<PAGE>
DEAN WITTER CALIFORNIA TAX-FREE INCOME FUND TWO WORLD TRADE CENTER, NEW YORK,
NEW YORK 10048
LETTER TO THE SHAREHOLDERS DECEMBER 31, 1995
DEAR SHAREHOLDER:
Bonds rallied significantly during 1995. Progressive tightening of monetary
policy by the Federal Reserve Board over the 12 months through February 1995
slowed economic growth and caused bonds to advance throughout the year. The
trend toward lower long-term interest rates was aided by the central bank's
easing of short-term interest rates in July and December.
MUNICIPAL MARKET CONDITIONS
Long-term municipal bond yields declined from 6.97 percent in December 1994 to
5.71 percent at the end of December 1995, as tracked by The Bond Buyer Revenue
Bond Index*. This 126 basis point drop in yield corresponded to a 10 percent
price increase for callable municipal bonds with 30-year maturities. Yields on
1-year municipal notes experienced a similar move, declining from 4.95 to 3.60
percent. At the end of the year, the yield pickup for extending maturity from
1-year (3.60%) to 30-years (5.71%) was 211 basis points.
Tax-exempt bond prices began the year by outperforming the prices of U.S.
Treasury bonds, but gradually deteriorated. The ratio of the Revenue Bond Index
yield to the 30-year U.S. Treasury bond yield moved from 89 percent in December
1994 to 84 percent by the end of February 1995. A declining ratio means that
municipal bond prices have been stronger than U.S. Treasury prices. In the
spring, the municipal market began to discount the risk of comprehensive changes
in the tax code created by flat-tax rhetoric from Washington. This caused the
yield ratio to move above 90 percent during the summer and end the year at 95
percent. Over the past 10 years, long municipal yields have averaged 89 percent
of U.S. Treasury yields.
- --------------------------------------------------------------
*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 Investors Service, Inc., and AA+
to A- by Standard & Poor's Corp.
<PAGE>
DEAN WITTER CALIFORNIA TAX-FREE INCOME FUND
LETTER TO THE SHAREHOLDERS DECEMBER 31, 1995, CONTINUED
Despite a resurgence in new issue volume in the second half of 1995, the
municipal market continued to experience consolidation. Municipal underwriting
was down 25 percent through June 1995, but ended the year only 5 percent below
1994's level. This followed a 44 percent drop in volume for all of 1994. Lower
underwriting volume and diminished profitability caused several major dealers to
withdraw from the municipal business.
TAX REFORM
[GRAPHIC]
Flat-tax advocates have generated
increased publicity for their proposals
and have influenced the municipal
market since early 1995. Most
tax-reform discussions have been based
on concepts containing broad
assumptions and lacking specific
details. The various plans seek to
simplify the tax process, but raise
questions about the fairness of
changing from a progressive tax
structure. Flat-tax proposals call for
the elimination of deductions of
mortgage interest, charitable
contributions, property taxes, and
state and local income taxes. As
politicians have focused more on tax
reform as an issue in the 1996
elections, media coverage has expanded
from the financial page to the front
page. Municipal bonds have periodically
come under political pressure in the
past. For example, prior to passage of
major tax reform legislation in 1986,
municipal yields briefly exceeded
taxable yields.
Flat-tax proposals would also affect
municipal credits. If mortgage interest
and property tax deductions were
eliminated, municipalities would
experience a decline in their property
tax base. The loss of state and local
income tax deductions would increase
the relative economic disadvantage that
high-tax states already face. The flat
tax represents an attempt to shift tax
accountability from the federal level
to local
<PAGE>
DEAN WITTER CALIFORNIA TAX-FREE INCOME FUND
LETTER TO THE SHAREHOLDERS DECEMBER 31, 1995, CONTINUED
governments. Taxpayer recognition of the extent of the changes under
consideration may impede the passage of comprehensive tax reform.
PERFORMANCE
Dean Witter California Tax-Free Income Fund's total return for the fiscal year
ended December 31, 1995 was 14.96 percent. The Fund's net asset value adjusted
for December's capital gains distribution increased from $11.87 to $12.92 per
share. Tax-free dividends totaling $0.61 per share were paid during the year.
Since inception (July 11, 1984) the Fund has provided shareholders with an
average annual total return of 9.03 percent. The accompanying chart illustrates
the performance of a $10,000 investment in the Fund for the 10 years ended
December 31, 1995, versus the performance of a similar hypothetical investment
in the issues comprising the Lehman Brothers Municipal Bond Index.
PORTFOLIO STRUCTURE
[GRAPHIC]
On December 31, 1995, the Fund's
$1.05 billion in net assets was
diversified among 13 long-term
municipal sectors and 93 credits.
The three largest sectors --
transportation, water & sewer and
refunded revenue bonds --
represented approximately 41 percent
of the portfolio. Bonds callable in
the next four years were reduced
from 30 to 18 percent of the
portfolio. As a result, call
protection improved from 6 to 7
years on average. The average
maturity of the long-term portfolio
moved from 16 to 19 years. Credit
quality was upgraded during 1995.
Long-term holdings rated AA and AAA
increased from 58 to 65 percent. The
credit quality of the portfolio is
illustrated at the right.
<PAGE>
DEAN WITTER CALIFORNIA TAX-FREE INCOME FUND
LETTER TO THE SHAREHOLDERS DECEMBER 31, 1995, CONTINUED
LOOKING AHEAD
The slower pace of economic growth in 1995 and the Federal Reserve Board's
latest interest rate moves have improved bond-market expectations. The
decreasing supply of new issues, combined with significant maturities and calls
for redemptions, should continue to be positive for the municipal market.
However, tax-reduction proposals are likely to continue to receive publicity and
cloud the outlook for tax-exempt bonds. With long-term municipal securities
yielding more than 90 percent of the yield on U.S. Treasuries, the market has
already begun the process of discounting the risk that a flat tax might
eventually become law.
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,
[SIGNATURE]
CHARLES A. FIUMEFREDDO
CHAIRMAN OF THE BOARD
<PAGE>
DEAN WITTER CALIFORNIA TAX-FREE INCOME FUND
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE
- ---------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
CALIFORNIA EXEMPT MUNICIPAL BONDS (96.1%)
GENERAL OBLIGATION (4.6%)
California,
$ 5,000 Ser 1990........................................................................... 7.00 % 08/01/07
5,000 Ser 1990........................................................................... 7.00 08/01/08
2,000 Ser AT............................................................................. 9.50 02/01/10
15,000 Various Purpose Dtd 04/01/93 (FSA)................................................. 5.50 04/01/19
3,600 Moulton-Niguel Water District, 1993 Refg (MBIA)...................................... 5.25 09/01/13
4,000 Santa Margarita / Dana Point Authority, Impr Dists #3, 3A, 4 & 4A 1994 Ser B Refg
(MBIA)............................................................................. 5.75 08/01/20
6,000 Santa Margarita Water District, Impr Dists #3&4 Refg Ser 1986........................ 7.50 11/01/05
5,000 Puerto Rico, Pub Impr Refg Ser 1987 A................................................ 5.00 07/01/05
- -------------
45,600
- -------------
EDUCATIONAL FACILITIES REVENUE (5.4%)
California Educational Facilities Authority,
1,750 Loyola Marymount University Ser 1992 B............................................. 6.55 10/01/12
2,300 Loyola Marymount University Ser 1992 B............................................. 6.60 10/01/22
3,000 Stanford University Ser I.......................................................... 6.75 01/01/13
3,500 University of Southern California Ser 1989 A....................................... 7.20 10/01/15
8,000 California Public Works Board, State University 1992 Ser A........................... 6.70 10/01/17
California Statewide Communities Development Authority,
3,400 Gemological Institute of America COPs (Connie Lee)................................. 6.00 05/01/20
4,100 Gemological Institute of America COPs (Connie Lee)................................. 6.00 05/01/25
15,000 University of California, Multiple Purpose Refg Ser 1993 C (AMBAC)................... 5.125 09/01/18
10,000 Whittier, Whittier College Refg Ser 1993 (Connie Lee)................................ 5.40 12/01/18
5,000 University of Puerto Rico, Ser M (MBIA).............................................. 5.25 06/01/25
- -------------
56,050
- -------------
ELECTRIC REVENUE (10.8%)
15,000 Los Angeles Department of Water & Power, Second Issue of 1993........................ 5.40 11/15/13
7,000 Northern California Power Agency, Hydro #1 1993 Refg Ser A (MBIA).................... 5.50 07/01/16
Sacramento Municipal Utility District,
5,700 Refg 1994 Ser H (MBIA)............................................................. 5.75 01/01/11
26,000 Refg 1992 Ser A (FGIC)............................................................. 6.30 08/15/18
Southern California Public Power Authority,
10,000 Mead-Adelanto 1994 Ser A........................................................... 5.15 07/01/15
6,115 Multiple Projects 1989 Ser......................................................... 6.00 07/01/18
5,000 Power 1993 Refg Ser A.............................................................. 5.00 07/01/15
7,000 Transmission Refg Ser 1988 (FGIC).................................................. 0.00 07/01/06
10,000 Transmission 1986 Refg Ser B....................................................... 5.50 07/01/23
Puerto Rico Electric Power Authority,
9,000 Power Ser O........................................................................ 5.00 07/01/12
9,000 Power Ser X........................................................................ 6.125 07/01/21
6,000 Power Ser X........................................................................ 5.50 07/01/25
- -------------
115,815
- -------------
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- -------------
<C> <C>
$ 5,000 $ 5,847,200
5,000 5,848,850
2,000 2,821,300
15,000 14,940,150
3,600 3,607,848
4,000
4,088,880
6,000 6,295,740
5,000 4,988,750
-----------------
- -------------
48,438,718
45,600
-----------------
- -------------
1,750 1,871,118
2,300 2,434,366
3,000 3,285,600
3,500 3,746,855
8,000 8,697,680
3,400 3,518,830
4,100 4,230,298
15,000 14,654,850
10,000 9,793,600
5,000 4,948,000
-----------------
- -------------
57,181,197
56,050
-----------------
- -------------
15,000 14,829,600
7,000 7,020,510
5,700 5,942,136
26,000 27,629,940
10,000 9,951,300
6,115 6,162,880
5,000 4,778,000
7,000 4,157,160
10,000 9,888,100
9,000 8,543,970
9,000 9,467,010
6,000 5,956,680
-----------------
- -------------
114,327,286
115,815
-----------------
- -------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER CALIFORNIA TAX-FREE INCOME FUND
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1995, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE
- ---------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
HOSPITAL REVENUE (10.4%)
$ 7,100 Antelope Valley Hospital District, Ser 1989 COPs..................................... 7.35 % 01/01/20
Bakersfield, Bakersfield Memorial Hospital
1,750 Ser 1992 A......................................................................... 6.375 01/01/12
2,000 Ser 1992 A......................................................................... 6.50 01/01/22
7,600 Berkeley, Alta Bates Medical Center Refg Ser A....................................... 6.50 12/01/11
California Health Facilities Financing Authority,
4,350 Downey Community Hospital Ser 1993................................................. 5.625 05/15/08
10,000 Kaiser Permanente 1983 Ser......................................................... 5.45 10/01/13
1,215 Merritt Peralta Medical Center 1985 Ser A.......................................... 9.00 05/01/15
4,000 California Statewide Communities Development Authority,
Sutter Health COPs (MBIA).......................................................... 5.50 08/15/22
20,000 Desert Hospital District, Desert Hospital Corp Ser 1992 COPs (CGIC).................. 6.392 07/28/20
Duarte, City of Hope National Medical Center,
3,000 Ser 1993 COPs...................................................................... 5.50 04/01/01
4,000 Ser 1993 COPs...................................................................... 6.25 04/01/23
6,000 Eden Township Hospital District, Ser 1989............................................ 7.40 11/01/19
5,000 Hemet Valley Hospital District, Moreno Valley Regional Medical Center 1988 Ser A..... 8.50 07/01/18
Madera County, Valley Children's Hospital
7,500 Ser 1995 COPs (MBIA)............................................................... 6.50 03/15/15
2,000 Ser 1995 COPs (MBIA)............................................................... 6.125 03/15/23
2,950 Rancho Mirage Joint Powers Financing Authority, Eisenhower Memorial Hospital COPs.... 7.00 03/01/22
Stockton,
2,000 Dameron Hospital Assn Refg Ser 1988................................................ 8.25 12/01/00
6,000 St Joseph Medical Center of Stockton 1993 Ser A (MBIA)............................. 5.50 06/01/23
9,000 University of California, UCLA Medical Center Refg Ser 1994 (MBIA)................... 5.50 12/01/14
- -------------
105,465
- -------------
INDUSTRIAL DEVELOPMENT/POLLUTION CONTROL REVENUE (5.4%)
California Pollution Control Financing Authority,
5,000 Atlantic Richfield Co Ser 1985..................................................... 9.125 11/01/04
6,000 Pacific Gas & Electric Co 1987 Ser B (AMT)......................................... 8.875 01/01/10
5,000 Southern California Edison Co 1988 Ser A (AMT)..................................... 6.90 09/01/06
10,000 Southern California Edison Co Ser D................................................ 6.85 12/01/08
10,000 Southern California Edison Co 1992 Ser B (AMT)..................................... 6.40 12/01/24
5,000 Waste Management Inc 1991 Ser A (AMT).............................................. 7.15 02/01/11
1,400 Intermodal Container Transfer Facility Joint Powers Authority,
Southern Pacific Transportation Co 1989 Ser A...................................... 7.70 11/01/14
San Diego, San Diego Gas & Electric Co
6,000 1986 Ser B (AMT)................................................................... 7.375 12/01/21
5,000 1987 Ser A (AMT)................................................................... 8.75 03/01/23
- -------------
53,400
- -------------
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- -------------
<C> <C>
$ 7,100 $ 7,491,565
1,750 1,836,537
2,000 2,076,980
7,600 7,759,220
4,350 4,382,799
10,000 9,820,600
1,215 1,242,022
4,000
3,977,560
20,000 21,323,000
3,000 2,995,650
4,000 3,958,200
6,000 6,124,080
5,000 5,358,550
7,500 8,625,075
2,000 2,113,660
2,950 3,182,194
2,000 2,157,420
6,000 5,907,840
9,000 9,102,510
-----------------
- -------------
109,435,462
105,465
-----------------
- -------------
5,000 5,120,700
6,000 6,562,320
5,000 5,378,850
10,000 10,769,400
10,000 10,335,400
5,000 5,503,600
1,400
1,494,234
6,000 6,220,200
5,000 5,412,300
-----------------
- -------------
56,797,004
53,400
-----------------
- -------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER CALIFORNIA TAX-FREE INCOME FUND
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1995, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE
- ---------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
MORTGAGE REVENUE - SINGLE FAMILY (4.3%)
California Housing Finance Agency,
$ 9,000 Home 1995 Ser J (AMBAC)............................................................ 6.00 % 08/01/17
6,150 Home 1989 Ser A.................................................................... 7.75 08/01/17
7,000 Home 1995 Ser M (AMT) (MBIA)....................................................... 6.15 08/01/27
9,215 Home 1995 Ser K (AMT) (AMBAC)...................................................... 6.25 08/01/27
4,275 Home 1991 Ser G (AMT).............................................................. 7.05 08/01/27
7,000 Purchase 1995 Ser B-2 (AMT)........................................................ 6.30 08/01/24
Puerto Rico Housing Finance Corporation,
1,265 Portfolio One GNMA-Backed Ser B.................................................... 7.65 10/15/22
705 Portfolio One GNMA-Backed Ser C.................................................... 6.85 10/15/23
- -------------
44,610
- -------------
PUBLIC FACILITIES REVENUE (4.5%)
10,000 Beverly Hills Public Financing Authority, 1993 Refg Ser A (MBIA)..................... 5.65 06/01/15
1,875 Campbell Redevelopment Agency, 1991 COPs............................................. 6.75 10/01/17
5,560 Grossmont Union High School District, Land Acquisition Convert Cap Apprec COPs
(FSA).............................................................................. 7.375+ 09/01/25
5,500 Los Angeles County-West Covina Civic Center Authority,
1987 Refg COPs..................................................................... 6.875 09/01/14
6,500 Nevada County, Western Nevada County Solid Waste Mgmt 1991 COPs...................... 7.50 06/01/21
10,000 San Jose Financing Authority, Convention Center Refg 1993 Ser C...................... 6.375 09/01/13
Stanislaus County Capital Improvements Financing Authority,
2,500 Ser A 1996 COPs (MBIA) (WI)........................................................ 5.25 05/01/14
3,000 Ser A 1996 COPs (MBIA) (WI)........................................................ 5.25 05/01/18
1,200 Puerto Rico Infrastructure Financing Authority, Spl Tax Ser 1988 A................... 7.90 07/01/07
- -------------
46,135
- -------------
RESOURCE RECOVERY REVENUE (0.5%)
4,855 Stanislaus Waste Energy Financing Agency, Ogden Martin Systems of Stanislaus Inc Refg
Ser 1990........................................................................... 7.625 01/01/10
- -------------
TAX ALLOCATION (6.5%)
5,000 Fountain Valley Agency for Community Development, 1985 Industrial Area............... 9.10 01/01/15
Garden Grove Community Development Agency,
5,000 Refg Issue of 1993................................................................. 5.70 10/01/13
7,000 Refg Issue of 1993................................................................. 5.875 10/01/23
Industry Urban-Development Agency,
10,000 Civic Rec-Ind Redev Proj #1 Sub Refg Ser 1987 A.................................... 7.30 05/01/06
2,165 Civic Rec-Ind Redev Proj #1 Sub Refg Ser 1987 B.................................... 7.375 05/01/15
25,500 Long Beach Financing Authority, Ser 1992 (AMBAC)..................................... 6.00 11/01/17
9,840 Pleasanton Joint Powers Financing Authority, Reassessment 1993 Ser A................. 6.15 09/02/12
- -------------
64,505
- -------------
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- -------------
<C> <C>
$ 9,000 $ 9,172,620
6,150 6,583,637
7,000 7,058,940
9,215 9,404,829
4,275 4,476,224
7,000 7,162,610
1,265 1,350,995
705 743,528
-----------------
- -------------
45,953,383
44,610
-----------------
- -------------
10,000 10,028,400
1,875 2,029,106
5,560
5,553,495
5,500
5,753,385
6,500 6,704,035
10,000 10,407,500
2,500 2,470,825
3,000 2,941,770
1,200 1,332,564
-----------------
- -------------
47,221,080
46,135
-----------------
- -------------
4,855
5,305,010
-----------------
- -------------
5,000 5,185,200
5,000 4,977,400
7,000 6,994,470
10,000 10,446,000
2,165 2,261,039
25,500 28,248,900
9,840 10,179,677
-----------------
- -------------
68,292,686
64,505
-----------------
- -------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER CALIFORNIA TAX-FREE INCOME FUND
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1995, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE
- ---------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
TRANSPORTATION FACILITIES REVENUE (14.7%)
$ 20,000 Foothills/Eastern Transportation Corridor, Toll Road Sr Lien Ser 1995 A.............. 6.00 % 01/01/34
Long Beach,
11,000 Harbor Ser 1989 A (AMT)............................................................ 7.375 05/15/09
10,000 Harbor Ser 1989 A (AMT)............................................................ 7.25 05/15/19
20,000 Harbor Ser 1995 (AMT) (MBIA)....................................................... 5.25 05/15/25
Los Angeles,
10,000 Department of Airports Refg 1985 Ser A (FGIC)...................................... 5.50 05/15/09
6,000 Harbor Department Issue of 1985.................................................... 8.70 09/01/15
Los Angeles County Transportation Commission, Sales Tax
20,000 Ser 1991 B......................................................................... 6.50 07/01/13
5,000 Ser 1986 A......................................................................... 6.25 07/01/16
20,000 San Diego County Regional Transportation Commission,
Sales Tax 1994 Ser A (FGIC)........................................................ 4.75 04/01/08
5,000 San Francisco Airports Commission, San Francisco Intl Airport Second Ser Refg Issue 4
(MBIA)............................................................................. 6.00 05/01/20
San Francisco Bay Area Rapid Transit District, Sales Tax
5,000 Ser 1990 (AMBAC)................................................................... 6.75 07/01/09
6,000 Ser 1995 (FGIC).................................................................... 5.50 07/01/15
4,000 Ser 1995 (FGIC).................................................................... 5.50 07/01/20
10,000 Puerto Rico Highway & Transportation Authority, Refg Ser X........................... 5.25 07/01/21
- -------------
152,000
- -------------
WATER & SEWER REVENUE (13.0%)
California Department of Water Resources,
4,000 Central Valley Ser F............................................................... 6.00 12/01/11
9,500 Central Valley Ser J-2............................................................. 6.125 12/01/13
8,000 Castaic Lake Water Agency, Refg Ser 1994 A COPs (MBIA)............................... 6.00 08/01/18
10,000 Central Coast Water Authority, Ser 1992 (AMBAC)...................................... 6.50 10/01/14
13,500 Contra Costa Water District, Ser G (MBIA)............................................ 5.50 10/01/19
11,000 East Bay Municipal Utility District, Water Refg Ser 1992............................. 6.00 06/01/20
4,000 Eastern Municipal Water District, Water & Sewer Ser 1991 COPs........................ 6.00 07/01/23
Fresno,
2,000 Sewer 1995 Ser A (MBIA)............................................................ 5.00 09/01/15
6,000 Sewer 1995 Ser A (MBIA)............................................................ 5.00 09/01/23
3,600 Goleta Water District, Refg Ser 1993 COPs (FGIC)..................................... 5.50 12/01/12
5,745 Los Angeles, Wastewater Ser 1990..................................................... 7.10 06/01/18
15,000 Los Angeles County Sanitation Districts Financing Authority, 1993 Ser A.............. 5.375 10/01/13
15,000 San Diego, Sewer 1993 Ser A.......................................................... 5.25 05/15/20
8,000 San Diego County Water Authority, Water Ser 1991 B COPs (MBIA)....................... 6.30 04/08/21
10,000 San Diego Public Facilities Financing Authority, Sewer Ser 1995 (FGIC)............... 5.00 05/15/20
5,750 San Francisco Public Utilities Commission, Water 1992 Refg Ser A..................... 6.00 11/01/15
4,000 San Jose-Santa Clara Clean Water Financing Authority, Sewer
Ser 1995 A (FGIC).................................................................. 5.375 11/15/20
- -------------
135,095
- -------------
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- -------------
<C> <C>
$ 20,000 $ 19,910,800
11,000 11,939,180
10,000 10,785,700
20,000 19,134,000
10,000 10,271,900
6,000 6,569,580
20,000 21,393,400
5,000 5,019,900
20,000
19,473,000
5,000
5,228,550
5,000 5,505,850
6,000 6,047,580
4,000 4,022,160
10,000 9,606,400
-----------------
- -------------
154,908,000
152,000
-----------------
- -------------
4,000 4,099,160
9,500 9,988,015
8,000 8,336,960
10,000 10,908,900
13,500 13,574,925
11,000 11,396,220
4,000 4,089,560
2,000 1,953,360
6,000 5,790,420
3,600 3,677,112
5,745 6,343,169
15,000 14,888,550
15,000 14,421,000
8,000 8,559,280
10,000 9,671,200
5,750 5,944,580
4,000
3,997,000
-----------------
- -------------
137,639,411
135,095
-----------------
- -------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER CALIFORNIA TAX-FREE INCOME FUND
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1995, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE
- ---------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
OTHER REVENUE (2.8%)
Los Angeles County,
$ 5,400 1991 Master Refg COPs.............................................................. 6.708 % 05/01/15
10,000 Pension Obligations Certificates Ser A............................................. 6.875 06/30/07
9,500 Public Properties Refg of 1987 COPs................................................ 0.00 04/01/04
5,000 Orange County Community Facilities District #86-2, Rancho
Santa Margarita Ser A of 1990...................................................... 7.65 08/15/17
2,750 Sacramento Area Flood Control Agency, Capital Assessment Dist #2 Ser 1995 (FGIC)..... 5.375 10/01/20
- -------------
32,650
- -------------
REFUNDED (13.2%)
5,000 California Health Facilities Financing Authority, St Joseph Health Ser 1991 A........ 6.75 07/01/01++
10,000 Los Angeles, Wastewater Ser 1990-B................................................... 7.15 06/01/00++
Los Angeles Convention & Exhibition Center Authority,
10,000 Ser 1985 COPs...................................................................... 9.00 12/01/05++
14,000 Ser 1985 COPs...................................................................... 9.00 12/01/05++
Los Angeles Department of Water & Power,
15,000 Electric Ser 1992 (Crossover)...................................................... 6.75 04/01/32
5,000 Water Works Issue of 1991 (Crossover).............................................. 7.00 04/01/31
10,000 Los Angeles County Transportation Commission, Sales Tax Ser 1987 A................... 6.75 07/01/02++
10,000 Northern California Transmission Agency, California-Oregon 1990 Ser A (MBIA)......... 7.00 05/01/00++
11,000 University of California, Multiple Purpose Refg Ser A................................ 6.875 09/01/02++
Puerto Rico Aqueduct & Sewer Authority,
5,000 Ser 1988 A......................................................................... 7.90 07/01/98++
10,000 Ser 1988 A......................................................................... 7.875 07/01/98++
13,000 Puerto Rico Highway Authority, Ser Q................................................. 7.75 07/01/00++
- -------------
118,000
- -------------
TOTAL CALIFORNIA EXEMPT MUNICIPAL BONDS (IDENTIFIED COST $943,610,087)......................................
974,180
- -------------
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- -------------
<C> <C>
$ 5,400 $ 5,318,892
10,000 10,329,100
9,500 5,633,975
5,000
5,169,400
2,750 2,747,883
-----------------
- -------------
29,199,250
32,650
-----------------
- -------------
5,000 5,681,900
10,000 11,380,100
10,000 13,473,100
14,000 18,862,340
15,000 16,942,650
5,000 5,655,450
10,000 11,523,000
10,000 11,258,500
11,000 12,743,940
5,000 5,534,600
10,000 11,101,300
13,000 15,138,890
-----------------
- -------------
139,295,770
118,000
-----------------
- -------------
974,180 1,013,994,257
- ------------- -----------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER CALIFORNIA TAX-FREE INCOME FUND
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1995, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE
- ---------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
CALIFORNIA EXEMPT SHORT-TERM MUNICIPAL OBLIGATIONS (3.2%)
$ 20,000 California School Cash Reserve Program Authority, 1995 Ser Pool A.................... 4.75 % 07/03/96
3,400 California Statewide Communities Development Authority, St Joseph Health Ser 1994
COPs (Demand 01/02/96)............................................................. 5.90* 07/01/24
10,370 Newport Beach, Hoag Memorial Hospital Presbyterian Ser 1992 (Demand 01/02/96)........ 5.90* 10/01/22
- -------------
TOTAL CALIFORNIA EXEMPT SHORT-TERM MUNICIPAL OBLIGATIONS
(IDENTIFIED COST $33,866,852)...............................................................................
33,770
- -------------
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- -------------
<C> <C>
$ 20,000 $ 20,115,400
3,400
3,400,000
10,370 10,370,000
-----------------
- -------------
33,770 33,885,400
- ------------- -----------------
$1,007,950 TOTAL INVESTMENTS (IDENTIFIED COST $977,476,939) (A)..................... 99.3% 1,047,879,657
- ----------
- ----------
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES........................... 0.7 7,001,236
----- -------------
NET ASSETS............................................................... 100.0% $1,054,880,893
----- -------------
----- -------------
<FN>
- ---------------------
AMT Alternative Minimum Tax.
COPs Certificates of Participation.
WI Security purchased on a when issued basis.
* Current coupon of variable rate security.
+ Currently a zero coupon bond; will convert to 7.375% on September
1, 1996.
++ Prerefunded to call date shown.
(a) The aggregate cost for federal income tax purposes is $977,476,939;
the aggregate gross unrealized appreciation is $71,252,838 and the
aggregate gross unrealized depreciation is $850,120, resulting in
net unrealized appreciation of $70,402,718.
BOND INSURANCE:
AMBAC AMBAC Indemnity Corporation.
CGIC Capital Guaranty Insurance Company.
Connie Lee Connie Lee Insurance Company.
FGIC Financial Guaranty Insurance Company.
FSA Financial Security Assurance Inc.
MBIA Municipal Bond Investors Assurance Corporation.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER CALIFORNIA TAX-FREE INCOME FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $977,476,939)............................ $1,047,879,657
Cash........................................................ 177,346
Receivable for:
Interest................................................ 16,966,024
Shares of beneficial interest sold...................... 537,823
Investments sold........................................ 90,669
Prepaid expenses............................................ 23,762
--------------
TOTAL ASSETS........................................... 1,065,675,281
--------------
LIABILITIES:
Payable for:
Investments purchased................................... 5,260,000
Dividends and distributions............................. 4,076,865
Plan of distribution fee................................ 668,462
Investment management fee............................... 471,133
Shares of beneficial interest repurchased............... 160,392
Accrued expenses............................................ 157,536
--------------
TOTAL LIABILITIES...................................... 10,794,388
--------------
NET ASSETS:
Paid-in-capital............................................. 976,792,091
Net unrealized appreciation................................. 70,402,718
Accumulated undistributed net investment income............. 268,610
Accumulated undistributed net realized gain................. 7,417,474
--------------
NET ASSETS............................................. $1,054,880,893
--------------
--------------
NET ASSET VALUE PER SHARE,
81,657,631 SHARES OUTSTANDING (UNLIMITED SHARES AUTHORIZED
OF $.01 PAR VALUE)........................................
$12.92
--------------
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER CALIFORNIA TAX-FREE INCOME FUND
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C>
NET INVESTMENT INCOME:
INTEREST INCOME............................................. $ 64,905,727
------------
EXPENSES
Plan of distribution fee.................................... 7,817,492
Investment management fee................................... 5,513,580
Transfer agent fees and expenses............................ 295,406
Shareholder reports and notices............................. 56,750
Professional fees........................................... 52,640
Custodian fees.............................................. 42,206
Trustees' fees and expenses................................. 33,645
Registration fees........................................... 6,805
Other....................................................... 36,310
------------
TOTAL EXPENSES BEFORE EXPENSE OFFSET................... 13,854,834
LESS: EXPENSE OFFSET................................... (42,141)
------------
TOTAL EXPENSES AFTER EXPENSE OFFSET.................... 13,812,693
------------
NET INVESTMENT INCOME.................................. 51,093,034
------------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain........................................... 15,612,579
Net change in unrealized depreciation....................... 78,220,453
------------
NET GAIN............................................... 93,833,032
------------
NET INCREASE................................................ $144,926,066
------------
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER CALIFORNIA TAX-FREE INCOME FUND
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
DECEMBER 31, 1995 DECEMBER 31, 1994
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income....................................... $ 51,093,034 $ 56,529,024
Net realized gain (loss).................................... 15,612,579 (1,886,812)
Net change in unrealized appreciation/depreciation.......... 78,220,453 (125,447,219)
----------------- -----------------
NET INCREASE (DECREASE)................................ 144,926,066 (70,805,007)
----------------- -----------------
DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income....................................... (50,973,219) (56,377,889)
Net realized gain........................................... (6,253,247) (2,061,346)
----------------- -----------------
TOTAL.................................................. (57,226,466) (58,439,235)
----------------- -----------------
Net decrease from transactions in shares of beneficial
interest.................................................. (40,657,242) (52,745,051)
----------------- -----------------
TOTAL INCREASE (DECREASE).............................. 47,042,358 (181,989,293)
NET ASSETS:
Beginning of period......................................... 1,007,838,535 1,189,827,828
----------------- -----------------
END OF PERIOD
(INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME OF
$268,610 AND $148,816, RESPECTIVELY).................... $ 1,054,880,893 $ 1,007,838,535
----------------- -----------------
----------------- -----------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER CALIFORNIA TAX-FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1995
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's investment objective is to
provide a high level of current income which is exempt from federal and
California income tax, consistent with the preservation of capital. The Fund was
organized as a Massachusetts business trust on April 9, 1984 and commenced
operations on July 11, 1984.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual results could differ from
those estimates. The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- Portfolio securities are valued 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 by the identified cost method.
The Fund amortizes premiums and accretes discounts over the life of the
respective securities. Interest income is accrued daily.
C. FEDERAL INCOME TAX STATUS -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable and nontaxable income to its
shareholders. Accordingly, no federal income tax provision is required.
<PAGE>
DEAN WITTER CALIFORNIA TAX-FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1995, CONTINUED
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 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
average daily net assets not exceeding $500 million; 0.525% to the portion of
average daily net assets exceeding $500 million but not exceeding $750 million;
0.50% to the portion of average daily net assets exceeding $750 million but not
exceeding $1 billion; and 0.475% to the portion of average 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
<PAGE>
DEAN WITTER CALIFORNIA TAX-FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1995, CONTINUED
capital gain 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, 1995,
it received approximately $1,540,000 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, 1995 aggregated
$228,169,126 and $244,035,696, respectively.
Dean Witter Trust Company, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At December 31, 1995, the Fund had
transfer agent fees and expenses payable of approximately $39,000.
The Fund has an unfunded noncontributory defined benefit pension plan covering
all independent Trustees of the Fund who will have served as independent
Trustees for at least five years at the time of retirement. Benefits under this
plan are based on years of service and compensation during the last five years
of service. Aggregate pension costs for the year ended December 31, 1995
<PAGE>
DEAN WITTER CALIFORNIA TAX-FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1995, CONTINUED
included in Trustees' fees and expenses in the Statement of Operations amounted
to $12,231. At December 31, 1995, the Fund had an accrued pension liability of
$59,712 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, 1995 DECEMBER 31, 1994
---------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
----------- -------------- ----------- ------------
<S> <C> <C> <C> <C>
Sold............................................................. 7,610,885 $ 95,058,902 10,564,887 $132,902,122
Reinvestment of dividends and distributions...................... 2,505,960 31,541,595 2,667,705 33,068,131
----------- -------------- ----------- ------------
10,116,845 126,600,497 13,232,592 165,970,253
Repurchased...................................................... (13,380,382) (167,257,739) (17,736,216) (218,715,304)
----------- -------------- ----------- ------------
Net decrease..................................................... (3,263,537) $ (40,657,242) (4,503,624) $(52,745,051)
----------- -------------- ----------- ------------
----------- -------------- ----------- ------------
</TABLE>
6. FEDERAL INCOME TAX STATUS
During the year ended December 31, 1995, the Fund utilized its net capital loss
carryover of approximately $1,942,000.
<PAGE>
DEAN WITTER CALIFORNIA TAX-FREE INCOME FUND
FINANCIAL HIGHLIGHTS
Selected data and per share ratios for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31
----------------------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value,
beginning of
period.......... $ 11.87 $ 13.31 $ 12.70 $ 12.46 $ 11.99 $ 12.05 $ 11.68 $ 11.19 $ 12.25 $ 11.41
---------- --------- --------- ---------- --------- --------- ---------- --------- --------- ----------
Net investment
income.......... 0.61 0.64 0.67 0.69 0.71 0.72 0.71 0.72 0.72 0.77
Net realized and
unrealized gain
(loss).......... 1.13 (1.42) 0.70 0.26 0.48 (0.06) 0.37 0.50 (1.06) 1.24
---------- --------- --------- ---------- --------- --------- ---------- --------- --------- ----------
Total from
investment
operations...... 1.74 (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........ (0.61) (0.64) (0.67) (0.69) (0.71) (0.72) (0.71) (0.72) (0.72) (0.77)
Net realized
gain.......... (0.08) (0.02) (0.09) (0.02) (0.01) -- -- (0.01) -- (0.40)
---------- --------- --------- ---------- --------- --------- ---------- --------- --------- ----------
Total dividends
and
distributions... (0.69) (0.66) (0.76) (0.71) (0.72) (0.72) (0.71) (0.73) (0.72) (1.17)
---------- --------- --------- ---------- --------- --------- ---------- --------- --------- ----------
Net asset value,
end of period... $ 12.92 $ 11.87 $ 13.31 $ 12.70 $ 12.46 $ 11.99 $ 12.05 $ 11.68 $ 11.19 $ 12.25
---------- --------- --------- ---------- --------- --------- ---------- --------- --------- ----------
---------- --------- --------- ---------- --------- --------- ---------- --------- --------- ----------
TOTAL INVESTMENT
RETURN+.......... 14.96% (5.97)% 10.97% 7.83% 10.18% 5.69% 9.54% 11.23% (2.70)% 18.38%
RATIOS TO AVERAGE
NET ASSETS:
Expenses......... 1.33% 1.32% 1.27% 1.32% 1.28% 1.30% 1.32% 1.34% 1.35% 1.32%
Net investment
income.......... 4.90% 5.10% 5.03% 5.45% 5.78% 5.98% 6.00% 6.31% 6.27% 6.34%
SUPPLEMENTAL DATA:
Net assets, end
of period,
in millions..... $ 1,055 $ 1,008 $ 1,190 $ 987 $ 834 $ 677 $ 567 $ 430 $ 365 $ 359
Portfolio
turnover rate... 23% 12% 10% 6% 3% 16% 13% 13% 23% 31%
<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, 1995, 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 at December 31, 1995 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE LLP
1177 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036
FEBRUARY 7, 1996
- --------------------------------------------------------------------------------
1995 FEDERAL TAX NOTICE (UNAUDITED)
During the year ended December 31, 1995, the Fund paid to the
shareholders $0.61 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, 1995, the
Fund paid to shareholders $0.08 per share from long-term capital
gains.
<PAGE>
TRUSTEES
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
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
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.
DEAN WITTER
CALIFORNIA
TAX-FREE
INCOME FUND
[Graphic]
ANNUAL REPORT
DECEMBER 31, 1995
<PAGE>
DEAN WITTER CALIFORNIA TAX-FREE INCOME FUND
GROWTH OF $10,000
DATE TOTAL LEHMAN MUNI BOND
INDEX
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
December 31, 1985 $10,000 $10,000
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
December 31, 1986 $11,838 $11,931
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
December 31, 1987 $11,519 $12,111
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
December 31, 1988 $12,812 $13,342
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
December 31, 1989 $14,034 $14,781
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
December 31, 1990 $14,832 $15,859
- -------------------------------------------------------------------------------
December 31, 1991 $16,342 $17,784
- -------------------------------------------------------------------------------
December 31, 1992 $17,622 $19,353
- -------------------------------------------------------------------------------
December 31, 1993 $19,555 $21,729
- -------------------------------------------------------------------------------
December 31, 1994 $18,388 $20,606
- -------------------------------------------------------------------------------
December 31, 1995 $21,140(3) $24,202
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
1 YEAR 5 YEARS 10 YEARS
---------------------------------------
---------------------------------------
14.96(1) 7.34(1) 7.77(1)
---------------------------------------
9.96(2) 7.04(2) 7.77(2)
---------------------------------------
---------------------------------------
---------------------------------
---------------------------------
Fund Lehman
---- ------
---------------------------------
---------------------------------
Past performance is not predictive of future returns.
- --------------------------------------
(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, 1995.
(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. The Index is unmanaged and should not be
considered an investment.
