<PAGE>
MORGAN STANLEY DEAN WITTER VALUE-ADDED MARKET TWO WORLD TRADE CENTER,
SERIES - EQUITY PORTFOLIO NEW YORK, NEW YORK 10048
LETTER TO THE SHAREHOLDERS JUNE 30, 1998
DEAR SHAREHOLDER:
The fiscal year ended June 30, 1998, saw a great deal of volatility and
uncertainty as financial turmoil in Asia spread to world equity markets.
However, the U.S. stock market recovered quickly and American large-cap stocks
actually benefited from the perception that they could provide a safe haven from
the turmoil. This positive investor psychology was coupled with strong
fundamentals -- low inflation, high employment and rising consumer confidence --
in the U.S. economy that supported rising equity prices. Smaller companies, in
which the Fund is more heavily weighted than the S&P 500 Index, also posted
impressive performances but were overshadowed by the exceptional returns of
larger companies.
PERFORMANCE AND PORTFOLIO
For the year ending June 30, 1998, Morgan Stanley Dean Witter Value-Added Market
Series - Equity Portfolio Class B produced a total return of 21.84 percent
compared to 30.14 percent for the Standard & Poor's 500 Index (S&P 500 Index)
and 22.14 percent for the Lipper Growth and Income Funds Index. Since its
inception on December 1, 1987, the Fund has provided an average annual total
return of 16.24 percent.
From their inceptions on July 28, 1997 through June 30, 1998, the Fund's Class
A, C and D shares posted total returns of 16.01 percent, 15.22 percent and 16.27
percent, respectively. The performance of the Fund's four share classes varies
because of differing expenses. For the same period, the S&P 500 Index returned
23.01 percent and the Lipper Growth and Income Funds Index returned 13.96
percent. For the period under review, the Fund underperformed the S&P 500
because of its emphasis on small-cap stocks which did not perform as strongly
relative to the large-cap issues that dominated the S&P 500. Investors worried
about the impact of the Asian financial crisis on U.S. profits shunned smaller
caps for the perceived safety of large caps.
<PAGE>
MORGAN STANLEY DEAN WITTER VALUE-ADDED MARKET SERIES - EQUITY PORTFOLIO
LETTER TO THE SHAREHOLDERS JUNE 30, 1998, CONTINUED
The accompanying chart illustrates the growth of a hypothetical $10,000
investment in the Fund's Class B shares for the ten-year period ended June 30,
1998, versus similar hypothetical investments in the issues that comprise the
S&P 500 Index and the Lipper Index.
Morgan Stanley Dean Witter Value-Added Market Series - Equity Portfolio invests
in substantially all of the stocks included in the S&P 500 Index. Unlike the
index, the Fund equally weights all stock positions, thereby emphasizing the
stocks of smaller- to medium-capitalization companies, which have historically
outperformed larger-capitalization companies over the long term. Even though
small- and mid-capitalization stocks have provided strong returns over the last
three to four years, they have been eclipsed by the returns of a narrow list of
large-capitalization growth stocks. The huge cash flows into these few large-cap
companies have left the rest of the market neglected and have pushed the
relative valuations of small- and mid-cap companies to historically low levels.
LOOKING AHEAD
Factors such as slowing global growth, specifically in Southeast Asia, coupled
with a stronger dollar are likely to present greater risks to the earnings of
larger companies with more foreign exposure. Smaller companies, on the other
hand, are likely to be cushioned from these events to a greater degree. This
scenario would bode well for small-cap equity markets in the United States. As
small-cap stocks benefit, so should the Fund, through its strategy of equally
weighting S&P issues of all market caps.
We appreciate your support of Morgan Stanley 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
2
<PAGE>
MORGAN STANLEY DEAN WITTER VALUE-ADDED MARKET
SERIES - EQUITY PORTFOLIO
FUND PERFORMANCE JUNE 30, 1998
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Growth of $10,000
--
Class B Shares
($ in Thousands)
<S> <C> <C> <C>
Fund S&P 500(4) Lipper(5)
June 1988 $10,000 $10,000 $10,000
June 1989 $11,687 $12,048 $11,809
June 1990 $12,409 $14,032 $12,887
June 1991 $13,131 $15,068 $13,646
June 1992 $14,684 $17,085 $15,476
June 1993 $17,401 $19,410 $18,008
June 1994 $17,794 $19,683 $18,714
June 1995 $21,605 $24,808 $22,359
June 1996 $25,768 $31,254 $27,254
June 1997 $32,134 $42,096 $35,158
June 1998 $39,152(3) $54,786 $42,941
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RETURNS. PERFORMANCE FOR CLASS
A, CLASS C, AND CLASS D SHARES WILL VARY FROM THE PERFORMANCE OF CLASS B
SHARES SHOWN ABOVE DUE TO DIFFERENCES IN CHARGES AND EXPENSES.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS*
- ----------------------------------------------------------------------------------------------------
CLASS B SHARES** CLASS A SHARES+
- ----------------------------------------------- -----------------------------------------------
<S> <C> <C> <C> <C> <C>
1 Year 21.84(1) 16.84(2) Since Inception (7/28/97) 16.01(1) 9.92(2)
5 Years 17.61(1) 17.40(2)
10 Years 14.62(1) 14.62(2)
</TABLE>
<TABLE>
<CAPTION>
CLASS C SHARES++ CLASS D SHARES#
- ----------------------------------------------- -----------------------------------------------
<S> <C> <C> <C> <C> <C>
Since Inception (7/28/97) 15.22(1) 14.22(2) Since Inception (7/28/97) 16.27(1)
</TABLE>
- ------------------------
(1) Figure shown assumes reinvestment of all distributions and does not reflect
the deduction of any sales charges.
(2) Figure shown assumes reinvestment of all distributions and the deduction of
the maximum applicable sales charge. See the Fund's current prospectus for
complete details on fees and sales charges.
(3) Closing value assuming a complete redemption on June 30, 1998.
(4) The Standard & Poor's 500 Stock Index (S&P 500) is a broad-based index, the
performance of which is based on the average performance of 500 widely held
common stocks. The performance of the Index does not include any expenses,
fees or charges. The Index is unmanaged and should not be considered an
investment.
(5) The Lipper Growth and Income Funds Index is an equally-weighted performance
index of the largest qualifying funds (based on net assets) in the Lipper
Growth and Income Funds objective. The Index, which is adjusted for capital
gains distributions and income dividends, is unmanaged and should not be
considered an investment. There are currently 30 funds represented in this
index.
* For periods of less than one year, the fund quotes its total return on a
non-annualized basis.
** The maximum contingent deferred sales charge (CDSC) for Class B is 5.0%.
The CDSC declines to 0% after six years.
+ The maximum front-end sales charge for Class A is 5.25%.
++ The maximum contingent deferred sales charge for Class C shares is 1% for
shares redeemed within one year of purchase.
# Class D shares have no sales charge.
3
<PAGE>
MORGAN STANLEY DEAN WITTER VALUE-ADDED MARKET SERIES - EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS JUNE 30, 1998
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (99.5%)
ADVERTISING/MARKETING SERVICES (0.6%)
61,000 Cognizant Corp....................................................................... $ 3,843,000
60,000 Interpublic Group of Companies, Inc.................................................. 3,641,250
62,000 Omnicom Group, Inc................................................................... 3,092,250
--------------
10,576,500
--------------
AEROSPACE & DEFENSE (0.8%)
69,000 Boeing Co............................................................................ 3,074,812
72,000 General Dynamics Corp................................................................ 3,348,000
31,000 Lockheed Martin Corp................................................................. 3,282,125
31,000 Northrop Grumman Corp................................................................ 3,196,875
--------------
12,901,812
--------------
AGRICULTURE RELATED (0.4%)
162,000 Archer-Daniels-Midland Co............................................................ 3,138,750
91,000 Pioneer Hi-Bred International, Inc................................................... 3,765,125
--------------
6,903,875
--------------
AIR FREIGHT (0.2%)
54,000 FDX Corp.*........................................................................... 3,388,500
--------------
AIRLINES (0.8%)
44,000 AMR Corp.*........................................................................... 3,663,000
27,500 Delta Air Lines, Inc................................................................. 3,554,375
123,000 Southwest Airlines Co................................................................ 3,643,875
45,000 US Airways Group Inc.*............................................................... 3,566,250
--------------
14,427,500
--------------
ALUMINUM (0.6%)
118,000 Alcan Aluminium Ltd. (Canada)........................................................ 3,259,750
50,000 Aluminum Co. of America.............................................................. 3,296,875
58,000 Reynolds Metals Co................................................................... 3,244,375
--------------
9,801,000
--------------
AUTO PARTS - AFTER MARKET (1.5%)
147,000 Cooper Tire & Rubber Co.............................................................. 3,031,875
63,000 Dana Corp............................................................................ 3,370,500
70,000 Echlin, Inc.......................................................................... 3,434,375
91,000 Genuine Parts Co..................................................................... 3,145,187
50,000 Goodyear Tire & Rubber Co............................................................ 3,221,875
94,000 ITT Industries, Inc.................................................................. 3,513,250
91,000 Snap-On, Inc......................................................................... 3,298,750
59,000 TRW, Inc............................................................................. 3,222,875
--------------
26,238,687
--------------
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
AUTOMOBILES (0.6%)
65,000 Chrysler Corp........................................................................ $ 3,664,375
58,000 Ford Motor Co........................................................................ 3,422,000
49,000 General Motors Corp.................................................................. 3,273,812
--------------
10,360,187
--------------
BANKS - MONEY CENTER (1.6%)
40,500 BankAmerica Corp..................................................................... 3,500,719
27,000 Bankers Trust New York Corp.......................................................... 3,133,687
50,000 Chase Manhattan Corp................................................................. 3,775,000
23,000 Citicorp............................................................................. 3,432,750
38,000 First Chicago NBD Corp............................................................... 3,367,750
63,000 First Union Corp..................................................................... 3,669,750
27,000 Morgan (J.P.) & Co., Inc............................................................. 3,162,375
46,000 NationsBank Corp..................................................................... 3,519,000
--------------
27,561,031
--------------
BANKS - REGIONAL (4.6%)
56,650 Banc One Corp........................................................................ 3,161,778
56,000 Bank of New York Co., Inc............................................................ 3,398,500
64,000 BankBoston Corp...................................................................... 3,560,000
49,000 BB&T Corporation..................................................................... 3,313,625
52,500 Comerica, Inc........................................................................ 3,478,125
57,000 Fifth Third Bancorp.................................................................. 3,583,875
44,000 Fleet Financial Group, Inc........................................................... 3,674,000
96,000 Huntington Bancshares, Inc........................................................... 3,210,000
89,000 KeyCorp.............................................................................. 3,170,625
52,000 Mellon Bank Corp..................................................................... 3,620,500
63,000 Mercantile Bancorporation, Inc....................................................... 3,173,625
50,000 National City Corp................................................................... 3,550,000
40,000 Northern Trust Corp.................................................................. 3,047,500
87,000 Norwest Corp......................................................................... 3,251,625
58,000 PNC Bank Corp........................................................................ 3,121,125
52,000 Republic New York Corp............................................................... 3,272,750
50,000 State Street Corp.................................................................... 3,475,000
70,000 Summit Bancorp.*..................................................................... 3,325,000
44,000 SunTrust Banks, Inc.................................................................. 3,577,750
137,500 Synovus Financial Corp............................................................... 3,265,625
81,000 U.S. Bancorp......................................................................... 3,483,000
39,000 Wachovia Corp........................................................................ 3,295,500
10,000 Wells Fargo & Co..................................................................... 3,690,000
--------------
77,699,528
--------------
BEVERAGES - ALCOHOLIC (0.8%)
69,000 Anheuser-Busch Companies, Inc........................................................ 3,255,937
58,000 Brown-Forman Corp. (Class B)......................................................... 3,726,500
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
4
<PAGE>
MORGAN STANLEY DEAN WITTER VALUE-ADDED MARKET SERIES - EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS JUNE 30, 1998, CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
96,000 Coors (Adolph) Co. (Class B)......................................................... $ 3,264,000
90,000 Seagram Co. Ltd. (Canada)............................................................ 3,684,375
--------------
13,930,812
--------------
BEVERAGES - SOFT DRINKS (0.4%)
42,000 Coca Cola Co......................................................................... 3,591,000
80,000 PepsiCo, Inc......................................................................... 3,295,000
--------------
6,886,000
--------------
BIOTECHNOLOGY (0.2%)
55,000 Amgen Inc.*.......................................................................... 3,595,625
--------------
BROADCAST MEDIA (1.1%)
110,000 CBS Corp............................................................................. 3,492,500
35,000 Clear Channel Communications, Inc.*.................................................. 3,819,375
90,000 Comcast Corp. (Class A Special)...................................................... 3,650,625
85,000 MediaOne Group Inc.*................................................................. 3,734,687
104,000 Tele-Communications, Inc. (Class A)*................................................. 3,991,000
--------------
18,688,187
--------------
BUILDING MATERIALS (0.6%)
47,000 Armstrong World Industries Inc....................................................... 3,166,625
60,000 Masco Corp........................................................................... 3,630,000
91,000 Owens Corning........................................................................ 3,713,937
--------------
10,510,562
--------------
CHEMICALS (1.4%)
78,000 Air Products & Chemicals, Inc........................................................ 3,120,000
35,000 Dow Chemical Co...................................................................... 3,384,062
48,000 DuPont (E.I) de Nemours & Co., Inc................................................... 3,582,000
51,000 Eastman Chemical Co.................................................................. 3,174,750
69,000 Praxair, Inc......................................................................... 3,230,062
32,000 Rohm & Haas Co....................................................................... 3,326,000
71,000 Union Carbide Corp................................................................... 3,789,625
--------------
23,606,499
--------------
CHEMICALS - DIVERSIFIED (1.0%)
168,000 Engelhard Corp....................................................................... 3,402,000
46,000 FMC Corp.*........................................................................... 3,136,625
68,000 Goodrich (B.F.) Co................................................................... 3,374,500
61,000 Monsanto Co.......................................................................... 3,408,375
49,000 PPG Industries, Inc.................................................................. 3,408,562
--------------
16,730,062
--------------
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
CHEMICALS - SPECIALTY (1.5%)
111,000 Ecolab, Inc.......................................................................... $ 3,441,000
180,000 Grace (W. R.) & Co................................................................... 3,071,250
84,000 Great Lakes Chemical Corp............................................................ 3,312,750
77,000 Hercules, Inc........................................................................ 3,166,625
70,000 International Flavors & Fragrances Inc............................................... 3,040,625
123,000 Morton International, Inc............................................................ 3,075,000
92,000 Nalco Chemical Co.................................................................... 3,231,500
91,000 Sigma-Aldrich Corp................................................................... 3,196,375
--------------
25,535,125
--------------
COMMERCIAL & CONSUMER SERVICES (1.0%)
76,000 Block (H.&R.), Inc................................................................... 3,201,500
149,000 Cendant Corp.*....................................................................... 3,110,375
100,000 Dun & Bradstreet Corp................................................................ 3,612,500
263,000 Laidlaw, Inc. (Canada)............................................................... 3,205,312
80,000 Service Corp. International.......................................................... 3,430,000
--------------
16,559,687
--------------
COMMUNICATIONS EQUIPMENT (1.8%)
172,000 Andrew Corp.*........................................................................ 3,096,000
120,000 DSC Communications Corp.*............................................................ 3,585,000
135,000 General Instrument Corp.*............................................................ 3,670,312
77,000 Harris Corp.......................................................................... 3,440,937
44,000 Lucent Technologies, Inc............................................................. 3,660,250
58,000 Motorola, Inc........................................................................ 3,048,625
58,000 Northern Telecom Ltd. (Canada)....................................................... 3,291,500
143,000 Scientific-Atlanta, Inc.............................................................. 3,628,625
51,000 Tellabs, Inc.*....................................................................... 3,649,687
--------------
31,070,936
--------------
COMPUTER - NETWORKING (1.0%)
104,000 3Com Corp.*.......................................................................... 3,191,500
65,000 Ascend Communications, Inc.*......................................................... 3,217,500
113,000 Bay Networks, Inc.*.................................................................. 3,644,250
254,000 Cabletron Systems, Inc.*............................................................. 3,413,125
40,000 Cisco Systems, Inc.*................................................................. 3,682,500
--------------
17,148,875
--------------
COMPUTER HARDWARE (1.8%)
128,000 Apple Computer, Inc.*................................................................ 3,672,000
136,000 COMPAQ Computer Corp................................................................. 3,859,000
213,000 Data General Corp.*.................................................................. 3,181,687
38,000 Dell Computer Corp.*................................................................. 3,524,500
67,000 Gateway 2000, Inc.*.................................................................. 3,391,875
54,000 Hewlett-Packard Co................................................................... 3,233,250
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
5
<PAGE>
MORGAN STANLEY DEAN WITTER VALUE-ADDED MARKET SERIES - EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS JUNE 30, 1998, CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
31,000 International Business Machines Corp................................................. $ 3,559,187
256,900 Silicon Graphics, Inc.*.............................................................. 3,114,912
78,000 Sun Microsystems, Inc.*.............................................................. 3,388,125
--------------
30,924,536
--------------
COMPUTER SOFTWARE & SERVICES (2.0%)
75,000 Adobe Systems, Inc................................................................... 3,182,812
82,000 Autodesk, Inc........................................................................ 3,151,875
60,000 Computer Associates International, Inc............................................... 3,333,750
58,000 Computer Sciences Corp.*............................................................. 3,712,000
110,000 HBO & Co............................................................................. 3,877,500
34,000 Microsoft Corp.*..................................................................... 3,684,750
295,000 Novell, Inc.*........................................................................ 3,761,250
128,000 Oracle Corp.*........................................................................ 3,136,000
116,000 Parametric Technology Corp.*......................................................... 3,139,250
129,000 Unisys Corp.*........................................................................ 3,644,250
--------------
34,623,437
--------------
COMPUTERS - PERIPHERAL EQUIPMENT (0.4%)
78,000 EMC Corp.*........................................................................... 3,495,375
144,000 Seagate Technology, Inc.*............................................................ 3,429,000
--------------
6,924,375
--------------
COMPUTERS - SYSTEMS (0.2%)
48,000 Shared Medical Systems Corp.......................................................... 3,525,000
--------------
CONSUMER - NONCYCLICAL (0.4%)
73,000 American Greetings Corp. (Class A)................................................... 3,718,437
134,000 Jostens, Inc......................................................................... 3,232,750
--------------
6,951,187
--------------
CONTAINERS - METAL & GLASS (0.6%)
91,000 Ball Corp............................................................................ 3,657,062
68,000 Crown Cork & Seal Co., Inc........................................................... 3,230,000
81,000 Owens-Illinois, Inc.*................................................................ 3,624,750
--------------
10,511,812
--------------
CONTAINERS - PAPER (0.8%)
80,000 Bemis Company, Inc................................................................... 3,270,000
247,000 Stone Container Corp................................................................. 3,859,375
60,000 Temple-Inland, Inc................................................................... 3,232,500
63,000 Union Camp Corp...................................................................... 3,126,375
--------------
13,488,250
--------------
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
DATA PROCESSING (0.8%)
49,000 Automatic Data Processing, Inc....................................................... $ 3,570,875
62,000 Ceridian Corp.*...................................................................... 3,642,500
92,000 Equifax, Inc......................................................................... 3,340,750
103,000 First Data Corp...................................................................... 3,431,187
--------------
13,985,312
--------------
DISTRIBUTORS - FOOD & HEALTH (0.6%)
38,000 Cardinal Health, Inc................................................................. 3,562,500
74,500 Supervalu, Inc....................................................................... 3,305,937
140,000 Sysco Corp........................................................................... 3,587,500
--------------
10,455,937
--------------
ELECTRICAL EQUIPMENT (1.5%)
90,000 AMP, Inc............................................................................. 3,093,750
53,000 Emerson Electric Co.................................................................. 3,199,875
40,000 General Electric Co.................................................................. 3,640,000
87,000 General Signal Corp.................................................................. 3,132,000
43,000 Honeywell, Inc....................................................................... 3,593,187
102,000 Raychem Corp......................................................................... 3,015,375
67,000 Rockwell International Corp.......................................................... 3,220,187
66,000 Thomas & Betts Corp.................................................................. 3,250,500
--------------
26,144,874
--------------
ELECTRONIC COMPONENTS (0.2%)
64,000 Grainger (W.W.), Inc................................................................. 3,188,000
--------------
ELECTRONICS - DEFENSE (0.2%)
56,000 Raytheon Co. (Class B)............................................................... 3,311,000
--------------
ELECTRONICS - INSTRUMENTATION (0.6%)
122,600 EG & G, Inc.......................................................................... 3,678,000
53,000 Perkin-Elmer Corp.................................................................... 3,295,937
86,000 Tektronix, Inc....................................................................... 3,042,250
--------------
10,016,187
--------------
ELECTRONICS - SEMICONDUCTORS (1.1%)
180,000 Advanced Micro Devices, Inc.*........................................................ 3,071,250
44,000 Intel Corp........................................................................... 3,258,750
139,000 LSI Logic Corp.*..................................................................... 3,205,687
127,000 Micron Technology, Inc.*............................................................. 3,151,187
227,000 National Semiconductor Corp.*........................................................ 2,993,562
62,000 Texas Instruments, Inc............................................................... 3,615,375
--------------
19,295,811
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE>
MORGAN STANLEY DEAN WITTER VALUE-ADDED MARKET SERIES - EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS JUNE 30, 1998, CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
ENGINEERING & CONSTRUCTION (0.6%)
73,000 Fluor Corp........................................................................... $ 3,723,000
148,000 Foster Wheeler Corp.................................................................. 3,172,750
88,000 McDermott International, Inc......................................................... 3,030,500
--------------
9,926,250
--------------
ENTERTAINMENT (0.8%)
126,000 King World Productions Inc.*......................................................... 3,213,000
44,000 Time Warner, Inc..................................................................... 3,759,250
60,000 Viacom, Inc. (Class B)*.............................................................. 3,495,000
32,000 Walt Disney Co....................................................................... 3,362,000
--------------
13,829,250
--------------
FINANCE - CONSUMER (1.2%)
23,000 Beneficial Corp...................................................................... 3,523,312
70,000 Countrywide Credit Industries, Inc................................................... 3,552,500
82,000 Green Tree Financial Corp............................................................ 3,510,625
62,000 Household International, Inc......................................................... 3,084,500
99,000 MBNA Corp............................................................................ 3,267,000
47,000 Providian Financial Corp............................................................. 3,692,437
--------------
20,630,374
--------------
FINANCE - DIVERSIFIED (1.9%)
33,000 American Express Co.................................................................. 3,762,000
52,000 American General Corp................................................................ 3,701,750
42,000 Associates First Capital Corp. (Class A)............................................. 3,228,750
56,000 Fannie Mae........................................................................... 3,402,000
75,000 Freddie Mac.......................................................................... 3,529,687
49,000 MBIA Inc............................................................................. 3,668,875
56,000 MGIC Investment Corp................................................................. 3,195,500
41,000 Morgan Stanley Dean Witter & Co. (Note 4)............................................ 3,746,375
63,000 SunAmerica Inc....................................................................... 3,618,562
--------------
31,853,499
--------------
FOODS (2.4%)
60,000 BestFoods............................................................................ 3,483,750
60,000 Campbell Soup Co..................................................................... 3,187,500
102,000 ConAgra, Inc......................................................................... 3,232,125
46,000 General Mills, Inc................................................................... 3,145,250
62,000 Heinz (H.J.) Co...................................................................... 3,479,750
51,000 Hershey Foods Corp................................................................... 3,519,000
83,000 Kellogg Co........................................................................... 3,117,687
58,000 Quaker Oats Company (The)............................................................ 3,186,375
31,000 Ralston-Ralston Purina Group......................................................... 3,621,187
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
56,000 Sara Lee Corp........................................................................ $ 3,132,500
44,000 Unilever NV (ADR) (Netherlands)...................................................... 3,473,250
35,000 Wrigley (Wm.) Jr. Co. (Class A)...................................................... 3,430,000
--------------
40,008,374
--------------
FOOTWEAR (0.4%)
74,000 Nike, Inc. (Class B)................................................................. 3,602,875
117,000 Reebok International Ltd. (United Kingdom)*.......................................... 3,239,437
--------------
6,842,312
--------------
GAMING, LOTTERY, & PARI-MUTUEL COMPANIES (0.4%)
147,000 Harrah's Entertainment, Inc.*........................................................ 3,417,750
146,000 Mirage Resorts, Inc.*................................................................ 3,111,625
--------------
6,529,375
--------------
GOLD & PRECIOUS METALS MINING (1.0%)
171,000 Barrick Gold Corp. (Canada).......................................................... 3,281,062
574,700 Battle Mountain Gold Co.............................................................. 3,412,281
340,000 Homestake Mining Co.................................................................. 3,527,500
137,000 Newmont Mining Corp.................................................................. 3,236,625
291,000 Placer Dome Inc. (Canada)............................................................ 3,419,250
--------------
16,876,718
--------------
HARDWARE & TOOLS (0.4%)
60,000 Black & Decker Corp.................................................................. 3,660,000
76,000 Stanley Works........................................................................ 3,158,750
--------------
6,818,750
--------------
HEALTHCARE - DIVERSIFIED (1.5%)
85,000 Abbott Laboratories.................................................................. 3,474,375
79,000 Allergan, Inc........................................................................ 3,663,625
69,000 American Home Products Corp.......................................................... 3,570,750
31,000 Bristol-Myers Squibb Co.............................................................. 3,563,062
47,000 Johnson & Johnson.................................................................... 3,466,250
104,000 Mallinckrodt Group, Inc.............................................................. 3,087,500
54,000 Warner-Lambert Co.................................................................... 3,746,250
--------------
24,571,812
--------------
HEALTHCARE - DRUGS (1.1%)
53,000 Lilly (Eli) & Co..................................................................... 3,501,312
27,000 Merck & Co., Inc..................................................................... 3,611,250
33,000 Pfizer, Inc.......................................................................... 3,586,687
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE>
MORGAN STANLEY DEAN WITTER VALUE-ADDED MARKET SERIES - EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS JUNE 30, 1998, CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
79,000 Pharmacia & Upjohn, Inc.............................................................. $ 3,643,875
39,000 Schering-Plough Corp................................................................. 3,573,375
--------------
17,916,499
--------------
HEALTHCARE - HMOS (0.4%)
117,000 Humana, Inc.*........................................................................ 3,648,937
55,000 United Healthcare Corp............................................................... 3,492,500
--------------
7,141,437
--------------
HEALTHCARE - LONG TERM (0.4%)
115,000 Healthsouth Corp.*................................................................... 3,069,062
91,000 Manor Care, Inc...................................................................... 3,497,812
--------------
6,566,874
--------------
HEALTHCARE - SPECIALIZED SERVICES (0.2%)
80,000 ALZA Corp. (Class A)*................................................................ 3,460,000
--------------
HEAVY DUTY TRUCKS & PARTS (0.6%)
58,000 Cummins Engine Co., Inc.............................................................. 2,972,500
113,000 Navistar International Corp.*........................................................ 3,262,875
61,000 PACCAR, Inc.......................................................................... 3,175,812
--------------
9,411,187
--------------
HOME BUILDING (0.8%)
91,000 Centex Corp.......................................................................... 3,435,250
81,000 Fleetwood Enterprises, Inc........................................................... 3,240,000
110,000 Kaufman & Broad Home Corp............................................................ 3,492,500
119,000 Pulte Corp........................................................................... 3,555,125
--------------
13,722,875
--------------
HOSPITAL MANAGEMENT (0.4%)
107,000 Columbia/HCA Healthcare Corp......................................................... 3,116,375
105,000 Tenet Healthcare Corp.*.............................................................. 3,281,250
--------------
6,397,625
--------------
HOUSEHOLD FURNISHINGS & APPLIANCES (0.4%)
70,000 Maytag Corp.......................................................................... 3,456,250
53,000 Whirlpool Corp....................................................................... 3,643,750
--------------
7,100,000
--------------
HOUSEHOLD PRODUCTS - NON-DURABLE (1.0%)
38,000 Clorox Co............................................................................ 3,624,250
39,000 Colgate-Palmolive Co................................................................. 3,432,000
76,000 Fort James Corp...................................................................... 3,382,000
69,000 Kimberly-Clark Corp.................................................................. 3,165,375
39,000 Procter & Gamble Co.................................................................. 3,551,437
--------------
17,155,062
--------------
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
HOUSEWARES (0.8%)
93,000 Fortune Brands, Inc.................................................................. $ 3,574,687
73,000 Newell Co............................................................................ 3,636,312
109,000 Rubbermaid, Inc...................................................................... 3,617,437
118,000 Tupperware Corp...................................................................... 3,318,750
--------------
14,147,186
--------------
INSURANCE BROKERS (0.4%)
51,000 Aon Corp............................................................................. 3,582,750
58,500 Marsh & McLennan Cos., Inc........................................................... 3,535,594
--------------
7,118,344
--------------
INVESTMENT BANKING/BROKERAGE (0.6%)
41,000 Lehman Brothers Holdings, Inc........................................................ 3,180,062
38,000 Merrill Lynch & Co., Inc............................................................. 3,505,500
105,000 Schwab (Charles) Corp................................................................ 3,412,500
--------------
10,098,062
--------------
INVESTMENT COMPANIES (0.2%)
57,000 Franklin Resources, Inc.............................................................. 3,078,000
--------------
LEISURE TIME - PRODUCTS (0.6%)
129,700 Brunswick Corp....................................................................... 3,210,075
94,000 Hasbro, Inc.......................................................................... 3,695,375
83,000 Mattel, Inc.......................................................................... 3,511,938
--------------
10,417,388
--------------
LIFE & HEALTH INSURANCE (1.2%)
42,000 Aetna Inc............................................................................ 3,197,250
65,000 Conseco, Inc......................................................................... 3,038,750
57,750 Jefferson-Pilot Corp................................................................. 3,345,891
75,000 Torchmark Corp....................................................................... 3,431,250
29,000 Transamerica Corp.................................................................... 3,338,625
60,000 UNUM Corp............................................................................ 3,330,000
--------------
19,681,766
--------------
LODGING - HOTELS (0.4%)
103,000 Hilton Hotels Corp................................................................... 2,935,500
102,000 Marriott International , Inc......................................................... 3,302,250
--------------
6,237,750
--------------
MACHINERY - DIVERSIFIED (1.9%)
65,000 Case Corp............................................................................ 3,136,250
60,000 Caterpillar, Inc..................................................................... 3,172,500
129,000 Cincinnati Milacron, Inc............................................................. 3,136,313
58,000 Cooper Industries, Inc............................................................... 3,186,375
60,000 Deere & Co........................................................................... 3,172,500
92,000 Dover Corp........................................................................... 3,151,000
114,000 Harnischfeger Industries, Inc........................................................ 3,227,625
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE>
MORGAN STANLEY DEAN WITTER VALUE-ADDED MARKET SERIES - EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS JUNE 30, 1998, CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
74,500 Ingersoll-Rand Co.................................................................... $ 3,282,656
25,000 NACCO Industries, Inc. (Class A)..................................................... 3,231,250
100,000 Timken Co............................................................................ 3,081,250
--------------
31,777,719
--------------
MANUFACTURING - DIVERSIFIED (2.7%)
56,000 Aeroquip-Vickers, Inc................................................................ 3,269,000
76,000 AlliedSignal, Inc.................................................................... 3,372,500
92,000 Corning, Inc......................................................................... 3,197,000
69,000 Crane Co............................................................................. 3,350,813
40,000 Eaton Corp........................................................................... 3,110,000
54,000 Illinois Tool Works Inc.............................................................. 3,601,125
61,000 Johnson Controls, Inc................................................................ 3,488,438
38,000 Minnesota Mining & Manufacturing Co.................................................. 3,123,125
61,000 National Service Industries, Inc..................................................... 3,103,375
82,000 Tenneco, Inc......................................................................... 3,121,125
45,600 Textron, Inc......................................................................... 3,268,950
91,400 Thermo Electron Corp.*............................................................... 3,124,738
58,000 Tyco International Ltd. (Bermuda).................................................... 3,654,000
40,000 United Technologies Corp............................................................. 3,700,000
--------------
46,484,189
--------------
MANUFACTURING - SPECIALIZED (1.2%)
69,000 Avery Dennison Corp.................................................................. 3,708,750
85,000 Briggs & Stratton Corp............................................................... 3,182,188
116,000 Millipore Corp....................................................................... 3,161,000
148,000 Pall Corp............................................................................ 3,034,000
82,700 Parker-Hannifin Corp................................................................. 3,152,938
87,000 Sealed Air Corp.*.................................................................... 3,197,250
--------------
19,436,126
--------------
MEDICAL PRODUCTS & SUPPLIES (2.1%)
95,000 Bard (C.R.), Inc..................................................................... 3,615,938
72,000 Bausch & Lomb, Inc................................................................... 3,609,000
59,000 Baxter International, Inc............................................................ 3,174,938
47,000 Becton, Dickinson & Co............................................................... 3,648,375
112,000 Biomet, Inc.......................................................................... 3,696,000
52,000 Boston Scientific Corp.*............................................................. 3,724,500
50,000 Guidant Corp......................................................................... 3,565,625
58,000 Medtronic, Inc....................................................................... 3,697,500
93,000 St. Jude Medical, Inc.*.............................................................. 3,423,563
80,400 United States Surgical Corp.......................................................... 3,668,250
--------------
35,823,689
--------------
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
METALS & MINING (0.9%)
147,000 ASARCO, Inc.......................................................................... $ 3,270,750
229,000 Cyprus Amax Minerals Co.............................................................. 3,034,250
200,000 Freeport-McMoran Copper & Gold, Inc. (Class B)....................................... 3,037,500
232,000 Inco Ltd. (Canada)................................................................... 3,161,000
56,000 Phelps Dodge Corp.................................................................... 3,202,500
--------------
15,706,000
--------------
MULTI-LINE INSURANCE (1.3%)
25,000 American International Group, Inc.................................................... 3,650,000
51,000 CIGNA Corp........................................................................... 3,519,000
33,000 Hartford Financial Services Group Inc................................................ 3,774,375
41,000 Lincoln National Corp................................................................ 3,746,375
36,000 Loews Corp........................................................................... 3,136,500
59,000 Travelers Group, Inc................................................................. 3,576,875
--------------
21,403,125
--------------
NATURAL GAS (2.3%)
50,000 Coastal Corp......................................................................... 3,490,625
61,500 Columbia Gas System, Inc............................................................. 3,420,938
59,000 Consolidated Natural Gas Co.......................................................... 3,473,625
80,000 Eastern Enterprises.................................................................. 3,430,000
71,000 Enron Corp........................................................................... 3,838,438
79,000 NICOR, Inc........................................................................... 3,169,875
83,000 ONEOK, Inc........................................................................... 3,309,625
89,000 Peoples Energy Corp.................................................................. 3,437,625
126,319 Sempra Energy*....................................................................... 3,505,358
83,000 Sonat, Inc........................................................................... 3,205,875
113,000 Williams Companies, Inc.............................................................. 3,813,750
--------------
38,095,734
--------------
OFFICE EQUIPMENT & SUPPLIES (0.4%)
235,000 Moore Corp. Ltd. (Canada)............................................................ 3,113,750
70,000 Pitney Bowes, Inc.................................................................... 3,368,750
--------------
6,482,500
--------------
OIL & GAS - EXPLORATION & PRODUCTION (1.1%)
52,000 Anardarko Petroleum Corp............................................................. 3,493,750
100,000 Apache Corp.......................................................................... 3,150,000
77,000 Burlington Resources, Inc............................................................ 3,315,813
56,000 Kerr-McGee Corp...................................................................... 3,241,000
142,000 Oryx Energy Co.*..................................................................... 3,141,750
176,000 Union Pacific Resources Group, Inc................................................... 3,091,000
--------------
19,433,313
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
9
<PAGE>
MORGAN STANLEY DEAN WITTER VALUE-ADDED MARKET SERIES - EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS JUNE 30, 1998, CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
OIL & GAS - REFINING & MARKETING (0.4%)
62,300 Ashland, Inc......................................................................... $ 3,216,238
80,000 Sun Co., Inc......................................................................... 3,105,000
--------------
6,321,238
--------------
OIL & GAS DRILLING (1.3%)
92,000 Baker Hughes, Inc.................................................................... 3,179,750
73,000 Dresser Industries, Inc.............................................................. 3,216,563
73,000 Halliburton Co....................................................................... 3,253,063
139,000 Helmerich & Payne, Inc............................................................... 3,092,750
163,000 Rowan Companies, Inc.*............................................................... 3,168,313
47,000 Schlumberger Ltd..................................................................... 3,210,688
42,000 Western Atlas, Inc.*................................................................. 3,564,750
--------------
22,685,877
--------------
OIL INTEGRATED - DOMESTIC (1.3%)
61,000 Amerada Hess Corp.................................................................... 3,313,063
41,000 Atlantic Richfield Co................................................................ 3,203,125
117,000 Occidental Petroleum Corp............................................................ 3,159,000
61,200 Pennzoil Co.......................................................................... 3,098,250
64,000 Phillips Petroleum Co................................................................ 3,084,000
88,000 Unocal Corp.......................................................................... 3,146,000
92,000 USX-Marathon Group................................................................... 3,156,750
--------------
22,160,188
--------------
OIL INTEGRATED - INTERNATIONAL (1.1%)
74,000 Amoco Corp........................................................................... 3,080,250
40,000 Chevron Corp......................................................................... 3,322,500
48,000 Exxon Corp........................................................................... 3,423,000
41,000 Mobil Corp........................................................................... 3,141,625
56,000 Royal Dutch Petroleum Co. (ADR) (Netherlands)........................................ 3,069,500
58,000 Texaco, Inc.......................................................................... 3,461,875
--------------
19,498,750
--------------
PAPER & FOREST PRODUCTS (1.9%)
99,000 Boise Cascade Corp................................................................... 3,242,250
66,000 Champion International Corp.......................................................... 3,246,375
57,000 Georgia-Pacific Corp................................................................. 3,359,438
72,000 International Paper Co............................................................... 3,096,000
167,000 Louisiana-Pacific Corp............................................................... 3,047,750
100,000 Mead Corp............................................................................ 3,175,000
75,000 Potlatch Corp........................................................................ 3,150,000
112,000 Westvaco Corp........................................................................ 3,164,000
68,000 Weyerhaeuser Co...................................................................... 3,140,750
104,000 Willamette Industries, Inc........................................................... 3,328,000
--------------
31,949,563
--------------
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
PERSONAL CARE (0.6%)
107,000 Alberto-Culver Co. (Class B)......................................................... $ 3,103,000
45,000 Avon Products, Inc................................................................... 3,487,500
58,000 Gillette Co.......................................................................... 3,287,875
--------------
9,878,375
--------------
PHOTOGRAPHY/IMAGING (0.8%)
52,000 Eastman Kodak Co..................................................................... 3,799,250
208,000 Ikon Office Solutions, Inc........................................................... 3,029,000
86,000 Polaroid Corp........................................................................ 3,058,375
35,000 Xerox Corp........................................................................... 3,556,875
--------------
13,443,500
--------------
PROPERTY - CASUALTY INSURANCE (1.4%)
35,000 Allstate Corp........................................................................ 3,204,688
42,000 Chubb Corp........................................................................... 3,375,750
81,000 Cincinnati Financial Corp............................................................ 3,128,625
14,500 General Re Corp...................................................................... 3,675,750
24,000 Progressive Corp..................................................................... 3,384,000
66,000 SAFECO Corp.......................................................................... 2,994,750
91,000 St. Paul Companies, Inc.............................................................. 3,827,688
--------------
23,591,251
--------------
PUBLISHING (0.8%)
61,000 Dow Jones & Co., Inc................................................................. 3,400,750
44,000 McGraw-Hill, Inc..................................................................... 3,588,750
82,000 Meredith Corp........................................................................ 3,848,875
50,500 Times Mirror Co. (Class A)........................................................... 3,175,188
--------------
14,013,563
--------------
PUBLISHING - NEWSPAPER (0.8%)
51,000 Gannett Co., Inc..................................................................... 3,624,188
57,000 Knight-Ridder Newspapers, Inc........................................................ 3,138,563
47,000 New York Times Co. (Class A)......................................................... 3,724,750
52,000 Tribune Co........................................................................... 3,578,250
--------------
14,065,751
--------------
RAILROADS (0.8%)
32,000 Burlington Northern Santa Fe Corp.................................................... 3,142,000
70,000 CSX Corp............................................................................. 3,185,000
108,000 Norfolk Southern Corp................................................................ 3,219,750
73,000 Union Pacific Corp................................................................... 3,221,125
--------------
12,767,875
--------------
RESTAURANTS (0.8%)
225,000 Darden Restaurants, Inc.............................................................. 3,571,875
51,000 McDonald's Corp...................................................................... 3,519,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
10
<PAGE>
MORGAN STANLEY DEAN WITTER VALUE-ADDED MARKET SERIES - EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS JUNE 30, 1998, CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
107,000 TRICON Global Restaurants, Inc.*..................................................... $ 3,390,563
151,000 Wendy's International, Inc........................................................... 3,548,500
--------------
14,029,938
--------------
RETAIL - BUILDING SUPPLIES (0.6%)
43,000 Home Depot, Inc...................................................................... 3,571,688
84,000 Lowe's Companies, Inc................................................................ 3,407,250
106,000 Sherwin-Williams Co.................................................................. 3,511,250
--------------
10,490,188
--------------
RETAIL - COMPUTERS & ELECTRONICS (0.4%)
78,000 Circuit City Stores, Inc............................................................. 3,656,250
69,000 Tandy Corp........................................................................... 3,661,313
--------------
7,317,563
--------------
RETAIL - DEPARTMENT STORES (1.5%)
88,000 Dillard's, Inc. (Class A)............................................................ 3,646,500
67,000 Federated Department Stores, Inc.*................................................... 3,605,438
59,000 Harcourt General, Inc................................................................ 3,510,500
55,000 May Department Stores Co............................................................. 3,602,500
45,000 Mercantile Stores Co., Inc........................................................... 3,552,188
48,000 Nordstrom, Inc....................................................................... 3,705,000
48,500 Penney (J.C.) Co., Inc............................................................... 3,507,156
--------------
25,129,282
--------------
RETAIL - DRUG STORES (0.8%)
93,000 CVS Corp............................................................................. 3,621,188
109,000 Longs Drug Stores Corp............................................................... 3,147,375
97,000 Rite Aid Corp........................................................................ 3,643,563
88,000 Walgreen Co.......................................................................... 3,635,500
--------------
14,047,626
--------------
RETAIL - FOOD CHAINS (1.3%)
69,000 Albertson's, Inc..................................................................... 3,575,063
139,000 American Stores Co................................................................... 3,362,063
88,000 Giant Food, Inc. (Class A)........................................................... 3,789,500
106,000 Great Atlantic & Pacific Tea Co., Inc................................................ 3,504,625
82,000 Kroger Co.*.......................................................................... 3,515,750
73,000 Winn-Dixie Stores, Inc............................................................... 3,736,688
--------------
21,483,689
--------------
RETAIL - GENERAL MERCHANDISE (1.0%)
57,000 Costco Companies, Inc.*.............................................................. 3,594,563
73,000 Dayton Hudson Corp................................................................... 3,540,500
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
184,000 Kmart Corp.*......................................................................... $ 3,542,000
58,000 Sears, Roebuck & Co.................................................................. 3,541,625
59,000 Wal-Mart Stores, Inc................................................................. 3,584,250
--------------
17,802,938
--------------
RETAIL - SPECIALTY (0.9%)
105,000 AutoZone, Inc.*...................................................................... 3,353,438
85,000 Consolidated Stores Corp.*........................................................... 3,081,250
166,000 Pep Boys-Manny, Moe & Jack........................................................... 3,143,625
137,000 Toys 'R' Us, Inc.*................................................................... 3,228,063
170,000 Venator Group, Inc*.................................................................. 3,251,250
--------------
16,057,626
--------------
RETAIL - SPECIALTY APPAREL (0.6%)
60,000 Gap, Inc. (The)...................................................................... 3,697,500
109,000 Limited (The), Inc................................................................... 3,610,625
144,000 TJX Companies, Inc................................................................... 3,474,000
--------------
10,782,125
--------------
SAVINGS & LOAN COMPANIES (0.6%)
45,000 Ahmanson (H.F.) & Co................................................................. 3,195,000
33,000 Golden West Financial Corp........................................................... 3,508,313
78,000 Washington Mutual, Inc............................................................... 3,383,250
--------------
10,086,563
--------------
SEMICONDUCTOR EQUIPMENT (0.4%)
103,000 Applied Materials, Inc.*............................................................. 3,038,500
113,000 KLA-Tencor Corp.*.................................................................... 3,128,688
--------------
6,167,188
--------------
SPECIALTY PRINTING (0.4%)
96,000 Deluxe Corp.......................................................................... 3,438,000
80,000 Donnelley (R.R.) & Sons Co........................................................... 3,660,000
--------------
7,098,000
--------------
STEEL & IRON (1.4%)
141,000 Allegheny Teledyne Inc............................................................... 3,225,375
567,000 Armco, Inc.*......................................................................... 3,614,625
257,000 Bethlehem Steel Corp.*............................................................... 3,196,438
129,000 Inland Steel Industries, Inc......................................................... 3,636,188
69,000 Nucor Corp........................................................................... 3,174,000
101,000 USX-U.S. Steel Group, Inc............................................................ 3,333,000
210,000 Worthington Industries, Inc.......................................................... 3,150,000
--------------
23,329,626
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
11
<PAGE>
MORGAN STANLEY DEAN WITTER VALUE-ADDED MARKET SERIES - EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS JUNE 30, 1998, CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
TELECOMMUNICATIONS - CELLULAR/WIRELESS (0.4%)
62,000 AirTouch Communications, Inc.*....................................................... $ 3,623,125
121,000 Nextel Communications, Inc. (Class A)*............................................... 3,002,313
--------------
6,625,438
--------------
TELECOMMUNICATIONS - LONG DISTANCE (0.8%)
55,000 AT&T Corp............................................................................ 3,141,875
62,000 MCI Communications Corp.............................................................. 3,599,875
49,000 Sprint Corp.......................................................................... 3,454,500
76,000 WorldCom, Inc.*...................................................................... 3,671,750
--------------
13,868,000
--------------
TELEPHONES (1.6%)
76,000 Alltel Corp.......................................................................... 3,534,000
76,000 Ameritech Corp....................................................................... 3,410,500
70,000 Bell Atlantic Corp................................................................... 3,193,750
51,000 BellSouth Corp....................................................................... 3,423,375
111,000 Frontier Corp........................................................................ 3,496,500
62,000 GTE Corp............................................................................. 3,448,750
82,000 SBC Communications, Inc.............................................................. 3,280,000
67,813 U.S. West, Inc....................................................................... 3,187,208
--------------
26,974,083
--------------
TEXTILES & APPAREL (0.8%)
108,000 Fruit of the Loom, Inc. (Class A)*................................................... 3,584,250
65,000 Liz Claiborne, Inc................................................................... 3,396,250
118,000 Russell Corp......................................................................... 3,562,125
65,000 VF Corp.............................................................................. 3,347,500
--------------
13,890,125
--------------
TEXTILES - HOME FURNISHINGS (0.2%)
66,000 Springs Industries, Inc. (Class A)................................................... 3,044,250
--------------
TOBACCO (0.4%)
85,000 Philip Morris Companies, Inc......................................................... 3,346,875
119,000 UST, Inc............................................................................. 3,213,000
--------------
6,559,875
--------------
TRUCKERS (0.2%)
97,200 Ryder System, Inc.................................................................... 3,067,875
--------------
UTILITIES - ELECTRIC (5.1%)
81,000 Ameren Corp.......................................................................... 3,219,750
68,000 American Electric Power Co., Inc..................................................... 3,085,500
100,000 Baltimore Gas & Electric Co.......................................................... 3,106,250
75,000 Carolina Power & Light Co............................................................ 3,253,125
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
119,000 Central & South West Corp............................................................ $ 3,198,125
91,000 CINergy Corp......................................................................... 3,185,000
77,000 Consolidated Edison, Inc............................................................. 3,546,813
79,000 Dominion Resources, Inc.............................................................. 3,219,250
90,000 DTE Energy Co........................................................................ 3,633,750
56,000 Duke Power Co........................................................................ 3,318,000
116,000 Edison International................................................................. 3,429,250
126,000 Entergy Corp......................................................................... 3,622,500
110,000 FirstEnergy Corp..................................................................... 3,382,500
52,000 FPL Group, Inc....................................................................... 3,276,000
84,000 GPU, Inc............................................................................. 3,176,250
120,000 Houston Industries, Inc.............................................................. 3,705,000
245,000 Niagara Mohawk Power Corp.*.......................................................... 3,659,688
115,000 Northern States Power Co............................................................. 3,291,875
143,000 PacifiCorp........................................................................... 3,235,375
126,000 PECO Energy Co....................................................................... 3,677,625
105,000 PG & E Corp.......................................................................... 3,314,063
138,000 PP&L Resources, Inc.................................................................. 3,130,875
98,500 Public Service Enterprise Group, Inc................................................. 3,392,094
121,000 Southern Co.......................................................................... 3,350,188
76,000 Texas Utilities Co................................................................... 3,163,500
104,100 Unicom Corp.......................................................................... 3,650,006
--------------
87,222,352
--------------
WASTE MANAGEMENT (0.4%)
97,000 Browning-Ferris Industries, Inc...................................................... 3,370,750
107,000 Waste Management, Inc................................................................ 3,745,000
--------------
7,115,750
--------------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(IDENTIFIED COST $1,020,525,772) (a).................................................... 99.5 % 1,692,211,903
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES.......................................... 0.5 7,912,850
------ ---------------
NET ASSETS.............................................................................. 100.0 % $ 1,700,124,753
------ ---------------
------ ---------------
</TABLE>
- ---------------------
ADR American Depository Receipt.
* Non-income producing security.
(a) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $699,688,454 and the
aggregate gross unrealized depreciation is $28,002,323, resulting in net
unrealized appreciation of $671,686,131.
SEE NOTES TO FINANCIAL STATEMENTS
12
<PAGE>
MORGAN STANLEY DEAN WITTER VALUE-ADDED MARKET SERIES - EQUITY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $1,020,525,772).......................................................... $1,692,211,903
Cash........................................................................................ 26,254
Receivable for:
Investments sold........................................................................ 24,435,123
Dividends............................................................................... 1,864,974
Shares of beneficial interest sold...................................................... 1,847,271
Prepaid expenses and other assets........................................................... 76,914
--------------
TOTAL ASSETS........................................................................... 1,720,462,439
--------------
LIABILITIES:
Payable for:
Investments purchased................................................................... 17,384,468
Plan of distribution fee................................................................ 1,108,872
Shares of beneficial interest repurchased............................................... 992,450
Investment management fee............................................................... 671,572
Accrued expenses and other payables......................................................... 180,324
--------------
TOTAL LIABILITIES...................................................................... 20,337,686
--------------
NET ASSETS............................................................................. $1,700,124,753
--------------
--------------
COMPOSITION OF NET ASSETS:
Paid-in-capital............................................................................. $ 940,922,686
Net unrealized appreciation................................................................. 671,686,131
Accumulated undistributed net investment income............................................. 3,092,922
Accumulated undistributed net realized gain................................................. 84,423,014
--------------
NET ASSETS............................................................................. $1,700,124,753
--------------
--------------
CLASS A SHARES:
Net Assets.................................................................................. $18,422,430
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE)................................... 476,912
NET ASSET VALUE PER SHARE.............................................................. $38.63
--------------
--------------
MAXIMUM OFFERING PRICE PER SHARE,
(NET ASSET VALUE PLUS 5.54% OF NET ASSET VALUE)...................................... $40.77
--------------
--------------
CLASS B SHARES:
Net Assets.................................................................................. $1,628,435,118
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE)................................... 42,252,735
NET ASSET VALUE PER SHARE.............................................................. $38.54
--------------
--------------
CLASS C SHARES:
Net Assets.................................................................................. $8,976,712
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE)................................... 233,396
NET ASSET VALUE PER SHARE.............................................................. $38.46
--------------
--------------
CLASS D SHARES:
Net Assets.................................................................................. $44,290,493
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE)................................... 1,144,749
NET ASSET VALUE PER SHARE.............................................................. $38.69
--------------
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
13
<PAGE>
MORGAN STANLEY DEAN WITTER VALUE-ADDED MARKET SERIES - EQUITY PORTFOLIO
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1998*
<TABLE>
<S> <C>
NET INVESTMENT INCOME:
INCOME
Dividends (net of $76,698 foreign withholding tax)............................................ $ 25,226,265
Interest...................................................................................... 1,699,563
------------
TOTAL INCOME............................................................................. 26,925,828
------------
EXPENSES
Plan of distribution fee (Class A shares)..................................................... 25,684
Plan of distribution fee (Class B shares)..................................................... 11,880,753
Plan of distribution fee (Class C shares)..................................................... 46,410
Investment management fee..................................................................... 7,209,874
Transfer agent fees and expenses.............................................................. 1,294,721
S&P license fee............................................................................... 236,819
Registration fees............................................................................. 119,265
Custodian fees................................................................................ 97,243
Shareholder reports and notices............................................................... 72,202
Professional fees............................................................................. 53,247
Trustees' fees and expenses................................................................... 9,884
Other......................................................................................... 13,079
------------
TOTAL EXPENSES........................................................................... 21,059,181
------------
NET INVESTMENT INCOME.................................................................... 5,866,647
------------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain............................................................................. 114,426,479
Net change in unrealized appreciation......................................................... 185,461,139
------------
NET GAIN................................................................................. 299,887,618
------------
NET INCREASE.................................................................................. $305,754,265
------------
------------
</TABLE>
- ---------------------
* Class A, Class C and Class D shares were issued July 28, 1997.
SEE NOTES TO FINANCIAL STATEMENTS
14
<PAGE>
MORGAN STANLEY DEAN WITTER VALUE-ADDED MARKET SERIES - EQUITY PORTFOLIO
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
JUNE 30, 1998* JUNE 30, 1997
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income....................................................... $ 5,866,647 $ 6,882,589
Net realized gain........................................................... 114,426,479 29,310,632
Net change in unrealized appreciation....................................... 185,461,139 223,988,603
-------------- --------------
NET INCREASE........................................................... 305,754,265 260,181,824
-------------- --------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A shares.......................................................... (63,581) --
Class B shares.......................................................... (5,643,366) (6,849,389)
Class C shares.......................................................... (16,505) --
Class D shares.......................................................... (276,561) --
Net realized gain
Class A shares.......................................................... (358,348) --
Class B shares.......................................................... (53,722,119) (20,247,286)
Class C shares.......................................................... (148,997) --
Class D shares.......................................................... (1,403,319) --
-------------- --------------
TOTAL DIVIDENDS AND DISTRIBUTIONS...................................... (61,632,796) (27,096,675)
-------------- --------------
Net increase from transactions in shares of beneficial interest............. 86,265,916 175,057,823
-------------- --------------
NET INCREASE........................................................... 330,387,385 408,142,972
NET ASSETS:
Beginning of period......................................................... 1,369,737,368 961,594,396
-------------- --------------
END OF PERIOD
(INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME OF $3,092,922 AND
$3,226,288, RESPECTIVELY)............................................... $1,700,124,753 $1,369,737,368
-------------- --------------
-------------- --------------
</TABLE>
- ---------------------
* Class A, Class C and Class D shares were issued July 28, 1997.
SEE NOTES TO FINANCIAL STATEMENTS
15
<PAGE>
MORGAN STANLEY DEAN WITTER VALUE-ADDED MARKET SERIES - EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS JUNE 30, 1998
1. ORGANIZATION AND ACCOUNTING POLICIES
Morgan Stanley Dean Witter Value-Added Market Series - Equity Portfolio (the
"Fund"), formerly Dean Witter Value-Added Market Series - Equity Portfolio, 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. On July 28, 1997, the Fund commenced offering three additional
classes of shares, with the then current shares, other than shares held by
certain employee benefit plans established by Dean Witter Reynolds Inc. and its
affiliate, SPS Transaction Services, Inc., designated as Class B shares. Shares
held by those employee benefit plans prior to July 28, 1997 have been designated
Class D shares.
The Fund offers Class A shares, Class B shares, Class C shares and Class D
shares. The four classes are substantially the same except that most Class A
shares are subject to a sales charge imposed at the time of purchase, some Class
A shares, and most Class B shares and Class C shares are subject to a contingent
deferred sales charge imposed on shares redeemed within one year, six years and
one year, respectively. Class D shares are not subject to a sales charge.
Additionally, Class A shares, Class B shares and Class C shares incur
distribution expenses.
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
16
<PAGE>
MORGAN STANLEY DEAN WITTER VALUE-ADDED MARKET SERIES - EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS JUNE 30, 1998, CONTINUED
not readily available, including circumstances under which it is determined by
Morgan Stanley Dean Witter Advisors Inc. (the "Investment Manager"), formerly
Dean Witter InterCapital Inc., 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
mark-to-market basis until sixty days prior to maturity and thereafter at
amortized cost based on their value on the 61st day. Short-term debt securities
having a maturity date of sixty days or less at the time of purchase are valued
at amortized cost.
B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on the
trade date (date the order to buy or sell is executed). Realized gains and
losses on security transactions are determined by the identified cost method.
Dividend income and other distributions are recorded on the ex-dividend date.
Discounts are accreted over the respective life of the securities. Interest
income is accrued daily.
C. MULTIPLE CLASS ALLOCATIONS -- Investment income, expenses (other than
distribution fees), and realized and unrealized gains and losses are allocated
to each class of shares based upon the relative net asset value on the date such
items are recognized. Distribution fees are charged directly to the respective
class.
D. FEDERAL INCOME TAX STATUS -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income to its shareholders.
Accordingly, no federal income tax provision is required.
E. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund records dividends and
distributions to its shareholders on the 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
17
<PAGE>
MORGAN STANLEY DEAN WITTER VALUE-ADDED MARKET SERIES - EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS JUNE 30, 1998, CONTINUED
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; 0.425% to the portion of
daily net assets exceeding $1 billion but not exceeding $2 billion. Effective
May 1, 1998 the Agreement was amended to reduce the annual rate to 0.40% of the
portion of daily net assets in excess of $2 billion.
Under the terms of the Agreement, in addition to managing the Fund's
investments, the Investment Manager maintains certain of the Fund's books and
records and furnishes, at its own expense, office space, facilities, equipment,
clerical, bookkeeping and certain legal services and pays the salaries of all
personnel, including officers of the Fund who are employees of the Investment
Manager. The Investment Manager also bears the cost of telephone services, heat,
light, power and other utilities provided to the Fund.
3. PLAN OF DISTRIBUTION
Shares of the Fund are distributed by Morgan Stanley 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. The Plan provides that the Fund will pay the Distributor a fee which is
accrued daily and paid monthly at the following annual rates: (i) Class A -- up
to 0.25% of the average daily net assets of Class A; (ii) Class B -- 1.0% of the
lesser of: (a) the average daily aggregate gross sales of the Class B shares
since the inception of the Fund (not including reinvestment of dividend or
capital gain distributions) less the average daily aggregate net asset value of
the Class B shares redeemed since the Fund's inception upon which a contingent
deferred sales charge has been imposed or waived; or (b) the average daily net
assets of Class B; and (iii) Class C -- up to 1.0% of the average daily net
assets of Class C. In the case of Class A shares, amounts paid under the Plan
are paid to the Distributor for services provided. In the case of Class B and
Class C shares, amounts paid under the Plan are paid to the Distributor for
services provided and the expenses borne by it and others in the distribution of
the shares of these Classes,
18
<PAGE>
MORGAN STANLEY DEAN WITTER VALUE-ADDED MARKET SERIES - EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS JUNE 30, 1998, CONTINUED
including the payment of commissions for sales of these Classes and incentive
compensation to, and expenses of, Morgan Stanley Dean Witter Financial Advisors
and others who engage in or support distribution of the 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
these shares to other than current shareholders; and preparation, printing and
distribution of sales literature and advertising materials. In addition, the
Distributor may utilize fees paid pursuant to the Plan, in the case of Class B
shares, to compensate Dean Witter Reynolds Inc. ("DWR"), an affiliate of the
Investment Manager and Distributor, and other selected broker-dealers for their
opportunity costs in advancing such amounts, which compensation would be in the
form of a carrying charge on any unreimbursed expenses.
In the case of Class B shares, provided that the Plan continues in effect, any
cumulative expenses incurred by the Distributor but not yet recovered may be
recovered through the payment of future distribution fees from the Fund pursuant
to the Plan and contingent deferred sales charges paid by investors upon
redemption of Class B shares. 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, totaled $65,044,670 at June 30, 1998.
In the case of Class A shares and Class C shares, expenses incurred pursuant to
the Plan in any calendar year in excess of 0.25% or 1.0% of the average daily
net assets of Class A or Class C, respectively, will not be reimbursed by the
Fund through payments in any subsequent year, except that expenses representing
a gross sales credit to Morgan Stanley Dean Witter Financial Advisors or other
selected broker-dealer representatives may be reimbursed in the subsequent
calendar year. For the period ended June 30, 1998, the distribution fee was
accrued for Class A shares and Class C shares at the annual rate of 0.25% and
1.0%, respectively.
The Distributor has informed the Fund that for the period ended June 30, 1998,
it received contingent deferred sales charges from certain redemptions of the
Fund's Class A shares, Class B shares and Class C shares of $17,900, $1,399,742
and $8,814, respectively, and received $106,072 in front-end sales charges from
sales of the Fund's Class A shares. The respective shareholders pay such charges
which are not an expense of the Fund.
19
<PAGE>
MORGAN STANLEY DEAN WITTER VALUE-ADDED MARKET SERIES - EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS JUNE 30, 1998, 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 year June 30, 1998 aggregated $339,145,308 and
$277,857,482, respectively. Included in the aforementioned are purchases and
sales of U.S. Government securities of $173,620 and $629,964, respectively. Also
included in the aforementioned are sales of common stock of Morgan Stanley Dean
Witter & Co., an affiliate of the Investment Manager, of $1,840,663 as well as a
realized gain of $1,275,073.
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At June 30, 1998, the Fund had
transfer agent fees and expenses payable of $6,512.
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 June 30, 1998, the Fund had an accrued pension liability of
$74,703 which is included in accrued expenses in the Statement of Assets and
Liabilities.
20
<PAGE>
MORGAN STANLEY DEAN WITTER VALUE-ADDED MARKET SERIES - EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS JUNE 30, 1998, CONTINUED
5. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
JUNE 30, 1998+ JUNE 30, 1997
---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
----------- -------------- ----------- --------------
<S> <C> <C> <C> <C>
CLASS A SHARES*
Sold............................................................. 566,344 $ 20,580,505 -- --
Reinvestment of dividends and distributions...................... 10,591 362,114 -- --
Redeemed......................................................... (100,023) (3,787,323) -- --
----------- -------------- ----------- --------------
Net increase - Class A........................................... 476,912 17,155,296 -- --
----------- -------------- ----------- --------------
CLASS B SHARES
Sold............................................................. 7,625,465 274,194,911 13,005,357 $ 378,425,492
Reinvestment of dividends and distributions...................... 1,584,986 54,222,347 865,747 24,803,673
Redeemed......................................................... (7,463,240) (270,820,041) (7,810,681) (228,171,342)
----------- -------------- ----------- --------------
Net increase - Class B........................................... 1,747,211 57,597,217 6,060,423 175,057,823
----------- -------------- ----------- --------------
CLASS C SHARES*
Sold............................................................. 275,286 10,002,911 -- --
Reinvestment of dividends and distributions...................... 4,390 150,050 -- --
Redeemed......................................................... (46,280) (1,694,447) -- --
----------- -------------- ----------- --------------
Net increase - Class C........................................... 233,396 8,458,514 -- --
----------- -------------- ----------- --------------
CLASS D SHARES*
Sold............................................................. 345,098 12,600,125 -- --
Reinvestment of dividends and distributions...................... 49,109 1,679,529 -- --
Redeemed......................................................... (301,496) (11,224,765) -- --
----------- -------------- ----------- --------------
Net increase - Class D........................................... 92,711 3,054,889 -- --
----------- -------------- ----------- --------------
Net increase in Fund............................................. 2,550,230 $ 86,265,916 6,060,423 $ 175,057,823
----------- -------------- ----------- --------------
----------- -------------- ----------- --------------
</TABLE>
- ------------------
+ On July 28, 1997, 1,052,038 shares representing $36,600,402 were transferred
to Class D.
* For the period July 28, 1997 (issue date) through June 30, 1998.
21
<PAGE>
MORGAN STANLEY 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 ENDED JUNE 30
----------------------------------------------------------------------------------------------------------------
1998*++ 1997 1996 1995 1994 1993 1992 1991 1990 1989
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS B SHARES
PER SHARE
OPERATING
PERFORMANCE:
Net asset value,
beginning of
period.......... $ 32.96 $ 27.09 $ 23.06 $ 19.23 $ 19.17 $ 16.29 $ 14.73 $ 14.21 $ 13.86 $ 12.47
---------- --------- --------- ---------- --------- --------- ---------- --------- --------- ----------
Net investment
income.......... 0.13 0.17 0.18 0.19 0.14 0.14 0.17 0.20 0.23 0.24
Net realized and
unrealized
gain............ 6.89 6.41 4.23 3.88 0.30 2.86 1.57 0.59 0.62 1.56
---------- --------- --------- ---------- --------- --------- ---------- --------- --------- ----------
Total from
investment
operations...... 7.02 6.58 4.41 4.07 0.44 3.00 1.74 0.79 0.85 1.80
---------- --------- --------- ---------- --------- --------- ---------- --------- --------- ----------
Less dividends
and
distributions
from:
Net investment
income........ (0.14) (0.18) (0.26) (0.09) (0.09) (0.12) (0.18) (0.21) (0.24) (0.24)
Net realized
gain.......... (1.30) (0.53) (0.12) (0.15) (0.29) -- -- (0.06) (0.26) (0.17)
---------- --------- --------- ---------- --------- --------- ---------- --------- --------- ----------
Total dividends
and
distributions... (1.44) (0.71) (0.38) (0.24) (0.38) (0.12) (0.18) (0.27) (0.50) (0.41)
---------- --------- --------- ---------- --------- --------- ---------- --------- --------- ----------
Net asset value,
end of period... $ 38.54 $ 32.96 $ 27.09 $ 23.06 $ 19.23 $ 19.17 $ 16.29 $ 14.73 $ 14.21 $ 13.86
---------- --------- --------- ---------- --------- --------- ---------- --------- --------- ----------
---------- --------- --------- ---------- --------- --------- ---------- --------- --------- ----------
TOTAL INVESTMENT
RETURN+.......... 21.84% 24.71% 19.27% 21.41% 2.26% 18.50% 11.83% 5.82% 6.17% 16.87%
RATIOS TO AVERAGE
NET ASSETS:
Expenses......... 1.36% 1.45% 1.51% 1.64% 1.68% 1.71% 1.80% 1.80% 1.80% 1.90%
Net investment
income.......... 0.35% 0.62% 0.81% 1.01% 0.86% 0.86% 1.10% 1.40% 1.90% 2.30%
SUPPLEMENTAL DATA:
Net assets, end
of period, in
millions........ $1,628 $1,370 $962 $642 $456 $311 $193 $139 $148 $78
Portfolio
turnover rate... 18% 11% 10% 11% 19% 6% 9% 20% 10% 10%
</TABLE>
- ---------------------
* Prior to July 28, 1997, the Fund issued one class of shares. All shares of
the Fund held prior to that date, other than shares held by certain
employee benefit plans established by Dean Witter Reynolds Inc. and its
affiliate, SPS Transaction Services, Inc., have been designated Class B
shares. Shares held by those employee benefit plans prior to July 28, 1997
have been designated Class D shares.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Does not reflect the deduction of sales charge. Calculated based on the net
asset value as of the last business day of the period.
SEE NOTES TO FINANCIAL STATEMENTS
22
<PAGE>
MORGAN STANLEY DEAN WITTER VALUE-ADDED MARKET SERIES - EQUITY PORTFOLIO
FINANCIAL HIGHLIGHTS, CONTINUED
<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 28, 1997*
THROUGH
JUNE 30, 1998++
- ----------------------------------------------------------------------------------------
<S> <C>
CLASS A SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.................................. $ 34.79
------
Net investment income................................................. 0.30
Net realized and unrealized gain...................................... 5.07
------
Total from investment operations...................................... 5.37
------
Less dividends and distributions from:
Net investment income.............................................. (0.23)
Net realized gain.................................................. (1.30)
------
Total dividends and distributions..................................... (1.53)
------
Net asset value, end of period........................................ $ 38.63
------
------
TOTAL INVESTMENT RETURN+.............................................. 16.01%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.............................................................. 0.83%(2)
Net investment income................................................. 0.87%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands............................... $18,422
Portfolio turnover rate............................................... 18%
</TABLE>
<TABLE>
<S> <C>
CLASS C SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.................................. $ 34.79
------
Net investment income................................................. 0.04
Net realized and unrealized gain...................................... 5.07
------
Total from investment operations...................................... 5.11
------
Less dividends and distributions from:
Net investment income.............................................. (0.14)
Net realized gain.................................................. (1.30)
------
Total dividends and distributions..................................... (1.44)
------
Net asset value, end of period........................................ $ 38.46
------
------
TOTAL INVESTMENT RETURN+.............................................. 15.22%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.............................................................. 1.58%(2)
Net investment income................................................. 0.12%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands............................... $8,977
Portfolio turnover rate............................................... 18%
</TABLE>
- ---------------------
* The date shares were first issued.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ 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.
SEE NOTES TO FINANCIAL STATEMENTS
23
<PAGE>
MORGAN STANLEY DEAN WITTER VALUE-ADDED MARKET SERIES - EQUITY PORTFOLIO
FINANCIAL HIGHLIGHTS, CONTINUED
<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 28, 1997*
THROUGH
JUNE 30, 1998++
- ----------------------------------------------------------------------------------------
<S> <C>
CLASS D SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.................................. $ 34.79
------
Net investment income................................................. 0.40
Net realized and unrealized gain...................................... 5.06
------
Total from investment operations...................................... 5.46
------
Less dividends and distributions from:
Net investment income.............................................. (0.26)
Net realized gain.................................................. (1.30)
------
Total dividends and distributions..................................... (1.56)
------
Net asset value, end of period........................................ $ 38.69
------
------
TOTAL INVESTMENT RETURN+.............................................. 16.27%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.............................................................. 0.58%(2)
Net investment income................................................. 1.17%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands............................... $44,290
Portfolio turnover rate............................................... 18%
</TABLE>
- ---------------------
* The date shares were first issued. Shareholders who held shares of the Fund
prior to July 28, 1997 (the date the Fund converted to a multiple class
share structure) should refer to the Financial Highlights of Class B to
obtain the historical per share data and ratio information of their shares.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Calculated based on the net asset value as of the last business day of the
period.
(1) Not annualized.
(2) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS
24
<PAGE>
MORGAN STANLEY DEAN WITTER VALUE-ADDED MARKET
SERIES - EQUITY PORTFOLIO
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND TRUSTEES
OF MORGAN STANLEY DEAN WITTER VALUE-ADDED MARKET SERIES - EQUITY PORTFOLIO
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Morgan Stanley Dean Witter
Value-Added Market Series - Equity Portfolio (the "Fund"), formerly Dean Witter
Value-Added Market Series - Equity Portfolio, at June 30, 1998, the results of
its operations for the year then ended, the changes in its net assets for each
of the two years in the period then ended and the financial highlights for each
of the periods presented, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at June 30, 1998 by correspondence with the custodian
and brokers, provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
1177 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK
AUGUST 5, 1998
1998 FEDERAL TAX NOTICE (UNAUDITED)
During the year ended June 30, 1998, the fund paid to shareholders
$0.98 per share from long-term capital gains. Of this $0.98
distribution, $0.26 is taxable as 28% rate gain and $0.72 is
taxable as 20% rate gain. For such period, 100% of the ordinary
dividends paid qualified for the dividends received deduction
available to corporations.
25
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TRUSTEES
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Wayne E. Hedien
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
Morgan Stanley Dean Witter Trust FSB
Harborside Financial Center - Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
Morgan Stanley Dean Witter Advisors Inc.
Two World Trade Center
New York, New York 10048
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.
Morgan Stanley
Dean Witter
Value-Added
Market Series
Equity Portfolio
[GRAPHIC]
Annual Report
June 30, 1998
