<PAGE> 1
DEAN WITTER AMERICAN VALUE FUND
Two World Trade Center
New York, New York 10048
DEAR SHAREHOLDER:
- --------------------------------------------------------------------------------
The upward momentum of the stock and bond markets was interrupted during
the first half of 1994 by the threat and then the reality of increased interest
rates. In response to surging economic growth, the Federal Reserve Board raised
the federal-funds rate -- the interest rate banks charge one another for
overnight loans -- from 3.00 percent to 4.25 percent. The central bank also
raised the discount rate -- the rate the Federal Reserve charges member banks
for loans -- to 3.50 percent. These moves were presented as a series of
preemptive strikes against growing inflationary fears. Inflationary fears were
also fueled by increased factory operating rates, a situation that in the past
has led industrial companies to raise prices. Additionally, several leading
economic indicators have suggested that inflation could become a problem in the
next 12 to 18 months.
The indicators of future trends notwithstanding, present measures of
inflation remain favorable. In fact, current data suggest inflation is actually
waning. Based on these data, it would appear the Federal Reserve Board's actions
were proactive. In any event, the central bank has attempted to stem inflation
considerably sooner than it has traditionally.
Inflationary trends determine which assets will outperform. Historically,
when inflation stays at low levels, financial assets have been the leading
investments. However, when inflation accelerates to levels above four percent,
"hard" assets such as gold, real estate or natural resources have outperformed.
Therefore, it is critical for financial assets that the Federal Reserve Board
acts effectively to keep economic growth in the two to three percent range.
PERFORMANCE
Against this tumultuous backdrop, Dean Witter American Value Fund declined
10.84 percent, versus declines of 3.39 percent for the Standard & Poor's 500
(S&P 500) and 9.12 percent for the NASDAQ Composite, an index of mid-size
companies. This comes on the heels of a productive fiscal year 1993, in which
the Fund produced a total return of 18.70 percent, outperforming both the S&P
500 and the NASDAQ, which returned 10.10 percent and 14.75 percent,
respectively.
Despite the Fund's disappointing results over the past six months, its
long-term track record remains impressive. For the 10 years ended June 30, 1994,
the Fund registered an average annual total return of 14.92 percent, just about
in line with the S&P 500, which returned 15.09 percent and outperforming the
NASDAQ, which returned 11.41 percent.
On June 30, 1994, the Fund distributed approximately $0.10 and $0.22 in
short and long-term capital gains to shareholders of record on June 23, 1994.
Over the period under review, the Fund's net assets increased from $1.22 billion
to $1.37 billion.
FED IN THE SPOTLIGHT
Historically, when the Federal Reserve Board has tightened monetary policy,
the capital markets have been volatile. While the central bank's actions
ultimately benefit the financial markets by containing
<PAGE> 2
inflation, in the shorter run these actions take a toll: dragging bond prices
down and exerting a drag on corporate profits, a development that does not agree
with stocks.
How long it will take the Federal Reserve Board to reach its goal of two to
three percent economic growth is difficult to forecast. However, it is expected
that once this goal is attained, the environment for stocks and bonds will again
be favorable. Until that time, history shows that the groups that fare best when
monetary policy is tight generally fall into two camps: defensive and late
cycle. The defensive groups encompass non-economically sensitive sectors such as
foods, household products, financial services and health care. Later cycle
groups, those that experience upturns once the economy has recovered to the
extent additional plant capacity is needed, include the construction,
engineering, metals and chemical sectors. In addition, the technology sectors
also should remain a focus in this environment as companies around the world
compete to be low-cost producers by substituting capital or technology for human
laborers.
PORTFOLIO STRATEGY
The Fund's underperformance over the past six months is attributable not
only to market volatility, but to the portfolio's emphasis on economically
sensitive issues. During this period, the portfolio was repositioned, moving
from an economically sensitive tilt, to a focus on the defensive and later-cycle
groups. Once the Federal Reserve Board's tightening mode has ended, the
portfolio most likely will be eased back to the more industrial, economically
sensitive industries. The U.S. is currently the major low-cost producer in a
number of industrial areas, and is expected to gain additional market share
globally, which should propel industrial earnings beyond the short-term economic
slowdown that will result from recent Federal Reserve Board actions.
LOOKING AHEAD
Once the Federal Reserve Board returns to a more accommodative monetary
stance, it is expected that a favorable disinflationary backdrop, coupled with a
beneficial competitive industrial position, will return the U.S. capital markets
to their forward march. We will continue to position the Fund in those
industries that offer the most attractive earnings opportunities.
We appreciate your support of the Dean Witter American Value Fund and look
forward to continuing to serve your investment needs and objectives.
Very truly yours,
Charles A. Fiumefreddo
Chairman of the Board
<PAGE> 3
DEAN WITTER AMERICAN VALUE FUND
PORTFOLIO OF INVESTMENTS June 30, 1994 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of Shares Value
- --------- ---------------
<C> <S> <C>
COMMON STOCKS (79.6%)
AUTO RELATED (0.8%)
140,000 Daimler Benz Aktieng (ADR)..... $ 6,335,000
269,070 Nissan Motors, Ltd (ADR)*...... 4,708,725
---------------
11,043,725
---------------
BANKS (6.4%)
250,000 BankAmerica Corp. ............. 11,437,500
300,000 Barnett Banks, Inc. ........... 13,125,000
400,000 First Bank System.............. 14,600,000
280,000 First Chicago Corp. ........... 13,475,000
200,000 First Interstate BanCorp. ..... 15,400,000
150,000 NationsBank Corp. ............. 7,706,250
300,000 Signet Banking................. 12,112,500
---------------
87,856,250
---------------
COMPUTER SOFTWARE (5.6%)
250,000 Computer Sciences Corp.*....... 10,406,250
400,000 General Motors (Class E)....... 13,950,000
414,000 Microsoft Corp.*............... 21,321,000
450,000 Oracle Systems Corp.*.......... 16,818,750
100,000 Powersoft Corp.*............... 4,825,000
200,000 Sybase, Inc.*.................. 9,750,000
---------------
77,071,000
---------------
CONSUMER -- BUSINESS SERVICES (1.4%)
200,000 First Data Corp. .............. 8,275,000
200,000 First Financial Management
Corp. ....................... 11,100,000
---------------
19,375,000
---------------
CONSUMER PRODUCTS (6.6%)
275,000 Anheuser-Busch Cos., Inc. ..... 13,956,250
55,000 Buenos Aires Embotelladora S.A.
(ADR)........................ 1,698,125
300,000 ConAgra, Inc. ................. 9,150,000
190,000 CPC International, Inc. ....... 9,167,500
80,000 Dial Corp. .................... 3,420,000
200,000 Duracell International,
Inc. ........................ 7,800,000
180,000 Gillette Co. (The)............. 11,722,500
49,000 Grupo Casa Autrey S.A. de C.V.
(ADR)........................ 1,304,625
100,000 Maybelline, Inc. .............. 2,762,500
209,000 Pet, Inc. ..................... 3,892,625
225,000 Procter & Gamble Co. .......... 12,009,375
250,000 Scott Paper Co. ............... 13,062,500
---------------
89,946,000
---------------
CYCLICAL COMMODITIES (5.2%)
250,000 Cyprus Amax Minerals........... 7,437,500
100,000 Dow Chemical Co. (The)......... 6,537,500
210,000 DuPont (E.I.) deNemours &
Co. ......................... 12,258,750
150,000 Eastman Chemical Co. .......... 7,162,500
181,000 Freeport-McMoran Copper &
Gold......................... 4,027,250
225,000 Monsanto Co. .................. 17,015,625
400,000 Praxair, Inc. ................. 7,800,000
330,000 Union Carbide Corp. ........... 8,827,500
---------------
71,066,625
---------------
<CAPTION>
Number
of Shares Value
- --------- ---------------
<C> <S> <C>
DRUGS (3.6%)
300,000 Abbott Laboratories............ $ 8,700,000
185,000 Lily (Eli) & Co. .............. 10,521,875
250,000 Pfizer, Inc. .................. 15,781,250
225,000 Warner-Lambert Co. ............ 14,850,000
---------------
49,853,125
---------------
ELECTRONICS (2.4%)
170,000 Analog Devices*................ 4,887,500
160,000 International Business Machines
Corp. ....................... 9,400,000
186,000 Linear Technology Corp. ....... 8,137,500
98,000 Maxim Integrated Products,
Inc.*........................ 5,071,500
157,500 Microchip Technology, Inc.*.... 5,551,875
---------------
33,048,375
---------------
ELECTRONICS -- SEMICONDUCTORS (3.7%)
129,000 Advanced Micro Devices,
Inc.*........................ 3,208,875
215,000 Intel Corp. ................... 12,577,500
510,000 Micron Technology, Inc. ....... 17,595,000
220,000 Texas Instruments, Inc. ....... 17,490,000
---------------
50,871,375
---------------
ENERGY (5.1%)
170,000 Amoco Corp. ................... 9,690,000
125,000 British Petroleum (ADR)........ 8,968,750
228,000 Chevron Corp. ................. 9,547,500
250,000 Halliburton Co. ............... 8,437,500
99,000 Landmark Graphics Corp.*....... 2,994,750
140,000 Royal Dutch Petroleum Co. ..... 14,647,500
150,000 Schlumberger, Ltd. ............ 8,868,750
153,000 Seagull Energy Corp.*.......... 3,958,875
149,500 Snyder Oil Corp. .............. 2,859,188
---------------
69,972,813
---------------
ENTERTAINMENT (0.4%)
125,000 Polygram NV (ADR)*............. 4,984,375
---------------
FINANCIAL -- MISCELLANEOUS (6.2%)
150,000 American International Group... 12,993,750
215,000 Federal Home Loan Mortgage
Corp. ....................... 13,007,500
190,000 Federal National Mortgage
Association.................. 15,865,000
170,000 First USA, Inc. ............... 6,523,750
140,000 General Re Corp. .............. 15,260,000
140,000 Marsh & McLennan Cos., Inc. ... 11,672,500
450,000 MBNA Corp. .................... 10,125,000
---------------
85,447,500
---------------
</TABLE>
<PAGE> 4
DEAN WITTER AMERICAN VALUE FUND
PORTFOLIO OF INVESTMENTS June 30, 1994 (unaudited) (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number
of Shares Value
- --------- ---------------
<C> <S> <C>
HEALTH EQUIPMENT & SERVICES (5.4%)
483,000 Columbia HCA Healthcare
Corp. ....................... $ 18,112,500
8,000 Coventry Corp.*................ 290,000
120,000 Genesis Health Ventures
Corp.*....................... 3,045,000
595,000 Humana Corp.*.................. 9,594,375
700,000 National Medical Enterprises... 10,937,500
300,000 United Healthcare Corp. ....... 13,762,500
255,000 U.S. Healthcare................ 9,435,000
240,000 Value Health, Inc.*............ 9,180,000
---------------
74,356,875
---------------
HOTELS/MOTELS (2.1%)
500,000 Hospitality Franchise Systems,
Inc.*........................ 12,250,000
305,875 La Quinta Inns, Inc. .......... 7,990,984
325,000 Marriott International,
Inc. ........................ 8,653,125
---------------
28,894,109
---------------
INDUSTRIALS (4.2%)
103,000 Emerson Electric Co. .......... 5,858,125
300,000 Fluor Corp. ................... 15,262,500
243,000 Foster Wheeler Corp. .......... 8,839,125
337,300 Grupo Tribasa S.A. de C.V.
(ADR)........................ 7,462,763
150,000 Titan Wheel International,
Inc. ........................ 3,618,750
110,000 United Technologies Corp. ..... 7,067,500
220,000 Wabash National Corp. ......... 9,845,000
---------------
57,953,763
---------------
MACHINERY (1.2%)
90,000 Caterpillar, Inc. ............. 9,000,000
135,000 Clark Equipment Co.*........... 8,066,250
---------------
17,066,250
---------------
MEDIA GROUP (4.2%)
204,000 Capital Cities/ABC............. 14,509,500
227,468 Clear Channel
Communications*.............. 8,558,483
272,000 Comcast (Class A).............. 4,862,000
118,000 Comcast (Class A) "Special".... 2,109,250
180,000 Grupo Televisa (GDS)*.......... 9,135,000
140,000 Infinity Broadcasting Corp.*... 3,360,000
400,000 Tele-Communications, Inc.*..... 8,150,000
200,000 Turner Broadcasting System,
Inc. ........................ 3,475,000
284,000 United International Holdings,
Inc. (Class A)............... 3,763,000
---------------
57,922,233
---------------
METALS (3.4%)
300,000 Alcan Aluminum, Ltd. (ADR)..... 6,825,000
100,000 Aluminum Co. of America........ 7,312,500
650,000 Bethlehem Steel Corp.*......... 12,106,250
230,000 Inland Steel Industries,
Inc. ........................ 8,021,250
185,000 Nucor Corp. ................... 12,672,500
12,000 Rouge Steel Co. (Class A)...... 322,500
---------------
47,260,000
---------------
<CAPTION>
Number
of Shares Value
- --------- ---------------
<C> <S> <C>
POLLUTION CONTROL (1.5%)
360,000 Browning-Ferris Industries,
Inc. ........................ $ 10,935,000
360,000 WMX Technologies, Inc. ........ 9,540,000
---------------
20,475,000
---------------
RETAIL -- SPECIALTY (4.1%)
311,000 Ann Taylor Store*.............. 11,934,625
390,000 Callaway Golf Co. ............. 15,210,000
37,000 Dayton-Hudson Corp. ........... 2,997,000
116,200 Fingerhut Cos. ................ 2,817,850
180,000 Gap, Inc. ..................... 7,695,000
250,000 Home Depot, Inc. .............. 10,531,250
100,000 Kohl's Corp.*.................. 4,700,000
40,000 Talbots, Inc. ................. 1,200,000
---------------
57,085,725
---------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT (0.8%)
130,000 Applied Materials, Inc.*....... 5,525,000
200,000 LAM Research*.................. 5,600,000
---------------
11,125,000
---------------
TELECOMMUNICATIONS (4.2%)
320,000 Ameritech Corp. ............... 12,240,000
275,000 AT&T Corp. .................... 14,953,125
225,000 BellSouth Corp. ............... 13,893,750
400,000 GTE Corp. ..................... 12,600,000
150,000 Tele Denmark A/S (ADR)......... 3,693,750
---------------
57,380,625
---------------
TRANSPORTATION RELATED (1.1%)
411,000 Southern Pacific Rail*......... 8,065,875
100,000 Wisconsin Central Transport*... 6,425,000
---------------
14,490,875
---------------
TOTAL COMMON STOCKS (IDENTIFIED
COST $1,103,623,766)......... 1,094,546,618
---------------
CONVERTIBLE PREFERRED
STOCK (0.2%)
ENERGY (0.2%)
77,500 Snyder Oil Corp. $1.50
(Identified Cost
$2,095,000).................. 1,966,563
---------------
OTHER SECURITIES* (0.0%)
AUTO RELATED (0.0%)
100,000 Daimler Benz Aktieng (ADR)
(Rights)..................... 44,286
---------------
BANKS (0.0%)
78 Chase Manhattan Corp.
(Warrants)................... 644
---------------
TOTAL OTHER SECURITIES
(IDENTIFIED COST $390)....... 44,930
---------------
</TABLE>
<PAGE> 5
DEAN WITTER AMERICAN VALUE FUND
PORTFOLIO OF INVESTMENTS June 30, 1994 (unaudited) (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount (in Coupon Maturity
thousands) Rate Date Value
- ---------- ------ -------- --------------
<C> <S> <C> <C> <C>
SHORT-TERM INVESTMENTS (18.5%)
U.S. GOVERNMENT AGENCIES(A)(18.5%)
$ 20,000 Federal Home Loan Mortgage Corporation....................... 4.163 % 7/ 5/94 $ 19,990,778
50,000 Federal Home Loan Mortgage Corporation....................... 4.207 7/12/94 49,935,833
25,000 Federal Home Loan Mortgage Corporation....................... 4.204 7/15/94 24,959,264
15,000 Federal Home Loan Mortgage Corporation....................... 4.261 7/21/94 14,964,583
40,600 Federal National Mortgage Association........................ 4.10 7/ 1/94 40,600,000
54,000 Federal National Mortgage Association........................ 4.174 7/ 7/94 53,962,470
8,000 Federal National Mortgage Association........................ 4.154 7/ 8/94 7,993,545
10,000 Federal National Mortgage Association........................ 4.191 7/14/94 9,984,905
12,300 Federal National Mortgage Association........................ 4.266 7/28/94 12,260,794
20,000 Tennessee Valley Authority................................... 4.179 7/ 5/94 19,990,733
--------------
TOTAL U.S. GOVERNMENT AGENCIES
(AMORTIZED COST $254,642,905).......................................... 254,642,905
--------------
REPURCHASE AGREEMENT (0.0%)
235 The Bank of New York 6.00% due 7/01/94 (dated 6/30/94;
proceeds $230,454; collateralized by $233,072 U.S. Treasury
Note 6.50% due 5/15/97 valued at $235,024) (Identified Cost
$230,416)............................................................ 230,416
--------------
TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST $254,873,321)......................................... 254,873,321
--------------
TOTAL INVESTMENTS
(IDENTIFIED COST $1,360,592,477)(B).................................... 98.3% 1,351,431,432
OTHER ASSETS IN EXCESS OF LIABILITIES.................................. 1.7 23,294,723
-------- --------------
NET ASSETS............................................................. 100.0% $1,374,726,155
======= ==============
</TABLE>
- ---------------
<TABLE>
<C> <S>
* Non-income producing security.
ADR- American Depository Receipts
GDS- Global Depository Shares
(a) U.S. Government Agencies were purchased on a discount basis. The interest rates shown have been adjusted to
reflect a bond equivalent yield.
(b) The aggregate cost for federal income tax purposes is $1,371,546,974; the aggregate gross unrealized
appreciation is $41,067,525 and the aggregate gross unrealized depreciation is $61,183,067, resulting in net
unrealized depreciation of $20,115,542.
</TABLE>
See Notes to Financial Statements
<PAGE> 6
DEAN WITTER AMERICAN VALUE FUND
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1994 (unaudited)
- -----------------------------------------
ASSETS:
Investments in securities, at value
(identified cost $1,360,592,477)
(Note 1)............................... $1,351,431,432
Receivable for:
Investments sold....................... 38,661,784
Shares of beneficial interest sold..... 6,075,703
Dividends.............................. 1,264,887
Prepaid expenses and other assets........ 129,283
--------------
TOTAL ASSETS..................... 1,397,563,089
--------------
LIABILITIES:
Payable for:
Investments purchased.................. 18,899,435
Shares of beneficial interest
repurchased.......................... 1,526,499
Plan of distribution fee (Note 3)...... 1,197,367
Investment management fee (Note 2)..... 604,776
Distributions payable.................... 173,958
Accrued expenses (Note 4)................ 434,899
--------------
TOTAL LIABILITIES................ 22,836,934
--------------
NET ASSETS:
Paid-in-capital.......................... 1,452,325,035
Accumulated net investment loss.......... (3,105,947)
Accumulated net realized loss on
investments............................ (65,331,888)
Net unrealized depreciation on
investments............................ (9,161,045)
--------------
NET ASSETS....................... $1,374,726,155
==============
NET ASSET VALUE PER SHARE,
67,772,326 shares outstanding
(unlimited authorized shares of $.01
par value)............................. $20.28
------
------
STATEMENT OF OPERATIONS For the six months
ended June 30, 1994 (unaudited)
- -----------------------------------------
INVESTMENT INCOME:
INCOME
Dividends (net of $127,456 foreign
withholding tax)..................... $ 6,192,977
Interest............................... 2,267,742
--------------
TOTAL INCOME......................... 8,460,719
--------------
EXPENSES
Plan of distribution fee (Note 3)...... 6,493,803
Investment management fee (Note 2)..... 3,540,714
Transfer agent fees and expenses....... 1,047,592
Registration fees...................... 208,877
Custodian fees......................... 177,473
Shareholder reports and notices (Note
4)................................... 59,671
Professional fees...................... 14,560
Trustees' fees and expenses (Note 4)... 13,643
Other.................................. 10,506
--------------
TOTAL EXPENSES....................... 11,566,839
--------------
NET INVESTMENT LOSS................ (3,106,120)
--------------
NET REALIZED AND UNREALIZED LOSS ON
INVESTMENTS (NOTE 1):
Net realized loss on investments....... (57,074,081)
Net change in unrealized depreciation
on
investments.......................... (104,343,829)
--------------
NET LOSS ON INVESTMENTS.............. (161,417,910)
--------------
NET DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS........ $(164,524,030)
==============
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the six For the
months ended year ended
June 30, 1994 December 31,
(unaudited) 1993
-------------- --------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment loss............................................................ $ (3,106,120) $ (4,683,331)
Net realized gain (loss) on investments........................................ (57,074,081) 83,571,143
Net change in unrealized depreciation on investments........................... (104,343,829) 38,314,852
-------------- --------------
Net increase (decrease) in net assets resulting from operations............ (164,524,030) 117,202,664
-------------- --------------
Dividends and distributions to shareholders from:
Net investment income.......................................................... -0- (235,229)
Net realized gain on investments............................................... (21,279,873) (76,071,042)
-------------- --------------
Total dividends and distributions.......................................... (21,279,873) (76,306,271)
============== ==============
Net increase from transactions in shares of beneficial interest (Note 5)......... 342,551,699 718,521,196
============== ==============
Total increase............................................................. 156,747,796 759,417,589
NET ASSETS:
Beginning of period.............................................................. 1,217,978,359 458,560,770
-------------- --------------
END OF PERIOD (including a net investment loss of $3,105,947 and $0,
respectively)................................................................... $1,374,726,155 $1,217,978,359
============== ==============
</TABLE>
See Notes to Financial Statements
<PAGE> 7
DEAN WITTER AMERICAN VALUE FUND
NOTES TO FINANCIAL STATEMENTS (unaudited)
- --------------------------------------------------------------------------------
1. ORGANIZATION AND ACCOUNTING POLICIES -- Dean Witter American Value Fund (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 was
incorporated in Maryland in 1979, reorganized as a Massachusetts business trust
on April 30, 1987 and commenced operations on March 27, 1980.
The following is a summary of significant accounting policies:
A. Valuation of Investments -- (1) an equity security listed or traded on
the New York or American 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; (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 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 (valuation of debt securities for which market
quotations are not readily available may be based upon current market
prices of securities which are comparable in coupon, rating and maturity or
an appropriate matrix utilizing similar factors); (4) short-term debt
securities having a maturity date of more than sixty days are valued on a
mark-to-market basis, that is, at prices based on market quotations for
securities of a similar type, yield, quality and maturity, until sixty days
prior to maturity and thereafter at amortized cost. Short-term debt
securities having a maturity date of sixty days or less at the time of
purchase are valued at amortized cost; and (5) all other securities and
other assets are valued at their fair value as determined in good faith
under procedures established by and under the general supervision of the
Trustees.
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 on the identified cost
method. Dividend income is recorded on the ex-dividend date. Interest
income is accrued daily.
C. Repurchase Agreements -- The Fund's custodian takes possession on behalf
of the Fund of the collateral pledged for investments in repurchase
agreements. It is the policy of the Fund to value the underlying collateral
daily on a mark-to-market basis to determine that the value, including
accrued interest, is at least equal to the repurchase price plus accrued
interest. In the event of default of the obligation to repurchase, the Fund
has the right to liquidate the collateral and apply the proceeds in
satisfaction of the obligation.
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 record 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
<PAGE> 8
DEAN WITTER AMERICAN VALUE FUND
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
- --------------------------------------------------------------------------------
federal tax-basis treatment; temporary differences do not require
reclassification. Dividends and distributions which exceed net investment
income and net realized capital gains for financial reporting purposes but
not for tax purposes are reported as dividends in excess of net investment
income or distributions in excess of net realized capital gains. To the
extent they exceed net investment income and net realized capital gains for
tax purposes, they are reported as distributions of paid-in-capital.
2. INVESTMENT MANAGEMENT AGREEMENT -- Pursuant to an Investment Management
Agreement with Dean Witter InterCapital Inc. (the "Investment Manager"), the
Fund pays its Investment Manager a monthly management fee, calculated and
accrued daily, by applying the following annual rates to the net assets of the
Fund determined at the close of each business day: 0.625% to the portion of
daily net assets not exceeding $250 million and 0.50% to the portion of daily
net assets exceeding $250 million.
Under the terms of the Agreement, in addition to managing the Fund's
investments, the Investment Manager maintains certain of the Fund's books and
records and furnishes, at its own expense, office space, facilities, equipment,
clerical, bookkeeping and certain legal services and pays the salaries of all
personnel, including officers of the Fund who are employees of the Investment
Manager. The Investment Manager also bears the cost of telephone services, heat,
light, power and other utilities provided to the Fund.
3. PLAN OF DISTRIBUTION -- Shares of the Fund are distributed by Dean Witter
Distributors Inc. (the "Distributor"), an affiliate of the Investment Manager.
The Fund has adopted a Plan of Distribution (the "Plan"), pursuant to Rule 12b-1
under the Act pursuant to which the Fund pays the Distributor compensation
accrued daily and payable monthly at an annual rate of 1.0% of the lesser of:
(a) the average daily aggregate gross sales of the Fund's shares since the
implementation of the Plan on April 30, 1984 (not including reinvestment of
dividend or capital gain distributions), less the average daily aggregate net
asset value of the Fund's shares redeemed since the Fund's implementation of the
Plan upon which a contingent deferred sales charge has been imposed or upon
which such charge has been waived; or (b) the Fund's average daily net assets
attributable to shares issued, net of related shares redeemed, since
implementation of the Plan. Amounts paid under the Plan are paid to the
Distributor to compensate it for the services provided and the expenses borne by
it and others in the distribution of the Fund's shares, including the payment of
commissions for sales of the Fund's shares and incentive compensation to and
expenses of the account executives of Dean Witter Reynolds Inc., an affiliate of
the Investment Manager, and other employees or selected dealers who engage in or
support distribution of the Fund's shares or who service shareholder accounts,
including overhead and telephone expenses; printing and distribution of
prospectuses and reports used in connection with the offering of the Fund's
shares to other than current shareholders and preparation, printing and
distribution of sales literature and advertising materials. In addition, the
Distributor may be compensated under the Plan for its opportunity costs in
advancing such amounts, which compensation would be in the form of a carrying
charge on any unreimbursed expenses incurred by the Distributor.
Provided that the Plan continues in effect, any cumulative expenses
incurred but not yet recovered, may be recovered through future distribution
fees from the Fund and contingent deferred sales charges from the Fund's
shareholders.
<PAGE> 9
DEAN WITTER AMERICAN VALUE FUND
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
- --------------------------------------------------------------------------------
The Distributor has informed the Fund that for the six months ended June
30, 1994, it received approximately $983,000 in deferred sales charges from
certain redemptions of the Fund's shares. The Fund's shareholders pay such
charges which are not an expense of the Fund.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES -- The cost of
purchases and proceeds from sales of portfolio securities, excluding short-term
investments, for the six months ended June 30, 1994 aggregated $1,953,849,113
and $1,863,741,963, respectively.
For the six months ended June 30, 1994, $372,610 was paid to Dean Witter
Reynolds Inc. in brokerage commissions for portfolio transactions executed on
behalf of the Fund. At June 30, 1994, the Fund's receivable for investments sold
included unsettled trades with Dean Witter Reynolds Inc. of $4,813,450.
Dean Witter Trust Company, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At June 30, 1994, the Fund had
transfer agent fees and expenses payable of approximately $214,000.
On January 1, 1994, the Fund adopted an unfunded noncontributory defined
benefit pension plan covering all independent Trustees of the Fund who will have
served as an independent Trustee 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 six months ended June 30, 1994, included in Trustees' fees and expenses in
the Statement of Operations amounted to $4,047. At June 30, 1994, the Fund had
an accrued pension liability of $3,760 which is included in accrued expenses in
the Statement of Assets and Liabilities.
Bowne & Co., Inc. is an affiliate of the Fund by virtue of a common Fund
Trustee and Director of Bowne & Co., Inc. For the six months ended June 30,
1994, the Fund paid Bowne & Co., Inc. $5,470 for printing of shareholder
reports.
5. SHARES OF BENEFICIAL INTEREST -- Transactions in shares of beneficial
interest were as follows:
<TABLE>
<CAPTION>
For the six
months ended For the year ended
June 30, 1994 December 31, 1993
--------------------------- ---------------------------
Shares Amount Shares Amount
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold............................ 21,349,536 $486,995,025 34,824,814 $812,736,396
Reinvestment of dividends and
distributions................. 988,724 20,179,867 3,202,538 72,246,949
---------- ------------ ---------- ------------
22,338,260 507,174,892 38,027,352 884,983,345
Repurchased..................... (7,303,669) (164,623,193) (7,200,270) (166,462,149)
---------- ------------ ---------- ------------
Net increase.................... 15,034,591 $342,551,699 30,827,082 $718,521,196
========== ============= ========== =============
</TABLE>
6. FEDERAL INCOME TAX STATUS -- At December 31, 1993, the Fund had temporary
book/tax differences which were primarily attributable to realized capital loss
deferrals on wash sales and permanent book/tax differences attributable to
offsetting of net realized short-term capital gains with the net operating loss
and dividend redesignations.
<PAGE> 10
DEAN WITTER AMERICAN VALUE FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
For the six
months ended For the year ended December 31,
June 30, 1994 ---------------------------------------------------------
(unaudited) 1993 1992 1991 1990 1989
-------------- ---------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning
of period............... $ 23.10 $ 20.93 $ 20.66 $ 14.39 $ 14.81 $ 13.19
----------- ---------- -------- -------- ------- -------
Net investment income
(loss)................ (0.05) (0.09) 0.03 0.05 0.24 0.34
Net realized and
unrealized gain (loss)
on investments........ (2.45) 3.94 0.71 7.90 (0.38) 2.99
----------- ---------- -------- -------- ------- -------
Total from investment
operations.............. (2.50) 3.85 0.74 7.95 (0.14) 3.33
----------- ---------- -------- -------- ------- -------
Less dividends and
distributions:
Dividends from net
investment income..... -0- (0.01) (0.03) (0.03) (0.28) (0.32)
Distributions from net
realized gains on
investments........... (0.32) (1.67) (0.44) (1.65) -0- (1.39)
----------- ---------- -------- -------- ------- -------
Total dividends and
distributions........... (0.32) (1.68) (0.47) (1.68) (0.28) (1.71)
----------- ---------- -------- -------- ------- -------
Net asset value, end of
period.................. $ 20.28 $ 23.10 $ 20.93 $ 20.66 $ 14.39 $ 14.81
========== ========== ======== ======== ======= =======
TOTAL INVESTMENT RETURN+.... (10.84)%(1) 18.70% 3.84% 56.26% (0.90)% 25.39%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands).......... $1,374,726 $1,217,978 $458,561 $226,982 $89,165 $99,993
Ratio of expenses to
average net assets...... 1.71%(2) 1.61% 1.72% 1.58% 1.70% 1.66%
Ratio of net investment
income (loss) to average
net assets.............. (0.46)%(2) (0.59)% 0.18% 0.29% 1.67% 2.23%
Portfolio turnover rate... 151 % 276 % 305% 264% 234% 196%
</TABLE>
- ---------------
+ Does not reflect the deduction of sales load.
(1) Not annualized.
(2) Annualized.
See Notes to Financial Statements
<PAGE> 11
(This Page Intentionally Left Blank)
<PAGE> 12
TRUSTEES
Jack F. Bennett
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Dr. John E. Jeuck
Dr. Manuel H. Johnson
Paul Kolton
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
Edward R. Telling
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Sheldon Curtis
Vice President, Secretary and General Counsel
John W. Vander Vliet
Vice President
Anita H. Kolleeny
Vice President
Thomas F. Caloia
Treasurer
TRANSFER AGENT
Dean Witter Trust Company
Harborside Financial Center - Plaza Two
Jersey City, New Jersey 07311
LEGAL COUNSEL
Sheldon Curtis
Two World Trade Center
New York, New York 10048
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
Dean Witter InterCapital Inc.
Two World Trade Center
New York, New York 10048
The financial statements included herein have been take from the records of the
Fund without examination by the independent accountants and accordingly they do
not express an opinion thereon.
This report is submitted for the general information of shareholders of the
Fund. For more detailed information about the Fund, its officers and trustees,
fees, expenses and other pertinent information, please see the prospectus of
the Fund.
This report is not authorized for distribution to prospective investors in the
Fund unless preceeded or accompanied by an effective prospectus.
DEAN WITTER
AMERICAN
VALUE FUND
[PHOTO]
Semiannual Report
June 30, 1994
<PAGE> 13
APPENDIX TO ELECTRONIC FORMAT DOCUMENT
The back cover of the Semiannual Report in the printed version contains
a picture of a chess board and pieces.
