<PAGE>
DEAN WITTER VALUE-ADDED MARKET SERIES -- EQUITY PORTFOLIO TWO WORLD TRADE
CENTER, NEW YORK, NEW YORK 10048
LETTER TO THE SHAREHOLDERS DECEMBER 31, 1996
DEAR SHAREHOLDER:
Despite two minor stock market corrections, the first in July and the second in
October, the six-month period ended December 31, 1996, was favorable for equity
investors with the Dow Jones Industrial Average (DJIA) ending at over 6400. The
Standard & Poor's 500 Composite Stock Index (S&P 500) and the NASDAQ composite
were also strong during the period.
PERFORMANCE
During the period under review, Dean Witter Value-Added Market Series -- Equity
Portfolio produced a total return of 7.87 percent, compared to 11.68 percent for
the S&P 500. The Fund lagged the capitalization-weighted S&P 500 because, while
the Fund invests in substantially all of the stocks represented by the S&P 500,
it equally weights all positions. This means that, in comparison to the S&P 500,
the Fund emphasizes smaller- to medium-cap companies that have historically
outperformed larger-caps over long time periods. However, during the six-month
period under review, large-cap and technology stocks, both areas in which the
Fund is under-weighted relative to the S&P 500, were market leaders. For the
calendar year 1996, the Fund provided a total return of 17.07 percent and over
the long-term, since inception on November 30, 1987, the Fund returned 248.99
percent, for an annualized total return of 14.75 percent.
Historically, the Fund has registered strong relative gains during periods of
small-cap out-performance, such as the period from 1991 through 1993. However,
in 1995 and 1996 the Fund experienced relative under-performance when large-cap
multi-nationals led the market.
LOOKING AHEAD
Going forward, we believe that the tide may again turn in favor of smaller-cap
companies as many relative valuation measures, such as price-to-book, dividend
yield and price-to-earnings, indicate that small-cap issues are undervalued
compared to large-caps. In addition, the
<PAGE>
DEAN WITTER VALUE-ADDED MARKET SERIES -- EQUITY PORTFOLIO
LETTER TO THE SHAREHOLDERS DECEMBER 31, 1996, CONTINUED
expected continued strong dollar will reduce the relative earnings growth of
large multi-nationals vis-a-vis small companies. Also, we expect the fundamental
outlook to be one of moderate economic growth as well as moderate inflation.
Given such a scenario, the Federal Reserve Board is not likely to raise interest
rates, which bodes well for the equity markets overall in 1997.
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,
[SIGNATURE]
CHARLES A. FIUMEFREDDO
CHAIRMAN OF THE BOARD
<PAGE>
DEAN WITTER VALUE-ADDED MARKET SERIES -- EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (97.4%)
AEROSPACE & DEFENSE (1.6%)
22,000 Boeing Co......................... $ 2,340,250
30,000 General Dynamics Corp............. 2,115,000
24,000 Lockheed Martin Corp.............. 2,196,000
35,600 McDonnell Douglas Corp............ 2,278,400
27,000 Northrop Grumman Corp............. 2,234,250
46,000 Raytheon Co....................... 2,213,750
36,500 Rockwell International Corp.*..... 2,221,937
32,000 United Technologies Corp.......... 2,112,000
-----------------
17,711,587
-----------------
AGRICULTURE RELATED (0.2%)
32,500 Pioneer Hi-Bred International,
Inc............................. 2,275,000
-----------------
AIRLINES (0.8%)
24,000 AMR Corp.*........................ 2,115,000
30,500 Delta Air Lines, Inc.............. 2,161,687
95,000 Southwest Airlines Co............. 2,101,875
96,500 USAir Group, Inc.*................ 2,255,687
-----------------
8,634,249
-----------------
ALUMINUM (0.6%)
65,000 Alcan Aluminum Ltd. (Canada)...... 2,185,625
34,500 Aluminum Co. of America........... 2,199,375
36,500 Reynolds Metals Co................ 2,057,687
-----------------
6,442,687
-----------------
AUTO PARTS - AFTER MARKET (1.0%)
108,000 Cooper Tire & Rubber Co........... 2,133,000
71,000 Echlin, Inc....................... 2,245,375
45,000 Genuine Parts Co.................. 2,002,500
44,000 Goodyear Tire & Rubber Co......... 2,260,500
41,000 TRW, Inc.......................... 2,029,500
-----------------
10,670,875
-----------------
AUTOMOBILES (0.6%)
69,000 Chrysler Corp..................... 2,277,000
64,000 Ford Motor Co..................... 2,040,000
41,500 General Motors Corp............... 2,313,625
-----------------
6,630,625
-----------------
BANKS - MONEY CENTER (1.2%)
23,000 BankAmerica Corp.................. 2,294,250
26,000 Bankers Trust New York Corp....... 2,242,500
25,500 Chase Manhattan Corp.............. 2,275,875
22,000 Citicorp.......................... 2,266,000
41,500 First Chicago NBD Corp............ 2,230,625
23,500 Morgan (J.P.) & Co., Inc.......... 2,294,187
-----------------
13,603,437
-----------------
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------
<C> <S> <C>
BANKS - REGIONAL (4.4%)
51,500 Banc One Corp..................... $ 2,214,500
34,500 Bank of Boston Corp............... 2,216,625
66,000 Bank of New York Co., Inc......... 2,227,500
56,000 Barnett Banks, Inc................ 2,303,000
38,000 Boatmen's Bancshares, Inc......... 2,446,250
41,500 Comerica, Inc..................... 2,173,562
44,000 Corestates Financial Corp......... 2,282,500
32,000 Fifth Third Bancorp............... 2,008,000
31,000 First Bank System, Inc............ 2,115,750
30,500 First Union Corp.................. 2,257,000
44,000 Fleet Financial Group, Inc........ 2,194,500
44,500 KeyCorp........................... 2,247,250
32,000 Mellon Bank Corp.................. 2,272,000
50,000 National City Corp................ 2,243,750
23,500 NationsBank Corp.................. 2,297,125
51,000 Norwest Corp...................... 2,218,500
59,000 PNC Bank Corp..................... 2,219,875
27,500 Republic New York Corp............ 2,244,687
45,500 SunTrust Banks, Inc............... 2,240,875
49,500 U.S. Bancorp...................... 2,221,312
40,000 Wachovia Corp..................... 2,260,000
8,000 Wells Fargo & Co.................. 2,158,000
-----------------
49,062,561
-----------------
BEVERAGES - ALCOHOLIC (0.7%)
51,000 Anheuser-Busch Companies, Inc..... 2,040,000
48,000 Brown-Forman Corp. (Class B)...... 2,196,000
110,000 Coors (Adolph) Co................. 2,090,000
52,200 Seagram Co. Ltd. (Canada)......... 2,022,750
-----------------
8,348,750
-----------------
BEVERAGES - SOFT DRINKS (0.6%)
39,000 Coca Cola Co...................... 2,052,375
74,500 Pepsi Co. Inc..................... 2,179,125
89,500 Whitman Corp...................... 2,047,312
-----------------
6,278,812
-----------------
BIOTECHNOLOGY (0.2%)
37,000 Amgen Inc.*....................... 2,011,875
-----------------
BROADCAST MEDIA (0.6%)
127,000 Comcast Corp. (Class A Special)... 2,254,250
159,000 Tele-Communications, Inc. (Class
A)*............................. 2,067,000
120,000 U.S. West Media Group*............ 2,220,000
-----------------
6,541,250
-----------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER VALUE-ADDED MARKET SERIES -- EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1996 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------
<C> <S> <C>
BUILDING MATERIALS (0.6%)
61,000 Masco Corp........................ $ 2,196,000
52,000 Owens-Corning Fiberglas Corp...... 2,216,500
40,000 Sherwin-Williams Co............... 2,240,000
-----------------
6,652,500
-----------------
BUSINESS SERVICES (0.2%)
63,000 Cognizant Corp.*.................. 2,079,000
-----------------
CHEMICALS (2.4%)
32,000 Air Products & Chemicals, Inc..... 2,212,000
26,000 Dow Chemical Co................... 2,037,750
23,500 Du Pont (E.I.) de Nemours & Co.... 2,217,812
38,000 Eastman Chemical Co............... 2,099,500
54,000 Goodrich (B.F.) Co................ 2,187,000
50,500 Hercules, Inc..................... 2,184,125
48,000 Mallinckrodt Group, Inc........... 2,118,000
59,000 Monsanto Co....................... 2,293,625
38,500 PPG Industries, Inc............... 2,160,812
48,500 Praxair, Inc...................... 2,237,062
29,000 Rohm & Haas Co.................... 2,367,125
52,500 Union Carbide Corp................ 2,145,937
-----------------
26,260,748
-----------------
CHEMICALS - DIVERSIFIED (0.6%)
65,000 Avery Dennison Corp............... 2,299,375
106,000 Engelhard Corp.................... 2,027,250
29,000 FMC Corp.*........................ 2,033,625
-----------------
6,360,250
-----------------
CHEMICALS - SPECIALTY (1.1%)
42,000 Grace (W. R.) & Co................ 2,173,500
45,500 Great Lakes Chemical Corp......... 2,127,125
45,000 International Flavors & Fragrances
Inc............................. 2,025,000
53,000 Morton International, Inc......... 2,159,750
58,000 Nalco Chemical Co................. 2,095,250
33,500 Sigma-Aldrich Corp................ 2,089,562
-----------------
12,670,187
-----------------
COMMUNICATIONS - EQUIPMENT/MANUFACTURERS (2.2%)
30,000 3Com Corp.*....................... 2,197,500
40,500 Andrew Corp.*..................... 2,146,500
105,000 Bay Networks, Inc.*............... 2,191,875
64,000 Cabletron Systems, Inc.*.......... 2,128,000
34,500 Cisco Systems, Inc.*.............. 2,195,062
119,000 DSC Communications Corp.*......... 2,127,125
101,500 General Instrument Corp.*......... 2,194,937
32,000 Harris Corp....................... 2,196,000
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------
<C> <S> <C>
37,000 Northern Telecom Ltd. (Canada).... $ 2,289,375
135,000 Scientific-Atlanta, Inc........... 2,025,000
60,000 Tellabs, Inc.*.................... 2,257,500
-----------------
23,948,874
-----------------
COMPUTER EQUIPMENT (0.2%)
39,000 Dell Computer Corp.*.............. 2,071,875
-----------------
COMPUTER SOFTWARE & SERVICES (2.1%)
85,000 Autodesk, Inc..................... 2,380,000
49,000 Automatic Data Processing, Inc.... 2,100,875
55,000 Ceridian Corp.*................... 2,227,500
43,000 Computer Associates International,
Inc............................. 2,139,250
27,000 Computer Sciences Corp.*.......... 2,217,375
57,000 First Data Corp................... 2,080,500
28,000 Microsoft Corp.*.................. 2,313,500
217,000 Novell, Inc.*..................... 2,047,937
50,000 Oracle Corp....................... 2,081,250
58,000 Seagate Technology, Inc.*......... 2,291,000
42,000 Shared Medical Systems Corp....... 2,063,250
-----------------
23,942,437
-----------------
COMPUTERS - SYSTEMS (2.5%)
184,500 Amdahl Corp.*..................... 2,237,062
90,000 Apple Computer, Inc.*............. 1,867,500
31,500 COMPAQ Computer Corp.*............ 2,338,875
151,000 Data General Corp.*............... 2,189,500
56,000 Digital Equipment Corp.*.......... 2,037,000
69,000 EMC Corp.*........................ 2,285,625
41,000 Hewlett-Packard Co................ 2,060,250
193,000 Intergraph Corp.*................. 1,978,250
15,000 International Business Machines
Corp............................ 2,265,000
92,000 Silicon Graphics, Inc.*........... 2,346,000
74,000 Sun Microsystems, Inc.*........... 1,896,250
171,000 Tandem Computers Inc.*............ 2,351,250
312,000 Unisys Corp.*..................... 2,106,000
-----------------
27,958,562
-----------------
CONGLOMERATES (0.2%)
23,300 Textron Inc....................... 2,196,025
-----------------
CONSUMER - NONCYCLICAL (0.4%)
72,500 American Greetings Corp. (Class
A).............................. 2,057,187
99,000 Jostens, Inc...................... 2,091,375
-----------------
4,148,562
-----------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER VALUE-ADDED MARKET SERIES -- EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1996 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------
<C> <S> <C>
CONTAINERS - METAL & GLASS (0.4%)
87,000 Ball Corp......................... $ 2,262,000
43,000 Crown Cork & Seal Co., Inc........ 2,338,125
-----------------
4,600,125
-----------------
CONTAINERS - PAPER (0.6%)
56,500 Bemis Company, Inc................ 2,083,437
136,500 Stone Container Corp.............. 2,030,437
38,500 Temple-Inland Inc................. 2,083,812
-----------------
6,197,686
-----------------
COSMETICS (0.6%)
43,000 Alberto-Culver Co. (Class B)...... 2,064,000
40,000 Avon Products, Inc................ 2,285,000
30,500 Gillette Co....................... 2,371,375
-----------------
6,720,375
-----------------
DISTRIBUTORS - CONSUMER PRODUCTS (0.5%)
124,000 Fleming Cos., Inc................. 2,139,000
71,000 SuperValu Stores, Inc............. 2,014,625
62,000 Sysco Corp........................ 2,022,750
-----------------
6,176,375
-----------------
ELECTRICAL EQUIPMENT (1.7%)
54,500 AMP, Inc.......................... 2,091,437
20,500 Emerson Electric Co............... 1,983,375
21,500 General Electric Co............... 2,125,812
49,000 General Signal Corp............... 2,094,750
27,500 Grainger (W.W.), Inc.............. 2,206,875
34,000 Honeywell, Inc.................... 2,235,500
27,000 Raychem Corp...................... 2,163,375
47,000 Thomas & Betts Corp............... 2,085,625
110,000 Westinghouse Electric Corp........ 2,186,250
-----------------
19,172,999
-----------------
ELECTRONICS - INSTRUMENTATION (0.6%)
110,000 EG & G, Inc....................... 2,213,750
36,000 Perkin-Elmer Corp................. 2,119,500
45,000 Tektronix, Inc.................... 2,306,250
-----------------
6,639,500
-----------------
ELECTRONICS - SEMICONDUCTORS (1.7%)
90,000 Advanced Micro Devices, Inc.*..... 2,317,500
66,000 Applied Materials, Inc.*.......... 2,367,750
17,500 Intel Corp........................ 2,290,312
85,000 LSI Logic Corp.*.................. 2,273,750
75,000 Micron Technology, Inc............ 2,184,375
38,000 Motorola, Inc..................... 2,332,250
95,000 National Semiconductor Corp.*..... 2,315,625
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------
<C> <S> <C>
36,500 Texas Instruments Inc............. $ 2,326,875
-----------------
18,408,437
-----------------
ENGINEERING & CONSTRUCTION (0.4%)
34,500 Fluor Corp........................ 2,164,875
57,000 Foster Wheeler Corp............... 2,116,125
-----------------
4,281,000
-----------------
ENTERTAINMENT (0.8%)
55,000 King World Productions Inc.*...... 2,028,125
57,000 Time Warner, Inc.................. 2,137,500
61,000 Viacom, Inc. (Class B)*........... 2,127,375
32,999 Walt Disney Co.................... 2,297,555
-----------------
8,590,555
-----------------
FINANCIAL - MISCELLANEOUS (1.4%)
41,500 American Express Co............... 2,344,750
52,000 American General Corp............. 2,125,500
20,500 Federal Home Loan Mortgage
Corp............................ 2,257,562
58,000 Federal National Mortgage
Assoc........................... 2,160,500
54,000 Green Tree Financial Corp......... 2,085,750
55,000 MBNA Corp......................... 2,282,500
27,000 MGIC Investment Corp.............. 2,052,000
-----------------
15,308,562
-----------------
FOODS (2.5%)
103,000 Archer-Daniels-Midland Co......... 2,266,000
27,000 Campbell Soup Co.................. 2,166,750
43,800 ConAgra, Inc...................... 2,179,050
28,000 CPC International Inc............. 2,170,000
32,500 General Mills, Inc................ 2,059,687
58,000 Heinz (H.J.) Co................... 2,073,500
46,500 Hershey Foods Corp................ 2,034,375
31,500 Kellogg Co........................ 2,067,187
54,000 Quaker Oats Company (The)......... 2,058,750
29,000 Ralston-Ralston Purina Group...... 2,127,875
57,000 Sara Lee Corp..................... 2,123,250
13,500 Unilever NV (ADR) (Netherlands)... 2,365,875
36,500 Wrigley (Wm.) Jr. Co. (Class A)... 2,053,125
-----------------
27,745,424
-----------------
GOLD MINING (1.3%)
76,000 Barrick Gold Corp. (Canada)....... 2,185,000
300,000 Battle Mountain Gold Co........... 2,062,500
317,000 Echo Bay Mines Ltd. (Canada)...... 2,100,125
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER VALUE-ADDED MARKET SERIES -- EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1996 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------
<C> <S> <C>
145,000 Homestake Mining Co............... $ 2,066,250
47,000 Newmont Mining Corp............... 2,103,250
94,000 Placer Dome Inc. (Canada)......... 2,044,500
154,000 Santa Fe Pacific Gold Corp........ 2,367,750
-----------------
14,929,375
-----------------
HARDWARE & TOOLS (0.5%)
68,000 Black & Decker Corp............... 2,048,500
57,000 Snap-On, Inc...................... 2,030,625
77,000 Stanley Works..................... 2,079,000
-----------------
6,158,125
-----------------
HEALTHCARE - DIVERSIFIED (1.2%)
42,500 Abbott Laboratories............... 2,156,875
65,000 Allergan, Inc..................... 2,315,625
36,000 American Home Products Corp....... 2,110,500
20,500 Bristol-Myers Squibb Co........... 2,229,375
41,000 Johnson & Johnson................. 2,039,750
30,000 Warner-Lambert Co................. 2,250,000
-----------------
13,102,125
-----------------
HEALTHCARE - DRUGS (1.0%)
31,000 Lilly (Eli) & Co.................. 2,263,000
28,000 Merck & Co., Inc.................. 2,219,000
26,400 Pfizer, Inc....................... 2,187,900
55,000 Pharmacia & Upjohn, Inc........... 2,179,375
32,000 Schering-Plough Corp.............. 2,072,000
-----------------
10,921,275
-----------------
HEALTHCARE - MISCELLANEOUS (0.4%)
175,000 Beverly Enterprises, Inc.*........ 2,231,250
77,500 Manor Care, Inc................... 2,092,500
-----------------
4,323,750
-----------------
HEALTHCARE HMOS (0.4%)
104,000 Humana, Inc.*..................... 1,989,000
49,000 United Healthcare Corp............ 2,205,000
-----------------
4,194,000
-----------------
HEALTHCARE SERVICES (0.2%)
78,000 Alza Corp.*....................... 2,018,250
-----------------
HEAVY DUTY TRUCKS & PARTS (1.2%)
49,000 Cummins Engine Co., Inc........... 2,254,000
67,000 Dana Corp......................... 2,185,875
32,000 Eaton Corp........................ 2,232,000
87,000 ITT Industries, Inc............... 2,131,500
220,000 Navistar International Corp.*..... 2,007,500
34,000 PACCAR, Inc....................... 2,303,500
-----------------
13,114,375
-----------------
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------
<C> <S> <C>
HOME BUILDING (0.6%)
63,000 Centex Corp....................... $ 2,370,375
163,000 Kaufman & Broad Home Corp......... 2,098,625
75,000 Pulte Corp........................ 2,306,250
-----------------
6,775,250
-----------------
HOSPITAL MANAGEMENT (0.5%)
55,000 Columbia/HCA Healthcare Corp...... 2,241,250
96,000 Tenet Healthcare Corp.*........... 2,100,000
76,000 Transitional Hospitals Corp.*..... 731,500
-----------------
5,072,750
-----------------
HOTELS/MOTELS (1.0%)
109,000 Harrah's Entertainment, Inc.*..... 2,166,375
38,000 HFS Inc.*......................... 2,270,500
89,000 Hilton Hotels Corp................ 2,325,125
49,000 ITT Corp.*........................ 2,125,375
38,000 Marriot International, Inc........ 2,099,500
-----------------
10,986,875
-----------------
HOUSEHOLD FURNISHINGS & APPLIANCES (0.4%)
33,500 Armstrong World Industries Inc.... 2,328,250
110,000 Maytag Corp....................... 2,172,500
-----------------
4,500,750
-----------------
HOUSEHOLD PRODUCTS (0.8%)
21,500 Clorox Co......................... 2,158,063
22,500 Colgate-Palmolive Co.............. 2,075,625
23,000 Kimberly Clark Corp............... 2,190,750
19,000 Procter & Gamble Co............... 2,042,500
-----------------
8,466,938
-----------------
HOUSEWARES (0.6%)
64,500 Newell Co......................... 2,031,750
89,000 Rubbermaid, Inc................... 2,024,750
43,000 Tupperware Corp................... 2,305,875
-----------------
6,362,375
-----------------
INSURANCE (1.0%)
29,000 Aetna Inc......................... 2,320,000
36,500 Jefferson-Pilot Corp.............. 2,066,813
42,500 Lincoln National Corp............. 2,231,250
20,000 MBIA Inc.......................... 2,025,000
27,800 Transamerica Corp................. 2,196,200
-----------------
10,839,263
-----------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER VALUE-ADDED MARKET SERIES -- EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1996 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------
<C> <S> <C>
INSURANCE BROKERS (0.6%)
122,000 Alexander & Alexander Services,
Inc............................. $ 2,119,750
36,000 Aon Corp.......................... 2,236,500
20,500 Marsh & McLennan Cos., Inc........ 2,132,000
-----------------
6,488,250
-----------------
INVESTMENT BANKING/BROKERAGE (1.0%)
35,000 Dean Witter, Discover & Co. (Note
4).............................. 2,318,750
27,500 Merrill Lynch & Co., Inc.......... 2,241,250
39,000 Morgan Stanley Group, Inc......... 2,227,875
44,000 Salomon, Inc...................... 2,073,500
51,000 Travelers Group, Inc.............. 2,314,125
-----------------
11,175,500
-----------------
LEISURE TIME (0.2%)
87,000 Brunswick Corp.................... 2,088,000
-----------------
LIFE INSURANCE (0.6%)
43,000 Torchmark Corp.................... 2,171,500
32,000 UNUM Corp......................... 2,312,000
65,300 USLife Corp....................... 2,171,225
-----------------
6,654,725
-----------------
MACHINE TOOLS (0.4%)
107,000 Cincinnati Milacron, Inc.......... 2,340,625
159,000 Giddings & Lewis, Inc............. 2,047,125
-----------------
4,387,750
-----------------
MACHINERY - DIVERSIFIED (2.0%)
50,000 Briggs & Stratton Corp............ 2,200,000
39,000 Case Corp......................... 2,125,500
28,000 Caterpillar, Inc.................. 2,107,000
53,000 Cooper Industries, Inc............ 2,232,625
51,500 Deere & Co........................ 2,092,188
49,000 Harnischfeger Industries, Inc..... 2,358,125
46,000 Ingersoll-Rand Co................. 2,047,000
25,500 Johnson Controls, Inc............. 2,113,313
42,500 Nacco Industries, Inc. (Class
A).............................. 2,273,750
48,500 Timken Co......................... 2,224,938
-----------------
21,774,439
-----------------
MANUFACTURED HOUSING (0.2%)
75,500 Fleetwood Enterprises, Inc........ 2,076,250
-----------------
MANUFACTURING - CONSUMER & INDUSTRIAL PRODUCTS (0.2%)
49,000 Whirlpool Corp.................... 2,284,625
-----------------
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------
<C> <S> <C>
MANUFACTURING - DIVERSIFIED (2.5%)
31,500 AlliedSignal, Inc................. $ 2,110,500
51,000 Corning, Inc...................... 2,358,750
75,000 Crane Co.......................... 2,175,000
40,500 Dover Corp........................ 2,035,125
26,000 Illinois Tool Works Inc........... 2,076,750
56,000 Millipore Corp.................... 2,317,000
26,000 Minnesota Mining & Manufacturing
Co.............................. 2,154,750
55,000 National Service Industries,
Inc............................. 2,055,625
80,000 Pall Corp......................... 2,040,000
53,000 Parker-Hannifin Corp.............. 2,053,750
48,000 Tenneco, Inc...................... 2,166,000
65,500 Trinova Corp...................... 2,382,563
44,000 Tyco International Ltd............ 2,326,500
-----------------
28,252,313
-----------------
MEDICAL PRODUCTS & SUPPLIES (1.9%)
76,000 Bard (C.R.), Inc.................. 2,128,000
57,000 Bausch & Lomb, Inc................ 1,995,000
52,000 Baxter International, Inc......... 2,132,000
47,500 Becton, Dickinson & Co............ 2,060,313
139,000 Biomet, Inc....................... 2,102,375
37,000 Boston Scientific Corp.*.......... 2,220,000
36,000 Guidant Corp...................... 2,052,000
32,500 Medtronic, Inc.................... 2,210,000
52,500 St. Jude Medical, Inc.*........... 2,237,813
54,000 United States Surgical Corp....... 2,126,250
-----------------
21,263,751
-----------------
METALS & MINING (0.2%)
82,000 ASARCO, Inc....................... 2,039,750
-----------------
METALS - MISCELLANEOUS (0.7%)
87,000 Cyprus Amax Minerals Co........... 2,033,625
67,500 Freeport-McMoran Copper & Gold,
Inc. (Class B).................. 2,016,563
66,000 Inco Ltd. (Canada)................ 2,103,750
32,000 Phelps Dodge Corp................. 2,160,000
-----------------
8,313,938
-----------------
MULTI-LINE INSURANCE (0.8%)
20,000 American International Group,
Inc............................. 2,165,000
16,800 CIGNA Corp........................ 2,295,300
34,000 ITT Hartford Group, Inc........... 2,295,000
44,500 Providian Corp.................... 2,286,188
-----------------
9,041,488
-----------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER VALUE-ADDED MARKET SERIES -- EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1996 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------
OFFICE EQUIPMENT & SUPPLIES (0.7%)
<C> <S> <C>
43,000 Alco Standard Corp........ $ 2,219,875
100,000 Moore Corp. Ltd.
(Canada)................ 2,037,500
37,000 Pitney Bowes, Inc......... 2,016,500
40,000 Xerox Corp................ 2,105,000
-------------
8,378,875
-------------
OIL & GAS (0.2%)
70,500 Union Pacific Resources
Group, Inc.............. 2,062,125
-------------
OIL & GAS DRILLING (0.4%)
42,500 Helmerich & Payne, Inc.... 2,215,313
100,000 Rowan Companies, Inc.*.... 2,262,500
-------------
4,477,813
-------------
OIL - DOMESTIC INTEGRATED (2.1%)
37,000 Amerada Hess Corp......... 2,141,375
48,000 Ashland, Inc.............. 2,106,000
15,500 Atlantic Richfield Co..... 2,053,750
31,500 Kerr-McGee Corp........... 2,268,000
37,500 Louisiana Land &
Exploration Co.......... 2,010,938
87,000 Occidental Petroleum
Corp.................... 2,033,625
39,500 Pennzoil Co............... 2,231,750
48,000 Phillips Petroleum Co..... 2,124,000
85,000 Sun Co., Inc.............. 2,071,875
56,500 Unocal Corp............... 2,295,313
90,000 USX-Marathon Group........ 2,148,750
-------------
23,485,376
-------------
OIL - EXPLORATION & PRODUCTION (0.6%)
43,500 Burlington Resources,
Inc..................... 2,191,313
96,000 Oryx Energy Co.*.......... 2,376,000
155,000 Santa Fe Energy Resources,
Inc.*................... 2,150,625
-------------
6,717,938
-------------
OIL - INTERNATIONAL INTEGRATED (1.1%)
26,000 Amoco Corp................ 2,093,000
31,000 Chevron Corp.............. 2,015,000
22,000 Exxon Corp................ 2,156,000
17,000 Mobil Corp................ 2,078,250
12,000 Royal Dutch Petroleum Co.
(Netherlands)........... 2,049,000
21,000 Texaco, Inc............... 2,060,625
-------------
12,451,875
-------------
OIL WELL EQUIPMENT & SERVICE (1.1%)
60,000 Baker Hughes, Inc......... 2,070,000
66,000 Dresser Industries,
Inc..................... 2,046,000
36,000 Halliburton Co............ 2,169,000
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------
<C> <S> <C>
124,000 McDermott International,
Inc..................... $ 2,061,500
22,000 Schlumberger, Ltd......... 2,197,250
31,000 Western Atlas, Inc.*...... 2,197,125
-------------
12,740,875
-------------
PAPER & FOREST PRODUCTS (2.3%)
68,000 Boise Cascade Corp........ 2,159,000
48,000 Champion International
Corp.................... 2,076,000
29,000 Georgia-Pacific Corp...... 2,088,000
53,000 International Paper Co.... 2,139,875
68,000 James River Corp. of
Virginia................ 2,252,500
99,000 Louisiana-Pacific Corp.... 2,091,375
37,000 Mead Corp................. 2,150,625
50,000 Potlatch Corp............. 2,150,000
42,000 Union Camp Corp........... 2,005,500
72,500 Westvaco Corp............. 2,084,375
46,000 Weyerhaeuser Co........... 2,179,250
32,000 Willamette Industries,
Inc..................... 2,224,000
-------------
25,600,500
-------------
PERSONAL LOANS (0.4%)
32,500 Beneficial Corp........... 2,059,688
25,500 Household International,
Inc..................... 2,352,375
-------------
4,412,063
-------------
PHOTOGRAPHY/IMAGING (0.4%)
26,000 Eastman Kodak Co.......... 2,086,500
48,000 Polaroid Corp............. 2,088,000
-------------
4,174,500
-------------
POLLUTION CONTROL (0.6%)
83,500 Browning-Ferris
Industries, Inc......... 2,191,875
190,000 Laidlaw Inc. (Class B)
(Canada)................ 2,185,000
61,000 WMX Technologies, Inc..... 1,990,125
-------------
6,367,000
-------------
PROPERTY - CASUALTY INSURANCE (1.4%)
39,500 Allstate Corp............. 2,286,063
42,000 Chubb Corp................ 2,257,500
13,000 General Re Corp........... 2,050,750
25,000 Loews Corp................ 2,356,250
56,000 SAFECO Corp............... 2,198,000
35,000 St. Paul Companies,
Inc..................... 2,051,875
108,500 USF&G Corp................ 2,264,938
-------------
15,465,376
-------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER VALUE-ADDED MARKET SERIES -- EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1996 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------
<C> <S> <C>
PUBLISHING (0.5%)
84,501 Dun & Bradstreet Corp..... $ 2,006,890
45,000 McGraw-Hill, Inc.......... 2,075,625
40,000 Meredith Corp............. 2,110,000
-------------
6,192,515
-------------
PUBLISHING - NEWSPAPER (1.1%)
62,000 Dow Jones & Co., Inc...... 2,100,250
28,000 Gannett Co., Inc.......... 2,096,500
54,000 Knight-Ridder Newspapers,
Inc..................... 2,065,500
56,000 New York Times Co. (Class
A)...................... 2,128,000
44,500 Times Mirror Co. (Class
A)...................... 2,213,875
26,000 Tribune Co................ 2,050,750
-------------
12,654,875
-------------
RAILROADS (1.0%)
24,000 Burlington Northern Santa
Fe Corp................. 2,073,000
26,000 Conrail, Inc.............. 2,590,250
49,000 CSX Corp.................. 2,070,250
23,500 Norfolk Southern Corp..... 2,056,250
34,000 Union Pacific Corp........ 2,044,250
-------------
10,834,000
-------------
RESTAURANTS (1.0%)
232,000 Darden Restaurants,
Inc..................... 2,030,000
86,000 Luby's Cafeterias, Inc.... 1,709,250
46,000 McDonald's Corp........... 2,081,500
245,000 Ryan's Family Steak
Houses, Inc.*........... 1,684,375
202,000 Shoney's Inc.*............ 1,414,000
107,000 Wendy's International,
Inc..................... 2,193,500
-------------
11,112,625
-------------
RETAIL - DEPARTMENT STORES (1.3%)
69,500 Dillard Department Stores,
Inc. (Class A).......... 2,145,813
64,000 Federated Department
Stores, Inc.*........... 2,184,000
45,000 Harcourt General, Inc..... 2,075,625
45,000 May Department Stores
Co...................... 2,103,750
43,000 Mercantile Stores Co.,
Inc..................... 2,123,125
58,000 Nordstrom, Inc............ 2,051,750
43,000 Penney (J.C.) Co., Inc.... 2,096,250
-------------
14,780,313
-------------
RETAIL - DRUG STORES (0.6%)
45,000 Longs Drug Stores Corp.... 2,210,625
59,500 Rite Aid Corp............. 2,365,125
52,500 Walgreen Co............... 2,100,000
-------------
6,675,750
-------------
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------
<C> <S> <C>
RETAIL - FOOD CHAINS (1.2%)
61,000 Albertson's, Inc.......... $ 2,173,125
53,000 American Stores Co........ 2,166,375
63,000 Giant Food, Inc. (Class
A)...................... 2,173,500
72,000 Great Atlantic & Pacific
Tea Co., Inc............ 2,295,000
49,000 Kroger Co.*............... 2,278,500
67,500 Winn-Dixie Stores, Inc.... 2,134,688
-------------
13,221,188
-------------
RETAIL - GENERAL MERCHANDISE (0.8%)
60,000 Dayton-Hudson Corp........ 2,355,000
195,000 Kmart Corp.*.............. 2,023,125
48,500 Sears, Roebuck & Co....... 2,237,063
90,000 Wal-Mart Stores, Inc.
(Class A)............... 2,058,750
-------------
8,673,938
-------------
RETAIL - SPECIALTY (1.7%)
72,000 Circuit City Stores,
Inc..................... 2,169,000
50,000 CVS Corp.*................ 2,068,750
42,000 Home Depot, Inc........... 2,105,250
57,000 Lowe's Companies, Inc..... 2,023,500
69,000 Pep Boys-Manny Moe &
Jack.................... 2,121,750
93,000 Price/Costco, Inc.*....... 2,336,625
47,000 Tandy Corp................ 2,068,000
73,000 Toys 'R' Us, Inc.*........ 2,190,000
93,000 Woolworth Corp.*.......... 2,034,375
-------------
19,117,250
-------------
RETAIL - SPECIALTY APPAREL (0.7%)
307,500 Charming Shoppes, Inc.*... 1,537,500
69,000 Gap, Inc.................. 2,078,625
115,000 Limited (The), Inc........ 2,113,125
50,000 TJX Companies, Inc........ 2,368,750
-------------
8,098,000
-------------
SAVINGS & LOAN COMPANIES (0.6%)
70,000 Ahmanson (H.F.) & Co...... 2,275,000
35,000 Golden West Financial
Corp.................... 2,209,375
76,000 Great Western Financial
Corp.................... 2,204,000
-------------
6,688,375
-------------
SHOES (0.6%)
37,000 Nike, Inc. (Class B)...... 2,210,750
54,500 Reebok International Ltd.
(United Kingdom)........ 2,289,000
227,000 Stride Rite Corp.......... 2,270,000
-------------
6,769,750
-------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER VALUE-ADDED MARKET SERIES -- EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1996 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------
<C> <S> <C>
SPECIALIZED SERVICES (1.2%)
70,500 Block (H.&R.), Inc........ $ 2,044,500
90,000 CUC International,
Inc.*................... 2,137,500
62,000 Ecolab, Inc............... 2,332,750
45,000 Interpublic Group of
Companies, Inc.......... 2,137,500
130,000 Safety-Kleen Corp......... 2,128,750
75,000 Service Corp.
International........... 2,100,000
-------------
12,881,000
-------------
SPECIALTY PRINTING (0.6%)
68,000 Deluxe Corp............... 2,227,000
66,000 Donnelley (R.R.) & Sons
Co...................... 2,070,750
73,000 Harland (John H.) Co...... 2,409,000
-------------
6,706,750
-------------
STEEL (1.1%)
448,000 Armco, Inc.*.............. 1,848,000
236,000 Bethlehem Steel Corp.*.... 2,124,000
115,000 Inland Steel Industries,
Inc..................... 2,300,000
42,000 Nucor Corp................ 2,142,000
68,000 USX-U.S. Steel Group...... 2,133,500
110,000 Worthington Industries,
Inc..................... 1,993,750
-------------
12,541,250
-------------
STEEL & IRON (0.2%)
93,000 Allegheny Teledyne Inc.... 2,139,000
-------------
TELECOMMUNICATIONS (0.4%)
87,000 Airtouch Communications,
Inc.*................... 2,196,750
46,000 Lucent Technologies,
Inc..................... 2,127,500
-------------
4,324,250
-------------
TELECOMMUNICATIONS - LONG DISTANCE (0.8%)
54,000 AT&T Corp................. 2,349,000
71,000 MCI Communications Corp... 2,316,375
56,000 Sprint Corp............... 2,233,000
90,000 WorldCom, Inc.*........... 2,340,000
-------------
9,238,375
-------------
TEXTILES (1.0%)
62,000 Fruit of the Loom, Inc.
(Class A)*.............. 2,348,250
53,500 Liz Claiborne, Inc........ 2,066,438
73,000 Russell Corp.............. 2,171,750
48,000 Springs Industries, Inc.
(Class A)............... 2,064,000
32,500 VF Corp................... 2,193,750
-------------
10,844,188
-------------
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------
<C> <S> <C>
TOBACCO (0.6%)
44,500 American Brands, Inc...... $ 2,208,313
20,500 Philip Morris Companies,
Inc..................... 2,308,813
67,000 UST, Inc.................. 2,169,125
-------------
6,686,251
-------------
TOYS (0.4%)
53,500 Hasbro Inc................ 2,079,813
77,000 Mattel, Inc............... 2,136,750
-------------
4,216,563
-------------
TRANSPORTATION - MISCELLANEOUS (0.4%)
49,000 Federal Express Corp.*.... 2,180,500
75,000 Ryder System, Inc......... 2,109,375
-------------
4,289,875
-------------
TRUCKERS (0.2%)
112,100 Caliber System, Inc....... 2,157,925
-------------
UTILITIES - ELECTRIC (5.0%)
53,000 American Electric Power
Co., Inc................ 2,179,625
75,500 Baltimore Gas & Electric
Co...................... 2,019,625
57,500 Carolina Power & Light
Co...................... 2,098,750
84,000 Central & South West
Corp.................... 2,152,500
62,200 CINergy Corp.............. 2,075,925
71,500 Consolidated Edison Co. of
New York, Inc........... 2,091,375
57,000 Dominion Resources,
Inc..................... 2,194,500
71,500 DTE Energy Co............. 2,314,813
45,000 Duke Power Co............. 2,081,250
110,000 Edison International...... 2,186,250
74,000 Entergy Corp.............. 2,053,500
49,000 FPL Group, Inc............ 2,254,000
65,000 General Public Utilities
Corp.................... 2,185,625
96,000 Houston Industries,
Inc..................... 2,172,000
243,000 Niagara Mohawk Power
Corp.*.................. 2,399,625
46,000 Northern States Power
Co...................... 2,110,250
100,500 Ohio Edison Co............ 2,286,375
102,000 Pacific Gas & Electric
Co...................... 2,142,000
104,000 PacifiCorp................ 2,132,000
84,000 PECO Energy Co............ 2,121,000
93,000 PP&L Resources, Inc....... 2,139,000
75,500 Public Service Enterprise
Group, Inc.............. 2,057,375
97,000 Southern Co............... 2,194,625
52,000 Texas Utilities Co........ 2,119,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER VALUE-ADDED MARKET SERIES -- EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1996 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------
<C> <S> <C>
82,500 Unicom Corp............... $ 2,237,813
55,000 Union Electric Co......... 2,117,500
-------------
56,116,301
-------------
UTILITIES - NATURAL GAS (2.7%)
46,000 Coastal Corp.............. 2,248,250
36,000 Columbia Gas System,
Inc..................... 2,290,500
37,000 Consolidated Natural Gas
Co...................... 2,044,250
57,000 Eastern Enterprises....... 2,016,375
47,000 Enron Corp................ 2,026,875
91,000 ENSERCH Corp.............. 2,093,000
62,500 NICOR, Inc................ 2,234,375
151,500 NorAm Energy Corp......... 2,329,313
78,000 ONEOK, Inc................ 2,340,000
69,000 Pacific Enterprises....... 2,095,875
52,500 PanEnergy Corp............ 2,362,500
60,500 Peoples Energy Corp....... 2,049,438
44,000 Sonat, Inc................ 2,266,000
55,500 Williams Cos., Inc........ 2,081,250
-------------
30,478,001
-------------
UTILITIES - TELEPHONE (1.8%)
67,000 Alltel Corp............... 2,102,125
36,500 Ameritech Corp............ 2,212,813
33,500 Bell Atlantic Corp........ 2,169,125
53,500 BellSouth Corp............ 2,160,063
49,500 GTE Corp.................. 2,252,250
47,000 NYNEX Corp................ 2,261,875
59,000 Pacific Telesis Group..... 2,168,250
43,000 SBC Communications,
Inc..................... 2,225,250
67,500 U.S. West Communications
Group................... 2,176,875
-------------
19,728,626
-------------
TOTAL COMMON STOCKS
(IDENTIFIED COST
$753,607,763)............. 1,081,449,271
-------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ------------------------------------------------------------------
<C> <S> <C>
SHORT-TERM INVESTMENTS (2.5%)
U.S. GOVERNMENT AGENCY (a) (2.4%)
$ 26,500 Federal Home Loan Bank 6.50% due
01/02/97 (Amortized Cost
$26,495,215).................... $ 26,495,215
-----------------
REPURCHASE AGREEMENT (0.1%)
942 The Bank of New York 5.375% due
01/02/97 (dated 12/31/96;
proceeds $942,619;
collateralized by $323,550 U.S.
Treasury Note 8.125% due
05/15/21 valued at $379,416,
$405,000 U.S. Treasury Note
8.625% due 08/15/97 valued at
$425,693 and $141,987 U.S.
Treasury Note 8.50% due 2/15/00
valued at $156,075)
(Identified Cost $942,337)........ 942,337
-----------------
TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST $27,437,552)..... 27,437,552
-----------------
TOTAL INVESTMENTS
(IDENTIFIED COST
$781,045,315) (B).......... 99.9% 1,108,886,823
OTHER ASSETS IN EXCESS OF
LIABILITIES................ 0.1 1,494,260
----- -------------
NET ASSETS................. 100.0% $1,110,381,083
----- -------------
----- -------------
<FN>
- ---------------------
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 $343,444,091 and the
aggregate gross unrealized depreciation is $15,602,583, resulting in net
unrealized appreciation of $327,841,508.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER VALUE-ADDED MARKET SERIES -- EQUITY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $781,045,315)............................ $1,108,886,823
Receivable for:
Investments sold........................................ 16,110,388
Shares of beneficial interest sold...................... 3,298,923
Dividends............................................... 1,694,257
Dividends from affiliate................................ 8,250
Foreign withholding taxes reclaimed..................... 1,779
Prepaid expenses and other assets........................... 76,502
--------------
TOTAL ASSETS........................................... 1,130,076,922
--------------
LIABILITIES:
Payable for:
Investments purchased................................... 15,689,881
Shares of beneficial interest repurchased............... 2,070,857
Plan of distribution fee................................ 805,566
Investment management fee............................... 458,195
Distributions to shareholders........................... 399,660
Accrued expenses and other payables......................... 271,680
--------------
TOTAL LIABILITIES...................................... 19,695,839
--------------
NET ASSETS:
Paid-in-capital............................................. 776,138,283
Net unrealized appreciation................................. 327,841,508
Dividends in excess of net investment income................ (83,837)
Accumulated undistributed net realized gain................. 6,485,129
--------------
NET ASSETS............................................. $1,110,381,083
--------------
--------------
NET ASSET VALUE PER SHARE,
38,946,741 SHARES OUTSTANDING (UNLIMITED SHARES AUTHORIZED
OF $.01 PAR VALUE)........................................
$28.51
--------------
--------------
</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, 1996 (UNAUDITED)
<TABLE>
<S> <C>
NET INVESTMENT INCOME:
INCOME
Dividends (net of $28,665 foreign withholding tax).......... $10,299,923
Dividends from affiliates................................... 15,840
Interest.................................................... 788,033
-----------
TOTAL INCOME........................................... 11,103,796
-----------
EXPENSES
Plan of distribution fee.................................... 4,402,921
Investment management fee................................... 2,428,030
Transfer agent fees and expenses............................ 438,840
S&P license fee............................................. 76,897
Registration fees........................................... 61,399
Shareholder reports and notices............................. 48,443
Custodian fees.............................................. 30,360
Professional fees........................................... 29,072
Trustees' fees and expenses................................. 8,418
Other....................................................... 6,952
-----------
TOTAL EXPENSES......................................... 7,531,332
-----------
NET INVESTMENT INCOME.................................. 3,572,464
-----------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain........................................... 10,388,136
Net change in unrealized appreciation....................... 65,605,119
-----------
NET GAIN............................................... 75,993,255
-----------
NET INCREASE................................................ $79,565,719
-----------
-----------
</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 YEAR
MONTHS ENDED ENDED
DECEMBER 31, 1996 JUNE 30,
(UNAUDITED) 1996
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income....................................... $ 3,572,464 $ 6,575,695
Net realized gain........................................... 10,388,136 22,043,253
Net change in unrealized appreciation....................... 65,605,119 110,384,142
----------------- ------------
NET INCREASE........................................... 79,565,719 139,003,090
----------------- ------------
DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income....................................... (6,849,389) (8,195,588)
Net realized gain........................................... (20,247,286) (3,791,857)
----------------- ------------
TOTAL.................................................. (27,096,675) (11,987,445)
----------------- ------------
Net increase from transactions in shares of beneficial
interest.................................................. 96,317,643 192,491,722
----------------- ------------
NET INCREASE........................................... 148,786,687 319,507,367
NET ASSETS:
Beginning of period......................................... 961,594,396 642,087,029
----------------- ------------
END OF PERIOD
(INCLUDING DIVIDENDS IN EXCESS OF NET INVESTMENT INCOME
OF $83,837 AND UNDISTRIBUTED NET INVESTMENT INCOME OF
$3,193,088, RESPECTIVELY)............................... $ 1,110,381,083 $961,594,396
----------------- ------------
----------------- ------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER VALUE-ADDED MARKET SERIES -- EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 (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, amended (the "Act"), as a
diversified, open-end management investment company. The Fund's investment
objective is to achieve a high level of total return on its assets through a
combination of capital appreciation and current income. The Fund seeks to
achieve its objective by investing, on an equally-weighted basis, in a
diversified portfolio of common stocks of the companies which are included in
the Standard & Poor's 500 Composite Stock Price Index. The Fund was organized as
a Massachusetts business trust on May 27, 1987 and commenced operations on
December 1, 1987.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual results could differ from
those estimates.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- (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 a security is traded on more than one exchange, the security is
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) when market
quotations are not readily available, including circumstances under which it is
determined by Dean Witter InterCapital Inc. (the "Investment Manager") 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; and
(4) short-term debt securities having a maturity date of more than sixty days at
time of purchase are valued on a market-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
<PAGE>
DEAN WITTER VALUE-ADDED MARKET SERIES -- EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 (UNAUDITED) CONTINUED
by the identified cost method. Dividend income and other distributions are
recorded on the ex-dividend date. Discounts are accreted over the respective
life of the securities. Interest income is accrued daily.
C. FEDERAL INCOME TAX STATUS -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable 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 ex-dividend date. The amount of
dividends and distributions from net investment income and net realized capital
gains are determined in accordance with federal income tax regulations which may
differ from generally accepted accounting principles. These "book/tax"
differences are either considered temporary or permanent in nature. To the
extent these differences are permanent in nature, such amounts are reclassified
within the capital accounts based on their federal tax-basis treatment;
temporary differences do not require reclassification. Dividends and
distributions which exceed net investment income and net realized capital gains
for financial reporting purposes but not for tax purposes are reported as
dividends in excess of net investment income or distributions in excess of net
realized capital gains. To the extent they exceed net investment income and net
realized capital gains for tax purposes, they are reported as distributions of
paid-in-capital.
2. INVESTMENT MANAGEMENT AGREEMENT
Pursuant to an Investment Management Agreement with the Investment Manager, the
Fund pays the Investment Manager a management fee, accrued daily and payable
monthly, by applying the following annual rates to the net assets of the Fund
determined as of the close of each business day: 0.50% to the portion of daily
net assets not exceeding $500 million; 0.45% to the portion of daily net assets
exceeding $500 million but not exceeding $1 billion and 0.425% to the portion of
daily net assets exceeding $1 billion.
Under the terms of the Agreement, in addition to managing the Fund's
investments, the Investment Manager maintains certain of the Fund's books and
records and furnishes, at its own expense, office space, facilities, equipment,
clerical, bookkeeping and certain legal services and pays the salaries of all
personnel, including officers of the Fund who are employees of the Investment
Manager. The Investment Manager also bears the cost of telephone services, heat,
light, power and other utilities provided to the Fund.
<PAGE>
DEAN WITTER VALUE-ADDED MARKET SERIES -- EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 (UNAUDITED) CONTINUED
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 gain distributions) less the
average daily aggregate net asset value of the Fund's shares redeemed since the
Fund's inception upon which a contingent deferred sales charge has been imposed
or upon which such charge has been waived; or (b) the Fund's average daily net
assets. Amounts paid under the Plan are paid to the Distributor to compensate it
for the services provided and the expenses borne by it and others in the
distribution of the Fund's shares, including the payment of commissions for
sales of the Fund's shares and incentive compensation to, and expenses of, the
account executives of Dean Witter Reynolds Inc. ("DWR"), an affiliate of the
Investment Manager and Distributor, and other employees and selected
broker-dealers who engage in or support distribution of the Fund's shares or who
service shareholder accounts, including overhead and telephone expenses,
printing and distribution of prospectuses and reports used in connection with
the offering of the Fund's shares to other than current shareholders and
preparation, printing and distribution of sales literature and advertising
materials. In addition, the Distributor may be compensated under the Plan for
its opportunity costs in advancing such amounts, which compensation would be in
the form of a carrying charge on any unreimbursed expenses 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.
Although there is no legal obligation for the Fund to pay expenses incurred in
excess of payments made to the Distributor under the Plan and the proceeds of
contingent deferred sales charges paid by investors upon redemption of shares,
if for any reason the Plan is terminated, the Trustees will consider at that
time the manner in which to treat such expenses. The Distributor has advised the
Fund that such excess amounts, including carrying charges, total $56,553,444 at
December 31, 1996.
The Distributor has informed the Fund that for the six months ended December 31,
1996, it received approximately $521,000 in contingent deferred sales charges
from certain redemptions of the Fund's shares.
<PAGE>
DEAN WITTER VALUE-ADDED MARKET SERIES -- EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 (UNAUDITED) CONTINUED
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, 1996 aggregated
$120,959,891 and $47,795,500, respectively. Included in the aforementioned are
sales of U.S. Government securities of $172,067. Also included in the
aforementioned are purchases and sales of common stock of Dean Witter, Discover
& Co., an affiliate of the Investment Manager, of $211,370 and $169,294,
respectively, as well as a realized gain of $37,094.
Dean Witter Trust Company, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At December 31, 1996, the Fund had
transfer agent fees and expenses payable of approximately $66,600.
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. At December 31, 1996, the Fund had an accrued pension liability of
$78,663 which is included in accrued expenses in the Statement of Assets and
Liabilities.
5. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
DECEMBER 31, 1996 FOR THE YEAR
---------------------------- ENDED
JUNE 30, 1996
(UNAUDITED) --------------------------
SHARES AMOUNT SHARES AMOUNT
----------- -------------- ----------- ------------
<S> <C> <C> <C> <C>
Sold............................................................. 5,619,612 $ 154,974,158 12,467,241 $314,913,953
Reinvestment of dividends and distributions...................... 865,747 24,803,673 435,932 10,776,245
----------- -------------- ----------- ------------
6,485,359 179,777,831 12,903,173 325,690,198
Repurchased...................................................... (3,035,757) (83,460,188) (5,249,483) (133,198,476)
----------- -------------- ----------- ------------
Net increase..................................................... 3,449,602 $ 96,317,643 7,653,690 $192,491,722
----------- -------------- ----------- ------------
----------- -------------- ----------- ------------
</TABLE>
6. FEDERAL INCOME TAX STATUS
As of June 30, 1996, the Fund had temporary book/tax differences which were
primarily attributable to capital loss deferrals on wash sales.
<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 YEAR
FOR THE SIX ENDED JUNE 30
MONTHS ENDED -------------
DECEMBER 31, 1996 1996
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
(UNAUDITED)
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period............................................. $ 27.09 $ 23.06
------ ------
Net investment income............................................................ 0.09 0.18
Net realized and unrealized gain................................................. 2.04 4.23
------ ------
Total from investment operations................................................. 2.13 4.41
------ ------
Less dividends and distributions from:
Net investment income......................................................... (0.18) (0.26)
Net realized gain............................................................. (0.53) (0.12)
------ ------
Total dividends and distributions................................................ (0.71) (0.38)
------ ------
Net asset value, end of period................................................... $ 28.51 $ 27.09
------ ------
------ ------
TOTAL INVESTMENT RETURN+......................................................... 7.87%(1) 19.27%
RATIOS TO AVERAGE NET ASSETS
Expenses......................................................................... 1.47 (2) 1.51%
Net investment income............................................................ 0.70 (2) 0.81%
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands.......................................... $1,110,381 $961,594
Portfolio turnover rate.......................................................... 5 (1) 10%
Average commission rate paid..................................................... $0.0308 $0.0302
<CAPTION>
1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period............................................. $ 19.23 $ 19.17 $ 16.29
------ ------ ------
Net investment income............................................................ 0.19 0.14 0.14
Net realized and unrealized gain................................................. 3.88 0.30 2.86
------ ------ ------
Total from investment operations................................................. 4.07 0.44 3.00
------ ------ ------
Less dividends and distributions from:
Net investment income......................................................... (0.09) (0.09) (0.12)
Net realized gain............................................................. (0.15) (0.29) --
------ ------ ------
Total dividends and distributions................................................ (0.24) (0.38) (0.12)
------ ------ ------
Net asset value, end of period................................................... $ 23.06 $ 19.23 $ 19.17
------ ------ ------
------ ------ ------
TOTAL INVESTMENT RETURN+......................................................... 21.41 % 2.26 % 18.50%
RATIOS TO AVERAGE NET ASSETS
Expenses......................................................................... 1.64 % 1.68 % 1.71 %
Net investment income............................................................ 1.01 % 0.86 % 0.86 %
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands.......................................... $642,087 $455,710 $310,726
Portfolio turnover rate.......................................................... 11 % 19 % 6 %
Average commission rate paid..................................................... -- -- --
<CAPTION>
1992
- -----------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period............................................. $ 14.73
------
Net investment income............................................................ 0.17
Net realized and unrealized gain................................................. 1.57
------
Total from investment operations................................................. 1.74
------
Less dividends and distributions from:
Net investment income......................................................... (0.18)
Net realized gain............................................................. --
------
Total dividends and distributions................................................ (0.18)
------
Net asset value, end of period................................................... $ 16.29
------
------
TOTAL INVESTMENT RETURN+......................................................... 11.83 %
RATIOS TO AVERAGE NET ASSETS
Expenses......................................................................... 1.80 %
Net investment income............................................................ 1.10 %
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands.......................................... $192,832
Portfolio turnover rate.......................................................... 9 %
Average commission rate paid..................................................... --
<FN>
- ---------------------
+ Does not reflect the deduction of sales charge. Calculated based on the net
asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
TRUSTEES
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Dr. Manuel H. Johnson
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Barry Fink
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 accompanied by an effective prospectus.
DEAN WITTER VALUE-ADDED MARKET SERIES EQUITY PORTFOLIO
[GRAPHIC]
SEMIANNUAL REPORT
DECEMBER 31, 1996
