<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, 1999
DEAR SHAREHOLDER:
During the twelve-month period ended June 30, 1999, investors experienced two
different markets. The first half of the fiscal year saw small- and
mid-capitalization stocks eclipsed by the returns of a narrow list of larger-cap
growth stocks. Huge cash flows into these few large-cap companies left the rest
of the market relatively neglected, bringing the relative valuation of
small- and mid-cap companies to historically low levels.
The second half of the period presented a different picture. Mega-cap market
leaders, particularly in the technology and pharmaceutical sectors, experienced
lower returns. Large-cap multinationals also faltered as concerns over inflation
and global economic crises surfaced. In contrast to the rocky road endured by
large-cap stocks, mid- and small-cap stocks had a much smoother ride. Strong
performance was evident in the smaller technology sector and in cyclical stocks,
particularly those in the drilling and basic material industries. This change in
leadership was reflected in the individual performance of the stocks in the S&P
500 Composite Stock Price Index (S&P 500). The largest 50 stocks were
outperformed by the remaining 450 during the first half of 1999, indicating a
shift in sentiment toward small- and mid-cap stocks as well as cyclicals.
PERFORMANCE AND PORTFOLIO
For the twelve-month period ended June 30, 1999, Morgan Stanley Dean Witter
Value-Added Market Series -- Equity Portfolio's Class B shares produced a total
return of 13.47 percent compared to 13.56 percent for the Lipper Growth and
Income Funds Index and 22.76 percent for the S&P 500. For the same period the
Fund's Class A, C and D shares posted total returns of 14.17 percent, 13.31
percent and 14.43 percent, respectively. The performance of the Fund's four
share classes varies because of differing expenses. The accompanying chart
illustrates the growth of a $10,000 investment in the Fund versus similar
investments in the Lipper and S&P 500 indexes.
<PAGE>
MORGAN STANLEY DEAN WITTER VALUE-ADDED MARKET SERIES - EQUITY PORTFOLIO
LETTER TO THE SHAREHOLDERS, JUNE 30, 1999, CONTINUED
The Fund invests in substantially all of the stocks included in the S&P 500.
Unlike that index, however, the Fund equally weights all stock positions,
thereby placing greater emphasis than the index does on the stocks of
small-to-medium-capitalized companies, which have historically outperformed
larger-capitalization companies. In addition, the Fund is overrepresented in the
cyclical and utilities sectors and underrepresented in the health care and
technology sectors, relative to the capitalization-weighted S&P 500. The Fund's
underperformance relative to the S&P 500 can be attributed to its focus on
small- and mid-cap stocks. The shift in sentiment toward cyclical and
smaller-cap stocks in the second half of the fiscal year favored the Fund's
equal-weighted indexing strategy. For the three months ended June 30 the Fund's
Class B shares rose 12.6 percent versus a 7.1 percent gain for the S&P 500.
LOOKING AHEAD
We believe the shift in sentiment toward cyclical and economically sensitive
stocks to be a sustainable change in strategy rather than a temporary,
momentum-driven move. It seems to be premised on the belief that the U.S.
economy will remain strong, that the global economy is improving, and that these
sectors are underowned and underperforming. If these assessments prove true,
companies in these sectors could outperform over the next six to twelve months.
Such a scenario would bode well for the Fund.
On May 1, 1999, Mitchell M. Merin was named President of the Morgan Stanley Dean
Witter Funds. Mr. Merin is the President and Chief Operating Officer of Asset
Management for Morgan Stanley Dean Witter & Co. and President, Chief Executive
Officer and Director of Morgan Stanley Dean Witter Advisors Inc., the Fund's
investment manager. He also serves as Chairman, Chief Executive Officer and
Director of the Fund's distributor and transfer agent.
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 objectives.
Very truly yours,
<TABLE>
<S> <C>
[SIGNATURE] [SIGNATURE]
CHARLES A. FIUMEFREDDO MITCHELL M. MERIN
CHAIRMAN OF THE BOARD PRESIDENT
</TABLE>
2
<PAGE>
MORGAN STANLEY DEAN WITTER VALUE-ADDED MARKET
SERIES - EQUITY PORTFOLIO
FUND PERFORMANCE JUNE 30, 1999
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
GROWTH OF $10,000 -- CLASS B SHARES
($ in Thousands)
Fund S&P 500(4) Lipper(5)
<S> <C> <C> <C>
June-1989 $10,000 $10,000 $10,000
June-1990 $10,617 $11,646 $10,913
June-1991 $11,235 $12,506 $11,556
June-1992 $12,564 $14,181 $13,106
June-1993 $14,889 $16,111 $15,249
June-1994 $15,225 $16,337 $15,847
June-1995 $18,485 $20,591 $18,934
June-1996 $22,048 $25,941 $23,078
June-1997 $27,495 $34,940 $29,771
June-1998 $33,499 $45,473 $36,361
June-1999 $38,012(3) $55,823 $41,290
</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 13.47%(1) 8.47%(2) 1 Year 14.17%(1) 8.18%(2)
Since Inception
5 Years 20.08(1) 19.89(2) (7/28/97) 15.74(1) 12.54(2)
10 Years 14.29(1) 14.29(2)
</TABLE>
<TABLE>
<CAPTION>
CLASS C SHARES++ CLASS D SHARES#
- ------------------------------------------ -----------------------------------------
<S> <C> <C> <C> <C> <C>
1 Year 13.31%(1) 12.31(2) 1 Year 14.43%(1)
Since Inception Since Inception
(7/28/97) 14.88(1) 14.88(2) (7/28/97) 16.02(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 charges. See the Fund's current prospectus for
complete details on fees and sales charges.
(3) Closing value assuming a complete redemption on June 30, 1999.
(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.
* 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, 1999
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (99.5%)
ACCIDENT & HEALTH INSURANCE (0.5%)
57,000 AFLAC, Inc........................................................................... $ 2,728,875
79,000 Torchmark Corp....................................................................... 2,695,875
58,000 UNUM Corp............................................................................ 3,175,500
--------------
8,600,250
--------------
ADVERTISING (0.5%)
43,000 Interpublic Group of Companies, Inc.................................................. 3,724,875
45,000 Omnicom Group, Inc................................................................... 3,600,000
--------------
7,324,875
--------------
AEROSPACE (1.0%)
72,000 Boeing Co............................................................................ 3,181,500
75,000 Goodrich (B.F.) Co. (The)............................................................ 3,187,500
73,000 Lockheed Martin Corp................................................................. 2,719,250
41,000 Northrop Grumman Corp................................................................ 2,718,812
52,000 United Technologies Corp............................................................. 3,727,750
--------------
15,534,812
--------------
AIR FREIGHT/DELIVERY SERVICES (0.2%)
68,000 FDX Corp.*........................................................................... 3,689,000
--------------
AIRLINES (0.8%)
45,000 AMR Corp.*........................................................................... 3,071,250
53,620 Delta Air Lines, Inc................................................................. 3,089,852
109,000 Southwest Airlines Co................................................................ 3,392,625
61,000 US Airways Group Inc.*............................................................... 2,657,312
--------------
12,211,039
--------------
ALCOHOLIC BEVERAGES (0.6%)
45,000 Anheuser-Busch Companies, Inc........................................................ 3,192,187
47,000 Brown-Forman Corp. (Class B)......................................................... 3,063,812
65,000 Coors (Adolph) Co. (Class B)......................................................... 3,217,500
--------------
9,473,499
--------------
ALUMINUM (0.6%)
92,000 Alcan Aluminium Ltd. (Canada)........................................................ 2,938,250
58,000 Alcoa Inc............................................................................ 3,588,750
49,900 Reynolds Metals Co................................................................... 2,944,100
--------------
9,471,100
--------------
APPAREL (0.7%)
277,000 Fruit of the Loom, Inc. (Class A)*................................................... 2,700,750
80,000 Liz Claiborne, Inc................................................................... 2,920,000
133,900 Russell Corp......................................................................... 2,611,050
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
68,110 VF Corp.............................................................................. $ 2,911,702
--------------
11,143,502
--------------
AUTO PARTS: O.E.M. (1.0%)
63,000 Dana Corp............................................................................ 2,901,937
144,800 Delphi Automotive Systems Corp....................................................... 2,687,850
35,000 Eaton Corp........................................................................... 3,220,000
51,500 Johnson Controls, Inc................................................................ 3,569,594
54,000 TRW Inc.............................................................................. 2,963,250
--------------
15,342,631
--------------
AUTOMOTIVE AFTERMARKET (0.6%)
125,000 Cooper Tire & Rubber Co.............................................................. 2,953,125
91,710 Genuine Parts Co..................................................................... 3,209,850
52,000 Goodyear Tire & Rubber Co............................................................ 3,058,250
--------------
9,221,225
--------------
BEVERAGES - NON-ALCOHOLIC (0.5%)
44,000 Coca Cola Co......................................................................... 2,750,000
82,000 Coca-Cola Enterprises Inc............................................................ 2,439,500
75,200 PepsiCo, Inc......................................................................... 2,909,300
--------------
8,098,800
--------------
BIOTECHNOLOGY (0.2%)
46,000 Amgen Inc.*.......................................................................... 2,797,375
--------------
BOOKS/MAGAZINES (0.4%)
57,470 Harcourt General, Inc................................................................ 2,963,297
82,600 Meredith Corp........................................................................ 2,860,025
--------------
5,823,322
--------------
BROADCASTING (0.4%)
82,000 CBS Corp.*........................................................................... 3,561,875
54,000 Clear Channel Communications, Inc.*.................................................. 3,722,625
--------------
7,284,500
--------------
BUILDING MATERIALS (0.2%)
77,000 Owens Corning........................................................................ 2,646,875
--------------
BUILDING MATERIALS/DIY CHAINS (0.4%)
55,000 Home Depot, Inc. (The)............................................................... 3,544,062
55,000 Lowe's Companies, Inc................................................................ 3,117,812
--------------
6,661,874
--------------
BUILDING PRODUCTS (0.4%)
48,000 Armstrong World Industries, Inc...................................................... 2,775,000
115,000 Masco Corp........................................................................... 3,320,625
--------------
6,095,625
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
4
<PAGE>
MORGAN STANLEY DEAN WITTER VALUE-ADDED MARKET SERIES - EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS JUNE 30, 1999, CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
CABLE TELEVISION (0.4%)
93,000 Comcast Corp. (Class A Special)...................................................... $ 3,574,687
48,000 MediaOne Group, Inc.*................................................................ 3,570,000
--------------
7,144,687
--------------
CASINO/GAMBLING (0.4%)
132,000 Harrah's Entertainment, Inc.*........................................................ 2,904,000
159,000 Mirage Resorts, Inc.*................................................................ 2,663,250
--------------
5,567,250
--------------
CELLULAR TELEPHONE (0.6%)
69,000 Nextel Communications, Inc. (Class A)*............................................... 3,462,937
61,000 Sprint Corp. (PCS Group)*............................................................ 3,484,625
16,500 Vodafone AirTouch PLC (ADR) (United Kingdom)......................................... 3,250,500
--------------
10,198,062
--------------
CLOTHING/SHOE/ACCESSORY STORES (0.9%)
74,000 Gap, Inc. (The)...................................................................... 3,727,750
80,000 Limited (The), Inc................................................................... 3,630,000
92,800 Nordstrom, Inc....................................................................... 3,108,800
102,000 TJX Companies, Inc................................................................... 3,397,875
--------------
13,864,425
--------------
COMPUTER COMMUNICATIONS (0.6%)
100,000 3Com Corp.*.......................................................................... 2,662,500
289,000 Cabletron Systems, Inc.*............................................................. 3,757,000
58,000 Cisco Systems, Inc.*................................................................. 3,737,375
--------------
10,156,875
--------------
COMPUTER HARDWARE (1.7%)
80,000 Apple Computer, Inc.*................................................................ 3,705,000
115,000 Compaq Computer Corp................................................................. 2,724,062
222,000 Data General Corp.*.................................................................. 3,232,875
92,000 Dell Computer Corp.*................................................................. 3,398,250
55,000 Gateway Inc.......................................................................... 3,245,000
37,000 Hewlett-Packard Co................................................................... 3,718,500
29,000 International Business Machines Corp................................................. 3,748,250
55,000 Sun Microsystems, Inc.*.............................................................. 3,788,125
--------------
27,560,062
--------------
COMPUTER SOFTWARE (2.0%)
41,000 Adobe Systems, Inc................................................................... 3,367,125
91,000 Autodesk, Inc........................................................................ 2,690,187
64,000 BMC Software, Inc.*.................................................................. 3,452,000
67,000 Computer Associates International, Inc............................................... 3,685,000
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
92,000 Compuware Corp.*..................................................................... $ 2,921,000
40,000 Microsoft Corp.*..................................................................... 3,605,000
135,000 Novell, Inc.*........................................................................ 3,577,500
100,000 Oracle Corp.*........................................................................ 3,712,500
194,000 Parametric Technology Corp.*......................................................... 2,691,750
162,000 PeopleSoft, Inc.*.................................................................... 2,794,500
--------------
32,496,562
--------------
COMPUTER/VIDEO CHAINS (0.5%)
41,000 Circuit City Stores, Inc. - Circuit City Group....................................... 3,813,000
77,900 Tandy Corp........................................................................... 3,807,362
--------------
7,620,362
--------------
CONSTRUCTION/AGRICULTURAL EQUIPMENT/TRUCKS (1.4%)
75,000 Case Corp............................................................................ 3,609,375
54,500 Caterpillar, Inc..................................................................... 3,270,000
62,000 Cummins Engine Co., Inc.............................................................. 3,541,750
71,000 Deere & Co........................................................................... 2,813,375
36,000 NACCO Industries, Inc. (Class A)..................................................... 2,646,000
71,000 Navistar International Corp.*........................................................ 3,550,000
65,000 PACCAR, Inc.......................................................................... 3,469,375
--------------
22,899,875
--------------
CONSUMER ELECTRONICS/
APPLIANCES (0.5%)
52,000 Maytag Corp.......................................................................... 3,623,750
50,000 Whirlpool Corp....................................................................... 3,700,000
--------------
7,323,750
--------------
CONSUMER SPECIALTIES (0.2%)
125,400 Jostens, Inc......................................................................... 2,641,237
--------------
CONSUMER SUNDRIES (0.2%)
99,000 American Greetings Corp. (Class A)................................................... 2,982,375
--------------
CONTAINERS/PACKAGING (1.1%)
73,000 Ball Corp............................................................................ 3,084,250
74,000 Bemis Company, Inc................................................................... 2,941,500
94,000 Crown Cork & Seal Co., Inc........................................................... 2,679,000
102,000 Owens-Illinois, Inc.*................................................................ 3,334,125
51,000 Sealed Air Corp.*.................................................................... 3,308,625
41,000 Temple-Inland, Inc................................................................... 2,798,250
--------------
18,145,750
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
5
<PAGE>
MORGAN STANLEY DEAN WITTER VALUE-ADDED MARKET SERIES - EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS JUNE 30, 1999, CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
CONTRACT DRILLING (0.4%)
131,000 Helmerich & Payne, Inc............................................................... $ 3,119,437
212,000 Rowan Companies, Inc.*............................................................... 3,908,750
--------------
7,028,187
--------------
DEPARTMENT STORES (1.2%)
89,000 Dillard's, Inc. (Class A)............................................................ 3,126,125
68,000 Federated Department Stores, Inc.*................................................... 3,599,750
48,000 Kohl's Corp.*........................................................................ 3,705,000
70,500 May Department Stores Co............................................................. 2,881,687
61,000 Penney (J.C.) Co., Inc............................................................... 2,962,312
59,500 Sears, Roebuck & Co.................................................................. 2,651,469
--------------
18,926,343
--------------
DISCOUNT CHAINS (1.2%)
97,000 Consolidated Stores Corp.*........................................................... 2,619,000
40,000 Costco Companies, Inc.*.............................................................. 3,200,000
52,000 Dayton Hudson Corp................................................................... 3,380,000
98,750 Dollar General Corp.................................................................. 2,863,750
196,000 Kmart Corp.*......................................................................... 3,221,750
78,000 Wal-Mart Stores, Inc................................................................. 3,763,500
--------------
19,048,000
--------------
DIVERSIFIED COMMERCIAL SERVICES (0.2%)
84,000 Paychex, Inc......................................................................... 2,667,000
--------------
DIVERSIFIED ELECTRONIC PRODUCTS (0.6%)
81,000 Harris Corp.......................................................................... 3,174,187
30,000 Honeywell, Inc....................................................................... 3,476,250
60,000 Rockwell International Corp.......................................................... 3,645,000
--------------
10,295,437
--------------
DIVERSIFIED FINANCIAL SERVICES (0.8%)
29,000 American Express Co.................................................................. 3,773,625
78,000 Citigroup Inc........................................................................ 3,705,000
32,000 Providian Financial Corp............................................................. 2,992,000
39,000 Transamerica Corp.................................................................... 2,925,000
--------------
13,395,625
--------------
DIVERSIFIED MANUFACTURING (1.8%)
131,000 Allegheny Teledyne Inc............................................................... 2,963,875
56,000 AlliedSignal, Inc.................................................................... 3,528,000
54,000 Cooper Industries, Inc............................................................... 2,808,000
48,000 Danaher Corp......................................................................... 2,790,000
85,000 Dover Corp........................................................................... 2,975,000
86,000 ITT Industries, Inc.................................................................. 3,278,750
32,000 Minnesota Mining & Manufacturing Co.................................................. 2,782,000
176,000 Thermo Electron Corp.*............................................................... 3,531,000
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
39,000 Tyco International Ltd. (Bermuda).................................................... $ 3,695,250
--------------
28,351,875
--------------
DRUGSTORE CHAINS (0.8%)
62,000 CVS Corp............................................................................. 3,146,500
85,000 Longs Drug Stores Corp............................................................... 2,937,812
107,000 Rite Aid Corp........................................................................ 2,634,875
114,000 Walgreen Co.......................................................................... 3,348,750
--------------
12,067,937
--------------
E.D.P. PERIPHERALS (0.5%)
58,000 EMC Corp.*........................................................................... 3,190,000
47,000 Network Appliance, Inc.*............................................................. 2,626,125
100,000 Seagate Technology, Inc.*............................................................ 2,562,500
--------------
8,378,625
--------------
E.D.P. SERVICES (1.1%)
82,000 Automatic Data Processing, Inc....................................................... 3,608,000
100,000 Ceridian Corp.*...................................................................... 3,268,750
53,420 Computer Sciences Corp.*............................................................. 3,695,996
55,000 Electronic Data Systems Corp......................................................... 3,110,937
68,000 First Data Corp...................................................................... 3,327,750
--------------
17,011,433
--------------
ELECTRIC UTILITIES (5.6%)
55,000 AES Corp. (The)*..................................................................... 3,196,875
78,000 Ameren Corp.......................................................................... 2,993,250
70,000 American Electric Power Co., Inc..................................................... 2,629,375
69,000 Carolina Power & Light Co............................................................ 2,954,062
112,000 Central & South West Corp............................................................ 2,618,000
89,000 Cinergy Corp......................................................................... 2,848,000
64,000 CMS Energy Corp...................................................................... 2,680,000
64,000 Consolidated Edison, Inc............................................................. 2,896,000
93,000 Constellation Energy Group, Inc...................................................... 2,755,125
70,000 Dominion Resources, Inc.............................................................. 3,031,875
77,000 DTE Energy Co........................................................................ 3,080,000
51,460 Duke Energy Corp..................................................................... 2,798,137
110,000 Edison International................................................................. 2,942,500
95,000 Entergy Corp......................................................................... 2,968,750
95,000 FirstEnergy Corp..................................................................... 2,945,000
64,000 Florida Progress Corp................................................................ 2,644,000
48,440 FPL Group, Inc....................................................................... 2,646,035
68,000 GPU, Inc............................................................................. 2,868,750
70,000 New Century Energies, Inc............................................................ 2,716,875
214,800 Niagara Mohawk Holdings Inc.......................................................... 3,450,225
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE>
MORGAN STANLEY DEAN WITTER VALUE-ADDED MARKET SERIES - EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS JUNE 30, 1999, CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
110,000 Northern States Power Co............................................................. $ 2,660,625
144,050 PacifiCorp........................................................................... 2,646,919
79,000 PECO Energy Co....................................................................... 3,308,125
93,860 PG & E Corp.......................................................................... 3,050,450
108,000 PP&L Resources, Inc.................................................................. 3,321,000
86,000 Public Service Enterprise Group, Inc................................................. 3,515,250
105,000 Reliant Energy, Inc.................................................................. 2,900,625
116,000 Southern Co.......................................................................... 3,074,000
69,000 Texas Utilities Co................................................................... 2,846,250
90,000 Unicom Corp.......................................................................... 3,470,625
--------------
88,456,703
--------------
ELECTRICAL PRODUCTS (0.6%)
46,500 Emerson Electric Co.................................................................. 2,923,687
89,670 Raychem Corp......................................................................... 3,317,790
67,000 Thomas & Betts Corp.................................................................. 3,165,750
--------------
9,407,227
--------------
ELECTRONIC COMPONENTS (0.4%)
188,000 Andrew Corp.*........................................................................ 3,560,250
50,000 Solectron Corp.*..................................................................... 3,334,375
--------------
6,894,625
--------------
ELECTRONIC DATA PROCESSING (0.4%)
170,000 Silicon Graphics, Inc.*.............................................................. 2,783,750
89,000 Unisys Corp.*........................................................................ 3,465,437
--------------
6,249,187
--------------
ELECTRONIC PRODUCTION EQUIPMENT (0.5%)
52,000 Applied Materials, Inc.*............................................................. 3,841,500
56,000 KLA-Tencor Corp.*.................................................................... 3,629,500
--------------
7,471,000
--------------
ENGINEERING & CONSTRUCTION (0.4%)
81,000 Fluor Corp........................................................................... 3,280,500
219,000 Foster Wheeler Corp.................................................................. 3,093,375
--------------
6,373,875
--------------
ENVIRONMENTAL SERVICES (0.4%)
67,000 Browning-Ferris Industries, Inc...................................................... 2,881,000
57,000 Waste Management, Inc................................................................ 3,063,750
--------------
5,944,750
--------------
FARMING/SEEDS/MILLING (0.4%)
177,000 Archer-Daniels-Midland Co............................................................ 2,732,437
90,000 Pioneer Hi-Bred International, Inc................................................... 3,504,375
--------------
6,236,812
--------------
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
FINANCE COMPANIES (1.6%)
71,000 Associates First Capital Corp. (Class A)............................................. $ 3,146,187
66,000 Capital One Financial Corp........................................................... 3,675,375
70,540 Countrywide Credit Industries, Inc................................................... 3,015,585
45,000 Fannie Mae........................................................................... 3,076,875
52,000 Freddie Mac.......................................................................... 3,016,000
77,500 Household International, Inc......................................................... 3,671,562
120,000 MBNA Corp............................................................................ 3,675,000
60,000 SLM Holding Corp..................................................................... 2,748,750
--------------
26,025,334
--------------
FINANCIAL PUBLISHING/SERVICES (0.8%)
54,000 Dow Jones & Co., Inc................................................................. 2,865,375
95,000 Dun & Bradstreet Corp................................................................ 3,366,562
75,000 Equifax, Inc......................................................................... 2,676,562
61,000 McGraw-Hill Companies, Inc........................................................... 3,290,187
--------------
12,198,686
--------------
FLUID CONTROLS (0.2%)
68,000 Parker-Hannifin Corp................................................................. 3,111,000
--------------
FOOD CHAINS (1.0%)
71,000 Albertson's, Inc..................................................................... 3,660,937
90,000 Great Atlantic & Pacific Tea Co., Inc................................................ 3,043,125
130,000 Kroger Co.*.......................................................................... 3,631,875
57,000 Safeway Inc.*........................................................................ 2,821,500
74,000 Winn-Dixie Stores, Inc............................................................... 2,733,375
--------------
15,890,812
--------------
FOOD DISTRIBUTORS (0.4%)
129,000 Supervalu, Inc....................................................................... 3,313,687
115,000 SYSCO Corp........................................................................... 3,428,437
--------------
6,742,124
--------------
FOREST PRODUCTS (0.7%)
74,000 Georgia-Pacific Group................................................................ 3,505,750
140,000 Louisiana-Pacific Corp............................................................... 3,325,000
55,000 Weyerhaeuser Co...................................................................... 3,781,250
--------------
10,612,000
--------------
GENERIC DRUGS (0.2%)
75,000 Watson Pharmaceuticals, Inc.*........................................................ 2,629,687
--------------
HOME BUILDING (0.7%)
76,000 Centex Corp.......................................................................... 2,854,750
106,800 Fleetwood Enterprises, Inc........................................................... 2,823,525
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE>
MORGAN STANLEY DEAN WITTER VALUE-ADDED MARKET SERIES - EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS JUNE 30, 1999, CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
110,830 Kaufman & Broad Home Corp............................................................ $ 2,756,896
119,850 Pulte Corp........................................................................... 2,764,041
--------------
11,199,212
--------------
HOME FURNISHINGS (0.4%)
75,800 Newell Rubbbermaid, Inc.............................................................. 3,524,700
146,000 Tupperware Corp...................................................................... 3,723,000
--------------
7,247,700
--------------
HOSPITAL/NURSING MANAGEMENT (0.5%)
116,000 Columbia/HCA Healthcare Corp......................................................... 2,646,250
112,000 HCR Manor Care, Inc.................................................................. 2,709,000
144,000 Tenet Healthcare Corp.*.............................................................. 2,673,000
--------------
8,028,250
--------------
HOTELS/RESORTS (0.5%)
56,000 Carnival Corp........................................................................ 2,716,000
192,000 Hilton Hotels Corp................................................................... 2,724,000
84,720 Marriott International, Inc. (Class A)............................................... 3,166,410
--------------
8,606,410
--------------
INDUSTRIAL MACHINERY/COMPONENTS (0.7%)
262,900 Harnischfeger Industries, Inc. (Canada).............................................. 525,800
46,000 Illinois Tool Works Inc.............................................................. 3,772,000
56,100 Ingersoll-Rand Co.................................................................... 3,625,462
148,100 Milacron Inc......................................................................... 2,739,850
--------------
10,663,112
--------------
INDUSTRIAL SPECIALTIES (0.7%)
85,000 Ecolab, Inc.......................................................................... 3,708,125
93,000 Millipore Corp....................................................................... 3,772,312
146,000 Pall Corp............................................................................ 3,239,375
--------------
10,719,812
--------------
INSURANCE BROKERS/SERVICES (0.4%)
77,070 AON Corp............................................................................. 3,179,137
47,000 Marsh & McLennan Cos., Inc........................................................... 3,548,500
--------------
6,727,637
--------------
INTEGRATED OIL COMPANIES (1.9%)
47,000 Amerada Hess Corp.................................................................... 2,796,500
35,000 Atlantic Richfield Co................................................................ 2,924,687
35,000 Chevron Corp......................................................................... 3,331,562
40,000 Exxon Corp........................................................................... 3,085,000
73,000 Kerr-McGee Corp...................................................................... 3,663,687
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
27,000 Mobil Corp........................................................................... $ 2,673,000
57,000 Phillips Petroleum Co................................................................ 2,867,812
54,100 Royal Dutch Petroleum Co. (ADR) (Netherlands)........................................ 3,259,525
52,000 Texaco, Inc.......................................................................... 3,250,000
72,000 Unocal Corp.......................................................................... 2,853,000
--------------
30,704,773
--------------
INTERNET SERVICES (0.2%)
25,000 America Online, Inc.*................................................................ 2,762,500
--------------
INVESTMENT BANKERS/
BROKERS/SERVICES (1.2%)
66,000 Bear Stearns Companies, Inc.......................................................... 3,085,500
52,000 Lehman Brothers Holdings, Inc........................................................ 3,237,000
39,000 Merrill Lynch & Co., Inc............................................................. 3,117,562
36,000 Morgan Stanley Dean Witter & Co. (Note 4)............................................ 3,690,000
63,000 Paine Webber Group, Inc.............................................................. 2,945,250
34,000 Schwab (Charles) Corp................................................................ 3,735,750
--------------
19,811,062
--------------
INVESTMENT MANAGERS (0.4%)
79,000 Franklin Resources, Inc.............................................................. 3,209,375
42,000 Kansas City Southern Industries, Inc................................................. 2,680,125
--------------
5,889,500
--------------
LIFE INSURANCE (0.8%)
42,000 American General Corp................................................................ 3,165,750
92,000 Conseco, Inc......................................................................... 2,800,250
43,000 Jefferson-Pilot Corp................................................................. 2,846,062
66,000 Lincoln National Corp................................................................ 3,452,625
--------------
12,264,687
--------------
MAJOR BANKS (4.6%)
51,000 Bank of America Corp................................................................. 3,738,937
86,000 Bank of New York Co., Inc............................................................ 3,155,125
61,000 Bank One Corp........................................................................ 3,633,312
64,470 BankBoston Corp...................................................................... 3,296,029
44,000 Chase Manhattan Corp................................................................. 3,811,500
52,890 Comerica, Inc........................................................................ 3,143,649
61,000 First Union Corp..................................................................... 2,867,000
95,000 Firstar Corp......................................................................... 2,660,000
76,000 Fleet Financial Group, Inc........................................................... 3,372,500
84,000 Huntington Bancshares, Inc........................................................... 2,934,750
89,740 KeyCorp.............................................................................. 2,882,897
98,000 Mellon Bank Corp..................................................................... 3,564,750
23,730 Morgan (J.P.) & Co., Inc............................................................. 3,334,065
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE>
MORGAN STANLEY DEAN WITTER VALUE-ADDED MARKET SERIES - EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS JUNE 30, 1999, CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
46,000 National City Corp................................................................... $ 3,013,000
56,460 PNC Bank Corp........................................................................ 3,253,508
53,000 Republic New York Corp............................................................... 3,613,938
71,000 SouthTrust Corp...................................................................... 2,720,188
44,000 State Street Corp.................................................................... 3,756,500
68,000 Summit Bancorp....................................................................... 2,843,250
44,340 SunTrust Banks, Inc.................................................................. 3,078,859
81,660 U.S. Bancorp......................................................................... 2,776,440
34,000 Wachovia Corp........................................................................ 2,909,125
83,000 Wells Fargo & Co..................................................................... 3,548,250
--------------
73,907,572
--------------
MAJOR CHEMICALS (1.4%)
26,500 Dow Chemical Co...................................................................... 3,362,188
44,000 DuPont (E.I) de Nemours & Co., Inc................................................... 3,005,750
56,000 Eastman Chemical Co.................................................................. 2,898,000
88,000 Hercules, Inc........................................................................ 3,459,500
69,000 Monsanto Co.......................................................................... 2,721,188
82,000 Rohm & Haas Co....................................................................... 3,515,754
61,000 Union Carbide Corp................................................................... 2,973,750
--------------
21,936,130
--------------
MAJOR PHARMACEUTICALS (2.1%)
69,000 Abbott Laboratories.................................................................. 3,139,500
55,000 American Home Products Corp.......................................................... 3,162,500
52,000 Bristol-Myers Squibb Co.............................................................. 3,662,750
39,000 Johnson & Johnson.................................................................... 3,822,000
41,000 Lilly (Eli) & Co..................................................................... 2,936,625
46,000 Merck & Co., Inc..................................................................... 3,404,000
26,000 Pfizer, Inc.......................................................................... 2,853,500
57,000 Pharmacia & Upjohn, Inc.............................................................. 3,238,313
60,000 Schering-Plough Corp................................................................. 3,180,000
48,000 Warner-Lambert Co.................................................................... 3,330,000
--------------
32,729,188
--------------
MAJOR U.S. TELECOMMUNICATIONS (2.2%)
51,000 ALLTEL Corp.......................................................................... 3,646,500
51,000 Ameritech Corp....................................................................... 3,748,500
65,000 AT&T Corp............................................................................ 3,627,813
57,000 Bell Atlantic Corp................................................................... 3,726,375
72,000 BellSouth Corp....................................................................... 3,375,000
50,000 GTE Corp............................................................................. 3,787,500
40,000 MCI WorldCom, Inc.................................................................... 3,440,000
65,000 SBC Communications, Inc.............................................................. 3,770,000
64,000 Sprint Corp. (FON Group)............................................................. 3,380,000
52,000 U.S. West, Inc....................................................................... 3,055,000
--------------
35,556,688
--------------
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
MANAGED HEALTH CARE (0.7%)
31,000 Aetna Inc............................................................................ $ 2,772,563
210,000 Humana, Inc.*........................................................................ 2,716,875
53,000 United HealthCare Corp............................................................... 3,319,125
33,000 Wellpoint Health Networks, Inc.*..................................................... 2,800,875
--------------
11,609,438
--------------
MEAT/POULTRY/FISH (0.2%)
102,910 ConAgra, Inc......................................................................... 2,739,979
--------------
MEDIA CONGLOMERATES (0.6%)
88,000 Disney (Walt) Co..................................................................... 2,711,500
51,000 Time Warner Inc...................................................................... 3,748,500
82,000 Viacom, Inc. (Class B)*.............................................................. 3,608,000
--------------
10,068,000
--------------
MEDICAL EQUIPMENT & SUPPLIES (0.2%)
44,000 Medtronic, Inc....................................................................... 3,426,500
--------------
MEDICAL SPECIALTIES (2.1%)
65,000 ALZA Corp. (Class A)*................................................................ 3,306,875
64,000 Bard (C.R.), Inc..................................................................... 3,060,000
49,000 Bausch & Lomb, Inc................................................................... 3,748,500
50,000 Baxter International, Inc............................................................ 3,031,250
91,000 Becton, Dickinson & Co............................................................... 2,730,000
86,000 Biomet, Inc.......................................................................... 3,407,750
85,000 Boston Scientific Corp.*............................................................. 3,734,688
61,000 Guidant Corp......................................................................... 3,137,688
95,000 Mallinckrodt, Inc.................................................................... 3,455,625
90,000 St. Jude Medical, Inc.*.............................................................. 3,206,250
--------------
32,818,626
--------------
MEDICAL/DENTAL DISTRIBUTORS (0.4%)
46,000 Cardinal Health, Inc................................................................. 2,949,750
85,000 McKesson HBOC, Inc................................................................... 2,730,625
--------------
5,680,375
--------------
MEDICAL/NURSING SERVICES (0.2%)
227,000 HEALTHSOUTH Corp.*................................................................... 3,390,813
--------------
METALS FABRICATIONS (0.2%)
148,000 Timken Co. (The)..................................................................... 2,886,000
--------------
MID - SIZED BANKS (1.3%)
118,000 AmSouth Bancorporation............................................................... 2,736,125
48,000 Fifth Third Bancorp.................................................................. 3,195,000
56,000 Mercantile Bancorporation, Inc....................................................... 3,199,000
37,350 Northern Trust Corp.................................................................. 3,622,950
70,000 Regions Financial Corp............................................................... 2,664,375
130,000 Synovus Financial Corp............................................................... 2,583,750
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
9
<PAGE>
MORGAN STANLEY DEAN WITTER VALUE-ADDED MARKET SERIES - EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS JUNE 30, 1999, CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
60,000 Union Planters Corp.................................................................. $ 2,681,250
--------------
20,682,450
--------------
MILITARY/GOV'T/TECHNICAL (0.7%)
108,600 EG & G, Inc.......................................................................... 3,868,875
55,000 General Dynamics Corp................................................................ 3,767,500
45,000 Raytheon Co. (Class B)............................................................... 3,166,875
--------------
10,803,250
--------------
MOTOR VEHICLES (0.4%)
58,450 Ford Motor Co........................................................................ 3,298,772
41,000 General Motors Corp.................................................................. 2,706,000
--------------
6,004,772
--------------
MOVIES/ENTERTAINMENT (0.4%)
77,000 King World Productions Inc.*......................................................... 2,680,563
69,000 Seagram Co. Ltd. (Canada)............................................................ 3,475,875
--------------
6,156,438
--------------
MULTI-LINE INSURANCE (1.2%)
79,000 Allstate Corp........................................................................ 2,834,125
30,000 American International Group, Inc.................................................... 3,511,875
40,000 CIGNA Corp........................................................................... 3,560,000
62,000 Hartford Financial Services Group, Inc............................................... 3,615,375
68,200 Provident Companies, Inc............................................................. 2,728,000
66,500 SAFECO Corp.......................................................................... 2,934,313
--------------
19,183,688
--------------
MULTI-SECTOR COMPANIES (1.6%)
104,355 Crane Co............................................................................. 3,280,660
75,000 Fortune Brands, Inc.................................................................. 3,103,125
33,000 General Electric Co.................................................................. 3,729,000
35,000 Loews Corp........................................................................... 2,769,375
108,000 McDermott International, Inc......................................................... 3,051,000
76,000 National Service Industries, Inc..................................................... 2,736,000
113,000 Tenneco, Inc......................................................................... 2,697,875
43,980 Textron, Inc......................................................................... 3,620,104
--------------
24,987,139
--------------
NATURAL GAS (1.1%)
49,000 Consolidated Natural Gas Co.......................................................... 2,976,750
69,000 Eastern Enterprises.................................................................. 2,742,750
70,000 Nicor Inc............................................................................ 2,664,375
99,000 ONEOK, Inc........................................................................... 3,143,250
81,000 Peoples Energy Corp.................................................................. 3,052,688
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
127,371 Sempra Energy........................................................................ $ 2,881,769
--------------
17,461,582
--------------
NEWSPAPERS (1.0%)
49,000 Gannett Co., Inc..................................................................... 3,497,375
55,460 Knight-Ridder, Inc................................................................... 3,046,834
94,760 New York Times Co. (The) (Class A)................................................... 3,488,353
48,000 Times Mirror Co. (Class A)........................................................... 2,844,000
40,000 Tribune Co........................................................................... 3,485,000
--------------
16,361,562
--------------
OFFICE EQUIPMENT/SUPPLIES (0.6%)
57,000 Avery Dennison Corp.................................................................. 3,441,375
52,000 Pitney Bowes, Inc.................................................................... 3,341,000
54,000 Xerox Corp........................................................................... 3,189,375
--------------
9,971,750
--------------
OIL & GAS PRODUCTION (1.0%)
72,000 Anardarko Petroleum Corp............................................................. 2,650,500
85,000 Apache Corp.......................................................................... 3,315,000
66,000 Burlington Resources, Inc............................................................ 2,854,500
146,000 Occidental Petroleum Corp............................................................ 3,084,250
235,000 Union Pacific Resources Group, Inc................................................... 3,833,438
--------------
15,737,688
--------------
OIL REFINING/MARKETING (0.5%)
68,000 Ashland, Inc......................................................................... 2,728,500
91,000 Sunoco, Inc.......................................................................... 2,747,063
94,000 USX-Marathon Group................................................................... 3,060,875
--------------
8,536,438
--------------
OIL/GAS TRANSMISSION (1.1%)
89,000 Coastal Corp......................................................................... 3,560,000
55,000 Columbia Gas System, Inc............................................................. 3,447,813
46,000 Enron Corp........................................................................... 3,760,500
86,000 Sonat, Inc........................................................................... 2,848,750
86,000 Williams Companies, Inc.............................................................. 3,660,375
--------------
17,277,438
--------------
OILFIELD SERVICES/EQUIPMENT (0.7%)
115,000 Baker Hughes Inc..................................................................... 3,852,500
81,000 Halliburton Co....................................................................... 3,665,250
46,000 Schlumberger Ltd..................................................................... 2,929,625
--------------
10,447,375
--------------
OTHER CONSUMER SERVICES (0.6%)
67,000 Block (H.&R.), Inc................................................................... 3,350,000
145,500 Cendant Corp.*....................................................................... 2,982,750
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
10
<PAGE>
MORGAN STANLEY DEAN WITTER VALUE-ADDED MARKET SERIES - EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS JUNE 30, 1999, CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
162,000 Service Corp. International.......................................................... $ 3,118,500
--------------
9,451,250
--------------
OTHER METALS/MINERALS (0.9%)
174,100 ASARCO, Inc.......................................................................... 3,275,256
235,000 Cyprus Amax Minerals Co.............................................................. 3,569,063
205,000 Inco Ltd. (Canada)................................................................... 3,690,000
52,000 Phelps Dodge Corp.................................................................... 3,220,750
--------------
13,755,069
--------------
OTHER PHARMACEUTICALS (0.2%)
33,000 Allergan, Inc........................................................................ 3,663,000
--------------
OTHER SPECIALTY STORES (0.9%)
105,860 AutoZone, Inc.*...................................................................... 3,189,033
129,000 Office Depot, Inc.*.................................................................. 2,846,063
149,000 Pep Boys-Manny, Moe & Jack........................................................... 3,222,125
93,000 Staples, Inc.*....................................................................... 2,871,375
141,000 Toys 'R' Us, Inc.*................................................................... 2,916,938
--------------
15,045,534
--------------
OTHER TELECOMMUNICATIONS (0.4%)
68,000 CenturyTel Inc....................................................................... 2,703,000
59,000 Frontier Corp........................................................................ 3,481,000
--------------
6,184,000
--------------
OTHER TRANSPORTATION (0.1%)
307,900 Laidlaw, Inc. (Canada)............................................................... 2,270,763
--------------
PACKAGE GOODS/COSMETICS (1.6%)
104,500 Alberto-Culver Co. (Class B)......................................................... 2,782,313
66,000 Avon Products, Inc................................................................... 3,663,000
29,000 Clorox Co............................................................................ 3,097,563
36,000 Colgate-Palmolive Co................................................................. 3,555,000
66,000 Gillette Co.......................................................................... 2,706,000
66,000 International Flavors & Fragrances, Inc.............................................. 2,928,750
54,000 Kimberly-Clark Corp.................................................................. 3,078,000
36,000 Procter & Gamble Co.................................................................. 3,213,000
--------------
25,023,626
--------------
PACKAGED FOODS (1.6%)
53,000 Bestfoods............................................................................ 2,623,500
62,000 Campbell Soup Co..................................................................... 2,875,250
39,000 General Mills, Inc................................................................... 3,134,625
55,000 Heinz (H.J.) Co...................................................................... 2,756,875
81,000 Kellogg Co........................................................................... 2,673,000
52,000 Quaker Oats Company (The)............................................................ 3,451,500
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
93,780 Ralston-Ralston Purina Group......................................................... $ 2,854,429
117,000 Sara Lee Corp........................................................................ 2,654,438
40,000 Unilever N.V. (Netherlands).......................................................... 2,790,000
--------------
25,813,617
--------------
PAINTS/COATINGS (0.3%)
47,000 PPG Industries, Inc.................................................................. 2,775,938
96,000 Sherwin-Williams Co.................................................................. 2,664,000
--------------
5,439,938
--------------
PAPER (1.6%)
76,000 Boise Cascade Corp................................................................... 3,258,500
60,000 Champion International Corp.......................................................... 2,872,500
76,600 Fort James Corp...................................................................... 2,901,225
68,000 International Paper Co............................................................... 3,434,000
82,000 Mead Corp............................................................................ 3,423,500
72,000 Potlatch Corp........................................................................ 3,163,500
114,000 Westavaco Corp....................................................................... 3,306,000
73,000 Willamette Industries, Inc........................................................... 3,362,563
--------------
25,721,788
--------------
PHOTOGRAPHIC PRODUCTS (0.4%)
39,000 Eastman Kodak Co..................................................................... 2,642,250
120,000 Polaroid Corp........................................................................ 3,315,000
--------------
5,957,250
--------------
PRECIOUS METALS (1.0%)
144,000 Barrick Gold Corp. (Canada).......................................................... 2,790,000
616,300 Battle Mountain Gold Co.............................................................. 1,502,231
215,000 Freeport-McMoran Copper & Gold, Inc. (Class B)....................................... 3,856,563
331,000 Homestake Mining Co.................................................................. 2,710,063
136,000 Newmont Mining Corp.................................................................. 2,703,000
240,000 Placer Dome Inc. (Canada)............................................................ 2,835,000
--------------
16,396,857
--------------
PRECISION INSTRUMENTS (0.4%)
31,000 Pe Corp-Pe Biosystems Group.......................................................... 3,557,250
103,000 Tektronix, Inc....................................................................... 3,109,313
--------------
6,666,563
--------------
PRINTING/FORMS (0.5%)
80,000 Deluxe Corp.......................................................................... 3,115,000
75,000 Donnelley (R.R.) & Sons Co........................................................... 2,779,688
259,000 Moore Corp. Ltd. (Canada)............................................................ 2,169,125
--------------
8,063,813
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
11
<PAGE>
MORGAN STANLEY DEAN WITTER VALUE-ADDED MARKET SERIES - EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS JUNE 30, 1999, CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
PROPERTY - CASUALTY INSURERS (0.7%)
47,000 Chubb Corp........................................................................... $ 3,266,500
78,000 Cincinnati Financial Corp............................................................ 2,920,125
19,500 Progressive Corp..................................................................... 2,827,500
86,000 St. Paul Companies, Inc.............................................................. 2,735,875
--------------
11,750,000
--------------
RAILROADS (0.7%)
85,000 Burlington Northern Santa Fe Corp.................................................... 2,635,000
60,000 CSX Corp............................................................................. 2,718,750
93,000 Norfolk Southern Corp................................................................ 2,801,625
51,000 Union Pacific Corp................................................................... 2,973,938
--------------
11,129,313
--------------
RECREATIONAL PRODUCTS/TOYS (0.6%)
123,000 Brunswick Corp....................................................................... 3,428,625
121,000 Hasbro, Inc.......................................................................... 3,380,438
112,000 Mattel, Inc.......................................................................... 2,961,000
--------------
9,770,063
--------------
RENTAL/LEASING COMPANIES (0.2%)
101,800 Ryder System, Inc.................................................................... 2,646,800
--------------
RESTAURANTS (0.8%)
162,000 Darden Restaurants, Inc.............................................................. 3,533,625
79,000 McDonald's Corp...................................................................... 3,263,688
52,000 Tricon Global Restaurants, Inc.*..................................................... 2,814,500
118,000 Wendy's International, Inc........................................................... 3,340,875
--------------
12,952,688
--------------
SAVINGS & LOAN ASSOCIATIONS (0.4%)
33,250 Golden West Financial Corp........................................................... 3,258,500
89,000 Washington Mutual, Inc............................................................... 3,148,375
--------------
6,406,875
--------------
SEMICONDUCTORS (1.2%)
151,000 Advanced Micro Devices, Inc.*........................................................ 2,727,438
52,000 Intel Corp........................................................................... 3,090,750
79,000 LSI Logic Corp.*..................................................................... 3,643,875
69,000 Micron Technology, Inc.*............................................................. 2,781,563
144,000 National Semiconductor Corp.*........................................................ 3,645,000
26,000 Texas Instruments, Inc............................................................... 3,770,000
--------------
19,658,626
--------------
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
SERVICES TO THE HEALTH INDUSTRY (0.4%)
90,000 IMS Health Inc....................................................................... $ 2,812,500
53,000 Shared Medical Systems Corp.......................................................... 3,458,250
--------------
6,270,750
--------------
SHOE MANUFACTURING (0.4%)
49,000 Nike, Inc. (Class B)................................................................. 3,102,313
166,000 Reebok International Ltd. (United Kingdom)*.......................................... 3,091,750
--------------
6,194,063
--------------
SMALLER BANKS (0.2%)
75,000 BB&T Corp............................................................................ 2,751,563
--------------
SPECIALTY CHEMICALS (1.6%)
69,000 Air Products & Chemicals, Inc........................................................ 2,777,250
145,000 Engelhard Corp....................................................................... 3,280,625
45,000 FMC Corp.*........................................................................... 3,074,063
180,000 Grace (W. R.) & Co................................................................... 3,307,500
62,000 Great Lakes Chemical Corp............................................................ 2,855,875
70,000 Nalco Chemical Co.................................................................... 3,631,250
75,000 Praxair, Inc......................................................................... 3,670,313
82,000 Sigma-Aldrich Corp................................................................... 2,823,875
--------------
25,420,751
--------------
SPECIALTY FOODS/CANDY (0.4%)
45,400 Hershey Foods Corp................................................................... 2,695,625
32,000 Wrigley (Wm.) Jr. Co. (Class A)...................................................... 2,880,000
--------------
5,575,625
--------------
SPECIALTY INSURERS (0.4%)
46,000 MBIA, Inc............................................................................ 2,978,500
68,000 MGIC Investment Corp................................................................. 3,306,500
--------------
6,285,000
--------------
SPECIALTY STEELS (0.2%)
57,000 Nucor Corp........................................................................... 2,703,938
--------------
STEEL/IRON ORE (0.7%)
256,000 Armco, Inc.*......................................................................... 1,696,000
348,000 Bethlehem Steel Corp.*............................................................... 2,675,250
107,000 USX-U.S. Steel Group................................................................. 2,889,000
206,000 Worthington Industries, Inc.......................................................... 3,373,250
--------------
10,633,500
--------------
TELECOMMUNICATIONS EQUIPMENT (1.6%)
52,000 Corning Inc.......................................................................... 3,646,500
86,000 General Instrument Corp.*............................................................ 3,655,000
54,000 Lucent Technologies Inc.............................................................. 3,641,625
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
12
<PAGE>
MORGAN STANLEY DEAN WITTER VALUE-ADDED MARKET SERIES - EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS JUNE 30, 1999, CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
38,000 Motorola, Inc........................................................................ $ 3,600,500
42,000 Nortel Networks Corp. (Canada)....................................................... 3,646,125
100,000 Scientific-Atlanta, Inc.............................................................. 3,600,000
52,000 Tellabs, Inc.*....................................................................... 3,513,250
--------------
25,303,000
--------------
TEXTILES (0.2%)
81,000 Springs Industries, Inc. (Class A)................................................... 3,533,625
--------------
TOBACCO (0.5%)
134,000 Nabisco Group Holdings Corp.......................................................... 2,621,398
68,000 Philip Morris Companies, Inc......................................................... 2,732,750
90,000 UST, Inc............................................................................. 2,632,500
--------------
7,986,648
--------------
TOOLS/HARDWARE (0.8%)
58,000 Black & Decker Corp.................................................................. 3,661,250
52,000 Briggs & Stratton Corp............................................................... 3,003,000
85,640 Snap-On, Inc......................................................................... 3,099,098
98,000 Stanley Works........................................................................ 3,154,375
--------------
12,917,723
--------------
WHOLESALE DISTRIBUTORS (0.4%)
61,000 Grainger (W.W.), Inc................................................................. 3,282,563
214,600 IKON Office Solutions, Inc........................................................... 3,219,000
--------------
6,501,563
--------------
TOTAL COMMON STOCKS
(IDENTIFIED COST $893,963,516)....................................................... 1,582,266,576
--------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
SHORT-TERM INVESTMENT (0.1%)
REPURCHASE AGREEMENT
$ 1,054 The Bank of New York 4.625% due 07/01/99 (dated 06/30/99; proceeds $1,054,195) (a)
(IDENTIFIED COST $1,054,060)..................................................... $ 1,054,060
--------------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(IDENTIFIED COST $895,017,576)(b)....................................................... 99.6 % 1,583,320,636
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES.......................................... 0.4 6,272,551
------ ---------------
NET ASSETS.............................................................................. 100.0 % $ 1,589,593,187
------ ---------------
------ ---------------
</TABLE>
- ---------------------
ADR American Depository Receipt.
* Non-income producing security.
(a) Collateralized by $1,075,171 U.S. Treasury Bill 0.00% due 7/01/99 valued at
$1,075,141.
(b) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $721,927,840 and the
aggregate gross unrealized depreciation is $33,624,780, resulting in net
unrealized appreciation of $688,303,060.
SEE NOTES TO FINANCIAL STATEMENTS
13
<PAGE>
MORGAN STANLEY DEAN WITTER VALUE-ADDED MARKET SERIES - EQUITY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1999
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $895,017,576)............................................................ $1,583,320,636
Cash........................................................................................ 296,647
Receivable for:
Investments sold........................................................................ 35,453,559
Dividends............................................................................... 1,766,563
Shares of beneficial interest sold...................................................... 1,327,303
Prepaid expenses and other assets........................................................... 78,850
--------------
TOTAL ASSETS........................................................................... 1,622,243,558
--------------
LIABILITIES:
Payable for:
Investments purchased................................................................... 29,049,799
Shares of beneficial interest repurchased............................................... 1,687,213
Plan of distribution fee................................................................ 1,070,031
Investment management fee............................................................... 643,599
Accrued expenses and other payables......................................................... 199,729
--------------
TOTAL LIABILITIES...................................................................... 32,650,371
--------------
NET ASSETS............................................................................. $1,589,593,187
--------------
--------------
COMPOSITION OF NET ASSETS:
Paid-in-capital............................................................................. $ 754,822,546
Net unrealized appreciation................................................................. 688,303,060
Accumulated undistributed net investment income............................................. 2,502,703
Accumulated undistributed net realized gain................................................. 143,964,878
--------------
NET ASSETS............................................................................. $1,589,593,187
--------------
--------------
CLASS A SHARES:
Net Assets.................................................................................. $ 25,186,971
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE)................................... 620,638
NET ASSET VALUE PER SHARE.............................................................. $40.58
--------------
--------------
MAXIMUM OFFERING PRICE PER SHARE,
(NET ASSET VALUE PLUS 5.54% OF NET ASSET VALUE)...................................... $42.83
--------------
--------------
CLASS B SHARES:
Net Assets.................................................................................. $1,497,116,447
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE)................................... 36,963,061
NET ASSET VALUE PER SHARE.............................................................. $40.50
--------------
--------------
CLASS C SHARES:
Net Assets.................................................................................. $ 10,748,290
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE)................................... 266,489
NET ASSET VALUE PER SHARE.............................................................. $40.33
--------------
--------------
CLASS D SHARES:
Net Assets.................................................................................. $ 56,541,479
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE)................................... 1,390,960
NET ASSET VALUE PER SHARE.............................................................. $40.65
--------------
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
14
<PAGE>
MORGAN STANLEY DEAN WITTER VALUE-ADDED MARKET SERIES - EQUITY PORTFOLIO
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1999
<TABLE>
<S> <C>
NET INVESTMENT INCOME:
INCOME
Dividends (net of $110,004 foreign withholding tax)........................................... $ 25,563,453
Interest...................................................................................... 81,150
------------
TOTAL INCOME............................................................................. 25,644,603
------------
EXPENSES
Plan of distribution fee (Class A shares)..................................................... 43,180
Plan of distribution fee (Class B shares)..................................................... 12,088,224
Plan of distribution fee (Class C shares)..................................................... 94,334
Investment management fee..................................................................... 7,021,725
Transfer agent fees and expenses.............................................................. 1,317,455
S&P license fee............................................................................... 230,178
Custodian fees................................................................................ 113,520
Shareholder reports and notices............................................................... 111,924
Registration fees............................................................................. 111,611
Professional fees............................................................................. 64,814
Trustees' fees and expenses................................................................... 13,292
Other......................................................................................... 20,699
------------
TOTAL EXPENSES........................................................................... 21,230,956
------------
NET INVESTMENT INCOME.................................................................... 4,413,647
------------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain............................................................................. 167,424,992
Net change in unrealized appreciation......................................................... 13,016,811
------------
NET GAIN................................................................................. 180,441,803
------------
NET INCREASE.................................................................................. $184,855,450
------------
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
15
<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, 1999 JUNE 30, 1998*
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income....................................................... $ 4,413,647 $ 5,866,647
Net realized gain........................................................... 167,424,992 114,426,479
Net change in unrealized appreciation....................................... 13,016,811 185,461,139
-------------- --------------
NET INCREASE........................................................... 184,855,450 305,754,265
-------------- --------------
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.......................................................... (31,601) (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...................................... (112,731,597) (61,632,796)
-------------- --------------
Net increase (decrease) from transactions in shares of beneficial
interest.................................................................. (182,655,419) 86,265,916
-------------- --------------
NET INCREASE (DECREASE)................................................ (110,531,566) 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 $2,502,703 AND
$3,092,922, RESPECTIVELY)............................................... $1,589,593,187 $1,700,124,753
-------------- --------------
-------------- --------------
</TABLE>
- ---------------------
* Class A, Class C and Class D shares were issued July 28, 1997.
SEE NOTES TO FINANCIAL STATEMENTS
16
<PAGE>
MORGAN STANLEY DEAN WITTER VALUE-ADDED MARKET SERIES - EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS JUNE 30, 1999
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.,
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
17
<PAGE>
MORGAN STANLEY DEAN WITTER VALUE-ADDED MARKET SERIES - EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS JUNE 30, 1999, CONTINUED
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 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.
18
<PAGE>
MORGAN STANLEY DEAN WITTER VALUE-ADDED MARKET SERIES - EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS JUNE 30, 1999, CONTINUED
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; and 0.40% to
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 (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;
19
<PAGE>
MORGAN STANLEY DEAN WITTER VALUE-ADDED MARKET SERIES - EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS JUNE 30, 1999, CONTINUED
(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.
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 $62,571,293 at June 30, 1999.
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 year ended June 30, 1999, the distribution fee was
accrued for Class A shares and Class C shares at the annual rate of 0.21% and
0.98%, respectively.
The Distributor has informed the Fund that for the year ended June 30, 1999, 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, $1,680,322 and
$7,325, respectively and received $38,323 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 year ended June 30, 1999 aggregated $201,097,441
and $502,248,720,
20
<PAGE>
MORGAN STANLEY DEAN WITTER VALUE-ADDED MARKET SERIES - EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS JUNE 30, 1999, CONTINUED
respectively. Included in the aforementioned are sales of U.S. Government
securities of $2,203,484. Also included in the aforementioned are sales of
common stock of Morgan Stanley Dean Witter & Co., an affiliate of the Investment
Manager, of $517,694 as well as a realized gain of $404,959.
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At June 30, 1999, the Fund had
transfer agent fees and expenses payable of approximately $2,400.
The Fund has an unfunded noncontributory defined benefit pension plan covering
all independent Trustees of the Fund who will have served as independent
Trustees for at least five years at the time of retirement. Benefits under this
plan are based on years of service and compensation during the last five years
of service. Aggregate pension costs for the year ended June 30, 1999 included in
Trustees fees and expenses in the Statement of Operations amounted to $1,975. At
June 30, 1999, the Fund had an accrued pension liability of $70,152 which is
included in accrued expenses in the Statement of Assets and Liabilities.
5. FEDERAL INCOME TAX STATUS
As of June 30, 1999, the Fund had temporary book/tax differences which were
primarily attributable to capital loss deferrals on wash sales.
6. 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 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.
21
<PAGE>
MORGAN STANLEY DEAN WITTER VALUE-ADDED MARKET SERIES - EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS JUNE 30, 1999, CONTINUED
7. 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, 1999 JUNE 30, 1998+*
---------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
----------- -------------- ----------- ------------
<S> <C> <C> <C> <C>
CLASS A SHARES
Sold............................................................. 245,777 $ 8,969,137 566,344 $ 20,580,505
Reinvestment of dividends and distributions...................... 41,964 1,425,933 10,591 362,114
Redeemed......................................................... (144,015) (5,239,246) (100,023) (3,787,323)
----------- -------------- ----------- ------------
Net increase - Class A........................................... 143,726 5,155,824 476,912 17,155,296
----------- -------------- ----------- ------------
CLASS B SHARES
Sold............................................................. 3,551,205 130,226,047 7,625,465 274,194,911
Reinvestment of dividends and distributions...................... 2,852,816 97,081,343 1,584,986 54,222,347
Redeemed......................................................... (11,693,695) (423,698,835) (7,463,240) (270,820,041)
----------- -------------- ----------- ------------
Net increase (decrease) - Class B................................ (5,289,674) (196,391,445) 1,747,211 57,597,217
----------- -------------- ----------- ------------
CLASS C SHARES
Sold............................................................. 150,627 5,498,048 275,286 10,002,911
Reinvestment of dividends and distributions...................... 20,139 682,912 4,390 150,050
Redeemed......................................................... (137,673) (5,015,296) (46,280) (1,694,447)
----------- -------------- ----------- ------------
Net increase - Class C........................................... 33,093 1,165,664 233,396 8,458,514
----------- -------------- ----------- ------------
CLASS D SHARES
Sold............................................................. 661,154 24,046,274 345,098 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......................................................... (851,489) (31,190,064) (301,496) (11,224,765)
----------- -------------- ----------- ------------
Net increase - Class D........................................... 246,211 7,414,538 92,711 3,054,889
----------- -------------- ----------- ------------
Net increase (decrease) in Fund.................................. (4,866,644) $ (182,655,419) 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.
22
<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
-----------------------------------------------------------------
1999++ 1998*++ 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CLASS B SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning of period........... $ 38.54 $ 32.96 $ 27.09 $ 23.06 $ 19.23
---------- --------- --------- ---------- ---------
Income from investment operations:
Net investment income....................... 0.11 0.13 0.17 0.18 0.19
Net realized and unrealized gain............ 4.57 6.89 6.41 4.23 3.88
---------- --------- --------- ---------- ---------
Total income from investment operations........ 4.68 7.02 6.58 4.41 4.07
---------- --------- --------- ---------- ---------
Less dividends and distributions from:
Net investment income....................... (0.11) (0.14) (0.18) (0.26) (0.09)
Net realized gain........................... (2.61) (1.30) (0.53) (0.12) (0.15)
---------- --------- --------- ---------- ---------
Total dividends and distributions.............. (2.72) (1.44) (0.71) (0.38) (0.24)
---------- --------- --------- ---------- ---------
Net asset value, end of period................. $ 40.50 $ 38.54 $ 32.96 $ 27.09 $ 23.06
---------- --------- --------- ---------- ---------
---------- --------- --------- ---------- ---------
TOTAL RETURN+.................................. 13.47% 21.84% 24.71% 19.27% 21.41%
RATIOS TO AVERAGE NET ASSETS:
Expenses....................................... 1.42%(1) 1.36% 1.45% 1.51% 1.64%
Net investment income.......................... 0.25%(1) 0.35% 0.62% 0.81% 1.01%
SUPPLEMENTAL DATA:
Net assets, end of period, in millions......... $1,497 $1,628 $1,370 $962 $642
Portfolio turnover rate........................ 13% 18% 11% 10% 11%
</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. 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) Reflects overall Fund ratios for investment income and non-class specific
expenses.
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
FOR THE YEAR JULY 28, 1997*
ENDED THROUGH
JUNE 30, 1999 JUNE 30, 1998
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
CLASS A SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period.................................. $ 38.63 $ 34.79
------ ------
Income from investment operations:
Net investment income.............................................. 0.35 0.30
Net realized and unrealized gain................................... 4.55 5.07
------ ------
Total income from investment operations............................... 4.90 5.37
------ ------
Less dividends and distributions from:
Net investment income.............................................. (0.34) (0.23)
Net realized gain.................................................. (2.61) (1.30)
------ ------
Total dividends and distributions..................................... (2.95) (1.53)
------ ------
Net asset value, end of period........................................ $ 40.58 $ 38.63
------ ------
------ ------
TOTAL RETURN+......................................................... 14.17% 16.01%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.............................................................. 0.80%(3) 0.83%(2)
Net investment income................................................. 0.87%(3) 0.87%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands............................... $25,187 $18,422
Portfolio turnover rate............................................... 13% 18%
CLASS C SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period.................................. $ 38.46 $ 34.79
------ ------
Income from investment operations:
Net investment income.............................................. 0.04 0.04
Net realized and unrealized gain................................... 4.56 5.07
------ ------
Total income from investment operations............................... 4.60 5.11
------ ------
Less dividends and distributions from:
Net investment income.............................................. (0.12) (0.14)
Net realized gain.................................................. (2.61) (1.30)
------ ------
Total dividends and distributions..................................... (2.73) (1.44)
------ ------
Net asset value, end of period........................................ $ 40.33 $ 38.46
------ ------
------ ------
TOTAL RETURN+......................................................... 13.31% 15.22%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.............................................................. 1.57%(3) 1.58%(2)
Net investment income................................................. 0.10%(3) 0.12%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands............................... $10,748 $ 8,977
Portfolio turnover rate............................................... 13% 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
24
<PAGE>
MORGAN STANLEY DEAN WITTER VALUE-ADDED MARKET SERIES - EQUITY PORTFOLIO
FINANCIAL HIGHLIGHTS, CONTINUED
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR JULY 28, 1997*
ENDED THROUGH
JUNE 30, 1999 JUNE 30, 1998
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
CLASS D SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period.................................. $ 38.69 $ 34.79
------ ------
Income from investment operations:
Net investment income.............................................. 0.47 0.40
Net realized and unrealized gain................................... 4.52 5.06
------ ------
Total income from investment operations............................... 4.99 5.46
------ ------
Less dividends and distributions from:
Net investment income.............................................. (0.42) (0.26)
Net realized gain.................................................. (2.61) (1.30)
------ ------
Total dividends and distributions..................................... (3.03) (1.56)
------ ------
Net asset value, end of period........................................ $ 40.65 $ 38.69
------ ------
------ ------
TOTAL RETURN+......................................................... 14.43% 16.27%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.............................................................. 0.59%(3) 0.58%(2)
Net investment income................................................. 1.08%(3) 1.17%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands............................... $56,541 $44,290
Portfolio turnover rate............................................... 13% 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
25
<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") at June 30, 1999, 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 indicated, 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, 1999 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 10036
AUGUST 5, 1999
1999 FEDERAL TAX NOTICE (UNAUDITED)
During the year ended June 30, 1999, the fund paid to shareholders
$2.51 per share from long-term capital gains. For such period,
100% of the ordinary dividends paid qualified for the dividends
received deduction available to corporations.
26
<PAGE>
TRUSTEES
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
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
Mitchell M. Merin
President
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. Read the
prospectus carefully before investing.
MORGAN STANLEY
DEAN WITTER
VALUE-ADDED
MARKET SERIES
EQUITY PORTFOLIO
[GRAPHIC]
ANNUAL REPORT
JUNE 30, 1999
