<PAGE>
TCW/DW MID-CAP EQUITY TRUST Two World Trade Center, New York, New York 10048
LETTER TO THE SHAREHOLDERS November 30, 1998
DEAR SHAREHOLDER:
Global equity markets witnessed extreme volatility over the past year, most
notably beginning last summer. Deepening recessions in non-Japan Asia and Japan
itself, debt defaults and a currency and economic collapse in Russia, as well
as fears over the outlook for Latin America triggered a major decline in stock
prices during the summer months. As stocks declined and credit market spreads
widened, a severe liquidity crunch developed, which resulted in the
near-collapse of a major hedge fund and enormous trading and loan losses at
banks and investment firms in both the United States and abroad. In turn,
lending was curbed, as was floating of new issues and trading liquidity.
To stave off a global credit crunch, which could have toppled the global
economy into recession or worse, the Federal Reserve Board and virtually all
other global central banks sharply reduced interest rates. Stock markets
rallied in response, and in October values recovered back to their previous
peaks.
PERFORMANCE
For the fiscal year ended November 30, 1998, TCW/DW Mid-Cap Equity Trust turned
in very strong performance, with Class A, Class B, Class C and Class D shares
producing total returns of 43.38 percent, 42.49 percent, 42.27 percent and
43.80 percent, respectively. For the same period, the Standard & Poor's Mid-Cap
400 Index and the Lipper Mid-Cap Fund Index registered total returns of 10.40
percent and 3.68 percent, respectively.
The Fund's favorable performance relative to its benchmark index and its Lipper
peer group is attributable primarily to the portfolio manager's investment in
companies that were able to grow regardless of external events, particularly
those in the Internet-related sector. According to the Fund's investment
adviser, TCW Funds Management, Inc. (TCW), these companies have been adept at
discovering new and creative ways to stay ahead of the competition within their
respective markets.
The accompanying chart illustrates the growth of a $10,000 investment in the
Class B shares of the Fund from its inception on February 27, 1996,
<PAGE>
TCW/DW MID-CAP EQUITY TRUST
LETTER TO THE SHAREHOLDERS November 30, 1998, continued
through November 30, 1998, versus similar hypothetical investments in the
issues that comprise the Standard & Poor's Mid-Cap 400 Index and the Lipper
Mid-Cap Funds Index, respectively.
THE PORTFOLIO
The past year was one in which the Fund made significant changes in its
portfolio sector weightings to take advantage of the fastest-growing sectors in
the economy and minimize the effect of any macroeconomic slowdown. Over the
reporting period, the Internet-related sector consistently exceeded
expectations, often by huge margins. Accordingly, large positions were built in
the sector, including powerful growth names such as Yahoo!, Amazon.com and
eBay, which were the Fund's three largest holdings as of November 30. TCW
believes that the Internet, with its power to change the way people interact
with each other, represents the U.S. economy's next major change, similar to
the PC revolution that took place in the early 1980s, which spawned a
technological revolution and created enormous shareholder wealth.
In the portion of the portfolio that is not invested in Internet-related
companies, the Fund also benefited from changes in the cable television
industry, where it has significant exposure. Industry consolidation, increased
share of advertising spending and the prospect of additional revenue streams
led to considerable stock appreciation. Another area where the Fund profited
was in specialty retail, which took advantage of a preference among consumers
to shop for specific and quality merchandise rather than undifferentiated
products offered by mass-marketed retailers.
The portfolio's three major areas of concentration on November 30, 1998, were
consumer-related groups, business services and technology. The most significant
reduction was in health care, which went from approximately 20 percent of net
assets to less than 10 percent. According to TCW, the health-care industry is
experiencing significant pricing pressure, which is affecting corporate
earnings growth.
GOING FORWARD
While the widespread easing of monetary policy has been encouraging, in TCW's
opinion several problems still loom large. Commodity prices are plunging,
global trade is declining, the prices of goods are falling and retail sales are
slowing sharply. These factors indicate that the global economy is in the grip
of a major slowdown, the extent of which cannot be forecast with much
conviction at this time.
According to TCW, the key, as ever, is in finding companies that have the
ability to grow throughout these and other trying economic times, companies
that concentrate their efforts on developing new and better products and
improving their processes, services and technologies in an effort to dominate
their industries. Investing in stocks that fit these criteria will continue to
be the Fund's priority.
2
<PAGE>
TCW/DW MID-CAP EQUITY TRUST
LETTER TO THE SHAREHOLDERS November 30, 1998, continued
We appreciate your ongoing 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>
TCW/DW MID-CAP EQUITY TRUST
FUND PERFORMANCE November 30, 1998
GROWTH OF $10,000 CLASS B
<TABLE>
<CAPTION>
Date Total S&P Midcap IX Lipper
- -------------------- -------------- ------------------- ------------
<S> <C> <C> <C>
February 27, 1996 $10,000 $10,000 $10,000
November 30, 1996 $10,920 $11,351 $11,192
November 30, 1997 $10,850 $14,468 $12,974
November 30, 1998 $15,160(3) $15,972 $13,452
</TABLE>
-- Fund -- S&P Midcap IX(4) -- Lipper(5)
Past performance is not predictive of future returns. Performance for Class A,
Class C, and Class D shares will vary from the performance of Class B shares
shown above due to differences in sales charges and expenses.
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS B SHARES*
- -------------------------------------------------------------
PERIOD ENDED 11/30/98
- ---------------------------
<S> <C> <C>
1 Year 42.49%(1) 37.49%(2)
Since Inception (2/27/96) 17.12%(1) 16.29%(2)
</TABLE>
<TABLE>
<CAPTION>
CLASS C SHARES++
- -------------------------------------------------------------
PERIOD ENDED 11/30/98
- ---------------------------
<S> <C> <C>
1 Year 42.27%(1) 41.27%(2)
Since Inception (7/28/97) 30.14%(1) 30.14%(2)
</TABLE>
<TABLE>
<CAPTION>
CLASS A SHARES++
- -------------------------------------------------------------
PERIOD ENDED 11/30/98
- ---------------------------
<S> <C> <C>
1 Year 43.38%(1) 35.85%(2)
Since Inception (7/28/97) 31.08%(1) 25.92%(2)
</TABLE>
<TABLE>
<CAPTION>
CLASS D SHARES#
- -------------------------------------------------------------
PERIOD ENDED 11/30/98
- ---------------------------
<S> <C>
1 Year 43.80%(1)
Since Inception (7/28/97) 31.46%(1)
</TABLE>
- ---------------
(1) Figure shown assumes reinvestment of all distributions and does not
reflect the deduction of any sales charges.
(2) Figure shown assumes reinvestment of all distributions and the deduction
of the maximum applicable sales charge. See the Fund's current prospectus
for complete details on fees and sales charges.
(3) Closing value after the deduction of a 3% contingent deferred sales charge
(CDSC), assuming a complete redemption on November 30, 1998.
(4) The Standard & Poor's Mid-Cap Index is a market-value weighted index, the
performance of which is based on the average performance of 400 domestic
stocks chosen for market size, liquidity, and industry group
representation. The Index does not include any expenses, fees or charges.
The Index is unmanaged and should not be considered an investment.
(5) The Lipper Mid-Cap Fund Index is an equally-weighted performance index of
the largest qualifying funds (based on net assets) in the Lipper Mid-Cap
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.
* The maximum CDSC for Class B shares is 5.0%. The CDSC declines to 0% after
six years.
+ The maximum front-end sales charge for Class A shares is 5.25%.
++ The maximum CDSC for Class C shares is 1% for shares redeemed within one
year of purchase.
# Class D shares have no sales charge.
4
<PAGE>
TCW/DW MID-CAP EQUITY TRUST
PORTFOLIO OF INVESTMENTS November 30, 1998
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (98.4%)
Accident & Health Insurance (2.0%)
78,200 Hartford Life, Inc. (Class A) .......... $ 4,286,337
------------
Advertising (3.2%)
253,712 Outdoor Systems, Inc.* ................. 6,850,224
------------
Biotechnology (1.2%)
34,400 Biogen, Inc.* .......................... 2,610,100
------------
Books/Magazine (0.3%)
39,000 Playboy Enterprises, Inc.
(Class B)* ............................. 602,062
------------
Broadcast Media (9.9%)
152,000 Cablevision Systems Corp.
(Class A)* ............................. 6,289,000
171,800 Clear Channel Communications,
Inc.* .................................. 8,031,650
130,000 TCA Cable TV, Inc. ..................... 3,705,000
119,600 Westwood One, Inc.* .................... 3,139,500
------------
21,165,150
------------
Cable & Telecommunications (2.9%)
82,900 Global Crossing Ltd.* .................. 3,139,837
114,100 MetroNet Communications Corp.
(Class B) (Canada)* .................... 3,016,519
------------
6,156,356
------------
Casino/Gambling (1.0%)
139,800 Mirage Resorts, Inc.* .................. 2,079,525
------------
Computer Software (1.8%)
149,400 Cerner Corp.* .......................... 3,921,750
------------
Computer Software
& Services (8.6%)
55,200 Documentum, Inc.* ...................... 2,318,400
178,300 FORE Systems, Inc.* .................... 2,696,787
106,200 National Techteam, Inc.* ............... 716,850
56,300 Rational Software Corp.* ............... 1,277,306
333,600 Siebel Systems, Inc.* .................. 8,048,100
86,400 VeriSign, Inc.* ........................ 3,434,400
------------
18,491,843
------------
Diversified Commercial
Services (10.7%)
68,287 Apollo Group, Inc. (Class A)* .......... 2,202,256
121,250 Paychex, Inc. .......................... 6,032,187
133,800 Robert Half International, Inc.* ....... 6,288,600
275,500 Romac International, Inc.* ............. 3,839,781
209,700 Whittman-Hart, Inc.* ................... 4,613,400
------------
22,976,224
------------
Diversified Financial Services (1.6%)
93,000 Price (T. Rowe) Associates, Inc. ....... 3,324,750
------------
Electronic Components (2.5%)
103,300 Xilinx, Inc.* .......................... $ 5,242,475
------------
Electronics - Semiconductors/
Components (5.8%)
87,800 Altera Corp.* .......................... 4,307,688
147,600 Maxim Integrated Products, Inc.*........ 5,793,300
66,600 Microchip Technology, Inc.* ............ 2,318,513
------------
12,419,501
------------
Hospital/Nursing Management (2.3%)
230,287 Health Management Associates,
Inc. (Class A)* ........................ 4,994,349
------------
Household Furnishings &
Appliances (1.6%)
123,900 Restoration Hardware, Inc.* ............ 3,407,250
------------
Internet (26.8%)
72,100 Amazon.com, Inc.* ...................... 13,843,200
104,800 At Home Corp. (Series A)* .............. 6,091,500
53,300 Broadcast.com Inc.* .................... 3,517,800
141,200 E*TRADE Group, Inc.* ................... 3,812,400
56,500 eBay Inc.* ............................. 11,158,750
3,200 GeoCities* ............................. 96,200
97,500 Yahoo! Inc.* ........................... 18,713,906
------------
57,233,756
------------
Life Insurance (0.5%)
32,300 MONY Group Inc.* ....................... 999,281
------------
Medical Specialties (1.3%)
151,300 Safeskin Corp.* ........................ 2,865,244
------------
Oil & Gas Drilling (0.9%)
174,700 Precision Drilling Corp. (Canada)*...... 1,888,944
------------
Real Estate (0.4%)
48,000 CB Richard Ellis Services, Inc.* ....... 852,000
------------
Retail - Specialty (9.7%)
155,600 Bed Bath & Beyond, Inc.* ............... 4,852,775
141,200 Best Buy Co., Inc.* .................... 8,136,650
140,300 Corporate Express, Inc.* ............... 806,725
167,500 Just For Feet, Inc.* ................... 3,789,688
358,200 PetSmart, Inc.* ........................ 3,067,088
------------
20,652,926
------------
Retail - Specialty Apparel (1.2%)
104,800 Talbot's, Inc. (The) ................... 2,672,400
------------
Wireless Communication (2.2%)
207,300 American Tower Corp. (Class A)*......... 4,793,813
------------
TOTAL COMMON STOCKS
(Identified Cost $123,840,678).......... 210,486,260
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
5
<PAGE>
TCW/DW MID-CAP EQUITY TRUST
PORTFOLIO OF INVESTMENTS November 30, 1998, continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- --------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENT (1.6%)
REPURCHASE AGREEMENT
$ 3,398 The Bank of New York 4.625%
due 12/01/98 (dated 11/30/98;
proceeds $3,398,551) (a)
(Identified Cost $3,398,114).......... $ 3,398,114
-------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
TOTAL INVESTMENTS
(Identified Cost $127,238,792) (b)..... 100.0% 213,884,374
LIABILITIES IN EXCESS OF OTHER
ASSETS ................................ ( 0.0) (7,569)
----- -----------
NET ASSETS ............................ 100.0% $213,876,805
===== ============
</TABLE>
- ----------------
* Non-income producing security.
(a) Collateralized by $1,052,812 Student Loan Marketing Assoc. 5.057% due
12/17/98 valued at $1,052,580; $1,740,000 U.S. Treasury Note 4.00% due
10/31/00 valued at $1,726,623 and $655,872 U.S. Treasury Note 6.25% due
10/31/01 valued at $687,554.
(b) The aggregate cost for federal income tax purposes approximates
identified cost. The aggregate gross unrealized appreciation is
$95,811,768 and the aggregate gross unrealized depreciation is
$9,166,186, resulting in net unrealized appreciation of $86,645,582.
SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE>
TCW/DW MID-CAP EQUITY TRUST
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
November 30, 1998
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $127,238,792)................................ $213,884,374
Receivable for:
Investments sold ............................................ 325,774
Shares of beneficial interest sold .......................... 185,611
Dividends ................................................... 18,566
Deferred organizational expenses ............................... 74,115
Prepaid expenses ............................................... 40,983
------------
TOTAL ASSETS ................................................ 214,529,423
------------
LIABILITIES:
Payable for:
Shares of beneficial interest repurchased ................... 271,355
Plan of distribution fee .................................... 140,902
Management fee .............................................. 102,036
Investment advisory fee ..................................... 68,024
Investments purchased ....................................... 24,750
Accrued expenses ............................................... 45,551
------------
TOTAL LIABILITIES ........................................... 652,618
------------
NET ASSETS .................................................. $213,876,805
============
COMPOSITION OF NET ASSETS:
Paid-in-capital ................................................ $130,533,669
Net unrealized appreciation .................................... 86,645,582
Accumulated net realized loss .................................. (3,302,446)
------------
NET ASSETS .................................................. $213,876,805
============
CLASS A SHARES:
Net Assets ..................................................... $ 1,107,296
Shares Outstanding (unlimited authorized, $.01 par value)....... 70,981
NET ASSET VALUE PER SHARE ................................... $ 15.60
============
MAXIMUM OFFERING PRICE PER SHARE,
(net asset value plus 5.54% of net asset value) ........... $ 16.46
============
CLASS B SHARES:
Net Assets ..................................................... $212,042,718
Shares Outstanding (unlimited authorized, $.01 par value)....... 13,717,791
NET ASSET VALUE PER SHARE ................................... $ 15.46
============
CLASS C SHARES:
Net Assets ..................................................... $ 712,341
Shares Outstanding (unlimited authorized, $.01 par value)....... 46,118
NET ASSET VALUE PER SHARE ................................... $ 15.45
============
CLASS D SHARES:
Net Assets ..................................................... $ 14,450
Shares Outstanding (unlimited authorized, $.01 par value)....... 923
NET ASSET VALUE PER SHARE ................................... $ 15.66
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE>
TCW/DW MID-CAP EQUITY TRUST
FINANCIAL STATEMENTS, continued
STATEMENT OF OPERATIONS
For the year ended November 30, 1998
<TABLE>
<CAPTION>
<S> <C>
NET INVESTMENT LOSS:
INCOME
Dividends ......................................... $ 176,224
Interest .......................................... 102,687
------------
TOTAL INCOME ................................... 278,911
------------
EXPENSES
Plan of distribution fee (Class A shares) ......... 1,092
Plan of distribution fee (Class B shares) ......... 1,616,961
Plan of distribution fee (Class C shares) ......... 2,906
Management fee .................................... 1,085,682
Investment advisory fee ........................... 723,788
Transfer agent fees and expenses .................. 242,766
Registration fees ................................. 84,733
Shareholder reports and notices ................... 59,459
Professional fees ................................. 51,628
Organizational expenses ........................... 33,032
Custodian fees .................................... 32,366
Trustees' fees and expenses ....................... 31,640
Other ............................................. 11,845
------------
TOTAL EXPENSES ................................. 3,977,898
------------
NET INVESTMENT LOSS ............................ (3,698,987)
------------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain ................................. 31,236,102
Net change in unrealized appreciation ............. 37,809,903
------------
NET GAIN ....................................... 69,046,005
------------
NET INCREASE ...................................... $ 65,347,018
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE>
TCW/DW MID-CAP EQUITY TRUST
FINANCIAL STATEMENTS, continued
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
NOVEMBER 30, 1998 NOVEMBER 30, 1997*
------------------- -------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment loss .................................. $ (3,698,987) $ (3,891,233)
Net realized gain (loss) ............................. 31,236,102 (22,962,571)
Net change in unrealized appreciation ................ 37,809,903 23,258,457
------------- -------------
NET INCREASE (DECREASE) ........................... 65,347,018 (3,595,347)
Net decrease from transactions in shares of beneficial
interest ........................................... (26,033,572) (27,115,386)
------------- -------------
NET INCREASE (DECREASE) ........................... 39,313,446 (30,710,733)
NET ASSETS:
Beginning of period .................................. 174,563,359 205,274,092
------------- -------------
END OF PERIOD ...................................... $ 213,876,805 $ 174,563,359
============= =============
</TABLE>
- ----------------
* Class A, Class C and Class D shares were issued July 28, 1997.
SEE NOTES TO FINANCIAL STATEMENTS
9
<PAGE>
TCW/DW MID-CAP EQUITY TRUST
NOTES TO FINANCIAL STATEMENTS November 30, 1998
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.
The Fund offers Class A shares, Class B shares, Class C shares and Class D
shares. The four classes are substantially the same except that most Class A
shares are subject to a sales charge imposed at the time of purchase and some
Class A shares, and most Class B shares and Class C shares are subject to a
contingent deferred sales charge imposed on shares redeemed within one year,
six years and one year, respectively. Class D shares are not subject to a sales
charge. Additionally, Class A shares, Class B shares and Class C shares incur
distribution expenses.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts and disclosures. Actual results could differ
from those estimates.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- (1) an equity security listed or traded on the
New York, American or other domestic or foreign stock exchange is valued at its
latest sale price on that exchange prior to the time when assets are valued; if
there were no sales that day, the security is valued at the latest bid price
(in cases where securities are traded on more than one exchange, the securities
are valued on the exchange designated as the primary market pursuant to
procedures adopted by the Trustees); (2) all other portfolio securities for
which over-the-counter market quotations are readily available are valued at
the latest available bid price prior to the time of valuation; (3) when market
quotations are not readily available, including circumstances under which it is
determined by 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
10
<PAGE>
TCW/DW MID-CAP EQUITY TRUST
NOTES TO FINANCIAL STATEMENTS November 30, 1998, continued
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 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.,
formerly Dean Witter InterCapital 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.
11
<PAGE>
TCW/DW MID-CAP EQUITY TRUST
NOTES TO FINANCIAL STATEMENTS November 30, 1998, continued
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 the Adviser 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.
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 (1) services
12
<PAGE>
TCW/DW MID-CAP EQUITY TRUST
NOTES TO FINANCIAL STATEMENTS November 30, 1998, continued
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, 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; (2) printing and distribution of prospectuses and reports
used in connection with the offering of these shares to other than current
shareholders; and (3) 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 $8,805,273 at November 30, 1998.
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 year ended November 30, 1998, the distribution fee was
accrued for Class A shares and Class C shares at the annual rate of 0.25% and
1.0%, respectively.
The Distributor has informed the Fund that for the year ended November 30,
1998, it received contingent deferred sales charges from certain redemptions of
the Fund's Class B shares and Class C shares of $679,862 and $372, respectively
and received $15,552 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.
13
<PAGE>
TCW/DW MID-CAP EQUITY TRUST
NOTES TO FINANCIAL STATEMENTS November 30, 1998, continued
5. 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, 1998
aggregated $92,856,026 and $125,265,184, respectively.
For the year ended November 30, 1998, the Fund incurred brokerage commissions
of $645 with Morgan Stanley & Co., Inc., an affliate of the Manager and
Distributor, for portfolio transactions executed on behalf of the Fund.
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Manager and
Distributor, is the Fund's transfer agent. At November 30, 1998, the Fund had
transfer agent fees and expenses payable of approximately $1,000.
6. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
NOVEMBER 30, 1998 NOVEMBER 30, 1997*
---------------------------------- ----------------------------------
SHARES AMOUNT SHARES AMOUNT
--------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C>
CLASS A SHARES
Sold ............................ 70,760 $ 975,219 6,748 $ 74,233
Repurchased ..................... (5,127) (68,294) (1,400) (15,778)
------ ------------- ------ -------------
Net increase -- Class A ......... 65,633 906,925 5,348 58,455
------ ------------- ------ -------------
CLASS B SHARES
Sold ............................ 2,515,413 32,751,132 2,893,121 29,335,443
Repurchased ..................... (4,871,632) (60,224,693) (5,621,922) (56,605,744)
---------- ------------- ---------- -------------
Net decrease -- Class B ......... (2,356,219) (27,473,561) (2,728,801) (27,270,301)
---------- ------------- ---------- -------------
CLASS C SHARES
Sold ............................ 41,665 574,086 7,669 86,447
Repurchased ..................... (3,216) (41,022) -- --
---------- ------------- ---------- -------------
Net increase -- Class C ......... 38,449 533,064 7,669 86,447
---------- ------------- ---------- -------------
CLASS D SHARES
Sold ............................ -- -- 923 10,013
---------- ------------- ---------- -------------
Net decrease in Fund ............ (2,252,137) $ (26,033,572) (2,714,861) $ (27,115,386)
========== ============= ========== =============
</TABLE>
- ---------------
* For Class A, C and D, for the period July 28, 1997 (issue date) through
November 30, 1997.
14
<PAGE>
TCW/DW MID-CAP EQUITY TRUST
NOTES TO FINANCIAL STATEMENTS November 30, 1998, continued
7. FEDERAL INCOME TAX STATUS
During the year ended November 30, 1998, the Fund utilized its net capital loss
carryover of approximately $34,462,000.
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 $3,106,000 during fiscal 1998.
As of November 30, 1998, the Fund had temporary book/tax differences
attributable to post-October losses and capital loss deferrals on wash sales
and permanent book/tax differences primarily attributable to a net operating
loss. To reflect reclassifications arising from the permanent differences,
paid-in-capital was charged and net investment loss was credited $3,698,987.
15
<PAGE>
TCW/DW MID-CAP EQUITY TRUST
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a share of beneficial interest
outstanding throughout the period:
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR FOR THE YEAR FEBRUARY 27, 1996*
ENDED ENDED THROUGH
NOVEMBER 30, 1998++ NOVEMBER 30, 1997**++ NOVEMBER 30, 1996
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CLASS B SHARES
SELECTED PER SHARE DATA
Net asset value, beginning of period ................... $10.85 $10.92 $10.00
------ ------ ------
Income (loss) from investment operations:
Net investment loss ................................... (0.26) (0.22) (0.13)
Net realized and unrealized gain ...................... 4.87 0.15 1.05
------ ------ ------
Total income (loss) from investment operations ......... 4.61 (0.07) 0.92
------ ------ ------
Net asset value, end of period ......................... $15.46 $10.85 $10.92
====== ====== ======
TOTAL RETURN+ .......................................... 42.49 % (0.64)% 9.20 %(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ............................................... 2.20 %(3) 2.29 % 2.28 %(2)
Net investment loss .................................... (2.05)%(3) (2.16)% (1.79)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ................ $212,043 $174,412 $205,274
Portfolio turnover rate ................................ 52 % 49 % 25 %(1)
</TABLE>
- -------------
* 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.
(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.
SEE NOTES TO FINANCIAL STATEMENTS
16
<PAGE>
TCW/DW MID-CAP EQUITY TRUST
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR JULY 28, 1997*
ENDED THROUGH
NOVEMBER 30, 1998 NOVEMBER 30, 1997
- -------------------------------------------------------------------------------------------
<S> <C> <C>
CLASS A SHARES++
SELECTED PER SHARE DATA
Net asset value, beginning of period ............ $10.88 $10.85
------ ------
Income from investment operations:
Net investment loss ............................ (0.18) (0.06)
Net realized and unrealized gain ............... 4.90 0.09
------ ------
Total income from investment operations ......... 4.72 0.03
------ ------
Net asset value, end of period .................. $15.60 $10.88
====== ======
TOTAL RETURN+ ................................... 43.38 % 0.28 %(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ........................................ 1.55 %(3) 1.55 %(2)
Net investment loss ............................. (1.40)%(3) (1.46)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ......... $1,107 $58
Portfolio turnover rate ......................... 52 % 49 %
CLASS C SHARES++
SELECTED PER SHARE DATA
Net asset value, beginning of period ............ $10.85 $10.85
------ ------
Income from investment operations:
Net investment loss ............................ (0.28) (0.08)
Net realized and unrealized gain ............... 4.88 0.08
------ ------
Total income from investment operations ......... 4.60 --
------ ------
Net asset value, end of period .................. $15.45 $10.85
====== ======
TOTAL RETURN+ ................................... 42.27 % 0.09 %(1)
RATIOS TO AVERAGE NET ASSETS :
Expenses ........................................ 2.30 %(3) 2.32 %(2)
Net investment loss ............................. (2.15)%(3) (2.22)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ......... $712 $83
Portfolio turnover rate ......................... 52 % 49 %
</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
et asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
(3) Reflects overall Fund ratios for investment income and non-class
specific expenses.
SEE NOTES TO FINANCIAL STATEMENTS
17
<PAGE>
TCW/DW MID-CAP EQUITY TRUST
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR JULY 28, 1997*
ENDED THROUGH
NOVEMBER 30, 1998 NOVEMBER 30, 1997
- --------------------------------------------------------------------------------------------
<S> <C> <C>
CLASS D SHARES++
SELECTED PER SHARE DATA
Net asset value, beginning of period ............ $10.89 $10.85
------ ------
Income from investment operations:
Net investment loss ............................ (0.15) (0.05)
Net realized and unrealized gain ............... 4.92 0.09
------ ------
Total income from investment operations ......... 4.77 0.04
------ ------
Net asset value, end of period .................. $15.66 $10.89
====== ======
TOTAL RETURN+ ................................... 43.80 % 0.37 %(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ........................................ 1.30 %(3) 1.30 %(2)
Net investment loss ............................. (1.15)%(3) (1.19)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ......... $15 $10
Portfolio turnover rate ......................... 52 % 49 %
</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.
(3) Reflects overall Fund ratios for investment income and non-class
specific expenses.
SEE NOTES TO FINANCIAL STATEMENTS
18
<PAGE>
TCW/DW MID-CAP EQUITY TRUST
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND TRUSTEES
OF TCW/DW MID-CAP EQUITY TRUST
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 TCW/DW Mid-Cap Equity Trust (the
"Fund") at November 30, 1998, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended and the financial highlights for each of the periods presented, 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, 1998 by correspondence with the custodian and
brokers, provide a reasonable basis for
the opinion expressed above.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
January 8, 1999
19
<PAGE>
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
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
MANAGER
Morgan Stanley Dean Witter Services Company Inc.
ADVISER
TCW Funds Management, Inc.
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
[GRAPHIC]
ANNUAL REPORT
NOVEMBER 30, 1998
