<PAGE> 1
MORGAN STANLEY DEAN WITTER CAPITAL GROWTH SECURITIES Two World Trade Center
LETTER TO THE SHAREHOLDERS April 30, 2000 New York, New York 10048
DEAR SHAREHOLDER:
During the six-month period ended April 30, 2000, the United States continued to
exhibit strong economic growth with accelerating inflationary pressures.
Concerned by the strength in the global economy and the threat of rising
inflation, the Federal Reserve Board continued its recent pattern of raising the
federal funds rate, increasing it to 6.00 percent in two steps during the
period. Subsequent to the end of the period, at its May meeting, the Fed raised
the federal funds rate an additional 50 basis points (one-half of one percent).
The U.S. equity market continued its bull-market run during this period. After
setting records during the second half of 1999, however, the U.S. equity markets
were plagued by increased volatility in the first quarter of 2000. While the S&P
500 increased 2.29 percent for the quarter, it had been down as much as 8
percent year-to-date in late February. Technology stocks again were the dominant
contributors to the market's performance. However, technology underperformed
late in the first quarter as investors' attention shifted toward old-economy
companies. In April, tech stocks pulled back sharply amid intense volatility.
PERFORMANCE AND PORTFOLIO STRATEGY
For the six-month period ended April 30, 2000, Morgan Stanley Dean Witter
Capital Growth Securities' Class B shares produced a total return of 24.91
percent, compared to 7.19 percent for the Standard & Poor's 500 Composite Stock
Price Index (S&P 500).* For the same period, the Fund's Class A, C and D shares
produced total returns of 25.31 percent, 24.86 percent and 25.50 percent,
respectively. The performance of the Fund's four share classes varies because of
differing expenses. The total return figures given assume the reinvestment of
all distributions but do not reflect the deduction of any applicable sales
charges.
---------------------
*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.
<PAGE> 2
MORGAN STANLEY DEAN WITTER CAPITAL GROWTH SECURITIES
LETTER TO THE SHAREHOLDERS April 30, 2000, continued
The Fund continued to invest in companies across the market-capitalization
spectrum as well as all major sectors of the S&P 500. However, during the period
the Fund's managers decreased its long-standing overweighting in technology to
an underweighting of 21 percent. This move was prompted by dramatic price
increases and valuation levels that we believed were unsustainable. Monies
flowed out of technology and consumer stocks, into capital goods (17 percent of
the Fund's assets) and energy (10.5 percent of the Fund's assets). The consumer
cyclical and staples positions represented 13 percent of the Fund's assets as of
April 30, down from a 21.5 percent weighting six months earlier.
The Fund added to its health-care and financial-services holdings, which
represented 10.5 percent and 14 percent of the Fund's assets, respectively, on
April 30. During the current period of market turbulence the Fund's managers
have diversified its portfolio among both growth and value issues. We have
shifted from a definitive growth bias, which the Fund maintained at the
beginning of the fiscal year, to a more neutral positioning. We expect to
maintain this posture until the full extent of the Federal Reserve Board's
actions can be reasonably ascertained.
The Fund's ten largest holdings on April 30 were Tyco International, Millipore,
Vishay Intertech, Honeywell, Citigroup, American Home Products, Warner-Lambert,
EMC, AVX and Dynergy.
LOOKING AHEAD
Although we continue to have a favorable long-term outlook for the stock market,
we expect that volatility will continue in the short-term. Going forward, we do
not anticipate making a dramatic shift in the Fund's strategy.
We appreciate your ongoing support of Morgan Stanley Dean Witter Capital Growth
Securities and look forward to continuing to serve your investment needs.
<TABLE>
<S> <C>
Very truly yours,
/s/ CHARLES A. FIUMEFREDDO /s/ MITCHELL M. MERIN
CHARLES A. FIUMEFREDDO MITCHELL M. MERIN
Chairman of the Board President
</TABLE>
2
<PAGE> 3
MORGAN STANLEY DEAN WITTER CAPITAL GROWTH SECURITIES
FUND PERFORMANCE April 30, 2000
AVERAGE ANNUAL TOTAL RETURNS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A*
----------------------------------------------
<S> <C> <C>
PERIOD ENDED 4/30/00
-------------------------
Since Inception (7/28/97) 19.56%(1) 17.24%(2)
1 Year 28.03%(1) 21.31%(2)
</TABLE>
<TABLE>
<CAPTION>
CLASS C+
----------------------------------------------
<S> <C> <C>
PERIOD ENDED 4/30/00
-------------------------
Since Inception (7/28/97) 18.80%(1) 18.80%(2)
1 Year 27.15%(1) 26.19%(2)
</TABLE>
<TABLE>
<CAPTION>
CLASS B**
----------------------------------------------
<S> <C> <C>
PERIOD ENDED 4/30/00
-------------------------
1 Year 27.13%(1) 22.30%(2)
5 Years 21.20%(1) 21.01%(2)
10 Years 14.86%(1) 14.86%(2)
</TABLE>
<TABLE>
<CAPTION>
CLASS D++
----------------------------------------------
<S> <C> <C>
PERIOD ENDED 4/30/00
-------------------------
Since Inception (7/28/97) 19.84%(1)
1 Year 28.44%(1)
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RETURNS. INVESTMENT RETURN AND
PRINCIPAL VALUE WILL FLUCTUATE. WHEN YOU SELL FUND SHARES, THEY MAY BE WORTH
MORE OR LESS THAN THEIR ORIGINAL COST.
---------------------
<TABLE>
<S> <C>
(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 sales charge. See
the Fund's current prospectus for complete details on fees
and sales charges.
* The maximum front-end sales charge for Class A is 5.25%.
** The maximum contingent deferred sales charge (CDSC) for
Class B is 5.0%. The CDSC declines to 0% after six years.
+ The maximum CDSC for Class C shares is 1% for shares
redeemed within one year of purchase.
++ Class D shares have no sales charge.
</TABLE>
3
<PAGE> 4
MORGAN STANLEY DEAN WITTER CAPITAL GROWTH SECURITIES
PORTFOLIO OF INVESTMENTS April 30, 2000 (unaudited)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
-------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (93.4%)
Aerospace (1.0%)
100,000 United Technologies Corp. ... $ 6,218,750
------------
Airlines (1.5%)
275,000 AMR Corp.*................... 9,367,188
------------
Apparel (0.3%)
85,000 Quiksilver, Inc.*............ 1,604,375
------------
Auto Parts: O.E.M. (0.5%)
50,000 Johnson Controls, Inc. ...... 3,165,625
------------
Broadcasting (0.4%)
60,000 Westwood One, Inc.*.......... 2,122,500
------------
Building Materials/DIY Chains (1.6%)
60,000 Home Depot, Inc. (The)....... 3,363,750
135,000 Lowe's Companies, Inc. ...... 6,682,500
------------
10,046,250
------------
Catalog/Specialty Distribution (0.7%)
40,000 CDW Computer Centers,
Inc.*....................... 4,152,500
------------
Cellular Telephone (0.3%)
40,000 Vodafone AirTouch PLC (ADR)
(United Kingdom)............ 1,880,000
------------
Clothing/Shoe/Accessory Stores (0.4%)
50,000 Limited (The), Inc. ......... 2,259,375
------------
Computer Communications (1.1%)
100,000 Cisco Systems, Inc.*......... 6,937,500
------------
Computer Software (0.3%)
75,000 Network Associates, Inc.*.... 1,903,125
------------
Computer/Video Chains (0.8%)
25,000 Best Buy Co., Inc.*.......... 2,018,750
50,000 Circuit City Stores, Inc. -
Circuit City Group.......... 2,940,625
------------
4,959,375
------------
Contract Drilling (3.0%)
100,000 ENSCO International Inc. .... 3,318,750
175,000 Marine Drilling Companies,
Inc.*....................... 4,550,000
75,000 Noble Drilling Corp.*........ 2,995,313
150,000 Rowan Companies, Inc.*....... 4,190,625
75,000 Transocean Sedco Forex
Inc. ....................... 3,525,000
------------
18,579,688
------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
-------------------------------------------------------
<C> <S> <C>
Discount Chains (2.3%)
100,000 Target Corp. ................ $ 6,656,250
135,000 Wal-Mart Stores, Inc. ....... 7,475,625
------------
14,131,875
------------
Diversified Electronic Products (1.3%)
460,300 Sensormatic Electronics
Corp.*...................... 7,681,256
------------
Diversified Financial Services (3.0%)
200,000 AXA Financial, Inc. ......... 6,525,000
200,000 Citigroup, Inc. ............. 11,887,500
------------
18,412,500
------------
Diversified Manufacturing (4.4%)
100,000 Dover Corp. ................. 5,081,250
185,000 Honeywell International,
Inc. ....................... 10,360,000
250,000 Tyco International Ltd.
(Bermuda)................... 11,484,374
------------
26,925,624
------------
Drugstore Chains (0.7%)
100,000 CVS Corp. ................... 4,350,000
------------
E.D.P. Peripherals (1.7%)
75,000 EMC Corp.*................... 10,420,313
------------
Electronic Components (7.0%)
150,000 Amphenol Corp. (Class A)*.... 9,562,500
100,000 AVX Corp. ................... 9,743,750
60,000 Burr-Brown Corp.*............ 4,083,750
100,000 Kemet Corp.*................. 7,450,000
135,000 Vishay Intertechnology,
Inc.*....................... 11,323,124
------------
42,163,124
------------
Electronic Data Processing (1.6%)
275,000 Compaq Computer Corp. ....... 8,043,750
35,000 Gateway, Inc.*............... 1,933,750
------------
9,977,500
------------
Electronic Distributors (1.1%)
150,000 Arrow Electronics, Inc.*..... 6,571,875
------------
Electronic Production Equipment (5.1%)
85,000 Applied Materials, Inc.*..... 8,654,062
125,000 Cognex Corp.*................ 6,984,374
25,000 Kulicke & Soffa Industries,
Inc.*....................... 1,957,813
60,000 Lam Research Corp.*.......... 2,748,750
40,000 Photronics, Inc.*............ 1,332,500
45,000 PRI Automation, Inc.*........ 3,594,375
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
4
<PAGE> 5
MORGAN STANLEY DEAN WITTER CAPITAL GROWTH SECURITIES
PORTFOLIO OF INVESTMENTS April 30, 2000 (unaudited) continued
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
-------------------------------------------------------
<C> <S> <C>
55,000 Teradyne, Inc.*.............. $ 6,050,000
------------
31,321,874
------------
Engineering & Construction (0.6%)
75,000 Quanta Services, Inc.*....... 3,482,813
------------
Finance Companies (1.6%)
165,000 Capital One Financial
Corp. ...................... 7,218,750
85,000 CompuCredit Corp.*........... 2,783,750
------------
10,002,500
------------
Food Chains (1.2%)
400,000 Kroger Co.*.................. 7,425,000
------------
Generic Drugs (2.0%)
310,000 Ivax Corp.*.................. 8,486,250
85,000 Watson Pharmaceuticals,
Inc.*....................... 3,819,688
------------
12,305,938
------------
Industrial Specialties (1.8%)
150,000 Millipore Corp. ............. 10,753,125
------------
Integrated Oil Companies (1.8%)
150,000 BP Amoco PLC (ADR) (United
Kingdom).................... 7,650,000
60,000 Murphy Oil Corp. ............ 3,540,000
------------
11,190,000
------------
Investment Bankers/Brokers/Services (3.3%)
150,000 Bear Stearns Companies,
Inc. ....................... 6,431,249
50,000 Donaldson, Lufkin & Jenrette,
Inc. ....................... 2,084,375
135,000 Edwards (A.G.), Inc. ........ 5,079,375
40,000 Lehman Brothers Holdings,
Inc. ....................... 3,282,500
30,000 Merrill Lynch & Co., Inc. ... 3,058,125
------------
19,935,624
------------
Major Banks (2.6%)
150,000 Bank of America Corp. ....... 7,350,000
40,000 Morgan (J.P.) & Co., Inc. ... 5,135,000
80,000 Wells Fargo & Co. ........... 3,285,000
------------
15,770,000
------------
Major Chemicals (0.8%)
85,000 Union Carbide Corp. ......... 5,015,000
------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
-------------------------------------------------------
<C> <S> <C>
Major Pharmaceuticals (4.2%)
185,000 American Home Products
Corp. ...................... $ 10,394,687
75,000 Lilly (Eli) & Co. ........... 5,798,438
85,000 Warner-Lambert Co. .......... 9,674,062
------------
25,867,187
------------
Medical Specialties (2.0%)
150,000 Boston Scientific Corp.*..... 3,975,000
250,000 Cooper Companies, Inc. ...... 8,406,250
------------
12,381,250
------------
Military/Gov't/Technical (0.3%)
40,000 Titan Corp. (The)*........... 1,717,500
------------
Motor Vehicles (0.9%)
60,000 General Motors Corp. ........ 5,617,500
------------
Movies/Entertainment (0.3%)
35,000 CBS Corp.*................... 2,056,250
------------
Multi-Line Insurance (1.3%)
75,000 American International
Group, Inc. ................ 8,226,563
------------
Multi-Sector Companies (2.5%)
85,000 Anixter International,
Inc.*....................... 2,863,438
120,000 Crane Co. ................... 3,225,000
60,000 General Electric Co. ........ 9,435,000
------------
15,523,438
------------
Natural Gas (0.6%)
85,000 Equitable Resources, Inc. ... 3,941,875
------------
Oil & Gas Production (2.3%)
80,000 Anardarko Petroleum Corp. ... 3,475,000
150,000 Newfield Exploration Co.*.... 6,093,750
175,000 Pogo Producing Co. .......... 4,484,375
------------
14,053,125
------------
Oil Refining/Marketing (2.0%)
175,000 Tosco Corp. ................. 5,610,938
225,000 Valero Energy Corp. ......... 6,525,000
------------
12,135,938
------------
Oil/Gas Transmission (2.4%)
100,000 Coastal Corp. ............... 5,018,750
150,000 Dynegy, Inc. ................ 9,815,625
------------
14,834,375
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
5
<PAGE> 6
MORGAN STANLEY DEAN WITTER CAPITAL GROWTH SECURITIES
PORTFOLIO OF INVESTMENTS April 30, 2000 (unaudited) continued
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
-------------------------------------------------------
<C> <S> <C>
Oilfield Services/Equipment (1.5%)
35,000 BJ Services Co.*............. $ 2,458,750
50,000 Cooper Cameron Corp.*........ 3,750,000
75,000 Weatherford International,
Inc.*....................... 3,046,875
------------
9,255,625
------------
Other Pharmaceuticals (2.4%)
135,000 Elan Corp. PLC (ADR)
(Ireland)*.................. 5,788,125
75,000 Forest Laboratories, Inc.*... 6,304,688
60,000 Shire Pharmaceuticals Group
PLC (ADR) (United
Kingdom)*................... 2,415,000
------------
14,507,813
------------
Other Specialty Stores (1.4%)
100,000 Linens 'N Things, Inc.*...... 3,087,500
500,000 Office Depot, Inc.*.......... 5,281,250
------------
8,368,750
------------
Other Telecommunications (1.3%)
200,000 BroadWing Inc. .............. 5,662,500
220,600 Hellenic Telecommunications
Organization S.A. (OTE)
(ADR) (Greece)*............. 2,578,263
------------
8,240,763
------------
Package Goods/Cosmetics (1.2%)
175,000 Avon Products, Inc. ......... 7,262,500
------------
Precision Instruments (0.9%)
100,000 Tektronix, Inc. ............. 5,787,500
------------
Property - Casualty Insurers (1.0%)
85,000 ACE Ltd. (Bermuda)........... 2,034,688
135,000 Everest Re Group, Ltd.
(Bermuda)................... 3,948,750
------------
5,983,438
------------
REIT - Industrial/Office (1.2%)
125,000 Boston Properties, Inc. ..... 4,359,375
150,000 Cornerstone Properties,
Inc. ....................... 2,737,500
------------
7,096,875
------------
Semiconductors (7.5%)
85,000 Atmel Corp.*................. 4,154,375
175,000 Cypress Semiconductor
Corp.*...................... 9,089,063
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
-------------------------------------------------------
<C> <S> <C>
175,000 Fairchild Semiconductor Corp.
(Class A)*.................. $ 8,312,500
200,000 Integrated Device Technology,
Inc.*....................... 9,599,999
60,000 Intel Corp. ................. 7,608,750
110,000 International Rectifier
Corp.*...................... 5,403,750
25,000 Lattice Semiconductor
Corp.*...................... 1,665,625
------------
45,834,062
------------
Shoe Manufacturing (0.4%)
35,000 Timberland Co. (Class A)*.... 2,428,125
------------
TOTAL COMMON STOCKS
(Identified Cost
$494,926,580)................ 572,152,644
------------
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS
---------
<C> <S> <C>
SHORT-TERM INVESTMENT (a) (8.9%)
U.S. GOVERNMENT AGENCY
$ 54,700 Federal Home Loan Mortgage
Corp. 5.88% due 05/01/00
(Amortized Cost
$54,700,000)................ 54,700,000
------------
626,852,644
TOTAL INVESTMENTS
(Identified Cost $549,626,580) (b).......
102.3%
(13,904,840)
LIABILITIES IN EXCESS OF OTHER
ASSETS......................... (2.3)
---- ------------
$612,947,804
NET ASSETS...................... 100.0%
---- ============
----
</TABLE>
---------------------
<TABLE>
<C> <S>
ADR American Depository Receipt.
* Non-income producing security.
(a) Purchased on a discount basis. The interest rate
shown has been adjusted to reflect a money
market equivalent yield.
(b) The aggregate cost for federal income tax
purposes approximates identified cost. The
aggregate gross unrealized appreciation is
$87,754,432 and the aggregate gross unrealized
depreciation is $10,528,368, resulting in net
unrealized appreciation of $77,226,064.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE> 7
MORGAN STANLEY DEAN WITTER CAPITAL GROWTH SECURITIES
FINANCIAL STATEMENTS
<TABLE>
<S> <C>
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2000 (unaudited)
ASSETS:
Investments in securities, at value
(identified cost $549,626,580)............................. $626,852,644
Cash........................................................ 63,806
Receivable for:
Investments sold........................................ 25,166,846
Shares of beneficial interest sold...................... 887,669
Dividends............................................... 141,725
Prepaid expenses and other assets........................... 84,495
------------
TOTAL ASSETS............................................ 653,197,185
------------
LIABILITIES:
Payable for:
Investments purchased................................... 38,970,066
Plan of distribution fee................................ 450,204
Shares of beneficial interest repurchased............... 383,082
Investment management fee............................... 316,214
Accrued expenses and other payables......................... 129,815
------------
TOTAL LIABILITIES....................................... 40,249,381
------------
NET ASSETS.............................................. $612,947,804
============
COMPOSITION OF NET ASSETS:
Paid-in-capital............................................. $436,391,813
Net unrealized appreciation................................. 77,226,064
Accumulated net investment loss............................. (3,011,346)
Accumulated undistributed net realized gain................. 102,341,273
------------
NET ASSETS.............................................. $612,947,804
============
CLASS A SHARES:
Net Assets.................................................. $7,457,718
Shares Outstanding (unlimited authorized, $.01 par value)... 460,519
NET ASSET VALUE PER SHARE............................... $16.19
============
MAXIMUM OFFERING PRICE PER SHARE,
(net asset value plus 5.54% of net asset value)........ $17.09
============
CLASS B SHARES:
Net Assets.................................................. $545,181,913
Shares Outstanding (unlimited authorized, $.01 par value)... 34,693,983
NET ASSET VALUE PER SHARE............................... $15.71
============
CLASS C SHARES:
Net Assets.................................................. $2,087,814
Shares Outstanding (unlimited authorized, $.01 par value)... 132,205
NET ASSET VALUE PER SHARE............................... $15.79
============
CLASS D SHARES:
Net Assets.................................................. $58,220,359
Shares Outstanding (unlimited authorized, $.01 par value)... 3,563,996
NET ASSET VALUE PER SHARE............................... $16.34
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE> 8
MORGAN STANLEY DEAN WITTER CAPITAL GROWTH SECURITIES
FINANCIAL STATEMENTS, continued
<TABLE>
<S> <C>
STATEMENT OF OPERATIONS
For the six months ended April 30, 2000 (unaudited)
NET INVESTMENT LOSS:
INCOME
Dividends (net of $1,537 foreign withholding tax)........... $ 1,121,189
Interest.................................................... 933,431
------------
TOTAL INCOME............................................ 2,054,620
------------
EXPENSES
Plan of distribution fee (Class A shares)................... 7,787
Plan of distribution fee (Class B shares)................... 2,639,881
Plan of distribution fee (Class C shares)................... 5,810
Investment management fee................................... 1,857,593
Transfer agent fees and expenses............................ 291,576
Shareholder reports and notices............................. 83,281
Professional fees........................................... 50,447
Registration fees........................................... 36,985
Custodian fees.............................................. 25,871
Trustees' fees and expenses................................. 11,052
Other....................................................... 3,364
------------
TOTAL EXPENSES.......................................... 5,013,647
------------
NET INVESTMENT LOSS..................................... (2,959,027)
------------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain........................................... 109,664,765
Net change in unrealized appreciation....................... 19,507,602
------------
NET GAIN................................................ 129,172,367
------------
NET INCREASE................................................ $126,213,340
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE> 9
MORGAN STANLEY DEAN WITTER CAPITAL GROWTH SECURITIES
FINANCIAL STATEMENTS, continued
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX
MONTHS ENDED FOR THE YEAR
APRIL 30, ENDED
2000 OCTOBER 31, 1999
---------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment loss.................................. $ (2,959,027) $ (5,225,051)
Net realized gain.................................... 109,664,765 152,060,838
Net change in unrealized appreciation................ 19,507,602 (15,097,438)
------------- ------------
NET INCREASE..................................... 126,213,340 131,738,349
------------- ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM NET REALIZED GAIN:
Class A shares....................................... (1,452,888) (401,300)
Class B shares....................................... (124,572,319) (51,411,180)
Class C shares....................................... (214,295) (98,960)
Class D shares....................................... (10,594,159) (4,282,604)
------------- ------------
TOTAL DISTRIBUTIONS.............................. (136,833,661) (56,194,044)
------------- ------------
Net increase (decrease) from transactions in shares
of beneficial interest.............................. 107,888,981 (44,859,929)
------------- ------------
NET INCREASE..................................... 97,268,660 30,684,376
NET ASSETS:
Beginning of period.................................. 515,679,144 484,994,768
------------- ------------
END OF PERIOD
(Including accumulated net investment losses of
$3,011,346 and $52,319, respectively)............ $612,947,804 $515,679,144
============= ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
9
<PAGE> 10
MORGAN STANLEY DEAN WITTER CAPITAL GROWTH SECURITIES
NOTES TO FINANCIAL STATEMENTS April 30, 2000 (unaudited)
1. ORGANIZATION AND ACCOUNTING POLICIES
Morgan Stanley 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. On
July 28, 1997, the Fund converted to a multiple class share structure.
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 and 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 securities are traded on more than one exchange, the securities are
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 Morgan Stanley Dean Witter Advisors 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; 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.
10
<PAGE> 11
MORGAN STANLEY DEAN WITTER CAPITAL GROWTH SECURITIES
NOTES TO FINANCIAL STATEMENTS April 30, 2000 (unaudited) continued
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, 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.
11
<PAGE> 12
MORGAN STANLEY DEAN WITTER CAPITAL GROWTH SECURITIES
NOTES TO FINANCIAL STATEMENTS April 30, 2000 (unaudited) continued
3. PLAN OF DISTRIBUTION
Shares of the Fund are distributed by Morgan Stanley 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 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 totaled
$15,057,895 at April 30, 2000.
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 Morgan Stanley Dean Witter Financial Advisors or other
selected broker-dealer representatives may be reimbursed in the subsequent
calendar year. For the six months ended April 30, 2000, the distribution fee was
accrued for Class A shares and Class C shares at the annual rate of 0.24% and
1.0%, respectively.
The Distributor has informed the Fund that for the six months ended April 30,
2000, it received contingent deferred sales charges from certain redemptions of
the Fund's Class B shares and Class C shares of $79,995 and $1,161, respectively
and received $2,542 in front-end sales
12
<PAGE> 13
MORGAN STANLEY DEAN WITTER CAPITAL GROWTH SECURITIES
NOTES TO FINANCIAL STATEMENTS April 30, 2000 (unaudited) continued
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 six months ended April 30, 2000 aggregated
$1,115,934,165 and $1,182,031,568, respectively.
For the six months ended April 30, 2000 the Fund incurred $138,385 in brokerage
commissions with DWR for portfolio transactions executed on behalf of the Fund.
At April 30, 2000, the Fund's payable for investments purchased and receivable
for investments sold included unsettled trades with DWR of $1,802,668 and
$3,311,057, respectively.
For the six months ended April 30, 2000, the Fund incurred brokerage commissions
of $102,800 with Morgan Stanley & Co., Inc., an affiliate of the Investment
Manager and Distributor, for portfolio transactions executed on behalf of the
Fund. At April 30, 2000, the Fund's payable for investments purchased and
receivable for investments sold included unsettled trades with Morgan Stanley &
Co., Inc. of $1,997,768 and $991,561, respectively.
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At April 30, 2000 the Fund had
transfer agent fees and expenses payable of approximately $291,600.
The Fund has an unfunded noncontributory defined benefit pension plan covering
all independent Trustees of the Fund who will have served as independent
Trustees for at least five years at the time of retirement. Benefits under this
plan are based on years of service and compensation during the last five years
of service. Aggregate pension costs for the six months ended April 30, 2000
included in Trustees fees and expenses in the Statement of Operations amounted
to $3,012. At April 30, 2000, the Fund had an accrued pension liability of
$52,952 which is included in accrued expenses in the Statement of Assets and
Liabilities.
13
<PAGE> 14
MORGAN STANLEY DEAN WITTER CAPITAL GROWTH SECURITIES
NOTES TO FINANCIAL STATEMENTS April 30, 2000 (unaudited) continued
5. FEDERAL INCOME TAX STATUS
As of October 31, 1999, the Fund had temporary book/tax differences primarily
attributable to capital loss deferrals on wash sales.
6. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
APRIL 30, 2000 OCTOBER 31, 1999
------------------------- --------------------------
(unaudited)
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- -------------
<S> <C> <C> <C> <C>
CLASS A SHARES
Sold........................................................ 172,665 $ 2,782,496 143,069 $ 2,289,077
Reinvestment of distributions............................... 98,234 1,410,649 28,595 388,035
Redeemed.................................................... (118,543) (1,820,700) (95,316) (1,520,516)
---------- ------------ ---------- -------------
Net increase - Class A...................................... 152,356 2,372,445 76,348 1,156,596
---------- ------------ ---------- -------------
CLASS B SHARES
Sold........................................................ 2,178,318 34,707,089 2,423,634 37,639,071
Reinvestment of distributions............................... 8,403,850 117,401,781 3,655,137 48,978,844
Redeemed.................................................... (4,233,961) (66,566,875) (8,138,374) (126,956,990)
---------- ------------ ---------- -------------
Net increase (decrease) - Class B........................... 6,348,207 85,541,995 (2,059,603) (40,339,075)
---------- ------------ ---------- -------------
CLASS C SHARES
Sold........................................................ 91,032 1,422,949 33,309 503,728
Reinvestment of distributions............................... 13,398 188,105 5,482 73,451
Redeemed.................................................... (13,782) (205,395) (63,569) (976,649)
---------- ------------ ---------- -------------
Net increase (decrease) - Class C........................... 90,648 1,405,659 (24,778) (399,470)
---------- ------------ ---------- -------------
CLASS D SHARES
Sold........................................................ 1,167,649 19,239,697 1,114,224 17,761,834
Reinvestment of distributions............................... 732,012 10,592,214 302,202 4,119,023
Redeemed.................................................... (674,807) (11,263,029) (1,714,336) (27,158,837)
---------- ------------ ---------- -------------
Net increase (decrease) - Class D........................... 1,224,854 18,568,882 (297,910) (5,277,980)
---------- ------------ ---------- -------------
Net increase (decrease) in Fund............................. 7,816,065 $107,888,981 (2,305,943) $ (44,859,929)
========== ============ ========== =============
</TABLE>
14
<PAGE> 15
MORGAN STANLEY 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
FOR THE SIX FOR THE YEAR FOR THE YEAR JULY 28, 1997*
MONTHS ENDED ENDED ENDED THROUGH
APRIL 30, 2000 OCTOBER 31, 1999 OCTOBER 31, 1998 OCTOBER 31, 1997
------------------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C> <C>
CLASS A SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period................. $16.91 $14.68 $18.75 $18.10
------ ------ ------ ------
Income (loss) from investment operations:
Net investment loss................................. (0.03) (0.04) (0.11) (0.04)
Net realized and unrealized gain (loss)............. 3.74 3.98 (0.55) 0.69
------ ------ ------ ------
Total income (loss) from investment operations....... 3.71 3.94 (0.66) 0.65
------ ------ ------ ------
Less distributions from net realized gain............ (4.43) (1.71) (3.41) --
------ ------ ------ ------
Net asset value, end of period....................... $16.19 $16.91 $14.68 $18.75
====== ====== ====== ======
TOTAL RETURN+........................................ 25.31 %(1) 29.74 % (2.84)% 3.59 %(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses............................................. 1.05 %(2)(3) 1.06 %(3) 1.09 %(3) 1.12 %(2)
Net investment loss.................................. (0.35)%(2)(3) (0.28)%(3) (0.69)%(3) (0.82)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands.............. $7,458 $5,212 $3,403 $1,684
Portfolio turnover rate.............................. 206 %(1) 557 % 230 % 123 %(1)
</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.
(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.
SEE NOTES TO FINANCIAL STATEMENTS
15
<PAGE> 16
MORGAN STANLEY DEAN WITTER CAPITAL GROWTH SECURITIES
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE SIX FOR THE YEAR ENDED OCTOBER 31
MONTHS ENDED ----------------------------------------------------------------
APRIL 30, 2000++ 1999++ 1998++ 1997*++ 1996 1995
-----------------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C> <C> <C> <C>
CLASS B SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning of
period.............................. $16.58 $14.53 $18.71 $16.98 $14.40 $11.86
------ ------ ------ ------ ------ ------
Income (loss) from investment
operations:
Net investment loss................. (0.09) (0.17) (0.23) (0.21) (0.11) (0.06)
Net realized and unrealized gain
(loss)............................ 3.65 3.93 (0.54) 4.68 2.69 2.60
------ ------ ------ ------ ------ ------
Total income (loss) from investment
operations.......................... 3.56 3.76 (0.77) 4.47 2.58 2.54
------ ------ ------ ------ ------ ------
Less distributions from net realized
gain................................ (4.43) (1.71) (3.41) (2.74) -- --
------ ------ ------ ------ ------ ------
Net asset value, end of period....... $15.71 $16.58 $14.53 $18.71 $16.98 $14.40
====== ====== ====== ====== ====== ======
TOTAL RETURN+........................ 24.91 %(1) 28.70% (3.56)% 31.21% 17.92% 21.42%
RATIOS TO AVERAGE NET ASSETS:
Expenses............................. 1.81 %(2)(3) 1.86%(3) 1.84%(3) 1.84% 1.84% 1.89%
Net investment loss.................. (1.11)%(2)(3) (1.08)%(3) (1.44)%(3) (1.26)% (0.64)% (0.43)%
SUPPLEMENTAL DATA:
Net assets, end of period, in
thousands........................... $545,182 $469,991 $441,787 $522,276 $506,571 $483,870
Portfolio turnover rate.............. 206 %(1) 557% 230% 123% 72% 33%
</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 held by certain employee
benefit plans established by Dean Witter Reynolds Inc., have been designated
as Class B shares. Shares held by those employee benefit plans prior July
28, 1997 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.
(1) Not annualized.
(2) Annualized.
(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.
SEE NOTES TO FINANCIAL STATEMENTS
16
<PAGE> 17
MORGAN STANLEY DEAN WITTER CAPITAL GROWTH SECURITIES
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX FOR THE YEAR FOR THE YEAR JULY 28, 1997*
MONTHS ENDED ENDED ENDED THROUGH
APRIL 30, 2000 OCTOBER 31, 1999 OCTOBER 31, 1998 OCTOBER 31, 1997
------------------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C> <C>
CLASS C SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period................. $16.64 $14.53 $18.71 $18.10
------ ------ ------ ------
Income (loss) from investment operations:
Net investment loss................................. (0.09) (0.12) (0.23) (0.07)
Net realized and unrealized gain (loss)............. 3.67 3.94 (0.54) 0.68
------ ------ ------ ------
Total income (loss) from investment operations....... 3.58 3.82 (0.77) 0.61
------ ------ ------ ------
Less distributions from net realized gain............ (4.43) (1.71) (3.41) --
------ ------ ------ ------
Net asset value, end of period....................... $15.79 $16.64 $14.53 $18.71
====== ====== ====== ======
TOTAL RETURN+........................................ 24.86 %(1) 29.17 % (3.56)% 3.37 %(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses............................................. 1.81 %(2)(3) 1.53 %(3) 1.84 %(3) 1.85 %(2)
Net investment loss.................................. (1.11)%(2)(3) (0.75)%(3) (1.44)%(3) (1.54)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands.............. $2,088 $692 $964 $389
Portfolio turnover rate.............................. 206 %(1) 557 % 230 % 123 %(1)
</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.
(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.
SEE NOTES TO FINANCIAL STATEMENTS
17
<PAGE> 18
MORGAN STANLEY DEAN WITTER CAPITAL GROWTH SECURITIES
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX FOR THE YEAR FOR THE YEAR JULY 28, 1997*
MONTHS ENDED ENDED ENDED THROUGH
APRIL 30, 2000 OCTOBER 31, 1999 OCTOBER 31, 1998 OCTOBER 31, 1997
------------------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C> <C>
CLASS D SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period................. $17.01 $14.73 $18.76 $18.10
------ ------ ------ ------
Income (loss) from investment operations:
Net investment loss................................. (0.01) (0.01) (0.07) (0.02)
Net realized and unrealized gain (loss)............. 3.77 4.00 (0.55) 0.68
------ ------ ------ ------
Total income (loss) from investment operations....... 3.76 3.99 (0.62) 0.66
------ ------ ------ ------
Less distributions from net realized gain............ (4.43) (1.71) (3.41) --
------ ------ ------ ------
Net asset value, end of period....................... $16.34 $17.01 $14.73 $18.76
====== ====== ====== ======
TOTAL RETURN+........................................ 25.50 %(1) 30.00 % (2.59)% 3.65 %(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses............................................. 0.81 %(2)(3) 0.86 %(3) 0.84 %(3) 0.82 %(2)
Net investment loss.................................. (0.11)%(2)(3) (0.08)%(3) (0.44)%(3) (0.50)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands.............. $58,220 $39,785 $38,840 $36,863
Portfolio turnover rate.............................. 206 %(1) 557 % 230 % 123 %(1)
</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.
(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.
SEE NOTES TO FINANCIAL STATEMENTS
18
<PAGE> 19
(This Page Intentionally Left Blank)
<PAGE> 20
TRUSTEES
----------------------------------
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
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
Mitchell M. Merin
President
Barry Fink
Vice President, Secretary and General Counsel
Peter Hermann
Vice President
Thomas F. Caloia
Treasurer
TRANSFER AGENT
----------------------------------
Morgan Stanley Dean Witter Trust FSB
Harborside Financial Center -- Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
----------------------------------
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
----------------------------------
Morgan Stanley Dean Witter Advisors Inc.
Two World Trade Center
New York, New York 10048
The financial statements included herein have been taken from the records of the
Fund without examination by the independent accountants and accordingly they
do not express an opinion thereon.
This report is submitted for the general information of shareholders of the
Fund. For more detailed information about the Fund, its officers and trustees,
fees, expenses and other pertinent information, please see the prospectus of
the Fund.
This report is not authorized for distribution to prospective investors in the
Fund unless preceded or accompanied by an effective prospectus. Read the
prospectus carefully before investing.
Morgan Stanley Dean Witter Distributors Inc., member NASD
MORGAN STANLEY
DEAN WITTER
CAPITAL GROWTH
SECURITIES
[PHOTO]
Semiannual Report
April 30, 2000
