DEAN WITTER CAPITAL APPRECIATION FUND, N-30D, 1997-01-30

DEAN WITTER CAPITAL APPRECIATION FUND
N-30D, 1997-01-30

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<PAGE>
DEAN WITTER CAPITAL APPRECIATION FUND TWO WORLD TRADE CENTER, NEW YORK, NEW
YORK 10048
LETTER TO THE SHAREHOLDERS NOVEMBER 30, 1996

DEAR SHAREHOLDER:
The Fund's fiscal year ended November 30, 1996, was a volatile period for
small-cap issues. Although these stocks performed well in the spring, they gave
back most of these gains in June and July. Since then, they have rebounded
somewhat, despite the market's strong large-cap bias as many investors
gravitated to larger and more established equities. The current environment of
benign interest rates and moderate economic growth bodes well for small-caps and
we believe the Fund's portfolio is well positioned to outperform market
averages.
PERFORMANCE AND PORTFOLIO
For the fiscal year ended November 30, 1996, the Fund produced a total return of
23.36 percent compared to 27.85 percent for the broad-based Standard & Poor's
500 Composite Stock Price Index (S&P 500) and 17.07 percent for the average fund
in the Lipper Capital Appreciation Funds Index. The accompanying chart
illustrates the performance of a $10,000 investment in the Fund from inception
through the fiscal year ended November 30, 1996, versus the performance of
similar hypothetical investments in the S&P 500 and the Lipper Capital
Appreciation Funds Index.
The Fund's performance was fueled by broad exposure to small-cap stocks in the
$5 to $25 price range with sound fundamentals, solid earnings momentum,
financial stability and management strength. The Fund is diversified among many
different industries and has the flexibility to seek opportunities wherever they
may lie.
Currently, the Fund has significant exposure to energy and oil service. These
stocks are typically highly cyclical with investors buying in the fall and
selling in the spring. However, during the Fund's fiscal year, inventories
reached new lows, day rates for drilling in the Gulf of Mexico increased and
many stocks rose above their 15-year trading
<PAGE>
DEAN WITTER CAPITAL APPRECIATION FUND
LETTER TO THE SHAREHOLDERS NOVEMBER 30, 1996, CONTINUED

ranges. Portfolio holdings in this sector include Diamond Offshore Drilling,
Inc., ENSCO International, Inc. and Marine Drilling Company, Inc.
[GRAPHIC]
The Fund's technology exposure is well
diversified among a wide variety of
subsectors, including
telecommunications and software.
[GRAPHIC]
Niche retail holdings also boosted the
Fund's performance. Several
restructurings, including inventory
reductions and store closings, took
place over the Fund's fiscal year and
benefited Fund holdings. Companies like
Paul Harris Stores, Inc. and Ross
Stores, Inc. were particularly strong
performers.
LOOKING AHEAD
[GRAPHIC]
Going forward, we believe that the Fund
is well positioned for strong
performance. We continue to see
compelling investment opportunities in
small- to mid-cap stocks, which we
believe have not been overvalued by the
market. We appreciate your ongoing
support of Dean Witter Capital
Appreciation Fund and look forward to
continuing to serve your investment
needs.
Sincerely,
[SIGNATURE]
CHARLES A. FIUMEFREDDO
CHAIRMAN OF THE BOARD
<PAGE>
DEAN WITTER CAPITAL APPRECIATION FUND
PORTFOLIO OF INVESTMENTS NOVEMBER 30, 1996
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (99.9%)
ADVERTISING (1.4%)
65,000 Ha Lo Industries, Inc.*............. $ 2,502,500
4,000 Lamar Advertising Co. (Class A)*.... 93,000
37,350 Outdoor Systems, Inc.*.............. 947,756
15,200 Snyder Communications, Inc.*........ 370,500
19,700 Universal Outdoor Holdings, Inc.*... 529,437
---------------
4,443,193
---------------
AEROSPACE & DEFENSE (0.7%)
100,000 BE Aerospace, Inc.*................. 2,287,500
---------------
AIR TRANSPORT (0.2%)
30,000 Alaska Air Group, Inc.*............. 723,750
---------------
AUTO PARTS (1.3%)
80,000 Boyds Wheels, Inc.*................. 1,180,000
30,000 Breed Technologies, Inc............. 802,500
10,000 Keystone Automotive Industries,
Inc.*............................... 142,500
50,000 Tower Automotive, Inc.*............. 1,593,750
7,700 Ugly Duckling Corp.*................ 131,862
5,400 United Auto Group, Inc.*............ 124,875
---------------
3,975,487
---------------
BIOTECHNOLOGY (2.4%)
40,000 Centocor, Inc.*..................... 1,105,000
150,000 Guilford Pharmaceuticals, Inc.*..... 2,437,500
60,000 Interneuron Pharmaceuticals,
Inc.*............................... 1,170,000
50,000 Liposome Co., Inc.*................. 893,750
100,000 Medarex, Inc.*...................... 787,500
70,000 Sequus Pharmaceuticals, Inc.*....... 988,750
---------------
7,382,500
---------------
BREWERY (0.0%)
40,000 American Craft Brewing International
Ltd.*............................... 100,000
---------------
BROADCAST MEDIA (0.3%)
50,000 All American Communications, Inc.
(Class B)*.......................... 487,500
9,400 Young Broadcasting Corp. (Class
A)*................................. 279,650
---------------
767,150
---------------
BUILDING MATERIALS (0.4%)
100,000 Universal Forest Products, Inc...... 1,250,000
---------------

<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------
<C> <S> <C>
BUSINESS SYSTEMS (1.6%)
45,000 American Management Systems,
Inc.*............................... $ 1,597,500
30,000 Cognizant Corp...................... 1,035,000
60,000 Encad, Inc.*........................ 2,250,000
---------------
4,882,500
---------------
COMMERCIAL SERVICES (7.8%)
9,100 Abacus Direct Corp.*................ 216,125
30,000 ABR Information Services, Inc.*..... 1,282,500
30,000 Billing Information Concepts*....... 892,500
20,000 Caribiner International, Inc.*...... 882,500
120,000 Childrens Comprehensive Service,
Inc.*............................... 1,860,000
50,000 Claremont Technology Group, Inc.*... 1,212,500
100,000 Employee Solutions, Inc.*........... 1,837,500
25,000 FYI Inc.*........................... 537,500
80,000 ICTS Holland Production BV*
(Netherlands)....................... 890,000
2,000 International Network Services*..... 64,000
55,000 Learning Tree International,
Inc.*............................... 2,488,750
50,000 Leasing Solutions, Inc.*............ 1,418,750
105,000 National Education Corp.*........... 1,483,125
10,100 National Processing, Inc.*.......... 181,800
30,000 Precision Response Corp.*........... 1,102,500
50,000 Saville Systems, PLC (ADR)*
(Ireland)........................... 2,062,500
35,000 Service Experts, Inc.*.............. 857,500
40,000 Strayer Education, Inc.............. 880,000
30,000 Superior Services, Inc.*............ 498,750
15,000 TeleTech Holdings, Inc.*............ 472,500
20,000 The Vincam Group, Inc.*............. 695,000
40,000 Whittman-Hart, Inc.*................ 1,790,000
60,000 Youth Services International,
Inc.*............................... 765,000
---------------
24,371,300
---------------
COMPUTER EQUIPMENT (0.3%)
40,000 American Power Conversion Corp.*.... 945,000
---------------
COMPUTER SOFTWARE & SERVICES (19.3%)
110,000 4FRONT Software International,
Inc.*............................... 440,000
10,000 Advent Software, Inc.*.............. 315,000
50,000 Ansoft Corp.*....................... 237,500
2,900 Aspect Development, Inc.*........... 67,425
4,900 Aurum Software, Inc.*............... 172,112
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER CAPITAL APPRECIATION FUND
PORTFOLIO OF INVESTMENTS NOVEMBER 30, 1996, CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------
<C> <S> <C>
40,000 Axent Technologies, Inc.*........... $ 630,000
60,000 Black Box Corp.*.................... 2,430,000
60,000 BroadVision, Inc.*.................. 412,500
97,500 Brooktrout Technology, Inc.*........ 3,120,000
20,000 BTG, Inc.*.......................... 397,500
3,000 C-Net, Inc.*........................ 50,250
40,100 CCC Information Services Group,
Inc.*............................... 611,525
30,000 Cellular Technical Services Co.,
Inc.*............................... 491,250
30,000 Check Point Software Technologies
Ltd.* (Israel)...................... 671,250
80,000 Ciber, Inc.*........................ 2,560,000
30,000 Citrix Systems, Inc.*............... 1,335,000
80,000 Computer Task Group, Inc............ 3,350,000
3,200 Cybermedia, Inc.*................... 63,200
50,000 Document Sciences Corp.*............ 525,000
50,000 DST Systems, Inc.*.................. 1,618,750
40,000 Engineering Animation, Inc.*........ 940,000
20,000 Farallon Communications, Inc.*...... 235,000
1,000 Forte Software, Inc.*............... 31,750
40,000 Harbinger Corp.*.................... 1,040,000
40,000 Hyperion Software Corp.*............ 860,000
900 I2 Technologies, Inc.*.............. 34,200
52,400 IDT Corp.*.......................... 694,300
40,000 IKOS Systems, Inc.*................. 770,000
2,800 Indus Group, Inc.*.................. 56,700
4,600 Infinity Financial Technology,
Inc.*............................... 74,750
70,000 Interlink Computer Sciences,
Inc.*............................... 910,000
150,000 ISG International Software Group
Ltd.* (Israel)...................... 2,531,250
21,000 JDA Software Group, Inc.*........... 561,750
40,000 Keane, Inc.*........................ 2,115,000
50,000 Manchester Equipment Co.*........... 500,000
60,000 Manugistics Group, Inc.*............ 2,235,000
50,000 MDL Information Systems, Inc.*...... 837,500
1,800 Mechanical Dynamics, Inc.*.......... 25,875
9,700 Memco Software Ltd.*................ 185,512
31,500 Mindspring Enterprises, Inc.*....... 192,937
70,000 Nicollet Process Engineering,
Inc.*............................... 96,250
9,100 ONTRACK Data International, Inc.*... 100,100
2,400 Open Market, Inc.*.................. 33,900
30,000 Pegasystems, Inc.*.................. 892,500

<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------
<C> <S> <C>
30,000 Phoenix International Ltd., Inc.*... $ 547,500
100,000 Pri Automation, Inc.*............... 4,650,000
60,000 Printware, Inc.*.................... 270,000
30,000 Raptor Systems, Inc.*............... 660,000
17,600 Renaissance Solutions, Inc.*........ 649,000
5,000 Rogue Wave Software*................ 63,750
70,000 Ross Systems, Inc.*................. 481,250
60,000 Scopus Technology, Inc.*............ 2,235,000
3,900 SeaChange International, Inc.*...... 100,425
8,400 Select Software Tools Ltd. (ADR)*
(United Kingdom).................... 147,000
30,000 Siebel Systems, Inc.*............... 1,327,500
100,000 SPSS, Inc.*......................... 2,875,000
11,700 SQA, Inc.*.......................... 337,837
47,500 STB Systems, Inc.*.................. 1,056,875
20,200 Summit Design, Inc.*................ 194,425
19,350 Sykes Enterprises, Inc.*............ 824,794
4,500 Technology Modeling Associates,
Inc.*............................... 48,375
90,000 Technology Solutions Co.*........... 4,050,000
40,000 TRO Learning, Inc.*................. 800,000
11,700 Trusted Information Systems,
Inc.*............................... 138,938
7,700 USCS International, Inc.*........... 125,125
50,000 Vanstar Corp.*...................... 1,362,500
50,000 Verilink Corp.*..................... 1,462,500
---------------
59,860,330
---------------
COMPUTERS (1.4%)
25,000 Ciprico, Inc.*...................... 331,250
20,000 IDX Systems Corp.*.................. 485,000
70,000 Micron Electronics, Inc.*........... 1,338,750
60,000 MICROS Systems, Inc.*............... 1,777,500
40,000 Proxima Corp.*...................... 550,000
---------------
4,482,500
---------------
COMPUTERS - PERIPHERAL EQUIPMENT (0.9%)
90,000 Tech Data Corp.*.................... 2,700,000
---------------
DISTRIBUTION (0.3%)
40,000 Central Garden & Pet Co.*........... 865,000
---------------
DRUGS (0.4%)
50,000 IDEC Pharmaceuticals Corp.*......... 1,206,250
---------------
EDUCATION (0.8%)
80,000 Control Data Systems, Inc.*......... 1,570,000
75,000 Cornell Corrections, Inc.*.......... 740,625
13,000 Education Management Corporation*... 234,000
---------------
2,544,625
---------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER CAPITAL APPRECIATION FUND
PORTFOLIO OF INVESTMENTS NOVEMBER 30, 1996, CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------
<C> <S> <C>
ELECTRONICS (7.5%)
50,000 Ampex Corp. (Class A)*.............. $ 512,500
40,000 Analog Devices, Inc.*............... 1,285,000
100,000 Computer Products, Inc.*............ 2,000,000
40,000 Flextronics International, Ltd.*.... 1,400,000
50,000 FORE Systems, Inc.*................. 1,962,500
80,000 Galileo Corp.*...................... 1,900,000
30,000 Holmes Protection Group, Inc.*...... 367,500
160,000 JPM Co.*............................ 1,880,000
60,000 Printrak International, Inc.*....... 555,000
30,000 SAES Getters SpA (ADR)* (Italy)..... 315,000
20,000 Sawtek, Inc.*....................... 735,000
70,000 Sipex Corp.*........................ 1,968,750
50,000 SRS Labs, Inc.*..................... 706,250
60,000 Tencor Instruments*................. 1,590,000
60,000 Ultrak, Inc.*....................... 1,815,000
90,000 Vitesse Semiconductor Corp.*........ 4,286,250
---------------
23,278,750
---------------
ELECTRONICS - SEMICONDUCTORS/COMPONENTS (3.8%)
40,000 Atmel Corp.*........................ 1,315,000
130,000 Etec Systems, Inc.*................. 3,802,500
110,000 Kulicke & Soffa Industries, Inc.*... 2,227,500
50,000 Microsemi Corp.*.................... 575,000
60,000 S3 Incorporated*.................... 1,012,500
100,000 Seeq Technology, Inc.*.............. 312,500
50,000 Supertex, Inc.*..................... 931,250
70,000 VLSI Technology, Inc.*.............. 1,601,250
---------------
11,777,500
---------------
ENGINEERING (0.2%)
50,000 Bouygues Offshore S.A. (ADR)*
(France)............................ 587,500
---------------
ENTERTAINMENT (0.6%)
60,000 Acres Gaming Inc.*.................. 997,500
30,000 Electronic Arts, Inc.*.............. 963,750
1,300 Penske Motorsports, Inc.*........... 39,813
---------------
2,001,063
---------------
ENVIRONMENTAL CONTROL (1.7%)
60,000 Tetra Tech, Inc.*................... 1,117,500
90,000 Tetra Technologies, Inc.*........... 2,283,750
60,000 U.S.A. Waste Services, Inc.*........ 1,935,000
---------------
5,336,250
---------------

<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------
<C> <S> <C>
FINANCIAL (0.7%)
10,000 Bank United Corp. (Class A)......... $ 266,250
26,000 Delta Financial Corporation*........ 594,750
25,000 HealthCare Financial Partners,
Inc.*............................... 312,500
40,900 Hubco Exploration, Inc.............. 996,938
2,500 Metris Companies, Inc.*............. 58,125
---------------
2,228,563
---------------
FINANCIAL SERVICES (1.7%)
80,000 First Financial Caribbean Corp...... 2,160,000
800 First USA Paymentech, Inc.*......... 31,200
99,000 Southern Pacific Funding Corp.*..... 3,143,250
---------------
5,334,450
---------------
FOOD SERVICES (0.3%)
117,500 BAB Holdings, Inc.*................. 910,625
---------------
FOOD WHOLESALERS (0.7%)
90,000 Northland Cranberries, Inc. (Class
A).................................. 2,002,500
---------------
FOREST PRODUCTS, PAPER & PACKAGING (0.3%)
30,000 Caraustar Industries, Inc........... 1,016,250
---------------
HEALTHCARE - MISCELLANEOUS (0.0%)
1,900 Superior Consultant Holdings
Corp.*.............................. 45,125
---------------
HOSPITAL MANAGEMENT (1.0%)
70,000 FPA Medical Management, Inc.*....... 1,330,000
30,000 Medcath, Inc.*...................... 446,250
30,000 Pediatrix Medical Group, Inc.*...... 1,158,750
---------------
2,935,000
---------------
HOTELS/MOTELS (0.5%)
80,000 Extended Stay America, Inc.*........ 1,660,000
---------------
HOUSEHOLD APPLIANCES (0.6%)
50,000 Furniture Brands International,
Inc.*............................... 618,750
50,000 O'Sullivan Industries Holdings,
Inc.*............................... 556,250
40,000 Stanley Furniture Co., Inc.*........ 640,000
---------------
1,815,000
---------------
INDUSTRIALS (1.0%)
50,000 DT Industries, Inc.................. 1,731,250
40,000 Zoltek Companies, Inc.*............. 1,405,000
---------------
3,136,250
---------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER CAPITAL APPRECIATION FUND
PORTFOLIO OF INVESTMENTS NOVEMBER 30, 1996, CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------
<C> <S> <C>
INSURANCE (2.1%)
35,000 Capmac Holdings, Inc................ $ 1,168,125
106,000 Delphi Financial Group, Inc. (Class
A)*................................. 2,994,500
30,000 FBL Financial Group, Inc. (Class
A).................................. 787,500
60,000 Penn Treaty American Corp.*......... 1,455,000
---------------
6,405,125
---------------
INVESTMENT COMPANIES (0.4%)
30,000 Sirrom Capital Corp................. 1,095,000
---------------
MACHINERY (0.3%)
30,000 Grandall Industries, Inc.*.......... 390,000
20,600 National-Oilwell, Inc.*............. 581,950
---------------
971,950
---------------
MANUFACTURING (0.6%)
105,000 Ballantyne of Omaha, Inc.*.......... 1,601,250
11,500 Chicago Miniature Lamp, Inc.*....... 379,500
---------------
1,980,750
---------------
MEDICAL PRODUCTS & SUPPLIES (3.2%)
97,400 Capstone Pharmacy Services*......... 1,034,875
45,000 ClinTrials Research Inc.*........... 945,000
90,000 Cryolife, Inc.*..................... 1,282,500
31,472 Fresenius Medical Care AG (ADR)*
(Germany)........................... 952,028
20,000 Immunomedics, Inc.*................. 135,000
120,000 Med-Design Corp.*................... 780,000
50,000 Molecular Dynamics, Inc.*........... 468,750
40,000 Norland Medical Systems, Inc.*...... 210,000
35,000 PLC Systems, Inc.* (Canada)......... 844,375
60,000 Sano Corp.*......................... 1,005,000
70,000 Staar Surgical Co.*................. 778,750
40,000 Vivus, Inc.*........................ 1,360,000
---------------
9,796,278
---------------
MEDICAL SERVICES (0.1%)
34,800 Medical Alliance, Inc.*............. 378,450
---------------
METALS & MINING (0.2%)
10,000 BRE-X Minerals Ltd* (Canada)........ 153,008
1,000 BRO-X Minerals Ltd.* (Canada)....... 1,897
40,000 International Curator Resources,
Ltd.* (Canada)...................... 326,023
20,000 US Energy Corp.*.................... 272,500
---------------
753,428
---------------

<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------
<C> <S> <C>
OFFSHORE DRILLING (2.6%)
20,000 Diamond Offshore Drilling, Inc.*.... $ 1,275,000
80,000 Reading & Bates Corp.*.............. 2,320,000
60,000 Rowan Companies, Inc.*.............. 1,417,500
70,000 Tidewater, Inc...................... 3,062,500
---------------
8,075,000
---------------
OIL & GAS (3.4%)
30,000 Barrett Resources Corp.*............ 1,222,500
110,000 Basin Exploration, Inc.*............ 660,000
10,000 Camco, Inc.......................... 417,500
94,000 Comstock Resources Inc.*............ 1,186,750
100,000 Gulf Canada Resources Ltd.*
(Canada)............................ 650,000
30,000 Lomak Petroleum, Inc................ 491,250
35,000 Marine Drilling Company, Inc.*...... 555,625
100,000 Noble Drilling Corp.*............... 1,925,000
29,900 Rutherford-Moran Oil Corp.*......... 904,475
70,000 Swift Energy Co.*................... 2,213,750
50,000 Zydeco Energy, Inc.*................ 293,750
---------------
10,520,600
---------------
OIL - EXPLORATION & PRODUCTION (0.9%)
60,000 Belden & Blake Corp.*............... 1,515,000
25,000 Forest Oil Corp.*................... 387,500
30,000 Mallon Resources Corp.*............. 240,000
30,000 Oryx Energy Co.*.................... 622,500
---------------
2,765,000
---------------
OIL EQUIPMENT & SERVICES (2.3%)
40,000 ENSCO International, Inc.*.......... 1,755,000
60,000 Global Industries Ltd.*............. 1,035,000
20,000 Pride Petroleum Services, Inc.*..... 362,500
50,000 Smith International, Inc.*.......... 2,043,750
80,000 Varco International, Inc.*.......... 1,830,000
---------------
7,026,250
---------------
PHARMACEUTICALS (3.1%)
60,000 Alkermes, Inc.*..................... 847,500
40,000 Alliance Pharmaceutical Corp.*...... 495,000
45,000 Chirex, Inc.*....................... 483,750
60,000 Curative Health Services, Inc.*..... 1,530,000
40,000 ICOS Corp.*......................... 305,000
70,000 North American Vaccine, Inc.*....... 1,706,250
10,000 Orphan Medical, Inc.*............... 93,750
60,000 PathoGenesis Corp.*................. 1,537,500
80,000 SangStat Medical Corp.*............. 1,810,000
50,000 Vical, Inc.*........................ 925,000
---------------
9,733,750
---------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER CAPITAL APPRECIATION FUND
PORTFOLIO OF INVESTMENTS NOVEMBER 30, 1996, CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------
<C> <S> <C>
POLLUTION CONTROL (1.2%)
35,000 Mansur Industries, Inc.*............ $ 275,625
100,000 US Filter Corp.*.................... 3,425,000
---------------
3,700,625
---------------
PUBLISHING (0.4%)
50,000 Hollinger International, Inc. (Class
A).................................. 550,000
30,000 International Imaging Materials,
Inc.*............................... 720,000
---------------
1,270,000
---------------
RESTAURANTS (1.4%)
78,000 CKE Restaurants, Inc................ 2,388,750
30,000 Garden Fresh Restaurant Corp.*...... 300,000
90,000 International Game Technology....... 1,755,000
---------------
4,443,750
---------------
RETAIL (2.4%)
50,000 Buckle, Inc.*....................... 1,412,500
5,600 Cost Plus, Inc.*.................... 102,200
3,900 Hot Topic, Inc.*.................... 73,125
2,300 Loehmann's, Inc.*................... 69,000
30,000 Maxim Group Inc.*................... 476,250
50,000 Paul Harris Stores, Inc.*........... 900,000
30,000 Ross Stores, Inc.................... 1,526,250
50,000 Service Merchandise Co., Inc.*...... 275,000
50,000 Tuesday Morning Corp.*.............. 1,075,000
40,000 Vans, Inc.*......................... 605,000
50,000 Zale Corp.*......................... 993,750
---------------
7,508,075
---------------
RETAIL - DEPARTMENT STORES (0.9%)
70,000 Dollar Tree Stores, Inc.*........... 2,660,000
---------------
RETAIL - FOOD CHAINS (0.2%)
6,200 P J America, Inc.*.................. 117,025
25,000 Wild Oats Markets, Inc.*............ 478,125
---------------
595,150
---------------
RETAIL - SPECIALTY (3.3%)
60,000 Cole National Corp. (Class A)*...... 1,575,000
63,600 Consolidated Stores Corp.*.......... 2,353,200
32,200 Eagle Hardware & Garden, Inc.*...... 776,825
40,000 Fossil, Inc.*....................... 520,000
50,000 Goody's Family Clothing, Inc.*...... 806,250
30,000 Pep Boys-Manny, Moe & Jack.......... 1,098,750
30,000 PetSmart, Inc.*..................... 765,000

<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------
<C> <S> <C>
50,000 TJX Companies, Inc.................. $ 2,256,250
---------------
10,151,275
---------------
SPORTING GOODS (0.0%)
10,000 Hibbett Sporting Goods, Inc.*....... 152,500
---------------
STEEL & IRON (1.9%)
90,000 Algoma Steel, Inc.* (Canada)........ 383,447
70,000 Gibraltar Steel Corp.*.............. 1,610,000
95,000 Olympic Steel, Inc.*................ 2,291,875
40,000 Shiloh Industries, Inc.*............ 660,000
23,300 Steel Dynamics, Inc.*............... 419,400
100,000 UNR Industries, Inc................. 662,500
---------------
6,027,222
---------------
TECHNOLOGY (0.7%)
110,000 Chips & Technologies, Inc.*......... 2,296,250
---------------
TELECOMMUNICATION EQUIPMENT (3.5%)
3,400 Advanced Fibre Communications,
Inc.*............................... 165,750
40,000 AML Communications, Inc.*........... 560,000
105,000 Davox Corp.*........................ 3,990,000
60,000 Digital Microwave Corp.*............ 1,432,500
50,000 DSC Communications Corp.*........... 900,000
6,300 GeoTel Communications
Corporation*........................ 81,900
70,000 Harmonic Lightwaves, Inc.*.......... 1,382,500
50,000 Loral Space & Communications
Ltd.*............................... 925,000
50,000 Mitec Telecom Inc.* (Canada)........ 238,960
30,000 NICE-Systems Ltd. (ADR)* (Israel)... 536,250
1,500 Polycom, Inc.*...................... 8,063
60,000 TALX Corporation*................... 472,500
---------------
10,693,423
---------------
TELECOMMUNICATIONS (2.7%)
33,937 Ascend Communications, Inc.*........ 2,413,769
110,000 ICG Communications, Inc.*........... 2,310,000
14,900 Lightbridge, Inc.*.................. 135,963
80,000 Tel-Save Holdings, Inc.*............ 1,700,000
80,000 Tollgrade Communications, Inc.*..... 1,880,000
---------------
8,439,732
---------------
TEXTILES (0.4%)
30,000 Cutter & Buck, Inc.*................ 315,000
40,000 Mohawk Industries, Inc.*............ 945,000
---------------
1,260,000
---------------
</TABLE>

TOTAL COMMON STOCKS
(IDENTIFIED COST $256,827,049)...... 310,521,550
---------------

<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------
<C> <S> <C>

PREFERRED STOCK (0.0%)
MEDICAL PRODUCTS & SUPPLIES
30,000 Fresenius National Medical Care
(Class D)* (Germany) (Identified
Cost $6,069)........................ $ 3,900
---------------

TOTAL INVESTMENTS
(IDENTIFIED COST
$256,833,118) (a)........... 99.9% 310,525,450

OTHER ASSETS IN EXCESS OF
LIABILITIES................. 0.1 283,531
----- ------------

NET ASSETS.................. 100.0% $310,808,981
----- ------------
----- ------------

<FN>
- ---------------------
ADR American Depository Receipt.
* Non-income producing security.
(a) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $64,130,128 and the
aggregate gross unrealized depreciation is $10,437,796, resulting in net
unrealized appreciation of $53,692,332.
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER CAPITAL APPRECIATION FUND
FINANCIAL STATEMENTS

STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1996

<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $256,833,118)............................ $310,525,450
Receivable for:
Investments sold........................................ 2,379,512
Shares of beneficial interest sold...................... 1,064,873
Dividends............................................... 35,871
Deferred organizational expenses............................ 139,725
Prepaid expenses............................................ 27,099
------------
TOTAL ASSETS........................................... 314,172,530
------------
LIABILITIES:
Payable for:
Investments purchased................................... 1,958,750
Plan of distribution fee................................ 254,751
Investment management fee............................... 186,815
Shares of beneficial interest repurchased............... 45,552
Payable to bank............................................. 751,058
Accrued expenses............................................ 166,623
------------
TOTAL LIABILITIES...................................... 3,363,549
------------
NET ASSETS:
Paid-in-capital............................................. 273,802,192
Net unrealized appreciation................................. 53,692,332
Accumulated net realized loss............................... (16,685,543)
------------
NET ASSETS............................................. $310,808,981
------------
------------
NET ASSET VALUE PER SHARE,
23,929,847 SHARES OUTSTANDING (UNLIMITED SHARES AUTHORIZED
OF $.01 PAR VALUE)........................................
$12.99
------------
------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER CAPITAL APPRECIATION FUND
FINANCIAL STATEMENTS, CONTINUED

STATEMENT OF OPERATIONS
FOR THE YEAR ENDED NOVEMBER 30, 1996

<TABLE>
<S> <C>
NET INVESTMENT INCOME:
INCOME
Dividends (net of $5,220 foreign withholding tax)........... $ 414,965
Interest.................................................... 191,463
------------
TOTAL INCOME........................................... 606,428
------------
EXPENSES
Plan of distribution fee.................................... 2,065,176
Investment management fee................................... 1,607,148
Transfer agent fees and expenses............................ 346,076
Registration fees........................................... 71,363
Professional fees........................................... 61,004
Custodian fees.............................................. 39,978
Shareholder reports and notices............................. 37,262
Organizational expenses..................................... 35,457
Trustees' fees and expenses................................. 18,576
Other....................................................... 1,883
------------
TOTAL EXPENSES......................................... 4,283,923
------------
NET INVESTMENT LOSS.................................... (3,677,495)
------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized loss........................................... (16,624,523)
Net change in unrealized appreciation....................... 48,698,318
------------
NET GAIN............................................... 32,073,795
------------
NET INCREASE................................................ $ 28,396,300
------------
------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER CAPITAL APPRECIATION FUND
FINANCIAL STATEMENTS, CONTINUED

STATEMENT OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR OCTOBER 27, 1995*
ENDED THROUGH
NOVEMBER 30, 1996 NOVEMBER 30, 1995
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment loss......................................... $ (3,677,495) $ (66,087)
Net realized loss........................................... (16,624,523) (61,020)
Net change in unrealized appreciation....................... 48,698,318 4,994,014
----------------- -----------------
NET INCREASE........................................... 28,396,300 4,866,907
Net increase from transactions in shares of beneficial
interest.................................................. 180,404,150 97,041,624
----------------- -----------------
NET INCREASE........................................... 208,800,450 101,908,531
NET ASSETS:
Beginning of period......................................... 102,008,531 100,000
----------------- -----------------
END OF PERIOD.......................................... $310,808,981 $102,008,531
----------------- -----------------
----------------- -----------------
</TABLE>

- ---------------------
* Commencement of operations.

SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER CAPITAL APPRECIATION FUND
NOTES TO FINANCIAL STATEMENTS NOVEMBER 30, 1996

1. ORGANIZATION AND ACCOUNTING POLICIES
Dean Witter Capital Appreciation 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
long-term capital appreciation. The Fund was organized as a Massachusetts
business trust on July 31, 1995 and had no operations other than those relating
to organizational matters and the issuance of 10,000 shares of beneficial
interest for $100,000 to Dean Witter InterCapital Inc. (the "Investment
Manager") to effect the Fund's initial capitalization. The Fund commenced
operations on October 27, 1995.
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 the Investment Manager that sale or bid prices are not reflective
of a security's market value, portfolio securities are valued at their fair
value as determined in good faith under procedures established by and under the
general supervision of the Trustees (valuation of debt securities for which
market quotations are not readily available may be based upon current market
prices of securities which are comparable in coupon, rating and maturity or an
appropriate matrix utilizing similar factors); and (4) short-term debt
securities having a maturity date of more than sixty days at time of purchase
are valued on a mark-to-market basis until sixty days prior to maturity and
thereafter at amortized cost based on their value on the 61st day. Short-term
debt securities having a maturity date of sixty days or less at the time of
purchase are valued at amortized cost.
B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on the
trade date (date the order to buy or sell is executed). Realized gains and
losses on security transactions are determined by the identified cost method.
Dividend income and other distributions are recorded on the ex-
<PAGE>
DEAN WITTER CAPITAL APPRECIATION FUND
NOTES TO FINANCIAL STATEMENTS NOVEMBER 30, 1996, CONTINUED

dividend date except for certain dividends on foreign securities which are
recorded as soon as the Fund is informed after the ex-dividend date. Discounts
are accreted over the life of the respective securities. Interest income is
accrued daily.
C. FEDERAL INCOME TAX STATUS -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income to its shareholders.
Accordingly, no federal income tax provision is required.
D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund records dividends and
distributions to its shareholders on the ex-dividend 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.
E. ORGANIZATIONAL EXPENSES -- The Investment Manager paid the organizational
expenses of the Fund in the amount of approximately $179,000 and was reimbursed
for the full amount thereof. Such expenses have been deferred and are being
amortized on the straight-line method over a period not to exceed five years
from the commencement of operations.
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
annual rate of 0.75% to the net assets of the Fund determined as of the close of
each business day.
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
<PAGE>
DEAN WITTER CAPITAL APPRECIATION FUND
NOTES TO FINANCIAL STATEMENTS NOVEMBER 30, 1996, CONTINUED

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 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 investors upon redemption of shares,
if for any reason the Plan is terminated, the Trustees will consider at that
time the manner in which to treat such expenses. The Distributor has advised the
Fund that such excess amounts, including carrying charges, total $11,218,433 at
November 30, 1996.
<PAGE>
DEAN WITTER CAPITAL APPRECIATION FUND
NOTES TO FINANCIAL STATEMENTS NOVEMBER 30, 1996, CONTINUED

The Distributor has informed the Fund that for the year ended November 30, 1996,
it received approximately $484,000 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 November 30, 1996 aggregated
$412,322,346 and $228,446,454, respectively.
For the year ended November 30, 1996, the Fund incurred brokerage commissions of
$21,460 with DWR for portfolio transactions executed on behalf of the Fund.
Dean Witter Trust Company, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At November 30, 1996, the Fund had
transfer agent fees and expenses payable of approximately $39,000.
5. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:

<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR OCTOBER 27, 1995*
ENDED THROUGH
NOVEMBER 30, 1996 NOVEMBER 30, 1995
---------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
----------- -------------- ----------- ------------
<S> <C> <C> <C> <C>
Sold............................................................. 20,783,480 $ 262,842,130 9,767,074 $ 97,945,242
Repurchased...................................................... (6,542,161) (82,437,980) (88,546) (903,618)
----------- -------------- ----------- ------------
Net increase..................................................... 14,241,319 $ 180,404,150 9,678,528 $ 97,041,624
----------- -------------- ----------- ------------
----------- -------------- ----------- ------------
<FN>
- ---------------------
* Commencement of operations.
</TABLE>

6. FEDERAL INCOME TAX STATUS
At November 30, 1996, the Fund had a net capital loss carryover of approximately
$15,684,000 which will be available through November 30, 2004 to offset future
capital gains to the extent provided by regulations.
Capital losses incurred after October 31 ("post-October" losses) within the
taxable year are deemed to arise on the first business day of the Fund's next
taxable year. The Fund incurred and will elect to defer net capital losses of
approximately $756,000 during fiscal 1996. As of November 30, 1996, the Fund had
temporary book/tax differences attributable to post-October losses and capital
loss deferrals on wash sales and permanent book/tax differences attributable to
a net operating loss. To reflect reclassifications arising from permanent
book/tax differences for the year ended November 30, 1996, paid-in-capital was
charged and net investment loss was credited $3,677,495.
<PAGE>
DEAN WITTER CAPITAL APPRECIATION FUND
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 YEAR OCTOBER 27, 1995*
ENDED THROUGH NOVEMBER
NOVEMBER 30, 1996 30, 1995
- ------------------------------------------------------------------------------------

<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:

Net asset value, beginning of period......... $ 10.53 $ 10.00
------ ------

Net investment loss.......................... (0.15) (0.01)

Net realized and unrealized gain............. 2.61 0.54
------ ------

Total from investment operations............. 2.46 0.53
------ ------

Net asset value, end of period............... $ 12.99 $ 10.53
------ ------
------ ------

TOTAL INVESTMENT RETURN+..................... 23.36% 5.30% (1)

RATIOS TO AVERAGE NET ASSETS:
Expenses..................................... 2.00% 2.87% (2)

Net investment loss.......................... (1.72)% (0.79)% (2)

SUPPLEMENTAL DATA:
Net assets, end of period, in thousands...... $310,809 $102,009

Portfolio turnover rate...................... 108% 7% (1)

Average commission rate paid................. $0.0570 --
<FN>

- ---------------------
* Commencement of operations.
+ 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.
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER CAPITAL APPRECIATION FUND
REPORT OF INDEPENDENT ACCOUNTANTS

TO THE SHAREHOLDERS AND TRUSTEES
OF DEAN WITTER CAPITAL APPRECIATION 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 Capital Appreciation
Fund (the "Fund") at November 30, 1996, the results of its operations for the
year then ended, and the changes in its net assets and the financial highlights
for the year then ended and for the period October 27, 1995 (commencement of
operations) through November 30, 1995, 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 November 30, 1996 by correspondence with the
custodian and brokers and the application of alternative auditing procedures
where confirmations from brokers were not received, provide a reasonable basis
for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036
JANUARY 10, 1997
<PAGE>

TRUSTEES

Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Dr. Manuel H. Johnson
Michael E. Nugent
Philip J. Purcell
John L. Schroeder

OFFICERS

Charles A. Fiumefreddo
Chairman and Chief Executive Officer

Sheldon Curtis
Vice President, Secretary and General Counsel

Ronald Worobel
Vice President

Thomas F. Caloia
Treasurer

TRANSFER AGENT

Dean Witter Trust Company
Harborside Financial Center - Plaza Two
Jersey City, New Jersey 07311

INDEPENDENT ACCOUNTANTS

Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036

INVESTMENT MANAGER

Dean Witter InterCapital Inc.
Two World Trade Center
New York, New York 10048

This report is submitted for the general information of shareholders of the
Fund. For more detailed information about the Fund, its officers and trustees,
fees, expenses and other pertinent information, please see the prospectus of the
Fund.

This report is not authorized for distribution to prospective investors in the
Fund unless preceded or accompanied by an effective prospectus.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

DEAN WITTER

CAPITAL APPRECIATION

FUND

[GRAPHIC]

ANNUAL REPORT

NOVEMBER 30, 1996

<PAGE>

DEAN WITTER CAPITAL APPRECIATION FUND

GROWTH OF $10,000

DATE TOTAL S&P 500 LIPPER
October 27, 1995 $10,000 $10,000 $10,000
November 30, 1995 $10,530 $10,485 $10,369
November 30, 1996 $12,590 (3) $13,405 $12,139

AVERAGE ANNUAL TOTAL RETURNS

1 YEAR LIFE OF FUND
23.36 (1) 26.98 (1)
18.36 (2) 23.41 (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%,
since inception-4%). See the Fund's current prospectus for complete
details on fees and sales charges.

(3) Closing value after the deduction of a 4% CDSC, assuming a complete
redemption on November 30, 1996.

(4) The Standard and 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 index does not include
any expenses, fees or charges. The index is unmanaged and should not be
considered an investment.

(5) The Lipper Capital Appreciation Funds Index is an equally-weighted
performance index of the largest qualifying funds (based on net assets) in
the Lipper Capital Appreciation 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.