<PAGE> 1
TCW/DW MID-CAP EQUITY TRUST Two World Trade Center, New York, New York 10048
LETTER TO THE SHAREHOLDERS May 31, 1998
DEAR SHAREHOLDER:
TCW/DW Mid-Cap Equity Trust performed strongly during the first half of its
fiscal year, ended May 31, 1998. For that six-month period, the Fund's Class B
shares produced a total return of 17.33 percent, compared to a return of 12.15
percent for the S&P Mid-Cap 400 Index and 8.82 percent for the Lipper Mid-Cap
Funds Index. For the same period, the Fund's Class A, C and D shares had total
returns of 17.74 percent, 17.22 percent and 17.91 percent, respectively. The
performance of the Fund's four share classes varies because of differing
expenses.
Contributing to the Fund's outperformance of its benchmark index and peer group
was its emphasis on mid-sized companies in the consumer, technology and
health-care sectors, each of which performed strongly during most of the period
under review.
THE MARKETPLACE
After realizing that the economic crisis in Asia would not have a major impact
on the U.S. economy, investors pushed all the major equity indexes up in the
first five months of 1998 to new records. Idyllic economic conditions, namely
low unemployment, low interest rates and an absence of significant inflation,
contributed to very high consumer confidence and impressive sales growth across
several sectors in the economy. In fact, to the extent that Asia limited the
Federal Reserve Board's need to push up rates, the crisis may have had a
positive effect on the U.S. capital markets for the first four months of the
year. For most of this period, mid-cap stocks participated in the stock market
rally, but a valuation gap continued to exist when compared to large-cap stocks,
because investors still were willing to pay a premium for the liquidity that
large-caps provide.
The month of May showed a partial erosion in many of the positive trends evident
in the first four months of 1998. Once again, the catalyst was Asia, where high
unemployment in Korea, a relatively peaceful Indonesian revolution and an attack
on the Russian currency caused a renewal of the same fears that led to the
market's weakness last October.
<PAGE> 2
TCW/DW MID-CAP EQUITY TRUST
LETTER TO THE SHAREHOLDERS May 31, 1998, continued
In fact the symptoms of this panic were almost exactly the same with the
largest, best-run companies holding their value while the market as a whole came
under pressure. In other words, the premium investors were willing to pay for
liquidity increased as events around the world created a jittery atmosphere.
TCW believes that investors' concerns may be misplaced and now is the time to
be adding to small- and mid-cap weightings. What is different now from six
months ago is that this market has far more clarity as to how events are likely
to unfold. While Asia is still weak and unlikely to recover in the near future,
things probably will not get much worse. The situation in Indonesia is still
not resolved, but the transfer of power was relatively peaceful (especially
when compared to the one in 1965). In Korea, unemployment and bankruptcies may
increase, but the new government has a mandate to introduce fundamental
changes, which may make the country and its economy stronger over the long
term.
More important than these external events, it is now evident that U.S. growth
was barely affected by this crisis. Unemployment continues to drop, consumer
confidence is at or near all-time highs and GDP growth has continued upward. If
the economy was able to withstand all the bad news in October, it is reasonable
to assume that May could have a similarly negligible effect. What gives TCW so
much confidence is that the stocks in the Fund's portfolio have little or no
exposure to problems in Asia and should benefit from conditions here at home.
Whatever Asian impact there is has most likely already occurred, yet the Fund's
holdings are valued as though they will be severely affected by a situation they
have little exposure to. Once this anomaly becomes evident, through continued
strong top and bottom line performance, TCW believes that these stocks should
appreciate and begin to receive multiples more commensurate with their superior
growth rates.
THE PORTFOLIO
TCW continues to hold firm to its long-term strategy of investing in the growth
sectors of the U.S. economy. Sector weightings as of May 31, 1998, are consumer
(22.2 percent), health-care (11.6 percent), services (31.1 percent) and
technology (26.8 percent). Even though financial stocks have had an extended
period of expansion, driven mainly by low interest rates and industry
consolidation, TCW still believes that poor internal growth rates and low
barriers to entry make this an unattractive sector to invest in over the
long-term. The Fund's portfolio remains highly concentrated with 44 stocks,
holding firm to the belief that the Fund is better off owning only the best
ideas within its investable universe.
2
<PAGE> 3
TCW/DW MID-CAP EQUITY TRUST
LETTER TO THE SHAREHOLDERS May 31, 1998, continued
Among the Fund's top five holdings are Clear Channel Communications (broadcast
media), Yahoo! Inc. (internet), Safeskin Corp. (medical products and supplies),
Siebel Systems, Inc. (computer software and services) and Romac International
(commercial services).
LOOKING AHEAD
Going forward, TCW will continue to adhere to its investment philosophy of
trying to identify high-quality, high-growth companies whose earnings power and
growth rates are underestimated by Wall Street consensus. In seeking to
accomplish this goal, TCW focuses primarily on the fundamentals of potential
portfolio holdings, including companies in emerging industries and those that
are fundamentally reshaping their established industries. TCW believes that as
long as a company is growing profitably and its fundamentals remain strong, the
market will ultimately reward its stock price. Furthermore, TCW does not attempt
to time the market but rather remains focused on company-specific investment
issues such as pricing flexibility, market share gains and improved
efficiencies.
We appreciate your support of TCW/DW Mid-Cap Equity Trust and look forward to
continuing to serve your investment needs.
Very truly yours,
/S/ CHARLES A. FIUMEFREDDO
CHARLES A. FIUMEFREDDO
Chairman of the Board
3
<PAGE> 4
TCW/DW MID-CAP EQUITY TRUST
PORTFOLIO OF INVESTMENTS May 31, 1998 (unaudited)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------
<CAPTION>
<C> <S> <C>
COMMON STOCKS (99.2%)
Advertising (3.0%)
174,275 Outdoor Systems, Inc.*....... $ 5,228,250
------------
Biotechnology (0.9%)
35,400 Biogen, Inc.*................ 1,557,600
------------
Broadcast Media (12.6%)
102,400 Cablevision Systems Corp.
(Class A)*.................. 5,670,400
106,900 Clear Channel Communications,
Inc.*....................... 10,249,038
67,000 TCA Cablevision TV, Inc. .... 4,061,875
92,600 Westwood One, Inc. .......... 2,465,475
------------
22,446,788
------------
Commercial Services (13.6%)
140,588 Apollo Group, Inc. (Class
A)*......................... 4,481,227
124,950 Paychex, Inc. ............... 4,490,391
137,800 Robert Half International,
Inc.*....................... 6,976,124
283,800 Romac International, Inc. ... 7,946,399
------------
23,894,141
------------
Computer Software (1.8%)
121,100 Cerner Corp.*................ 3,088,050
------------
Computer Software & Services (13.0%)
90,200 Avid Technology, Inc.*....... 3,653,100
183,700 FORE Systems, Inc. .......... 4,006,956
109,400 National Techteam, Inc.*..... 984,600
104,400 PeopleSoft, Inc.*............ 4,547,925
343,700 Siebel Systems, Inc.*........ 7,819,174
63,700 VeriSign, Inc.*.............. 2,022,475
------------
23,034,230
------------
Consumer Business Services (1.8%)
63,800 CBT Group PLC (ADR)
(Ireland)*.................. 3,174,050
------------
Electronics - Semiconductors/
Components (5.9%)
61,600 Altera Corp.*................ 2,071,300
152,100 Maxim Integrated Products,
Inc.*....................... 5,076,338
84,600 Xilinx, Inc.*................ 3,214,800
------------
10,362,438
------------
Entertainment (1.2%)
98,600 Mirage Resorts, Inc.*........ 2,052,113
------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------
NUMBER OF
SHARES VALUE
<C> <S> <C>
Financial Services (1.9%)
95,800 Price (T. Rowe) Associates,
Inc......................... $ 3,388,925
------------
Hospital Management (2.7%)
158,125 Health Management Associates,
Inc. (Class A)*............. 4,714,102
------------
Insurance (1.8%)
61,800 Hartford Life, Inc. (Class
A).......................... 3,182,700
------------
Internet (9.4%)
28,700 Amazon.com, Inc.*............ 2,518,425
55,900 At Home Corp. (Series A)*.... 1,935,538
107,000 E*TRADE Group, Inc.*......... 2,313,875
89,200 Yahoo! Inc.*................. 9,750,675
------------
16,518,513
------------
Medical Products & Supplies (4.9%)
247,000 Safeskin Corp.*.............. 8,645,000
------------
Medical Services (1.3%)
153,800 Coventry Corp.*.............. 2,210,875
------------
Oil & Gas Drilling (4.0%)
288,600 Patterson Energy, Inc.*...... 3,228,713
180,000 Precision Drilling Corp.
(Canada)*................... 3,757,500
------------
6,986,213
------------
Publishing (0.4%)
40,200 Playboy Enterprises, Inc.
(Class B)*.................. 718,575
------------
Real Estate (0.9%)
49,400 CB Commercial Real Estate
Services Group, Inc.*....... 1,661,075
------------
Recreation (1.3%)
153,150 Signature Resorts, Inc.*..... 2,373,825
------------
Restaurants (2.0%)
72,400 Starbucks Corp.*............. 3,466,150
------------
Retail - Specialty (13.8%)
99,600 Bed, Bath & Beyond, Inc. .... 4,998,675
204,000 Best Buy Co., Inc.*.......... 6,655,499
172,600 Just For Feet, Inc.*......... 3,775,625
264,100 Petsmart, Inc.*.............. 2,607,988
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
4
<PAGE> 5
TCW/DW MID-CAP EQUITY TRUST
PORTFOLIO OF INVESTMENTS May 31, 1998 (unaudited) continued
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------
<C> <S> <C>
262,700 Sunglass Hut International,
Inc.*....................... $ 3,201,656
108,000 Talbots, Inc. ............... 3,084,750
------------
24,324,193
------------
Telecommunications Equipment
(1.0%)
108,600 Pairgain Technologies,
Inc.*....................... 1,696,876
------------
TOTAL COMMON STOCKS
(Identified Cost
$111,220,257)................ 174,724,682
------------
PRINCIPAL
AMOUNT IN
THOUSANDS
-------
SHORT-TERM INVESTMENT (0.5%)
REPURCHASE AGREEMENT
$842 The Bank of New York 5.50%
due 06/01/98 (dated
05/29/98; proceeds $842,473)
(a) (Identified
Cost $842,087).............. 842,087
------------
</TABLE>
<TABLE>
<CAPTION>
VALUE
- -----------------------------------------------------
<CAPTION>
<S> <C> <C>
TOTAL INVESTMENTS
(Identified Cost $112,062,344)(b) 99.7% $175,566,769
OTHER ASSETS IN EXCESS
OF LIABILITIES.................. 0.3 459,398
---- ------------
NET ASSETS...................... 100.0% $176,026,167
===== ============
</TABLE>
- ---------------------
ADR American Depository Receipt.
* Non-income producing security.
(a) Collateralized by $847,710 Government National Mortgage Assoc. 6.50% due
05/15/13 valued at $858,929.
(b) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $72,394,794 and the
aggregate gross unrealized depreciation is $8,890,369, resulting in net
unrealized appreciation of $63,504,425.
SEE NOTES TO FINANCIAL STATEMENTS
5
<PAGE> 6
TCW/DW MID-CAP EQUITY TRUST
FINANCIAL STATEMENTS
<TABLE>
<S> <C>
STATEMENT OF ASSETS AND LIABILITIES
May 31, 1998 (unaudited)
ASSETS:
Investments in securities, at value
(identified cost $112,062,344)............................. $175,566,769
Receivable for:
Investments sold........................................ 590,908
Shares of beneficial interest sold...................... 259,709
Dividends............................................... 16,660
Deferred organizational expenses............................ 90,676
Prepaid expenses and other assets........................... 110,735
------------
TOTAL ASSETS............................................ 176,635,457
------------
LIABILITIES:
Payable for:
Shares of beneficial interest repurchased............... 289,713
Plan of distribution fee................................ 133,242
Management fee.......................................... 93,084
Investment advisory fee................................. 62,056
Accrued expenses............................................ 31,195
------------
TOTAL LIABILITIES....................................... 609,290
------------
NET ASSETS.............................................. $176,026,167
============
COMPOSITION OF NET ASSETS:
Paid-in-capital............................................. $133,599,059
Net unrealized appreciation................................. 63,504,425
Net investment loss......................................... (1,871,618)
Accumulated net realized loss............................... (19,205,699)
------------
NET ASSETS.............................................. $176,026,167
============
CLASS A SHARES:
Net Assets.................................................. $532,661
Shares Outstanding (unlimited authorized, $.01 par value)... 41,596
NET ASSET VALUE PER SHARE............................... $12.81
============
MAXIMUM OFFERING PRICE PER SHARE,
(net asset value plus 5.54% of net asset value)........ $13.52
============
CLASS B SHARES:
Net Assets.................................................. $175,147,321
Shares Outstanding (unlimited authorized, $.01 par value)... 13,759,167
NET ASSET VALUE PER SHARE............................... $12.73
============
CLASS C SHARES:
Net Assets.................................................. $334,338
Shares Outstanding (unlimited authorized, $.01 par value)... 26,269
NET ASSET VALUE PER SHARE............................... $12.73
============
CLASS D SHARES:
Net Assets.................................................. $11,847
Shares Outstanding (unlimited authorized, $.01 par value)... 923
NET ASSET VALUE PER SHARE............................... $12.84
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE> 7
TCW/DW MID-CAP EQUITY TRUST
FINANCIAL STATEMENTS, continued
<TABLE>
<S> <C>
STATEMENT OF OPERATIONS
For the six months ended May 31, 1998 (unaudited)
NET INVESTMENT INCOME:
INCOME
Dividends................................................... $ 80,532
Interest.................................................... 23,750
-----------
TOTAL INCOME............................................ 104,282
-----------
EXPENSES
Plan of distribution fee (Class A shares)................... 172
Plan of distribution fee (Class B shares)................... 815,049
Plan of distribution fee (Class C shares)................... 655
Management fee.............................................. 535,889
Investment advisory fee..................................... 357,259
Transfer agent fees and expenses............................ 120,145
Registration fees........................................... 44,503
Professional fees........................................... 29,056
Shareholder reports and notices............................. 22,581
Organizational expenses..................................... 16,471
Trustees' fees and expenses................................. 14,578
Custodian fees.............................................. 10,976
Other....................................................... 8,566
-----------
TOTAL EXPENSES.......................................... 1,975,900
-----------
NET INVESTMENT LOSS..................................... (1,871,618)
-----------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain........................................... 15,332,849
Net change in unrealized appreciation....................... 14,668,746
-----------
NET GAIN................................................ 30,001,595
-----------
NET INCREASE................................................ $28,129,977
===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE> 8
TCW/DW MID-CAP EQUITY TRUST
FINANCIAL STATEMENTS, continued
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
MAY 31, 1998 NOVEMBER 30, 1997*
- --------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment loss................................ $(1,871,618) $ (3,891,233)
Net realized gain (loss)........................... 15,332,849 (22,962,571)
Net change in unrealized appreciation.............. 14,668,746 23,258,457
------------ ------------
NET INCREASE (DECREASE)........................ 28,129,977 (3,595,347)
Net decrease from transactions in shares of
beneficial interest............................... (26,667,169) (27,115,386)
------------ ------------
NET INCREASE (DECREASE)........................ 1,462,808 (30,710,733)
NET ASSETS:
Beginning of period................................ 174,563,359 205,274,092
------------ ------------
END OF PERIOD
(Including a net investment loss of
$1,871,618 and $0, respectively)............... $176,026,167 $174,563,359
============ ============
</TABLE>
- ---------------------
* Class A, Class C and Class D shares were issued July 28, 1997.
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE> 9
TCW/DW MID-CAP EQUITY TRUST
NOTES TO FINANCIAL STATEMENTS May 31, 1998 (unaudited)
1. ORGANIZATION AND ACCOUNTING POLICIES
TCW/DW Mid-Cap Equity Trust (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 to seek
long-term capital appreciation. The Fund seeks to achieve its objective by
investing primarily in equity securities, including common stocks and securities
convertible into common stock, issued by medium-sized companies. The Fund was
organized as a Massachusetts business trust on October 17, 1995 and commenced
operations on February 27, 1996. On July 28, 1997, the Fund commenced offering
three additional classes of shares, with the then current shares designated as
Class B shares.
Effective June 22, 1998, the following entities have changed their names:
<TABLE>
<CAPTION>
OLD NAME NEW NAME
- --------------------------------- ------------------------------------------------
<S> <C>
Dean Witter InterCapital Inc. Morgan Stanley Dean Witter Advisors Inc.
Dean Witter Distributors Inc. Morgan Stanley Dean Witter Distributors Inc.
Dean Witter Services Company Inc. Morgan Stanley Dean Witter Services Company Inc.
</TABLE>
The Fund offers Class A shares, Class B shares, Class C shares and Class D
shares. The four classes are substantially the same except that most Class A
shares are subject to a sales charge imposed at the time of purchase, some Class
A shares, and most Class B shares and Class C shares are subject to a contingent
deferred sales charge imposed on shares redeemed within one year, six years and
one year, respectively. Class D shares are not subject to a sales charge.
Additionally, Class A shares, Class B shares and Class C shares incur
distribution expenses.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual results could differ from
those estimates.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- (1) an equity security listed or traded on the
New York, American or other domestic or foreign stock exchange is valued at its
latest sale price on that exchange prior to the time when assets are valued; if
there were no sales that day, the security is valued at the latest bid price (in
cases where 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
9
<PAGE> 10
TCW/DW MID-CAP EQUITY TRUST
NOTES TO FINANCIAL STATEMENTS May 31, 1998 (unaudited) continued
readily available, including circumstances under which it is determined by TCW
Funds Management, Inc. (the "Adviser") 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 from 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. MULTIPLE CLASS ALLOCATIONS -- Investment income, expenses (other than
distribution fees), and realized and unrealized gains and losses are allocated
to each class of shares based upon the relative net asset value on the date such
items are recognized. Distribution fees are charged directly to the respective
class.
D. FEDERAL INCOME TAX STATUS -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income to its shareholders.
Accordingly, no federal income tax provision is required.
E. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund records dividends and
distributions to its shareholders on the record date. The amount of dividends
and distributions from net investment income and net realized capital gains are
determined in accordance with federal income tax regulations which may differ
from generally accepted accounting principles. These "book/tax" differences are
either considered temporary or permanent in nature. To the extent these
differences are permanent in nature, such amounts are reclassified within the
capital accounts based on their federal tax-basis treatment; temporary
differences do not require reclassification. Dividends and distributions which
exceed net investment income and net realized capital gains for financial
reporting purposes but not for tax purposes are reported as dividends in excess
of net investment income or distributions in excess of
10
<PAGE> 11
TCW/DW MID-CAP EQUITY TRUST
NOTES TO FINANCIAL STATEMENTS May 31, 1998 (unaudited) continued
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.
F. ORGANIZATIONAL EXPENSES -- Morgan Stanley Dean Witter Advisors Inc., an
affiliate of Morgan Stanley Dean Witter Services Co. Inc. (the "Manager"), paid
the organizational expenses of the Fund in the amount of approximately $165,000
which have been 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. MANAGEMENT AGREEMENT
Pursuant to a Management Agreement, the Fund pays the Manager a management fee,
accrued daily and payable monthly, by applying the annual rate of 0.60% to the
net assets of the Fund determined as of the close of each business day.
Under the terms of the Management Agreement, the 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 Manager. The Manager also bears the cost of telephone services, heat,
light, power and other utilities provided to the Fund.
3. INVESTMENT ADVISORY AGREEMENT
Pursuant to an Investment Advisory Agreement, the Fund pays an advisory fee,
accrued daily and payable monthly, by applying the annual rate of 0.40% to the
net assets of the Fund determined as of the close of each business day.
Under the terms of the Investment Advisory Agreement, the Fund has retained the
Adviser to invest the Fund's assets, including placing orders for the purchase
and sale of portfolio securities. The Adviser obtains and evaluates such
information and advice relating to the economy, securities markets, and specific
securities as it considers necessary or useful to continuously manage the assets
of the Fund in a manner consistent with its investment objective. In addition,
the Adviser pays the salaries of all personnel, including officers of the Fund,
who are employees of the Adviser.
11
<PAGE> 12
TCW/DW MID-CAP EQUITY TRUST
NOTES TO FINANCIAL STATEMENTS May 31, 1998 (unaudited) continued
4. PLAN OF DISTRIBUTION
Shares of the Fund are distributed by Morgan Stanley Dean Witter Distributors
Inc. (the "Distributor"), an affiliate of the Manager. The Fund has adopted a
Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under the Act. The Plan
provides that the Fund will pay the Distributor a fee which is accrued daily and
paid monthly at the following annual rates: (i) Class A -- up to 0.25% of the
average daily net assets of Class A; (ii) Class B -- 1.0% of the lesser of: (a)
the average daily aggregate gross sales of the Class B shares since inception of
the Fund (not including reinvestment of dividend or capital gain distributions)
less the average net asset value of the Class B shares redeemed since the Fund's
inception upon which a contingent deferred sales charge has been imposed or
waived; or (b) the average daily net assets of Class B; and (iii) Class C -- up
to 1.0% of the average daily net assets of Class C. In the case of Class A
shares, amounts paid under the Plan are paid to the Distributor for services
provided. In the case of Class B and Class C shares, amounts paid under the Plan
are paid to the Distributor for services provided and the expenses borne by it
and others in the distribution of the shares of these Classes, including the
payment of commissions for sales of these Classes and incentive compensation to,
and expenses of, the Morgan Stanley Dean Witter Financial Advisors and others
who engage in or support distribution of the shares or who service shareholder
accounts, including overhead and telephone expenses; printing and distribution
of prospectuses and reports used in connection with the offering of these shares
to other than current shareholders; and preparation, printing and distribution
of sales literature and advertising materials. In addition, the Distributor may
utilize fees paid pursuant to the Plan, in the case of Class B shares, to
compensate Dean Witter Reynolds Inc. ("DWR"), an affiliate of the Investment
Manager and Distributor, and other selected broker-dealers for their opportunity
costs in advancing such amounts, which compensation would be in the form of a
carrying charge on any unreimbursed expenses.
In the case of Class B shares, provided that the Plan continues in effect, any
cumulative expenses incurred by the Distributor but not yet recovered may be
recovered through the payment of future distribution fees from the Fund pursuant
to the Plan and contingent deferred sales charges paid by investors upon
redemption of Class B shares. Although there is no legal obligation for the Fund
to pay expenses incurred in excess of payments made to the Distributor under the
Plan and the proceeds of contingent deferred sales charges paid by investors
upon redemption of shares, if for any reason the Plan is terminated, the
Trustees will consider at that time the manner in which to treat such expenses.
The Distributor has advised the Fund that such excess amounts, including
carrying charges, totaled $8,838,385 at May 31, 1998.
12
<PAGE> 13
TCW/DW MID-CAP EQUITY TRUST
NOTES TO FINANCIAL STATEMENTS May 31, 1998 (unaudited) continued
In the case of Class A shares and Class C shares, expenses incurred pursuant to
the Plan in any calendar year in excess of 0.25% or 1.0% of the average daily
net assets of Class A or Class C, respectively, will not be reimbursed by the
Fund through payments in any subsequent year, except that expenses representing
a gross sales credit to Morgan Stanley Dean Witter Financial Advisors or other
selected broker-dealer representatives may be reimbursed in the subsequent
calendar year. For the six months ended May 31, 1998, the distribution fee was
accrued for Class A shares and Class C shares at the annual rate of 0.23% and
1.0%, respectively.
The Distributor has informed the Fund that for the six months ended May 31,
1998, it received contingent deferred sales charges from certain redemptions of
the Fund's Class B shares and Class C shares of $412,233 and $43, respectively
and received $7,904 in front-end sales charges from sales of the Fund's Class A
shares. The respective shareholders pay such charges which are not an expense of
the Fund.
5. 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, 1998 aggregated
$46,375,209 and $75,501,535, respectively.
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent.
6. FEDERAL INCOME TAX STATUS
At November 30, 1997, the Fund had a net capital loss carryover of approximately
$34,462,000 of which $11,576,000 will be available through November 30, 2004 and
$22,886,000 will be available through November 30, 2005 to offset future capital
gains to the extent provided by regulations.
13
<PAGE> 14
TCW/DW MID-CAP EQUITY TRUST
NOTES TO FINANCIAL STATEMENTS May 31, 1998 (unaudited) continued
7. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
MAY 31, 1998 NOVEMBER 30, 1997*
------------------------- -------------------------
(unaudited)
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
CLASS A SHARES
Sold........................................................ 36,248 $ 486,902 6,748 $ 74,233
Repurchased................................................. -- -- (1,400) (15,778)
---------- ------------ ---------- ------------
Net increase - Class A...................................... 36,248 486,902 5,348 58,455
---------- ------------ ---------- ------------
CLASS B SHARES
Sold........................................................ 566,449 7,307,185 2,893,121 29,335,443
Repurchased................................................. (2,881,292) (34,711,692) (5,621,922) (56,605,744)
---------- ------------ ---------- ------------
Net decrease - Class B...................................... (2,314,843) (27,404,507) (2,728,801) (27,270,301)
---------- ------------ ---------- ------------
CLASS C SHARES
Sold........................................................ 19,102 256,804 7,669 86,447
Repurchased................................................. (502) (6,368) -- --
---------- ------------ ---------- ------------
Net increase - Class C...................................... 18,600 250,436 7,669 86,447
---------- ------------ ---------- ------------
CLASS D SHARES
Sold........................................................ -- -- 923 10,013
---------- ------------ ---------- ------------
Net decrease in Fund........................................ (2,259,995) $(26,667,169) (2,714,861) $(27,115,386)
========== ============ ========== ============
</TABLE>
- ---------------------
* For Class A, C and D shares, for the period July 28, 1997 (issue date) through
November 30, 1997.
14
<PAGE> 15
TCW/DW MID-CAP EQUITY TRUST
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 FEBRUARY 27, 1996*
MONTHS ENDED ENDED THROUGH
MAY 31, 1998++ NOVEMBER 30, 1997**++ NOVEMBER 30, 1996
- ---------------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C>
CLASS B SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period........................ $10.85 $10.92 $10.00
------ ------ ------
Net investment loss......................................... (0.12) (0.22) (0.13)
Net realized and unrealized gain............................ 2.00 0.15 1.05
------ ------ ------
Total from investment operations............................ 1.88 (0.07) 0.92
------ ------ ------
Net asset value, end of period.............................. $12.73 $10.85 $10.92
====== ====== ======
TOTAL INVESTMENT RETURN+.................................... 17.33%(1) (0.64)% 9.20%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................... 2.21%(2) 2.29% 2.28%(2)
Net investment loss......................................... (2.10)%(2) (2.16)% (1.79)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands..................... $175,147 $174,412 $205,274
Portfolio turnover rate..................................... 26%(1) 49% 25%(1)
Average commission rate paid................................ $0.0597 $0.0569 $0.0577
</TABLE>
- ---------------------
<TABLE>
<C> <S>
* Commencement of operations.
** Prior to July 28, 1997, the Fund issued one class of shares.
All shares of the Fund held prior to that date have been
designated Class B shares.
++ The per share amounts were computed using an average number
of shares outstanding during the period.
+ Does not reflect the deduction of sales charge. Calculated
based on the net asset value as of the last business day of
the period.
(1) Not annualized.
(2) Annualized.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
15
<PAGE> 16
TCW/DW MID-CAP EQUITY TRUST
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX JULY 28, 1997*
MONTHS ENDED THROUGH
MAY 31, 1998++ NOVEMBER 30, 1997++
- ---------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
CLASS A SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period........................ $10.88 $10.85
------ ------
Net investment loss......................................... (0.09) (0.06)
Net realized and unrealized gain............................ 2.02 0.09
------ ------
Total from investment operations............................ 1.93 0.03
------ ------
Net asset value, end of period.............................. $12.81 $10.88
====== ======
TOTAL INVESTMENT RETURN+.................................... 17.74%(1) 0.28%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................... 1.56%(2) 1.55%(2)
Net investment loss......................................... (1.41)%(2) (1.46)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands..................... $533 $58
Portfolio turnover rate..................................... 26%(1) 49%
Average commission rate paid................................ $0.0597 $0.0569
CLASS C SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period........................ $10.85 $10.85
------ ------
Net investment loss......................................... (0.13) (0.08)
Net realized and unrealized gain............................ 2.01 0.08
------ ------
Total from investment operations............................ 1.88 --
------ ------
Net asset value, end of period.............................. $12.73 $10.85
====== ======
TOTAL INVESTMENT RETURN+.................................... 17.22%(1) 0.09%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................... 2.32%(2) 2.32%(2)
Net investment loss......................................... (2.19)%(2) (2.22)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands..................... $334 $83
Portfolio turnover rate..................................... 26%(1) 49%
Average commission rate paid................................ $0.0597 $0.0569
</TABLE>
- ---------------------
* The date shares were first issued.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Does not reflect the deduction of sales charge. Calculated based on the net
asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS
16
<PAGE> 17
TCW/DW MID-CAP EQUITY TRUST
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX JULY 28, 1997*
MONTHS ENDED THROUGH
MAY 31, 1998++ NOVEMBER 30, 1997++
- ---------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
CLASS D SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period........................ $10.89 $10.85
------ ------
Net investment loss......................................... (0.07) (0.05)
Net realized and unrealized gain............................ 2.02 0.09
------ ------
Total from investment operations............................ 1.95 0.04
------ ------
Net asset value, end of period.............................. $12.84 $10.89
====== ======
TOTAL INVESTMENT RETURN+.................................... 17.91%(1) 0.37%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................... 1.30%(2) 1.30%(2)
Net investment loss......................................... (1.18)%(2) (1.19)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands..................... $12 $10
Portfolio turnover rate..................................... 26%(1) 49%
Average commission rate paid................................ $0.0597 $0.0569
</TABLE>
- ---------------------
* The date shares were first issued.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Calculated based on the net asset value as of the last business day of the
period.
(1) Not annualized.
(2) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS
17
<PAGE> 18
(This Page Intentionally Left Blank)
<PAGE> 19
(This Page Intentionally Left Blank)
<PAGE> 20
TRUSTEES
John C. Argue
Richard M. DeMartini
Charles A. Fiumefreddo
John R. Haire
Dr. Manuel H. Johnson
Thomas E. Larkin, Jr.
Michael E. Nugent
John L. Schroeder
Marc I. Stern
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Thomas E. Larkin, Jr.
President
Barry Fink
Vice President, Secretary and General Counsel
Douglas S. Foreman
Vice President
Christopher J. Ainley
Vice President
Thomas F. Caloia
Treasurer
TRANSFER AGENT
Morgan Stanley Dean Witter Trust FSB
Harborside Financial Center - Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
MANAGER
Dean Witter Services Company Inc.
ADVISER
TCW Funds Management, Inc.
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.
TCW / DW
MID-CAP
EQUITY TRUST
[PHOTO]
SEMIANNUAL REPORT
MAY 31, 1998
