<PAGE>
DEAN WITTER CALIFORNIA TAX-FREE DAILY INCOME TRUST
Two World Trade Center
New York, New York 10048
DEAR SHAREHOLDER:
-----------------------------------------------------------------------------
The three forces influencing the direction and level of yields on
short-term municipal securities during the first half of 1995 were changes in
Federal Reserve monetary policy, shifts in investor demand in a generally
thin market and reaction to the bankruptcy of Orange County, California.
Yields on tax-free money market instruments declined as mounting evidence
of a slowing economy caused interest rates to fall in anticipation of an
easing of Federal Reserve Board monetary policy. The drop in yields was most
apparent among securities with maturities of six months to one year. Shorter
maturities displayed a more volatile pattern in response to changes in
seasonal demand and a diminished supply of suitable tax-free money market
investments.
The decline in interest rates during the first half of 1995 essentially
erased the increase in yields that occurred at the long-end of the municipal
money market during the second half of 1994. The Bond Buyer One Year Note
Index fell from a peak of 5.10 percent in mid-January to 3.79 percent at the
end of June, only four basis points above the level one year earlier. Yields
for the shortest maturities, on the other hand, fluctuated within a wider
band during the six month period. Returns for variable-rate demand
obligations (VRDOs) with weekly rate changes ranged from a low of 2.60
percent in early January, to a high of 4.70 percent in late April during the
tax redemption season. At the end of June, weekly rates stood at 4.00
percent, 20 basis points above one-year yields.
The Orange County, California, bankruptcy continued to cloud the market.
The County's difficulties had been precipitated by the collapse of its highly
leveraged investment pool in December 1994. Investors became more selective
in their purchases of California securities. As a result, many California
issuers were faced with higher borrowing costs or the need to acquire credit
enhancement for their financings.
THE PORTFOLIO
On June 30, 1995, the Fund's annualized 30-day yield was 2.97 percent. Net
assets stood at $226 million. At the end of June, the portfolio was broadly
diversified across market sectors. The Fund was 64 percent invested in
California exempt VRDOs. California-exempt commercial paper and municipal
notes, the two other types of securities utilized in the portfolio, comprised
20 percent and 16 percent of the portfolio, respectively.
The Fund's weighted average maturity remained within a short (25 day) to
moderate (45 day) range for most of the first half of 1995. During the month
of June, seasonal purchases of new one-year tax and revenue anticipation
notes (TRANs) caused the average maturity to extend modestly to 47 days.
Fewer commitments were made, to new note purchases than in past years because
of greater selectivity.
The portfolio had no exposure to Orange County or its pool participants at
the time of the county's declaration of bankruptcy. The failure of the Orange
County investment pool reinforced the need to emphasize safety and quality in
the selection of all tax-free money fund investments. Particular attention
has been given to analyzing each borrower's investment pool practices when
making portfolio selections.
LOOKING AHEAD
Extension of the Fund's average maturity in the weeks ahead will hinge
upon Federal Reserve Board actions affecting the direction of interest rates
as well as the availability of suitable investments. Developments in the
bankruptcy proceedings of Orange County, California, will be watched closely
for their impact on the tax-free money market. As always, we will maintain
our emphasis on quality and liquidity in making investment selections.
We appreciate your support of Dean Witter California Tax-Free Daily Income
Trust and look forward to continuing to serve your investment needs and
objectives.
Very truly yours,
/s/ Charles A. Fiumefreddo
---------------------------------
Charles A. Fiumefreddo
Chairman of the Board
<PAGE>
DEAN WITTER CALIFORNIA TAX-FREE DAILY INCOME TRUST
PORTFOLIO OF INVESTMENTS June 30, 1995 (unaudited)
-----------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN CURRENT
THOUSANDS) YIELD VALUE
----------- -------- --------------
<C> <S> <C> <C>
CALIFORNIA TAX-EXEMPT SHORT-TERM VARIABLE RATE MUNICIPAL OBLIGATIONS*
(65.4%)
CALIFORNIA
$ 6,300 California Educational Facilities Authority, California Institute of
Technology Ser 1994, 3.60% due 07/06/95 ............................. 3.60% $ 6,300,000
California Health Facilities Financing Authority,
4,300 Catholic HealthCare West 1988 Ser A (MBIA), 3.90% due 07/05/95 ..... 3.90 4,300,000
6,000 Childrens Hospital of Orange County Ser 1991 (MBIA), 3.85% due
07/06/95 ............................................................ 3.85 6,000,000
6,850 Health Dimensions Inc Ser 1987 A, 4.50% due 08/01/95 ................ 4.50 6,850,000
2,000 Kaiser Permanente Ser 1993 B, 3.90% due 07/05/95 .................... 3.90 2,000,000
5,000 Memorial Health Services Ser 1994, 4.00% due 07/05/95 ............... 4.00 5,000,000
10,000 St Francis Medical Center 1995 Ser E (MBIA), 3.90% due 07/05/95 .... 3.90 10,000,000
4,000 St Francis Memorial Hospital Ser 1993 B, 4.15% due 07/03/95 ........ 4.15 4,000,000
3,000 St Joseph Health System Ser 1991 B, 4.10% due 07/03/95 ............. 4.10 3,000,000
5,800 Scripps Memorial Hospital Ser 1991 B (MBIA), 3.90% due 07/05/95 .... 3.90 5,800,000
3,500 Sutter Health Ser 1990 B, 4.05% due 07/03/95 ........................ 4.05 3,500,000
California Pollution Control Financing Authority,
3,000 Chevron USA Ser 1984 B, 4.25% due 12/15/95 .......................... 4.25 3,000,000
5,400 Noranda-Grey Eagle Mines Inc Ser 1983 A & 1985 C, 4.40% due
07/05/95 ............................................................ 4.40 5,400,000
10,000 California Public Capital Improvements Financing Authority, Pooled
Ser 1988 C, 3.70% due 09/15/95 ...................................... 3.70 10,000,000
California Statewide Communities Development Authority, House Ear
4,705 Institute 1993 Ser A COPs, 4.35% due 09/01/95 ....................... 4.35 4,705,000
3,100 St Joseph Health System COPs, 4.10% due 07/03/95 .................... 4.10 3,100,000
9,200 Contra Costa Transportation Authority, Sales Tax 1993 Ser A (FGIC),
3.90% due 07/05/95 .................................................. 3.90 9,200,000
5,000 Long Beach, Memorial Health Services Ser 1991, 3.90% due 07/05/95 ... 3.90 5,000,000
5,900 Los Angeles, Multi-family 1985 Series K, 3.75% due 07/06/95 ......... 3.75 5,900,000
10,000 Los Angeles County Metropolitan Transportation Authority, Prop C
Sales Tax Refg Ser 1993 A (MBIA), 3.90% due 07/06/95 ................ 3.90 10,000,000
10,300 Newport Beach, Hoag Memorial Hospital/Presbyterian 1992 Ser A,
4.25% due 07/03/95 .................................................. 4.25 10,300,000
5,500 Oakland, Skyline Hill Assn Multi-family Issue A of 1985, 3.80% due
07/06/95 ............................................................ 3.80 5,500,000
5,000 San Diego, Lusk Mira Mesa Apts Issue E 1985, 3.60% due 07/06/95 ..... 3.60 5,000,000
5,700 San Diego County Regional Transportation Commission, Second Senior
Sales Tax 1992 Ser A (FGIC), 4.05% due 07/05/95 ..................... 4.05 5,700,000
6,600 Southern California Public Power Authority, Transmission 1991 Refg
Ser (AMBAC), 3.90% due 07/05/95 ..................................... 3.90 6,600,000
--------------
146,155,000
--------------
PUERTO RICO
1,700 Puerto Rico Highway & Transportation, Ser X, 3.80% due 07/05/95 ..... 3.80 1,700,000
--------------
TOTAL CALIFORNIA TAX-EXEMPT SHORT-TERM VARIABLE RATE
MUNICIPAL OBLIGATIONS (AMORTIZED COST $147,855,000 ) .......................... 147,855,000
--------------
</TABLE>
<PAGE>
DEAN WITTER CALIFORNIA TAX-FREE DAILY INCOME TRUST
PORTFOLIO OF INVESTMENTS June 30, 1995 (unaudited) (continued)
----------------------------------------------------------------------------
<TABLE>
<CAPTION>
YIELD TO
PRINCIPAL MATURITY
AMOUNT (IN ON DATE OF
THOUSANDS) PURCHASE VALUE
----------- ---------- --------------
<C> <S> <C> <C>
CALIFORNIA TAX-EXEMPT COMMERCIAL PAPER (20.4%)
CALIFORNIA
$7,800 California Pollution Control Financing Authority, Pacific Gas &
Electric Co 1988 Ser E, 4.15% due 09/04/95 ........................ 4.15% $ 7,800,000
5,000 Delmar Race Track Authority, Ser 1993 BANs, 3.40% due 08/24/95 .... 3.40 5,000,000
Los Angeles Wastewater System,
4,000 3.80% due 08/22/95 ................................................ 3.80 4,000,000
3,500 3.80% due 08/24/95 ................................................ 3.80 3,500,000
Metropolitan Water District of Southern California,
4,750 3.85% due 08/29/95 ................................................ 3.85 4,750,000
5,000 3.10% due 09/12/95 ................................................ 3.10 5,000,000
5,000 Sacramento Municipal Utility District, Ser H, 3.85% due 10/24/95 .. 3.85 5,000,000
5,000 West & Central Basin Financing Authority, West Basin Municipal
Water District TRANs, 2.75% due 08/08/95 .......................... 2.75 5,000,000
-------------
40,050,000
-------------
PUERTO RICO
6,000 Puerto Rico Government Development Bank, 3.80% due 08/10/95 ....... 3.80 6,000,000
-------------
TOTAL CALIFORNIA TAX-EXEMPT COMMERCIAL PAPER
(AMORTIZED COST $46,050,000) ................................................. 46,050,000
-------------
CALIFORNIA TAX-EXEMPT SHORT-TERM MUNICIPAL
NOTES & BONDS (16.4%)
5,000 Alameda County, 1994-95 TRANs, dtd 07/21/94 4.75% due 08/11/95 .... 4.20 5,002,948
California School Cash Reserve Program Authority,
7,000 1994 Pool Ser A, dtd 07/05/94 4.50% due 07/05/95 .................. 3.75 7,000,554
6,000 1995 Pool Ser A, dtd 07/05/95 4.75% due 07/03/96 (WI) ............ 3.75 6,057,480
6,000 California Statewide Communities Development Authority,
1994 Ser A TRANs, dtd 07/06/94 4.50% due 07/17/95 ................. 3.65 6,002,155
5,000 Los Angeles County Local Educational Agencies, Pooled 1994-95 Ser A
TRANs, dtd 07/07/94 4.50% due 07/06/95 ............................ 3.75 5,000,494
2,045 Los Angeles Unified School District, 1994 Ser B COPs (AMBAC), dtd
12/01/94 5.00% due 12/01/95 ....................................... 4.60 2,048,289
6,000 Santa Barbara County, 1995-1996 Ser A TRANs, dtd 07/06/95 4.50% due
07/05/96 (WI) ..................................................... 3.79 6,040,920
-------------
TOTAL CALIFORNIA TAX-EXEMPT SHORT-TERM MUNICIPAL
NOTES & BONDS (AMORTIZED COST $37,152,840) ................................... 37,152,840
-------------
TOTAL INVESTMENTS (AMORTIZED COST $231,057,840) (A) ................ 102.2% 231,057,840
LIABILITIES IN EXCESS OF CASH AND OTHER ASSETS ..................... (2.2) (4,934,064)
---------- -------------
NET ASSETS ......................................................... 100.0% $226,123,776
========== =============
<FN>
---------------
BANs Bond Anticipation Notes.
COPs Certificates of Participation.
TRANs Tax and Revenue Anticipation Notes.
* Due date reflects next rate change.
(WI) Security purchased on a when issued basis.
(a) Cost is the same for federal income tax purposes.
Bond Insurance:
AMBAC AMBAC Indemnity Corporation.
FGIC Financial Guaranty Insurance Company.
MBIA Municipal Bond Investors Assurance Company.
</TABLE>
See Notes to Financial Statements
<PAGE>
DEAN WITTER CALIFORNIA TAX-FREE DAILY INCOME TRUST
FINANCIAL STATEMENTS
-----------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1995 (unaudited)
-----------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments in securities, at value
(amortized cost $231,057,840) .......... $231,057,840
Cash .................................... 7,018,774
Interest receivable ..................... 2,027,966
Prepaid expenses and other assets ...... 39,142
--------------
TOTAL ASSETS ........................ 240,143,722
--------------
LIABILITIES:
Payable for:
Investments purchased .................. 12,098,400
Shares of beneficial interest
repurchased ........................... 1,711,413
Investment management fee .............. 92,914
Plan of distribution fee ............... 18,583
Accrued expenses and other payables .... 98,636
--------------
TOTAL LIABILITIES ................... 14,019,946
--------------
NET ASSETS:
Paid-in-capital ......................... 226,124,641
Accumulated undistributed net investment
income ................................. 68
Accumulated net realized loss ........... (933)
--------------
NET ASSETS .......................... $226,123,776
==============
NET ASSET VALUE PER SHARE, 226,124,641
shares outstanding (unlimited shares
authorized of $.01 par value) .......... $ 1.00
==============
</TABLE>
STATEMENT OF OPERATIONS
For the six months ended June 30, 1995 (unaudited)
-----------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
NET INVESTMENT INCOME:
INTEREST INCOME ................... $4,265,278
------------
EXPENSES
Investment management fee ....... 555,542
Plan of distribution fee ......... 107,460
Transfer agent fees and expenses 97,413
Professional fees ................ 21,179
Shareholder reports and notices . 17,684
Trustees' fees and expenses ..... 14,643
Registration fees ................ 3,990
Other ............................ 6,146
------------
TOTAL EXPENSES .................. 824,057
------------
NET INVESTMENT INCOME AND NET
INCREASE ...................... $3,441,221
============
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
-----------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE YEAR
JUNE 30, 1995 ENDED DECEMBER
(UNAUDITED) 31, 1994
---------------- -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income .................................................... $ 3,441,221 $ 5,489,268
Net realized loss ........................................................ -- (933)
---------------- -----------------
Net increase ............................................................ 3,441,221 5,488,335
---------------- -----------------
Dividends to shareholders from net investment income ...................... (3,441,489) (5,488,932)
Net increase (decrease) from transactions in shares of beneficial interest 9,044,978 (33,978,891)
---------------- -----------------
Total increase (decrease) ............................................... 9,044,710 (33,979,488)
NET ASSETS:
Beginning of period ....................................................... 217,079,066 251,058,554
---------------- -----------------
END OF PERIOD (including undistributed net investment income of
$68 and $336, respectively) .............................................. $226,123,776 $217,079,066
================ =================
</TABLE>
See Notes to Financial Statements
<PAGE>
DEAN WITTER CALIFORNIA TAX-FREE DAILY INCOME TRUST
NOTES TO FINANCIAL STATEMENTS (unaudited)
-----------------------------------------------------------------------------
1. ORGANIZATION AND ACCOUNTING POLICIES -- Dean Witter California Tax-Free
Daily Income Trust (the "Fund") is registered under the Investment Company
Act of 1940, as amended (the "Act"), as a diversified, open-end management
investment company. The Fund was organized as a Massachusetts business trust
on April 25, 1988 and commenced operations on July 22, 1988.
The following is a summary of significant accounting policies:
A. Valuation of Investments -- Portfolio securities are valued at
amortized cost, which approximates market value.
B. Accounting for Investments -- Security transactions are accounted for
on the trade date (date the order to buy or sell is executed). Realized
gains and losses on security transactions are determined by the identified
cost method. The Fund amortizes premiums and accretes discounts on
securities purchased over the life of the respective securities. Interest
income is accrued daily.
C. Federal Income Tax Status -- It is the Fund's policy to comply with
the requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable and nontaxable
income to its shareholders. Accordingly, no federal income tax provision
is required.
D. Dividends and Distributions to Shareholders -- The Fund records
dividends and distributions to shareholders as of the close of each
business day.
2. INVESTMENT MANAGEMENT AGREEMENT -- Pursuant to an Investment Management
Agreement with Dean Witter InterCapital Inc. (the "Investment Manager"), the
Fund pays its Investment Manager a management fee, accrued daily and payable
monthly, by applying the following annual rates to the net assets of the Fund
determined as of the close of each business day: 0.50% to the portion of the
daily net assets not exceeding $500 million; 0.425% to the portion of the
daily net assets exceeding $500 million but not exceeding $750 million;
0.375% to the portion of the daily net assets exceeding $750 million but not
exceeding $1 billion; 0.35% to the portion of the daily net assets exceeding
$1 billion but not exceeding $1.5 billion; 0.325% to the portion of the daily
net assets exceeding $1.5 billion but not exceeding $2 billion; 0.30% to the
portion of the daily net assets exceeding $2 billion but not exceeding $2.5
billion; 0.275% to the portion of the daily net assets exceeding $2.5 billion
but not exceeding $3 billion; and 0.25% to the portion of the daily net
assets exceeding $3 billion.
Under the terms of the Agreement, in addition to managing the Fund's
investments, the Investment Manager maintains certain of the Fund's books and
records and furnishes, at its own expense, office space, facilities,
equipment, clerical, bookkeeping and certain legal services and pays the
salaries of all personnel, including officers of the Fund who are employees
of the Investment Manager. The Investment Manager also bears the cost of
telephone services, heat, light, power and other utilities provided to the
Fund.
3. PLAN OF DISTRIBUTION -- Dean Witter Distributors Inc. (the "Distributor"),
an affiliate of the Investment Manager, is the distributor of the Fund's
shares and, in accordance with a Plan of Distribution (the "Plan") pursuant
to Rule 12b-1 under the Act, finances certain expenses in connection
therewith.
Under the Plan, the Distributor bears the expense of all promotional and
distribution related activities on behalf of the Fund, except for expenses
that the Trustees determine to reimburse, as described
<PAGE>
DEAN WITTER CALIFORNIA TAX-FREE DAILY INCOME TRUST
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
-----------------------------------------------------------------------------
below. The following activities and services may be provided by the
Distributor and other broker-dealers under the Plan: (1) compensation to, and
expenses of, the Distributor and other broker-dealers; (2) sales incentives
and bonuses to sales representatives and to marketing personnel in connection
with promoting sales of the Fund's shares; (3) expenses incurred in
connection with promoting sales of the Fund's shares; (4) preparing and
distributing sales literature; and (5) providing advertising and promotional
activities, including direct mail solicitation and television, radio,
newspaper, magazine and other media advertisements.
The Fund is authorized to reimburse the Distributor for specific expenses
the Distributor incurs or plans to incur in promoting the distribution of the
Fund's shares. The amount of each monthly reimbursement payment may in no
event exceed an amount equal to a payment at the annual rate of 0.15% of the
Fund's average daily net assets during the month. Expenses incurred by the
Distributor pursuant to the Plan in any fiscal year will not be reimbursed by
the Fund through payments accrued in any subsequent fiscal year. For the six
months ended June 30, 1995, the distribution fee was accrued at the annual
rate of 0.10%.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES --The cost of
purchases and proceeds from sales/maturities of portfolio securities for the
six months ended June 30, 1995 aggregated $194,933,400 and $176,250,000,
respectively.
Dean Witter Trust Company, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At June 30, 1995, the Fund had
transfer agent fees and expenses payable of approximately $17,600.
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 six
months ended June 30, 1995 included in Trustees' fees and expenses in the
Statement of Operations amounted to $4,212. At June 30, 1995, the Fund had an
accrued pension liability of $50,028 which is included in accrued expenses in
the Statement of Assets and Liabilities.
5. SHARES OF BENEFICIAL INTEREST -- Transactions in shares of beneficial
interest, at $1.00 per share, were as follows:
<TABLE>
<CAPTION>
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED,
JUNE 30, 1995 DECEMBER 31, 1994
--------------- -----------------
<S> <C> <C>
Shares sold .................................. 240,845,327 532,591,210
Shares issued in reinvestment of dividends .. 3,440,818 5,489,548
--------------- -----------------
244,286,145 538,080,758
Shares repurchased ........................... (235,241,167) (572,059,649)
--------------- -----------------
Net increase (decrease) in shares outstanding 9,044,978 (33,978,891)
=============== =================
</TABLE>
<PAGE>
DEAN WITTER CALIFORNIA TAX-FREE DAILY INCOME TRUST
FINANCIAL HIGHLIGHTS
-----------------------------------------------------------------------------
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE YEAR ENDED DECEMBER 31,
JUNE 30, 1995 ---------------------------------------------------------------------
(UNAUDITED) 1994 1993 1992 1991 1990
--------------- --------------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period .... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------------- --------------- ---------- ---------- ---------- ----------
Net investment income .................... 0.015 0.021 0.018 0.023 0.037 0.049
Less dividends from net investment income (0.015) (0.021) (0.018) (0.023) (0.037) (0.049)
--------------- --------------- ---------- ---------- ---------- ----------
Net asset value, end of period ........... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
=============== =============== ========== ========== ========== ==========
TOTAL INVESTMENT RETURN .................. 1.56%(1) 2.17% 1.78% 2.37% 3.77% 5.04%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $226,124 $217,079 $251,059 $288,044 $332,426 $361,144
Ratios to average net assets:
Expenses ................................ 0.74%(2) 0.72% 0.71% 0.73% 0.70% 0.71%
Net investment income ................... 3.10%(2) 2.13% 1.76% 2.35% 3.70% 4.89%
<FN>
---------------
(1) Not annualized
(2) Annualized
</TABLE>
See Notes to Financial Statements
<PAGE>
TRUSTEES
Jack F. Bennett
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Dr. Manuel H. Johnson
Paul Kolton
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Sheldon Curtis
Vice President, Secretary and General Counsel
Katherine H. Stromberg
Vice President
Thomas F. Caloia
Treasurer
TRANSFER AGENT
Dean Witter Trust Company
Harborside Financial Center -- Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
Dean Witter InterCapital Inc.
Two World Trade Center
New York, New York 10048
The financial statements included herein have been taken from the records of
the Fund without examination by the independent accountants and accordingly
they do not express an opinion thereon.
This report is submitted for the general information of shareholders of the
Fund. For more detailed information about the Fund, its officers and
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
Daily Income Trust
Semiannual Report
June 30, 1995
