<PAGE>
DEAN WITTER CAPITAL GROWTH SECURITIES TWO WORLD TRADE CENTER, NEW YORK, NEW
YORK 10048
LETTER TO THE SHAREHOLDERS OCTOBER 31, 1996
DEAR SHAREHOLDER:
During the Fund's fiscal year, the stock market experienced two corrections, the
first in June and July and the second in October. While the October correction
was relatively minor for the overall stock market, growth stocks were
particularly hard hit as concerns regarding third quarter earnings, the national
election and uncertainty regarding the economy going into 1997 combined to weigh
heavily on these issues.
PERFORMANCE AND PORTFOLIO
For the fiscal year ended October 31, 1996, the Fund produced a return of 17.92
percent compared to a return of 24.05 percent for the broad-based S&P 500
Composite Stock Price Index (S&P 500) and 16.94 percent for the average fund in
the Lipper Growth Funds Index. The accompanying chart illustrates the
performance of a $10,000 investment in the Fund from inception through the
fiscal year ended October 31, 1996, versus the performance of similar
hypothetical investments in the S&P 500 and the Lipper Growth Funds Index.
While the Fund outperformed the S&P 500 during the first half of the fiscal
year, it underperformed in the second half for several reasons. First and
foremost was the particularly strong impact of the two market corrections on
growth-related issues. With the Fund's transformation into a more classic type
of growth fund, it was penalized during these time periods, particularly during
the October correction. During the period, the Fund underperformed the S&P 500
by approximately 4.5 percent in October, which had a dampening effect upon
overall fiscal 1996 performance.
Additionally, the Fund was underweighted in the financial and technology sectors
which, aside from the early-summer and October corrections, were strong
performers during the fiscal year. The Fund is now more heavily weighted in
these two areas. Also the Fund had no meaningful exposure to the energy sector
since these issues generally have not met the Fund's selection criteria. The
lack of exposure in this sector negatively impacted performance as energy stocks
were one of the best performers throughout the fiscal year.
<PAGE>
DEAN WITTER CAPITAL GROWTH SECURITIES
LETTER TO THE SHAREHOLDERS OCTOBER 31, 1996, CONTINUED
During the Fund's third fiscal quarter, in order to widen the universe from
which the Fund can choose stocks, we modified the Fund's screening criteria.
Pursuant to the revised criteria, companies considered for the Fund's portfolio
must have demonstrated a history of consistent growth in earnings and revenues
for the past several years. In addition, these companies must have solid future
earnings growth characteristics and attractive valuations.
[GRAPHIC]
As part of this new focus, the Fund
established positions in several
companies, including Staples Inc.,
Intel Corp., Tidewater Inc., Green Tree
Financial Corp., Dollar General Corp.,
Household International Inc. and Cisco
Systems Inc. The Fund sold positions in
Forest Labs Inc., International Flavor
and Fragrances, Biomet Inc., Wrigley
Jr. Co., Tootsie Roll Inds., U.S.
Tobacco, International Dairy Queen Inc.
- -- Class A and Genuine Parts Co. At the
end of the Fund's 1996 fiscal year the
Fund owned 61 stocks; net assets
totaled slightly more than $506
million.
LOOKING AHEAD
[GRAPHIC]
We are confident that the changes we
have made to the Fund's screening
criteria and the attractive valuations
now present in many growth issues will
allow the Fund to perform well going
forward.
[GRAPHIC]
We appreciate your ongoing support of
Dean Witter Capital Growth Securities
and look forward to continuing to serve
your investment needs.
Sincerely,
[SIGNATURE]
CHARLES A. FIUMEFREDDO
CHAIRMAN OF THE BOARD
<PAGE>
DEAN WITTER CAPITAL GROWTH SECURITIES
PORTFOLIO OF INVESTMENTS OCTOBER 31, 1996
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (93.2%)
ADVERTISING (2.4%)
252,200 Interpublic Group of Companies,
Inc................................. $ 12,231,700
---------------
APPAREL (2.5%)
218,000 Cintas Corp......................... 12,698,500
---------------
AUTO RELATED (0.1%)
10,900 United Auto Group, Inc.*............ 374,687
---------------
BANKING (1.3%)
89,900 Fifth Third Bancorp................. 5,629,987
15,000 State Street Boston Corp............ 950,625
---------------
6,580,612
---------------
BEVERAGES - ALCOHOLIC (1.4%)
182,000 Anheuser-Busch Companies, Inc....... 7,007,000
---------------
BEVERAGES - SOFT DRINKS (1.4%)
140,000 Coca Cola Co........................ 7,070,000
---------------
BIOTECHNOLOGY (2.7%)
210,000 Medtronic Inc....................... 13,518,750
---------------
CHEMICALS - SPECIALTY (1.6%)
140,200 Sigma-Aldrich Corp.................. 8,201,700
---------------
COMMERCIAL SERVICES (1.6%)
100,000 Affiliated Computer Services,
Inc.*............................... 5,350,000
120,250 Primark Corp.*...................... 2,991,219
---------------
8,341,219
---------------
COMMUNICATIONS - EQUIPMENT & SOFTWARE (1.7%)
140,000 Cisco Systems, Inc.*................ 8,645,000
---------------
COMPUTER SOFTWARE (9.9%)
115,000 Adaptec, Inc.*...................... 6,986,250
150,000 Computer Associates International,
Inc................................. 8,868,750
65,000 EMC Corp.*.......................... 1,706,250
23,500 Ingram Micro, Inc. (Class A)*....... 423,000
70,000 Microsoft Corp.*.................... 9,607,500
170,000 Oracle Corp.*....................... 7,182,500
170,000 Parametric Technology Corp.*........ 8,287,500
252,000 Sterling Commerce, Inc.*............ 7,087,500
---------------
50,149,250
---------------
DRUGS (2.0%)
157,000 Schering-Plough Corp................ 10,048,000
---------------
DRUGS & HEALTHCARE (2.6%)
260,000 Abbott Laboratories................. 13,162,500
---------------
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------
<C> <S> <C>
ELECTRONICS (5.9%)
317,700 Dionex Corp.*....................... $ 12,152,025
180,000 Harman International Industries,
Inc................................. 9,247,500
76,000 Intel Corp.......................... 8,341,000
---------------
29,740,525
---------------
ENERGY RELATED (1.2%)
140,000 AES Corp.*.......................... 6,142,500
---------------
ENTERTAINMENT (3.7%)
295,000 Circus Circus Enterprises, Inc.*.... 10,177,500
230,000 Electronic Arts, Inc.*.............. 8,596,250
---------------
18,773,750
---------------
FINANCIAL - MISCELLANEOUS (8.8%)
350,000 Federal National Mortgage Assoc..... 13,693,750
220,000 Green Tree Financial Corp........... 8,717,500
110,000 Household International, Inc........ 9,735,000
200,000 MBNA Corp........................... 7,550,000
70,000 MGIC Investment Corp................ 4,803,750
---------------
44,500,000
---------------
FOOD WHOLESALERS (1.9%)
286,200 Sysco Corp.......................... 9,730,800
---------------
FOODS (2.1%)
210,700 ConAgra, Inc........................ 10,508,663
---------------
HEALTHCARE - DIVERSIFIED (1.8%)
122,000 United Healthcare Corp.............. 4,620,750
185,000 Universal Health Services, Inc.
(Class B)*.......................... 4,625,000
---------------
9,245,750
---------------
HOTELS/MOTELS (3.7%)
134,000 HFS, Inc.*.......................... 9,815,500
440,000 La Quinta Inns, Inc................. 8,800,000
---------------
18,615,500
---------------
INSURANCE (1.6%)
75,100 American International Group,
Inc................................. 8,157,738
---------------
MACHINERY - DIVERSIFIED (1.4%)
195,000 Thermo Electron Corp.*.............. 7,117,500
---------------
MANUFACTURED HOUSING (1.3%)
385,000 Clayton Homes, Inc.................. 6,496,875
---------------
MANUFACTURING - DIVERSIFIED (1.6%)
164,000 Sherwin-Williams Co................. 8,220,500
---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER CAPITAL GROWTH SECURITIES
PORTFOLIO OF INVESTMENTS OCTOBER 31, 1996, CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------
<C> <S> <C>
MEDIA GROUP (1.4%)
95,000 Clear Channel Communications,
Inc.*............................... $ 6,935,000
---------------
OFFICE EQUIPMENT & SUPPLIES (2.2%)
40,000 Hewlett-Packard Co.................. 1,765,000
494,000 Staples, Inc.*...................... 9,200,750
---------------
10,965,750
---------------
OFFSHORE DRILLING (0.7%)
77,000 Tidewater, Inc...................... 3,368,750
---------------
OIL & GAS PRODUCTS (1.1%)
195,000 Input/Output, Inc.*................. 5,801,250
---------------
OIL RELATED - INTERNATIONAL (0.2%)
60,000 Pride Petroleum Services, Inc.*..... 1,042,500
---------------
PHARMACEUTICALS (1.9%)
195,000 Johnson & Johnson................... 9,603,750
---------------
POLLUTION CONTROL (3.1%)
225,000 United Waste Systems, Inc.*......... 7,650,000
234,000 US Filter Corp.*.................... 8,073,000
---------------
15,723,000
---------------
RETAIL - DEPARTMENT STORES (4.1%)
265,000 Dollar General Corp................. 7,353,750
502,800 Wal-Mart Stores, Inc................ 13,387,050
---------------
20,740,800
---------------
RETAIL - DRUG STORES (2.1%)
288,000 Walgreen Co......................... 10,872,000
---------------
RETAIL - FOOD CHAINS (0.7%)
80,000 Safeway, Inc.*...................... 3,430,000
---------------
RETAIL - SPECIALTY (4.2%)
415,000 General Nutrition Companies,
Inc.*............................... 7,573,750
250,000 Home Depot, Inc..................... 13,687,500
---------------
21,261,250
---------------
SPECIALIZED SERVICES (2.6%)
454,000 Service Corp. International......... 12,939,000
---------------
TELECOMMUNICATIONS (1.8%)
110,000 Tellabs, Inc.*...................... 9,350,000
---------------
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------
<C> <S> <C>
UTILITIES (0.9%)
220,000 Citizens Utilities Co. (Series
A)*................................. $ 2,392,500
200,000 Citizens Utilities Co. (Series
B)*................................. 2,200,000
---------------
4,592,500
---------------
TOTAL COMMON STOCKS
(IDENTIFIED COST $384,906,020)...... 471,904,569
---------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ------------------------------------------------------------------
<C> <S> <C>
SHORT-TERM INVESTMENTS (a) (7.9%)
U.S. GOVERNMENT AGENCIES
$ 8,000 Federal Home Loan Banks 5.18% due
11/08/96............................ 7,991,942
22,062 Federal Home Loan Mortgage Corp.
5.19% to 5.53% due 11/01/96 to
11/13/96............................ 22,033,802
10,000 Federal National Mortgage Assoc.
5.175% due 11/05/96................. 9,994,250
---------------
TOTAL SHORT-TERM INVESTMENTS
(AMORTIZED COST $40,019,994)........ 40,019,994
---------------
TOTAL INVESTMENTS
(IDENTIFIED COST
$424,926,014)(B)............ 101.1% 511,924,563
LIABILITIES IN EXCESS OF
CASH AND OTHER ASSETS....... (1.1) (5,353,372)
----- ------------
NET ASSETS.................. 100.0% $506,571,191
----- ------------
----- ------------
<FN>
- ---------------------
* Non-income producing security.
(a) Securities were purchased on a discount basis. The interest rates shown
have been adjusted to reflect a money market equivalent yield.
(b) The aggregate cost for federal income tax purposes is $425,835,608; the
aggregate gross unrealized appreciation is $94,408,176 and the aggregate
gross unrealized depreciation is $8,319,221, resulting in net unrealized
appreciation of $86,088,955.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER CAPITAL GROWTH SECURITIES
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1996
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $424,926,014)............................ $511,924,563
Cash........................................................ 61,132
Receivable for:
Investments sold........................................ 9,209,149
Shares of beneficial interest sold...................... 854,095
Dividends............................................... 275,491
Prepaid expenses............................................ 24,107
------------
TOTAL ASSETS........................................... 522,348,537
------------
LIABILITIES:
Payable for:
Investments purchased................................... 14,526,940
Plan of distribution fee................................ 440,085
Shares of beneficial interest repurchased............... 324,897
Investment management fee............................... 284,397
Accrued expenses............................................ 201,027
------------
TOTAL LIABILITIES...................................... 15,777,346
------------
NET ASSETS:
Paid-in-capital............................................. 339,520,458
Net unrealized appreciation................................. 86,998,549
Accumulated net investment loss............................. (48,617)
Accumulated undistributed net realized gain................. 80,100,801
------------
NET ASSETS............................................. $506,571,191
------------
------------
NET ASSET VALUE PER SHARE,
29,829,176 SHARES OUTSTANDING (UNLIMITED SHARES AUTHORIZED
OF $.01 PAR VALUE)........................................
$16.98
------------
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER CAPITAL GROWTH SECURITIES
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 1996
<TABLE>
<S> <C>
NET INVESTMENT INCOME:
INCOME
Dividends (net of $7,932 foreign withholding tax)........... $ 5,695,313
Interest.................................................... 487,039
-----------
TOTAL INCOME........................................... 6,182,352
-----------
EXPENSES
Plan of distribution fee.................................... 5,164,737
Investment management fee................................... 3,339,125
Transfer agent fees and expenses............................ 793,958
Shareholder reports and notices............................. 78,146
Professional fees........................................... 52,594
Registration fees........................................... 43,570
Custodian fees.............................................. 18,310
Trustees' fees and expenses................................. 18,272
Other....................................................... 13,033
-----------
TOTAL EXPENSES......................................... 9,521,745
-----------
NET INVESTMENT LOSS.................................... (3,339,393)
-----------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain........................................... 84,433,122
Net change in unrealized appreciation....................... 3,014,056
-----------
NET GAIN............................................... 87,447,178
-----------
NET INCREASE................................................ $84,107,785
-----------
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER CAPITAL GROWTH SECURITIES
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
OCTOBER 31, 1996 OCTOBER 31, 1995
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment loss......................................... $ (3,339,393) $ (2,027,598)
Net realized gain........................................... 84,433,122 18,302,740
Net change in unrealized appreciation....................... 3,014,056 74,477,893
---------------- ----------------
NET INCREASE........................................... 84,107,785 90,753,035
Net decrease from transactions in shares of beneficial
interest.................................................. (61,406,297) (63,860,121)
---------------- ----------------
NET INCREASE........................................... 22,701,488 26,892,914
NET ASSETS:
Beginning of period......................................... 483,869,703 456,976,789
---------------- ----------------
END OF PERIOD
(INCLUDING ACCUMULATED NET INVESTMENT LOSS OF $48,617
AND $51,171, RESPECTIVELY).............................. $506,571,191 $483,869,703
---------------- ----------------
---------------- ----------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER CAPITAL GROWTH SECURITIES
NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 1996
1. ORGANIZATION AND ACCOUNTING POLICIES
Dean Witter Capital Growth Securities (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
long-term capital growth. The Fund was organized as a Massachusetts business
trust on December 8, 1989 and commenced operations on April 2, 1990.
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 securities are traded on more than one exchange; the securities are
valued on the exchange designated as the primary market 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 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; 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. 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.
<PAGE>
DEAN WITTER CAPITAL GROWTH SECURITIES
NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 1996, CONTINUED
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 Dean Witter InterCapital
Inc. (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: 0.65% to the portion of daily net assets not exceeding $500
million; 0.55% to the portion of daily net assets exceeding $500 million but not
exceeding $1 billion; 0.50% to the portion of daily net assets exceeding $1
billion but not exceeding $1.5 billion; and 0.475% to the portion of daily net
assets exceeding $1.5 billion.
Under the terms of the Agreement, in addition to managing the Fund's
investments, the Investment Manager maintains certain of the Fund's books and
records and furnishes, at its own expense, office space, facilities, equipment,
clerical, bookkeeping and certain legal services and pays the salaries of all
personnel, including officers of the Fund who are employees of the Investment
Manager. The Investment Manager also bears the cost of telephone services, heat,
light, power and other utilities provided to the Fund.
3. PLAN OF DISTRIBUTION
Shares of the Fund are distributed by Dean Witter Distributors Inc. (the
"Distributor"), an affiliate of the Investment Manager. The Fund has adopted a
Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under the Act pursuant
to which the Fund pays the Distributor compensation, accrued daily and payable
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 Fund's inception (not
including reinvestment of dividend or
<PAGE>
DEAN WITTER CAPITAL GROWTH SECURITIES
NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 1996, CONTINUED
capital gain distributions) less the average daily aggregate net asset value of
the Fund's shares redeemed since the Fund's inception 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. Amounts paid under the Plan
are paid to the Distributor to compensate it for the services provided and the
expenses borne by it and others in the distribution of the Fund's shares,
including the payment of commissions for sales of the Fund's shares and
incentive compensation to, and expenses of, the account executives of Dean
Witter Reynolds Inc.("DWR"), an affiliate of the Investment Manager and
Distributor, and other employees or selected broker-dealers who engage in or
support distribution of the Fund's shares or who service shareholder accounts,
including overhead and telephone expenses, printing and distribution of
prospectuses and reports used in connection with the offering of the Fund's
shares to other than current shareholders and preparation, printing and
distribution of sales literature and advertising materials. In addition, the
Distributor may be compensated under the Plan for its opportunity costs in
advancing such amounts, which compensation would be in the form of a carrying
charge on any unreimbursed expenses incurred by the Distributor.
Provided that the Plan continues in effect, any cumulative expenses incurred but
not yet recovered may be recovered through future distribution fees from the
Fund and contingent deferred sales charges from the Fund's shareholders.
Although there is no legal obligation for the Fund to pay expenses incurred in
excess of payments made to the Distributor under the Plan and the proceeds of
contingent deferred sales charges paid by the investors upon redemption of
shares, if for any reason the Plan is terminated, the Trustees will consider at
the time the manner in which to treat such expenses. The Distributor has advised
the Fund that such excess amounts, including carrying charges, totaled
$23,614,745 at October 31, 1996.
The Distributor has informed the Fund that for the year ended October 31, 1996,
it received approximately $591,000 in contingent deferred sales charges from
certain redemptions of the Fund's shares.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales of portfolio securities, excluding
short-term investments, for the year ended October 31, 1996 aggregated
$363,486,245 and $450,240,531, respectively. Included in the aforementioned are
purchases and sales of Citizens Utilities Co., an affiliate of the Fund by
virtue of a common Trustee, in the amount of $1,710,671 and $8,930,272,
respectively, as well as a realized gain of $1,547,968.
<PAGE>
DEAN WITTER CAPITAL GROWTH SECURITIES
NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 1996, CONTINUED
For the year ended October 31, 1996, the Fund incurred brokerage commissions of
$167,217 with DWR for portfolio transactions executed on behalf of the Fund. At
October 31, 1996, the Fund's payable for investments purchased included
unsettled trades with DWR of $311,890.
Dean Witter Trust Company, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At October 31, 1996, the Fund had
transfer agent fees and expenses payable of approximately $79,000.
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 cost for the year ended October 31, 1996 included
in Trustees fees and expenses in the Statement of Operations amounted to $2,800.
At October 31, 1996, the Fund had an accrued pension liability of $48,617 which
is included in accrued expenses in the Statement of Assets and Liabilities.
5. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
OCTOBER 31, 1996 OCTOBER 31, 1995
-------------------------- --------------------------
<S> <C> <C> <C> <C>
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ----------- -------------
Sold............................................................. 6,983,726 $ 113,678,617 9,967,719 $ 129,676,850
Repurchased...................................................... (10,755,353) (175,084,914) (14,892,453) (193,536,971)
----------- ------------- ----------- -------------
Net decrease..................................................... (3,771,627) $ (61,406,297) (4,924,734) $ (63,860,121)
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
</TABLE>
6. FEDERAL INCOME TAX STATUS
During the year ended October 31, 1996, the Fund utilized its net capital loss
carryover of approximately $3,122,000.
As of October 31, 1996, the Fund had temporary book/tax differences primarily
attributable to capital loss deferrals on wash sales and permanent book/tax
differences primarily attributable to a net operating loss. To reflect
reclassifications arising from permanent book/tax differences for the year ended
October 31, 1996 paid-in-capital was charged $3,356,840, accumulated
undistributed net realized gain was credited $14,893 and accumulated net
investment loss was credited $3,341,947.
<PAGE>
DEAN WITTER CAPITAL GROWTH SECURITIES
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
FOR THE PERIOD
APRIL 2, 1990*
FOR THE YEAR ENDED OCTOBER 31 THROUGH
---------------------------------------------------------------- OCTOBER 31,
1996 1995 1994 1993 1992 1991 1990
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value,
beginning of period............... $ 14.40 $ 11.86 $ 13.35 $ 14.09 $ 13.58 $ 9.19 $ 10.00
--------- --------- --------- --------- --------- --------- ------
Net investment income (loss)....... (0.11) (0.06) (0.07) (0.08) (0.03) (0.01) 0.01
Net realized and unrealized gain
(loss)............................ 2.69 2.60 -- (0.50) 0.58 4.42 (0.82)
--------- --------- --------- --------- --------- --------- ------
Total from investment operations... 2.58 2.54 (0.07) (0.58) 0.55 4.41 (0.81)
--------- --------- --------- --------- --------- --------- ------
Less dividends and distributions
from:
Net investment income........... -- -- -- -- -- (0.02) --
Net realized gain............... -- -- (1.42) (0.16) (0.04) -- --
--------- --------- --------- --------- --------- --------- ------
Total dividends and
distributions..................... -- -- (1.42) (0.16) (0.04) (0.02) --
--------- --------- --------- --------- --------- --------- ------
Net asset value, end of period..... $ 16.98 $ 14.40 $ 11.86 $ 13.35 $ 14.09 $ 13.58 $ 9.19
--------- --------- --------- --------- --------- --------- ------
--------- --------- --------- --------- --------- --------- ------
TOTAL INVESTMENT RETURN+........... 17.92% 21.42% (0.79)% (4.25)% 4.06% 48.07% (8.10)%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses........................... 1.84% 1.89% 1.87% 1.81% 1.74% 1.83% 1.97%(2)
Net investment income (loss)....... (0.64)% (0.43)% (0.15)% (0.38)% (0.32)% (0.17)% 0.25%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in
thousands......................... $506,571 $483,870 $456,977 $683,165 $973,110 $600,027 $206,588
Portfolio turnover rate............ 72% 33% 13% 25% 29% 40% 10%(1)
Average commission rate paid....... 0.0571 -- -- -- -- -- --
<FN>
- ---------------------
* Commencement of operations.
+ Does not reflect the deduction of sales charge. Calculated based on the net
asset value of the last business day of the period.
(1) Not annualized.
(2) Annualized.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER CAPITAL GROWTH SECURITIES
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND TRUSTEES
OF DEAN WITTER CAPITAL GROWTH SECURITIES
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 Capital Growth
Securities (the "Fund") at October 31, 1996, the results of its operations for
the year then ended, the changes in its net assets for each of the two years in
the period then ended and the financial highlights for each of the six years in
the period then ended and for the period April 2, 1990 (commencement of
operations) through October 31, 1990, 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 October 31, 1996 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE LLP
1177 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036
DECEMBER 5, 1996
<PAGE>
(This page has been left blank intentionally.)
<PAGE>
DEAN WITTER CAPITAL GROWTH SECURITIES
GROWTH OF $10,000
DATE TOTAL S&P LIPPER IX
April 2, 1990 $10,000 $10,000 $10,000
October 31, 1990 $ 9,190 $ 9,173
October 31, 1991 $13,605 $12,242 $12,709
October 31, 1992 $14,158 $13,459 $13,701
October 31, 1993 $13,556 $15,465 $16,301
October 31, 1994 $13,450 $16,061 $16,634
October 31, 1995 $16,330 $20,298 $20,622
October 31, 1996 $19,256 (3) $25,180 $24,116
AVERAGE ANNUAL TOTAL RETURNS
1 YEAR 5 YEARS LIFE OF FUND
17.92 (1) 7.19 (1) 10.47 (1)
12.92 (2) 6.89 (2) 10.47 (2)
Fund S&P 500 (4) LIPPER IX (5)
----- ----- ----
Past performance is not predictive of future returns.
________________________________________
(1) Figure shown assumes reinvestment of all distributions and does not reflect
the deduction of any sales charges.
(2) Figure shown assumes reinvestment of all distributions and the deduction of
the maximum applicable contingent deferred sales charge (CDSC) (1 year-5%,
5 years - 2%, since inception - 0%). See the Fund's current prospectus for
complete details on fees and sales charges.
(3) Closing value assuming a complete redemption on October 31, 1996.
(4) The Standard & Poor's 500 Composite Stock Price Index (S&P 500) is a broad-
based index, the performance of which is based on the average performance
of 500 widely held common stocks. The performance of the index does not
include any expenses, fees or charges. The Index is unmanaged and should
not be considered an investment.
(5) The Lipper Growth Funds Index is an equally-weighted performance index of
the largest- qualifying funds (based on net assets) in the Lipper Growth
Funds objective. The Index, which is adjusted for capital gains
distributions and income dividends, is unmanaged and should not be
considered an investment. There are currently 30 funds represented in this
Index.
