Filed Pursuant to Rule 497(c)
Registration File No.: 2-66269
DEAN WITTER
AMERICAN VALUE FUND
PROSPECTUS--FEBRUARY 25, 1994
DEAN WITTER AMERICAN VALUE FUND (THE "FUND") IS AN OPEN-END DIVERSIFIED
MANAGEMENT INVESTMENT COMPANY WHOSE INVESTMENT OBJECTIVE IS LONG-TERM CAPITAL
GROWTH CONSISTENT WITH AN EFFORT TO REDUCE VOLATILITY. THE FUND INVESTS
PRINCIPALLY IN COMMON STOCK OF COMPANIES IN INDUSTRIES WHICH, AT THE TIME OF
THE INVESTMENT, ARE BELIEVED TO BE UNDERVALUED IN THE MARKET PLACE. (SEE
"INVESTMENT OBJECTIVE AND POLICIES.")
Shares of the Fund are continuously offered at net asset value without
the imposition of a sales charge. However, redemptions and/or repurchases are
subject in most cases to a contingent deferred sales charge, scaled down from
5% to 1% of the amount redeemed, if made within six years of purchase, which
charge will be paid to the Fund's Distributor, Dean Witter Distributors Inc.
(See "Redemptions and Repurchases--Contingent Deferred Sales Charge.") In
addition, the Fund pays the Distributor a distribution fee pursuant to a Plan
of Distribution at the annual rate of 1.0% of the lesser of (i) the average
daily aggregate net sales or (ii) the average daily net assets of the Fund.
(See "Purchase of Fund Shares--Plan of Distribution.")
This Prospectus sets forth concisely the information you should know
before investing in the Fund. It should be read and retained for future
reference. Additional information about the Fund is contained in the Statement
of Additional Information, dated February 25, 1994, which has been filed with
the Securities and Exchange Commission, and which is available at no charge
upon request of the Fund at the address or telephone numbers listed below. The
Statement of Additional Information is incorporated herein by reference.
DEAN WITTER
AMERICAN VALUE FUND
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(212) 392-2550
(800) 526-3143
TABLE OF CONTENTS
Prospectus Summary......................... 2
Summary of Fund Expenses................... 3
Financial Highlights....................... 4
The Fund and its Management................ 5
Investment Objective and Policies.......... 5
Investment Restrictions.................... 8
Purchase of Fund Shares.................... 9
Shareholder Services....................... 10
Redemptions and Repurchases................ 12
Dividends, Distributions and Taxes......... 14
Performance Information.................... 14
Additional Information..................... 15
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND THE SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
DEAN WITTER
AMERICAN VALUE FUND
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(212) 392-2550
(800) 526-3143
- -------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
DEAN WITTER DISTRIBUTORS INC., DISTRIBUTOR
<PAGE>
PROSPECTUS SUMMARY
===============================================================================
THE
FUND
The Fund, a Massachusetts business trust, is an open-end diversified
management investment company investing principally in industries which, at the
time of investment, are believed to be undervalued in the market place (see
page 5).
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SHARES OFFERED
Shares of beneficial interest with $0.01 par value (see page 15).
- -------------------------------------------------------------------------------
OFFERING
PRICE
At net asset value (see page 9). Shares redeemed within six years of
purchase are subject to a contingent deferred sales charge under most
circumstances (see page 12).
- -------------------------------------------------------------------------------
MINIMUM
PURCHASE
Minimum initial investment, $1,000; minimum subsequent investment, $100
(see page 9).
- -------------------------------------------------------------------------------
INVESTMENT
OBJECTIVE
The investment objective of the Fund is capital growth consistent with
an effort to reduce volatility.
- -------------------------------------------------------------------------------
INVESTMENT
MANAGER
Dean Witter InterCapital Inc., the Investment Manager of the Fund, and
its wholly-owned subsidiary, Dean Witter Services Company Inc., serve in
various investment management, advisory, management and administrative
capacities to eighty-one investment companies and other portfolios with assets
of approximately $71.2 billion at December 31, 1993 (see page 5).
- -------------------------------------------------------------------------------
MANAGEMENT
FEE
The Investment Manager receives a monthly fee at an annual rate of
0.625 of 1% of daily net assets up to $250 million in net assets and 0.50 of 1%
of daily net assets over $250 million (see page 5).
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DIVIDENDS AND
CAPITAL GAINS
DISTRIBUTIONS
It is anticipated that distributions of income and net short-term
capital gains, if any, will be made semi-annually. Net long-term capital gains,
if any, are distributed at least annually or retained for reinvestment by the
Fund. Dividends and capital gains distributions are automatically reinvested in
additional shares at net asset value unless the shareholder elects to receive
cash (see page 14).
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DISTRIBUTOR AND
DISTRIBUTION FEE
Dean Witter Distributors Inc. (the "Distributor"). For its services as
Distributor, which includes payment of sales commissions to account executives
and various other promotional and sales related expenses, the Distributor
receives from the Fund a distribution fee accrued daily and payable monthly at
the rate of 1.0% per annum of the lesser of (a) the average daily aggregate net
sales or (b) the average daily net assets of the Fund. The fee compensates the
Distributor for services provided in distributing shares of the Fund and for
sales related expenses. The Distributor also receives the proceeds of any
contingent deferred sales charges (see page 9).
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REDEMPTION--
CONTINGENT
DEFERRED
SALES
CHARGE
At net asset value; redeemable involuntarily if total value of the
account is less than $100. Although no commission or sales charge is imposed
upon the purchase of shares, a contingent deferred sales charge (scaled down
from 5% to 1%) is imposed on any redemption of shares which causes the
aggregate current value of an account with the Fund to fall below the aggregate
amount of the investor's purchase payments made during the preceding six years.
There is no charge imposed on redemption of shares purchased through
reinvestment of dividends or distributions (see page 12).
- -------------------------------------------------------------------------------
RETIREMENT
PLANS
You can take advantage of tax benefits for personal retirement accounts
by investing in the Fund through an IRA (Individual Retirement Account) or
<PAGE>
Custodial Account under Section 403(b)(7) of the Internal Revenue Code (see
page 11).
- -------------------------------------------------------------------------------
RISKS
Emphasis on "undervalued" industries reflects investment views
frequently contrary to general market assessments and may involve risks
associated with departure from general investment opinions. The Fund may also
invest in futures and options which may be considered speculative in nature and
may involve greater risks than those customarily assumed by other investment
companies which do not invest in such instruments (see page 6).
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The above is qualified in its entirety by the detailed information appearing
elsewhere in the Prospectus and in the Statement of Additional Information.
2
<PAGE>
SUMMARY OF FUND EXPENSES
===============================================================================
The following table illustrates all expenses and fees that a
shareholder of the Fund will incur. The expenses and fees set forth in the
table are for the fiscal year ended December 31, 1993.
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases....................... None
Maximum Sales Charge Imposed on Reinvested Dividends............ None
Deferred Sales Charge
(as a percentage of the lesser of original purchase price
or redemption proceeds)........................................ 5.0%
A deferred sales charge is imposed at the following declining rates:
Year Since Purchase Percentage of
Payment Made Amount Redeemed
------------- -----------------
First.................................. 5.0%
Second................................. 4.0%
Third.................................. 3.0%
Fourth................................. 2.0%
Fifth.................................. 2.0%
Sixth.................................. 1.0%
Seventh and thereafter................. None
Redemption Fees................................................. None
Exchange Fee.................................................... None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees................................................. 0.55%
12b-1 Fees*..................................................... 0.86%
Other Expenses.................................................. 0.20%
Total Fund Operating Expenses................................... 1.61%
- ----------
* A portion of the 12b-1 fee equal to 0.25% of the Fund's average daily net
assets is characterized as a service fee within the meaning of National
Association of Securities Dealers, Inc. ("NASD") guidelines.
Long-term shareholders of the Fund may pay more in sales charges and
distribution fees than the economic equivalent of the maximum front-end sales
charges permitted by the NASD.
EXAMPLE 1 year 3 years 5 years 10 years
- ------- ------ ------- ------ --------
You would pay the following expenses
on a $1,000 investment, assuming
(1) 5% annual return and
(2) redemption at the end of
each time period:.................... $66 $81 $107 $191
You would pay the following expenses
on the same investment, assuming no
redemption:.......................... $16 $51 $ 87 $191
The above example should not be considered a representation of past or
future expenses or performance. Actual expenses of the fund may be greater or
less than those shown.
The purpose of this table is to assist the investor in understanding
the various costs and expenses that an investor in the Fund will bear directly
or indirectly. For a more complete description of these costs and expenses, see
"The Fund and its Management," "Plan of Distribution" and "Redemptions and
Repurchases."
3
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
===================================================================================================================================
The following per share data and ratios for a share of beneficial interest outstanding throughout each period have been
audited by Price Waterhouse, independent accountants. The financial highlights should be read in conjunction with the financial
statements and notes thereto and the unqualified report of the independent accountants which are contained in the Statement of
Additional Information. Further information about the performance of the Fund is contained in the Fund's Annual Report to
Shareholders, which may be obtained without charge upon request to the Fund.
<CAPTION>
For the year ended December 31,
------------------------------------------------------------------------------------------------
1993 1992 1991 1990 1989 1988 1987 1986 1985 1984
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value, be-
ginning of period......... $20.93 $20.66 $14.39 $14.81 $13.19 $12.21 $12.64 $12.67 $10.06 $12.56
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Investment (loss)
income -- net............ (0.09) 0.03 0.05 0 . 24 0.34 0.29 0.19 0.28 0.32 0.28
Realized and
unrealized gain
(loss) on invest-
ments -- net............. 3.94 0.71 7.90 (0.38) 2.99 1.03 0.20 1.76 2.61 (1.23)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from investment
operations................ 3.85 0.74 7.95 (0.14) 3.33 1.32 0.39 2.04 2.93 (0.95)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Less dividends and
distributions:
Dividends from net
investment income........ (0.01) (0.03) (0.03) (0.28) (0.32) (0.33) (0.23) (0.32) (0.32) (0.23)
Distributions from
capital gains............ (1.67) (0.44) (1.65) 0.00 (1.39) (0.00) (0.59) (1.75) 0.00 (1.32)
Distributions from
paid-in-capital......... 0.00 0.00 0.00 0.00 0.00 (0.01) 0.00 0.00 0.00 0.00
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total dividends and
distributions............. (1.68) (0.47) (1.68) (0.28) (1.71) (0.34) (0.82) (2.07) (0.32) (1.55)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of
period.................... $23.10 $20.93 $20.66 $14.39 $14.81 $13.19 $12.21 $12.64 $12.67 $10.06
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL INVESTMENT RETURN+... 18.70% 3.84% 56.26% (0.90)% 25.39% 10.84% 2.84% 15.82% 29.79% (8.32)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands)............ $1,217,978 $458,561 $226,982 $89,165 $99,993 $90,053 $109,425 $78,872 $43,235 $37,946
Ratio of expenses to
average net assets........ 1.61% 1.72% 1.58% 1.70% 1.66% 1.78% 1.62% 1.39% 1.24% 1.17%
Ratio of net investment
(loss) income to
average net assets........ (0.59)% 0.18% 0.29% 1.67% 2.23% 2.15% 1.42% 2.10% 2.85% 2.84%
Portfolio turnover rate.... 276 % 305% 264% 234% 196% 133% 203% 120% 61% 107%
<FN>
- ----------
+ Does not reflect the deduction of sales load.
See Notes to Financial Statements
</TABLE>
4
<PAGE>
THE FUND AND ITS MANAGEMENT
===============================================================================
Dean Witter American Value Fund (the "Fund") is an open-end diversified
management investment company incorporated in Maryland on December 13, 1979.
The Fund was reorganized as a trust of the type commonly known as a
"Massachusetts business trust" on April 30, 1987, at which time its name was
changed from Dean Witter Industry-Valued Securities Inc. to Dean Witter
American Value Fund.
Dean Witter InterCapital Inc. ("InterCapital" or the "Investment
Manager"), whose address is Two World Trade Center, New York, New York 10048,
is the Fund's Investment Manager. The Investment Manager, which was
incorporated in July, 1992, is a wholly-owned subsidiary of Dean Witter,
Discover & Co. ("DWDC") a balanced financial services organization providing a
broad range of nationally marketed credit and investment products.
InterCapital and its wholly-owned subsidiary, Dean Witter Services
Company, Inc. ("DWSC"), serve in various investment management, advisory,
management and administrative capacities to a total of eighty-one investment
companies, twenty-nine of which are listed on the New York Stock Exchange, with
combined total assets of approximately $69.2 billion as of December 31, 1993.
The Investment Manager also manages portfolios of pension plans, other
institutions and individuals which aggregated approximately $2.0 billion at
such date.
The Fund has retained the Investment Manager to provide administrative
services, manage its business affairs and manage the investment of the Fund's
assets, including the placing of orders for the purchase and sale of portfolio
securities. InterCapital has retained DWSC, to perform the aforementioned
administrative services for the Fund.
The Fund's Board of Trustees reviews the various services provided by
or under the direction of the Investment Manager to ensure that the Fund's
general investment policies and programs are being properly carried out and
that administrative services are being provided in a satisfactory manner.
As full compensation for the services and facilities furnished to the
Fund and for expenses of the Fund assumed by the Investment Manager, the Fund
pays the Investment Manager monthly compensation calculated daily by applying
the following annual rates to the net assets of the Fund determined as of the
close of each business day: 0.625% of the portion of the daily net assets not
exceeding $250 million and 0.50% of the portion of the daily net assets
exceeding $250 million. For the fiscal year ended December 31, 1993, the Fund
accrued total compensation to the Investment Manager amounting to 0.55% of the
Fund's average daily net assets and the Fund's total expenses amounted to 1.61%
of the Fund's average daily net assets.
INVESTMENT OBJECTIVE AND POLICIES
===============================================================================
The investment objective of the Fund is long-term capital growth consistent
with an effort to reduce volatility. There is no assurance that the Fund's
objective will be achieved. The Fund seeks to achieve its investment objective
by investing in a diversified portfolio of securities consisting principally of
common stocks. The Fund utilizes an investment process that places primary
emphasis on seeking to identify industries, rather than individual companies,
as prospects for capital appreciation and whereby the Investment Manager seeks
to invest assets of the Fund in industries it considers to be undervalued at
the time of purchase and to sell those it considers overvalued.
After selection of the Fund's target industries, specific company
investments are selected. In this process, the Investment Manager seeks to
identify companies whose prospects are deemed attractive on the basis of an
evaluation of valuation screens and prospective company fundamentals.
Following selection of the Fund's specific investments, the Investment
Manager will attempt to allocate the assets of the Fund so as to reduce the
volatility of its portfolio. In doing so, the Fund may hold a portion of its
portfolio in fixed-income securities in an effort to moderate extremes of price
fluctuations. The Fund may invest up to 35% of its portfolio in common stocks
of non-U.S. companies, in companies in non-classified industries, and in
convertible debt securities, convertible preferred securities, U.S. Government
securities (securities issued or guaranteed as to principal and interest by the
United States or its agencies and instrumentalities) and investment grade
corporate debt securities when, in the opinion of the Investment Manager, the
projected total return on such securities is equal to or greater than the
expected total return on common stocks, or when such holdings might be expected
to reduce the volatility of the portfolio, and in money market instruments
under any one or more of the following circumstances: (i) pending investment of
proceeds of sale of Fund shares or of portfolio securities; (ii) pending
settlement of purchases of portfolio securities; or (iii) to maintain liquidity
for the purpose of meeting anticipated redemptions. Greater than 35% of the
Fund's total assets may be invested in money market instruments to maintain,
5
<PAGE>
temporarily, a "defensive" posture when, in the opinion of the Investment
Manager, it is advisable to do so because of economic or market conditions.
Because prices of stocks fluctuate from day to day, the value of an
investment in the Fund will vary based upon the Fund's investment performance.
The Fund's emphasis on "undervalued" industries reflects investment views which
are frequently contrary to general market assessments and which may involve
risks associated with departure from general investment opinions.
The Fund may purchase securites on a when-issued or delayed delivery
basis, may purchase or sell securities on a forward commitment basis and may
purchase securities on a "when, as and if issued" basis.
OPTIONS AND FUTURES TRANSACTIONS
The Fund may purchase and sell (write) call and put options on debt and equity
securities which are listed on Exchanges or are written in over-the-counter
transactions ("OTC Options"). Listed options, which are currently listed on
several different Exchanges, are issued by the Options Clearing Corporation
("OCC"). Ownership of a listed call option gives the Fund the right to buy from
the OCC the underlying security covered by the option at the stated exercise
price (the price per unit of the underlying security) by filing an exercise
notice prior to the expiration date of the option. The writer (seller) of the
option would then have the obligation to sell to the OCC the underlying
security at that exercise price prior to the expiration date of the option,
regardless of its then current market price. Ownership of a listed put option
would give the Fund the right to sell the underlying security to the OCC at the
stated exercise price. The Fund will not write covered options on portfolio
securities exceeding in the aggregate 25% of the value of its total assets.
OTC OPTIONS. OTC options are purchased from or sold (written) to dealers or
financial institutions which have entered into direct agreements with the Fund.
With OTC options, such variables as expiration date, exercise price and premium
will be agreed upon between the Fund and the transacting dealer, without the
intermediation of a third party such as the OCC. The Fund will engage in OTC
option transactions only with primary U.S. Government securities dealers
recognized by the Federal Reserve Bank of New York.
COVERED CALL WRITING. The Fund is permitted to write covered call options on
portfolio securities in order to aid it in achieving its investment objective.
As a writer of a call option, the Fund has the obligation, upon notice of
exercise of the option, to deliver the securityunderlying the option (certain
listed call options written by the Fund will be exercisable by the purchaser
only on a specific date).
COVERED PUT WRITING. As a writer of covered put options, the Fund incurs an
obligation to buy the security underlying the option from the purchaser of the
put at the option's exercise price at any time during the option period. The
Fund will write put options for two purposes: (1) to receive the premiums paid
by purchasers; and (2) when the Investment Manager wishes to purchase the
security underlying the option at a price lower than its current market price,
in which case it will write the covered put at an exercise price reflecting the
lower purchase price sought.
PURCHASING CALL AND PUT OPTIONS. The Fund may invest up to 10% of its total
assets in the purchase of put and call options on securities and stock indexes,
with a maximum of 5% of the Fund's total assets invested in stock index
options. The Fund may purchase put options on securities which it holds (or has
the right to acquire) in its portfolio only to protect itself against a decline
in the value of the security. The Fund may also purchase put options to close
out written put positions in a manner similar to call option closing purchase
transactions. There are no other limits on the Fund's ability to purchase call
and put options.
STOCK INDEX OPTIONS. The Fund may purchase and write options on stock indexes
for hedging purposes. Options on stock indexes are similar to options on stock
except that, rather than the right to take or make delivery of stock at a
specified price, an option on a stock index gives the holder the right to
receive, upon exercise of the option, an amount of cash if the closing level of
the stock index upon which the option is based is greater than, in the case of
a call, or less than, in the case of a put, the exercise price of the option.
See "Risks of Options on Indexes" in the Statement of Additional Information.
FUTURES CONTRACTS. The Fund may purchase and sell interest rate and stock
index futures contracts ("futures contracts") that are traded on U.S. commodity
exchanges on such underlying securities as U.S. Treasury bonds, notes, and
bills and GNMA Certificates ("interest rate" futures) and such indexes as the
S&P 500 Index and the New York Stock Exchange Composite Index ("stock index"
futures) and the Moody's Investment-Grade Corporate Bond Index ("bond index"
futures). As a futures contract purchaser, the Fund incurs an obligation to
take delivery of a specified amount of the obligation underlying the contract
at a specified time in the future for a specified price. As a seller of a
futures contract, the Fund incurs an obligation to deliver the specified amount
of the underlying obligation at a specified time in return for an
6
<PAGE>
agreed upon price. The Fund will purchase or sell interest rate futures
contracts and bond index futures contracts for the purpose of hedging its
fixed-income portfolio (or anticipated portfolio) securities against changes in
prevailing interest rates. The Fund will purchase or sell stock index futures
contracts for the purpose of hedging its equity portfolio (or anticipated
portfolio) securities against changes in their prices.
The Fund also may purchase and write call and put options on futures
contracts and enter into closing transactions with respect to such options to
terminate an existing position.
RISKS OF OPTIONS AND FUTURES TRANSACTIONS. The Fund may close out its position
as writer of an option, or as a buyer or seller of a futures contract only if a
liquid secondary market exists for options or futures contracts of that series.
There is no assurance that such a market will exist. Also, exchanges may limit
the amount by which the price of many futures contracts may move on any day. If
the price moves equal the daily limit on successive days, then it may prove
impossible to liquidate a futures position until the daily limit moves have
ceased.
The extent to which the Fund may enter into transactions involving
options and futures contracts may be limited by the Internal Revenue Code's
requirements for qualification as a regulated investment company and the Fund's
intention to qualify as such. See "Dividends, Distributions and Taxes."
While the futures contracts and options transactions to be engaged in
by the Fund for the purpose of hedging the Fund's portfolio securities are not
speculative in nature, there are risks inherent in the use of such instruments.
One such risk is that the Investment Manager could be incorrect in its
expectations as to the direction or extent of various interest rate or price
movements or the time span within which the movements take place. For example,
if the Fund sold futures contracts for the sale of securities in anticipation
of an increase in interest rates, and then interest rates went down, causing
bond prices to rise, the Fund would incur a loss on the sale. Another risk
which may arise in employing futures contracts to protect against the price
volatility of portfolio securities is that the prices of securities and indexes
subject to futures contracts (and thereby the futures contract prices) may
correlate imperfectly with the behavior of the cash prices of the Fund's
portfolio securities. See the Statement of Additional Information for a further
discussion of risks.
New futures contracts, options and other financial products and various
combinations thereof continue to be developed. The Fund may invest in any such
futures, options or products as may be developed, to the extent consistent with
its investment objective and applicable regulatory requirements.
REPURCHASE AGREEMENTS
The Fund may enter into repurchase agreements, which may be viewed as a type of
secured lending by the Fund, and which typically involve the acquisition by the
Fund of debt securities from a selling financial institution such as a bank,
savings and loan association or broker-dealer. The agreement provides that the
Fund will sell back to the institution, and that the institution will
repurchase, the underlying security at a specified price and at a fixed time in
the future, usually notmore than seven days from the date of purchase. While
repurchase agreements involve certain risks not associated with direct
investments in debt securities, the Fund follows procedures designed to
minimize those risks.
FOREIGN SECURITIES. The Fund may invest up to 35% of the value of its total
assets, at the time of purchase, in securities issued by foreign issuers.
Foreign securities investments may be affected by changes in currency rates or
exchange control regulations, changes in governmental administration or
economic or monetary policy (in the United States and abroad) or changed
circumstances in dealings between nations. Costs may be incurred in connection
with conversions between various currencies held by the Fund.
SPECIFIC INVESTMENT POLICIES
The Fund has adopted the following specific policies which are not fundamental
investment policies and may be changed by the Board of Trustees.
1. At least 65% of the Fund's total assets will be invested in common
stocks of U.S. companies which, at the time of purchase, were in undervalued or
moderately valued industries as determined by the Investment Manager, except as
stated in Paragraph (3) below.
2. Up to 35% of the value of the Fund's total assets may be invested
in: (a) common stocks of non-U.S. companies, or companies in non-classified
industries, including American Depository Receipts (which are custody receipts
with respect to foreign securities) (the Fund's investments in unlisted foreign
securities are deemed to be illiquid securities, which under the Fund's current
investment policies may not in the aggregate amount to more than 15% of the
Fund's net assets); (b) convertible debt securities (bonds, debentures,
corporate notes, preferred stock and other securities) which are convertible
into common stock; (c) U.S. Government securities and investment grade
corporate debt securities when, in the opinion of the Investment Manager, the
projected total return on such securities is equal to or greater than the
expected total return on equity securities, or when such holdings might be
expected to reduce the volatility of the portfolio; and (d) money market
instruments under any one or more of the
7
<PAGE>
following circumstances: (i) pending investment of proceeds of sale of shares
of the Fund or of portfolio securities; (ii) pending settlement of purchases of
portfolio securities; or (iii) to maintain liquidity for the purpose of meeting
anticipated redemptions.
3. Notwithstanding any of the foregoing limitations, the Fund may
invest more than 35% of the Fund's total assets in money market instruments to
maintain, temporarily, a "defensive" posture when, in the opinion of the
Investment Manager, it is advisable to do so because of economic or market
conditions, including, for example, times during which the Investment Manager
believes the risk, or volatility, relative to expected returns of the
securities it monitors, is excessive.
The foregoing limitations apply at the time of acquisition based on the
last determined market value of the Fund's assets, and any subsequent change in
any applicable percentage resulting from market fluctuations or other changes
in total assets will not require elimination of any security from the
portfolio.
PORTFOLIO MANAGEMENT
The Fund's portfolio is actively managed by its Investment Manager with a view
to achieving the Fund's investment objective. In determining which securities
to purchase for the Fund or hold in the Fund's portfolio, the Investment
Manager will rely on information from various sources, including research,
analysis and appraisals of brokers and dealers, including Dean Witter Reynolds
Inc. ("DWR"), a broker-dealer affiliate of InterCapital, the views of Trustees
of the Fund and others regarding economic developments and interest rate
trends, and the Investment Manager's own analysis of factors it deems relevant.
No particular emphasis is given to investments in securities for the purpose of
earning current income. The Fund's portfolio is managed within InterCapital's
Large Capitalization Equities Group, which manages twenty-four equity funds and
fund portfolios with approximately $16 billion in assets as of December 31,
1993. Anita H. Koleeny, Senior Vice President of InterCapital and a member of
InterCapital's Large Capitalization Equity Group, has been the primary
portfolio manager of the Fund and a portfolio manager at InterCapital for over
five years.
Although the Fund does not engage in substantial short-term trading as
a means of achieving its investment objective, it may sell portfolio securities
without regard to the length of time they have been held, in accordance with
the investment policies described earlier. It is anticipated that, under normal
circumstances, the Fund's portfolio turnover rate will not exceed 400% in any
one year. The Fund will incur brokerage costs commensurate with its portfolio
turnover rate. Short term gains and losses may result from such portfolio
transactions. See "Dividends, Distributions and Taxes" for a discussion of the
tax implications of the Fund's trading policy. A more extensive discussion of
the Fund's portfolio brokerage policies is set forth in the Statement of
Additional Information.
Pursuant to an order of the Securities and Exchange Commission the Fund
may effect principal transactions in certain money market instruments with DWR.
In addition, the Fund may incur brokerage commissions on transactions conducted
through DWR.
INVESTMENT RESTRICTIONS
=============================================================================
The investment restrictions listed below are among the restrictions which have
been adopted by the Fund as fundamental policies. Under the Investment Company
Act of 1940, as amended (the "Act"), a fundamental policy may not be changed
without the vote of a majority of the outstanding voting securities of the
Fund, as defined in the Act. For purposes of the following limitations: (i) all
percentage limitations apply immediately after a purchase or initial
investment; and (ii) any subsequent change in any applicable percentage
resulting from market fluctuations or other changes in total or net assets does
not require elimination of any security from the portfolio.
The Fund may not:
1. Invest more than 5% of the value of its total assets in the
securities of any one issuer (other than obligations issued, or guaranteed by,
the United States Government, its agencies or instrumentalities).
2. Purchase more than 10% of all outstanding voting securities or any
class of securities of any one issuer.
3. Invest more than 25% of the value of its total assets in securities
of issuers in any one industry. This restriction does not apply to obligations
issued or guaranteed by the United States Government or its agencies or
instrumentalities or to cash equivalents.
4. Invest more than 5% of the value of its total assets in securities
of issuers having a record, together with predecessors, of less than three
years of continuous operation. This restriction shall not apply to any
obligation of the United States Government, its agencies or instrumentalities.
8
<PAGE>
PURCHASE OF FUND SHARES
=============================================================================
The Fund offers its shares for sale to the public on a continuous basis.
Pursuant to a Distribution Agreement between the Fund and Dean Witter
Distributors Inc. (the "Distributor"), an affiliate of the Investment Manager,
shares of the Fund are distributed by the Distributor and offered by DWR and
other brokers and dealers which have entered into agreements with the
Distributor ("Selected Broker-Dealers"). The principal executive office of the
Distributor is located at Two World Trade Center, New York, New York 10048.
The minimum initial purchase is $1,000. Subsequent purchases of $100 or
more may be made by sending a check, payable to Dean Witter American Value
Fund, directly to Dean Witter Trust Company (the "Transfer Agent") at P.O. Box
1040, Jersey City, NJ 07303 or by contacting a DWR or other Selected Broker-
Dealer account executive. In the case of investments pursuant to Systematic
Payroll Deduction Plans (including Individual Retirement Plans), the Fund, in
its discretion, may accept investments without regard to any minimum amounts
which would otherwise be required, if the Fund has reason to believe that
additional investments will increase the investment in each account under such
Plans to at least $1,000. Certificates for shares purchased will not be issued
unless requested by the shareholder in writing to the Transfer Agent.
Shares of the Fund are sold through the Distributor on a normal five
business day settlement basis; that is, payment is due on the fifth business
day (settlement date) after the order is placed with the Distributor. Shares of
the Fund purchased through the Distributor are entitled to dividends beginning
on the next business day following settlement date. Since DWR and other
Selected Broker-Dealers forward investors' funds on settlement date, they will
benefit from the temporary use of the funds if payment is made prior thereto.
As noted above, orders placed directly with the Transfer Agent must be
accompanied by payment. Shares of the Fund purchased through the Distributor
are entitled to any dividend declared beginning on the next business day
following settlement date. Shares purchased through the Transfer Agent will be
entitled to receive income dividends and capital gains distributions if their
order is received by the close of business on the day prior to the record date
for such distributions. The offering price will be the net asset value per
share next determined following receipt of an order (see "Determination of Net
Asset Value"). While no sales charge is imposed at the time shares are
purchased, a contingent deferred sales charge may be imposed at the time of
redemption (see "Redemptions and Repurchases"). The Fund and the Distributor
reserve the right to reject any purchase orders.
PLAN OF DISTRIBUTION
The Fund has adopted a Plan of Distribution, pursuant to Rule 12b-1 under the
Act (the "Plan"), under which the Fund will pay the Distributor a fee, which is
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
inception of the Fund's original plan of distribution on April 30, 1984 (not
including reinvestments of dividends or capital gains distributions), less the
average daily aggregate net asset value of the Fund's shares redeemed since
that plan's inception upon which a contingent deferred sales charge has been
imposed or waived, or (b) the average daily net assets of the Fund attributable
to shares issued, net of related shares redeemed, since inception of the Fund's
original plan of distribution. This fee is treated by the Fund as an expense in
the year it is accrued. Amounts paid under the Plan are paid to the Distributor
to compensate it for the services provided and the expenses borne by the
Distributor 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 DWR's account executives and others who engage
in or support distribution of 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 utilize fees paid pursuant to the Plan to compensate DWR and
other Selected Broker-Dealers for their opportunity costs in advancing such
amounts, which compensation would be in the form of a carrying charge on any
unreimbursed distribution expenses incurred.
For the fiscal year ended December 31, 1993, the Fund accrued payments
under the Plan amounting to $6,891,780, which amount is equal to 0.86% of the
Fund's average daily net assets for the fiscal year. The payments accrued under
the Plan were calculated pursuant to clause (a) of the compensation formula
under the Plan. Of the amount accrued under the Plan, 0.25% of the Fund's
average daily net assets is characterized as a service fee within the meaning
of NASD guidelines.
At any given time, the Distributor may incur expenses in distributing
shares of the Fund which may be in excess of the total of (i) the payments made
by the Fund pursuant to the Plan and the Fund's original plan of distribution,
and (ii) the proceeds of contingent deferred sales charges paid by investors
upon the redemption of shares (see "Redemptions and
9
<PAGE>
Repurchases--Contingent Deferred Sales Charge"). For example, if the
Distributor incurred $1 million in expenses in distributing shares of the Fund
and $750,000 had been received by the Distributor as described in (i) and (ii)
above, the excess expense would amount to $250,000. The Distributor has advised
the Fund that such excess amounts, including the carrying charge described
above, totalled $34,972,698 at December 31, 1993, which was equal to 2.87% of
the Fund's net assets on such date.
Because there is no requirement under the Plan that the Distributor be
reimbursed for all its expenses or any requirement that the Plan be continued
from year to year, this excess amount does not constitute a liability of the
Fund. Although there is no legal obligation for the Fund to pay expenses
incurred by the Distributor 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. Any cumulative expenses incurred, but not yet recovered through
distribution fees or contingent deferred sales charges, may or may not be
recovered through future distribution fees or contingent deferred sales
charges.
DETERMINATION OF NET ASSET VALUE
The net asset value per share of the Fund is determined once daily at 4:00
p.m., New York time by taking the value of all assets of the Fund, subtracting
all its liabilities, dividing by the number of shares outstanding and adjusting
to the nearest cent. The net asset value per share will not be determined on
Good Friday and on such other federal and non-federal holidays as are observed
by the New York Stock Exchange.
In the calculation of the Fund's net asset value: (1) an equity
portfolio security listed or traded on the New York or American Stock Exchange
is valued at its latest sale price on that exchange (if there were no sales
that day, the security is valued at the latest bid price); (2) an option is
valued at the mean between the latest bid and asked prices); (3) a futures
contract is valued at the latest sales price on the commodities exchange on
which it trades unless the Board determines that such price does not reflect
its market value, in which case it will be valued at its fair value as
determined by the Board of Trustees; (4) all other portfolio securities for
which over-the-counter market quotations are readily available are valued at
the latest bid price; (5) 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 Fund's
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); (6) the value of short-term debt securities which
mature at a date less than sixty days subsequent to valuation date will be
determined on an amortized cost or amortized value basis; and (7) the value of
other assets will be determined in good faith at fair value under procedures
established by and under the general supervision of the Fund's Trustees.
Certain securities in the Fund's portfolio may be valued by an outside
pricing service approved by the Fund's Trustees. The pricing service utilizes a
matrix system incorporating security quality, maturity and coupon as the
evaluation model parameters, and/or research evaluations by its staff,
including review of broker-dealer market price quotations, in determining what
it believes is the fair valuation of the portfolio securities valued by such
pricing service.
SHAREHOLDER SERVICES
===============================================================================
AUTOMATIC INVESTMENT OF DIVIDENDS AND DISTRIBUTIONS. All income dividends and
capital gains distributions are automatically paid in full and fractional
shares of the Fund (or, if specified by the shareholder, any other open-end
investment company for which InterCapital serves as investment manager
(collectively, with the Fund, the "Dean Witter Funds")), unless the shareholder
requests that they be paid in cash. Shares so acquired are not subject to the
imposition of a contingent deferred sales charge upon their redemption (see
"Redemptions and Repurchases").
INVESTMENT OF DIVIDENDS OR DISTRIBUTIONS RECEIVED IN CASH. Any shareholder who
receives a cash payment representing a dividend or capital gains distribution
may invest such dividend or distribution at the net asset value next determined
after receipt by the
Transfer Agent, by returning the check or the proceeds to the Transfer Agent
within thirty days after the payment date. Shares so acquired are not subject
to the imposition of a contingent deferred sales charge upon their redemption
(see "Redemptions and Repurchases").
EASYINVEST.SM Shareholders may subscribe to EasyInvest, an automatic purchase
plan which provides for any amount from $100 to $5,000 to be transferred
automatically from a checking or savings account, on a semi-monthly, monthly or
quarterly basis, to the Transfer Agent for investment in shares of the Fund.
10
<PAGE>
SYSTEMATIC WITHDRAWAL PLAN. A systematic withdrawal plan (the "Withdrawal
Plan") is available for shareholders who own or purchase shares of the Fund
having a minimum value of $10,000 based upon the then current net asset value.
The Withdrawal Plan provides for monthly or quarterly (March, June, September
and December) checks in any amount, not less than $25, or in any whole
percentage of the account balance, on an annualized basis. Any applicable
contingent deferred sales charge will be imposed on shares redeemed under the
Withdrawal Plan (See "Redemptions and Repurchases--Contingent Deferred Sales
Charge"). Therefore, any shareholder participating in the Withdrawal Plan will
have sufficient shares redeemed from his or her account so that the proceeds
(net of any applicable contingent deferred sales charge) to the shareholder
will be the designated monthly or quarterly amount.
TAX-SHELTERED RETIREMENT PLANS. Retirement plans are available for use by
corporations, the self-employed, Individual Retirement Accounts and Custodial
Accounts under Section 403(b)(7) of the Internal Revenue Code. Adoption of such
plans should be on advice of legal counsel or tax adviser.
Shareholders should contact their DWR or other Selected Broker-Dealer
account executive or the Transfer Agent for further information about any of
the above services.
EXCHANGE PRIVILEGE
The Fund makes available to its shareholders an "Exchange Privilege" allowing
the exchange of shares of the Fund for shares of other Dean Witter Funds sold
with a contingent deferred sales charge ("CDSC funds"), and for shares of Dean
Witter Short-Term U.S. Treasury Trust, Dean Witter Limited Term Municipal
Trust, Dean Witter Short-Term Bond Fund and five Dean Witter Funds which are
money market funds (the foregoing eight non-CDSC funds are hereinafter
collectively referred to in this section as the "Exchange Funds.") Exchanges
may be made after the shares of the Fund acquired by purchase (not by exchange
or dividend reinvestment) have been held for thirty days. There is no waiting
period for exchanges of shares acquired by exchange or dividend reinvestment.
An exchange to another CDSC fund or any Exchange Fund that is not a
money market fund is on the basis of the next calculated net asset value per
share of each fund after the exchange order is received. When exchanging into a
money market fund from the Fund, shares of the Fund are redeemed out of the
Fund at their next calculated net asset value and the proceeds of the
redemption are used to purchase shares of the money market fund at their net
asset value determined the following day. Subsequent exchanges between any of
the money market funds and any of the CDSC funds can be effected on the same
basis. No contingent deferred sales charge ("CDSC") is imposed at the time of
any exchange, although any applicable CDSC will be imposed upon ultimate
redemption. Shares of the Fund acquired in exchange for shares of another CDSC
fund having a different CDSC schedule than that of this Fund will be subject to
the CDSC schedule of this Fund, even if such shares are subsequently re-
exchanged for shares of the CDSC fund originally purchased. During the period
of time the shareholder remains invested in shares of an Exchange Fund
(calculated from the last day of the month in which the shares were acquired)
the holding period (for the purpose of determining the rate of the contingent
deferred sales charge) is frozen. If those shares are subsequently reexchanged
for shares of a CDSC fund, the holding period previously frozen when the first
exchange was made resumes on the last day of the month in which shares of a
CDSC fund are reacquired. Thus, the CDSC is based upon the time (calculated as
described above) the shareholder was invested in shares of a CDSC fund (see
"Redemptions and Repurchases--Contingent Deferred Sales Charge"). However, in
the case of shares exchanged for shares of an Exchange Fund on or after April
23, 1990, upon a redemption of shares which results in a CDSC being imposed, a
credit (not to exceed the amount of the CDSC) will be given in an amount equal
to the Exchange Fund 12b-1 distribution fees, if any, incurred on or after that
date which are attributable to those shares. (Exchange Fund 12b-1 distribution
fees are described in the prospectuses for those funds.)
In addition, shares of the Fund may be acquired in exchange for shares
of Dean Witter Funds sold with a front-end sales charge ("front-end sales
charge funds"), but shares of the Fund, however acquired, may not be exchanged
for shares of front-end sales charge funds. Shares of a CDSC fund acquired in
exchange for shares of a front-end sales charge fund (or in exchange for shares
of other Dean Witter Funds for which shares of a front-end sales charge fund
have been exchanged) are not subject to any CDSC upon their redemption.
Purchases and exchanges should be made for investment purposes only. A
pattern of frequent exchanges may be deemed by the Investment Manager to be
abusive and contrary to the best interests of the Fund's other shareholders
and, at the Investment Manager's discretion, may be limited by the Fund's
refusal to accept additional purchases and/or exchanges from the investor.
Although the Fund does not have any specific definition of what constitutes a
pattern of frequent exchanges, and will consider all relevant factors in
determining whether a particular situation is abusive and contrary to the best
interests of the Fund and its other shareholders, investors should be aware
that the Fund and each of the other Dean Witter Funds may in their discretion
limit or otherwise restrict
11
<PAGE>
the number of times this Exchange Privilege may be exercised by any investor.
Any such restriction will be made by the Fund on a prospective basis only, upon
notice to the shareholder not later than ten days following such shareholder's
most recent exchange.
The Exchange Privilege may be terminated or revised at any time by the
Fund and/or any of such Dean Witter Funds for which shares of the Fund have
been exchanged, upon such notice as may be required by applicable regulatory
agencies (presently sixty days' prior written notice for termination or
material revision), provided that six months' prior written notice of
termination will be given to shareholders who hold shares of an Exchange Fund
pursuant to the Exchange Privilege, and provided further that the Exchange
Privilege may be terminated or materially revised without notice under certain
unusual circumstances. Shareholders maintaining margin accounts with DWR or
another Selected Dealer are referred to their account executive regarding
restrictions on exchange of shares of the Fund pledged in the margin account.
The current prospectus for each fund describes its investment
objective(s) and policies, and shareholders should obtain a copy and examine it
carefully before investing. Exchanges are subject to the minimum investment
requirement and any other conditions imposed by each fund. An exchange will be
treated for federal income tax purposes the same as a repurchase or redemption
of shares, on which the shareholder may realize a capital gain or loss.
However, the ability to deduct capital losses on an exchange may be limited in
situations where there is an exchange of shares within ninety days after the
shares are purchased. The Exchange Privilege is only available in states where
an exchange may legally be made.
If DWR or another Selected Broker-Dealer is the current dealer of
record and its account numbers are part of the account information,
shareholders may initiate an exchange of shares of the Fund for shares of any
of the Dean Witter Funds (for which the Exchange Privilege is available)
pursuant to this Exchange Privilege by contacting their DWR or other Selected
Broker-Dealer account executive (no Exchange Privilege Authorization Form is
required). Other shareholders (and those shareholders who are clients of DWR or
another Selected Broker-Dealer but who wish to make exchanges directly by
telephoning the Transfer Agent) must complete and forward to the Transfer Agent
an Exchange Privilege Authorization Form, copies of which may be obtained from
the Transfer Agent, to initiate an exchange. If the Authorization Form is used,
exchanges may be made in writing or by contacting the Transfer Agent at (800)
526-3143 (toll free). The Fund will employ reasonable procedures to confirm
that exchange instructions communicated over the telephone are genuine. Such
procedures may include requiring various forms of personal identification such
as name, mailing address, social security or other tax identification number
and DWR or other Selected Broker-Dealer account number (if any). Telephone
instructions may also be recorded. If such procedures are not employed, the
Fund may be liable for any losses due to unauthorized or fraudulent
instructions.
Telephone exchange instructions will be accepted if received by the
Transfer Agent between 9:00 a.m. and 4:00 p.m. New York time, on any day the
New York Stock Exchange is open. Any shareholder wishing to make an exchange
who has previously filed an Exchange Privilege Authorization Form and who is
unable to reach the Fund by telephone should contact his or her DWR or other
Selected Broker-Dealer account executive, if appropriate, or make a written
exchange request. Shareholders are advised that during periods of drastic
economic or market changes, it is possible that the telephone exchange
procedures may be difficult to implement, although this has not been the case
with the Dean Witter Funds in the past.
For further information regarding the Exchange Privilege, shareholders
should contact their DWR or other Selected Broker-Dealer account executive or
the Transfer Agent.
REDEMPTIONS AND REPURCHASES
===============================================================================
REDEMPTION. Shares of the Fund can be redeemed for cash at any time at the net
asset value per share next determined; however, such redemption proceeds may be
reduced by the amount of any applicable contingent deferred sales charges (see
below). If shares are held in a shareholder's account without a share
certificate, a written request for redemption to the Fund's Transfer Agent at
P.O. Box 983, Jersey City, NJ 07303 is required. If certificates are held by
the shareholder, the shares may be redeemed by surrendering the certificates
with a written request for redemption, along with any additional documentation
required by the Transfer Agent.
CONTINGENT DEFERRED SALES CHARGE. Shares of the Fund which are held for six
years or more after purchase (calculated from the last day of the month in
which the shares were purchased) will not be subject to any charge upon
redemption. Shares redeemed sooner than six years after purchase may, however,
be subject to a charge upon redemption. This charge is called a "contingent
deferred sales charge" ("CDSC"), and it will be a percentage of the dollar
amount of shares redeemed and will be assessed on an amount equal to the lesser
of the current market value or the cost of the shares being
12
<PAGE>
redeemed. The size of this percentage will depend upon how long the shares have
been held, as set forth in the table below:
Contingent Deferred
Year Since Sales Charge
Purchase as a Percentage of
Payment Made Amount Redeemed
------------ ------------------
First............................................. 5.0%
Second............................................ 4.0%
Third............................................. 3.0%
Fourth............................................ 2.0%
Fifth............................................. 2.0%
Sixth............................................. 1.0%
Seventh and thereafter............................ None
A CDSC will not be imposed on: (i) any amount which represents an
increase in value of shares purchased within the six years preceding the
redemption; (ii) the current net asset value of shares purchased more than six
years prior to the redemption; and (iii) the current net asset asset value of
shares purchased through reinvestment of dividends or distributions and/or
shares acquired in exchange for shares of Dean Witter Funds sold with a front-
end sales charge or of other Dean Witter Funds acquired in exchange for such
shares. Moreover, in determining whether a CDSC is applicable it will be
assumed that amounts described in (i), (ii) and (iii) above (in that order) are
redeemed first. In addition, no CDSC will be imposed on redemptions of shares
which were purchased by the employee benefit plans established by DWR and SPS
Transaction Services, Inc. (an affiliate of DWR) for their employees as
qualified under Section 401(k) of the Internal Revenue Code.
In addition, the CDSC, if otherwise applicable, will be waived in the
case of (i) redemptions of shares held at the time a shareholder dies or
becomes disabled, only if the shares are (a) registered either in the name of
an individual shareholder (not a trust), or in the names of such shareholder
and his or her spouse as joint tenants with right of survivorship, or (b) held
in a qualified corporate or self-employed retirement plan, Individual
Retirement Account or Custodial Account under Section 403(b)(7) of the Internal
Revenue Code, provided in either case that the redemption is requested within
one year of the death or initial determination of disability, and (ii)
redemptions in connection with the following retirement plan distributions: (a)
lump-sum or other distributions from a qualified corporate or self-employed
retirement plan following retirement (or in the case of a "key employee" of a
"top heavy" plan, following attainment of age 59 1/2); (b) distributions from
an Individual Retirement Account or Custodial Account under Section 403(b)(7)
of the Internal Revenue Code following attainment of age 59 1/2; and (c) a tax-
free return of an excess contribution to an IRA. For the purpose of determining
disability, the Distributor utilizes the definition of disability contained in
Section 72(m)(7) of the Internal Revenue Code, which relates to the inability
to engage in gainful employment. All waivers will be granted only following
receipt by the Distributor of confirmation of the shareholder's entitlement.
REPURCHASE. DWR and other Selected Broker-Dealers are authorized to repurchase
shares represented by a share certificate which is delivered to any of their
offices. Shares held in a shareholder's account without a share certificate may
also be repurchased by DWR and other Selected Broker-Dealers upon the
telephonic request of the shareholder. The repurchase price is the net asset
value per share next determined (see "Purchase of Fund Shares") after such
purchase order is received by DWR or other Selected Broker-Dealer, reduced by
any applicable CDSC.
The CDSC, if any, will be the only fee imposed upon repurchase by the
Fund, the Distributor, DWR or other Selected Broker-Dealer. The offer by DWR
and other Selected Broker-Dealers to repurchase shares may be suspended without
notice by them at any time. In that event, shareholders may redeem their shares
through the Fund's Transfer Agent as set forth above under "Redemption."
PAYMENT FOR SHARES REDEEMED OR REPURCHASED. Payment for shares presented for
repurchase or redemption will be made by check within seven days after receipt
by the Transfer Agent of the certificate and/or written request in good order.
Such payment may be postponed or the right of redemption suspended under
unusual circumstances. If the shares to be redeemed have recently been
purchased by check, payment of the redemption proceeds may be delayed for the
minimum time needed to verify that the check used for investment has been
honored (not more than fifteen days from the time of receipt of the check by
the Transfer Agent.) Shareholders maintaining margin accounts with DWR or
another Selected Dealer are referred to their account executive regarding
restrictions on redemption of shares of the Fund pledged in the margin account.
REINSTATEMENT PRIVILEGE. A shareholder who has had his or her shares redeemed
or repurchased and has not previously exercised this reinstatement privilege
may, within thirty days after the date of the redemption or repurchase,
reinstate any portion or all of the proceeds of such redemption or repurchase
in shares of the Fund at the net asset value next determined after a
reinstatement request, together with the proceeds, is received by the Transfer
Agent and receive a pro rata credit for any CDSC paid in connection with such
redemption or repurchase.
INVOLUNTARY REDEMPTION. The Fund reserves the right to redeem, upon sixty
days' notice and at net asset value, the shares of any shareholder whose shares
have a value of less than $100 as a result of redemptions or repurchases, or
such lesser amount as may be fixed by the Board of Trustees.
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<PAGE>
However, before the Fund redeems such shares and sends the proceeds to the
shareholder, it will notify the shareholder that the value of the shares is
less than $100 and allow the shareholder to make an additional investment in an
amount which will increase the value of the account to $100 or more before the
redemption is processed. No CDSC will be imposed on any involuntary redemption.
DIVIDENDS, DISTRIBUTIONS AND TAXES
===============================================================================
DIVIDENDS AND DISTRIBUTIONS. The Fund intends to pay semi-annual dividends and
to distribute substantially all of the Fund's net investment income and net
short-term capital gains, if there are any. The Fund intends to distribute
dividends from net long-term capital gains, if any, at least once each year.
The Fund may, however, determine either to distribute or to retain all or part
of any long-term capital gains in any year for reinvestment.
All dividends and any capital gains distributions will be paid in
additional Fund shares and automatically credited to the shareholder's account
without issuance of a share certificate unless the shareholder requests in
writing that all dividends be paid in cash. (See "Shareholder Services--
Automatic Investment of Dividends and Distributions".)
TAXES. Because the Fund intends to distribute all of its net investment income
and net short-term capital gains to shareholders and otherwise remain qualified
as a regulated investment company under Subchapter M of the Internal Revenue
Code, it is not expected that the Fund will be required to pay any federal
income tax. Shareholders who are required to pay taxes on their income will
normally have to pay federal income taxes, and any state income taxes, on the
dividends and distributions they receive from the Fund. Such dividends and
distributions, to the extent that they are derived from net investment income
or short-term capital gains, are taxable to the shareholder as ordinary
dividend income regardless of whether the shareholder receives such
distributions in additional shares or in cash.
One of the requirements for the Fund to remain qualified as a regulated
investment company is that less than 30% of the Fund's gross income be derived
from gains from the sale or other disposition of securities held for less than
three months. Accordingly, the Fund may be restricted in the writing of options
on securities held for less than three months, in the writing of options which
expire in less than three months, and in effecting closing transactions with
respect to call or put options which have been written or purchased less than
three months prior to such transactions. The Fund may also be restricted in its
ability to engage in transactions involving futures contracts.
Distributions of net long-term capital gains, if any, are taxable to
shareholders as long-term capital gains regardless of how long a shareholder
has held the Fund's shares and regardless of whether the distribution is
received in additional shares or in cash. Capital gains distributions are not
eligible for the dividends received deduction.
At the end of the calendar year, shareholders will be sent full
information on their dividends and capital gains distributions for tax
purposes, including information as to the portion taxable as ordinary income,
the portion taxable as long-term capital gains, and the amount of dividends
eligible for the Federal dividends received deduction available to
corporations. To avoid being subject to a 31% federal backup withholding tax on
taxable dividends, capital gains distributions and the proceeds of redemptions
and repurchases, shareholders' taxpayer identification numbers must be
furnished and certified as to their accuracy.
Shareholders should consult their tax advisers as to the applicability
of the foregoing to their current situation.
PERFORMANCE INFORMATION
===============================================================================
From time to time the Fund may quote its "total return" in advertisements and
sales literature. The total return of the Fund is based on historical earnings
and is not intended to indicate future performance. The "average annual total
return" of the Fund refers to a figure reflecting the average annualized
percentage increase (or decrease) in the value of an initial investment in the
Fund of $1,000 over periods of one, five and ten years. Average annual total
return reflects all income earned by the Fund, any appreciation or depreciation
of the Fund's assets, all expenses incurred by the Fund and all sales charges
which would be incurred by redeeming shareholders, for the stated periods. It
also assumes reinvestment of all dividends and distributions paid by the Fund.
In addition to the foregoing, the Fund may advertise its total return
over different periods of time by means of aggregate, average, year-by-year or
other types of total return figures. The Fund may also advertise the growth of
hypothetical investments of $10,000, $50,000 and $100,000 in
14
<PAGE>
shares of the Fund. Such calculations may or may not reflect the deduction of
the contingent deferred sales charge which, if reflected, would reduce the
performance quoted. The Fund from time to time may also advertise its
performance relative to certain performance rankings and indexes compiled by
independent organizations (such as mutual fund performance rankings of Lipper
Analytical Services, Inc., the S&P 500 Stock Index and the Dow Jones Industrial
Average).
ADDITIONAL INFORMATION
===============================================================================
VOTING RIGHTS. All shares of beneficial interest of the Fund are of $0.01 par
value and are equal as to earnings, assets and voting privileges.
The Fund is not required to hold Annual Meetings of Shareholders and in
ordinary circumstances the Fund does not intend to hold such meetings. The
Trustees may call Special Meetings of Shareholders for action by shareholder
vote as may be required by the Act or the Declaration of Trust. Under certain
circumstances, the Trustees may be removed by action of the Trustees or by the
Shareholders.
Under Massachusetts law, shareholders of a business trust may, under
certain limited circumstances, be held personally liable as partners for the
obligations of the Fund. However, the Declaration of Trust contains an express
disclaimer of shareholder liability for acts or obligations of the Fund,
requires that notice of such Fund obligations include such disclaimer, and
provides for indemnification out of the Fund's property for any shareholder
held personally liable for the obligations of the Fund. Thus, the risk of a
shareholder incurring financial loss on account of shareholder liability is
limited to circumstances in which the Fund itself would be unable to meet its
obligations. Given the above limitations on shareholder personal liability, and
the nature of the Fund's assets and operations, in the opinion of Massachusetts
counsel to the Fund, the risk to Fund shareholders of personal liability is
remote.
SHAREHOLDER INQUIRIES. All inquiries regarding the Fund should be directed to
the Fund at the telephone number or address set forth on the front cover of
this Prospectus.
15
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DEAN WITTER
AMERICAN VALUE FUND
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
TRUSTEES
Jack F. Bennett
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Dr. John E. Jeuck
Dr. Manuel H. Johnson
Paul Kolton
Michael E. Nugent
Edward R. Telling
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Sheldon Curtis
Vice President, Secretary and
General Counsel
Anita H. Kolleeny
Vice President
Thomas F. Caloia
Treasurer
CUSTODIAN
The Bank of New York
110 Washington Street
New York, New York 10286
TRANSFER AGENT AND
DIVIDEND DISBURSING AGENT
Dean Witter Trust Company
Harborside Financial Center
Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
Price Waterhouse
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
Dean Witter InterCapital Inc.
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