<PAGE> 1
DEAN WITTER TAX-FREE DAILY INCOME TRUST Two World Trade Center, New York, New
LETTER TO THE SHAREHOLDERS June 30, 1996 York 10048
DEAR SHAREHOLDER:
In contrast to the pattern of lower interest rates in 1995, tax-free money
market yields trended upward during the first six months of 1996. The
fixed-income markets opened the year with a confident tone and the decline in
short-term interest rates which started one year earlier was sustained into
mid-February. The positive outlook faded, however, as healthy economic
indicators aroused concern that the Federal Reserve's easing step in late
January could be its last. The shift in market psychology began in earnest after
a surprisingly large increase in payroll employment was reported in early March.
By the end of June prevailing sentiment entertained the possibility of the Fed
tightening later in the summer.
At the long end of the tax-free money market, yields for municipal securities
maturing in six months to one year moved higher in conjunction with the rise in
taxable money market yields. The Bond Buyer One Year Note Index, a widely
followed indicator of longer-term municipal money market interest rates, dipped
to a two-year low of 3.08 percent in mid-February aided by seasonal demand. For
the balance of the first half of 1996 one year note rates rose steadily and the
Index reached 3.88 percent at the end of June.
Interest rates for shorter maturities, represented by daily and weekly variable
rate demand obligations (VRDOs), responded to the seasonal pattern of cash
flows. Weekly VRDO yields dropped quickly at the start of the year falling from
5.00 percent in late December to 3.00 percent in early February in the face of
strong demand, rose above 4.00 percent during tax payment season in late April
and declined again to finish June at 3.30 percent.
<PAGE> 2
DEAN WITTER TAX-FREE DAILY INCOME TRUST
LETTER TO THE SHAREHOLDERS June 30, 1996, continued
PORTFOLIO MANAGEMENT AND PERFORMANCE
Dean Witter Tax-Free Daily Income Trust produced a total return of 1.37 percent
for the six-month period ended June 30, 1996. Thirty-day yields ranged from a
low of 2.60 percent for the month of March to a high of 2.92 percent for the
month of May.
The Fund's net assets exceeded $529 million, with 72 percent of the Fund's
portfolio invested in VRDOs. Tax-exempt commercial paper and municipal notes,
the two other types of securities utilized in the portfolio, comprised 18
percent and 10 percent of the portfolio, respectively. The Fund was broadly
diversified geographically with holdings in 34 states.
During most of the six-month period, the Fund's weighted average maturity fell
within a short to moderate range of 30 to 50 days. Seasonal purchases of new
one-year tax and revenue anticipation notes (TRANS) marketed in June caused the
average maturity to extend. At the end of June, the Fund's average maturity had
lengthened to 62 days, well within the overall limit of 90 days.
Portfolio holdings are continuously reviewed to maintain or improve
creditworthiness. Particular attention is devoted to monitoring the credit
quality of banks providing letters of credit and liquidity facilities for our
investments. Over the past several years, mounting concern about Japanese bank
exposure had prompted the steady reduction in securities supported by these
banks. The final holding was eliminated early in the first half of 1996.
LOOKING AHEAD
Over the coming months, the market's attention will be focused on the Federal
Reserve Board's next step in monetary policy. Strong employment numbers and the
potential for inflation prompt a cautious approach to the risk of rising
interest rates. In this uncertain environment the average maturity of the Fund's
portfolio is expected to remain conservative. As always, we will maintain our
emphasis on high quality and liquidity in making investment selections.
<PAGE> 3
DEAN WITTER TAX-FREE DAILY INCOME TRUST
LETTER TO THE SHAREHOLDERS June 30, 1996, continued
We appreciate your support of Dean Witter Tax-Free Daily Income Trust and look
forward to continuing to serve your investment needs and objectives.
Very truly yours,
/s/ CHARLES A. FIUMEFREDDO
- --------------------------
CHARLES A. FIUMEFREDDO
Chairman of the Board
<PAGE> 4
DEAN WITTER TAX-FREE DAILY INCOME TRUST
PORTFOLIO OF INVESTMENTS June 30, 1996 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN CURRENT DEMAND
THOUSANDS RATE+ DATE* VALUE
- -------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
SHORT-TERM VARIABLE RATE MUNICIPAL OBLIGATIONS (76.0%)
California
$10,500 California Public Capital Improvements Financing Authority,
Pooled Ser 1988 C...................................................... 3.65% 09/15/96 $ 10,500,000
8,500 Newport Beach, Hoag Memorial Hospital/Presbyterian 1992 Ser A........... 3.55 07/01/96 8,500,000
Colorado
9,000 Colorado Health Facilities Authority, Kaiser Permanente 1994 Ser A...... 3.40 07/08/96 9,000,000
Connecticut
Connecticut Special Assessment,
10,000 Unemployment Compensation 1993 Ser C (FGIC)............................ 3.90 07/01/96 10,000,252
10,000 Unemployment Compensation 1993 Ser C (FGIC)............................ 3.90 07/01/97 10,000,000
District of Columbia
4,800 The American University Ser 1985........................................ 3.15 07/08/96 4,800,000
Florida
9,900 Dade County, Water & Sewer Ser 1994 (FGIC).............................. 3.30 07/08/96 9,900,000
Dade County Industrial Development Authority,
18,200 Dolphins Stadium Ser 1985 A............................................ 3.35 07/08/96 18,200,000
3,000 Florida Power & Light Co Ser 1993...................................... 3.60 07/01/96 3,000,000
7,000 Orlando Utilities Commission, Water & Electric Ser 1991 BANs............ 3.25 07/08/96 7,000,000
11,800 Volusia County Health Facilities Authority, Pooled Ser 1985 (FGIC)...... 3.70 07/08/96 11,800,000
Georgia
12,000 Georgia Municipal Association, Pool Ser 1990 COPs (MBIA)................ 3.30 07/08/96 12,000,000
Hawaii
Hawaii Department of Budget & Finance, Kaiser Permanente
5,000 Semiannual Tender Ser 1984 B........................................... 3.20 09/01/96 5,000,000
5,000 Ser 1995 A............................................................. 3.40 07/08/96 5,000,000
Idaho
10,000 Idaho Health Facilities Authority, Pooled Ser 1985...................... 3.40 07/08/96 10,000,000
Illinois
7,000 Chicago, Tender Notes Ser 1995 A........................................ 3.65 10/31/96 7,000,000
10,000 Illinois Educational Facilities Authority, Northwestern University Ser
1988................................................................... 3.40 07/08/96 10,000,000
Illinois Health Facilities Authority,
6,090 Evangelical Hospitals Corp Ser 1985 A.................................. 3.45 07/08/96 6,090,000
5,000 Lutheran General Health Care System Ser 1985 B......................... 4.20 07/01/96 5,000,000
4,000 Northwestern Memorial Hospital Ser 1995................................ 3.65 07/01/96 4,000,000
5,000 Parkside Development Corp Ser 1991..................................... 3.45 07/08/96 5,000,000
10,000 Oak Forest, Homewood South Suburban Mayors & Managers Assn Ser 1989..... 3.40 07/08/96 10,000,000
Indiana
6,300 Indiana Health Facility Financing Authority, Methodist Hospital of
Indiana Inc Ser 1992 B................................................. 3.35 07/08/96 6,300,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 5
DEAN WITTER TAX-FREE DAILY INCOME TRUST
PORTFOLIO OF INVESTMENTS June 30, 1996 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN CURRENT DEMAND
THOUSANDS RATE+ DATE* VALUE
- ---------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Kentucky
$ 9,350 Mason County, East Kentucky Power Co-op Inc Ser 1984 (NRU-CFC Gtd)...... 3.15% 07/08/96 $ 9,350,000
Louisiana
2,600 Ascension Parish, Shell Oil Co Ser 1993................................. 3.60 07/01/96 2,600,000
5,320 Louisiana Offshore Terminal Authority, LOOP Inc 1991 Ser A.............. 3.40 07/01/96 5,320,000
4,400 Louisiana Recovery District, Sales Tax Ser 1988 (FGIC).................. 3.65 07/01/96 4,400,000
10,000 New Orleans Aviation Board, Ser 1993 B (MBIA)........................... 3.25 07/08/96 10,000,000
Massachusetts
10,000 Massachusetts Bay Transportation Authority, 1984 Ser A.................. 3.05 09/01/96 10,000,000
6,700 Massachusetts Industrial Finance Agency, Ogden Haverhill Proj Ser 1992
A...................................................................... 3.35 07/08/96 6,700,000
5,000 Massachusetts Municipal Wholesale Electric Company, Power Supply
1994 Ser C............................................................. 3.05 07/08/96 5,000,000
Minnesota
4,800 Minneapolis & St Paul Housing & Redevelopment Authority, Childrens'
Health Care Ser 1995 B (CGIC).......................................... 3.75 07/01/96 4,800,000
4,000 University of Minnesota Regents, Ser 1985 F............................. 3.25 08/01/96 4,000,000
Missouri
10,000 Missouri Health & Educational Facilities Authority, Sisters of Mercy
Health System St Louis Inc Ser 1989 A.................................. 3.35 07/08/96 10,000,000
Nebraska
7,600 Nebraska Higher Education Loan Program Inc, 1985 Ser A (MBIA)........... 3.40 07/08/96 7,600,000
New Jersey
4,000 Glouster County, Mobil Oil Refining Corp Ser 1993 A..................... 3.00 07/08/96 4,000,000
New York
2,800 New York City Municipal Water Finance Authority, 1994 Ser C (FGIC)...... 3.60 07/01/96 2,800,000
1,000 Triborough Bridge & Tunnel Authority Ser 1994 (FGIC).................... 3.05 07/08/96 1,000,000
North Carolina
6,000 Asheville, Ser 1993 A COPs.............................................. 3.20 07/08/96 6,000,000
5,000 North Carolina Medical Care Commission, Duke University Hospital
Ser 1985 B............................................................. 3.25 07/08/96 5,000,000
Ohio
10,500 Columbus, Unltd Tax Ser 1995-1.......................................... 3.00 07/08/96 10,500,000
8,500 Ohio Air Quality Development Authority, Sohio Air-British Petroleum Co
Ser 1995............................................................... 3.60 07/01/96 8,500,000
Oklahoma
Oklahoma Water Resources Board,
5,000 State Loan Prog Ser 1994 A............................................. 3.10 09/03/96 5,000,000
5,000 State Loan Prog Ser 1995............................................... 3.25 09/01/96 5,000,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 6
DEAN WITTER TAX-FREE DAILY INCOME TRUST
PORTFOLIO OF INVESTMENTS June 30, 1996 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN CURRENT DEMAND
THOUSANDS RATE+ DATE* VALUE
- -------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Pennsylvania
$10,000 Pennsylvania Higher Education Facilities Authority, Thomas Jefferson
University Ser 1992 C.................................................. 3.25% 08/26/96 $ 10,000,000
South Carolina
York County,
14,000 North Carolina Electric Membership Corp, Ser 1984 N-5 (NRU-CFC Gtd).... 3.25 09/15/96 14,000,000
4,920 Saluda River Electric Co-op Inc Ser 1984-E2 (NRU-CFC Gtd).............. 3.25 09/15/96 4,920,000
Tennessee
4,500 Metropolitan Nashville Airport Authority, American Airlines Refg Ser
1995 B................................................................. 3.65 07/01/96 4,500,000
Texas
7,000 Harris County Health Facilities Development Corporation, Methodist
Hospital Ser 1994...................................................... 3.70 07/01/96 7,000,000
5,000 Texas, Veterans' Housing Assistance Fund I Ser 1995..................... 3.30 07/08/96 5,000,000
Utah
12,000 Intermountain Power Agency, 1985 Ser F.................................. 3.35 09/15/96 12,000,000
Virginia
5,000 Virginia Housing Development Authority, 1995 Subser D STEM IV........... 3.35 07/16/96 5,000,000
West Virginia
5,000 Pleasants County Commission, American Cyanamid Co Ser 1985.............. 3.45 07/08/96 5,000,000
Wisconsin
10,000 Wisconsin Health Facilities Authority, Franciscan Health Care Inc Ser
1985 A-1............................................................... 3.45 07/08/96 10,000,000
Wyoming
4,400 Platte County, Tri-State Generation & Transmission Assn Ser 1984 A...... 3.70 07/01/96 4,400,000
5,200 Sweetwater County, PacifiCorp Ser 1994 (AMBAC).......................... 3.70 07/01/96 5,200,000
------------
TOTAL SHORT-TERM VARIABLE RATE MUNICIPAL OBLIGATIONS
(Amortized Cost $402,680,252)................................................................... 402,680,252
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 7
DEAN WITTER TAX-FREE DAILY INCOME TRUST
PORTFOLIO OF INVESTMENTS June 30, 1996 (unaudited) continued
<TABLE>
<CAPTION>
YIELD TO
PRINCIPAL MATURITY
AMOUNT IN COUPON MATURITY ON DATE OF
THOUSANDS RATE DATE PURCHASE VALUE
- ---------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C>
TAX-EXEMPT COMMERCIAL PAPER (18.8%)
Colorado
$10,000 Platte River Power Authority, Electric Subordinate Lien Ser
S-1........................................................ 3.65% 10/10/96 3.65% $ 10,000,000
Florida
Florida Local Government Finance Commission,
5,000 Ser 1991................................................... 3.60 08/20/96 3.60 5,000,000
7,000 Ser 1991................................................... 3.65 08/29/96 3.65 7,000,000
5,000 Jacksonville, Ser A......................................... 3.60 08/13/96 3.60 5,000,000
Indiana
6,000 Mount Vernon, General Electric Co Ser 1989 A................ 3.55 10/17/96 3.55 6,000,000
Louisiana
8,900 St. James Parish, Texaco Inc Ser 1988 B..................... 3.75 07/18/96 3.75 8,900,000
Maryland
10,000 Montgomery County, 1995 Ser BANs............................ 3.60 09/10/96 3.60 10,000,000
Massachusetts
8,700 Massachusetts Bay Transportation Authority, Ser C........... 3.35 08/21/96 3.35 8,700,000
7,000 Massachusetts Health & Educational Facilities Authority,
Harvard University Ser L................................... 3.55 10/24/96 3.55 7,000,000
8,700 Massachusetts Industrial Finance Agency, New England Power
Co 1992 Ser B.............................................. 3.60 09/09/96 3.60 8,700,000
Minnesota
4,500 Rochester, Mayo Foundation/Mayo Medical Center Ser 1992 B... 3.60 10/08/96 3.60 4,500,000
7,000 Southern Minnesota Municipal Power Agency, Ser B............ 3.60 10/23/96 3.60 7,000,000
South Carolina
8,000 South Carolina Public Service Authority, Promissory Notes... 3.60 10/29/96 3.60 8,000,000
Washington
4,000 Seattle, Municipal Light & Power Ser 1991 B................. 3.65 10/15/96 3.65 4,000,000
----------
TOTAL TAX-EXEMPT COMMERCIAL PAPER (Amortized Cost $99,800,000).................................... 99,800,000
----------
SHORT-TERM MUNICIPAL NOTES (10.9%)
Colorado
5,000 Colorado, Ser 1996 A TRANs, dtd 07/01/96 (WI)............... 4.50 06/27/97 3.85 5,030,950
Idaho
7,000 Idaho, Ser 1996 TANs, dtd 07/02/96 (WI)..................... 4.50 06/30/97 3.90 7,040,180
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 8
DEAN WITTER TAX-FREE DAILY INCOME TRUST
PORTFOLIO OF INVESTMENTS June 30, 1996 (unaudited) continued
<TABLE>
<CAPTION>
YIELD TO
PRINCIPAL MATURITY
AMOUNT IN COUPON MATURITY ON DATE OF
THOUSANDS RATE DATE PURCHASE VALUE
- ---------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C>
Indiana
$ 5,000 Indiana Bond Bank, Advance Funding Notes Ser 1996 A-1, dtd
02/01/96................................................... 4.25% 07/08/96 3.35% $ 5,001,099
3,000 Indianapolis, Local Public Improvement Bond Bank Ser 1995 E
Notes, dtd 12/21/95........................................ 4.50 07/11/96 3.70 3,000,771
Iowa
10,000 Iowa School Corporations, Warrant Certificates Ser 1996-97
(FSA), dtd 06/27/96........................................ 4.75 06/27/97 3.95 10,076,479
Massachusetts
5,000 Massachusetts, 1996 Ser A Notes, dtd 06/11/96............... 4.25 06/10/97 3.90 5,015,918
Michigan
Michigan Municipal Bond Authority,
7,325 Ser 1995 B Notes dtd 07/03/95.............................. 4.50 07/03/96 3.80 7,325,540
10,000 Ser 1996 A Notes dtd 07/03/96 (WI)......................... 4.50 07/03/97 3.90 10,057,700
5,000 Michigan Notes, dtd 02/20/96................................ 4.00 09/30/96 3.00 5,012,511
------------
TOTAL SHORT-TERM MUNICIPAL NOTES (Amortized Cost $57,561,148)..................................... 57,561,148
------------
TOTAL INVESTMENTS (Amortized Cost $560,041,400) (a)....................................... 105.7% 560,041,400
LIABILITIES IN EXCESS OF CASH AND OTHER ASSETS............................................ (5.7) (30,219,415)
------ ------------
NET ASSETS................................................................................ 100.0% $529,821,985
====== ============
</TABLE>
- ---------------------
BANs Bond Anticipation Notes.
COPs Certificates of Participation.
TANs Tax Anticipation Notes.
TRANs Tax and Revenue Anticipation Notes.
WI Security purchased on a when issued basis.
+ Rate shown is the rate in effect at June 30, 1996.
* Date in which the principal amount can be recovered through
demand.
(a) Cost is the same for federal income tax purposes.
Bond Insurance:
AMBAC AMBAC Indemnity Corporation.
CGIC Capital Guaranty Insurance Company.
FGIC Financial Guaranty Insurance Company.
FSA Financial Security Assurance Inc.
MBIA Municipal Bond Investors Assurance Corporation.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 9
DEAN WITTER TAX-FREE DAILY INCOME TRUST
FINANCIAL STATEMENTS
<TABLE>
<S> <C>
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1996 (unaudited)
ASSETS:
Investments in securities, at value
(amortized cost $560,041,400)........................................ $560,041,400
Cash.................................................................. 2,482,932
Receivable for:
Interest.......................................................... 2,725,385
Shares of beneficial interest sold................................ 204
Prepaid expenses and other assets..................................... 63,935
------------
TOTAL ASSETS...................................................... 565,313,856
------------
LIABILITIES:
Payable for:
Investments purchased............................................. 32,128,830
Shares of beneficial interest repurchased......................... 2,995,474
Investment management fee......................................... 204,256
Plan of distribution fee.......................................... 41,310
Accrued expenses...................................................... 122,001
------------
TOTAL LIABILITIES................................................. 35,491,871
------------
NET ASSETS:
Paid-in-capital....................................................... 529,823,869
Accumulated undistributed net investment income....................... 624
Accumulated net realized loss......................................... (2,508)
------------
NET ASSETS........................................................ $529,821,985
============
NET ASSET VALUE PER SHARE
529,823,869 shares outstanding
(unlimited shares authorized of $.01 par value)...................... $1.00
====
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 10
DEAN WITTER TAX-FREE DAILY INCOME TRUST
FINANCIAL STATEMENTS, continued
<TABLE>
<S> <C>
STATEMENT OF OPERATIONS
For the six months ended June 30, 1996 (unaudited)
NET INVESTMENT INCOME:
INTEREST INCOME......................................................... $9,541,498
----------
EXPENSES
Investment management fee............................................... 1,361,899
Plan of distribution fee................................................ 258,710
Transfer agent fees and expenses........................................ 236,898
Registration fees....................................................... 47,664
Shareholder reports and notices......................................... 29,216
Professional fees....................................................... 20,678
Custodian fees.......................................................... 13,336
Trustees' fees and expenses............................................. 8,655
Other................................................................... 2,892
----------
TOTAL EXPENSES BEFORE EXPENSE OFFSET................................ 1,979,948
LESS: EXPENSE OFFSET................................................ (3,851)
----------
TOTAL EXPENSES AFTER EXPENSE OFFSET................................. 1,976,097
----------
NET INVESTMENT INCOME............................................... 7,565,401
NET REALIZED GAIN................................................... 12,513
----------
NET INCREASE............................................................ $7,577,914
==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 11
DEAN WITTER TAX-FREE DAILY INCOME TRUST
FINANCIAL STATEMENTS, continued
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX
MONTHS ENDED FOR THE YEAR
JUNE 30, ENDED
1996 DECEMBER 31, 1995
- ------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income............................... $ 7,565,401 $ 18,011,734
Net realized gain................................... 12,513 7,061
-------------- -------------
NET INCREASE.................................... 7,577,914 18,018,795
Dividends from net investment income................ (7,565,202) (18,011,934)
Net increase (decrease) from transactions in shares
of beneficial interest............................. 8,157,198 (21,937,469)
-------------- -------------
TOTAL INCREASE (DECREASE)....................... 8,169,910 (21,930,608)
NET ASSETS:
Beginning of period................................. 521,652,075 543,582,683
-------------- -------------
END OF PERIOD
(Including undistributed net investment income
of $624 and $425, respectively)................. $ 529,821,985 $ 521,652,075
============== =============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 12
DEAN WITTER TAX-FREE DAILY INCOME TRUST
NOTES TO FINANCIAL STATEMENTS June 30, 1996 (unaudited)
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's investment objective is to
provide a high level of daily income which is exempt from federal income tax,
consistent with stability of principal and liquidity. The Fund was incorporated
in Maryland in 1980, commenced operations on February 20, 1981 and reorganized
as a Massachusetts business trust on April 30, 1987.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual results could differ from
those estimates. The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- Portfolio securities are valued 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 accretes discounts over the life of the
respective securities. Interest income is accrued daily.
C. FEDERAL INCOME TAX STATUS -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable and nontaxable income to its
shareholders. Accordingly, no federal income tax provision is required.
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 the 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
<PAGE> 13
DEAN WITTER TAX-FREE DAILY INCOME TRUST
NOTES TO FINANCIAL STATEMENTS June 30, 1996 (unaudited) continued
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 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. For the six months ended June 30, 1996, the distribution fee
was accrued at the annual rate of 0.09%.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales/maturities of portfolio securities
for the six months ended June 30, 1996 aggregated $607,426,130 and $569,174,106,
respectively.
<PAGE> 14
DEAN WITTER TAX-FREE DAILY INCOME TRUST
NOTES TO FINANCIAL STATEMENTS June 30, 1996 (unaudited) continued
Dean Witter Trust Company, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At June 30, 1996, the Fund had
transfer agent fees and expenses payable of approximately $43,000.
The Fund has an unfunded noncontributory defined benefit pension plan covering
all independent Trustees of the Fund who will have served as independent
Trustees for at least five years at the time of retirement. Benefits under this
plan are based on years of service and compensation during the last five years
of service. Aggregate pension costs for the six months ended June 30, 1996
included in Trustees' fees and expenses in the Statement of Operations amounted
to $418. At June 30, 1996, the Fund had an accrued pension liability of $48,883
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 SIX
MONTHS ENDED FOR THE YEAR
JUNE 30, ENDED
1996 DECEMBER 31, 1995
------------ -----------------
(unaudited)
<S> <C> <C>
Sold.................................................................................. 602,042,543 1,154,021,924
Reinvestment of dividends............................................................. 7,521,348 18,011,934
------------ -------------
609,563,891 1,172,033,858
Repurchased........................................................................... (601,406,693) (1,193,971,327)
------------ -------------
Net increase (decrease) in shares outstanding......................................... 8,157,198 (21,937,469)
============ =============
</TABLE>
6. FEDERAL INCOME TAX STATUS
At December 31, 1995, the Fund had a net capital loss carryover of approximately
$15,000 of which $10,400 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.
During the year ended December 31, 1995, the Fund utilized capital loss
carryovers of approximately $7,100.
<PAGE> 15
DEAN WITTER TAX-FREE DAILY INCOME TRUST
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE YEAR ENDED DECEMBER 31
JUNE 30, -------------------------------------------------------
1996 1995 1994 1993 1992 1991
------------------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <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
------- ----- ----- ----- ----- -----
Net investment income................................ 0.014 0.032 0.022 0.018 0.024 0.039
Less dividends from net income....................... (0.014) (0.032) (0.022) (0.018) (0.024) (0.039)
------- ----- ----- ----- ----- -----
Net asset value, end of period....................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ===== ===== ===== ===== =====
TOTAL INVESTMENT RETURN+............................. 1.37%(1) 3.22% 2.25% 1.85% 2.39% 4.02%
RATIOS TO AVERAGE NET ASSETS:
Expenses............................................. 0.72%(2) 0.72% 0.71% 0.71% 0.68% 0.68%
Net investment income................................ 2.74%(2) 3.16% 2.22% 1.83% 2.37% 3.95%
SUPPLEMENTAL DATA:
Net assets, end of period, in millions............... $530 $522 $544 $568 $670 $823
</TABLE>
- ---------------------
+ Calculated based on the net asset value as of the last business day of the
period.
(1) Not annualized.
(2) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 16
BOARD OF DIRECTORS
- -------------------------------------------------------
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Dr. Manuel H. Johnson
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
- -------------------------------------------------------
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Sheldon Curtis
Vice President, Secretary and General Counsel
Katherine H. Stromberg
Vice President
Thomas F. Caloia
Treasurer
TRANSFER AGENT
- -------------------------------------------------------
Dean Witter Trust Company
Harborside Financial Center - Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
- -------------------------------------------------------
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
- -------------------------------------------------------
Dean Witter InterCapital Inc.
Two World Trade Center
New York, New York 10048
The financial statements included herein have been taken from the records of the
Fund without examination by the independent accountants and accordingly they do
not express an opinion thereon.
This report is submitted for the general information of shareholders of the
Fund. For more detailed information about the Fund, its officers and directors,
fees, expenses and other pertinent information, please see the prospectus of
the Fund.
This report is not authorized for distribution to prospective investors in the
Fund unless preceded or accompanied by an effective prospectus.
DEAN WITTER
TAX-FREE DAILY
INCOME TRUST
[LOGO]
Semiannual Report
June 30, 1996
