<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT TWO WORLD TRADE CENTER NEW
SERIES YORK, NEW YORK 10048
LETTER TO THE SHAREHOLDERS JUNE 30, 1998
DEAR SHAREHOLDER:
The equity markets across the globe were choppy during the first half of 1998.
Fears of the Asian meltdown spreading, coupled with Japan slipping into
recession, ignited fears of a worldwide slowdown. Equity market performance in
the United States, up 17.7 percent, and Europe, up 26.7 percent, faced periods
of volatility but surged ahead on the strength of firm economies, strong
consumer spending and low inflation. The real damage was in the emerging
markets. Hong Kong, whose currency had not devalued, shed 27.9 percent of its
value, while Indonesia, the hardest-hit Asian market, lost 58 percent of its
capitalization. The shockwaves were felt half a world away in eastern Europe and
Latin America. Russia and Brazil, for instance, were consistently rumored to be
on the brink of devaluation, with their markets down 59.7 percent and 17.6
percent, respectively.
THE UNITED STATES
Despite a vibrant consumer sector, the financial crisis in Asia appeared to be
having an increasing impact on U.S. economic growth during the period under
review. In April, the U.S. trade deficit widened to $14.5 billion, worse than
the consensus estimate. Falling exports and an inventory overhang slowed the
growth of the industrial sector from the beginning of the year. Nonetheless,
many sectors of the U.S. economy remain strong, and the trade deficit's drag on
U.S. economic growth appears to have been offset by strong domestic demand.
Consumer spending grew at the rapid rate of 6 percent in the first quarter and
remained high in the second quarter, due to strong labor and financial market
conditions.
Sound fundamentals played a positive role in the bond market's performance
during the first half of 1998. Inflationary pressures were minimal throughout
the period and the U.S. budget surplus continued to grow, diminishing the supply
of Treasury securities. Interest rates fell across the board, with short-term
rates falling less than long-term rates due in large part to the federal-funds
rate anchoring the short end at
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES
LETTER TO THE SHAREHOLDERS JUNE 30, 1998, CONTINUED
5.50 percent. The federal-funds rate has now been within 50 basis points of the
current level for more than three and one-half years. Despite the strength of
the domestic economy and tightness of the labor market, the uncertainty
generated by Asia and the plunge in commodity prices have encouraged the Federal
Reserve to keep monetary policy on hold. Even though the Fed's governors voted
to adopt a bias toward tightening monetary conditions in March, few market
participants believe that such a move will take place as long as Asia remains
mired in financial turmoil and the dollar remains firm against that continent's
currencies.
While volatile, the U.S. stock market remained relatively resilient in the face
of global economic uncertainty, and domestic large-cap stocks benefited from a
perception that they could provide a safe haven from the disorder in Asia. This
positive investor psychology combined with strong fundamentals like low
inflation, high employment and rising consumer confidence in the U.S. economy to
support rising equity prices.
EUROPE
During the period under review, European stock markets delivered strong returns,
in both local currency and U.S.-dollar terms. After a setback during the fourth
quarter of 1997, due to the crisis in Asia, European markets recovered strongly
during the first half of 1998. Market performance was driven by several factors,
particularly the strength of the ongoing recovery in the European economies.
Continental Europe is now the only major region worldwide where analysts expect
stronger economic growth in 1998 versus 1997. In the core European markets,
economic activity has accelerated as a result of increased business and consumer
optimism. At the same time, interest-rate cuts in Spain and Italy as part of the
European Monetary Union (EMU) convergence process have stimulated real GDP
growth of better than 3 percent, with further strengthening likely this year.
Throughout Europe the inflationary outlook remains benign. Lower commodity
prices resulting from the slowdown in Asia imply interest-rate stability for the
rest of the year. In the United Kingdom, which is now in a different phase of
its economic cycle, high interest rates and a pronounced local currency have had
a strongly negative impact on economic activity, and GDP growth forecasts for
the U.K. have been reduced to around 2.5 percent for the full year.
At the corporate level, earnings results from Continental European corporations
have largely met analysts' expectations and these companies remain fairly
positive on the prospects for the second half of the year. This has been the
case particularly for sectors geared to the ongoing recovery in European
economies, with banking, consumer goods and telecom stocks showing the strongest
earnings growth. Where earnings have disappointed, this has been mainly due to
lower sales or
2
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES
LETTER TO THE SHAREHOLDERS JUNE 30, 1998, CONTINUED
increased competition in Asian markets. However, the overall impact from Asia
has been less severe than expected, and Continental European corporate earnings,
supported by accelerating domestic economies, are expected to grow by 13 to 14
percent this year. In the United Kingdom, the strength of interest rates and the
British pound have continued to have a damaging effect on company profits,
particularly for manufacturers and exporters. Mainly because of this, corporate
earnings are expected to grow by a more moderate 5 to 7 percent in 1998.
In addition to positive economic fundamentals, the transition to the European
single currency (Euro) has also supported the region's performance over the last
six months. With the 11 "first-wave" EMU members now established, the two main
issues are the convergence of short-term interest rates and the formulation of a
monetary policy framework for the European Central Bank. Short-term interest
rates must converge further during the second half of 1998, implying sharp cuts
in the southern European economies. However, the risk that falling interest
rates could result in overheating in Spain and Italy has been reduced by the
disinflationary effect of the crisis in Asian markets. The majority of European
corporations will be fully prepared for the transition to the Euro before the
end of the third quarter, and markets appear to be discounting a generally
smooth transition throughout the rest of this year.
The imminence of the single currency has had a significant impact on the level
of European corporate activity. This has been especially true in the banking and
financial sectors, where the single currency creates scope for significant
operational synergies and cost savings. Most of the activity of the last six
months has taken place within national borders as companies attempt to
strengthen their domestic position. However, once the Euro is well established,
competitive pressures and pricing transparency should lead to cross-border
deals, creating larger companies with a pan-European presence. This is
particularly true for industries such as transport and automobiles, where the
disappearance of pricing differentials across Europe may create significant
margin pressure. The very positive market reactions to recent restructuring
announcements at Hoechst and Siemens give an indication of the growing pressure
on company management to take action to maximize shareholder value. Corporate
restructuring and reform may provide a significant boost to Continental European
earnings in the medium term.
ASIA AND THE PACIFIC
Asian markets experienced an extremely volatile and weak first half as the
economic downturn in the region intensified. A strong rally during January in
response to reform initiatives and debt rescheduling in a number of markets
proved to be short-lived as the difficulties of implementation
3
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES
LETTER TO THE SHAREHOLDERS JUNE 30, 1998, CONTINUED
were gradually realized. Toward the end of the period, the release of
first-quarter economic data dealt a further blow to confidence by revealing the
contraction in growth to be far more severe than had initially been anticipated.
Particularly unsettling was the 2 percent contraction in Hong Kong's domestic
economy, which had been accorded a degree of insulation from the downturn in the
region.
Having rallied in the first quarter in line with the region's markets, its
currencies weakened later in the period, softening returns from markets on a
currency-adjusted basis during the second quarter. This occurred despite the
tight fiscal and monetary policies pursued throughout the region, which were
influenced by the International Monetary Fund (IMF) through its direct
involvement via IMF bail-out programs in three markets (Thailand, Korea and
Indonesia) and through the moral suasion it continued to exercise elsewhere.
Interest rates accordingly remained high, creating a negative operating
environment for companies by squeezing liquidity at a time when banks were
curtailing lending in response to a marked deterioration in asset quality.
The Hong Kong stock market's performance was punctuated by recurrent concerns
over a possible severance of the Hong Kong-U.S. dollar peg. These concerns
stemmed from a belief that China's ambitious growth target of 7 to 8 percent for
1998 could not be achieved without the external stimulus of a devaluation of its
currency. This conviction placed upward pressure on interest rates as the Hong
Kong Monetary Authority moved to squeeze speculators out of its inter-bank
market. The impact on stocks was unsurprisingly severe, given both the issues of
confidence that speculation involves and the dominance of
interest-rate-sensitive property and bank stocks in the Hong Kong market.
Politics dominated the Indonesian market as President Suharto was unseated after
more than 30 years in power in the most forceful display of social unrest seen
by the region for a generation. In a less spectacular fashion, politics remained
central to the Malaysian market as the ebb and flow of political influence
between Prime Minister Mahathir and his deputy affected sentiment, given the
latter's more pragmatic approach toward the role of foreign investment in
Malaysia's economic rehabilitation.
In Northeast Asia, the New Year rally in Korean stocks following the successful
rescheduling of its foreign debt proved short-lived as IMF requirements began to
manifest themselves in extremely high interest rates and as recession in the
manufacturing sector began in earnest. However, by regional comparison Korea
performed better than most markets over the six months, given the extreme
weakness in that market at the close of 1997. In Taiwan, financial and
electronics stocks led the
4
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES
LETTER TO THE SHAREHOLDERS JUNE 30, 1998, CONTINUED
market lower, in spite of a relatively robust domestic economy. The contagion
effect of the regional slowdown was also an issue, as it was in Singapore, where
stock valuations corrected to reflect the earnings impact of the sharp
contraction in the neighboring economies of Indonesia and Malaysia.
The Japanese market moved lower during the first quarter, dogged by persistent
concerns over solvency and asset quality in the banking sector. The political
debate surrounding the appropriate stimuli for the recession-ridden economy did
little to lift sentiment, which was mirrored by a continued slide in the yen
before intervention by the U.S. and Japanese central banks forced a correction.
The regional downturn continued to put pressure on Australian stocks during the
first quarter of 1998 as commodity prices weakened in line with external demand.
The currency moved lower as the current account moved further into deficit,
thereby diluting currency-adjusted returns. By contrast, a relatively robust
Australian economy enabled domestic stocks to outperform during the second
quarter, helping the Australian market post a modest positive return for the
period as a whole.
CAPITAL APPRECIATION PORTFOLIO
For the six-month period ended June 30, 1998, the Capital Appreciation Portfolio
posted a total return of 4.39 percent versus 17.70 percent for the S&P 500 Index
and 15.63 percent for the Lipper Variable Annuity Capital Appreciation
Underlying Funds Average.
The Portfolio's underperformance relative to the S&P 500 and its Lipper universe
is a result of the Portfolio's overweighting relative to these benchmarks in
small-cap stocks while, during the period under review, large-cap stocks
significantly outperformed. However, we continue to believe that the small-cap
segment of the market remains undervalued and that this segment offers greater
growth potential over the long term, than the broader market. Accordingly, the
Portfolio continues to pursue small-cap stocks in the $5 to $25 price-range with
sound fundamentals, solid earnings momentum and financial stability while
maintaining broad diversification across industry groups. The top four
industries represented in the portfolio on June 30, 1998, were technology (22.4
percent of net assets), consumer cyclicals (22.1 percent), financials (10.5
percent), and health care (28.8 percent). While the technology industry has been
particularly affected by the Asian crisis, we remain heavily concentrated in
this sector because we are convinced there is good value among small- and
mid-cap software names that operate within niche markets.
5
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES
LETTER TO THE SHAREHOLDERS JUNE 30, 1998, CONTINUED
We believe that small- and mid-cap stocks stand to benefit from the current
environment of stable interest rates, moderate economic growth and a strong U.S.
dollar. Although the Asian financial crisis initially caused investors to
gravitate toward the perceived safety of large caps, small- and mid-cap stocks
actually have less global exposure and may provide investors with a greater
defense against any continued turmoil around the Pacific Rim.
CAPITAL GROWTH PORTFOLIO
For the six-month period ended June 30, 1998, the Capital Growth Portfolio
posted a total return of 15.40 percent versus 17.70 percent for the S&P 500
Index and 16.23 percent for the Lipper Variable Annuity Growth Underlying Funds
Average.
The Portfolio's diversification into small- and mid-capitalization stocks
contributed heavily to its performance during the period under review. However,
the large-scale underperformance of these stocks relative to their
large-capitalization counterparts in the final weeks of the second quarter
caused the Portfolio to underperform the market. On June 30, 1998, the Portfolio
was approximately 53 percent invested in large-cap stocks and 47 percent in mid-
and small-cap companies. Going forward, we do not anticipate that there will be
any dramatic shift in the market-capitalization structure of the Portfolio. We
believe that portfolio diversification is important across both industry sectors
and capitalization ranges.
Investments in the technology, financial and retail sectors contributed to the
Portfolio's performance during the period. The Portfolio maintained overweighted
positions in each of these sectors for much of the period. At the end of June,
the Portfolio had approximately 17 percent of its assets invested in financial
and interest-rate-sensitive stocks, 25 percent in technology and capital goods
stocks, 12 percent in basic industry and economically sensitive stocks and 45
percent in consumer and consumer-related stocks. The remaining 1 percent was
invested in cash and cash equivalents.
Among the Portfolio's largest holdings were U.S.A. Waste Services, Snyder
Communications, Tyco International, Providian Financial and Conseco.
COMPETITIVE EDGE PORTFOLIO
The Competitive Edge Portfolio was introduced on May 18, 1998. This Portfolio
seeks long-term capital growth by investing at least 80 percent of its net
assets in the common stocks of U.S. and
6
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES
LETTER TO THE SHAREHOLDERS JUNE 30, 1998, CONTINUED
non-U.S. companies included in the "Best Ideas" subgroup of "Global Investing:
The Competitive Edge," a research compilation assembled and maintained by Morgan
Stanley Dean Witter Equity Research, and supplemental securities chosen by the
investment manager.
The Global Investing study examines some 2,000 companies to uncover those that
have a long-term sustainable competitive advantage in the global arena. The team
then follows a rigorous process to identify whether the competitive advantage is
reflected in the current stock price. Finally, from that list the team produces
a shorter set of their most highly recommended stocks -- the Competitive Edge
"Best Ideas" list.
On June 30, 1998, the Portfolio's largest holdings were News Corporation, ST
Microelectronics NV, American Express, Procter & Gamble, Asia Pulp & Paper and
Citicorp.
DIVIDEND GROWTH PORTFOLIO
For the six-month period ended June 30, 1998, the Dividend Growth Portfolio
posted a total return of 10.18 percent, compared to 17.70 percent for the S&P
500 Index and 12.26 percent for the Lipper Variable Annuity Growth and Income
Underlying Funds Average.
The Portfolio's underperformance of its benchmark was accounted for by its
limited exposure to technology stocks, which have very little, if any, current
yield. Additionally, the Portfolio was underweighted in its exposure to
financial services stocks, which performed very well during the period.
The Dividend Growth Portfolio began operations on November 9, 1994. Since that
date, the Fund has maintained a fully invested posture. During the six-month
period under review, shares of Associates First Capital were received into the
portfolio as a spin-off from Ford Motor Company. Subsequently, this holding was
built into a full portfolio position. The Portfolio's holding in Tricon Global
Restaurants (a spin-off from Pepsico) was liquidated. At period-end, the
Portfolio owned 52 common stocks spread among 34 industries.
EQUITY PORTFOLIO
For the six-month period ended June 30, 1998, the Equity Portfolio posted a
total return of 17.90 percent, compared to 17.72 percent for the S&P 500 Index
and 16.15 percent for the Lipper Variable Annuity Growth Index.
7
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES
LETTER TO THE SHAREHOLDERS JUNE 30, 1998, CONTINUED
The Portfolio has been defensively positioned for much of 1998. Given our
expectations that world economic growth would be slow, our emphasis has been on
growth stocks. During periods of economic slowdown, growth stocks tend to
outperform cyclical stocks, because they typically have more stable earnings.
Entertainment and media has been one area of greatest concentration, accounting
for 10 percent of net assets on June 30. Other growth sectors such as health
care, financial services and consumer staples have been market weighted. In
1998, the Portfolio has been overweighted in only one area of cyclicals, namely
consumer cyclicals or retailers. Given strong wage growth and low unemployment
in the United States, retail sales, were, as expected, strong. The Portfolio has
been market weighted in technology stocks all year, with an emphasis on the
steady growth sectors of technology such as software. Hardware stocks have been
avoided. Basic cyclicals, such as capital goods and transportation, have been
underweighted throughout the year. Currently, 9.6 percent of the Portfolio is
invested in U.S. Treasury bonds.
Among the Portfolio's largest holdings are Equitable Companies, General
Electric, Viacom, Becton Dickinson & Co. and America Online.
Looking ahead, we are currently expecting the world economy to slow further as
1998 progresses. We also anticipate that unemployment in the United States is
likely to increase. Therefore, it is probable that we will increase our emphasis
on defensive growth stocks and reduce our exposure to consumer cyclicals.
INCOME BUILDER PORTFOLIO
For the six-month period ended June 30, 1998, the Income Builder Portfolio
posted a total return of 4.94 percent, compared to 17.70 percent for the S&P 500
Index and 10.64 percent for the Lipper Variable Annuity Equity Income Underlying
Funds Average.
The Income Builder Portfolio commenced operations on January 21, 1997. By June
30, 1998, assets had grown to more than $88.8 million. The target asset mix of
the Portfolio is 40 percent large-capitalization common stocks, 30 percent
convertible securities, 10 percent investment-grade fixed-income securities, 10
percent high-yield bonds and 10 percent Real Estate Investment Trusts (REITs).
On June 30, the large-capitalization segment was relatively fully invested, as
it has been since the Portfolio's inception. Portfolio transactions completed
during the first six months of 1998 included the sale of Sbarro and Peco Energy,
and the purchases of Consolidated Natural Gas and Houston
8
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES
LETTER TO THE SHAREHOLDERS JUNE 30, 1998, CONTINUED
Industries. Additionally, shares of Associates First Capital were received as a
spin-off from Ford Motor Co. and subsequently built into a full portfolio
position. At period-end, the Portfolio owned 62 common stocks throughout 32
industry groups.
The convertible portion of the Portfolio performed well during the first half of
1998, providing high current income with a reasonable level of equity
participation. The Portfolio's tilt toward yield did cause it to lag its peers
as the equity markets rallied, but it also provided significant downside support
in weaker periods. It is our experience that convertibles can perform well in
modestly increasing, stable or declining markets, but will lag during strong
periods.
The Portfolio's exposure to small-cap issues also negatively affected its
relative performance during the period. The convertible market is dominated by
small-cap companies, which trailed large caps for much of the first half of the
fiscal year. Going forward, we continue to focus on the convertibles of
small-and mid-cap companies, and the Portfolio should benefit meaningfully when
small caps resume their historical leadership role.
The REIT portion of the Portfolio posted negative returns during the period
under review. More recently, however, attractive dividend yields and compelling
valuations have generated significant interest in the group. Our exposure to
this sector is slightly below the 10 percent target, in expectation of two of
the Portfolio's real-estate-related investments converting to REIT status in the
near future. The Portfolio's REIT investments are split between REIT stocks and
REIT convertible securities.
The fixed-income portion of the Portfolio performed as expected, with fairly low
sensitivity to interest-rate fluctuations. This portion of the Portfolio is
structured to provide maximum current income with low exposure to
interest-rate-movements. This strategy helped reduce volatility in the Portfolio
during the fiscal year.
EUROPEAN GROWTH PORTFOLIO
For the six-month period ended June 30, 1998, the European Growth Portfolio
posted a total return of 26.24 percent versus 15.92 percent for the Morgan
Stanley Capital International World Index and 16.25 percent for the Lipper
Variable Annuity International Underlying Funds Average.
The Portfolio's largest single exposure is the United Kingdom (29 percent),
followed by France (16 percent), Germany (12 percent) and the Netherlands (11
percent). The Portfolio remains overweighted in Sweden, where stocks continue to
offer an attractive balance of growth and value,
9
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES
LETTER TO THE SHAREHOLDERS JUNE 30, 1998, CONTINUED
and underweighted in Switzerland. Holdings remain concentrated in blue-chip
stocks with exposure to the ongoing recovery in European economies. Among the
Portfolio's largest holdings are Philips Electronics NV, Accor SA, Alcatel
Alstholm, AXA -- UAP and Nestle SA.
The outlook for the European stock markets during the second half of 1998
remains broadly positive. Equity market valuations look expensive at current
levels, with the MSCI Europe Index trading on a price/earnings multiple of
around 26x 1998 and 25x 1999. However, on interest-rate-based valuation measures
the markets look more attractive and mutual fund liquidity should continue to
provide technical support. Growth in corporate earnings is underpinned by the
strength of the European domestic economies and by the benign (and improving)
inflationary outlook.
GLOBAL DIVIDEND GROWTH PORTFOLIO
For the six-month period ended June 30, 1998, the Global Dividend Growth
Portfolio posted a total return of 9.70 percent, compared to 15.92 percent for
the Morgan Stanley Capital International World Index (MSCI World Index) and
15.44 percent for the Lipper Variable Annuity Global Underlying Funds Average.
The Portfolio's underperformance relative to its benchmark index was due
primarily to its underweighting in the United States and an overweighting in
Japan. Additionally, the Portfolio's focus on value-oriented stocks, which
underperformed growth stocks during the period, also negatively impacted its
performance.
The Portfolio remains fully invested and well diversified, with 122 equity
issues spread across the world's 14 largest markets, as defined by market
capitalization. The United States, as the world's largest market, continues to
be the Portfolio's biggest target weighting, at approximately 34 percent of the
total net assets spread among 25 stocks. Recent U.S. additions to the Portfolio
include Albertson's, Aluminum Company of America, and Consolidated Natural Gas.
The Portfolio also remains exposed to Japan, the world's third largest market,
with a target allocation of approximately 18 percent of total net assets. In
conjunction with the recent reduction in assets from 23 percent, shares of
Mitsubishi Electric were liquidated. While there remains plenty of pessimism
surrounding Japanese stocks in general, there are still many world class
Japanese companies selling at very attractive prices, which we believe may offer
significant rewards for patient, disciplined long-term investors.
10
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES
LETTER TO THE SHAREHOLDERS JUNE 30, 1998, CONTINUED
The Portfolio's target allocation to Europe is 36.5 percent: the United Kingdom
(11 percent), France (6.5 percent), Germany (7 percent), Italy (4 percent), the
Netherlands (3 percent), Switzerland (2 percent), Spain (1.5 percent), and
Sweden (1.5 percent). We are very optimistic about the long-term growth
potential of high-quality European common stocks, many of which are more
attractively valued than their U.S. counterparts.
In the Pacific Rim, the Portfolio has exposure to Hong Kong (5 percent) and
Malaysia (1 percent). The dramatic decline recently witnessed in many Asian
currencies and equity markets has surpassed even the most pessimistic
expectations. The effects from this crisis seem largely contained within the
region but may eventually have wide-reaching implications for global growth,
inflation and interest rates. Because the Portfolio is exposed to only two
Southeast Asian countries, it has fared better than many other global equity
funds. Our exposure to the resource-oriented markets of Australia (2 percent)
and Canada (2.5 percent) offers risk reduction through diversification, as well
as growth potential in economically stable countries.
Looking ahead, we will remain sensitive to any factors that would necessitate
changes to the Portfolio's country allocation. We believe that the long-term
outlook for the economies and well-established large-capitalization
international companies is positive. Consequently, we remain confident, patient,
and fully invested.
PACIFIC GROWTH PORTFOLIO
For the six-month period ended June 30, 1998, the Pacific Growth Portfolio
posted a total return of -22.32 percent, compared to -6.60 percent for the MSCI
Pacific Free Index, -26.85 percent for the MSCI All Country Far East Free Index
excluding Japan and -18.81 percent for the Lipper Variable Annuity Pacific
Region Underlying Funds Average. The MSCI Pacific Free Index measures the
performance of markets in the Pacific Rim and is dominated by the performance of
Japanese equities because of the relative size of the Japanese market, which
currently makes up more than 70 percent to the Index. It is important to note
that the Fund's exposure to Japan is modest relative to this Index. The MSCI All
Country Far East Free Index excluding Japan measures the performance of the
smaller stock markets of the Pacific Basin, commonly referred to as the Tiger
economies, and contains no exposure to the markets of Japan and Australia. The
Lipper Pacific Region Funds Average tracks the performance of funds that invest
in equity securities whose primary trading markets or operations are
concentrated in the Pacific Basin or a single country within this region.
11
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES
LETTER TO THE SHAREHOLDERS JUNE 30, 1998, CONTINUED
The period under review was a difficult one for the Pacific region in general
and for the Portfolio in particular. The overall contribution to the Portfolio's
performance from stock selection was negative, inhibited by weak relative
returns from Indonesia, given the extremely difficult stock-picking environment
there, and from Japanese stocks. Stock selection in Hong Kong, Singapore, Korea
and Taiwan contributed positively to the Portfolio's relative performance,
despite general weakness in these markets. The Portfolio's geographical
allocation contributed positively to performance, particularly an overweightings
in Japan and Australia. However, performance was further hindered by the
Portfolio's underweighting of Korea, which outperformed the rest of the region
during the period. In the case of Korea, the Portfolio is still unable to meet
that country's Qualified Foreign Investor requirements and accordingly remains
limited in its local market exposure.
The Portfolio's large cash position made a positive contribution to its overall
performance, particularly in an environment of falling markets. Similarly
beneficial was our decision to hedge a portion of our Hong Kong dollar and
Singapore dollar exposures given the weakness experienced by these currencies
during the first half.
The outlook for the markets of the Tiger economies of Asia continues to be weak.
The economic environment is clearly suppressed by the inability of most
countries in the region to generate significant export recovery despite the
major boost to competitiveness given by the currency declines of the last twelve
months. The failure of Japanese authorities to stimulate a recovery, together
with the weakness of the yen, is clearly not contributing toward an upturn in
exports. Indeed, with trade within the Asian region typically accounting for
approximately half of exports, the very factor that insulated Asia from the
global recession of the early 1990s is now working to the detriment of the
region. Domestic demand remains weak across the area, with the only positive
factor being the decline in demand for imported goods now generating trade
account surpluses.
The euphoria that surrounded policy announcements in the early part of the year
has now dissipated with most investors recognizing the enormity of the
challenges that the region faces in implementing reforms. There is growing
evidence of a shift away from the IMF's approach to dealing with the region's
economic crisis. Faced with extremely tight liquidity and falling output, many
authorities are leaning toward monetary and fiscal stimuli in an attempt to ease
the corporate sector's financial burdens to stimulate growth. Whatever the
long-term success of the IMF program, the short-run consequences are likely to
include weaker currencies and upward pressure on inflation, which
12
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES
LETTER TO THE SHAREHOLDERS JUNE 30, 1998, CONTINUED
continues to be underreported by official CPI data. Confidence will also be
affected should there be an abandonment of IMF discipline in the economies
(Korea, Thailand and Indonesia) currently subject to the targets and conditions
of a IMF Portfolio Program.
Currency volatility is likely to remain high, particularly in the wake of
China's warnings last month of possible devaluation should downward pressure on
the yen continue. Timed to coincide with President Clinton's visit to Beijing,
China's comments appear to have represented an opportunistic political move.
However, growth in China, which is dominated by a strong disinflationary pulse
that resulted from an overaccumulation of inventories in the latter half of
1997, is clearly under pressure. Inflation data have turned negative, mirrored
by a sharp slowing in retail activity and manufacturing output. At the same
time, an ambitious program of state-sector reform currently under way in China
demands strong growth to absorb the inevitable job losses that will result. The
suspicion therefore remains that the authorities will consider employing the
external stimulus which devaluation invites.
The risk of such a devaluation, which would put immense pressure on the Hong
Kong dollar, accordingly remains, although the abandonment of the Hong Kong
dollar peg is not our central assumption. This notwithstanding, with policy
slippage increasingly apparent in the region as authorities lessen their resolve
to tackle the crisis with tight monetary and fiscal measures, the region's
currencies generally are forecast to remain soft. The portfolio's currency
hedges will therefore remain in place. Against this background, we continue to
overweight Australia and Japan at the expense of the Tiger markets.
Within the Tiger region, we continue to prefer Hong Kong to Southeast Asia.
Despite declines in residential property prices of 40 to 50 percent from the
peak of the cycle and a very weak retail sector, the corporate sector continues
to be in better health there than in much of the rest of the region. This is
primarily due to lower corporate debt, greater corporate transparency and
stronger company management. These factors, together with a price earnings ratio
close to single figures, lead us to be relatively more-positive. The portfolio
also has a relative preference for Singapore, again due to the strengths of the
corporate sector and to the resolve of that government in responding to economic
difficulties. Conversely, the underweighting of Malaysia remains intact, in the
face of concerns exacerbated by recent policy shifts. The sidelining of Deputy
Prime Minister Anwar in favor of Daim Zainuddin has coincided with looser
monetary conditions. It is still not clear that the Malaysian authorities have
the political resolve to tackle the problems of heavily leveraged, well-
connected corporate entrepreneurs without disadvantaging minority shareholders.
13
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES
LETTER TO THE SHAREHOLDERS JUNE 30, 1998, CONTINUED
Elsewhere in the region, in Indonesia the uncertainties created by a new
President and the almost unprecedented severity of the economic downturn there
lead us to continue to have minimal exposure to this market. In Korea, the
response to President Kim Dae Jung's initiatives has been disappointing on the
part of the labor unions, and clearly the reform process is going to be slow and
painful. As elsewhere in the region, the Korean portfolio is focused on
exporting companies, including Samsung Electronics and POSCO. The Portfolio has
a modest exposure to the Philippines, with an emphasis on utility companies. We
intend to increase the weighting in Taiwan while reducing slightly our relative
weighting on electronics given that sector's uncertain earnings outlook.
Recapitalization efforts in Thailand have been frustrated by the poor
performance of its bank stocks and a further escalation in nonperforming loans.
This will probably hinder the progress of the equity market, so we intend to
lighten our exposure there slightly.
With little improvement expected in Japan's domestic economy, politics and
policy choices there will be central to the performance of the market in the
coming months. Clear, decisive action to clear out bad banks, reform the tax
structure and accelerate the restructuring process would be taken quite
positively and enable the market to rally. This process has been complicated by
the shocking resignation of Prime Minister Hashimoto after a heavy protest vote
against his party in the recent Upper House Election. The new prime minister,
Mr. Obuchi, is very much old-style Japan, and his appointment has so far been
taken negatively by the market. It is still unclear how he plans to stabilize
the economy and the financial system. However, the opportunity to reform them
has clearly been given greater potency by this political moment. The Portfolio
therefore remains overweighted in Japan, given its potential to outperform the
Tiger markets over the next six months.
Economic activity in Australia is expected to slow further, in line with that of
its major trading partners. However, relative to the contraction currently being
experienced elsewhere in Asia, the Australian economy remains comparatively
robust. In addition, the prospect of further efforts by U.S. authorities to
stabilize the yen, and hence the intraregional currencies, may result in a
short-term reversal of capital flows into the region. In such circumstances
Australia would benefit, given its safe-haven status, and could cause the market
to trade higher in the short term. Although we feel that earnings expectations
are too optimistic in certain sectors, we nevertheless acknowledge that value is
emerging, particularly in cyclical stocks. Accordingly, as indicated, we remain
overweighted in the Australian portion of the Portfolio.
In view of our cautious approach to the equity markets in both the Pacific Basin
and Australia, we expect to operate cash levels in the Portfolios at higher
levels than usual in anticipation of buying
14
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES
LETTER TO THE SHAREHOLDERS JUNE 30, 1998, CONTINUED
opportunities to come. We believe that the equity markets have already
discounted much of the negative economic outlook for the region and are
convinced that longer-term investors should look to further weakness as an
opportunity to build exposure to the region. It is interesting that there has
recently been a significant increase in the number of corporate purchases of
assets in the region as multinational companies have looked for opportunities.
Such deals are typically taking place at prices above those indicated by current
stock market valuations and may be a guide to longer-term values once the
current economic slowdown, and attendant weak sentiment, bottom out.
S&P 500 INDEX PORTFOLIO
The S&P 500 Index Portfolio was introduced on May 18, 1998. This portfolio seeks
to provide investment results that correspond to the total returns of the S&P
500 Composite Stock Price Index (S&P 500).
Diversifying a portfolio among a variety of securities and industries has proven
to be an effective investment approach. The Portfolio mimics the holdings of the
S&P 500 Index and therefore is diversified among 500 stocks in America's leading
industries. In addition, since many of the stocks that make up the S&P 500 Index
pay dividends, the Portfolio will be well represented in dividend-paying
securities. Such securities can become an important capital-building component
of a diversified portfolio.
UTILITIES PORTFOLIO
For the six-month period ended June 30, 1998, the Utilities Portfolio posted a
total return of 10.34 percent, compared to 17.72 for the broad-based S&P 500
Index and 9.30 percent for the Lipper Variable Annuity Utilities Underlying
Funds Average.
During the first six months of 1998, Asian economic fears and uncertainties
resurfaced and contributed to extreme volatility in U.S. financial markets. The
primary beneficiaries of the turmoil in the Pacific region included Treasury
bonds, electric utilities and selective telecommunications equities as investors
sought these vehicles for their relative safety and quality. Investors
especially favored electric utility equities, due to their attractive
valuations, defensive characteristics, strengthening fundamentals and minimal
Asian exposure. This positive utility backdrop provided the underpinnings for
the favorable investment performance of the Portfolio during the first half of
1998.
15
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES
LETTER TO THE SHAREHOLDERS JUNE 30, 1998, CONTINUED
The resumption of Asian economic concerns enabled the Portfolio to close the
performance gap with the overall market during the second quarter, when
safe-haven investments became increasingly appealing.
With respect to electric utilities, performance was robust and the fundamentals
continue to prove positive as the industry progresses from a monopoly
environment to a competitive marketplace and investor concerns regarding
regulatory treatment ease further. The Portfolio continues to emphasize
companies characterized by low unit costs and good earnings growth opportunities
through sound diversification strategies. Within this sector, the trend of
mergers and acquisitions continued during the period, and providing additional
price appreciation for the group was the suggestion of foreign utility company
interest in selective U.S. electric assets.
Turning to the telecom sector, merger and acquisition fever was also evident
throughout the first six months of 1998 as investors propelled stock prices
upward in anticipation of further industry consolidation. Notably, SBC
Communications announced its acquisition of Ameritech in a $62 billion merger
proposal, thus creating a local carrier with a significant customer reach from
Ohio to California. Also, AT&T announced a groundbreaking merger with the cable
company Telecommunications Inc., which should provide a powerful foray into the
local telecom market. Both proposed mergers follow the convergence path that
many telecom companies have been taking since the passage of the
Telecommunication Act of 1996. The outlook for earnings growth within this
sector remains favorable especially given the high-growth prospects for such
newer industry applications as data/Internet. Telecom companies are capitalizing
on the strong growth of data by incorporating Internet access into their
existing suites of telecom services.
Foreign telecom companies within the Portfolio also performed strongly. This
segment of the Portfolio enhances its overall investment appeal and includes
very minimal Asian exposure, with a primary emphasis on Europe, as well as
Canada and Latin America. The foreign component, which remains geographically
dispersed, benefited from the strong revenue growth characteristics of
broadening worldwide telecom infrastructure as well as the potential
consolidation among telecom companies globally.
Performance of the natural gas sector, in contrast, lagged within the utility
sectors as natural gas prices weakened considerably, due to a drop in oil prices
and warm temperatures. However, given the fact that gas prices are extremely
sensitive to weather changes, a turn toward warmer-than-normal weather during
June increased demand for natural gas resulting in a modest rebound in gas
16
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES
LETTER TO THE SHAREHOLDERS JUNE 30, 1998, CONTINUED
commodity prices and stocks. The Portfolio continues to focus on high-quality
well-diversified companies within all areas of the natural gas sector. This is
due to the favorable long-term outlook of the natural gas sector, given the
increasing appeal worldwide as a clean-burning, environmentally friendly energy
source.
The Portfolio remained fully invested during the first half of 1998, reflecting
improved investor confidence, particularly within the electric sector, given its
appeal in a volatile financial marketplace. Widespread diversification remains a
key characteristic and strength of the Portfolio. To place this in perspective,
on June 30, 1998, 89 percent of the Portfolio's net assets was allocated to
utility and utility-related equities. Within the equity component, 51 percent
was allocated to electric utilities, 38 percent to telecommunications and 11
percent to natural gas. Enhancing overall diversification are foreign
securities, accounting for 8 percent of net assets, that are focused on the
growth area of global telecommunications. The Portfolio's high-quality
fixed-income portfolio accounted for 9 percent of net assets, with 2 percent
held in cash and cash equivalents.
During the second half of 1998, the Portfolio anticipates a modest decrease in
the electric utility component, in favor of selective telecommunication
opportunities, while keeping the Portfolio well positioned to benefit from the
current environment of low inflation and low interest rates. The Portfolio
remains uniquely balanced to capitalize on the expansive growth occurring across
all utility sectors and remains structured to meet its long-term objectives.
STRATEGIST PORTFOLIO
For the six-month period ended June 30, 1998, the Strategist Portfolio posted a
total return of 16.82 percent versus 17.70 percent for the S&P 500 Index, 4.17
percent for the Lehman Brothers Government/Corporate Bond Index and 9.73 for the
Lipper Variable Annuity Flexible Portfolio Underlying Funds Average.
The Portfolio's outperformance of its Lipper peer group and the Lehman Index was
a direct result of a decision to maintain its equity overweighting during last
year's disruptive currency devaluations. The Portfolio maintained a positive
stance on the equity market, because our analysis had indicated that valuations
could continue to climb as long as the Federal Reserve Board maintained a stable
monetary policy and inflation continued to be relatively subdued. While
ancillary events such as currency upheavals, financial risks in Japan and
Russia, and political risks in the United States cropped up to cause minor
corrections, our views focused on the underlying attractiveness of U.S.
valuations, with inflation at 1.3 percent and earnings growing between 6 and 8
percent. Therefore,
17
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES
LETTER TO THE SHAREHOLDERS JUNE 30, 1998, CONTINUED
we held our asset allocation target to 70 percent in equities, 20 percent in
bonds and 10 percent in cash. A secondary source of the Portfolio's
outperformance is its equity sector overweightings and an emphasis on the longer
end of the yield curve in the bond component.
The equity portfolio had been tilted toward large-capitalization consumer issues
since the fourth quarter of 1997 and thus benefited tremendously when retailers,
entertainment, and auto and personal computer stocks rallied in 1998. By
focusing on fewer names with greater earnings visibility, the Portfolio was
better able to take advantage of these trends. On June 30, 1998, the Portfolio's
largest equity holdings were America Online (internet), Gap (retail-specialty
apparel), Mediaone (media group), Dell Computer (computers), Chrysler (autos)
and Lucent Technologies (communications equipment).
The fixed-income component, while only 20 percent of the Portfolio, helped it
outperform the Lehman Index by maintaining a slightly longer maturity and
greater weighting in the corporate sector. The fixed-income component's average
maturity at midyear stood at 10 years, the average yield at 6.14 percent and the
duration at 5 1/2 years.
HIGH YIELD PORTFOLIO
For the six-month period ended June 30, 1998, the High Yield Portfolio posted a
total return of 4.18 percent, compared to 4.50 for the Lehman High Yield Index
and 4.58 percent for the Lipper Variable Annuity High Yield Underlying Funds
Average.
Following some market weakness in 1997's fourth quarter as a result of the
crisis in the emerging markets, the high-yield bond sector proceeded to
stabilize and recover during the first half of 1998, given the continued
strength in the U.S. economy. This strength has resulted in solid earnings
improvements on the part of many high-yield companies and has thus provided fuel
for the sharp equity market advance experienced during the period. Many
high-yield companies have taken advantage of higher equity valuations to raise
equity and strengthen their own balance sheets. The resulting credit quality
improvement has helped keep the high-yield market's performance strong relative
to that of many of the other fixed-income markets.
As the economy has continued to expand over the past few years, the Portfolio
has tended to concentrate on B-rated issues. In a growing economy one can
generally find undervalued upgrade candidates in this sector of the market that
provide attractive yields as well as appreciation potential. Given our
expectation for ongoing growth in the economy this year, we continue to feel
that many of
18
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES
LETTER TO THE SHAREHOLDERS JUNE 30, 1998, CONTINUED
these issues could be very attractive investments. However, in light of the
lower market yields available today and the potential for a modest correction in
the market, we have taken some defensive steps for the Portfolio over the past
year. These include increasing its allocation to the higher-quality end of the
market (BB-rated issues or higher). We feel that these holdings will better
protect shareholders during a potentially nervous market environment as well as
provide the liquidity and portfolio flexibility needed to take advantage of
higher, more attractive market yields in the future.
In addition, the Portfolio has sold many of its heavily cyclical positions and
is now focused mainly on more predictable, recession-resistant and growth
sectors of the economy such as food and beverages, health care,
telecommunications, and media and cable. In some of these sectors, such as media
and telecommunications, we expect to see continued consolidation, which should
bode well for many of the Portfolio's individual holdings. Finally, in keeping
with our present more defensive posture, we will continue to limit our exposure
to foreign emerging high-yield markets, particularly given the risk associated
with the ongoing crisis in many emerging markets.
The one- to two-year outlook for the high-yield market remains positive, with
our expectations for continued economic growth and a relatively favorable
interest-rate environment. We caution, however, that during this period the
possibility exists for another round of investor nervousness in reaction to
potential Federal Reserve Board moves or another disruption in emerging markets.
QUALITY INCOME PLUS PORTFOLIO
For the six-month period ended June 30, 1998, the Quality Income Plus Portfolio
posted a total return of 4.45 percent, compared to 3.93 percent for the Lehman
Aggregate Bond Index and 3.97 percent for the Lipper Variable Annuity Corporate
Debt A-Rated Underlying Funds Average.
Given the expectation that interest rates would eventually trend lower as fewer
U.S. Treasury instruments would be issued, and that the U.S. dollar would
continue to strengthen, thus dampening potential inflationary pressures from
above-target economic growth, the Portfolio pursued the following strategies.
First, it focused on providing a consistent return over time by increasing its
amount of long-duration, high-quality instruments and zero-coupon bonds issued
by the Federal National Mortgage Association (FNMA). This goal was accomplished
by selling short-maturity corporate notes and premium mortgage-backed
securities. Second, the Portfolio's allocation to U.S. government instruments
was increased to approximately 10 percent of assets, whereas yankee
19
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES
LETTER TO THE SHAREHOLDERS JUNE 30, 1998, CONTINUED
corporate notes and bonds were sold. By doing so, the Portfolio sought to
participate in any price appreciation afforded by such instruments as both
domestic and international investors sought refuge in the safety of U.S.
Treasury instruments.
Looking ahead, we believe that the strong technical underpinnings of the U.S.
government market, with its burgeoning surplus coupled with low inflation
expectations, should continue to make fixed-income investments particularly
attractive in the months ahead.
MONEY MARKET PORTFOLIO
As of June 30, 1998, the Money Market Portfolio had assets in excess of $350
million with an average life of 73 days. The Portfolio's annualized net
investment income for the most recent six-month fiscal period was 5.13 percent,
while its 30-day annualized yield for June was 5.13 percent.
On June 30, 1998, approximately 81 percent of the Portfolio was invested in
high-quality commercial paper, 10 percent in short-term bank notes and bankers'
acceptances issued by major and financially strong commercial banks, 8 percent
in certificates of deposit issued by such institutions and the remainder in
federal agency obligations.
At the end of this fiscal period, approximately 81 percent of the Portfolio's
assets were due to mature in less than four months. Therefore, the Portfolio is
well positioned for stability of value with a high degree of liquidity. We
continue to operate the Portfolio in a straightforward, conservative style
without structured notes or derivative products, which could fluctuate
excessively when interest rates change. In addition, the Portfolio has avoided
making any direct investments in Asian financial institutions, because of their
relatively slim levels of capital strength. As a result, the Portfolio's
exposure to credit-rating downgrades, which some money market funds have
experienced recently, has been limited.
At this time we anticipate a slight moderation in the pace of economic activity
during the remainder of 1998, with no major adverse surprises in the rate of
inflation. In view of the benign inflationary environment, along with the
uncertainty of international economic events, we anticipate that the Fed will
maintain the current federal funds target rate for the near term. As a result,
we do not expect the investment yields available to the Portfolio during the
months immediately ahead to differ dramatically from those that were available
during the fiscal period just ended.
As always, the Money Market Portfolio serves as a useful investment for
liquidity, preservation of capital and a yield that reflects prevailing money
market conditions.
20
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES
LETTER TO THE SHAREHOLDERS JUNE 30, 1998, CONTINUED
We appreciate your ongoing support of Morgan Stanley Dean Witter Variable Series
and look forward to continuing to serve your investment objectives.
Very truly yours,
[SIGNATURE]
CHARLES A. FIUMEFREDDO
CHAIRMAN OF THE BOARD
21
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES - MONEY MARKET
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
ANNUALIZED
PRINCIPAL YIELD
AMOUNT IN ON DATE OF MATURITY
THOUSANDS PURCHASE DATE VALUE
- ---------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
COMMERCIAL PAPER (80.9%)
AUTOMOTIVE - FINANCE (13.9%)
$ 13,310 American Honda Finance Corp....................... 5.55-5.58 % 07/16/98-07/30/98 $ 13,267,846
5,100 Chrysler Financial Corp........................... 5.59 07/01/98 5,100,000
9,950 Daimler-Benz North America Corp................... 5.60-5.61 07/23/98-08/11/98 9,900,988
6,000 Ford Motor Credit Co.............................. 5.56 07/21/98 5,981,633
14,600 General Motors Acceptance Corp.................... 5.58-5.63 08/21/98-11/19/98 14,413,995
------------
48,664,462
------------
BANK HOLDING COMPANIES (12.6%)
11,500 Bankers Trust Corp................................ 5.56-5.76 08/24/98-01/11/99 11,287,111
14,000 Morgan (J.P.) & Co. Inc........................... 5.57-5.63 07/10/98-12/16/98 13,753,563
5,000 Mellon Financial Co............................... 5.60 07/27/98 4,980,067
5,000 NationsBank Corp.................................. 5.61 08/13/98 4,967,033
4,130 Norwest Corp...................................... 5.60 07/31/98 4,110,830
5,000 PNC Funding Corp.................................. 5.62 08/26/98 4,957,067
------------
44,055,671
------------
BANKS - COMMERCIAL (13.7%)
10,000 Abbey National North America Corp................. 5.65-5.67 10/29/98-11/04/98 9,812,091
5,000 Barclays U.S. Funding Corp........................ 5.56 07/07/98 4,995,492
4,000 Rabobank USA Financial Corp....................... 5.62 10/23/98 3,930,840
16,000 Societe Generale N.A., Inc........................ 5.57-5.58 07/09/98-10/09/98 15,865,997
5,000 Toronto-Dominion Holdings USA Inc................. 5.63 11/10/98 4,899,717
8,650 UBS Finance (DE) Inc.............................. 5.58-5.66 08/10/98-11/20/98 8,549,078
------------
48,053,215
------------
BROKERAGE (2.8%)
10,045 Goldman Sachs Group L.P........................... 5.59 08/18/98-09/03/98 9,958,938
------------
ENERGY (1.4%)
4,900 Texaco Inc........................................ 5.55 07/23/98 4,883,650
------------
FINANCE - COMMERCIAL (6.4%)
7,240 CIT Group Holdings, Inc........................... 5.60-5.61 09/24/98-10/09/98 7,138,847
15,745 International Lease Finance Corp.................. 5.61-5.67 09/15/98-01/13/99 15,413,084
------------
22,551,931
------------
FINANCE - CONSUMER (13.3%)
10,475 American General Finance Corp..................... 5.59-5.60 08/07/98-08/31/98 10,399,440
10,840 Avco Financial Services Inc....................... 5.57-5.62 08/04/98-09/17/98 10,751,366
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
22
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES - MONEY MARKET
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
ANNUALIZED
PRINCIPAL YIELD
AMOUNT IN ON DATE OF MATURITY
THOUSANDS PURCHASE DATE VALUE
- ---------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 11,000 Beneficial Corp................................... 5.58-5.59 % 09/01/98-09/10/98 $ 10,887,306
9,700 Commercial Credit Co.............................. 5.58 07/08/98-09/02/98 9,649,314
4,725 Household Finance Corp............................ 5.58 08/14/98 4,693,353
------------
46,380,779
------------
FINANCE - CORPORATE (1.3%)
4,575 Ciesco, L.P....................................... 5.60 09/25/98 4,514,890
------------
FINANCE - DIVERSIFIED (5.5%)
4,970 Associates Corp. of North America................. 5.59 09/11/98 4,915,231
14,430 General Electric Capital Corp..................... 5.59-5.68 08/20/98-02/19/99 14,204,588
------------
19,119,819
------------
FINANCE - EQUIPMENT (3.1%)
10,780 Deere (John) Capital Corp......................... 5.56-5.60 07/02/98-12/08/98 10,692,870
------------
INDUSTRIALS (0.6%)
2,140 Deere & Co........................................ 5.58 09/04/98 2,118,671
------------
INSURANCE (0.8%)
3,010 American General Corp............................. 5.60 10/02/98 2,967,233
------------
OFFICE EQUIPMENT (1.1%)
3,920 IBM Credit Corp................................... 5.61 10/21/98 3,853,412
------------
RETAIL (4.4%)
15,540 Sears Roebuck Acceptance Corp..................... 5.56-5.57 07/15/98-07/28/98 15,494,702
------------
TOTAL COMMERCIAL PAPER
(AMORTIZED COST $283,310,243)................................................... 283,310,243
------------
SHORT-TERM BANK NOTES (9.0%)
10,500 First Union National Bank......................... 5.65-5.66 10/28/98-01/20/99 10,500,000
14,900 La Salle National Bank............................ 5.57-5.58 07/13/98-10/05/98 14,900,000
6,000 NationsBank, N.A.................................. 5.58 08/27/98 6,000,000
------------
TOTAL SHORT-TERM BANK NOTES
(AMORTIZED COST $31,400,000).................................................... 31,400,000
------------
CERTIFICATES OF DEPOSIT (8.0%)
5,000 Chase Manhattan Bank (USA)........................ 5.62 07/06/98 5,000,000
9,500 Fleet National Bank............................... 5.58-5.61 08/19/98-09/28/98 9,500,000
5,000 Mellon Bank, N.A.................................. 5.68 01/04/99 5,000,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
23
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES - MONEY MARKET
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
ANNUALIZED
PRINCIPAL YIELD
AMOUNT IN ON DATE OF MATURITY
THOUSANDS PURCHASE DATE VALUE
- ---------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 8,500 U.S. Bank N.A..................................... 5.60 % 10/19/98-10/26/98 $ 8,500,000
------------
TOTAL CERTIFICATES OF DEPOSIT
(AMORTIZED COST $28,000,000).................................................... 28,000,000
------------
BANKERS' ACCEPTANCES (1.4%)
5,000 Corestates Bank, N.A. (AMORTIZED COST
$4,972,500)..................................... 5.58 08/06/98 4,972,500
------------
U.S. GOVERNMENT AGENCY (1.3%)
4,600 Federal National Mortgage Assoc. (AMORTIZED COST
$4,542,309)..................................... 5.47-5.61 07/14/98-03/05/99 4,542,309
------------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(AMORTIZED COST $352,225,052) (a)......................................................... 100.6 % 352,225,052
LIABILITIES IN EXCESS OF CASH AND OTHER ASSETS............................................ (0.6) (2,154,598)
------ -------------
NET ASSETS................................................................................ 100.0 % $ 350,070,454
------ -------------
------ -------------
</TABLE>
- ---------------------
(a) Cost is the same for federal income tax purposes.
SEE NOTES TO FINANCIAL STATEMENTS
24
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES - QUALITY INCOME PLUS
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- --------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
CORPORATE BONDS (66.3%)
BANKS AND BANK HOLDING COMPANIES (10.2%)
$ 5,000 Banc One Corp.......................................... 8.00 % 04/29/27 $ 5,823,450
5,000 Banco Central Hispanoamericano (Cayman Islands)........ 7.50 06/15/05 5,288,350
5,000 First Bank N.A......................................... 8.35 11/01/04 5,567,500
5,000 First Bank System...................................... 7.625 05/01/05 5,366,200
5,000 Fleet Financial Group, Inc............................. 6.875 01/15/28 5,111,100
3,000 Mellon Bank N.A........................................ 7.625 09/15/07 3,272,970
5,000 NationsBank Corp....................................... 7.80 09/15/16 5,640,350
3,000 Old Kent Financial Corp................................ 6.625 11/15/05 3,044,580
2,000 Santander Financial Issuances (Cayman Islands)......... 7.75 05/15/05 2,134,480
5,000 State Street Boston Corp............................... 5.95 09/15/03 4,993,400
2,000 Swiss Bank Corp........................................ 7.375 07/15/15 2,176,200
2,000 Wachovia Corp.......................................... 6.375 04/15/03 2,025,940
------------
50,444,520
------------
BEVERAGES (1.5%)
2,000 Coca-Cola Enterprises Inc.............................. 8.50 02/01/22 2,445,200
5,000 Coca-Cola Enterprises Inc.............................. 6.75 01/15/38 5,054,550
------------
7,499,750
------------
BROKERAGE (3.2%)
2,000 Bear Stearns Companies, Inc............................ 8.75 03/15/04 2,237,600
5,000 Donaldson Lufkin & Jenrette, Inc....................... 6.875 11/01/05 5,131,250
2,000 Lehman Brothers Holdings, Inc.......................... 8.75 03/15/05 2,250,960
5,000 Lehman Brothers Holdings, Inc.......................... 8.50 08/01/15 5,861,150
------------
15,480,960
------------
CONSUMER PRODUCTS (4.1%)
4,000 Becton Dickinson & Co.+................................ 8.70 01/15/25 4,571,080
3,000 Carnival Corp.......................................... 6.65 01/15/28 2,968,890
5,000 CPC International, Inc................................. 7.25 12/15/26 5,461,700
1,000 Maytag Corp............................................ 9.75 05/15/02 1,122,510
5,000 Philip Morris Companies, Inc........................... 7.125 10/01/04 5,154,350
1,000 Sony Corp. (Japan)..................................... 6.125 03/04/03 1,005,030
------------
20,283,560
------------
DEFENSE (1.8%)
3,000 Lockheed Martin Corp.+................................. 7.70 06/15/08 3,317,520
5,000 Lockheed Martin Corp................................... 7.20 05/01/36 5,419,000
------------
8,736,520
------------
ELECTRONICS - SEMICONDUCTORS/COMPONENTS (1.0%)
5,000 Applied Materials, Inc................................. 7.125 10/15/17 5,074,900
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
25
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES - QUALITY INCOME PLUS
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- --------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
ENERGY (3.6%)
$ 2,000 Anadarko Petroleum Corp................................ 7.73 % 09/15/96 $ 2,212,500
5,000 Dresser Industries, Inc................................ 7.60 08/15/96 5,703,100
320 Mobil Corp............................................. 9.17 02/29/00 330,876
2,000 Petroliam Nasional Berhad - 144A* (Malaysia)........... 7.75 08/15/15 1,616,320
3,000 Phillips Petroleum Co.................................. 7.125 03/15/28 3,034,530
1,000 Texaco Capital, Inc.................................... 9.75 03/15/20 1,380,770
3,000 Transocean Offshore Inc................................ 8.00 04/15/27 3,463,920
------------
17,742,016
------------
FINANCIAL SERVICES (2.7%)
3,000 Ford Capital BV........................................ 9.50 06/01/10 3,794,310
5,000 Ford Motor Credit Corp................................. 7.75 03/15/05 5,409,400
4,000 Norwest Financial Inc.................................. 7.875 02/15/02 4,228,600
------------
13,432,310
------------
HEALTHCARE - DIVERSIFIED (0.2%)
1,000 Kaiser Foundation Health Plan, Inc..................... 9.55 07/15/05 1,193,990
------------
INDUSTRIALS (9.8%)
5,000 Aluminum Co. of America................................ 6.75 01/15/28 5,109,250
5,000 Barrick Gold Corp.+.................................... 7.50 05/01/07 5,312,400
5,000 Boeing Co.............................................. 7.95 08/15/24 5,932,750
4,644 Burlington Northern Santa Fe Corp...................... 7.33 06/23/10 4,869,145
4,731 Burlington Northern Santa Fe Corp...................... 7.97 01/01/15 5,318,929
3,000 Caterpillar, Inc....................................... 9.375 08/15/11 3,813,450
5,000 Honeywell, Inc......................................... 6.625 06/15/28 5,061,200
5,000 Kerr McGee Corp........................................ 7.125 10/15/27 5,120,150
5,000 PanAmSat Corp. - 144A*................................. 6.00 01/15/03 4,956,500
3,000 Tyco International Group S.A. (Luxembourg)............. 7.00 06/15/28 3,025,710
------------
48,519,484
------------
INSURANCE (5.0%)
2,000 CNA Financial Corp..................................... 6.50 04/15/05 2,005,680
2,000 Equitable Companies, Inc............................... 7.00 04/01/28 2,055,420
3,000 Jackson National Life Insurance Co. - 144A*............ 8.15 03/15/27 3,452,460
5,000 Liberty Mutual Insurance Co. - 144A*................... 7.875 10/15/26 5,608,050
5,000 Lumbermens Mutual Casualty - 144A*..................... 9.15 07/01/26 6,047,400
5,000 Nationwide Financial Services, Inc..................... 8.00 03/01/27 5,474,450
------------
24,643,460
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
26
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES - QUALITY INCOME PLUS
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- --------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
PHARMACEUTICALS (1.3%)
$ 5,000 Johnson & Johnson...................................... 8.72 % 11/01/24 $ 5,768,950
665 Marion Merrell Corp.................................... 9.11 08/01/05 732,806
------------
6,501,756
------------
PUBLISHING (0.6%)
3,000 Times Mirror Co........................................ 6.61 09/15/27 3,100,830
------------
RESTAURANTS (0.3%)
1,000 McDonald's Corp........................................ 8.875 04/01/11 1,232,690
------------
RETAIL (3.0%)
5,000 May Department Stores Co............................... 6.875 11/01/05 5,178,500
5,000 May Department Stores Co............................... 7.625 08/15/13 5,545,500
1,000 Penney (J.C.) Co., Inc................................. 9.75 06/15/21 1,118,080
2,932 Wal-Mart Stores, Inc................................... 7.49 06/21/07 3,148,796
------------
14,990,876
------------
TELECOMMUNICATIONS (6.7%)
3,500 Aliant Communications, Inc............................. 6.75 04/01/28 3,576,265
5,000 AT&T Corp.............................................. 8.35 01/15/25 5,546,000
2,000 Cable & Wireless PLC (United Kingdom).................. 6.625 03/06/05 2,017,660
2,000 Frontier Corp.......................................... 7.25 05/15/04 2,092,420
2,000 GTE Corp............................................... 6.84 04/15/18 2,008,120
5,000 GTE Corp............................................... 7.90 02/01/27 5,427,000
2,000 GTE Corp............................................... 6.94 04/15/28 2,014,560
2,000 Illinois Bell Telephone Co............................. 7.25 03/15/24 2,058,680
5,000 Lucent Technologies Inc................................ 7.25 07/15/06 5,351,150
3,000 U.S. West Cap Funding, Inc............................. 6.875 07/15/28 3,008,910
------------
33,100,765
------------
TRANSPORTATION (1.0%)
4,952 America West Airlines.................................. 6.85 07/02/09 5,020,751
------------
UTILITIES - ELECTRIC (10.3%)
1,000 Chugach Electric Co.................................... 9.14 03/15/22 1,126,680
5,000 Florida Power & Light Co............................... 7.05 12/01/26 5,066,450
2,000 Northern States Power Co............................... 6.50 03/01/28 2,004,740
3,000 Oglethorpe Power Co.................................... 6.974 06/30/11 3,082,170
3,500 Oklahoma Gas & Electric Co............................. 6.50 07/15/17 3,596,740
5,000 Pennsylvania Power & Light Co.......................... 7.70 10/01/09 5,576,700
5,000 Potomac Electric Power Co.............................. 7.25 07/01/23 5,230,900
4,000 Public Service Electric & Gas.......................... 7.375 03/01/14 4,167,520
4,000 Puget Sound Energy Co.................................. 7.02 12/01/27 4,146,560
5,000 South Carolina Electric & Gas Co....................... 7.625 06/01/23 5,285,400
3,000 Southern California Edison Co.......................... 7.25 03/01/26 3,060,720
1,000 Tampa Electric Co...................................... 7.75 11/01/22 1,110,680
2,000 United Utilities PLC (United Kingdom).................. 6.45 04/01/08 1,991,940
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
27
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES - QUALITY INCOME PLUS
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- --------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 5,000 Virginia Electric Power Co............................. 7.25 % 02/01/23 $ 5,204,700
------------
50,651,900
------------
TOTAL CORPORATE BONDS
(IDENTIFIED COST $308,616,421)......................................................... 327,651,038
------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS (29.9%)
15 Federal Home Loan Mortgage Corp........................ 11.50 06/01/11-05/01/19 17,426
4,842 Federal Home Loan Mortgage Corp. PC Gold............... 6.00 10/01/23-11/01/27 4,719,396
2,103 Federal Home Loan Mortgage Corp. PC Gold............... 8.50 01/01/22-12/01/24 2,196,509
25,000 Federal National Mortgage Assoc........................ 0.00 10/09/19 7,166,000
20,772 Federal National Mortgage Assoc........................ 6.00 10/01/27-04/01/28 20,220,521
828 Federal National Mortgage Assoc........................ 6.50 02/01/26-04/01/28 880,397
191 Federal National Mortgage Assoc........................ 7.00 10/01/27 193,415
355 Federal National Mortgage Assoc........................ 7.50 05/01/27 364,055
985 Federal National Mortgage Assoc........................ 9.00 06/01/21-02/01/25 1,040,246
9,030 Government National Mortgage Assoc..................... 6.00 03/15/28-07/21/28 4,917,335
4,000 Government National Mortgage Assoc. (a)................ 6.00 07/15/28-07/21/28 3,907,500
22,868 Government National Mortgage Assoc..................... 6.50 04/15/26-07/01/28 13,842,278
9,000 Government National Mortgage Assoc. (a)................ 6.50 07/01/28 8,977,500
13,013 Government National Mortgage Assoc..................... 7.00 09/15/27-04/15/28 13,216,303
17,898 Government National Mortgage Assoc..................... 7.50 04/15/24-09/15/27 18,389,849
14,784 Government National Mortgage Assoc..................... 8.00 10/15/24-09/15/26 15,315,364
3,656 Government National Mortgage Assoc..................... 8.50 01/15/17-03/01/28 3,854,886
2,346 Government National Mortgage Assoc..................... 9.00 07/15/24-12/15/24 2,510,188
168 Government National Mortgage Assoc..................... 10.00 05/15/16-04/15/19 183,434
5,000 Tennessee Valley Authority............................. 7.85 06/15/44 5,370,650
8,000 U.S. Treasury Bond..................................... 6.375 08/15/27 8,777,600
3,000 U.S. Treasury Note..................................... 6.50 05/31/02 3,098,370
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
28
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES - QUALITY INCOME PLUS
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- --------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 8,000 U.S. Treasury Note..................................... 7.00 % 07/15/06 $ 8,733,280
------------
TOTAL U.S. GOVERNMENT & AGENCY OBLIGATIONS
(IDENTIFIED COST $145,148,832)......................................................... 147,892,502
------------
CANADIAN GOVERNMENT OBLIGATIONS (2.5%)
5,000 Hydro-Quebec........................................... 9.50 11/15/30 6,988,250
5,000 Province of New Brunswick.............................. 7.625 06/29/04 5,404,600
------------
TOTAL CANADIAN GOVERNMENT OBLIGATIONS
(IDENTIFIED COST $10,380,050).......................................................... 12,392,850
------------
SHORT-TERM INVESTMENT (0.6%)
REPURCHASE AGREEMENT
2,951 The Bank of New York
(dated 06/30/98; proceeds $2,951,814) (b) (IDENTIFIED
COST $2,951,363)..................................... 5.50 07/01/98 2,951,363
------------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(IDENTIFIED COST $467,096,666) (c)........................................................ 99.3 % 490,887,753
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES............................................ 0.7 3,249,967
------ -------------
NET ASSETS................................................................................ 100.0 % $ 494,137,720
------ -------------
------ -------------
</TABLE>
- ---------------------
* Resale is restricted to qualified institutional investors.
+ Securities segregated as collateral for securities purchased on a forward
commitment basis.
PC Participation Certificate.
(a) Securities purchased on a forward commitment basis with an approximate
principal amount. The actual principal amount will be determined upon
settlement.
(b) Collateralized by $1,347,609 U.S. Treasury Note 5.875% due 09/30/02 valued
at $1,382,875 and $1,584,568 U.S. Treasury Note 6.125% due 09/30/00 valued
at $1,627,516.
(c) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $24,582,079 and the
aggregate gross unrealized depreciation is $790,992, resulting in net
unrealized appreciation of $23,791,087.
SEE NOTES TO FINANCIAL STATEMENTS
29
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES - HIGH YIELD
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
CORPORATE BONDS (97.0%)
AUTOMOTIVE (3.0%)
$ 4,874 Speedy Muffler King, Inc..................................................... 10.875% 10/01/06 $ 4,362,230
8,000 Toyota Motor Credit Corp..................................................... 15.00 09/25/98 8,169,760
------------
12,531,990
------------
BROADCAST MEDIA (5.4%)
257 Brill Media Co., LLC......................................................... 7.50 12/15/07 --
9,000 Brill Media Co., LLC (Series B).............................................. 7.50 12/15/07 8,460,026
4,500 Mentus Media Corp. - 144A* (Units)(++)....................................... 12.00+ 02/01/03 4,747,500
4,000 Source Media, Inc............................................................ 12.00 11/01/04 4,090,000
2,005 Spanish Broadcasting System, Inc............................................. 12.50 06/15/02 2,285,700
3,000 Tri-State Outdoor Media Group, Inc. - 144A*.................................. 11.00 05/15/08 3,045,000
------------
22,628,226
------------
BUSINESS SERVICES (4.0%)
4,500 Anacomp, Inc. (Series B)..................................................... 10.875 04/01/04 4,736,250
5,385 Comforce Corp................................................................ 15.00+ 12/01/09 5,654,686
3,250 Comforce Operating, Inc. (Series B).......................................... 12.00 12/01/07 3,510,000
3,000 Xerox Credit Corp............................................................ 15.00 10/07/98 3,072,600
------------
16,973,536
------------
CABLE/CELLULAR (11.4%)
2,000 American Cellular Corp. - 144A*.............................................. 10.50 05/15/08 1,995,000
3,750 Australis Holdings Ltd. (Australia).......................................... 15.00++ 11/01/02 637,500
9,000 Clearnet Communications Inc. (Canada)........................................ 14.75++ 12/15/05 7,560,000
5,000 CTI Holdings S.A. - 144A* (Argentina)........................................ 11.50++ 04/15/08 2,775,000
3,000 FrontierVision Operating Partners, L.P....................................... 11.00 10/15/06 3,330,000
2,000 James Cable Partners L.P. (Series B)......................................... 10.75 08/15/04 2,130,000
10,000 McCaw International Ltd...................................................... 13.00++ 04/15/07 6,550,000
7,000 Nextel Communications, Inc................................................... 10.65++ 09/15/07 4,742,500
15,340 Price Communications Cellular Holdings (Series B)............................ 13.50++ 08/01/07 10,738,000
4,500 Price Communications Wireless, Inc. - 144A*.................................. 9.125 12/15/06 4,500,000
5,000 Triton Communications LLC - 144A*............................................ 11.00++ 05/01/08 2,812,500
------------
47,770,500
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
30
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES - HIGH YIELD
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
COMPUTER EQUIPMENT (1.0%)
$ 4,000 IBM Credit Corp.............................................................. 15.00 % 02/02/99 $ 4,212,400
------------
CONSUMER PRODUCTS (1.6%)
4,500 IHF Holdings Inc. (Series B)................................................. 15.00 11/15/04 3,555,000
3,000 J.B. Williams Holdings, Inc.................................................. 12.00 03/01/04 3,150,000
------------
6,705,000
------------
ELECTRICAL & ALARM SYSTEMS (1.0%)
4,500 Mosler, Inc.................................................................. 11.00 04/15/03 4,140,000
------------
ENTERTAINMENT/GAMING & LODGING (13.0%)
10,000 Aladdin Gaming/Capital Corp. - 144A* (Units)(++)............................. 13.50++ 03/01/10 4,700,000
2,000 Argosy Gaming Co............................................................. 13.25 06/01/04 2,240,000
4,500 Bluegreen Corp. - 144A*...................................................... 10.50 04/01/08 4,455,000
3,500 El Comandante................................................................ 11.75 12/15/03 3,535,000
9,000 Epic Resorts LLC - 144A* (Units)(++)......................................... 13.00 06/15/05 9,090,000
4,000 Fitzgerald Gaming Corp. - 144A*.............................................. 12.25 12/15/04 3,940,000
5,325 Lady Luck Gaming Finance Corp................................................ 11.875 03/01/01 5,431,500
7,500 Motels of America, Inc. (Series B)........................................... 12.00 04/15/04 7,312,500
3,000 Players International, Inc................................................... 10.875 04/15/05 3,262,500
6,000 Premier Cruises Ltd. - 144A*................................................. 11.00 03/15/08 4,080,000
6,357 Resort At Summerlin - 144A*.................................................. 13.00+ 12/15/07 6,643,585
------------
54,690,085
------------
FINANCE (4.1%)
5,000 Commercial Credit Co......................................................... 15.00 07/10/98 5,005,050
4,000 General Electric Capital Corp................................................ 15.00 01/21/99 4,203,800
8,000 Household Finance Corp....................................................... 15.00 09/25/98 8,164,960
------------
17,373,810
------------
FOODS & BEVERAGES (7.6%)
5,330 Envirodyne Industries, Inc................................................... 10.25 12/01/01 5,343,325
2,500 Fleming Companies, Inc....................................................... 10.625 12/15/01 2,662,500
2,000 General Mills, Inc........................................................... 15.00 01/29/99 2,108,180
4,000 Iowa Select Farm L.P. - 144A*................................................ 10.75 12/01/05 4,020,000
10,250 PepsiCo, Inc................................................................. 15.00 08/06/98 10,339,483
17,750 Specialty Foods Acquisition Corp. (Series B)................................. 13.00++ 08/15/05 7,588,125
------------
32,061,613
------------
HEALTHCARE (1.6%)
3,000 Unilab Corp.................................................................. 11.00 04/01/06 3,232,500
6,000 Unison Healthcare Corp. - 144A* (a).......................................... 12.25 11/01/06 3,315,000
------------
6,547,500
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
31
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES - HIGH YIELD
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MANUFACTURING (2.1%)
$ 2,000 Berry Plastics Corp.......................................................... 12.25 % 04/15/04 $ 2,175,000
5,000 International Semi-Tech Microelectronics, Inc. (Canada)...................... 11.50++ 08/15/03 1,550,000
2,000 International Wire Group, Inc................................................ 11.75 06/01/05 2,200,000
3,000 Outsourcing Services Group, Inc. - 144A*..................................... 10.875 03/01/06 3,075,000
------------
9,000,000
------------
MANUFACTURING - DIVERSIFIED (3.8%)
3,000 Interlake Corp............................................................... 12.00 11/15/01 3,270,000
3,000 J.B. Poindexter & Co., Inc................................................... 12.50 05/15/04 2,985,000
5,000 Jordan Industries, Inc. (Series B)........................................... 10.375 08/01/07 5,125,000
7,200 Jordan Industries, Inc. (Series B)........................................... 11.75++ 04/01/09 4,644,000
------------
16,024,000
------------
METALS & MINING (2.3%)
4,500 Centaur Mining & Exploration Ltd. - 144A* (Australia)........................ 11.00 12/01/07 4,590,000
5,000 Murrin Murrin Holdings Property Ltd. (Australia)............................. 9.375 08/31/07 4,950,000
------------
9,540,000
------------
OIL & GAS (2.2%)
5,000 Gothic Energy Corp. - 144A* (Units)(++)...................................... 14.125++ 05/01/06 2,850,000
4,000 Key Energy Group, Inc. (Conv.)............................................... 5.00 09/15/04 3,160,000
3,000 Transamerican Refining Corp. - 144A*......................................... 16.00 06/30/03 3,195,000
------------
9,205,000
------------
PUBLISHING (0.7%)
2,975 United States Banknote Corp.................................................. 10.375 06/01/02 3,004,750
------------
RESTAURANTS (3.5%)
20,351 American Restaurant Group Holdings, Inc. - 144A*............................. 0.00 12/15/05 4,935,190
4,000 Carrols Corp................................................................. 11.50 08/15/03 4,230,000
5,000 FRD Acquisition Corp. (Series B)............................................. 12.50 07/15/04 5,487,500
------------
14,652,690
------------
RETAIL (0.7%)
3,000 Hills Stores Co. (Series B).................................................. 12.50 07/01/03 2,992,500
------------
RETAIL - FOOD CHAINS (0.7%)
2,875 Pantry, Inc.................................................................. 10.25 10/15/07 2,961,250
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
32
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES - HIGH YIELD
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
TELECOMMUNICATION EQUIPMENT (3.4%)
$ 6,000 FWT, Inc..................................................................... 9.875% 11/15/07 $ 5,580,000
7,000 SBA Communications Corp. - 144A*............................................. 12.00++ 03/01/08 4,410,000
8,000 Spectrasite Holdings, Inc. - 144A*........................................... 12.00++ 07/15/08 4,470,000
------------
14,460,000
------------
TELECOMMUNICATIONS (16.4%)
7,000 21st Century Telecom Group, Inc.............................................. 12.25++ 02/15/08 3,955,000
2,500 Advanced Radio Telecommunication (Units)(++)................................. 14.00 02/15/07 2,662,500
6,000 Birch Telecom Inc. - 144A* (Units)(++)....................................... 14.00 06/15/08 6,007,500
4,000 Covad Communication Group, Inc. - 144A*...................................... 13.50++ 03/15/08 2,075,000
5,000 e. Spire Communications, Inc................................................. 13.75 07/15/07 5,712,500
2,000 Esprit Telecom Group PLC (United Kingdom).................................... 11.50 12/15/07 2,057,500
5,000 Facilicom International, Inc................................................. 10.50 01/15/08 4,900,000
10,000 Firstworld Communications, Inc. - 144A* (Units)(++).......................... 13.00++ 04/15/08 4,400,000
3,000 GST Equipment Funding, Inc................................................... 13.25 05/01/07 3,450,000
4,000 Hyperion Telecommunication, Inc. (Series B).................................. 13.00++ 04/15/03 2,980,000
2,000 Hyperion Telecommunication, Inc. (Series B).................................. 12.25 09/01/04 2,155,000
28,500 In-Flight Phone Corp. (Series B) (b)......................................... 14.00++ 05/15/02 3,990,000
4,000 Onepoint Communications Corp. - 144A* (Units)(++)............................ 14.50 06/01/08 3,760,000
4,000 Optel, Inc. -144A*........................................................... 11.50 07/01/08 4,000,000
2,000 Peoples Telephone Co., Inc................................................... 12.25 07/15/02 2,110,000
2,500 Primus Telecommunications Group, Inc. - 144A*................................ 9.875 05/15/08 2,450,000
4,000 Startec Global Communications Corp. - 144A* (Units)(++)...................... 12.00 05/15/08 3,890,000
4,000 Transtel Pass-Thru Trust - 144A*............................................. 12.50 11/01/07 3,770,000
2,500 USA Mobile Communications Holdings, Inc...................................... 14.00 11/01/04 2,762,500
2,250 Winstar Communications, Inc.................................................. 14.00++ 10/15/05 1,884,375
------------
68,971,875
------------
TEXTILES (0.4%)
4,000 U.S. Leather, Inc. (a)....................................................... 10.25 07/31/03 1,780,000
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
33
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES - HIGH YIELD
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
TRANSPORTATION (1.1%)
$ 5,000 Alpha Shipping PLC - 144A* (United Kingdom).................................. 9.50 % 02/15/08 $ 4,712,500
------------
WIRELESS COMMUNICATION (6.0%)
4,500 American Mobile Satellite Corp. - 144A* (Units)(++).......................... 12.25 04/01/08 4,230,000
4,000 Echostar DBS Corp............................................................ 12.50 07/01/02 4,490,000
5,000 Globalstar L.P./Capital Corp................................................. 10.75 11/01/04 4,775,000
3,659 Orbcomm Global LP/Capital Corp. (Series B)................................... 14.00 08/15/04 4,134,670
4,000 Star Choice Communications, Inc. (Canada).................................... 13.00 12/15/05 4,080,000
5,000 TCI Satellite Entertainment, Inc............................................. 12.25 02/15/07 3,387,500
------------
25,097,170
------------
TOTAL CORPORATE BONDS
(IDENTIFIED COST $426,335,795).................................................................... 408,036,395
------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES
- -----------
<C> <S> <C>
COMMON STOCKS (c) (1.9%)
AUTOMOTIVE (0.0%)
87 Norther Holdings Industrial Corp. * (d).............................................. --
------------
CABLE/CELLULAR (0.3%)
67,187 Price Communications Corp............................................................ 1,028,878
------------
ENTERTAINMENT/GAMING & LODGING (0.0%)
2,000 Motels of America, Inc. - 144A*...................................................... 110,072
71,890 Vagabond Inns, Inc. (Class D) (b).................................................... --
------------
110,072
------------
FOODS & BEVERAGES (0.0%)
120,000 Specialty Foods Acquisition Corp. - 144A*............................................ 120,000
------------
RESTAURANTS (0.0%)
7,750 American Restaurant Group Holdings, Inc. - 144A*..................................... --
------------
RETAIL (1.6%)
1,389,850 County Seat Store Corp. (d) (e)...................................................... 6,489,210
------------
TOTAL COMMON STOCKS
(IDENTIFIED COST $14,930,288)........................................................ 7,748,160
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
34
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES - HIGH YIELD
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
PREFERRED STOCK (0.4%)
RESTAURANTS
1,500 American Restaurant Group Holdings, Inc. - 144A* (Units)(++) (IDENTIFIED COST
$1,500,000)........................................................................ $ 1,530,000
------------
</TABLE>
<TABLE>
<CAPTION>
EXPIRATION
DATE
----------
<C> <S> <C> <C>
WARRANTS (c) (0.2%)
AEROSPACE (0.0%)
1,500 Sabreliner Corp. - 144A*................................................. 04/15/03 75,000
------------
BUSINESS SERVICES (0.1%)
42,250 Comforce Corp. - 144A*................................................... 01/00/00 295,750
------------
CABLE/CELLULAR (0.0%)
3,750 Australis Holdings Ltd. - 144A* (Australia).............................. 10/30/01 --
------------
CONTAINERS (0.0%)
2,000 Crown Packaging Holdings, Ltd. - 144A*................................... 11/01/03 --
------------
ENTERTAINMENT/GAMING & LODGING (0.0%)
1,000 Boomtown, Inc. - 144A*................................................... 11/01/98 --
2,000 Fitzgeralds Gaming Corp.................................................. 12/19/98 9,105
3,500 Fitzgeralds South Inc. - 144A*........................................... 03/15/99 --
6,000 Resort At Summerlin...................................................... 01/00/00 --
------------
9,105
------------
RETAIL (0.0%)
2,000 County Seat Holdings Co.................................................. 10/15/98 --
------------
WIRELESS COMMUNICATION (0.1%)
92,640 Star Choice Communications, Inc. - 144A* (Canada)........................ 01/00/00 464,186
------------
TOTAL WARRANTS
(IDENTIFIED COST $371,333)........................................................... 844,041
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS
- -----------
<C> <S> <C>
SHORT-TERM INVESTMENT (0.5%)
REPURCHASE AGREEMENT
$ 2,259 The Bank of New York 5.50% due 07/01/98 (dated 06/30/98; proceeds $2,259,138) (f)
(IDENTIFIED COST $2,258,792)....................................................... 2,258,792
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
35
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES - HIGH YIELD
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(IDENTIFIED COST $445,396,208) (g)........................................................ 100.0 % 420,417,388
OTHER ASSETS IN EXCESS OF LIABILITIES..................................................... 0.0 147,732
------ -------------
NET ASSETS................................................................................ 100.0 % $ 420,565,120
------ -------------
------ -------------
</TABLE>
- ---------------------
* Resale is restricted to qualified institutional investors.
(++) Consists of one or more class of securities traded together as a unit;
bonds or preferred stocks with attached warrants.
+ Payment-in-kind security.
++ Currently a zero coupon bond and will pay interest at the rate shown at a
future specified date.
(a) Non-income producing security; bond in default.
(b) Non-income producing security; issuer in bankruptcy.
(c) Non-income producing securities.
(d) Acquired through exchange offer.
(e) Includes 498,645 shares which are due from the issuer pursuant to a
reorganization.
(f) Collateralized by $1,838,561 U.S. Treasury Note 5.25% due 01/31/01 valued
at $1,865,918 and $362,822 U.S. Treasury Bond 10.75% due 02/15/03 valued at
$438,051.
(g) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $14,246,277 and the
aggregate gross unrealized depreciation is $39,225,097, resulting in net
unrealized depreciation of $24,978,820.
SEE NOTES TO FINANCIAL STATEMENTS
36
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES - UTILITIES
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER
OF
SHARES VALUE
- ------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (89.0%)
NATURAL GAS (9.4%)
153,625 Burlington Resources, Inc................................... $ 6,615,477
184,930 EEX Corp.*.................................................. 1,733,719
220,460 El Paso Natural Gas Co...................................... 8,432,595
198,250 Enron Corp.................................................. 10,717,891
250,000 Questar Corp................................................ 4,906,250
140,000 Seagull Energy Corp.*....................................... 2,318,750
325,000 Williams Companies, Inc..................................... 10,968,750
------------
45,693,432
------------
TELECOMMUNICATIONS (33.8%)
56,666 360 DEG. Communications Co.*................................ 1,813,312
115,000 Airtouch Communications, Inc.*.............................. 6,720,312
195,000 ALLTEL Corp................................................. 9,067,500
120,000 AT&T Corp................................................... 6,855,000
200,000 BCE, Inc. (Canada).......................................... 8,537,500
164,320 Bell Atlantic Corp.......................................... 7,497,100
195,000 Cable & Wireless PLC (ADR) (United Kingdom)................. 7,190,625
207,500 Century Telephone Enterprises, Inc.......................... 9,519,062
270,000 Ericsson (L.M.) Telephone Co. (Class B) (ADR) (Sweden)...... 7,728,750
91,100 Esat Telecom Group PLC (ADR) (Ireland)*..................... 3,439,025
150,000 Frontier Corp............................................... 4,725,000
140,000 GTE Corp.................................................... 7,787,500
33,984 Lucent Technologies, Inc.................................... 2,827,044
105,000 MCI Communications Corp..................................... 6,096,562
105,000 MediaOne Group Inc.*........................................ 4,613,438
163,254 Qwest Communications International, Inc.*................... 5,683,280
249,346 SBC Communications, Inc..................................... 9,973,840
135,000 Southern New England Telecommunications Corp................ 8,842,500
120,000 Sprint Corp................................................. 8,460,000
65,000 Tele Danmark AS (ADR) (Denmark)............................. 3,063,125
120,000 Telecom Corp. of New Zealand Ltd. (ADR) (New Zealand)....... 3,930,000
80,000 Telefonos de Mexico S.A. (Series L) (ADR) (Mexico).......... 3,845,000
130,000 Telephone & Data Systems, Inc............................... 5,118,750
51,500 Telstra Corp. Ltd. (ADR) (Australia)........................ 2,613,625
112,868 U.S. West, Inc.............................................. 5,304,775
273,500 WorldCom, Inc.*............................................. 13,213,469
------------
164,466,094
------------
<CAPTION>
NUMBER
OF
SHARES VALUE
- ------------------------------------------------------------------------------------
<C> <S> <C>
UTILITIES - ELECTRIC (45.8%)
60,000 AES Corp.*.................................................. $ 3,153,750
210,000 Baltimore Gas & Electric Co................................. 6,523,125
135,000 Carolina Power & Light Co................................... 5,855,625
130,000 Central & South West Corp................................... 3,493,750
215,865 CINergy Corp................................................ 7,555,275
225,000 CMS Energy Corp............................................. 9,900,000
130,000 Consolidated Edison Co. of New York, Inc.................... 5,988,125
337,500 DPL, Inc.................................................... 6,117,187
212,500 DQE, Inc.................................................... 7,650,000
130,000 DTE Energy Co............................................... 5,248,750
141,216 Duke Energy Corp............................................ 8,367,048
130,000 Edison International........................................ 3,843,125
110,000 Energy East Corp............................................ 4,578,750
175,000 Entergy Corp................................................ 5,031,250
140,000 FPL Group, Inc.............................................. 8,820,000
150,000 GPU, Inc.................................................... 5,671,875
125,000 Hawaiian Electric Industries, Inc........................... 4,960,937
200,000 Houston Industries, Inc..................................... 6,175,000
215,000 Illinova Corp............................................... 6,450,000
225,000 IPALCO Enterprises, Inc..................................... 9,998,437
120,000 Kansas City Power & Light Co................................ 3,480,000
100,000 Montana Power Co............................................ 3,475,000
200,000 New Century Energies, Inc................................... 9,087,500
115,000 New England Electric System................................. 4,973,750
320,000 NIPSCO Industries, Inc...................................... 8,960,000
100,000 OGE Energy Corp............................................. 2,700,000
280,000 PacifiCorp.................................................. 6,335,000
220,000 Pinnacle West Capital Corp.................................. 9,900,000
55,000 Potomac Electric Power Co................................... 1,378,437
210,000 Public Service Company of New Mexico........................ 4,764,375
115,000 Public Service Enterprise Group, Inc........................ 3,960,312
215,000 SCANA Corp.................................................. 6,409,688
140,000 Sempra Energy............................................... 3,885,000
275,000 Southern Co................................................. 7,614,063
161,500 Texas Utilities Co.......................................... 6,722,438
190,000 Western Resources, Inc...................................... 7,374,375
200,000 Wisconsin Energy Corp....................................... 6,075,000
------------
222,476,947
------------
TOTAL COMMON STOCKS
(IDENTIFIED COST $262,923,439).............................. 432,636,473
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
37
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES - UTILITIES
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ------------------------------------------------------------------------------------------------------------
<C> <S> <C>
CORPORATE BONDS (8.6%)
NATURAL GAS (1.1%)
$ 3,000 Coastal Corp.
7.75% due 10/15/35............................................................... $ 3,308,670
2,000 Panhandle Eastern Corp.
8.625% due 04/15/25.............................................................. 2,250,020
------------
5,558,690
------------
TELECOMMUNICATIONS (1.5%)
2,000 360 DEG. Communications Co.
6.65% due 01/15/08............................................................... 2,021,780
2,000 GTE Corp.
7.90% due 02/01/27............................................................... 2,170,800
500 LCI International, Inc.
7.25% due 06/15/07............................................................... 509,695
2,000 Sprint Corp.
9.25% due 04/15/22............................................................... 2,550,380
------------
7,252,655
------------
UTILITIES - ELECTRIC (6.0%)
2,250 Consumers Energy Co.
6.875% due 03/01/18.............................................................. 2,297,115
2,000 Empresa Nacional de Electricidad Chile
8.125% due 02/01/97.............................................................. 1,962,100
2,250 Florida Power & Light Co.
7.05% due 12/01/26............................................................... 2,279,903
3,000 Illinois Power Co.
8.75% due 07/01/21............................................................... 3,187,830
3,000 Indianapolis Power Co.
7.05% due 02/01/24............................................................... 3,078,660
2,500 Niagara Mohawk Power Corp.
8.00% due 06/01/04............................................................... 2,675,775
3,000 Public Service Electric
& Gas Co.
7.00% due 09/01/24............................................................... 3,024,420
2,000 South Carolina Electric
& Gas Co.
7.625% due 06/01/23.............................................................. 2,114,160
1,000 Southern California Edison Co.
7.25% due 03/01/26............................................................... 1,020,240
2,000 Southwestern Public Service
8.50% due 02/15/25............................................................... 2,251,220
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ------------------------------------------------------------------------------------------------------------
<C> <S> <C>
$ 5,000 Wisconsin Electric Power Co.
7.125% due 03/15/16.............................................................. $ 5,148,900
------------
29,040,323
------------
TOTAL CORPORATE BONDS
(IDENTIFIED COST $39,321,785)...................................................... 41,851,668
------------
U.S. GOVERNMENT AGENCY (0.3%)
1,250 Tennessee Valley Authority 8.00% due 03/31/45
(IDENTIFIED COST $1,250,000)..................................................... 1,296,875
------------
SHORT-TERM INVESTMENT (1.7%)
REPURCHASE AGREEMENT
8,337 The Bank of New York 5.50% due 07/01/98 (dated 06/30/98; proceeds $8,338,750) (a)
(IDENTIFIED COST $8,337,476)..................................................... 8,337,476
------------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(IDENTIFIED COST $311,832,700) (b)........................................................ 99.6 % 484,122,492
LIABILITIES IN EXCESS OF CASH AND OTHER ASSETS............................................ 0.4 1,750,495
------ -------------
NET ASSETS................................................................................ 100.0 % $ 485,872,987
------ -------------
------ -------------
</TABLE>
- ---------------------
ADR American Depository Receipt.
* Non-income producing security.
(a) Collateralized by $8,403,750 U.S. Treasury Note 5.50% due 03/31/03 valued
at $8,504,225.
(b) The aggregate cost for federal income tax purposes approximates identified
cost.The aggregate gross unrealized appreciation is $173,793,996 and the
aggregate gross unrealized depreciation is $1,504,204, resulting in net
unrealized appreciation of $172,289,792.
SEE NOTES TO FINANCIAL STATEMENTS
38
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES - INCOME BUILDER
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (43.4%)
APPAREL (0.9%)
21,600 Kellwood Co............................................................................. $ 772,200
-----------
AUTO PARTS (0.8%)
13,700 Dana Corp............................................................................... 732,950
-----------
AUTOMOTIVE (2.5%)
13,100 Chrysler Corp........................................................................... 738,512
12,600 Ford Motor Co........................................................................... 743,400
10,900 General Motors Corp..................................................................... 728,256
-----------
2,210,168
-----------
BANKS (4.1%)
33,000 First Security Corp..................................................................... 705,375
23,300 First Tennessee National Corp........................................................... 733,950
20,200 KeyCorp................................................................................. 719,625
26,500 Washington Federal, Inc................................................................. 732,062
12,400 Wilmington Trust Corp................................................................... 754,850
-----------
3,645,862
-----------
BANKS - THRIFT INSTITUTIONS (0.8%)
17,000 Washington Mutual, Inc.................................................................. 737,375
-----------
BUILDING MATERIALS (0.8%)
6,700 Vulcan Materials Co..................................................................... 714,806
-----------
CHEMICALS (3.3%)
7,500 Dow Chemical Co......................................................................... 725,156
17,300 Hercules, Inc........................................................................... 711,462
11,000 PPG Industries, Inc..................................................................... 765,187
7,200 Rohm & Haas Co.......................................................................... 748,350
-----------
2,950,155
-----------
CONGLOMERATES (0.8%)
18,700 Tenneco, Inc............................................................................ 711,769
-----------
CONTAINERS - METAL & GLASS (0.8%)
15,500 Crown Cork & Seal Co., Inc.............................................................. 736,250
-----------
FINANCIAL (1.0%)
2,400 Providian Financial Corp................................................................ 188,550
24,000 TCF Financial Corp...................................................................... 708,000
-----------
896,550
-----------
FINANCIAL - MISCELLANEOUS (1.6%)
11,500 Fannie Mae.............................................................................. 698,625
15,500 SLM Holding Corp........................................................................ 759,500
-----------
1,458,125
-----------
FINANCIAL SERVICES (0.8%)
9,500 Associates First Capital Corp. (Class A)................................................ 730,312
-----------
FOOD PROCESSING (0.8%)
21,000 Hormel Foods Corp....................................................................... 725,812
-----------
HEALTHCARE - DRUGS (0.8%)
7,900 Schering-Plough Corp.................................................................... 723,837
-----------
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
INSURANCE (2.5%)
12,500 Jefferson-Pilot Corp.................................................................... $ 724,219
8,000 Lincoln National Corp................................................................... 731,000
16,200 Torchmark Corp.......................................................................... 741,150
-----------
2,196,369
-----------
LIFE INSURANCE (0.2%)
2,084 Aegon N.V. (ARS) (Netherlands).......................................................... 180,266
-----------
MACHINERY - DIVERSIFIED (0.9%)
13,100 Johnson Controls, Inc................................................................... 749,156
-----------
MANUFACTURING - CONSUMER & INDUSTRIAL PRODUCTS (0.9%)
11,100 Whirlpool Corp.......................................................................... 763,125
-----------
METALS & MINING (0.8%)
53,000 Cyprus Amax Minerals Co................................................................. 702,250
-----------
MISCELLANEOUS (0.8%)
14,700 American Greetings Corp. (Class A)...................................................... 748,781
-----------
MOBILE HOME & RECREATION (0.8%)
18,000 Fleetwood Enterprises, Inc.............................................................. 720,000
-----------
OIL & GAS (0.9%)
14,700 Ashland, Inc............................................................................ 758,887
-----------
REAL ESTATE (0.1%)
9,800 Excel Legacy Corp.*..................................................................... 42,875
6,000 Reckson Services Industries, Inc.*...................................................... 19,875
-----------
62,750
-----------
REAL ESTATE INVESTMENT TRUST (4.2%)
8,000 American General Hospitality Corp....................................................... 170,000
12,700 Boston Properties, Inc.................................................................. 438,150
30,000 Equity One, Inc......................................................................... 307,500
19,800 Excel Realty Trust, Inc................................................................. 570,488
3,750 Healthcare Realty Trust, Inc............................................................ 102,188
27,500 LTC Properties, Inc..................................................................... 512,188
16,600 Meditrust Co............................................................................ 463,763
15,000 Reckson Associates Realty Corp.......................................................... 354,375
34,200 Sunstone Hotel Investors, Inc........................................................... 455,288
12,500 Tanger Factory Outlet Centers, Inc...................................................... 396,094
-----------
3,770,034
-----------
RETAIL - SPECIALTY APPAREL (0.9%)
292 Abercrombie & Fitch Co. (Class A)*...................................................... 12,848
22,500 Limited (The), Inc...................................................................... 745,313
-----------
758,161
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
39
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES - INCOME BUILDER
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
STEEL (0.8%)
22,000 USX-U.S. Steel Group, Inc............................................................... $ 726,000
-----------
TELECOMMUNICATIONS (2.4%)
15,400 Bell Atlantic Corp...................................................................... 702,625
12,500 GTE Corp................................................................................ 695,313
15,500 U.S. West, Inc.......................................................................... 728,500
-----------
2,126,438
-----------
TELEPHONES (0.8%)
12,800 AT&T Corp............................................................................... 731,200
-----------
TOBACCO (1.6%)
18,000 Philip Morris Companies, Inc............................................................ 708,750
27,000 UST, Inc................................................................................ 729,000
-----------
1,437,750
-----------
UTILITIES - ELECTRIC (3.3%)
15,400 Consolidated Edison, Inc................................................................ 709,363
24,000 Houston Industries, Inc................................................................. 741,000
16,600 New England Electric System............................................................. 717,950
21,300 Public Service Enterprise Group, Inc.................................................... 733,519
-----------
2,901,832
-----------
UTILITIES - GAS (0.8%)
12,300 Consolidated Natural Gas Co............................................................. 724,163
-----------
WHOLESALE DISTRIBUTOR (0.9%)
17,000 Supervalu, Inc.......................................................................... 754,375
-----------
TOTAL COMMON STOCKS
(IDENTIFIED COST $34,611,749)........................................................... 38,557,708
-----------
CONVERTIBLE PREFERRED STOCKS (21.7%)
APPAREL (0.5%)
10,000 Warnaco Group, Inc. $3.00............................................................... 460,000
-----------
AUTO PARTS (0.7%)
12,000 BTI Capital Trust $3.25 - 144A**........................................................ 519,000
3,700 Walbro Capital Trust $2.00.............................................................. 81,400
-----------
600,400
-----------
BANKS - INTERNATIONAL (1.4%)
22,000 National Australia Bank, Ltd. $1.969 (Australia) (Units)++.............................. 631,125
19,500 Westpac Banking Corp. (STRYPES) $3.135.................................................. 588,656
-----------
1,219,781
-----------
BANKS - REGIONAL (0.9%)
30,000 CNB Capital Trust I $1.50............................................................... 787,500
-----------
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
BROADCAST MEDIA (1.2%)
19,400 Metromedia International Group, Inc. $3.625............................................. $ 999,100
4,000 Triathlon Broadcasting Co. $0.945....................................................... 39,000
-----------
1,038,100
-----------
BUSINESS SERVICES (0.7%)
12,500 Unisys Corp. (Series A) $3.75........................................................... 653,125
-----------
CABLE & TELECOMMUNICATIONS (0.6%)
8,550 EchoStar Communications Corp. (Series C) $3.375......................................... 500,175
-----------
COMMERCIAL SERVICES (0.8%)
20,000 Cendant Corp. $3.75..................................................................... 748,750
-----------
COSMETICS (1.0%)
13,000 Estee Lauder Co. $3.80.................................................................. 871,000
-----------
ENTERTAINMENT (1.0%)
14,000 Premier Parks, Inc. $4.05............................................................... 889,000
-----------
FINANCE (1.6%)
3,290 Insignia Financing, Inc. $3.25.......................................................... 165,322
15,940 Merrill Lynch & Co., Inc. (STRYPES) $2.39 (1)........................................... 502,110
10,000 Merrill Lynch & Co., Inc. (STRYPES) $4.087 (2).......................................... 725,000
-----------
1,392,432
-----------
INSURANCE (0.6%)
2,500 American Heritage Life Investment Corp. $4.25........................................... 162,500
40,000 Philadelphia Consolidated Holding Corp. $0.70........................................... 410,000
-----------
572,500
-----------
MACHINERY (0.8%)
28,000 Ingersoll-Rand Co. $1.688............................................................... 672,000
-----------
OIL & GAS (0.9%)
50,000 Tesoro Petroleum Corp. $1.16............................................................ 768,750
-----------
PACKAGING & BOTTLING (0.9%)
20,000 Sealed Air Corp. (Series A) $2.00....................................................... 840,000
-----------
PUBLISHING (1.3%)
34,090 Hollinger International, Inc. $0.95..................................................... 536,918
25,000 Reader's Digest Association, Inc $1.93.................................................. 643,750
-----------
1,180,668
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
40
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES - INCOME BUILDER
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
REAL ESTATE INVESTMENT TRUST (2.9%)
13,700 Camden Property Trust (Series A) $2.25.................................................. $ 363,050
9,000 Equity Residential Properties Trust (Series E) $1.75.................................... 232,875
22,560 FelCor Suite Hotels, Inc. (Series A) $1.95.............................................. 547,080
1,085 Merry Land & Investment Co., Inc. (Series C) $2.15...................................... 28,413
7,000 Rouse Co. (Series B) $3.00.............................................................. 348,250
40,000 SL Green Realty Corp. $2.00............................................................. 1,020,000
-----------
2,539,668
-----------
STEEL (0.8%)
35,000 USX Corp. $1.44......................................................................... 756,875
-----------
TELECOMMUNICATIONS (1.3%)
12,330 Loral Space & Communications Ltd. $3.00 (Bermuda)....................................... 946,328
4,500 Qualcomm Financial Trust $2.875......................................................... 217,688
-----------
1,164,016
-----------
TRANSPORTATION (0.8%)
15,000 Union Pacific Capital Trust $3.125 - 144A**............................................. 701,250
-----------
UTILITIES (1.0%)
19,000 CalEnergy Capital Trust III $3.25....................................................... 869,250
-----------
TOTAL CONVERTIBLE PREFERRED STOCKS
(IDENTIFIED COST $19,040,925)........................................................... 19,225,240
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS
- ---------
<C> <S> <C>
CORPORATE BONDS (26.2%)
CONVERTIBLE BONDS (10.4%)
AUTO PARTS (1.4%)
$ 650 Mark IV Industries, Inc. - 144A** 4.75% due 11/01/04.................................... 595,159
350 MascoTech, Inc.
4.50% due 12/15/03.................................................................... 333,921
300 Tower Automotive, Inc. - 144A** 5.00% due 08/01/04...................................... 310,518
-----------
1,239,598
-----------
CABLE/CELLULAR (0.2%)
400 U.S. Cellular Corp.
0.00% due 06/15/15.................................................................... 150,184
-----------
FINANCE (1.2%)
1,000 Financial Federal Corp. - 144A** 4.50% due 05/01/05..................................... 1,053,750
-----------
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
HEALTHCARE (1.6%)
$ 800 Concentra Managed Care, Inc. - 144A**
4.50% due 03/15/03.................................................................... $ 717,000
280 Emeritus Corp. - 144A** 6.25% due 01/01/06.............................................. 221,449
650 Phymatrix Corp.
6.75% due 06/15/03.................................................................... 468,000
-----------
1,406,449
-----------
HEALTHCARE - MISCELLANEOUS (0.3%)
225 Pharmaceutical Marketing Services, Inc. (Eurobond) 6.25% due 02/01/03................... 217,125
-----------
HOTELS/MOTELS (0.5%)
560 Capstar Hotel Corp.
4.75% due 10/15/04.................................................................... 459,200
-----------
MACHINERY (0.2%)
200 Thermo Fibertek, Inc. - 144A** 4.50% due 07/15/04....................................... 199,562
-----------
MEDICAL EQUIPMENT (0.4%)
400 ThermoTrex Corp.
3.25% due 11/01/07.................................................................... 353,040
-----------
OFFICE EQUIPMENT & SUPPLIES (0.6%)
550 Danka Business Systems PLC (United Kingdom)
6.75% due 04/01/02.................................................................... 476,514
-----------
PUBLISHING (0.1%)
100 Nelson (Thomas), Inc.
5.75% due 11/30/99.................................................................... 99,938
-----------
REAL ESTATE INVESTMENT TRUST (0.6%)
575 Capstone Capital Corp.
6.55% due 03/14/02.................................................................... 550,080
-----------
RESTAURANTS (0.0%)
300 Boston Chicken, Inc.
0.00% due 06/01/15.................................................................... 15,000
50 Boston Chicken, Inc.
4.50% due 02/01/04.................................................................... 7,868
-----------
22,868
-----------
RETAIL (0.4%)
70 Petsmart, Inc. - 144A**
6.75% due 11/01/04.................................................................... 93,625
300 Saks Holdings, Inc.
5.50% due 09/15/06.................................................................... 281,757
-----------
375,382
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
41
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES - INCOME BUILDER
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
SEMICONDUCTORS (0.7%)
$ 700 National Semiconductor Corp. - 144A** 6.50% due 10/01/02................................ $ 639,401
-----------
SHOES (2.2%)
1,000 Genesco, Inc. - 144A**
5.50% due 04/15/05.................................................................... 1,015,000
350 Nine West Group, Inc. - 144A** 5.50% due 07/15/03....................................... 293,262
805 Nine West Group, Inc.
5.50% due 07/15/03.................................................................... 674,501
-----------
1,982,763
-----------
TOTAL CONVERTIBLE BONDS
(IDENTIFIED COST $9,546,904)............................................................ 9,225,854
-----------
NON-CONVERTIBLE BONDS (15.8%)
BROADCAST MEDIA (1.5%)
195 Outlet Broadcasting, Inc. 10.875% due 07/15/03.......................................... 203,073
1,000 Young Broadcasting Corp. 11.75% due 11/15/04............................................ 1,100,000
-----------
1,303,073
-----------
BUILDING MATERIALS (0.6%)
500 USG Corp. (Series B)
9.25% due 09/15/01.................................................................... 537,660
-----------
CABLE/CELLULAR (2.9%)
2,400 Continental Cablevision, Inc. 11.00% due 06/01/07....................................... 2,616,960
-----------
CHEMICALS (2.5%)
2,130 Harris Chemical North America, Inc.
10.75% due 10/15/03................................................................... 2,239,162
-----------
ENTERTAINMENT/GAMING (0.8%)
700 Casino Magic Finance Corp. 11.50% due 10/15/01.......................................... 728,000
-----------
FINANCIAL SERVICES (0.8%)
600 Videotron Group Ltd. (Canada) 10.625% due 02/15/05...................................... 663,000
-----------
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
PACKAGING & BOTTLING (2.3%)
$ 1,875 Huntsman Polymers Corp. 11.75% due 12/01/04............................................. $ 2,043,750
-----------
PUBLISHING (1.7%)
800 Big Flower Press, Inc.
8.875% due 07/01/07................................................................... 812,000
600 Garden State Newspapers, Inc. 12.00% due 07/01/04....................................... 666,000
-----------
1,478,000
-----------
STEEL (1.9%)
1,000 AK Steel Corp.
10.75% due 04/01/04................................................................... 1,065,000
600 Ivaco, Inc. (Canada)
11.50% due 09/15/05................................................................... 657,000
-----------
1,722,000
-----------
TEXTILES (0.8%)
700 Dan River, Inc.
10.125% due 12/15/03.................................................................. 742,000
-----------
TOTAL NON-CONVERTIBLE BONDS
(IDENTIFIED COST $14,251,127)........................................................... 14,073,605
-----------
TOTAL CORPORATE BONDS
(IDENTIFIED COST $23,798,031)........................................................... 23,299,459
-----------
SHORT-TERM INVESTMENTS (9.0%)
U.S. GOVERNMENT AGENCIES (a) (4.5%)
1,000 Federal Home Loan Mortgage Corp. 5.48% due 07/07/98..................................... 999,087
3,000 Federal National Mortgage Assoc. 5.58% due 07/07/98..................................... 2,997,210
-----------
TOTAL U.S. GOVERNMENT AGENCIES
(AMORTIZED COST $3,996,297)............................................................. 3,996,297
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
42
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES - INCOME BUILDER
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
REPURCHASE AGREEMENT (4.5%)
$ 4,024 The Bank of New York 5.50% due 07/01/98 (dated 06/30/98; proceeds $4,024,566) (b)
(IDENTIFIED COST $4,023,951).......................................................... $ 4,023,951
-----------
TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST $8,020,248)............................................................ 8,020,248
-----------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(IDENTIFIED COST $85,470,953) (c).......................................................... 100.3 % 89,102,655
LIABILITIES IN EXCESS OF OTHER ASSETS...................................................... (0.3) (229,173)
------ ------------
NET ASSETS................................................................................. 100.0 % $ 88,873,482
------ ------------
------ ------------
</TABLE>
- ---------------------
ARS American Regulatory Share.
STRYPES Structured yield product exchangeable for stock.
* Non-income producing security.
** Resale is restricted to qualified institutional investors.
++ Consists of one or more class of securities traded together as a unit;
stocks with attached warrants.
(1) Convertible into IMC Global, Inc. common stock.
(2) Convertible into SunAmerica, Inc. common stock.
(a) Securities were purchased on a discount basis. The interest rates shown
have been adjusted to reflect a money market equivalent yield.
(b) Collateralized by $1,925,351 U.S. Treasury Bond 6.625% due 02/15/27
valued at $2,212,685 and $1,885,884 U.S. Treasury Note 5.50% due
05/31/03 valued at $1,891,745.
(c) The aggregate cost for federal income tax purposes approximates
identified cost. The aggregate gross unrealized appreciation is
$6,169,481 and the aggregate gross unrealized depreciation is
$2,537,779, resulting in net unrealized appreciation of $3,631,702.
SEE NOTES TO FINANCIAL STATEMENTS
43
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES - DIVIDEND GROWTH
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (97.5%)
AEROSPACE (4.0%)
746,000 Raytheon Co. (Class B).............................................................. $ 44,107,250
465,000 United Technologies Corp............................................................ 43,012,500
--------------
87,119,750
--------------
ALUMINUM (1.9%)
624,000 Aluminum Co. of America............................................................. 41,145,000
--------------
AUTO PARTS (1.9%)
752,000 TRW, Inc............................................................................ 41,078,000
--------------
AUTOMOTIVE (3.8%)
725,000 Ford Motor Co....................................................................... 42,775,000
583,000 General Motors Corp................................................................. 38,951,687
--------------
81,726,687
--------------
BANKS (5.5%)
716,400 Banc One Corp....................................................................... 39,984,075
467,000 BankAmerica Corp.................................................................... 40,366,312
1,115,000 KeyCorp............................................................................. 39,721,875
--------------
120,072,262
--------------
BEVERAGES - SOFT DRINKS (1.9%)
1,010,000 PepsiCo, Inc........................................................................ 41,599,375
--------------
CHEMICALS (5.6%)
415,000 Dow Chemical Co..................................................................... 40,125,312
634,000 Eastman Chemical Co................................................................. 39,466,500
603,000 PPG Industries, Inc................................................................. 41,946,187
--------------
121,537,999
--------------
COMPUTERS (2.0%)
372,000 International Business Machines Corp................................................ 42,710,250
--------------
CONGLOMERATES (3.7%)
500,000 Minnesota Mining & Manufacturing Co................................................. 41,093,750
1,055,000 Tenneco, Inc........................................................................ 40,155,937
--------------
81,249,687
--------------
COSMETICS (1.9%)
718,000 Gillette Co......................................................................... 40,701,625
--------------
DRUGS (5.6%)
1,011,000 Abbott Laboratories................................................................. 41,324,625
776,000 American Home Products Corp......................................................... 40,158,000
351,000 Bristol-Myers Squibb Co............................................................. 40,343,063
--------------
121,825,688
--------------
ELECTRIC - MAJOR (1.9%)
454,000 General Electric Co................................................................. 41,314,000
--------------
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
FINANCIAL - MISCELLANEOUS (1.9%)
826,000 Household International, Inc........................................................ $ 41,093,500
--------------
FINANCIAL SERVICES (2.0%)
552,676 Associates First Capital Corp. (Class A)............................................ 42,486,968
--------------
FOODS (3.7%)
746,000 Quaker Oats Company (The)........................................................... 40,983,375
698,000 Sara Lee Corp....................................................................... 39,044,375
--------------
80,027,750
--------------
HOUSEHOLD PRODUCTS (1.9%)
453,000 Procter & Gamble Co................................................................. 41,251,313
--------------
INSURANCE (1.9%)
543,000 Aetna Inc........................................................................... 41,335,875
--------------
MACHINERY - CONSTRUCTION & MATERIALS (1.9%)
770,000 Caterpillar, Inc.................................................................... 40,713,750
--------------
METALS & MINING (1.8%)
703,000 Phelps Dodge Corp................................................................... 40,202,813
--------------
NATURAL GAS (3.9%)
1,000,000 Burlington Resources, Inc........................................................... 43,062,500
1,113,000 El Paso Natural Gas Co.............................................................. 42,572,250
--------------
85,634,750
--------------
OFFICE EQUIPMENT (1.8%)
820,000 Pitney Bowes, Inc................................................................... 39,462,500
--------------
OIL - DOMESTIC (3.7%)
814,000 Ashland, Inc........................................................................ 42,022,750
505,000 Atlantic Richfield Co............................................................... 39,453,125
--------------
81,475,875
--------------
OIL INTEGRATED - INTERNATIONAL (5.5%)
576,000 Exxon Corp.......................................................................... 41,076,000
515,000 Mobil Corp.......................................................................... 39,461,875
730,000 Royal Dutch Petroleum Co.
(ADR) (Netherlands)............................................................... 40,013,125
--------------
120,551,000
--------------
PAPER & FOREST PRODUCTS (3.6%)
918,000 International Paper Co.............................................................. 39,474,000
856,000 Weyerhaeuser Co..................................................................... 39,536,500
--------------
79,010,500
--------------
PHOTOGRAPHY (2.0%)
595,000 Eastman Kodak Co.................................................................... 43,472,188
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
44
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES - DIVIDEND GROWTH
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
RAILROADS (1.9%)
420,000 Burlington Northern Santa Fe Corp................................................... $ 41,238,750
--------------
RETAIL - DEPARTMENT STORES (1.9%)
625,000 May Department Stores Co............................................................ 40,937,500
--------------
RETAIL - FOOD CHAINS (1.9%)
1,690,000 American Stores Co.................................................................. 40,876,875
--------------
STEEL (1.8%)
1,250,000 Timken Co........................................................................... 38,515,625
--------------
TELECOMMUNICATIONS (5.4%)
872,000 Bell Atlantic Corp.................................................................. 39,785,000
550,000 Sprint Corp......................................................................... 38,775,000
844,000 U.S. West, Inc...................................................................... 39,668,000
--------------
118,228,000
--------------
TOBACCO (1.9%)
1,028,000 Philip Morris Companies, Inc........................................................ 40,477,500
--------------
TRANSPORTATION (1.8%)
1,266,000 Ryder System, Inc................................................................... 39,958,125
--------------
UTILITIES - ELECTRIC (3.7%)
628,000 FPL Group, Inc...................................................................... 39,564,000
1,144,000 Unicom Corp......................................................................... 40,111,500
--------------
79,675,500
--------------
UTILITIES - GAS (1.9%)
709,000 Consolidated Natural Gas Co......................................................... 41,742,375
--------------
TOTAL COMMON STOCKS
(IDENTIFIED COST $1,638,829,585).................................................... 2,120,449,355
--------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
U.S. GOVERNMENT OBLIGATIONS (1.9%)
$ 35,000 U.S. Treasury Note 5.625% due 04/30/00.............................................. $ 35,052,850
5,000 U.S. Treasury Note 6.375% due 01/15/99.............................................. 5,026,100
--------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(IDENTIFIED COST $39,894,843)....................................................... 40,078,950
--------------
SHORT-TERM INVESTMENT (0.3%)
REPURCHASE AGREEMENT
7,390 The Bank of New York 5.50% due 07/01/98 (dated 06/30/98; proceeds $7,391,288) (a)
(IDENTIFIED COST $7,390,159)...................................................... 7,390,159
--------------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(IDENTIFIED COST $1,686,114,587) (b).................................................... 99.7 % 2,167,918,464
OTHER ASSETS IN EXCESS OF LIABILITIES................................................... 0.3 6,267,478
------ ---------------
NET ASSETS.............................................................................. 100.0 % $ 2,174,185,942
------ ---------------
------ ---------------
</TABLE>
- ---------------------
ADR American Depository Receipt.
(a) Collateralized by $1,193,969 U.S. Treasury Note 6.25% due 06/30/02 valued
at $1,222,513, and $6,240,900 U.S. Treasury Note 5.50% due 03/31/03 valued
at $6,315,449.
(b) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $504,656,259 and the
aggregate gross unrealized depreciation is $22,852,382, resulting in net
unrealized appreciation of $481,803,877.
SEE NOTES TO FINANCIAL STATEMENTS
45
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES - CAPITAL GROWTH
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (99.3%)
ADVERTISING (4.2%)
40,000 HA-LO Industries, Inc.*................................................................ $ 1,245,000
110,000 Snyder Communications, Inc.*........................................................... 4,840,000
------------
6,085,000
------------
APPAREL & FOOTWEAR (2.6%)
60,000 Tommy Hilfiger Corp.*.................................................................. 3,750,000
------------
BANKS - REGIONAL (1.0%)
20,000 State Street Corp...................................................................... 1,390,000
------------
BUILDING MATERIALS (2.7%)
55,000 Southdown, Inc......................................................................... 3,925,625
------------
COMPUTER EQUIPMENT (3.1%)
100,000 EMC Corp.*............................................................................. 4,481,250
------------
COMPUTER SOFTWARE (7.2%)
80,000 Cadence Design Systems, Inc.*.......................................................... 2,500,000
40,000 Microsoft Corp.*....................................................................... 4,335,000
75,000 Network Associates, Inc.*.............................................................. 3,585,937
------------
10,420,937
------------
COMPUTER SOFTWARE & SERVICES (3.1%)
70,000 Legato Systems, Inc.*.................................................................. 2,730,000
38,000 Visio Corp.*........................................................................... 1,814,500
------------
4,544,500
------------
COMPUTERS (2.3%)
55,000 Lexmark International Group, Inc. (Class A)*........................................... 3,355,000
------------
CONSUMER BUSINESS SERVICES (2.4%)
110,000 AccuStaff, Inc.*....................................................................... 3,437,500
------------
CONTAINERS - PAPER (2.7%)
60,000 Elan Corp. PLC (ADR) (Ireland)*........................................................ 3,858,750
------------
DRUGS (2.2%)
70,000 ICN Pharmaceuticals, Inc............................................................... 3,198,125
------------
ELECTRONIC COMPONENTS (1.2%)
47,000 ADC Telecommunications, Inc.*.......................................................... 1,715,500
------------
ELECTRONICS (0.9%)
30,000 Sanmina Corp.*......................................................................... 1,295,625
------------
ENVIRONMENTAL CONTROL (4.0%)
75,000 Newpark Resources, Inc.*............................................................... 834,375
100,000 U.S.A. Waste Services, Inc.*........................................................... 4,937,500
------------
5,771,875
------------
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
FINANCIAL - MISCELLANEOUS (3.2%)
60,000 Providian Financial Corp............................................................... $ 4,713,750
------------
FINANCIAL SERVICES (5.1%)
60,000 SunAmerica Inc......................................................................... 3,446,250
65,000 Travelers Group, Inc................................................................... 3,940,625
------------
7,386,875
------------
HEALTHCARE - DIVERSIFIED (1.4%)
35,000 Universal Health Services, Inc. (Class B)*............................................. 2,043,125
------------
HOSPITAL MANAGEMENT (5.2%)
39,000 Express Scripts, Inc. (Class A)*....................................................... 3,120,000
45,000 Quorum Health Group, Inc.*............................................................. 1,186,875
95,000 Total Renal Care Holdings, Inc.*....................................................... 3,277,500
------------
7,584,375
------------
INSURANCE (3.2%)
100,000 Conseco, Inc........................................................................... 4,675,000
------------
MANUFACTURING - CONSUMER & INDUSTRIAL PRODUCTS (3.3%)
75,000 Tyco International Ltd................................................................. 4,725,000
------------
MEDIA GROUP (2.6%)
35,000 Clear Channel Communications, Inc.*.................................................... 3,819,375
------------
OIL DRILLING & SERVICES (1.2%)
100,000 Global Industries Ltd.*................................................................ 1,681,250
------------
OIL EQUIPMENT & SERVICES (1.0%)
70,000 Varco International, Inc.*............................................................. 1,386,875
------------
PHARMACEUTICALS (4.7%)
90,000 Medicis Pharmaceutical Corp. (Class A)*................................................ 3,262,500
75,000 Watson Pharmaceuticals, Inc.*.......................................................... 3,501,562
------------
6,764,062
------------
POLLUTION CONTROL (1.4%)
70,000 U.S. Filter Corp.*..................................................................... 1,964,375
------------
PRECISION INSTRUMENTS (0.0%)
3,200 Mettler-Toledo International Inc.*..................................................... 64,200
------------
RESTAURANTS (2.0%)
55,000 Starbucks Corp.*....................................................................... 2,935,625
------------
RETAIL (1.8%)
60,000 Abercrombie & Fitch Co. (Class A)*..................................................... 2,640,000
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
46
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES - CAPITAL GROWTH
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
RETAIL - DEPARTMENT STORES (4.5%)
75,000 Dollar General Corp.................................................................... $ 2,967,188
90,000 Proffitt's, Inc.*...................................................................... 3,633,750
------------
6,600,938
------------
RETAIL - FOOD CHAINS (1.1%)
40,000 Safeway, Inc.*......................................................................... 1,627,500
------------
RETAIL - GENERAL MERCHANDISE (1.2%)
40,000 Fred Meyer, Inc.*...................................................................... 1,700,000
------------
RETAIL - SPECIALTY (5.3%)
45,000 Consolidated Stores Corp.*............................................................. 1,631,250
68,000 Finish Line, Inc. (Class A)*........................................................... 1,904,000
145,000 Staples, Inc.*......................................................................... 4,195,938
------------
7,731,188
------------
RETAIL - SPECIALTY APPAREL (2.3%)
75,000 Stage Stores, Inc.*.................................................................... 3,393,750
------------
TELECOMMUNICATIONS (4.7%)
50,000 AirTouch Communications, Inc.*......................................................... 2,921,875
55,000 Tellabs, Inc.*......................................................................... 3,935,938
------------
6,857,813
------------
UTILITIES - ELECTRIC (2.5%)
70,000 AES Corp. (The)*....................................................................... 3,679,374
------------
UTILITIES - TELECOMMUNICATIONS (2.0%)
60,000 WorldCom, Inc.*........................................................................ 2,898,750
------------
TOTAL COMMON STOCKS
(IDENTIFIED COST $115,654,044)......................................................... 144,102,887
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
SHORT-TERM INVESTMENT (0.4%)
REPURCHASE AGREEMENT
$ 673 The Bank of New York 5.50% due 07/01/98 (dated 06/30/97; proceeds $673,363) (a)
(IDENTIFIED COST $673,260)........................................................... $ 673,260
------------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(IDENTIFIED COST $116,327,304) (a)........................................................ 99.7 % 144,776,147
OTHER ASSETS IN EXCESS OF LIABILITIES..................................................... 0.3 377,982
------ -------------
NET ASSETS................................................................................ 100.0 % $ 145,154,129
------ -------------
------ -------------
</TABLE>
- ---------------------
ADR American Depository Receipt.
* Non-income producing security.
(a) Collateralized by $124,073 U.S. Treasury Bond 6.00% due 02/15/26 valued at
$131,269 and $532,763 U.S. Treasury Note 6.25% due 02/28/02 valued at
$555,456.
(c) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $30,815,986 and the
aggregate gross unrealized depreciation is $2,367,143, resulting in net
unrealized appreciation of $28,448,843.
SEE NOTES TO FINANCIAL STATEMENTS
47
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES - GLOBAL DIVIDEND GROWTH
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON AND PREFERRED STOCKS (96.1%)
AUSTRALIA (1.9%)
BANKING
300,000 Australia & New Zealand Banking Group Ltd............................................. $ 2,068,030
------------
BUILDING & CONSTRUCTION
788,000 Pioneer International Ltd............................................................. 1,877,315
------------
GOLD
2,350,000 Normandy Mining Ltd................................................................... 1,919,518
------------
OIL RELATED
650,000 Santos Ltd............................................................................ 2,011,100
------------
PAPER & FOREST PRODUCTS
465,000 Amcor Ltd............................................................................. 2,034,336
------------
TOTAL AUSTRALIA....................................................................... 9,910,299
------------
CANADA (2.4%)
BANKING
73,000 Toronto Dominion Bank................................................................. 3,305,979
------------
NATURAL GAS
76,800 IPL Energy, Inc....................................................................... 3,464,996
140,000 TransCanada Pipelines Ltd............................................................. 3,108,145
------------
6,573,141
------------
OIL RELATED
168,000 Imperial Oil Ltd...................................................................... 2,940,343
------------
TOTAL CANADA.......................................................................... 12,819,463
------------
FRANCE (6.7%)
BANKING
15,500 Societe Generale...................................................................... 3,215,364
------------
BUILDING & CONSTRUCTION
30,000 Lafarge S.A........................................................................... 3,094,315
------------
FINANCIAL SERVICES
31,000 Compagnie Financiere de Paribas....................................................... 3,310,009
5,150 Societe Eurafrance S.A................................................................ 3,229,639
------------
6,539,648
------------
FOODS & BEVERAGES
14,500 Eridania Beghin-Say S.A............................................................... 3,194,571
------------
MISCELLANEOUS MATERIALS & COMMODITIES
16,500 Compagnie de Saint-Gobain............................................................. 3,052,480
------------
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
MULTI-INDUSTRY
6,000 Compagnie Generale d'Industrie et de Participations................................... $ 3,163,627
------------
OIL INTEGRATED - INTERNATIONAL
22,700 Elf Aquitaine S.A..................................................................... 3,184,256
25,000 Total S.A. (B Shares)................................................................. 3,242,842
------------
6,427,098
------------
TELECOMMUNICATIONS
16,000 Alcatel Alsthom....................................................................... 3,250,433
------------
TELEVISION
20,200 Societe Television
Francaise 1......................................................................... 3,123,591
------------
TOTAL FRANCE.......................................................................... 35,061,127
------------
GERMANY (6.1%)
BANKING
65,000 Commerzbank AG........................................................................ 2,469,446
------------
BUILDING & CONSTRUCTION
73,000 Bilfinger & Berger Bau AG............................................................. 2,496,848
------------
CHEMICALS
60,000 BASF AG............................................................................... 2,845,214
56,000 Bayer AG.............................................................................. 2,892,440
------------
5,737,654
------------
ELECTRICAL EQUIPMENT
42,000 Siemens AG............................................................................ 2,558,370
------------
MACHINERY - DIVERSIFIED
6,700 MAN AG................................................................................ 2,608,417
------------
MULTI-INDUSTRY
48,500 RWE AG................................................................................ 2,864,458
4,000 Viag AG............................................................................... 2,747,332
------------
5,611,790
------------
RETAIL - DEPARTMENT STORES
5,000 Karstadt AG........................................................................... 2,426,312
------------
STEEL & IRON
11,200 Thyssen AG............................................................................ 2,842,891
------------
TEXTILES & APPAREL
1,150 Hugo Boss AG (Pref.).................................................................. 2,531,107
------------
UTILITIES - ELECTRIC
37,800 VEBA AG............................................................................... 2,536,653
------------
TOTAL GERMANY......................................................................... 31,819,488
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
48
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES - GLOBAL DIVIDEND GROWTH
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
HONG KONG (4.4%)
CONGLOMERATES
1,241,000 Swire Pacific Ltd. (Class A).......................................................... $ 4,685,890
------------
REAL ESTATE
970,000 Cheung Kong (Holdings) Ltd............................................................ 4,770,800
1,381,000 Henderson Land Development Co., Ltd................................................... 4,554,902
------------
9,325,702
------------
TELECOMMUNICATIONS
2,339,800 Hong Kong Telecommunications Ltd...................................................... 4,394,771
------------
UTILITIES - ELECTRIC
1,485,000 Hong Kong Electric Holdings Ltd....................................................... 4,600,787
------------
TOTAL HONG KONG....................................................................... 23,007,150
------------
ITALY (3.0%)
ELECTRIC POWER
468,000 Edison SpA............................................................................ 3,749,309
------------
FINANCIAL SERVICES
258,000 Istituto Mobiliare Italiano SpA....................................................... 4,057,059
------------
OIL & GAS PRODUCTS
610,000 Ente Nazionale Idrocarburi SpA........................................................ 3,991,071
------------
TELECOMMUNICATIONS
810,000 Telecom Italia SpA.................................................................... 3,914,439
------------
TOTAL ITALY........................................................................... 15,711,878
------------
JAPAN (19.7%)
AUTOMOTIVE
154,000 Honda Motor Co........................................................................ 5,473,094
211,000 Toyota Motor Corp..................................................................... 5,449,568
------------
10,922,662
------------
BREWERS
620,000 Kirin Brewery Co., Ltd................................................................ 5,843,165
------------
BUILDING & CONSTRUCTION
731,000 Sekisui House Ltd..................................................................... 5,653,417
------------
ELECTRONICS & ELECTRICAL
857,000 Hitachi, Ltd.......................................................................... 5,579,748
119,500 Kyocera Corp.......................................................................... 5,828,849
320,000 Matsushita Electric Industrial Co., Ltd............................................... 5,133,813
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
662,000 Matsushita Electric Works, Ltd........................................................ $ 5,334,101
1,376,000 Mitsubishi Electric Corp.............................................................. 3,157,871
600,000 NEC Corp.............................................................................. 5,581,295
704,000 Sharp Corp............................................................................ 5,692,777
65,000 Sony Corp............................................................................. 5,588,129
70,000 TDK Corp.............................................................................. 5,161,871
------------
47,058,454
------------
ENTERTAINMENT & LEISURE TIME
56,300 Nintendo Co., Ltd..................................................................... 5,204,712
------------
MACHINERY - DIVERSIFIED
1,500,000 Mitsubishi Heavy Industries Ltd....................................................... 5,654,676
------------
PHARMACEUTICALS
297,000 Taisho Pharmaceutical Co., Ltd........................................................ 5,534,029
221,000 Takeda Chemical Industries............................................................ 5,866,835
------------
11,400,864
------------
POSTAL DELIVERY
503,000 Yamato Transport Co., Ltd............................................................. 5,627,086
------------
TOBACCO
805 Japan Tobacco, Inc.................................................................... 5,438,094
------------
TOTAL JAPAN........................................................................... 102,803,130
------------
MALAYSIA (0.4%)
BANKING
1,351,000 AMMB Holdings Berhad.................................................................. 713,119
------------
BUILDING & CONSTRUCTION
1,185,000 United Engineers (Malaysia) Berhad.................................................... 484,903
------------
CONGLOMERATES
1,595,000 Sime Darby Berhad..................................................................... 1,104,528
------------
TOTAL MALAYSIA........................................................................ 2,302,550
------------
NETHERLANDS (2.7%)
APPLIANCES & HOUSEHOLD DURABLES
27,000 Philips Electronics NV................................................................ 2,264,789
------------
BANKING
101,800 ABN-AMRO Holding NV................................................................... 2,376,965
------------
CHEMICALS
23,000 DSM NV................................................................................ 2,355,734
------------
POSTAL DELIVERY
41,400 TNT Post Group NV*.................................................................... 1,056,019
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
49
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES - GLOBAL DIVIDEND GROWTH
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
STEEL & IRON
47,000 Koninklijke Hoogovens NV.............................................................. $ 2,028,843
------------
TELECOMMUNICATIONS
41,400 Koninklijke KPN NV.................................................................... 1,590,121
------------
TRANSPORTATION
58,000 KLM Royal Dutch Air Lines NV.......................................................... 2,350,044
------------
TOTAL NETHERLANDS..................................................................... 14,022,515
------------
SPAIN (1.5%)
BANKING
32,000 Banco Popular Espanol S.A............................................................. 2,727,842
------------
ELECTRIC
109,000 Endesa S.A............................................................................ 2,383,309
------------
OIL RELATED
50,000 Repsol S.A............................................................................ 2,753,519
------------
TOTAL SPAIN........................................................................... 7,864,670
------------
SWEDEN (1.5%)
AUTOMOBILES
84,000 Volvo AB (B Shares)................................................................... 2,495,622
------------
BANKING
364,000 Nordbanken Holding AB................................................................. 2,663,748
------------
MACHINERY - DIVERSIFIED
90,600 Sandvik AB (B Shares)................................................................. 2,482,036
------------
TOTAL SWEDEN.......................................................................... 7,641,406
------------
SWITZERLAND (2.1%)
BANKING
10,123 UBS AG*............................................................................... 3,758,665
------------
FOODS & BEVERAGES
1,670 Nestle S.A............................................................................ 3,568,677
------------
PHARMACEUTICALS
2,140 Novartis AG - Bearer.................................................................. 3,558,683
------------
TOTAL SWITZERLAND..................................................................... 10,886,025
------------
UNITED KINGDOM (10.2%)
BANKING
190,000 National Westminster Bank PLC......................................................... 3,393,196
196,000 Royal Bank of Scotland Group PLC...................................................... 3,399,032
------------
6,792,228
------------
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
BREWERS
177,678 Bass PLC.............................................................................. $ 3,327,203
------------
FOODS & BEVERAGES
445,000 Hillsdown Holdings PLC................................................................ 1,209,521
------------
LEISURE
562,000 Rank Group PLC........................................................................ 3,083,174
------------
MERCHANDISING
190,000 Next PLC.............................................................................. 1,631,649
------------
METALS NON-FERROUS
285,000 Rio Tinto PLC......................................................................... 3,207,853
------------
MISCELLANEOUS MATERIALS & COMMODITIES
960,000 Cookson Group PLC..................................................................... 3,297,648
------------
MULTI-INDUSTRY
552,000 Hanson PLC............................................................................ 3,352,775
------------
PAPER PRODUCTS
955,000 Arjo Wiggins Appleton PLC............................................................. 3,200,849
------------
STEEL & IRON
1,530,000 British Steel PLC..................................................................... 3,361,305
------------
TOBACCO
353,000 B.A.T. Industries PLC................................................................. 3,531,765
------------
UTILITIES - ELECTRIC
522,500 National Grid Group PLC............................................................... 3,519,926
367,000 National Power PLC.................................................................... 3,451,525
380,000 Scottish Hydro-Electric PLC........................................................... 3,371,018
------------
10,342,469
------------
UTILITIES - WATER
210,000 Hyder PLC............................................................................. 3,288,143
121,500 Hyder PLC (Pref.)..................................................................... 243,628
201,000 Severn Trent PLC...................................................................... 3,517,583
------------
7,049,354
------------
TOTAL UNITED KINGDOM.................................................................. 53,387,793
------------
UNITED STATES (33.5%)
AEROSPACE & DEFENSE
70,000 Northrop Grumman Corp................................................................. 7,218,750
------------
ALUMINUM
105,000 Aluminum Co. of America............................................................... 6,923,437
------------
AUTOMOTIVE
124,000 Ford Motor Co......................................................................... 7,316,000
------------
BANKING
80,500 BankAmerica Corp...................................................................... 6,958,219
195,000 KeyCorp............................................................................... 6,946,875
------------
13,905,094
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
50
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES - GLOBAL DIVIDEND GROWTH
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
CHEMICALS
71,000 Dow Chemical Co....................................................................... $ 6,864,812
------------
COMPUTERS - SYSTEMS
64,000 International Business Machines Corp.................................................. 7,348,000
------------
CONGLOMERATES
83,500 Minnesota Mining & Manufacturing Co................................................... 6,862,656
183,000 Tenneco, Inc.......................................................................... 6,965,437
------------
13,828,093
------------
CONTAINERS - METAL & GLASS
146,500 Crown Cork & Seal Co., Inc............................................................ 6,958,750
------------
ENGINEERING & CONSTRUCTION
139,000 Fluor Corp............................................................................ 7,089,000
------------
FINANCIAL SERVICES
92,050 Associates First Capital Corp. (Class A).............................................. 7,076,344
------------
MACHINERY - DIVERSIFIED
140,000 Deere & Co............................................................................ 7,402,500
------------
METALS & MINING
121,000 Phelps Dodge Corp..................................................................... 6,919,688
------------
OIL - DOMESTIC
139,500 Ashland, Inc.......................................................................... 7,201,688
------------
OIL INTEGRATED - INTERNATIONAL
84,000 Chevron Corp.......................................................................... 6,977,250
------------
PAPER & FOREST PRODUCTS
156,000 International Paper Co................................................................ 6,708,000
------------
PHARMACEUTICALS
60,000 Bristol-Myers Squibb Co............................................................... 6,896,250
------------
RETAIL
144,000 Dayton-Hudson Corp.................................................................... 6,984,000
------------
SUPERMARKETS
130,000 Albertson's, Inc...................................................................... 6,735,625
------------
TELECOMMUNICATIONS
95,000 Sprint Corp........................................................................... 6,697,500
------------
TIRE & RUBBER GOODS
107,500 Goodyear Tire & Rubber Co............................................................. 6,927,031
------------
TOBACCO
180,000 Philip Morris Companies, Inc.......................................................... 7,087,500
------------
UTILITIES - ELECTRIC
183,400 GPU, Inc.............................................................................. 6,934,813
------------
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
UTILITIES - GAS
120,000 Consolidated Natural Gas Co........................................................... $ 7,065,000
------------
TOTAL UNITED STATES................................................................... 175,065,125
------------
TOTAL COMMON AND PREFERRED STOCKS
(IDENTIFIED COST $455,165,940)........................................................ 502,302,619
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS
- ----------
<C> <S> <C>
SHORT-TERM INVESTMENT (3.7%)
U.S. GOVERNMENT AGENCY
$ 19,500 Federal Home Loan Mortgage Corp. 5.85% due 07/01/98 (a) (AMORTIZED COST
$19,500,000)........................................................................ 19,500,000
------------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(IDENTIFIED COST $474,665,940) (B)........................................................ 99.8 % 521,802,619
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES............................................ 0.2 1,172,201
------ -------------
NET ASSETS................................................................................ 100.0 % $ 522,974,820
------ -------------
------ -------------
</TABLE>
- ---------------------
* Non-income producing security.
(a) Security was purchased on a discount basis. The interest rate shown has
been adjusted to reflect a money market equivalent yield.
(b) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $80,950,658 and the
aggregate gross unrealized depreciation is $33,813,979, resulting in net
unrealized appreciation of $47,136,679.
SEE NOTES TO FINANCIAL STATEMENTS
51
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES - GLOBAL DIVIDEND GROWTH
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
FORWARD FOREIGN CURRENCY CONTRACTS OPEN AT JUNE 30, 1998:
<TABLE>
<CAPTION>
UNREALIZED
CONTRACTS TO IN DELIVERY APPRECIATION
RECEIVE EXCHANGE FOR DATE (DEPRECIATION)
- ------------------------------------------------------------
<S> <C> <C> <C>
$ 240,512 JPY 34,135,934 07/01/98 $ (5,070)
ITL 348,967,125 $ 197,406 07/01/98 (1,423)
$ 73,803 JPY 10,258,585 07/02/98 --
$ 322,167 GBP 193,746 07/02/98 (905)
$ 224,025 JPY 31,123,763 07/03/98 113
$ 50,988 GBP 30,639 07/03/98 (104)
ITL 306,138,437 $ 172,283 07/06/98 (353)
GBP 468,870 $ 781,907 07/06/98 (66)
GBP 338,328 $ 564,298 07/07/98 (135)
<CAPTION>
UNREALIZED
CONTRACTS TO IN DELIVERY APPRECIATION
RECEIVE EXCHANGE FOR DATE (DEPRECIATION)
- ------------------------------------------------------------
<S> <C> <C> <C>
$ 158,129 FRF 957,600 07/31/98 97
$ 62,452 FRF 378,810 07/31/98 (63)
-------
Net unrealized depreciation........ $ (7,909)
-------
-------
</TABLE>
CURRENCY ABBREVIATIONS:
<TABLE>
<S> <C>
FRF French Franc.
GBP British Pound.
ITL Italian Lira.
JPY Japanese Yen.
</TABLE>
<TABLE>
<CAPTION>
PERCENT
OF
NET
INDUSTRY VALUE ASSETS
- -------------------------------------------------------------------------------------
<S> <C> <C>
Aerospace & Defense......................................... $ 7,218,750 1.4%
Aluminum.................................................... 6,923,437 1.3
Appliances & Household Durables............................. 2,264,789 0.4
Automobiles................................................. 2,495,622 0.5
Automotive.................................................. 18,238,662 3.5
Banking..................................................... 43,996,480 8.4
Brewers..................................................... 9,170,368 1.7
Building & Construction..................................... 13,606,798 2.6
Chemicals................................................... 14,958,200 2.9
Computers - Systems......................................... 7,348,000 1.4
Conglomerates............................................... 19,618,511 3.7
Containers - Metal & Glass.................................. 6,958,750 1.3
Electric.................................................... 2,383,309 0.4
Electric Power.............................................. 3,749,309 0.7
Electrical Equipment........................................ 2,558,370 0.5
Electronics & Electrical.................................... 47,058,454 9.0
Engineering & Construction.................................. 7,089,000 1.4
Entertainment & Leisure Time................................ 5,204,712 1.0
Financial Services.......................................... 17,673,051 3.4
Foods & Beverages........................................... 7,972,769 1.5
Gold........................................................ 1,919,518 0.4
Leisure..................................................... 3,083,174 0.6
Machinery - Diversified..................................... 18,147,629 3.5
Merchandising............................................... 1,631,649 0.3
Metals & Mining............................................. 6,919,688 1.3
Metals Non-Ferrous.......................................... 3,207,853 0.6
Miscellaneous Materials & Commodities....................... 6,350,128 1.2
Multi-Industry.............................................. 12,128,192 2.3
Natural Gas................................................. 6,573,141 1.3
Oil & Gas Products.......................................... 3,991,071 0.8
<CAPTION>
PERCENT
OF
NET
INDUSTRY VALUE ASSETS
- -------------------------------------------------------------------------------------
<S> <C> <C>
Oil - Domestic.............................................. $ 7,201,688 1.4%
Oil Integrated - International.............................. 13,404,348 2.6
Oil Related................................................. 7,704,962 1.5
Paper & Forest Products..................................... 8,742,336 1.7
Paper Products.............................................. 3,200,849 0.6
Pharmaceuticals............................................. 21,855,797 4.2
Postal Delivery............................................. 6,683,105 1.3
Real Estate................................................. 9,325,702 1.8
Retail...................................................... 6,984,000 1.3
Retail - Department Stores.................................. 2,426,312 0.5
Steel & Iron................................................ 8,233,039 1.6
Supermarkets................................................ 6,735,625 1.3
Telecommunications.......................................... 19,847,264 3.8
Television.................................................. 3,123,591 0.6
Textiles & Apparel.......................................... 2,531,107 0.5
Tire & Rubber Goods......................................... 6,927,031 1.3
Tobacco..................................................... 16,057,359 3.1
Transportation.............................................. 2,350,044 0.4
U.S. Government Agency...................................... 19,500,000 3.7
Utilities - Electric........................................ 24,414,722 4.7
Utilities - Gas............................................. 7,065,000 1.3
Utilities - Water........................................... 7,049,354 1.3
------------- ---
$ 521,802,619 99.8%
------------- ---
------------- ---
</TABLE>
<TABLE>
<CAPTION>
PERCENT
OF
NET
TYPE OF INVESTMENT VALUE ASSETS
- -------------------------------------------------------------------------------------
<S> <C> <C>
Common Stocks............................................... $ 499,527,884 95.5%
Preferred Stocks............................................ 2,774,735 0.6
Short-Term Investment....................................... 19,500,000 3.7
------------- ---
$ 521,802,619 99.8%
------------- ---
------------- ---
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
52
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES - EUROPEAN GROWTH
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------
<C> <S> <C>
COMMON AND PREFERRED STOCKS AND RIGHTS (97.9%)
DENMARK (0.9%)
PHARMACEUTICALS
33,950 Novo-Nordisk AS (Series B)................... $ 4,675,616
-------------
FINLAND (1.8%)
INSURANCE
887 Pohjola Insurance Co. "B".................... 44,085
-------------
TELECOMMUNICATION EQUIPMENT
124,400 Nokia Oyj (A Shares)......................... 9,138,400
-------------
TOTAL FINLAND................................ 9,182,485
-------------
FRANCE (16.4%)
BANKING
87,467 Banque Nationale de Paris.................... 7,130,737
1,138 Banque Nationale de Paris (New)*............. 92,775
59,560 Credit Commercial de France.................. 5,003,060
-------------
12,226,572
-------------
CONGLOMERATES
63,790 Lagardere S.C.A.............................. 2,649,714
-------------
ELECTRICAL EQUIPMENT
55,480 Alcatel Alsthom.............................. 11,270,877
-------------
ELECTRONICS - SEMICONDUCTORS
83,900 SGS-Thomson Microelectronics N.V.*........... 5,933,022
-------------
HOTELS/MOTELS
41,330 Accor S.A.................................... 11,540,616
-------------
HOUSEHOLD PRODUCTS
50,940 Societe BIC S.A.............................. 3,614,853
-------------
INSURANCE
99,400 AXA-UAP...................................... 11,154,716
-------------
MERCHANDISING
7,800 Carrefour S.A................................ 4,923,674
-------------
MISCELLANEOUS MATERIALS & COMMODITIES
28,800 Compagnie de Saint-Gobain.................... 5,327,964
-------------
OIL RELATED
24,040 Elf Aquitaine S.A............................ 3,372,225
42,000 Total S.A. (B Shares)........................ 5,447,974
-------------
8,820,199
-------------
<CAPTION>
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------
<C> <S> <C>
PHARMACEUTICALS
50,150 Sanofi S.A................................... $ 5,884,421
-------------
RETAIL
23,250 Etablissements Economiques du Casino
Guichard-Perrachon ET CIE*................. 1,852,480
-------------
TOTAL FRANCE................................. 85,199,108
-------------
GERMANY (11.8%)
AIRLINES
240,000 Deutsche Lufthansa AG........................ 6,032,185
-------------
APPAREL MANUFACTURER
1,490 Hugo Boss AG (Pref.)......................... 3,279,434
-------------
AUTOMOTIVE
6,744 Bayerische Motoren Werke (BMW) AG............ 6,806,282
1,348 Bayerische Motoren Werke (BMW) AG (New)*..... 1,341,813
674 Bayerische Motoren Werke (BMW) AG
(Rights)*.................................. 680,224
6,430 Volkswagen AG................................ 6,197,805
-------------
15,026,124
-------------
BANKING
95,200 Bayerische Vereinsbank AG.................... 8,054,858
47,500 Dresdner Bank AG............................. 2,561,107
-------------
10,615,965
-------------
CHEMICALS
108,400 BASF AG...................................... 5,140,353
-------------
HEALTH & PERSONAL CARE
81 Rhoen-Klinikum AG............................ 7,996
103 Rhoen-Klinikum AG (Pref.).................... 9,911
-------------
17,907
-------------
MACHINERY - DIVERSIFIED
95,000 Mannesmann AG................................ 9,745,341
-------------
MULTI-LINE INSURANCE
23,450 Allianz AG................................... 7,800,240
-------------
UTILITIES
59,000 VEBA AG...................................... 3,959,326
-------------
TOTAL GERMANY................................ 61,616,875
-------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
53
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES - EUROPEAN GROWTH
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------
<C> <S> <C>
ITALY (4.1%)
BANKING
2,100,000 Banca di Roma*............................... $ 4,363,697
-------------
HOUSEHOLD FURNISHINGS & APPLIANCES
112,650 Industrie Natuzzi SpA (ADR).................. 2,928,900
-------------
TELECOMMUNICATIONS
1,203,500 Telecom Italia SpA........................... 8,844,096
-------------
TELEVISION
830,000 Mediaset SpA................................. 5,288,302
-------------
TOTAL ITALY.................................. 21,424,995
-------------
NETHERLANDS (11.1%)
ELECTRICAL EQUIPMENT
149,235 Philips Electronics NV....................... 12,517,995
-------------
ELECTRONICS - SEMICONDUCTORS
81,000 ASM Lithography Holding NV*.................. 2,391,936
-------------
INSURANCE
109,444 Aegon NV..................................... 9,502,398
604 Aegon NV (Stock Dividend)*................... 52,442
153,584 ING Groep NV................................. 10,035,018
-------------
19,589,858
-------------
OIL INTEGRATED - INTERNATIONAL
105,440 Royal Dutch Petroleum Co..................... 5,834,216
-------------
PUBLISHING
272,000 Ver Ned Uitgev Ver Bezit NV.................. 9,860,100
-------------
RETAIL
233,137 Koninklijke Ahold NV......................... 7,467,794
4,662 Koninklijke Ahold NV (Stock Dividend)*....... 149,332
-------------
7,617,126
-------------
TOTAL NETHERLANDS............................ 57,811,231
-------------
SPAIN (4.5%)
BANKING
166,283 Banco Bilbao Vizcaya S.A..................... 8,528,723
81,842 Banco Popular Espanol S.A.................... 6,976,625
-------------
15,505,348
-------------
TELECOMMUNICATIONS
165,494 Telefonica S.A............................... 7,646,979
-------------
TOTAL SPAIN.................................. 23,152,327
-------------
SWEDEN (9.8%)
AUTOMOBILES
208,750 Volvo AB (B Shares).......................... 6,201,917
-------------
<CAPTION>
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------
<C> <S> <C>
BANKING
367,000 Nordbanken Holding AB*....................... $ 2,685,702
-------------
BUSINESS SERVICES
110,000 Assa Abloy AB (Series B)..................... 4,313,860
169,000 Securitas AB (Series "B" Free)............... 8,255,504
-------------
12,569,364
-------------
INSURANCE
548,405 Skandia Forsakrings AB....................... 7,820,637
-------------
PHARMACEUTICALS
260,167 Astra AB (B Shares).......................... 5,174,700
105,600 Astra AB (Series "A" Free)................... 2,153,215
-------------
7,327,915
-------------
RETAIL
62,080 Hennes & Mauritz AB (B Shares)............... 3,952,805
-------------
TELECOMMUNICATION EQUIPMENT
364,540 Ericsson (L.M.) Telephone Co. AB (Series "B"
Free)...................................... 10,625,196
-------------
TOTAL SWEDEN................................. 51,183,536
-------------
SWITZERLAND (8.6%)
BANKING
43,565 Credit Suisse Group.......................... 9,679,518
24,175 UBS AG....................................... 8,976,103
-------------
18,655,621
-------------
FINANCIAL SERVICES
2,470 Compagnie Financiere Richemont AG (Series
"A")....................................... 3,227,748
-------------
FOOD, BEVERAGE, TOBACCO, & HOUSEHOLD PRODUCTS
5,082 Nestle S.A................................... 10,859,889
-------------
PHARMACEUTICALS
4,720 Novartis AG.................................. 7,842,844
1,000 Novartis AG - Bearer......................... 1,662,936
281 Roche Holdings AG............................ 2,755,428
-------------
12,261,208
-------------
TOTAL SWITZERLAND............................ 45,004,466
-------------
UNITED KINGDOM (28.9%)
AEROSPACE & DEFENSE
405,492 British Aerospace PLC........................ 3,103,565
810,000 Rolls-Royce PLC*............................. 3,342,921
114,707 Smiths Industries PLC........................ 1,587,573
-------------
8,034,059
-------------
AIR TRANSPORT
154,350 British Airways PLC.......................... 1,669,100
-------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
54
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES - EUROPEAN GROWTH
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------
<C> <S> <C>
AUTOMOTIVE
414,838 BBA Group PLC................................ $ 3,119,758
-------------
BANKING
339,000 Abbey National PLC........................... 6,020,259
159,000 Barclays Bank PLC............................ 4,581,490
158,394 HSBC Holdings PLC............................ 4,017,295
290,000 Lloyds TSB Group PLC......................... 4,054,776
154,000 Standard Chartered PLC....................... 1,748,774
-------------
20,422,594
-------------
BEVERAGES - ALCOHOLIC
311,297 Diageo PLC................................... 3,685,523
-------------
BROADCAST MEDIA
160,000 Flextech PLC*................................ 1,478,072
-------------
BUILDING & CONSTRUCTION
313,000 Blue Circle Industries PLC................... 1,766,724
-------------
BUSINESS SERVICES
169,866 Reuters Holdings PLC......................... 1,940,273
-------------
COMPUTER SOFTWARE & SERVICES
150,000 Sage Group (The) PLC......................... 4,235,567
385,816 SEMA Group PLC............................... 4,535,605
-------------
8,771,172
-------------
CONGLOMERATES
608,562 BTR PLC...................................... 1,725,121
415,000 Tomkins PLC.................................. 2,250,771
-------------
3,975,892
-------------
ELECTRICAL EQUIPMENT
306,363 BICC Group (The) PLC......................... 653,901
210,000 General Electric Co. PLC..................... 1,808,654
-------------
2,462,555
-------------
FOOD PROCESSING
262,000 Associated British Foods PLC................. 2,470,585
312,000 Unilever PLC................................. 3,319,259
-------------
5,789,844
-------------
FOOD, BEVERAGE, TOBACCO, & HOUSEHOLD PRODUCTS
266,420 B.A.T. Industries PLC........................ 2,665,532
177,500 Tate & Lyle PLC.............................. 1,406,651
-------------
4,072,183
-------------
HEALTH & PERSONAL CARE
880,000 London International Group PLC............... 3,088,877
-------------
INSURANCE
40,000 Britannic Assurance PLC...................... 757,045
289,200 Prudential Corp. PLC......................... 3,807,293
327,271 Royal & Sun Alliance Insurance Group PLC..... 3,380,763
-------------
7,945,101
-------------
<CAPTION>
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------
<C> <S> <C>
LEISURE
216,000 Granada Group PLC............................ $ 3,969,184
314,000 Rank Group PLC............................... 1,722,627
-------------
5,691,811
-------------
NATURAL GAS
601,541 BG PLC*...................................... 3,475,636
-------------
OIL RELATED
440,000 British Petroleum Co. PLC.................... 6,412,538
794,000 Lasmo PLC.................................... 3,177,588
329,000 Shell Transport & Trading Co. PLC............ 2,315,124
-------------
11,905,250
-------------
PHARMACEUTICALS
319,100 Glaxo Wellcome PLC........................... 9,572,465
473,344 SmithKline Beecham PLC....................... 5,773,738
-------------
15,346,203
-------------
PUBLISHING - NEWSPAPER
198,000 United News & Media PLC...................... 2,766,783
-------------
RAILROAD EQUIPMENT
90,000 Railtrack Group PLC.......................... 2,204,602
-------------
REAL ESTATE
203,200 Hammerson PLC................................ 1,650,131
-------------
RETAIL
209,200 Great Universal Stores PLC................... 2,755,844
247,000 Morrison (W.M.) Supermarkets PLC............. 1,243,855
164,000 Next PLC..................................... 1,408,370
-------------
5,408,069
-------------
RETAIL - DEPARTMENT STORES
162,000 Kingfisher PLC............................... 2,606,803
-------------
RETAIL - MERCHANDISING
177,820 Tesco PLC.................................... 1,734,612
-------------
TELECOMMUNICATIONS
829,000 British Telecommunications PLC............... 10,229,445
474,000 General Cable PLC*........................... 1,881,140
425,635 Securicor PLC................................ 3,463,562
180,000 Vodafone Group PLC........................... 2,282,641
-------------
17,856,788
-------------
UTILITIES - ELECTRIC
168,524 National Power PLC........................... 1,584,918
-------------
TOTAL UNITED KINGDOM......................... 150,453,333
-------------
TOTAL COMMON AND PREFERRED STOCKS AND RIGHTS
(IDENTIFIED COST $349,451,800)............... 509,703,972
-------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
55
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES - EUROPEAN GROWTH
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- --------------------------------------------------------------------------
<C> <S> <C>
SHORT-TERM INVESTMENT (a) (1.5%)
U.S. GOVERNMENT AGENCY
$ 8,000 Federal Home Loan Mortgage Corp. 5.85% due
07/01/98
(AMORTIZED COST $8,000,000)................ $ 8,000,000
-------------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(IDENTIFIED COST $357,451,800) (b)........................................................ 99.4 % 517,703,972
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES............................................ 0.6 3,227,573
------ -------------
NET ASSETS................................................................................ 100.0 % $ 520,931,545
------ -------------
------ -------------
</TABLE>
- ---------------------
ADR American Depository Receipt.
* Non-income producing security.
(a) Security was purchased on a discount basis. The interest rate shown has
been adjusted to reflect a money market equivalent yield.
(b) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $165,154,546 and the
aggregate gross unrealized depreciation is $4,902,374, resulting in net
unrealized appreciation of $160,252,172.
FORWARD FOREIGN CURRENCY CONTRACTS OPEN AT JUNE 30, 1998:
<TABLE>
<CAPTION>
UNREALIZED
CONTRACTS TO IN DELIVERY APPRECIATION/
RECEIVE EXCHANGE FOR DATE DEPRECIATION
- --------------------------------------------------
<S> <C> <C> <C>
$ 95,931 FIM 526,423 07/01/98 $ 92
$ 806,477 GBP 483,500 07/01/98 242
$ 208,685 GBP 125,374 07/02/98 (376)
-----
Net unrealized depreciation......... $ (42)
-----
-----
</TABLE>
<TABLE>
<CAPTION>
CURRENCY ABBREVIATIONS:
- -------------------------------------------------------
<S> <C>
GBP British Pound.
FIM Finnish Markka.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
56
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES - EUROPEAN GROWTH
SUMMARY OF INVESTMENTS JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
PERCENT
OF
NET
INDUSTRY VALUE ASSETS
<S> <C> <C>
- -----------------------------------------------------------------------------------
Aerospace & Defense......................................... $ 8,034,059 1.5 %
Air Transport............................................... 1,669,100 0.3
Airlines.................................................... 6,032,185 1.2
Apparel Manufacturer........................................ 3,279,434 0.6
Automobiles................................................. 6,201,917 1.2
Automotive.................................................. 18,145,882 3.5
Banking..................................................... 84,475,499 16.2
Beverages - Alcoholic....................................... 3,685,523 0.7
Broadcast Media............................................. 1,478,072 0.3
Building & Construction..................................... 1,766,724 0.3
Business Services........................................... 14,509,637 2.8
Chemicals................................................... 5,140,353 1.0
Computer Software & Services................................ 8,771,172 1.7
Conglomerates............................................... 6,625,606 1.3
Electrical Equipment........................................ 26,251,427 5.1
Electronics - Semiconductors................................ 8,324,958 1.6
Financial Services.......................................... 3,227,748 0.6
Food Processing............................................. 5,789,844 1.1
Food, Beverage, Tobacco, & Household Products............... 14,932,072 2.9
Health & Personal Care...................................... 3,106,784 0.6
Hotels/Motels............................................... 11,540,616 2.2
Household Furnishings & Appliances.......................... 2,928,900 0.6
Household Products.......................................... 3,614,853 0.7
Insurance................................................... 46,554,397 8.9
Leisure..................................................... 5,691,811 1.1
Machinery - Diversified..................................... 9,745,341 1.9
Merchandising............................................... 4,923,674 0.9
Miscellaneous Materials & Commodities....................... 5,327,964 1.0
<CAPTION>
PERCENT
OF
NET
INDUSTRY VALUE ASSETS
- -----------------------------------------------------------------------------------
<S> <C> <C>
Multi-Line Insurance........................................ $ 7,800,240 1.5 %
Natural Gas................................................. 3,475,636 0.7
Oil Integrated - International.............................. 5,834,216 1.1
Oil Related................................................. 20,725,449 4.0
Pharmaceuticals............................................. 45,495,363 8.7
Publishing.................................................. 9,860,100 1.9
Publishing - Newspaper...................................... 2,766,783 0.5
Railroad Equipment.......................................... 2,204,602 0.4
Real Estate................................................. 1,650,131 0.3
Retail...................................................... 18,830,480 3.6
Retail - Department Stores.................................. 2,606,803 0.5
Retail - Merchandising...................................... 1,734,612 0.3
Telecommunication Equipment................................. 19,763,596 3.8
Telecommunications.......................................... 34,347,863 6.6
Television.................................................. 5,288,302 1.0
U.S. Government Agency...................................... 8,000,000 1.6
Utilities................................................... 3,959,326 0.8
Utilities - Electric........................................ 1,584,918 0.3
------------ -------
$517,703,972 99.4 %
------------ -------
------------ -------
</TABLE>
<TABLE>
<CAPTION>
PERCENT
OF
NET
TYPE OF INVESTMENT VALUE ASSETS
<S> <C> <C>
- -----------------------------------------------------------------------------------
Common Stocks............................................... $505,734,403 97.2 %
Preferred Stocks............................................ 3,289,345 0.6
Rights...................................................... 680,224 0.1
Short-Term Investment....................................... 8,000,000 1.5
------------ -------
$517,703,972 99.4 %
------------ -------
------------ -------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
57
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES - PACIFIC GROWTH
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS, WARRANTS AND BONDS (86.2%)
AUSTRALIA (5.3%)
BANKING
125,000 Westpac Banking Corp., Ltd....................................................... $ 761,898
-----------
COMMERCIAL SERVICES
60,500 Mayne Nickless Ltd............................................................... 320,090
-----------
FOOD WHOLESALERS
295,000 Goodman Fielder Ltd.............................................................. 428,983
-----------
FOOD, BEVERAGE, TOBACCO, & HOUSEHOLD PRODUCTS
257,000 Fosters Brewing Group Ltd........................................................ 604,320
-----------
MANUFACTURING - DIVERSIFIED
230,000 Pacific Dunlop Ltd............................................................... 371,466
-----------
OIL - EXPLORATION & PRODUCTION
90,000 Oil Search Ltd................................................................... 135,888
-----------
RETAIL STORES
38,400 Coles Myer Ltd................................................................... 149,700
-----------
TOTAL AUSTRALIA.................................................................. 2,772,345
-----------
CHINA (1.0%)
METALS & MINING
795,000 Yanzhou Coal Mining Co., Ltd..................................................... 151,888
-----------
REAL ESTATE
382,000 China Resources Beijing Land..................................................... 123,281
-----------
UTILITIES - ELECTRIC
331,000 Huaneng Power International, Inc. (Class H)...................................... 110,027
476,000 Zhejiang Southeast Electric Power Co., Ltd. (B Shares)........................... 133,280
-----------
243,307
-----------
TOTAL CHINA...................................................................... 518,476
-----------
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
HONG KONG (27.4%)
BANKING
219,000 Dao Heng Bank Group Ltd.......................................................... $ 310,979
131,500 Hang Seng Bank Ltd............................................................... 743,523
27,000 HSBC Holdings PLC................................................................ 660,492
-----------
1,714,994
-----------
BANKS
28,600 Dah Sing Financial Group......................................................... 33,228
-----------
BUILDING & CONSTRUCTION
74,000 New World Infrastructure Ltd.*................................................... 85,019
-----------
CONGLOMERATES
118,000 Citic Pacific Ltd................................................................ 208,688
496,000 Hutchison Whampoa Ltd............................................................ 2,618,783
92,000 Swire Pacific Ltd. (Class A)..................................................... 347,383
-----------
3,174,854
-----------
ELECTRONIC & ELECTRICAL EQUIPMENT
191,000 ASM Pacific Technology Ltd....................................................... 81,366
125,000 Johnson Electric Holdings, Ltd................................................... 463,112
-----------
544,478
-----------
ENGINEERING & CONSTRUCTION
150,000 Road King Infrastructure Ltd.*................................................... 118,118
-----------
REAL ESTATE
358,000 Cheung Kong (Holdings) Ltd....................................................... 1,760,769
398,000 New World Development Co., Ltd................................................... 770,671
283,000 Sun Hung Kai Properties Ltd...................................................... 1,201,923
-----------
3,733,363
-----------
RETAIL - FOOD CHAINS
258,000 Dairy Farm International Holdings Ltd............................................ 276,060
-----------
RETAIL - SPECIALTY APPAREL
60 Dickson Concepts International Ltd. (New)........................................ 84
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
58
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES - PACIFIC GROWTH
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
TELECOMMUNICATIONS
299,000 China Telecom Ltd................................................................ $ 519,144
1,000,000 Hong Kong Telecommunications Ltd................................................. 1,878,267
-----------
2,397,411
-----------
UTILITIES
276,500 CLP Holdings Ltd................................................................. 1,259,982
431,892 Hong Kong & China Gas Co., Ltd................................................... 490,628
19,676 Hong Kong & China Gas Co., Ltd. (Warrants due 09/30/99).......................... 1,346
195,000 Hong Kong Electric Holdings Ltd.................................................. 604,144
-----------
2,356,100
-----------
TOTAL HONG KONG.................................................................. 14,433,709
-----------
INDIA (1.1%)
ALUMINUM
9,000 Hindalco Industries Ltd. (GDR)*.................................................. 126,000
-----------
BANKING
16,000 State Bank of India (GDR)........................................................ 189,600
-----------
TELEPHONES
13,500 Mahanagar Telephone Nigam Ltd. (GDR)*............................................ 141,412
-----------
TEXTILES
18,000 Reliance Industries Ltd. (GDR)................................................... 117,450
-----------
TOTAL INDIA...................................................................... 574,462
-----------
INDONESIA (0.4%)
INVESTMENT COMPANIES
500,000 Peregrine Indonesia Fund Ltd.**.................................................. --
-----------
OIL & GAS EXPLORATION
16,500 Gulf Indonesia Resources Ltd.*................................................... 189,750
-----------
TOTAL INDONESIA.................................................................. 189,750
-----------
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
JAPAN (19.3%)
AUTO TRUCKS & PARTS
1,000 Yasunaga Corp.................................................................... $ 6,043
-----------
AUTOMOTIVE
7,000 Honda Motor Co................................................................... 248,777
8,000 Toyota Motor Corp................................................................ 206,619
-----------
455,396
-----------
BANKING
26,000 Asahi Bank Ltd................................................................... 114,101
18,000 Bank of Tokyo-Mitsubishi Ltd..................................................... 190,230
30,000 Mitsui Trust & Banking Co., Ltd.................................................. 70,576
15,000 Sanwa Bank Ltd................................................................... 133,921
15,000 Sumitomo Bank Ltd................................................................ 145,683
12,000 Sumitomo Trust & Banking Co...................................................... 53,525
-----------
708,036
-----------
BEVERAGES
3,000 Itoen Ltd........................................................................ 92,806
24,000 Kajima Corp...................................................................... 65,612
4,000 Mikuni Coca-Cola Bottling Co..................................................... 68,489
-----------
226,907
-----------
BREWERY
17,000 Kirin Brewery Co., Ltd........................................................... 160,216
-----------
BUILDING & CONSTRUCTION
7,000 Kaneshita Construction........................................................... 36,360
JPY 12,000 K Sanwa Shutter Corp. 0.90% due 03/31/06 (Conv.)................................... 79,338
-----------
115,698
-----------
BUILDING MATERIALS
3,700 Nichiha Corp..................................................................... 21,801
14,000 Sanwa Shutter Corp............................................................... 61,439
-----------
83,240
-----------
BUSINESS SERVICES
2,000 Nichii Gakkan Co................................................................. 66,331
3,000 Secom Co......................................................................... 172,878
-----------
239,209
-----------
CHEMICALS
6,000 Ibiden Co., Ltd.................................................................. 82,662
33,000 Mitsubishi Chemical Corp......................................................... 59,590
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
59
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES - PACIFIC GROWTH
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
10,000 Sanyo Chemical Industries Ltd.................................................... $ 84,892
7,000 Shin-Etsu Chemical Co............................................................ 120,863
14,000 Sumitomo Bakelite Co., Ltd....................................................... 93,065
3,000 Tokyo Ohka Kogyo Co., Ltd........................................................ 85,036
-----------
526,108
-----------
COMPUTER SOFTWARE & SERVICES
6,000 Hitachi Software Engineering Co., Ltd............................................ 158,849
3,000 Meitec Corp...................................................................... 103,597
5 NTT Data Communications Systems Corp............................................. 180,216
-----------
442,662
-----------
COSMETICS
9,000 Kao Corp......................................................................... 138,561
-----------
ELECTRIC
6,500 Tokyo Electric Power Co.......................................................... 127,194
-----------
ELECTRONIC & ELECTRICAL EQUIPMENT
2,000 Aiwa Co., Ltd.................................................................... 62,590
5,000 Canon, Inc....................................................................... 113,309
JPY 9,000 K Canon, Inc. 1.00% due 12/20/02 (Conv.)........................................... 137,590
3,000 Mitsui High-Tec, Inc............................................................. 70,791
14,000 NGK Insulators, Ltd.............................................................. 121,367
2,000 Shinko Electric Industries Co., Ltd.............................................. 72,662
3,400 Sony Corp........................................................................ 292,302
10,000 Sumitomo Electric Industries..................................................... 100,935
3,000 TDK Corp......................................................................... 221,223
-----------
1,192,769
-----------
ELECTRONICS
500 Nidec Corp....................................................................... 34,101
2,000 Rohm Co., Ltd.................................................................... 205,036
-----------
239,137
-----------
ELECTRONICS - SEMICONDUCTORS/COMPONENTS
4,000 Tokyo Seimitsu Co., Ltd.......................................................... 100,719
-----------
ENGINEERING & CONSTRUCTION
8,000 Kurita Water Industries Ltd...................................................... 94,389
-----------
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
ENTERTAINMENT
2,000 Nintendo Co., Ltd................................................................ $ 184,892
3,600 Sony Music Entertainment Inc..................................................... 152,547
-----------
337,439
-----------
FINANCIAL SERVICES
2,000 Nichiei Co., Ltd. (Kyoto)........................................................ 135,827
10,000 Nomura Securities Co., Ltd....................................................... 116,187
2,700 Orix Corp........................................................................ 182,007
-----------
434,021
-----------
FOOD, BEVERAGE, TOBACCO, & HOUSEHOLD PRODUCTS
10,000 Nippon Meat Packers, Inc......................................................... 122,230
-----------
HAND TOOLS
1,000 Disco Corp....................................................................... 27,698
-----------
INSURANCE
15,000 Tokio Marine & Fire Insurance Co................................................. 153,885
-----------
MACHINERY
14,000 Daifuku Co., Ltd................................................................. 52,072
3,000 Fuji Machine Manufacturing Co., Ltd.............................................. 79,425
1,300 Keyence Corp..................................................................... 141,223
7,000 Minebea Co., Ltd................................................................. 69,547
JPY 19,000 K Minebea Co., Ltd. 0.80% due 03/31/03 (Conv.)..................................... 220,482
16,000 OSG Corp......................................................................... 95,540
2,700 Shima Seiki Manufacturing Ltd.................................................... 91,101
-----------
749,390
-----------
MERCHANDISING
4,000 Misumi Corp...................................................................... 67,338
-----------
METALS
100 Fujimi Inc....................................................................... 3,655
-----------
METALS & MINING
4,000 Sumitomo Special Metals Co., Ltd................................................. 84,892
-----------
METALS NON-FERROUS
29,000 Mitsui Mining & Smelting Co., Ltd................................................ 120,173
-----------
MULTI-INDUSTRY
10,000 Mitsui & Co...................................................................... 53,957
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
60
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES - PACIFIC GROWTH
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
NATURAL GAS
48,000 Tokyo Gas Co., Ltd............................................................... $ 106,705
-----------
OFFICE EQUIPMENT
14,000 Ricoh Co., Ltd................................................................... 147,151
-----------
PAPER PRODUCTS
23,000 Tomoegawa Paper Co., Ltd......................................................... 56,424
-----------
PHARMACEUTICALS
12,000 Sankyo Co., Ltd.................................................................. 272,806
7,000 Takeda Chemical Industries....................................................... 185,827
-----------
458,633
-----------
PHOTOGRAPHY/IMAGING
7,000 Fuji Photo Film Co............................................................... 243,237
-----------
REAL ESTATE
24,000 Heiwa Real Estate Co., Ltd....................................................... 69,065
JPY 4,000 K Heiwa Real Estate Co., Ltd. 2.50% due 03/29/02 (Conv.)........................... 29,151
10,000 Mitsubishi Estate Co., Ltd....................................................... 87,770
11,000 Mitsui Fudosan Co................................................................ 86,734
-----------
272,720
-----------
RETAIL
4,000 Ito-Yokado Co., Ltd.............................................................. 187,914
700 Otsuka Kagu Ltd.................................................................. 32,230
-----------
220,144
-----------
RETAIL - DEPARTMENT STORES
12,000 Hankyu Department Stores, Inc.................................................... 62,331
-----------
RETAIL - GENERAL MERCHANDISE
2,200 Circle K Japan Co., Ltd.......................................................... 76,446
3,000 Seven - Eleven Japan Co., Ltd.................................................... 178,273
3,500 Shimamura Co., Ltd............................................................... 94,424
-----------
349,143
-----------
STEEL
76,000 Nippon Steel Co.................................................................. 133,410
52,000 Sumitomo Metal Industries........................................................ 83,424
10,000 Yamato Kogyo Co., Ltd............................................................ 73,381
-----------
290,215
-----------
TELECOMMUNICATIONS
21 DDI Corp......................................................................... 72,971
11,000 Nippon Comsys Corp............................................................... 126,144
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
27 Nippon Telegraph & Telephone Corp................................................ $ 223,381
-----------
422,496
-----------
TEXTILES
32,000 Mitsubishi Rayon Co., Ltd........................................................ 89,324
40,000 Nitto Boseki Co., Ltd............................................................ 89,784
-----------
179,108
-----------
TIRE & RUBBER GOODS
6,000 Bridgestone Corp................................................................. 141,583
-----------
TRANSPORTATION
25 East Japan Railway Co............................................................ 117,266
25,000 Tokyu Corp....................................................................... 75,719
-----------
192,985
-----------
TOTAL JAPAN...................................................................... 10,153,837
-----------
MALAYSIA (5.0%)
AUTOMOTIVE
105,680 Oriental Holdings Berhad......................................................... 176,560
-----------
BANKING
117,600 Malayan Banking Berhad........................................................... 119,024
283,999 Public Bank Berhad............................................................... 85,956
-----------
204,980
-----------
BUILDING & CONSTRUCTION
114,999 Gamuda Berhad.................................................................... 87,433
16,666 Gamuda Berhad (Warrants due 12/29/01)*........................................... 1,090
135,000 Lingkaran Trans Kota Holdings Berhad*............................................ 77,143
-----------
165,666
-----------
ELECTRONICS
45,000 Malaysian Pacific Industries Berhad.............................................. 53,390
-----------
INSURANCE
140,400 Malaysian Assurance Alliance Berhad.............................................. 122,383
-----------
LEISURE
123,000 Berjaya Sports Toto Berhad....................................................... 183,160
371,000 Metroplex Berhad................................................................. 59,737
175,000 Resorts World Berhad............................................................. 193,220
-----------
436,117
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
61
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES - PACIFIC GROWTH
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
MULTI-INDUSTRY
110,000 Hong Leong Industries Berhad..................................................... $ 82,034
-----------
PLANTATION
162,000 Highlands & Lowlands Berhad...................................................... 114,930
367,000 IOI Corporated Berhad............................................................ 183,944
95,500 Kuala Lumpur Kepong Berhad....................................................... 154,927
-----------
453,801
-----------
TELECOMMUNICATIONS
184,000 Telekom Malaysia Berhad.......................................................... 311,864
-----------
TOBACCO
60,000 R.J. Reynolds Berhad............................................................. 83,535
-----------
UTILITIES
248,000 Tenaga Nasional Berhad........................................................... 300,242
-----------
UTILITIES - ELECTRIC
105,000 Malakoff Berhad.................................................................. 194,491
-----------
WATER
206,000 Puncak Niaga Holdings Berhad*.................................................... 71,826
-----------
TOTAL MALAYSIA................................................................... 2,656,889
-----------
PHILIPPINES (2.0%)
CONGLOMERATES
315,000 First Philippine Holdings Corp. (B Shares)....................................... 212,530
-----------
REAL ESTATE
608,400 Ayala Land, Inc.................................................................. 175,923
-----------
TELECOMMUNICATIONS
17,200 Philippine Long Distance Telephone Co. (ADR)..................................... 389,150
-----------
UTILITIES
112,900 Manila Electric Co. (B Shares)................................................... 299,253
-----------
TOTAL PHILIPPINES................................................................ 1,076,856
-----------
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
SINGAPORE (8.9%)
BANKING
66,400 Development Bank of Singapore, Ltd............................................... $ 368,451
162,520 Overseas Chinese Banking Corp., Ltd.............................................. 554,593
136,000 Overseas Union Bank Ltd.......................................................... 298,635
131,000 United Overseas Bank Ltd......................................................... 408,160
-----------
1,629,839
-----------
CONGLOMERATES
85,500 Keppel Corp., Ltd................................................................ 128,884
195,000 Natsteel Ltd..................................................................... 189,792
-----------
318,676
-----------
ELECTRONIC & ELECTRICAL EQUIPMENT
38,700 Elec & Eltek International Co., Ltd.............................................. 130,806
179,000 Venture Manufacturing Ltd........................................................ 339,941
-----------
470,747
-----------
ELECTRONICS
30,000 GP Batteries International Ltd................................................... 54,837
-----------
ENGINEERING
401,471 Singapore Technologies Engineering Ltd........................................... 283,531
-----------
PUBLISHING
42,467 Singapore Press Holdings Ltd..................................................... 284,794
-----------
REAL ESTATE
121,000 City Developments Ltd............................................................ 338,944
116,000 Keppel Land Ltd.................................................................. 106,706
-----------
445,650
-----------
SHIPBUILDING
48,000 Jurong Shipyard Ltd.............................................................. 232,166
78,000 Keppel Fels Ltd.................................................................. 233,769
-----------
465,935
-----------
TELECOMMUNICATIONS
210,000 Singapore Telecommunications Ltd................................................. 299,110
-----------
TRANSPORTATION
100,000 Singapore Airlines Ltd........................................................... 468,843
-----------
TOTAL SINGAPORE.................................................................. 4,721,962
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
62
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES - PACIFIC GROWTH
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
SOUTH KOREA (3.0%)
COMMUNICATIONS - EQUIPMENT/MANUFACTURERS
1 LG Information & Communication Ltd............................................... $ 15
-----------
ELECTRONIC & ELECTRICAL EQUIPMENT
5,799 Samsung Display Devices Co....................................................... 158,732
15,388 Samsung Electronics Co. (GDR).................................................... 477,365
80 Samsung Electronics Co........................................................... 1,270
-----------
637,367
-----------
ENERGY
19,200 Korea Electric Power Corp........................................................ 205,314
-----------
INVESTMENT COMPANIES
25,000 Atlantis Korean Smaller Co's*.................................................... 118,750
-----------
MACHINERY
49,500 Daewoo Heavy Industries.......................................................... 151,029
-----------
STEEL & IRON
13,670 Pohang Iron & Steel Co., Ltd..................................................... 456,837
-----------
TOTAL SOUTH KOREA................................................................ 1,569,312
-----------
TAIWAN (10.2%)
BUILDING MATERIALS
41,063 Asia Cement Corp. (GDR).......................................................... 369,567
-----------
CHEMICALS
$ 205 K Nan Ya Plastics Corp. 1.75% due 07/09/01 (Conv.)................................. 217,300
-----------
COMPUTERS
33,000 Acer, Inc. (GDR)................................................................. 194,700
9,000 Asustek Computer Inc. (GDR)...................................................... 71,100
$ 185 K Compal Electronics 1.00% due 11/21/03 (Conv.).................................... 397,750
-----------
663,550
-----------
ELECTRONIC COMPONENTS
26,000 Yageo Corp. (ADR)................................................................ 208,000
-----------
INVESTMENT COMPANIES
163 Taipei Fund*..................................................................... 1,428,369
-----------
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
RETAIL
$ 330 K Far Eastern Department Stores - 144A** 3.00% due 07/06/01 (Conv.)................ $ 280,500
-----------
SEMICONDUCTOR EQUIPMENT
$ 210 K Siliconware Precision Industries Co. 0.50% due 07/21/04 (Conv.).................. 199,500
-----------
SEMICONDUCTORS
50,750 Taiwan Semiconductor Manufacturing Co., Ltd. (ADR)............................... 853,234
$ 180 K United Microelectronics Corp. 0.25% due 05/16/04 (Conv.)......................... 181,800
-----------
1,035,034
-----------
STEEL & IRON
23,388 China Steel Corp. (GDR).......................................................... 289,427
-----------
TRANSPORTATION
$ 412 K U-Ming Marine Transport 1.50% due 02/07/01 (Conv.)............................... 341,960
$ 304 K Yang Ming Marine Transportation - 144A** 2.00% due 10/06/01 (Conv.).............. 348,080
-----------
690,040
-----------
TOTAL TAIWAN..................................................................... 5,381,287
-----------
THAILAND (2.6%)
BANKING
130,800 Bangkok Bank Public Co., Ltd..................................................... 161,558
178,500 Thai Farmers Bank Public Co., Ltd. (Alien Market)................................ 157,937
-----------
319,495
-----------
ENERGY
10,100 Ban Pu Coal Co., Ltd............................................................. 16,553
-----------
ENTERTAINMENT
15,000 Grammy Entertainment PLC......................................................... 34,917
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
63
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES - PACIFIC GROWTH
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
OIL RELATED
41,800 PTT Exploration & Production Public Co., Ltd..................................... $ 317,720
-----------
TELECOMMUNICATIONS
43,000 Advanced Info Service Public Co., Ltd............................................ 171,591
-----------
TELEVISION
47,000 BEC World Public Co., Ltd........................................................ 181,972
-----------
TRANSPORTATION
342,400 Bangkok Expressway Public Co., Ltd.*............................................. 138,261
-----------
UTILITIES - ELECTRIC
194,200 Cogeneration Public Co.*......................................................... 78,418
63,800 Electricity Generating Public Co., Ltd........................................... 99,261
-----------
177,679
-----------
TOTAL THAILAND................................................................... 1,358,188
-----------
TOTAL COMMON STOCKS, WARRANTS AND BONDS
(IDENTIFIED COST $65,083,370).................................................... 45,407,073
-----------
</TABLE>
<TABLE>
<CAPTION>
CURRENCY DESCRIPTION,
AMOUNT IN EXPIRATION DATE
THOUSANDS AND STRIKE PRICE
- ---------------- --------------------------------------
<C> <S> <C>
PURCHASED PUT OPTION ON FOREIGN CURRENCY (1.2%)
JPY 778,491 August 11, 1998/JPY 123.57 (IDENTIFIED COST $170,415)............................ 658,350
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS
- ----------------
<C> <S> <C>
SHORT-TERM INVESTMENT (6.3%)
U.S. GOVERNMENT AGENCY
$ 3,300 Federal National Mortgage Assoc. 5.52% due 07/02/98 (a)
(IDENTIFIED COST $3,299,494)................................................... 3,299,494
-----------
</TABLE>
<TABLE>
<CAPTION>
VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(IDENTIFIED COST $68,553,279) (b).......................................................... 93.7 % $ 49,364,917
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES............................................. 6.3 3,327,652
------ ------------
NET ASSETS................................................................................. 100.0 % $ 52,692,569
------ ------------
------ ------------
</TABLE>
- ---------------------
ADR American Depository Receipt.
GDR Global Depository Receipt.
K In thousands.
* Non-income producing security.
** Resale is restricted to qualified institutional investors.
(a) Security was purchased on a discount basis. The interest rate shown has
been adjusted to reflect a money market equivalent yield.
(b) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $1,601,891 and the
aggregate gross unrealized depreciation is $20,790,253, resulting in net
unrealized depreciation of $19,188,362.
FORWARD FOREIGN CURRENCY CONTRACTS OPEN AT JUNE 30, 1998:
<TABLE>
<CAPTION>
UNREALIZED
CONTRACTS TO IN DELIVERY APPRECIATION/
DELIVER EXCHANGE FOR DATE (DEPRECIATION)
- -------------------------------------------------------------
<S> <C> <C> <C>
MYR 850,021 $ 209,107 07/02/98 $ 3,291
SGD 1,611,220 $ 970,907 11/16/98 22,213
HKD 32,839,000 $ 4,157,625 12/01/98 (10,108)
HKD 9,914,000 $ 1,221,869 06/10/99 4,406
---------------
Net unrealized appreciation........... $ 19,802
---------------
---------------
</TABLE>
<TABLE>
<CAPTION>
CURRENCY ABBREVIATIONS:
<S> <C>
HKD Hong Kong Dollar.
JPY Japanese Yen.
MYR Malaysian Ringgit.
SGD Singapore Dollar.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
64
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES - PACIFIC GROWTH
SUMMARY OF INVESTMENTS JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
PERCENT OF
INDUSTRY VALUE NET ASSETS
<S> <C> <C>
- --------------------------------------------------------------------------------------
Aluminum.................................................... $ 126,000 0.2 %
Auto Trucks & Parts......................................... 6,043 0.0
Automotive.................................................. 631,956 1.2
Banking..................................................... 5,528,842 10.5
Banks....................................................... 33,228 0.1
Beverages................................................... 226,907 0.4
Brewery..................................................... 160,216 0.3
Building & Construction..................................... 366,383 0.7
Building Materials.......................................... 452,807 0.9
Business Services........................................... 239,209 0.4
Chemicals................................................... 743,408 1.4
Commercial Services......................................... 320,090 0.6
Communications - Equipment/Manufacturers.................... 15 0.0
Computer Software & Services................................ 442,662 0.8
Computers................................................... 663,550 1.3
Conglomerates............................................... 3,706,060 7.0
Cosmetics................................................... 138,561 0.3
Currency Options............................................ 658,350 1.2
Electric.................................................... 127,194 0.2
Electronic & Electrical Equipment........................... 2,845,361 5.4
Electronic Components....................................... 208,000 0.4
Electronics................................................. 347,364 0.7
Electronics - Semiconductors/
Components................................................ 100,719 0.2
Energy...................................................... 221,867 0.4
Engineering................................................. 283,531 0.5
Engineering & Construction.................................. 212,507 0.4
Entertainment............................................... 372,356 0.7
Financial Services.......................................... 434,021 0.8
Food Wholesalers............................................ 428,983 0.8
Food, Beverage, Tobacco, & Household Products............... 726,550 1.4
Hand Tools.................................................. 27,698 0.1
Insurance................................................... 276,268 0.5
Investment Companies........................................ 1,547,119 2.9
Leisure..................................................... 436,117 0.8
Machinery................................................... 900,419 1.7
Manufacturing - Diversified................................. 371,466 0.7
Merchandising............................................... 67,338 0.1
Metals...................................................... 3,655 0.0
Metals & Mining............................................. 236,780 0.4
Metals Non-Ferrous.......................................... 120,173 0.2
Multi-Industry.............................................. 135,991 0.3
<CAPTION>
PERCENT OF
INDUSTRY VALUE NET ASSETS
- --------------------------------------------------------------------------------------
<S> <C> <C>
Natural Gas................................................. $ 106,705 0.2 %
Office Equipment............................................ 147,151 0.3
Oil & Gas Exploration....................................... 189,750 0.4
Oil - Exploration & Production.............................. 135,888 0.3
Oil Related................................................. 317,720 0.6
Paper Products.............................................. 56,424 0.1
Pharmaceuticals............................................. 458,633 0.9
Photography/Imaging......................................... 243,237 0.5
Plantation.................................................. 453,801 0.9
Publishing.................................................. 284,794 0.5
Real Estate................................................. 4,750,937 9.0
Retail...................................................... 500,644 1.0
Retail - Department Stores.................................. 62,331 0.1
Retail - Food Chains........................................ 276,060 0.5
Retail - General Merchandise................................ 349,143 0.7
Retail - Specialty Apparel.................................. 84 0.0
Retail Stores............................................... 149,700 0.3
Semiconductor Equipment..................................... 199,500 0.4
Semiconductors.............................................. 1,035,034 2.0
Shipbuilding................................................ 465,935 0.9
Steel....................................................... 290,215 0.5
Steel & Iron................................................ 746,264 1.4
Telecommunications.......................................... 3,991,622 7.6
Telephones.................................................. 141,412 0.3
Television.................................................. 181,972 0.3
Textiles.................................................... 296,558 0.6
Tire & Rubber Goods......................................... 141,583 0.3
Tobacco..................................................... 83,535 0.2
Transportation.............................................. 1,490,129 2.8
U.S. Government Agency...................................... 3,299,494 6.3
Utilities................................................... 2,955,595 5.6
Utilities - Electric........................................ 615,477 1.2
Water....................................................... 71,826 0.1
------------ ---
$ 49,364,917 93.7 %
------------ ---
------------ ---
</TABLE>
<TABLE>
<CAPTION>
PERCENT OF
TYPE OF INVESTMENT VALUE NET ASSETS
<S> <C> <C>
- --------------------------------------------------------------------------------------
Common Stocks............................................... $ 42,971,186 81.6 %
Convertible Bonds........................................... 2,433,451 4.6
Foreign Currency Put Options................................ 658,350 1.2
Short-Term Investment....................................... 3,299,494 6.3
Warrants.................................................... 2,436 0.0
------------ ---
$ 49,364,917 93.7 %
------------ ---
------------ ---
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
65
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES - CAPITAL APPRECIATION
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (91.2%)
ADVERTISING (2.4%)
20,000 Snyder Communications, Inc.*............................................................ $ 880,000
-----------
ADVERTISING/MARKETING SERVICES (1.5%)
15,000 Boron, LePore & Associates, Inc......................................................... 568,125
-----------
AIR FREIGHT (1.2%)
10,000 Expeditors International of Washington, Inc............................................. 437,500
-----------
BANKS (6.6%)
10,000 Bank of New York Co., Inc............................................................... 606,875
10,000 NationsBank Corp........................................................................ 765,000
7,000 Pacific Bank, N.A....................................................................... 378,875
8,000 Wachovia Corp........................................................................... 676,000
-----------
2,426,750
-----------
BIOTECHNOLOGY (2.0%)
20,000 Centocor, Inc.*......................................................................... 725,000
-----------
BROADCAST MEDIA (7.4%)
15,000 Chancellor Media Corp.*................................................................. 744,375
5,000 Clear Channel Communications, Inc.*..................................................... 545,625
15,000 Emmis Broadcasting Corp. (Class A)*..................................................... 717,187
12,500 Jacor Communications, Inc.*............................................................. 737,500
-----------
2,744,687
-----------
BUSINESS SERVICES (1.4%)
17,000 AccuStaff, Inc.*........................................................................ 531,250
-----------
COMPUTER EQUIPMENT (1.2%)
10,600 Storage Technology Corp.*............................................................... 459,775
-----------
COMPUTER SERVICES (0.1%)
3,000 American Business Information, Inc. (B Shares)*......................................... 47,625
-----------
COMPUTER SOFTWARE (2.9%)
10,400 Compuware Corp.*........................................................................ 531,050
20,800 Systems & Computer Technology Corp.*.................................................... 559,000
-----------
1,090,050
-----------
COMPUTER SOFTWARE & SERVICES (5.0%)
20,000 AXENT Technologies, Inc.*............................................................... 611,250
20,000 BroadVision, Inc.*...................................................................... 475,000
12,450 Harbinger Corp.*........................................................................ 301,134
30,000 Segue Software, Inc.*................................................................... 468,750
-----------
1,856,134
-----------
COMPUTERS (1.0%)
8,200 Gulfstream Aerospace Corp.*............................................................. 381,300
-----------
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
DISTRIBUTORS - FOOD & HEALTH (1.9%)
7,500 Cardinal Health, Inc.................................................................... $ 703,125
-----------
DRUGS (4.0%)
12,000 Elan Corp. PLC (ADR) (Ireland)*......................................................... 771,750
20,000 Forest Laboratories, Inc.*.............................................................. 715,000
-----------
1,486,750
-----------
ELECTRICAL EQUIPMENT (0.6%)
6,000 AFC Cable Systems, Inc.*................................................................ 213,000
-----------
ELECTRONICS (2.2%)
50,000 Aeroflex Inc.*.......................................................................... 518,750
10,000 Vitesse Semiconductor Corp.*............................................................ 308,750
-----------
827,500
-----------
FINANCIAL SERVICES (2.4%)
7,000 Capital One Financial Corp.............................................................. 869,312
-----------
HEALTH EQUIPMENT & SERVICES (3.7%)
30,000 DVI, Inc................................................................................ 765,000
27,000 United Payors & United Providers, Inc.*................................................. 604,125
-----------
1,369,125
-----------
HEALTHCARE (4.0%)
15,000 Allegiance Corp......................................................................... 768,750
10,000 Warner-Lambert Co....................................................................... 693,750
-----------
1,462,500
-----------
HEALTHCARE - SPECIALIZED SERVICES (1.5%)
20,000 QuadraMed Corp.*........................................................................ 546,250
-----------
LEISURE TIME - PRODUCTS (0.7%)
20,000 Oakley, Inc.*........................................................................... 260,000
-----------
LIFE & HEALTH INSURANCE (1.3%)
10,000 Conseco, Inc............................................................................ 467,500
-----------
MEDICAL PRODUCTS & SUPPLIES (3.2%)
20,000 Closure Medical Corp.*.................................................................. 497,500
16,000 Lincare Holdings, Inc.*................................................................. 672,000
-----------
1,169,500
-----------
MEDICAL SERVICES (0.8%)
50,000 Medaphis Corp.*......................................................................... 300,000
-----------
MISCELLANEOUS (2.2%)
5,000 Advance Paradigm, Inc.*................................................................. 180,625
30,000 Mail-Well, Inc.*........................................................................ 650,625
-----------
831,250
-----------
NATURAL GAS (1.0%)
20,000 Basin Exploration, Inc.*................................................................ 352,500
-----------
OIL EQUIPMENT & SERVICES (0.6%)
10,000 Core Laboratories N.V................................................................... 215,000
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
66
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES - CAPITAL APPRECIATION
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
PHARMACEUTICALS (6.4%)
20,000 Alkermes, Inc.*......................................................................... $ 358,750
15,000 ALZA Corp. (Class A)*................................................................... 648,750
16,000 ICN Pharmaceuticals, Inc................................................................ 731,000
50,000 ImClone Systems, Inc.*.................................................................. 609,375
-----------
2,347,875
-----------
POLLUTION CONTROL (1.5%)
12,000 American Disposal Services, Inc.*....................................................... 562,500
-----------
PROPERTY - CASUALTY INSURANCE (1.5%)
15,000 Mutual Risk Management Ltd. (Bermuda)................................................... 546,562
-----------
PUBLISHING (0.8%)
7,900 Valassis Communications, Inc.*.......................................................... 304,644
-----------
RETAIL (4.9%)
15,000 Abercrombie & Fitch Co. (Class A)*...................................................... 660,000
40,000 Baker (J.), Inc......................................................................... 460,000
20,000 Sunglass Hut International, Inc.*....................................................... 220,000
15,000 Zale Corp.*............................................................................. 477,188
-----------
1,817,188
-----------
SHOES (3.2%)
40,000 Genesco Inc.*........................................................................... 652,500
25,000 Wolverine World Wide, Inc............................................................... 542,188
-----------
1,194,688
-----------
SPECIALIZED SERVICES (2.0%)
15,000 Party City Corp.*....................................................................... 433,125
7,100 Service Corp. International............................................................. 304,413
-----------
737,538
-----------
TELECOMMUNICATIONS (7.8%)
10,000 Advanced Fibre Communications, Inc.*.................................................... 400,625
15,000 ICG Communications, Inc.*............................................................... 547,500
20,000 Tele-Communications TCI Ventures Group (Class A)*....................................... 400,000
20,000 WinStar Communications, Inc.*........................................................... 858,750
50,000 WorldPort Communications, Inc.*......................................................... 675,000
-----------
2,881,875
-----------
TRANSPORTATION - MISCELLANEOUS (0.3%)
2,000 Coach USA, Inc.*........................................................................ 91,250
-----------
TOTAL COMMON STOCKS
(IDENTIFIED COST $29,983,226)........................................................... 33,705,628
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
SHORT-TERM INVESTMENTS (6.5%)
U.S. GOVERNMENT AGENCY (a) (2.2%)
$ 800 Federal National Mortgage Association 5.52% due 07/02/98 (AMORTIZED COST $799,877)...... $ 799,877
-----------
REPURCHASE AGREEMENT (4.3%)
1,610 The Bank of New York 5.50% due 07/01/98 (dated 06/30/98; proceeds $1,610,908) (b)
(IDENTIFIED COST $1,610,662).......................................................... 1,610,662
-----------
TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST $2,410,539)............................................................ 2,410,539
-----------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(IDENTIFIED COST $32,393,765) (c).......................................................... 97.7 % 36,116,167
OTHER ASSETS IN EXCESS OF LIABILITIES...................................................... 2.3 847,686
------ ------------
NET ASSETS................................................................................. 100.0 % $ 36,963,853
------ ------------
------ ------------
</TABLE>
- ---------------------
ADR American Depository Receipt.
* Non-income producing security.
(a) Security was purchased on a discount basis. The interest rate shown has
been adjusted to reflect a money market equivalent yield.
(b) Collateralized by $1,171,150 U.S. Treasury Bond 8.75% due 08/15/20 valued
at $1,642,875.
(c) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $4,235,990 and the
aggregate gross unrealized depreciation is $513,588, resulting in net
unrealized appreciation of $3,722,402.
SEE NOTES TO FINANCIAL STATEMENTS
67
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES - EQUITY
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (83.5%)
AGRICULTURE RELATED (0.5%)
40,000 Delta & Pine Land Co................................................................. $ 1,780,000
75,000 Pioneer Hi-Bred International, Inc................................................... 3,103,125
--------------
4,883,125
--------------
APPAREL (1.1%)
240,000 Warnaco Group, Inc. (Class A)........................................................ 10,185,000
--------------
BANKS (4.5%)
220,000 Argentaria (ADR) (Spain)............................................................. 9,927,500
65,000 Citicorp............................................................................. 9,701,250
80,000 First Union Corp..................................................................... 4,660,000
65,000 Mellon Bank Corp..................................................................... 4,525,625
70,000 National City Corp................................................................... 4,970,000
34,000 State Street Corp.................................................................... 2,363,000
222,000 U.S. Bancorp......................................................................... 9,546,000
--------------
45,693,375
--------------
BIOTECHNOLOGY (0.4%)
176,000 IDEC Pharmaceuticals Corp.*.......................................................... 4,092,000
--------------
CABLE & TELECOMMUNICATIONS (2.1%)
220,000 Cox Communications, Inc. (Class A)*.................................................. 10,656,250
120,000 Time Warner, Inc..................................................................... 10,252,500
--------------
20,908,750
--------------
CAPITAL GOODS (1.8%)
200,000 General Electric Co.................................................................. 18,200,000
--------------
COMMUNICATIONS - EQUIPMENT & SOFTWARE (2.0%)
225,000 Ascend Communications, Inc.*......................................................... 11,137,500
100,000 Cisco Systems, Inc.*................................................................. 9,206,250
--------------
20,343,750
--------------
COMMUNICATIONS EQUIPMENT (2.7%)
240,000 Alcatel Alsthom (ADR) (France)....................................................... 9,765,000
130,000 Lucent Technologies, Inc............................................................. 10,814,375
90,000 Nokia Corp. (ADR) (Class A) (Finland)................................................ 6,530,625
--------------
27,110,000
--------------
COMPUTER HARDWARE (1.1%)
125,000 Dell Computer Corp.*................................................................. 11,593,750
--------------
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
COMPUTER SERVICES (0.5%)
150,000 First Data Corp...................................................................... $ 4,996,875
--------------
COMPUTER SOFTWARE (6.1%)
50,000 BMC Software, Inc.*.................................................................. 2,596,875
60,000 Citrix Systems, Inc.*................................................................ 4,102,500
150,000 Computer Associates International, Inc............................................... 8,334,375
215,000 Compuware Corp.*..................................................................... 10,978,437
95,900 Great Plains Software, Inc.*......................................................... 3,236,625
340,000 Legato Systems, Inc.*................................................................ 13,260,000
110,000 Manugistics Group, Inc.*............................................................. 2,722,500
50,000 Microsoft Corp.*..................................................................... 5,418,750
35,000 Network Associates, Inc.*............................................................ 1,673,437
220,000 Veritas Software Corp.*.............................................................. 9,088,750
--------------
61,412,249
--------------
CONSTRUCTION (0.4%)
120,000 Pulte Corp........................................................................... 3,585,000
--------------
CONSUMER - NONCYCLICAL (5.0%)
60,000 Avon Products, Inc................................................................... 4,650,000
43,000 Clorox Co............................................................................ 4,101,125
50,000 Colgate-Palmolive Co................................................................. 4,400,000
210,000 Groupe Danone (ADR) (France)......................................................... 11,550,000
100,000 Kroger Co.*.......................................................................... 4,287,500
300,000 Rubbermaid, Inc...................................................................... 9,956,250
150,000 Unilever N.V. (Netherlands).......................................................... 11,840,625
--------------
50,785,500
--------------
CONSUMER BUSINESS SERVICES (1.1%)
240,310 Cendant Corp.*....................................................................... 5,016,471
100,000 Ceridian Corp.*...................................................................... 5,875,000
--------------
10,891,471
--------------
CONSUMER PRODUCTS (3.6%)
220,000 CVS Corp............................................................................. 8,566,250
200,000 Dominick's Supermarkets, Inc.*....................................................... 8,912,500
290,000 Rite Aid Corp........................................................................ 10,893,125
200,000 Safeway, Inc.*....................................................................... 8,137,500
--------------
36,509,375
--------------
DRUGS (7.2%)
75,000 ALZA Corp. (Class A)*................................................................ 3,243,750
100,000 American Home Products Corp.......................................................... 5,175,000
80,000 Bristol-Myers Squibb Co.............................................................. 9,195,000
59,000 Dura Pharmaceuticals, Inc.*.......................................................... 1,320,125
210,000 Forest Laboratories, Inc.*........................................................... 7,507,500
110,000 Lilly (Eli) & Co..................................................................... 7,266,875
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
68
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES - EQUITY
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
80,000 Merck & Co., Inc..................................................................... $ 10,700,000
300,000 Mylan Laboratories, Inc.............................................................. 9,018,750
100,000 Schering-Plough Corp................................................................. 9,162,500
150,000 Warner-Lambert Co.................................................................... 10,406,250
--------------
72,995,750
--------------
ENERGY (0.7%)
50,000 Coflexip, S.A. (ADR) (France)........................................................ 3,050,000
165,000 Global Industries Ltd.*.............................................................. 2,774,062
30,000 Transocean Offshore, Inc............................................................. 1,335,000
--------------
7,159,062
--------------
ENTERTAINMENT (0.5%)
100,000 Electronic Arts Inc.*................................................................ 5,400,000
--------------
FINANCIAL - MISCELLANEOUS (5.4%)
43,700 Affiliated Managers Group, Inc.*..................................................... 1,622,362
100,000 American Express Co.................................................................. 11,400,000
75,000 Associates First Capital Corp. (Class A)............................................. 5,765,625
60,000 Edwards (A.G.), Inc.................................................................. 2,561,250
100,000 Freddie Mac.......................................................................... 4,706,250
127,900 Heller Financial, Inc.*.............................................................. 3,837,000
63,000 Lehman Brothers Holdings, Inc........................................................ 4,886,437
145,000 Merrill Lynch & Co., Inc............................................................. 13,376,250
140,000 Paine Webber Group, Inc.............................................................. 6,002,500
--------------
54,157,674
--------------
HEALTHCARE PRODUCTS & SERVICES (1.4%)
150,000 Health Management Associates, Inc. (Class A)*........................................ 5,015,625
267,000 Total Renal Care Holdings, Inc.*..................................................... 9,211,500
--------------
14,227,125
--------------
INSURANCE (6.5%)
6,647 Aegon N.V. (Netherlands)............................................................. 574,978
150,000 Ambac Financial Group, Inc........................................................... 8,775,000
30,000 American International Group, Inc.................................................... 4,380,000
260,000 Equitable Companies, Inc............................................................. 19,483,750
109,800 Hartford Life, Inc. (Class A)........................................................ 6,251,737
63,000 Marsh & McLennan Companies, Inc...................................................... 3,807,563
215,000 Nationwide Financial Services, Inc. (Class A)........................................ 10,965,000
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
45,000 SunAmerica Inc....................................................................... $ 2,584,688
100,000 Torchmark Corp....................................................................... 4,575,000
100,000 Travelers Group, Inc................................................................. 6,062,500
--------------
67,460,216
--------------
INTERNET (3.7%)
60,000 Amazon.com, Inc.*.................................................................... 5,981,250
140,000 America Online, Inc.................................................................. 14,840,000
92,300 BroadVision, Inc.*................................................................... 2,192,125
100,000 CheckFree Holdings Corp.*............................................................ 2,943,750
13,900 Inktomi Corp.*....................................................................... 550,788
170,000 Intuit Inc.*......................................................................... 10,412,500
10,000 SportsLine USA, Inc.*................................................................ 365,000
--------------
37,285,413
--------------
LIFE INSURANCE (1.2%)
150,000 Providian Financial Corp............................................................. 11,784,375
--------------
MANUFACTURING - CONSUMER & INDUSTRIAL PRODUCTS (0.5%)
70,000 Whirlpool Corp....................................................................... 4,812,500
--------------
MEDIA GROUP (6.7%)
121,410 CBS Corp............................................................................. 3,854,768
100,000 Clear Channel Communications, Inc.*.................................................. 10,912,500
400,000 News Corp., Ltd. (ADR) (Australia)................................................... 12,850,000
112,500 Outdoor Systems, Inc.*............................................................... 3,150,000
130,000 Tele-Communications Liberty Media Group (Class A)*................................... 5,045,625
60,000 Tribune Co........................................................................... 4,128,750
139,000 True North Communications, Inc....................................................... 4,065,750
300,000 Viacom, Inc. (Class B)*.............................................................. 17,475,000
200,000 Young & Rubicam, Inc.*............................................................... 6,400,000
--------------
67,882,393
--------------
MEDICAL PRODUCTS & SUPPLIES (2.6%)
180,000 Bausch & Lomb, Inc................................................................... 9,022,500
200,000 Becton, Dickinson & Co............................................................... 15,525,000
30,000 Boston Scientific Corp.*............................................................. 2,148,750
--------------
26,696,250
--------------
RESTAURANTS (1.8%)
420,000 Brinker International, Inc.*......................................................... 8,085,000
150,000 McDonald's Corp...................................................................... 10,350,000
--------------
18,435,000
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
69
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES - EQUITY
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
RETAIL (10.6%)
131,324 Abercrombie & Fitch Co. (Class A)*................................................... $ 5,778,256
200,000 AnnTaylor Stores Corp.*.............................................................. 4,237,500
170,000 Costco Companies, Inc.*.............................................................. 10,720,625
120,000 Dayton Hudson Corp................................................................... 5,820,000
225,000 Dollar Tree Stores, Inc.*............................................................ 9,112,500
535,000 Family Dollar Stores, Inc............................................................ 9,897,500
115,000 Hasbro, Inc.......................................................................... 4,520,938
112,500 Home Depot, Inc...................................................................... 9,344,531
550,000 Kmart Corp.*......................................................................... 10,587,500
170,000 Limited (The), Inc................................................................... 5,631,250
90,000 Lowe's Companies, Inc................................................................ 3,650,625
40,000 May Department Stores Co............................................................. 2,620,000
240,000 Proffitt's, Inc.*.................................................................... 9,690,000
160,000 TJX Companies, Inc................................................................... 3,860,000
200,000 Wal-Mart Stores, Inc................................................................. 12,150,000
--------------
107,621,225
--------------
TELECOMMUNICATION - UTILITIES (1.4%)
205,000 AirTouch Communications, Inc.*....................................................... 11,979,688
50,000 WorldCom, Inc.*...................................................................... 2,415,662
--------------
14,395,350
--------------
TELECOMMUNICATIONS (0.4%)
90,000 Pacific Gateway Exchange, Inc.*...................................................... 3,605,625
--------------
TOTAL COMMON STOCKS
(IDENTIFIED COST $645,546,835)....................................................... 845,108,178
--------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS
- ---------
<C> <S> <C>
U.S. GOVERNMENT OBLIGATIONS (9.6%)
$ 88,800 U.S. Treasury Note 0.00% due 05/15/19................................................ 26,886,864
89,000 U.S. Treasury Bond 0.00% due 05/15/20................................................ 25,436,200
38,000 U.S. Treasury Bond 0.00% due 05/15/21................................................ 10,256,960
32,500 U.S. Treasury Bond 6.125% due 11/15/27............................................... 34,790,275
--------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(IDENTIFIED COST $95,327,925)........................................................ 97,370,299
--------------
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
SHORT-TERM INVESTMENTS (6.5%)
U.S. GOVERNMENT AGENCY (a) (6.4%)
$ 65,000 Federal Home Loan Mortgage Corp. 5.85% due 07/01/98 (AMORTIZED COST $65,000 000)..... $ 65,000,000
--------------
REPURCHASE AGREEMENT (0.1%)
499 The Bank of New York 5.50% due 07/01/98 (dated 06/30/98; proceeds $499,131) (b)
(IDENTIFIED COST $499,055)......................................................... 499,055
--------------
TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST $65,499,055)........................................................ 65,499,055
--------------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(IDENTIFIED COST $806,373,815) (c)...................................................... 99.6 % 1,007,977,532
OTHER ASSETS IN EXCESS OF LIABILITIES................................................... 0.4 3,578,862
------ ---------------
NET ASSETS.............................................................................. 100.0 % $ 1,011,556,394
------ ---------------
------ ---------------
</TABLE>
- ---------------------
ADR American Depository Receipt.
* Non-income producing security.
(a) Security was purchased on a discount basis. The interest rate shown has
been adjusted to reflect a money market equivalent yield.
(b) Collateralized by $498,485 U.S. Treasury Note 6.25% due 03/31/99 valued at
$509,036.
(c) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $211,348,028 and the
aggregate gross unrealized depreciation is $9,744,311, resulting in net
unrealized appreciation of $201,603,717.
SEE NOTES TO FINANCIAL STATEMENTS
70
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES - S&P 500 INDEX
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (91.6%)
ADVERTISING/MARKETING SERVICES (0.2%)
106 Cognizant Corp......................................................................... $ 6,678
89 Interpublic Group of Companies, Inc.................................................... 5,401
111 Omnicom Group, Inc..................................................................... 5,536
------------
17,615
------------
AEROSPACE & DEFENSE (0.8%)
758 Boeing Co.............................................................................. 33,778
95 General Dynamics Corp.................................................................. 4,417
147 Lockheed Martin Corp................................................................... 15,564
51 Northrop Grumman Corp.................................................................. 5,259
------------
59,018
------------
AGRICULTURAL PRODUCTS (0.2%)
428 Archer-Daniels-Midland Co.............................................................. 8,292
183 Pioneer Hi-Bred International, Inc..................................................... 7,572
------------
15,864
------------
AIR FREIGHT (0.1%)
110 FDX Corp.*............................................................................. 6,902
------------
AIRLINES (0.4%)
137 AMR Corp.*............................................................................. 11,405
57 Delta Air Lines, Inc................................................................... 7,367
167 Southwest Airlines Co.................................................................. 4,947
66 US Airways Group Inc.*................................................................. 5,230
------------
28,949
------------
ALUMINUM (0.2%)
171 Alcan Aluminium Ltd. (Canada).......................................................... 4,724
126 Aluminum Co. of America................................................................ 8,308
54 Reynolds Metals Co..................................................................... 3,021
------------
16,053
------------
AUTO PARTS - AFTER MARKET (0.4%)
18 Cooper Tire & Rubber Co................................................................ 371
69 Dana Corp.............................................................................. 3,691
29 Echlin, Inc............................................................................ 1,423
134 Genuine Parts Co....................................................................... 4,631
118 Goodyear Tire & Rubber Co.............................................................. 7,604
77 ITT Industries, Inc.................................................................... 2,878
28 Snap-On, Inc........................................................................... 1,015
92 TRW, Inc............................................................................... 5,025
------------
26,638
------------
AUTOMOBILES (1.6%)
484 Chrysler Corp.......................................................................... 27,285
910 Ford Motor Co.......................................................................... 53,690
501 General Motors Corp.................................................................... 33,473
------------
114,448
------------
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
BANKS - MONEY CENTER (3.9%)
512 BankAmerica Corp....................................................................... $ 44,256
73 Bankers Trust New York Corp............................................................ 8,473
640 Chase Manhattan Corp................................................................... 48,320
339 Citicorp............................................................................... 50,596
215 First Chicago NBD Corp................................................................. 19,054
727 First Union Corp....................................................................... 42,348
134 Morgan (J.P.) & Co., Inc............................................................... 15,695
718 NationsBank Corp....................................................................... 54,927
------------
283,669
------------
BANKS - REGIONAL (4.0%)
526 Banc One Corp.......................................................................... 29,357
282 Bank of New York Co., Inc.............................................................. 17,114
220 BankBoston Corp........................................................................ 12,237
92 BB&T Corporation....................................................................... 6,221
117 Comerica, Inc.......................................................................... 7,751
197 Fifth Third Bancorp.................................................................... 12,386
213 Fleet Financial Group, Inc............................................................. 17,785
144 Huntington Bancshares, Inc............................................................. 4,815
330 KeyCorp................................................................................ 11,756
195 Mellon Bank Corp....................................................................... 13,577
87 Mercantile Bancorporation, Inc......................................................... 4,383
246 National City Corp..................................................................... 17,466
73 Northern Trust Corp.................................................................... 5,562
568 Norwest Corp........................................................................... 21,229
226 PNC Bank Corp.......................................................................... 12,162
81 Republic New York Corp................................................................. 5,098
121 State Street Corp...................................................................... 8,409
116 Summit Bancorp.*....................................................................... 5,510
158 SunTrust Banks, Inc.................................................................... 12,847
172 Synovus Financial Corp................................................................. 4,073
557 U.S. Bancorp........................................................................... 23,951
155 Wachovia Corp.......................................................................... 13,097
64 Wells Fargo & Co....................................................................... 23,616
------------
290,402
------------
BEVERAGES - ALCOHOLIC (0.4%)
364 Anheuser-Busch Companies, Inc.......................................................... 17,176
52 Brown-Forman Corp. (Class B)........................................................... 3,341
8 Coors (Adolph) Co. (Class B)........................................................... 272
260 Seagram Co. Ltd. (Canada).............................................................. 10,644
------------
31,433
------------
BEVERAGES - SOFT DRINKS (2.8%)
1,852 Coca Cola Co.**........................................................................ 158,346
1,118 PepsiCo, Inc........................................................................... 46,048
------------
204,394
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
71
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES - S&P 500 INDEX
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
BIOTECHNOLOGY (0.2%)
191 Amgen Inc.*............................................................................ $ 12,487
------------
BROADCAST MEDIA (1.0%)
539 CBS Corp............................................................................... 17,113
93 Clear Channel Communications, Inc.*.................................................... 10,149
277 Comcast Corp. (Class A Special)........................................................ 11,236
457 MediaOne Group Inc..................................................................... 20,079
380 Tele-Communications, Inc. (Class A)*................................................... 14,582
------------
73,159
------------
BUILDING MATERIALS (0.1%)
19 Armstrong World Industries Inc......................................................... 1,280
127 Masco Corp............................................................................. 7,683
25 Owens Corning.......................................................................... 1,020
------------
9,983
------------
CHEMICALS (1.4%)
176 Air Products & Chemicals, Inc.......................................................... 7,040
169 Dow Chemical Co........................................................................ 16,340
846 Du Pont (E.I.) De Nemours & Co., Inc................................................... 63,133
51 Eastman Chemical Co.................................................................... 3,175
103 Praxair, Inc........................................................................... 4,822
45 Rohm & Haas Co......................................................................... 4,677
89 Union Carbide Corp..................................................................... 4,750
------------
103,937
------------
CHEMICALS - DIVERSIFIED (0.5%)
67 Engelhard Corp......................................................................... 1,357
16 FMC Corp.*............................................................................. 1,091
55 Goodrich (B.F.) Co..................................................................... 2,729
449 Monsanto Co............................................................................ 25,088
133 PPG Industries, Inc.................................................................... 9,252
------------
39,517
------------
CHEMICALS - SPECIALTY (0.2%)
97 Ecolab, Inc............................................................................ 3,007
17 Grace (W. R.) & Co..................................................................... 290
28 Great Lakes Chemical Corp.............................................................. 1,104
71 Hercules, Inc.......................................................................... 2,920
70 International Flavors & Fragrances Inc................................................. 3,041
98 Morton International, Inc.............................................................. 2,450
31 Nalco Chemical Co...................................................................... 1,089
47 Sigma-Aldrich Corp..................................................................... 1,651
------------
15,552
------------
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
COMMERCIAL & CONSUMER SERVICES (0.4%)
68 Block (H.&R.), Inc..................................................................... $ 2,864
638 Cendant Corp.*......................................................................... 13,318
129 Dun & Bradstreet Corp.................................................................. 4,660
247 Laidlaw, Inc. (Canada)................................................................. 3,010
192 Service Corp. International............................................................ 8,232
------------
32,084
------------
COMMUNICATIONS EQUIPMENT (2.1%)
21 Andrew Corp.*.......................................................................... 378
89 DSC Communications Corp.*.............................................................. 2,659
113 General Instrument Corp.*.............................................................. 3,072
60 Harris Corp............................................................................ 2,681
984 Lucent Technologies Inc................................................................ 81,856
448 Motorola, Inc.......................................................................... 23,548
390 Northern Telecom Ltd. (Canada)......................................................... 22,132
59 Scientific-Atlanta, Inc................................................................ 1,497
137 Tellabs, Inc.*......................................................................... 9,804
------------
147,627
------------
COMPUTER - NETWORKING (1.3%)
267 3Com Corp.*............................................................................ 8,194
126 Ascend Communications, Inc.*........................................................... 6,237
144 Bay Networks, Inc.*.................................................................... 4,644
119 Cabletron Systems, Inc.*............................................................... 1,599
767 Cisco Systems, Inc.*................................................................... 70,612
------------
91,286
------------
COMPUTER HARDWARE (3.2%)
100 Apple Computer, Inc.*.................................................................. 2,869
1,240 COMPAQ Computer Corp................................................................... 35,185
11 Data General Corp.*.................................................................... 164
483 Dell Computer Corp.*................................................................... 44,798
101 Gateway 2000, Inc.*.................................................................... 5,113
777 Hewlett-Packard Co..................................................................... 46,523
707 International Business Machines Corp................................................... 81,172
142 Silicon Graphics, Inc.*................................................................ 1,722
284 Sun Microsystems, Inc.*................................................................ 12,336
------------
229,882
------------
COMPUTER SOFTWARE & SERVICES (3.8%)
32 Adobe Systems, Inc..................................................................... 1,358
11 Autodesk, Inc.......................................................................... 423
410 Computer Associates International, Inc................................................. 22,781
117 Computer Sciences Corp.*............................................................... 7,488
322 HBO & Co............................................................................... 11,350
1,848 Microsoft Corp.**...................................................................... 200,277
264 Novell, Inc.*.......................................................................... 3,366
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
72
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES - S&P 500 INDEX
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
730 Oracle Corp.*.......................................................................... $ 17,885
176 Parametric Technology Corp.*........................................................... 4,763
164 Unisys Corp.*.......................................................................... 4,633
------------
274,324
------------
COMPUTERS - PERIPHERAL EQUIPMENT (0.3%)
373 EMC Corp.*............................................................................. 16,715
158 Seagate Technology, Inc.*.............................................................. 3,762
------------
20,477
------------
COMPUTERS - SYSTEMS (0.1%)
6 Shared Medical Systems Corp............................................................ 441
------------
CONSUMER - NONCYCLICAL (0.0%)
55 American Greetings Corp. (Class A)..................................................... 2,802
9 Jostens, Inc........................................................................... 217
------------
3,019
------------
CONTAINERS - METAL & GLASS (0.1%)
7 Ball Corp.............................................................................. 281
93 Crown Cork & Seal Co., Inc............................................................. 4,417
100 Owens-Illinois, Inc.*.................................................................. 4,475
------------
9,173
------------
CONTAINERS - PAPER (0.1%)
25 Bemis Company, Inc..................................................................... 1,022
24 Stone Container Corp................................................................... 375
26 Temple-Inland, Inc..................................................................... 1,401
52 Union Camp Corp........................................................................ 2,580
------------
5,378
------------
DATA PROCESSING (0.5%)
226 Automatic Data Processing, Inc......................................................... 16,470
54 Ceridian Corp.*........................................................................ 3,172
96 Equifax, Inc........................................................................... 3,486
335 First Data Corp........................................................................ 11,160
------------
34,288
------------
DISTRIBUTORS - FOOD & HEALTH (0.2%)
83 Cardinal Health, Inc................................................................... 7,781
28 Supervalu, Inc......................................................................... 1,242
220 Sysco Corp............................................................................. 5,637
------------
14,660
------------
ELECTRICAL EQUIPMENT (3.7%)
143 AMP, Inc............................................................................... 4,916
332 Emerson Electric Co.................................................................... 20,044
2,444 General Electric Co.................................................................... 222,404
10 General Signal Corp.................................................................... 360
95 Honeywell, Inc......................................................................... 7,938
39 Raychem Corp........................................................................... 1,153
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
147 Rockwell International Corp............................................................ $ 7,065
25 Thomas & Betts Corp.................................................................... 1,231
------------
265,111
------------
ELECTRONIC COMPONENTS (0.1%)
64 Grainger (W.W.), Inc................................................................... 3,188
------------
ELECTRONICS - DEFENSE (0.2%)
254 Raytheon Co. (Class B)................................................................. 15,018
------------
ELECTRONICS - INSTRUMENTATION (0.0%)
10 EG & G, Inc............................................................................ 300
22 Perkin-Elmer Corp...................................................................... 1,368
12 Tektronix, Inc......................................................................... 424
------------
2,092
------------
ELECTRONICS - SEMICONDUCTORS (1.6%)
66 Advanced Micro Devices, Inc.*.......................................................... 1,126
1,272 Intel Corp............................................................................. 94,207
66 LSI Logic Corp.*....................................................................... 1,522
138 Micron Technology, Inc.*............................................................... 3,424
76 National Semiconductor Corp.*.......................................................... 1,002
293 Texas Instruments, Inc................................................................. 17,086
------------
118,367
------------
ENGINEERING & CONSTRUCTION (0.1%)
62 Fluor Corp............................................................................. 3,162
9 Foster Wheeler Corp.................................................................... 193
28 McDermott International, Inc........................................................... 964
------------
4,319
------------
ENTERTAINMENT (1.5%)
17 King World Productions Inc.*........................................................... 433
443 Time Warner, Inc....................................................................... 37,849
267 Viacom, Inc. (Class B)*................................................................ 15,553
511 Walt Disney Co......................................................................... 53,687
------------
107,522
------------
FINANCE - CONSUMER (0.7%)
41 Beneficial Corp........................................................................ 6,281
48 Capital One Financial Corp............................................................. 5,961
71 Countrywide Credit Industries, Inc..................................................... 3,603
87 Green Tree Financial Corp.............................................................. 3,725
242 Household International, Inc........................................................... 12,039
376 MBNA Corp.............................................................................. 12,408
71 Providian Financial Corp............................................................... 5,578
------------
49,595
------------
FINANCE - DIVERSIFIED (2.9%)
346 American Express Co.................................................................... 39,444
190 American General Corp.................................................................. 13,526
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
73
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES - S&P 500 INDEX
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
260 Associates First Capital Corp. (Class A)............................................... $ 19,987
778 Fannie Mae............................................................................. 47,263
509 Freddie Mac............................................................................ 23,955
64 MBIA Inc............................................................................... 4,792
86 MGIC Investment Corp................................................................... 4,907
450 Morgan Stanley Dean Witter & Co. (Note 4).............................................. 41,119
125 SLM Holding Corp....................................................................... 6,125
147 SunAmerica Inc......................................................................... 8,443
------------
209,561
------------
FOODS (2.3%)
217 BestFoods.............................................................................. 12,600
341 Campbell Soup Co....................................................................... 18,116
360 ConAgra, Inc........................................................................... 11,407
119 General Mills, Inc..................................................................... 8,137
274 Heinz (H.J.) Co........................................................................ 15,378
107 Hershey Foods Corp..................................................................... 7,383
307 Kellogg Co............................................................................. 11,532
90 Quaker Oats Company (The).............................................................. 4,944
79 Ralston-Ralston Purina Group........................................................... 9,228
350 Sara Lee Corp.......................................................................... 19,578
480 Unilever N.V. (Netherlands)............................................................ 37,890
87 Wrigley (Wm.) Jr. Co. (Class A)........................................................ 8,526
------------
164,719
------------
FOOTWEAR (0.2%)
216 Nike, Inc. (Class B)................................................................... 10,516
13 Reebok International Ltd. (United Kingdom)*............................................ 360
------------
10,876
------------
GAMING, LOTTERY, & PARI-MUTUEL COMPANIES (0.1%)
47 Harrah's Entertainment, Inc.*.......................................................... 1,093
135 Mirage Resorts, Inc.*.................................................................. 2,877
------------
3,970
------------
GOLD & PRECIOUS METALS MINING (0.1%)
243 Barrick Gold Corp. (Canada)............................................................ 4,663
56 Battle Mountain Gold Co................................................................ 332
98 Homestake Mining Co.................................................................... 1,017
117 Newmont Mining Corp.................................................................... 2,764
115 Placer Dome Inc. (Canada).............................................................. 1,351
------------
10,127
------------
HARDWARE & TOOLS (0.1%)
62 Black & Decker Corp.................................................................... 3,782
67 Stanley Works.......................................................................... 2,785
------------
6,567
------------
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
HEALTHCARE - DIVERSIFIED (4.2%)
1,158 Abbott Laboratories.................................................................... $ 47,333
30 Allergan, Inc.......................................................................... 1,391
984 American Home Products Corp............................................................ 50,922
746 Bristol-Myers Squibb Co................................................................ 85,743
1,009 Johnson & Johnson...................................................................... 74,414
34 Mallinckrodt Group, Inc................................................................ 1,009
615 Warner-Lambert Co...................................................................... 42,666
------------
303,478
------------
HEALTHCARE - DRUGS (4.9%)
831 Lilly (Eli) & Co....................................................................... 54,898
896 Merck & Co., Inc.**.................................................................... 119,840
979 Pfizer, Inc.**......................................................................... 106,405
381 Pharmacia & Upjohn, Inc................................................................ 17,574
550 Schering-Plough Corp................................................................... 50,394
------------
349,111
------------
HEALTHCARE - HMOS (0.2%)
108 Humana, Inc.*.......................................................................... 3,368
145 United Healthcare Corp................................................................. 9,207
------------
12,575
------------
HEALTHCARE - LONG TERM (0.1%)
300 Healthsouth Corp.*..................................................................... 8,006
41 Manor Care, Inc........................................................................ 1,576
------------
9,582
------------
HEALTHCARE - SPECIALIZED SERVICES (0.1%)
65 ALZA Corp. (Class A)*.................................................................. 2,811
------------
HEAVY DUTY TRUCKS & PARTS (0.1%)
52 Navistar International Corp.*.......................................................... 1,501
51 PACCAR, Inc............................................................................ 2,655
------------
4,156
------------
HOME BUILDING (0.1%)
45 Centex Corp............................................................................ 1,699
8 Fleetwood Enterprises, Inc............................................................. 320
9 Kaufman & Broad Home Corp.............................................................. 286
10 Pulte Corp............................................................................. 299
------------
2,604
------------
HOSPITAL MANAGEMENT (0.3%)
483 Columbia/HCA Healthcare Corp........................................................... 14,067
231 Tenet Healthcare Corp.*................................................................ 7,219
------------
21,286
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
74
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES - S&P 500 INDEX
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
HOUSEHOLD FURNISHINGS & APPLIANCES (0.1%)
61 Maytag Corp............................................................................ $ 3,012
49 Whirlpool Corp......................................................................... 3,369
------------
6,381
------------
HOUSEHOLD PRODUCTS - NON-DURABLE (2.0%)
68 Clorox Co.............................................................................. 6,485
222 Colgate-Palmolive Co................................................................... 19,536
165 Fort James Corp........................................................................ 7,342
418 Kimberly-Clark Corp.................................................................... 19,176
1,006 Procter & Gamble Co.................................................................... 91,609
------------
144,148
------------
HOUSEWARES (0.2%)
130 Fortune Brands, Inc.................................................................... 4,997
104 Newell Co.............................................................................. 5,181
97 Rubbermaid, Inc........................................................................ 3,219
14 Tupperware Corp........................................................................ 394
------------
13,791
------------
INSURANCE BROKERS (0.3%)
126 Aon Corp............................................................................... 8,852
193 Marsh & McLennan Companies, Inc........................................................ 11,634
------------
20,486
------------
INVESTMENT BANKING/BROKERAGE (0.6%)
84 Bear Stearns Companies, Inc............................................................ 4,778
77 Lehman Brothers Holdings, Inc.......................................................... 5,972
260 Merrill Lynch & Co., Inc............................................................... 23,985
174 Schwab (CHARLES) Corp.................................................................. 5,655
------------
40,390
------------
INVESTMENT COMPANIES (0.1%)
190 Franklin Resources, Inc................................................................ 10,260
------------
LEISURE TIME - PRODUCTS (0.2%)
46 Brunswick Corp......................................................................... 1,139
86 Hasbro, Inc............................................................................ 3,381
220 Mattel, Inc............................................................................ 9,309
------------
13,829
------------
LIFE & HEALTH INSURANCE (0.5%)
109 Aetna Inc.............................................................................. 8,298
122 Conseco, Inc........................................................................... 5,704
80 Jefferson-Pilot Corp................................................................... 4,635
105 Torchmark Corp......................................................................... 4,804
41 Transamerica Corp...................................................................... 4,720
90 UNUM Corp.............................................................................. 4,995
------------
33,156
------------
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
LODGING - HOTELS (0.1%)
161 Hilton Hotels Corp..................................................................... $ 4,589
166 Marriott International, Inc............................................................ 5,374
------------
9,963
------------
MACHINERY - DIVERSIFIED (0.6%)
56 Case Corp.............................................................................. 2,702
275 Caterpillar, Inc....................................................................... 14,541
9 Cincinnati Milacron, Inc............................................................... 219
91 Cooper Industries, Inc................................................................. 4,999
186 Deere & Co............................................................................. 9,835
145 Dover Corp............................................................................. 4,966
11 Harnischfeger Industries, Inc.......................................................... 311
108 Ingersoll-Rand Co...................................................................... 4,759
2 NACCO Industries, Inc. (Class A)....................................................... 259
29 Timken Co.............................................................................. 894
------------
43,485
------------
MANUFACTURING - DIVERSIFIED (1.8%)
7 Aeroquip-Vickers, Inc.................................................................. 409
424 AlliedSignal, Inc...................................................................... 18,815
151 Corning, Inc........................................................................... 5,247
21 Crane Co............................................................................... 1,020
54 Eaton Corp............................................................................. 4,199
187 Illinois Tool Works Inc................................................................ 12,471
55 Johnson Controls, Inc.................................................................. 3,145
303 Minnesota Mining & Manufacturing Co.................................................... 24,903
32 National Service Industries, Inc....................................................... 1,628
127 Tenneco, Inc........................................................................... 4,834
123 Textron, Inc........................................................................... 8,818
104 Thermo Electron Corp.*................................................................. 3,556
437 Tyco International Ltd................................................................. 27,531
172 United Technologies Corp............................................................... 15,910
------------
132,486
------------
MANUFACTURING - SPECIALIZED (0.2%)
76 Avery Dennison Corp.................................................................... 4,085
6 Briggs & Stratton Corp................................................................. 225
10 Millipore Corp......................................................................... 273
58 Pall Corp.............................................................................. 1,189
72 Parker-Hannifin Corp................................................................... 2,745
63 Sealed Air Corp.*...................................................................... 2,315
------------
10,832
------------
MEDICAL PRODUCTS & SUPPLIES (0.9%)
43 Bard (C.R.), Inc....................................................................... 1,637
26 Bausch & Lomb, Inc..................................................................... 1,303
211 Baxter International, Inc.............................................................. 11,354
80 Becton, Dickinson & Co................................................................. 6,210
84 Biomet, Inc............................................................................ 2,772
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
75
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES - S&P 500 INDEX
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
146 Boston Scientific Corp.*............................................................... $ 10,457
113 Guidant Corp........................................................................... 8,058
352 Medtronic, Inc......................................................................... 22,440
39 St. Jude Medical, Inc.*................................................................ 1,436
57 U.S. Surgical Corp..................................................................... 2,601
------------
68,268
------------
METALS & MINING (0.1%)
9 ASARCO, Inc............................................................................ 200
22 Cyprus Amax Minerals Co................................................................ 292
90 Freeport-McMoran Copper & Gold, Inc. (Class B)......................................... 1,367
77 Inco Ltd. (Canada)..................................................................... 1,049
27 Phelps Dodge Corp...................................................................... 1,544
------------
4,452
------------
MULTI-LINE INSURANCE (2.3%)
525 American International Group, Inc...................................................... 76,650
162 CIGNA Corp............................................................................. 11,178
88 Hartford Financial Services Group Inc.................................................. 10,065
75 Lincoln National Corp.................................................................. 6,853
86 Loews Corp............................................................................. 7,493
863 Travelers Group, Inc................................................................... 52,319
------------
164,558
------------
NATURAL GAS (0.6%)
69 Coastal Corp........................................................................... 4,817
54 Columbia Gas System, Inc............................................................... 3,004
62 Consolidated Natural Gas Co............................................................ 3,650
5 Eastern Enterprises.................................................................... 214
246 Enron Corp............................................................................. 13,299
36 NICOR, Inc............................................................................. 1,445
7 ONEOK, Inc............................................................................. 279
8 Peoples Energy Corp.................................................................... 309
180 Sempra Energy*......................................................................... 4,985
72 Sonat, Inc............................................................................. 2,781
318 Williams Companies, Inc................................................................ 10,733
------------
45,516
------------
OFFICE EQUIPMENT & SUPPLIES (0.1%)
21 Moore Corp. Ltd. (Canada).............................................................. 278
205 Pitney Bowes, Inc...................................................................... 9,866
------------
10,144
------------
OIL & GAS - EXPLORATION & PRODUCTION (0.2%)
45 Anardarko Petroleum Corp............................................................... 3,023
44 Apache Corp............................................................................ 1,386
115 Burlington Resources, Inc.............................................................. 4,952
22 Kerr-McGee Corp........................................................................ 1,273
49 Oryx Energy Co.*....................................................................... 1,084
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
163 Union Pacific Resources Group, Inc..................................................... $ 2,863
------------
14,581
------------
OIL & GAS - REFINING & MARKETING (0.1%)
57 Ashland, Inc........................................................................... 2,943
70 Sun Co., Inc........................................................................... 2,717
------------
5,660
------------
OIL & GAS DRILLING (0.7%)
127 Baker Hughes, Inc...................................................................... 4,389
114 Dresser Industries, Inc................................................................ 5,023
197 Halliburton Co......................................................................... 8,779
12 Helmerich & Payne, Inc................................................................. 267
20 Rowan Companies, Inc.*................................................................. 389
374 Schlumberger Ltd....................................................................... 25,549
36 Western Atlas, Inc.*................................................................... 3,056
------------
47,452
------------
OIL INTEGRATED - DOMESTIC (0.7%)
59 Amerada Hess Corp...................................................................... 3,204
241 Atlantic Richfield Co.................................................................. 18,828
276 Occidental Petroleum Corp.............................................................. 7,452
22 Pennzoil Co............................................................................ 1,114
196 Phillips Petroleum Co.................................................................. 9,445
157 Unocal Corp............................................................................ 5,613
217 USX-Marathon Group..................................................................... 7,446
------------
53,102
------------
OIL INTEGRATED - INTERNATIONAL (5.0%)
720 Amoco Corp............................................................................. 29,970
491 Chevron Corp........................................................................... 40,784
1,835 Exxon Corp.**.......................................................................... 130,858
586 Mobil Corp............................................................................. 44,902
1,608 Royal Dutch Petroleum Co. (ADR) (Netherlands).......................................... 88,139
406 Texaco, Inc............................................................................ 24,233
------------
358,886
------------
PAPER & FOREST PRODUCTS (0.4%)
13 Boise Cascade Corp..................................................................... 426
63 Champion International Corp............................................................ 3,099
69 Georgia-Pacific Corp................................................................... 4,067
231 International Paper Co................................................................. 9,933
51 Louisiana-Pacific Corp................................................................. 931
49 Mead Corp.............................................................................. 1,556
7 Potlatch Corp.......................................................................... 294
47 Westvaco Corp.......................................................................... 1,328
149 Weyerhaeuser Co........................................................................ 6,882
84 Willamette Industries, Inc............................................................. 2,688
------------
31,204
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
76
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES - S&P 500 INDEX
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
PERSONAL CARE (0.8%)
13 Alberto-Culver Co. (Class B)........................................................... $ 377
99 Avon Products, Inc..................................................................... 7,673
843 Gillette Co............................................................................ 47,788
------------
55,838
------------
PHOTOGRAPHY/IMAGING (0.6%)
242 Eastman Kodak Co....................................................................... 17,681
62 IKON Office Solutions, Inc............................................................. 903
10 Polaroid Corp.......................................................................... 356
246 Xerox Corp............................................................................. 25,000
------------
43,940
------------
PROPERTY - CASUALTY INSURANCE (1.1%)
315 Allstate Corp.......................................................................... 28,842
126 Chubb Corp............................................................................. 10,127
109 Cincinnati Financial Corp.............................................................. 4,210
57 General Re Corp........................................................................ 14,450
54 Progressive Corp....................................................................... 7,614
106 SAFECO Corp............................................................................ 4,810
176 St. Paul Companies, Inc................................................................ 7,403
------------
77,456
------------
PUBLISHING (0.2%)
61 Dow Jones & Co., Inc................................................................... 3,401
65 McGraw-Hill, Inc....................................................................... 5,302
24 Meredith Corp.......................................................................... 1,127
67 Times Mirror Co. (Class A)............................................................. 4,213
------------
14,043
------------
PUBLISHING - NEWSPAPER (0.4%)
213 Gannett Co., Inc....................................................................... 15,136
51 Knight-Ridder, Inc..................................................................... 2,808
62 New York Times Co. (Class A)........................................................... 4,914
79 Tribune Co............................................................................. 5,436
------------
28,294
------------
RAILROADS (0.5%)
118 Burlington Northern Santa Fe Corp...................................................... 11,586
164 CSX Corp............................................................................... 7,462
284 Norfolk Southern Corp.................................................................. 8,467
185 Union Pacific Corp..................................................................... 8,163
------------
35,678
------------
RESTAURANTS (0.6%)
69 Darden Restaurants, Inc................................................................ 1,095
516 McDonald's Corp........................................................................ 35,604
99 TRICON Global Restaurants, Inc.*....................................................... 3,137
61 Wendy's International, Inc............................................................. 1,434
------------
41,270
------------
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
RETAIL (0.0%)
1 Abercrombie & Fitch Co. (Class A)*..................................................... $ 44
------------
RETAIL - BUILDING SUPPLIES (0.8%)
551 Home Depot, Inc........................................................................ 45,767
262 Lowe's Companies, Inc.................................................................. 10,627
113 Sherwin-Williams Co.................................................................... 3,743
------------
60,137
------------
RETAIL - COMPUTERS & ELECTRONICS (0.1%)
64 Circuit City Stores, Inc............................................................... 3,000
66 Tandy Corp............................................................................. 3,502
------------
6,502
------------
RETAIL - DEPARTMENT STORES (0.6%)
70 Dillard's, Inc. (Class A).............................................................. 2,901
158 Federated Department Stores, Inc.*..................................................... 8,502
46 Harcourt General, Inc.................................................................. 2,737
173 May Department Stores Co............................................................... 11,332
22 Mercantile Stores Co., Inc............................................................. 1,737
50 Nordstrom, Inc......................................................................... 3,859
188 Penney (J.C.) Co., Inc................................................................. 13,595
------------
44,663
------------
RETAIL - DRUG STORES (0.5%)
288 CVS Corp............................................................................... 11,214
9 Longs Drug Stores Corp................................................................. 260
193 Rite Aid Corp.......................................................................... 7,250
373 Walgreen Co............................................................................ 15,410
------------
34,134
------------
RETAIL - FOOD CHAINS (0.4%)
184 Albertson's, Inc....................................................................... 9,534
205 American Stores Co..................................................................... 4,958
28 Giant Food, Inc. (Class A)............................................................. 1,206
9 Great Atlantic & Pacific Tea Co., Inc.................................................. 298
192 Kroger Co.*............................................................................ 8,232
97 Winn-Dixie Stores, Inc................................................................. 4,965
------------
29,193
------------
RETAIL - GENERAL MERCHANDISE (2.1%)
162 Costco Companies, Inc.*................................................................ 10,216
328 Dayton Hudson Corp..................................................................... 15,908
366 Kmart Corp.*........................................................................... 7,046
293 Sears, Roebuck & Co.................................................................... 17,891
1,684 Wal-Mart Stores, Inc.**................................................................ 102,303
------------
153,364
------------
RETAIL - SPECIALTY (0.2%)
99 AutoZone, Inc.*........................................................................ 3,162
70 Consolidated Stores Corp.*............................................................. 2,538
14 Pep Boys-Manny, Moe & Jack............................................................. 265
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
77
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES - S&P 500 INDEX
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
209 Toys 'R' Us, Inc.*..................................................................... $ 4,925
63 Venator Group, Inc*.................................................................... 1,205
------------
12,095
------------
RETAIL - SPECIALTY APPAREL (0.4%)
295 Gap, Inc............................................................................... 18,179
148 Limited (The), Inc..................................................................... 4,903
208 TJX Companies, Inc..................................................................... 5,018
------------
28,100
------------
SAVINGS & LOAN COMPANIES (0.3%)
71 Ahmanson (H.F.) & Co................................................................... 5,041
43 Golden West Financial Corp............................................................. 4,571
291 Washington Mutual, Inc................................................................. 12,600
------------
22,212
------------
SEMICONDUCTOR EQUIPMENT (0.1%)
275 Applied Materials, Inc.*............................................................... 8,112
39 KLA-Tencor Corp.*...................................................................... 1,080
------------
9,192
------------
SPECIALTY PRINTING (0.1%)
38 Deluxe Corp............................................................................ 1,361
106 Donnelley (R.R.) & Sons Co............................................................. 4,850
------------
6,211
------------
STEEL & IRON (0.1%)
128 Allegheny Teledyne Inc................................................................. 2,928
25 Armco, Inc.*........................................................................... 159
27 Bethlehem Steel Corp.*................................................................. 336
57 Nucor Corp............................................................................. 2,622
40 USX-U.S. Steel Group, Inc.............................................................. 1,320
22 Worthington Industries, Inc............................................................ 330
------------
7,695
------------
TELECOMMUNICATIONS - CELLULAR/WIRELESS (0.4%)
429 AirTouch Communications, Inc.*......................................................... 25,070
178 Nextel Communications, Inc. (Class A)*................................................. 4,417
------------
29,487
------------
TELECOMMUNICATIONS - LONG DISTANCE (2.2%)
1,218 AT&T Corp.............................................................................. 69,578
543 MCI Communications Corp................................................................ 31,528
323 Sprint Corp............................................................................ 22,772
774 WorldCom, Inc.*........................................................................ 37,394
------------
161,272
------------
TELEPHONES (3.6%)
120 ALLTEL Corp............................................................................ 5,580
825 Ameritech Corp......................................................................... 37,022
1,164 Bell Atlantic Corp..................................................................... 53,108
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
743 BellSouth Corp......................................................................... $ 49,874
111 Frontier Corp.......................................................................... 3,497
722 GTE Corp............................................................................... 40,161
1,379 SBC Communications, Inc................................................................ 55,160
376 U.S. West, Inc......................................................................... 17,687
------------
262,089
------------
TEXTILES & APPAREL (0.1%)
34 Fruit of the Loom, Inc. (Class A)*..................................................... 1,128
50 Liz Claiborne, Inc..................................................................... 2,613
8 Russell Corp........................................................................... 242
91 VF Corp................................................................................ 4,687
------------
8,670
------------
TEXTILES - HOME FURNISHINGS (0.0%)
5 Springs Industries, Inc. (Class A)..................................................... 231
------------
TOBACCO (1.0%)
1,822 Philip Morris Companies, Inc........................................................... 71,741
121 UST, Inc............................................................................... 3,267
------------
75,008
------------
TRUCKERS (0.0%)
35 Ryder System, Inc...................................................................... 1,105
------------
UTILITIES - ELECTRIC (2.1%)
89 Ameren Corp............................................................................ 3,538
124 American Electric Power Co............................................................. 5,626
96 Baltimore Gas & Electric Co............................................................ 2,982
114 Carolina Power & Light Co.............................................................. 4,945
138 Central & South West Corp.............................................................. 3,709
103 CINergy Corp........................................................................... 3,605
177 Consolidated Edison, Inc............................................................... 8,153
127 Dominion Resources, Inc................................................................ 5,175
109 DTE Energy Co.......................................................................... 4,401
270 Duke Power Co.......................................................................... 15,997
272 Edison International................................................................... 8,041
160 Entergy Corp........................................................................... 4,600
150 FirstEnergy Corp....................................................................... 4,612
136 FPL Group, Inc......................................................................... 8,568
83 GPU, Inc............................................................................... 3,138
192 Houston Industries, Inc................................................................ 5,928
125 Niagara Mohawk Power Corp.*............................................................ 1,867
98 Northern States Power Co............................................................... 2,805
193 PacifiCorp............................................................................. 4,367
167 PECO Energy Co......................................................................... 4,874
286 PG & E Corp............................................................................ 9,027
126 PP&L Resources, Inc.................................................................... 2,859
151 Public Service Enterprise Group, Inc................................................... 5,200
523 Southern Co............................................................................ 14,481
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
78
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES - S&P 500 INDEX
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
210 Texas Utilities Co..................................................................... $ 8,741
141 Unicom Corp............................................................................ 4,944
------------
152,183
------------
WASTE MANAGEMENT (0.2%)
138 Browning-Ferris Industries, Inc........................................................ 4,796
357 Waste Management, Inc.................................................................. 12,495
------------
17,291
------------
TOTAL COMMON STOCKS
(IDENTIFIED COST $6,444,947)........................................................... 6,589,721
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS
- ---------
<C> <S> <C>
SHORT-TERM INVESTMENTS (16.7%)
U.S. GOVERNMENT AGENCY (a)
$ 1,200 Federal Home Loan Mortgage Corp. 5.85% due 07/01/98 (AMORTIZED COST $1,200,000).......... 1,200,000
----------
TOTAL INVESTMENTS........................................................................ 7,789,721
----------
</TABLE>
<TABLE>
<CAPTION>
NUMBER DESCRIPTION,
OF DELIVERY YEAR,
CONTRACTS AND MONTH VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
FINANCIAL FUTURES (b) (0.0%)
SHORT POSITION
5 E-MINI S&P ES/September 1998............................................................ $ (665)
------------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(IDENTIFIED COST $7,644,947) (c).......................................................... 108.3 % 7,789,721
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL FINANCIAL FUTURES................................................................... 0.0 (665)
LIABILITIES IN EXCESS OF OTHER ASSETS..................................................... (8.3) (596,691)
------ -------------
NET ASSETS................................................................................ 100.0 % $ 7,192,365
------ -------------
------ -------------
</TABLE>
- ---------------------
ADR American Depository Receipt.
* Non-income producing security.
** Some or all of these securities are segregated in connection with open
futures contracts.
(a) Security was purchased on a discount basis. The interest rate shown has
been adjusted to reflect a money market equivalent yield.
(b) Value represents variation margin on open futures contracts at June 30,
1998. The market value of these futures contracts is $283,575 and the
unrealized appreciation is $2,110.
(c) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $240,102 and the
aggregate gross unrealized depreciation is $95,328, resulting in net
unrealized appreciation of $144,774.
SEE NOTES TO FINANCIAL STATEMENTS
79
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES - COMPETITIVE EDGE "BEST
IDEAS"
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON AND PREFERRED STOCKS (85.2%)
AUSTRALIA (2.7%)
PUBLISHING & TELEVISION
70,000 News Corporation Ltd. (Pref.)...................................... $ 495,535
-----------
FINLAND (2.4%)
PAPER PRODUCTS
16,200 UPM-Kymmene Oyj.................................................... 445,347
-----------
FRANCE (9.7%)
ELECTRONICS - SEMICONDUCTORS/COMPONENTS
7,000 ST Microelectronics NV*............................................ 489,125
-----------
INSURANCE
3,860 AXA-UAP............................................................ 433,171
-----------
OIL - INTEGRATED
3,370 Total S.A. (B Shares).............................................. 437,135
-----------
TIRE & RUBBER GOODS
7,200 Compagnie Generale des Etablissements Michelin (B Shares).......... 414,688
-----------
TOTAL FRANCE....................................................... 1,774,119
-----------
GERMANY (4.6%)
AUTOMOTIVE
430 Bayerische Motoren Werke (BMW) AG.................................. 433,971
-----------
MACHINERY - DIVERSIFIED
1,070 MAN AG............................................................. 416,568
-----------
TOTAL GERMANY...................................................... 850,539
-----------
HONG KONG (2.4%)
BANKING
17,600 HSBC Holdings PLC.................................................. 430,543
-----------
JAPAN (2.3%)
PHOTOGRAPHY/IMAGING
12,000 Fuji Photo Film Co................................................. 416,979
-----------
SINGAPORE (2.5%)
PAPER PRODUCTS
40,000 Asia Pulp & Paper Co., Ltd. (ADR).................................. 450,000
-----------
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
SWEDEN (2.3%)
MACHINERY - DIVERSIFIED
15,200 Sandvik AB (B Shares).............................................. $ 416,412
-----------
SWITZERLAND (4.7%)
BANKING
1,200 UBS AG............................................................. 445,556
-----------
CEMENT
330 Holderbank Financiere Glarus AG (B Shares)......................... 419,289
-----------
TOTAL SWITZERLAND.................................................. 864,845
-----------
UNITED KINGDOM (6.7%)
CONSUMER PRODUCTS
37,300 Unilever PLC....................................................... 396,822
-----------
ENGINEERING & CONSTRUCTION
21,300 Siebe PLC.......................................................... 425,147
-----------
FOODS & BEVERAGES
35,000 Diageo PLC......................................................... 414,374
-----------
TOTAL UNITED KINGDOM............................................... 1,236,343
-----------
UNITED STATES (44.9%)
AIR FREIGHT
6,000 FDX Corp.*......................................................... 376,500
-----------
AIRCRAFT & AEROSPACE
8,000 Boeing Co.......................................................... 356,500
-----------
BANKING
3,000 Citicorp........................................................... 447,750
-----------
BEVERAGES
9,000 Coca-Cola Enterprises Inc.......................................... 353,250
-----------
CHEMICALS
5,000 Du Pont (E.I.) De Nemours & Co., Inc............................... 373,125
-----------
COMMUNICATIONS - EQUIPMENT & SOFTWARE
4,000 Cisco Systems, Inc.*............................................... 368,250
-----------
COMPUTER SOFTWARE
4,000 Microsoft Corp..................................................... 433,500
-----------
CONSUMER PRODUCTS
5,000 Procter & Gamble Co................................................ 455,312
-----------
ELECTRICAL EQUIPMENT
6,000 Emerson Electric Co................................................ 362,250
4,000 General Electric Co................................................ 364,000
-----------
726,250
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
80
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES - COMPETITIVE EDGE "BEST
IDEAS"
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
ELECTRONICS - SEMICONDUCTORS/COMPONENTS
5,000 Intel Corp......................................................... $ 370,312
-----------
FINANCIAL SERVICES
4,000 American Express Co................................................ 456,000
-----------
MEDICAL EQUIPMENT
6,000 Medtronic, Inc..................................................... 382,500
-----------
MEDICAL SERVICES
8,000 Quintiles Transnational Corp.*..................................... 393,000
-----------
OIL - INTERNATIONAL
5,000 Chevron Corp....................................................... 415,312
-----------
OIL DRILLING & SERVICES
8,000 Dresser Industries, Inc............................................ 352,500
5,000 Schlumberger Ltd................................................... 341,563
-----------
694,063
-----------
PHARMACEUTICALS
6,000 Lilly (Eli) & Co................................................... 396,375
-----------
PUBLISHING & TELEVISION
4,000 Time Warner, Inc................................................... 341,750
-----------
SPECIALTY PACKAGING
10 Sealed Air Corp.*.................................................. 368
-----------
TELEPHONE - LONG DISTANCE
6,000 AT&T Corp.......................................................... 342,750
-----------
TEMPORARY SERVICES
6,130 Manpower, Inc...................................................... 175,854
-----------
UTILITIES - ELECTRIC
7,000 AES Corp. (The)*................................................... 367,938
-----------
TOTAL UNITED STATES................................................ 8,226,659
-----------
TOTAL COMMON AND PREFERRED STOCKS
(IDENTIFIED COST $15,604,644)...................................... 15,607,321
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS
------------
<C> <S> <C>
SHORT-TERM INVESTMENTS (18.6%)
U.S. GOVERNMENT AGENCY (a) (15.8%)
$ 2,900 Federal Home Loan Mortgage Corp. 5.85% due 07/01/98 (AMORTIZED COST
$2,900,000)...................................................... 2,900,000
-----------
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
REPURCHASE AGREEMENT (2.8%)
$ 518 The Bank of New York 5.50% due 07/01/98 (dated 06/30/98; proceeds
$518,020) (b) (IDENTIFIED COST $517,941)......................... $ 517,941
-----------
TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST 3,417,941)........................................ 3,417,941
-----------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(IDENTIFIED COST $19,022,585) (c).......................................................... 103.8 % 19,025,262
LIABILITIES IN EXCESS OF CASH AND OTHER ASSETS............................................. (3.8) (707,790)
------ ------------
NET ASSETS................................................................................. 100.0 % $ 18,317,472
------ ------------
------ ------------
</TABLE>
- ---------------------
ADR American Depository Receipt.
* Non-income producing security.
(a) Security was purchased on a discount basis. The interest rate shown has
been adjusted to reflect a money market equivalent yield.
(b) Collateralized by $306,573 U.S. Treasury Bond 6.00% due 02/15/26 valued at
$324,355 and $199,718 U.S. Treasury Note 6.25% due 03/31/99 valued at
$203,945.
(c) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $488,593 and the
aggregate gross unrealized depreciation is $485,916, resulting in net
unrealized appreciation of $2,677.
FORWARD FOREIGN CURRENCY CONTRACTS OPEN AT JUNE 30, 1998:
<TABLE>
<CAPTION>
IN UNREALIZED
CONTRACTS TO EXCHANGE DELIVERY APPRECIATION/
RECEIVE FOR DATE DEPRECIATION
- ---------------------------------------------------
<S> <C> <C> <C>
AUD 104,038 $ 63,182 07/01/98 $ 1,196
FRF 1,719,149 $286,482 07/31/98 (2,770 )
GBP 173,175 $289,566 07/01/98 (797 )
-------
Net unrealized
depreciation................. $ (2,371 )
-------
-------
</TABLE>
CURRENCY ABBREVIATIONS:
<TABLE>
<S> <C>
AUD Australian Dollar.
GBP British Pound.
FRF French Franc.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
81
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES - COMPETITIVE EDGE "BEST
IDEAS"
SUMMARY OF INVESTMENTS JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
PERCENT OF
INDUSTRY VALUE NET ASSETS
<S> <C> <C>
- -------------------------------------------------------------------------------------
Air Freight................................................. $ 376,500 2.0%
Aircraft & Aerospace........................................ 356,500 1.9
Automotive.................................................. 433,971 2.4
Banking..................................................... 1,323,849 7.2
Beverages................................................... 353,250 1.9
Cement...................................................... 419,289 2.3
Chemicals................................................... 373,125 2.0
Communications - Equipment & Software....................... 368,250 2.0
Computer Software........................................... 433,500 2.3
Consumer Products........................................... 852,134 4.6
Electrical Equipment........................................ 726,250 4.0
Electronics - Semiconductors/
Components................................................ 859,437 4.7
Engineering & Construction.................................. 425,147 2.3
Financial Services.......................................... 456,000 2.5
Foods & Beverages........................................... 414,374 2.3
Insurance................................................... 433,171 2.4
Machinery - Diversified..................................... 832,980 4.5
Medical Equipment........................................... 382,500 2.1
Medical Services............................................ 393,000 2.1
Oil - Integrated............................................ 437,135 2.4
<CAPTION>
PERCENT OF
INDUSTRY VALUE NET ASSETS
- -------------------------------------------------------------------------------------
<S> <C> <C>
Oil - International......................................... $ 415,312 2.3%
Oil Drilling & Services..................................... 694,063 3.8
Paper Products.............................................. 895,347 4.9
Pharmaceuticals............................................. 396,375 2.2
Photography/Imaging......................................... 416,979 2.3
Publishing & Television..................................... 837,285 4.6
Specialty Packaging......................................... 368 0.0
Telephone - Long Distance................................... 342,750 1.9
Temporary Services.......................................... 175,854 1.0
Tire & Rubber Goods......................................... 414,688 2.3
U.S. Government Agency...................................... 2,900,000 15.8
Utilities - Electric........................................ 367,938 2.0
Repurchase Agreement........................................ 517,941 2.8
----------- -----
$19,025,262 103.8%
----------- -----
----------- -----
</TABLE>
<TABLE>
<CAPTION>
PERCENT OF
TYPE OF INVESTMENT VALUE NET ASSETS
<S> <C> <C>
- -------------------------------------------------------------------------------------
Common Stocks............................................... $15,607,321 85.2%
Short-Term Investments...................................... 3,417,941 18.6
----------- -----
$19,025,262 103.8%
----------- -----
----------- -----
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
82
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES - STRATEGIST
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (67.7%)
AEROSPACE & DEFENSE (2.4%)
96,000 Cordant Technologies Inc............................................................... $ 4,428,000
95,000 General Motors Corp. (Class H)......................................................... 4,476,875
60,500 Honeywell, Inc......................................................................... 5,055,531
------------
13,960,406
------------
ALUMINUM (0.6%)
52,000 Aluminum Co. of America................................................................ 3,428,750
------------
APPLIANCES & HOUSEHOLD DURABLES (1.1%)
125,000 Maytag Corp............................................................................ 6,171,875
------------
AUTOMOTIVE (2.6%)
152,900 Chrysler Corp.......................................................................... 8,619,737
105,000 Ford Motor Co.......................................................................... 6,195,000
------------
14,814,737
------------
BANKS (1.7%)
64,000 NationsBank Corp....................................................................... 4,896,000
14,050 Wells Fargo & Co....................................................................... 5,184,450
------------
10,080,450
------------
BANKS - MONEY CENTER (1.8%)
66,600 Chase Manhattan Corp................................................................... 5,028,300
37,400 Citicorp............................................................................... 5,581,950
------------
10,610,250
------------
BEVERAGES - SOFT DRINKS (0.7%)
104,900 PepsiCo, Inc........................................................................... 4,320,569
------------
BIOTECHNOLOGY (1.1%)
236,000 BioChem Pharma Inc. (Canada)*.......................................................... 6,224,500
5,900 Clinichem Development Inc. (Canada)*................................................... 33,556
------------
6,258,056
------------
CHEMICALS (3.5%)
67,000 Dow Chemical Co. ...................................................................... 6,478,062
60,000 Du Pont (E.I.) De Nemours & Co., Inc. ................................................. 4,477,500
147,300 Georgia Gulf Corp. .................................................................... 3,360,281
104,200 Monsanto Co. .......................................................................... 5,822,175
------------
20,138,018
------------
COMMUNICATIONS EQUIPMENT (3.9%)
76,650 Cisco Systems, Inc.*................................................................... 7,056,591
92,800 Lucent Technologies Inc................................................................ 7,719,800
51,000 PMC - Sierra, Inc. (Canada)*........................................................... 2,384,250
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
72,100 Tellabs, Inc.*......................................................................... $ 5,159,656
------------
22,320,297
------------
COMPUTER SOFTWARE (1.7%)
60,600 Microsoft Corp.*....................................................................... 6,567,525
70,500 Network Associates, Inc.*.............................................................. 3,370,781
------------
9,938,306
------------
COMPUTER SOFTWARE & SERVICES (0.6%)
104,000 HBO & Co............................................................................... 3,666,000
------------
COMPUTERS (3.1%)
85,000 Dell Computer Corp.*................................................................... 7,883,750
114,000 Gateway 2000, Inc.*.................................................................... 5,771,250
92,900 Sun Microsystems, Inc.*................................................................ 4,035,344
------------
17,690,344
------------
CONSUMER PRODUCTS (0.2%)
90,000 Oakley, Inc.*.......................................................................... 1,170,000
------------
ELECTRICAL EQUIPMENT (1.5%)
50,000 Emerson Electric Co.................................................................... 3,018,750
59,200 General Electric Co.................................................................... 5,387,200
------------
8,405,950
------------
ENTERTAINMENT (0.7%)
38,000 Walt Disney Co. ....................................................................... 3,992,375
------------
FINANCIAL SERVICES (2.8%)
50,000 American Express Co.................................................................... 5,700,000
87,300 Fannie Mae............................................................................. 5,303,475
83,850 Travelers Group, Inc................................................................... 5,083,406
------------
16,086,881
------------
FOODS (1.1%)
100,000 Aurora Foods, Inc.*.................................................................... 2,112,500
60,300 General Mills, Inc. ................................................................... 4,123,012
------------
6,235,512
------------
HEALTHCARE - HMOS (0.9%)
50,000 United Healthcare Corp. ............................................................... 3,175,000
30,000 Wellpoint Health Networks, Inc.*....................................................... 2,220,000
------------
5,395,000
------------
HOUSEHOLD PRODUCTS (1.5%)
57,800 Colgate-Palmolive Co................................................................... 5,086,400
112,500 Rubbermaid, Inc........................................................................ 3,733,594
------------
8,819,994
------------
INSURANCE (3.9%)
124,500 Ace, Ltd. (Bermuda).................................................................... 4,855,500
38,500 American International Group, Inc...................................................... 5,621,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
83
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES - STRATEGIST
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
100,000 Conseco, Inc........................................................................... $ 4,675,000
96,000 Equitable Companies, Inc............................................................... 7,194,000
------------
22,345,500
------------
INTERNET (1.9%)
100,600 America Online, Inc.*.................................................................. 10,663,600
------------
MEDIA GROUP (2.5%)
64,500 Clear Channel Communications, Inc.*.................................................... 7,038,562
170,000 MediaOne Group Inc.*................................................................... 7,469,408
------------
14,507,970
------------
MEDICAL EQUIPMENT (0.5%)
45,000 Perkin-Elmer Corp...................................................................... 2,798,437
------------
METALS - MISCELLANEOUS (0.7%)
75,000 Phelps Dodge Corp...................................................................... 4,289,062
------------
OIL - DOMESTIC (1.9%)
85,000 Amerada Hess Corp...................................................................... 4,616,562
80,600 Atlantic Richfield Co.................................................................. 6,296,875
------------
10,913,437
------------
OIL INTEGRATED - INTERNATIONAL (3.5%)
65,000 Chevron Corp........................................................................... 5,399,063
79,700 Exxon Corp............................................................................. 5,683,606
70,200 Mobil Corp............................................................................. 5,379,075
65,700 Texaco, Inc............................................................................ 3,921,469
------------
20,383,213
------------
PAPER PRODUCTS (1.1%)
124,200 Champion International Corp............................................................ 6,109,088
------------
PHARMACEUTICALS (4.6%)
128,600 Abbott Laboratories.................................................................... 5,256,525
112,600 American Home Products Corp............................................................ 5,827,050
68,400 Johnson & Johnson...................................................................... 5,044,500
66,600 Lilly (Eli) & Co. ..................................................................... 4,399,763
87,300 Warner-Lambert Co...................................................................... 6,056,438
------------
26,584,276
------------
POLLUTION CONTROL (0.3%)
50,000 Waste Management, Inc.................................................................. 1,750,000
------------
PROPERTY - CASUALTY INSURANCE (1.0%)
70,400 Chubb Corp............................................................................. 5,658,400
------------
RAILROAD EQUIPMENT (0.2%)
31,000 Trinity Industries, Inc................................................................ 1,286,500
------------
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
RETAIL - DEPARTMENT STORES (1.8%)
265,000 Kmart Corp.*........................................................................... $ 5,101,250
77,300 May Department Stores Co............................................................... 5,063,150
------------
10,164,400
------------
RETAIL - SPECIALTY (4.9%)
122,400 Bed Bath & Beyond, Inc.*............................................................... 6,341,850
106,000 Costco Companies, Inc.*................................................................ 6,684,625
76,300 Home Depot, Inc........................................................................ 6,337,669
68,300 Payless ShoeSource, Inc.*.............................................................. 5,032,856
120,000 Pier 1 Imports, Inc. .................................................................. 2,865,000
30,000 Williams-Sonoma, Inc.*................................................................. 954,375
------------
28,216,375
------------
RETAIL - SPECIALTY APPAREL (1.3%)
125,700 Gap, Inc............................................................................... 7,746,263
------------
SAVINGS & LOAN ASSOCIATIONS (1.5%)
46,000 Golden West Financial Corp............................................................. 4,890,375
90,450 Washington Mutual, Inc................................................................. 3,923,269
------------
8,813,644
------------
SEMICONDUCTORS (0.6%)
45,000 Intel Corp............................................................................. 3,332,813
------------
STEEL & IRON (0.3%)
40,000 Nucor Corp............................................................................. 1,840,000
------------
TELECOMMUNICATIONS - LONG DISTANCE (0.4%)
60,000 Qwest Communications International, Inc.*.............................................. 2,088,750
------------
TOBACCO (0.7%)
100,000 Philip Morris Companies, Inc........................................................... 3,937,500
------------
TRANSPORTATION - MISCELLANEOUS (0.6%)
101,000 Airborne Freight Corp.................................................................. 3,528,688
------------
TOTAL COMMON STOCKS
(IDENTIFIED COST $276,051,607)......................................................... 390,461,686
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS
- ---------
<C> <S> <C>
CORPORATE BONDS (9.9%)
AEROSPACE & DEFENSE (0.6%)
$ 1,000 Honeywell, Inc.
6.625% due 06/15/28.......................................................... 1,012,240
1,000 Northrop-Grumman Corp.
7.875% due 03/01/26.......................................................... 1,139,810
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
84
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES - STRATEGIST
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- --------------------------------------------------------------------------------------------------------
<C> <S> <C>
$ 1,000 Raytheon Co.
7.20% due 08/15/27........................................................... $ 1,067,450
------------
3,219,500
------------
AIRLINES (0.2%)
1,000 Continental Airlines, Inc. (Series 981A)
6.648% due 03/15/19.......................................................... 1,020,100
------------
BANKS (1.7%)
1,000 Amsouth Bank of Alabama
6.45% due 02/01/18........................................................... 1,003,160
1,000 BB&T Corp.
6.375% due 06/30/05.......................................................... 1,000,400
1,240 Compass Trust I (Series A)
8.23% due 01/15/27........................................................... 1,361,359
2,000 MBNA Capital I (Series A)
8.278% due 12/01/26.......................................................... 2,149,140
1,000 Mercantile Bancorporation, Inc.
7.30% due 06/15/07........................................................... 1,062,340
2,000 St. Paul Bancorp, Inc.
7.125% due 02/15/04.......................................................... 2,061,860
1,000 Wilmington Trust Corp.
6.625% due 05/01/08.......................................................... 1,019,440
------------
9,657,699
------------
BANKS - THRIFT INSTITUTIONS (0.2%)
1,000 Long Island Savings Bank
6.20% due 04/02/01........................................................... 998,800
------------
BROKERAGE (0.5%)
1,000 Credit Suisse First Boston NY - 144A**
6.50% due 05/01/08........................................................... 1,017,730
2,000 Paine Webber Group, Inc.
6.55% due 04/15/08........................................................... 2,001,960
------------
3,019,690
------------
BUILDING MATERIALS (0.3%)
1,500 Masco Corp
7.125% due 08/15/13.......................................................... 1,607,070
------------
CHEMICALS (0.3%)
1,900 Solutia, Inc.
7.375% due 10/15/27.......................................................... 1,998,648
------------
COMPUTER SOFTWARE (0.2%)
1,000 Computer Associates International - 144A**
6.375% due 04/15/05.......................................................... 992,170
------------
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- --------------------------------------------------------------------------------------------------------
<C> <S> <C>
FINANCE (0.3%)
$ 2,000 Household Finance Corp.
6.40% due 06/17/08........................................................... $ 1,994,920
------------
FINANCIAL SERVICES (1.9%)
2,000 Arkwright CSN Trust - 144A**
9.625% due 08/15/26.......................................................... 2,402,500
3,000 Centura Capital Trust I - 144A**
8.845% due 06/01/27.......................................................... 3,401,250
3,000 Markel Capital Trust I (Series B)
8.71% due 01/01/46........................................................... 3,287,220
2,000 Orion Capital Trust I
8.73% due 01/01/37........................................................... 2,152,980
------------
11,243,950
------------
INDUSTRIALS (0.2%)
1,000 Lexmark International Inc.
6.75% due 05/15/08........................................................... 1,003,120
------------
INSURANCE (0.5%)
1,000 CNA Financial Corp.
6.50% due 04/15/05........................................................... 1,002,840
1,000 Conseco, Inc.
6.80% due 06/15/05........................................................... 999,040
1,000 Terra Nova Ins (United Kingdom) Holding - 144A**
7.00% due 05/15/08........................................................... 1,020,980
------------
3,022,860
------------
MANUFACTURING (0.3%)
2,000 Tyco International Group SA (Luxembourg)
6.375% due 06/15/05.......................................................... 2,005,280
------------
MEDIA GROUP (0.4%)
2,000 News America Inc.- 144A**
7.30% due 04/30/28........................................................... 2,050,000
------------
RAILROADS (0.4%)
1,966 Southern Pacific Co. (Series B)
7.28% due 04/30/15........................................................... 2,081,664
------------
RETAIL (0.5%)
1,000 Neiman Marcus Group Inc.
7.125% due 06/01/28.......................................................... 1,031,950
1,000 Penny (J.C.) Co., Inc.
7.625% due 03/01/97.......................................................... 1,095,120
1,000 Tommy Hilfiger USA Inc.
6.50% due 06/01/03........................................................... 1,000,900
------------
3,127,970
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
85
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES - STRATEGIST
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- --------------------------------------------------------------------------------------------------------
<C> <S> <C>
RETAIL - DEPARTMENT STORES (0.5%)
$ 2,500 Shopko Stores, Inc.
8.50% due 03/15/02........................................................... $ 2,664,825
------------
TELECOMMUNICATIONS (0.4%)
1,000 GTE Corp.
6.84% due 04/15/18........................................................... 1,004,060
1,000 GTE Corp.
8.75% due 11/01/21........................................................... 1,223,480
------------
2,227,540
------------
UTILITIES (0.3%)
1,000 Energen Corp.
7.125% due 02/15/28.......................................................... 1,037,060
1,000 United Utilities Corp. (United Kingdom)
6.45% due 04/01/08........................................................... 995,970
------------
2,033,030
------------
UTILITIES - ELECTRIC (0.2%)
1,000 Western Resources, Inc.
6.875% due 08/01/04.......................................................... 1,024,620
------------
TOTAL CORPORATE BONDS
(IDENTIFIED COST $55,523,655).................................................. 56,993,456
------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS (9.7%)
Federal National Mortgage Assoc.
1,000 5.75% due 04/15/03........................................................... 999,640
2,000 5.75% due 06/15/05........................................................... 1,994,680
3,000 5.75% due 02/15/08........................................................... 2,985,630
U.S. Treasury Bond
1,800 6.125% due 11/15/27.......................................................... 1,926,846
2,400 6.625% due 02/15/27.......................................................... 2,709,024
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- --------------------------------------------------------------------------------------------------------
<C> <S> <C>
U.S. Treasury Note
$ 2,000 5.625% due 11/30/00.......................................................... $ 2,003,860
2,000 5.75% due 08/15/03........................................................... 2,021,000
2,000 5.875% due 02/28/99.......................................................... 2,004,380
13,000 6.00% due 09/30/98........................................................... 13,021,320
1,000 6.25% due 02/28/02........................................................... 1,021,600
1,000 6.25% due 02/15/03........................................................... 1,028,540
2,000 6.375% due 05/15/99.......................................................... 2,014,100
1,500 6.50% due 04/30/99........................................................... 1,511,700
2,000 6.50% due 08/15/05........................................................... 2,110,240
7,000 6.875% due 08/31/99.......................................................... 7,104,160
5,000 6.875% due 03/31/00.......................................................... 5,110,400
4,000 6.875% due 05/15/06.......................................................... 4,330,160
2,000 7.25% due 05/15/04........................................................... 2,169,440
------------
TOTAL U.S. GOVERNMENT & AGENCY OBLIGATIONS
(IDENTIFIED COST $55,981,906).................................................. 56,066,720
------------
SHORT-TERM INVESTMENTS (13.4%)
U.S. GOVERNMENT AGENCIES (a) (12.7%)
16,000 Federal Farm Credit Bank 5.38% due 07/09/98.................................... 15,980,871
3,900 Federal Home Loan Banks 5.40% due 07/01/98..................................... 3,900,000
20,000 Federal Home Loan Mortgage Corp. 5.45% due 07/10/98............................ 19,972,750
33,223 Federal National Mortgage Assoc. 5.44-5.46% due 07/06/98-07/17/98.............. 33,165,775
------------
TOTAL U.S. GOVERNMENT AGENCIES
(AMORTIZED COST $73,019,396)................................................... 73,019,396
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
86
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES - STRATEGIST
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- --------------------------------------------------------------------------------------------------------
<C> <S> <C>
REPURCHASE AGREEMENT (0.7%)
$ 4,266 The Bank of New York 5.50% due 07/01/98 (dated 06/30/98; proceeds $4,266,595)
(b)
(IDENTIFIED COST $4,265,943)................................................. $ 4,265,943
------------
TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST $77,285,339).................................................. 77,285,339
------------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(IDENTIFIED COST $464,842,507) (c)........................................................ 100.7 % 580,807,201
LIABILITIES IN EXCESS OF OTHER ASSETS..................................................... (0.7) (4,239,558)
------ -------------
NET ASSETS................................................................................ 100.0 % $ 576,567,643
------ -------------
------ -------------
</TABLE>
- ---------------------
* Non-income producing security.
** Resale is restricted to qualified institutional investors.
(a) Securities were purchased on a discount basis. The interest rates shown
have been adjusted to reflect a money market equivalent yield.
(b) Collateralized by $1,975,771 U.S. Treasury Bond 7.125% due 02/15/23 valued
at $2,379,894 and by $1,940,655 U.S. Treasury Note 5.375% due 02/15/01
valued at $1,971,368.
(c) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $120,779,590 and the
aggregate gross unrealized depreciation is $4,814,896, resulting in net
unrealized appreciation of $115,964,694.
SEE NOTES TO FINANCIAL STATEMENTS
87
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES
FINANCIAL STATEMENTS
STATEMENTS OF ASSETS AND LIABILITIES
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
MONEY QUALITY HIGH INCOME DIVIDEND
MARKET INCOME PLUS YIELD UTILITIES BUILDER GROWTH
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
ASSETS:
Investments in securities, at
value *..................... $352,225,052 $ 490,887,753 $ 420,417,388 $ 484,122,492 $89,102,655 $2,167,918,464
Cash.......................... 10,112 260,107 -- 25,001 -- --
Receivable for:
Investments sold.......... -- 8,993,000 5,283,071 -- 97,515 7,949,892
Shares of beneficial
interest sold........... 369,879 132,795 319,960 281,654 195,658 3,633,026
Dividends................. -- -- -- 1,044,847 144,542 3,204,121
Interest.................. 674,772 7,526,933 8,023,833 894,287 428,912 479,869
Foreign withholding taxes
reclaimed............... -- -- -- 8,731 -- --
Prepaid expenses and other
assets...................... 1,267 1,188 2,129 1,009 1,908 4,943
Unrealized appreciation on
open forward foreign
currency contracts.......... -- -- -- -- -- --
Receivable from affiliate..... -- -- -- -- -- --
------------ -------------- -------------- -------------- ----------- --------------
TOTAL ASSETS............. 353,281,082 507,801,776 434,046,381 486,378,021 89,971,190 2,183,190,315
------------ -------------- -------------- -------------- ----------- --------------
LIABILITIES:
Payable for:
Investments purchased..... -- 12,935,052 13,026,083 -- 992,660 6,546,984
Shares of beneficial
interest repurchased.... 3,022,140 460,536 239,615 202,734 33,897 1,390,750
Compensated foreign
currency contracts...... -- -- -- -- -- --
Variation margin on
futures contracts....... -- -- -- -- -- --
Investment management
fee..................... 155,107 216,328 182,970 274,247 57,058 977,447
Payable to bank............... -- -- -- -- -- --
Accrued expenses and other
payables.................... 33,381 52,140 32,593 28,053 14,093 89,192
------------ -------------- -------------- -------------- ----------- --------------
TOTAL LIABILITIES........ 3,210,628 13,664,056 13,481,261 505,034 1,097,708 9,004,373
------------ -------------- -------------- -------------- ----------- --------------
NET ASSETS:
Paid-in-capital............... 350,070,431 489,007,491 510,970,197 305,922,756 84,543,695 1,568,536,873
Accumulated undistributed net
investment income (loss).... 23 451 159,071 1,274 9,713 1,202
Accumulated undistributed net
realized gain (loss)........ -- (18,661,309) (65,585,328) 7,659,165 688,372 123,843,990
Net unrealized appreciation
(depreciation).............. -- 23,791,087 (24,978,820) 172,289,792 3,631,702 481,803,877
------------ -------------- -------------- -------------- ----------- --------------
NET ASSETS............... $350,070,454 $ 494,137,720 $ 420,565,120 $ 485,872,987 $88,873,482 $2,174,185,942
------------ -------------- -------------- -------------- ----------- --------------
------------ -------------- -------------- -------------- ----------- --------------
*IDENTIFIED COST......... $352,225,052 $ 467,096,666 $ 445,396,208 $ 311,832,700 $85,470,953 $1,686,114,587
------------ -------------- -------------- -------------- ----------- --------------
------------ -------------- -------------- -------------- ----------- --------------
SHARES OF BENEFICIAL
INTEREST OUTSTANDING..... 350,070,431 45,339,654 70,013,076 25,304,237 7,424,325 100,927,668
------------ -------------- -------------- -------------- ----------- --------------
------------ -------------- -------------- -------------- ----------- --------------
NET ASSET VALUE PER SHARE
(UNLIMITED AUTHORIZED SHARES
OF $.01 PAR VALUE)............ $1.00 $10.90 $6.01 $19.20 $11.97 $21.54
------------ -------------- -------------- -------------- ----------- --------------
------------ -------------- -------------- -------------- ----------- --------------
</TABLE>
- ------------------
<TABLE>
<C> <S>
** Includes foreign cash of $1,539, $10,906 and $76,894, respectively.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
88
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES
FINANCIAL STATEMENTS
STATEMENTS OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
JUNE 30, 1998 (UNAUDITED)
GLOBAL
CAPITAL DIVIDEND EUROPEAN PACIFIC CAPITAL S&P 500
GROWTH GROWTH GROWTH GROWTH APPRECIATION EQUITY INDEX
<S> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
ASSETS:
Investments in securities, at
value *..................... $144,776,147 $521,802,619 $517,703,972 $49,364,917 $36,116,167 $1,007,977,532 $ 7,789,721
Cash.......................... -- 418,062 887,267** 2,223,547** -- -- 21,990
Receivable for:
Investments sold.......... 3,155,728 1,845,551 1,372,709 291,918 2,176,282 14,810,252 310
Shares of beneficial
interest sold........... 63,029 246,011 616,550 1,775,447 36,918 1,512,520 306,155
Dividends................. 20,725 1,375,624 797,185 114,169 2,413 462,369 4,569
Interest.................. 103 4,793 7,778 32,665 246 254,314 --
Foreign withholding taxes
reclaimed............... -- 473,532 835,353 -- -- 159,066 --
Prepaid expenses and other
assets...................... 44 1,112 915 533 12 1,842 --
Unrealized appreciation on
open forward foreign
currency contracts.......... -- -- -- 19,802 -- -- --
Receivable from affiliate..... -- -- -- -- 11,185 -- 3,991
------------ ------------ ------------ ----------- ----------- ------------ ------------
TOTAL ASSETS............. 148,015,776 526,167,304 522,221,729 53,822,998 38,343,223 1,025,177,895 8,126,736
------------ ------------ ------------ ----------- ----------- ------------ ------------
LIABILITIES:
Payable for:
Investments purchased..... 2,680,137 2,421,459 -- 703,196 1,339,188 12,772,126 929,519
Shares of beneficial
interest repurchased.... 83,882 305,236 771,181 60,753 28,991 392,244 196
Compensated foreign
currency contracts...... -- -- -- 267,337 -- -- --
Variation margin on
futures contracts....... -- -- -- -- -- -- 665
Investment management
fee..................... 80,599 342,177 447,430 45,554 -- 423,905 --
Payable to bank............... -- -- -- -- -- -- --
Accrued expenses and other
payables.................... 17,029 123,612 71,573 53,589 11,191 33,226 3,991
------------ ------------ ------------ ----------- ----------- ------------ ------------
TOTAL LIABILITIES........ 2,861,647 3,192,484 1,290,184 1,130,429 1,379,370 13,621,501 934,371
------------ ------------ ------------ ----------- ----------- ------------ ------------
NET ASSETS:
Paid-in-capital............... 105,657,905 458,285,689 328,684,704 116,790,606 34,427,009 734,776,774 7,030,770
Accumulated undistributed net
investment income (loss).... (220,715) -- 3,468,436 301,240 164,100 89 11,209
Accumulated undistributed net
realized gain (loss)........ 11,268,096 17,551,301 28,540,499 (45,214,368) (1,349,658) 75,175,814 3,502
Net unrealized appreciation
(depreciation).............. 28,448,843 47,137,830 160,237,906 (19,184,909) 3,722,402 201,603,717 146,884
------------ ------------ ------------ ----------- ----------- ------------ ------------
NET ASSETS............... $145,154,129 $522,974,820 $520,931,545 $52,692,569 $36,963,853 $1,011,556,394 $ 7,192,365
------------ ------------ ------------ ----------- ----------- ------------ ------------
------------ ------------ ------------ ----------- ----------- ------------ ------------
*IDENTIFIED COST......... $116,327,304 $474,665,940 $357,451,800 $68,553,279 $32,393,765 $806,373,815 $ 7,644,947
------------ ------------ ------------ ----------- ----------- ------------ ------------
------------ ------------ ------------ ----------- ----------- ------------ ------------
SHARES OF BENEFICIAL
INTEREST OUTSTANDING..... 7,390,611 38,539,329 18,822,656 11,571,118 3,145,802 28,885,434 700,352
------------ ------------ ------------ ----------- ----------- ------------ ------------
------------ ------------ ------------ ----------- ----------- ------------ ------------
NET ASSET VALUE PER SHARE
(UNLIMITED AUTHORIZED SHARES
OF $.01 PAR VALUE)............ $19.64 $13.57 $27.68 $4.55 $11.75 $35.02 $10.27
------------ ------------ ------------ ----------- ----------- ------------ ------------
------------ ------------ ------------ ----------- ----------- ------------ ------------
<CAPTION>
COMPETITIVE EDGE
"BEST IDEAS" STRATEGIST
<S> <C> <C>
- ------------------------------
ASSETS:
Investments in securities, at
value *..................... $ 19,025,262 $580,807,201
Cash.......................... 76,894** --
Receivable for:
Investments sold.......... -- 2,585,332
Shares of beneficial
interest sold........... 285,515 236,286
Dividends................. 5,766 265,423
Interest.................. 79 1,801,824
Foreign withholding taxes
reclaimed............... 2,996 --
Prepaid expenses and other
assets...................... -- 1,925
Unrealized appreciation on
open forward foreign
currency contracts.......... -- --
Receivable from affiliate..... 4,069 --
--------------------- ------------
TOTAL ASSETS............. 19,400,581 585,697,991
--------------------- ------------
LIABILITIES:
Payable for:
Investments purchased..... 716,503 8,687,509
Shares of beneficial
interest repurchased.... 24,277 157,407
Compensated foreign
currency contracts...... -- --
Variation margin on
futures contracts....... -- --
Investment management
fee..................... -- 246,361
Payable to bank............... 338,260 --
Accrued expenses and other
payables.................... 4,069 39,071
--------------------- ------------
TOTAL LIABILITIES........ 1,083,109 9,130,348
--------------------- ------------
NET ASSETS:
Paid-in-capital............... 18,270,082 464,966,819
Accumulated undistributed net
investment income (loss).... 40,983 13,016
Accumulated undistributed net
realized gain (loss)........ 4,271 (4,376,886)
Net unrealized appreciation
(depreciation).............. 2,136 115,964,694
--------------------- ------------
NET ASSETS............... $ 18,317,472 $576,567,643
--------------------- ------------
--------------------- ------------
*IDENTIFIED COST......... $ 19,022,585 $464,842,507
--------------------- ------------
--------------------- ------------
SHARES OF BENEFICIAL
INTEREST OUTSTANDING..... 1,858,186 37,117,796
--------------------- ------------
--------------------- ------------
NET ASSET VALUE PER SHARE
(UNLIMITED AUTHORIZED SHARES
OF $.01 PAR VALUE)............ $9.86 $15.53
--------------------- ------------
--------------------- ------------
</TABLE>
89
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES
FINANCIAL STATEMENTS, CONTINUED
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
QUALITY
MONEY INCOME HIGH INCOME DIVIDEND
MARKET PLUS YIELD UTILITIES BUILDER GROWTH
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
INCOME
Interest...................... $ 9,532,905 $ 16,552,688 $ 24,518,945 $ 1,798,684 $ 1,196,954 $ 1,629,246
Dividends..................... -- -- -- 6,839,228** 897,862** 22,863,880**
------------- ------------- ------------- ------------- ----------- ------------
TOTAL INCOME............. 9,532,905 16,552,688 24,518,945 8,637,912 2,094,816 24,493,126
------------- ------------- ------------- ------------- ----------- ------------
EXPENSES
Investment management fee..... 844,095 1,201,645 987,907 1,528,136 275,688 5,370,256
Professional fees............. 12,908 13,231 17,349 14,749 9,234 12,182
Custodian fees................ 9,497 30,463 17,778 11,847 13,255 50,938
Shareholder reports and
notices..................... 12,227 19,495 11,096 13,239 1,147 69,437
Trustees' fees and expenses... 545 979 604 779 94 2,516
Transfer agent fees and
expenses.................... 250 248 326 240 249 248
Other......................... 1,216 4,907 4,766 2,672 986 7,630
------------- ------------- ------------- ------------- ----------- ------------
TOTAL EXPENSES........... 880,738 1,270,968 1,039,826 1,571,662 300,653 5,513,207
Less: amounts
waived/reimbursed........... -- -- -- -- -- --
------------- ------------- ------------- ------------- ----------- ------------
NET EXPENSES............. 880,738 1,270,968 1,039,826 1,571,662 300,653 5,513,207
------------- ------------- ------------- ------------- ----------- ------------
NET INVESTMENT INCOME
(LOSS)................... 8,652,167 15,281,720 23,479,119 7,066,250 1,794,163 18,979,919
------------- ------------- ------------- ------------- ----------- ------------
NET REALIZED AND UNREALIZED
GAIN (LOSS):
Net realized gain (loss) on:
Investments............... -- 4,582,236 (2,239,863) 7,699,017 683,183 126,803,218
Futures contracts......... -- -- -- -- -- --
Foreign exchange
transactions............ -- -- -- -- -- --
------------- ------------- ------------- ------------- ----------- ------------
NET GAIN (LOSS).......... -- 4,582,236 (2,239,863) 7,699,017 683,183 126,803,218
------------- ------------- ------------- ------------- ----------- ------------
Net change in unrealized
appreciation/
depreciation on:
Investments............... -- 1,402,602 (5,652,680) 31,939,636 561,147 50,908,064
Translation of forward
foreign currency
contracts, other assets
and liabilities
denominated in foreign
currencies.............. -- -- -- -- -- --
------------- ------------- ------------- ------------- ----------- ------------
NET APPRECIATION
(DEPRECIATION)........... -- 1,402,602 (5,652,680) 31,939,636 561,147 50,908,064
------------- ------------- ------------- ------------- ----------- ------------
NET GAIN (LOSS).......... -- 5,984,838 (7,892,543) 39,638,653 1,244,330 177,711,282
------------- ------------- ------------- ------------- ----------- ------------
NET INCREASE (DECREASE)....... $ 8,652,167 $ 21,266,558 $ 15,586,576 $ 46,704,903 $ 3,038,493 $196,691,201
------------- ------------- ------------- ------------- ----------- ------------
------------- ------------- ------------- ------------- ----------- ------------
</TABLE>
- ------------------
<TABLE>
<C> <S>
* For the period May 18, 1998 (commencement of operations) through June 30,
1998.
** Net of $56,339, $184, $98,277, $908, $765,312, $917,526, $52,229, $115,857,
$8, $1,478 and $9,723 foreign withholding tax, respectively.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
90
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES
FINANCIAL STATEMENTS, CONTINUED
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
GLOBAL
CAPITAL DIVIDEND EUROPEAN PACIFIC CAPITAL
GROWTH GROWTH GROWTH GROWTH APPRECIATION
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
INCOME
Interest...................... $ 109,037 $ 408,185 $ 304,470 $ 101,660 $ 149,687
Dividends..................... 148,326** 7,053,602** 5,752,497** 755,797** 14,413
------------- ------------ ------------- ------------- -------------
TOTAL INCOME............. 257,363 7,461,787 6,056,967 857,457 164,100
------------- ------------ ------------- ------------- -------------
EXPENSES
Investment management fee..... 445,692 1,917,455 2,297,623 314,733 130,285
Professional fees............. 14,134 16,226 16,346 10,859 10,657
Custodian fees................ 12,586 175,950 175,115 86,200 5,261
Shareholder reports and
notices..................... 3,693 12,990 11,178 3,490 407
Trustees' fees and expenses... 165 808 760 28 17
Transfer agent fees and
expenses.................... 248 248 248 248 248
Other......................... 1,208 5,251 5,749 9,542 --
------------- ------------ ------------- ------------- -------------
TOTAL EXPENSES........... 477,726 2,128,928 2,507,019 425,100 146,875
Less: amounts
waived/reimbursed........... -- -- -- -- (146,875)
------------- ------------ ------------- ------------- -------------
NET EXPENSES............. 477,726 2,128,928 2,507,019 425,100 --
------------- ------------ ------------- ------------- -------------
NET INVESTMENT INCOME
(LOSS)................... (220,363) 5,332,859 3,549,948 432,357 164,100
------------- ------------ ------------- ------------- -------------
NET REALIZED AND UNREALIZED
GAIN (LOSS):
Net realized gain (loss) on:
Investments............... 12,505,633 22,467,696 28,565,859 (17,683,803) (1,091,794)
Futures contracts......... -- -- -- -- --
Foreign exchange
transactions............ -- (82,132) (5,810) (564,197) --
------------- ------------ ------------- ------------- -------------
NET GAIN (LOSS).......... 12,505,633 22,385,564 28,560,049 (18,248,000) (1,091,794)
------------- ------------ ------------- ------------- -------------
Net change in unrealized
appreciation/
depreciation on:
Investments............... 6,955,839 18,677,868 70,961,281 3,467,919 2,338,262
Translation of forward
foreign currency
contracts, other assets
and liabilities
denominated in foreign
currencies.............. -- 18,256 8,303 4,636 --
------------- ------------ ------------- ------------- -------------
NET APPRECIATION
(DEPRECIATION)........... 6,955,839 18,696,124 70,969,584 3,472,555 2,338,262
------------- ------------ ------------- ------------- -------------
NET GAIN (LOSS).......... 19,461,472 41,081,688 99,529,633 (14,775,445) 1,246,468
------------- ------------ ------------- ------------- -------------
NET INCREASE (DECREASE)....... $ 19,241,109 $ 46,414,547 $ 103,079,581 $ (14,343,088) $ 1,410,568
------------- ------------ ------------- ------------- -------------
------------- ------------ ------------- ------------- -------------
<CAPTION>
S&P 500 COMPETITIVE EDGE
EQUITY INDEX* "BEST IDEAS"* STRATEGIST
<S> <C> <C> <C> <C>
- ------------------------------
INVESTMENT INCOME:
INCOME
Interest...................... $ 1,775,720 $ 4,872 $ 27,889 $ 5,768,848
Dividends..................... 3,148,542** 6,337** 13,094** 2,147,370**
------------- ------------ ------- ------------
TOTAL INCOME............. 4,924,262 11,209 40,983 7,916,218
------------- ------------ ------- ------------
EXPENSES
Investment management fee..... 2,272,304 2,073 7,978 1,340,136
Professional fees............. 14,298 3,520 3,520 14,322
Custodian fees................ 30,751 149 226 17,525
Shareholder reports and
notices..................... 18,840 243 243 16,774
Trustees' fees and expenses... 1,319 19 19 831
Transfer agent fees and
expenses.................... 248 60 60 248
Other......................... 2,586 -- -- 3,430
------------- ------------ ------- ------------
TOTAL EXPENSES........... 2,340,346 6,064 12,046 1,393,266
Less: amounts
waived/reimbursed........... -- (6,064) (12,046) --
------------- ------------ ------- ------------
NET EXPENSES............. 2,340,346 -- -- 1,393,266
------------- ------------ ------- ------------
NET INVESTMENT INCOME
(LOSS)................... 2,583,916 11,209 40,983 6,522,952
------------- ------------ ------- ------------
NET REALIZED AND UNREALIZED
GAIN (LOSS):
Net realized gain (loss) on:
Investments............... 76,298,726 14 3,788 (4,376,822)
Futures contracts......... -- 3,488 -- --
Foreign exchange
transactions............ -- -- 483 --
------------- ------------ ------- ------------
NET GAIN (LOSS).......... 76,298,726 3,502 4,271 (4,376,822)
------------- ------------ ------- ------------
Net change in unrealized
appreciation/
depreciation on:
Investments............... 70,953,343 144,774 2,677 81,487,452
Translation of forward
foreign currency
contracts, other assets
and liabilities
denominated in foreign
currencies.............. -- 2,110 (541) --
------------- ------------ ------- ------------
NET APPRECIATION
(DEPRECIATION)........... 70,953,343 146,884 2,136 81,487,452
------------- ------------ ------- ------------
NET GAIN (LOSS).......... 147,252,069 150,386 6,407 77,110,630
------------- ------------ ------- ------------
NET INCREASE (DECREASE)....... $ 149,835,985 $ 161,595 $ 47,390 $ 83,633,582
------------- ------------ ------- ------------
------------- ------------ ------- ------------
</TABLE>
91
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES
FINANCIAL STATEMENTS, CONTINUED
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
MONEY MARKET QUALITY INCOME PLUS
------------------------------- ------------------------------
FOR THE SIX FOR THE SIX
MONTHS ENDED FOR THE YEAR MONTHS ENDED FOR THE YEAR
JUNE 30, 1998 ENDED DECEMBER JUNE 30, 1998 ENDED DECEMBER
(UNAUDITED) 31, 1997 (UNAUDITED) 31, 1997
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET
ASSETS:
OPERATIONS:
Net investment income......... $ 8,652,167 $ 18,013,271 $ 15,281,720 $ 30,890,531
Net realized gain (loss)...... -- -- 4,582,236 4,211,639
Net change in unrealized
appreciation/depreciation... -- -- 1,402,602 12,724,498
-------------- -------------- ------------- --------------
NET INCREASE............. 8,652,167 18,013,271 21,266,558 47,826,668
-------------- -------------- ------------- --------------
DIVIDENDS AND DISTRIBUTIONS
FROM:
Net investment income......... (8,652,209) (18,013,450) (15,281,417) (30,957,912)
Net realized gain............. -- -- -- --
-------------- -------------- ------------- --------------
TOTAL.................... (8,652,209) (18,013,450) (15,281,417) (30,957,912)
-------------- -------------- ------------- --------------
TRANSACTIONS IN SHARES OF
BENEFICIAL INTEREST:
Net proceeds from sales....... 165,527,676 186,625,741 51,242,002 20,704,612
Reinvestment of dividends and
distributions............... 8,652,209 18,013,450 15,281,451 30,957,912
Cost of shares repurchased.... (159,687,538) (209,298,904) (53,360,382) (68,201,984)
-------------- -------------- ------------- --------------
NET INCREASE
(DECREASE)............... 14,492,347 (4,659,713) 13,163,071 (16,539,460)
-------------- -------------- ------------- --------------
TOTAL INCREASE
(DECREASE)............... 14,492,305 (4,659,892) 19,148,212 329,296
NET ASSETS:
Beginning of period........... 335,578,149 340,238,041 474,989,508 474,660,212
-------------- -------------- ------------- --------------
END OF PERIOD............ $ 350,070,454 $ 335,578,149 $494,137,720 $ 474,989,508
-------------- -------------- ------------- --------------
-------------- -------------- ------------- --------------
UNDISTRIBUTED NET INVESTMENT
INCOME........................ $ 23 $ 65 $ 451 $ 148
-------------- -------------- ------------- --------------
-------------- -------------- ------------- --------------
SHARES ISSUED AND REPURCHASED:
Sold.......................... 165,527,676 186,625,741 4,725,579 1,958,805
Issued in reinvestment of
dividends and
distributions............... 8,652,209 18,013,450 1,412,747 2,970,264
Repurchased................... (159,687,538) (209,298,904) (4,922,015) (6,558,494)
-------------- -------------- ------------- --------------
NET INCREASE (DECREASE)....... 14,492,347 (4,659,713) 1,216,311 (1,629,425)
-------------- -------------- ------------- --------------
-------------- -------------- ------------- --------------
</TABLE>
- ------------------
<TABLE>
<C> <S>
* For the period January 21, 1997 (commencement of operations) through
December 31, 1997.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
92
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES
FINANCIAL STATEMENTS, CONTINUED
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
HIGH YIELD UTILITIES INCOME BUILDER
----------------------------- ----------------------------- ------------------------------
FOR THE SIX FOR THE YEAR FOR THE SIX FOR THE YEAR FOR THE SIX
MONTHS ENDED ENDED MONTHS ENDED ENDED MONTHS ENDED FOR THE YEAR
JUNE 30, 1998 DECEMBER 31, JUNE 30, 1998 DECEMBER 31, JUNE 30, 1998 ENDED DECEMBER
(UNAUDITED) 1997 (UNAUDITED) 1997 (UNAUDITED) 31, 1997*
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET
ASSETS:
OPERATIONS:
Net investment income......... $ 23,479,119 $ 38,277,750 $ 7,066,250 $ 14,516,395 $ 1,794,163 $ 1,300,879
Net realized gain (loss)...... (2,239,863) 184,126 7,699,017 24,274,209 683,183 773,374
Net change in unrealized
appreciation/depreciation... (5,652,680) (2,939,937) 31,939,636 61,888,240 561,147 3,070,555
------------- ------------- ------------- ------------- ------------- --------------
NET INCREASE............. 15,586,576 35,521,939 46,704,903 100,678,844 3,038,493 5,144,808
------------- ------------- ------------- ------------- ------------- --------------
DIVIDENDS AND DISTRIBUTIONS
FROM:
Net investment income......... (23,614,944) (37,998,064) (7,065,029) (14,516,342) (1,784,491) (1,300,838)
Net realized gain............. -- -- (24,274,238) (5,380,346) (768,185) --
------------- ------------- ------------- ------------- ------------- --------------
TOTAL.................... (23,614,944) (37,998,064) (31,339,267) (19,896,688) (2,552,676) (1,300,838)
------------- ------------- ------------- ------------- ------------- --------------
TRANSACTIONS IN SHARES OF
BENEFICIAL INTEREST:
Net proceeds from sales....... 81,646,297 94,751,829 40,136,887 10,084,184 37,820,455 51,206,002
Reinvestment of dividends and
distributions............... 23,614,944 37,998,064 31,339,251 19,896,688 2,552,676 1,300,838
Cost of shares repurchased.... (44,729,024) (21,761,038) (59,103,043) (93,290,638) (7,408,299) (927,977)
------------- ------------- ------------- ------------- ------------- --------------
NET INCREASE
(DECREASE)............... 60,532,217 110,988,855 12,373,095 (63,309,766) 32,964,832 51,578,863
------------- ------------- ------------- ------------- ------------- --------------
TOTAL INCREASE
(DECREASE)............... 52,503,849 108,512,730 27,738,731 17,472,390 33,450,649 55,422,833
NET ASSETS:
Beginning of period........... 368,061,271 259,548,541 458,134,256 440,661,866 55,422,833 --
------------- ------------- ------------- ------------- ------------- --------------
END OF PERIOD............ $420,565,120 $368,061,271 $485,872,987 $458,134,256 $ 88,873,482 $ 55,422,833
------------- ------------- ------------- ------------- ------------- --------------
------------- ------------- ------------- ------------- ------------- --------------
UNDISTRIBUTED NET INVESTMENT
INCOME........................ $ 159,071 $ 294,896 $ 1,274 $ 53 $ 9,713 $ 41
------------- ------------- ------------- ------------- ------------- --------------
------------- ------------- ------------- ------------- ------------- --------------
SHARES ISSUED AND REPURCHASED:
Sold.......................... 13,288,566 15,438,103 2,048,367 586,036 3,109,913 4,681,304
Issued in reinvestment of
dividends and
distributions............... 3,872,899 6,235,666 1,621,515 1,234,020 211,392 114,240
Repurchased................... (7,283,936) (3,542,834) (3,015,666) (5,905,011) (608,035) (84,489)
------------- ------------- ------------- ------------- ------------- --------------
NET INCREASE (DECREASE)....... 9,877,529 18,130,935 654,216 (4,084,955) 2,713,270 4,711,055
------------- ------------- ------------- ------------- ------------- --------------
------------- ------------- ------------- ------------- ------------- --------------
<CAPTION>
DIVIDEND GROWTH
-------------------------------
FOR THE SIX
MONTHS ENDED FOR THE YEAR
JUNE 30, 1998 ENDED DECEMBER
(UNAUDITED) 31, 1997
<S> <C> <C>
- ------------------------------
INCREASE (DECREASE) IN NET
ASSETS:
OPERATIONS:
Net investment income......... $ 18,979,919 $ 33,294,853
Net realized gain (loss)...... 126,803,218 187,796,245
Net change in unrealized
appreciation/depreciation... 50,908,064 131,882,494
-------------- --------------
NET INCREASE............. 196,691,201 352,973,592
-------------- --------------
DIVIDENDS AND DISTRIBUTIONS
FROM:
Net investment income......... (18,978,858) (33,294,817)
Net realized gain............. (187,973,609) (76,862,062)
-------------- --------------
TOTAL.................... (206,952,467) (110,156,879)
-------------- --------------
TRANSACTIONS IN SHARES OF
BENEFICIAL INTEREST:
Net proceeds from sales....... 273,013,818 315,154,387
Reinvestment of dividends and
distributions............... 206,952,467 110,156,879
Cost of shares repurchased.... (201,424,835) (50,626,648)
-------------- --------------
NET INCREASE
(DECREASE)............... 278,541,450 374,684,618
-------------- --------------
TOTAL INCREASE
(DECREASE)............... 268,280,184 617,501,331
NET ASSETS:
Beginning of period........... 1,905,905,758 1,288,404,427
-------------- --------------
END OF PERIOD............ $2,174,185,942 $1,905,905,758
-------------- --------------
-------------- --------------
UNDISTRIBUTED NET INVESTMENT
INCOME........................ $ 1,202 $ 141
-------------- --------------
-------------- --------------
SHARES ISSUED AND REPURCHASED:
Sold.......................... 11,743,837 15,299,661
Issued in reinvestment of
dividends and
distributions............... 9,564,893 5,383,295
Repurchased................... (8,637,169) (2,443,929)
-------------- --------------
NET INCREASE (DECREASE)....... 12,671,561 18,239,027
-------------- --------------
-------------- --------------
</TABLE>
93
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES
FINANCIAL STATEMENTS, CONTINUED
STATEMENTS OF CHANGES IN NET ASSETS, CONTINUED
<TABLE>
<CAPTION>
CAPITAL GROWTH GLOBAL DIVIDEND GROWTH
------------------------------ ----------------------------------
FOR THE SIX FOR THE SIX
MONTHS ENDED FOR THE YEAR MONTHS ENDED JUNE FOR THE YEAR
JUNE 30, 1998 ENDED DECEMBER 30, 1998 ENDED DECEMBER
(UNAUDITED) 31, 1997 (UNAUDITED) 31, 1997
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET
ASSETS:
OPERATIONS:
Net investment income
(loss)...................... $ (220,363) $ 9,982 $ 5,332,859 $ 6,849,599
Net realized gain (loss)...... 12,505,633 9,166,337 22,385,564 48,844,173
Net change in unrealized
appreciation/depreciation... 6,955,839 11,601,734 18,696,124 (13,083,151)
------------- -------------- ----------------- --------------
NET INCREASE
(DECREASE)............... 19,241,109 20,778,053 46,414,547 42,610,621
------------- -------------- ----------------- --------------
DIVIDENDS AND DISTRIBUTIONS
FROM:
Net investment income......... (10,014) (406,792) (5,258,423) (7,198,015)
Net realized gain............. (10,080,542) (11,642,832) (52,205,069) (17,705,621)
------------- -------------- ----------------- --------------
TOTAL.................... (10,090,556) (12,049,624) (57,463,492) (24,903,636)
------------- -------------- ----------------- --------------
TRANSACTIONS IN SHARES OF
BENEFICIAL INTEREST:
Net proceeds from sales....... 17,697,443 33,654,933 52,135,051 124,800,012
Reinvestment of dividends and
distributions............... 10,090,556 12,049,624 57,463,465 24,903,636
Cost of shares repurchased.... (18,884,499) (14,195,060) (57,188,211) (20,618,115)
------------- -------------- ----------------- --------------
NET INCREASE
(DECREASE)............... 8,903,500 31,509,497 52,410,305 129,085,533
------------- -------------- ----------------- --------------
TOTAL INCREASE
(DECREASE)............... 18,054,053 40,237,926 41,361,360 146,792,518
NET ASSETS:
Beginning of period........... 127,100,076 86,862,150 481,613,460 334,820,942
------------- -------------- ----------------- --------------
END OF PERIOD............ $145,154,129 $ 127,100,076 $ 522,974,820 $ 481,613,460
------------- -------------- ----------------- --------------
------------- -------------- ----------------- --------------
UNDISTRIBUTED NET INVESTMENT
INCOME........................ $ (220,715) $ 9,662 $ -- $ (74,436)
------------- -------------- ----------------- --------------
------------- -------------- ----------------- --------------
SHARES ISSUED AND REPURCHASED:
Sold.......................... 876,156 1,796,050 3,491,623 8,901,084
Issued in reinvestment of
dividends and
distributions............... 513,266 710,054 4,219,083 1,756,694
Repurchased................... (946,229) (774,142) (3,851,985) (1,479,827)
------------- -------------- ----------------- --------------
NET INCREASE (DECREASE)....... 443,193 1,731,962 3,858,721 9,177,951
------------- -------------- ----------------- --------------
------------- -------------- ----------------- --------------
</TABLE>
- ------------------
<TABLE>
<C> <S>
* For the period January 21, 1997 (commencement of operations) through
December 31, 1997.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
94
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES
FINANCIAL STATEMENTS, CONTINUED
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
PACIFIC GROWTH CAPITAL APPRECIATION
EUROPEAN GROWTH --------------------------- ---------------------------
-----------------------------
FOR THE SIX FOR THE SIX
FOR THE SIX FOR THE YEAR MONTHS ENDED FOR THE YEAR MONTHS ENDED FOR THE YEAR
MONTHS ENDED ENDED JUNE 30, ENDED JUNE 30, ENDED
JUNE 30, 1998 DECEMBER 31, 1998 DECEMBER 31, 1998 DECEMBER 31,
(UNAUDITED) 1997 (UNAUDITED) 1997 (UNAUDITED) 1997*
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET
ASSETS:
OPERATIONS:
Net investment income
(loss)...................... $ 3,549,948 $ 3,717,809 $ 432,357 $ 1,303,162 $ 164,100 $ 209,858
Net realized gain (loss)...... 28,560,049 33,715,966 (18,248,000) (18,390,247) (1,091,794) (257,864)
Net change in unrealized
appreciation/depreciation... 70,969,584 15,487,002 3,472,555 (29,854,161) 2,338,262 1,384,140
------------- ------------- ------------ ------------ ------------ ------------
NET INCREASE
(DECREASE)............... 103,079,581 52,920,777 (14,343,088) (46,941,246) 1,410,568 1,336,134
------------- ------------- ------------ ------------ ------------ ------------
DIVIDENDS AND DISTRIBUTIONS
FROM:
Net investment income......... (5,476,236) (3,760,260) (2,185,913) (1,891,258) (209,858) --
Net realized gain............. (30,256,754) (18,466,454) -- -- -- --
------------- ------------- ------------ ------------ ------------ ------------
TOTAL.................... (35,732,990) (22,226,714) (2,185,913) (1,891,258) (209,858) --
------------- ------------- ------------ ------------ ------------ ------------
TRANSACTIONS IN SHARES OF
BENEFICIAL INTEREST:
Net proceeds from sales....... 82,019,163 69,322,769 27,252,656 27,108,335 12,107,319 33,834,119
Reinvestment of dividends and
distributions............... 35,732,990 22,226,714 2,185,913 1,891,258 209,858 --
Cost of shares repurchased.... (55,608,452) (33,224,347) (29,120,536) (55,800,009) (8,859,945) (2,864,342)
------------- ------------- ------------ ------------ ------------ ------------
NET INCREASE
(DECREASE)............... 62,143,701 58,325,136 318,033 (26,800,416) 3,457,232 30,969,777
------------- ------------- ------------ ------------ ------------ ------------
TOTAL INCREASE
(DECREASE)............... 129,490,292 89,019,199 (16,210,968) (75,632,920) 4,657,942 32,305,911
NET ASSETS:
Beginning of period........... 391,441,253 302,422,054 68,903,537 144,536,457 32,305,911 --
------------- ------------- ------------ ------------ ------------ ------------
END OF PERIOD............ $520,931,545 $391,441,253 $52,692,569 $68,903,537 $36,963,853 $32,305,911
------------- ------------- ------------ ------------ ------------ ------------
------------- ------------- ------------ ------------ ------------ ------------
UNDISTRIBUTED NET INVESTMENT
INCOME........................ $ 3,468,436 $ 5,394,724 $ 301,240 $ 2,054,796 $ 164,100 $ 209,858
------------- ------------- ------------ ------------ ------------ ------------
------------- ------------- ------------ ------------ ------------ ------------
SHARES ISSUED AND REPURCHASED:
Sold.......................... 2,926,605 3,070,886 5,130,035 3,373,487 1,031,231 3,118,030
Issued in reinvestment of
dividends and
distributions............... 1,290,931 983,918 480,420 188,937 17,860 --
Repurchased................... (2,023,712) (1,452,789) (5,303,636) (6,804,802) (757,974) (263,345)
------------- ------------- ------------ ------------ ------------ ------------
NET INCREASE (DECREASE)....... 2,193,824 2,602,015 306,819 (3,242,378) 291,117 2,854,685
------------- ------------- ------------ ------------ ------------ ------------
------------- ------------- ------------ ------------ ------------ ------------
<CAPTION>
EQUITY
------------------------------
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
JUNE 30, 1998 DECEMBER 31,
(UNAUDITED) 1997
<S> <C> <C>
- ------------------------------
INCREASE (DECREASE) IN NET
ASSETS:
OPERATIONS:
Net investment income
(loss)...................... $ 2,583,916 $ 4,000,633
Net realized gain (loss)...... 76,298,726 114,548,760
Net change in unrealized
appreciation/depreciation... 70,953,343 87,770,605
-------------- -------------
NET INCREASE
(DECREASE)............... 149,835,985 206,319,998
-------------- -------------
DIVIDENDS AND DISTRIBUTIONS
FROM:
Net investment income......... (2,583,827) (4,001,396)
Net realized gain............. (114,146,703) (43,430,509)
-------------- -------------
TOTAL.................... (116,730,530) (47,431,905)
-------------- -------------
TRANSACTIONS IN SHARES OF
BENEFICIAL INTEREST:
Net proceeds from sales....... 141,578,466 150,537,439
Reinvestment of dividends and
distributions............... 116,730,530 47,431,905
Cost of shares repurchased.... (102,948,339) (55,675,579)
-------------- -------------
NET INCREASE
(DECREASE)............... 155,360,657 142,293,765
-------------- -------------
TOTAL INCREASE
(DECREASE)............... 188,466,112 301,181,858
NET ASSETS:
Beginning of period........... 823,090,282 521,908,424
-------------- -------------
END OF PERIOD............ $1,011,556,394 $823,090,282
-------------- -------------
-------------- -------------
UNDISTRIBUTED NET INVESTMENT
INCOME........................ $ 89 $ --
-------------- -------------
-------------- -------------
SHARES ISSUED AND REPURCHASED:
Sold.......................... 3,865,993 4,895,346
Issued in reinvestment of
dividends and
distributions............... 3,330,575 1,670,194
Repurchased................... (2,822,934) (1,832,698)
-------------- -------------
NET INCREASE (DECREASE)....... 4,373,634 4,732,842
-------------- -------------
-------------- -------------
</TABLE>
95
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES
FINANCIAL STATEMENTS, CONTINUED
STATEMENTS OF CHANGES IN NET ASSETS, CONTINUED
<TABLE>
<CAPTION>
COMPETITIVE
S&P 500 EDGE "BEST
INDEX IDEAS"
------------ ------------ STRATEGIST
------------------------------
FOR THE SIX FOR THE SIX
MONTHS ENDED MONTHS ENDED FOR THE SIX
JUNE 30, JUNE 30, MONTHS ENDED FOR THE YEAR
1998* 1998* JUNE 30, 1998 ENDED DECEMBER
(UNAUDITED) (UNAUDITED) (UNAUDITED) 31, 1997
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET
ASSETS:
OPERATIONS:
Net investment income......... $ 11,209 $ 40,983 $ 6,522,952 $ 14,575,529
Net realized gain (loss)...... 3,502 4,271 (4,376,822) 52,520,724
Net change in unrealized
appreciation/depreciation... 146,884 2,136 81,487,452 (8,667,550)
------------ ------------ -------------- --------------
NET INCREASE............. 161,595 47,390 83,633,582 58,428,703
------------ ------------ -------------- --------------
DIVIDENDS AND DISTRIBUTIONS
FROM:
Net investment income......... -- -- (6,509,998) (14,592,034)
Net realized gain............. -- -- (52,303,444) (10,026,602)
------------ ------------ -------------- --------------
TOTAL.................... -- -- (58,813,442) (24,618,636)
------------ ------------ -------------- --------------
TRANSACTIONS IN SHARES OF
BENEFICIAL INTEREST:
Net proceeds from sales....... 5,601,450 22,522,138 54,909,744 49,903,217
Reinvestment of dividends and
distributions............... -- -- 58,813,442 24,618,636
Cost of shares repurchased.... (570,680) (4,252,056) (59,003,828) (35,071,627)
------------ ------------ -------------- --------------
NET INCREASE............. 5,030,770 18,270,082 54,719,358 39,450,226
------------ ------------ -------------- --------------
TOTAL INCREASE........... 5,192,365 18,317,472 79,539,498 73,260,293
NET ASSETS:
Beginning of period........... 2,000,000 -- 497,028,145 423,767,852
------------ ------------ -------------- --------------
END OF PERIOD............ $ 7,192,365 $18,317,472 $ 576,567,643 $ 497,028,145
------------ ------------ -------------- --------------
------------ ------------ -------------- --------------
UNDISTRIBUTED NET INVESTMENT
INCOME........................ $ 11,209 $ 40,983 $ 13,016 $ 62
------------ ------------ -------------- --------------
------------ ------------ -------------- --------------
SHARES ISSUED AND REPURCHASED:
Sold.......................... 757,897 2,293,505 3,415,832 3,393,163
Issued in reinvestment of
dividends and
distributions............... -- -- 3,777,711 1,704,636
Repurchased................... (57,545) (435,319) (3,665,142) (2,398,648)
------------ ------------ -------------- --------------
NET INCREASE.................. 700,352 1,858,186 3,528,401 2,699,151
------------ ------------ -------------- --------------
------------ ------------ -------------- --------------
</TABLE>
- ------------------
<TABLE>
<C> <S>
* For the period May 18, 1998 (commencement of operations) through June 30,
1998.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
96
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES
NOTES TO FINANCIAL STATEMENTS JUNE 30, 1998 (UNAUDITED)
1. ORGANIZATION AND ACCOUNTING POLICIES
Morgan Stanley Dean Witter Variable Investment Series (the "Fund"), formerly
Dean Witter Variable Investment Series, is registered under the Investment
Company Act of 1940, as amended, as a diversified, open-end management
investment company. Investments in the Fund may be made only by (1) Northbrook
Life Insurance Company to fund the benefits under variable annuity contracts and
variable life insurance contracts it issues; (2) Allstate Life Insurance Company
of New York to fund the benefits under variable annuity contracts it issues; (3)
Glenbrook Life and Annuity Company to fund the benefits under variable annuity
contracts and variable life insurance contracts it issues; and (4) Paragon Life
Insurance Company to fund the benefits under variable life insurance contracts
it issues to certain employees of Morgan Stanley Dean Witter & Co., the parent
company of Morgan Stanley Dean Witter Advisors Inc. (the "Investment Manager"),
formerly Dean Witter InterCapital Inc.
The Fund, organized on February 25, 1983 as a Massachusetts business trust,
consists of fifteen Portfolios ("Portfolios") which commenced operations as
follows:
<TABLE>
<CAPTION>
COMMENCEMENT OF COMMENCEMENT OF
PORTFOLIO OPERATIONS PORTFOLIO OPERATIONS
- ------------------------------ ----------------- ------------------------------------ -----------------
<S> <C> <C> <C>
Money Market.................. March 9, 1984 European Growth..................... March 1, 1991
Quality Income Plus........... March 1, 1987 Pacific Growth...................... February 23, 1994
High Yield.................... March 9, 1984 Capital Appreciation................ January 21, 1997
Utilities..................... March 1, 1990 Equity.............................. March 9, 1984
Income Builder................ January 21, 1997 S&P 500 Index....................... May 18, 1998
Dividend Growth............... March 1, 1990 Competitive Edge "Best Ideas"....... May 18, 1998
Capital Growth................ March 1, 1991 Strategist.......................... March 1, 1987
Global Dividend Growth........ February 23, 1994
</TABLE>
<TABLE>
<CAPTION>
The investment objectives of each Portfolio are as follows:
<S> <C>
<CAPTION>
PORTFOLIO INVESTMENT OBJECTIVE
<S> <C>
Money Market Seeks high current income, preservation of capital and liquidity
by investing in short-term money market instruments.
Quality Income Plus Seeks, as its primary objective, to earn a high level of current
income and, as a secondary objective, capital appreciation, but
only when consistent with its primary objective, by investing
primarily in U.S. Government securities and higher-rated fixed
income securities.
High Yield Seeks, as its primary objective, to earn a high level of current
income and, as a secondary objective, capital appreciation, but
only when consistent with its primary objective, by investing
primarily in lower-rated fixed income securities.
Utilities Seeks to provide current income and long-term growth of income
and capital by investing primarily in equity and fixed income
securities of companies engaged in the public utilities industry.
Income Builder Seeks, as its primary objective, to earn reasonable income and,
as a secondary objective, growth of capital by investing
primarily in income-producing equity securities.
</TABLE>
97
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES
NOTES TO FINANCIAL STATEMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
PORTFOLIO INVESTMENT OBJECTIVE
<S> <C>
Dividend Growth Seeks to provide reasonable current income and long-term growth
of income and capital by investing primarily in common stocks of
companies with a record of paying dividends and the potential for
increasing dividends.
Capital Growth Seeks long-term capital growth by investing primarily in common
stocks.
Global Dividend Seeks to provide reasonable current income and long-term growth
Growth of income and capital by investing primarily in common stocks of
companies, issued by issuers worldwide, with a record of paying
dividends and the potential for increasing dividends.
European Growth Seeks to maximize the capital appreciation of its investments by
investing primarily in securities issued by issuers located in
Europe.
Pacific Growth Seeks to maximize the capital appreciation of its investments by
investing primarily in securities issued by issuers located in
Asia, Australia and New Zealand.
Capital Appreciation Seeks long-term capital appreciation by investing primarily in
the common stocks of U.S. companies that offer the potential for
either superior earnings growth and/or appear to be undervalued.
Equity Seeks, as its primary objective, capital growth and, as a
secondary objective, income, but only when consistent with its
primary objective, by investing primarily in common stocks.
S&P 500 Index Seeks to provide investment results that, before expenses,
correspond to the total return of the Standards & Poor's 500
Composite Stock Price Index (the "S&P 500 Index") by investing
primarily in common stocks included in the S&P 500 Index.
Competitive Edge Seeks long-term capital growth by investing primarily in the
"Best Ideas" common stock of U.S. and non - U.S. companies included in the
"Best Ideas" list, a research compilation assembled and
maintained by Morgan Stanley Dean Witter Equity Research.
Strategist Seeks a high total investment return through a fully managed
investment policy utilizing equity, investment grade fixed income
and money market securities and writing covered options.
</TABLE>
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 -- Money Market: securities are valued at amortized
cost which approximates market value. All remaining Portfolios: (1) an equity
security listed or traded on the New York, American or other domestic or foreign
stock exchange is valued at its latest sale price on that exchange prior to the
time when assets are valued; if there were no sales that day, the security is
valued at the latest bid price (in cases where securities are traded on more
than one exchange, the securities are valued on the exchange designated as the
primary market pursuant to procedures adopted by the Trustees); (2) all other
portfolio securities for which over-the-counter market quotations are readily
available are valued at the latest available bid price prior to the time of
valuation; (3) listed options are valued at the latest sale price on the
exchange on which they are
98
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES
NOTES TO FINANCIAL STATEMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
listed unless no sales of such options have taken place that day, in which case
they are valued at the mean between their latest bid and asked price; (4) when
market quotations are not readily available, including circumstances under which
it is determined by the Investment Manager (or, in the case of European Growth
and Pacific Growth, by Morgan Grenfell Investment Services Limited (the "Sub-
Advisor")) that sale or 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 also be based upon current market prices of securities
which are comparable in coupon, rating and maturity or an appropriate matrix
utilizing similar factors); (5) certain of the Fund's portfolio securities may
be valued by an outside pricing service approved by the Trustees. The pricing
service may utilize a matrix system incorporating security quality, maturity and
coupon as the evaluation model parameters, and/or research and evaluations by
its staff, including review of broker-dealer market price quotations in
determining what it believes is the fair valuation of the securities valued by
such pricing service; and (6) short-term debt securities having a maturity date
of more than sixty days at the 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.
Dividend income and other distributions are recorded on the ex-dividend date
except for certain dividends on foreign securities which are recorded as soon as
the Fund is informed after the ex-dividend date. Interest income is accrued
daily except where collection is not expected. Money Market amortizes premiums
and accretes discounts on securities owned; gains and losses realized upon the
sale of securities are based on amortized cost. Discounts for all other
Portfolios are accreted over the life of the respective securities.
C. ACCOUNTING FOR OPTIONS -- (1) Written options on debt obligations, equities
and foreign currency: When the Fund writes a call or put option, an amount equal
to the premium received is included in the Fund's Statement of Assets and
Liabilities as a liability which is subsequently marked-to-market to reflect the
current market value of the option written. If a written option either expires
or the Fund enters into a closing purchase transaction, the Fund realizes a gain
or loss without regard to any unrealized gain or loss on the underlying security
or currency and the liability related to such option is extinguished. If a
written call option is exercised, the Fund realizes a gain or loss from the sale
of the underlying security or currency and the proceeds from such sale are
increased by the
99
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES
NOTES TO FINANCIAL STATEMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
premium originally received. If a put option which the Fund has written is
exercised, the amount of the premium originally received reduces the cost of the
security which the Fund purchases upon exercise of the option; and (2) purchased
options on debt obligations, equities and foreign currency: When the Fund
purchases a call or put option, the premium paid is recorded as an investment
and is subsequently marked-to-market to reflect the current market value. If a
purchased option expires, the Fund will realize a loss to the extent of the
premium paid. If the Fund enters into a closing sale transaction, a gain or loss
is realized for the difference between the proceeds from the sale and the cost
of the option. If a put option is exercised, the cost of the security sold upon
exercise will be increased by the premium originally paid. If a call option is
exercised, the cost of the security purchased upon exercise will be increased by
the premium originally paid.
D. FOREIGN CURRENCY TRANSLATION -- The books and records of the Portfolios
investing in foreign currency denominated transactions are translated into U.S.
dollars as follows: (1) the foreign currency market value of investment
securities, other assets and liabilities and forward foreign currency contracts
are translated at the exchange rates prevailing at the end of the period; and
(2) purchases, sales, income and expenses are translated at the exchange rates
prevailing on the respective dates of such transactions. The resultant exchange
gains and losses are included in the Statement of Operations as realized and
unrealized gain/loss on foreign exchange transactions. Pursuant to U.S. Federal
income tax regulations, certain foreign exchange gains/losses included in
realized and unrealized gain/loss are included in or are a reduction of ordinary
income for federal income tax purposes. The Portfolios do not isolate that
portion of the results of operations arising as a result of changes in the
foreign exchange rates from the changes in the market prices of the securities.
E. FORWARD FOREIGN CURRENCY CONTRACTS -- Some of the Portfolios may enter into
forward foreign currency contracts which are valued daily at the appropriate
forward exchange rates. The resultant unrealized exchange gains and losses are
included in the Statement of Operations as unrealized gain/ loss on foreign
exchange transactions. The Portfolios record realized gains or losses on
delivery of the currency or at the time the forward contract is extinguished
(compensated) by entering into a closing transaction prior to delivery.
F. FEDERAL INCOME TAX STATUS -- It is the Fund's policy to comply individually
for each Portfolio 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.
G. 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
100
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES
NOTES TO FINANCIAL STATEMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
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.
H. EXPENSES -- Direct expenses are charged to the respective Portfolio and
general Fund expenses are allocated on the basis of relative net assets or
equally among the Portfolios.
2. INVESTMENT MANAGEMENT AND SUB-ADVISORY AGREEMENTS
Pursuant to an Investment Management Agreement (the "Agreement"), the Fund pays
the Investment Manager a management fee, accrued daily and payable monthly, by
applying the following annual rates to each Portfolios' net assets determined at
the close of each business day: Money Market and Strategist -- 0.50%; High Yield
- -- 0.50% to the portion of daily net assets not exceeding $500 million and
effective May 1, 1998 the Agreement was amended to reduce the annual rate to
0.425% to the portion of daily net assets exceeding $500 million; Quality Income
Plus -- 0.50% to the portion of daily net assets not exceeding $500 million and
0.45% to the portion of daily net assets exceeding $500 million; Utilities --
0.65% to the portion of daily net assets not exceeding $500 million and 0.55% to
the portion of daily net assets exceeding $500 million; Capital Growth and
Competitive Edge "Best Ideas" -- 0.65%; Global Dividend Growth, Capital
Appreciation and Income Builder -- 0.75%; European Growth -- 1.0% to the portion
of daily net assets not exceeding $500 million and effective May 1, 1998 the
Agreement was amended to reduce the annual rate to 0.95% to the portion of daily
net assets exceeding $500 million; Pacific Growth -- 1.0%; Dividend Growth --
0.625% to the portion of daily net assets not exceeding $500 million, 0.50% to
the portion of daily net assets exceeding $500 million but not exceeding $1
billion, 0.475% to the portion of daily net assets exceeding $1 billion but not
exceeding $2 billion and effective May 1, 1998 the Agreement was amended to
reduce the annual rate to 0.45% to the portion of daily net assets exceeding $2
billion; Equity -- 0.50% to the portion of daily net assets not exceeding $1
billion and 0.475% to the portion of daily net assets exceeding $1 billion; and
S&P 500 Index -- 0.40%.
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
101
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES
NOTES TO FINANCIAL STATEMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
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.
Under a Sub-Advisory Agreement between the Investment Manager and the
Sub-Advisor, the Sub-Advisor provides European Growth and Pacific Growth with
investment advice and portfolio management relating to the Portfolios'
investments in securities, subject to the overall supervision of the Investment
Manager. As compensation for its services provided pursuant to the Sub-Advisory
Agreement, the Investment Manager pays the Sub-Advisor monthly compensation
equal to 40% of its monthly compensation.
The Investment Manager has undertaken to reimburse all operating expenses and
waive the compensation provided for in its Investment Management Agreement with
Capital Appreciation until such time as the Portfolio has $50 million of net
assets or until December 31, 1998, whichever occurs first and with S&P 500 Index
and Competitive Edge "Best Ideas" until such time as the respective Portfolio
has $50 million of net assets or until six months from the date of the
Portfolio's commencement of operations, whichever occurs first. At June 30,
1998, included in the Statements of Assets and Liabilities are receivables from
an affiliate which represent expense reimbursements due to the Portfolios.
3. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
Purchases and sales/maturities of portfolio securities, excluding short-term
investments (except Money Market), for the period ended June 30, 1998 were as
follows:
<TABLE>
<CAPTION>
U.S. GOVERNMENT SECURITIES OTHER
---------------------------- --------------------------------
PURCHASES SALES/MATURITIES PURCHASES SALES/MATURITIES
----------- -------------- -------------- ----------------
<S> <C> <C> <C> <C>
Money Market............................ $12,881,229 $ 8,402,535 $ 714,564,221 $ 709,993,911
Quality Income Plus..................... 243,370,022 250,859,069 118,387,548 98,099,071
High Yield.............................. -- -- 279,623,392 214,804,796
Utilities............................... -- -- 17,358,593 26,500,041
Income Builder.......................... 650,650 288,018 49,817,639 22,672,291
Dividend Growth......................... 35,027,344 35,053,438 396,192,143 281,867,132
Capital Growth.......................... -- -- 106,186,760 107,635,600
Global Dividend Growth.................. -- -- 125,981,707 143,422,544
European Growth......................... -- -- 147,491,393 117,878,548
Pacific Growth.......................... -- -- 23,879,533 27,877,686
Capital Appreciation.................... -- -- 43,308,414 36,207,736
Equity.................................. 99,811,910 68,979,366 694,774,453 731,250,894
S&P 500 Index........................... 70,026 -- 6,376,958 --
Competitive Edge "Best Ideas"........... -- -- 15,604,644 3,788
Strategist.............................. 57,645,729 55,080,241 190,136,853 177,350,637
</TABLE>
102
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES
NOTES TO FINANCIAL STATEMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
Included in the payable for investments purchased at June 30, 1998 for Dividend
Growth and Income Builder, are $1,096,872 and $171,535, respectively, for
unsettled trades with Dean Witter Reynolds Inc. ("DWR"), an affiliate of the
Investment Manager. Included in the receivable for investments sold at June 30,
1998 for Income Builder and Capital Appreciation are $92,715 and $660,794,
respectively, for unsettled trades with DWR.
For the six months ended June 30, 1998, the following Portfolios incurred
brokerage commissions with DWR for portfolio transactions executed on behalf of
the Portfolio:
<TABLE>
<CAPTION>
GLOBAL
INCOME DIVIDEND CAPITAL DIVIDEND CAPITAL
UTILITIES BUILDER GROWTH GROWTH GROWTH APPRECIATION EQUITY STRATEGIST
----------- ------------ -------------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 4,425 $ 13,379 $ 27,225 $ 11,080 $ 11,950 $ 15,014 $ 12,910 $ 18,566
----------- ------------ ------- ------------ ------------ ------------ ------------ ------------
----------- ------------ ------- ------------ ------------ ------------ ------------ ------------
</TABLE>
Included in the receivable for investments sold at June 30, 1998 for Global
Dividend Growth and Capital Growth are $158,129 and $390,005, respectively, for
unsettled trades with Morgan Stanley & Co., Inc. ("Morgan Stanley"), an
affiliate of the Investment Manager. Included in the payable for investments
purchased at June 30, 1998 for Global Dividend Growth and Competitive Edge "Best
Ideas" are $294,620 and $717,506, respectively, for unsettled trades with Morgan
Stanley.
For the six months ended June 30, 1998, the following Portfolios incurred
brokerage commissions with Morgan Stanley for portfolio transactions executed on
behalf of the Portfolio:
<TABLE>
<CAPTION>
COMPETITIVE
GLOBAL EDGE
INCOME DIVIDEND CAPITAL DIVIDEND EUROPEAN PACIFIC "BEST
BUILDER GROWTH GROWTH GROWTH GROWTH GROWTH EQUITY IDEAS" STRATEGIST
------- -------- ------- -------- -------- ------- ------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$650 $ 63,730 $18,690 $141,013 $24,987 $4,181 $111,935 $ 8,175 $29,875
------- -------- ------- -------- -------- ------- ------- ---------- ----------
------- -------- ------- -------- -------- ------- ------- ---------- ----------
</TABLE>
For the six months ended June 30, 1998, European Growth incurred brokerage
commissions of $4,661 with affiliates of the Sub-Advisor for portfolio
transactions executed on behalf of the Portfolio.
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager, is
the Fund's transfer agent.
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, 1998
included in Trustees' fees and expenses in the Statement of Operations and the
accrued pension liability included in accrued expenses in the Statement of
Assets and Liabilities are as follows:
103
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES
NOTES TO FINANCIAL STATEMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
AGGREGATE PENSION COST
QUALITY GLOBAL
MONEY INCOME HIGH INCOME DIVIDEND CAPITAL DIVIDEND EUROPEAN PACIFIC CAPITAL
MARKET PLUS YIELD UTILITIES BUILDER GROWTH GROWTH GROWTH GROWTH GROWTH APPRECIATION EQUITY STRATEGIST
------- ------- ------ --------- ------- -------- ------- -------- -------- ------- ------------ ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 152 $ 230 $ 186 $ 217 $ 36 $ 988 $ 68 $ 240 $ 310 $ 28 $ 17 $ 410 $ 250
------- ------- ------ --------- ------- -------- ------- -------- -------- ------- --- ------ ----------
------- ------- ------ --------- ------- -------- ------- -------- -------- ------- --- ------ ----------
ACCRUED PENSION LIABILITY
$11,354 $7,555 $3,528 $ 4,976 $ 36 $ 8,388 $ 370 $ 662 $ 909 $ 239 $ 17 $5,413 $ 8,140
------- ------- ------ --------- ------- -------- ------- -------- -------- ------- --- ------ ----------
------- ------- ------ --------- ------- -------- ------- -------- -------- ------- --- ------ ----------
</TABLE>
4. FEDERAL INCOME TAX STATUS
At December 31, 1997, the following Portfolios had an approximate net capital
loss carryover which may be used to offset future capital gains to the extent
provided by regulations:
<TABLE>
<CAPTION>
AMOUNT IN THOUSANDS
Available through -------------------------------------------------------------------------
December 31, 1998 1999 2000 2001 2002 2003 2004 2005 TOTAL
- ---------------------------------------- ------- ------ ------ ------ ------- ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Quality Income Plus..................... -- -- -- -- $20,752 -- $2,491 -- $23,243
High Yield.............................. $34,291 $7,336 $3,057 $4,736 3,256 $2,984 5,521 -- 61,181
Pacific Growth.......................... -- -- -- -- -- 1,939 4,124 $11,428 17,491
</TABLE>
Net capital and net foreign currency losses incurred after October 31
("post-October losses") within the taxable year are deemed to arise on the first
business day of the Portfolios' next taxable year. The following Portfolios
incurred and will elect to defer post-October losses during fiscal 1997: Capital
Growth -- $389,000; Global Dividend Growth -- $4,000; Pacific Growth --
$8,545,000; Capital Appreciation -- $30,000.
At December 31, 1997, the primary reason(s) for significant temporary book/tax
differences were as follows:
<TABLE>
<CAPTION>
LOSS DEFERRALS
POST-OCTOBER FROM WASH
LOSSES SALES
----------- --------------
<S> <C> <C>
High Yield.............................. -
Utilities............................... -
Income Builder.......................... -
Dividend Growth......................... -
Capital Growth.......................... - -
Global Dividend Growth.................. - -
European Growth......................... -
Pacific Growth.......................... - -
Capital Appreciation.................... -
Equity.................................. -
</TABLE>
Additionally, Global Dividend Growth and Pacific Growth had temporary
differences attributable to income from the mark-to-market of passive foreign
investment companies.
104
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES
NOTES TO FINANCIAL STATEMENTS JUNE 30, 1998 (UNAUDITED) CONTINUED
5. PURPOSES OF AND RISKS RELATING TO CERTAIN FINANCIAL INSTRUMENTS
Global Dividend Growth, European Growth, Pacific Growth and Competitive Edge
"Best Ideas" may enter into forward foreign currency contracts ("forward
contracts") to facilitate settlement of foreign currency denominated portfolio
transactions or to manage foreign currency exposure associated with foreign
currency denominated securities. Such Portfolios may also purchase and write put
options on foreign currencies in which the Portfolios' securities are
denominated to protect against a decline in value of such securities due to
currency devaluations.
Forward contracts and over-the-counter put options on foreign currencies involve
elements of market risk in excess of the amounts reflected in the Statement of
Assets and Liabilities. The Portfolios bear the risk of an unfavorable change in
the foreign exchange rates underlying the forward contracts. Risks may also
arise upon entering into these contracts and over-the-counter put options on
foreign currencies from the potential inability of the counterparties to meet
the terms of their contracts.
At June 30, 1998, Global Dividend Growth, European Growth and Pacific Growth had
outstanding forward contracts.
At June 30, 1998, European Growth's investments in securities of issuers in the
United Kingdom represented 28.9% of the Portfolio's net assets. Pacific Growth's
investments in securities of issuers in Hong Kong represented 27.4% of the
Portfolio's net assets. These investments, which involve risks and
considerations not present with respect to U.S. securities, may be affected by
economic or political developments in these regions.
At June 30, 1998, Global Dividend Growth's, European Growth's and Pacific
Growth's cash balance consisted principally of interest bearing deposits with
Chase Manhattan Bank N.A., the custodian of each Portfolio.
6. SUBSEQUENT EVENT
In May 1998, the sub-advisor advised the Fund's Board of Directors and the
Investment Manager of its resignation as sub-advisor to Pacific Growth and
European Growth, effective at the close of business on October 31, 1998 and
December 31, 1998, respectively. On June 2, 1998 the Board of Directors
unanimously recommended that a new sub-advisory agreement with Morgan Stanley
Asset Management Inc., an affiliate of the Investment Manager, be submitted to
shareholders for approval at a special meeting to be held on August 18, 1998.
105
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
NET ASSET
VALUE NET NET REALIZED TOTAL FROM DISTRIBUTIONS TOTAL
BEGINNING INVESTMENT AND UNREALIZED INVESTMENT DIVIDENDS TO TO DIVIDENDS AND
YEAR ENDED DECEMBER 31 OF PERIOD INCOME GAIN (LOSS) OPERATIONS SHAREHOLDERS SHAREHOLDERS DISTRIBUTIONS
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
MONEY MARKET
1993 $ 1.00 $0.027 -- $0.027 $ (0.027) -- $ (0.027)
1994 1.00 0.037 -- 0.037 (0.037) -- (0.037)
1995 1.00 0.055 -- 0.055 (0.055) -- (0.055)
1996 1.00 0.050 -- 0.050 (0.050) -- (0.050)
1997 1.00 0.051 -- 0.051 (0.051) -- (0.051)
1998(a) 1.00 0.025 -- 0.025 (0.025) -- (0.025)
QUALITY INCOME PLUS
1993 10.39 0.69 $ 0.64 1.33 (0.69) -- (0.69)
1994 11.03 0.69 (1.40) (0.71) (0.69) $ (0.18) (0.87)
1995 9.45 0.72 1.50 2.22 (0.71) -- (0.71)
1996 10.96 0.71 (0.58) 0.13 (0.72) -- (0.72)
1997 10.37 0.70 0.40 1.10 (0.70) -- (0.70)
1998(a) 10.77 0.34 0.13 0.47 (0.34) -- (0.34)
HIGH YIELD
1993 6.43 0.81 0.68 1.49 (0.81) -- (0.81)
1994 7.11 0.79 (0.95) (0.16) (0.79) -- (0.79)
1995 6.16 0.80 0.08 0.88 (0.78) -- (0.78)
1996 6.26 0.77 (0.06) 0.71 (0.79) -- (0.79)
1997 6.18 0.75 (0.06) 0.69 (0.75) -- (0.75)
1998(a) 6.12 0.36 (0.11) 0.25 (0.36) -- (0.36)
UTILITIES
1993 12.34 0.49 1.43 1.92 (0.50) (0.02) (0.52)
1994 13.74 0.53 (1.75) (1.22) (0.52) (0.08) (0.60)
1995 11.92 0.53 2.81 3.34 (0.58) -- (0.58)
1996 14.68 0.55 0.70 1.25 (0.55) (0.04) (0.59)
1997 15.34 0.57 3.46 4.03 (0.57) (0.21) (0.78)
1998(a) 18.59 0.29 1.63 1.92 (0.29) (1.02) (1.31)
INCOME BUILDER
1997(b) 10.00 0.44 1.76 2.20 (0.44) -- (0.44)
1998(a) 11.76 0.27 0.32 0.59 (0.27) (0.11) (0.38)
DIVIDEND GROWTH
1993 11.51 0.36 1.27 1.63 (0.36) -- (0.36)
1994 12.78 0.38 (0.80) (0.42) (0.37) -- (0.37)
1995 11.99 0.38 3.89 4.27 (0.41) (0.26) (0.67)
1996 15.59 0.41 3.22 3.63 (0.41) (0.41) (0.82)
1997 18.40 0.41 4.20 4.61 (0.41) (1.00) (1.41)
1998(a) 21.60 0.21 1.99 2.20 (0.21) (2.05) (2.26)
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
106
<PAGE>
<TABLE>
<CAPTION>
RATIOS TO AVERAGE NET
ASSETS
-----------------------
NET
NET ASSET TOTAL NET ASSETS AT INVESTMENT PORTFOLIO
VALUE END INVESTMENT END OF PERIOD INCOME TURNOVER
OF PERIOD RETURN+ (000'S) EXPENSES (LOSS) RATE
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
MONEY MARKET
1993 $ 1.00 2.75% $ 129,925 0.57% 2.71 % N/A
1994 1.00 3.81 268,624 0.55 3.93 N/A
1995 1.00 5.66 249,787 0.53 5.52 N/A
1996 1.00 5.11 340,238 0.52 4.97 N/A
1997 1.00 5.23 335,578 0.52 5.10 N/A
1998(a) 1.00 2.57(1) 350,070 0.52(2) 5.13 (2) N/A
QUALITY INCOME PLUS
1993 11.03 12.99 487,647 0.56 6.17 219%
1994 9.45 (6.63) 414,905 0.54 6.88 254
1995 10.96 24.30 520,579 0.54 7.07 162
1996 10.37 1.56 474,660 0.53 6.84 182
1997 10.77 11.09 474,990 0.53 6.71 171
1998(a) 10.90 4.45(1) 494,138 0.53(2) 6.36 (2) 73(1)
HIGH YIELD
1993 7.11 24.08 90,200 0.60 11.80 177
1994 6.16 (2.47) 111,934 0.59 11.71 105
1995 6.26 14.93 154,310 0.54 12.67 58
1996 6.18 11.98 259,549 0.51 12.59 57
1997 6.12 11.87 368,061 0.53 12.44 95
1998(a) 6.01 4.18(1) 420,565 0.53(2) 11.88 (2) 55(1)
UTILITIES
1993 13.74 15.69 490,934 0.71 3.75 11
1994 11.92 (9.02) 382,412 0.68 4.21 15
1995 14.68 28.65 479,070 0.68 4.00 13
1996 15.34 8.68 440,662 0.67 3.61 9
1997 18.59 27.15 458,134 0.67 3.48 13
1998(a) 19.20 10.34(1) 485,873 0.67(2) 3.01 (2) 4(1)
INCOME BUILDER
1997(b) 11.76 22.38(1) 55,423 0.15(2)(4) 5.73 (2)(4) 41(1)
1998(a) 11.97 4.94(1) 88,873 0.82(2) 4.88 (2) 34(1)
DIVIDEND GROWTH
1993 12.78 14.34 483,145 0.68 3.01 6
1994 11.99 (3.27) 572,952 0.64 3.13 20
1995 15.59 36.38 865,417 0.61 2.75 24
1996 18.40 23.96 1,288,404 0.57 2.46 23
1997 21.60 25.61 1,905,906 0.54 2.06 28
1998(a) 21.54 10.18(1) 2,174,186 0.53(2) 1.82 (2) 15(1)
</TABLE>
107
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES
FINANCIAL HIGHLIGHTS, CONTINUED
<TABLE>
<CAPTION>
NET ASSET NET
VALUE INVESTMENT NET REALIZED TOTAL FROM DISTRIBUTIONS TOTAL
BEGINNING INCOME AND UNREALIZED INVESTMENT DIVIDENDS TO TO DIVIDENDS AND
YEAR ENDED DECEMBER 31 OF PERIOD (LOSS) GAIN (LOSS) OPERATIONS SHAREHOLDERS SHAREHOLDERS DISTRIBUTIONS
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
CAPITAL GROWTH
1993 $ 12.79 $ 0.08 $(0.98) $(0.90) $ (0.08) -- $ (0.08)
1994 11.81 0.10 (0.26) (0.16) (0.10) $ (0.03) (0.13)
1995 11.52 0.10 3.68 3.78 (0.08) -- (0.08)
1996 15.22 0.08 1.65 1.73 (0.03) (0.27) (0.30)
1997 16.65 0.01 3.90 3.91 (0.08) (2.19) (2.27)
1998(a) 18.29 (0.03) 2.85 2.82 -- (1.47) (1.47)
GLOBAL DIVIDEND GROWTH
1994(c) 10.00 0.23 (0.20) 0.03 (0.21) -- (0.21)
1995 9.82 0.24 1.90 2.14 (0.26) (0.01) (0.27)
1996 11.69 0.24 1.75 1.99 (0.24) (0.31) (0.55)
1997 13.13 0.22 1.37 1.59 (0.23) (0.60) (0.83)
1998(a) 13.89 0.15 1.20 1.35 (0.15) (1.52) (1.67)
EUROPEAN GROWTH
1993 10.18 0.12 3.98 4.10 (0.12) (0.13) (0.25)
1994 14.03 0.17 0.96 1.13 (0.16) (0.44) (0.60)
1995 14.56 0.20 3.50 3.70 (0.19)* (0.54) (0.73)
1996 17.53 0.17 4.91 5.08 (0.04) (1.01) (1.05)
1997 21.56 0.21 3.19 3.40 (0.24) (1.18) (1.42)
1998(a) 23.54 0.36 5.82 6.18 (0.31) (1.73) (2.04)
PACIFIC GROWTH
1994(c) 10.00 0.07 (0.74) (0.67) -- (0.07) (0.07)
1995 9.26 0.12 0.41 0.53 (0.09) -- (0.09)
1996 9.70 0.05 0.32 0.37 (0.11) -- (0.11)
1997 9.96 0.12 (3.82) (3.70) (0.14) -- (0.14)
1998(a) 6.12 0.04 (1.41) (1.37) (0.20) -- (0.20)
CAPITAL APPRECIATION
1997(b) 10.00 0.07 1.25 1.32 -- -- --
1998(a) 11.32 0.05 0.45 0.50 (0.07) -- (0.07)
EQUITY
1993 19.80 0.15 3.63 3.78 (0.15) (1.28) (1.43)
1994 22.15 0.23 (1.31) (1.08) (0.22) (1.60) (1.82)
1995 19.25 0.22 7.92 8.14 (0.25) -- (0.25)
1996 27.14 0.16 2.70 2.86 (0.16) (3.45) (3.61)
1997 26.39 0.18 9.27 9.45 (0.18) (2.08) (2.26)
1998(a) 33.58 0.10 5.91 6.01 (0.10) (4.47) (4.57)
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
108
<PAGE>
<TABLE>
<CAPTION>
RATIOS TO AVERAGE NET
ASSETS
-----------------------
NET
NET ASSET TOTAL NET ASSETS AT INVESTMENT PORTFOLIO
VALUE END INVESTMENT END OF PERIOD INCOME TURNOVER
OF PERIOD RETURN+ (000'S) EXPENSES (LOSS) RATE
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CAPITAL GROWTH
1993 $ 11.81 (6.99)% $ 50,309 0.74% 0.78 % 36%
1994 11.52 (1.28) 45,715 0.77 0.90 37
1995 15.22 32.92 66,995 0.74 0.70 34
1996 16.65 11.55 86,862 0.73 0.52 98
1997 18.29 24.54 127,100 0.71 0.01 139
1998(a) 19.64 15.40(1) 145,154 0.70(2) (0.32 ) (2) 79(1)
GLOBAL DIVIDEND GROWTH
1994(c) 9.82 0.27(1) 138,486 0.87(2)(3) 2.62 (2) 20(1)
1995 11.69 22.14 205,739 0.88 2.23 55
1996 13.13 17.49 334,821 0.85 1.94 39
1997 13.89 12.04 481,613 0.84 1.61 48
1998(a) 13.57 9.70(1) 522,975 0.83(2) 2.09 (2) 25(1)
EUROPEAN GROWTH
1993 14.03 40.88 79,052 1.28 0.97 77
1994 14.56 8.36 152,021 1.16 1.49 58
1995 17.53 25.89 188,119 1.17 1.25 69
1996 21.56 29.99 302,422 1.11 0.97 43
1997 23.54 16.07 391,441 1.12 1.04 45
1998(a) 27.68 26.24(1) 520,932 1.09(2) 1.54 (2) 26(1)
PACIFIC GROWTH
1994(c) 9.26 (6.73) (1) 75,425 1.00(2)(3) 0.56 (2) 22(1)
1995 9.70 5.74 98,330 1.44 1.23 53
1996 9.96 3.89 144,536 1.37 1.01 50
1997 6.12 (37.70) 68,904 1.44 1.09 58
1998(a) 4.55 (22.32)(1) 52,693 1.35(2) 1.38 (2) 40(1)
CAPITAL APPRECIATION
1997(b) 11.32 13.20(1) 32,306 -- (4) 1.30 (2)(4) 25(1)
1998(a) 11.75 4.39(1) 36,964 -- (2)(5) 0.94 (2)(5) 125(1)
EQUITY
1993 22.15 19.72 182,828 0.58 0.69 265
1994 19.25 (4.91) 225,289 0.57 1.19 299
1995 27.14 42.53 359,779 0.54 0.97 269
1996 26.39 12.36 521,908 0.54 0.58 279
1997 33.58 37.43 823,090 0.52 0.61 145
1998(a) 35.02 17.90(1) 1,011,556 0.51(2) 0.57 (2) 92(1)
</TABLE>
109
<PAGE>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES
FINANCIAL HIGHLIGHTS, CONTINUED
<TABLE>
<CAPTION>
NET ASSET
VALUE NET NET REALIZED TOTAL FROM DISTRIBUTIONS TOTAL
BEGINNING INVESTMENT AND UNREALIZED INVESTMENT DIVIDENDS TO TO DIVIDENDS AND
YEAR ENDED DECEMBER 31 OF PERIOD INCOME GAIN (LOSS) OPERATIONS SHAREHOLDERS SHAREHOLDERS DISTRIBUTIONS
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
S & P 500 INDEX
1998(a)(d) $ 10.00 $ 0.02 $ 0.25 $ 0.27 -- -- --
COMPETITIVE EDGE "BEST IDEAS"
1998(a)(d) 10.00 0.02 (0.16) (0.14) -- -- --
STRATEGIST
1993 12.29 0.38 0.86 1.24 $ (0.38) $ (0.47) $ (0.85)
1994 12.68 0.48 0.01 0.49 (0.46) (0.26) (0.72)
1995 12.45 0.62 0.49 1.11 (0.67) (0.44) (1.11)
1996 12.45 0.43 1.39 1.82 (0.43) (0.12) (0.55)
1997 13.72 0.45 1.40 1.85 (0.45) (0.32) (0.77)
1998(a) 14.80 0.19 2.29 2.48 (0.19) (1.56) (1.75)
</TABLE>
<TABLE>
<C> <S>
- ---------------------
(a) For the six months ended June 30, 1998 (unaudited).
Commencement of operations:
(b) January 21, 1997.
(c) February 23, 1994.
(d) May 18, 1998.
+ Calculated based on the net asset value as of the last business day of the
period.
* Includes dividends in excess of net investment income of $0.02.
** Less than 0.05%.
(1) Not annualized.
(2) Annualized.
(3) If the Investment Manager had not assumed all expenses and waived its
management fee for the period February 23, 1994 through May 12, 1994 for
Global Dividend Growth and February 23, 1994 through August 2, 1994 for
Pacific Growth, the ratio of expenses to average net assets would have been
0.97% for Global Dividend Growth and 1.40% for Pacific Growth.
(4) If the Investment Manager had not assumed all expenses and waived its
management fee for the period January 21, 1997 through December 3, 1997 for
Income Builder and January 21, 1997 through December 31, 1997 for Capital
Appreciation, the ratios of expenses and net investment income to average
net assets would have been 0.99% and 4.89%, respectively, for Income
Builder and 0.97% and 0.33%, respectively, for Capital Appreciation.
(5) If the Investment Manager had not assumed all expenses and waived its
management fee for the six months ending June 30, 1998 for Capital
Appreciation, the ratio of expenses and net investment income to average
net assets would have been 0.84% and 0.10%, respectively.
(6) If the Investment Manager had not assumed all expenses and waived its
management fee for the period May 18, 1998 through June 30, 1998 for S&P
500 Index and Competitive Edge "Best Ideas", respectively, the ratios of
expenses and net investment income to average net assets would have been
1.17% and 0.99%, respectively, for S&P 500 Index and 0.98% and 2.36%,
respectively, for Competitive Edge "Best Ideas".
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
110
<PAGE>
<TABLE>
<CAPTION>
RATIOS TO AVERAGE NET
ASSETS
-----------------------
NET
NET ASSET TOTAL NET ASSETS AT INVESTMENT PORTFOLIO
VALUE END INVESTMENT END OF PERIOD INCOME TURNOVER
OF PERIOD RETURN+ (000'S) EXPENSES (LOSS) RATE
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
S & P 500 INDEX
1998(a)(d) $ 10.27 2.70% (1) $ 7,192 -- (2)(6) -- (2)(6) --
COMPETITIVE EDGE "BEST
IDEAS"
1998(a)(d) 9.86 (1.40)(1) 18,317 -- (2)(6) -- (2)(6) -- ** (1)
STRATEGIST
1993 12.68 10.38 287,502 0.57% 3.11 % 57%
1994 12.45 3.94 392,760 0.54 3.93 125
1995 12.45 9.48 388,579 0.52 5.03 329
1996 13.72 15.02 423,768 0.52 3.30 153
1997 14.80 13.71 497,028 0.52 3.09 159
1998(a) 15.53 16.82(1) 576,568 0.52(2) 2.43 (2) 52(1)
</TABLE>
111
<PAGE>
Trustees
------------------------------------------------------------------------------
Michael Bozic Dr. Manuel H. Johnson
Charles A. Fiumefreddo Michael E. Nugent
Edwin J. Garn Philip J. Purcell
John R. Haire John L. Schroeder
Wayne E. Hedien
Officers
------------------------------------------------------------------------------
Charles A. Fiumefreddo
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
Barry Fink
VICE PRESIDENT, SECRETARY AND GENERAL COUNSEL
Thomas F. Caloia
TREASURER
Transfer Agent Independent Accountants
- -------------------------------------- --------------------------------------
Morgan Stanley Dean Witter Trust FSB PricewaterhouseCoopers LLP
Harborside Financial Center--Plaza Two 1177 Avenue of the Americas
Jersey City, New Jersey 07311 New York, New York 10036
Investment Manager
----------------------------------------
Morgan Stanley Dean Witter Advisors Inc.
Two World Trade Center
New York, New York 10048
Sub-Advisor
(European Growth and Pacific Growth
Portfolio)
----------------------------------------
Morgan Grenfell Investment Services
Limited
The financial statements included herein have been taken from the records of the
Fund without examination by the independent accountants and accordingly they do
not express an opinion thereon.
This report is submitted for the general information of shareholders of the
Fund. For more detailed information about the Fund, its officers and trustees,
fees, expenses and other pertinent information, please see the prospectus of the
Fund.
This report is not authorized for distribution to prospective investors in the
Fund unless preceded or accompanied by an effective prospectus.
<PAGE>
MORGAN STANLEY DEAN WITTER
VARIABLE INVESTMENT SERIES
SEMI-ANNUAL REPORT
JUNE 30, 1998
Northbrook Life Insurance Company BULK RATE MAIL
U.S. POSTAGE
P.O. Box 94040 PAID
ROCKVILLE CENTER
Palatine, IL 60094-4040 NY 11570
PERMIT NO. 150
40113A
<PAGE>
MORGAN STANLEY DEAN WITTER
VARIABLE INVESTMENT SERIES
SEMI-ANNUAL REPORT
JUNE 30, 1998
Allstate Life Insurance Company of New York BULK RATE MAIL
U.S. POSTAGE
P.O. Box 94038 PAID
ROCKVILLE CENTER
Palatine, IL 60094-4038 NY 11570
PERMIT NO. 150
40915A