<PAGE>
DEAN WITTER AMERICAN VALUE FUND
Two World Trade Center, New York, New York 10048
LETTER TO THE SHAREHOLDERS December 31, 1997
DEAR SHAREHOLDER:
The past year proved to be eventful for investors. During the first half of
1997 the market was led exclusively by blue-chip companies -- only index
funds and blue chip equity funds performed well. Market leadership was very
narrow at this time, with the 25 largest stocks on the S&P 500 contributing
to an inordinate share of the index's 20 percent gain. During that period,
Dean Witter American Value Fund was up only 12 percent.
In mid summer, the U.S. dollar broke out of 6 and 10-year trading ranges.
This change led to a rotation of the Fund, out of industries with substantial
foreign exposure and into domestically oriented ones. This process was
initiated by reducing the portfolio's weightings in such sectors as
technology, aerospace, agriculture, energy service, and global consumer
stocks, and increasing its exposure to such domestic industries as retail and
financial services.
Additionally, the Fund significantly increased its weighting in
mid-capitalization stocks. This was done because mid-cap stocks generally
have minimal exposure to foreign currencies and economies, the capital gains
tax rate favors this sector and because the Fund's portfolio manager
anticipates attractive relative earnings for mid-caps in a still robust
domestic economy. By July, the Fund's mid-cap weighting totaled 40 percent of
net assets. As a result, the Fund's year-to-date performance nearly doubled
between June and July, from 12.24 percent for the six months ended June 30,
1997, to 25.29 percent for the seven months ended July 30, 1997.
By September it had become clear that the U.S. dollar's sharp appreciation
carried greater repercussions than had been expected initially. For example,
many emerging-market countries had pegged their currencies to the dollar. As
a result, many Asian and Latin American countries suddenly found their
exports to be uncompetitive. For many of these countries, exports are the
main engine of economic growth. In response to these developments, currency
devaluations began to occur in Southeast Asia and quickly spread to other
emerging markets. This turbulence induced the
<PAGE>
DEAN WITTER AMERICAN VALUE FUND
LETTER TO THE SHAREHOLDERS December 31, 1997, continued
Fund to exit industries with Asian exposure. Additionally, evidence began to
mount that U.S. corporate earnings could come under pressure as wage costs
accelerate and pricing flexibility decline in the face of inexpensive Asian
imports. As a result, the Fund further shifted to domestically oriented
industries characterized by steady-growth and high earnings visibility.
[THE NARRATIVE AND/OR TABULAR INFORMATION BELOW IS A FAIR AND ACCURATE
DESCRIPTION OF GRAPHIC OR IMAGE MATERIAL OMITTED FOR THE
PURPOSE OF EDGAR FILING.]
GROWTH OF $10,000 -- CLASS B
($ IN THOUSANDS)
Lipper
Date Total S&P 500 IX(4) Growth Funds IX(5)
- ------------------------------------------------------------------------------
December 31, 1987 $10,000 $10,000 $10,000
December 31, 1988 $11,084 $11,655 $11,413
December 31, 1989 $13,899 $15,343 $14,548
December 31, 1990 $13,774 $14,869 $13,761
December 31, 1991 $21,522 $19,390 $18,761
December 31, 1992 $22,348 $20,886 $20,192
December 31, 1993 $26,528 $22,965 $22,611
December 31, 1994 $24,738 $23,268 $22,256
December 31, 1995 $35,178 $32,003 $29,522
December 31, 1996 $38,883 $39,347 $34,683
December 31, 1997 $51,149(3) $52,469 $44,422
Average Annual Total Returns
1 year 5 Years 10 Years
- --------------------------------------
31.55(1) 18.01(1) 17.73(1)
26.55(2) 17.80(2) 17.73(2)
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, 1997.
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.
PERFORMANCE
For the fiscal year ended December 31, 1997, the Fund's Class B shares
produced a total return of 31.55 percent compared to 33.35 percent for the
Standard & Poor's 500 Composite Stock Price Index (S&P 500) and 28.08 percent
for the Lipper Growth Funds Index. The accompanying chart illustrates the
performance of a $10,000 investment in the Fund for the 10-year period ended
December 31, 1997, versus the performance of similar hypothetical investments
in the S&P 500 and the Lipper Growth Funds Index.
THE PORTFOLIO
Based on recent analysis, the Fund's portfolio manager expects U.S. economic
growth to slow to the 2.25 percent range in 1998, with earnings in the
vicinity of 5 percent. When earnings growth slips below 10 percent, market
leadership typically shifts from economically sensitive issues to steady
growth ones. In response, the Fund has been tilted in this direction so that
steady growth stocks currently represent 60 percent of net assets.
On the cyclical side, the Fund's 12 percent weighting in technology
emphasizes software and services, which are more stable than other technology
sectors during economic slowdowns. Holdings in this area include Computer
Associates International, Inc. and BMC Software, Inc. As of December 31,
1997, the Fund had a 7 percent weighting in retail, which is expected to be
bolstered by a low
<PAGE>
DEAN WITTER AMERICAN VALUE FUND
LETTER TO THE SHAREHOLDERS December 31, 1997, continued
unemployment level below 5 percent and by real wage growth and lower sourcing
costs. Retail positions include Wal-Mart, Inc., Dayton Hudson Corp. and
Barnes & Noble, Inc.
On the growth side, the Fund has increased its consumer staples weighting to
11 percent of net assets, emphasizing industries and companies with little or
no South American or Asian exposure. This sector includes food chains such as
Safeway Inc., drugstores like Rite Aid Corp., and such selected food
companies as Nabisco Holdings Corp. In the consumer/business services area,
the Fund continues to hold 12 percent of its net assets in the radio/cable
and newspaper industries. Commitments in these sectors include Clear Channel
Communications Inc., CBS Corp., Comcast Corp. and Gannett Co., Inc.
Health care, which remains overweighted in the Fund at 14 percent, reflects
an emphasis on drugs, biotechnology and medical devices -- all industries
with patent protection and pricing power. Companies in these areas include
Eli Lilly & Co., Pfizer, Inc., Centocor Inc. and Guidant Corp. The Fund has
also maintained an overweighted position in interest-rate sensitive stocks,
as evidenced by its 25 percent commitment to the financial sector, where the
focus is on regional banks, brokerage, government agencies and utilities. A
sample of some of these holdings includes Summit Bancorp, Norwest Corp.,
Travelers Group, Inc., Fannie Mae and Bell Atlantic Corp.
Because an economic backdrop that is typically associated with falling
interest rates and more difficult corporate earnings is expected to remain in
place, we have established a 6 percent position in long-term U.S. Treasuries
and a 3 percent weighting in 30-year zero-coupon bonds.
OUTLOOK
To sum up, 1997 saw the Fund shift away from industries tilted toward foreign
markets and cyclical growth, and began to focus on steady, reliable, domestic
growth. These related rotations served the Fund well in 1997. This new focus
will likely remain in place throughout much of 1998.
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, 1997
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (86.0%)
Agriculture Related (1.3%)
400,000 Dekalb Genetics Corp. (Class B) ................................. $ 15,700,000
516,667 Delta & Pine Land Co. .......................................... 15,758,343
200,000 Pioneer Hi-Bred International, Inc. ............................ 21,450,000
--------------
52,908,343
--------------
Auto Related (0.1%)
127,900 Budget Group, Inc. (Class A)* ................................... 4,420,544
--------------
Banks (9.8%)
350,000 Ahmanson (H.F.) & Co. .......................................... 23,428,125
105,000 AmSouth Bancorporation .......................................... 5,702,812
75,000 City National Corp. ............................................ 2,770,312
130,000 Comerica, Inc. ................................................. 11,732,500
17,450,000 Credito Italiano SpA (Italy) .................................... 53,823,613
275,000 Crestar Financial Corp. ........................................ 15,675,000
687,000 Dime Bancorp, Inc. ............................................. 20,781,750
205,000 First Security Corp. ........................................... 8,584,375
150,000 First Tennessee National Corp. ................................. 10,012,500
205,000 First Union Corp. .............................................. 10,506,250
340,000 Mellon Bank Corp. .............................................. 20,612,500
200,000 Northern Trust Corp. ........................................... 13,950,000
1,200,000 Norwest Corp. .................................................. 46,350,000
360,000 PNC Bank Corp. ................................................. 20,542,500
185,000 Southtrust Corp. ............................................... 11,701,250
200,000 Summit Bancorp .................................................. 10,650,000
245,000 U.S. Bancorp .................................................... 27,424,687
100,000 Union Planters Corp. ............................................ 6,793,750
410,000 Washington Mutual, Inc. ........................................ 26,137,500
170,000 Wells Fargo & Co. .............................................. 57,704,375
93,200 Zions Bancorporation ............................................ 4,194,000
--------------
409,077,799
--------------
Beverages - Soft Drinks (0.1%)
41,900 Coca Cola Co. ................................................... 2,791,587
--------------
Biotechnology (2.2%)
350,000 Alkermes, Inc.* ................................................. 6,868,750
870,000 Biochem Pharma, Inc. (Canada)* .................................. 18,106,875
881,000 Centocor, Inc.* ................................................. 29,293,250
300,000 Genzyme Corp. General Division* ................................ 8,287,500
375,000 Gilead Sciences, Inc.* .......................................... 14,343,750
385,000 IDEC Pharmaceuticals Corp.* ..................................... 13,234,375
--------------
90,134,500
--------------
Cable & Telecommunications (2.2%)
324,000 Comcast Corp. (Class A) ......................................... $ 10,287,000
1,090,000 Comcast Corp. (Class A Special) ................................. 34,335,000
550,000 Cox Communications, Inc. (Class A)* ............................. 22,034,375
900,000 Tele-Communications, Inc. (Class A)* ............................ 25,087,500
--------------
91,743,875
--------------
Cable Television Equipment (0.4%)
300,000 CIENA Corp.* .................................................... 18,337,500
--------------
Capital Goods (0.6%)
325,000 General Electric Co. ............................................ 23,846,875
--------------
Communications Equipment (0.2%)
180,000 Cisco Systems, Inc.* ............................................ 10,035,000
--------------
Computer Services (0.5%)
400,000 Paychex, Inc. ................................................... 20,250,000
--------------
Computer Software (4.5%)
320,000 BMC Software, Inc.* ............................................. 20,960,000
69,000 Citrix Systems, Inc.* ........................................... 5,244,000
800,000 Computer Associates International, Inc. ........................ 42,300,000
730,000 Compuware Corp.* ................................................ 23,360,000
117,500 Manugistics Group, Inc.* ........................................ 5,214,062
1,000,000 PeopleSoft, Inc.* ............................................... 38,750,000
510,000 Platinum Technology, Inc.* ...................................... 14,407,500
40,000 SAP AG (Pref.)(Germany) ......................................... 13,092,325
440,500 Veritas Software Corp.* ......................................... 22,300,312
--------------
185,628,199
--------------
Consumer Business Services (2.2%)
700,000 Automatic Data Processing, Inc. ................................. 42,962,500
500,000 Corrections Corp. of America* ................................... 18,531,250
635,000 Sysco Corp. ..................................................... 28,932,187
--------------
90,425,937
--------------
<PAGE>
Consumer - Products (10.5%)
385,000 Alberto-Culver Co. (Class B) .................................... 12,344,062
875,000 Albertson's, Inc. ............................................... 41,453,125
400,000 Clorox Co. ...................................................... 31,625,000
600,000 CVS Corp. ....................................................... 38,437,500
1,020,000 Fred Meyer, Inc.* ............................................... 37,102,500
500,000 Heinz (H.J.) Co. ................................................ 25,406,250
1,000,000 Kroger Co.* ..................................................... 36,937,500
920,000 Nabisco Holdings Corp. (Class A) ................................ 44,562,500
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER AMERICAN VALUE FUND
PORTFOLIO OF INVESTMENTS December 31, 1997, continued
NUMBER OF
SHARES VALUE
- ---------------------------------------------------------------------------------------------
100,000 Procter & Gamble Co. ........................................... $ 7,981,250
475,000 Quaker Oats Company (The) ....................................... 25,056,250
700,000 Rite Aid Corp. ................................................. 41,081,250
699,000 Safeway, Inc.* .................................................. 44,211,750
200,000 Sara Lee Corp. .................................................. 11,262,500
1,300,000 Walgreen Co. .................................................... 40,787,500
--------------
438,248,937
--------------
Drugs (6.1%)
425,000 Bristol-Myers Squibb Co. ....................................... 40,215,625
240,000 Cardinal Health, Inc. .......................................... 18,030,000
215,000 Dura Pharmaceuticals, Inc.* ..................................... 9,863,125
620,000 Lilly (Eli) & Co. .............................................. 43,167,500
200,000 Medicis Pharmaceutical Corp. (Class A)* ......................... 10,250,000
12,000 Novartis AG (Switzerland) ....................................... 19,459,459
530,000 Pfizer, Inc. .................................................... 39,518,125
645,000 Schering-Plough Corp. .......................................... 40,070,625
271,000 Warner-Lambert Co. ............................................. 33,604,000
--------------
254,178,459
--------------
Finance (1.1%)
800,000 Fannie Mae ...................................................... 45,650,000
--------------
Financial - Miscellaneous (6.0%)
205,000 American Express Co. ........................................... 18,296,250
190,000 Associates First Capital Corp. (Class A) ........................ 13,513,750
300,000 Donaldson, Lufkin & Jenrette, Inc. .............................. 23,850,000
504,050 Edwards (A.G.), Inc. ........................................... 20,035,987
965,000 Freddie Mac ..................................................... 40,469,687
700,000 Hambrecht & Quist Group* ........................................ 25,550,000
2,800 Legg Mason, Inc. ............................................... 156,625
400,000 Lehman Brothers Holdings, Inc. .................................. 20,400,000
650,000 Merrill Lynch & Co., Inc. ...................................... 47,409,375
605,500 Paine Webber Group, Inc. ........................................ 20,927,594
91,500 Price (T. Rowe) Associates, Inc. ............................... 5,753,063
274,600 Providian Financial Corp. ....................................... 12,408,488
--------------
248,770,819
--------------
Healthcare - Diversified (0.4%)
470,000 General Nutrition Companies, Inc.* ............................. 15,921,250
--------------
Healthcare Products & Services (3.7%)
1,000,000 HBO & Co. ...................................................... 47,937,500
1,650,000 Health Management Associates, Inc. (Class A)* ................... 41,662,500
1,200,000 Healthsouth Corp.* .............................................. $ 33,300,000
398,100 Renal Treatment Centers, Inc.* .................................. 14,381,363
583,333 Total Renal Care Holdings, Inc.* ................................ 16,041,658
--------------
153,323,021
--------------
Hotels/Motels (1.1%)
1,393,798 Cendant Corp.* .................................................. 47,911,806
--------------
Household Products (0.4%)
360,000 Sunbeam Corporation, Inc. ...................................... 15,165,000
--------------
Insurance (3.7%)
441,000 Allstate Corp. .................................................. 40,075,875
120,000 Hartford Financial Services Group Inc. .......................... 11,227,500
250,000 Lincoln National Corp. .......................................... 19,531,250
133,470 Marsh & McLennan Companies, Inc. ................................ 9,951,857
401,000 SunAmerica Inc. ................................................. 17,142,750
125,000 Torchmark Corp. ................................................ 5,257,813
950,000 Travelers Group, Inc. ........................................... 51,181,250
--------------
154,368,295
--------------
Internet (2.3%)
600,000 America Online, Inc.* ........................................... 53,512,500
300,000 Check Point Software Technologies Ltd. (Israel)* ................ 12,225,000
260,000 CheckFree Holdings Corp.* ....................................... 7,020,000
345,000 Yahoo! Inc.* .................................................... 23,891,250
--------------
96,648,750
--------------
Machinery - Diversified (0.2%)
164,800 Thermo Electron Corp.* ......................................... 7,333,600
--------------
Media Group (9.3%)
1,610,000 CBS Corp. ....................................................... 47,394,375
689,500 Chancellor Media Corp.* ......................................... 51,453,938
450,000 Clear Channel Communications, Inc.* ............................. 35,746,875
701,000 Gannett Co., Inc. ............................................... 43,330,563
300,000 HSN, Inc.* ...................................................... 15,450,000
438,000 Jacor Communications, Inc.* ..................................... 23,268,750
400,000 News Corp., Ltd. (ADR)(Australia) ............................... 8,925,000
650,000 Outdoor Systems, Inc.* .......................................... 24,943,750
760,000 Time Warner, Inc. ............................................... 47,120,000
483,100 Tribune Co. .................................................... 30,072,975
325,000 Universal Outdoor Holdings, Inc.* .............................. 16,900,000
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER AMERICAN VALUE FUND
PORTFOLIO OF INVESTMENTS December 31, 1997, continued
NUMBER OF
SHARES VALUE
- ---------------------------------------------------------------------------------------------
306,600 Univision Communications, Inc. (Class A)* .......................$ 21,404,513
500,000 Viacom, Inc. (Class B)* ......................................... 20,718,750
--------------
386,729,489
--------------
Medical Supplies (1.9%)
450,000 Guidant Corp. ................................................... 28,012,500
500,000 Medtronic, Inc. ................................................. 26,156,250
200,000 Mentor Corp. .................................................... 7,300,000
285,300 Sofamor Danek Group, Inc.* ...................................... 18,562,331
--------------
80,031,081
--------------
Miscellaneous (0.7%)
480,000 Equitable Companies, Inc. ....................................... 23,880,000
169,000 Excite, Inc.* ................................................... 5,070,000
--------------
28,950,000
--------------
Recreation (0.5%)
205,000 Walt Disney Co. ................................................. 20,307,813
--------------
Restaurants (0.3%)
385,000 Cracker Barrel Old Country Store, Inc. .......................... 12,849,375
--------------
Retail (7.0%)
401,000 Barnes & Noble, Inc.* ........................................... 13,383,375
1,500,000 Costco Companies, Inc.* ......................................... 66,843,750
646,000 Dayton-Hudson Corp. ............................................. 43,605,000
527,500 Dollar General Corp. ............................................ 19,121,875
295,000 Family Dollar Stores, Inc. ...................................... 8,647,188
600,000 Gap, Inc. ....................................................... 21,262,500
700,000 Home Depot, Inc. ............................................... 41,212,500
361,100 Lowe's Companies, Inc. ......................................... 17,219,956
543,000 Mattel, Inc. ................................................... 20,226,750
350,000 Proffitt's, Inc.* ............................................... 9,953,125
740,000 Wal-Mart Stores, Inc. ........................................... 29,183,750
--------------
290,659,769
--------------
Telecommunications (1.6%)
750,000 LCI International, Inc.* ........................................ 23,062,500
800,000 Teleport Communications Group Inc.* ............................. 43,900,000
--------------
66,962,500
--------------
Transportation (0.9%)
500,000 OMI Corp.* ...................................................... 4,593,750
557,000 US Airways Group Inc.* .......................................... 34,812,500
--------------
39,406,250
--------------
Utilities (3.9%)
400,000 Ameritech Corp. .................................................$ 32,200,000
386,000 Bell Atlantic Corp. ............................................ 35,126,000
550,000 Consolidated Edison Co. of New York, Inc. ....................... 22,550,000
400,000 FPL Group, Inc. ................................................ 23,675,000
400,000 GTE Corp. ....................................................... 20,900,000
150,000 New York State Electric & Gas Corp. ............................ 5,325,000
455,000 U.S. West Communications Group, Inc. ............................ 20,531,875
--------------
160,307,875
--------------
Utilities - Electric (0.2%)
200,000 Pinnacle West Capital Corp. ..................................... 8,475,000
--------------
Utilities - Telecommunications (0.1%)
51,500 Intermedia Communications Inc.* ................................ 3,116,286
--------------
TOTAL COMMON STOCKS
(Identified Cost $3,070,263,608) ................................ 3,574,915,534
--------------
<PAGE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS
- -----------
<S> <C> <C>
U.S. GOVERNMENT OBLIGATIONS (9.0%)
$242,000 U.S. Treasury Bond 6.375% due 08/15/27 .......................... 255,317,260
342,000 U.S. Treasury Strip 0.00% due 05/15/20 .......................... 88,916,580
107,000 U.S. Treasury Strip 0.00% due 11/15/19 .......................... 28,658,880
-------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Identified Cost $356,519,055) .................................. 372,892,720
-------------
SHORT-TERM INVESTMENTS (7.1%)
U.S. GOVERNMENT AGENCY (a)(7.0%)
293,000 Federal Home Loan Mortgage Corp. 6.00% due 01/02/98
(Amortized Cost $292,951,167) 292,951,167
-------------
REPURCHASE AGREEMENT (0.1%)
The Bank of New York 3.875% due 01/02/98 (dated 12/31/97,
4,377 proceeds $4,377,721)(b) (Identified Cost $4,376,779) ............ 4,376,779
-------------
TOTAL SHORT-TERM INVESTMENTS
(Identified Cost $297,327,946) .................................. 297,327,946
-------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER AMERICAN VALUE FUND
PORTFOLIO OF INVESTMENTS December 31, 1997, continued
<TABLE>
<CAPTION>
VALUE
- ------------------------------------ -------- --------------
<S> <C> <C>
TOTAL INVESTMENTS
(Identified Cost $3,724,110,609)(c) . 102.1% $4,245,136,200
LIABILITIES IN EXCESS OF OTHER
ASSETS .............................. (2.1) (89,244,700)
-------- --------------
NET ASSETS .......................... 100.0% $4,155,891,500
======== ==============
</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) Collateralized by $4,016,966 U.S. Treasury Note 7.00% due 07/15/06
valued at $4,464,314.
(c) The aggregate cost for federal income tax purposes approximates
identified cost. The aggregate gross unrealized appreciation is
$537,652,888 and the aggregate gross unrealized depreciation is
$16,627,297, resulting in net unrealized appreciation of
$521,025,591.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER AMERICAN VALUE FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1997
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $3,724,110,609)......................... $4,245,136,200
Receivable for:
Investments sold........................................ 29,647,388
Shares of beneficial interest sold...................... 8,751,357
Interest................................................ 5,827,705
Dividends............................................... 2,138,596
Prepaid expenses and other assets......................... 122,713
--------------
TOTAL ASSETS............................................ 4,291,623,959
--------------
LIABILITIES:
Payable for:
Investments purchased................................... 124,542,641
Distributions to shareholders .......................... 3,767,120
Plan of distribution fee................................ 2,946,023
Shares of beneficial interest repurchased............... 2,219,241
Investment management fee............................... 1,808,423
Accrued expenses and other payables....................... 449,011
--------------
TOTAL LIABILITIES....................................... 135,732,459
--------------
NET ASSETS ............................................. $4,155,891,500
==============
COMPOSITION OF NET ASSETS:
Paid-in-capital........................................... $3,481,928,047
Net unrealized appreciation .............................. 521,025,591
Accumulated net investment loss........................... (42,030)
Accumulated undistributed net realized gain............... 152,979,892
--------------
NET ASSETS ............................................. $4,155,891,500
==============
CLASS A SHARES:
Net Assets................................................ $15,843,639
Shares Outstanding (unlimited authorized, $.01 par value) 535,374
NET ASSET VALUE PER SHARE............................... $29.59
==============
MAXIMUM OFFERING PRICE PER SHARE,
(net asset value plus 5.54% of net asset value) ....... $31.23
==============
CLASS B SHARES:
Net Assets................................................ $4,078,071,882
Shares Outstanding (unlimited authorized, $.01 par value) 138,185,565
NET ASSET VALUE PER SHARE............................... $29.51
==============
CLASS C SHARES:
Net Assets................................................ $12,204,456
Shares Outstanding (unlimited authorized, $.01 par
value)................................................... 413,867
NET ASSET VALUE PER SHARE............................... $29.49
==============
CLASS D SHARES:
Net Assets................................................ $49,771,523
Shares Outstanding (unlimited authorized, $.01 par
value)................................................... 1,679,836
NET ASSET VALUE PER SHARE............................... $29.63
==============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER AMERICAN VALUE FUND
FINANCIAL STATEMENTS, continued
STATEMENT OF OPERATIONS
For the year ended December 31, 1997*
<TABLE>
<CAPTION>
<S> <C>
NET INVESTMENT INCOME:
INCOME
Dividends (net of $103,775 foreign
withholding tax)......................... $ 24,992,865
Interest.................................. 15,881,254
--------------
TOTAL INCOME............................ 40,874,119
--------------
EXPENSES
Plan of distribution fee (Class A
shares).................................. 7,380
Plan of distribution fee (Class B
shares).................................. 30,004,099
Plan of distribution fee (Class C
shares).................................. 26,712
Investment management fee................. 18,075,407
Transfer agent fees and expenses.......... 3,788,836
Registration fees......................... 359,919
Custodian fees............................ 228,926
Shareholder reports and notices........... 222,511
Professional fees......................... 61,757
Trustees' fees and expenses............... 15,729
Other..................................... 37,222
--------------
TOTAL EXPENSES.......................... 52,828,498
--------------
NET INVESTMENT LOSS..................... (11,954,379)
--------------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain ........................ 738,335,473
Net change in unrealized appreciation .... 251,384,827
--------------
NET GAIN................................ 989,720,300
--------------
NET INCREASE.............................. $977,765,921
==============
</TABLE>
- ------------
* Class A, Class C and Class D shares were issued July 28, 1997.
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, 1997* DECEMBER 31, 1996
- ------------------------------------------------------ ------------------ -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment loss.................................... $ (11,954,379) $ (9,041,376)
Net realized gain...................................... 738,335,473 275,397,900
Net change in unrealized appreciation.................. 251,384,827 13,163,448
------------------ -----------------
NET INCREASE......................................... 977,765,921 279,519,972
------------------ -----------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income -Class B shares.................. -- (1,126,313)
Net realized gain
Class A shares........................................ (1,747,209) --
Class B shares........................................ (680,450,520) (299,891,577)
Class C shares........................................ (1,454,608) --
Class D shares........................................ (6,581,680) --
------------------ -----------------
TOTAL DIVIDENDS AND DISTRIBUTIONS.................... (690,234,017) (301,017,890)
------------------ -----------------
Net increase from transactions in shares of beneficial
interest.............................................. 769,509,113 731,461,022
------------------ -----------------
NET INCREASE......................................... 1,057,041,017 709,963,104
NET ASSETS:
Beginning of period.................................... 3,098,850,483 2,388,887,379
------------------ -----------------
END OF PERIOD
(Including net investment losses of $42,030 and
$43,257, respectively)................................ $4,155,891,500 $3,098,850,483
================== =================
</TABLE>
- ------------
* Class A, Class C and Class D shares were issued July 28, 1997.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER AMERICAN VALUE FUND
NOTES TO FINANCIAL STATEMENTS December 31, 1997
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. On July 28,
1997, the Fund commenced offering three additional classes of shares, with
the then current shares, other than shares which were purchased prior to
April 30, 1984 (and with respect to such shares, certain shares acquired
through reinvestment of dividends and capital gains distributions
(collectively the "Old Shares")), designated as Class B shares. The Old
Shares have been designated Class D shares.
The Fund offers Class A shares, Class B shares, Class C shares and Class D
shares. The four classes are substantially the same except that most Class A
shares are subject to a sales charge imposed at the time of purchase, some
Class A shares, and most Class B shares and Class C shares are subject to a
contingent deferred sales charge imposed on shares redeemed within one year,
six years and one year, respectively. Class D shares are not subject to a
sales charge. Additionally, Class A shares, Class B shares and Class C shares
incur distribution expenses.
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
<PAGE>
DEAN WITTER AMERICAN VALUE FUND
NOTES TO FINANCIAL STATEMENTS December 31, 1997, continued
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.
C. MULTIPLE CLASS ALLOCATIONS -- Investment income, expenses (other than
distribution fees), and realized and unrealized gains and losses are
allocated to each class of shares based upon the relative net asset value on
the date such items are recognized. Distribution fees are charged directly to
the respective class.
D. FEDERAL INCOME TAX STATUS -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income to its shareholders.
Accordingly, no federal income tax provision is required.
E. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund records dividends
and distributions to its shareholders on the record date. The amount of
dividends and distributions from net investment income and net realized
capital gains are determined in accordance with federal income tax
regulations which may differ from generally accepted accounting principles.
These "book/tax" differences are either considered temporary or permanent in
nature. To the extent these differences are permanent in nature, such amounts
are reclassified within the capital accounts based on their 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 a management fee, accrued daily and payable monthly, by
applying the following annual rates to the net
<PAGE>
DEAN WITTER AMERICAN VALUE FUND
NOTES TO FINANCIAL STATEMENTS December 31, 1997, continued
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
but not exceeding $3.5 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.
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. The
Plan provides that the Fund will pay the Distributor a fee which is accrued
daily and paid monthly at the following annual rates: (i) Class A - up to
0.25% of the average daily net assets of Class A; (ii) Class B - 1.0% of the
lesser of: (a) the average daily aggregate gross sales of the Class B shares
since the inception of the Fund (not including reinvestment of dividend or
capital gain distributions) less the average daily aggregate net asset value
of the Class B shares redeemed since the Fund's inception upon which a
contingent deferred sales charge has been imposed or waived; or (b) the
average daily net assets of Class B; and (iii) Class C - up to 1.0% of the
average daily net assets of Class C. In the case of Class A shares, amounts
paid under the Plan are paid to the Distributor for services provided. In the
case of Class B and Class C shares, amounts paid under the Plan are paid to
the Distributor for services provided and the expenses borne by it and others
in the distribution of the shares of these Classes, including the payment of
commissions for sales of these Classes 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 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 these 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, in the case of Class
B
<PAGE>
DEAN WITTER AMERICAN VALUE FUND
NOTES TO FINANCIAL STATEMENTS December 31, 1997, continued
shares, 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 expenses.
In the case of Class B shares, provided that the Plan continues in effect,
any cumulative expenses incurred by the Distributor but not yet recovered may
be recovered through the payment of future distribution fees from the Fund
pursuant to the Plan and contingent deferred sales charges paid by investors
upon redemption of Class B shares. 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, totaled $72,540,376 at December
31, 1997.
In the case of Class A shares and Class C shares, expenses incurred pursuant
to the Plan in any calendar year in excess of 0.25% or 1.0% of the average
daily net assets of Class A or Class C, respectively, will not be reimbursed
by the Fund through payments in any subsequent year, except that expenses
representing a gross sales credit to account executives may be reimbursed in
the subsequent calendar year. For the period ended December 31, 1997, the
distribution fee was accrued for Class A shares and Class C shares at the
annual rate of 0.25% and 1.0%, respectively.
The Distributor has informed the Fund that for the year ended December 31,
1997, it received contingent deferred sales charges from certain redemptions
of the Fund's Class B shares and Class C shares of $4,721,534 and $3,192,
respectively and received $202,038 in front-end sales charges from sales of
the Fund's Class A shares. The respective shareholders pay such charges which
are not an expense of the Fund.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales of portfolio securities,
excluding short-term investments, for the year ended December 31, 1997
aggregated $9,245,904,533 and $9,254,551,447, respectively. Included in the
aforementioned are purchases and sales of U.S. Government securities of
$410,926,244 and $180,464,206, respectively.
For the year ended December 31, 1997, the Fund incurred $1,122,089 in
brokerage commissions with DWR for portfolio transactions executed on behalf
of the Fund.
At December 31, 1997, the Fund's payable for investments purchased included
unsettled trades with DWR of $8,367,064.
<PAGE>
DEAN WITTER AMERICAN VALUE FUND
NOTES TO FINANCIAL STATEMENTS December 31, 1997, continued
For the period May 31, 1997 through December 31, 1997, the Fund incurred
brokerage commissions of $551,901 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 December 31, 1997 the Fund's
payable for investments purchased and receivable for investments sold
included unsettled trades with Morgan Stanley & Co., Inc., of $4,206,932 and
$4,914,567, respectively.
Dean Witter Trust FSB, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At December 31, 1997, the Fund had
transfer agent fees and expenses payable of approximately $54,000.
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, 1997 included in Trustees' fees and expenses in the
Statement of Operations amounted to $4,301. At December 31, 1997, the Fund
had an accrued pension liability of $42,030 which is included in accrued
expenses in the Statement of Assets and Liabilities.
5. FEDERAL INCOME TAX STATUS
As of December 31, 1997, 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 differences accumulated net
realized gain was charged $11,955,606 and accumulated net investment loss was
credited $11,955,606.
<PAGE>
DEAN WITTER AMERICAN VALUE FUND
NOTES TO FINANCIAL STATEMENTS December 31, 1997, continued
6. 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, 1997+ DECEMBER 31, 1996
------------------------------- ------------------------------
SHARES AMOUNT SHARES AMOUNT
-------------- --------------- -------------- --------------
<S> <C> <C> <C> <C>
CLASS A SHARES*
Sold ....................................... 539,039 $ 17,439,944 -- --
Reinvestment of distributions............... 57,321 1,665,172 -- --
Redeemed.................................... (60,986) (2,023,896) -- --
-------------- --------------- -------------- ---------------
Net increase - Class A...................... 535,374 17,081,220 -- --
-------------- --------------- -------------- ---------------
CLASS B SHARES
Sold ....................................... 26,893,089 818,085,006 36,925,212 $1,016,961,498
Reinvestment of dividends and
distributions.............................. 22,224,675 644,669,591 10,599,054 286,147,878
Redeemed ................................... (24,498,814) (739,128,498) (20,736,856) (571,648,354)
-------------- --------------- -------------- ---------------
Net increase - Class B...................... 24,618,950 723,626,099 26,787,410 731,461,022
-------------- --------------- -------------- ---------------
CLASS C SHARES*
Sold ....................................... 387,776 12,691,589 -- --
Reinvestment of distributions............... 46,319 1,340,948 -- --
Redeemed ................................... (20,228) (667,646) -- --
-------------- --------------- -------------- ---------------
Net increase - Class C...................... 413,867 13,364,891 -- --
-------------- --------------- -------------- ---------------
CLASS D SHARES*
Sold ....................................... 332,349 10,839,979 -- --
Reinvestment of distributions............... 208,632 6,067,022 -- --
Redeemed ................................... (45,049) (1,470,098) -- --
-------------- --------------- -------------- ---------------
Net increase - Class D...................... 495,932 15,436,903 -- --
-------------- --------------- -------------- ---------------
Net increase in Fund ....................... 26,064,123 $ 769,509,113 26,787,410 $ 731,461,022
============== =============== ============== ===============
</TABLE>
- ------------
+ On July 28, 1997, 1,183,904 shares representing $37,731,024 were
transferred to Class D.
* For the period July 28, 1997 (issue date) through December 31, 1997.
<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,
--------------------------------------------------------------------------------------------------
1997*++ 1996 1995 1994 1993 1992 1991 1990 1989 1988
- ----------------------------- --------- --------- -------- --------- --------- -------- -------- --------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS B SHARES
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning of
period ...................... $27.01 $27.16 $21.21 $23.10 $20.93 $20.66 $14.39 $14.81 $13.19 $12.21
--------- --------- -------- --------- --------- -------- -------- --------- -------- --------
Net investment income (loss) . (0.10) (0.08) 0.01 -- (0.09) 0.03 0.05 0.24 0.34 0.29
Net realized and unrealized
gain (loss) ................. 8.34 2.86 8.87 (1.57) 3.94 0.71 7.90 (0.38) 2.99 1.03
--------- --------- -------- --------- --------- -------- -------- --------- -------- --------
Total from investment
operations .................. 8.24 2.78 8.88 (1.57) 3.85 0.74 7.95 (0.14) 3.33 1.32
--------- --------- -------- --------- --------- -------- -------- --------- -------- --------
Less dividends and
distributions from:
net investment income ...... -- (0.01) -- -- (0.01) (0.03) (0.03) (0.28) (0.32) (0.33)
Net realized gain ........... (5.74) (2.92) (2.93) (0.32) (1.67) (0.44) (1.65) -- (1.39) --
Paid-in-capital ............. -- -- -- -- -- -- -- -- -- (0.01)
--------- --------- -------- --------- --------- -------- -------- --------- -------- --------
Total dividends and
distributions ............... (5.74) (2.93) (2.93) (0.32) (1.68) (0.47) (1.68) (0.28) (1.71) (0.34)
--------- --------- -------- --------- --------- -------- -------- --------- -------- -------
Net asset value, end of
period ...................... $29.51 $27.01 $27.16 $21.21 $23.10 $20.93 $20.66 $14.39 $14.81 $13.19
========= ========= ======== ========= ========= ======== ======== ========= ======== ========
TOTAL INVESTMENT RETURN+ .... 31.55% 10.53% 42.20% (6.75)% 18.70% 3.84% 56.26% (0.90)% 25.39% 10.84%
RATIOS TO AVERAGE NET ASSETS:
Expenses...................... 1.46% 1.53% 1.61% 1.71% 1.61% 1.72% 1.58% 1.70% 1.66% 1.78%
Net investment income (loss) . (0.34)% (0.33)% 0.06% 0.01% (0.59)% 0.18% 0.29% 1.67% 2.23% 2.15%
SUPPLEMENTAL DATA:
net assets, end of period, in
millions..................... $4,078 $3,099 $2,389 $1,490 $1,218 $459 $227 $89 $100 $90
Portfolio turnover rate ..... 275% 279% 256% 295% 276% 305% 264% 234% 196% 133%
Average commission rate paid . $0.0563 $0.0590 -- -- -- -- -- -- -- --
</TABLE>
- ------------
* Prior to July 28, 1997, the Fund issued one class of shares. All shares
of the Fund held prior to that date, other than shares which were
purchased prior to April 30, 1984 (and with respect to such shares,
certain shares acquired through reinvestment of dividends and capital
gains distributions (collectively the "Old Shares")), have been
designated Class B shares. The Old Shares have been designated Class D
shares.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ 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
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 28, 1997*
THROUGH
DECEMBER 31,
1997++
- ------------------------------------------ ------------------
<S> <C>
CLASS A SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ..... $31.87
------------------
Net investment income ..................... 0.05
Net realized and unrealized gain .......... 2.32
------------------
Total from investment operations .......... 2.37
------------------
Less distributions from net realized gain (4.65)
------------------
Net asset value, end of period ............ $29.59
==================
TOTAL INVESTMENT RETURN+ .................. 7.70 %(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses .................................. 0.92 %(2)
Net investment income ..................... 0.38 %(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands .. $15,844
Portfolio turnover rate ................... 275 %
Average commission rate paid .............. $0.0563
CLASS C SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ..... $31.87
------------------
Net investment loss ....................... (0.05)
Net realized and unrealized gain .......... 2.32
------------------
Total from investment operations .......... 2.27
------------------
Less distributions from net realized gain . (4.65)
------------------
Net asset value, end of period ............ $29.49
==================
TOTAL INVESTMENT RETURN+ .................. 7.39 %(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses .................................. 1.66 %(2)
Net investment loss ....................... (0.36)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands .. $12,204
Portfolio turnover rate ................... 275 %
Average commission rate paid .............. $0.0563
</TABLE>
- ------------
* The date shares were first issued.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ 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>
DEAN WITTER AMERICAN VALUE FUND
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 28, 1997*
THROUGH
DECEMBER 31,
1997++
- ------------------------------------------ ------------------
<S> <C>
CLASS D SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ..... $31.87
------------------
Net investment income ..................... 0.07
Net realized and unrealized gain .......... 2.34
------------------
Total from investment operations .......... 2.41
------------------
Less distributions from net realized gain (4.65)
------------------
Net asset value, end of period ............ $29.63
==================
TOTAL INVESTMENT RETURN+ .................. 7.83%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses .................................. 0.64%(2)
Net investment income ..................... 0.50%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands .. $49,772
Portfolio turnover rate ................... 275%
Average commission rate paid .............. $0.0563
</TABLE>
- ------------
* The date shares were first issued. Shareholders who held shares of the
Fund prior to July 28, 1997 (the date the Fund converted to a multiple
class share structure) should refer to the Financial Highlights of Class
B to obtain the historical per share data and ratio information of their
shares.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ 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>
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, 1997, 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 periods presented, 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, 1997 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, 1998
<PAGE>
DEAN WITTER AMERICAN VALUE FUND
FEDERAL TAX NOTICE (unaudited)
1997 FEDERAL TAX NOTICE
For the year ended December 31, 1997, the Fund paid to shareholders the
following per share amounts from long-term capital gains. These distributions
are taxable as 28% rate gains or 20% rate gains, as indicated below:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS D
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Portion of long-term capital gains taxable as:
28% rate gain ................................ $0.48 $0.72 $0.48 $0.48
20% rate gain ................................ 0.46 0.46 0.46 0.46
--------- --------- --------- ---------
Total.......................................... $0.94 $1.18 $0.94 $0.94
========= ========= ========= =========
</TABLE>
For the year ended December 31, 1997, 5.08% of the income dividends
qualified for the dividends received deduction available to corporations.
<PAGE>
TRUSTEES
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Wayne E. Hedien
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 FSB
Harborside Financial Center - Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
Dean Witter InterCapital Inc.
Two World Trade Center
New York, New York 10048
This report is submitted for the general information of shareholders of the
Fund. For more detailed information about the Fund, its officers and trustees,
fees, expenses and other pertinent information, please see the prospectus of
the Fund.
This report is not authorized for distribution to prospective investors in the
Fund unless preceded or accompanied by an effective prospectus.
DEAN WITTER
AMERICAN
VALUE FUND
ANNUAL REPORT
DECEMBER 31, 1997
