<PAGE>
MORGAN STANLEY DEAN WITTER VALUE-ADDED
MARKET SERIES -- EQUITY PORTFOLIO Two World Trade Center
LETTER TO THE SHAREHOLDERS December 31, 1998 New York, New York 10048
DEAR SHAREHOLDER:
We are pleased to present the semiannual report on the operations of Morgan
Stanley Dean Witter Value-Added Market Series/Equity Portfolio for the
six-month period ended December 31, 1998.
Investors in the equity market were taken on a wild ride in 1998. After soaring
to a record high of 9,338 in July, the Dow plunged nearly 1,800 points by the
end of August. Several factors combined to drag down the price of stocks,
including a slowdown in profits growth, the persistent Asian contagion,
Russia's debt default and devaluation of the ruble, the worsening White House
scandal and the collapse of a major hedge fund. Fortunately, the steadying
influence of the Goldilocks economy -- an environment that is neither too hot
nor too cold, allowing for economic expansion with low inflation -- pulled the
market out of its summer slump.
During 1998 the top 50 stocks in the Standard & Poor's 500 Composite Stock
Price Index (S&P 500), which comprise about 50 percent of the total market
capitalization of the index, represented more than 80 percent of the S&P 500's
total return. Large-cap growth companies such as Microsoft, Lucent, Wal-Mart,
IBM, Cisco, Dell and MCI Worldcom were the market leaders in 1998. Even though
the Fund includes all these companies, their share in the Fund is much smaller
than the portion of the Index they represent.
Morgan Stanley Dean Witter Value-Added Market Series/Equity Portfolio invests
in substantially all of the stocks included in the S&P 500. Unlike that index,
however, the Fund weights all the stock positions equally. The small- and
medium-capitalized companies in the index, therefore, make up a greater portion
of the portfolio compared to the index. In addition, the Fund is
overrepresented in the cyclical and utilities sectors and underrepresented in
the healthcare and technology sectors, relative to the capitalization-weighted
S&P 500, as a result of the Fund's strategy.
<PAGE>
MORGAN STANLEY DEAN WITTER VALUE-ADDED MARKET SERIES -- EQUITY PORTFOLIO
LETTER TO THE SHAREHOLDERS December 31, 1998, continued
PERFORMANCE AND PORTFOLIO
For the six months ending December 31, 1998, Morgan Stanley Dean Witter
Value-Added Market Series/Equity Portfolio Class B gained 0.05 percent, while
the S&P 500 rose 9.24 percent. The Fund's Class A, C and D shares returned 0.36
percent, --0.01 percent, and 0.50 percent, respectively, for the same time
period. For calendar year 1998 the Fund's Class B shares gained 11.22 percent.
Since its inception on December 1, 1987, the Fund has provided an average
annual total return of 15.46 percent.
LOOKING AHEAD
Many observers anticipate a slight moderation in the pace of economic activity
during the first half of 1999, with no major adverse surprises in the rate of
inflation. Further, the current relatively low interest rates may support a
small-cap rally. What's more, the small-cap segment of the market appears to be
undervalued and may offer greater growth potential than the broader market over
the long term. Such a scenario would bode well for the Fund, because its
returns have historically been strong during periods, such as 1991 through
1993, when small-cap stocks have outperformed larger ones.
We appreciate your ongoing 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,
/s/ CHARLES A. FIUMEFREDDO
- --------------------------
CHARLES A. FIUMEFREDDO
Chairman of the Board
2
<PAGE>
MORGAN STANLEY DEAN WITTER VALUE-ADDED MARKET SERIES -- EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS December 31, 1998 (unaudited)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------- -------------------
<S> <C> <C>
COMMON STOCKS (99.9%)
Accident & Health Insurance (0.6%)
63,000 Provident Companies, Inc. ............ $ 2,614,500
75,600 Torchmark Corp. ...................... 2,669,625
58,000 UNUM Corp. ........................... 3,385,750
--------------
8,669,875
--------------
Advertising (0.4%)
43,000 Interpublic Group of Companies,
Inc. .............................. 3,429,250
62,300 Omnicom Group, Inc. .................. 3,613,400
--------------
7,042,650
--------------
Aerospace (0.7%)
83,000 Boeing Co. ........................... 2,707,875
32,000 Lockheed Martin Corp. ................ 2,712,000
41,000 Northrop Grumman Corp. ............... 2,998,125
31,000 United Technologies Corp. ............ 3,371,250
--------------
11,789,250
--------------
Air Freight/Delivery Services (0.2%)
38,000 FDX Corp.* ........................... 3,382,000
--------------
Airlines (0.8%)
45,000 AMR Corp.* ........................... 2,671,875
55,420 Delta Air Lines, Inc. ................ 2,881,840
154,000 Southwest Airlines Co. ............... 3,455,375
55,000 US Airways Group Inc.* ............... 2,860,000
--------------
11,869,090
--------------
Alcoholic Beverages (0.9%)
51,000 Anheuser-Busch Companies, Inc......... 3,346,875
47,000 Brown-Forman Corp. (Class B) ......... 3,557,312
65,000 Coors (Adolph) Co. (Class B) ......... 3,668,437
93,670 Fortune Brands, Inc. ................. 2,962,314
--------------
13,534,938
--------------
Aluminum (0.6%)
111,000 Alcan Aluminium Ltd. (Canada) ........ 3,003,937
45,400 Aluminum Co. of America .............. 3,385,137
58,400 Reynolds Metals Co. .................. 3,076,950
--------------
9,466,024
--------------
Apparel (0.8%)
224,000 Fruit of the Loom, Inc.
(Class A)* ........................... 3,094,000
89,000 Liz Claiborne, Inc. .................. 2,809,063
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------- -------------------
<S> <C> <C>
145,000 Russell Corp. ........................ $ 2,945,313
65,510 VF Corp. ............................. 3,070,781
--------------
11,919,157
--------------
Auto Parts: O.E.M. (0.8%)
69,922 Dana Corp. ........................... 2,858,062
40,310 Eaton Corp. .......................... 2,849,413
58,000 Johnson Controls, Inc. ............... 3,422,000
59,480 TRW, Inc. ............................ 3,342,032
--------------
12,471,507
--------------
Automotive Aftermarket (0.6%)
148,050 Cooper Tire & Rubber Co. ............. 3,025,772
91,710 Genuine Parts Co. .................... 3,066,553
56,000 Goodyear Tire & Rubber Co. ........... 2,824,500
--------------
8,916,825
--------------
Biotechnology (0.2%)
33,000 Amgen Inc.* .......................... 3,448,500
--------------
Books/Magazine (0.4%)
59,470 Harcourt General, Inc. ............... 3,163,061
82,600 Meredith Corp. ....................... 3,128,475
--------------
6,291,536
--------------
Broadcasting (0.4%)
110,820 CBS Corp.* ........................... 3,629,355
63,000 Clear Channel Communications,
Inc.* ............................. 3,433,500
--------------
7,062,855
--------------
Building Materials (0.2%)
91,740 Owens Corning ........................ 3,251,036
--------------
Building Materials/DIY Chains (0.4%)
55,000 Home Depot, Inc. ..................... 3,365,313
66,000 Lowe's Companies, Inc. ............... 3,378,375
--------------
6,743,688
--------------
Building Products (0.6%)
47,360 Armstrong World Industries, Inc....... 2,856,400
57,440 Georgia-Pacific Corp. ................ 3,363,830
121,000 Masco Corp. .......................... 3,478,750
--------------
9,698,980
--------------
Cable Television (0.7%)
58,000 Comcast Corp. (Class A Special) ...... 3,403,875
73,610 MediaOne Group Inc.* ................. 3,459,670
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
3
<PAGE>
MORGAN STANLEY DEAN WITTER VALUE-ADDED MARKET SERIES -- EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS December 31, 1998 (unaudited) continued
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------- -------------------
<S> <C> <C>
62,000 Tele-Communications, Inc.
(Class A)* ......................... $ 3,429,375
--------------
10,292,920
--------------
Casino/Gambling (0.4%)
180,000 Harrah's Entertainment, Inc.* ........ 2,823,750
194,000 Mirage Resorts, Inc.* ................ 2,897,875
--------------
5,721,625
--------------
Cellular Telephone (0.6%)
50,000 AirTouch Communications, Inc.*........ 3,606,250
133,000 Nextel Communications, Inc.
(Class A)* ........................... 3,142,125
115,000 Sprint Corp. (PCS Group)* ............ 2,659,375
--------------
9,407,750
--------------
Clothing/Shoe/Accessory Stores (0.9%)
58,000 Gap, Inc. (The) ...................... 3,262,500
109,870 Limited (The), Inc. .................. 3,199,964
92,800 Nordstrom, Inc. ...................... 3,219,000
119,000 TJX Companies, Inc. .................. 3,451,000
258,000 Venator Group, Inc.* ................. 1,660,875
--------------
14,793,339
--------------
Computer Communications (0.8%)
71,000 3Com Corp.* .......................... 3,181,687
51,000 Ascend Communications, Inc.* ......... 3,353,250
332,000 Cabletron Systems, Inc.* ............. 2,780,500
36,000 Cisco Systems, Inc.* ................. 3,341,250
--------------
12,656,687
--------------
Computer Software (1.8%)
75,630 Adobe Systems, Inc. .................. 3,535,702
82,600 Autodesk, Inc. ....................... 3,520,825
62,000 BMC Software, Inc.* .................. 2,762,875
65,000 Computer Associates
International, Inc. ............... 2,770,625
24,000 Microsoft Corp.* ..................... 3,325,500
184,500 Novell, Inc.* ........................ 3,344,062
76,000 Oracle Corp.* ........................ 3,277,500
175,000 Parametric Technology Corp.* ......... 2,843,750
141,700 PeopleSoft, Inc.* .................... 2,674,587
--------------
28,055,426
--------------
Computer/Video Chains (0.4%)
68,000 Circuit City Stores, Inc. ............ 3,395,750
63,490 Tandy Corp. .......................... 2,614,994
--------------
6,010,744
--------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------- -------------------
<S> <C> <C>
Construction/Ag Equip/Trucks (1.3%)
131,000 Case Corp. ........................... $ 2,857,437
63,000 Caterpillar, Inc. .................... 2,898,000
78,000 Cummins Engine Co., Inc. ............. 2,769,000
85,000 Deere & Co. .......................... 2,815,625
31,000 NACCO Industries, Inc. (Class A)...... 2,852,000
113,850 Navistar International Corp.* ........ 3,244,725
69,000 PACCAR, Inc. ......................... 2,820,375
--------------
20,257,162
--------------
Consumer Electronics/Appliances (0.4%)
52,000 Maytag Corp. ......................... 3,237,000
53,410 Whirlpool Corp. ...................... 2,957,579
--------------
6,194,579
--------------
Consumer Specialties (0.2%)
135,050 Jostens, Inc. ........................ 3,536,622
--------------
Consumer Sundries (0.2%)
73,580 American Greetings Corp.
(Class A) .......................... 3,021,379
--------------
Containers/Packaging (1.2%)
80,000 Ball Corp. ........................... 3,660,000
76,000 Bemis Company, Inc. .................. 2,883,250
90,000 Crown Cork & Seal Co., Inc. .......... 2,773,125
96,000 Owens-Illinois, Inc.* ................ 2,940,000
68,000 Sealed Air Corp.* .................... 3,472,250
60,450 Temple-Inland, Inc. .................. 3,585,441
--------------
19,314,066
--------------
Contract Drilling (0.4%)
148,000 Helmerich & Payne, Inc. .............. 2,867,500
277,000 Rowan Companies, Inc.* ............... 2,770,000
--------------
5,637,500
--------------
Department Stores (1.2%)
96,000 Dillard's, Inc. (Class A) ............ 2,724,000
75,000 Federated Department Stores,
Inc.* .............................. 3,267,187
54,000 Kohl's Corp.* ........................ 3,317,625
55,440 May Department Stores Co. ............ 3,347,190
58,000 Penney (J.C.) Co., Inc. .............. 2,718,750
67,000 Sears, Roebuck & Co. ................. 2,847,500
--------------
18,222,252
--------------
Discount Chains (1.2%)
132,000 Consolidated Stores Corp.* ........... 2,664,750
45,000 Costco Companies, Inc.* .............. 3,248,438
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
4
<PAGE>
MORGAN STANLEY DEAN WITTER VALUE-ADDED MARKET SERIES -- EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS December 31, 1998 (unaudited) continued
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------- -------------------
<S> <C> <C>
67,000 Dayton Hudson Corp. .................. $ 3,634,750
114,000 Dollar General Corp. ................. 2,693,250
196,000 Kmart Corp.* ......................... 3,001,250
42,000 Wal-Mart Stores, Inc. ................ 3,420,375
--------------
18,662,813
--------------
Diversified Commercial Services (0.2%)
52,000 Paychex, Inc. ........................ 2,674,750
--------------
Diversified Electronic Products (0.4%)
77,530 Harris Corp. ......................... 2,839,536
67,500 Rockwell International Corp. ......... 3,277,969
--------------
6,117,505
--------------
Diversified Financial Services (0.7%)
33,240 American Express Co. ................. 3,398,790
47,000 Providian Financial Corp. ............ 3,525,000
29,240 Transamerica Corp. ................... 3,377,220
--------------
10,301,010
--------------
Diversified Manufacturing (2.1%)
97,000 Aeroquip-Vickers, Inc. ............... 2,903,938
142,000 Allegheny Teledyne Inc. .............. 2,902,125
76,620 AlliedSignal, Inc. ................... 3,395,224
58,450 Cooper Industries, Inc. .............. 2,787,334
50,000 Danaher Corp. ........................ 2,715,625
92,700 Dover Corp. .......................... 3,395,138
52,000 FMC Corp.* ........................... 2,912,000
86,000 ITT Industries, Inc. ................. 3,418,500
38,290 Minnesota Mining &
Manufacturing Co. .................... 2,723,376
162,000 Thermo Electron Corp.* ............... 2,743,875
46,000 Tyco International Ltd. .............. 3,470,125
--------------
33,367,260
--------------
Drug Store Chain (0.9%)
62,000 CVS Corp. ............................ 3,410,000
92,200 Longs Drug Stores Corp. .............. 3,457,500
71,000 Rite Aid Corp. ....................... 3,518,938
57,000 Walgreen Co. ......................... 3,338,062
--------------
13,724,500
--------------
E.D.P. Peripherals (0.4%)
43,000 EMC Corp.* ........................... 3,655,000
110,000 Seagate Technology, Inc.* ............ 3,327,500
--------------
6,982,500
--------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------- -------------------
<S> <C> <C>
E.D.P. Services (1.1%)
41,000 Automatic Data Processing, Inc. ...... $ 3,287,687
50,000 Ceridian Corp.* ...................... 3,490,625
53,420 Computer Sciences Corp.* ............. 3,442,251
63,000 Electronic Data Systems Corp. ........ 3,165,750
103,800 First Data Corp. ..................... 3,289,162
--------------
16,675,475
--------------
Electric Utilities (5.8%)
58,000 AES Corp. (The)* ..................... 2,747,750
81,670 Ameren Corp. ......................... 3,486,288
68,520 American Electric Power Co. .......... 3,224,723
100,830 Baltimore Gas & Electric Co. ......... 3,113,126
72,000 Carolina Power & Light Co. ........... 3,388,500
119,960 Central & South West Corp. ........... 3,291,403
91,740 CINergy Corp. ........................ 3,153,562
64,000 Consolidated Edison, Inc. ............ 3,384,000
70,000 Dominion Resources, Inc. ............. 3,272,500
77,000 DTE Energy Co. ....................... 3,301,375
51,460 Duke Power Co. ....................... 3,296,656
116,940 Edison International ................. 3,259,703
109,940 Entergy Corp. ........................ 3,421,882
105,870 FirstEnergy Corp. .................... 3,447,392
48,440 FPL Group, Inc. ...................... 2,985,115
76,000 GPU, Inc. ............................ 3,358,250
105,000 Houston Industries, Inc. ............. 3,373,125
55,000 New Century Energies, Inc. ........... 2,681,250
214,800 Niagara Mohawk Power Corp.* .......... 3,463,650
115,940 Northern States Power Co. ............ 3,217,335
144,050 PacifiCorp ........................... 3,034,053
83,000 PECO Energy Co. ...................... 3,454,875
105,860 PG & E Corp. ......................... 3,334,590
118,800 PP&L Resources, Inc. ................. 3,311,550
86,000 Public Service Enterprise Group,
Inc. .............................. 3,440,000
116,000 Southern Co. ......................... 3,371,250
73,000 Texas Utilities Co. .................. 3,408,188
90,000 Unicom Corp. ......................... 3,470,625
--------------
91,692,716
--------------
Electrical Products (0.6%)
51,390 Emerson Electric Co. ................. 3,215,087
102,670 Raychem Corp. ........................ 3,317,524
66,490 Thomas & Betts Corp. ................. 2,879,848
--------------
9,412,459
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
5
<PAGE>
MORGAN STANLEY DEAN WITTER VALUE-ADDED MARKET SERIES -- EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS December 31, 1998 (unaudited) continued
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------- -------------------
<S> <C> <C>
Electronic Components (0.2%)
68,000 AMP, Inc. .................................. $ 3,540,250
--------------
Electronic Data Processing (2.1%)
86,000 Apple Computer, Inc.* ...................... 3,520,625
85,000 COMPAQ Computer Corp. ...................... 3,564,687
174,000 Data General Corp.* ........................ 2,860,125
46,000 Dell Computer Corp.* ....................... 3,366,625
61,000 Gateway 2000, Inc.* ........................ 3,122,437
50,000 Hewlett-Packard Co. ........................ 3,415,625
18,000 International Business
Machines Corp. .......................... 3,325,500
258,900 Silicon Graphics, Inc.* .................... 3,333,337
40,000 Sun Microsystems, Inc.* .................... 3,422,500
95,000 Unisys Corp.* .............................. 3,271,562
--------------
33,203,023
--------------
Electronic Production Equipment (0.4%)
77,000 Applied Materials, Inc.* ................... 3,286,938
80,000 KLA-Tencor Corp.* .......................... 3,470,000
--------------
6,756,938
--------------
Engineering & Construction (0.4%)
73,530 Fluor Corp. ................................ 3,129,621
219,000 Foster Wheeler Corp. ....................... 2,888,062
--------------
6,017,683
--------------
Environmental Services (0.4%)
91,000 Browning-Ferris Industries, Inc. ........... 2,587,812
72,118 Waste Management, Inc. ..................... 3,362,502
--------------
5,950,314
--------------
Farming/Seeds/Milling (0.4%)
171,360 Archer-Daniels-Midland Co. ................. 2,945,250
99,000 Pioneer Hi-Bred
International, Inc. ..................... 2,673,000
--------------
5,618,250
--------------
Finance Companies (1.6%)
80,000 Associates First Capital Corp.
(Class A) ............................... 3,390,000
22,000 Capital One Financial Corp. ................ 2,530,000
70,540 Countrywide Credit
Industries, Inc. ........................ 3,540,226
45,000 Fannie Mae ................................. 3,330,000
52,000 Freddie Mac ................................ 3,350,750
77,500 Household International, Inc. .............. 3,070,937
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------- -------------------
<S> <C> <C>
139,000 MBNA Corp. ................................. $ 3,466,312
57,000 SLM Holding Corp. .......................... 2,736,000
--------------
25,414,225
--------------
Financial Publishing/Services (0.6%)
100,800 Dun & Bradstreet Corp. ..................... 3,181,500
85,000 Equifax, Inc. .............................. 2,905,937
33,000 McGraw-Hill, Inc. .......................... 3,361,875
--------------
9,449,312
--------------
Fluid Controls (0.2%)
83,260 Parker-Hannifin Corp. ...................... 2,726,765
--------------
Food Chains (1.4%)
52,000 Albertson's, Inc. .......................... 3,311,750
95,000 American Stores Co. ........................ 3,509,062
46,000 Fred Meyer, Inc.* .......................... 2,771,500
106,860 Great Atlantic & Pacific Tea
Co., Inc. ............................... 3,165,727
57,000 Kroger Co.* ................................ 3,448,500
45,000 Safeway, Inc.* ............................. 2,742,188
73,540 Winn-Dixie Stores, Inc. .................... 3,300,108
--------------
22,248,835
--------------
Food Distributors (0.4%)
129,000 Supervalu, Inc. ............................ 3,612,000
120,000 Sysco Corp. ................................ 3,292,500
--------------
6,904,500
--------------
Forest Products (0.4%)
151,000 Louisiana-Pacific Corp. .................... 2,765,188
64,000 Weyerhaeuser Co. ........................... 3,252,000
6,017,188
--------------
Home Building (0.8%)
76,000 Centex Corp. ............................... 3,424,750
91,000 Fleetwood Enterprises, Inc. ................ 3,162,250
110,830 Kaufman & Broad Home Corp. ................. 3,186,362
119,850 Pulte Corp. ................................ 3,333,328
--------------
13,106,690
--------------
Home Furnishings (0.7%)
73,000 National Service Industries, Inc. .......... 2,774,000
73,600 Newell Co. ................................. 3,036,000
103,000 Rubbermaid, Inc. ........................... 3,238,062
166,000 Tupperware Corp. ........................... 2,728,625
--------------
11,776,687
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE>
MORGAN STANLEY DEAN WITTER VALUE-ADDED MARKET SERIES -- EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS December 31, 1998 (unaudited) continued
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------- -------------------
<S> <C> <C>
Hospital/Nursing Management (0.5%)
117,000 Columbia/HCA Healthcare Corp. ........... $ 2,895,750
91,700 HCR Manor Care, Inc.* ................... 2,693,687
105,720 Tenet Healthcare Corp.* ................. 2,775,150
--------------
8,364,587
--------------
Hotels/Resorts (0.5%)
56,000 Carnival Corp. (Class A) ................ 2,688,000
134,000 Hilton Hotels Corp. ..................... 2,562,750
102,720 Marriott International, Inc. ............ 2,978,880
--------------
8,229,630
--------------
Industrial Machinery/Components (0.8%)
262,900 Harnischfeger Industries, Inc. .......... 2,678,294
54,460 Illinois Tool Works Inc. ................ 3,158,680
75,060 Ingersoll-Rand Co. ...................... 3,523,129
140,000 Milacron, Inc. .......................... 2,695,000
--------------
12,055,103
--------------
Industrial Specialties (0.6%)
93,000 Ecolab, Inc. ............................ 3,365,438
116,690 Millipore Corp. ......................... 3,318,372
133,000 Pall Corp. .............................. 3,366,563
--------------
10,050,373
--------------
Insurance Brokers/Services (0.4%)
51,380 AON Corp. ............................... 2,845,167
58,935 Marsh & McLennan
Companies, Inc. ...................... 3,444,014
--------------
6,289,181
--------------
Integrated Oil Companies (2.1%)
61,440 Amerada Hess Corp. ...................... 3,056,640
55,000 Amoco Corp. ............................. 3,320,625
41,340 Atlantic Richfield Co. .................. 2,697,435
40,330 Chevron Corp. ........................... 3,344,869
44,000 Exxon Corp.* ............................ 3,217,500
73,000 Kerr-McGee Corp. ........................ 2,792,250
37,000 Mobil Corp. ............................. 3,223,625
64,580 Phillips Petroleum Co. .................. 2,752,723
56,460 Royal Dutch Petroleum Co. (ADR)
(Netherlands) ........................ 2,703,023
58,470 Texaco, Inc. ............................ 3,091,601
97,000 Unocal Corp. ............................ 2,831,187
--------------
33,031,478
--------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------- -------------------
<S> <C> <C>
Investment Bankers/Brokers/
Services (0.9%)
76,000 Bear Stearns Companies, Inc. ............ $ 2,840,500
61,000 Lehman Brothers Holdings, Inc. .......... 2,687,812
44,000 Merrill Lynch & Co., Inc. ............... 2,937,000
41,170 Morgan Stanley Dean Witter & Co. 2,923,070
61,000 Schwab (CHARLES) Corp. .................. 3,427,438
--------------
14,815,820
--------------
Investment Managers (0.2%)
75,000 Franklin Resources, Inc. ................ 2,400,000
--------------
Life Insurance (0.8%)
42,000 American General Corp. .................. 3,276,000
99,683 Conseco, Inc. ........................... 3,046,562
43,000 Jefferson-Pilot Corp. ................... 3,225,000
40,000 SunAmerica Inc. ......................... 3,245,000
--------------
12,792,562
--------------
Major Banks (5.0%)
86,000 Bank of New York Co., Inc. .............. 3,461,500
68,000 Bank One Corp. .......................... 3,472,250
58,000 BankAmerica Corp. ....................... 3,487,250
73,000 BankBoston Corp. ........................ 2,842,438
38,100 Bankers Trust New York Corp. ............ 3,255,169
87,000 BB&T Corp. .............................. 3,507,188
48,000 Chase Manhattan Corp. ................... 3,267,000
67,000 Citigroup, Inc. ......................... 3,316,500
52,890 Comerica, Inc. .......................... 3,606,437
56,000 First Union Corp. ....................... 3,405,500
76,000 Fleet Financial Group, Inc. ............. 3,396,250
106,403 Huntington Bancshares, Inc. ............. 3,198,740
89,740 KeyCorp ................................. 2,871,680
49,000 Mellon Bank Corp. ....................... 3,368,750
27,230 Morgan (J.P.) & Co., Inc. ............... 2,860,852
46,000 National City Corp. ..................... 3,335,000
58,460 PNC Bank Corp. .......................... 3,164,147
67,000 Republic New York Corp. ................. 3,052,687
47,000 State Street Corp. ...................... 3,269,437
70,520 Summit Bancorp. ......................... 3,080,842
44,340 SunTrust Banks, Inc. .................... 3,392,010
81,660 U.S. Bancorp ............................ 2,898,930
34,000 Wachovia Corp. .......................... 2,972,875
90,000 Wells Fargo & Co. ....................... 3,594,375
--------------
78,077,807
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE>
MORGAN STANLEY DEAN WITTER VALUE-ADDED MARKET SERIES -- EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS December 31, 1998 (unaudited) continued
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------- -------------------
<S> <C> <C>
Major Chemicals (1.3%)
30,000 Dow Chemical Co. ......................... $ 2,728,125
47,000 Du Pont (E.I.) de Nemours &
Co., Inc. ................................ 2,493,938
63,000 Eastman Chemical Co. ..................... 2,819,250
98,000 Hercules, Inc. ........................... 2,682,750
68,000 Monsanto Co. ............................. 3,230,000
96,840 Rohm & Haas Co. .......................... 2,917,305
71,540 Union Carbide Corp. ...................... 3,040,450
--------------
19,911,818
--------------
Major Pharmaceuticals (2.4%)
69,000 Abbott Laboratories ...................... 3,381,000
61,560 American Home Products Corp. ............. 3,466,598
55,460 Baxter International, Inc. ............... 3,566,771
26,000 Bristol-Myers Squibb Co. ................. 3,479,125
39,000 Johnson & Johnson ........................ 3,271,125
38,000 Lilly (Eli) & Co. ........................ 3,377,250
23,000 Merck & Co., Inc. ........................ 3,396,813
27,000 Pfizer, Inc. ............................. 3,386,812
60,000 Pharmacia & Upjohn, Inc. ................. 3,397,500
60,000 Schering-Plough Corp. .................... 3,315,000
48,000 Warner-Lambert Co. ....................... 3,609,000
--------------
37,646,994
--------------
Major U.S. Telecommunications (2.2%)
56,000 ALLTEL Corp. ............................. 3,349,500
54,000 Ameritech Corp. .......................... 3,422,250
43,000 AT&T Corp. ............................... 3,235,750
57,000 Bell Atlantic Corp. ...................... 3,238,313
72,000 BellSouth Corp. .......................... 3,591,000
50,000 GTE Corp. ................................ 3,371,875
46,000 MCI WorldCom, Inc.* ...................... 3,300,500
65,000 SBC Communications, Inc. ................. 3,485,625
42,000 Sprint Corp. (FON Group) ................. 3,533,250
52,000 U.S. West, Inc. .......................... 3,360,500
--------------
33,888,563
--------------
Managed Health Care (0.5%)
39,000 Aetna Inc. ............................... 3,066,375
142,000 Humana, Inc.* ............................ 2,529,375
60,000 United Healthcare Corp. .................. 2,583,750
--------------
8,179,500
--------------
Meat/Poultry/Fish (0.2%)
102,910 ConAgra, Inc. ............................ 3,241,665
--------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------- -------------------
<S> <C> <C>
Medical Equipment & Supplies (0.2%)
44,000 Medtronic, Inc. .......................... $ 3,267,000
--------------
Medical Specialties (1.9%)
65,000 ALZA Corp. (Class A)* .................... 3,396,250
70,000 Bard (C.R.), Inc. ........................ 3,465,000
58,000 Bausch & Lomb, Inc. ...................... 3,480,000
82,700 Becton, Dickinson & Co. .................. 3,530,256
86,000 Biomet, Inc. ............................. 3,456,125
120,000 Boston Scientific Corp.* ................. 3,217,500
32,000 Guidant Corp. ............................ 3,528,000
104,900 Mallinckrodt Group, Inc. ................. 3,232,231
97,000 St. Jude Medical, Inc.* .................. 2,685,688
--------------
29,991,050
--------------
Medical/Dental Distributors (0.2%)
46,000 Cardinal Health, Inc. .................... 3,490,250
--------------
Medical/Nursing Services (0.2%)
208,000 Healthsouth Corp.* ....................... 3,211,000
--------------
Metals Fabrications (0.2%)
150,000 Timken Co. ............................... 2,831,250
--------------
Mid-Sized Banks (1.2%)
48,000 Fifth Third Bancorp ...................... 3,423,000
63,480 Mercantile Bancorporation, Inc. .......... 2,928,015
40,350 Northern Trust Corp. ..................... 3,520,538
66,000 Regions Financial Corp. .................. 2,660,625
138,640 Synovus Financial Corp. .................. 3,379,350
60,000 Union Planters Corp. ..................... 2,718,750
--------------
18,630,278
--------------
Military/Gov't/Technical (0.6%)
123,600 EG & G, Inc. ............................. 3,437,625
55,000 General Dynamics Corp. ................... 3,224,375
56,470 Raytheon Co. (Class B) ................... 3,007,028
--------------
9,669,028
--------------
Motor Vehicles (0.4%)
58,450 Ford Motor Co. ........................... 3,430,284
47,000 General Motors Corp. ..................... 3,363,438
--------------
6,793,722
--------------
Movies/Entertainment (1.1%)
122,000 King World Productions Inc.* ............. 3,591,375
90,660 Seagram Co. Ltd. (Canada) ................ 3,445,080
54,000 Time Warner, Inc. ........................ 3,351,375
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE>
MORGAN STANLEY DEAN WITTER VALUE-ADDED MARKET SERIES -- EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS December 31, 1998 (unaudited) continued
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------- -------------------
<S> <C> <C>
47,000 Viacom, Inc. (Class B)* ................ $ 3,478,000
96,720 Walt Disney Co. ........................ 2,901,600
--------------
16,767,430
--------------
Multi-Line Insurance (1.2%)
70,560 Allstate Corp. ......................... 2,725,380
33,000 American International Group,
Inc. ................................. 3,188,625
42,000 CIGNA Corp. ............................ 3,247,125
62,000 Hartford Financial Services
Group, Inc. .......................... 3,402,250
39,330 Lincoln National Corp. ................. 3,217,685
66,500 SAFECO Corp. ........................... 2,855,344
--------------
18,636,409
--------------
Multi-Sector Companies (1.4%)
104,355 Crane Co. .............................. 3,150,217
33,000 General Electric Co. ................... 3,368,063
43,330 Honeywell, Inc. ........................ 3,263,291
33,000 Loews Corp. ............................ 3,242,250
108,000 McDermott International, Inc. .......... 2,666,250
82,620 Tenneco, Inc. .......................... 2,814,244
45,980 Textron, Inc. .......................... 3,491,606
--------------
21,995,921
--------------
Natural Gas Distribution (1.2%)
53,000 Consolidated Natural Gas Co. ........... 2,862,000
77,000 Eastern Enterprises .................... 3,368,750
79,630 Nicor Inc. ............................. 3,364,368
83,720 ONEOK, Inc. ............................ 3,024,385
85,000 Peoples Energy Corp. ................... 3,389,375
127,371 Sempra Energy .......................... 3,232,039
--------------
19,240,917
--------------
Newspapers (1.2%)
61,500 Dow Jones & Co., Inc. .................. 2,959,687
51,420 Gannett Co., Inc. ...................... 3,403,361
57,460 Knight-Ridder, Inc. .................... 2,937,642
94,760 New York Times Co. (Class A) ........... 3,286,988
50,940 Times Mirror Co. (Class A) ............. 2,852,640
52,400 Tribune Co. ............................ 3,458,400
--------------
18,898,718
--------------
Office Equipment/Supplies (0.6%)
64,000 Avery Dennison Corp. ................... 2,884,000
52,000 Pitney Bowes, Inc. ..................... 3,435,250
28,000 Xerox Corp. ............................ 3,304,000
--------------
9,623,250
--------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------- -------------------
<S> <C> <C>
Oil & Gas Production (1.0%)
96,800 Anardarko Petroleum Corp. .............. $ 2,988,700
109,900 Apache Corp. ........................... 2,781,844
74,000 Burlington Resources, Inc. ............. 2,650,125
156,000 Occidental Petroleum Corp. ............. 2,632,500
204,000 Oryx Energy Co.* ....................... 2,741,250
301,000 Union Pacific Resources Group,
Inc. ................................... 2,727,813
--------------
16,522,232
--------------
Oil Refineries/Marketing (0.6%)
58,000 Ashland, Inc. .......................... 2,805,750
87,000 Sunoco Inc. ............................ 3,137,438
94,000 USX-Marathon Group ..................... 2,831,750
--------------
8,774,938
--------------
Oil/Gas Transmission (1.0%)
95,000 Coastal Corp. .......................... 3,319,063
60,500 Columbia Energy Group, Inc. ............ 3,493,875
61,000 Enron Corp. ............................ 3,480,813
101,000 Sonat, Inc. ............................ 2,733,312
108,870 Williams Companies, Inc. ............... 3,395,383
--------------
16,422,446
--------------
Oilfield Services/Equipment (0.6%)
158,700 Baker Hughes, Inc. ..................... 2,807,006
116,000 Halliburton Co. ........................ 3,436,500
59,000 Schlumberger, Ltd. ..................... 2,721,375
--------------
8,964,881
--------------
Other Consumer Services (0.6%)
76,560 Block (H.&R.), Inc. .................... 3,445,200
179,000 Cendant Corp.* ......................... 3,412,187
80,670 Service Corp. International ............ 3,070,502
--------------
9,927,889
--------------
Other Metals/Minerals (0.9%)
174,100 ASARCO, Inc. ........................... 2,622,381
290,000 Cyprus Amax Minerals Co. ............... 2,900,000
251,000 Freeport-McMoran Copper &
Gold, Inc. (Class B) ................. 2,619,813
253,400 Inco Ltd. (Canada) ..................... 2,676,537
56,400 Phelps Dodge Corp. ..................... 2,869,350
--------------
13,688,081
--------------
Other Pharmaceuticals (0.2%)
54,000 Allergan, Inc. ......................... 3,496,500
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
9
<PAGE>
MORGAN STANLEY DEAN WITTER VALUE-ADDED MARKET SERIES -- EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS December 31, 1998 (unaudited) continued
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------- -------------------
<S> <C> <C>
Other Specialty Stores (0.8%)
105,860 AutoZone, Inc.* ....................... $ 3,486,764
188,000 Pep Boys-Manny, Moe & Jack ............ 2,949,250
62,000 Staples, Inc.* ........................ 2,708,625
160,000 Toys 'R' Us, Inc.* .................... 2,700,000
--------------
11,844,639
--------------
Other Transportation (0.2%)
286,500 Laidlaw, Inc. (Canada) ................ 2,882,906
--------------
Package Goods/Cosmetics (1.6%)
114,000 Alberto-Culver Co. (Class B) .......... 3,042,375
75,000 Avon Products, Inc. ................... 3,318,750
29,000 Clorox Co. ............................ 3,387,563
36,000 Colgate-Palmolive Co. ................. 3,343,500
58,500 Gillette Co. .......................... 2,826,281
70,590 International Flavors &
Fragrances Inc. ..................... 3,119,196
64,000 Kimberly-Clark Corp. .................. 3,488,000
36,000 Procter & Gamble Co. .................. 3,287,250
--------------
25,812,915
--------------
Packaged Foods (1.8%)
60,480 BestFoods ............................. 3,220,560
55,000 Campbell Soup Co. ..................... 3,025,000
43,000 General Mills, Inc. ................... 3,343,250
55,000 Heinz (H.J.) Co. ...................... 3,114,375
83,570 Kellogg Co. ........................... 2,851,826
52,000 Quaker Oats Company (The) ............. 3,094,000
93,780 Ralston-Ralston Purina Group .......... 3,036,128
112,920 Sara Lee Corp. ........................ 3,182,932
40,320 Unilever N.V. (Netherlands) ........... 3,344,040
--------------
28,212,111
--------------
Paints/Coatings (0.2%)
49,420 PPG Industries, Inc. .................. 2,878,715
106,870 Sherwin-Williams Co. .................. 3,139,306
--------------
6,018,021
--------------
Paper (1.8%)
99,770 Boise Cascade Corp. ................... 3,092,870
71,500 Champion International Corp. .......... 2,895,750
76,600 Fort James Corp. ...................... 3,064,000
72,530 International Paper Co. ............... 3,250,251
100,740 Mead Corp. ............................ 2,952,941
72,000 Potlatch Corp. ........................ 2,655,000
50,000 Union Camp Corp. ...................... 3,375,000
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------- -------------------
<S> <C> <C>
105,000 Westvaco Corp. ........................ $ 2,815,312
104,700 Willamette Industries, Inc. ........... 3,507,450
--------------
27,608,574
--------------
Photographic Products (0.2%)
42,400 Eastman Kodak Co. ..................... 3,052,800
148,000 Polaroid Corp. ........................ 2,765,750
--------------
5,818,550
--------------
Precious Metals (0.9%)
152,800 Barrick Gold Corp. (Canada) ........... 2,979,600
616,300 Battle Mountain Gold Co. .............. 2,542,238
291,000 Homestake Mining Co. .................. 2,673,562
148,000 Newmont Mining Corp. .................. 2,673,250
235,000 Placer Dome Inc. (Canada) ............. 2,702,500
--------------
13,571,150
--------------
Precision Instruments (0.4%)
36,000 Perkin-Elmer Corp. .................... 3,512,250
103,000 Tektronix, Inc. ....................... 3,096,438
--------------
6,608,688
--------------
Printing Forms (0.6%)
92,000 Deluxe Corp. .......................... 3,363,750
75,000 Donnelley (R.R.) & Sons Co. ........... 3,285,938
259,000 Moore Corp. Ltd. (Canada) ............. 2,849,000
--------------
9,498,688
--------------
Property -- Casualty Insurance (1.0%)
1,533 Berkshire Hathaway, Inc. .............. 3,602,550
49,000 Chubb Corp. ........................... 3,178,875
81,600 Cincinnati Financial Corp. ............ 2,988,600
21,000 Progressive Corp. ..................... 3,556,875
91,600 St. Paul Companies, Inc. .............. 3,183,100
--------------
16,510,000
--------------
Railroads (0.8%)
91,000 Burlington Northern Santa Fe
Corp. ............................... 3,071,250
70,450 CSX Corp. ............................. 2,923,675
100,000 Norfolk Southern Corp. ................ 3,168,750
63,000 Union Pacific Corp. ................... 2,838,938
--------------
12,002,613
--------------
Recreational Products/Toys (0.6%)
140,500 Brunswick Corp. ....................... 3,477,375
94,720 Hasbro, Inc. .......................... 3,421,760
115,000 Mattel, Inc. .......................... 2,623,438
--------------
9,522,573
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
10
<PAGE>
MORGAN STANLEY DEAN WITTER VALUE-ADDED MARKET SERIES -- EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS December 31, 1998 (unaudited) continued
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------- -------------------
<S> <C> <C>
Rental/Leasing Companies (0.2%)
106,000 Ryder System, Inc. ..................... $ 2,756,000
--------------
Restaurants (0.9%)
198,000 Darden Restaurants, Inc. ............... 3,564,000
46,000 McDonald's Corp. ....................... 3,524,750
69,000 Tricon Global Restaurants, Inc.* ....... 3,458,625
134,000 Wendy's International, Inc. ............ 2,922,875
--------------
13,470,250
--------------
Savings & Loan Associations (0.4%)
33,250 Golden West Financial Corp. ............ 3,048,609
94,000 Washington Mutual, Inc. ................ 3,589,625
--------------
6,638,234
--------------
Semiconductors (1.3%)
125,000 Advanced Micro Devices, Inc.* .......... 3,617,188
29,000 Intel Corp. ............................ 3,436,500
173,000 LSI Logic Corp.* ....................... 2,789,625
66,000 Micron Technology, Inc.* ............... 3,337,125
228,100 National Semiconductor Corp.* .......... 3,079,350
40,000 Texas Instruments, Inc. ................ 3,422,500
--------------
19,682,288
--------------
Services to the Health Industry (0.6%)
110,790 HBO & Co. .............................. 3,178,288
45,000 IMS Health Inc. ........................ 3,394,688
55,000 Shared Medical Systems Corp. ........... 2,743,125
--------------
9,316,101
--------------
Shoe Manufacturing (0.4%)
74,560 Nike, Inc. (Class B) ................... 3,024,340
186,000 Reebok International Ltd.
(United Kingdom)* .................... 2,766,750
--------------
5,791,090
--------------
Soft Drinks (0.6%)
41,500 Coca Cola Co. .......................... 2,775,313
76,000 Coca-Cola Enterprises Inc. ............. 2,717,000
80,700 PepsiCo, Inc. .......................... 3,303,656
--------------
8,795,969
--------------
Specialty Chemicals (1.7%)
78,600 Air Products & Chemicals, Inc. ......... 3,144,000
169,300 Engelhard Corp. ........................ 3,301,350
82,000 Goodrich (B.F.) Co. .................... 2,941,750
181,300 Grace (W. R.) & Co. .................... 2,844,144
78,850 Great Lakes Chemical Corp. ............. 3,154,000
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------- -------------------
<S> <C> <C>
123,770 Morton International, Inc. ............. $ 3,032,365
92,660 Nalco Chemical Co. ..................... 2,872,460
82,000 Praxair, Inc. .......................... 2,890,500
97,000 Sigma-Aldrich Corp. .................... 2,837,250
--------------
27,017,819
--------------
Specialty Foods/Candy (0.4%)
45,400 Hershey Foods Corp. .................... 2,823,313
35,250 Wrigley (Wm.) Jr. Co. (Class A) ........ 3,157,078
--------------
5,980,391
--------------
Specialty Insurers (0.4%)
49,370 MBIA, Inc. ............................. 3,236,821
67,000 MGIC Investment Corp. .................. 2,667,437
--------------
5,904,258
--------------
Specialty Steel (0.2%)
69,520 Nucor Corp. ............................ 3,006,740
--------------
Steel/Iron Ore (0.6%)
296,000 Armco Inc. ............................. 1,295,000
333,000 Bethlehem Steel Corp.* ................. 2,788,875
119,000 USX-U.S. Steel Group, Inc. ............. 2,737,000
222,000 Worthington Industries, Inc. ........... 2,775,000
--------------
9,595,875
--------------
Telecommunication Equipment (1.7%)
173,150 Andrew Corp.* .......................... 2,856,975
76,000 Corning, Inc. .......................... 3,420,000
104,000 General Instrument Corp.* .............. 3,529,500
31,000 Lucent Technologies Inc. ............... 3,410,000
55,000 Motorola, Inc. ......................... 3,358,438
67,000 Northern Telecom Ltd. (Canada) ......... 3,358,375
157,000 Scientific-Atlanta, Inc. ............... 3,581,562
50,000 Tellabs, Inc.* ......................... 3,428,125
--------------
26,942,975
--------------
Telecommunications (0.2%)
103,000 Frontier Corp. ......................... 3,502,000
--------------
Textiles (0.2%)
66,470 Springs Industries, Inc. (Class A)...... 2,754,351
--------------
Tobacco (0.6%)
65,000 Philip Morris Companies, Inc. .......... 3,477,500
101,000 RJR Nabisco Holdings Corp. ............. 2,998,437
101,000 UST, Inc. .............................. 3,522,375
--------------
9,998,312
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
11
<PAGE>
MORGAN STANLEY DEAN WITTER VALUE-ADDED MARKET SERIES -- EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS December 31, 1998 (unaudited) continued
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ---------- -----------------
<S> <C> <C>
Tools/Hardware (0.8%)
60,500 Black & Decker Corp. ..................... $ 3,391,781
73,000 Briggs & Stratton Corp. .................. 3,640,875
91,640 Snap-On, Inc. ............................ 3,190,218
98,000 Stanley Works ............................ 2,719,500
--------------
12,942,374
--------------
Wholesale Distributor (0.4%)
70,000 Grainger (W.W.), Inc. .................... 2,913,750
313,000 IKON Office Solutions, Inc. .............. 2,680,063
--------------
5,593,813
--------------
TOTAL COMMON STOCKS
(Identified Cost $1,007,964,300).......... 1,572,440,149
--------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ----------- -----------------
<S> <C> <C>
SHORT-TERM INVESTMENT (0.2%)
REPURCHASE AGREEMENT
$ 2,716 The Bank of New York 4.00%
due 01/04/99 (dated 12/31/98;
proceeds $2,717,645) (a)
(Identified Cost $2,716,438)........ $ 2,716,438
--------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
TOTAL INVESTMENTS
(Identified Cost $1,010,680,738) (b). 100.1% 1,575,156,587
LIABILITIES IN EXCESS OF OTHER
ASSETS .............................. ( 0.1) (1,220,572)
----- -------------
NET ASSETS .......................... 100.0% $1,573,936,015
===== ==============
</TABLE>
- --------------------------------
ADR American Depository Receipt.
* Non-income producing security.
(a) Collateralized by $2,742,060 U.S. Treasury Note 6.75% due 06/30/99
valued at $2,770,767.
(b) The aggregate cost for federal income tax purposes approximates
identified cost. The aggregate gross unrealized appreciation is
$631,165,516 and the aggregate gross unrealized depreciation is
$66,689,667, resulting in net unrealized appreciation of
$564,475,849.
SEE NOTES TO FINANCIAL STATEMENTS
12
<PAGE>
MORGAN STANLEY DEAN WITTER VALUE-ADDED MARKET SERIES -- EQUITY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1998 (unaudited)
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $1,010,680,738).............. $1,575,156,587
Receivable for:
Investments sold ........................... 39,242,244
Dividends .................................. 2,124,841
Shares of beneficial interest sold ......... 883,192
Prepaid expenses and other assets ............... 134,338
--------------
TOTAL ASSETS ............................... 1,617,541,202
--------------
LIABILITIES:
Payable for:
Investments purchased ...................... 38,252,881
Shares of beneficial interest
repurchased ............................. 2,224,999
Dividends and distributions to
shareholders ............................ 1,286,595
Plan of distribution fee ................... 1,049,639
Investment management fee .................. 601,009
Accrued expenses and other payables ............. 190,064
--------------
TOTAL LIABILITIES .......................... 43,605,187
--------------
NET ASSETS ................................. $1,573,936,015
==============
COMPOSITION OF NET ASSETS:
Paid-in-capital ................................. $ 932,468,418
Net unrealized appreciation ..................... 564,475,849
Accumulated undistributed net investment
income ....................................... 453,494
Accumulated undistributed net realized
gain ......................................... 76,538,254
--------------
NET ASSETS ................................. $1,573,936,015
==============
CLASS A SHARES:
Net Assets ...................................... $20,288,984
Shares Outstanding (unlimited authorized,
$.01 par value)............................... 568,781
NET ASSET VALUE PER SHARE .................. $35.67
======
MAXIMUM OFFERING PRICE PER SHARE,
(net asset value plus 5.54% of net
asset value) ............................ $37.65
======
CLASS B SHARES:
Net Assets ...................................... $1,489,240,160
Shares Outstanding (unlimited authorized,
$.01 par value)............................... 41,699,258
NET ASSET VALUE PER SHARE .................. $35.71
======
CLASS C SHARES:
Net Assets ...................................... $9,978,567
Shares Outstanding (unlimited authorized,
$.01 par value)............................... 280,370
NET ASSET VALUE PER SHARE .................. $35.59
======
CLASS D SHARES:
Net Assets ...................................... $54,428,304
Shares Outstanding (unlimited authorized,
$.01 par value)............................... 1,524,650
NET ASSET VALUE PER SHARE .................. $35.70
======
</TABLE>
STATEMENT OF OPERATIONS
For the six months ended December 31, 1998 (unaudited)
<TABLE>
<CAPTION>
<S> <C>
NET INVESTMENT INCOME:
INCOME
Dividends (net of $33,914 foreign
withholding tax) ............................... $ 13,116,424
Interest .......................................... 74,047
------------
TOTAL INCOME ................................. 13,190,471
------------
EXPENSES
Plan of distribution fee (Class A shares) ......... 23,188
Plan of distribution fee (Class B shares) ......... 6,237,523
Plan of distribution fee (Class C shares) ......... 44,492
Investment management fee ......................... 3,534,330
Transfer agent fees and expenses .................. 692,122
S&P license fee ................................... 115,845
Registration fees ................................. 55,307
Custodian fees .................................... 50,831
Shareholder reports and notices ................... 30,710
Professional fees ................................. 26,568
Trustees' fees and expenses ....................... 6,296
Other ............................................. 12,770
------------
TOTAL EXPENSES ............................... 10,829,982
------------
NET INVESTMENT INCOME ........................ 2,360,489
------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain ................................. 99,999,004
Net change in unrealized appreciation ............. (110,810,400)
------------
NET LOSS ..................................... (10,811,396)
------------
NET DECREASE ...................................... $ (8,450,907)
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
13
<PAGE>
MORGAN STANLEY DEAN WITTER VALUE-ADDED MARKET SERIES -- EQUITY PORTFOLIO
FINANCIAL STATEMENTS, continued
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
DECEMBER 31, 1998 JUNE 30, 1998*
------------------- -----------------
(unaudited)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income ................................ $ 2,360,489 $ 5,866,647
Net realized gain .................................... 99,999,004 114,426,479
Net change in unrealized appreciation ................ (110,810,400) 185,461,139
-------------- --------------
NET INCREASE (DECREASE) ........................... (8,450,907) 305,754,265
-------------- --------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A shares ..................................... (180,719) (63,581)
Class B shares ..................................... (4,196,032) (5,643,366)
Class C shares ..................................... (31,600) (16,505)
Class D shares ..................................... (591,644) (276,561)
Net realized gain
Class A shares ..................................... (1,373,528) (358,348)
Class B shares ..................................... (102,029,801) (53,722,119)
Class C shares ..................................... (676,323) (148,997)
Class D shares ..................................... (3,651,949) (1,403,319)
-------------- --------------
TOTAL DIVIDENDS AND DISTRIBUTIONS ................. (112,731,596) (61,632,796)
-------------- --------------
Net increase (decrease) from transactions in shares of
beneficial interest ................................ (5,006,235) 86,265,916
-------------- --------------
NET INCREASE (DECREASE) ........................... (126,188,738) 330,387,385
NET ASSETS:
Beginning of period .................................. 1,700,124,753 1,369,737,368
-------------- --------------
END OF PERIOD
(Including undistributed net investment income of
$453,494 and $3,092,922, respectively)............. $1,573,936,015 $1,700,124,753
============== ==============
</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
NOTES TO FINANCIAL STATEMENTS December 31, 1998 (unaudited)
1. ORGANIZATION AND ACCOUNTING POLICIES
Morgan Stanley Dean Witter Value-Added Market Series -- Equity Portfolio (the
"Fund") is registered under the Investment Company Act of 1940, amended (the
"Act"), as a diversified, open-end management investment company. The Fund's
investment objective is to achieve a high level of total return on its assets
through a combination of capital appreciation and current income. The Fund
seeks to achieve its objective by investing, on an equally-weighted basis, in a
diversified portfolio of common stocks of the companies which are included in
the Standard & Poor's 500 Composite Stock Price Index. The Fund was organized
as a Massachusetts business trust on May 27, 1987 and commenced operations on
December 1, 1987. 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 and 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 not readily available, including circumstances under which it is
determined by Morgan Stanley Dean Witter Advisors Inc. (the "Investment
Manager"), that sale or bid prices are not reflective of a security's market
value, portfolio securities are valued at their fair value as determined in
good faith under procedures established by and
15
<PAGE>
MORGAN STANLEY DEAN WITTER VALUE-ADDED MARKET SERIES -- EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS December 31, 1998 (unaudited) continued
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 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
16
<PAGE>
MORGAN STANLEY DEAN WITTER VALUE-ADDED MARKET SERIES -- EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS December 31, 1998 (unaudited) continued
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; and 0.40% to the portion of daily net assets exceeding $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 (1) services provided and the expenses borne by it and others
in the distribution of the shares of these Classes, 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; (2) printing and
distribution of prospectuses and reports used in connection with the offering
of these shares to other than current shareholders; and (3) 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.
17
<PAGE>
MORGAN STANLEY DEAN WITTER VALUE-ADDED MARKET SERIES -- EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS December 31, 1998 (unaudited) continued
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 $64,225,725 at December 31, 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 six months ended December 31, 1998, the distribution fee
was accrued for Class A shares and Class C shares at the annual rate of 0.25%
and 1.00%, respectively.
The Distributor has informed the Fund that for the six months ended December
31, 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
$183, $802,155 and $2,531, respectively and received $19,896 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.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales of portfolio securities,
excluding short-term investments, for the six months ended December 31, 1998
aggregated $116,570,002 and $226,248,184, respectively. Included in the
aforementioned are sales of U.S. Government securities of $2,203,484.
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager
and Distributor, is the Fund's transfer agent. At December 31, 1998, the Fund
had transfer agent fees and expenses payable of approximately $31,000.
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
18
<PAGE>
MORGAN STANLEY DEAN WITTER VALUE-ADDED MARKET SERIES -- EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS December 31, 1998 (unaudited) continued
years of service. At December 31, 1998, the Fund had an accrued pension
liability of $73,263 which is included in accrued expenses in the Statement of
Assets and Liabilities.
5. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
DECEMBER 31, 1998 JUNE 30, 1998+*
------------------------------------ ----------------------------------
(unaudited)
SHARES AMOUNT SHARES AMOUNT
------------------ ----------------- ---------------- -----------------
<S> <C> <C> <C> <C>
CLASS A SHARES
Sold ................................................ 118,744 $ 4,190,083 566,344 $ 20,580,505
Reinvestment of dividends and distributions ......... 41,964 1,425,933 10,591 362,114
Redeemed ............................................ (68,839) (2,438,362) (100,023) (3,787,323)
------- -------------- -------- --------------
Net increase -- Class A ............................. 91,869 3,177,654 476,912 17,155,296
------- -------------- -------- --------------
CLASS B SHARES
Sold ................................................ 1,903,790 68,006,951 7,625,465 274,194,911
Reinvestment of dividends and distributions ......... 2,852,816 97,081,343 1,584,986 54,222,347
Redeemed ............................................ (5,310,083) (187,241,841) (7,463,240) (270,820,041)
---------- -------------- ---------- --------------
Net increase (decrease) -- Class B .................. (553,477) (22,153,547) 1,747,211 57,597,217
---------- -------------- ---------- --------------
CLASS C SHARES
Sold ................................................ 72,116 2,569,008 275,286 10,002,911
Reinvestment of dividends and distributions ......... 20,139 682,912 4,390 150,050
Redeemed ............................................ (45,281) (1,582,321) (46,280) (1,694,447)
---------- -------------- ---------- --------------
Net increase -- Class C ............................. 46,974 1,669,599 233,396 8,458,514
---------- -------------- ---------- --------------
CLASS D SHARES
Sold ................................................ 359,330 12,656,625 345,098 12,600,125
Reinvestment of dividends and distributions ......... 121,897 4,144,486 49,109 1,679,529
Acquisition of Dean Witter Retirement Series --
Value-Added Market Series .......................... 314,649 10,413,842 -- --
Redeemed ............................................ (415,975) (14,914,894) (301,496) (11,224,765)
---------- -------------- ---------- --------------
Net increase -- Class D ............................. 379,901 12,300,059 92,711 3,054,889
---------- -------------- ---------- --------------
Net increase (decrease) in Fund ..................... (34,733) $ (5,006,235) 2,550,230 $ 86,265,916
========== ============== ========== ==============
</TABLE>
- ---------------
+ On July 28, 1997, 1,052,038 shares representing $36,600,402 were transferred
to Class D.
* For Class A, C and D shares, for the period July 28, 1997 (issue date)
through June 30, 1998.
6. FEDERAL INCOME TAX STATUS
As of June 30, 1998, the Fund had temporary book/tax differences which were
primarily attributable to capital loss deferrals on wash sales.
19
<PAGE>
MORGAN STANLEY DEAN WITTER VALUE-ADDED MARKET SERIES -- EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS December 31, 1998 (unaudited) continued
7. ACQUISITION OF DEAN WITTER RETIREMENT SERIES -- VALUE-ADDED MARKET SERIES
As of the close of business on September 11, 1998, the Fund acquired all the
net assets of Dean Witter Retirement Series -- Value-Added Market Series
("Retirement Value-Added") pursuant to a plan of reorganization (the "Plan")
approved by the shareholders of Retirement Value-Added on August 19, 1998. The
acquisition was accomplished by a tax-free exchange of 314,649 Class D shares
of the Fund at a net asset value of $33.09 per share for 1,055,958 shares of
Retirement Value-Added. The net assets of the Fund and Retirement Value-Added
immediately before the acquisition were $1,402,211,163 and $10,413,842,
respectively, including unrealized appreciation of $3,600,118 for Retirement
Value-Added. Immediately after the acquisition, the combined net assets of the
Fund amounted to $1,412,625,005.
20
<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 SIX
MONTHS ENDED
DECEMBER 31, 1998
------------------
(unaudited)
<S> <C>
CLASS B SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning of period .................. $38.54
------
Income (loss) from investment operations:
Net investment income ................................ 0.05
Net realized and unrealized gain (loss) .............. (0.90)
------
Total income (loss) from investment operations ........ (0.85)
------
Less dividends and distributions from:
Net investment income ................................ (0.11)
Net realized gain .................................... (1.87)
------
Total dividends and distributions ..................... (1.98)
------
Net asset value, end of period ........................ $35.71
======
TOTAL RETURN+ ......................................... 0.05%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses .............................................. 1.43%(2)(3)
Net investment income ................................. 0.27%(2)(3)
SUPPLEMENTAL DATA:
Net assets, end of period, in millions ................ $1,489
Portfolio turnover rate ............................... 7%(1)
<CAPTION>
FOR THE YEAR ENDED JUNE 30,
---------------------------------------------------------------
1998*++ 1997 1996 1995 1994
------------- ------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
CLASS B SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning of period .................. $32.96 $27.09 $23.06 $19.23 $19.17
--------- --------- ------- ------- -------
Income (loss) from investment operations:
Net investment income ................................ 0.13 0.17 0.18 0.19 0.14
Net realized and unrealized gain (loss) .............. 6.89 6.41 4.23 3.88 0.30
--------- --------- ------- ------- -------
Total income (loss) from investment operations ........ 7.02 6.58 4.41 4.07 0.44
--------- --------- ------- ------- -------
Less dividends and distributions from:
Net investment income ................................ (0.14) (0.18) (0.26) (0.09) (0.09)
Net realized gain .................................... (1.30) (0.53) (0.12) (0.15) (0.29)
--------- --------- ------- ------- -------
Total dividends and distributions ..................... (1.44) (0.71) (0.38) (0.24) (0.38)
--------- --------- ------- ------- -------
Net asset value, end of period ........................ $38.54 $32.96 $27.09 $23.06 $19.23
========= ========= ======= ======= =======
TOTAL RETURN+ ......................................... 21.84% 24.71% 19.27% 21.41% 2.26%
RATIOS TO AVERAGE NET ASSETS :
Expenses .............................................. 1.36% 1.45% 1.51% 1.64% 1.68%
Net investment income ................................. 0.35% 0.62% 0.81% 1.01% 0.86%
SUPPLEMENTAL DATA :
Net assets, end of period, in millions ................ $1,628 $1,370 $962 $642 $456
Portfolio turnover rate ............................... 18% 11% 10% 11% 19%
</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.
(1) Not annualized.
(2) Annualized.
(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.
SEE NOTES TO FINANCIAL STATEMENTS
21
<PAGE>
MORGAN STANLEY DEAN WITTER VALUE-ADDED MARKET SERIES -- EQUITY PORTFOLIO
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX JULY 28, 1997*
MONTHS ENDED THROUGH
DECEMBER 31, 1998 JUNE 30, 1998
------------------- ---------------
(unaudited)
<S> <C> <C>
CLASS A SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period ................... $38.63 $34.79
------- -------
Income (loss) from investment operations:
Net investment income ................................. 0.14 0.30
Net realized and unrealized gain (loss) ............... (0.89) 5.07
------- -------
Total income (loss) from investment operations ......... (0.75) 5.37
------- -------
Less dividends and distributions from:
Net investment income ................................. (0.34) (0.23)
Net realized gain ..................................... (1.87) (1.30)
------- -------
Total dividends and distributions ...................... (2.21) (1.53)
------- -------
Net asset value, end of period ......................... $35.67 $38.63
======= =======
TOTAL RETURN+ .......................................... 0.36%(1) 16.01%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ............................................... 0.84%(2)(3) 0.83%(2)
Net investment income .................................. 0.88%(2)(3) 0.87%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ................ $20,289 $18,422
Portfolio turnover rate ................................ 7%(1) 18%
CLASS C SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period ................... $38.46 $34.79
----------- --------
Income (loss) from investment operations:
Net investment income ................................. 0.02 0.04
Net realized and unrealized gain (loss) ............... (0.90) 5.07
----------- --------
Total income (loss) from investment operations ......... (0.88) 5.11
----------- --------
Less dividends and distributions from:
Net investment income ................................. (0.12) (0.14)
Net realized gain ..................................... (1.87) (1.30)
----------- --------
Total dividends and distributions ...................... (1.99) (1.44)
----------- --------
Net asset value, end of period ......................... $35.59 $38.46
=========== ========
TOTAL RETURN+ .......................................... (0.01)%(1) 15.22%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ............................................... 1.59%(2)(3) 1.58%(2)
Net investment income .................................. 0.13%(2)(3) 0.12%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ................ $9,979 $8,977
Portfolio turnover rate ................................ 7%(1) 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.
(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.
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
FOR THE SIX JULY 28, 1997*
MONTHS ENDED THROUGH
DECEMBER 31, 1998 JUNE 30, 1998
------------------- ---------------
(unaudited)
<S> <C> <C>
CLASS D SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period ................... $38.69 $34.79
-------- -------
Income (loss) from investment operations:
Net investment income ................................. 0.17 0.40
Net realized and unrealized gain (loss) ............... (0.87) 5.06
-------- -------
Total income (loss) from investment operations ......... (0.70) 5.46
-------- -------
Less dividends and distributions from:
Net investment income ................................. (0.42) (0.26)
Net realized gain ..................................... (1.87) (1.30)
-------- -------
Total dividends and distributions ...................... (2.29) (1.56)
-------- -------
Net asset value, end of period ......................... $35.70 $38.69
======== =======
TOTAL RETURN+ .......................................... 0.50%(1) 16.27%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ............................................... 0.59%(2)(3) 0.58%(2)
Net investment income .................................. 1.11%(2)(3) 1.17%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ................ $54,428 $44,290
Portfolio turnover rate ................................ 7%(1) 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.
(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.
SEE NOTES TO FINANCIAL STATEMENTS
23
<PAGE>
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
The financial statements included herein have been taken from the records
of the Fund without examination by the independent accountants and
accordingly they do not express an opinion thereon.
This report is submitted for the general information of shareholders
of the Fund. For more detailed information about the Fund, its officers
and trustees, fees, expenses and other pertinent information, please see
the prospectus of the Fund.
This report is not authorized for distribution to prospective investors
in the Fund unless preceded or accompanied by an effective prospectus.
MORGAN STANLEY
DEAN WITTER
VALUE-ADDED
MARKET SERIES
EQUITY PORTFOLIO
[GRAPHIC]
SEMIANNUAL REPORT
December 31, 1998
