-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MsK7adw86C34xVWO7hRXvE417XDeZ13ZhNZu6jGIw3Bu4it1Zt8US3iQcvb04ypa vkxZ+Y36RoIXMQhDlcayBQ== 0000950123-96-004619.txt : 19960928 0000950123-96-004619.hdr.sgml : 19960928 ACCESSION NUMBER: 0000950123-96-004619 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960821 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: DEAN WITTER TAX FREE DAILY INCOME TRUST CENTRAL INDEX KEY: 0000315812 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 133075005 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-03031 FILM NUMBER: 96618429 BUSINESS ADDRESS: STREET 1: TWO WORLD TRADE CTR CITY: NEW YORK STATE: NY ZIP: 10048 BUSINESS PHONE: 2123922550 FORMER COMPANY: FORMER CONFORMED NAME: DEAN WITTER SEARS TAX FREE DAILY INCOME TRUST DATE OF NAME CHANGE: 19930209 FORMER COMPANY: FORMER CONFORMED NAME: WITTER DEAN SEARS TAX FREE DAILY INCOME FUND INC DATE OF NAME CHANGE: 19870827 FORMER COMPANY: FORMER CONFORMED NAME: INTERCAPITAL TAX FREE DAILY INCOME FUND INC DATE OF NAME CHANGE: 19830419 N-30D 1 SEMI-ANNUAL REPORT 1 DEAN WITTER TAX-FREE DAILY INCOME TRUST Two World Trade Center, New York, New LETTER TO THE SHAREHOLDERS June 30, 1996 York 10048 DEAR SHAREHOLDER: In contrast to the pattern of lower interest rates in 1995, tax-free money market yields trended upward during the first six months of 1996. The fixed-income markets opened the year with a confident tone and the decline in short-term interest rates which started one year earlier was sustained into mid-February. The positive outlook faded, however, as healthy economic indicators aroused concern that the Federal Reserve's easing step in late January could be its last. The shift in market psychology began in earnest after a surprisingly large increase in payroll employment was reported in early March. By the end of June prevailing sentiment entertained the possibility of the Fed tightening later in the summer. At the long end of the tax-free money market, yields for municipal securities maturing in six months to one year moved higher in conjunction with the rise in taxable money market yields. The Bond Buyer One Year Note Index, a widely followed indicator of longer-term municipal money market interest rates, dipped to a two-year low of 3.08 percent in mid-February aided by seasonal demand. For the balance of the first half of 1996 one year note rates rose steadily and the Index reached 3.88 percent at the end of June. Interest rates for shorter maturities, represented by daily and weekly variable rate demand obligations (VRDOs), responded to the seasonal pattern of cash flows. Weekly VRDO yields dropped quickly at the start of the year falling from 5.00 percent in late December to 3.00 percent in early February in the face of strong demand, rose above 4.00 percent during tax payment season in late April and declined again to finish June at 3.30 percent. 2 DEAN WITTER TAX-FREE DAILY INCOME TRUST LETTER TO THE SHAREHOLDERS June 30, 1996, continued PORTFOLIO MANAGEMENT AND PERFORMANCE Dean Witter Tax-Free Daily Income Trust produced a total return of 1.37 percent for the six-month period ended June 30, 1996. Thirty-day yields ranged from a low of 2.60 percent for the month of March to a high of 2.92 percent for the month of May. The Fund's net assets exceeded $529 million, with 72 percent of the Fund's portfolio invested in VRDOs. Tax-exempt commercial paper and municipal notes, the two other types of securities utilized in the portfolio, comprised 18 percent and 10 percent of the portfolio, respectively. The Fund was broadly diversified geographically with holdings in 34 states. During most of the six-month period, the Fund's weighted average maturity fell within a short to moderate range of 30 to 50 days. Seasonal purchases of new one-year tax and revenue anticipation notes (TRANS) marketed in June caused the average maturity to extend. At the end of June, the Fund's average maturity had lengthened to 62 days, well within the overall limit of 90 days. Portfolio holdings are continuously reviewed to maintain or improve creditworthiness. Particular attention is devoted to monitoring the credit quality of banks providing letters of credit and liquidity facilities for our investments. Over the past several years, mounting concern about Japanese bank exposure had prompted the steady reduction in securities supported by these banks. The final holding was eliminated early in the first half of 1996. LOOKING AHEAD Over the coming months, the market's attention will be focused on the Federal Reserve Board's next step in monetary policy. Strong employment numbers and the potential for inflation prompt a cautious approach to the risk of rising interest rates. In this uncertain environment the average maturity of the Fund's portfolio is expected to remain conservative. As always, we will maintain our emphasis on high quality and liquidity in making investment selections. 3 DEAN WITTER TAX-FREE DAILY INCOME TRUST LETTER TO THE SHAREHOLDERS June 30, 1996, continued We appreciate your support of Dean Witter 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 4 DEAN WITTER TAX-FREE DAILY INCOME TRUST PORTFOLIO OF INVESTMENTS June 30, 1996 (unaudited)
PRINCIPAL AMOUNT IN CURRENT DEMAND THOUSANDS RATE+ DATE* VALUE - ------------------------------------------------------------------------------------------------------------------------------- SHORT-TERM VARIABLE RATE MUNICIPAL OBLIGATIONS (76.0%) California $10,500 California Public Capital Improvements Financing Authority, Pooled Ser 1988 C...................................................... 3.65% 09/15/96 $ 10,500,000 8,500 Newport Beach, Hoag Memorial Hospital/Presbyterian 1992 Ser A........... 3.55 07/01/96 8,500,000 Colorado 9,000 Colorado Health Facilities Authority, Kaiser Permanente 1994 Ser A...... 3.40 07/08/96 9,000,000 Connecticut Connecticut Special Assessment, 10,000 Unemployment Compensation 1993 Ser C (FGIC)............................ 3.90 07/01/96 10,000,252 10,000 Unemployment Compensation 1993 Ser C (FGIC)............................ 3.90 07/01/97 10,000,000 District of Columbia 4,800 The American University Ser 1985........................................ 3.15 07/08/96 4,800,000 Florida 9,900 Dade County, Water & Sewer Ser 1994 (FGIC).............................. 3.30 07/08/96 9,900,000 Dade County Industrial Development Authority, 18,200 Dolphins Stadium Ser 1985 A............................................ 3.35 07/08/96 18,200,000 3,000 Florida Power & Light Co Ser 1993...................................... 3.60 07/01/96 3,000,000 7,000 Orlando Utilities Commission, Water & Electric Ser 1991 BANs............ 3.25 07/08/96 7,000,000 11,800 Volusia County Health Facilities Authority, Pooled Ser 1985 (FGIC)...... 3.70 07/08/96 11,800,000 Georgia 12,000 Georgia Municipal Association, Pool Ser 1990 COPs (MBIA)................ 3.30 07/08/96 12,000,000 Hawaii Hawaii Department of Budget & Finance, Kaiser Permanente 5,000 Semiannual Tender Ser 1984 B........................................... 3.20 09/01/96 5,000,000 5,000 Ser 1995 A............................................................. 3.40 07/08/96 5,000,000 Idaho 10,000 Idaho Health Facilities Authority, Pooled Ser 1985...................... 3.40 07/08/96 10,000,000 Illinois 7,000 Chicago, Tender Notes Ser 1995 A........................................ 3.65 10/31/96 7,000,000 10,000 Illinois Educational Facilities Authority, Northwestern University Ser 1988................................................................... 3.40 07/08/96 10,000,000 Illinois Health Facilities Authority, 6,090 Evangelical Hospitals Corp Ser 1985 A.................................. 3.45 07/08/96 6,090,000 5,000 Lutheran General Health Care System Ser 1985 B......................... 4.20 07/01/96 5,000,000 4,000 Northwestern Memorial Hospital Ser 1995................................ 3.65 07/01/96 4,000,000 5,000 Parkside Development Corp Ser 1991..................................... 3.45 07/08/96 5,000,000 10,000 Oak Forest, Homewood South Suburban Mayors & Managers Assn Ser 1989..... 3.40 07/08/96 10,000,000 Indiana 6,300 Indiana Health Facility Financing Authority, Methodist Hospital of Indiana Inc Ser 1992 B................................................. 3.35 07/08/96 6,300,000
SEE NOTES TO FINANCIAL STATEMENTS 5 DEAN WITTER TAX-FREE DAILY INCOME TRUST PORTFOLIO OF INVESTMENTS June 30, 1996 (unaudited) continued
PRINCIPAL AMOUNT IN CURRENT DEMAND THOUSANDS RATE+ DATE* VALUE - --------------------------------------------------------------------------------------------------------------------------------- Kentucky $ 9,350 Mason County, East Kentucky Power Co-op Inc Ser 1984 (NRU-CFC Gtd)...... 3.15% 07/08/96 $ 9,350,000 Louisiana 2,600 Ascension Parish, Shell Oil Co Ser 1993................................. 3.60 07/01/96 2,600,000 5,320 Louisiana Offshore Terminal Authority, LOOP Inc 1991 Ser A.............. 3.40 07/01/96 5,320,000 4,400 Louisiana Recovery District, Sales Tax Ser 1988 (FGIC).................. 3.65 07/01/96 4,400,000 10,000 New Orleans Aviation Board, Ser 1993 B (MBIA)........................... 3.25 07/08/96 10,000,000 Massachusetts 10,000 Massachusetts Bay Transportation Authority, 1984 Ser A.................. 3.05 09/01/96 10,000,000 6,700 Massachusetts Industrial Finance Agency, Ogden Haverhill Proj Ser 1992 A...................................................................... 3.35 07/08/96 6,700,000 5,000 Massachusetts Municipal Wholesale Electric Company, Power Supply 1994 Ser C............................................................. 3.05 07/08/96 5,000,000 Minnesota 4,800 Minneapolis & St Paul Housing & Redevelopment Authority, Childrens' Health Care Ser 1995 B (CGIC).......................................... 3.75 07/01/96 4,800,000 4,000 University of Minnesota Regents, Ser 1985 F............................. 3.25 08/01/96 4,000,000 Missouri 10,000 Missouri Health & Educational Facilities Authority, Sisters of Mercy Health System St Louis Inc Ser 1989 A.................................. 3.35 07/08/96 10,000,000 Nebraska 7,600 Nebraska Higher Education Loan Program Inc, 1985 Ser A (MBIA)........... 3.40 07/08/96 7,600,000 New Jersey 4,000 Glouster County, Mobil Oil Refining Corp Ser 1993 A..................... 3.00 07/08/96 4,000,000 New York 2,800 New York City Municipal Water Finance Authority, 1994 Ser C (FGIC)...... 3.60 07/01/96 2,800,000 1,000 Triborough Bridge & Tunnel Authority Ser 1994 (FGIC).................... 3.05 07/08/96 1,000,000 North Carolina 6,000 Asheville, Ser 1993 A COPs.............................................. 3.20 07/08/96 6,000,000 5,000 North Carolina Medical Care Commission, Duke University Hospital Ser 1985 B............................................................. 3.25 07/08/96 5,000,000 Ohio 10,500 Columbus, Unltd Tax Ser 1995-1.......................................... 3.00 07/08/96 10,500,000 8,500 Ohio Air Quality Development Authority, Sohio Air-British Petroleum Co Ser 1995............................................................... 3.60 07/01/96 8,500,000 Oklahoma Oklahoma Water Resources Board, 5,000 State Loan Prog Ser 1994 A............................................. 3.10 09/03/96 5,000,000 5,000 State Loan Prog Ser 1995............................................... 3.25 09/01/96 5,000,000
SEE NOTES TO FINANCIAL STATEMENTS 6 DEAN WITTER TAX-FREE DAILY INCOME TRUST PORTFOLIO OF INVESTMENTS June 30, 1996 (unaudited) continued
PRINCIPAL AMOUNT IN CURRENT DEMAND THOUSANDS RATE+ DATE* VALUE - ------------------------------------------------------------------------------------------------------------------------------- Pennsylvania $10,000 Pennsylvania Higher Education Facilities Authority, Thomas Jefferson University Ser 1992 C.................................................. 3.25% 08/26/96 $ 10,000,000 South Carolina York County, 14,000 North Carolina Electric Membership Corp, Ser 1984 N-5 (NRU-CFC Gtd).... 3.25 09/15/96 14,000,000 4,920 Saluda River Electric Co-op Inc Ser 1984-E2 (NRU-CFC Gtd).............. 3.25 09/15/96 4,920,000 Tennessee 4,500 Metropolitan Nashville Airport Authority, American Airlines Refg Ser 1995 B................................................................. 3.65 07/01/96 4,500,000 Texas 7,000 Harris County Health Facilities Development Corporation, Methodist Hospital Ser 1994...................................................... 3.70 07/01/96 7,000,000 5,000 Texas, Veterans' Housing Assistance Fund I Ser 1995..................... 3.30 07/08/96 5,000,000 Utah 12,000 Intermountain Power Agency, 1985 Ser F.................................. 3.35 09/15/96 12,000,000 Virginia 5,000 Virginia Housing Development Authority, 1995 Subser D STEM IV........... 3.35 07/16/96 5,000,000 West Virginia 5,000 Pleasants County Commission, American Cyanamid Co Ser 1985.............. 3.45 07/08/96 5,000,000 Wisconsin 10,000 Wisconsin Health Facilities Authority, Franciscan Health Care Inc Ser 1985 A-1............................................................... 3.45 07/08/96 10,000,000 Wyoming 4,400 Platte County, Tri-State Generation & Transmission Assn Ser 1984 A...... 3.70 07/01/96 4,400,000 5,200 Sweetwater County, PacifiCorp Ser 1994 (AMBAC).......................... 3.70 07/01/96 5,200,000 ------------ TOTAL SHORT-TERM VARIABLE RATE MUNICIPAL OBLIGATIONS (Amortized Cost $402,680,252)................................................................... 402,680,252 ------------
SEE NOTES TO FINANCIAL STATEMENTS 7 DEAN WITTER TAX-FREE DAILY INCOME TRUST PORTFOLIO OF INVESTMENTS June 30, 1996 (unaudited) continued
YIELD TO PRINCIPAL MATURITY AMOUNT IN COUPON MATURITY ON DATE OF THOUSANDS RATE DATE PURCHASE VALUE - --------------------------------------------------------------------------------------------------------------------------------- TAX-EXEMPT COMMERCIAL PAPER (18.8%) Colorado $10,000 Platte River Power Authority, Electric Subordinate Lien Ser S-1........................................................ 3.65% 10/10/96 3.65% $ 10,000,000 Florida Florida Local Government Finance Commission, 5,000 Ser 1991................................................... 3.60 08/20/96 3.60 5,000,000 7,000 Ser 1991................................................... 3.65 08/29/96 3.65 7,000,000 5,000 Jacksonville, Ser A......................................... 3.60 08/13/96 3.60 5,000,000 Indiana 6,000 Mount Vernon, General Electric Co Ser 1989 A................ 3.55 10/17/96 3.55 6,000,000 Louisiana 8,900 St. James Parish, Texaco Inc Ser 1988 B..................... 3.75 07/18/96 3.75 8,900,000 Maryland 10,000 Montgomery County, 1995 Ser BANs............................ 3.60 09/10/96 3.60 10,000,000 Massachusetts 8,700 Massachusetts Bay Transportation Authority, Ser C........... 3.35 08/21/96 3.35 8,700,000 7,000 Massachusetts Health & Educational Facilities Authority, Harvard University Ser L................................... 3.55 10/24/96 3.55 7,000,000 8,700 Massachusetts Industrial Finance Agency, New England Power Co 1992 Ser B.............................................. 3.60 09/09/96 3.60 8,700,000 Minnesota 4,500 Rochester, Mayo Foundation/Mayo Medical Center Ser 1992 B... 3.60 10/08/96 3.60 4,500,000 7,000 Southern Minnesota Municipal Power Agency, Ser B............ 3.60 10/23/96 3.60 7,000,000 South Carolina 8,000 South Carolina Public Service Authority, Promissory Notes... 3.60 10/29/96 3.60 8,000,000 Washington 4,000 Seattle, Municipal Light & Power Ser 1991 B................. 3.65 10/15/96 3.65 4,000,000 ---------- TOTAL TAX-EXEMPT COMMERCIAL PAPER (Amortized Cost $99,800,000).................................... 99,800,000 ---------- SHORT-TERM MUNICIPAL NOTES (10.9%) Colorado 5,000 Colorado, Ser 1996 A TRANs, dtd 07/01/96 (WI)............... 4.50 06/27/97 3.85 5,030,950 Idaho 7,000 Idaho, Ser 1996 TANs, dtd 07/02/96 (WI)..................... 4.50 06/30/97 3.90 7,040,180
SEE NOTES TO FINANCIAL STATEMENTS 8 DEAN WITTER TAX-FREE DAILY INCOME TRUST PORTFOLIO OF INVESTMENTS June 30, 1996 (unaudited) continued
YIELD TO PRINCIPAL MATURITY AMOUNT IN COUPON MATURITY ON DATE OF THOUSANDS RATE DATE PURCHASE VALUE - --------------------------------------------------------------------------------------------------------------------------------- Indiana $ 5,000 Indiana Bond Bank, Advance Funding Notes Ser 1996 A-1, dtd 02/01/96................................................... 4.25% 07/08/96 3.35% $ 5,001,099 3,000 Indianapolis, Local Public Improvement Bond Bank Ser 1995 E Notes, dtd 12/21/95........................................ 4.50 07/11/96 3.70 3,000,771 Iowa 10,000 Iowa School Corporations, Warrant Certificates Ser 1996-97 (FSA), dtd 06/27/96........................................ 4.75 06/27/97 3.95 10,076,479 Massachusetts 5,000 Massachusetts, 1996 Ser A Notes, dtd 06/11/96............... 4.25 06/10/97 3.90 5,015,918 Michigan Michigan Municipal Bond Authority, 7,325 Ser 1995 B Notes dtd 07/03/95.............................. 4.50 07/03/96 3.80 7,325,540 10,000 Ser 1996 A Notes dtd 07/03/96 (WI)......................... 4.50 07/03/97 3.90 10,057,700 5,000 Michigan Notes, dtd 02/20/96................................ 4.00 09/30/96 3.00 5,012,511 ------------ TOTAL SHORT-TERM MUNICIPAL NOTES (Amortized Cost $57,561,148)..................................... 57,561,148 ------------ TOTAL INVESTMENTS (Amortized Cost $560,041,400) (a)....................................... 105.7% 560,041,400 LIABILITIES IN EXCESS OF CASH AND OTHER ASSETS............................................ (5.7) (30,219,415) ------ ------------ NET ASSETS................................................................................ 100.0% $529,821,985 ====== ============
- --------------------- BANs Bond Anticipation Notes. COPs Certificates of Participation. TANs Tax Anticipation Notes. TRANs Tax and Revenue Anticipation Notes. WI Security purchased on a when issued basis. + Rate shown is the rate in effect at June 30, 1996. * Date in which the principal amount can be recovered through demand. (a) Cost is the same for federal income tax purposes. Bond Insurance: AMBAC AMBAC Indemnity Corporation. CGIC Capital Guaranty Insurance Company. FGIC Financial Guaranty Insurance Company. FSA Financial Security Assurance Inc. MBIA Municipal Bond Investors Assurance Corporation. SEE NOTES TO FINANCIAL STATEMENTS 9 DEAN WITTER TAX-FREE DAILY INCOME TRUST FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES June 30, 1996 (unaudited) ASSETS: Investments in securities, at value (amortized cost $560,041,400)........................................ $560,041,400 Cash.................................................................. 2,482,932 Receivable for: Interest.......................................................... 2,725,385 Shares of beneficial interest sold................................ 204 Prepaid expenses and other assets..................................... 63,935 ------------ TOTAL ASSETS...................................................... 565,313,856 ------------ LIABILITIES: Payable for: Investments purchased............................................. 32,128,830 Shares of beneficial interest repurchased......................... 2,995,474 Investment management fee......................................... 204,256 Plan of distribution fee.......................................... 41,310 Accrued expenses...................................................... 122,001 ------------ TOTAL LIABILITIES................................................. 35,491,871 ------------ NET ASSETS: Paid-in-capital....................................................... 529,823,869 Accumulated undistributed net investment income....................... 624 Accumulated net realized loss......................................... (2,508) ------------ NET ASSETS........................................................ $529,821,985 ============ NET ASSET VALUE PER SHARE 529,823,869 shares outstanding (unlimited shares authorized of $.01 par value)...................... $1.00 ====
SEE NOTES TO FINANCIAL STATEMENTS 10 DEAN WITTER TAX-FREE DAILY INCOME TRUST FINANCIAL STATEMENTS, continued STATEMENT OF OPERATIONS For the six months ended June 30, 1996 (unaudited) NET INVESTMENT INCOME: INTEREST INCOME......................................................... $9,541,498 ---------- EXPENSES Investment management fee............................................... 1,361,899 Plan of distribution fee................................................ 258,710 Transfer agent fees and expenses........................................ 236,898 Registration fees....................................................... 47,664 Shareholder reports and notices......................................... 29,216 Professional fees....................................................... 20,678 Custodian fees.......................................................... 13,336 Trustees' fees and expenses............................................. 8,655 Other................................................................... 2,892 ---------- TOTAL EXPENSES BEFORE EXPENSE OFFSET................................ 1,979,948 LESS: EXPENSE OFFSET................................................ (3,851) ---------- TOTAL EXPENSES AFTER EXPENSE OFFSET................................. 1,976,097 ---------- NET INVESTMENT INCOME............................................... 7,565,401 NET REALIZED GAIN................................................... 12,513 ---------- NET INCREASE............................................................ $7,577,914 ==========
SEE NOTES TO FINANCIAL STATEMENTS 11 DEAN WITTER TAX-FREE DAILY INCOME TRUST FINANCIAL STATEMENTS, continued
STATEMENT OF CHANGES IN NET ASSETS FOR THE SIX MONTHS ENDED FOR THE YEAR JUNE 30, ENDED 1996 DECEMBER 31, 1995 - ------------------------------------------------------------------------------------------ (unaudited) INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Net investment income............................... $ 7,565,401 $ 18,011,734 Net realized gain................................... 12,513 7,061 -------------- ------------- NET INCREASE.................................... 7,577,914 18,018,795 Dividends from net investment income................ (7,565,202) (18,011,934) Net increase (decrease) from transactions in shares of beneficial interest............................. 8,157,198 (21,937,469) -------------- ------------- TOTAL INCREASE (DECREASE)....................... 8,169,910 (21,930,608) NET ASSETS: Beginning of period................................. 521,652,075 543,582,683 -------------- ------------- END OF PERIOD (Including undistributed net investment income of $624 and $425, respectively)................. $ 529,821,985 $ 521,652,075 ============== =============
SEE NOTES TO FINANCIAL STATEMENTS 12 DEAN WITTER TAX-FREE DAILY INCOME TRUST NOTES TO FINANCIAL STATEMENTS June 30, 1996 (unaudited) 1. ORGANIZATION AND ACCOUNTING POLICIES Dean Witter Tax-Free Daily Income Trust (the "Fund") is registered under the Investment Company Act of 1940, as amended (the "Act"), as a diversified, open-end management investment company. The Fund's investment objective is to provide a high level of daily income which is exempt from federal income tax, consistent with stability of principal and liquidity. The Fund was incorporated in Maryland in 1980, commenced operations on February 20, 1981 and reorganized as a Massachusetts business trust on April 30, 1987. The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts and disclosures. Actual results could differ from those estimates. The following is a summary of significant accounting policies: A. VALUATION OF INVESTMENTS -- Portfolio securities are valued at amortized cost, which approximates market value. B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on the trade date (date the order to buy or sell is executed). Realized gains and losses on security transactions are determined by the identified cost method. The Fund amortizes premiums and accretes discounts over the life of the respective securities. Interest income is accrued daily. C. FEDERAL INCOME TAX STATUS -- It is the Fund's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable and nontaxable income to its shareholders. Accordingly, no federal income tax provision is required. D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund records dividends and distributions to shareholders as of the close of each business day. 2. INVESTMENT MANAGEMENT AGREEMENT Pursuant to an Investment Management Agreement with Dean Witter InterCapital Inc. (the "Investment Manager"), the Fund pays the Investment Manager a management fee, accrued daily and payable monthly, by applying the following annual rates to the net assets of the Fund determined as of the close of each business day: 0.50% to the portion of the daily net assets not exceeding $500 million; 0.425% to the portion of the daily net assets exceeding $500 million but not exceeding $750 million; 0.375% to the portion of the daily net assets exceeding $750 million but not exceeding $1 billion; 0.35% to the portion of the daily net assets exceeding $1 billion but not exceeding $1.5 billion; 0.325% to the 13 DEAN WITTER TAX-FREE DAILY INCOME TRUST NOTES TO FINANCIAL STATEMENTS June 30, 1996 (unaudited) continued portion of the daily net assets exceeding $1.5 billion but not exceeding $2 billion; 0.30% to the portion of the daily net assets exceeding $2 billion but not exceeding $2.5 billion; 0.275% to the portion of the daily net assets exceeding $2.5 billion but not exceeding $3 billion; and 0.25% to the portion of the daily net assets exceeding $3 billion. Under the terms of the Agreement, in addition to managing the Fund's investments, the Investment Manager maintains certain of the Fund's books and records and furnishes, at its own expense, office space, facilities, equipment, clerical, bookkeeping and certain legal services and pays the salaries of all personnel, including officers of the Fund who are employees of the Investment Manager. The Investment Manager also bears the cost of telephone services, heat, light, power and other utilities provided to the Fund. 3. PLAN OF DISTRIBUTION Dean Witter Distributors Inc. (the "Distributor"), an affiliate of the Investment Manager, is the distributor of the Fund's shares and, in accordance with a Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under the Act, finances certain expenses in connection therewith. Under the Plan, the Distributor bears the expense of all promotional and distribution related activities on behalf of the Fund, except for expenses that the Trustees determine to reimburse, as described below. The following activities and services may be provided by the Distributor and other broker-dealers under the Plan: (1) compensation to, and expenses of, the Distributor and other broker-dealers; (2) sales incentives and bonuses to sales representatives and to marketing personnel in connection with promoting sales of the Fund's shares; (3) expenses incurred in connection with promoting sales of the Fund's shares; (4) preparing and distributing sales literature; and (5) providing advertising and promotional activities, including direct mail solicitation and television, radio, newspaper, magazine and other media advertisements. The Fund is authorized to reimburse the Distributor for specific expenses the Distributor incurs or plans to incur in promoting the distribution of the Fund's shares. The amount of each monthly reimbursement payment may in no event exceed an amount equal to a payment at the annual rate of 0.15% of the Fund's average daily net assets. For the six months ended June 30, 1996, the distribution fee was accrued at the annual rate of 0.09%. 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, 1996 aggregated $607,426,130 and $569,174,106, respectively. 14 DEAN WITTER TAX-FREE DAILY INCOME TRUST NOTES TO FINANCIAL STATEMENTS June 30, 1996 (unaudited) continued Dean Witter Trust Company, an affiliate of the Investment Manager and Distributor, is the Fund's transfer agent. At June 30, 1996, the Fund had transfer agent fees and expenses payable of approximately $43,000. 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 six months ended June 30, 1996 included in Trustees' fees and expenses in the Statement of Operations amounted to $418. At June 30, 1996, the Fund had an accrued pension liability of $48,883 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:
FOR THE SIX MONTHS ENDED FOR THE YEAR JUNE 30, ENDED 1996 DECEMBER 31, 1995 ------------ ----------------- (unaudited) Sold.................................................................................. 602,042,543 1,154,021,924 Reinvestment of dividends............................................................. 7,521,348 18,011,934 ------------ ------------- 609,563,891 1,172,033,858 Repurchased........................................................................... (601,406,693) (1,193,971,327) ------------ ------------- Net increase (decrease) in shares outstanding......................................... 8,157,198 (21,937,469) ============ =============
6. FEDERAL INCOME TAX STATUS At December 31, 1995, the Fund had a net capital loss carryover of approximately $15,000 of which $10,400 will be available through December 31, 1999 and $4,600 will be available through December 31, 2002 to offset future capital gains to the extent provided by regulations. During the year ended December 31, 1995, the Fund utilized capital loss carryovers of approximately $7,100. 15 DEAN WITTER TAX-FREE DAILY INCOME TRUST FINANCIAL HIGHLIGHTS Selected ratios and per share data for a share of beneficial interest outstanding throughout each period:
FOR THE SIX MONTHS ENDED FOR THE YEAR ENDED DECEMBER 31 JUNE 30, ------------------------------------------------------- 1996 1995 1994 1993 1992 1991 ------------------------------------------------------------------------------------------------------------------------------ (unaudited) PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ------- ----- ----- ----- ----- ----- Net investment income................................ 0.014 0.032 0.022 0.018 0.024 0.039 Less dividends from net income....................... (0.014) (0.032) (0.022) (0.018) (0.024) (0.039) ------- ----- ----- ----- ----- ----- Net asset value, end of period....................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ======= ===== ===== ===== ===== ===== TOTAL INVESTMENT RETURN+............................. 1.37%(1) 3.22% 2.25% 1.85% 2.39% 4.02% RATIOS TO AVERAGE NET ASSETS: Expenses............................................. 0.72%(2) 0.72% 0.71% 0.71% 0.68% 0.68% Net investment income................................ 2.74%(2) 3.16% 2.22% 1.83% 2.37% 3.95% SUPPLEMENTAL DATA: Net assets, end of period, in millions............... $530 $522 $544 $568 $670 $823
- --------------------- + Calculated based on the net asset value as of the last business day of the period. (1) Not annualized. (2) Annualized. SEE NOTES TO FINANCIAL STATEMENTS 16 BOARD OF DIRECTORS - ------------------------------------------------------- Michael Bozic Charles A. Fiumefreddo Edwin J. Garn John R. Haire Dr. Manuel H. Johnson Michael E. Nugent Philip J. Purcell John L. Schroeder OFFICERS - ------------------------------------------------------- Charles A. Fiumefreddo Chairman and Chief Executive Officer 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 directors, 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 TAX-FREE DAILY INCOME TRUST [LOGO] Semiannual Report June 30, 1996 -----END PRIVACY-ENHANCED MESSAGE-----