<PAGE>
MORGAN STANLEY DEAN WITTER VALUE-ADDED TWO WORLD TRADE CENTER,
MARKET SERIES - EQUITY PORTFOLIO NEW YORK, NEW YORK 10048
LETTER TO THE SHAREHOLDERS JUNE 30, 2000
DEAR SHAREHOLDER:
During the 12-month period ended June 30, 2000, the U.S. equity markets reached
new heights amid episodes of heightened volatility. Strong global economic
growth, rising crude oil prices and a tight labor market fueled concerns about
inflation. The Federal Reserve Board raised the federal funds rate by a total of
150 basis points (1.50 percent) during the period, negatively affecting
expectations for earnings growth and the profitability of old-economy stocks.
However, new-economy stocks shrugged off the higher rates until April, when a
correction in the Nasdaq refocused investors on such traditional valuation
measures as earnings, cash flow and financial flexibility. Toward the end of the
period, investors favored health care, consumer staples, energy and utility
stocks over those in the technology sector. Value stocks significantly
outperformed the largest growth stocks in the second quarter of 2000.
PERFORMANCE AND PORTFOLIO
For the 12-month period ended June 30, 2000, Morgan Stanley Dean Witter
Value-Added Market Series/Equity Portfolio's Class B shares produced a total
return of -3.73 percent compared to 7.25 percent for the Standard & Poor's 500
Stock Index (S&P 500). For the same period the Fund's Class A, C and D shares
posted total returns of -3.11 percent, -3.76 percent and -2.89 percent,
respectively. The performance of the Fund's four share classes varies because
each class has different expenses. The total return figures given assume the
reinvestment of all distributions but do not reflect the deduction of any
applicable sales charges. The accompanying chart compares the Fund's performance
to that of the S&P 500.
The Fund invests in substantially all the stocks included in the S&P 500. Unlike
the index, however, the Fund equally weights all the stock positions, thereby
emphasizing the stocks of small- and mid-cap companies. These stocks have
historically outperformed large-cap
<PAGE>
MORGAN STANLEY DEAN WITTER VALUE-ADDED MARKET SERIES - EQUITY PORTFOLIO
LETTER TO THE SHAREHOLDERS JUNE 30, 2000, CONTINUED
companies over the long term, though in recent years large-cap stocks have
significantly outpaced small caps. The Fund is overweighted in the cyclical and
utilities sectors and underweighted in health care and technology relative to
the capitalization-weighted S&P 500. A narrowing of the market during the first
half of the period, when just a few issues were responsible for most of the S&P
500's return, hindered the Fund's performance.
LOOKING AHEAD
We believe that the health of the domestic economy will largely determine how
the market will perform in the months to come. With recent economic data
indicating that the Fed's interest-rate hikes have begun to slow the economy,
there is a growing consensus that the Fed may discontinue its tightening
strategy. If investors continue to remain focused on company fundamentals and
the overall economic outlook, it is reasonable to believe they will come to
recognize undervalued sectors of the market, such as cyclical and basic
materials stocks. Such a scenario could bode well for the equally weighted
strategy employed by the Fund.
We appreciate your ongoing support of Morgan Stanley Dean Witter Value-Added
Market
Series/Equity Portfolio and look forward to continuing to serve your financial
needs.
Very truly yours,
[/S/ CHARLES A. FIUMEFREDDO] [/S/ MITCHELL M. MERIN]
CHARLES A. FIUMEFREDDO MITCHELL M. MERIN
CHAIRMAN OF THE BOARD PRESIDENT
<PAGE>
MORGAN STANLEY DEAN WITTER VALUE-ADDED MARKET SERIES - EQUITY
PORTFOLIO
FUND PERFORMANCE JUNE 30, 2000
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
"GROWTH OF $10,000 -- CLASS B SHARES"
($ in Thousands)
<TABLE>
<CAPTION>
FUND S&P 500(4)
<S> <C> <C>
June 30, 1990 $10,000 $10,000
June 30, 1991 $10,582 $10,738
June 30, 1992 $11,834 $12,176
June 30, 1993 $14,024 $13,833
June 30, 1994 $14,340 $14,028
June 30, 1995 $17,411 $17,680
June 30, 1996 $20,766 $22,274
June 30, 1997 $25,897 $30,001
June 30, 1998 $31,552 $39,045
June 30, 1999 $35,803 $47,932
June 30, 2000 $34,468(3) $51,405
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RETURNS. INVESTMENT RETURN AND
PRINCIPAL VALUE WILL FLUCTUATE. WHEN YOU SELL FUND SHARES, THEY MAY BE WORTH
MORE OR LESS THAN THEIR ORIGINAL COST. 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 SALES CHARGES AND EXPENSES.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
----------------------------------------------------------------------------------------------
CLASS A SHARES* CLASS B SHARES**
-------------------------------------------- ---------------------------------------------
PERIOD ENDED 6/30/00 PERIOD ENDED 6/30/00
------------------------- -------------------------
<S> <C> <C> <C> <C> <C>
1 Year (3.11)%(1) (8.20)%(2) 1 Year (3.73)%(1) (8.02)%(2)
Since Inception (7/28/97) 8.90 (1) 6.91 (2) 5 Year 14.64 (1) 14.40 (2)
10 Year 13.17 (1) 13.17 (2)
</TABLE>
<TABLE>
<CAPTION>
CLASS C SHARES+ CLASS D SHARES++
--------------------------------------------- ---------------------------------------------
PERIOD ENDED 6/30/00 PERIOD ENDED 6/30/00
------------------------- -------------------------
<S> <C> <C> <C> <C> <C>
1 Year (3.76)%(1) (4.62)%(2) 1 Year (2.89)%(1)
Since Inception (7/28/97) 8.12 (1) 8.12 (2) Since Inception (7/28/97) 9.16 (1)
</TABLE>
------------------------
(1) Figure shown assumes reinvestment of all distributions and does not reflect
the deduction of any sales charges.
(2) Figure shown assumes reinvestment of all distributions and the deduction of
the maximum applicable sales charge. See the Fund's current prospectus for
complete details on fees and sales charges.
(3) Closing value assuming a complete redemption on June 30, 2000.
(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.
* The maximum front-end sales charge for Class A is 5.25%.
** The maximum contingent deferred sales charge (CDSC) for Class B is 5.0%.
The CDSC declines to 0% after six years.
+ 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.
<PAGE>
MORGAN STANLEY DEAN WITTER VALUE-ADDED MARKET SERIES - EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENT JUNE 30, 2000
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (98.4%)
ACCIDENT & HEALTH INSURANCE (0.3%)
46,000 AFLAC, Inc........................................................................... $ 2,113,125
99,000 UnumProvident Corp................................................................... 1,986,187
--------------
4,099,312
--------------
ADVERTISING (0.6%)
61,000 Interpublic Group of Companies, Inc.................................................. 2,623,000
29,000 Omnicom Group, Inc................................................................... 2,582,812
39,000 Young & Rubicam, Inc................................................................. 2,230,312
--------------
7,436,124
--------------
AEROSPACE (1.1%)
65,000 Boeing Co............................................................................ 2,717,812
72,800 Goodrich (B.F.) Co. (The)............................................................ 2,479,750
87,460 Lockheed Martin Corp................................................................. 2,170,101
37,000 Northrop Grumman Corp................................................................ 2,451,250
46,000 United Technologies Corp............................................................. 2,708,250
--------------
12,527,163
--------------
AIR FREIGHT/DELIVERY SERVICES (0.2%)
68,000 FedEx Corp.*......................................................................... 2,584,000
--------------
AIRLINES (0.8%)
60,000 AMR Corp.*........................................................................... 1,586,250
51,620 Delta Air Lines, Inc................................................................. 2,610,036
133,000 Southwest Airlines Co................................................................ 2,518,687
58,340 US Airways Group Inc.*............................................................... 2,275,260
--------------
8,990,233
--------------
ALCOHOLIC BEVERAGES (0.8%)
43,000 Anheuser-Busch Companies, Inc........................................................ 3,211,562
47,000 Brown-Forman Corp. (Class B)......................................................... 2,526,250
58,000 Coors (Adolph) Co. (Class B)......................................................... 3,509,000
--------------
9,246,812
--------------
ALUMINUM (0.5%)
72,000 Alcan Aluminium, Ltd. (Canada)....................................................... 2,232,000
137,600 Alcoa, Inc........................................................................... 3,990,400
--------------
6,222,400
--------------
APPAREL (0.5%)
62,000 Liz Claiborne, Inc................................................................... 2,185,500
115,000 Russell Corp......................................................................... 2,300,000
78,400 VF Corp.............................................................................. 1,866,900
--------------
6,352,400
--------------
<CAPTION>
NUMBER OF
SHARES VALUE
----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
AUTO PARTS: O.E.M. (0.9%)
82,000 Dana Corp............................................................................ $ 1,737,375
152,000 Delphi Automotive Systems Corp....................................................... 2,213,500
32,000 Eaton Corp........................................................................... 2,144,000
48,500 Johnson Controls, Inc................................................................ 2,488,656
41,480 TRW Inc.............................................................................. 1,799,195
12,000 Visteon Corp.*....................................................................... 145,504
--------------
10,528,230
--------------
AUTOMOTIVE AFTERMARKET (0.4%)
159,000 Cooper Tire & Rubber Co.............................................................. 1,768,875
86,710 Genuine Parts Co..................................................................... 1,734,200
85,000 Goodyear Tire & Rubber Co............................................................ 1,700,000
--------------
5,203,075
--------------
BEVERAGES - NON-ALCOHOLIC (0.6%)
37,000 Coca Cola Co......................................................................... 2,125,187
98,000 Coca-Cola Enterprises Inc............................................................ 1,598,625
75,200 PepsiCo, Inc......................................................................... 3,341,700
--------------
7,065,512
--------------
BIOTECHNOLOGY (0.4%)
46,000 Amgen Inc.*.......................................................................... 3,231,500
23,000 Biogen, Inc.*........................................................................ 1,482,062
--------------
4,713,562
--------------
BOOKS/MAGAZINES (0.5%)
57,000 Harcourt General, Inc................................................................ 3,099,375
78,600 Meredith Corp........................................................................ 2,652,750
--------------
5,752,125
--------------
BROADCASTING (0.2%)
37,000 Clear Channel Communications, Inc.*.................................................. 2,775,000
--------------
BUILDING MATERIALS (0.3%)
133,000 Owens Corning........................................................................ 1,230,250
54,500 Vulcan Materials Co.................................................................. 2,326,469
--------------
3,556,719
--------------
BUILDING MATERIALS/DIY CHAINS (0.4%)
44,000 Home Depot, Inc. (The)............................................................... 2,197,250
49,000 Lowe's Companies, Inc................................................................ 2,012,062
--------------
4,209,312
--------------
BUILDING PRODUCTS (0.3%)
100,000 Armstrong Holdings, Inc.............................................................. 1,531,250
115,000 Masco Corp........................................................................... 2,077,187
--------------
3,608,437
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
4
<PAGE>
MORGAN STANLEY DEAN WITTER VALUE-ADDED MARKET SERIES - EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENT JUNE 30, 2000, CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
CABLE TELEVISION (0.4%)
57,000 Comcast Corp. (Class A Special)*..................................................... $ 2,312,062
35,000 MediaOne Group, Inc.*................................................................ 2,320,981
--------------
4,633,043
--------------
CASINO/GAMBLING (0.2%)
114,150 Harrah's Entertainment, Inc.*........................................................ 2,390,016
--------------
CELLULAR TELEPHONE (0.4%)
36,000 Nextel Communications, Inc. (Class A)*............................................... 2,202,750
44,000 Sprint Corp. (PCS Group)*............................................................ 2,618,000
--------------
4,820,750
--------------
CLOTHING/SHOE/ACCESSORY STORES (0.8%)
59,000 Gap, Inc. (The)...................................................................... 1,843,750
126,000 Limited (The), Inc................................................................... 2,724,750
86,000 Nordstrom, Inc....................................................................... 2,074,750
124,000 TJX Companies, Inc................................................................... 2,325,000
--------------
8,968,250
--------------
COAL MINING (0.0%)
16,734 Arch Coal, Inc....................................................................... 128,643
--------------
COMPUTER COMMUNICATIONS (0.6%)
43,000 3Com Corp.*.......................................................................... 2,475,187
44,000 Adaptec, Inc.*....................................................................... 1,001,000
56,000 Cabletron Systems, Inc.*............................................................. 1,414,000
36,000 Cisco Systems, Inc.*................................................................. 2,288,250
--------------
7,178,437
--------------
COMPUTER SOFTWARE (1.7%)
25,000 Adobe Systems, Inc................................................................... 3,246,875
60,000 Autodesk, Inc........................................................................ 2,081,250
42,000 BMC Software, Inc.*.................................................................. 1,530,375
28,000 Citrix Systems, Inc.*................................................................ 530,250
40,000 Computer Associates International, Inc............................................... 2,047,500
82,000 Compuware Corp.*..................................................................... 845,625
27,000 Microsoft Corp.*..................................................................... 2,158,312
73,000 Novell, Inc.*........................................................................ 675,250
34,600 Oracle Corp.*........................................................................ 2,906,400
101,000 Parametric Technology Corp.*......................................................... 1,104,687
116,000 PeopleSoft, Inc.*.................................................................... 1,928,500
10,000 Veritas Software Corp.*.............................................................. 1,130,000
--------------
20,185,024
--------------
<CAPTION>
NUMBER OF
SHARES VALUE
----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
COMPUTER/VIDEO CHAINS (0.5%)
35,000 Best Buy Co., Inc.*.................................................................. $ 2,213,750
48,000 Circuit City Stores, Inc. - Circuit City Group....................................... 1,593,000
52,000 RadioShack Corp...................................................................... 2,463,500
--------------
6,270,250
--------------
CONSTRUCTION/AGRICULTURAL EQUIPMENT/TRUCKS (0.8%)
54,500 Caterpillar, Inc..................................................................... 1,846,187
53,500 Cummins Engine Co., Inc.............................................................. 1,457,875
54,460 Deere & Co........................................................................... 2,015,020
71,000 Navistar International Corp.*........................................................ 2,205,437
58,000 PACCAR, Inc.......................................................................... 2,301,875
--------------
9,826,394
--------------
CONSUMER ELECTRONICS/APPLIANCES (0.4%)
64,000 Maytag Corp.......................................................................... 2,360,000
40,100 Whirlpool Corp....................................................................... 1,869,662
--------------
4,229,662
--------------
CONSUMER SUNDRIES (0.2%)
94,000 American Greetings Corp. (Class A)................................................... 1,786,000
--------------
CONTAINERS/PACKAGING (1.2%)
72,100 Ball Corp............................................................................ 2,320,719
65,000 Bemis Company, Inc................................................................... 2,185,625
124,000 Crown Cork & Seal Co., Inc........................................................... 1,860,000
116,000 Owens-Illinois, Inc.*................................................................ 1,355,750
222,000 Pactiv Corp.......................................................................... 1,748,250
45,000 Sealed Air Corp.*.................................................................... 2,356,875
44,000 Temple-Inland, Inc................................................................... 1,848,000
--------------
13,675,219
--------------
CONTRACT DRILLING (0.4%)
99,000 Rowan Companies, Inc.*............................................................... 3,007,125
31,000 Transocean Sedco Forex Inc........................................................... 1,656,562
--------------
4,663,687
--------------
DEPARTMENT STORES (1.1%)
130,000 Dillard's, Inc. (Class A)............................................................ 1,592,500
63,000 Federated Department Stores, Inc.*................................................... 2,126,250
54,000 Kohl's Corp.*........................................................................ 3,003,750
72,500 May Department Stores Co............................................................. 1,740,000
108,000 Penney (J.C.) Co., Inc............................................................... 1,991,250
62,000 Sears, Roebuck & Co.................................................................. 2,022,750
--------------
12,476,500
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
5
<PAGE>
MORGAN STANLEY DEAN WITTER VALUE-ADDED MARKET SERIES - EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENT JUNE 30, 2000, CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
DISCOUNT CHAINS (1.0%)
144,000 Consolidated Stores Corp.*........................................................... $ 1,728,000
53,000 Costco Wholesale Corp.*.............................................................. 1,749,000
112,500 Dollar General Corp.................................................................. 2,193,750
218,000 Kmart Corp.*......................................................................... 1,485,125
39,000 Target Corp.......................................................................... 2,262,000
46,600 Wal-Mart Stores, Inc................................................................. 2,685,325
--------------
12,103,200
--------------
DIVERSIFIED COMMERCIAL SERVICES (0.4%)
81,000 Paychex, Inc......................................................................... 3,402,000
53,000 Sabre Holdings Corp.*................................................................ 1,510,500
--------------
4,912,500
--------------
DIVERSIFIED ELECTRONIC PRODUCTS (0.2%)
57,000 Rockwell International Corp.......................................................... 1,795,500
--------------
DIVERSIFIED FINANCIAL SERVICES (0.9%)
57,000 American Express Co.................................................................. 2,971,125
47,000 Citigroup, Inc....................................................................... 2,831,750
147,000 Conseco, Inc......................................................................... 1,433,250
32,000 Providian Financial Corp............................................................. 2,880,000
--------------
10,116,125
--------------
DIVERSIFIED MANUFACTURING (1.4%)
41,000 Danaher Corp......................................................................... 2,026,937
58,000 Dover Corp........................................................................... 2,352,625
54,000 Honeywell International, Inc......................................................... 1,819,125
86,000 ITT Industries, Inc.................................................................. 2,612,250
27,000 Minnesota Mining & Manufacturing Co.................................................. 2,227,500
117,000 Thermo Electron Corp.*............................................................... 2,464,312
56,000 Tyco International Ltd. (Bermuda).................................................... 2,653,000
--------------
16,155,749
--------------
DRUGSTORE CHAINS (0.8%)
67,000 CVS Corp............................................................................. 2,680,000
96,000 Longs Drug Stores Corp............................................................... 2,088,000
190,000 Rite Aid Corp........................................................................ 1,246,875
107,000 Walgreen Co.......................................................................... 3,444,062
--------------
9,458,937
--------------
E.D.P. PERIPHERALS (0.8%)
40,000 EMC Corp.*........................................................................... 3,077,500
22,000 Lexmark International Group, Inc. (Class A)*......................................... 1,479,500
<CAPTION>
NUMBER OF
SHARES VALUE
----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
30,000 Network Appliance, Inc.*............................................................. $ $2,413,125
42,000 Seagate Technology, Inc.*............................................................ 2,310,000
--------------
9,280,125
--------------
E.D.P. SERVICES (1.1%)
57,000 Automatic Data Processing, Inc....................................................... 3,053,062
111,000 Ceridian Corp.*...................................................................... 2,670,937
34,000 Computer Sciences Corp.*............................................................. 2,539,375
39,000 Electronic Data Systems Corp......................................................... 1,608,750
59,000 First Data Corp...................................................................... 2,927,875
--------------
12,799,999
--------------
ELECTRIC UTILITIES (6.1%)
70,000 AES Corp. (The)*..................................................................... 3,193,750
59,700 Ameren Corp.......................................................................... 2,014,875
129,380 American Electric Power Co., Inc..................................................... 3,832,882
82,500 Cinergy Corp......................................................................... 2,098,594
85,000 CMS Energy Corp...................................................................... 1,880,625
68,000 Consolidated Edison, Inc............................................................. 2,014,500
78,000 Constellation Energy Group, Inc...................................................... 2,539,875
59,500 CP&L, Inc............................................................................ 1,900,281
57,000 Dominion Resources, Inc.............................................................. 2,443,875
70,000 DTE Energy Co........................................................................ 2,139,375
51,460 Duke Energy Corp..................................................................... 2,901,057
119,000 Edison International................................................................. 2,439,500
96,000 Entergy Corp......................................................................... 2,610,000
103,000 FirstEnergy Corp..................................................................... 2,407,625
58,000 Florida Progress Corp................................................................ 2,718,750
54,000 FPL Group, Inc....................................................................... 2,673,000
68,000 GPU, Inc............................................................................. 1,840,250
75,000 New Century Energies, Inc............................................................ 2,250,000
211,800 Niagara Mohawk Holdings Inc.*........................................................ 2,951,962
101,000 Northern States Power Co............................................................. 2,038,937
72,000 PECO Energy Co....................................................................... 2,902,500
106,200 PG & E Corp.......................................................................... 2,615,175
73,000 Pinnacle West Capital Corp........................................................... 2,472,875
86,000 PPL Corp............................................................................. 1,886,625
79,000 Public Service Enterprise Group, Inc................................................. 2,735,375
97,000 Reliant Energy, Inc.................................................................. 2,867,562
112,000 Southern Co.......................................................................... 2,611,000
66,000 TXU Corp............................................................................. 1,947,000
71,000 Unicom Corp.......................................................................... 2,746,812
--------------
71,674,637
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE>
MORGAN STANLEY DEAN WITTER VALUE-ADDED MARKET SERIES - EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENT JUNE 30, 2000, CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
ELECTRICAL PRODUCTS (0.7%)
58,000 Cooper Industries, Inc............................................................... $ 1,888,625
43,500 Emerson Electric Co.................................................................. 2,626,312
31,260 Energizer Holdings, Inc.............................................................. 570,495
46,875 Molex Inc............................................................................ 2,258,789
72,000 Thomas & Betts Corp.................................................................. 1,377,000
--------------
8,721,221
--------------
ELECTRONIC COMPONENTS (0.6%)
116,000 Andrew Corp.*........................................................................ 3,893,250
64,000 Solectron Corp.*..................................................................... 2,680,000
--------------
6,573,250
--------------
ELECTRONIC DATA PROCESSING (1.7%)
39,400 Apple Computer, Inc.*................................................................ 2,061,112
101,000 Compaq Computer Corp................................................................. 2,581,812
50,000 Dell Computer Corp.*................................................................. 2,465,625
45,000 Gateway, Inc......................................................................... 2,553,750
19,000 Hewlett-Packard Co................................................................... 2,372,625
23,000 International Business Machines Corp................................................. 2,519,937
33,200 NCR Corp.*........................................................................... 1,292,725
50,900 Silicon Graphics, Inc.*.............................................................. 190,875
30,000 Sun Microsystems, Inc.*.............................................................. 2,728,125
91,000 Unisys Corp.*........................................................................ 1,325,187
--------------
20,091,773
--------------
ELECTRONIC PRODUCTION EQUIPMENT (0.6%)
27,000 Applied Materials, Inc.*............................................................. 2,446,875
32,000 KLA-Tencor Corp.*.................................................................... 1,874,000
31,000 Teradyne, Inc.*...................................................................... 2,278,500
--------------
6,599,375
--------------
ENGINEERING & CONSTRUCTION (0.3%)
63,000 Fluor Corp........................................................................... 1,992,375
127,300 Foster Wheeler Corp.................................................................. 1,097,962
--------------
3,090,337
--------------
ENVIRONMENTAL SERVICES (0.5%)
317,000 Allied Waste Industries, Inc.*....................................................... 3,170,000
114,000 Waste Management, Inc................................................................ 2,166,000
--------------
5,336,000
--------------
FARMING/SEEDS/MILLING (0.2%)
204,000 Archer-Daniels-Midland Co............................................................ 2,001,750
--------------
FINANCE COMPANIES (1.6%)
89,000 Associates First Capital Corp. (Class A)............................................. 1,985,812
57,000 Capital One Financial Corp........................................................... 2,543,625
<CAPTION>
NUMBER OF
SHARES VALUE
----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
68,000 Countrywide Credit Industries, Inc................................................... $ 2,061,250
45,000 Fannie Mae........................................................................... 2,348,437
52,000 Freddie Mac.......................................................................... 2,106,000
71,500 Household International, Inc......................................................... 2,971,719
108,000 MBNA Corp............................................................................ 2,929,500
53,000 SLM Holding Corp..................................................................... 1,984,187
--------------
18,930,530
--------------
FINANCIAL PUBLISHING/SERVICES (0.6%)
90,300 Dun & Bradstreet Corp................................................................ 2,584,837
73,000 Equifax, Inc......................................................................... 1,916,250
53,000 McGraw-Hill Companies, Inc........................................................... 2,862,000
--------------
7,363,087
--------------
FLUID CONTROLS (0.2%)
64,000 Parker-Hannifin Corp................................................................. 2,192,000
--------------
FOOD CHAINS (0.9%)
70,000 Albertson's, Inc..................................................................... 2,327,500
109,000 Great Atlantic & Pacific Tea Co., Inc................................................ 1,812,125
124,000 Kroger Co.*.......................................................................... 2,735,750
56,000 Safeway Inc.*........................................................................ 2,527,000
105,000 Winn-Dixie Stores, Inc............................................................... 1,502,812
--------------
10,905,187
--------------
FOOD DISTRIBUTORS (0.5%)
129,000 Supervalu, Inc....................................................................... 2,459,062
77,000 SYSCO Corp........................................................................... 3,243,625
--------------
5,702,687
--------------
FOREST PRODUCTS (0.5%)
65,000 Georgia-Pacific Corp................................................................. 1,706,250
175,000 Louisiana-Pacific Corp............................................................... 1,903,125
43,000 Weyerhaeuser Co...................................................................... 1,849,000
--------------
5,458,375
--------------
GENERIC DRUGS (0.3%)
62,000 Watson Pharmaceuticals, Inc.*........................................................ 3,332,500
--------------
HOME BUILDING (0.6%)
86,200 Centex Corp.......................................................................... 2,025,700
110,830 Kaufman & Broad Home Corp............................................................ 2,195,819
119,850 Pulte Corp........................................................................... 2,591,756
--------------
6,813,275
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE>
MORGAN STANLEY DEAN WITTER VALUE-ADDED MARKET SERIES - EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENT JUNE 30, 2000, CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
HOME FURNISHINGS (0.5%)
109,000 Leggett & Platt, Inc................................................................. $ 1,798,500
81,000 Newell Rubbermaid, Inc............................................................... 2,085,750
112,000 Tupperware Corp...................................................................... 2,464,000
--------------
6,348,250
--------------
HOSPITAL/NURSING MANAGEMENT (0.6%)
86,000 HCA-The Healthcare Corp.............................................................. 2,612,250
159,000 Manor Care, Inc...................................................................... 1,113,000
116,000 Tenet Healthcare Corp.*.............................................................. 3,132,000
--------------
6,857,250
--------------
HOTELS/RESORTS (0.6%)
82,000 Carnival Corp........................................................................ 1,599,000
248,000 Hilton Hotels Corp................................................................... 2,325,000
80,720 Marriott International, Inc. (Class A)............................................... 2,910,965
--------------
6,834,965
--------------
INDUSTRIAL MACHINERY/COMPONENTS (0.4%)
46,000 Illinois Tool Works Inc.............................................................. 2,622,000
56,100 Ingersoll-Rand Co.................................................................... 2,258,025
--------------
4,880,025
--------------
INDUSTRIAL SPECIALTIES (0.8%)
77,000 Ecolab, Inc.......................................................................... 3,007,812
52,000 Millipore Corp....................................................................... 3,919,500
116,000 Pall Corp............................................................................ 2,146,000
--------------
9,073,312
--------------
INSURANCE BROKERS/SERVICES (0.5%)
77,070 AON Corp............................................................................. 2,393,987
28,000 Marsh & McLennan Cos., Inc........................................................... 2,924,250
--------------
5,318,237
--------------
INTEGRATED OIL COMPANIES (1.8%)
37,000 Amerada Hess Corp.................................................................... 2,284,750
9,480 BP Amoco PLC (United Kingdom)........................................................ 536,212
32,000 Chevron Corp......................................................................... 2,714,000
96,500 Conoco, Inc. (Class B)............................................................... 2,370,281
36,000 Exxon Mobil Corp..................................................................... 2,826,000
57,000 Phillips Petroleum Co................................................................ 2,889,187
51,100 Royal Dutch Petroleum Co. (ADR) (Netherlands)........................................ 3,145,844
43,000 Texaco, Inc.......................................................................... 2,289,750
72,000 Unocal Corp.......................................................................... 2,385,000
--------------
21,441,024
--------------
<CAPTION>
NUMBER OF
SHARES VALUE
----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
INTERNET SERVICES (0.3%)
34,000 America Online, Inc.*................................................................ $ 1,793,500
15,000 Yahoo! Inc.*......................................................................... 1,858,125
--------------
3,651,625
--------------
INVESTMENT BANKERS/BROKERS/SERVICES (1.4%)
56,300 Bear Stearns Companies, Inc.......................................................... 2,343,487
28,000 Lehman Brothers Holdings, Inc........................................................ 2,647,750
28,000 Merrill Lynch & Co., Inc............................................................. 3,220,000
35,000 Morgan Stanley Dean Witter & Co. (Note 4)............................................ 2,913,750
56,000 Paine Webber Group, Inc.............................................................. 2,548,000
72,000 Schwab (Charles) Corp................................................................ 2,421,000
--------------
16,093,987
--------------
INVESTMENT MANAGERS (0.4%)
70,000 Franklin Resources, Inc.............................................................. 2,126,250
63,000 Price (T.) Rowe Associates, Inc...................................................... 2,677,500
--------------
4,803,750
--------------
LIFE INSURANCE (0.8%)
42,000 American General Corp................................................................ 2,562,000
43,000 Jefferson-Pilot Corp................................................................. 2,426,812
66,000 Lincoln National Corp................................................................ 2,384,250
81,600 Torchmark Corp....................................................................... 2,014,500
--------------
9,387,562
--------------
MAJOR BANKS (4.0%)
51,000 Bank of America Corp................................................................. 2,193,000
66,000 Bank of New York Co., Inc............................................................ 3,069,000
70,000 Bank One Corp........................................................................ 1,859,375
79,000 BB&T Corp............................................................................ 1,886,125
45,000 Chase Manhattan Corp. (The).......................................................... 2,072,812
52,890 Comerica, Inc........................................................................ 2,373,439
67,000 First Union Corp..................................................................... 1,662,437
77,000 FleetBoston Financial Corp........................................................... 2,618,000
103,000 Huntington Bancshares, Inc........................................................... 1,628,687
103,000 KeyCorp.............................................................................. 1,815,375
94,000 Mellon Financial Corp................................................................ 3,425,125
21,000 Morgan (J.P.) & Co., Inc............................................................. 2,312,625
104,000 National City Corp................................................................... 1,774,500
56,460 PNC Bank Corp........................................................................ 2,646,562
78,000 SouthTrust Corp...................................................................... 1,764,750
30,000 State Street Corp.................................................................... 3,181,875
79,000 Summit Bancorp....................................................................... 1,945,375
44,340 SunTrust Banks, Inc.................................................................. 2,025,784
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE>
MORGAN STANLEY DEAN WITTER VALUE-ADDED MARKET SERIES - EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENT JUNE 30, 2000, CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
98,000 U.S. Bancorp......................................................................... $ 1,886,500
35,000 Wachovia Corp........................................................................ 1,898,750
69,000 Wells Fargo & Co..................................................................... 2,673,750
--------------
46,713,846
--------------
MAJOR CHEMICALS (1.0%)
66,000 Dow Chemical Co...................................................................... 1,992,375
44,000 DuPont (E.I) de Nemours & Co., Inc................................................... 1,925,000
43,000 Eastman Chemical Co.................................................................. 2,053,250
131,000 Hercules Inc......................................................................... 1,842,188
65,000 Rohm & Haas Co....................................................................... 2,242,500
42,000 Union Carbide Corp................................................................... 2,079,000
--------------
12,134,313
--------------
MAJOR PHARMACEUTICALS (2.8%)
69,000 Abbott Laboratories.................................................................. 3,074,813
54,000 American Home Products Corp.......................................................... 3,172,500
44,000 Bristol-Myers Squibb Co.............................................................. 2,563,000
33,000 Johnson & Johnson.................................................................... 3,361,875
41,000 Lilly (Eli) & Co..................................................................... 4,094,875
43,000 Merck & Co., Inc..................................................................... 3,294,875
142,250 Pfizer Inc........................................................................... 6,828,000
73,000 Pharmacia Corp....................................................................... 3,773,188
60,000 Schering-Plough Corp................................................................. 3,030,000
--------------
33,193,126
--------------
MAJOR U.S. TELECOMMUNICATIONS (1.9%)
37,000 ALLTEL Corp.......................................................................... 2,291,688
50,000 AT&T Corp............................................................................ 1,581,250
46,000 Bell Atlantic Corp................................................................... 2,337,375
58,000 BellSouth Corp....................................................................... 2,472,250
38,000 GTE Corp............................................................................. 2,365,500
63,000 SBC Communications, Inc.............................................................. 2,724,750
46,000 Sprint Corp. (FON Group)............................................................. 2,346,000
38,000 U.S. West, Inc....................................................................... 3,258,500
60,000 WorldCom, Inc.*...................................................................... 2,752,500
--------------
22,129,813
--------------
MANAGED HEALTH CARE (0.8%)
36,000 Aetna Inc............................................................................ 2,310,750
319,000 Humana, Inc.*........................................................................ 1,555,125
43,000 UnitedHealth Group Inc............................................................... 3,687,250
27,000 Wellpoint Health Networks, Inc.*..................................................... 1,955,813
--------------
9,508,938
--------------
MEAT/POULTRY/FISH (0.2%)
118,000 ConAgra, Inc......................................................................... 2,249,375
--------------
<CAPTION>
NUMBER OF
SHARES VALUE
----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
MEDIA CONGLOMERATES (0.8%)
68,000 Disney (Walt) Co. (The).............................................................. $ 2,639,250
27,000 Time Warner Inc...................................................................... 2,052,000
73,700 Viacom, Inc. (Class B)*.............................................................. 5,025,419
--------------
9,716,669
--------------
MEDICAL EQUIPMENT & SUPPLIES (0.2%)
52,000 Medtronic, Inc....................................................................... 2,590,250
--------------
MEDICAL SPECIALTIES (2.7%)
69,000 ALZA Corp. (Class A)*................................................................ 4,079,625
64,000 Bard (C.R.), Inc..................................................................... 3,080,000
44,000 Bausch & Lomb, Inc................................................................... 3,404,500
47,000 Baxter International, Inc............................................................ 3,304,688
76,000 Becton, Dickinson & Co............................................................... 2,180,250
76,000 Biomet, Inc.......................................................................... 2,921,250
108,000 Boston Scientific Corp.*............................................................. 2,369,250
9,400 Edwards Lifesciences Corp............................................................ 173,900
42,000 Guidant Corp......................................................................... 2,079,000
66,000 Mallinckrodt, Inc.................................................................... 2,866,875
29,000 PE Corporation-PE Biosystems Group................................................... 1,910,375
83,900 St. Jude Medical, Inc.*.............................................................. 3,848,913
--------------
32,218,626
--------------
MEDICAL/DENTAL DISTRIBUTORS (0.5%)
52,000 Cardinal Health, Inc................................................................. 3,848,000
113,000 McKesson HBOC, Inc................................................................... 2,365,938
--------------
6,213,938
--------------
MEDICAL/NURSING SERVICES (0.2%)
378,000 Healthsouth Corp.*................................................................... 2,716,875
--------------
METALS FABRICATIONS (0.2%)
124,600 Timken Co. (The)..................................................................... 2,320,675
--------------
MID - SIZED BANKS (1.4%)
121,000 AmSouth Bancorporation............................................................... 1,905,750
45,000 Fifth Third Bancorp.................................................................. 2,846,250
89,000 Firstar Corp......................................................................... 1,874,563
42,000 Northern Trust Corp.................................................................. 2,730,000
71,400 Old Kent Financial Corp.............................................................. 1,909,950
98,000 Regions Financial Corp............................................................... 1,941,625
114,000 Synovus Financial Corp............................................................... 2,009,250
64,500 Union Planters Corp.................................................................. 1,801,969
--------------
17,019,357
--------------
MILITARY/GOV'T/TECHNICAL (0.6%)
55,000 General Dynamics Corp................................................................ 2,873,750
45,000 PerkinElmer, Inc..................................................................... 2,975,625
90,000 Raytheon Co. (Class B)............................................................... 1,732,500
--------------
7,581,875
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
9
<PAGE>
MORGAN STANLEY DEAN WITTER VALUE-ADDED MARKET SERIES - EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENT JUNE 30, 2000, CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
MOTOR VEHICLES (0.5%)
55,000 Ford Motor Co........................................................................ $ 2,365,000
37,000 General Motors Corp.................................................................. 2,148,313
40,000 Harley-Davidson, Inc................................................................. 1,540,000
--------------
6,053,313
--------------
MOVIES/ENTERTAINMENT (0.2%)
47,000 Seagram Co. Ltd. (Canada)............................................................ 2,726,000
--------------
MULTI-LINE INSURANCE (1.1%)
85,000 Allstate Corp........................................................................ 1,891,250
26,000 American International Group, Inc.................................................... 3,055,000
34,000 CIGNA Corp........................................................................... 3,179,000
59,000 Hartford Financial Services Group, Inc............................................... 3,300,313
98,000 Safeco Corp.......................................................................... 1,947,750
--------------
13,373,313
--------------
MULTI-SECTOR COMPANIES (1.2%)
116,000 Crane Co............................................................................. 2,820,250
80,000 Fortune Brands, Inc.................................................................. 1,845,000
54,000 General Electric Co.................................................................. 2,862,000
270,000 McDermott International, Inc......................................................... 2,379,375
93,000 National Service Industries, Inc..................................................... 1,813,500
41,980 Textron, Inc......................................................................... 2,280,039
--------------
14,000,164
--------------
NATURAL GAS (1.0%)
48,000 Eastern Enterprises.................................................................. 3,024,000
68,630 Nicor Inc............................................................................ 2,239,054
78,000 ONEOK, Inc........................................................................... 2,023,125
60,000 Peoples Energy Corp.................................................................. 1,942,500
117,371 Sempra Energy........................................................................ 1,995,307
--------------
11,223,986
--------------
NEWSPAPERS (1.1%)
41,000 Dow Jones & Co., Inc................................................................. 3,003,250
41,000 Gannett Co., Inc..................................................................... 2,452,313
50,460 Knight-Ridder, Inc................................................................... 2,683,841
66,000 New York Times Co. (The) (Class A)................................................... 2,607,000
61,000 Tribune Co........................................................................... 2,135,000
--------------
12,881,404
--------------
OFFICE EQUIPMENT/SUPPLIES (0.6%)
44,000 Avery Dennison Corp.................................................................. 2,953,500
52,000 Pitney Bowes, Inc.................................................................... 2,080,000
<CAPTION>
NUMBER OF
SHARES VALUE
----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
97,000 Xerox Corp........................................................................... $ 2,012,750
--------------
7,046,250
--------------
OIL & GAS PRODUCTION (1.5%)
59,000 Anardarko Petroleum Corp............................................................. 2,909,438
58,000 Apache Corp.......................................................................... 3,411,125
72,500 Burlington Resources, Inc............................................................ 2,773,125
48,000 Kerr-McGee Corp...................................................................... 2,829,000
113,000 Occidental Petroleum Corp............................................................ 2,380,063
163,000 Union Pacific Resources Group, Inc................................................... 3,586,000
--------------
17,888,751
--------------
OIL REFINING/MARKETING (0.8%)
55,000 Ashland, Inc......................................................................... 1,928,438
94,000 Sunoco, Inc.......................................................................... 2,767,125
90,000 Tosco Corp........................................................................... 2,548,125
94,000 USX-Marathon Group................................................................... 2,355,875
--------------
9,599,563
--------------
OIL/GAS TRANSMISSION (1.3%)
60,000 Coastal Corp......................................................................... 3,652,500
46,000 Columbia Energy Group................................................................ 3,018,750
70,000 El Paso Energy Corp.................................................................. 3,565,625
40,000 Enron Corp........................................................................... 2,580,000
65,000 Williams Companies, Inc.............................................................. 2,709,688
--------------
15,526,563
--------------
OILFIELD SERVICES/EQUIPMENT (0.8%)
97,000 Baker Hughes Inc..................................................................... 3,104,000
72,000 Halliburton Co....................................................................... 3,397,500
36,000 Schlumberger Ltd..................................................................... 2,686,500
--------------
9,188,000
--------------
OTHER CONSUMER SERVICES (0.3%)
59,000 Block (H.&R.), Inc................................................................... 1,910,125
131,000 Cendant Corp.*....................................................................... 1,834,000
--------------
3,744,125
--------------
OTHER METALS/MINERALS (0.5%)
101,000 Allegheny Technologies Inc........................................................... 1,818,000
135,000 Inco Ltd. (Canada)*.................................................................. 2,075,625
47,000 Phelps Dodge Corp.................................................................... 1,747,813
--------------
5,641,438
--------------
OTHER PHARMACEUTICALS (0.3%)
51,000 Allergan, Inc........................................................................ 3,799,500
--------------
OTHER SPECIALTY STORES (0.9%)
89,000 AutoZone, Inc.*...................................................................... 1,958,000
63,000 Bed Bath & Beyond Inc.*.............................................................. 2,279,813
208,000 Office Depot, Inc.*.................................................................. 1,300,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
10
<PAGE>
MORGAN STANLEY DEAN WITTER VALUE-ADDED MARKET SERIES - EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENT JUNE 30, 2000, CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
197,000 Pep Boys-Manny Moe & Jack............................................................ $ 1,182,000
108,000 Staples, Inc.*....................................................................... 1,660,500
136,000 Toys 'R' Us, Inc.*................................................................... 1,980,500
--------------
10,360,813
--------------
OTHER TELECOMMUNICATIONS (0.3%)
63,000 CenturyTel, Inc...................................................................... 1,811,250
56,000 Global Crossing Ltd. (Bermuda)*...................................................... 1,473,500
--------------
3,284,750
--------------
PACKAGE GOODS/COSMETICS (1.7%)
97,000 Alberto-Culver Co. (Class B)......................................................... 2,964,563
67,000 Avon Products, Inc................................................................... 2,981,500
65,000 Clorox Co............................................................................ 2,912,813
49,000 Colgate-Palmolive Co................................................................. 2,933,875
58,500 Gillette Co.......................................................................... 2,043,844
66,000 International Flavors & Fragrances, Inc.............................................. 1,992,375
46,500 Kimberly-Clark Corp.................................................................. 2,667,938
36,000 Procter & Gamble Co.................................................................. 2,061,000
--------------
20,557,908
--------------
PACKAGED FOODS (2.3%)
53,000 Bestfoods............................................................................ 3,670,250
67,000 Campbell Soup Co..................................................................... 1,951,375
70,000 General Mills, Inc................................................................... 2,677,500
65,000 Heinz (H.J.) Co...................................................................... 2,843,750
73,000 Kellogg Co........................................................................... 2,171,750
198,000 Nabisco Group Holdings............................................................... 5,135,625
45,000 Quaker Oats Company (The)............................................................ 3,380,625
93,780 Ralston-Ralston Purina Group......................................................... 1,869,739
112,920 Sara Lee Corp........................................................................ 2,180,768
40,000 Unilever N.V. (Netherlands).......................................................... 1,720,000
--------------
27,601,382
--------------
PAINTS/COATINGS (0.4%)
45,000 PPG Industries, Inc.................................................................. 1,994,063
107,000 Sherwin-Williams Co.................................................................. 2,267,063
--------------
4,261,126
--------------
PAPER (1.2%)
68,000 Boise Cascade Corp................................................................... 1,759,500
85,000 Fort James Corp...................................................................... 1,965,625
94,779 International Paper Co............................................................... 2,825,597
73,000 Mead Corp............................................................................ 1,843,250
64,000 Potlatch Corp........................................................................ 2,120,000
<CAPTION>
NUMBER OF
SHARES VALUE
----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
81,000 Westavaco Corp....................................................................... $ 2,009,813
68,000 Willamette Industries, Inc........................................................... 1,853,000
--------------
14,376,785
--------------
PHOTOGRAPHIC PRODUCTS (0.3%)
33,000 Eastman Kodak Co..................................................................... 1,963,500
107,000 Polaroid Corp........................................................................ 1,932,688
--------------
3,896,188
--------------
PRECIOUS METALS (0.8%)
109,000 Barrick Gold Corp. (Canada).......................................................... 1,982,438
165,000 Freeport-McMoRan Copper & Gold, Inc. (Class B)....................................... 1,526,250
319,000 Homestake Mining Co.................................................................. 2,193,125
105,000 Newmont Mining Corp.................................................................. 2,270,625
211,000 Placer Dome Inc. (Canada)............................................................ 2,017,688
--------------
9,990,126
--------------
PRECISION INSTRUMENTS (0.4%)
13,246 Agilent Technologies, Inc.*.......................................................... 976,893
48,000 Tektronix, Inc....................................................................... 3,552,000
--------------
4,528,893
--------------
PRINTING/FORMS (0.3%)
78,400 Deluxe Corp.......................................................................... 1,847,300
92,500 Donnelley (R.R.) & Sons Co........................................................... 2,087,031
--------------
3,934,331
--------------
PROPERTY - CASUALTY INSURERS (1.0%)
43,000 Chubb Corp........................................................................... 2,644,500
67,000 Cincinnati Financial Corp............................................................ 2,106,313
39,000 Loews Corp........................................................................... 2,340,000
30,000 Progressive Corp..................................................................... 2,220,000
74,000 St. Paul Companies, Inc.............................................................. 2,525,250
--------------
11,836,063
--------------
RAILROADS (0.9%)
84,000 Burlington Northern Santa Fe Corp.................................................... 1,926,750
85,000 CSX Corp............................................................................. 1,800,938
32,000 Kansas City Southern Industries, Inc................................................. 2,838,000
126,000 Norfolk Southern Corp................................................................ 1,874,250
51,000 Union Pacific Corp................................................................... 1,896,563
--------------
10,336,501
--------------
RECREATIONAL PRODUCTS/TOYS (0.5%)
106,000 Brunswick Corp....................................................................... 1,755,625
129,000 Hasbro, Inc.......................................................................... 1,943,063
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
11
<PAGE>
MORGAN STANLEY DEAN WITTER VALUE-ADDED MARKET SERIES - EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENT JUNE 30, 2000, CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
163,000 Mattel, Inc.......................................................................... $ 2,149,563
--------------
5,848,251
--------------
RENTAL/LEASING COMPANIES (0.2%)
101,800 Ryder System, Inc.................................................................... 1,927,838
--------------
RESTAURANTS (0.8%)
158,000 Darden Restaurants, Inc.............................................................. 2,567,500
77,000 McDonald's Corp...................................................................... 2,536,188
68,000 Tricon Global Restaurants, Inc.*..................................................... 1,921,000
118,000 Wendy's International, Inc........................................................... 2,101,875
--------------
9,126,563
--------------
SAVINGS & LOAN ASSOCIATIONS (0.5%)
14,000 Charter One Financial, Inc........................................................... 322,000
85,750 Golden West Financial Corp........................................................... 3,499,672
87,000 Washington Mutual, Inc............................................................... 2,512,125
--------------
6,333,797
--------------
SEMICONDUCTORS (2.0%)
43,000 Advanced Micro Devices, Inc.*........................................................ 3,321,750
33,000 Analog Devices, Inc.*................................................................ 2,508,000
22,000 Conexant Systems, Inc.*.............................................................. 1,068,375
20,000 Intel Corp........................................................................... 2,672,500
34,000 LSI Logic Corp.*..................................................................... 1,840,250
14,000 Maxim Integrated Products, Inc.*..................................................... 950,250
40,000 Micron Technology, Inc.*............................................................. 3,522,500
6,998 MIPS Technologies, Inc.*............................................................. 272,938
39,000 National Semiconductor Corp.*........................................................ 2,213,250
32,000 Texas Instruments, Inc............................................................... 2,198,000
38,000 Xilinx, Inc.*........................................................................ 3,137,375
--------------
23,705,188
--------------
SERVICES TO THE HEALTH INDUSTRY (0.6%)
102,000 IMS Health Inc....................................................................... 1,836,000
117,000 Quintiles Transnational Corp.*....................................................... 1,645,313
48,000 Shared Medical Systems Corp.......................................................... 3,501,000
--------------
6,982,313
--------------
SHOE MANUFACTURING (0.5%)
51,000 Nike, Inc. (Class B)................................................................. 2,030,438
220,800 Reebok International Ltd.*........................................................... 3,519,000
--------------
5,549,438
--------------
<CAPTION>
NUMBER OF
SHARES VALUE
----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
SPECIALTY CHEMICALS (1.3%)
72,600 Air Products & Chemicals, Inc........................................................ $ 2,236,988
115,000 Engelhard Corp....................................................................... 1,962,188
33,000 FMC Corp.*........................................................................... 1,914,000
170,000 Grace (W. R.) & Co................................................................... 2,061,250
65,000 Great Lakes Chemical Corp............................................................ 2,047,500
61,500 Praxair, Inc......................................................................... 2,302,406
80,500 Sigma-Aldrich Corp................................................................... 2,354,625
--------------
14,878,957
--------------
SPECIALTY FOODS/CANDY (0.4%)
47,400 Hershey Foods Corp................................................................... 2,298,900
32,000 Wrigley (Wm.) Jr. Co. (Class A)...................................................... 2,566,000
--------------
4,864,900
--------------
SPECIALTY INSURERS (0.4%)
47,000 MBIA, Inc............................................................................ 2,264,813
48,000 MGIC Investment Corp................................................................. 2,184,000
--------------
4,448,813
--------------
SPECIALTY STEELS (0.2%)
57,000 Nucor Corp........................................................................... 1,891,688
--------------
STEEL/IRON ORE (0.4%)
348,000 Bethlehem Steel Corp.*............................................................... 1,239,750
99,000 USX-U.S. Steel Group................................................................. 1,837,688
196,000 Worthington Industries, Inc.......................................................... 2,058,000
--------------
5,135,438
--------------
TELECOMMUNICATION EQUIPMENT (2.1%)
54,000 ADC Telecommunications, Inc.*........................................................ 4,525,875
26,000 Comverse Technology, Inc.*........................................................... 2,418,000
14,000 Corning Inc.......................................................................... 3,778,250
42,000 Lucent Technologies Inc.............................................................. 2,488,500
45,000 Motorola, Inc........................................................................ 1,307,813
40,000 Nortel Networks Corp. (Canada)....................................................... 2,730,000
19,000 QUALCOMM Inc.*....................................................................... 1,138,813
40,000 Scientific - Atlanta, Inc............................................................ 2,980,000
46,000 Tellabs, Inc.*....................................................................... 3,148,125
--------------
24,515,376
--------------
TEXTILES (0.2%)
62,500 Springs Industries, Inc. (Class A)................................................... 2,011,719
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
12
<PAGE>
MORGAN STANLEY DEAN WITTER VALUE-ADDED MARKET SERIES - EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENT JUNE 30, 2000, CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
TOBACCO (0.3%)
89,420 Philip Morris Companies, Inc......................................................... $ 2,375,219
116,000 UST, Inc............................................................................. 1,703,750
--------------
4,078,969
--------------
TOOLS/HARDWARE (0.8%)
58,000 Black & Decker Corp.................................................................. 2,280,125
51,000 Briggs & Stratton Corp............................................................... 1,746,750
78,640 Snap-On, Inc......................................................................... 2,093,790
78,000 Stanley Works........................................................................ 1,852,500
--------------
7,973,165
--------------
WHOLESALE DISTRIBUTORS (0.1%)
52,000 Grainger (W.W.), Inc................................................................. 1,602,250
--------------
TOTAL COMMON STOCKS
(IDENTIFIED COST $747,219,993)....................................................... 1,157,039,972
--------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
SHORT-TERM INVESTMENT (a) (0.7%)
U.S. GOVERNMENT AGENCY
$ 8,200 Federal Home Loan Banks 6.57% due 07/03/00 (AMORTIZED COST $8,197,007)............... $ 8,197,007
--------------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(IDENTIFIED COST $755,417,000)(b)....................................................... 99.1% 1,165,236,979
OTHER ASSETS IN EXCESS OF LIABILITIES................................................... 0.9 10,563,853
----- ---------------
NET ASSETS.............................................................................. 100.0% $ 1,175,800,832
----- ---------------
----- ---------------
</TABLE>
---------------------
ADR American Depository Receipt.
* Non-income producing security.
(a) Purchased on a discount basis. The interest rate shown has been adjusted to
reflect a money market equivalent yield.
(b) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $503,748,129 and the
aggregate gross unrealized depreciation is $93,928,150, resulting in net
unrealized appreciation of $409,819,979.
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, 2000
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $755,417,000)............................................................ $1,165,236,979
Cash........................................................................................ 23,976
Receivable for:
Investments sold........................................................................ 14,261,241
Dividends............................................................................... 1,629,406
Shares of beneficial interest sold...................................................... 313,788
Prepaid expenses and other assets........................................................... 48,181
--------------
TOTAL ASSETS........................................................................... 1,181,513,571
--------------
LIABILITIES:
Payable for:
Investments purchased................................................................... 3,153,381
Shares of beneficial interest repurchased............................................... 1,009,010
Plan of distribution fee................................................................ 898,032
Investment management fee............................................................... 466,097
Accrued expenses and other payables......................................................... 186,219
--------------
TOTAL LIABILITIES...................................................................... 5,712,739
--------------
NET ASSETS............................................................................. $1,175,800,832
==============
COMPOSITION OF NET ASSETS:
Paid-in-capital............................................................................. $ 564,240,458
Net unrealized appreciation................................................................. 409,819,979
Accumulated undistributed net investment income............................................. 4,327,553
Accumulated undistributed net realized gain................................................. 197,412,842
--------------
NET ASSETS............................................................................. $1,175,800,832
==============
CLASS A SHARES:
Net Assets.................................................................................. $ 18,488,656
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE)................................... 531,253
NET ASSET VALUE PER SHARE.............................................................. $34.80
==============
MAXIMUM OFFERING PRICE PER SHARE,
(NET ASSET VALUE PLUS 5.54% OF NET ASSET VALUE)...................................... $36.73
==============
CLASS B SHARES:
Net Assets.................................................................................. $1,102,818,816
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE)................................... 31,729,499
NET ASSET VALUE PER SHARE.............................................................. $34.76
==============
CLASS C SHARES:
Net Assets.................................................................................. $ 8,294,188
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE)................................... 239,638
NET ASSET VALUE PER SHARE.............................................................. $34.61
==============
CLASS D SHARES:
Net Assets.................................................................................. $ 46,199,172
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE)................................... 1,324,431
NET ASSET VALUE PER SHARE.............................................................. $34.88
==============
</TABLE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 2000
<TABLE>
<S> <C>
NET INVESTMENT INCOME:
INCOME
Dividends (net of $57,197 foreign withholding tax)........................................... $ 23,900,028
Interest..................................................................................... 73,636
-------------
TOTAL INCOME............................................................................ 23,973,664
-------------
EXPENSES
Plan of distribution fee (Class A shares).................................................... 56,868
Plan of distribution fee (Class B shares).................................................... 11,340,621
Plan of distribution fee (Class C shares).................................................... 88,718
Investment management fee.................................................................... 6,295,516
Transfer agent fees and expenses............................................................. 1,153,980
S&P license fee.............................................................................. 204,548
Shareholder reports and notices.............................................................. 128,885
Custodian fees............................................................................... 112,606
Registration fees............................................................................ 86,518
Professional fees............................................................................ 76,996
Trustees' fees and expenses.................................................................. 16,268
Other........................................................................................ 14,430
-------------
TOTAL EXPENSES.......................................................................... 19,575,954
-------------
NET INVESTMENT INCOME:.................................................................. 4,397,710
-------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain............................................................................ 205,392,501
Net change in unrealized appreciation........................................................ (278,483,081)
-------------
NET LOSS................................................................................ (73,090,580)
-------------
NET DECREASE................................................................................. $ (68,692,870)
=============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
14
<PAGE>
MORGAN STANLEY DEAN WITTER VALUE-ADDED MARKET SERIES - EQUITY PORTFOLIO
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
JUNE 30, 2000 JUNE 30, 1999
------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income....................................................... $ 4,397,710 $ 4,413,647
Net realized gain........................................................... 205,392,501 167,424,992
Net change in unrealized appreciation....................................... (278,483,081) 13,016,811
-------------- --------------
NET INCREASE (DECREASE)................................................ (68,692,870) 184,855,450
-------------- --------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A shares.......................................................... (224,412) (180,719)
Class B shares.......................................................... (1,848,606) (4,196,032)
Class C shares.......................................................... (7,042) (31,601)
Class D shares.......................................................... (499,079) (591,644)
Net realized gain
Class A shares.......................................................... (2,899,725) (1,373,528)
Class B shares.......................................................... (142,677,362) (102,029,801)
Class C shares.......................................................... (1,105,847) (676,323)
Class D shares.......................................................... (5,255,324) (3,651,949)
-------------- --------------
TOTAL DIVIDENDS AND DISTRIBUTIONS...................................... (154,517,397) (112,731,597)
-------------- --------------
Net decrease from transactions in shares of beneficial interest............. (190,582,088) (182,655,419)
-------------- --------------
NET DECREASE........................................................... (413,792,355) (110,531,566)
NET ASSETS:
Beginning of period......................................................... 1,589,593,187 1,700,124,753
-------------- --------------
END OF PERIOD
(INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME OF $4,327,553 AND
$2,502,703, RESPECTIVELY)............................................... $1,175,800,832 $1,589,593,187
============== ==============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
15
<PAGE>
MORGAN STANLEY DEAN WITTER VALUE-ADDED MARKET SERIES - EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS JUNE 30, 2000
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, as 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 converted to a multiple class share
structure.
The Fund offers Class A shares, Class B shares, Class C shares and Class D
shares. The four classes are substantially the same except that most Class A
shares are subject to a sales charge imposed at the time of purchase and some
Class A shares, and most Class B shares and Class C shares are subject to a
contingent deferred sales charge imposed on shares redeemed within one year, six
years and one year, respectively. Class D shares are not subject to a sales
charge. Additionally, Class A shares, Class B shares and Class C shares incur
distribution expenses.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual results could differ from
those estimates.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- (1) an equity security listed or traded on the
New York, American or other domestic or foreign stock exchange is valued at its
latest sale price on that exchange prior to the time when assets are valued; if
there were no sales that day, the security is valued at the latest bid price (in
cases where a security is traded on more than one exchange, the security is
valued on the exchange designated as the primary market pursuant to procedures
adopted by the Trustees); (2) all other portfolio securities for which
over-the-counter market quotations are readily available are valued at the
latest available bid price prior to the time of valuation; (3) when market
quotations are not readily available, including circumstances under which it is
determined by Morgan Stanley Dean Witter Advisors Inc. (the "Investment
Manager"), that sale or bid prices are not reflective of a security's market
value, portfolio securities are valued at their fair value as determined in good
faith under procedures established by and under the general supervision of the
Trustees; and
16
<PAGE>
MORGAN STANLEY DEAN WITTER VALUE-ADDED MARKET SERIES - EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS JUNE 30, 2000, CONTINUED
(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.
17
<PAGE>
MORGAN STANLEY DEAN WITTER VALUE-ADDED MARKET SERIES - EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS JUNE 30, 2000, 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.
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 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 totaled
$62,357,249 at June 30, 2000.
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
18
<PAGE>
MORGAN STANLEY DEAN WITTER VALUE-ADDED MARKET SERIES - EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS JUNE 30, 2000, CONTINUED
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, 2000,
the distribution fee was accrued for Class A shares and Class C shares at the
annual rate of 0.24% and 0.91%, respectively.
The Distributor has informed the Fund that for the year ended June 30, 2000, it
received contingent deferred sales charges from certain redemptions of the
Fund's Class B shares and Class C shares of $1,372,154 and $2,280, respectively
and received $15,343 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, 2000 aggregated $142,745,049
and $493,615,264, respectively. Also included in the aforementioned are sales of
common stock of Morgan Stanley Dean Witter & Co., an affiliate of the Investment
Manager and Distributor, of $2,738,399 as well as a realized gain of $2,380,503.
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At June 30, 2000, the Fund had
transfer agent fees and expenses payable of approximately $5,900.
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, 2000 included in
Trustees fees and expenses in the Statement of Operations amounted to $4,227. At
June 30, 2000, the Fund had accrued pension liability of $66,780 which is
included in accrued expenses in the Statement of Assets and Liabilities.
19
<PAGE>
MORGAN STANLEY DEAN WITTER VALUE-ADDED MARKET SERIES - EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS JUNE 30, 2000, CONTINUED
5. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
JUNE 30, 2000 JUNE 30, 1999
--------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
----------- -------------- ----------- -------------
<S> <C> <C> <C> <C>
CLASS A SHARES
Sold............................................................. 271,786 $ 9,990,865 245,777 $ 8,969,137
Reinvestment of dividends and distributions...................... 87,762 2,951,436 41,964 1,425,933
Redeemed......................................................... (448,933) (15,520,794) (144,015) (5,239,246)
----------- ------------- ----------- -------------
Net increase (decrease) - Class A................................ (89,385) (2,578,493) 143,726 5,155,824
----------- ------------- ----------- -------------
CLASS B SHARES
Sold............................................................. 2,463,804 90,153,710 3,551,205 130,226,047
Reinvestment of dividends and distributions...................... 3,909,380 131,824,277 2,852,816 97,081,343
Redeemed......................................................... (11,606,746) (406,730,593) (11,693,695) (423,698,835)
----------- ------------- ----------- -------------
Net decrease - Class B........................................... (5,233,562) (184,752,606) (5,289,674) (196,391,445)
----------- ------------- ----------- -------------
CLASS C SHARES
Sold............................................................. 61,411 2,233,604 150,627 5,498,048
Reinvestment of dividends and distributions...................... 32,130 1,078,614 20,139 682,912
Redeemed......................................................... (120,392) (4,157,369) (137,673) (5,015,296)
----------- ------------- ----------- -------------
Net increase (decrease) - Class C................................ (26,851) (845,151) 33,093 1,165,664
----------- ------------- ----------- -------------
CLASS D SHARES
Sold............................................................. 585,478 21,192,658 661,154 24,046,274
Reinvestment of dividends and distributions...................... 165,573 5,574,843 121,897 4,144,486
Acquisition of Dean Witter Retirement Series - Value-Added Market
Series -- -- 314,649 10,413,842
Redeemed......................................................... (817,580) (29,173,339) (851,489) (31,190,064)
----------- ------------- ----------- -------------
Net increase (decrease) - Class D................................ (66,529) (2,405,838) 246,211 7,414,538
----------- ------------- ----------- -------------
Net decrease in Fund............................................. (5,416,327) $(190,582,088) (4,866,644) $(182,655,419)
=========== ============= =========== =============
</TABLE>
6. FEDERAL INCOME TAX STATUS
As of June 30, 2000, the Fund had temporary book/tax differences primarily
attributable to capital loss deferrals on wash sales and permanent book/tax
differences attributable to a dividend redesignation. To reflect
reclassification arising from the permanent difference, accumulated
undistributed net investment income was credited and accumulated undistributed
net realized gain was charged $6,279.
20
<PAGE>
MORGAN STANLEY DEAN WITTER VALUE-ADDED MARKET SERIES - EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS JUNE 30, 2000, CONTINUED
7. ACQUISITION OF DEAN WITTER RETIREMENT SERIES -- VALUE-ADDED MARKET SERIES
As of the close of business on September 11, 1998, the Fund acquired all the net
assets of Dean Witter Retirement Series -- Value Added Series ("Retirement
Value-Added") pursuant to a plan of reorganization 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
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR FOR THE YEAR JULY 28, 1997*
ENDED ENDED THROUGH
JUNE 30, 2000 JUNE 30, 1999 JUNE 30, 1998
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CLASS A SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period.................................. $ 40.58 $ 38.63 $ 34.79
------- ------- -------
Income (loss) from investment operations:
Net investment income.............................................. 0.34 0.35 0.30
Net realized and unrealized gain (loss)............................ (1.76) 4.55 5.07
------- ------- -------
Total income (loss) from investment operations........................ (1.42) 4.90 5.37
------- ------- -------
Less dividends and distributions from:
Net investment income.............................................. (0.31) (0.34) (0.23)
Net realized gain.................................................. (4.05) (2.61) (1.30)
------- ------- -------
Total dividends and distributions..................................... (4.36) (2.95) (1.53)
------- ------- -------
Net asset value, end of period........................................ $ 34.80 $ 40.58 $ 38.63
======= ======= =======
TOTAL RETURN+......................................................... (3.11)% 14.17% 16.01%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.............................................................. 0.83 %(3) 0.80%(3) 0.83%(2)
Net investment income................................................. 0.93 %(3) 0.87%(3) 0.87%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands $18,489 $25,187 $18,422
Portfolio turnover rate............................................... 11 % 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 and non-class specific
expenses.
SEE NOTES TO FINANCIAL STATEMENTS
22
<PAGE>
MORGAN STANLEY DEAN WITTER VALUE-ADDED MARKET SERIES - EQUITY PORTFOLIO
FINANCIAL HIGHLIGHTS, CONTINUED
<TABLE>
<CAPTION>
FOR THE YEAR ENDED JUNE 30
--------------------------------------------------------------------
2000++ 1999++ 1998*++ 1997 1996
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CLASS B SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning of period...................... $ 40.50 $ 38.54 $ 32.96 $ 27.09 $ 23.06
---------- ---------- ---------- ---------- --------
Income (loss) from investment operations:
Net investment income.................................. 0.10 0.11 0.13 0.17 0.18
Net realized and unrealized gain (loss)................ (1.74) 4.57 6.89 6.41 4.23
---------- ---------- ---------- ---------- --------
Total income (loss) from investment operations............ (1.64) 4.68 7.02 6.58 4.41
---------- ---------- ---------- ---------- --------
Less dividends and distributions from:
Net investment income.................................. (0.05) (0.11) (0.14) (0.18) (0.26)
Net realized gain...................................... (4.05) (2.61) (1.30) (0.53) (0.12)
---------- ---------- ---------- ---------- --------
Total dividends and distributions......................... (4.10) (2.72) (1.44) (0.71) (0.38)
---------- ---------- ---------- ---------- --------
Net asset value, end of period............................ $ 34.76 $ 40.50 $ 38.54 $ 32.96 $ 27.09
========== ========== ========== ========== ========
TOTAL RETURN+............................................. (3.73)% 13.47% 21.84% 24.71% 19.27%
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................. 1.48 %(1) 1.42%(1) 1.36% 1.45% 1.51%
Net investment income..................................... 0.28 %(1) 0.25%(1) 0.35% 0.62% 0.81%
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands................... $1,102,819 $1,497,116 $1,628,435 $1,369,737 $961,594
Portfolio turnover rate................................... 11 % 13% 18% 11% 10%
</TABLE>
---------------------
* Prior to July 28, 1997, the Fund issued one class of shares. All shares of
the Fund held prior to that date, other than shares held by certain
employee benefit plans established by Dean Witter Reynolds Inc. 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 FOR THE YEAR JULY 28, 1997*
ENDED ENDED THROUGH
JUNE 30, 2000 JUNE 30, 1999 JUNE 30, 1998
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CLASS C SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period........................ $ 40.33 $ 38.46 $ 34.79
--------- --------- ---------
Income (loss) from investment operations:
Net investment income.................................... 0.09 0.04 0.04
Net realized and unrealized gain (loss).................. (1.73) 4.56 5.07
--------- --------- ---------
Total income (loss) from investment operations.............. (1.64) 4.60 5.11
--------- --------- ---------
Less dividends and distributions from:
Net investment income.................................... (0.03) (0.12) (0.14)
Net realized gain........................................ (4.05) (2.61) (1.30)
--------- --------- ---------
Total dividends and distributions........................... (4.08) (2.73) (1.44)
--------- --------- ---------
Net asset value, end of period.............................. $ 34.61 $ 40.33 $ 38.46
========= ========= =========
TOTAL RETURN+............................................... (3.76)% 13.31% 15.22%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................... 1.50 %(3) 1.57%(3) 1.58%(2)
Net investment income....................................... 0.26 %(3) 0.10%(3) 0.12%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands..................... $8,294 $10,748 $8,977
Portfolio turnover rate..................................... 11 % 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 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 FOR THE YEAR JULY 28, 1997*
ENDED ENDED THROUGH
JUNE 30, 2000 JUNE 30, 1999 JUNE 30, 1998
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CLASS D SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period........................ $ 40.65 $ 38.69 $ 34.79
--------- --------- ---------
Income (loss) from investment operations:
Net investment income.................................... 0.42 0.47 0.40
Net realized and unrealized gain (loss).................. (1.76) 4.52 5.06
--------- --------- ---------
Total income (loss) from investment operations.............. (1.34) 4.99 5.46
--------- --------- ---------
Less dividends and distributions from:
Net investment income.................................... (0.38) (0.42) (0.26)
Net realized gain........................................ (4.05) (2.61) (1.30)
--------- --------- ---------
Total dividends and distributions........................... (4.43) (3.03) (1.56)
--------- --------- ---------
Net asset value, end of period.............................. $ 34.88 $ 40.65 $ 38.69
========= ========= =========
TOTAL RETURN+............................................... (2.89)% 14.43% 16.27%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................... 0.59 %(3) 0.59%(3) 0.58%(2)
Net investment income....................................... 1.17 %(3) 1.08%(3) 1.17%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands..................... $46,199 $56,541 $44,290
Portfolio turnover rate 11 % 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
INDEPENDENT AUDITORS' REPORT
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES
OF MORGAN STANLEY DEAN WITTER VALUE-ADDED MARKET SERIES - EQUITY PORTFOLIO:
We have audited the accompanying statement of assets and liabilities of Morgan
Stanley Dean Witter Value-Added Market Series -- Equity Portfolio (the "Fund"),
including the portfolio of investments, as of June 30, 2000, and the related
statements of operations and changes in net assets, and financial highlights for
the year then ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audit. The statement of changes in net assets for the year ended June 30, 1999
and the financial highlights for each of the years in the four year period ended
June 30, 1999 were audited by other auditors whose report, dated August 5, 1999,
expressed an unqualified opinion on those statements and financial highlights.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards 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. Our procedures included confirmation of securities owned at
June 30, 2000 by correspondence with the custodian and broker. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Morgan Stanley Dean
Witter Value-Added Market Series -- Equity Portfolio as of June 30, 2000, the
results of its operations, the changes in net assets and the financial
highlights for the year then ended in conformity with accounting principles
generally accepted in the United States of America.
Deloitte & Touche LLP
NEW YORK, NEW YORK
AUGUST 9, 2000
2000 FEDERAL TAX NOTICE (UNAUDITED)
During the year ended June 30, 2000 the fund paid to shareholders
$3.82 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>
MORGAN STANLEY DEAN WITTER VALUE-ADDED MARKET SERIES - EQUITY
PORTFOLIO
CHANGE IN INDEPENDENT ACCOUNTANTS
On July 1, 2000, PricewaterhouseCoopers LLP resigned as independent accountants
of the Fund.
The reports of PricewaterhouseCoopers LLP on the financial statements of the
Fund for the past two fiscal years contained no adverse opinion or disclaimer of
opinion and were not qualified or modified as to uncertainty, audit scope or
accounting principle.
In connection with its audits for the two most recent fiscal years and through
July 1, 2000, there have been no disagreements with PricewaterhouseCoopers LLP
on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreements if not resolved
to the satisfaction of PricewaterhouseCoopers LLP would have caused them to make
reference thereto in their report on the financial statements for such years.
On July 1, 2000, the Fund, with the approval of its Board of Trustees and its
Audit Committee, engaged Deloitte & Touche LLP as its new independent
accountants for the year ended June 30, 2000.
27
<PAGE>
TRUSTEES
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
Wayne E. Hedien
James F. Higgins
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
Guy G. Rutherford, Jr.
Vice President
Alice S. Weiss
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
Deloitte & Touche LLP
Two World Financial Center
New York, New York 10281
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 Distributors Inc., member NASD.
MORGAN STANLEY
DEAN WITTER
VALUE-ADDED
MARKET SERIES
EQUITY PORTFOLIO
[GRAPHIC]
ANNUAL REPORT
JUNE 30, 2000
