DEAN WITTER CAPITAL APPRECIATION FUND, N-30D, 1997-07-31

DEAN WITTER CAPITAL APPRECIATION FUND
N-30D, 1997-07-31

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<PAGE>
DEAN WITTER CAPITAL APPRECIATION FUND TWO WORLD TRADE CENTER, NEW YORK, NEW
YORK 10048
LETTER TO THE SHAREHOLDERS MAY 31, 1997

DEAR SHAREHOLDER:

The six-month period ended May 31, 1997, was particularly volatile for small-cap
stocks, as investors became increasingly frustrated by the prolonged period of
underperformance. The market's large-cap bias continued and small caps lagged
the Standard & Poor's 500 Composite Stock Price Index (S&P 500) for most of the
period. The Federal Reserve Board's 25 basis point rate increase in April
affected small-cap growth stocks more than the broad market as investors shunned
high-multiple issues while continuing to bid up the prices of larger, more
liquid, big-cap names. However, at period-end, the small caps rebounded as
investors perceived good value in the small-cap market. In May, the Russell 2000
gained 11.1 percent versus 6.0 percent for the S&P 500.

PERFORMANCE AND PORTFOLIO

For the six months ended May 31, 1997, the Fund produced a total return of -2.54
percent compared to 13.14 percent for the S&P 500 and 4.37 percent for the
Lipper Capital Appreciation Funds Index. The Fund's underperformance relative to
these benchmarks during this time period was the result of our focus on
small-cap stocks -- which represent about 85 percent of the Fund's total net
assets -- while the market favored larger companies. While this period was
disappointing for the Fund, we believe that the small cap segment of the market
remains undervalued with greater growth potential than the broader market over
the long term.

The Fund continues to pursue growth stocks characterized by sound fundamentals,
solid earnings momentum, financial stability and management strength. While the
Fund is well diversified across a broad range of industries, it is more heavily
weighted in computer software and services, commercial services,
telecommunications equipment and retail. Among the Fund's holdings that
performed particularly well during the period were Keane, Inc. and Payless
ShoeSource, Inc.
<PAGE>
DEAN WITTER CAPITAL APPRECIATION FUND
LETTER TO THE SHAREHOLDERS MAY 31, 1997, CONTINUED

LOOKING AHEAD

We believe that the current benign interest rate environment and moderate
economic climate bode well for small-cap stocks and that these issues are
positioned to outperform the overall market. In addition, we believe that the
Fund's investment strategy of emphasizing company fundamentals and having its
portfolio weighted in industries we believe will deliver above-average growth,
positions the Fund to participate in a rebound of small-cap stocks.

On June 30, 1997, the Fund's Trustees approved a proposal to adopt a multiple
class share structure. Through this arrangement, the Fund will offer four
classes of shares with various sales charges, ongoing fees and other features.
This conversion is scheduled to take place on July 28, 1997. A revised
prospectus, which includes complete details regarding this change, will be
mailed to shareholders in the coming weeks.

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
RESULTS OF SPECIAL MEETING (UNAUDITED)

On May 21, 1997, a special meeting of the shareholders of Dean Witter Capital
Appreciation Fund was held for the purpose of voting on four separate matters;
the results of which are as follows:

1) Approval of a new Investment Management Agreement between the Fund and
Dean Witter InterCapital Inc., in connection with the merger of Morgan
Stanley Group Inc. with Dean Witter Discover & Co.

2) Election of Trustees:

<TABLE>
<CAPTION>
FOR WITHHELD
---------- --------
<S> <C> <C>
Michael Bozic....................................................................................... 12,973,442 819,269
Charles A. Fiumefreddo.............................................................................. 12,977,359 815,352
Edwin J. Garn....................................................................................... 12,987,590 805,121
John R. Haire....................................................................................... 12,953,003 839,708
Wayne E. Hedien..................................................................................... 12,971,920 820,791
Dr. Manuel H. Johnson............................................................................... 12,981,022 811,689
Michael E. Nugent................................................................................... 12,990,283 802,428
Philip J. Purcell................................................................................... 12,993,392 799,319
John L. Schroeder................................................................................... 12,963,962 828,749
</TABLE>

3) Approval of a new investment policy with respect to investments in
certain other investment companies:

4) Ratification of the selection of Price Waterhouse LLP as the Fund's
independent accountants:

<TABLE>
<CAPTION>
VOTE NO. OF SHARES
- ------------------------------------------------------------------------------------------------------- -------------------
<S> <C>
For.................................................................................................... 12,616,635
Against................................................................................................ 257,391
Abstain................................................................................................ 918,685
</TABLE>
<PAGE>
DEAN WITTER CAPITAL APPRECIATION FUND
PORTFOLIO OF INVESTMENTS MAY 31, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (99.0%)
ADVERTISING (0.7%)
60,000 Snyder Communications, Inc.*........ $ 1,650,000
25,000 TMP Worldwide, Inc.*................ 487,500
---------------
2,137,500
---------------
AEROSPACE & DEFENSE (0.5%)
100,000 Kellstrom Industries, Inc.*......... 1,475,000
---------------
AIRLINES (0.5%)
50,000 US Airways Group Inc.*.............. 1,737,500
---------------
AUTO PARTS (0.7%)
60,000 Tower Automotive, Inc.*............. 2,377,500
---------------
BIOTECHNOLOGY (2.8%)
40,000 Centocor, Inc.*..................... 1,400,000
150,000 Guilford Pharmaceuticals, Inc.*..... 3,712,500
50,000 Immunex Corp.*...................... 1,556,250
60,000 Liposome Co., Inc.*................. 1,515,000
50,000 Osteotech, Inc.*.................... 443,750
70,000 Somanetics Corp.*................... 280,000
---------------
8,907,500
---------------
BROADCAST MEDIA (0.3%)
70,000 All American Communications, Inc.
(Class B)*........................ 945,000
---------------
CABLE & TELECOMMUNICATIONS (0.6%)
70,000 International Family Entertainment,
Inc. (Series B)*.................. 1,951,250
---------------
CEMENT (0.3%)
50,000 Giant Cement Holding, Inc.*......... 875,000
---------------
CHEMICALS - SPECIALTY (0.5%)
50,000 Crompton & Knowles Corp............. 1,168,750
60,000 Eco Soil Systems, Inc.*............. 307,500
---------------
1,476,250
---------------
COMMERCIAL SERVICES (3.9%)
30,000 Caribiner International, Inc.*...... 1,942,500
100,000 Learning Tree International,
Inc.*............................. 3,900,000
130,000 May & Speh, Inc.*................... 1,446,250
5,300 Metro Information Services, Inc.*... 97,387
30,000 Quebecor Printing, Inc. (Canada).... 526,144
45,000 Service Experts, Inc.*.............. 1,260,000
50,000 Superior Services, Inc.*............ 1,075,000
80,000 Whittman-Hart, Inc.*................ 2,080,000
---------------
12,327,281
---------------

<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------
<C> <S> <C>
COMMUNICATIONS - EQUIPMENT/MANUFACTURERS (0.3%)
20,000 3Com Corp.*......................... $ 965,000
---------------
COMMUNICATIONS - SOFTWARE (0.2%)
40,000 Aware, Inc.*........................ 550,000
---------------
COMPUTER EQUIPMENT (0.3%)
60,000 International Rectifier Corp.*...... 1,005,000
---------------
COMPUTER SOFTWARE (6.0%)
80,000 Cerner Corp.*....................... 1,560,000
50,000 Compuware Corp.*.................... 2,318,750
40,000 Cyrix Corp.*........................ 1,005,000
100,000 Data Dimensions, Inc.*.............. 3,025,000
60,000 Information Management Resources,
Inc.*............................. 2,100,000
30,000 Pairgain Technologies, Inc.*........ 626,250
40,000 Peerless Systems Corp.*............. 615,000
60,000 SEEC, Inc.*......................... 1,117,500
40,000 Simulation Sciences, Inc.*.......... 590,000
120,000 Software Artistry, Inc.*............ 1,470,000
110,000 Systems & Computer Technology
Corp.*............................ 2,612,500
50,000 UniComp, Inc.*...................... 431,250
60,000 Wall Data, Inc.*.................... 1,492,500
---------------
18,963,750
---------------
COMPUTER SOFTWARE & SERVICES (13.0%)
60,000 Analysts International Corp......... 2,115,000
2,900 Aspect Development, Inc.*........... 66,337
35,000 Avant! Corp.*....................... 787,500
40,100 CCC Information Services Group,
Inc.*............................. 666,662
40,000 Ciber, Inc.*........................ 1,650,000
70,000 Computer Horizons Corp.*............ 3,832,500
70,000 Harbinger Corp.*.................... 2,135,000
40,000 HPR, Inc.*.......................... 635,000
40,000 Hyperion Software Corp.*............ 715,000
40,000 IKOS Systems, Inc.*................. 970,000
40,000 Imnet Systems, Inc.*................ 995,000
70,000 ISG International Software Group
Ltd.* (Israel).................... 840,000
100,000 Keane, Inc.*........................ 5,637,500
100,000 Lycos, Inc.*........................ 1,425,000
45,000 Manugistics Group, Inc.*............ 2,891,250
30,000 National TechTeam, Inc.*............ 731,250
60,000 Phoenix International Ltd., Inc.*... 1,230,000
45,000 PRI Automation, Inc.*............... 1,710,000
28,000 Printware, Inc.*.................... 105,000
100,000 Scopus Technology, Inc.*............ 2,987,500
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER CAPITAL APPRECIATION FUND
PORTFOLIO OF INVESTMENTS MAY 31, 1997 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------
<C> <S> <C>
100,000 SMART Modular Technologies, Inc.*... $ 3,275,000
50,000 SPSS, Inc.*......................... 1,562,500
70,000 STB Systems, Inc.*.................. 2,240,000
7,700 USCS International, Inc.*........... 174,212
100,000 Xylan Corp.*........................ 2,075,000
---------------
41,452,211
---------------
COMPUTERS (1.9%)
60,000 Gulfstream Aerospace Corp.*......... 1,762,500
80,000 MICROS Systems, Inc.*............... 3,140,000
10,000 Sunquest Information Systems,
Inc.*............................. 118,750
30,000 Synopsys, Inc.*..................... 1,113,750
---------------
6,135,000
---------------
COMPUTERS - SYSTEMS (0.7%)
100,000 Data General Corp.*................. 2,137,500
---------------
DRUGS (0.3%)
50,000 IDEC Pharmaceuticals Corp.*......... 1,118,750
---------------
EDUCATION (0.4%)
85,000 Cornell Corrections, Inc.*.......... 1,020,000
13,000 Education Management Corp.*......... 310,375
---------------
1,330,375
---------------
ELECTRONIC COMPONENTS (0.3%)
31,500 Vishay Intertechnology, Inc.*....... 925,313
---------------
ELECTRONICS (3.2%)
30,000 Analog Devices, Inc.*............... 802,500
40,000 Holmes Protection Group, Inc.*...... 540,000
42,000 Innovex, Inc........................ 1,165,500
100,000 JPM Co.*............................ 3,000,000
100,000 Printrak International, Inc.*....... 1,175,000
100,000 Vitesse Semiconductor Corp.*........ 3,587,500
---------------
10,270,500
---------------
ELECTRONICS & ELECTRICAL (0.9%)
70,000 Teradyne, Inc.*..................... 2,870,000
---------------
ELECTRONICS - SEMICONDUCTORS (0.5%)
60,000 MRV Communications, Inc.*........... 1,470,000
---------------
ELECTRONICS - SEMICONDUCTORS/COMPONENTS (2.7%)
60,000 Electroglas, Inc.*.................. 1,507,500
50,000 Etec Systems, Inc.*................. 2,225,000
110,000 Kulicke & Soffa Industries, Inc.*... 3,712,500
40,000 Leitch Technology Corp.* (Canada)... 948,439

<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------
<C> <S> <C>
2,000 Rambus Inc.*........................ $ 62,500
---------------
8,455,939
---------------
ENTERTAINMENT (0.6%)
30,000 Circus Circus Enterprises, Inc.*.... 780,000
40,000 Grand Casinos, Inc.*................ 515,000
30,000 Speedway Motorsports, Inc.*......... 712,500
---------------
2,007,500
---------------
ENVIRONMENTAL (0.3%)
30,000 Allied Waste Industries, Inc.*...... 438,750
80,000 ITEQ, Inc.*......................... 620,000
---------------
1,058,750
---------------
ENVIRONMENTAL CONTROL (1.7%)
40,000 Culligan Water Technologies,
Inc.*............................. 1,780,000
100,000 U.S.A Waste Services, Inc.*......... 3,625,000
---------------
5,405,000
---------------
FINANCIAL (1.4%)
40,000 Block (H.&R.), Inc.................. 1,320,000
70,000 Gold Banc Corp., Inc................ 910,000
44,800 Hartford Life, Inc. (Class A)*...... 1,500,800
50,000 Reliance Group Holdings, Inc........ 612,500
---------------
4,343,300
---------------
FOOD PROCESSING (1.0%)
110,000 International Multifoods Corp....... 3,107,500
---------------
FOODS (0.2%)
40,000 Foodmaker, Inc.*.................... 560,000
---------------
FURNITURE (0.2%)
25,900 Knoll, Inc.*........................ 488,863
---------------
HEALTHCARE (0.1%)
30,000 Bone Care International, Inc.*...... 345,000
---------------
HEALTHCARE - DIVERSIFIED (0.2%)
30,000 Healthsouth Corp.*.................. 686,250
---------------
HEALTHCARE - MISCELLANEOUS (0.6%)
60,000 Equity Corporation International*... 1,417,500
14,400 Superior Consultant Holdings
Corp.*............................ 421,200
---------------
1,838,700
---------------
HEALTHCARE SERVICES (0.1%)
30,000 NovaCare, Inc.*..................... 378,750
---------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER CAPITAL APPRECIATION FUND
PORTFOLIO OF INVESTMENTS MAY 31, 1997 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------
<C> <S> <C>
HOSPITAL MANAGEMENT (0.8%)
70,000 FPA Medical Management, Inc.*....... $ 1,400,000
80,000 Medcath, Inc.*...................... 1,190,000
---------------
2,590,000
---------------
HOSPITAL RELATED (0.6%)
60,000 Genesis Health Ventures, Inc.*...... 1,972,500
---------------
HOTELS/MOTELS (0.5%)
30,000 Harrah's Entertainment, Inc.*....... 558,750
40,000 La Quinta Inns, Inc................. 920,000
---------------
1,478,750
---------------
HOUSEHOLD APPLIANCES (0.7%)
70,000 Furniture Brands International,
Inc.*............................. 1,093,750
50,000 O'Sullivan Industries Holdings,
Inc.*............................. 781,250
24,900 Stanley Furniture Co., Inc.*........ 429,525
---------------
2,304,525
---------------
INSURANCE (0.5%)
60,000 Penn Treaty American Corp.*......... 1,620,000
---------------
MACHINERY (2.4%)
50,000 Chart Industries, Inc............... 1,125,000
70,000 Grandall Industries, Inc.*.......... 1,050,000
40,000 MagneTek, Inc.*..................... 700,000
100,000 National-Oilwell, Inc.*............. 4,837,500
---------------
7,712,500
---------------
MACHINERY - DIVERSIFIED (0.8%)
20,000 Asyst Technologies, Inc.*........... 790,000
60,000 Credence Systems Corp.*............. 1,770,000
---------------
2,560,000
---------------
MANUFACTURING (1.7%)
105,000 Ballantyne of Omaha, Inc.*.......... 1,693,125
40,000 Cognex Corp.*....................... 1,040,000
70,000 General Scanning, Inc.*............. 936,250
60,000 Regal-Beloit Corp................... 1,597,500
---------------
5,266,875
---------------
MEDICAL PRODUCTS & SUPPLIES (1.2%)
30,000 Health Care & Retirement Corp.*..... 1,020,000
100,000 Molecular Dynamics, Inc.*........... 1,425,000
20,000 Patterson Dental Co.*............... 680,000
35,000 PLC Systems, Inc.* (Canada)......... 614,688
---------------
3,739,688
---------------

<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------
<C> <S> <C>
MEDICAL SERVICES (0.4%)
100,000 Medical Resources, Inc.*............ $ 1,375,000
---------------
METALS & MINING (0.0%)
1,000 BRO-X Minerals Ltd.* (Canada)....... 508
---------------
MISCELLANEOUS (2.8%)
16,700 Allin Communications Corp.*......... 50,100
45,000 Brunswick Technologies, Inc.*....... 399,375
30,000 GATX Corp........................... 1,702,500
50,000 Mail-Well, Inc.*.................... 1,612,500
60,000 Maverick Tube Corp.*................ 1,792,500
60,000 OPTEK Technology, Inc.*............. 690,000
70,000 Royal Group Technologies Ltd.*
(Canada).......................... 1,715,000
40,000 Triarc Co., Inc. (Class A)*......... 915,000
---------------
8,876,975
---------------
NATURAL GAS - DISTRIBUTION (0.7%)
60,000 Valero Energy Corp.................. 2,145,000
---------------
NATURAL GAS - EXPLORATION & PRODUCTION (0.2%)
30,000 Gulf Island Fabrication, Inc.*...... 723,750
---------------
OIL & GAS (2.3%)
40,000 Barringer Technologies, Inc.*....... 585,000
50,000 Basin Exploration, Inc.*............ 356,250
15,000 Bellwether Exploration Co.*......... 148,125
60,000 Edge Petroleum Corp.*............... 840,000
120,000 Gulf Canada Resources, Ltd.*
(Canada).......................... 1,095,000
85,000 Lomak Petroleum, Inc................ 1,508,750
100,000 Noble Drilling Corp.*............... 2,175,000
95,000 Zydeco Energy, Inc.*................ 486,875
---------------
7,195,000
---------------
OIL & GAS DRILLING (1.0%)
60,000 Patterson Energy, Inc.*............. 2,130,000
100,000 Unit Corp.*......................... 1,075,000
---------------
3,205,000
---------------
OIL & GAS EXPLORATION (0.6%)
100,000 NUMAR Corp.*........................ 1,925,000
---------------
OIL & GAS PRODUCTS (0.5%)
50,000 St. Mary Land & Exploration Co...... 1,562,500
---------------
OIL EQUIPMENT & SERVICES (0.9%)
25,000 ENSCO International, Inc.*.......... 1,246,875
60,000 Global Industries Ltd.*............. 1,297,500
30,000 Wiser Oil Co........................ 468,750
---------------
3,013,125
---------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER CAPITAL APPRECIATION FUND
PORTFOLIO OF INVESTMENTS MAY 31, 1997 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------
<C> <S> <C>
OIL RELATED (0.4%)
60,000 Veritas DGC, Inc.*.................. $ 1,245,000
---------------
PACKAGING & BOTTLING (0.2%)
40,000 Jefferson Smurfit Corp.*............ 720,000
---------------
PAPER (0.9%)
100,000 Scotts Company (The) (Class A)*..... 2,925,000
---------------
PHARMACEUTICALS (1.8%)
60,000 Alkermes, Inc.*..................... 982,500
60,000 Emisphere Technologies, Inc.*....... 1,230,000
20,000 Genset (ADR)* (France).............. 342,500
30,000 PathoGenesis Corp.*................. 817,500
100,000 SangStat Medical Corp.*............. 2,462,500
---------------
5,835,000
---------------
POLLUTION CONTROL (0.2%)
30,000 Mansur Industries, Inc.*............ 521,250
---------------
PUBLISHING (0.7%)
80,000 Valassis Communications, Inc.*...... 2,220,000
---------------
REAL ESTATE (0.3%)
50,000 Catellus Development Corp.*......... 843,750
---------------
RETAIL (3.3%)
100,000 Claire's Stores, Inc................ 1,925,000
50,000 Family Dollar Stores, Inc........... 1,287,500
30,000 Hot Topic, Inc.*.................... 855,000
80,000 Michaels Stores, Inc.*.............. 1,570,000
30,000 Pier 1 Imports, Inc................. 671,250
70,000 Ross Stores, Inc.................... 1,986,250
70,000 Stein Mart, Inc.*................... 2,100,000
---------------
10,395,000
---------------
RETAIL - DEPARTMENT STORES (1.5%)
60,000 Dollar General Corp................. 2,017,500
60,000 Payless ShoeSource, Inc.*........... 2,842,500
---------------
4,860,000
---------------
RETAIL - SPECIALTY (4.7%)
30,000 Advanced Lighting Technologies,
Inc.*............................. 757,500
70,000 Ashworth, Inc.*..................... 621,250
40,000 Baker (J.), Inc..................... 320,000
114,000 Braun's Fashions Corp.*............. 912,000
30,000 Circuit City Stores, Inc............ 1,185,000
110,000 Cole National Corp. (Class A)*...... 4,166,250
100,000 Consolidated Stores Corp.*.......... 3,825,000
50,000 DSI Toys, Inc.*..................... 400,000
90,000 Funco, Inc.*........................ 1,428,750

<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------
<C> <S> <C>
30,000 TJX Companies, Inc.................. $ 1,440,000
---------------
15,055,750
---------------
SEMICONDUCTORS (3.0%)
50,000 Burr-Brown Corp.*................... 1,562,500
40,000 Integrated Circuit Systems, Inc.*... 710,000
60,000 KLA-Tencor Corp.*................... 2,850,000
50,000 Plasma-Therm, Inc.*................. 293,750
100,000 TriQuint Semiconductor, Inc.*....... 3,950,000
---------------
9,366,250
---------------
SPECIALIZED SERVICES (0.6%)
50,000 Service Corp. International......... 1,762,500
---------------
TECHNOLOGY (2.1%)
50,000 Aerial Communications, Inc.*........ 431,250
30,000 Brilliant Digital Entertainment,
Inc.*............................. 180,000
60,000 CIENA Corp.*........................ 2,797,500
50,000 Cyberoptics Corp.*.................. 825,000
6,700 IONA Technologies PLC (ADR)* (United
Kingdom).......................... 115,575
60,000 Kuhlman Corp........................ 1,657,500
3,600 LHS Group, Inc.*.................... 118,800
40,000 TransAct Technologies Inc.*......... 480,000
---------------
6,605,625
---------------
TECHNOLOGY RELATED (0.5%)
150,000 Graham-Field Health Products,
Inc.*............................. 1,593,750
---------------
TELECOMMUNICATION EQUIPMENT (3.5%)
157,500 Davox Corp.*........................ 5,079,375
90,000 Digital Microwave Corp.*............ 2,767,500
50,000 DSC Communications Corp.*........... 1,275,000
60,000 Mitec Telecom Inc.* (Canada)........ 403,050
50,000 NICE-Systems Ltd. (ADR)* (Israel)... 1,500,000
---------------
11,024,925
---------------
TELECOMMUNICATIONS (3.3%)
30,000 General DataComm Industries,
Inc.*............................. 270,000
30,000 Millicom International Cellular
S.A.*............................. 1,361,250
70,000 QUALCOMM, Inc.*..................... 3,368,750
50,000 Tel-Save Holdings, Inc.*............ 762,500
80,000 Telco Communications Group, Inc.*... 1,860,000
30,000 Telefonica de Argentina S.A. (ADR)
(Class B)* (Argentina)............ 1,087,500
</TABLE>

TOTAL COMMON STOCKS
(IDENTIFIED COST $260,157,887)...... 314,195,240
---------------

<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)...................... $ 2,250
---------------
</TABLE>

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS
- -----------
<C> <S> <C>
SHORT-TERM INVESTMENT (3.5%)
REPURCHASE AGREEMENT
$ 11,207 The Bank of New York 5.44% due
06/02/97 (dated 05/30/97; proceeds
$11,212,509; collateralized by
$11,588,580 Federal National
Mortgage Assoc. 0.00% due 08/26/97
valued at $11,431,580) (Identified
Cost $11,207,431)................. 11,207,431
---------------

TOTAL INVESTMENTS
(IDENTIFIED COST
$271,371,387) (A)........... 102.5% 325,404,921

LIABILITIES IN EXCESS OF
OTHER ASSETS................ (2.5) (7,943,231)
----- ------------
NET ASSETS.................. 100.0% $317,461,690
----- ------------
----- ------------
<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 $58,102,392 and the
aggregate gross unrealized depreciation is $4,068,858, resulting in net
unrealized appreciation of $54,033,534.
</TABLE>

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

STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1997 (UNAUDITED)

<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $271,371,387)............................ $325,404,921
Receivable for:
Investments sold........................................ 1,646,407
Shares of beneficial interest sold...................... 716,495
Dividends............................................... 24,150
Deferred organizational expenses............................ 121,892
Prepaid expenses and other assets........................... 57,607
------------

TOTAL ASSETS........................................... 327,971,472
------------

LIABILITIES:
Payable for:
Investments purchased................................... 6,431,568
Shares of beneficial interest repurchased............... 3,525,664
Plan of distribution fee................................ 258,931
Investment management fee............................... 194,198
Accrued expenses and other payables......................... 99,421
------------
TOTAL LIABILITIES...................................... 10,509,782
------------
NET ASSETS:
Paid-in-capital............................................. 290,687,547
Net unrealized appreciation................................. 54,033,534
Net investment loss......................................... (2,828,513)
Accumulated net realized loss............................... (24,430,878)
------------
NET ASSETS............................................. $317,461,690
------------
------------
NET ASSET VALUE PER SHARE,
25,071,738 SHARES OUTSTANDING (UNLIMITED SHARES AUTHORIZED
OF $.01 PAR VALUE)........................................
$12.66
------------
------------
</TABLE>

STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED MAY 31, 1997 (UNAUDITED)

<TABLE>
<S> <C>
NET INVESTMENT INCOME:

INCOME
Dividends (net of $3,045 foreign withholding tax)........... $ 269,332
Interest.................................................... 80,335
------------

TOTAL INCOME........................................... 349,667
------------

EXPENSES
Plan of distribution fee.................................... 1,583,599
Investment management fee................................... 1,187,699
Transfer agent fees and expenses............................ 269,500
Shareholder reports and notices............................. 32,940
Professional fees........................................... 27,951
Custodian fees.............................................. 25,297
Registration fees........................................... 24,402
Organizational expenses..................................... 17,833
Trustees' fees and expenses................................. 6,100
Other....................................................... 2,859
------------

TOTAL EXPENSES......................................... 3,178,180
------------

NET INVESTMENT LOSS.................................... (2,828,513)
------------

NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized loss........................................... (7,745,335)
Net change in unrealized appreciation....................... 341,202
------------

NET LOSS............................................... (7,404,133)
------------

NET DECREASE................................................ $(10,232,646)
------------
------------
</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
FOR THE SIX YEAR
MONTHS ENDED ENDED
MAY 31, 1997 NOVEMBER
(UNAUDITED) 30, 1996
- ---------------------------------------------------------------------------------------------
<S> <C> <C>

INCREASE (DECREASE) IN NET ASSETS:

OPERATIONS:
Net investment loss......................................... $ (2,828,513) $(3,677,495)
Net realized loss........................................... (7,745,335) (16,624,523)
Net change in unrealized appreciation....................... 341,202 48,698,318
----------------- -----------

NET INCREASE (DECREASE)................................ (10,232,646) 28,396,300
Net increase from transactions in shares of beneficial
interest.................................................. 16,885,355 180,404,150
----------------- -----------

NET INCREASE........................................... 6,652,709 208,800,450

NET ASSETS:
Beginning of period......................................... 310,808,981 102,008,531
----------------- -----------

END OF PERIOD
(INCLUDING A NET INVESTMENT LOSS OF $2,828,513 AND $0,
RESPECTIVELY)........................................... $317,461,690 $310,808,981
----------------- -----------
----------------- -----------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER CAPITAL APPRECIATION FUND
NOTES TO FINANCIAL STATEMENTS MAY 31, 1997 (UNAUDITED)

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 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 Dean Witter InterCapital Inc. (the "Investment Manager") that sale
or bid prices are not reflective of a security's market value, portfolio
securities are valued at their fair value as determined in good faith under
procedures established by and under the general supervision of the Trustees
(valuation of debt securities for which market quotations are not readily
available may be based upon current market prices of securities which are
comparable in coupon, rating and maturity or an appropriate matrix utilizing
similar factors); and (4) short-term debt securities having a maturity date of
more than sixty days at time of purchase are valued on a mark-to-market basis
until sixty days prior to maturity and thereafter at amortized cost based on
their value on the 61st day. Short-term debt securities having a maturity date
of sixty days or less at the time of purchase are valued at amortized cost.

B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on the
trade date (date the order to buy or sell is executed). Realized gains and
losses on security transactions are determined by the identified cost method.
Dividend income and other distributions are recorded on the ex-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.
<PAGE>
DEAN WITTER CAPITAL APPRECIATION FUND
NOTES TO FINANCIAL STATEMENTS MAY 31, 1997 (UNAUDITED) CONTINUED

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. Effective May 1, 1997, the Agreement was amended to reduce
the annual fee to 0.725% of the portion of daily net assets exceeding $500
million.

Under the terms of the Agreement, in addition to managing the Fund's
investments, the Investment Manager maintains certain of the Fund's books and
records and furnishes, at its own expense, office space, facilities, equipment,
clerical, bookkeeping and certain legal services and pays the salaries of all
personnel, including officers of the Fund who are employees of the Investment
Manager. The Investment Manager also bears the cost of telephone services, heat,
light, power and other utilities provided to the Fund.
<PAGE>
DEAN WITTER CAPITAL APPRECIATION FUND
NOTES TO FINANCIAL STATEMENTS MAY 31, 1997 (UNAUDITED) CONTINUED

3. PLAN OF DISTRIBUTION

Shares of the Fund are distributed by Dean Witter Distributors Inc. (the
"Distributor"), an affiliate of the Investment Manager. The Fund has adopted a
Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under the Act pursuant
to which the Fund pays the Distributor compensation, accrued daily and payable
monthly, at an annual rate of 1.0% of the lesser of: (a) the average daily
aggregate gross sales of the Fund's shares since the 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 others who engage in or support
distribution of the Fund's shares or who service shareholder accounts, including
overhead and telephone expenses, printing and distribution of prospectuses and
reports used in connection with the offering of the Fund's shares to other than
current shareholders and preparation, printing and distribution of sales
literature and advertising materials. In addition, the Distributor may utilize
fees paid pursuant to the Plan to compensate DWR and other selected
broker-dealers for their opportunity costs in advancing such amounts, which
compensation would be in the form of a carrying charge on any unreimbursed
distribution expenses 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 $12,089,412 at
May 31, 1997.

The Distributor has informed the Fund that for the six months ended May 31,
1997, it received approximately $550,000 in contingent deferred sales charges
from certain redemptions of the Fund's shares.
<PAGE>
DEAN WITTER CAPITAL APPRECIATION FUND
NOTES TO FINANCIAL STATEMENTS MAY 31, 1997 (UNAUDITED) CONTINUED

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 May 31, 1997 aggregated
$314,102,027 and $303,025,854, respectively.

For the six months ended May 31, 1997, the Fund incurred brokerage commissions
of $9,040 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 May 31, 1997, the Fund had
transfer agent fees and expenses payable of approximately $43,000.

5. SHARES OF BENEFICIAL INTEREST

Transactions in shares of beneficial interest were as follows:

<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
MAY 31, 1997 FOR THE YEAR
---------------------------- ENDED
NOVEMBER 30, 1996
(UNAUDITED) --------------------------
SHARES AMOUNT SHARES AMOUNT
----------- -------------- ----------- ------------
<S> <C> <C> <C> <C>
Sold............................................................. 7,225,619 $ 92,890,941 20,783,480 $262,842,130
Repurchased...................................................... (6,083,728) (76,005,586) (6,542,161) (82,437,980)
----------- -------------- ----------- ------------
Net increase..................................................... 1,141,891 $ 16,885,355 14,241,319 $180,404,150
----------- -------------- ----------- ------------
----------- -------------- ----------- ------------
</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.

7. SUBSEQUENT EVENT

On June 30, 1997, the Fund's Board of Trustees approved a proposal to adopt a
multiple class share structure. Through this arrangement, the Fund will offer
four classes of shares with various sales charges, ongoing fees and other
features. This conversion is scheduled to take place on July 28, 1997.
<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 SIX FOR THE YEAR OCTOBER 27, 1995*
MONTHS ENDED ENDED THROUGH
MAY 31, 1997 NOVEMBER 30, 1996 NOVEMBER 30, 1995
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
(UNAUDITED)

PER SHARE OPERATING PERFORMANCE:

Net asset value, beginning of period......... $ 12.99 $ 10.53 $ 10.00
-------- -------- --------

Net investment loss.......................... (0.11) (0.15) (0.01)

Net realized and unrealized gain (loss)...... (0.22) 2.61 0.54
-------- -------- --------

Total from investment operations............. (0.33) 2.46 0.53
-------- -------- --------

Net asset value, end of period............... 12.66 $ 12.99 $ 10.53
-------- -------- --------
-------- -------- --------

TOTAL INVESTMENT RETURN+..................... (2.54)%(1) 23.36% 5.30%(1)

RATIOS TO AVERAGE NET ASSETS:
Expenses..................................... 2.01%(2) 2.00% 2.87%(2)

Net investment loss.......................... (1.79)%(2) (1.72)% (0.79)%(2)

SUPPLEMENTAL DATA:
Net assets, end of period, in thousands...... $317,462 $310,809 $102,009

Portfolio turnover rate...................... 97%(1) 108% 7%(1)

Average commission rate paid................. $0.0574 $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>

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

TRUSTEES

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

OFFICERS

Charles A. Fiumefreddo
Chairman and Chief Executive Officer

Barry Fink
Vice President, Secretary and General Counsel

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

The financial statements included herein have been taken from the records
of the Fund without examination by the independent accountants and accordingly
they do not express an opinion thereon.

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

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

DEAN WITTER
CAPITAL APPRECIATION
FUND

[GRAPHIC]

SEMIANNUAL REPORT
MAY 31, 1997