<PAGE>
DEAN WITTER AMERICAN VALUE FUND
Two World Trade Center
New York, New York 10048
DEAR SHAREHOLDER:
- -----------------------------------------------------------------------------
The 12 months ended December 31, 1994 were difficult for securities
markets throughout the world with little respite for investors in either
stocks or bonds. The catalyst for declining returns was a series of moves by
the Federal Reserve Board which reversed a period of declining interest rates
that had lasted approximately five years.
FISCAL YEAR PERFORMANCE REVIEW
For the fiscal year, Dean Witter American Value Fund posted a total return
of -6.75 percent, versus 1.31 percent for the Standard & Poor's 500 Index
(S&P 500) and -3.20 percent for the NASDAQ composite. Despite disappointing
performance in 1994, the Fund's long-term record remains intact. For the 5
and 10 years ended December 31, 1994, the Fund produced average annual total
returns of 12.22 percent and 14.35 percent, respectively. This performance
compares favorably to both the S&P 500 (8.68 percent and 14.36 percent,
respectively) and the NASDAQ (10.58 percent and 11.76 percent, respectively).
Regrettably, 1994 was not a stellar year for the Fund. The broader market
averages did not tell the whole story. A look at 2800 companies on the
American and New York Stock Exchanges and the National Association of
Securities Dealers Automated Quotations system (NASDAQ) --many of which are
represented in the Fund's portfolio --reveals that since February 1994 (when
the Federal Reserve Board initiated a series of interest rate hikes), 69
percent of these issues have exhibited returns of 0 percent or less. What's
more, one-half of these stocks experienced declines of at least 10 percent,
while 30 percent were down more than 20 percent.
In general, growth stocks as a class and the growth funds that own them
underperformed. Growth stocks with earnings growth rates between 15 percent
and 25 percent were unable to compete with basic cyclicals, many of which
showed earnings gains ranging between 100 percent and 500 percent last year.
As specifically relates to the portfolio's investment strategy, a delay in
sector rotation until the Federal Reserve Board raised the discount rate (in
May 1994) cost the Fund significant relative performance. Also, the
maintenance of a defensive position through December 1994 (that is, higher
cash levels and fewer high-growth-potential industries) diluted participation
in the year-end rally.
DEAN WITTER AMERICAN VALUE FUND
GROWTH OF $10,000
($ IN THOUSANDS)
DATE TOTAL S&P 500
------ ------- ---------
December 31, 1984 $10,000 $10,000
December 31, 1985 $12,979 $13,173
December 31, 1986 $15,033 $15,631
December 31, 1987 $15,459 $16,452
December 31, 1988 $17,136 $19,175
December 31, 1989 $21,486 $25,241
December 31, 1990 $21,293 $24,460
December 31, 1991 $33,272 $31,898
December 31, 1992 $34,548 $34,325
December 31, 1993 $41,010 $37,780
December 31, 1994 $38,243(3) $38,276
AVERAGE ANNUAL TOTAL RETURNS
1 YEAR 5 YEARS 10 YEARS
------ ------- --------
- 6.75(1) 12.22(1) 14.35(1)
-11.34(2) 11.97(2) 14.35(2)
____ Fund ____ S&P 500(4)
Past performance is not predictive of future returns.
________________________________________
(1) Figure shown assumes reinvestment of all distributions and does not
reflect the deduction of any sales charges.
(2) Figure shown assumes reinvestment of all distributions and the deduction
of the maximum applicable contingent deferred sales charge (CDSC) (1 year
-5%, 5 years-2%, 10 years-0%). See the Fund's current prospectus for
complete details on fees and sales charges.
(3) Closing value assuming a complete redemption on December 31, 1994.
(4) The S&P 500 is a broad-based index, the performance of which is based on
<PAGE>
the average performance of 500 widely held common stocks. The index does
not include any expenses, fees or charges.
The accompanying chart illustrates the performance of a $10,000 investment
in the Fund over the 10-year period ended December 31, 1994, versus the
performance of a similar hypothetical investment in the issues that comprise
the Standard & Poor's 500 Index.
FEDERAL RESERVE BOARD MOVES PROPELLED THE FUND'S STRATEGY
Last February, the Federal Reserve Board's strategy was unclear since it
raised the federal-funds rate --the interest rate commercial banks charge one
another for overnight loans --but not the discount rate --the rate the
Federal Reserve charges member banks for loans. The central bank's intention
to apply the brakes to a rapidly
<PAGE>
<PAGE>
expanding U.S. economy and quell potential inflationary pressure became clear
in May when the Federal Reserve Board began raising the discount rate. As we
stated in the Fund's semiannual report to shareholders, dated June 30, 1994,
the Federal Reserve Board's initial increase was the classic signal to
reposition the portfolio, with investments in late-cycle industries (steel,
aluminum and chemicals, for example) aimed at taking advantage of current
robust economic conditions, and non-economically sensitive defensive
industries (such as consumer non-durable products, technology and health
care) anticipating a future slowdown.
The Federal Reserve Board continued to raise interest rates through the
summer, and by October the yield curve (the relationship between yields on
bonds of varying maturities) flattened; that is, short-term interest rates
began to approach or equal longer-term rates. This was our signal to rotate
out of late-cycle stocks and fully tilt the portfolio toward growth
industries such as consumer non-durables, health care-related companies and
growth retailers. At this time, we reduced, but did not eliminate, the Fund's
technology holdings, because this sector's high earnings growth was expected
to be offset by its high degree of price volatility. We also reestablished
positions in interest-rate sensitive groups, including utilities, insurance
companies and miscellaneous financial services.
WHAT'S IN STORE FOR THE NEW YEAR?
We believe the first half of 1995 may hold some attractive buying
opportunities. Thus, we enter 1995 with an above-average level of cash. We
also believe corporate profit growth will slow to between 5 percent and 10
percent in response to the Federal Reserve Board's tightening efforts. As
earnings projections become more realistic, further buying opportunities
should emerge.
In 1995, we anticipate focusing on opportunities in high-growth sectors of
the U.S. economy. As mentioned earlier, these groups underperformed in 1994,
as companies in these sectors lost their relative earnings advantage. The
reverse is expected in 1995. As overall corporate earnings slow from a 20
percent to 25 percent range to between 5 percent and 10 percent, growth
stocks, which typically grow at a rate of 15 percent to 25 percent, will
likely regain their earnings advantage. Additionally, as the economy slows,
interest rates should begin receding. Historically, when interest rates
decline, price-earnings (P/E) ratios expand, particularly for growth stocks,
which traditionally sport higher P/E ratios because they possess higher
long-term growth rates.
LOOKING AHEAD
Over the next several years, we see a sustainable worldwide recovery
fueled by freer trade and the widespread adoption of capitalism. Global
economic growth could reach the three percent to four percent range, with the
greatest growth occurring in the developing economies, and recoveries in
Europe and Japan. It is noteworthy that, because of less efficient production
means, developing countries currently consume one-third more raw materials or
commodities, such as copper and steel. Given this reality, our investment
themes for a global recovery include infrastructure opportunities such as raw
materials, machinery, technology and telecommunications. The U.S. enters this
era in a superb competitive position.
We appreciate your support of 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>
<PAGE>
DEAN WITTER AMERICAN VALUE FUND
PORTFOLIO OF INVESTMENTS December 31, 1994
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------- --------------
<C> <S> <C>
COMMON STOCKS (73.1%)
BASIC CYCLICAL COMMODITIES (0.9%)
130,000 International Paper Co. ........... $ 9,798,750
40,000 Union Carbide Corp. ............... 1,175,000
71,000 USX-U.S. Steel Group, Inc. ........ 2,520,500
--------------
13,494,250
--------------
BIOTECHNOLOGY (0.2%)
75,000 Biogen, Inc.* ..................... 3,093,750
--------------
CABLE/CELLULAR (3.4%)
100,000 Airtouch Communications Corp.* ... 2,912,500
100,000 California Microwave, Inc.* ...... 3,600,000
200,000 DSC Communications Corp.* ......... 7,200,000
207,000 General Instrument Corp.* ......... 6,210,000
170,000 Glenayre Technologies, Inc.* ..... 9,817,500
365,000 Motorola, Inc. .................... 21,124,375
--------------
50,864,375
--------------
COMPUTER EQUIPMENT (1.1%)
679,000 EMC Corp. Mass.* .................. 14,683,375
25,000 Microtouch Systems, Inc.* ......... 1,118,750
--------------
15,802,125
--------------
COMPUTER SOFTWARE (5.5%)
220,000 Autodesk, Inc. .................... 8,635,000
320,000 Cadence Design Systems, Inc.* .... 6,600,000
607,000 Informix Corp.* ................... 19,424,000
236,000 Microsoft Corp.* .................. 14,425,500
300,000 Oracle Systems Corp.* ............. 13,237,500
126,000 Parametric Technology Corp.* ..... 4,315,500
260,000 Peoplesoft, Inc.* ................. 9,685,000
300,000 Symantec Corp.* ................... 5,250,000
--------------
81,572,500
--------------
CONSUMER BUSINESS SERVICES (5.0%)
230,000 Automatic Data Processing, Inc. .. 13,455,000
339,100 Computer Sciences Corp.* .......... 17,294,100
290,000 First Data Corp. .................. 13,738,750
200,000 First Financial Management Corp. . 12,325,000
400,000 General Motors (Class E) .......... 15,400,000
50,000 Omnicom Group, Inc. ............... 2,587,500
--------------
74,800,350
--------------
DRUGS (5.5%)
145,000 Astra AB (ADR)* ................... 3,733,750
508,600 Astra AB (Series "A" Free)
(Sweden) .......................... 13,141,765
152,000 Lilly (Eli) & Co. ................. 9,975,000
234,000 Pfizer, Inc. ...................... 18,076,500
170,000 Scherer (R.P.)* ................... 7,713,750
186,000 Schering-Plough Corp. ............. 13,764,000
193,000 Warner-Lambert Co. ................ 14,861,000
--------------
81,265,765
--------------
ELECTRICAL EQUIPMENT (1.3%)
160,000 AMP, Inc. ......................... 11,640,000
225,000 Molex, Inc. ....................... 7,762,500
--------------
19,402,500
--------------
<PAGE>
ELECTRONICS-SEMICONDUCTORS/ COMPONENTS (1.6%)
207,000 Intel Corp. ....................... $13,170,375
30,000 LSI Logic Corp.* .................. 1,211,250
200,000 Micron Technology, Inc. ........... 8,825,000
--------------
23,206,625
--------------
ELECTRONICS-SPECIALTY (2.3%)
255,000 Altera Corp.* ..................... 10,646,250
173,000 Analog Devices, Inc.* ............. 6,076,625
246,000 Maxim Integrated Products, Inc.* . 8,610,000
140,000 Xilinx, Inc.* ..................... 8,260,000
--------------
33,592,875
--------------
ENERGY (5.4%)
270,000 Amoco Corp. ....................... 15,963,750
300,000 Apache Corp. ...................... 7,500,000
107,126 British Petroleum PLC (ADR) ...... 8,556,689
180,000 Mobil Corp. ....................... 15,165,000
80,000 Norsk Hydro AS (ADR) .............. 3,130,000
600,000 Occidental Petroleum Corp. ........ 11,550,000
150,000 Royal Dutch Petroleum Co. (ADR) .. 16,125,000
149,500 Snyder Oil Corp. .................. 2,223,813
--------------
80,214,252
--------------
ENTERTAINMENT (2.1%)
290,000 Broderbund Software, Inc.* ........ 13,557,500
100,000 Macromedia, Inc.* ................. 2,550,000
125,000 Polygram NV (ADR) ................. 5,765,625
300,000 Sierra On-Line, Inc.* ............. 10,125,000
--------------
31,998,125
--------------
ENTERTAINMENT/GAMING (0.1%)
44,000 National Gaming Corp.* ............ 528,000
56,000 Primadonna Resorts, Inc.* ......... 1,330,000
--------------
1,858,000
--------------
FINANCIAL-MISCELLANEOUS (3.6%)
200,000 American International Group, Inc. 19,600,000
121,500 General Re Corp. .................. 15,035,625
400,000 Green Tree Financial Corp. ........ 12,150,000
300,000 MBNA Corp. ........................ 7,012,500
--------------
53,798,125
--------------
FOODS & BEVERAGES (6.3%)
760,500 Archer-Daniels-Midland Co. ........ 15,685,313
300,000 Coca Cola Co. ..................... 15,450,000
515,000 ConAgra, Inc. ..................... 16,093,750
270,000 CPC International, Inc. ........... 14,377,500
175,000 IBP, Inc. ......................... 5,293,750
370,000 International Flavors &
Fragrances, Inc. ................. 17,112,500
509,000 Pet, Inc. ......................... 10,052,750
--------------
94,065,563
--------------
HEALTHCARE PRODUCTS & SERVICES
(2.6%)
165,000 Genesis Health Ventures Corp.* ... 5,218,125
254,000 Healthsouth Corp.* ................ 9,398,000
</TABLE>
<PAGE>
<PAGE>
DEAN WITTER AMERICAN VALUE FUND
PORTFOLIO OF INVESTMENTS December 31, 1994 (continued)
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------- --------------
<C> <S> <C>
HEALTHCARE PRODUCTS & SERVICES
(continued)
110,000 Horizon Healthcare Corp.* ......... $ 3,080,000
560,000 Humana Corp.* ..................... 12,670,000
250,000 Shared Medical Systems Corp. ..... 8,187,500
--------------
38,553,625
--------------
HOTELS/MOTELS (2.5%)
440,000 Hospitality Franchise Systems,
Inc.* ............................ 11,660,000
688,312 La Quinta Inns, Inc. .............. 14,712,669
375,000 Marriott International, Inc. ..... 10,546,875
--------------
36,919,544
--------------
HOUSEHOLD PRODUCTS (5.6%)
298,000 Clorox Co. ........................ 17,544,750
345,000 Duracell International, Inc. ..... 14,964,375
200,000 Gillette Co. ...................... 14,950,000
250,000 Procter & Gamble Co. .............. 15,500,000
175,000 Scott Paper Co. ................... 12,096,875
300,000 Sunbeam-Oster, Inc. ............... 7,725,000
--------------
82,781,000
--------------
INDUSTRIALS (0.7%)
250,000 Fluor Corp. ....................... 10,781,250
--------------
MEDIA GROUP (2.7%)
125,000 Capital Cities/ABC, Inc. .......... 10,656,250
57,435 CBS, Inc. ......................... 3,180,463
127,000 Clear Channel Communications* .... 6,445,250
340,000 Infinity Broadcasting Corp.* ..... 10,710,000
450,000 Tele-Communications, Inc. (Class
A)* ............................... 9,787,500
--------------
40,779,463
--------------
MEDICAL PRODUCTS & SUPPLIES (3.6%)
488,000 Abbott Laboratories ............... 15,921,000
163,500 Allergan, Inc. .................... 4,618,875
300,000 Johnson & Johnson ................. 16,425,000
300,000 Medtronic, Inc. ................... 16,687,500
--------------
53,652,375
--------------
POLLUTION CONTROL (1.7%)
450,000 Browning-Ferris Industries, Inc. . 12,768,750
495,000 WMX Technologies, Inc. ............ 12,993,750
--------------
25,762,500
--------------
RESTAURANTS (0.1%)
70,000 Lone Star Steakhouse & Saloon* ... 1,347,500
--------------
RETAIL-SPECIALTY (3.1%)
213,000 Albertson's, Inc. ................. 6,177,000
57,000 Callaway Golf Co. ................. 1,888,125
342,000 Home Depot, Inc. .................. 15,732,000
550,000 Officemax, Inc.* .................. 14,575,000
88,000 Safeway, Inc.* .................... 2,805,000
225,000 Staples, Inc.* .................... 5,512,500
--------------
46,689,625
--------------
<PAGE>
TELECOMMUNICATIONS (4.1%)
30,000 Ascend Communications, Inc.* ..... $ 1,222,500
300,000 Bay Networks, Inc.* ............... 8,775,000
485,000 Cisco Systems, Inc.* .............. 16,975,000
45,000 Summa Four, Inc.* ................. 1,181,250
250,000 Tele Danmark AS (ADR)* ............ 6,375,000
150,000 Tellabs, Inc.* .................... 8,325,000
360,000 ThreeCom Corp.* ................... 18,540,000
--------------
61,393,750
--------------
TRANSPORTATION (0.3%)
100,000 Wisconsin Central Transport* ..... 4,075,000
--------------
UTILITIES (1.8%)
400,000 FPL Group, Inc. ................... 14,050,000
620,000 Southern Co. ...................... 12,400,536
--------------
26,450,536
--------------
TOTAL COMMON STOCKS (IDENTIFIED
COST $1,039,828,658) ............. 1,088,215,348
--------------
PREFERRED STOCKS (1.9%)
COMMUNICATIONS-EQUIPMENT & SOFTWARE (1.2%)
240,000 Nokia Corp. (conv.) (ADR)* ........ 18,000,000
--------------
COMPUTER SOFTWARE (0.6%)
15,000 Sap AG (Germany) .................. 8,499,516
--------------
ENERGY (0.1%)
77,500 Snyder Oil Corp. (conv.) .......... 1,559,687
--------------
TOTAL PREFERRED STOCKS
(IDENTIFIED COST $25,799,157) ... 28,059,203
--------------
<CAPTION>
PRINCIPAL
AMOUNT (IN
THOUSANDS)
- -----------
<C> <S> <C>
U.S. GOVERNMENT OBLIGATION (10.1%)
$158,000 U.S. Treasury Bond 7.50% due
11/15/24 (Identified Cost
$149,551,250) ................... 151,038,125
-------------
SHORT-TERM INVESTMENTS (17.6%)
COMMERCIAL PAPER (A) (2.6%)
AUTOMOTIVE FINANCE (1.3%)
20,000 Ford Motor Credit Co. 5.907% due
1/4/95 ......................... 19,990,167
-------------
FINANCE-DIVERSIFIED (1.3%)
19,800 American Express Credit Corp.
5.804% due 1/3/95 .............. 19,793,620
-------------
TOTAL COMMERCIAL PAPER
(AMORTIZED COST $39,783,787) 39,783,787
-------------
</TABLE>
<PAGE>
<PAGE>
DEAN WITTER AMERICAN VALUE FUND
PORTFOLIO OF INVESTMENTS December 31, 1994 (continued)
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN
THOUSANDS) VALUE
- ----------- --------------
<C> <S> <C>
U.S. GOVERNMENT AGENCIES (A)
(14.9%)
$29,000 Federal Home Loan Mortgage
Corporation 5.959% due
1/18/95 ..................... $ 28,918,792
22,000 Federal Home Loan Mortgage
Corporation 5.831% due
1/25/95 ..................... 21,914,933
42,950 Federal National Mortgage
Association 5.956% due
1/11/95 ..................... 42,879,252
38,000 Federal National Mortgage
Association 5.968% due
1/11/95 ..................... 37,937,300
50,000 Federal National Mortgage
Association 5.902% due
1/12/95 ..................... 49,910,167
40,000 Federal National Mortgage
Association 5.955% due
1/13/95 ..................... 39,920,933
--------------
TOTAL U.S. GOVERNMENT
AGENCIES (AMORTIZED COST
$221,481,377) ............... 221,481,377
--------------
REPURCHASE AGREEMENT (0.1%)
$ 1,704 The Bank of New York 3.125%
due 1/3/95 (dated 12/30/94;
proceeds $1,705,059;
collateralized by $1,786,292
U.S. Treasury Bill 6.43% due
6/8/95 valued at $1,738,556)
(Identified Cost $1,704,467) $ 1,704,467
--------------
TOTAL SHORT-TERM
INVESTMENTS (Identified
Cost $262,969,631) ......... 262,969,631
--------------
TOTAL INVESTMENTS
(Identified Cost
$1,478,148,696)(b) ..... 102.7% 1,530,282,307
LIABILITIES IN EXCESS OF
OTHER ASSETS ........... (2.7) (40,328,243)
-------- --------------
NET ASSETS .............. 100.0% $1,489,954,064
======== ==============
</TABLE>
- ---------------
ADR American Depository Receipt.
* Non-income producing security.
(a) Securities were purchased on a discount basis. The interest rates shown
have been adjusted to reflect a bond equivalent yield.
(b) The aggregate cost of investments for federal income tax purposes is
$1,492,816,368; the aggregate gross unrealized appreciation is
$60,325,868 and the aggregate gross unrealized depreciation is
$22,859,929, resulting in net unrealized appreciation of $37,465,939.
See Notes to Financial Statements
<PAGE>
<PAGE>
DEAN WITTER AMERICAN VALUE FUND
FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1994
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $1,478,148,696) ........... $1,530,282,307
Receivable for:
Investments sold ........................... 17,012,765
Shares of beneficial interest sold ........ 3,197,975
Interest ................................... 1,538,832
Dividends .................................. 922,397
Prepaid expenses and other assets ........... 82,686
--------------
TOTAL ASSETS ............................. 1,553,036,962
--------------
LIABILITIES:
Payable for:
Investments purchased ..................... 59,694,421
Plan of distribution fee .................. 1,232,632
Shares of beneficial interest repurchased . 1,060,819
Investment management fee ................. 648,847
Accrued expenses and other payables ........ 446,179
--------------
TOTAL LIABILITIES ........................ 63,082,898
--------------
NET ASSETS:
Paid-in-capital ............................. 1,504,574,815
Net unrealized appreciation on investments . 52,133,611
Accumulated undistributed net investment
income .................................... 182,460
Accumulated net realized loss on investments (66,936,822)
--------------
NET ASSETS ............................... $1,489,954,064
==============
NET ASSET VALUE PER SHARE, 70,253,058 shares
outstanding (unlimited shares authorized of
$.01 par value) ........................... $21.21
======
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1994
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
NET INVESTMENT INCOME:
INCOME
Dividends (net of $151,278 foreign
withholding tax) .................. $ 14,680,162
Interest ........................... 9,765,046
---------------
TOTAL INCOME ...................... 24,445,208
---------------
EXPENSES
Plan of distribution fee ........... 14,026,146
Investment management fee .......... 7,401,318
Transfer agent fees and expenses .. 2,087,842
Custodian fees ..................... 296,613
Registration fees .................. 254,655
Shareholder reports and notices ... 110,510
Professional fees .................. 39,640
Trustees' fees and expenses ....... 31,623
Other .............................. 14,069
---------------
TOTAL EXPENSES .................... 24,262,416
---------------
NET INVESTMENT INCOME ............ 182,792
---------------
NET REALIZED AND UNREALIZED LOSS ON
INVESTMENTS:
Net realized loss on investments ... (58,679,520)
Net change in unrealized
appreciation on investments ....... (43,049,173)
---------------
NET LOSS ON INVESTMENTS .......... (101,728,693)
---------------
NET DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS ...... $(101,545,901)
===============
</TABLE>
<PAGE>
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE YEAR ENDED
DECEMBER 31, 1994 DECEMBER 31, 1993
------------------ ------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income (loss) ............................................. $ 182,792 $ (4,683,331)
Net realized gain (loss) on investments .................................. (58,679,520) 83,571,143
Net change in unrealized appreciation on investments ..................... (43,049,173) 38,314,852
------------------ ------------------
Net increase (decrease) in net assets resulting from operations ........ (101,545,901) 117,202,664
------------------ ------------------
Dividends and distributions to shareholders from:
Net investment income .................................................... -- (235,229)
Net realized gain ........................................................ (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 .......... 394,801,479 718,521,196
------------------ ------------------
Total increase .......................................................... 271,975,705 759,417,589
NET ASSETS:
Beginning of period ...................................................... 1,217,978,359 458,560,770
------------------ ------------------
END OF PERIOD (including undistributed net investment income of $182,460
and $0, respectively) .................................................. $1,489,954,064 $1,217,978,359
================== ==================
</TABLE>
See Notes to Financial Statements
<PAGE>
<PAGE>
DEAN WITTER AMERICAN VALUE FUND
NOTES TO FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------
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 at time of purchase are valued on a mark-to-market basis
until sixty days prior to maturity and thereafter at amortized cost based on
their value on the 61st day. Short-term debt securities having a maturity
date of sixty days or less at the time of purchase are valued at amortized
cost; 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 and includes amortization of discounts of certain short-term
securities.
C. 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.
D. 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 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.
<PAGE>
<PAGE>
DEAN WITTER AMERICAN VALUE FUND
NOTES TO FINANCIAL STATEMENTS (continued)
- -----------------------------------------------------------------------------
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 management fee, accrued daily and payable
monthly, 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 Distributor,
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.
The Distributor has informed the Fund that for the year ended December 31,
1994, it received approximately $2,508,000 in contingent 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.
<PAGE>
<PAGE>
DEAN WITTER AMERICAN VALUE FUND
NOTES TO FINANCIAL STATEMENTS (continued)
- -----------------------------------------------------------------------------
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES --The cost of
purchases and proceeds from sales of portfolio securities, excluding
short-term investments, for the year ended December 31, 1994 aggregated
$3,853,771,150 and $3,652,594,687, respectively. Included in the
aforementioned are purchases and sales of U.S. Government securities of
$255,189,528 and $122,863,879, respectively.
For the year ended December 31, 1994, the Fund incurred brokerage
commissions of $1,210,464 with Dean Witter Reynolds Inc. for portfolio
transactions executed on behalf of the Fund. At December 31, 1994, the Fund's
receivable for investments sold and payable for investments purchased
included unsettled trades with Dean Witter Reynolds Inc. of $1,094,087 and
$8,855,759, respectively.
Dean Witter Trust Company, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At December 31, 1994, the Fund had
transfer agent fees and expenses payable of approximately $211,000.
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 independent Trustees for at least five years at the time of
retirement. Benefits under this plan are based on years of service and
compensation during the last five years of service. Aggregate pension costs
for the year ended December 31, 1994, included in Trustees' fees and expenses
in the Statement of Operations amounted to $12,001. At December 31, 1994, the
Fund had an accrued pension liability of $11,426 which is included in accrued
expenses in the Statement of Assets and Liabilities.
5. SHARES OF BENEFICIAL INTEREST --Transactions in shares of beneficial
interest were as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE YEAR ENDED
DECEMBER 31, 1994 DECEMBER 31, 1993
------------------------------- ------------------------------
SHARES AMOUNT SHARES AMOUNT
-------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C>
Sold ......................... 31,171,952 $ 693,824,171 34,824,814 $ 812,736,396
Reinvestment of dividends and
distributions ............... 988,724 20,179,867 3,202,538 72,246,949
-------------- --------------- ------------- ---------------
32,160,676 714,004,038 38,027,352 884,983,345
Repurchased .................. (14,645,353) (319,202,559) (7,200,270) (166,462,149)
-------------- --------------- ------------- ---------------
Net increase ................. 17,515,323 $ 394,801,479 30,827,082 $ 718,521,196
============== =============== ============= ===============
</TABLE>
6. FEDERAL INCOME TAX STATUS --At December 31, 1994, the Fund had net capital
loss carryover of approximately $34,379,000 which will be available through
December 31, 2002 to offset future capital gains to the extent provided by
regulations. Capital losses incurred after October 31 ("post-October losses")
within the taxable year are deemed to arise on the first business day of the
Fund's next taxable year. The Fund incurred and will elect to defer net
capital losses of approximately $17,891,000 during fiscal 1994. As of
December 31, 1994, the Fund had temporary book/tax differences primarily
attributable to post-October loss deferrals and capital loss deferrals on
wash sales.
<PAGE>
<PAGE>
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 YEAR ENDED DECEMBER 31,
-------------------------------------------------------------
1994 1993 1992 1991 1990
------------ ------------ ---------- ---------- ---------
<S> <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
------------ ------------ ---------- ---------- ---------
Net investment income (loss) ............... -- (0.09) 0.03 0.05 0.24
Net realized and unrealized gain (loss) on
investments ............................... (1.57) 3.94 0.71 7.90 (0.38)
------------ ------------ ---------- ---------- ---------
Total from investment operations ........... (1.57) 3.85 0.74 7.95 (0.14)
------------ ------------ ---------- ---------- ---------
Less dividends and distributions from:
Net investment income .................... -- (0.01) (0.03) (0.03) (0.28)
Net realized gain ......................... (0.32) (1.67) (0.44) (1.65) --
Paid-in-capital ........................... -- -- -- -- --
------------ ------------ ---------- ---------- ---------
Total dividends and distributions .......... (0.32) (1.68) (0.47) (1.68) (0.28)
------------ ------------ ---------- ---------- ---------
Net asset value, end of period ............. $ 21.21 $ 23.10 $ 20.93 $ 20.66 $ 14.39
============ ============ ========== ========== =========
TOTAL INVESTMENT RETURN+ ................... (6.75)% 18.70% 3.84% 56.26% (0.90)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) ... $1,489,954 $1,217,978 $458,561 $226,982 $89,165
Ratios to average net assets:
Expenses .................................. 1.71% 1.61% 1.72% 1.58% 1.70%
Net investment income (loss) ............. 0.01% (0.59)% 0.18% 0.29% 1.67%
Portfolio turnover rate .................... 295% 276% 305% 264% 234%
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
1989 1988 1987 1986 1985
--------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value,
beginning of period ... $ 13.19 $ 12.21 $ 12.64 $ 12.67 $ 10.06
--------- --------- ---------- --------- ---------
Net investment income
(loss) ................. 0.34 0.29 0.19 0.28 0.32
Net realized and
unrealized gain (loss)
on investments ......... 2.99 1.03 0.20 1.76 2.61
--------- --------- ---------- --------- ---------
Total from investment
operations ............. 3.33 1.32 0.39 2.04 2.93
--------- --------- ---------- --------- ---------
Less dividends and
distributions from:
Net investment income (0.32) (0.33) (0.23) (0.32) (0.32)
Net realized gain ...... (1.39) -- (0.59) (1.75) --
Paid-in-capital ........ -- (0.01) -- -- --
--------- --------- ---------- --------- ---------
Total dividends and
distributions .......... (1.71) (0.34) (0.82) (2.07) (0.32)
--------- --------- ---------- --------- ---------
Net asset value, end of
period ................. $ 14.81 $ 13.19 $ 12.21 $ 12.64 $ 12.67
========= ========= ========== ========= =========
TOTAL INVESTMENT RETURN+
25.39% 10.84% 2.84% 15.82% 29.79%
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of
period (in thousands) . $99,993 $90,053 $109,425 $78,872 $43,235
Ratios to average net
assets:
Expenses ............... 1.66% 1.78% 1.62% 1.39% 1.24%
Net investment income
(loss) ................. 2.23% 2.15% 1.42% 2.10% 2.85%
Portfolio turnover rate 196% 133% 203% 120% 61%
</TABLE>
- ---------------
+ Does not reflect the deduction of sales charge.
See Notes to Financial Statements
<PAGE>
<PAGE>
DEAN WITTER AMERICAN VALUE FUND
REPORT OF INDEPENDENT ACCOUNTANTS
- -----------------------------------------------------------------------------
To the Shareholders and Trustees of Dean Witter American Value Fund
In our opinion, the accompanying statement of assets and liabilities,
including the portfolio of investments, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of Dean Witter
American Value Fund (the "Fund") at December 31, 1994, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended and the financial highlights for each
of the ten years in the period then ended, in conformity with generally
accepted accounting principles. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities owned at December 31,
1994 by correspondence with the custodian and brokers, provide a reasonable
basis for the opinion expressed above.
PRICE WATERHOUSE LLP
New York, New York
February 10, 1995
1994 FEDERAL TAX NOTICE (unaudited)
During the year ended December 31, 1994, the Fund paid to shareholders
$.21646 per share from long-term capital gains. For such period, 9.5% of the
income paid qualified for the dividends received deduction available to
corporations.
<PAGE>
<PAGE>
TRUSTEES
Jack F. Bennett
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Dr. Manuel H. Johnson
Paul Kolton
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
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
TRANSFER AGENT
Dean Witter Trust Company
Harborside Financial Center -Plaza Two
Jersey City, New Jersey 07311
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
This report is submitted for the general information of shareholders of the
Fund. For more detailed information about the Fund, its officers and
trustees, fees, expenses and other pertinent information, please see
the prospectus of the Fund.
This report is not authorized for distribution to prospective investors
in the Fund unless preceded or accompanied by an effective prospectus.
DEAN WITTER
AMERICAN
VALUE FUND
ANNUAL REPORT
DECEMBER 31, 1994
