<PAGE>
Registration File No.: 2-66269
DEAN WITTER AMERICAN VALUE FUND
LETTER TO THE SHAREHOLDERS December 31, 1996
Two World Trade Center, New York, New York 10048
DEAR SHAREHOLDER:
The stock market soared to new highs during Dean Witter American Value Fund's
fiscal year ended December 31, 1996. Large-capitalization stocks led the way
and outperformed small caps by a wide margin, with the Dow Jones Industrial
Average gaining 28.91 percent while the Russell 2000 trailed with a 21.37
percent gain. The Fund maintained a relatively conservative position during the
year, causing it to underperform its benchmark.
PERFORMANCE AND PORTFOLIO
For the fiscal year ended December 31, 1996, the Fund produced a total return
of 10.53 percent compared to 22.95 percent for the broad-based Standard &
Poor's 500 Composite Stock Price Index (S&P 500) and 17.48 percent for the
average fund in the Lipper Growth Funds Index. The accompanying chart
illustrates the performance of a $10,000 investment in the Fund for the 10
years ended December 31, 1996, versus the performance of similar hypothetical
investments in the S&P 500 and the Lipper Growth Funds Index.
POSITIONING OF THE FUND
Dean Witter American Value Fund was positioned for slow economic growth through
much of the year, remaining equally weighted in steady growth stocks and
cyclical stocks. However, during the spring and summer, many economic
indicators led us to believe that corporate earnings would be flat to down for
1996. Economic growth began to decelerate while wages and raw material prices
for energy and grain rose. Based on that data we took, as it turned out, an
overly defensive position with the portfolio during mid-summer.
Since then, we have returned to overweighting investments in those sectors of
the market that should achieve relative earnings outperformance, based upon
both near-term considerations and long-term trends. The first of these sectors
is technology, which currently makes up about one-third of
<PAGE>
DEAN WITTER AMERICAN VALUE FUND
LETTER TO THE SHAREHOLDERS December 31, 1996, continued
the portfolio. It is likely that the industrialized nations will continue to
invest heavily in technology in order to compete effectively with low-wage,
emerging markets. The emerging markets, in order to compete globally, are
investing heavily in technologies such as basic phone service and computing
capacity. Our technology holdings are concentrated in PC-related,
networking-and semiconductor-related companies. Holdings in this sector
currently include Intel Corp., Microsoft Corp., Seagate Technology, Inc. and
Cisco Systems, Inc.
DEAN WITTER AMERICAN VALUE FUND
GROWTH OF $10,000
DATE TOTAL S&P 500 LIPPER
===============================================================================
December 31, 1986 $10,000 $10,000 $10,000
===============================================================================
December 31, 1987 $10,284 $10,525 $11,931
===============================================================================
December 31, 1988 $11,399 $12,267 $13,619
===============================================================================
December 31, 1989 $14,293 $16,148 $17,363
===============================================================================
December 31, 1990 $11,164 $15,649 $16,423
===============================================================================
December 31, 1991 $22,133 $20,408 $22,271
===============================================================================
December 31, 1992 $22,983 $21,961 $23,971
- -------------------------------------------------------------------------------
December 31, 1993 $27,281 $24,170 $26,842
- -------------------------------------------------------------------------------
December 31, 1994 $25,439 $22,489 $26,420
- -------------------------------------------------------------------------------
December 31, 1995 $36,175 $33,683 $34,899
- -------------------------------------------------------------------------------
December 31, 1996 $39,986(3) $41,412 $35,810
===============================================================================
AVERAGE ANNUAL TOTAL RETURNS
1 YEAR 5 YEARS 10 YEARS
========================================================
10.53(1) 12.56(1) 14.87(1)
--------------------------------------------------------
5.56(2) 12.31(2) 14.87(2)
========================================================
==========================================================
Fund S&P 500 (4) Lipper IX (5)
-------- ------- -------
==========================================================
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, 1996.
(4) The Standard & Poor's 500 Composite Stock Price Index (S&P 500) is a
broad-based index, the performance of which is based on the average
performance of 500 widely held common stocks. The performance of the index
does not include any expenses, fees or charges. The Index is unmanaged and
should not be considered an investment.
(5) The Lipper Growth Funds Index is an equally-weighted performance index of
the largest qualifying funds (based on net assets) in the Lipper Growth
Funds objective. The Index, which is adjusted for capital gains
distributions and income dividends, is unmanaged and should not be
considered an investment. There are currently 30 funds represented in this
index.
We are also focused on the aging of the baby boom generation. As this large
segment of the population approaches retirement, they are likely to intensify
their savings efforts to supplement any Medicare or social security payments
that they may receive. This should benefit the brokerage, life insurance and
banking industries. Holdings in financial services include SunAmerica Inc., a
leader in annuities. Increasingly, the Fund is gaining exposure to banks like
NationsBank Corp., which is building its asset management business, and like
Citicorp, which maintains a major global presence. Health care industries such
as drugs, biotechnology and medical devices also benefit from an aging
population. Health care holdings currently include Lilly (Eli) & Co., Bristol
Myers Squibb Co., Centocor, Inc. and Medtronic, Inc.
Finally, industries that export goods to developing markets are expected to
benefit from continued strong economic growth in those regions. Primary
industry beneficiaries include aerospace, oil equipment, agriculture related
and consumer goods. Holdings currently include Boeing Co. in aerospace,
Schlumberger, Ltd. in oil well equipment, Monsanto Co. in agriculture and
Avon Products, Inc. in consumer goods.
Energy has been market weighted in the portfolio for most of the year with a
concentration in drilling and
<PAGE>
DEAN WITTER AMERICAN VALUE FUND
LETTER TO THE SHAREHOLDERS December 31, 1996, continued
oil service stocks. This is atypical for the Fund but, when it became clear
that the oil and gas companies were entering a new phase of capital spending
that would continue in 1997 (even if oil prices were to sink to $19 to $20 a
barrel), we began to build our positions during the first quarter of 1996.
Again, volume growth should remain resilient boosted by accelerating demand
from developing countries undergoing industrialization and national standard of
living improvements.
During August of the Fund's fiscal year, Dean Witter American Value Fund
received a prestigious distinction. It was chosen for the Forbes Honor Roll,
which highlights a small number of funds based on 1) performance, 2)
preservation of capital and 3) continuity of management. The funds honored by
Forbes have shown that they can provide good performance not only in up
markets, but in down markets as well.
LOOKING AHEAD
We expect the world economy to continue to grow moderately in 1997. Modest
earnings growth of approximately 8 percent and relatively stable inflation
should continue to drive the markets higher. We will continue to focus on those
sectors expected to have relative earnings outperformance such as technology
and health care, and interest-rate sensitive and export-related industries.
We appreciate your support of the Dean Witter American Value Fund and look
forward to continuing to serve your investment needs and objectives.
Very truly yours,
/s/ Charles A. Fiumefreddo
CHARLES A. FIUMEFREDDO
Chairman of the Board
<PAGE>
DEAN WITTER AMERICAN VALUE FUND
PORTFOLIO OF INVESTMENTS December 31, 1996
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------
COMMON STOCKS (92.8%)
Agriculture Related (4.7%)
685,000 Archer-Daniels-Midland Co. ..................... $ 15,070,000
Dekalb Genetics Corp.
196,400 (Class B) ..................................... 9,967,300
315,000 Delta & Pine Land Co. .......................... 10,080,000
270,000 IMC Global, Inc. ............................... 10,563,750
1,230,000 Monsanto Co. ................................... 47,816,250
85,000 Mycogen Corp.* ................................. 1,785,000
437,000 Pioneer Hi-Bred
International, Inc. .......................... 30,590,000
150,000 Potash Corp. of
Saskatchewan, Inc.
(Canada) ..................................... 12,750,000
200,000 Tyson Foods, Inc. (Class A) .................... 6,825,000
-------------
145,447,300
-------------
Apparel & Footwear (0.9%)
274,300 Jones Apparel Group, Inc.* ..................... 10,251,962
400,000 Reebok International Ltd.
(United Kingdom) ............................. 16,800,000
-------------
27,051,962
-------------
Auto Related (0.8%)
450,000 General Motors Corp. ........................... 25,087,500
-------------
Banks (7.8%)
445,000 Bank of Boston Corp. ........................... 28,591,250
340,000 BankAmerica Corp. .............................. 33,915,000
370,000 Chase Manhattan Corp. .......................... 33,022,500
378,000 Citicorp ....................................... 38,934,000
450,000 First Chicago NBD Corp. ........................ 24,187,500
482,700 Mellon Bank Corp. .............................. 34,271,700
350,000 NationsBank Corp. .............................. 34,212,500
400,000 PNC Bank Corp. ................................. 15,050,000
-------------
242,184,450
-------------
Basic Cyclicals (1.9%)
250,000 Aluminum Co. of America ........................ 15,937,500
200,000 Crown Cork & Seal Co., Inc. .................... 10,875,000
185,000 Du Pont (E.I.) de Nemours & Co. ............... 17,459,375
200,000 RMI Titanium Co.* .............................. 5,625,000
300,000 Titanium Metals Corp.* ......................... 9,787,500
-------------
59,684,375
-------------
Biotechnology (3.5%)
513,000 Biochem Pharma, Inc.* .......................... $ 25,585,875
875,000 Biogen, Inc.* .................................. 33,687,500
1,251,000 Centocor, Inc.* ................................ 44,723,250
124,500 IDEC Pharmaceuticals Corp.* 2,941,312
-------------
106,937,937
-------------
Capital Goods (3.2%)
417,000 Boeing Co. ..................................... 44,358,375
450,000 Honeywell, Inc. ................................ 29,587,500
405,000 United Technologies Corp. ...................... 26,730,000
-------------
100,675,875
-------------
Communications Equipment (7.4%)
400,000 3Com Corp.* .................................... 29,300,000
158,000 ADC Telecommunications, Inc.* ................. 4,898,000
246,500 Adtran, Inc.* .................................. 10,229,750
14,800 Advanced Fibre Communications, Inc.* .......... 823,250
395,000 Andrew Corp.* .................................. 20,935,000
150,000 Ascend Communications, Inc.* .................. 9,300,000
585,000 Cisco Systems, Inc.* ........................... 37,220,625
700,000 Ericsson (L.M.) Telephone
Co. (Class B) (ADR)
(Sweden) ..................................... 21,087,500
545,000 Lucent Technologies, Inc. ...................... 25,206,250
465,000 Newbridge Networks Corp.* (Canada) ............ 13,136,250
720,000 Pairgain Technologies, Inc.* ................... 21,870,000
330,000 Tellabs, Inc.* ................................. 12,416,250
235,000 U.S. Robotics Corp.* ........................... 16,920,000
100,000 Uniphase Corp.* ................................ 5,250,000
-------------
228,592,875
-------------
Computer Equipment (5.9%)
435,000 COMPAQ Computer Corp.* ......................... 32,298,750
942,000 Dell Computer Corp.* ........................... 50,043,750
1,200,000 EMC Corp.* ..................................... 39,750,000
200,000 Gateway 2000, Inc.* ............................ 10,700,000
170,000 Quantum Corp.* ................................. 4,823,750
900,000 Seagate Technology, Inc.* ...................... 35,550,000
150,000 Western Digital Corp.* ......................... 8,531,250
-------------
181,697,500
-------------
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER AMERICAN VALUE FUND
PORTFOLIO OF INVESTMENTS December 31, 1996, continued
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------
Computer Services (1.3%)
350,000 Gartner Group, Inc.
(Class A)* ................................... $ 13,606,250
200,000 Keane, Inc.* ................................... 6,350,000
111,000 Reuters Holdings PLC (ADR)
(United Kingdom) ............................. 8,491,500
215,000 Transaction Systems
Architects, Inc. (Class A)* .................. 7,041,250
200,000 Vanstar Corp.* ................................. 4,900,000
-------------
40,389,000
-------------
Computer Software (5.0%)
350,000 BMC Software, Inc.* ............................ 14,481,250
255,000 Computer Associates
International, Inc. .......................... 12,686,250
75,000 Learning Tree International, Inc.* ............ 2,193,750
890,000 Microsoft Corp.* ............................... 73,536,250
50,000 Parametric Technology Corp.* .................. 2,568,750
600,000 Peoplesoft, Inc.* .............................. 28,725,000
284,900 Rational Software Corp.* ....................... 11,182,325
160,000 Veritas Software Co.* .......................... 7,880,000
-------------
153,253,575
-------------
Consumer - Noncyclical (1.4%)
344,600 Avon Products, Inc. ............................ 19,685,275
150,000 Colgate-Palmolive Co. .......................... 13,837,500
10,200 Nu Skin Asia Pacific Inc.
(Class A)* ................................... 314,925
100,000 Procter & Gamble Co. ........................... 10,750,000
-------------
44,587,700
-------------
Consumer Business Services (1.6%)
44,200 BA Merchant Services, Inc.
(Class A)* ................................... 790,075
120,000 Computer Sciences Corp.* ....................... 9,855,000
300,000 Diebold, Inc. .................................. 18,862,500
290,400 National Education Corp.* ...................... 4,428,600
580,000 Service Corp. International .................... 16,240,000
-------------
50,176,175
-------------
Consumer Products (1.1%)
261,000 Callaway Golf Company .......................... 7,503,750
340,000 Kroger Co.* .................................... 15,810,000
280,000 Safeway, Inc.* ................................. 11,970,000
-------------
35,283,750
-------------
Drugs (4.2%)
380,000 Bristol-Myers Squibb Co. ....................... $ 41,325,000
373,300 Dura Pharmaceuticals, Inc.* .................... 17,778,412
530,000 Lilly (Eli) & Co. .............................. 38,690,000
415,000 Warner-Lambert Co. ............................. 31,125,000
-------------
128,918,412
-------------
Energy (8.7%)
345,000 Apache Corp. ................................... 12,204,375
600,000 Baker Hughes, Inc. ............................. 20,700,000
150,800 BJ Services Co.* ............................... 7,690,800
240,000 British Petroleum Co. PLC
(ADR) (United Kingdom) ....................... 33,930,000
290,000 Chesapeake Energy Corp.* ....................... 16,131,250
60,000 Cooper Cameron Corp.* .......................... 4,590,000
303,400 Diamond Offshore Drilling, Inc.* .............. 17,293,800
100,000 ENSCO International, Inc.* ..................... 4,850,000
440,000 Global Marine, Inc.* ........................... 9,075,000
294,000 Louisiana Land & Exploration Co. .............. 15,765,750
69,000 Marine Drilling Company, Inc.* ................ 1,354,125
400,000 Noble Drilling Corp.* .......................... 7,950,000
530,000 Reading & Bates Corp.* ......................... 14,045,000
150,000 Rowan Companies, Inc.* ......................... 3,393,750
370,000 Schlumberger, Ltd. ............................. 36,953,750
242,000 Smith International, Inc.* ..................... 10,859,750
155,000 Texaco, Inc. ................................... 15,209,375
250,000 Transocean Offshore, Inc. ...................... 15,656,250
350,000 Unocal Corp. ................................... 14,218,750
120,000 Western Atlas, Inc.* ........................... 8,505,000
-------------
270,376,725
-------------
Entertainment/Gaming & Lodging (2.8%)
240,000 HFS, Inc.* ..................................... 14,340,000
950,000 Hilton Hotels Corp. ............................ 24,818,750
482,000 International Game Technology ................. 8,796,500
534,700 MGM Grand, Inc.* ............................... 18,647,663
800,000 Mirage Resorts, Inc.* .......................... 17,300,000
280,000 Sodak Gaming, Inc.* ............................ 4,200,000
-------------
88,102,913
-------------
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER AMERICAN VALUE FUND
PORTFOLIO OF INVESTMENTS December 31, 1996, continued
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------
Financial - Miscellaneous (8.3%)
300,000 American Express Co. ........................... $ 16,950,000
246,000 Countrywide Credit Industries, Inc. ........... 7,041,750
137,700 Crescent Real Estate Equities, Inc. ........... 7,263,675
355,000 Federal Home Loan Mortgage Corp. .............. 39,094,375
1,100,000 Federal National Mortgage Assoc. .............. 40,975,000
870,000 Lehman Brothers Holdings, Inc. ................ 27,296,250
665,000 Merrill Lynch & Co., Inc. ...................... 54,197,500
150,000 MGIC Investment Corp. .......................... 11,400,000
625,000 Morgan Stanley Group, Inc. ..................... 35,703,125
570,000 Paine Webber Group Inc. ........................ 16,031,250
41,000 PMI Group, Inc. ................................ 2,270,375
-------------
258,223,300
-------------
Healthcare Products & Services (0.7%)
720,000 Health Management Associates, Inc.
(Class A)* ................................... 16,200,000
26,500 PhyCor, Inc.* .................................. 745,313
73,700 Shared Medical Systems Corp. .................. 3,620,513
-------------
20,565,826
-------------
Insurance (3.4%)
100,000 Ace, Ltd. (Bermuda) ............................ 6,012,500
400,000 Allstate Corp. ................................. 23,150,000
555,000 Conseco Inc. ................................... 35,381,250
190,200 Exel Ltd. (Bermuda) ............................ 7,203,825
360,000 SunAmerica Inc. ................................ 15,975,000
400,000 Travelers Group, Inc. .......................... 18,150,000
-------------
105,872,575
-------------
Internet (1.0%)
670,000 America Online, Inc.* .......................... 22,277,500
107,000 Netscape Communications Corp.* ................ 6,072,250
96,000 Security Dynamics Technologies, Inc.* ......... 3,012,000
-------------
31,361,750
-------------
Media Group (2.4%)
38,000 Chancellor Broadcasting Co. (Class A)* ........ 893,000
401,400 Clear Channel Communications, Inc.* ........... 14,500,575
425,000 Evergreen Media Corp. (Class A)* .............. $ 10,518,750
509,000 Infinity Broadcasting Corp. (Class A)* ........ 17,115,125
469,000 Lin Television Corp.* .......................... 19,698,000
5,000 Telemundo Group, Inc. (Class A)* .............. 143,125
325,600 Univision Communications, Inc. (Class A)* ..... 12,047,200
-------------
74,915,775
-------------
Medical Supplies (1.9%)
395,000 Boston Scientific Corp.* ....................... 23,700,000
305,000 Guidant Corp. .................................. 17,385,000
257,200 Medtronic, Inc. ................................ 17,489,600
-------------
58,574,600
-------------
Restaurants (0.9%)
400,000 Boston Chicken, Inc.* .......................... 14,300,000
440,000 Starbucks Corp.* ............................... 12,540,000
-------------
26,840,000
-------------
Retail (3.2%)
700,000 Dayton-Hudson Corp. ............................ 27,475,000
51,600 Eagle Hardware & Garden, Inc.* ................ 1,064,250
325,000 Federated Department Stores, Inc.* ............ 11,090,625
100,000 Gucci Group NV (Italy) ......................... 6,387,500
450,000 Home Depot, Inc. ............................... 22,556,250
710,000 Price/Costco, Inc.* ............................ 17,838,750
340,000 Tiffany & Co. .................................. 12,452,500
-------------
98,864,875
-------------
Semiconductors (8.5%)
460,000 Altera Corp.* .................................. 33,407,500
500,000 Analog Devices, Inc.* .......................... 16,937,500
700,000 Applied Materials, Inc.* ....................... 25,112,500
300,000 Atmel Corp.* ................................... 9,937,500
385,000 Intel Corp. .................................... 50,386,875
700,000 KLA Instruments Corp.* ......................... 24,762,500
657,000 Maxim Integrated Products, Inc.* .............. 28,415,250
445,000 Microchip Technology, Inc.* .................... 22,583,750
865,000 Micron Technology, Inc. ........................ 25,193,125
200,000 Novellus Systems, Inc.* ........................ 10,825,000
150,000 Tencor Instruments* ............................ 3,956,250
250,000 Vitesse Semiconductor Corp.* .................. 11,375,000
-------------
262,892,750
-------------
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER AMERICAN VALUE FUND
PORTFOLIO OF INVESTMENTS December 31, 1996, continued
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------
Telecommunications (0.2%)
200,000 Teleport Communications
Group Inc. (Class A)* ........................ $ 6,075,536
-------------
Transportation (0.1%)
243,600 OMI Corp.* ..................................... 2,131,500
46,000 Teekay Shipping Corp. .......................... 1,506,500
-------------
3,638,000
-------------
TOTAL COMMON STOCKS
(Identified Cost $2,607,849,373) 2,876,273,011
-------------
PRINCIPAL
AMOUNT IN
THOUSANDS
- -----------
U.S. GOVERNMENT OBLIGATIONS (2.9%)
$277,000 U.S. Treasury Strip
0.00% due 05/15/19 ............................. 59,926,180
140,000 U.S. Treasury Strip
0.00% due 08/15/19 ............................. 29,772,400
-------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Identified Cost $88,481,454) .................... 89,698,580
-------------
SHORT-TERM INVESTMENTS (3.6%)
U.S. GOVERNMENT AGENCY (a) (3.2%)
100,000 Federal Home Loan Bank
6.50% due 01/02/97
(Amortized cost
$99,981,945) ................................... 99,981,945
-------------
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT (0.4%)
$10,736 The Bank of New York
5.375% due 01/02/97
(dated 12/31/96; proceeds
$10,739,434; collateralized
by $10,959,010
U.S. Treasury Note
5.375% due 05/31/98
valued at $10,950,953)
(Identified Cost
$10,736,228) ................................... $ 10,736,228
-------------
TOTAL SHORT-TERM
INVESTMENTS
(Identified Cost $110,718,173) 110,718,173
-------------
TOTAL INVESTMENTS
(Identified Cost $2,807,049,000) (b) 99.3% 3,076,689,764
OTHER ASSETS IN EXCESS OF
LIABILITIES ........................ 0.7 22,160,719
----- --------------
NET ASSETS ......................... 100.0% $3,098,850,483
===== ==============
- --------------
ADR American Depository Receipt.
* Non-income producing security.
(a) Security was purchased on a discount basis. The interest rate shown has
been adjusted to reflect a money market equivalent yield.
(b) The aggregate cost for federal income tax purposes approximates
identified cost. The aggregate gross unrealized appreciation is
$332,910,220 and the aggregate gross unrealized depreciation is
$63,269,456, resulting in net unrealized appreciation of $269,640,764.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER AMERICAN VALUE FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
ASSETS:
Investments in securities, at value
(identified cost $2,807,049,000) ......... $3,076,689,764
Receivable for:
Investments sold ......................... 34,934,696
Shares of beneficial interest sold ...... 4,923,729
Dividends ................................ 1,113,675
Foreign withholding taxes reclaimed ..... 7,459
Interest ................................. 1,611
Prepaid expenses and other assets ........ 49,231
--------------
TOTAL ASSETS ............................ 3,117,720,165
--------------
LIABILITIES:
Payable for:
Investments purchased .................... 11,000,900
Shares of beneficial interest repurchased 2,541,048
Plan of distribution fee ................. 2,394,402
Investment management fee ................ 1,378,857
Distributions to shareholders ............ 883,534
Accrued expenses .......................... 670,941
--------------
TOTAL LIABILITIES ....................... 18,869,682
--------------
NET ASSETS:
Paid-in-capital ........................... 2,712,418,934
Net unrealized appreciation ............... 269,640,764
Accumulated net investment loss ........... (43,257)
Accumulated undistributed net realized
gain ..................................... 116,834,042
--------------
NET ASSETS .............................. $3,098,850,483
==============
NET ASSET VALUE PER SHARE,
114,750,518 shares outstanding (unlimited
shares authorized of $.01 par value) .... $ 27.01
==============
STATEMENT OF OPERATIONS
For the year ended December 31, 1996
NET INVESTMENT INCOME:
INCOME
Dividends (net of $154,587 foreign
withholding tax) ..................... $ 21,737,318
Interest .............................. 11,658,199
-------------
TOTAL INCOME ........................ 33,395,517
-------------
EXPENSES
Plan of distribution fee .............. 24,339,469
Investment management fee ............. 14,111,045
Transfer agent fees and expenses ..... 3,046,573
Registration fees ..................... 328,344
Custodian fees ........................ 321,785
Shareholder reports and notices ...... 166,570
Professional fees ..................... 54,714
Trustees' fees and expenses ........... 37,971
Other ................................. 30,422
-------------
TOTAL EXPENSES ...................... 42,436,893
-------------
NET INVESTMENT LOSS ................. (9,041,376)
-------------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain ..................... 275,397,900
Net change in unrealized appreciation 13,163,448
-------------
NET GAIN ............................ 288,561,348
-------------
NET INCREASE .......................... $279,519,972
=============
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER AMERICAN VALUE FUND
FINANCIAL STATEMENTS, continued
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995
- --------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income (loss) .......................... $ (9,041,376) $ 1,115,260
Net realized gain ..................................... 275,397,900 449,119,481
Net change in unrealized appreciation ................. 13,163,448 204,343,705
-------------- --------------
NET INCREASE ........................................ 279,519,972 654,578,446
-------------- --------------
DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income ................................. (1,126,313) (193,886)
Net realized gain ..................................... (299,891,577) (231,910,868)
-------------- --------------
TOTAL ............................................... (301,017,890) (232,104,754)
-------------- --------------
Net increase from transactions in shares of beneficial
interest ............................................. 731,461,022 476,459,623
-------------- --------------
NET INCREASE ........................................ 709,963,104 898,933,315
NET ASSETS:
Beginning of period ................................... 2,388,887,379 1,489,954,064
-------------- --------------
END OF PERIOD
(Including a net investment loss of $43,257 and
undistributed net investment income of $1,103,834,
respectively) ....................................... $3,098,850,483 $2,388,887,379
============== ==============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER AMERICAN VALUE FUND
NOTES TO FINANCIAL STATEMENTS December 31, 1996
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's investment objective is capital
growth consistent with an effort to reduce volatility. The Fund seeks to
achieve its objective by investing in a diversified portfolio of securities
consisting principally of common stocks. The Fund was incorporated in Maryland
in 1979, commenced operations on March 27, 1980 and was reorganized as a
Massachusetts business trust on April 30, 1987.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts and disclosures. Actual results could differ
from those estimates.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- (1) an equity security listed or traded on the
New York or American Stock Exchange or other stock exchange is valued at its
latest sale price on that exchange prior to the time when assets are valued; if
there were no sales that day, the security is valued at the latest bid price
(in cases where a security is traded on more than one exchange, the security is
valued on the exchange designated as the primary market pursuant to procedures
adopted by the Trustees); (2) all other portfolio securities for which
over-the-counter market quotations are readily available are valued at the
latest available bid price prior to the time of valuation; (3) when market
quotations are not readily available, including circumstances under which it is
determined by Dean Witter InterCapital Inc. (the "Investment Manager") that
sale or bid prices are not reflective of a security's market value, portfolio
securities are valued at their fair value as determined in good faith under
procedures established by and under the general supervision of the Trustees
(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); and (4) short-term debt securities having a maturity date of
more than sixty days at time of purchase are valued on a mark-to-market basis
until sixty days prior to maturity and thereafter at amortized cost based on
their value on the 61st day. Short-term debt securities having a maturity date
of sixty days or less at the time of purchase are valued at amortized cost.
B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on the
trade date (date the order to buy or sell is executed). Realized gains and
losses on security transactions are determined by the identified cost method.
Dividend income and other distributions are recorded on the ex-dividend date.
Discounts are accreted over the life of the respective securities. Interest
income is accrued daily.
<PAGE>
DEAN WITTER AMERICAN VALUE FUND
NOTES TO FINANCIAL STATEMENTS December 31, 1996, continued
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.
2. INVESTMENT MANAGEMENT AGREEMENT
Pursuant to an Investment Management Agreement with the Investment Manager, the
Fund pays the Investment Manager a management fee, accrued daily and payable
monthly, by applying the following annual rates to the net assets of the Fund
determined 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. Effective May 1, 1996, the annual rate was
reduced to 0.475% of net assets in excess of $2.5 billion.
Under the terms of the Agreement, in addition to managing the Fund's
investments, the Investment Manager maintains certain of the Fund's books and
records and furnishes, at its own expense, office space, facilities, equipment,
clerical, bookkeeping and certain legal services and pays the salaries of all
personnel, including officers of the Fund who are employees of the Investment
Manager. The Investment Manager also bears the cost of telephone services,
heat, light, power and other utilities provided to the Fund.
3. PLAN OF DISTRIBUTION
Shares of the Fund are distributed by 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
<PAGE>
DEAN WITTER AMERICAN VALUE FUND
NOTES TO FINANCIAL STATEMENTS December 31, 1996, continued
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. ("DWR"), an affiliate of the
Investment Manager and Distributor, and other employees or selected
broker-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.
Although there is no legal obligation for the Fund to pay expenses incurred in
excess of payments made to the Distributor under the Plan and the proceeds of
contingent deferred sales charges paid by investors upon redemption of shares,
if for any reason the Plan is terminated, the Trustees will consider at that
time the manner in which to treat such expenses. The Distributor has advised
the Fund that such excess amounts, including carrying charges, total
$71,290,842 at December 31, 1996.
The Distributor has informed the Fund that for the year ended December 31,
1996, it received approximately $3,792,000 in contingent deferred sales charges
from certain redemptions of the Fund's shares.
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, 1996
aggregated $7,759,136,387 and $7,369,697,616, respectively. Included in the
aforementioned are purchases and sales of U.S. Government securities of
$374,755,316 and $654,246,740, respectively.
<PAGE>
DEAN WITTER AMERICAN VALUE FUND
NOTES TO FINANCIAL STATEMENTS December 31, 1996, continued
For the year ended December 31, 1996, the Fund incurred $902,407 in brokerage
commissions with DWR for portfolio transactions executed on behalf of the Fund.
At December 31, 1996, the Fund's receivable for investments sold included
unsettled trades with DWR of $10,424,494.
Dean Witter Trust Company, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At December 31, 1996, the Fund had
transfer agent fees and expenses payable of approximately $295,000.
The Fund has an unfunded noncontributory defined benefit pension plan covering
all independent Trustees of the Fund who will have served as independent
Trustees for at least five years at the time of retirement. Benefits under this
plan are based on years of service and compensation during the last five years
of service. Aggregate pension costs for the year ended December 31, 1996
included in Trustees' fees and expenses in the Statement of Operations amounted
to $21,704. At December 31, 1996, the Fund had an accrued pension liability of
$40,889 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 FOR THE YEAR
ENDED ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995
------------------------------ -------------------------------
SHARES AMOUNT SHARES AMOUNT
-------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C>
Sold .............................................. 36,925,212 $1,016,961,498 27,784,767 $ 726,405,402
Reinvestment of dividends and distributions ....... 10,599,054 286,147,878 8,258,700 219,428,179
-------------- -------------- -------------- ---------------
47,524,266 1,303,109,376 36,043,467 945,833,581
Repurchased ....................................... (20,736,856) (571,648,354) (18,333,417) (469,373,958)
-------------- -------------- -------------- ---------------
Net increase ...................................... 26,787,410 $ 731,461,022 17,710,050 $ 476,459,623
============== ============== ============== ===============
</TABLE>
6. FEDERAL INCOME TAX STATUS
As of December 31, 1996, the Fund had temporary book/tax differences primarily
attributable to capital loss deferrals on wash sales and permanent book/tax
differences primarily attributable to a net operating loss. To reflect
reclassifications arising from permanent book/tax differences for the year
ended December 31, 1996, paid-in-capital was charged $76,526, accumulated net
realized gain was charged $8,944,072 and accumulated net investment loss was
credited $9,020,598.
<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,
-----------------------------------------
1996 1995 1994 1993
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE
OPERATING PERFORMANCE:
Net asset value,
beginning of period ........ $27.16 $21.21 $23.10 $20.93
--------- -------- --------- ---------
Net investment income
(loss) ..................... (0.08) 0.01 -- (0.09)
Net realized and
unrealized gain (loss) .... 2.86 8.87 (1.57) 3.94
--------- -------- --------- ---------
Total from investment
operations ................. 2.78 8.88 (1.57) 3.85
--------- -------- --------- ---------
Less dividends and
distributions from:
Net investment income .... (0.01) -- -- (0.01)
Net realized gain ......... (2.92) (2.93) (0.32) (1.67)
Paid-in-capital ........... -- -- -- --
--------- -------- --------- ---------
Total dividends and
distributions .............. (2.93) (2.93) (0.32) (1.68)
--------- -------- --------- ---------
Net asset value,
end of period .............. $27.01 $27.16 $21.21 $23.10
========= ======== ========= =========
TOTAL INVESTMENT RETURN+ 10.53% 42.20% (6.75)% 18.70%
RATIOS TO
AVERAGE NET ASSETS:
Expenses .................... 1.53% 1.61% 1.71% 1.61%
Net investment income (loss) (0.33)% 0.06% 0.01% (0.59)%
SUPPLEMENTAL DATA:
Net assets, end of period,
(in millions) .............. $3,099 $2,389 $1,490 $1,218
Portfolio turnover rate .... 279% 256% 295% 276%
Average commission rate paid $0.0590 -- -- --
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
1992 1991 1990 1989 1988 1987
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE
OPERATING PERFORMANCE:
Net asset value,
beginning of period ........ $20.66 $14.39 $14.81 $13.19 $12.21 $12.64
-------- -------- --------- -------- -------- --------
Net investment income
(loss) ..................... 0.03 0.05 0.24 0.34 0.29 0.19
Net realized and
unrealized gain (loss) .... 0.71 7.90 (0.38) 2.99 1.03 0.20
-------- -------- --------- -------- -------- --------
Total from investment
operations ................. 0.74 7.95 (0.14) 3.33 1.32 0.39
-------- -------- --------- -------- -------- --------
Less dividends and
distributions from:
Net investment income .... (0.03) (0.03) (0.28) (0.32) (0.33) (0.23)
Net realized gain ......... (0.44) (1.65) -- (1.39) -- (0.59)
Paid-in-capital ........... -- -- -- -- (0.01) --
-------- -------- --------- -------- -------- --------
Total dividends and
distributions .............. (0.47) (1.68) (0.28) (1.71) (0.34) (0.82)
-------- -------- --------- -------- -------- --------
Net asset value,
end of period .............. $20.93 $20.66 $14.39 $14.81 $13.19 $12.21
======== ======== ========= ======== ======== ========
TOTAL INVESTMENT RETURN+ 3.84% 56.26% (0.90)% 25.39% 10.84% 2.84%
RATIOS TO
AVERAGE NET ASSETS:
Expenses .................... 1.72% 1.58% 1.70% 1.66% 1.78% 1.62%
Net investment income (loss) 0.18% 0.29% 1.67% 2.23% 2.15% 1.42%
SUPPLEMENTAL DATA:
Net assets, end of period,
(in millions) .............. $ 459 $ 227 $ 89 $ 100 $ 90 $ 109
Portfolio turnover rate .... 305% 264% 234% 196% 133% 203%
Average commission rate paid -- -- -- -- -- --
</TABLE>
- --------------
+ Does not reflect the deduction of sales charge. Calculated based on the
net asset value as of the last business day of the period.
SEE NOTES TO FINANCIAL STATEMENTS
<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, 1996, 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 at December 31, 1996 by correspondence with the custodian and
brokers and the application of alternative auditing procedures where
confirmations from brokers were not received, provide a reasonable basis for
the opinion expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
February 6, 1997
1996 FEDERAL TAX NOTICE (unaudited)
During the year ended December 31, 1996, the Fund paid to its
shareholders $0.75 per share from long-term capital gains. For such
period, 6.97% of the income paid qualified for the dividends received
deduction available to corporations.
<PAGE>
TRUSTEES
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Dr. Manuel H. Johnson
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Barry Fink
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
AMERCIAN
VALUE FUND
Annual Report
December 31, 1996
