<PAGE>
DEAN WITTER TAX-FREE DAILY INCOME TRUST
LETTER TO THE SHAREHOLDERS June 30, 1997
Two World Trade Center, New York, New York 10048
DEAR SHAREHOLDER:
We are pleased to present the semiannual report on the operations of Dean
Witter Tax-Free Daily Income Trust for the six-month period ended June 30,
1997.
The most noteworthy news for the tax-free money market during the first half
of 1997 was the Federal Reserve Board's 25 basis point increase in the
federal-funds rate. That move came midway through the period, following the
Federal Open Market Committee's meeting in late March. During the second
quarter, however, favorable inflation reports and moderate economic growth
kept the Federal Reserve on the sidelines. In the absence of outside
influences, the movement of tax-free money market interest rates was driven
primarily by seasonal changes in supply and demand.
Yields moved higher for securities maturing in six months to one year, the
long end of the municipal money market. The Bond Buyer One Year Note Index, a
benchmark indicator of longer-term municipal money market yields, rose from
3.51 percent at the end of December to 3.85 percent at the end of March.
During the second quarter, the Index peaked at 3.96 percent in late April
when pressures related to the tax payment season caused all municipal money
market yields to increase. At the end of June, the Index stood at 3.85
percent, unchanged from the end of the first quarter.
By the end of June, the ratio of the One Year Note Index to the yield for
one-year U.S. Treasury Bills was 68 percent, up from 64 percent at the end of
1996. This higher ratio indicates that yields in this sector of the municipal
money market became more attractive in relation to Treasuries with comparable
maturities.
At the short end of the tax-free money market maturity range, variable rate
demand obligations (VRDOs) with daily and weekly rate changes conformed to
the recurring pattern of wide interest rate swings and the predictable timing
of highs and lows. The low for weekly VRDO yields was set at 2.85 percent
during the first week of January when positive cash flows were the strongest.
The high yield of 4.50 percent came at the end of April along with the heavy
seasonal outflows associated with tax payments. Improved cash inflow in May
and early June caused weekly VRDO yields to drop to 3.35 percent by the first
week of June before rising again to 4.125 percent in late June.
<PAGE>
DEAN WITTER TAX-FREE DAILY INCOME TRUST
LETTER TO THE SHAREHOLDERS June 30, 1997, continued
PORTFOLIO MANAGEMENT AND PERFORMANCE
Dean Witter Tax-Free Daily Income Trust produced a total return of 1.45
percent for the six-month period ended June 30, 1997. Thirty-day yields for
the Fund ranged from a low of 2.67 percent for the month of March to a high
of 3.16 percent for May.
On June 30, the Fund's net assets exceeded $520 million, with 65 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 24 percent and 11 percent of the portfolio, respectively. The Fund
was broadly diversified geographically, with holdings in 33 states.
Portfolio holdings are continuously reviewed to maintain or improve
creditworthiness. Particular effort is devoted to monitoring the credit
quality of institutions that provide credit enhancement and liquidity
facilities for money market investments.
The Fund's weighted average maturity moved within a range of 34 to 56 days
during the six-month period. Normally, seasonal purchases of new one-year tax
and revenue anticipation notes (TRANs) cause the average maturity to extend
during the month of June. However, because attractive yields were available
for shorter maturities and new one-year financings were aggressively priced,
the incentive to extend maturities was reduced this year. At the end of June,
the Fund's weighted average maturity was 54 days.
LOOKING FORWARD
The economy has enjoyed steady growth with low inflation for a prolonged
period, which has produced a tightened labor market. If this low unemployment
continues, it could produce wage pressures and threaten price stability. In
the months ahead, we anticipate that the Federal Reserve will be watchful for
any signs of accelerating wage and price increases, which could prompt
further tightening of monetary policy. In such an environment, the weighted
average maturity for the Fund's portfolio would be held in a moderate range,
to maintain investment flexibility.
We appreciate your support of Dean Witter Tax-Free Daily Income Trust and
look forward to continuing to serve your investment needs and objectives.
Sincerely,
/s/ Charles A. Fiumefreddo
- --------------------------
CHARLES A. FIUMEFREDDO
Chairman of the Board
<PAGE>
DEAN WITTER TAX-FREE DAILY INCOME TRUST
RESULTS OF SPECIAL MEETING (unaudited)
On May 21, 1997, a special meeting of the shareholders of Dean Witter
Tax-Free Daily Income Trust was held for the purpose of voting on four
separate matters, the results of which are as follows:
(1) APPROVAL OF A NEW INVESTMENT MANAGEMENT AGREEMENT BETWEEN THE FUND AND
DEAN WITTER INTERCAPITAL INC. IN CONNECTION WITH THE MERGER OF MORGAN
STANLEY GROUP INC. WITH DEAN WITTER, DISCOVER & CO.:
<TABLE>
<CAPTION>
<S> <C>
For ....................................... 286,077,114
Against .................................. 12,854,767
Abstain .................................. 19,793,918
</TABLE>
(2) ELECTION OF TRUSTEES:
<TABLE>
<CAPTION>
<S> <C>
Michael Bozic
For ....................................... 302,807,852
Withheld .................................. 15,917,947
Charles A. Fiumefreddo
For ....................................... 302,781,080
Withheld .................................. 15,944,719
Edwin J. Garn
For ....................................... 302,225,317
Withheld .................................. 16,500,482
John R. Haire
For ....................................... 302,904,184
Withheld .................................. 15,821,615
Wayne E. Hedien
For ....................................... 302,992,034
Withheld .................................. 15,733,765
Dr. Manuel H. Johnson
For ....................................... 302,099,623
Withheld................................... 16,626,176
Michael E. Nugent
For ....................................... 302,745,444
Withheld .................................. 15,980,355
Philip J. Purcell
For ....................................... 303,073,864
Withheld .................................. 15,651,935
John L. Schroeder
For ....................................... 303,034,176
Withheld .................................. 15,691,623
</TABLE>
(3) APPROVAL OF A NEW INVESTMENT POLICY WITH RESPECT TO INVESTMENTS IN
CERTAIN OTHER INVESTMENT COMPANIES:
<TABLE>
<CAPTION>
<S> <C>
For ....................................... 271,287,980
Against .................................. 22,608,452
Abstain .................................. 24,829,367
</TABLE>
(4) RATIFICATION OF THE SELECTION OF PRICE WATERHOUSE LLP AS THE FUND'S
INDEPENDENT ACCOUNTANTS:
<TABLE>
<CAPTION>
<S> <C>
For ....................................... 299,862,704
Against .................................. 3,379,196
Abstain .................................. 15,483,899
</TABLE>
<PAGE>
DEAN WITTER TAX-FREE DAILY INCOME TRUST
PORTFOLIO OF INVESTMENTS June 30, 1997 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN CURRENT DEMAND
THOUSANDS RATE+ DATE* VALUE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHORT-TERM VARIABLE RATE MUNICIPAL OBLIGATIONS (65.8%)
CALIFORNIA
California Pollution Control Financing Authority,
$7,800 Pacific Gas & Electric Co 1997 Ser A ........................... 3.85% 07/01/97 $7,800,000
4,000 Southern California Edison Co 1986 Ser A ....................... 5.20 07/01/97 4,000,000
2,500 Southern California Edison Co 1986 Ser C ....................... 5.20 07/01/97 2,500,000
8,000 California Public Capital Improvements Financing Authority,
Pooled Ser 1988 C ............................................. 3.85 09/15/97 8,000,000
4,000 Newport Beach, Hoag Memorial Hospital/Presbyterian Ser 1992 &
1996 Ser A ..................................................... 4.00 07/01/97 4,000,000
4,200 Southern California Public Power Authority, Transmission 1991
Refg (AMBAC) .................................................. 3.90 07/08/97 4,200,000
COLORADO
9,000 Colorado Health Facilities Authority, Kaiser Permanente 1994 Ser
A .............................................................. 4.10 07/08/97 9,000,000
CONNECTICUT
10,000 Connecticut Special Assessment, Unemployment Compensation 1993
Ser C (FGIC) ................................................... 3.90 07/01/98 10,000,000
DISTRICT OF COLUMBIA
4,800 District of Columbia, The American University Ser 1985 .......... 4.20 07/08/97 4,800,000
FLORIDA
9,800 Dade County, Water & Sewer Ser 1994 (FGIC) ...................... 4.15 07/08/97 9,800,000
17,900 Dade County Industrial Development Authority, Dolphins Stadium
Ser 1985 A ..................................................... 4.15 07/08/97 17,900,000
9,100 University Athletic Association, University of Florida Ser 1990 . 4.00 07/01/97 9,100,000
GEORGIA
11,800 Burke County Development Authority, Ogelthorpe Power Co Ser 1994
A (FGIC) ....................................................... 4.15 07/08/97 11,800,000
12,000 Georgia Municipal Association, Pool Ser 1990 COPs (MBIA) ........ 4.15 07/08/97 12,000,000
HAWAII
5,000 Hawaii Department of Budget & Finance, Kaiser Permanente
Semiannual Tender Ser 1984 B .................................. 3.50 09/02/97 5,000,000
IDAHO
1,000 Idaho Health Facilities Authority, St. Luke's Regional Medical
Center Ser 1995 ............................................... 4.10 07/01/97 1,000,000
ILLINOIS
7,000 Chicago, Tender Notes Ser 1996 .................................. 3.55 10/31/97 7,000,000
10,000 Illinois Educational Facilities Authority, Northwestern
University Ser 1988 ........................................... 4.30 07/08/97 10,000,000
7,100 Illinois Health Facilities Authority, Northwestern Memorial
Hospital Ser 1995 ............................................. 4.25 07/01/97 7,100,000
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER TAX-FREE DAILY INCOME TRUST
PORTFOLIO OF INVESTMENTS June 30, 1997 (unaudited) continued
PRINCIPAL
AMOUNT IN CURRENT DEMAND
THOUSANDS RATE+ DATE* VALUE
- ----------------------------------------------------------------------------------------------------------------
$10,000 Illinois Toll Highway Authority, Refg Ser 1993-B (MBIA) ......... 4.15 % 07/08/97 $10,000,000
10,000 Oak Forest, Homewood South Suburban Mayors & Managers Assn
Ser 1989 ....................................................... 4.15 07/08/97 10,000,000
INDIANA
10,000 Indiana Hospital Equipment Financing Authority, Ser 1985 A
(MBIA) ......................................................... 4.25 07/08/97 10,000,000
KENTUCKY
9,150 Mason County, East Kentucky Power Co-op Inc Ser 1984 (NRU-CFC
Gtd) .......................................................... 4.20 07/08/97 9,150,000
LOUISIANA
1,000 East Baton Rouge Parish, Exxon Corp Ser 1993 ................... 4.05 07/01/97 1,000,000
4,100 Louisiana Public Facilities Authority, Kenner Hotel Ltd
Partnership Ser 1985 ........................................... 4.15 07/01/97 4,100,000
10,000 New Orleans Aviation Board, Ser 1993 B (MBIA) ................... 4.15 07/08/97 10,000,000
MASSACHUSETTS
7,000 Massachusetts Bay Transportation Authority, 1984 Ser A .......... 3.45 09/02/97 7,000,000
5,000 Massachusetts Municipal Wholesale Electric Company, Power Supply
1994 Ser C ..................................................... 4.10 07/08/97 5,000,000
MINNESOTA
1,900 Beltrami County, Environmental Northwood Panelboard Co Ser 1991 . 4.10 07/01/97 1,900,000
4,700 Minneapolis & St Paul Housing & Redevelopment Authority,
Childrens' Health Care Ser 1995 B (FSA) ....................... 4.30 07/01/97 4,700,000
MISSOURI
Missouri Health & Educational Facilities Authority,
10,000 Sisters of Mercy Health System St Louis Inc Ser 1989 A ........ 4.15 07/08/97 10,000,000
5,000 Washington University Ser 1996 C ............................... 4.10 07/01/97 5,000,000
NEW JERSEY
4,000 Gloucester County, Mobil Oil Refining Corp Ser 1993 A ........... 3.75 07/08/97 4,000,000
New Jersey Economic Development Authority,
2,500 Toys "R" Us Inc ............................................... 3.75 07/01/97 2,500,000
3,100 United Water New Jersey Inc Ser 1996 B (AMBAC) ................. 3.75 07/01/97 3,100,000
NEW YORK
300 New York State Dormitory Authority, Cornell University Ser 1990
B ............................................................. 4.00 07/01/97 300,000
NORTH CAROLINA
6,000 Asheville, Ser 1993 A COPs ...................................... 4.05 07/08/97 6,000,000
5,000 North Carolina Medical Care Commission, Duke University Hospital
Ser 1985 B ..................................................... 4.075 07/08/97 5,000,000
OHIO
9,900 Columbus, Unlimited Tax Ser 1995-1 .............................. 4.10 07/08/97 9,900,000
2,100 Ohio Air Quality Development Authority, Mead Co 1986 Ser A ...... 4.00 07/01/97 2,100,000
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER TAX-FREE DAILY INCOME TRUST
PORTFOLIO OF INVESTMENTS June 30, 1997 (unaudited) continued
PRINCIPAL
AMOUNT IN CURRENT DEMAND
THOUSANDS RATE+ DATE* VALUE
- ----------------------------------------------------------------------------------------------------------------
OKLAHOMA
$11,695 Oklahoma Water Resources Board, State Loan Prog Ser 1994 A & Ser
1995 ........................................................... 3.50% 09/02/97 $11,695,000
OREGON
3,500 Oregon, Ser 73 G ................................................ 4.05 07/08/97 3,500,000
PENNSYLVANIA
2,500 Delaware County Industrial Development Authority, United Parcel
Service of America Ser 1985 ................................... 4.00 07/01/97 2,500,000
5,000 Pennsylvania Higher Education Facilities Authority, Thomas
Jefferson University 1992 Ser C ............................... 3.85 09/23/97 5,000,000
SOUTH CAROLINA
York County,
8,000 North Carolina Electric Membership Corp, Ser 1984 N-5 (NRU-CFC
Gtd) .......................................................... 3.55 09/15/97 8,000,000
8,815 Saluda River Electric Co-op Inc Ser 1984 E-1 & E-2 (NRU-CFC
Gtd) ........................................................... 3.50 08/15/97 8,815,000
TENNESSEE
5,000 Metropolitan Nashville Airport Authority, American Airlines Refg
Ser 1995 A ..................................................... 4.10 07/01/97 5,000,000
TEXAS
10,000 Texas, Veterans' Housing Assistance Fund I Ser 1995 ............. 4.15 07/08/97 10,000,000
UTAH
7,000 Intermountain Power Agency, 1985 Ser F .......................... 3.55 09/15/97 7,000,000
WEST VIRGINIA
5,000 Pleasants County Commission, American Cyanamid Co Ser 1985 ...... 4.25 07/08/97 5,000,000
WISCONSIN
10,000 Wisconsin Health & Educational Facilities Authority, Franciscan
Health Care Inc Ser 1985 A-1 .................................. 4.15 07/08/97 10,000,000
-----------
TOTAL SHORT-TERM VARIABLE RATE MUNICIPAL OBLIGATIONS
(Amortized Cost $342,260,000) ................................... 342,260,000
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER TAX-FREE DAILY INCOME TRUST
PORTFOLIO OF INVESTMENTS June 30, 1997 (unaudited) continued
<TABLE>
<CAPTION>
YIELD TO
PRINCIPAL MATURITY
AMOUNT IN COUPON MATURITY ON DATE OF
THOUSANDS RATE DATE PURCHASE VALUE
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
TAX-EXEMPT COMMERCIAL PAPER (24.6%)
ALABAMA
$6,200 Montgomery Industrial Development Board, General Electric Co Ser
1990 A ......................................................... 3.65% 08/07/97 3.65% $6,200,000
ARIZONA
6,450 Maricopa County Pollution Control Corporation, Southern
California Edison Co 1985 Ser C ................................ 3.35 07/10/97 3.35 6,450,000
FLORIDA
5,500 Palm Beach County Health Facilities Authority, Hospital Pooled
Loan (MBIA) ................................................... 3.60 07/23/97 3.60 5,500,000
GEORGIA
Georgia Municipal Gas Authority,
5,000 Southern Portfolio I Ser D ..................................... 3.70 07/24/97 3.70 5,000,000
6,400 TRANSCO Portfolio I Ser B-2 ................................... 3.75 09/17/97 3.75 6,400,000
HAWAII
6,200 Hawaii Department of Budget & Finance, Citizens Utilities Co Ser
1985 ........................................................... 3.85 08/11/97 3.85 6,200,000
LOUISIANA
8,200 Plaquemines Port Harbor & Terminal District, Electric-Coal
Transfer Co Ser 1985 B ......................................... 3.75 10/08/97 3.75 8,200,000
MARYLAND
Baltimore County,
5,000 Ser 1995 BANs .................................................. 3.80 08/06/97 3.80 5,000,000
6,000 Ser 1995 BANs .................................................. 3.70 09/09/97 3.70 6,000,000
8,000 Metro District Ser 1995 BANs ................................... 3.80 09/11/97 3.80 8,000,000
MINNESOTA
4,500 Rochester, Mayo Foundation/Mayo Medical Center Ser 1992 B ....... 3.80 08/20/97 3.80 4,500,000
OHIO
5,000 Ohio Air Quality Development Authority, Cleveland Electric
Illuminating Co 1988 Ser B (FGIC) ............................. 3.70 08/06/97 3.70 5,000,000
PENNSYLVANIA
Pennsylvania,
5,000 Ser 1997 A BANs ................................................ 3.75 08/12/97 3.75 5,000,000
4,900 Ser 1997 A BANs ................................................ 3.75 08/19/97 3.75 4,900,000
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER TAX-FREE DAILY INCOME TRUST
PORTFOLIO OF INVESTMENTS June 30, 1997 (unaudited) continued
YIELD TO
PRINCIPAL MATURITY
AMOUNT IN COUPON MATURITY ON DATE OF
THOUSANDS RATE DATE PURCHASE VALUE
- ---------------------------------------------------------------------------------------------------------------------------
TEXAS
$11,000 Houston, 1993 Ser A ............................................. 3.75 % 09/16/97 3.75% $ 11,000,000
San Antonio,
6,000 Electric & Gas Ser 1995 A ...................................... 3.75 07/29/97 3.75 6,000,000
6,000 Electric & Gas Ser 1995 A ...................................... 3.75 08/28/97 3.75 6,000,000
WASHINGTON
Seattle,
9,000 Municipal Light & Power Ser 1991 B ............................. 3.70 07/22/97 3.70 9,000,000
3,000 Municipal Light & Power Ser 1991 B ............................. 3.70 08/26/97 3.70 3,000,000
WISCONSIN
Wisconsin,
5,665 1997 Ser A ..................................................... 3.60 08/26/97 3.60 5,665,000
5,000 Transportation Notes 1997 Ser A ................................ 3.65 08/14/97 3.65 5,000,000
-------------
TOTAL TAX-EXEMPT COMMERCIAL PAPER (Amortized Cost $128,015,000) . 128,015,000
-------------
SHORT-TERM MUNICIPAL NOTES (11.4%)
COLORADO
5,000 Colorado, Ser 1997 A TRANs, dtd 07/01/97 (WI) ................... 4.50 06/26/98 3.86 5,030,350
IDAHO
5,000 Idaho, Ser 1997 TANs, dtd 07/01/97 (WI) ........................ 4.625 06/30/98 3.89 5,035,750
INDIANA
5,000 Indiana Bond Bank, Advance Funding Ser 1997 A-2, dtd 02/04/97 ... 4.25 01/21/98 3.70 5,014,850
3,025 Indianapolis Local Improvement Bond Bank, Ser 1997 C Notes,
dtd 06/19/97 ................................................... 4.375 01/08/98 3.76 3,034,535
IOWA
5,570 Iowa School Corporations, Warrant Certificates Ser A 1997-98
(FSA), dtd 06/26/97 ............................................ 4.50 06/26/98 3.89 5,602,226
MICHIGAN
10,000 Michigan, Notes, dtd 02/12/97 ................................... 4.50 09/30/97 3.47 10,025,242
10,000 Michigan Municipal Bond Authority, Ser 1996 A Notes, dtd
07/03/96 ....................................................... 4.50 07/03/97 3.90 10,000,316
PENNSYLVANIA
4,000 Temple University, Ser 1997, dtd 05/19/97 ....................... 4.75 05/18/97 3.90 4,028,749
TEXAS
5,000 Texas, Ser 1996 TRANs, dtd 08/30/96 ............................ 4.75 08/29/97 3.97 5,006,062
UTAH
2,750 Davis County, Ser 1997 TRANs, dtd 06/30/97 ...................... 4.25 12/31/97 3.75 2,756,701
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER TAX-FREE DAILY INCOME TRUST
PORTFOLIO OF INVESTMENTS June 30, 1997 (unaudited) continued
YIELD TO
PRINCIPAL MATURITY
AMOUNT IN COUPON MATURITY ON DATE OF
THOUSANDS RATE DATE PURCHASE VALUE
- ---------------------------------------------------------------------------------------------------------------------------
WISCONSIN
$3,800 Wisconsin, Operating Notes of 1997, dtd 07/01/97 (WI) .......... 4.50% 06/15/98 3.85 % $3,822,762
-------------
TOTAL SHORT-TERM MUNICIPAL NOTES (Amortized Cost $59,357,543) ... 59,357,543
-------------
TOTAL INVESTMENTS (Amortized Cost $529,632,543)(a) ............. 101.8 % 529,632,543
LIABILITIES IN EXCESS OF CASH AND OTHER ASSETS ................. (1.8) (9,597,102)
-------------
NET ASSETS ..................................................... 100.0 % $520,035,441
======= =============
</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, 1997.
* 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.
FGIC Financial Guaranty Insurance Company.
FSA Financial Security Assurance Inc.
MBIA Municipal Bond Investors Assurance Corporation.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER TAX-FREE DAILY INCOME TRUST
FINANCIAL STATEMENTS
STATEMENTS OF ASSETS AND LIABILITIES
June 30, 1997 (unaudited)
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments in securities, at value
(amortized cost $529,632,543)........... $529,632,543
Cash..................................... 3,938,342
Receivable for:
Investment sold........................ 10,000,000
Interest .............................. 3,434,231
Prepaid expenses and other assets ....... 83,645
--------------
TOTAL ASSETS........................... 547,088,761
--------------
LIABILITIES:
Payable for:
Investments purchased.................. 23,888,862
Shares of beneficial interest
repurchased........................... 2,814,038
Investment management fee.............. 219,984
Plan of distribution fee............... 44,267
Accrued expenses and other payables ..... 86,169
--------------
TOTAL LIABILITIES...................... 27,053,320
--------------
NET ASSETS:
Paid-in-capital.......................... 520,037,420
Accumulated undistributed net investment
income.................................. 529
Accumulated net realized loss............ (2,508)
--------------
NET ASSETS............................. $520,035,441
==============
NET ASSET VALUE PER SHARE,
520,037,420 shares outstanding
(unlimited shares authorized of $.01
par value).............................. $1.00
=====
</TABLE>
STATEMENT OF OPERATIONS
For the six months ended June 30, 1997 (unaudited)
<TABLE>
<CAPTION>
<S> <C>
NET INVESTMENT INCOME:
INTEREST INCOME.......................... $ 9,682,356
--------------
EXPENSES
Investment management fee................ 1,329,196
Plan of distribution fee................. 257,292
Transfer agent fees and expenses......... 194,109
Shareholder reports and notices ......... 33,513
Registration fees........................ 31,942
Professional fees........................ 26,848
Custodian fees........................... 13,735
Trustees' fees and expenses ............. 8,285
Other.................................... 3,860
--------------
TOTAL EXPENSES ........................ 1,898,780
LESS: EXPENSE OFFSET .................. (13,735)
--------------
NET EXPENSES........................... 1,885,045
--------------
NET INVESTMENT INCOME AND NET INCREASE... $ 7,797,311
==============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER TAX-FREE DAILY INCOME TRUST
FINANCIAL STATEMENTS, continued
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
JUNE 30, 1997 DECEMBER 31, 1996
- -----------------------------------------------------------------------------------------
(UNAUDITED)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income ................................. $ 7,797,311 $ 15,359,674
Net realized gain ..................................... -- 12,513
------------ ------------
NET INCREASE ........................................ 7,797,311 15,372,187
Dividends from net investment income................... (7,797,388) (15,359,493)
Net increase (decrease) from transactions in shares of
beneficial interest................................... (1,843,835) 214,584
------------ ------------
NET INCREASE (DECREASE).............................. (1,843,912) 227,278
NET ASSETS:
Beginning of period.................................... 521,879,353 521,652,075
------------ ------------
END OF PERIOD
(Including undistributed net investment income of
$529 and $606, respectively)......................... $520,035,441 $521,879,353
============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER TAX-FREE DAILY INCOME TRUST
NOTES TO FINANCIAL STATEMENTS June 30, 1997 (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
<PAGE>
DEAN WITTER TAX-FREE DAILY INCOME TRUST
NOTES TO FINANCIAL STATEMENTS June 30, 1997 (unaudited) continued
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 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, 1997, the
distribution fee was accrued at the 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 six months ended June 30, 1997 aggregated $588,695,268 and
$579,495,000, respectively.
<PAGE>
DEAN WITTER TAX-FREE DAILY INCOME TRUST
NOTES TO FINANCIAL STATEMENTS June 30, 1997 (unaudited) continued
Dean Witter Trust Company, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At June 30, 1997, the Fund had
transfer agent fees and expenses payable of approximately $12,600.
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, 1997
included in Trustees' fees and expenses in the Statement of Operations amounted
to $1,224. At June 30, 1997, the Fund had an accrued pension liability of
$47,415 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 FOR THE YEAR
MONTHS ENDED ENDED
JUNE 30, 1997 DECEMBER 31, 1996
------------- ------------------
(UNAUDITED)
<S> <C> <C>
Shares sold .................................. 565,061,486 1,127,357,086
Shares issued in reinvestment of dividends .. 7,797,388 15,359,493
------------ ----------------
572,858,874 1,142,716,579
Shares repurchased ........................... (574,702,709) (1,142,501,995)
------------ ----------------
Net increase (decrease) in shares
outstanding.................................. (1,843,835) 214,584
============ ================
</TABLE>
6. FEDERAL INCOME TAX STATUS
At December 31, 1996, the Fund had a net capital loss carryover of
approximately $2,500 which will be available through December 31, 2002 to
offset future capital gains to the extent provided by regulations.
<PAGE>
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 FOR THE YEAR ENDED DECEMBER 31
MONTHS ENDED ------------------------------------------------
JUNE 30, 1997 1996 1995 1994 1993 1992
-----------------------------------------------------------------------------------------------------
(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 0.028 0.032 0.022 0.018 0.024
Less dividends from net income......... (0.014) (0.028) (0.032) (0.022) (0.018) (0.024)
------- ------- ------- ------- ------- -------
Net asset value, end of period......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= ======= =======
TOTAL INVESTMENT RETURN+ .............. 1.45% (1) 2.83% 3.22% 2.25% 1.85% 2.39%
RATIOS TO AVERAGE NET ASSETS:
Expenses............................... 0.71% (2)(3) 0.71% 0.72% 0.71% 0.71% 0.68%
Net investment income.................. 2.90% (2) 2.76% 3.16% 2.22% 1.83% 2.37%
SUPPLEMENTAL DATA:
Net assets, end of period, in
millions.............................. $520 $522 $522 $544 $568 $670
<FN>
- ------------
+ Calculated based on the net asset value as of the last business day of
the period.
(1) Not annualized.
(2) Annualized.
(3) Does not reflect the effect of expense offset of 0.01%.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER
TAX-FREE DAILY
INCOME TRUST
Semiannual Report
June 30, 1997
TRUSTEES
- --------
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
Barry Fink
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 and opinion thereon.
This report is submitted for the general information of shareholders of the
Fund. For more detailed information about the Fund, its officers and
trustees, fees, expenses and other pertinent information, please see the
prospectus of the Fund.
This report is not authorized for distribution to prospective investors in
the Fund unless preceded or accompanied by an effective prospectus.