<PAGE> 1
DEAN WITTER AMERICAN VALUE FUND Two World Trade Center, New York,
New York 10048
LETTER TO THE SHAREHOLDERS June 30, 1997
DEAR SHAREHOLDER:
A sustained economic expansion accompanied by low levels of inflation, continues
to drive the stock market to record levels. Through the first half of 1997, the
Standard & Poor's 500 Composite Stock Price Index (S&P 500) recorded a total
return of 20.62 percent, versus 12.94 percent for Dean Witter American Value
Fund and 14.28 percent for the average growth fund, as measured by Lipper
Analytical Services, Inc.
MARKET LEADERSHIP REVIEW
Year-to-date, the S&P 500 has, by and large, outpaced most equity fund managers.
Market leadership has been concentrated in the 50 largest stocks. As a result,
valuations in these blue-chip issues have been bid up significantly. In a market
environment like this, many portfolio managers prudently diversify their
holdings in an effort to reduce risk and enhance liquidity. In the current
environment of narrow market leadership, many managers have been able to produce
strong returns, but have still lagged the S&P 500.
Investors historically gravitate toward large stocks during periods of economic
or earnings uncertainty. Indeed, as evidence mounted during the first quarter
that the Federal Reserve Board would tighten rates in order to restrain economic
growth, investors rotated out of small- and mid-sized issues, flocking into the
stocks of large, well-known companies. Economic growth did slow significantly in
the second quarter and earnings for some companies may run short of
expectations. However, leading economic indicators suggest that the third
quarter may show a pickup in activity. Should economic growth rebound as we
expect it will, market leadership should broaden as investor confidence in the
earnings of a wider array of companies builds. Typically, portfolio managers
outpace the market indices during periods of broad market participation.
In addition, the valuation gap between large and small stocks has become quite
striking. As this gap narrows, the prices of small- and mid-sized stocks are
expected to make a significant move upward.
<PAGE> 2
DEAN WITTER AMERICAN VALUE FUND
LETTER TO THE SHAREHOLDERS June, 30, 1997 (unaudited) continued
POSITIONING THE FUND'S PORTFOLIO
We continue to maintain a very diversified portfolio, both in terms of
industries and market capitalization. On the industry front, the Fund has a
slight tilt toward economically sensitive groups. The economic expansion is
expected to continue into 1998, with wide-ranging strength across the economy
and little in the way of capacity bottlenecks or excess inventories.
At approximately 23 percent of net assets, technology continues to represent an
important portfolio commitment. Driven by the need to be the low-cost producer
in a competitive global environment, demand for technology is expected to
rebound by the fall, which is typically the strongest seasonal period for this
sector. With real wages rising ahead of inflation and unemployment at its lowest
level in several decades, retailers (approximately six percent of the Fund's net
assets) are expected to experience stronger relative earnings. Cyclical
industries, which we believe also have secular strength include energy
(approximately seven percent of net assets), agriculture (five percent of net
assets) and aerospace (four percent of net assets), which all should benefit
from increased exports to newly industrialized countries with developing middle
classes.
Similarly, we believe global consumer-brand companies will continue to excel as
they too take advantage of growing markets abroad. The Fund maintains a
commitment of approximately 9 percent here. Health care companies with
proprietary products, including drug, medical device and biotechnology
companies, are expected to continue to outpace general corporate earnings growth
and represent more than 11 percent of the Fund's net assets. While we believe
the economy will continue to expand, inflation is expected to remain dormant. As
a result, the secular trends of deregulation and consolidation should continue
to lift stocks in the financial sector, which represents approximately 16
percent of the Fund's net assets.
The Fund is also diversified in terms of market capitalization, although the
portfolio maintains a tilt toward larger-capitalization issues. As of June 30,
1997, large-cap issues represented approximately 65 percent of the stock
portfolio and mid-sized companies, approximately 35 percent.
LOOKING AHEAD
As described earlier, given an anticipated rebound in the economy and an
expansion of the valuation gap between large and smaller issues, it is expected
that market leadership will broaden going forward. However, large-cap issues are
expected to continue to participate given their greater exposure to faster-
growing countries abroad and the rising importance of economies of scale.
Further, we believe that the
<PAGE> 3
DEAN WITTER AMERICAN VALUE FUND
LETTER TO THE SHAREHOLDERS June, 30, 1997 (unaudited) continued
Fund's consistent long-term approach of industry-focused investing and
diversification across large and mid-sized companies will continue to serve the
Fund well.
On June 30, 1997, the Fund's Board of Trustees approved a proposal to adopt a
multiple class share structure. Through this arrangement the Fund will offer
four classes of shares with various sales charges, ongoing fees and other
features. This conversion occurred on July 28, 1997. Existing shares purchased
with a front-end sales charge prior to April 30, 1984 were designated Class D.
Existing shares purchased with a contingent deferred sales charge after April
30, 1984 were designated Class B. A revised prospectus, which includes complete
details regarding this change, was mailed with your June 1997 statement.
We appreciate your ongoing support of Dean Witter American Value Fund and look
forward to continuing to serve your investment needs.
Very truly yours,
/s/ CHARLES A. FIUMEFREDDO
CHARLES A. FIUMEFREDDO
Chairman of the Board
<PAGE> 4
DEAN WITTER AMERICAN VALUE FUND
RESULTS OF SPECIAL MEETING (unaudited)
* * *
On May 21, 1997, a special meeting of the Fund's shareholders was held for the
purpose of voting on four separate matters, the results of which were as
follows:
(1) APPROVAL OF A NEW INVESTMENT MANAGEMENT AGREEMENT BETWEEN THE FUND AND DEAN
WITTER INTERCAPITAL INC. IN CONNECTION WITH THE MERGER OF MORGAN STANLEY
GROUP INC. WITH DEAN WITTER, DISCOVER & CO.:
<TABLE>
<S> <C>
For...................................................................... 54,895,721
Against.................................................................. 1,214,566
Abstain.................................................................. 5,658,779
</TABLE>
(2) ELECTION OF TRUSTEES:
<TABLE>
<S> <C>
Michael Bozic
For.................... 57,911,290
Withheld............... 3,857,776
Charles A. Fiumefreddo
For.................... 57,979,561
Withheld............... 3,789,505
Edwin J. Garn
For.................... 57,998,748
Withheld............... 3,770,318
John R. Haire
For.................... 57,829,120
Withheld............... 3,939,946
Wayne E. Hedien
For.................... 57,950,058
Withheld............... 3,819,008
Dr. Manuel H. Johnson
For.................... 58,010,171
Withheld............... 3,758,895
Michael E. Nugent
For.................... 58,073,384
Withheld............... 3,695,682
Philip J. Purcell
For.................... 58,064,396
Withheld............... 3,704,670
John L. Schroeder
For.................... 57,969,890
Withheld............... 3,799,176
</TABLE>
(3) APPROVAL OF A NEW INVESTMENT POLICY WITH RESPECT TO INVESTMENTS IN CERTAIN
OTHER INVESTMENT COMPANIES:
<TABLE>
<S> <C>
For...................................................................... 52,626,594
Against.................................................................. 2,428,730
Abstain.................................................................. 6,713,742
</TABLE>
(4) RATIFICATION OF PRICE WATERHOUSE LLP AS INDEPENDENT ACCOUNTANTS:
<TABLE>
<S> <C>
For...................................................................... 56,133,397
Against.................................................................. 937,519
Abstain.................................................................. 4,698,150
</TABLE>
<PAGE> 5
DEAN WITTER AMERICAN VALUE FUND
PORTFOLIO OF INVESTMENTS June 30, 1997 (unaudited)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -----------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (95.2%)
Agriculture Related (4.8%)
301,000 Case Corp. ................ $ 20,731,375
448,500 Deere & Co. ............... 24,611,437
417,500 Dekalb Genetics Corp.
(Class B)................. 33,295,625
500,000 Delta & Pine Land Co. ..... 17,812,500
830,000 Monsanto Co. .............. 35,741,875
458,700 Pioneer Hi-Bred
International, Inc. ...... 36,696,000
------------
168,888,812
------------
Apparel & Footwear (0.2%)
200,000 Westpoint Stevens, Inc.*... 7,800,000
------------
Banks (6.0%)
650,000 Bank of New York Co.,
Inc. ..................... 28,275,000
520,000 BankAmerica Corp. ......... 33,572,500
432,000 Barnett Banks, Inc. ....... 22,680,000
495,000 Fleet Financial Group,
Inc. ..................... 31,308,750
830,000 Mellon Bank Corp. ......... 37,453,750
500,000 NationsBank Corp. ......... 32,250,000
114,000 State Street Corp. ........ 5,272,500
325,000 Washington Mutual, Inc. ... 19,418,750
------------
210,231,250
------------
Basic Cyclicals (0.9%)
260,000 Crompton & Knowles
Corp. .................... 5,785,000
119,000 Fuller (H.B.) Co. ......... 6,545,000
250,000 Reynolds Metals Co. ....... 17,812,500
------------
30,142,500
------------
Biotechnology (2.2%)
1,227,000 Biochem Pharma, Inc.*...... 27,147,375
950,000 Centocor, Inc.*............ 29,450,000
290,000 Gilead Sciences, Inc.*..... 8,011,250
300,000 Vertex Pharmaceuticals,
Inc.*..................... 11,400,000
------------
76,008,625
------------
Capital Goods (4.7%)
150,000 Aeroquip-Vickers, Inc. .... 7,087,500
270,000 Boeing Co. ................ 14,326,875
67,900 Caterpillar, Inc. ......... 7,290,762
215,000 Crane Co. ................. 8,989,687
420,000 General Electric Co. ...... 27,457,500
330,000 Honeywell, Inc. ........... 25,038,750
60,000 Ingersoll-Rand Co. ........ 3,705,000
230,000 McDonnell Douglas Corp. ... 15,755,000
120,000 Parker-Hannifin Corp. ..... 7,282,500
160,000 Sundstrand Corp. .......... 8,930,000
150,000 Timken Co. ................ 5,334,375
<CAPTION>
NUMBER OF
SHARES VALUE
- -----------------------------------------------------------
<C> <S> <C>
140,000 Tyco International Ltd. ... $ 9,738,750
300,000 United Technologies
Corp. .................... 24,900,000
------------
165,836,699
------------
Communications Equipment (6.5%)
125,000 Advanced Fibre
Communications, Inc.*..... 7,554,687
900,000 Bay Networks, Inc.*........ 23,906,250
630,000 Brightpoint, Inc.*......... 20,514,375
120,000 CIENA Corp.*............... 5,647,500
195,000 Cisco Systems, Inc.*....... 13,089,375
930,000 Ericsson (L.M.) Telephone
Co. (Class B) (ADR)
(Sweden).................. 36,618,750
590,000 Lucent Technologies
Inc. ..................... 42,516,875
550,000 Newbridge Networks Corp.*
(Canada).................. 23,925,000
395,000 Northern Telecom Ltd.
(Canada).................. 35,945,000
308,000 Tellabs, Inc.*............. 17,171,000
------------
226,888,812
------------
Computer Equipment (1.6%)
100,000 Dell Computer Corp.*....... 11,737,500
950,000 EMC Corp.*................. 37,050,000
100,000 SCI Systems, Inc.*......... 6,375,000
------------
55,162,500
------------
Computer Services (0.6%)
150,000 HNC Software, Inc.*........ 5,700,000
300,000 Paychex, Inc. ............. 11,512,500
59,000 Transaction Systems
Architects, Inc. (Class
A)*....................... 2,020,750
------------
19,233,250
------------
Computer Software (3.3%)
200,000 BMC Software, Inc.*........ 11,075,000
300,000 Computer Associates
International, Inc. ...... 16,706,250
300,000 Compuware Corp.*........... 14,325,000
260,000 Microsoft Corp.*........... 32,873,750
380,000 Oracle Corp.*.............. 19,118,750
150,000 Peoplesoft, Inc.*.......... 7,912,500
250,000 Veritas Software Corp.*.... 12,500,000
------------
114,511,250
------------
Construction (1.4%)
450,000 American Standard
Companies, Inc.*.......... 20,137,500
82,100 Knoll, Inc.*............... 1,949,875
350,000 Masco Corp. ............... 14,612,500
350,000 Miller (Herman), Inc. ..... 12,512,500
------------
49,212,375
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 6
DEAN WITTER AMERICAN VALUE FUND
PORTFOLIO OF INVESTMENTS June 30, 1997 (unaudited) continued
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -----------------------------------------------------------
<C> <S> <C>
Consumer - Noncyclical (5.4%)
385,000 Alberto-Culver Co.
(Class B)................. $ 10,780,000
190,000 Avon Products, Inc. ....... 13,406,875
370,000 Coca Cola Co. ............. 24,975,000
610,000 Colgate-Palmolive Co. ..... 39,802,500
304,300 Heinz (H.J.) Co. .......... 14,035,837
430,000 PanAmerican Beverages, Inc.
(Class A) (Mexico)........ 14,136,250
500,000 PepsiCo, Inc. ............. 18,781,250
230,000 Procter & Gamble Co. ...... 32,487,500
550,000 Sunbeam Corporation........ 20,762,500
------------
189,167,712
------------
Consumer Business Services (2.7%)
500,000 Allied Waste Industries,
Inc.*..................... 8,500,000
303,000 Apollo Group, Inc. (Class
A)*....................... 10,680,750
780,000 Browning-Ferris Industries,
Inc. ..................... 25,935,000
350,000 Corrections Corp. of
America*.................. 13,912,500
815,000 Service Corp.
International............. 26,793,125
225,000 U.S.A. Waste Services,
Inc.*..................... 8,690,625
------------
94,512,000
------------
Consumer Products (3.6%)
300,000 Callaway Golf Co. ......... 10,650,000
400,000 CVS Corp. ................. 20,500,000
195,000 Philips Electronics NV
(Netherlands)............. 13,959,776
310,000 Philips Electronics NV
(Netherlands)............. 22,281,250
350,900 Rite Aid Corp. ............ 17,501,137
230,000 Samsonite Corp.*........... 10,148,750
106,000 Sony Corp. (Japan)......... 9,240,314
260,000 Sony Corp. (ADR) (Japan)... 22,880,000
------------
127,161,227
------------
Drugs (5.1%)
425,000 Bristol-Myers Squibb
Co. ...................... 34,425,000
232,000 Dura Pharmaceuticals,
Inc.*..................... 9,222,000
320,000 Lilly (Eli) & Co. ......... 34,980,000
21,500 Novartis (Switzerland)..... 34,347,023
250,000 Pfizer, Inc. .............. 29,875,000
280,000 Warner-Lambert Co. ........ 34,790,000
------------
177,639,023
------------
Energy (6.2%)
660,000 Baker Hughes, Inc. ........ 25,533,750
100,800 BJ Services Co.*........... 5,405,400
660,000 Cooper Cameron Corp.*...... 30,855,000
155,000 Diamond Offshore Drilling,
Inc. ..................... 12,109,375
<CAPTION>
NUMBER OF
SHARES VALUE
- -----------------------------------------------------------
<S> <C> <C>
200,000 Dresser Industries,
Inc. ..................... $ 7,450,000
300,000 EVI, Inc. ................. 12,600,000
260,000 Falcon Drilling Company,
Inc.*..................... 14,982,500
380,000 Halliburton Co. ........... 30,115,000
200,000 Halter Marine Group,
Inc.*..................... 4,800,000
326,200 Santa Fe International
Corp.*.................... 11,090,800
360,000 Schlumberger, Ltd. ........ 45,000,000
260,000 Smith International,
Inc.*..................... 15,795,000
------------
215,736,825
------------
Financial - Miscellaneous (6.0%)
515,000 American Express Co........ 38,367,500
850,000 Hambrecht & Quist Group*... 27,837,500
1,220,000 Lehman Brothers Holdings,
Inc. ..................... 49,410,000
770,000 Merrill Lynch & Co.,
Inc. ..................... 45,911,250
600,000 Paine Webber Group,
Inc. ..................... 21,000,000
70,700 Price (T.) Rowe Associates,
Inc. ..................... 3,649,887
410,000 Salomon, Inc. ............. 22,806,250
------------
208,982,387
------------
Healthcare Products & Services (2.7%)
150,000 HBO & Co. ................. 10,331,250
63,000 Health Care & Retirement
Corp.*.................... 2,102,625
1,100,000 Health Management
Associates, Inc. (Class
A)*....................... 31,350,000
1,400,000 Heathsouth Corp.*.......... 34,912,500
288,000 Tenet Healthcare Corp.*.... 8,514,000
150,000 Vencor, Inc.*.............. 6,337,500
------------
93,547,875
------------
Hotels/Motels (0.7%)
300,000 HFS, Inc.*................. 17,400,000
376,800 Host Marriott Corp.*....... 6,711,750
------------
24,111,750
------------
Insurance (4.2%)
312,000 Allstate Corp. ............ 22,776,000
250,000 Conseco Inc. .............. 9,250,000
400,000 Equitable Companies,
Inc. ..................... 13,300,000
300,000 Hartford Financial Services
Group Inc. ............... 24,825,000
304,970 Marsh & McLennan Companies,
Inc. ..................... 21,767,234
256,800 Nationwide Financial
Services, Inc. (Class
A)........................ 6,821,250
300,000 St. Paul Companies,
Inc. ..................... 22,875,000
134,600 SunAmerica Inc. ........... 6,561,750
300,000 Travelers Group, Inc. ..... 18,918,750
------------
147,094,984
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 7
DEAN WITTER AMERICAN VALUE FUND
PORTFOLIO OF INVESTMENTS June 30, 1997 (unaudited) continued
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -----------------------------------------------------------
<C> <S> <C>
Internet (1.1%)
650,000 America Online, Inc.*...... $ 36,156,250
100,000 E*TRADE Group, Inc.*....... 1,956,250
------------
38,112,500
------------
Media Group (5.2%)
473,400 Clear Channel
Communications, Inc.*..... 29,114,100
450,000 Cox Communications, Inc.
(Class A)*................ 10,800,000
455,000 Evergreen Media Corp.
(Class A)*................ 20,247,500
120,000 Gannett Co., Inc. ......... 11,850,000
225,000 Jacor Communications,
Inc.*..................... 8,620,312
400,000 Outdoor Systems, Inc.*..... 15,200,000
700,000 Time Warner, Inc. ......... 33,775,000
300,600 Univision Communications,
Inc. (Class A)*........... 11,760,975
160,000 Valassis Communications,
Inc.*..................... 3,840,000
1,580,000 Westinghouse Electric
Corp. .................... 36,537,500
------------
181,745,387
------------
Medical Supplies (1.1%)
440,000 Guidant Corp. ............. 37,400,000
------------
Retail (6.0%)
200,500 Barnes & Noble, Inc.*...... 8,621,500
990,000 Costco Companies Inc.*..... 32,546,250
785,000 Dayton-Hudson Corp. ....... 41,752,188
322,000 Dollar General Corp. ...... 12,075,000
470,000 General Nutrition
Companies, Inc.*.......... 13,101,250
520,000 Home Depot, Inc. .......... 35,847,500
1,360,000 Kmart Corp.*............... 16,660,000
88,400 Polo Ralph Lauren Corp.*... 2,419,950
236,500 Ross Stores, Inc. ......... 7,715,813
100,000 Tiffany & Co. ............. 4,618,750
1,050,000 Wal-Mart Stores, Inc. ..... 35,503,125
------------
210,861,326
------------
Semiconductor Capital Equipment (3.6%)
580,000 Applied Materials, Inc.*... 41,035,000
38,000 DuPont Photomasks, Inc.*... 2,049,625
225,000 Etec Systems, Inc.*........ 9,632,813
710,000 KLA-Tencor Corp.*.......... 34,612,500
400,000 PRI Automation, Inc.*...... 15,150,000
550,000 Teradyne, Inc.*............ 21,587,500
------------
124,067,438
------------
<CAPTION>
NUMBER OF
SHARES VALUE
- -----------------------------------------------------------
<S> <C> <C>
Semiconductors (5.9%)
1,275,000 Analog Devices, Inc.*...... $ 33,867,188
365,000 Lattice Semiconductor
Corp.*.................... 20,576,875
586,000 Linear Technology Corp. ... 30,252,250
680,000 LSI Logic Corp.*........... 21,760,000
600,000 Maxim Integrated Products,
Inc.*..................... 34,050,000
118,000 MEMC Electronic Materials,
Inc.*..................... 3,864,500
150,000 Micrel, Inc.*.............. 7,575,000
400,000 Micron Technology, Inc.*... 15,975,000
375,000 Texas Instruments, Inc. ... 31,523,438
230,000 Vitesse Semiconductor
Corp.*.................... 7,503,750
------------
206,948,001
------------
Telecommunications (0.7%)
225,000 Corning, Inc. ............. 12,515,625
400,000 WorldCom, Inc.*............ 12,775,000
------------
25,290,625
------------
Transportation (2.8%)
200,000 Cummins Engine Co., Inc.... 14,112,500
210,000 Eaton Corp. ............... 18,335,625
50,100 Knightsbridge Tankers
Ltd. ..................... 1,258,763
840,000 OMI Corp.*................. 8,032,500
300,000 PACCAR, Inc. .............. 13,912,500
136,500 Ryanair Holdings PLC (ADR)*
(Ireland)................. 3,668,438
400,000 Ryder System, Inc. ........ 13,200,000
245,000 Teekay Shipping Corp. ..... 8,467,813
553,625 US Airways Group Inc.*..... 17,500,536
------------
98,488,675
------------
TOTAL COMMON STOCKS
(Identified Cost
$2,897,461,600)........... 3,324,783,808
------------
PRINCIPAL
AMOUNT IN
THOUSANDS
- ---------
SHORT-TERM INVESTMENTS (3.6%)
U.S. GOVERNMENT AGENCY (a) (3.3%)
$114,000 Federal Home Loan Mortgage
Corp. 6.00% due 07/01/97
(Amortized Cost
$114,000,000)............. 114,000,000
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 8
DEAN WITTER AMERICAN VALUE FUND
PORTFOLIO OF INVESTMENTS June 30, 1997 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- -----------------------------------------------------------
<C> <S> <C>
REPURCHASE AGREEMENT (0.3%)
$ 11,671 The Bank of New York 5.75%
due 07/01/97 (dated
06/30/97; proceeds
$11,673,329,
collateralized by
$2,028,955 U.S. Treasury
Note 6.25% due 03/31/99
valued at $2,067,141,
$7,843,000 U.S. Treasury
Note 6.625% due 05/15/07
valued at $7,963,094 and
$1,701,375 U.S. Treasury
Note 8.75% due 08/15/00
valued at $1,874,658)
(Identified Cost $11,671,464)... $ 11,671,464
--------------
TOTAL SHORT-TERM INVESTMENTS
(Identified Cost $125,671,464)... 125,671,464
--------------
TOTAL INVESTMENTS
(Identified Cost $3,023,133,064)
(b)................................ 98.8% 3,450,455,272
OTHER ASSETS IN EXCESS
OF LIABILITIES.................... 1.2 40,391,883
---- --------------
NET ASSETS....................... 100.0% $3,490,847,155
===== ==============
</TABLE>
- ---------------------
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
$456,436,232 and the aggregate gross unrealized depreciation is
$29,114,024, resulting in net unrealized appreciation of $427,322,208.
FORWARD FOREIGN CURRENCY CONTRACTS OPEN AT JUNE 30, 1997:
<TABLE>
<CAPTION>
CONTRACTS IN EXCHANGE DELIVERY UNREALIZED
TO DELIVER FOR DATE DEPRECIATION
- ------------------------------------------------------------
<S> <C> <C> <C>
$7,750,300 CHF 11,185,232 07/01/97 $(94,425)
========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 9
DEAN WITTER AMERICAN VALUE FUND
FINANCIAL STATEMENTS
<TABLE>
<S> <C>
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1997 (unaudited)
ASSETS:
Investments in securities, at value
(identified cost $3,023,133,064)................................... $3,450,455,272
Receivable for:
Investments sold................................................ 88,708,435
Shares of beneficial interest sold.............................. 3,305,333
Dividends....................................................... 1,612,971
Prepaid expenses and other assets................................... 177,111
--------------
TOTAL ASSETS.................................................... 3,544,259,122
--------------
LIABILITIES:
Payable for:
Investments purchased........................................... 40,375,927
Shares of beneficial interest repurchased....................... 2,560,800
Plan of distribution fee........................................ 2,528,898
Investment management fee....................................... 1,478,158
Distributions to shareholders................................... 707,469
Payable to bank..................................................... 5,374,917
Accrued expenses and other payables................................. 385,798
--------------
TOTAL LIABILITIES............................................... 53,411,967
--------------
NET ASSETS:
Paid-in-capital..................................................... 2,829,267,729
Net unrealized appreciation......................................... 427,322,208
Accumulated net investment loss..................................... (4,406,482)
Accumulated undistributed net realized gain......................... 238,663,700
--------------
NET ASSETS...................................................... $3,490,847,155
==============
NET ASSET VALUE PER SHARE,
118,749,703 shares outstanding
(unlimited shares authorized of $.01 par value).................... $29.40
======
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 10
DEAN WITTER AMERICAN VALUE FUND
FINANCIAL STATEMENTS, continued
<TABLE>
<S> <C>
STATEMENT OF OPERATIONS
For the six months ended June 30, 1997 (unaudited)
NET INVESTMENT INCOME:
INCOME
Dividends (net of $92,924 foreign withholding tax).................... $ 13,718,471
Interest.............................................................. 6,494,103
------------
TOTAL INCOME...................................................... 20,212,574
------------
EXPENSES
Plan of distribution fee.............................................. 14,334,276
Investment management fee............................................. 8,230,124
Transfer agent fees and expenses...................................... 1,667,802
Custodian fees........................................................ 113,443
Shareholder reports and notices....................................... 102,863
Registration fees..................................................... 79,185
Professional fees..................................................... 23,248
Trustees' fees and expenses........................................... 8,878
Other................................................................. 15,980
------------
TOTAL EXPENSES.................................................... 24,575,799
------------
NET INVESTMENT LOSS............................................... (4,363,225)
------------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain..................................................... 247,689,667
Net change in unrealized appreciation................................. 157,681,444
------------
NET GAIN.......................................................... 405,371,111
------------
NET INCREASE.......................................................... $401,007,886
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 11
DEAN WITTER AMERICAN VALUE FUND
FINANCIAL STATEMENTS, continued
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
JUNE 30, 1997 DECEMBER 31, 1996
- -------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment loss................................ $ (4,363,225) $ (9,041,376)
Net realized gain.................................. 247,689,667 275,397,900
Net change in unrealized appreciation.............. 157,681,444 13,163,448
-------------- ---------------
NET INCREASE................................... 401,007,886 279,519,972
-------------- ---------------
DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income.............................. -- (1,126,313)
Net realized gain.................................. (125,860,009) (299,891,577)
-------------- ---------------
TOTAL.......................................... (125,860,009) (301,017,890)
-------------- ---------------
Net increase from transactions in shares of
beneficial interest............................... 116,848,795 731,461,022
-------------- ---------------
NET INCREASE................................... 391,996,672 709,963,104
NET ASSETS:
Beginning of period................................ 3,098,850,483 2,388,887,379
-------------- ---------------
END OF PERIOD
(Including net investment losses of
$4,406,482 and $43,257, respectively).......... $3,490,847,155 $ 3,098,850,483
============== ===============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 12
DEAN WITTER AMERICAN VALUE FUND
NOTES TO FINANCIAL STATEMENTS June 30, 1997 (unaudited)
1. ORGANIZATION AND ACCOUNTING POLICIES
Dean Witter American Value Fund (the "Fund") is registered under the Investment
Company Act of 1940, as amended (the "Act"), as a diversified, open-end
management investment company. The Fund'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, American or other domestic or foreign stock exchange is valued at its
latest sale price on that exchange prior to the time when assets are valued; if
there were no sales that day, the security is valued at the latest bid price (in
cases where a security is traded on more than one exchange, the security is
valued on the exchange designated as the primary market pursuant to procedures
adopted by the Trustees); (2) all other portfolio securities for which
over-the-counter market quotations are readily available are valued at the
latest available bid price prior to the time of valuation; (3) when market
quotations are not readily available, including circumstances under which it is
determined by 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
<PAGE> 13
DEAN WITTER AMERICAN VALUE FUND
NOTES TO FINANCIAL STATEMENTS June 30, 1997 (unaudited) continued
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.
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; 0.50% to the portion of daily net assets
exceeding $250 million but not exceeding $2.5 billion and 0.475% to the portion
of daily net assets exceeding $2.5 billion. Effective May 1, 1997, the Agreement
was amended to reduce the annual rate to 0.45% of the portion of daily net
assets in excess of $3.5 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.
<PAGE> 14
DEAN WITTER AMERICAN VALUE FUND
NOTES TO FINANCIAL STATEMENTS June 30, 1997 (unaudited) continued
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. ("DWR"), an affiliate of the Investment Manager and
Distributor, and others 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 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.
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 $71,404,758 at
June 30, 1997.
<PAGE> 15
DEAN WITTER AMERICAN VALUE FUND
NOTES TO FINANCIAL STATEMENTS June 30, 1997 (unaudited) continued
The Distributor has informed the Fund that for the six months ended June 30,
1997, it received approximately $2,625,000 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 six months ended June 30, 1997 aggregated
$4,108,494,035 and $4,154,930,203, respectively. Included in the aforementioned
are sales of U.S. Government securities of $123,721,798.
For the six months ended June 30, 1997, the Fund incurred $177,670 in brokerage
commissions with DWR for portfolio transactions executed on behalf of the Fund.
For the period May 31, 1997 through June 30, 1997, the Fund incurred brokerage
commissions of $46,313 with Morgan Stanley & Co., Inc., an affiliate of the
Investment Manager since May 31, 1997, for portfolio transactions executed on
behalf of the Fund. At June 30, 1997, the Fund's receivable for investments sold
included unsettled trades with Morgan Stanley & Co. Inc. of $9,277,858.
Dean Witter Trust Company, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At June 30, 1997, the Fund had
transfer agent fees and expenses payable of approximately $223,000.
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 six months ended June 30, 1997
included in Trustees' fees and expenses in the Statement of Operations amounted
to $2,631. At June 30, 1997, the Fund had an accrued pension liability of
$41,149 which is included in accrued expenses in the Statement of Assets and
Liabilities.
<PAGE> 16
DEAN WITTER AMERICAN VALUE FUND
NOTES TO FINANCIAL STATEMENTS June 30, 1997 (unaudited) continued
5. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
---------------------------- -----------------------------
(unaudited)
SHARES AMOUNT SHARES AMOUNT
----------- ------------ ----------- -------------
<S> <C> <C> <C> <C>
Sold..................................................... 14,617,133 $416,781,695 36,925,212 $1,016,961,498
Reinvestment of dividends and distributions.............. 4,103,868 119,709,830 10,599,054 286,147,878
----------- ------------ ----------- --------------
18,721,001 536,491,525 47,524,266 1,303,109,376
Repurchased.............................................. (14,721,816) (419,642,730) (20,736,856) (571,648,354)
----------- ------------ ----------- --------------
Net increase............................................. 3,999,185 $116,848,795 26,787,410 $ 731,461,022
=========== ============ =========== ==============
</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.
7. SUBSEQUENT EVENT
On June 30, 1997, the fund's Board of Trustees approved a proposal to adopt a
multiple class share structure. Through this arrangement, the Fund will offer
four classes of shares with various sales charges, ongoing fees and other
features. This conversion occurred on July 28, 1997.
<PAGE> 17
DEAN WITTER AMERICAN VALUE FUND
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE YEAR ENDED DECEMBER 31,
JUNE 30, ----------------------------------------------
1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period........................ $ 27.01 $ 27.16 $21.21 $23.10
------- ------- ------ ------
Net investment income (loss)................................ (0.04) (0.08) 0.01 --
Net realized and unrealized gain (loss)..................... 3.53 2.86 8.87 (1.57)
------- ------- ------ ------
Total from investment operations............................ 3.49 2.78 8.88 (1.57)
------- ------- ------ ------
Less dividends and distributions from:
Net investment income.................................... -- (0.01) -- --
Net realized gain........................................ (1.10) (2.92) (2.93) (0.32)
------- ------- ------ ------
Total dividends and distributions........................... (1.10) (2.93) (2.93) (0.32)
------- ------- ------ ------
Net asset value, end of period.............................. $ 29.40 $ 27.01 $27.16 $21.21
======= ======= ====== ======
TOTAL INVESTMENT RETURN+.................................... 12.94%(1) 10.53% 42.20% (6.75)%
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................... 1.50%(2) 1.53% 1.61% 1.71%
Net investment income (loss)................................ (0.27)%(2) (0.33)% 0.06% 0.01%
SUPPLEMENTAL DATA:
Net assets, end of period, in millions...................... $3,491 $3,099 $2,389 $1,490
Portfolio turnover rate..................................... 135%(1) 279% 256% 295%
Average commission rate paid................................ $0.0607 $0.0590 -- --
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
------------------------------
1993 1992
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period........................ $20.93 $20.66
------ ------
Net investment income (loss)................................ (0.09) 0.03
Net realized and unrealized gain (loss)..................... 3.94 0.71
------ ------
Total from investment operations............................ 3.85 0.74
------ ------
Less dividends and distributions from:
Net investment income.................................... (0.01) (0.03)
Net realized gain........................................ (1.67) (0.44)
------ ------
Total dividends and distributions........................... (1.68) (0.47)
------ ------
Net asset value, end of period.............................. $23.10 $20.93
====== ======
TOTAL INVESTMENT RETURN+.................................... 18.70% 3.84%
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................... 1.61% 1.72%
Net investment income (loss)................................ (0.59)% 0.18%
SUPPLEMENTAL DATA:
Net assets, end of period, in millions...................... $1,218 $459
Portfolio turnover rate..................................... 276% 305%
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.
(1) Not annualized.
(2) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 18
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<PAGE> 19
(This page has been left blank intentionally)
<PAGE> 20
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
The financial statements included herein have been taken from the records of
the Fund without examination by the independent accountants and accordingly
they do not express an opinion thereon.
This report is submitted for the general information of shareholders of the
Fund. For more detailed information about the Fund, its officers and
trustees, fees, expenses and other pertinent information, please see the
prospectus of the Fund.
This report is not authorized for distribution to prospective investors in the
Fund unless preceded or accompanied by an effective prospectus.
DEAN WITTER
AMERICAN
VALUE FUND
PHOTO
Semiannual Report
June 30, 1997
