<PAGE>
DEAN WITTER EQUITY INCOME TRUST
Two World Trade Center
New York, New York 10048
DEAR SHAREHOLDER:
- - --------------------------------------------------------------------------------
This will be the final report to shareholders of Dean Witter Equity Income
Trust. On April 14, 1994, the Fund's shareholders approved a plan of
reorganization that resulted in the combination of its assets with those of Dean
Witter Value-Added Market Series/EQUITY PORTFOLIO. With that vote, Equity Income
shareholders became Value-Added shareholders, receiving shares equal in value to
their investment in Equity Income.
THE ECONOMY
The market seesawed during the six months ended March 31, 1994. The overall
economic recovery picked up steam during the fourth quarter of 1993, driven in
part by accelerating industrial production, stronger consumer confidence and
lower unemployment. However, during the first quarter of this year, anxiety over
the potential for increased inflation induced the Federal Reserve Board to raise
the federal-funds rate, the interest rate banks charge each other for overnight
loans, from 3.00 percent to 3.50 percent, in two separate moves. These moves
jolted the stock and bond markets, resulting in sharp sell-offs. Despite higher
interest rates, however, the economy appears to be humming along stronger than
expected: fourth quarter gross domestic product was seven percent and evidence
of continued strength is emerging. The S&P 500 finished the six-month period
with a total return of -1.53 percent. Equity Income performed in line with the
market, producing a total return of -1.61 percent. (On April 18, following the
close of the period under review, the Federal Reserve Board, continuing its war
on potential inflationary pressure, again nudged the federal-funds rate by 25
basis points.)
PORTFOLIO STRUCTURE
The Fund strived to achieve its objectives by maintaining a portfolio of
high-quality, dividend-paying common stocks that were expected to steadily
increase their dividends. Stocks with attractive yields that regularly increase
their dividends are most frequently found in the consumer area, most notably in
the drug, food and tobacco sectors. Unfortunately, over the past two years,
interest rates and yields have declined throughout the financial markets and, at
the same time, consumer stocks have significantly underperformed the market
averages. This scenario is attributable in large part to the widespread
avoidance of higher-priced premium-brand products by consumers in favor of
lower-priced generic-brand products. In this environment, many of the premier
companies held in the Fund's portfolio, such as Philip Morris, Anheuser-Busch
and Kimberly-Clark, were forced to cut prices to defend their market share.
Also, while many of these companies continued to raise dividends, the price cuts
led to diminished earnings and lower stock prices. Consequently, maintaining a
high level of current income, with an acceptable total return, became
increasingly difficult.
We appreciate your support of Dean Witter Equity Income Trust. We believe
the reorganization of your shares into those of Dean Witter Value-Added Market
Series/EQUITY PORTFOLIO will prove beneficial in the long run. Value-Added is
index oriented, investing in the stocks that comprise its benchmark, the
Standard & Poor's 500 Composite Stock Price Index. Unlike the index, however,
the Fund equally weights all stock positions, thereby emphasizing the stocks of
small and mid-sized companies, which historically outperform larger-capitalized
companies. Since its inception on December 1, 1987, through March 31, 1994,
Value-Added has produced an average annual total return of 13.65 percent.
We look forward to continuing to serve your investment needs.
Very truly yours,
Charles A. Fiumefreddo
CHAIRMAN OF THE BOARD
<PAGE>
DEAN WITTER EQUITY INCOME TRUST
PORTFOLIO OF INVESTMENTS MARCH 31, 1994 (UNAUDITED)
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- - ---------- -------------
<C> <S> <C>
COMMON STOCKS (56.9%)
ADVERTISING (0.4%)
14,000 Interpublic Group Cos.,
Inc. ....................... $ 416,500
-------------
AEROSPACE & DEFENSE (0.7%)
20,000 Rockwell International
Corp. ...................... 795,000
-------------
ALUMINUM (1.2%)
19,000 Alcan Aluminium, Ltd.
(ADR)+ ..................... 418,000
6,000 Aluminum Co. of America ...... 429,750
9,000 Reynolds Metals Co. .......... 412,875
-------------
1,260,625
-------------
APPAREL (1.8%)
17,000 Liz Claiborne, Inc. .......... 401,625
21,000 Melville Corp. ............... 800,625
16,000 V.F. Corp. ................... 800,000
-------------
2,002,250
-------------
AUTOMOTIVE - REPLACEMENT PARTS
(0.7%)
22,000 Genuine Parts Co. ............ 770,000
-------------
BANKING (3.2%)
22,000 Banc One Corp. ............... 726,000
20,000 BankAmerica Corp. ............ 787,500
11,000 Bankers Trust New York
Corp. ...................... 779,625
17,000 NationsBank Corp. ............ 777,750
13,000 Wachovia Corp. ............... 412,750
-------------
3,483,625
-------------
BANKS - REGIONAL (0.7%)
19,000 First Union Corp. ............ 790,875
-------------
BEVERAGES (1.5%)
15,000 Anheuser-Busch Cos., Inc. .... 795,000
22,000 PepsiCo, Inc. ................ 805,750
-------------
1,600,750
-------------
BUILDING MATERIALS (0.4%)
15,000 Champion International
Corp. ...................... 435,000
-------------
BUSINESS SERVICES (0.7%)
26,000 Deluxe Corp. ................. 802,750
-------------
CHEMICALS (1.8%)
17,000 American Cyanamid Co. ........ 790,500
28,300 Avery Dennison Corp. ......... 788,863
7,000 Dow Chemical Co. ............. 420,875
-------------
2,000,238
-------------
COMPUTERS - EQUIPMENT (1.2%)
10,000 Hewlett-Packard Co. .......... 821,250
8,000 International Business
Machines Corp. ............. 436,000
-------------
1,257,250
-------------
CONSUMER PRODUCTS (1.1%)
24,000 Jostens, Inc. ................ 408,000
15,000 Kimberly-Clark Corp. ......... 793,125
-------------
1,201,125
-------------
<CAPTION>
NUMBER OF
SHARES VALUE
- - ---------- -------------
<C> <S> <C>
DRUGS (1.9%)
8,000 American Home Products
Corp. ...................... $ 464,000
15,000 Bristol-Myers Squibb Co. ..... 774,375
21,000 Johnson & Johnson ............ 792,750
-------------
2,031,125
-------------
ELECTRONICS - DEFENSE (0.7%)
48,000 EG & G, Inc. ................. 786,000
-------------
FINANCE (2.3%)
15,000 American Express Co. ......... 414,375
22,000 Beneficial Corp. ............. 805,750
21,000 Golden West Financial
Corp. ...................... 805,875
25,000 Great Western Financial
Corp. ...................... 400,000
-------------
2,426,000
-------------
FOODS (3.0%)
16,000 CPC International, Inc. ...... 758,000
33,000 Fleming Cos., Inc. ........... 812,625
8,000 General Mills, Inc. .......... 445,000
23,000 Heinz, (H.J.) Co. ............ 770,500
9,000 Kellogg Co. .................. 459,000
-------------
3,245,125
-------------
FOREST & PAPER PRODUCTS (0.7%)
17,000 Boise Cascade Corp. .......... 386,750
18,000 Federal Paper Board Co. ...... 405,000
-------------
791,750
-------------
GOLD (0.4%)
17,000 American Barrick Resource
Corp. ...................... 431,375
-------------
HEALTH CARE DRUGS (2.3%)
8,000 Lilly (Eli) & Co. ............ 398,000
14,000 Merck & Co., Inc. ............ 416,500
14,000 Schering-Plough Corp. ........ 787,500
41,000 Syntex Corp. ................. 568,875
14,000 Upjohn & Co. ................. 379,750
-------------
2,550,625
-------------
HEALTH EQUIPMENT & SERVICES
(0.7%)
17,000 Bard (C.R.), Inc. ............ 412,250
18,000 Baxter International, Inc. ... 407,250
-------------
819,500
-------------
HOUSEHOLD PRODUCTS (0.7%)
15,000 Clorox Co. ................... 751,875
-------------
INSURANCE (3.1%)
12,000 Aetna Life & Casualty Co. .... 637,500
7,000 CIGNA Corp. .................. 415,625
18,000 Continental Corp. ............ 407,250
</TABLE>
<PAGE>
DEAN WITTER EQUITY INCOME TRUST
PORTFOLIO OF INVESTMENTS MARCH 31, 1994 (UNAUDITED) (CONTINUED)
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- - ---------- -------------
<C> <S> <C>
25,800 Crawford & Co., Class "B"..... $ 393,450
19,000 Lincoln National Corp. ....... 764,750
7,000 Unum Corp. ................... 369,250
30,000 USF & G Corp. ................ 393,750
-------------
3,381,575
-------------
MACHINERY - DIVERSIFIED (0.4%)
11,000 Cooper Industries, Inc. ...... 407,000
-------------
MANUFACTURING (0.7%)
49,000 Pall Corp. ................... 814,625
-------------
MEDICAL SUPPLIES (1.5%)
29,000 Abbott Laboratories........... 772,125
20,000 Allergan, Inc. ............... 407,500
24,000 United States Surgical
Corp. ...................... 432,000
-------------
1,611,625
-------------
METALS & BASIC MATERIALS
(0.7%)
15,000 Phelps Dodge Corp. ........... 783,750
-------------
METALS & MINING (0.6%)
10,000 ASARCO, Inc. ................. 223,750
17,000 Inco, Ltd. ................... 420,750
-------------
644,500
-------------
NATURAL GAS - DISTRIBUTION
(0.6%)
100,000 Arkla, Inc. .................. 675,000
-------------
OIL - DOMESTIC (1.1%)
15,000 Amoco Corp. .................. 796,875
5,000 Atlantic Richfield Co. ....... 475,000
-------------
1,271,875
-------------
OIL - FOREIGN (1.1%)
7,000 Exxon Corp. .................. 440,125
12,000 Texaco, Inc. ................. 756,000
-------------
1,196,125
-------------
OIL INTEGRATED - DOMESTIC
(0.7%)
16,000 Pennzoil Co. ................. 800,000
-------------
OIL RELATED (1.8%)
9,000 Amerada Hess Corp. ........... 402,750
26,000 Occidental Petroleum Corp. ... 419,250
24,000 Sun Co. ...................... 777,000
25,000 USX-Marathon Group ........... 412,500
-------------
2,011,500
-------------
OIL WELL - MACHINERY (1.3%)
23,000 Baker Hughes, Inc. ........... 408,250
26,000 Dresser Industries, Inc. ..... 552,500
14,000 Halliburton Co. .............. 407,750
-------------
1,368,500
-------------
NUMBER OF
SHARES VALUE
- - ---------- -------------
PHOTOGRAPHY (0.4%)
10,000 Eastman Kodak Co. ............ $ 443,750
-------------
PUBLISHING - BUSINESS (0.4%)
7,000 Dun & Bradstreet Corp. ....... 411,250
-------------
PUBLISHING - NEWSPAPER (0.4%)
13,000 Times Mirror Co. (The) ....... 404,625
-------------
RETAIL (2.5%)
11,000 Dayton-Hudson Corp. .......... 803,000
44,000 K-Mart Corp. ................. 797,500
19,000 May Department Stores Co. .... 790,875
23,000 Woolworth (F.W.) Co. ......... 347,875
-------------
2,739,250
-------------
RETAIL - DEPARTMENT STORES
(0.7%)
24,000 Dillard Department Stores,
Inc. Class "A" ............. 804,000
-------------
SAVINGS & LOAN ASSOCIATIONS
(0.4%)
24,000 Ahmanson (H.F.) & Co. ........ 405,000
-------------
SHOES (0.7%)
51,000 Stride Rite Corp. ............ 752,250
-------------
TELECOMMUNICATIONS (4.9%)
49,600 Ameritech Corp. .............. 1,891,000
8,000 Bell Atlantic Corp. .......... 414,000
26,000 GTE Corp. .................... 806,000
18,200 NYNEX Corp. .................. 627,900
23,000 Sprint Corp. ................. 787,750
20,000 U.S. West, Inc. .............. 815,000
-------------
5,341,650
-------------
TOBACCO (1.9%)
14,000 American Brands, Inc. ........ 423,500
16,000 Philip Morris Cos., Inc. ..... 812,000
32,000 UST, Inc. .................... 792,000
-------------
2,027,500
-------------
TRANSPORTATION (0.4%)
9,000 Delta Air Lines, Inc. ........ 407,250
-------------
WASTE DISPOSAL (1.8%)
16,000 Browning-Ferris Industries,
Inc. ....................... 404,000
66,000 WMX Technologies, Inc. ....... 1,567,500
-------------
1,971,500
-------------
WHOLESALE DISTRIBUTOR (0.7%)
23,000 SuperValu, Inc. .............. 796,375
-------------
TOTAL COMMON STOCKS
(IDENTIFIED COST
$64,284,386) ............... 62,119,838
-------------
</TABLE>
<PAGE>
DEAN WITTER EQUITY INCOME TRUST
PORTFOLIO OF INVESTMENTS MARCH 31, 1994 (UNAUDITED) (CONTINUED)
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- - --------------- ------------ ----------- -------------
<C> <S> <C> <C> <C>
SHORT TERM INVESTMENTS (26.2%)
COMMERCIAL PAPER (A)(16.9%)
AUTOMOTIVE FINANCE (3.6%)
$ 4,000 Ford Motor Credit Co. ............................................... 3.58% 4/ 8/94 $ 3,997,215
-------------
FINANCE - DIVERSIFIED (13.3%)
5,000 American General Finance Corp. ...................................... 3.58 4/13/94 4,994,033
5,500 Commercial Credit Co. ............................................... 3.58 4/11/94 5,494,531
4,000 General Electric Capital Corp. ...................................... 3.50 4/ 5/94 3,998,444
-------------
14,487,008
-------------
TOTAL COMMERCIAL PAPER (AMORTIZED COST $18,484,223) 18,484,223
-------------
U.S. GOVERNMENT AGENCY (A)(4.3%)
4,700 Federal National Mortgage Association (Amortized Cost $4,694,060).... 3.50 4/14/94 4,694,060
-------------
REPURCHASE AGREEMENT (5.0%)
5,493 The Bank of New York 3.50% due 4/ 1/94 (dated 3/31/94; proceeds
$5,493,157; collateralized by $5,770,608 U.S. Treasury Note 6.25%
due 2/15/03 valued at $5,602,475) (Identified Cost $5,492,623)..... 5,492,623
-------------
TOTAL SHORT TERM INVESTMENTS (IDENTIFIED COST $28,670,906) ..................................... 28,670,906
-------------
TOTAL INVESTMENTS (IDENTIFIED COST $92,955,292)(B) ........................ 83.1% 90,790,744
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES ............................ 16.9 18,503,005
---------- -------------
NET ASSETS ................................................................ 100.0 % $ 109,293,749
---------- -------------
---------- -------------
<FN>
- - ------------------------------
+ AMERICAN DEPOSITORY RECEIPT.
(A) COMMERCIAL PAPER AND U.S. GOVERNMENT AGENCY WERE PURCHASED ON A DISCOUNT
BASIS. THE RATES SHOWN HAVE BEEN ADJUSTED TO REFLECT A BOND EQUIVALENT
YIELD
(B) THE AGGREGATE COST FOR FEDERAL INCOME TAX PURPOSES IS $93,081,077; THE
AGGREGATE GROSS UNREALIZED APPRECIATION IS $1,563,878 AND THE AGGREGATE
GROSS UNREALIZED DEPRECIATION IS $3,854,211, RESULTING IN NET UNREALIZED
DEPRECIATION OF $2,290,333.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER EQUITY INCOME TRUST
FINANCIAL STATEMENTS
- - --------------------------------------------------------------------------------
<TABLE>
<S> <C>
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1994 (UNAUDITED)
ASSETS:
Investments in securities, at value
(identified cost $92,955,292)
(Note 1).......................... $ 90,790,744
Cash................................ 11,839,629
Receivable for:
Investments sold.................. 27,508,078
Dividends......................... 210,015
Shares of beneficial interest
sold............................ 14,772
Prepaid expenses and other assets... 30,426
------------
TOTAL ASSETS................. 130,393,664
------------
LIABILITIES:
Payable for:
Investments purchased............. 20,700,906
Shares of beneficial interest
repurchased..................... 151,609
Plan of distribution fee (Note
3).............................. 97,362
Investment management fee (Note
2).............................. 68,153
Accrued expenses (Note 4)........... 81,885
------------
TOTAL LIABILITIES............ 21,099,915
------------
NET ASSETS:
Paid-in-capital..................... 121,533,266
Accumulated undistributed net
investment
income............................ 128,547
Accumulated net realized loss....... (10,203,516)
Net unrealized depreciation on
investments....................... (2,164,548)
------------
NET ASSETS................... $109,293,749
------------
------------
NET ASSET VALUE PER SHARE,
13,056,440
shares outstanding (unlimited
shares authorized of $.01 par
value)............................ $8.37
------------
------------
</TABLE>
<TABLE>
<S> <C>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 31, 1994 (UNAUDITED)
INVESTMENT INCOME:
INCOME
Dividends........................ $2,121,969
Interest......................... 167,553
----------
TOTAL INCOME.................. 2,289,522
----------
EXPENSES
Plan of distribution fee (Note
3)............................. 677,648
Investment management fee (Note
2)............................. 474,353
Transfer agent fees and expenses
(Note 4)....................... 90,254
Custodian fees................... 25,007
Registration fees................ 23,680
Trustees' fees and expenses (Note
4)............................. 20,492
Professional fees................ 12,906
Shareholder reports and
notices........................ 7,903
Other............................ 2,952
----------
TOTAL EXPENSES................ 1,335,195
----------
NET INVESTMENT INCOME....... 954,327
----------
NET REALIZED AND UNREALIZED GAIN
(LOSS) (Note 1):
Net realized loss on
investments.................... (4,226,000)
Net realized gain on closing
options written................ 37,395
Net realized gain on expired
options written................ 2,437
----------
Total net realized loss....... (4,186,168)
Net change in unrealized
depreciation................... 2,048,519
----------
NET LOSS...................... (2,137,649)
----------
NET DECREASE IN NET ASSETS
RESULTING FROM
OPERATIONS.................. $(1,183,322)
----------
----------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED FOR THE YEAR ENDED
MARCH 31, 1994 (UNAUDITED) SEPTEMBER 30, 1993
-------------------------- -------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income............................................ $ 954,327 $ 2,504,030
Net realized (loss) gain......................................... (4,186,168) 9,101,738
Net change in unrealized depreciation............................ 2,048,519 (8,599,155)
--------------- -------------------
Net (decrease) increase in net assets resulting from
operations................................................... (1,183,322) 3,006,613
--------------- -------------------
Dividends and distributions to shareholders from:
Net investment income............................................ (420,262) (2,432,895)
Net realized gain................................................ (294,529) (9,101,738)
--------------- -------------------
Total dividends and distributions............................ (714,791) (11,534,633)
--------------- -------------------
Net (decrease) increase from transactions in shares of beneficial
interest (Note 6)................................................ (42,029,009) 3,539,044
--------------- -------------------
Total decrease............................................... (43,927,122) (4,988,976)
NET ASSETS:
Beginning of period................................................ 153,220,871 158,209,847
--------------- -------------------
END OF PERIOD (including undistributed net investment income of
$128,547 and $77,319, respectively).............................. $ 109,293,749 $ 153,220,871
--------------- -------------------
--------------- -------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER EQUITY INCOME TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- - --------------------------------------------------------------------------------
1. ORGANIZATION AND ACCOUNTING POLICIES -- Dean Witter Equity 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. It was
organized on October 2, 1984 as a Massachusetts business trust and commenced
operations on February 28, 1985.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- (1) an equity portfolio security listed or
traded on the New York or American Stock Exchange is valued at its latest
sale price taken at 4:00 p.m. New York time on that exchange (if there were
no sales that day, the security is valued at the latest bid price); (2) an
option listed on an exchange is valued at the mean between its latest bid
and asked prices; (3) all other portfolio securities for which
over-the-counter market quotations are readily available are valued at the
latest bid price; (4) when market quotations are not readily available,
including circumstances under which it is determined by the Investment
Manager that sale and bid prices are not reflective of a security's market
value, portfolio securities are valued at their fair value as determined in
good faith under procedures established by and under the general supervision
of the Trustees (valuation of debt securities for which market quotations
are not readily available may be based upon current market prices of
securities which are comparable in coupon, rating and maturity or an
appropriate matrix utilizing similar factors); (5) the fair value of
short-term debt securities which mature at a date less than sixty days
subsequent to valuation date are determined on an amortized cost or
amortized value basis; other short-term debt securities will be valued on a
mark-to-market basis until such time as they reach a maturity of 60 days,
whereupon they will be valued at amortized value unless the Trustees
determine such does not reflect the securities' fair value, in which case
these securities will be valued at their fair value as determined by the
Trustees; and (6) the value of other assets is determined in good faith at
fair value under procedures established by and under the general supervision
of the Fund's Trustees.
B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on
the trade date (date the order to buy or sell is executed). Realized gains
and losses on security transactions are determined on the identified cost
method. Dividend income is recorded on the ex-dividend date. Interest income
is accrued daily.
C. OPTION ACCOUNTING PRINCIPLES -- When the Fund writes a call option on a
stock index option and on an equity security, an amount equal to the premium
received by the Fund is included in the Fund's Statement of Assets and
Liabilities as an asset and as an equivalent liability. The amount of the
liability is subsequently marked-to-market to reflect the current market
value of the stock index option written. Listed options are valued at the
last sales price on the exchange on which they are listed (if there were no
sales that day, the option is valued at the mean between the closing bid and
asked prices). If a stock index option which the Fund has written either
expires, is assigned, or is closed by the Fund, the Fund realizes a gain or
loss based upon the premium received, the difference between the closing
level of the stock index upon which the option is based and the exercise
price of the option adjusted for the premium received, or the difference
between the premium received and the premium paid, respectively. If an
equity security option which the Fund has written either expires or if the
Fund enters into a closing purchase transaction, the Fund realizes a gain
(or loss if the cost of a closing purchase transaction exceeds the premium
received when the option was written) without regard to any unrealized gain
or loss on the underlying security, and the liability related to such option
is extinguished. If an equity security
<PAGE>
DEAN WITTER EQUITY INCOME TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED)
- - --------------------------------------------------------------------------------
call option which the Fund has written is exercised, the Fund realizes a
capital gain or loss from the sale of the underlying security and the
proceeds from such sale are increased by the premium originally received.
The premium paid by the Fund for the purchase of a call or put option is
included in the Fund's Statement of Assets and Liabilities as an investment
and is subsequently marked-to-market to reflect the current market value of
the option.
D. 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 income to its shareholders.
Accordingly, no federal income tax provision is required.
E. 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 reclassifications.
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.
F. REPURCHASE AGREEMENTS -- The Fund's custodian takes possession on behalf
of the Fund of the collateral pledged for investments in repurchase
agreements. It is the policy of the Fund to value the underlying collateral
daily on a mark-to-market basis to determine that the value, including
accrued interest, is at least equal to the repurchase price plus accrued
interest. In the event of default of the obligation to repurchase, the Fund
has the right to liquidate the collateral and apply the proceeds in
satisfaction of the obligation.
2. INVESTMENT MANAGEMENT AGREEMENT -- Pursuant to an Investment Management
Agreement (the "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: 0.75% of the portion
of the daily net assets not exceeding $500 million; 0.65% of the portion of the
daily net assets exceeding $500 million.
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 office space and 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
<PAGE>
DEAN WITTER EQUITY INCOME TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED)
- - --------------------------------------------------------------------------------
"Plan") pursuant to Rule 12b-1 under the Act pursuant to which the Fund pays the
Distributor compensation, accrued daily and payable monthly, at the annual rate
of 1.0% of the lesser of: (a) the average daily aggregate gross sales of the
Fund's shares since the inception of the Fund (not including reinvestments of
dividends or 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 it
provides and the expenses borne by it and others in the distribution of the
Fund's shares, including the payment of commissions for sales of the Fund's
shares and incentive compensation to and expenses of the account executives of
Dean Witter Reynolds Inc., an affiliate of the Investment Manager, and other
employees or selected dealers who engage in or support distribution of the
Fund's shares or who service shareholders' accounts, including overhead and
telephone expenses; printing and distribution of prospectuses and reports used
in connection with the offering of the Fund's shares; and preparation, printing
and distribution of sales literature and advertising materials.
Provided that the Plan continues in effect, any cumulative expenses incurred
by the Distributor, but not yet recovered, may be recovered through future
distribution fees from the Fund and contingent deferred sales charges from the
Fund's shareholders.
Dean Witter Reynolds Inc. has informed the Fund that for the six months
ended March 31, 1994, it received approximately $94,000 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 the proceeds from sales of securities (excluding short-term
investments) for the six months ended March 31, 1994 were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
----------- -------------
<S> <C> <C>
Common Stocks................................................ $58,779,081 $ 143,898,617
</TABLE>
<TABLE>
<CAPTION>
CONTRACTS PREMIUMS
------------ -------------
<S> <C> <C>
Option contracts written: outstanding at beginning of
period...................................................... 854 $ 886,000
Options written............................................ 674 777,866
Options closed............................................. (1,478) (1,661,429)
Options expired............................................ (50) (2,437)
------ -------------
Option contracts written: outstanding at end of period....... -0- -0-
------ -------------
------ -------------
</TABLE>
For the six months ended March 31, 1994, the Fund incurred brokerage
commissions of $4,273 with Dean Witter Reynolds Inc. for transactions executed
on behalf of the Fund.
On April 1, 1991, the Fund established an unfunded noncontributory defined
benefit pension plan covering all independent Trustees of the Fund who will have
served as an Independent Trustee for at least five years at the time of
retirement. Benefits under this plan are based on years of service and
compensation during the last five years of service. Aggregate pension costs for
the six months ended March 31, 1994, included in Trustees' fees and expenses in
the Statement of Operations,
<PAGE>
DEAN WITTER EQUITY INCOME TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED)
- - --------------------------------------------------------------------------------
amounted to $4,577. At March 31, 1994, the Fund had an accrued pension liability
of $40,713 which is included in accrued expenses in the Statement of Assets and
Liabilities.
Dean Witter Trust Company, an affiliate of the Investment Manager and
distributor, is the Fund's transfer agent. At March 31, 1994, the Fund had
transfer agent fees and expenses payable of approximately $12,000.
5. FEDERAL INCOME TAX STATUS -- As a result of the reorganization described in
Note 7, the Fund will have a short taxable period ending April 18, 1994. The
Fund's net capital loss carryover at April 18, 1994 will be combined with that,
if any, of Dean Witter Value-Added Market Series ("Value-Added") (see Note 7)
and may offset future capital gains of Value-Added subject to certain
limitations imposed by regulations. At April 18, 1994, the Fund had a net
capital loss carryover of approximately $3,084,000, which will be available
through June 30, 1999. Capital losses of the Fund incurred after October 31
within the taxable year are deemed to arise on the first business day of the
Fund's next taxable year. The Fund will elect to defer a net capital loss of
approximately $6,089,000 incurred during such period. As a result of the
reorganization, these losses will be deemed to have occurred on the first
business day of Value-Added's next taxable year, July 1, 1994. To the extent
that these carryover losses are used to offset future capital gains, it is
probable that the gains so offset will not be distributed to shareholders. The
Fund had permanent book/tax differences primarily attributable to dividend
redesignations. To reflect cumulative reclassifications arising from permanent
book/tax differences for the year ended September 30, 1993, accumulated
undistributed net investment income was charged $482,837, accumulated net
realized loss on investments was credited for $18,751,936 and paid-in-capital
was charged for $18,269,099.
6. SHARES OF BENEFICIAL INTEREST -- Transactions in shares of beneficial
interest were as follows:
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED FOR THE YEAR ENDED
MARCH 31, 1994 SEPTEMBER 30, 1993
------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold.................................... 794,985 $ 6,838,822 3,896,925 $ 35,206,353
Reinvestment of dividends and
distributions.......................... 55,151 473,750 896,925 7,965,768
---------- ------------ ---------- ------------
850,136 7,312,572 4,793,850 43,172,121
Repurchased............................. (5,719,412) (49,341,581) (4,450,288) (39,633,077)
---------- ------------ ---------- ------------
Net (decrease) increase................. (4,869,276) $(42,029,009) 343,562 $ 3,539,044
---------- ------------ ---------- ------------
---------- ------------ ---------- ------------
</TABLE>
7. SUBSEQUENT EVENT -- On April 18, 1994, the Fund combined substantially all of
its net assets with Value-Added pursuant to a plan of reorganization approved by
the Fund's shareholders on April 14, 1994. The acquisition was accomplished by a
tax-free exchange of 12,702,132 shares of the Fund for 5,526,681 shares of
Value-Added at a net asset value of $19.26.
<PAGE>
DEAN WITTER EQUITY INCOME TRUST
FINANCIAL HIGHLIGHTS (UNAUDITED)
- - --------------------------------------------------------------------------------
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 SEPTEMBER 30,
MARCH 31, -----------------------------------------------------------------
1994 1993 1992 1991 1990 1989
----------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period............................... $8.55 $9.00 $9.19 $7.70 $9.21 $8.07
----------- --------- --------- --------- --------- ---------
Investment income--net.............. 0.03 0.14 0.13 0.20 0.20 0.21
Realized and unrealized gain (loss)
on investments--net................ (0.16) 0.05 0.32 2.01 (0.99) 1.65
----------- --------- --------- --------- --------- ---------
Total from investment operations...... (0.13) 0.19 0.45 2.21 (0.79) 1.86
----------- --------- --------- --------- --------- ---------
Less dividends and distributions:
Dividends from net investment
income............................. (0.03) (0.14) (0.13) (0.20) (0.20) (0.21)
Distributions from net realized
gains on investments............... (0.02) (0.50) -0- (0.52) -0- -0-
Distributions from paid in
capital............................ -0- -0- (0.51) -0- (0.52) (0.51)
----------- --------- --------- --------- --------- ---------
Total dividends and distributions..... (0.05) (0.64) (0.64) (0.72) (0.72) (0.72)
----------- --------- --------- --------- --------- ---------
Net asset value, end of period........ $8.37 $8.55 $9.00 $9.19 $7.70 $9.21
----------- --------- --------- --------- --------- ---------
----------- --------- --------- --------- --------- ---------
TOTAL INVESTMENT RETURN+................ (1.61)%(1) 2.03% 5.12% 29.71% (9.03)% 23.99%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands)........................... $109,294 $153,221 $158,210 $137,227 $147,103 $230,015
Ratio of expenses to average
net assets........................... 1.97%(2) 2.04% 2.04% 2.09% 2.05% 1.97%
Ratio of net investment income to
average net assets................... 1.41%(2) 1.54% 1.51% 2.32% 2.34% 2.41%
Portfolio turnover rate............... 49% 106% 57% 131% 48% 82%
<FN>
- - ------------------------------
+ Does not reflect the deduction of sales load.
(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. John E. Jeuck
Dr. Manuel H. Johnson
Paul Kolton
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
Edward R. Telling
OFFICERS
- - --------------------------------------------------
Charles A. Fiumefreddo
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
DEAN WITTER
EQUITY INCOME
Sheldon Curtis TRUST
VICE PRESIDENT, SECRETARY AND GENERAL COUNSEL [LOGO]
Kenton J. Hinchliffe
VICE PRESIDENT
Thomas F. Caloia
TREASURER
TRANSFER AGENT
- - --------------------------------------------------
Dean Witter Trust Company
Harborside Financial Center - Plaza Two
Jersey City, New Jersey 07311
LEGAL COUNSEL
- - --------------------------------------------------
Sheldon Curtis
Two World Trade Center
New York, New York 10048
INDEPENDENT ACCOUNTANTS
- - --------------------------------------------------
Price Waterhouse
1177 Avenue of the Americas
New York, New York 10036 SEMIANNUAL REPORT
MARCH 31, 1994
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.
