant Treasurer, or, if
there shall be more than one, the Assistant Treasurers in the order
determined by the Trustees or the President, shall, in the absence or
disability of the Treasurer, perform the duties and exercise the powers of
the Treasurer and shall perform such other duties and have such other powers
as the Trustees, or the President, may from time to time prescribe.

SECTION 6.14. Delegation of Duties. Whenever an officer is absent or
disabled, or whenever for any reason the Trustees may deem it desirable, the
Trustees may delegate the powers and duties of an officer or officers to any
other officer or officers or to any Trustee or Trustees.

ARTICLE VII
DIVIDENDS AND DISTRIBUTIONS

Subject to any applicable provisions of law and the Declaration, dividends
and distributions upon the Shares may be declared at such intervals as the
Trustees may determine, in cash, in securities or other property, or in
Shares, from any sources permitted by law, all as the Trustees shall from
time to time determine.

Inasmuch as the computation of net income and net profits from the sales
of securities or other properties for federal income tax purposes may vary
from the computation thereof on the records of the Trust, the Trustees shall
have power, in their discretion, to distribute as income dividends and as
capital gain distributions, respectively, amounts sufficient to enable the
Trust to avoid or reduce liability for federal income taxes.

ARTICLE VIII
CERTIFICATES OF SHARES

SECTION 8.1. Certificates of Shares. Certificates for Shares of each
series or class of Shares shall be in such form and of such design as the
Trustees shall approve, subject to the right of the Trustees to change such
form and design at any time or from time to time, and shall be entered in the
records of the Trust as they are issued. Each such certificate shall bear a
distinguishing number; shall exhibit the holder's name and certify the number
of full Shares owned by such holder; shall be signed by or in the name of

<PAGE>

the Trust by the President, or a Vice President, and countersigned by the
Secretary or an Assistant Secretary or the Treasurer and an Assistant
Treasurer of the Trust; shall be sealed with the seal; and shall contain such
recitals as may be required by law. Where any certificate is signed by a
Transfer Agent or by a Registrar, the signature of such officers and the seal
may be facsimile, printed or engraved. The Trust may, at its option,
determine not to issue a certificate or certificates to evidence Shares owned
of record by any Shareholder.

In case any officer or officers who shall have signed, or whose facsimile
signature or signatures shall appear on, any such certificate or certificates
shall cease to be such officer or officers of the Trust, whether because of
death, resignation or otherwise, before such certificate or certificates
shall have been delivered by the Trust, such certificate or certificates
shall, nevertheless, be adopted by the Trust and be issued and delivered as
though the person or persons who signed such certificate or certificates or
whose facsimile signature or signatures shall appear therein had not ceased
to be such officer or officers of the Trust.

No certificate shall be issued for any share until such share is fully
paid.

SECTION 8.2. Lost, Stolen, Destroyed and Mutilated Certificates. The
Trustees may direct a new certificate or certificates to be issued in place
of any certificate or certificates theretofore issued by the Trust alleged to
have been lost, stolen or destroyed, upon satisfactory proof of such loss,
theft, or destruction; and the Trustees may, in their discretion, require the
owner of the lost, stolen or destroyed certificate, or his legal
representative, to give to the Trust and to such Registrar, Transfer Agent
and/or Transfer Clerk as may be authorized or required to countersign such
new certificate or certificates, a bond in such sum and of such type as they
may direct, and with such surety or sureties, as they may direct, as
indemnity against any claim that may be against them or any of them on
account of or in connection with the alleged loss, theft or destruction of
any such certificate.

ARTICLE IX
CUSTODIAN

SECTION 9.1. Appointment and Duties. The Trust shall at times employ a
bank or trust company having capital, surplus and undivided profits of at
least five million dollars ($5,000,000) as custodian with authority as its
agent, but subject to such restrictions, limitations and other requirements,
if any, as may be contained in these By-Laws and the 1940 Act:

(1) to receive and hold the securities owned by the Trust and deliver
the same upon written or electronically transmitted order;

(2) to receive and receipt for any moneys due to the Trust and
deposit the same in its own banking department or elsewhere as the
Trustees may direct;

(3) to disburse such funds upon orders or vouchers;

all upon such basis of compensation as may be agreed upon between the
Trustees and the custodian. If so directed by a Majority Shareholder Vote,
the custodian shall deliver and pay over all property of the Trust held by it
as specified in such vote.

The Trustees may also authorize the custodian to employ one or more
sub-custodians from time to time to perform such of the acts and services of
the custodian and upon such terms and conditions as may be agreed upon
between the custodian and such sub-custodian and approved by the Trustees.

SECTION 9.2. Central Certificate System. Subject to such rules,
regulations and orders as the Commission may adopt, the Trustees may direct
the custodian to deposit all or any part of the securities owned by the Trust
in a system for the central handling of securities established by a national
securities exchange or a national securities association registered with the
Commission under the Securities Exchange Act of 1934, or such other person as
may be permitted by the Commission, or otherwise in accordance with the 1940
Act, pursuant to which system all securities of any particular class or
series of any issuer deposited within the system are treated as fungible and
may be transferred or pledged by bookkeeping entry without physical delivery
of such securities, provided that all such deposits shall be subject to
withdrawal only upon the order of the Trust.

<PAGE>

ARTICLE X
WAIVER OF NOTICE

Whenever any notice of the time, place or purpose of any meeting of
Shareholders, Trustees, or of any committee is required to be given in
accordance with law or under the provisions of the Declaration or these
By-Laws, a waiver thereof in writing, signed by the person or persons
entitled to such notice and filed with the records of the meeting, whether
before or after the holding thereof, or actual attendance at the meeting of
shareholders, Trustees or committee, as the case may be, in person, shall be
deemed equivalent to the giving of such notice to such person.

ARTICLE XI
MISCELLANEOUS

SECTION 11.1. Location of Books and Records. The books and records of the
Trust may be kept outside the Commonwealth of Massachusetts at such place or
places as the Trustees may from time to time determine, except as otherwise
required by law.

SECTION 11.2. Record Date. The Trustees may fix in advance a date as the
record date for the purpose of determining Shareholders entitled to notice
of, or to vote at, any meeting of Shareholders, or Shareholders entitled to
receive payment of any dividend or the allotment of any rights, or in order
to make a determination of Shareholders for any other proper purpose. Such
date, in any case, shall be not more than ninety (90) days, and in case of a
meeting of Shareholders not less than ten (10) days, prior to the date on
which particular action requiring such determination of Shareholders is to be
taken. In lieu of fixing a record date the Trustees may provide that the
transfer books shall be closed for a stated period but not to exceed, in any
case, twenty (20) days. If the transfer books are closed for the purpose of
determining Shareholders entitled to notice of a vote at a meeting of
Shareholders, such books shall be closed for at least ten (10) days
immediately preceding such meeting.

SECTION 11.3. Seal. The Trustees shall adopt a seal, which shall be in
such form and shall have such inscription thereon as the Trustees may from
time to time provide. The seal of the Trust may be affixed to any document,
and the seal and its attestation may be lithographed, engraved or otherwise
printed on any document with the same force and effect as if it had been
imprinted and attested manually in the same manner and with the same effect
as if done by a Massachusetts business corporation under Massachusetts law.

SECTION 11.4. Fiscal Year. The fiscal year of the Trust shall end on such
date as the Trustees may by resolution specify, and the Trustees may by
resolution change such date for future fiscal years at any time and from time
to time.

SECTION 11.5. Orders for Payment of Money. All orders or instructions for
the payment of money of the Trust, and all notes or other evidences of
indebtedness issued in the name of the Trust, shall be signed by such officer
or officers or such other person or persons as the Trustees may from time to
time designate, or as may be specified in or pursuant to the agreement
between the Trust and the bank or trust company appointed as Custodian of the
securities and funds of the Trust.

ARTICLE XII
COMPLIANCE WITH FEDERAL REGULATIONS

The Trustees are hereby empowered to take such action as they may deem to
be necessary, desirable or appropriate so that the Trust is or shall be in
compliance with any federal or state statute, rule or regulation with which
compliance by the Trust is required.

<PAGE>

ARTICLE XIII
AMENDMENTS

These By-Laws may be amended, altered, or repealed, or new By-Laws may be
adopted, (a) by a Majority Shareholder Vote, or (b) by the Trustees;
provided, however, that no By-Law may be amended, adopted or repealed by the
Trustees if such amendment, adoption or repeal requires, pursuant to law, the
Declaration, or these By-Laws, a vote of the Shareholders. The Trustees shall
in no event adopt By-Laws which are in conflict with the Declaration, and any
apparent inconsistency shall be construed in favor of the related provisions
in the Declaration.

ARTICLE XIV
DECLARATION OF TRUST

The Declaration of Trust establishing Dean Witter Tax-Free Daily Income
Trust, dated April 6, 1987, together with all amendments thereto, a copy of
which is on file in the office of the Secretary of the Commonwealth of
Massachusetts, provides that the name Dean Witter Tax-Free Daily Income Trust
refers to the Trustees under the Declaration collectively as Trustees, but
not as individuals or personally; and no Trustee, Shareholder, officer,
employee or agent of Dean Witter Tax-Free Daily Income Trust shall be held to
any personal liability, nor shall resort be had to their private property for
the satisfaction of any obligation or claim or otherwise, in connection with
the affairs of said Dean Witter Tax-Free Daily Income Trust, but the Trust
Estate only shall be liable.

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the use in the Prospectus constituting part of this Post-
Effective Amendment No. 19 to the registration statement on Form N-1A (the
"Registration Statement") of our report dated February 13, 1995, relating to
the financial statements and financial highlights of Dean Witter Tax-Free Daily
Income Trust, which appears in such Prospectus, and to the incorporation by
reference of our report into the Statement of Additional Information which
constitutes part of this Registration Statement. We also consent to the
reference to us under the heading "Financial Highlights" in the Prospectus and
to the references to us under the headings "Independent Accountants" and
"Experts" in the Statement of Additional Information.

Price Waterhouse LLP

1177 Avenue of the Americas
New York, New York
February 24, 1995

DEAN WITTER/ TAX-FREE DAILY INCOME TRUST

Exhibit 16: Schedule for computation of each performance
quotation provided in the Statement of Additional Information.

(16) The Trust's current yield for the seven days ending
December 31, 1994.

(A-B) x 365/N

(1.000816 -1) x 365/7 = 4.25%

The Trust's effective annualized yield for the seven days ending
December 31, 1994

365/N
A - 1

365/7
1.000816 - 1 = 4.34%

A = Value of a share of the Trust at end of period.
B = Value of a share of the Trust at beginning of period.
N = Number of days in the period.

CALCULATION

Tax equivalent Yield = 7.04% Based on a tax
= bracket of 39.6%
(1.000816-1) x 365/7
= 4.25%

((1.000186) x 52.1428714-1)
= 4.34%

TAX BRACKET: 39.6%

FORMULA (CURRENT 7 DAY YIELD / 1-39.6)
CURRENT 7 DAY YIELD: 4.25
4.25/60.4
= 7.04%

SCHEDULE FOR COMPUTATIONS OF PERFORMANCE QUOTATIONS
DEAN WITTER TAX FREE DAILY INCOME TRUST

(A) GROWTH OF $10,000
(B) GROWTH OF $50,000
(C) GROWTH OF $100,000

FORMULA: G=(TR+1)*P
G=GROWTH OF INITIAL INVESTMENT
P=INITIAL INVESTMENT
TR=TOTAL RETURN SINCE INCEPTION

INVESTED-P TOTAL
$10,000, $50,000 & RETURN-TR (A) GROWTH OF (B) GROWTH OF (C) GROWTH OF
$100,000 31-DEC-94 $10,000 INVESTMENT-G $50,000 INVESTMENT-G $100,000 INVESTMENT-G
- ------------------ ---------- -------------------- -------------------- ----------------------
<S> <C> <C> <C> <C>
23-Feb-81 87.09 $18,709 $93,545 $187,090
</TABLE>

<ARTICLE> 6

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<INVESTMENTS-AT-COST> 536,306,539
<INVESTMENTS-AT-VALUE> 536,306,539
<RECEIVABLES> 13,820,166
<ASSETS-OTHER> 724,187
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 550,850,892
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 7,268,209
<TOTAL-LIABILITIES> 7,268,209
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 543,604,140
<SHARES-COMMON-STOCK> 543,604,140
<SHARES-COMMON-PRIOR> 567,704,503
<ACCUMULATED-NII-CURRENT> 625
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (22,082)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 543,582,683
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 17,798,784
<OTHER-INCOME> 0
<EXPENSES-NET> 4,293,335
<NET-INVESTMENT-INCOME> 13,505,449
<REALIZED-GAINS-CURRENT> (4,609)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 13,500,840
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (13,504,824)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,349,415,609
<NUMBER-OF-SHARES-REDEEMED> (1,387,020,796)
<SHARES-REINVESTED> 13,504,824
<NET-CHANGE-IN-ASSETS> (24,104,347)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (17,473)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 17,798,784
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,293,335
<AVERAGE-NET-ASSETS> 609,484,175
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.022
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (0.022)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.71
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each of CHARLES A.
FIUMEFREDDO and EDWARD R. TELLING, whose signatures appear below,
constitutes and appoints Sheldon Curtis, Marilyn K. Cranney and
Barry Fink, or any of them, his true and lawful attorneys-in-fact
and agent, with full power of substitution among himself and each
of the persons appointed herein, for him and in his name, place and
stead, in any and all capacities, to sign any amendments to any
registration statement of ANY OF THE DEAN WITTER FUNDS SET FORTH ON
SCHEDULE A ATTACHED HERETO, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of
them, may lawfully do or cause to be done by virtue hereof.

Dated: May 10, 1994

/s/ Charles A. Fiumefreddo /s/ Edward R. Telling
Charles A. Fiumefreddo Edward R. Telling

DEAN WITTER FUNDS

MONEY MARKET

1. Dean Witter Liquid Asset Fund Inc.
2. Active Assets Money Trust
3. Active Assets Tax-Free Trust
4. Active Assets California Tax-Free Trust
5. Active Assets Government Securities Trust
6. Dean Witter Tax-Free Daily Income Trust
7. Dean Witter U.S. Government Money Market Trust
8. Dean Witter California Tax-Free Daily Income Trust
9. Dean Witter New York Municipal Money Market Trust

EQUITY FUNDS

10. Dean Witter American Value Fund
11. Dean Witter Dividend Growth Securities Inc.
12. Dean Witter Capital Growth Securities
13. Dean Witter Natural Resource Development Securities Inc.
14. Dean Witter Precious Metals & Minerals Trust
15. Dean Witter Developing Growth Securities Trust
16. Dean Witter World Wide Investment Trust
17. Dean Witter Value-Added Market Series
18. Dean Witter European Growth Fund Inc.
19. Dean Witter Pacific Growth Fund Inc.
20. Dean Witter Equity Income Trust
21. Dean Witter Utilities Fund
22. Dean Witter Health Sciences Trust
23. Dean Witter Global Dividend Growth Securities

ASSET ALLOCATION FUNDS

24. Dean Witter Managed Assets Trust
25. Dean Witter Strategist Fund

FIXED-INCOME FUNDS

26. Dean Witter High Yield Securities Inc.
27. Dean Witter Convertible Securities Trust
28. Dean Witter Intermediate Income Securities
29. Dean Witter World Wide Income Trust
30. Dean Witter Global Short-Term Income Fund Inc.
31. Dean Witter Diversified Income Trust
32. Dean Witter Premier Income Trust
33. Dean Witter U.S. Government Securities Trust

34. Dean Witter Federal Securities Trust
35. Dean Witter Short-Term U.S. Treasury Trust
36. Dean Witter Tax-Exempt Securities Trust
37. Dean Witter California Tax-Free Income Fund
38. Dean Witter New York Tax-Free Income Fund
39. Dean Witter Multi-State Municipal Series Trust
Arizona Series
California Series
Florida Series
Massachusetts Series
Michigan Series
Minnesota Series
New Jersey Series
New York Series
Ohio Series
Pennsylvania Series
40. Dean Witter Select Municipal Reinvestment Fund
41. Dean Witter Limited Term Municipal Trust

SPECIAL PURPOSE FUNDS

42. Dean Witter Variable Investment Series
Money Market Portfolio
Quality Income Plus Portfolio
High Yield Portfolio
Utilities Portfolio
Dividend Growth Portfolio
Capital Growth Portfolio
European Growth Portfolio
Equity Portfolio
Managed Assets Portfolio

43. Dean Witter Retirement Series
Liquid Asset Series
U.S. Government Money Market Series
U.S. Government Securities Series
Intermediate Income Securities Series
American Value Series
Capital Growth Series
Dividend Growth Series
Strategist Series
Utilities Series
Value-Added Market Series
Global Equity Series

CLOSED-END FUNDS

44. High Income Advantage Trust
45. High Income Advantage Trust II
46. High Income Advantage Trust III
47. InterCapital Income Securities Inc.
48. Dean Witter Government Income Trust
49. InterCapital Insured Municipal Bond Trust
50. InterCapital Insured Municipal Trust
51. InterCapital Quality Municipal Investment Trust
52. InterCapital Quality Municipal Income Trust
53. Municipal Income Trust
54. Municipal Income Trust II
55. Municipal Income Trust III
56. Municipal Income Opportunities Trust
57. Municipal Income Opportunities Trust II
58. Municipal Income Opportunities Trust III
59. Municipal Premium Income Trust
60. Prime Income Trust
61. InterCapital Insured Municipal Income Trust
62. InterCapital California Insured Municipal Income Trust
63. InterCapital Quality Municipal Securities
64. InterCapital California Quality Municipal Securities
65. InterCapital New York Quality Municipal Securities

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each of JACK F. BENNETT,
EDWIN J. GARN, JOHN R. HAIRE, JOHN E. JEUCK, MANUEL H. JOHNSON,
PAUL KOLTON and MICHAEL E. NUGENT, whose signatures appear below,
constitutes and appoints David M. Butowsky, Ronald Feiman and
Stuart Strauss, or any of them, his true and lawful attorneys-in-
fact and agents, with full power of substitution among himself and
each of the persons appointed herein, for him and in his name,
place and stead, in any and all capacities, to sign any amendments
to any registration statement of ANY OF THE DEAN WITTER FUNDS SET
FORTH ON SCHEDULE A ATTACHED HERETO, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with
the Securities and Exchange Commission, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of
them, may lawfully do or cause to be done by virtue hereof.

Dated: May 10, 1994

/s/ Jack F. Bennett /s/ Manuel H. Johnson
Jack F. Bennett Manuel H. Johnson

/s/ Edwin J. Garn /s/ Paul Kolton
Edwin J. Garn Paul Kolton

/s/ John R. Haire /s/ Michael E. Nugent
John R. Haire Michael E. Nugent

/s/ John E. Jeuck
John E. Jeuck

DEAN WITTER FUNDS

MONEY MARKET

EQUITY FUNDS

ASSET ALLOCATION FUNDS

24. Dean Witter Managed Assets Trust
25. Dean Witter Strategist Fund

FIXED-INCOME FUNDS

SPECIAL PURPOSE FUNDS

CLOSED-END FUNDS

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that PHILIP J. PURCELL, whose signature
appears below, constitutes and appoints Sheldon Curtis, Marilyn K. Cranney and
Barry Fink, or any of them, his true and lawful attorneys-in-fact and agents,
with full power of substitution among himself and each of the persons appointed
herein, for him and in his name, place and stead, in any and all capacities, to
sign any amendments to any registration statement OF ANY OF THE DEAN WITTER
FUNDS SET FORTH ON SCHEDULE A ATTACHED HERETO, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, may lawfully do or cause to be
done by virtue hereof.

Dated: April 8, 1994

/s/ Philip J. Purcell
Philip J. Purcell

DEAN WITTER FUNDS
MONEY MARKET
1. Dean Witter Liquid Asset Fund Inc.
2. Active Assets Money Trust
3. Active Assets Tax-Free Trust
4. Active Assets California Tax-Free Trust
5. Active Assets Government Securities Trust
6. Dean Witter Tax-Free Daily Income Trust
7. Dean Witter U.S. Government Money Market Trust
8. Dean Witter California Tax-Free Daily Income Trust
9. Dean Witter New York Municipal Money Market Trust

EQUITY FUNDS
10. Dean Witter American Value Fund
11. Dean Witter Dividend Growth Securities Inc.
12. Dean Witter Capital Growth Securities
13. Dean Witter Natural Resource Development Securities Inc.
14. Dean Witter Precious Metals & Minerals Trust
15. Dean Witter Developing Growth Securities Trust
16. Dean Witter World Wide Investment Trust
17. Dean Witter Value-Added Market Series
18. Dean Witter European Growth Fund Inc.
19. Dean Witter Pacific Growth Fund Inc.
20. Dean Witter Equity Income Trust
21. Dean Witter Utilities Fund
22. Dean Witter Health Sciences Trust
23. Dean Witter Global Dividend Growth Securities
24. Dean Witter Global Utilities Fund

ASSET ALLOCATION FUNDS
25. Dean Witter Managed Assets Trust
26. Dean Witter Strategist Fund

FIXED-INCOME FUNDS
27. Dean Witter High Yield Securities Inc.
28. Dean Witter Convertible Securities Trust
29. Dean Witter Intermediate Income Securities
30. Dean Witter World Wide Income Trust
31. Dean Witter Global Short-Term Income Fund Inc.
32. Dean Witter Diversified Income Trust
33. Dean Witter Premier Income Trust
34. Dean Witter U.S. Government Securities Trust
35. Dean Witter Federal Securities Trust

36. Dean Witter Short-Term U.S. Treasury Trust
37. Dean Witter Tax-Exempt Securities Trust
38. Dean Witter California Tax-Free Income Fund
39. Dean Witter New York Tax-Free Income Fund
40. Dean Witter Multi-State Municipal Series Trust
Arizona Series
California Series
Florida Series
Massachusetts Series
Michigan Series
Minnesota Series
New Jersey Series
New York Series
Ohio Series
Pennsylvania Series
41. Dean Witter Select Municipal Reinvestment Fund
42. Dean Witter Limited Term Municipal Trust
43. Dean Witter Short-Term Bond Fund

SPECIAL PURPOSE FUNDS
44. Dean Witter Variable Investment Series
Money Market Portfolio
Quality Income Plus Portfolio
High Yield Portfolio
Utilities Portfolio
Dividend Growth Portfolio
Capital Growth Portfolio
European Growth Portfolio
Equity Portfolio
Managed Assets Portfolio
45. Dean Witter Retirement Series
Liquid Asset Series
U.S. Government Money Market Series
U.S. Government Securities Series
Intermediate Income Securities Series
American Value Series
Capital Growth Series
Dividend Growth Series
Strategist Series
Utilities Series
Value-Added Market Series
Global Equity Series

CLOSED-END FUNDS
46. High Income Advantage Trust
47. High Income Advantage Trust II
48. High Income Advantage Trust III
49. InterCapital Income Securities Inc.
50. Dean Witter Government Income Trust
51. InterCapital Insured Municipal Bond Trust
52. InterCapital Insured Municipal Trust
53. InterCapital Quality Municipal Investment Trust
54. InterCapital Quality Municipal Income Trust
55. Municipal Income Trust
56. Municipal Income Trust II
57. Municipal Income Trust III
58. Municipal Income Opportunities Trust
59. Municipal Income Opportunities Trust II
60. Municipal Income Opportunities Trust III
61. Municipal Premium Income Trust
62. Prime Income Trust
63. InterCapital Insured Municipal Income Trust
64. InterCapital California Insured Municipal Income Trust
65. InterCapital Quality Municipal Securities
66. InterCapital California Quality Municipal Securities
67. InterCapital New York Quality Municipal Securities
68. InterCapital California Insured Municipal Securities
69. InterCapital Insured Municipal Securities

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that JOHN L. SCHROEDER, whose signature
appears below, constitues and appoints David M. Butowsky, Ronald Feiman and
Stuart Strauss, or any of them, his true and lawful attorneys-in-fact and
agents, with full power of substitution among himself and each of the persons
appointed herein, for him and in his name, place and stead, in any and all
capacities, to sign any amendments to any registration statement of ANY OF THE
DEAN WITTER FUNDS SET FORTH ON SCHEDULE A ATTACHED HERETO, and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, may lawfully do or cause to be
done by virtue hereof.

Dated: April 13, 1994

/s/ John L. Schroeder
John L. Schroeder

ASSET ALLOCATION FUNDS
25. Dean Witter Managed Assets Trust
26. Dean Witter Strategist Fund

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that MICHAEL BOZIC, whose signature appears
below, constitues and appoints David M. Butowsky, Ronald Feiman and Stuart
Strauss, or any of them, his true and lawful attorneys-in-fact and agents, with
full power of substitution among himself and each of the persons appointed
herein, for him and in his name, place and stead, in any and all capacities, to
sign any amendments to any registration statement of ANY OF THE DEAN WITTER
FUNDS SET FORTH ON SCHEDULE A ATTACHED HERETO, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, may lawfully do or cause to be
done by virtue hereof.

Dated: April 15, 1994

/s/ Michael Bozic
Michael Bozic

ASSET ALLOCATION FUNDS
25. Dean Witter Managed Assets Trust
26. Dean Witter Strategist Fund