<PAGE>
DEAN WITTER CALIFORNIA TAX-FREE INCOME FUND
Two World Trade Center
New York, New York 10048
DEAR SHAREHOLDER:
- -------------------------------------------------------------------------------
Strong economic growth and a shift in Federal Reserve Board monetary
policy during the first half of 1994 resulted in the sharpest increase in
interest rates in more than six years. At the beginning of the year, most
economic indicators were pointing toward a vigorous recovery. Concerns over
potential inflationary pressure developed as the job market approached full
employment and commodity prices remained volatile. The Federal Reserve Board
responded by tightening monetary policy. Between February and May, the
central bank raised the federal-funds rate--the interest rate banks charge
each other for overnight loans--from 3.00 percent to 4.25 percent in four
separate moves. In May, the discount rate--the interest rate the Federal
Reserve charges member banks for loans--was increased by 50 basis points to
3.50 percent.
Long-term municipal bond yields, as measured by The Bond Buyer Revenue
Bond Index,* were little changed between October and January. However, in
February and March the Index yield rose 89 basis points from 5.50 percent to
6.39 percent. During April, May and June the municipal market began to show
signs of stability, despite 15 to 20 basis point yield changes each month. At
the end of June the Index yielded 6.56 percent.
The municipal market is also influenced by unique supply and demand
conditions. New-issue underwriting totaled a record $290 billion in 1993. The
pace of new-issue activity over the first half of 1994, however, slowed 40
percent to a projected annual rate of $180 billion. By way of comparison,
bond maturities and calls for redemptions will reduce municipal debt
outstanding by approximately $190 billion. This imbalance helped municipal
securities outperform their U.S. Treasury counterparts during the second
quarter. With $12 billion, California was the largest state source of new
issues, representing 13 percent of total offerings.
PERFORMANCE
For the six-month period ended June 30, 1994, Dean Witter California
Tax-Free Income Fund paid shareholders tax-free income dividends totaling
$0.32 per share and capital gains distributions totaling $0.02 per share. The
Fund's total return for this period was -4.93 percent and is a result of the
portfolio's decline in value. Since inception the Fund has provided
shareholders with an attractive average annual total return of 9.03 percent.
The Fund's net assets exceeded $1.1 billion.
PORTFOLIO STRUCTURE
The net short-term investment position at the end of June was 7.7 percent.
Refunded bonds with escrows set to be called within 10 years comprised
another 20 percent of the portfolio. Long-term investments were diversified
among 12 specific municipal sectors and 113 credits. The three largest
sectors in the portfolio were water & sewer, hospital and electric revenue
bonds, comprising 41 percent of net assets. The average maturity and call
protection of the Fund's long-term holdings were 17 years and 6 years,
respectively. Bonds subject to the alternative minimum tax (AMT) comprised
approximatey 10 percent of net assets. The credit quality ratings of the
long-term portfolio are summarized below:
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
MOODY'S OR STANDARD & POOR'S RATING PERCENT
- ----------------------------------- ---------
<S> <C>
Aaa or AAA ......................... 32
Aa or AA ........................... 28
A or A ............................. 26
Baa or BBB ......................... 7
Not rated .......................... 7
</TABLE>
LOOKING AHEAD
A continuation of low new-issue supply coupled with significant bond calls
and maturities should help support municipal bond values, as well as sustain
investor demand for municipal securities. However, the overall direction of
interest rates will primarily be determined by the strength of the economy,
the trend of inflation and the Federal Reserve Board's response to economic
conditions. The level of interest rates and bond redemption activity are the
key factors expected to influence the Fund's future results.
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,
Charles A. Fiumefreddo
Chairman of the Board
- ---------------
*The Bond Buyer Revenue Bond Index is an arithmetic average of the yields of
25 selected municipal revenue bonds with 30-year maturities. Ratings of these
bonds range from Aa1 to Baa1, as measured by Moody's and AA+ to A-, as
measured by Standard & Poor's.
<PAGE>
<PAGE>
DEAN WITTER CALIFORNIA TAX-FREE INCOME FUND
PORTFOLIO OF INVESTMENTS June 30, 1994 (unaudited)
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- ------------ ---------- ---------- --------------
<S> <C> <C> <C> <C>
CALIFORNIA EXEMPT MUNICIPAL BONDS (93.1%)
GENERAL OBLIGATION (6.3%)
California,
$ 5,000 Ser 1990 ........................................................ 7.00% 8/ 1/07 $ 5,496,250
5,000 Ser 1990 ........................................................ 7.00 8/ 1/08 5,465,550
2,000 Ser AT .......................................................... 9.50 2/ 1/10 2,643,640
20,000 Various Purpose Dtd 4/1/93 (FSA Insured) ........................ 5.50 4/ 1/19 17,664,000
5,000 San Diego Open Space Park Facilities District #1, Ser 86A
(Prerefunded) ................................................... 7.60 1/ 1/07 5,322,350
Santa Margarita Water District,
6,000 Impr Dists #3&4 Refg Ser 1986 ................................... 7.50 11/ 1/05 6,445,380
12,000 Impr Dist #4 1978 Ser E ......................................... 7.40 7/ 1/15 12,656,400
3,500 Impr Dist #4A 1984 Ser A ........................................ 7.75 8/ 1/06 3,771,355
Puerto Rico, Pub Impr
5,000 Refg Ser 1987 A ................................................. 5.00 7/ 1/05 4,635,700
5,085 Ser 1991 (Prerefunded) .......................................... 7.30 7/ 1/20 5,732,575
- ------------ --------------
68,585 69,833,200
- ------------ --------------
EDUCATIONAL FACILITIES REVENUE (5.8%)
California Educational Facilities Authority,
1,750 Loyola Marymount University Ser 1992 B .......................... 6.55 10/ 1/12 1,775,848
2,300 Loyola Marymount University Ser 1992 B .......................... 6.60 10/ 1/22 2,279,300
3,000 Stanford University Ser I ....................................... 6.75 1/ 1/13 3,099,330
3,500 University of Southern California Ser 1989 A .................... 7.20 10/ 1/15 3,744,055
California Public Works Board,
8,000 State University 1992 Ser A ..................................... 6.70 10/ 1/17 7,933,680
7,000 University of California 1990 Ser A (Prerefunded) ............... 7.00 9/ 1/15 7,818,370
University of California, Multiple Purpose
11,000 Refg Ser A (Prerefunded) ........................................ 6.875 9/ 1/16 12,318,350
20,000 Refg Ser 1993 C (AMBAC Insured) ................................. 5.125 9/ 1/18 16,732,400
10,000 Whittier, Whittier College Refg Ser 1993 (Connie Lee Insured) ... 5.40 12/ 1/18 8,750,100
- ------------ --------------
66,550 64,451,433
- ------------ --------------
ELECTRIC REVENUE (11.5%)
2,000 Kings River Conservation District, Pine Flat Power Ser D ........ 6.00 1/ 1/17 1,911,000
Los Angeles Department of Water & Power,
15,000 Second Issue of 1993 ............................................ 5.40 11/15/13 13,438,350
3,450 Refg Issue of 1993 .............................................. 5.375 9/ 1/23 2,956,892
5,000 Refg Second Issue of 1993 ....................................... 5.40 11/15/31 4,218,750
Northern California Power Agency,
15,000 Geothermal #3 1985 Ser A (Crossover Refunded) ................... 7.00 7/ 1/10 15,174,300
7,000 Hydro #1 1993 Refg Ser A (MBIA Insured) ......................... 5.50 7/ 1/16 6,292,020
10,000 Northern California Transmission Agency, California-Oregon
1990 Ser A (MBIA Insured) (Prerefunded) ......................... 7.00 5/ 1/24 11,086,600
5,000 Redding, Ser 1989 A COPs (MBIA Insured) (Prerefunded) ........... 7.125 7/ 1/14 5,423,100
13,000 Sacramento Municipal Utility District, Refg 1992 Ser A INFLOS
(FGIC Insured) .................................................. 9.376+ 8/15/18 12,805,000
Southern California Public Power Authority,
12,800 Mead--Adelanto 1994 Ser A Linked Inverse Floaters & ACES
(AMBAC Insured) ................................................. 5.01 7/ 1/15 10,966,400
6,115 Multiple Projects 1989 Ser ...................................... 6.00 7/ 1/18 5,696,856
8,000 Power 1993 Refg Ser A ........................................... 5.00 7/ 1/15 6,764,880
3,000 Power Refg C 1992 (AMBAC Insured) (Prerefunded) ................. 5.75 7/ 1/17 3,096,990
5,000 Southern Transmission Sub Crossover Refg Ser 1992 ............... 5.75 7/ 1/21 4,537,300
7,000 Transmission Refg Ser 1988 (FGIC Insured) ....................... 0.00 7/ 1/06 3,406,970
10,000 Transmission 1986 Refg Ser B .................................... 5.50 7/ 1/23 8,598,100
<PAGE>
<PAGE>
<CAPTION>
DEAN WITTER CALIFORNIA TAX-FREE INCOME FUND
PORTFOLIO OF INVESTMENTS June 30, 1994 (unaudited) (continued)
- -----------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- ------------ ---------- ---------- --------------
<S> <C> <C> <C> <C>
Puerto Rico Electric Power Authority,
$ 3,000 Power Ser N ..................................................... 5.00% 7/ 1/12 $ 2,552,010
9,000 Power Ser O ..................................................... 5.00 7/ 1/12 7,656,030
- ------------ --------------
139,365 126,581,548
- ------------ --------------
HOSPITAL REVENUE (13.5%)
7,100 Antelope Valley Hospital District, Ser 1989 COPs ................. 7.35 1/ 1/20 7,572,079
Bakersfield, Bakersfield Memorial Hospital
1,750 Ser 1992 A ...................................................... 6.375 1/ 1/12 1,721,912
2,000 Ser 1992 A ...................................................... 6.50 1/ 1/22 1,932,980
7,600 Berkeley, Alta Bates Hospital 1995 Ser A ......................... 6.50 12/ 1/11 7,312,568
California Health Facilities Financing Authority,
4,350 Downey Community Hospital Ser 1993 .............................. 5.625 5/15/08 4,115,187
10,000 Kaiser Permanente 1983 Ser ...................................... 5.45 10/ 1/13 8,875,000
8,000 Kaiser Permanente 1985 Ser A .................................... 9.125 10/ 1/15 8,544,160
3,500 Kaiser Permanente 1991 Ser A .................................... 6.25 3/ 1/21 3,389,435
12,500 Kaiser Permanente 1985 Ser ...................................... 5.55 8/15/25 10,759,000
3,500 Merrit Peralta Medical Center 1985 Ser A ........................ 9.00 5/ 1/15 3,600,940
5,000 St Joseph Health Ser 1991 A (Prerefunded) ....................... 6.75 7/ 1/21 5,513,600
5,000 Sutter Community Hospitals of Sacramento Ser A (Crossover
Refunded) ...................................................... 9.25 1/ 1/13 5,217,350
Desert Hospital District, Desert Hospital Corp
5,000 Ser 1990 COPs (Prerefunded) ..................................... 8.00 7/ 1/10 5,830,050
3,000 Ser 1990 COPs (Prerefunded) ..................................... 8.10 7/ 1/20 3,513,390
10,000 Ser 1992 COPs MVRICS (Capital Guaranty Insured) ................. 9.309+ 7/28/20 9,975,000
Duarte,
3,000 City of Hope National Medical Center, Ser 1993 COPs ............ 5.50 4/ 1/01 2,920,620
4,000 City of Hope National Medical Center, Ser 1993 COPs ............ 6.25 4/ 1/23 3,713,720
6,000 Eden Township Hospital District, Ser 1989 ........................ 7.40 11/ 1/19 6,032,640
5,000 Hemet Valley Hospital District, Moreno Valley Regional Medical
Center 1988 Ser A ............................................... 8.50 7/ 1/18 5,321,150
5,000 Los Angeles, Hollywood Presbyterian Hospital/Olmstead Memorial
Ser 1985 COPs (State Insured) ................................... 9.00 7/ 1/13 5,272,650
2,950 Rancho Mirage Joint Powers Financing Authority, Eisenhower
Memorial Hospital COPs .......................................... 7.00 3/ 1/22 2,995,046
4,000 Riverside, Kaiser Permanente 1985 Ser A .......................... 9.00 12/ 1/15 4,281,160
5,000 Santa Rosa, Kaiser Permanente 1985 Ser A ......................... 9.00 12/ 1/15 5,357,150
Stockton,
2,000 Dameron Hospital Assn Refg Ser 1988 ............................. 8.25 12/ 1/00 2,180,780
6,000 St Joseph Medical Center of Stockton 1993 Ser A (MBIA Insured) . 5.50 6/ 1/23 5,299,440
University of California,
9,000 UCLA Medical Center Refg Ser 1994 (MBIA Insured) ................ 5.50 12/ 1/14 8,140,410
8,500 UCLA Medical Center Ser 1986 (Prerefunded) ...................... 6.90 12/ 1/16 9,112,850
- ------------ --------------
148,750 148,500,267
- ------------ --------------
INDUSTRIAL DEVELOPMENT/POLLUTION CONTROL REVENUE (5.2%)
2,500 California Alternative Energy Source Financing Authority, SRI
International Cogeneration Ser 1985 (a) ......................... 9.75 12/ 1/05 1,250,000
California Pollution Control Financing Authority,
5,000 Atlantic Richfield Co Ser 1985 .................................. 9.125 11/ 1/04 5,396,450
6,000 Pacific Gas & Electric Co 1987 Ser B (AMT) ...................... 8.875 1/ 1/10 6,674,880
5,000 Southern California Edison Co 1988 Ser A (AMT) .................. 6.90 9/ 1/06 5,167,250
10,000 Southern California Edison Co Ser D ............................. 6.85 12/ 1/08 10,458,200
10,000 Southern California Edison Co 1992 Ser B (AMT) .................. 6.40 12/ 1/24 9,828,300
5,000 Waste Management Inc 1991 Ser A (AMT) ........................... 7.15 2/ 1/11 5,287,200
<PAGE>
<PAGE>
<CAPTION>
DEAN WITTER CALIFORNIA TAX-FREE INCOME FUND
PORTFOLIO OF INVESTMENTS June 30, 1994 (unaudited) (continued)
- -----------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- ------------ ---------- ---------- --------------
<S> <C> <C> <C> <C>
$ 1,400 Intermodal Container Transfer Facility Joint Powers Authority,
Southern Pacific Transportation Co 1989 Ser A ................... 7.70% 11/ 1/14 $ 1,534,274
San Diego,
6,000 San Diego Gas & Electric Co 1986 Ser B (AMT) .................... 7.375 12/ 1/21 6,364,800
5,000 San Diego Gas & Electric Co 1987 Ser A (AMT) .................... 8.75 3/ 1/23 5,592,150
- ------------ --------------
55,900 57,553,504
- ------------ --------------
MORTGAGE REVENUE--SINGLE FAMILY (1.4%)
California Housing Finance Agency,
6,620 Home 1989 Ser A ................................................. 7.75 8/ 1/17 6,814,959
435 Home 1991 Ser B (AMT) ........................................... 7.55 8/ 1/20 435,491
4,425 Home 1991 Ser G (AMT) ........................................... 7.05 8/ 1/27 4,483,676
85 Huntington Beach, Home 1983 Ser A ................................ 9.60 3/ 1/14 84,903
35 Newark Redevelopment Agency, 1984 Residential .................... 10.00 9/ 1/11 34,990
5,205 San Francisco Redevelopment Agency, Residential 1984 Issue A .... 0.00 4/ 1/17 464,390
410 Southern California Home Financing Authority, GNMA & FNMA-Backed
1991 Issue A (AMT) .............................................. 7.35 9/ 1/24 421,021
Puerto Rico Housing Finance Corporation,
1,610 Portfolio One GNMA-Backed Ser B ................................. 7.65 10/15/22 1,653,148
1,000 Portfolio One GNMA-Backed Ser C ................................. 6.85 10/15/23 1,016,300
- ------------ --------------
19,825 15,408,878
- ------------ --------------
PUBLIC FACILITIES REVENUE (11.3%)
10,000 Alameda County Public Facilities Corporation, 1991 Financing COPs 6.15 9/ 1/21 10,199,300
Beverly Hills,
1,735 Civic Center Impr Refg COPs ..................................... 7.00 6/ 1/15 1,768,104
3,265 Civic Center Impr Refg COPs (Prerefunded) ....................... 7.00 6/ 1/15 3,585,688
10,000 Beverly Hills Public Financing Authority, Lease 1993 Ser A (MBIA
Insured) ........................................................ 5.65 6/ 1/15 9,184,600
Campell Redevelopment Agency,
1,875 1991 Financing COPs ............................................. 6.75 10/ 1/17 1,890,731
3,125 1991 Financing COPs (Prerefunded) ............................... 6.75 10/ 1/17 3,453,281
9,000 El Cajon--San Diego County Civic Center Authority, East County
Regional Center 1986 Refg (Prerefunded) ......................... 6.70 12/ 1/07 9,601,650
5,560 Grossmont Union High School District, Land Acquisition
Convertible Cap Apprec COPs (FSA Insured) ....................... 0.00 9/ 1/25 5,001,276
Los Angeles Convention & Exhibition Center Authority,
10,000 Ser 1985 COPs (Prerefunded) ..................................... 9.00 12/ 1/10 12,829,400
10,000 Ser 1993 A (MBIA Insured) ....................................... 5.375 8/15/18 8,692,700
14,000 Ser 1985 COPs (Prerefunded) ..................................... 9.00 12/ 1/20 17,961,160
5,500 Los Angeles County--West Covina Civic Center Authority, 1987 Refg
COPs ............................................................ 6.875 9/ 1/14 5,558,575
6,500 Nevada County, Western Nevada County Solid Waste Mgmt 1991 COPs . 7.50 6/ 1/21 6,617,585
5,000 North City West School Facilities Financing Authority, Community
Facs Dist #1 Spl Tax Ser 1989 A ................................. 7.85 9/ 1/19 5,181,500
3,500 Poway Redevelopment Agency, 1986 Cap Impr COPs ................... 7.875 8/ 1/11 3,688,440
5,000 San Jose Financing Authority, Convention Center Refg 1993 Ser C . 6.40 9/ 1/17 4,867,050
10,000 Stanislaus County Capital Improvements Financing Authority, Refg
Ser 1990 COPs ................................................... 7.55 4/ 1/18 10,431,100
3,000 University of California, Los Angeles Campus Parking Ser C
(Prerefunded) ................................................... 7.75 11/ 1/15 3,267,000
1,200 Puerto Rico Infrastructure Financing Authority, Spl Tax Ser
1988 A .......................................................... 7.90 7/ 1/07 1,321,068
- ------------ --------------
118,260 125,100,208
- ------------ --------------
<PAGE>
<PAGE>
<CAPTION>
DEAN WITTER CALIFORNIA TAX-FREE INCOME FUND
PORTFOLIO OF INVESTMENTS June 30, 1994 (unaudited) (continued)
- -----------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- ------------ ---------- ---------- --------------
<S> <C> <C> <C> <C>
RESOURCE RECOVERY REVENUE (0.5%)
$ 5,000 Stanislaus Waste Energy Financing Agency, Ogden Martin Systems of
Stanislaus Inc Refg Ser 1990 .................................... 7.625% 1/ 1/10 $ 5,230,100
- ------------ --------------
TAX ALLOCATION (7.6%)
5,000 Fountain Valley Agency For Community Development, Industrial Area
1985 ............................................................ 9.10 1/ 1/15 5,325,150
Garden Grove Community Development Agency,
5,000 Refg Issue of 1993 .............................................. 5.70 10/ 1/13 4,500,350
7,000 Refg Issue of 1993 .............................................. 5.875 10/ 1/23 6,165,460
Industry Urban-Development Agency,
10,000 Civic Rec--Ind Redev Proj #1 Sub Refg Ser 1987 A ................ 7.30 5/ 1/06 10,691,600
2,160 Civic Rec--Ind Redev Proj #1 Sub Refg Ser 1987 B ................ 7.375 5/ 1/15 2,272,666
6,840 Civic Rec--Ind Redev Proj #1 Sub Refg Ser 1987 B (Prerefunded)... 7.375 5/ 1/15 7,430,702
25,500 Long Beach Financing Authority, Ser 1992 (AMBAC Insured) ........ 6.00 11/ 1/17 24,508,050
3,750 Long Beach Redevelopment Agency, Downtown Refg Ser 1988 B
(Prerefunded) ................................................... 8.30 11/ 1/10 4,238,737
5,000 Los Angeles Community Redevelopment Agency, Central Business Dist
Ser E (Prerefunded) ............................................. 8.85 7/ 1/10 5,342,400
7,000 Norwalk Redevelopment Agency, Proj #1 1987 Refg .................. 7.15 12/ 1/15 7,359,380
1,960 Pleasanton Joint Powers Financing Authority, Reassessment 1993
Ser A ........................................................... 6.15 9/ 2/12 1,826,054
5,000 Rancho Cucamonga Redevelopment Agency, Refg 1994 (MBIA Insured)... 5.50 9/ 1/23 4,390,450
- ------------ --------------
84,210 84,050,999
- ------------ --------------
TRANSPORTATION FACILITIES REVENUE (11.1%)
Long Beach,
11,000 Harbor Ser 1989 A (AMT) ......................................... 7.375 5/15/09 11,796,400
10,000 Harbor Ser 1989 A (AMT) ......................................... 7.25 5/15/19 10,674,000
Los Angeles,
5,000 Department of Airports Refg 1989 Ser C .......................... 7.00 5/ 1/10 5,293,150
6,000 Harbor Department Issue of 1985 ................................. 8.70 9/ 1/15 6,199,680
Los Angeles County Transportation Commission,
20,000 Sales Tax Ser 1991 B ............................................ 6.50 7/ 1/13 20,107,800
5,000 Sales Tax Ser 1986 A ............................................ 6.25 7/ 1/16 4,871,800
10,000 Sales Tax Ser 1987 A (Prerefunded) .............................. 6.75 7/ 1/19 11,102,200
2,650 Sales Tax Ser 1989 A ............................................ 7.00 7/ 1/19 2,735,569
2,000 Orange County Airport, Refg Ser 1993 (AMT) (MBIA Insured) ....... 5.50 7/ 1/13 1,824,140
3,000 San Diego County Regional Transportation Commission, Sales Tax
1989 Ser A (Prerefunded) ........................................ 7.375 4/ 1/06 3,352,140
5,000 San Francisco Airports Commission, San Francisco Intl Airport
Second Ser Refg Issue 4 (MBIA Insured) .......................... 6.00 5/ 1/20 4,760,400
San Francisco Bay Area Rapid Transit District,
5,000 Sales Tax Ser 1990 (AMBAC Insured) .............................. 6.75 7/ 1/09 5,258,200
10,000 Sales Tax Ser 1985 (Prerefunded) ................................ 9.00 7/ 1/11 10,795,700
13,000 Puerto Rico Highway Authority, Ser Q (Prerefunded) ............... 7.75 7/ 1/10 14,954,940
10,000 Puerto Rico Highway & Transportation Authority, Refg Ser X ...... 5.25 7/ 1/21 8,374,400
- ------------ --------------
117,650 122,100,519
- ------------ --------------
WATER & SEWER REVENUE (16.3%)
California Department of Water Resources,
4,000 Central Valley Ser F ............................................ 6.00 12/ 1/11 3,882,080
9,500 Central Valley Ser J-2 .......................................... 6.125 12/ 1/13 9,345,910
3,000 Central Valley Refg Ser L ....................................... 5.50 12/ 1/23 2,619,120
<PAGE>
<PAGE>
<CAPTION>
DEAN WITTER CALIFORNIA TAX-FREE INCOME FUND
PORTFOLIO OF INVESTMENTS June 30, 1994 (unaudited) (continued)
- -----------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- ------------ ---------- ---------- --------------
<S> <C> <C> <C> <C>
$ 10,000 Central Coast Water Authority, Ser 1992 (AMBAC Insured) ......... 6.50% 10/ 1/14 $ 10,155,500
Contra Costa Water Authority,
3,400 Water Treatment 1990 Ser A (Prerefunded) ........................ 7.25 10/ 1/10 3,828,604
5,000 Water Treatment 1990 Ser A (Prerefunded) ........................ 6.875 10/ 1/20 5,556,900
5,000 Water Refg Ser F (FGIC Insured) ................................. 5.00 10/ 1/20 4,076,950
East Bay Municipal Utility District,
8,000 Water Refg Ser 1986 (Prerefunded) ............................... 7.00 3/ 1/08 8,537,280
8,000 Water Refg Ser 1992 ............................................. 6.00 6/ 1/20 7,548,880
4,000 Eastern Municipal Water District, Water & Sewer Ser 1991 COPs ... 6.00 7/ 1/23 3,658,040
3,600 Goleta Water District, Refg Ser 1993 COPs (FGIC Insured) ........ 5.50 12/ 1/12 3,295,800
Los Angeles,
5,745 Wastewater Ser 1990 ............................................. 7.10 6/ 1/18 5,959,978
5,000 Wastewater Ser 1990-A (Prerefunded) ............................. 7.00 2/ 1/20 5,516,500
17,000 Wastewater Ser 1990-B (Prerefunded) ............................. 7.15 6/ 1/20 19,059,890
20,500 Los Angeles County Sanitation Districts Financing Authority, 1993
Ser A ........................................................... 5.375 10/ 1/13 18,242,540
5,000 Los Angeles Department of Water & Power, Water Works Issue of
1991 (Crossover Refunded) ....................................... 7.00 4/ 1/31 5,487,000
3,600 Moulton Niguel Water District, 1993 Refg (MBIA Insured) ......... 5.25 9/ 1/13 3,153,276
5,045 Riverside, Water Ser 1985 (Prerefunded) .......................... 8.60 10/ 1/10 5,466,005
15,000 San Diego, Sewer 1993 Ser A ...................................... 5.25 5/15/20 12,462,000
San Diego County Water Authority,
11,000 Water Ser 1989 A COPs (Prerefunded) ............................. 7.30 5/ 1/09 11,943,580
4,000 Water Ser 1991 B COPs CARS (MBIA Insured) ....................... 9.28+ 4/ 8/21 3,935,000
5,750 San Francisco Public Utilities Commission, Water 1992 Refg Ser A 6.00 11/ 1/15 5,535,410
5,000 West & Central Basin Financing Authority, Water Basin Refg Ser
1993 A (AMBAC Insured) .......................................... 5.00 8/ 1/16 4,167,700
Puerto Rico Aqueduct & Sewer Authority,
5,000 Ser 1988 A ...................................................... 7.90 7/ 1/07 5,410,600
9,450 Ser 1988 A ...................................................... 7.875 7/ 1/17 10,217,907
- ------------ --------------
180,590 179,062,450
- ------------ --------------
OTHER REVENUE (2.6%)
3,500 CSAC Finance Corporation, Contra Costa County Project III Ser
1986 COPs (Prerefunded) ......................................... 7.50 10/ 1/09 3,838,555
Los Angeles County,
2,750 1991 Master Refg RIBS COPs ...................................... 10.288+ 5/ 1/15 2,777,500
10,000 Pension Obligations Certificates Ser A .......................... 6.875 6/30/07 10,573,100
9,500 Public Properties Refg of 1987 COPs ............................. 0.00 4/ 1/04 5,274,400
5,000 Orange County Community Facilities District #86-2, Rancho Santa
Margarita Series A of 1990 ...................................... 7.65 8/15/17 5,179,350
1,000 Orange County Community Facilities District #87-3, Mission Viejo
Ser A of 1990 ................................................... 7.80 8/15/15 1,103,860
- ------------ --------------
31,750 28,746,765
- ------------ --------------
1,036,435 TOTAL CALIFORNIA EXEMPT MUNICIPAL BONDS
(IDENTIFIED COST $998,966,082) .................................. 1,026,619,871
- ------------ --------------
CALIFORNIA EXEMPT SHORT-TERM MUNICIPAL OBLIGATIONS (7.6%)
6,400 California Health Facilities Financing Authority, St Francis
Memorial Hospital Ser 1993 B (Tender 7/1/94) .................... 3.50* 11/ 1/19 6,400,000
California School Cash Reserve Program Authority,
5,000 1993 Pool Ser A ................................................. 3.40 7/ 5/94 5,000,250
5,000 1994 Pool Ser A ................................................. 4.50 7/ 5/95 5,036,300
<PAGE>
<PAGE>
<CAPTION>
DEAN WITTER CALIFORNIA TAX-FREE INCOME FUND
PORTFOLIO OF INVESTMENTS June 30, 1994 (unaudited) (continued)
- -----------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- ------------ ---------- ---------- --------------
<S> <C> <C> <C> <C>
$ 5,000 California Statewide Communities Development Authority,
St Joseph Health COPs (Tender 7/6/94) ........................... 2.15*% 7/ 1/08 $ 5,000,000
Irvine Ranch Water District,
6,800 Cons Refg Ser 1993 B (Tender 7/1/94) ............................ 3.00* 8/ 1/09 6,800,000
5,000 District #'s 140--240--105--250 (Tender 7/1/94) ................. 3.00* 4/ 1/33 5,000,000
15,285 Newport Beach, Hoag Memorial Hospital Presbyterian Ser 1992
(Tender 7/1/94) ................................................. 3.45* 10/ 1/22 15,285,000
15,000 Orange County Sanitation Districts, Ser 1992 C COPs
(FGIC Insured) (Tender 7/1/94) .................................. 3.00* 8/ 1/17 15,000,000
5,000 San Francisco Redevelopment Agency, Bayside Village 1985
Issue D Ser A (Tender 7/7/94) ................................... 2.525* 12/ 1/05 5,000,000
15,000 Ventura County, Ser 1994 TRANs ................................... 4.50 8/ 1/95 15,093,750
- ------------ --------------
83,485 TOTAL CALIFORNIA EXEMPT SHORT-TERM MUNICIPAL
- ------------ OBLIGATIONS (IDENTIFIED COST $83,638,366) ....................... 83,615,300
--------------
$1,119,920 TOTAL INVESTMENTS (IDENTIFIED COST $1,082,604,488) (B) .......... 100.7% 1,110,235,171
============ LIABILITIES IN EXCESS OF CASH AND OTHER ASSETS .................. (0.7) (7,348,629)
----- --------------
NET ASSETS ....................................................... 100.0% $1,102,886,542
===== ==============
<FN>
- ---------------
ACES Auction Rate Securities
AMT Alternative Minimum Tax
CARS Complementary Auction Rate Certificates
COPs Certificates of Participation
INFLOS Inverse Floating Rate Securities
MVRICS Municipal Variable Rate Inverse Class Securities
RIBS Residual Interest Bonds
TRANs Tax and Revenue Anticipation Notes
+ Current coupon rate for residual interest bonds. This rate resets
periodically as the auction rate on the related short-term securities
fluctuates.
* Variable or floating rate securities. Coupon rate shown reflects current
rate.
(a) Security in default. Partial interest paid. Interest income is
recorded as received.
(b) The aggregate cost for federal income tax purposes is $1,082,604,448;
the aggregate gross unrealized appreciation is $56,728,388 and the
aggregate gross unrealized depreciation is $29,097,665, resulting in
net unrealized appreciation of $27,630,723.
</TABLE>
See Notes to Financial Statements
<PAGE>
<PAGE>
DEAN WITTER CALIFORNIA TAX-FREE INCOME FUND
FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1994 (unaudited)
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $1,082,604,448) (Note 1) $1,110,235,171
Cash ...................................... 1,222,867
Receivable for:
Interest ................................. 19,216,011
Investments sold ......................... 13,396,700
Shares of beneficial interest sold ...... 1,893,222
Prepaid expenses and other assets ........ 33,415
--------------
TOTAL ASSETS ........................... 1,145,997,386
--------------
LIABILITIES:
Payable for:
Investments purchased .................... 41,124,149
Plan of distribution fee (Note 3) ....... 704,013
Investment management fee (Note 2) ...... 482,075
Shares of beneficial interest repurchased 381,607
Dividends to shareholders ................. 306,961
Accrued expenses (Note 4) ................. 112,039
--------------
TOTAL LIABILITIES ...................... 43,110,844
--------------
NET ASSETS:
Paid-in-capital ........................... 1,071,516,131
Accumulated undistributed net realized
gain on investments ...................... 3,739,688
Net unrealized appreciation on investments 27,630,723
--------------
NET ASSETS ............................. $1,102,886,542
==============
NET ASSET VALUE PER SHARE, 89,486,433
shares outstanding (unlimited authorized
shares of $.01 par value) ................ $12.32
======
</TABLE>
STATEMENT OF OPERATIONS
For the six months ended June 30, 1994 (unaudited)
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT INCOME:
INTEREST INCOME ......................... $ 35,998,110
--------------
EXPENSES
Plan of distribution fee (Note 3) ..... 4,214,467
Investment management fee (Note 2) .... 2,970,765
Transfer agent fees and expenses ...... 153,739
Shareholder reports and notices ....... 33,260
Professional fees ...................... 16,450
Trustees' fees and expenses ............ 13,209
Custodian fees ......................... 8,170
Registration fee ....................... 5,724
Other .................................. 22,617
--------------
TOTAL EXPENSES ........................ 7,438,401
--------------
NET INVESTMENT INCOME ................ 28,559,709
--------------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS (Note 1):
Net realized gain on investments ....... 3,794,734
Net change in unrealized appreciation on
investments ............................ (89,998,761)
--------------
NET LOSS ON INVESTMENTS ............... (86,204,027)
--------------
NET DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS ........... $(57,644,318)
==============
</TABLE>
<PAGE>
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE YEAR
JUNE 30, 1994 ENDED DECEMBER
(UNAUDITED) 31, 1993
---------------- -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income ................................................. $ 28,559,709 $ 55,504,028
Net realized gain on investments ...................................... 3,794,734 10,170,859
Net change in unrealized appreciation on investments .................. (89,998,761) 46,376,952
---------------- -----------------
Net increase (decrease) in net assets resulting from operations ..... (57,644,318) 112,051,839
---------------- -----------------
Dividends and distributions to shareholders from:
Net investment income ................................................. (28,557,390) (55,504,028)
Net realized gain on investments ...................................... (2,061,325) (8,123,876)
---------------- -----------------
Total dividends and distributions .................................... (30,618,715) (63,627,904)
---------------- -----------------
Net increase from transactions in shares of beneficial interest
(Note 5) .............................................................. 1,321,747 153,955,199
---------------- -----------------
Total increase (decrease) ............................................ (86,941,286) 202,379,134
NET ASSETS:
Beginning of period .................................................... 1,189,827,828 987,448,694
---------------- -----------------
END OF PERIOD (including distributions in excess of net investment of
$0 and $2,319, respectively) ........................................... $1,102,886,542 $1,189,827,828
================ =================
</TABLE>
See Notes to Financial Statements
<PAGE>
<PAGE>
DEAN WITTER CALIFORNIA TAX-FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS (unaudited)
- -----------------------------------------------------------------------------
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 grid 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.
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. In computing net investment income, the Fund
amortizes premiums and original issue discounts. With respect to market
discount on bonds purchased after April 30, 1993, a portion of any
capital gain realized upon disposition may be recharacterized as taxable
investment income. Interest income is accrued daily except where
collection is not expected.
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 monthly management fee, calculated and
accrued daily, by applying the annual rate of 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 exceeding $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.
<PAGE>
<PAGE>
DEAN WITTER CALIFORNIA TAX-FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
- -----------------------------------------------------------------------------
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 inception of the Fund (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 the account
executives of Dean Witter Reynold Inc., an affiliate of the Investment
Manager, and other employees or selected 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, and the 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
expense.
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 six months ended June
30, 1994, it received approximately $813,000 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 six months ended June 30, 1994 aggregated
$76,574,681 and $83,167,504, respectively.
Dean Witter Trust Company, an affiliate of the Investment Manager and the
Distributor, is the Fund's transfer agent. At June 30, 1994, the Fund had
transfer agent fees and expenses payable of approximately $34,000.
On April 1, 1991, the Fund established an unfunded noncontributory defined
benefit pension plan covering all Trustees of the Fund who will have served
as an independent Trustee 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, 1994, included in Trustees' fees and expenses in the
Statement of Operations amounted to $4,048. At June 30, 1994, the Fund had an
accrued pension liability of $43,059 which is included in accrued expenses in
the Statement of Assets and Liabilities.
<PAGE>
<PAGE>
DEAN WITTER CALIFORNIA TAX-FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
- -----------------------------------------------------------------------------
5. SHARES OF BENEFICIAL INTEREST -- Transactions in shares of beneficial
interest were as follows:
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED FOR THE YEAR ENDED
JUNE 30, 1994 (UNAUDITED) DECEMBER 31, 1993
----------------------------- -------------------------------
SHARES AMOUNT SHARES AMOUNT
------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C>
Sold ......................... 6,499,167 $ 83,380,894 20,116,156 $ 264,871,259
Reinvestment of dividends and
distributions ............... 1,380,958 17,508,135 2,852,146 37,675,586
------------- -------------- -------------- ---------------
7,880,125 100,889,029 22,968,302 302,546,845
Repurchased .................. (7,818,484) (99,567,282) (11,273,363) (148,591,646)
------------- -------------- -------------- ---------------
Net increase ................. 61,641 $ 1,321,747 11,694,939 $ 153,955,199
============= ============== ============== ===============
</TABLE>
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, 1994 ------------------------------------------------------------
(UNAUDITED) 1993 1992 1991 1990 1989
--------------- ------------ ---------- ---------- ---------- ----------
<S> <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
------ ----- ------ ------ ------ ------
Net investment income ... 0.32 0.67 0.69 0.71 0.72 0.71
Net realized and
unrealized gain (loss)
on investments .......... (0.97) 0.70 0.26 0.48 (0.06) 0.37
------ ----- ------ ------ ------ ------
Total from investment
operations .............. (0.65) 1.37 0.95 1.19 0.66 1.08
------ ----- ------ ------ ------ ------
Less dividends and
distributions:
Dividends from net
investment income ...... (0.32) (0.67) (0.69) (0.71) (0.72) (0.71)
Distributions from net realized
gain on investments ... (0.02) (0.09) (0.02) (0.01) -0- -0-
------ ----- ------ ------ ------ ------
Total dividends and
distributions ........... (0.34) (0.76) (0.71) (0.72) (0.72) (0.71)
------ ----- ------ ------ ------ ------
Net asset value, end of
period .................. $12.32 $13.31 $12.70 $12.46 $11.99 $12.05
====== ====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN+ . (4.93)%(1) 10.97% 7.83% 10.18% 5.69% 9.54%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) .......... $1,102,887 $1,189,828 $987,449 $833,628 $677,270 $567,191
Ratio of expenses to
average net assets ...... 1.31%(2) 1.27% 1.32% 1.28% 1.30% 1.32%
Ratio of net investment
income to average net
assets ................. 5.04%(2) 5.03% 5.45% 5.78% 5.98% 6.00%
Portfolio turnover rate . 7% 10% 6% 3% 16% 13%
<FN>
- ---------------
+ Does not reflect the deduction of sales load.
(1) Not annualized.
(2) Annualized.
</TABLE>
See Notes to Financial Statements
<PAGE>
<PAGE>
TRUSTEES
Jack F. Bennett
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Dr. John E. Jeuck
Dr. Manuel H. Johnson
Paul Kolton
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
Edward R. Telling
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Sheldon Curtis
Vice President, Secretary and General Counsel
James F. Willison
Vice President
Thomas F. Caloia
Treasurer
TRANSFER AGENT
Dean Witter Trust Company
Harborside Financial Center -- Plaza Two
Jersey City, New Jersey 07311
LEGAL COUNSEL
Sheldon Curtis
Two World Trade Center
New York, New York 10048
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
trustees, fees, expenses and other pertinent information, please see the
prospectus of the Fund.
This report is not authorized for distribution to prospective investors
in the Fund unless preceded or accompanied by an effective prospectus.
DEAN WITTER
CALIFORNIA
TAX-FREE
INCOME FUND
SEMIANNUAL REPORT
JUNE 30, 1994
