<PAGE>
DEAN WITTER VALUE-ADDED MARKET SERIES -- EQUITY PORTFOLIO TWO WORLD TRADE
CENTER, NEW YORK, NEW
YORK 10048
LETTER TO THE SHAREHOLDERS
DEAR SHAREHOLDER:
During the six-month period ended December 31, 1994, Dean Witter Value-Added
Market Series-Equity Portfolio posted a total return of 3.5 percent, compared to
4.9 percent for the Standard & Poor's 500 Composite Stock Price Index (S&P 500
Index). After strong performances in 1991, 1992 and 1993, the Fund posted a 0.1
percent gain for calendar year 1994, lagging the capitalization-weighted S&P
500, which posted a return of 1.3 percent, but outperforming the Russell 2000, a
small-cap index, which declined 1.3 percent. Since inception on November 30,
1987, the Fund has experienced growth of 131.2 percent, for an annualized total
return of 12.6 percent.
A PERIOD OF RISING INTEREST RATES
The equity market's subdued performance during the second half of 1994, as well
as for the entire calendar year, was primarily linked to higher interest rates.
The Federal Reserve Board, concerned that strong economic growth could lead to
higher inflation, began to tighten monetary policy in early February. In six
separate moves, the central bank increased the federal-funds rate from 3.00
percent to 5.50 percent by year end. As a result, both short-term and long-term
interest rates rose dramatically during the year. By December 31, 1994, the
yield on the 2-year U.S. Treasury note had increased to 7.76 percent, from 4.23
percent, a year ago. Similarly, the yield on the 30-year U.S. Treasury bond
increased to 7.88 percent, from 6.35 percent, a year ago.
LOOKING AHEAD
Looking forward, the Fund will continue to invest in substantially all of the
stocks included in the S&P 500 Index. However, unlike the S&P 500 Index, which
is capitalization weighted, the Fund equally weights all stock positions. By
doing so, it emphasizes the performance of stocks of smaller- to
medium-capitalized companies, which historically have
<PAGE>
DEAN WITTER VALUE-ADDED MARKET SERIES -- EQUITY PORTFOLIO
LETTER TO THE SHAREHOLDERS, CONTINUED
outperformed larger-capitalized companies. Although the Federal Reserve Board
may raise rates further during the first quarter of 1995 and negatively impact
stocks in the short-term, the equity markets, small-cap stocks in particular,
have the potential to register significant gains for the long-term investor.
We appreciate your support of Dean Witter Value-Added Market Series-Equity
Portfolio and look forward to continuing to serve your financial needs and
objectives.
Very truly yours,
[SIG]
CHARLES A. FIUMEFREDDO
CHAIRMAN OF THE BOARD
<PAGE>
DEAN WITTER VALUE-ADDED MARKET SERIES -- EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1994 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (95.9%)
AEROSPACE & DEFENSE (1.7%)
22,000 Boeing Company...................... $ 1,028,500
23,500 General Dynamics Corp............... 1,022,250
13,500 Lockheed Corp....................... 980,437
21,500 Martin Marietta Corp................ 954,063
7,000 McDonnell Douglas Corp.............. 994,000
22,500 Northrop Grumman Corp............... 945,000
14,000 Raytheon Co......................... 894,250
25,500 Rockwell International Corp......... 911,625
14,000 United Technologies Corp............ 880,250
---------------
8,610,375
---------------
AIRLINES (0.7%)
19,000 AMR Corp.*.......................... 1,011,750
20,000 Delta Air Lines, Inc................ 1,010,000
54,000 Southwest Airlines Co............... 904,500
131,000 USAir Group, Inc.*.................. 573,125
---------------
3,499,375
---------------
ALUMINUM (0.6%)
38,000 Alcan Aluminium, Ltd................ 964,250
11,800 Aluminum Co. of America............. 1,022,175
19,500 Reynolds Metals Co.................. 955,500
---------------
2,941,925
---------------
AUTO PARTS - AFTER MARKET (0.9%)
37,000 Cooper Tire & Rubber Co............. 874,125
30,000 Echlin, Inc......................... 900,000
26,000 Genuine Parts Co.................... 936,000
30,000 Goodyear Tire & Rubber Co........... 1,008,750
58,000 SPX Corp............................ 964,250
---------------
4,683,125
---------------
AUTOMOBILES (0.6%)
21,000 Chrysler Corp....................... 1,029,000
34,000 Ford Motor Co....................... 952,000
21,500 General Motors Corp................. 908,375
---------------
2,889,375
---------------
BANKS - MONEY CENTER (1.3%)
23,500 BankAmerica Corp.................... 928,250
16,500 Bankers Trust N.Y. Corp............. 913,688
27,000 Chase Manhattan Corp................ 928,125
26,000 Chemical Banking Corp............... 932,750
22,500 Citicorp............................ 930,937
19,000 First Chicago Corp.................. 907,250
16,000 Morgan (J.P.) & Co., Inc............ 896,000
---------------
6,437,000
---------------
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------
<C> <S> <C>
BANKS - REGIONAL (3.9%)
35,500 Banc One Corp....................... $ 900,812
36,000 Bank of Boston Corp................. 931,500
23,000 Barnett Banks, Inc.................. 882,625
35,000 Boatmens Bancshares, Inc............ 949,375
37,000 CoreStates Financial Corp........... 962,000
22,000 First Fidelity Bancorp.............. 987,250
14,000 First Interstate Bancorp............ 946,750
21,000 First Union Corp.................... 868,875
27,500 Fleet Financial Group, Inc.......... 893,750
38,000 Keycorp............................. 950,000
30,000 Mellon Bank Corp.................... 918,750
36,000 National City Corp.................. 931,500
22,000 NationsBank Corp.................... 992,750
33,000 NBD Bancorp, Inc.................... 903,375
40,000 Norwest Corp........................ 935,000
43,000 PNC Bank Corp....................... 908,375
55,000 Shawmut National Corp............... 900,625
18,500 SunTrust Banks, Inc................. 883,375
42,000 U.S. Bancorp........................ 939,750
29,000 Wachovia Corp....................... 935,250
6,500 Wells Fargo & Co.................... 942,500
---------------
19,464,187
---------------
BEVERAGES - ALCOHOLIC (0.7%)
18,000 Anheuser-Busch Cos., Inc............ 915,750
32,000 Brown-Forman Corp. (Class B)........ 976,000
54,500 Coors (Adolph) Co................... 912,875
30,000 Seagram Co., Ltd.................... 885,000
---------------
3,689,625
---------------
BEVERAGES - SOFT DRINKS (0.4%)
19,300 Coca Cola Co........................ 993,950
27,500 PepsiCo, Inc........................ 996,875
---------------
1,990,825
---------------
BROADCAST MEDIA (0.8%)
12,000 Capital Cities/ABC, Inc............. 1,023,000
17,000 CBS, Inc............................ 941,375
60,000 Comcast Corp. (Class A Special)..... 937,500
40,000 Tele-Communications, Inc............ 870,000
---------------
3,771,875
---------------
BUILDING MATERIALS (0.6%)
38,000 Masco Corp.......................... 859,750
31,000 Owens-Corning Fiberglass Corp.*..... 992,000
29,000 Sherwin - Williams Co............... 960,625
---------------
2,812,375
---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER VALUE-ADDED MARKET SERIES -- EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1994 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------
<C> <S> <C>
CHEMICALS (1.9%)
21,000 Air Products & Chemicals, Inc....... $ 937,125
14,200 Dow Chemical Co..................... 954,950
17,000 duPont (E.I.) de Nemours & Co....... 956,250
18,300 Eastman Chemical Co................. 924,150
21,500 Goodrich (B.F.) Co.................. 932,563
9,000 Hercules, Inc....................... 1,038,375
13,500 Monsanto Co......................... 951,750
46,000 Praxair, Inc........................ 943,000
17,000 Rohm & Haas Co...................... 971,125
30,000 Union Carbide Corp.................. 881,250
---------------
9,490,538
---------------
CHEMICALS - DIVERSIFIED (1.0%)
29,000 Avery Dennison Corp................. 1,029,500
42,500 Engelhard Corp...................... 945,625
43,500 First Mississippi Corp.............. 1,087,500
16,000 FMC Corp.*.......................... 924,000
24,000 PPG Industries, Inc................. 891,000
---------------
4,877,625
---------------
CHEMICALS - SPECIALTY (1.0%)
24,500 Grace (W.R.) & Co................... 946,312
16,500 Great Lakes Chemical Corp........... 940,500
34,500 Morton International, Inc........... 983,250
27,500 Nalco Chemical Co................... 921,250
30,000 Sigma-Aldrich, Inc.................. 975,000
---------------
4,766,312
---------------
COMMUNICATIONS - EQUIPMENT/MANUFACTURERS (1.2%)
19,500 Andrew Corp.*....................... 1,018,875
29,000 Cisco Systems, Inc.*................ 1,015,000
27,500 DSC Communications Corp.*........... 990,000
124,000 M/A-Com., Inc.*..................... 899,000
28,500 Northern Telecom, Ltd............... 951,188
49,000 Scientific-Atlanta, Inc............. 1,029,000
---------------
5,903,063
---------------
COMPUTER SOFTWARE & SERVICES (2.2%)
25,000 Autodesk, Inc....................... 981,250
16,500 Automatic Data Processing, Inc...... 965,250
36,500 Ceridian Corp.*..................... 980,937
21,000 Computer Associates Int'l., Inc..... 1,018,500
19,700 Computer Sciences Corp.*............ 1,004,700
19,000 First Data Corp..................... 900,125
26,000 Lotus Development Corp.*............ 1,066,000
16,500 Microsoft Corp.*.................... 1,008,563
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------
<C> <S> <C>
57,500 Novell, Inc.*....................... $ 977,500
23,000 Oracle Systems Corp.*............... 1,014,875
30,000 Shared Medical Systems Corp......... 982,500
---------------
10,900,200
---------------
COMPUTERS - SYSTEMS (2.2%)
93,100 Amdahl Corp.*....................... 1,024,100
26,000 Apple Computer, Inc................. 1,007,500
25,500 COMPAQ Computer Corp.*.............. 1,007,250
62,000 Cray Research, Inc.*................ 976,500
103,000 Data General Corp.*................. 1,030,000
29,000 Digital Equipment Corp.*............ 964,250
108,500 Intergraph Corp.*................... 881,562
13,700 International Business Machines
Corp................................ 1,006,950
28,000 Sun Microsystems, Inc.*............. 990,500
58,000 Tandem Computers, Inc.*............. 993,250
103,900 Unisys Corp.*....................... 896,138
---------------
10,778,000
---------------
CONGLOMERATES (0.8%)
11,000 ITT Corp............................ 974,875
50,000 Teledyne, Inc.*..................... 1,006,250
21,500 Tenneco, Inc........................ 913,750
19,500 Textron, Inc........................ 982,312
---------------
3,877,187
---------------
CONTAINERS - METAL & GLASS (0.4%)
32,000 Ball Corp........................... 1,008,000
24,000 Crown Cork & Seal, Inc.*............ 906,000
---------------
1,914,000
---------------
CONTAINERS - PAPER (0.6%)
39,000 Bemis Company, Inc.................. 936,000
55,000 Stone Container Corp.*.............. 948,750
20,500 Temple-Inland, Inc.................. 925,063
---------------
2,809,813
---------------
COSMETICS (0.8%)
37,000 Alberto-Culver Co................... 1,008,250
15,500 Avon Products, Inc.................. 926,125
13,500 Gillette Co......................... 1,009,125
22,000 International Flavors & Fragrances,
Inc................................. 1,017,500
---------------
3,961,000
---------------
DISTRIBUTORS - CONSUMER PRODUCTS (0.6%)
43,000 Fleming Cos., Inc................... 999,750
39,000 SuperValu, Inc...................... 955,500
37,000 Sysco Corp.......................... 952,750
---------------
2,908,000
---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER VALUE-ADDED MARKET SERIES -- EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1994 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------
<C> <S> <C>
ELECTRICAL EQUIPMENT (1.7%)
13,000 AMP, Inc............................ $ 945,750
15,000 Emerson Electric Co................. 937,500
19,000 General Electric Co................. 969,000
29,000 General Signal Corp................. 924,375
16,000 Grainger (W.W.), Inc................ 924,000
29,000 Honeywell, Inc...................... 913,500
25,000 Raychem Corp........................ 890,625
14,500 Thomas & Betts Corp................. 973,312
76,000 Westinghouse Electric Corp.......... 931,000
---------------
8,409,062
---------------
ELECTRONIC - SEMICONDUCTORS (1.2%)
42,000 Advanced Micro Devices, Inc.*....... 1,044,750
15,500 Intel Corp.......................... 986,188
23,000 Micron Technology, Inc.............. 1,014,875
17,300 Motorola, Inc....................... 1,001,237
52,500 National Semiconductor Corp.*....... 1,023,750
13,200 Texas Instruments, Inc.............. 988,350
---------------
6,059,150
---------------
ELECTRONICS - DEFENSE (0.6%)
24,000 E-Systems, Inc...................... 999,000
63,000 EG & G, Inc......................... 889,875
24,000 Loral Corp.......................... 909,000
---------------
2,797,875
---------------
ELECTRONICS - INSTRUMENTATION (0.6%)
10,000 Hewlett-Packard Co.................. 998,750
37,500 Perkin-Elmer Corp................... 960,938
26,500 Tektronix, Inc...................... 907,625
---------------
2,867,313
---------------
ENGINEERING & CONSTRUCTION (0.7%)
21,000 Fluor Corp.......................... 905,625
30,000 Foster Wheeler Corp................. 892,500
72,500 Morrison Knudsen Co., Inc........... 924,375
55,000 Zurn Industries, Inc................ 990,000
---------------
3,712,500
---------------
ENTERTAINMENT (0.7%)
25,500 King World Productions, Inc.*....... 879,750
25,500 Time Warner, Inc.................... 895,687
22,000 Viacom, Inc.*....................... 893,750
21,800 Walt Disney Co...................... 1,005,525
---------------
3,674,712
---------------
FINANCIAL - MISCELLANEOUS (1.8%)
32,500 American Express Co................. 958,750
32,500 American General Corp............... 918,125
27,000 Dean Witter, Discover & Co. (Note
4).................................. 914,625
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------
<C> <S> <C>
18,000 Federal Home Loan Mortgage Corp..... $ 909,000
12,000 Federal National Mortgage
Association......................... 874,500
43,000 MBNA Corp........................... 1,005,125
25,000 Merrill Lynch & Co., Inc............ 893,750
24,000 Salomon, Inc........................ 900,000
19,000 Transamerica Corp................... 945,250
27,000 Travelers, Inc...................... 877,500
---------------
9,196,625
---------------
FOODS (2.6%)
48,000 Archer-Daniels-Midland Co........... 990,000
23,000 Campbell Soup Co.................... 1,014,875
29,000 ConAgra, Inc........................ 906,250
19,000 CPC International, Inc.............. 1,011,750
17,000 General Mills, Inc.................. 969,000
27,500 Heinz, (H.J.) Co.................... 1,010,625
20,500 Hershey Foods Corp.................. 991,688
17,000 Kellogg Co.......................... 988,125
47,000 Pet, Inc............................ 928,250
31,000 Quaker Oats Co...................... 953,250
23,000 Ralston-Ralston Purina Group........ 1,026,375
40,000 Sara Lee Corp....................... 1,010,000
21,000 Wrigley, (Wm.), Jr., Co. (Class
A).................................. 1,036,875
---------------
12,837,063
---------------
GOLD MINING (1.1%)
42,500 American Barrick Resource Corp...... 945,625
84,000 Echo Bay Mines, Ltd................. 892,500
54,500 Homestake Mining Co................. 933,312
27,000 Newmont Mining Corp................. 972,000
40,500 Placer Dome, Inc.................... 880,875
74,000 Santa Fe Pacific Gold Corp.......... 952,750
---------------
5,577,062
---------------
HARDWARE & TOOLS (0.6%)
41,500 Black & Decker Corp................. 985,625
28,000 Snap-On, Inc........................ 931,000
24,500 Stanley Works....................... 875,875
---------------
2,792,500
---------------
HEALTH CARE - MISCELLANEOUS (1.1%)
51,000 ALZA Corp.*......................... 918,000
17,500 Amgen, Inc.*........................ 1,030,313
66,000 Beverly Enterprises, Inc.*.......... 948,750
35,500 Manor Care, Inc..................... 971,812
22,000 U.S. HealthCare, Inc................ 902,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER VALUE-ADDED MARKET SERIES -- EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1994 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------
<C> <S> <C>
21,000 United Healthcare Corp.*............ $ 947,625
---------------
5,718,500
---------------
HEALTH CARE DIVERSIFIED (1.4%)
30,500 Abbott Laboratories, Inc............ 995,063
35,000 Allergan, Inc....................... 988,750
15,800 American Home Products Corp......... 991,450
17,500 Bristol-Myers Squibb Co............. 1,012,812
17,000 Johnson & Johnson................... 930,750
32,000 Mallinckrodt Group, Inc............. 956,000
12,600 Warner-Lambert Co................... 970,200
---------------
6,845,025
---------------
HEALTH CARE DRUGS (1.0%)
15,500 Lilly (Eli) & Co.................... 1,017,188
25,600 Merck & Co., Inc.................... 976,000
13,200 Pfizer, Inc......................... 1,019,700
13,600 Schering-Plough Corp................ 1,006,400
29,800 Upjohn & Co......................... 916,350
---------------
4,935,638
---------------
HEAVY DUTY TRUCKS & PARTS (1.0%)
22,500 Cummins Engine Co., Inc............. 1,018,125
40,500 Dana Corp........................... 946,687
20,000 Eaton Corp.......................... 990,000
64,000 Navistar International Corp.*....... 968,000
22,500 PACCAR, Inc......................... 984,375
---------------
4,907,187
---------------
HOME BUILDING (0.5%)
40,000 Centex Corp......................... 910,000
70,000 Kaufman & Broad Home Corp........... 901,250
41,000 Pulte Corp.......................... 943,000
---------------
2,754,250
---------------
HOSPITAL MANAGEMENT (0.6%)
25,500 Columbia/HCA Healthcare Corp........ 930,750
89,000 Community Psychiatric Centers*...... 979,000
66,000 National Medical Enterprises,
Inc.*............................... 932,250
---------------
2,842,000
---------------
HOTELS/MOTELS (0.6%)
15,000 Hilton Hotels Corp.................. 1,010,625
33,000 Marriott International, Inc......... 928,125
30,000 Promus Cos., Inc.*.................. 930,000
---------------
2,868,750
---------------
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------
<C> <S> <C>
HOUSEHOLD FURNISHINGS & APPLIANCES (0.9%)
25,000 Armstrong World Industries, Inc..... $ 962,500
34,000 Bassett Furniture, Inc.............. 969,000
59,000 Maytag Corp......................... 885,000
17,400 Whirlpool Corp...................... 874,350
83,000 Zenith Electronics*................. 964,875
---------------
4,655,725
---------------
HOUSEHOLD PRODUCTS (1.2%)
17,000 Clorox Co........................... 1,000,875
16,000 Colgate-Palmolive Co................ 1,014,000
18,500 Kimberly-Clark Corp................. 934,250
16,000 Procter & Gamble Co................. 992,000
14,500 Scott Paper Co...................... 1,002,313
8,500 Unilever N.V. (ADR)................. 990,250
---------------
5,933,688
---------------
HOUSEWARES (0.6%)
43,500 Newell Co........................... 913,500
22,500 Premark International, Inc.......... 984,375
34,000 Rubbermaid, Inc..................... 977,500
---------------
2,875,375
---------------
INSURANCE BROKERS (0.4%)
51,500 Alexander & Alexander Services,
Inc................................. 952,750
12,000 Marsh & McLennan Cos., Inc.......... 951,000
---------------
1,903,750
---------------
LEISURE TIME (0.8%)
144,000 Bally Entertainment Corp.*.......... 882,000
50,000 Brunswick Corp...................... 943,750
88,000 Handleman Co........................ 1,001,000
51,000 Outboard Marine Corp................ 1,000,875
---------------
3,827,625
---------------
LIFE INSURANCE (1.1%)
18,000 Jefferson-Pilot Corp................ 933,750
26,000 Lincoln National Corp............... 910,000
29,000 Providian Corp...................... 895,375
26,500 Torchmark Corp...................... 924,187
23,500 UNUM Corp........................... 887,125
28,000 USLIFE Corp......................... 976,500
---------------
5,526,937
---------------
MACHINE TOOLS (0.4%)
39,000 Cincinnati Milacron, Inc............ 921,375
64,000 Giddings & Lewis, Inc............... 944,000
---------------
1,865,375
---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER VALUE-ADDED MARKET SERIES -- EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1994 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------
<C> <S> <C>
MACHINERY - DIVERSIFIED (1.9%)
30,000 Briggs & Stratton Corp.............. $ 982,500
17,000 Caterpillar, Inc.................... 937,125
17,500 Clark Equipment Co.*................ 949,375
28,000 Cooper Industries, Inc.............. 955,500
15,000 Deere & Co.......................... 993,750
37,500 Harnischfeger Industries, Inc....... 1,054,688
29,000 Ingersoll Rand Co................... 913,500
20,000 NACCO Industries, Inc. (Class A).... 967,500
27,000 Timken Co........................... 951,750
26,000 Varity Corp.*....................... 942,500
---------------
9,648,188
---------------
MANUFACTURED HOUSING (0.4%)
51,000 Fleetwood Enterprises, Inc.......... 956,250
52,500 Skyline Corp........................ 1,010,625
---------------
1,966,875
---------------
MANUFACTURING - DIVERSIFIED INDUSTRIES (1.9%)
27,500 AlliedSignal, Inc................... 935,000
35,000 Crane Co............................ 940,625
17,000 Dover Corp.......................... 877,625
23,000 Illinois Tool Works, Inc............ 1,006,250
18,000 Johnson Controls, Inc............... 882,000
19,000 Millipore Corp...................... 919,125
53,500 Pall Corp........................... 1,003,125
22,000 Parker-Hannifin Corp................ 1,001,000
32,000 Trinova Corp........................ 940,000
19,000 Tyco International, Ltd............. 902,500
---------------
9,407,250
---------------
MEDICAL PRODUCTS & SUPPLIES (1.6%)
37,000 Bard (C.R.), Inc.................... 999,000
28,000 Bausch & Lomb, Inc.................. 948,500
35,700 Baxter International, Inc........... 1,008,525
21,000 Becton, Dickinson & Co.............. 1,008,000
74,000 Biomet, Inc.*....................... 1,017,500
18,200 Medtronic, Inc...................... 1,012,375
25,500 St. Jude Medical, Inc............... 1,000,875
48,000 United States Surgical Corp......... 912,000
---------------
7,906,775
---------------
METALS - MISCELLANEOUS (0.8%)
33,500 ASARCO, Inc......................... 954,750
36,500 Cyprus Amax Minerals Co............. 953,562
33,000 Inco, Ltd........................... 944,625
16,000 Phelps Dodge Corp................... 990,000
---------------
3,842,937
---------------
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------
<C> <S> <C>
MISCELLANEOUS (2.3%)
34,500 Airtouch Communications Corp.*...... $ 1,004,813
35,000 American Greetings Corp............. 940,625
31,000 Corning, Inc........................ 926,125
41,000 Dial Corp........................... 871,250
27,500 Harcourt General, Inc............... 969,375
24,000 Harris Corp......................... 1,020,000
52,200 Jostens, Inc........................ 972,225
17,800 Minnesota Mining & Manufacturing
Co.................................. 950,075
29,000 Pioneer Hi-Bred International,
Inc................................. 986,000
169,568 RJR Nabisco Holdings Corp.*......... 932,624
14,000 TRW, Inc............................ 924,000
56,000 Whitman Corp........................ 966,000
---------------
11,463,112
---------------
MULTI-LINE INSURANCE (0.6%)
20,000 Aetna Life & Casualty Co............ 942,500
10,000 American International Group,
Inc................................. 980,000
15,000 CIGNA Corp.......................... 954,375
---------------
2,876,875
---------------
OFFICE EQUIPMENT & SUPPLIES (0.7%)
15,500 Alco Standard....................... 972,625
50,000 Moore Corp., Ltd.................... 943,750
30,000 Pitney-Bowes, Inc................... 952,500
8,800 Xerox Corp.......................... 871,200
---------------
3,740,075
---------------
OIL & GAS DRILLING (0.4%)
37,000 Helmerich & Payne, Inc.............. 948,125
146,000 Rowan Cos., Inc.*................... 894,250
---------------
1,842,375
---------------
OIL - DOMESTIC INTEGRATED (2.1%)
19,500 Amerada Hess Corp................... 889,687
27,500 Ashland Oil, Inc.................... 948,750
9,500 Atlantic Richfield Co............... 966,625
20,500 Kerr-McGee Corp..................... 943,000
25,000 Louisiana Land & Exploration Co..... 909,375
48,000 Occidental Petroleum Corp........... 924,000
22,000 Pennzoil Co......................... 970,750
28,500 Phillips Petroleum Co............... 933,375
35,500 Sun Co., Inc........................ 1,020,625
35,000 Unocal Corp......................... 953,750
57,000 USX-Marathon Group.................. 933,375
---------------
10,393,312
---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER VALUE-ADDED MARKET SERIES -- EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1994 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------
<C> <S> <C>
OIL - EXPLORATION & PRODUCTION (0.7%)
25,000 Burlington Resources, Inc........... $ 875,000
254,500 Maxus Energy Corp.*................. 858,938
80,000 Oryx Energy Co.*.................... 950,000
111,000 Santa Fe Energy Resources*.......... 888,000
---------------
3,571,938
---------------
OIL - INTERNATIONAL INTEGRATED (1.2%)
16,500 Amoco Corp.......................... 975,562
22,600 Chevron Corp........................ 1,008,525
16,500 Exxon Corp.......................... 1,002,375
12,000 Mobil Corp.......................... 1,011,000
8,500 Royal Dutch Petroleum Co............ 913,750
15,500 Texaco, Inc......................... 928,063
---------------
5,839,275
---------------
OIL WELL EQUIPMENT & SERVICE (1.1%)
52,000 Baker Hughes, Inc................... 949,000
46,000 Dresser Industries, Inc............. 868,250
31,000 Halliburton Co...................... 1,026,875
36,000 McDermott International, Inc........ 891,000
18,500 Schlumberger, Ltd................... 931,937
24,500 Western Atlas, Inc.*................ 921,813
---------------
5,588,875
---------------
PAPER & FOREST PRODUCTS (2.3%)
33,500 Boise Cascade Corp.................. 896,125
25,500 Champion International Corp......... 930,750
32,500 Federal Paper Board, Inc............ 942,500
13,000 Georgia-Pacific Corp................ 929,500
13,000 International Paper Co.............. 979,875
47,000 James River Corp.................... 951,750
33,500 Louisiana-Pacific Corp.............. 912,875
19,500 Mead Corp........................... 948,187
26,500 Potlatch Corp....................... 987,125
19,000 Union Camp Corp..................... 895,375
25,500 Westvaco Corp....................... 1,000,875
25,000 Weyerhaeuser Co..................... 937,500
---------------
11,312,437
---------------
PERSONAL LOANS (0.4%)
25,000 Beneficial Corp..................... 975,000
27,000 Household International, Inc........ 1,002,375
---------------
1,977,375
---------------
PHOTOGRAPHY/IMAGING (0.4%)
20,000 Eastman Kodak Co.................... 955,000
28,000 Polaroid Corp....................... 910,000
---------------
1,865,000
---------------
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------
<C> <S> <C>
POLLUTION CONTROL (0.6%)
31,000 Browning-Ferris Industries, Inc..... $ 879,625
195,000 Rollins Environmental Services,
Inc.*............................... 950,625
35,000 WMX Technologies, Inc............... 918,750
---------------
2,749,000
---------------
PROPERTY - CASUALTY INSURANCE (1.3%)
12,900 Chubb Corp.......................... 998,138
66,000 Continental Corp.................... 1,254,000
8,000 General Re Corp..................... 990,000
18,500 SAFECO Corp......................... 962,000
23,000 St. Paul Cos., Inc.................. 1,029,250
75,000 USF&G Corp.......................... 1,021,875
---------------
6,255,263
---------------
PUBLISHING (0.6%)
17,000 Dun & Bradstreet Corp............... 935,000
14,000 McGraw-Hill, Inc.................... 936,250
21,000 Meredith Corp....................... 979,125
---------------
2,850,375
---------------
PUBLISHING - NEWSPAPER (1.2%)
31,000 Dow Jones & Co., Inc................ 961,000
19,000 Gannett Co., Inc.................... 1,011,750
19,000 Knight-Ridder Newspapers, Inc....... 959,500
45,000 New York Times Co. (Class A)........ 995,625
31,500 Times Mirror Co..................... 988,312
16,000 Tribune Co.......................... 876,000
---------------
5,792,187
---------------
RAILROADS (1.1%)
18,500 Burlington Northern, Inc............ 890,313
18,500 Conrail, Inc........................ 934,250
14,000 CSX Corp............................ 974,750
15,500 Norfolk Southern Corp............... 939,688
52,000 Santa Fe Pacific Corp............... 910,000
20,000 Union Pacific Corp.................. 912,500
---------------
5,561,501
---------------
RESTAURANTS (1.0%)
40,000 Luby's Cafeterias, Inc.............. 895,000
35,000 McDonald's Corp..................... 1,023,750
148,000 Ryan's Family Steak House, Inc.*.... 1,091,500
72,000 Shoney's, Inc.*..................... 918,000
62,000 Wendy's International, Inc.......... 891,250
---------------
4,819,500
---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER VALUE-ADDED MARKET SERIES -- EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1994 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------
<C> <S> <C>
RETAIL - DEPARTMENT STORES (1.0%)
35,500 Dillard Department Stores, Inc.
(Class A)........................... $ 949,625
27,500 May Department Stores Co............ 928,125
24,000 Mercantile Stores, Inc.............. 948,000
24,000 Nordstrom, Inc...................... 1,008,000
22,000 Penney (J.C.) Co., Inc.............. 981,750
---------------
4,815,500
---------------
RETAIL - DRUG STORES (0.6%)
30,000 Longs Drug Stores Corp.............. 952,500
43,000 Rite Aid Corp....................... 1,005,125
22,500 Walgreen Co......................... 984,375
---------------
2,942,000
---------------
RETAIL - FOOD CHAINS (1.3%)
31,500 Albertson's, Inc.................... 913,500
36,000 American Stores Co.................. 967,500
119,000 Brunos, Inc......................... 966,875
45,000 Giant Foods, Inc. (Class A)......... 978,750
49,000 Great Atlantic & Pacific Tea,
Inc................................. 888,125
38,000 Kroger Co.*......................... 916,750
19,000 Winn-Dixie Stores, Inc.............. 976,125
---------------
6,607,625
---------------
RETAIL - GENERAL MERCHANDISE (0.7%)
13,000 Dayton-Hudson Corp.................. 919,750
70,000 K-Mart Corp......................... 910,000
21,000 Sears, Roebuck & Co................. 966,000
44,000 Wal-Mart Stores, Inc................ 935,000
---------------
3,730,750
---------------
RETAIL - SPECIALTY (1.7%)
44,000 Circuit City Stores, Inc............ 979,000
21,000 Home Depot, Inc..................... 966,000
27,500 Lowe's Co., Inc..................... 955,625
31,000 Melville Corp....................... 957,125
30,000 Pep Boys-Manny, Moe & Jack.......... 930,000
62,000 Price Enterprises, Inc.*............ 790,500
20,000 Tandy Corp.......................... 1,002,500
31,000 Toys 'R' Us, Inc.*.................. 945,500
60,500 Woolworth Corp...................... 907,500
---------------
8,433,750
---------------
RETAIL - SPECIALTY APPAREL (0.7%)
138,000 Charming Shoppes, Inc............... 897,000
31,500 Gap (The), Inc...................... 960,750
52,000 Limited (The), Inc.................. 942,500
58,500 TJX Companies, Inc.................. 914,062
---------------
3,714,312
---------------
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------
<C> <S> <C>
SAVINGS & LOAN COMPANIES (0.6%)
58,000 Ahmanson (H.F.) & Co................ $ 935,250
26,000 Golden West Financial Corp.......... 916,500
58,000 Great Western Financial Corp........ 928,000
---------------
2,779,750
---------------
SHOES (0.8%)
29,500 Brown Group, Inc.................... 944,000
13,500 Nike, Inc. (Class B)................ 1,007,438
25,500 Reebok International, Ltd........... 1,007,250
82,000 Stride Rite Corp.................... 912,250
---------------
3,870,938
---------------
SPECIALIZED SERVICES (1.5%)
25,000 Block (H&R), Inc.................... 928,125
44,500 Ecolab, Inc......................... 934,500
30,500 Interpublic Group of Cos., Inc...... 979,812
219,000 National Educational Corp.*......... 903,375
35,500 National Service Industries, Inc.... 909,688
50,000 Ogden Corp.......................... 937,500
64,000 Safety-Kleen Corp................... 944,000
37,000 Service Corp. International......... 1,026,750
---------------
7,563,750
---------------
SPECIALTY PRINTING (0.5%)
33,500 Deluxe Corp......................... 887,750
31,500 Donnelley (R.R.) & Sons Co.......... 929,250
46,000 Harland (John H.) Co................ 920,000
---------------
2,737,000
---------------
STEEL (1.1%)
148,000 Armco, Inc.*........................ 980,500
50,000 Bethlehem Steel Corp.*.............. 900,000
25,800 Inland Steel Industries, Inc.*...... 906,225
18,000 Nucor Corp.......................... 999,000
27,000 USX-U.S. Steel Group, Inc........... 958,500
46,000 Worthington Industries, Inc......... 908,500
---------------
5,652,725
---------------
TELECOMMUNICATION - LONG DISTANCE (0.6%)
19,000 AT&T Corp........................... 954,750
50,000 MCI Communications Corp............. 918,750
35,000 Sprint Corp......................... 966,875
---------------
2,840,375
---------------
TEXTILES (1.2%)
160,000 Hartmarx Corp.*..................... 940,000
57,000 Liz Claiborne, Inc.................. 961,875
68,000 Oshkosh B' Gosh, Inc. (Class A)..... 935,000
30,500 Russell Corp........................ 956,937
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER VALUE-ADDED MARKET SERIES -- EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1994 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------
<C> <S> <C>
27,000 Springs Industries, Inc............. $ 999,000
20,000 V.F. Corp........................... 972,500
---------------
5,765,312
---------------
TOBACCO (0.6%)
27,000 American Brands, Inc................ 1,012,500
17,000 Philip Morris Cos., Inc............. 977,500
32,500 UST, Inc............................ 901,875
---------------
2,891,875
---------------
TOYS (0.4%)
32,000 Hasbro, Inc......................... 936,000
37,000 Mattel, Inc......................... 929,625
---------------
1,865,625
---------------
TRANSPORTATION - MISCELLANEOUS (0.5%)
15,000 Federal Express Corp.*.............. 903,750
33,500 Pittston Services Group............. 887,750
43,000 Ryder System, Inc................... 946,000
---------------
2,737,500
---------------
TRUCKERS (0.6%)
44,000 Consolidated Freightways, Inc.*..... 984,500
16,500 Roadway Service, Inc................ 932,250
43,000 Yellow Corp......................... 1,026,625
---------------
2,943,375
---------------
UTILITIES - ELECTRIC (4.6%)
31,000 American Electric Power Co., Inc.... 1,019,125
43,000 Baltimore Gas & Electric Co......... 951,375
38,000 Carolina Power & Light Co........... 1,011,750
42,000 Central & South West Corp........... 950,250
40,920 CINergy Corp........................ 956,505
35,500 Consolidated Edison of New York,
Inc................................. 914,125
36,000 Detroit Edison Co................... 940,500
26,000 Dominion Resources, Inc............. 929,500
24,000 Duke Power Co....................... 915,000
41,000 Entergy Corp........................ 896,875
29,000 FPL Group, Inc...................... 1,018,625
27,500 Houston Industries, Inc............. 979,688
66,000 Niagara Mohawk Power Corp........... 940,500
21,500 Northern States Power Co............ 946,000
51,500 Ohio Edison Co...................... 952,750
40,000 Pacific Gas & Electric Co........... 975,000
52,500 PacifiCorp.......................... 951,562
38,000 PECO Energy Co...................... 931,000
34,000 Public Service Enterprise Group,
Inc................................. 901,000
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------
<C> <S> <C>
67,000 SCEcorp............................. $ 979,875
47,000 Southern Co......................... 940,000
28,000 Texas Utilities Co.................. 896,000
39,000 Unicom Corp......................... 936,000
28,500 Union Electric Co................... 1,008,187
---------------
22,841,192
---------------
UTILITIES - NATURAL GAS (2.7%)
38,000 Coastal Corp........................ 978,500
5,700 Columbia Gas Systems, Inc.*......... 133,950
27,000 Consolidated Natural Gas Co......... 958,500
39,000 Eastern Enterprises................. 1,023,750
31,000 Enron Corp.......................... 945,500
74,000 ENSERCH Corp........................ 971,250
38,500 NICOR, Inc.......................... 875,875
170,000 NorAm Energy Corp................... 913,750
56,000 ONEOK, Inc.......................... 1,008,000
44,000 Pacific Enterprises................. 935,000
45,000 Panhandle Eastern Corp.............. 888,750
36,000 Peoples Energy Corp................. 940,500
34,000 Sonat, Inc.......................... 952,000
63,400 Transco Energy, Inc................. 1,054,025
37,000 Williams Cos., Inc.................. 929,625
---------------
13,508,975
---------------
UTILITIES - TELEPHONE (1.5%)
24,700 Ameritech Corp...................... 997,262
17,500 Bell Atlantic Corp.................. 870,625
16,500 BellSouth Corp...................... 893,063
31,500 GTE Corp............................ 956,812
26,500 NYNEX Corp.......................... 973,875
31,500 Pacific Telesis Group............... 897,750
22,500 SBC Communications, Inc............. 908,438
26,000 U.S. West, Inc...................... 926,250
---------------
7,424,075
---------------
TOTAL COMMON STOCKS
(IDENTIFIED COST $405,982,400)...... 475,296,391
---------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ------------------------------------------------------------------
<C> <S> <C>
SHORT-TERM INVESTMENTS (5.8%)
COMMERCIAL PAPER (a) (5.7%)
AUTOMOTIVE FINANCE (2.6%)
$ 13,000 Ford Motor Credit Co. 5.88% due
1/03/95............................. 12,995,757
---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER VALUE-ADDED MARKET SERIES -- EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1994 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ------------------------------------------------------------------
<C> <S> <C>
FINANCE - DIVERSIFIED (3.1%)
$ 15,300 American Express Credit Corp.
5.80% due 1/03/95................... $ 15,295,070
---------------
TOTAL COMMERCIAL PAPER
(AMORTIZED COST $28,290,827)........ 28,290,827
---------------
REPURCHASE AGREEMENT (0.1%)
304 The Bank of New York 3.125% due
1/03/95 (dated 12/30/94; proceeds
$319,044; collateralized by $304,432
U.S. Treasury Bill 6.43% due 6/08/95
valued at $310,521) (Identified Cost
$304,485)........................... 304,485
---------------
TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST $28,595,312)....... 28,595,312
---------------
<C>
TOTAL INVESTMENTS
(IDENTIFIED COST
$434,577,712) (B)......................... 101.7% 503,891,703
LIABILITIES IN EXCESS OF
OTHER ASSETS.............................. (1.7) (8,358,143)
---- -----------
NET ASSETS................................ 100.0% $495,533,560
----- ------------
----- ------------
<FN>
- ---------------------
* Non-income producing security.
ADR American Depository Receipt.
(a) Securities were purchased on a discount basis. The interest rates shown
have been adjusted to reflect a bond equivalent yield.
(b) The aggregate cost for federal income tax purposes is $435,644,764; the
aggregate gross unrealized appreciation is $85,867,751 and the aggregate
gross unrealized depreciation is $17,620,812, resulting in net unrealized
appreciation of $68,246,939.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER VALUE-ADDED MARKET SERIES -- EQUITY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1994 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $434,577,712)............................. $503,891,703
Receivable for:
Investments sold........................................ 10,571,695
Shares of beneficial interest sold...................... 1,649,137
Dividends............................................... 1,146,570
Prepaid expenses and other assets........................... 94,543
------------
TOTAL ASSETS........................................... 517,353,648
------------
LIABILITIES:
Payable for:
Investments purchased................................... 20,478,212
Plan of distribution fee................................ 419,959
Shares of beneficial interest repurchased............... 301,341
Investment management fee............................... 207,340
Distributions to shareholders........................... 186,099
Accrued expenses and other payables......................... 227,137
------------
TOTAL LIABILITIES...................................... 21,820,088
------------
NET ASSETS:
Paid-in-capital............................................. 430,428,290
Net unrealized appreciation................................. 69,313,991
Accumulated undistributed net investment income............. 2,022,549
Accumulated net realized loss............................... (6,231,270)
------------
NET ASSETS............................................. $495,533,560
------------
------------
NET ASSET VALUE PER SHARE,
25,215,373 SHARES OUTSTANDING (UNLIMITED SHARES AUTHORIZED
OF $.01 PAR VALUE)........................................
$19.65
------------
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER VALUE-ADDED MARKET SERIES -- EQUITY PORTFOLIO
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1994 (UNAUDITED)
<TABLE>
<S> <C>
NET INVESTMENT INCOME:
INCOME
Dividends (net of $13,825 foreign withholding tax).......... $ 6,068,082
Dividends from affiliates................................... 6,000
Interest.................................................... 502,652
-----------
TOTAL INCOME........................................... 6,576,734
-----------
EXPENSES
Plan of distribution fee.................................... 2,396,646
Investment management fee................................... 1,226,768
Transfer agent fees and expenses............................ 254,349
Professional fees........................................... 45,480
Registration fees........................................... 35,739
Shareholder reports and notices............................. 27,692
Custodian fees.............................................. 21,743
Trustees' fees and expenses................................. 14,662
Other....................................................... 40,117
-----------
TOTAL EXPENSES......................................... 4,063,196
-----------
NET INVESTMENT INCOME.................................. 2,513,538
-----------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain........................................... 2,832,944
Net change in unrealized appreciation....................... 10,173,498
-----------
NET GAIN............................................... 13,006,442
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $15,519,980
-----------
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER VALUE-ADDED MARKET SERIES -- EQUITY PORTFOLIO
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
DECEMBER 31, 1994 JUNE 30,
(UNAUDITED) 1994
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income....................................... $ 2,513,538 $ 3,117,201
Net realized gain........................................... 2,832,944 7,402,929
Net change in unrealized appreciation....................... 10,173,498 (4,307,318)
----------------- -----------
NET INCREASE........................................... 15,519,980 6,212,812
----------------- -----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income....................................... (2,290,654) (1,576,609)
Net realized gain........................................... (3,801,166) (4,901,161)
----------------- -----------
TOTAL.................................................. (6,091,820) (6,477,770)
Net increase from transactions in shares of beneficial
interest.................................................. 30,395,720 145,248,538
----------------- -----------
TOTAL INCREASE......................................... 39,823,880 144,983,580
NET ASSETS:
Beginning of period......................................... 455,709,680 310,726,100
----------------- -----------
END OF PERIOD
(INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME OF
$2,022,549 AND $1,799,665, RESPECTIVELY)................. $495,533,560 $455,709,680
----------------- -----------
----------------- -----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER VALUE-ADDED MARKET SERIES -- EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1994 (UNAUDITED)
1. ORGANIZATION AND ACCOUNTING POLICIES
Dean Witter Value-Added Market Series -- Equity Portfolio (the "Fund") is
registered under the Investment Company Act of 1940, as amended (the "Act"), as
a diversified, open-end management investment company. The Fund was organized as
a Massachusetts business trust on May 27, 1987 and commenced operations on
December 1, 1987.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- (1) an equity security listed or traded on the
New York or American 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); (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)
when market quotations are not readily available, 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; (4) certain of
the Fund's portfolio securities may be valued by an outside pricing service
approved by the Trustees. The pricing service utilizes 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 portfolio securities valued by such pricing service; and
(5) short-term debt securities having a maturity date of more than sixty days at
time of purchase are valued on a mark-to-market basis until sixty days prior to
maturity and thereafter at amortized cost based on their value on the 61st day.
Short-term 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 on the identified cost method.
Dividend income is recorded on the ex-dividend date. Interest income is accrued
daily and includes amortization of discounts of certain short-term securities.
C. FEDERAL INCOME TAX STATUS -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income to its shareholders.
Accordingly, no federal income tax provision is required.
D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund records dividends and
distributions to its shareholders on the record date. The amount of dividends
and distributions from net investment
<PAGE>
DEAN WITTER VALUE-ADDED MARKET SERIES -- EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1994 (UNAUDITED) CONTINUED
income and net realized capital gains are determined in accordance with federal
income tax regulations which may differ from generally accepted accounting
principles. These "book/tax" differences are either considered temporary or
permanent in nature. To the extent these differences are permanent in nature,
such amounts are reclassified within the capital accounts based on their federal
tax-basis treatment; temporary differences do not require reclassification.
Dividends and distributions which exceed net investment income and net realized
capital gains for financial reporting purposes but not for tax purposes are
reported as dividends in excess of net investment income or distributions in
excess of net realized capital gains. To the extent they exceed net investment
income and net realized capital gains for tax purposes, they are reported as
distributions of paid-in-capital.
2. INVESTMENT MANAGEMENT AGREEMENT
Pursuant to an Investment Management Agreement with Dean Witter InterCapital
Inc. (the "Investment Manager"), the Fund pays its Investment Manager a
management fee, accrued daily and payable monthly, by applying the following
annual rates to the net assets of the Fund determined as of the close of each
business day: 0.50% to the portion of the daily net assets not exceeding $500
million and 0.45% to the portion of the daily net assets exceeding $500 million.
Under the terms of the Agreement, in addition to managing the Fund's
investments, the Investment Manager maintains certain of the Fund's books and
records and furnishes, at its own expense, office space, facilities, equipment,
clerical, bookkeeping and certain legal services and pays the salaries of all
personnel, including officers of the Fund who are employees of the Investment
Manager. The Investment Manager also bears the cost of telephone services, heat,
light, power and other utilities provided to the Fund.
3. PLAN OF DISTRIBUTION
Shares of the Fund are distributed by Dean Witter Distributors Inc. (the
"Distributor"), an affiliate of the Investment Manager. The Fund has adopted a
Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under the Act pursuant
to which the Fund pays the Distributor compensation, accrued daily and payable
monthly, at an annual rate of 1.0% of the lesser of: (a) the average daily
aggregate gross sales of the Fund's shares since the Fund's inception (not
including reinvestment of dividend or capital gains distributions) less the
average daily aggregate net asset value of the Fund's shares redeemed since the
Fund's inception upon which a contingent deferred sales charge has been imposed
or upon which such charge has been waived; or (b) the Fund's average daily net
assets. Amounts paid under the Plan are paid to the Distributor to compensate it
for the services provided
<PAGE>
DEAN WITTER VALUE-ADDED MARKET SERIES -- EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1994 (UNAUDITED) CONTINUED
and the expenses borne by it and others in the distribution of the Fund's
shares, including the payment of commissions for sales of the Fund's shares and
incentive compensation to and expenses of the account executives of Dean Witter
Reynolds Inc., an affiliate of the Investment Manager and Distributor, and
others who engage in or support distribution of the Fund's shares or who service
shareholder accounts, including overhead and telephone expenses, printing and
distribution of prospectuses and reports used in connection with the offering of
the Fund's shares to other than current shareholders and preparation, printing
and distribution of sales literature and advertising materials. In addition, the
Distributor may be compensated under the Plan for its opportunity costs in
advancing such amounts, which compensation would be in the form of a carrying
charge on any unreimbursed expenses incurred by the Distributor.
Provided that the Plan continues in effect, any cumulative expenses incurred but
not yet recovered may be recovered through future distribution fees from the
Fund and contingent deferred sales charges from the Fund's shareholders.
The Distributor has informed the Fund that for the year ended June 30, 1994, it
received approximately $292,000 in contingent deferred sales charges from
certain redemptions of the Fund's shares. The Fund's shareholders pay such
charges which are not an expense of the Fund.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales of portfolio securities, excluding
short-term investments, for the six months ended December 31, 1994 aggregated
$42,784,691 and $26,863,595, respectively. Included in the aforementioned are
purchases of common stock of Dean Witter, Discover & Co., an affiliate of the
Investment Manager, of $100,965.
Dean Witter Trust Company, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At December 31, 1994, the Fund had
transfer agent fees and expenses payable of approximately $47,000.
On April 1, 1991, the Fund established an unfunded noncontributory defined
benefit pension plan covering all independent Trustees of the Fund who will have
served as 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 December 31, 1994 included in Trustees' fees and expenses
in the Statement of Operations amounted to $4,120. At December 31, 1994, the
Fund had an accrued pension liability of $87,874 which is included in accrued
expenses in the Statement of Assets and Liabilities.
<PAGE>
DEAN WITTER VALUE-ADDED MARKET SERIES -- EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1994 (UNAUDITED) CONTINUED
5. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED FOR THE YEAR ENDED
DECEMBER 31, 1994 JUNE 30, 1994
---------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
----------- -------------- ----------- ------------
<S> <C> <C> <C> <C>
Sold............................................................. 3,281,535 $ 65,563,733 5,379,438 $106,212,388
Reinvestment of dividends and distributions...................... 101,617 1,992,704 307,559 6,066,139
Shares issued in connection with the acquisition of Dean Witter
Equity Income Trust............................................. -- -- 5,526,681 106,440,012
----------- -------------- ----------- ------------
3,383,152 67,556,437 11,213,678 218,718,539
Repurchased...................................................... (1,860,476) (37,160,717) (3,729,607) (73,470,001)
----------- -------------- ----------- ------------
Net increase..................................................... 1,522,676 $ 30,395,720 7,484,071 $145,248,538
----------- -------------- ----------- ------------
----------- -------------- ----------- ------------
</TABLE>
6. FEDERAL INCOME TAX STATUS
As part of the Fund's acquisition of the assets of Dean Witter Equity Income
Trust ("Equity Income"), the Fund obtained a net capital loss carryover from
Equity Income. Utilization of these carryovers is subject to limitations imposed
by the Internal Revenue Code and Treasury Regulations. At June 30, 1994, the
Fund had net capital loss carryovers of approximately $3,465,000 which will be
available through June 30, 1999 to offset future capital gains.
Any net capital losses incurred after October 31 within the taxable year are
deemed to arise on the first business day of the Fund's next taxable year.
Equity Income incurred and elected to defer a net capital loss of approximately
$4,532,000 during its short year ended April 18, 1994. The Fund also obtained
these losses as part of the acquisition.
<PAGE>
DEAN WITTER VALUE-ADDED MARKET SERIES -- EQUITY PORTFOLIO
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS
ENDED
DECEMBER FOR THE YEAR ENDED JUNE 30
31, 1994 -----------------------------------------------------
(UNAUDITED) 1994 1993 1992 1991 1990
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value,
beginning of period............... $ 19.23 $ 19.17 $ 16.29 $ 14.73 $ 14.21 $ 13.86
---------- --------- --------- --------- --------- ---------
Net investment income.............. 0.09 0.14 0.14 0.17 0.20 0.23
Net realized and unrealized gain on
investments........................ 0.57 0.30 2.86 1.57 0.59 0.62
---------- --------- --------- --------- --------- ---------
Total from investment operations... 0.66 0.44 3.00 1.74 0.79 0.85
---------- --------- --------- --------- --------- ---------
Less dividends and distributions
from:
Net investment income........... (0.09) (0.09) (0.12) (0.18) (0.21) (0.24)
Net realized gain............... (0.15) (0.29) -- -- (0.06) (0.26)
---------- --------- --------- --------- --------- ---------
Total dividends and
distributions..................... (0.24) (0.38) (0.12) (0.18) (0.27) (0.50)
---------- --------- --------- --------- --------- ---------
Net asset value, end of period..... $ 19.65 $ 19.23 $ 19.17 $ 16.29 $ 14.73 $ 14.21
---------- --------- --------- --------- --------- ---------
---------- --------- --------- --------- --------- ---------
TOTAL INVESTMENT RETURN+........... 3.46%(1) 2.26% 18.50% 11.83% 5.82% 6.17%
RATIOS TO AVERAGE NET ASSETS:
Expenses........................... 1.66%(2) 1.68% 1.71% 1.80% 1.80% 1.80%
Net investment income.............. 1.02%(2) 0.86% 0.86% 1.10% 1.40% 1.90%
SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands)........................ $495,534 $455,710 $310,726 $192,832 $139,058 $147,539
Portfolio turnover rate............ 6%(1) 19% 6% 9% 20% 10%
<FN>
- ---------------------
+ Does not reflect the deduction of sales charge.
(1) Not annualized.
(2) Annualized.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
Trustees
Jack F. Bennet
Michael Bozic Dean Witter
Charles A. Fiumefreddo Value-Added
Edwin J. Garn Market Series
John R. Haire Equity Portfolio
Dr. Manuel H. Johnson
Paul Kolton
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
Officers
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Sheldon Curtis
Vice President, Secretary and General Counsel
Kenton J. Hinchliffe
Vice President
Thomas F. Caloia
Treasurer
Transfer Agent
Dean Witter Trust Company
Harborside Financial Center - Plaza Two
Jersey City, New Jersey 07311
Independent Accountants
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
Investment Manager
Dean Witter InterCapital Inc.
Two World Trade Center
New York, New York 10048
The financial statements included herein have
been taken from the records of the Fund without
examination by the independent accountants and
accordingly they do not express an opinion
thereon.
This report is submitted for the general
information of shareholders of the Fund. For more
detailed information about the Fund, its officers
and trustees, fees, expenses and other pertinent
information, please see the prospectus of the Fund.
This report is not authorized for distribution to
prospective investors in the Fund unless preceded or Semiannual Report
accompanied by an effective prospectus. December 31, 1994
