<PAGE>
DEAN WITTER CALIFORNIA TAX-FREE INCOME FUND
Two World Trade Center
New York, New York 10048
DEAR SHAREHOLDER:
- --------------------------------------------------------------------------------
MARKET CONDITIONS
Interest rates moved higher throughout 1994 as the fixed-income markets
focused on the strong pace of economic growth and the potential for higher
inflation. Satisfied that economic growth would be sustained, the Federal
Reserve Board began to tighten monetary policy. Between February and November,
the central bank raised the federal-funds rate from 3.00 percent to 5.50 percent
in six stages. This led to a severe bear market in bonds.
Municipal yields, as tracked by THE BOND BUYER Revenue Bond Index,* began
1994 at 5.52 percent, nearly a record low. The Index peaked at 7.37 percent in
November and ended the year at 6.97 percent. The 145 basis point yield increase
during the year was equivalent to an 18 percent price decline for a bond with a
30 year maturity. In contrast, over the
six-year period between 1987 and 1993, yields
fell from 9.00 percent to 5.50 percent and
bond prices appreciated 24 percent.
The municipal bond market's weakness
paralleled trends in other fixed-income
sectors. The 30-year U.S. Treasury bond's
yield increased 160 basis points and closed
1994 at 7.84 percent. During the year, the
ratio of Revenue Bond Index yields to 30-year
U.S. Treasury bond yields ranged from a low
of 85 percent to a high of 92 percent and
ended the year at 89 percent. (At higher
ratios, municipals are more attractive
relative to taxable investments.)
The fiscal year was also marked by
periods of supply/ demand imbalance in
municipals. Between February and May, dealer
inventories reached near-record levels as
long-term bonds were sold to pay taxes and
increase cash. A semblance of stability
returned to the market between June and
August. However, after Labor Day the market
was again subject to a renewed round of bond
sales as fund redemptions mounted and
tax-loss selling accelerated. Market
conditions improved in December as the
"January effect" -- the reinvestment of
coupons, redemptions and maturities at a time
of seasonally scarce supply -- was
anticipated. This seasonal pattern more than
offset market uncertainty caused by the
Orange County, California bankruptcy filing.
On December 6, 1994, Orange County, one of
the most affluent areas in the country, was
forced to seek protection after its pooled
investment fund faced unprecedented losses.
Higher interest rates slowed state and
local government debt issuance. New-issue
volume dropped 44 percent to $163 billion in
1994. The driving force behind this sharp
decline was the virtual halt in refunding
issues, which plummeted 74 percent. In
comparison, California volume -- #1 in the
nation
- --------------------------------------------------------------------------------
* THE BOND BUYER Revenue Bond Index is an arithmetic average of the yields of 25
selected municipal revenue bonds with 30-year maturities. Credit ratings of
these bonds range from Aa1 to Baa1 by Moody's and AA+ to A- by Standard &
Poor's.
<PAGE>
at $26 million -- only declined 33 percent. Last year the level of redemptions
from maturing debt and refunding calls reached $191 billion and exceeded the
supply of new issues coming to market. This marked the decline in the amount of
municipal securities outstanding. A repeat of this supply scarcity is expected
in 1995 and bodes well for the relative performance of municipals.
PERFORMANCE
Dean Witter California Tax-Free Income Fund's total return for the year
ended December 31, 1994 was -5.97 percent. Tax free dividends totaling $0.64 per
share were paid during the year. At year end, the Fund's net assets totaled $1
billion. Since inception the Fund has provided shareholders with an average
annual total return of 8.48 percent. The accompanying chart illustrates the
performance of a $10,000 investment in the Fund over the 10-year period ended
December 31, 1994, versus the performance of a similar hypothetical investment
in the Lehman Brothers Municipal Bond Index.
INVESTMENT STRATEGY
During a year of rapidly rising interest rates, the Fund benefited from its
established mix of older high-coupon bonds. At the end of the fiscal year, the
portfolio held 19 percent of its net assets in refunded issues, which were
secured by U.S. government securities held in escrow to redeem these issues on
their first call dates. The Fund also increased its short-term investment and
cash position to 6 percent at year-end 1994.
On December 31, 1994, the portfolio's long-term investments were diversified
among 12 specific municipal sectors and 93 credits. Uninsured exposure in three
Orange County-related holdings represented 1.6 percent of net assets. These
issuers operated independent of Orange County and their credit exposure was
limited to participation in the investment pool. Two other Fund holdings with
pool exposure were insured by MBIA. The three largest sectors were water &
sewer, hospital and electric revenue bonds, representing 42 percent of net
assets. The average maturity and call protection of the Fund's long-term
holdings were 16 years and 6 years, respectively. Bonds subject to the
alternative minimum tax (AMT) comprised approximately 5 percent of net assets.
The credit-quality ratings of the long-term portfolio are summarized below:
<TABLE>
<CAPTION>
MOODY'S OR STANDARD & POOR'S RATING PERCENT
- ---------------------------------------------------------------------------- ---------
<S> <C>
Aaa or AAA.................................................................. 33%
Aa or AA.................................................................... 25
A or A...................................................................... 29
Baa or BBB.................................................................. 5
Not rated................................................................... 8
</TABLE>
LOOKING AHEAD
Moving into 1995, the Fund plans to reduce its defensive positions,
including refunded bonds, as the pace of economic growth and inflationary
expectations moderate. New investments will continue to stress credit quality
and essential service sectors. However, even with the move to higher yields that
occurred last year, the Fund cannot obtain the yield of many older investments
that may be called or sold in the next few years.
We appreciate your ongoing support of Dean Witter California Tax-Free Income
Fund and look forward to continuing to serve your investment needs.
Very truly yours,
[SIG]
Charles A. Fiumefreddo
CHAIRMAN OF THE BOARD
<PAGE>
DEAN WITTER CALIFORNIA TAX-FREE INCOME FUND
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- ---------- -------- --------- --------------
<C> <S> <C> <C> <C>
CALIFORNIA EXEMPT MUNICIPAL BONDS (92.3%)
GENERAL OBLIGATION (6.6%)
California,
$ 5,000 Ser 1990.................................................. 7.00 % 08/01/07 $ 5,256,200
5,000 Ser 1990.................................................. 7.00 08/01/08 5,222,900
2,000 Ser AT.................................................... 9.50 02/01/10 2,541,820
15,000 Various Purpose Dtd 4/1/93 (FSA Insured).................. 5.50 04/01/19 12,603,600
5,000 San Diego Open Space Park Facilities District #1, Ser 86A
(Prerefunded)............................................. 7.60 01/01/07 5,210,900
4,000 Santa Margarita/Dana Point Authority, Impr Dists #3, 3A, 4 &
4A 1994 Ser B Refg (MBIA Insured)......................... 5.75 08/01/20 3,493,640
Santa Margarita Water District,
6,000 Impr Dists #3&4 Refg Ser 1986............................. 7.50 11/01/05 5,615,700
12,000 Impr Dist #4 1978 Ser E (Prerefunded)..................... 7.40 07/01/15 13,133,640
3,500 Impr Dist #4A 1984 Ser A (Prerefunded).................... 7.75 08/01/06 3,757,460
Puerto Rico, Pub Impr
5,000 Refg Ser 1987 A........................................... 5.00 07/01/05 4,380,100
5,085 Ser 1991 (Prerefunded).................................... 7.30 07/01/20 5,574,482
- ---------- --------------
67,585 66,790,442
- ---------- --------------
EDUCATIONAL FACILITIES REVENUE (5.8%)
California Educational Facilities Authority,
1,750 Loyola Marymount University Ser 1992 B.................... 6.55 10/01/12 1,689,327
2,300 Loyola Marymount University Ser 1992 B.................... 6.60 10/01/22 2,168,992
3,000 Stanford University Ser I................................. 6.75 01/01/13 3,023,430
3,500 University of Southern California Ser 1989 A.............. 7.20 10/01/15 3,566,640
California Public Works Board,
8,000 State University 1992 Ser A............................... 6.70 10/01/17 7,675,040
7,000 University of California 1990 Ser A (Prerefunded)......... 7.00 09/01/15 7,547,050
University of California, Multiple Purpose
11,000 Refg Ser A (Prerefunded).................................. 6.875 09/01/16 11,857,120
15,000 Refg Ser 1993 C (AMBAC Insured)........................... 5.125 09/01/18 12,017,850
10,000 Whittier College Refg Ser 1993 (Connie Lee Insured)......... 5.40 12/01/18 8,244,500
- ---------- --------------
61,550 57,789,949
- ---------- --------------
ELECTRIC REVENUE (12.2%)
15,000 Los Angeles Department of Water & Power, Second Issue of
1993...................................................... 5.40 11/15/13 12,678,900
Northern California Power Agency,
15,000 Geothermal #3 1985 Ser A (Crossover Refunded)............. 7.00 07/01/10 15,162,450
7,000 Hydro #1 1993 Refg Ser A (MBIA Insured)................... 5.50 07/01/16 5,993,470
10,000 Northern California Transmission Agency, California-Oregon
1990 Ser A (MBIA Insured) (Prerefunded)................... 7.00 05/01/24 10,719,700
5,000 Redding, Ser 1989 A COPs (MBIA Insured) (Prerefunded)....... 7.125 07/01/14 5,302,400
Sacramento Municipal Utility District,
5,700 Refg 1994 Ser H (MBIA Insured)............................ 5.75 01/01/11 5,220,345
26,000 Refg 1992 Ser (FGIC Insured).............................. 6.30 08/15/18 24,568,960
</TABLE>
<PAGE>
DEAN WITTER CALIFORNIA TAX-FREE INCOME FUND
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1994 (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- ---------- -------- --------- --------------
<C> <S> <C> <C> <C>
Southern California Public Power Authority,
$ 12,800 Mead-Adelanto 1994 Ser (AMBAC Insured).................... 5.01 % 07/01/15 $ 10,470,912
6,115 Multiple Projects 1989 Ser................................ 6.00 07/01/18 5,472,803
8,000 Power 1993 Refg Ser A..................................... 5.00 07/01/15 6,301,120
7,000 Transmission Refg Ser 1988 (FGIC Insured)................. 0.00 07/01/06 3,395,840
10,000 Transmission 1986 Refg Ser B.............................. 5.50 07/01/23 8,179,600
Puerto Rico Electric Power Authority,
3,000 Power Ser N............................................... 5.00 07/01/12 2,462,940
9,000 Power Ser O............................................... 5.00 07/01/12 7,388,820
- ---------- --------------
139,615 123,318,260
- ---------- --------------
HOSPITAL REVENUE (12.9%)
7,100 Antelope Valley Hospital District, Ser 1989 COPs............ 7.35 01/01/20 7,161,699
Bakersfield, Bakersfield Memorial Hospital
1,750 Ser 1992 A................................................ 6.375 01/01/12 1,625,855
2,000 Ser 1992 A................................................ 6.50 01/01/22 1,821,140
7,600 Berkeley, Alta Bates Hospital 1995 Ser A.................... 6.50 12/01/11 6,705,708
California Health Facilities Financing Authority,
4,350 Downey Community Hospital Ser 1993........................ 5.625 05/15/08 3,870,282
10,000 Kaiser Permanente 1983 Ser................................ 5.45 10/01/13 8,412,300
8,000 Kaiser Permanente 1985 Ser A.............................. 9.125 10/01/15 8,374,000
3,500 Merritt Peralta Medical Center 1985 Ser A................. 9.00 05/01/15 3,538,500
5,000 St Joseph Health Ser 1991 A (Prerefunded)................. 6.75 07/01/21 5,354,000
Desert Hospital District, Desert Hospital Corp
5,000 Ser 1990 COPs (Prerefunded)............................... 8.00 07/01/10 5,622,450
20,000 Ser 1992 COPs (CGIC Insured).............................. 6.392 07/28/20 19,085,800
Duarte, City of Hope National Medical Center,
3,000 Ser 1993 COPs............................................. 5.50 04/01/01 2,774,940
4,000 Ser 1993 COPs............................................. 6.25 04/01/23 3,315,480
6,000 Eden Township Hospital District, Ser 1989................... 7.40 11/01/19 5,457,960
5,000 Hemet Valley Hospital District, Moreno Valley Regional
Medical Center 1988 Ser A................................. 8.50 07/01/18 5,210,600
5,000 Los Angeles, Hollywood Presbyterian Hospital/Olmstead
Memorial Ser 1985 COPs (State Insured).................... 9.00 07/01/13 5,186,350
2,950 Rancho Mirage Joint Powers Financing Authority, Eisenhower
Memorial Hospital COPs.................................... 7.00 03/01/22 2,848,992
4,000 Riverside, Kaiser Permanente 1985 Ser A..................... 9.00 12/01/15 4,205,920
5,000 Santa Rosa, Kaiser Permanente 1985 Ser A.................... 9.00 12/01/15 5,267,050
Stockton,
2,000 Dameron Hospital Assn Refg Ser 1988....................... 8.25 12/01/00 2,102,300
6,000 St Joseph Medical Center of Stockton 1993 Ser A (MBIA
Insured).................................................. 5.50 06/01/23 4,975,380
University of California,
9,000 UCLA Medical Center Refg Ser 1994 (MBIA Insured).......... 5.50 12/01/14 7,812,360
8,500 UCLA Medical Center Ser 1986 (Prerefunded)................ 6.90 12/01/16 8,907,490
- ---------- --------------
134,750 129,636,556
- ---------- --------------
</TABLE>
<PAGE>
DEAN WITTER CALIFORNIA TAX-FREE INCOME FUND
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1994 (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- ---------- -------- --------- --------------
<C> <S> <C> <C> <C>
INDUSTRIAL DEVELOPMENT/POLLUTION CONTROL REVENUE (5.5%)
$ 2,500 California Alternative Energy Source Financing Authority,
SRI International Cogeneration Ser 1985 (a)............... 9.75 % 12/01/05 $ 1,250,000
California Pollution Control Financing Authority,
5,000 Atlantic Richfield Co Ser 1985............................ 9.125 11/01/04 5,241,500
6,000 Pacific Gas & Electric Co 1987 Ser B (AMT)................ 8.875 01/01/10 6,528,780
5,000 Southern California Edison Co 1988 Ser A (AMT)............ 6.90 09/01/06 5,093,800
10,000 Southern California Edison Co Ser D....................... 6.85 12/01/08 10,128,500
10,000 Southern California Edison Co 1992 Ser B (AMT)............ 6.40 12/01/24 9,135,400
5,000 Waste Management Inc 1991 Ser A (AMT)..................... 7.15 02/01/11 5,066,100
1,400 Intermodal Container Transfer Facility Joint Powers
Authority, Southern Pacific Transportation Co
1989 Ser A................................................ 7.70 11/01/14 1,428,462
San Diego, San Diego Gas & Electric Co
6,000 1986 Ser B (AMT).......................................... 7.375 12/01/21 6,075,180
5,000 1987 Ser A (AMT).......................................... 8.75 03/01/23 5,486,450
- ---------- --------------
55,900 55,434,172
- ---------- --------------
MORTGAGE REVENUE -- SINGLE FAMILY (1.3%)
California Housing Finance Agency,
6,490 Home 1989 Ser A........................................... 7.75 08/01/17 6,704,754
4,315 Home 1991 Ser G (AMT)..................................... 7.05 08/01/27 4,244,277
Puerto Rico Housing Finance Corporation,
1,365 Portfolio One GNMA-Backed Ser B........................... 7.65 10/15/22 1,419,573
1,000 Portfolio One GNMA-Backed Ser C........................... 6.85 10/15/23 1,003,760
- ---------- --------------
13,170 13,372,364
- ---------- --------------
PUBLIC FACILITIES REVENUE (10.6%)
10,000 Alameda County Public Facilities Corporation, 1991 Financing
COPs...................................................... 6.15 09/01/21 9,950,000
3,265 Beverly Hills, Civic Center Impr Refg COPs (Prerefunded).... 7.00 06/01/15 3,491,264
10,000 Beverly Hills Public Financing Authority, Lease 1993 Ser A
(MBIA Insured)............................................ 5.65 06/01/15 8,730,300
1,875 Campell Redevelopment Agency, 1991 Financing COPs........... 6.75 10/01/17 1,793,063
9,000 El Cajon-San Diego County Civic Center Authority, East
County Regional Center 1986 Refg (Prerefunded)............ 6.70 12/01/07 9,394,020
5,560 Grossmont Union High School District, Land Acquisition
Convertible Cap Apprec COPs (FSA Insured)................. 0.00 ** 09/01/25 4,935,556
Los Angeles Convention & Exhibition Center Authority,
10,000 Ser 1985 COPs (Prerefunded)............................... 9.00 12/01/10 12,322,200
14,000 Ser 1985 COPs (Prerefunded)............................... 9.00 12/01/20 17,251,080
5,500 Los Angeles County-West Covina Civic Center Authority, 1987
Refg COPs................................................. 6.875 09/01/14 5,443,735
6,500 Nevada County, Western Nevada County Solid Waste Mgmt 1991
COPs...................................................... 7.50 06/01/21 5,971,745
5,000 North City West School Facilities Financing Authority,
Community Facs Dist #1 Spl Tax Ser 1989 A................. 7.85 09/01/19 5,024,800
3,500 Poway Redevelopment Agency, 1986 Cap Impr COPs.............. 7.875 08/01/11 3,571,365
</TABLE>
<PAGE>
DEAN WITTER CALIFORNIA TAX-FREE INCOME FUND
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1994 (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- ---------- -------- --------- --------------
<C> <S> <C> <C> <C>
$ 5,000 San Jose Financing Authority, Convention Center Refg 1993
Ser C..................................................... 6.40 % 09/01/17 $ 4,666,200
10,000 Stanislaus County Capital Improvements Financing Authority,
Refg Ser 1990 COPs........................................ 7.55 04/01/18 10,075,100
3,000 University of California, Los Angeles Campus Parking Ser C
(Prerefunded)............................................. 7.75 11/01/15 3,188,040
1,200 Puerto Rico Infrastructure Financing Authority, Spl Tax Ser
1988 A.................................................... 7.90 07/01/07 1,270,632
- ---------- --------------
103,400 107,079,100
- ---------- --------------
RESOURCE RECOVERY REVENUE (0.5%)
Stanislaus Waste-To-Energy Financing Agency, Ogden Martin
Systems of Stanislaus Inc Refg Ser 1990................... 7.625 01/01/10
5,000
- ----------
5,119,000
--------------
TAX ALLOCATION (7.0%)
5,000 Fountain Valley Agency For Community Development, 1985
Industrial Area........................................... 9.10 01/01/15 5,050,000
Garden Grove Community Development Agency,
5,000 Refg Issue of 1993........................................ 5.70 10/01/13 4,101,000
7,000 Refg Issue of 1993........................................ 5.875 10/01/23 5,651,030
Industry Urban-Development Agency,
10,000 Civic Rec-Ind Redev Proj #1 Sub Refg Ser 1987 A........... 7.30 05/01/06 10,028,500
2,160 Civic Rec-Ind Redev Proj #1 Sub Refg Ser 1987 B........... 7.375 05/01/15 2,154,017
6,840 Civic Rec-Ind Redev Proj #1 Sub Refg Ser 1987 B
(Prerefunded)............................................. 7.375 05/01/15 7,266,474
25,500 Long Beach Financing Authority, Ser 1992 (AMBAC Insured).... 6.00 11/01/17 23,705,310
3,750 Long Beach Redevelopment Agency, Downtown Refg Ser 1988 B
(Prerefunded)............................................. 8.30 11/01/10 4,124,288
7,000 Norwalk Redevelopment Agency, Proj #1 1987 Refg............. 7.15 12/01/15 6,800,010
1,960 Pleasanton Joint Powers Financing Authority, Reassessment
1993 Ser A................................................ 6.15 09/02/12 1,764,823
- ---------- --------------
74,210 70,645,452
- ---------- --------------
TRANSPORTATION FACILITIES REVENUE (9.9%)
Long Beach,
11,000 Harbor Ser 1989 A (AMT)................................... 7.375 05/15/09 11,304,040
10,000 Harbor Ser 1989 A (AMT)................................... 7.25 05/15/19 10,078,100
Los Angeles,
5,000 Department of Airports Refg 1989 Ser C.................... 7.00 05/01/10 5,084,950
6,000 Harbor Department Issue of 1985........................... 8.70 09/01/15 6,363,300
Los Angeles County Transportation Commission,
20,000 Sales Tax Ser 1991 B...................................... 6.50 07/01/13 19,191,000
5,000 Sales Tax Ser 1986 A...................................... 6.25 07/01/16 4,586,250
10,000 Sales Tax Ser 1987 A (Prerefunded)........................ 6.75 07/01/19 10,695,100
5,000 San Francisco Airports Commission, San Francisco Intl
Airport Second Ser Refg Issue 4 (MBIA Insured)............ 6.00 05/01/20 4,558,450
5,000 San Francisco Bay Area Rapid Transit District, Sales Tax Ser
1990 (AMBAC Insured)...................................... 6.75 07/01/09 5,105,850
</TABLE>
<PAGE>
DEAN WITTER CALIFORNIA TAX-FREE INCOME FUND
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1994 (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- ---------- -------- --------- --------------
<C> <S> <C> <C> <C>
$ 13,000 Puerto Rico Highway Authority, Ser Q (Prerefunded).......... 7.75 % 07/01/10 $ 14,460,030
10,000 Puerto Rico Highway & Transportation Authority, Refg Ser
X......................................................... 5.25 07/01/21 8,030,400
- ---------- --------------
100,000 99,457,470
- ---------- --------------
WATER & SEWER REVENUE (17.1%)
California Department of Water Resources,
4,000 Central Valley Ser F...................................... 6.00 12/01/11 3,747,600
9,500 Central Valley Ser J-2.................................... 6.125 12/01/13 8,870,245
8,000 Castaic Lake Water Agency, Refg Ser 1994 A COPs (MBIA
Insured).................................................. 6.00 08/01/18 7,322,640
10,000 Central Coast Water Authority, Ser 1992 (AMBAC Insured)..... 6.50 10/01/14 9,856,500
5,000 Contra Costa Water Authority, Water Treatment 1990
Ser A (Prerefunded)....................................... 6.875 10/01/20 5,366,600
5,000 Contra Costa Water District, Water Ser G (MBIA Insured)..... 5.50 10/01/19 4,215,650
East Bay Municipal Utility District,
8,000 Water Refg Ser 1986 (Prerefunded)......................... 7.00 03/01/08 8,358,560
8,000 Water Refg Ser 1992....................................... 6.00 06/01/20 7,163,840
4,000 Eastern Municipal Water District, Water & Sewer Ser 1991
COPs...................................................... 6.00 07/01/23 3,500,120
3,600 Goleta Water District, Refg Ser 1993 COPs (FGIC Insured).... 5.50 12/01/12 3,169,980
Los Angeles,
5,745 Wastewater Ser 1990....................................... 7.10 06/01/18 5,762,005
5,000 Wastewater Ser 1990-A (Prerefunded)....................... 7.00 02/01/20 5,367,350
17,000 Wastewater Ser 1990-B (Prerefunded)....................... 7.15 06/01/20 18,417,630
20,500 Los Angeles County Sanitation Districts Financing Authority,
1993 Ser A................................................ 5.375 10/01/13 17,389,330
5,000 Los Angeles Department of Water & Power, Water Works Issue
of 1991 (Crossover Refunded).............................. 7.00 04/01/31 5,323,100
3,600 Moulton Niguel Water District, 1993 Refg (MBIA Insured)..... 5.25 09/01/13 2,961,720
San Diego County Water Authority,
11,000 Water Ser 1989 A COPs (Prerefunded)....................... 7.30 05/01/09 11,680,460
8,000 Water Ser 1991 COPs (MBIA Insured)........................ 6.30 04/08/21 7,540,240
15,000 San Diego, Sewer 1993 Ser A................................. 5.25 05/15/20 11,719,200
5,750 San Francisco Public Utilities Commission, Water 1992 Refg
Ser A..................................................... 6.00 11/01/15 5,264,643
5,000 West & Central Basin Financing Authority, Water Basin Refg
Ser 1993 A (AMBAC Insured)................................ 5.00 08/01/16 3,983,950
Puerto Rico Aqueduct & Sewer Authority,
5,000 Ser 1988 A................................................ 7.90 07/01/07 5,310,400
9,450 Ser 1988 A................................................ 7.875 07/01/17 10,121,517
- ---------- --------------
181,145 172,413,280
- ---------- --------------
OTHER REVENUE (2.9%)
3,500 CSAC Finance Corporation, Contra Costa County Project III
Ser 1986 COPs (Prerefunded)............................... 7.50 10/01/09 3,731,385
</TABLE>
<PAGE>
DEAN WITTER CALIFORNIA TAX-FREE INCOME FUND
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1994 (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- ---------- -------- --------- --------------
<C> <S> <C> <C> <C>
Los Angeles County,
$ 5,400 1991 Master Refg COPs..................................... 6.708% 05/01/15 $ 5,129,892
10,000 Pension Obligations Certificates Ser A.................... 6.875 06/30/07 10,426,400
9,500 Public Properties Refg of 1987 COPs....................... 0.00 04/01/04 5,295,015
5,000 Orange County Community Facilities District #86-2, Rancho
Santa Margarita Series A of 1990.......................... 7.65 08/15/17 4,460,549
- ---------- --------------
33,400 29,043,241
- ---------- --------------
969,725 TOTAL CALIFORNIA EXEMPT MUNICIPAL BONDS
- ----------
(IDENTIFIED COST $937,731,746).............................. 930,099,286
--------------
CALIFORNIA EXEMPT SHORT-TERM MUNICIPAL OBLIGATIONS (5.7%)
5,000 California Health Facilities Financing Authority, Memorial
Health Refg Ser 1994 (Tender 01/04/95).................... 5.40 * 10/01/24 5,000,000
5,000 California School Cash Reserve Program Authority,
1993 Pool Ser A........................................... 4.50 07/05/95 4,959,500
10,000 California Statewide Communities Development Authority,
St Joseph Health Systems COPs (Tender 01/03/95)........... 6.15 * 07/01/24 10,000,000
17,500 Newport Beach, Hoag-Memorial Hospital Presbyterian Ser 1992
(Tender 01/03/95)......................................... 6.00 * 10/01/22 17,500,000
5,045 Riverside, Water Ser 1985 (Prerefunded 10/01/95)............ 8.60 10/01/10 5,327,621
15,000 Ventura County, Ser 1994 TRANs.............................. 4.50 08/01/95 14,850,000
- ---------- --------------
57,545 TOTAL CALIFORNIA EXEMPT SHORT-TERM MUNICIPAL
- ----------
OBLIGATIONS (IDENTIFIED COST $57,822,396)................... 57,637,121
--------------
<C>
$1,027,270 TOTAL INVESTMENTS (IDENTIFIED COST $995,554,142) (B)(C)..... 98.0% 987,736,407
- ----------
- ----------
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES.............. 2.0 20,102,128
--------- --------------
NET ASSETS.................................................. 100.0% $1,007,838,535
--------- --------------
--------- --------------
</TABLE>
- -------------
<TABLE>
<C> <S>
AMT ALTERNATIVE MINIMUM TAX.
COPS CERTIFICATES OF PARTICIPATION.
TRANS TAX AND REVENUE ANTICIPATION NOTES.
* VARIABLE OR FLOATING RATE SECURITIES. COUPON RATE SHOWN REFLECTS CURRENT RATE.
** CURRENTLY ZERO COUPON BOND; WILL BECOME INTEREST BEARING AT A FUTURE DATE.
(A) SECURITY IN DEFAULT. PARTIAL INTEREST PAID. INTEREST INCOME IS RECORDED AS RECEIVED.
(B) THE AGGREGATE COST FOR FEDERAL INCOME TAX PURPOSES IS $995,554,142; THE AGGREGATE GROSS
UNREALIZED APPRECIATION IS $35,136,549 AND THE AGGREGATE GROSS UNREALIZED DEPRECIATION IS
$42,954,284, RESULTING IN NET UNREALIZED DEPRECIATION OF $7,817,735.
(C) INVESTMENT WITHIN CALIFORNIA AND PUERTO RICO REPRESENTS 91.9% AND 6.1% OF NET ASSETS,
RESPECTIVELY.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER CALIFORNIA TAX-FREE INCOME FUND
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $995,554,142)........ $ 987,736,407
Cash.................................... 1,235,323
Receivable for:
Interest.............................. 17,615,206
Investments sold...................... 5,207,008
Shares of beneficial interest sold.... 676,553
Prepaid expenses and other assets....... 16,053
---------------
TOTAL ASSETS.................... 1,012,486,550
---------------
LIABILITIES:
Payable for:
Dividends to shareholders............. 2,175,328
Shares of beneficial interest
repurchased......................... 1,226,730
Plan of distribution fee.............. 645,365
Investment management fee............. 456,506
Accrued expenses and other payables..... 144,086
---------------
TOTAL LIABILITIES............... 4,648,015
---------------
NET ASSETS:
Paid-in-capital......................... 1,017,449,333
Net unrealized depreciation............. (7,817,735)
Accumulated undistributed net investment
income................................ 148,816
Accumulated net realized loss........... (1,941,879)
---------------
NET ASSETS...................... $ 1,007,838,535
---------------
---------------
NET ASSET VALUE PER SHARE, 84,921,168
shares outstanding (unlimited shares
authorized of $.01 par value)......... $11.87
---------------
---------------
</TABLE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1994
<TABLE>
<S> <C>
NET INVESTMENT INCOME:
INTEREST INCOME........................ $ 71,154,330
--------------
EXPENSES
Plan of distribution fee............. 8,309,032
Investment management fee............ 5,824,889
Transfer agent fees and expenses..... 297,531
Shareholder reports and notices...... 63,622
Professional fees.................... 48,774
Trustees' fees and expenses.......... 29,672
Custodian fees....................... 8,870
Registration fees.................... 5,264
Other................................ 37,652
--------------
TOTAL EXPENSES................... 14,625,306
--------------
NET INVESTMENT INCOME.......... 56,529,024
--------------
NET REALIZED AND UNREALIZED LOSS:
Net realized loss.................... (1,886,812)
Net change in unrealized
appreciation....................... (125,447,219)
--------------
NET LOSS......................... (127,334,031)
--------------
NET DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS.... $ (70,805,007)
--------------
--------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE YEAR ENDED
DECEMBER 31, 1994 DECEMBER 31, 1993
------------------ ------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income................................................ $ 56,529,024 $ 55,504,028
Net realized gain (loss)............................................. (1,886,812) 10,170,859
Net change in unrealized appreciation................................ (125,447,219) 46,376,952
------------------ ------------------
Net increase (decrease).......................................... (70,805,007) 112,051,839
------------------ ------------------
Dividends and distributions to shareholders from:
Net investment income................................................ (56,377,889) (55,504,028)
Net realized gain.................................................... (2,061,346) (8,123,876)
------------------ ------------------
Total............................................................ (58,439,235) (63,627,904)
Net increase (decrease) from transactions in shares of beneficial
interest.............................................................. (52,745,051) 153,955,199
------------------ ------------------
Total increase (decrease)........................................ (181,989,293) 202,379,134
NET ASSETS:
Beginning of period.................................................... 1,189,827,828 987,448,694
------------------ ------------------
END OF PERIOD (including undistributed net investment income of
$148,816 and distributions in excess of net investment income of
$2,319, respectively)................................................. $ 1,007,838,535 $ 1,189,827,828
------------------ ------------------
------------------ ------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER CALIFORNIA TAX-FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. ORGANIZATION AND ACCOUNTING POLICIES -- Dean Witter California Tax-Free
Income Fund (the "Fund") is registered under the Investment Company Act of 1940,
as amended (the "Act"), as a diversified, open-end management investment
company. The Fund was organized as a Massachusetts business trust on April 9,
1984 and commenced operations on July 11, 1984.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- Portfolio securities are valued for the Fund
by an outside independent pricing service approved by the Trustees. The
pricing service has informed the Fund that in valuing the Fund's portfolio
securities, it uses both a computerized matrix of tax-exempt securities and
evaluations by its staff, in each case based on information concerning
market transactions and quotations from dealers which reflect the bid side
of the market each day. The Fund's portfolio securities are thus valued by
reference to a combination of transactions and quotations for the same or
other securities believed to be comparable in quality, coupon, maturity,
type of issue, call provisions, trading characteristics and other features
deemed to be relevant. Short-term debt securities having a maturity date of
more than sixty days at time of purchase are valued on a mark-to-market
basis until sixty days prior to maturity and thereafter at amortized cost
based on their value on the 61st day. Short-term debt securities having a
maturity date of sixty days or less at the time of purchase are valued at
amortized cost.
B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on
the trade date (date the order to buy or sell is executed). Realized gains
and losses on security transactions are determined on 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 its shareholders on the record date. The
amount of dividends and distributions from net investment income and net
realized capital gains are determined in accordance with federal income tax
regulations which may differ from generally accepted accounting principles.
These "book/tax" differences are either considered temporary or permanent in
nature. To the extent these differences are permanent in nature, such
amounts are reclassified within the capital accounts based on their federal
tax-basis treatment; temporary differences do not require reclassification.
Dividends and distributions which exceed net investment income and net
realized capital gains for financial reporting purposes but not for tax
purposes are reported as dividends in excess of net investment income or
distributions in excess of net realized capital gains. To the extent they
exceed net investment income and net realized capital gains for tax
purposes, they are reported as distributions of paid-in-capital.
2. INVESTMENT MANAGEMENT AGREEMENT -- Pursuant to an Investment Management
Agreement with Dean Witter InterCapital Inc. (the "Investment Manager"), the
Fund pays its Investment Manager a management fee, accrued daily and payable
monthly, by applying the following annual rates to the Fund's net assets
determined as of the close of each business day: 0.55% to the portion of daily
net assets not exceeding $500 million; 0.525% to the portion of daily net assets
exceeding $500 million but not exceed-
<PAGE>
DEAN WITTER CALIFORNIA TAX-FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
ing $750 million; 0.50% to the portion of daily net assets exceeding $750
million but not exceeding $1 billion; and 0.475% to the portion of daily net
assets exceeding $1 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 -- Shares of the Fund are distributed by Dean Witter
Distributors Inc. (the "Distributor"), an affiliate of the Investment Manager.
The Fund has adopted a Plan of Distribution (the "Plan") pursuant to Rule 12b-1
under the Act pursuant to which the Fund pays the Distributor compensation,
accrued daily and payable monthly, at an annual rate of 0.75% of the lesser of:
(a) the average daily aggregate gross sales of the Fund's shares since the
Fund's inception (not including reinvestment of dividend or capital gains
distributions) less the average daily aggregate net asset value of the Fund's
shares redeemed since the Fund's inception upon which a contingent deferred
sales charge has been imposed or upon which such charge has been waived; or (b)
the Fund's average daily net assets. Amounts paid under the Plan are paid to the
Distributor to compensate it for the services provided and the expenses borne by
it and others in the distribution of the Fund's shares, including the payment of
commissions for sales of the Fund's shares and incentive compensation to and
expenses of account executives of Dean Witter Reynolds Inc., an affiliate of the
Investment Manager and Distributor, and other employees and selected
broker-dealers, who engage in or support distribution of the Fund's shares or
who service shareholder accounts, including overhead and telephone expenses,
printing and distribution of prospectuses and reports used in connection with
the offering of the Fund's shares to other than current shareholders and
preparation, printing and distribution of sales literature and advertising
materials. In addition, the Distributor may be compensated under the Plan for
its opportunity costs in advancing such amounts, which compensation would be in
the form of a carrying charge on any unreimbursed expenses by the Distributor.
Provided that the Plan continues in effect, any cumulative expenses incurred
but not yet recovered may be recovered through future distribution fees from the
Fund and contingent deferred sales charges from the Fund's shareholders.
The Distributor has informed the Fund that for the year ended December 31,
1994, it received approximately $1,752,000 in contingent deferred sales charges
from certain redemptions of the Fund's shares. The Fund's shareholders pay such
charges which are not an expense of the Fund.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES -- The cost of
purchases and proceeds from sales of portfolio securities, excluding short-term
investments, for the year ended December 31, 1994 aggregated $127,850,424 and
$185,117,490, 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 $32,000.
<PAGE>
DEAN WITTER CALIFORNIA TAX-FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
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 $10,214. At December 31, 1994, the Fund had
an accrued pension liability of $48,937 which is included in accrued expenses in
the Statement of Assets and Liabilities.
5. SHARES OF BENEFICIAL INTEREST -- Transactions in shares of beneficial
interest were as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE YEAR ENDED
DECEMBER 31, 1994 DECEMBER 31, 1993
-------------------------------- --------------------------------
SHARES AMOUNT SHARES AMOUNT
-------------- ---------------- -------------- ----------------
<S> <C> <C> <C> <C>
Sold................................ 10,564,887 $ 132,902,122 20,116,156 $ 264,871,259
Reinvestment of dividends and
distributions...................... 2,667,705 33,068,131 2,852,146 37,675,586
-------------- ---------------- -------------- ----------------
13,232,592 165,970,253 22,968,302 302,546,845
Repurchased......................... (17,736,216) (218,715,304) (11,273,363) (148,591,646)
-------------- ---------------- -------------- ----------------
Net increase (decrease)............. (4,503,624) $ (52,745,051) 11,694,939 $ 153,955,199
-------------- ---------------- -------------- ----------------
-------------- ---------------- -------------- ----------------
</TABLE>
6. FEDERAL INCOME TAX STATUS -- At December 31, 1994, the Fund had net capital
loss carryovers of approximately $1,887,000, which will be available through
December 31, 2002 to offset future capital gains to the extent provided by
regulations.
<PAGE>
DEAN WITTER CALIFORNIA TAX-FREE INCOME FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------------------------------
1994 1993 1992 1991 1990 1989 1988 1987 1986
---------- ---------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning
of period................. $ 13.31 $ 12.70 $ 12.46 $ 11.99 $ 12.05 $ 11.68 $ 11.19 $ 12.25 $ 11.41
---------- ---------- --------- --------- --------- --------- --------- --------- ---------
Net investment income...... 0.64 0.67 0.69 0.71 0.72 0.71 0.72 0.72 0.77
Net realized and unrealized
gain (loss) on
investments............... (1.42) 0.70 0.26 0.48 (0.06) 0.37 0.50 (1.06) 1.24
---------- ---------- --------- --------- --------- --------- --------- --------- ---------
Total from investment
operations................ (0.78) 1.37 0.95 1.19 0.66 1.08 1.22 (0.34) 2.01
---------- ---------- --------- --------- --------- --------- --------- --------- ---------
Less dividends and
distributions from:
Net investment income.... (0.64) (0.67) (0.69) (0.71) (0.72) (0.71) (0.72) (0.72) (0.77)
Net realized gain........ (0.02) (0.09) (0.02) (0.01) -- -- (0.01) -- (0.40)
---------- ---------- --------- --------- --------- --------- --------- --------- ---------
Total dividends and
distributions............. (0.66) (0.76) (0.71) (0.72) (0.72) (0.71) (0.73) (0.72) (1.17)
---------- ---------- --------- --------- --------- --------- --------- --------- ---------
Net asset value, end of
period.................... $ 11.87 $ 13.31 $ 12.70 $ 12.46 $ 11.99 $ 12.05 $ 11.68 $ 11.19 $ 12.25
---------- ---------- --------- --------- --------- --------- --------- --------- ---------
---------- ---------- --------- --------- --------- --------- --------- --------- ---------
TOTAL INVESTMENT RETURN+... (5.97)% 10.97% 7.83% 10.18% 5.69% 9.54% 11.23% (2.70)% 18.38%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands)............ $1,007,839 $1,189,828 $ 987,449 $ 833,628 $ 677,270 $ 567,191 $ 430,148 $ 365,414 $ 358,939
Ratios to average net
assets:
Expenses................. 1.32% 1.27% 1.32% 1.28% 1.30% 1.32% 1.34% 1.35% 1.32%
Net investment income.... 5.10% 5.03% 5.45% 5.78% 5.98% 6.00% 6.31% 6.27% 6.34%
Portfolio turnover rate.... 12% 10% 6% 3% 16% 13% 13% 23% 31%
<CAPTION>
1985
---------
<S> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning
of period................. $ 10.31
---------
Net investment income...... 0.80
Net realized and unrealized
gain (loss) on
investments............... 1.10
---------
Total from investment
operations................ 1.90
---------
Less dividends and
distributions from:
Net investment income.... (0.80)
Net realized gain........ --
---------
Total dividends and
distributions............. (0.80)
---------
Net asset value, end of
period.................... $ 11.41
---------
---------
TOTAL INVESTMENT RETURN+... 19.03%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands)............ $ 184,168
Ratios to average net
assets:
Expenses................. 1.41%
Net investment income.... 7.22%
Portfolio turnover rate.... 47%
<FN>
- -----------------
+ DOES NOT REFLECT THE DEDUCTION OF SALES CHARGE.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER CALIFORNIA TAX-FREE INCOME FUND
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Trustees of Dean Witter California Tax-Free Income Fund
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Dean Witter California Tax-Free
Income Fund (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
$0.636 per share from net investment income. All of the Fund's dividends
from net investment income were exempt interest dividends, excludable from
gross income for Federal income tax purposes. For the year ended December
31, 1994, the Fund paid to shareholders $0.023 per share from long-term
capital gains.
<PAGE>
TRUSTEES
Jack F. Bennett
Michael Bozic
Charles A. Fiumefreddo DEAN WITTER
Edwin J. Garn CALIFORNIA
John R. Haire TAX-FREE
Dr. Manuel H. Johnson INCOME FUND
Paul Kolton
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Sheldon Curtis
Vice President, Secretary and General Counsel
James F. Willison
Vice President
Thomas F. Caloia
Treasurer
TRANSFER AGENT
[Photo]
Dean Witter Trust Company
Harborside Financial Center - Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
Dean Witter InterCapital Inc.
Two World Trade Center
New York, New York 10048
This report is submitted for the general
information of shareholders of the Fund.
For more detailed information about the
Fund, its officers and trustees, fees,
expenses and other pertinent information,
please see the prospectus of the Fund.
This report is not authorized for
distribution to prospective investors
in the Fund unless preceded or accompanied
by an effective prospectus.
ANNUAL REPORT
DECEMBER 31, 1994
<PAGE>
DEAN WITTER CALIFORNIA TAX-FREE INCOME FUND
GROWTH OF $10,000
($ IN THOUSANDS)
<TABLE>
<CAPTION>
DATE TOTAL LEHMAN MUNI BOND INDEX
<S> <C> <C>
December 31, 1984 $10,000 $10,000
December 31, 1985 $11,903 $12,003
December 31, 1986 $14,092 $14,321
December 31, 1987 $13,711 $14,537
December 31, 1988 $15,251 $16,014
December 31, 1989 $16,705 $17,742
December 31, 1990 $17,655 $19,035
December 31, 1991 $19,452 $21,346
December 31, 1992 $20,976 $23,229
December 31, 1993 $23,277 $26,081
December 31, 1994 $21,888(3) $24,733
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
1 YEAR 5 YEARS 10 YEARS
<S> <C> <C>
- 5.97(1) 5.55(1) 8.15(1)
-10.43(2) 5.23(2) 8.15(2)
Fund Lehman (4)
------- ------
Past performance is not predictive of future returns.
<FN>
- -------------------------------------
(1) Figure shown assumes reinvestment of all distributions and does not reflect
the deduction of any sales charges.
(2) Figure shown assumes reinvestment of all distributions and the deduction of
the maximum applicable contingent deferred sales charge (CDSC) (1 year-5%,
5 years-2%, 10 years-0%). See the Fund's current prospectus for complete
details on fees and sales charges.
(3) Closing value, assuming a complete redemption on December 31, 1994.
(4) The Lehman Brothers Municipal Bond Index tracks the performance of
municipal bonds with maturities of 2 years or greater and a minimum credit
rating of Baa or BBB, as rated by Moody's Investors Service, Inc. or
Standard & Poor's Corp. The Index does not include any expenses, fees, or
charges.
</TABLE>
