<PAGE>
MORGAN STANLEY DEAN WITTER MID-CAP EQUITY TRUST Two World Trade Center,
LETTER TO THE SHAREHOLDERS November 30, 1999 New York, New York 10048
DEAR SHAREHOLDER:
The twelve-month period ended November 30, 1999, proved to be a rewarding one
for Morgan Stanley Dean Witter Mid-Cap Equity Trust. During this period, the
Fund's Class B shares returned 115.82 percent, compared to 21.37 percent for the
Standard & Poor's MidCap 400 Index (S&P MidCap) and 38.69 percent for the Lipper
Mid Cap Fund Index. For the same period, the Fund's Class A, C and D shares
returned 116.89 percent, 115.18 percent and 116.96 percent, respectively. (The
performance of the Fund's four share classes varies because of differing
expenses. Total return figures assume the reinvestment of all distributions and
do not reflect the deduction of any applicable sales charges.) The accompanying
chart compares the Fund's performance to that of the S&P MidCap and Lipper
indexes.
The Fund's outperformance relative to its benchmark indexes was attributable
primarily to its heavy weighting in technology stocks, particularly
Internet-related companies. On November 30, 1999, at 39.5 percent of net assets
- - up from 26 percent a year ago - technology represented the Fund's largest
sector weighting. Following close behind were business services at 25.2 percent
and consumer staples with an 18.2 percent weighting as compared to 31 percent
and 26 percent in 1998, respectively. Health care, representing 7.1 percent of
net assets, remains the lowest weighted of the Fund's four core growth sectors,
as a result of the lingering pricing pressure many of the health-care companies
are facing.
PORTFOLIO STRATEGY
According to TCW Investment Management Company (formerly TCW Funds Management,
Inc.), the Fund's sub-advisor, the strategy of the Fund remains unchanged:
investing in what the sub-advisor believes to be rapidly growing companies
whose earnings power is significantly underestimated by Wall Street consensus.
During the fiscal year, TCW continued to position the Fund in what it believes
are the fastest-growing
<PAGE>
MORGAN STANLEY DEAN WITTER MID-CAP EQUITY TRUST
LETTER TO THE SHAREHOLDERS November 30, 1999, continued
sectors of the economy in an effort to minimize the effect of any macroeconomic
slowdown. During this past year, the main investment theme continued to be
seeking companies that were positioned to take advantage of the high-powered
growth occurring in communications and data, driven mostly by the Internet.
Instead of remaining just a personal-computer-dependent application, the Web
has moved on to television and digital wireless telephony and a whole host of
growth companies has arisen to facilitate this transition. Key holdings
benefiting from this trend include Qualcomm, Gemstar International Group and
JDS Uniphase. In addition, the Fund maintains an exposure to companies that
have been successful at creating entirely new businesses on the Web, including
Yahoo! and eBay, and in companies that are allowing their clients to use the
Internet to improve their own business processes, such as Verisign, Vignette
and Scient.
The Fund continues to hold quite a few older-line companies not related to the
new economy. In the broadcast sector, the Fund maintains positions in
Univision, the nation's leading Hispanic broadcaster, and Echostar, a satellite
video provider. Both companies have ridden the wave of consumers looking for
more choices in entertainment. In the health-care arena, the Fund owns Biogen
and Genentech, which have been successful in developing new pharmaceuticals.
TCW continues to cast a wide net, looking for companies that have developed new
processes or are changing the dynamics of an existing industry. It is here that
the Fund seeks to add the most value for its shareholders, by identifying
companies with the potential for exceeding Wall Street's growth estimates. As
the true magnitude of the opportunity these companies face becomes more
evident, other investors are expected to rush in to gain exposure, which could
drive stock prices higher over time. This in a nutshell describes the Fund's
investment process, a philosophy that the Fund's sub-advisor continued to
follow regardless of the prevailing macroeconomic conditions.
LOOKING AHEAD
The past year has been a relatively stable one for the U.S. equity markets,
particularly compared to the turmoil of 1998. Nevertheless, the phenomenon of a
few stocks accounting for most of the gains in the major indexes while many
laggards were left behind continued. TCW believes that one possible explanation
for this trend is that many older companies are seeing their very franchises
threatened by new technologies and new intermediaries who are using the
Internet to change the rules of the game. As a result, investors are deciding
not to pay for future earnings that may not exist. Instead, investors appear to
prefer to invest money in companies that are expected to benefit from future
change while avoiding those that may be threatened.
According to TCW, this theme of dramatic economic change is one on which the
Fund seeks to capitalize. In other words, TCW seeks to identify companies that
are driving change while avoiding those that may
2
<PAGE>
MORGAN STANLEY DEAN WITTER MID-CAP EQUITY TRUST
LETTER TO THE SHAREHOLDERS November 30, 1999, continued
be negatively affected by it. As the pace of change accelerates, TCW
anticipates that the market will reward companies that are creating the new
economy while penalizing those that remain wedded to the old. Finally, while it
is impossible to expect the same returns that the Fund has delivered over the
past few years, TCW believes that attractive investment opportunities will
arise in the years ahead.
We appreciate your ongoing support of Morgan Stanley Dean Witter Mid-Cap Equity
Trust and look forward to continuing to serve your investment needs.
Very truly yours,
/s/ CHARLES A. FIUMEFREDDO /s/ MITCHELL M. MERIN
CHARLES A. FIUMEFREDDO MITCHELL M. MERIN
Chairman of the Board President
3
<PAGE>
MORGAN STANLEY DEAN WITTER MID-CAP EQUITY TRUST
RESULTS OF ANNUAL MEETING
* * * * *
On June 8, 1999, a special meeting of the Fund's shareholders was held for the
purpose of voting on three separate matters, the results of which were as
follows:
(1) APPROVAL OF A NEW INVESTMENT MANAGEMENT AGREEMENT BETWEEN THE FUND
AND MORGAN STANLEY DEAN WITTER ADVISORS INC.:
For .............. 6,382,378
Against .......... 138,571
Abstain .......... 562,201
(2) APPROVAL OF A NEW SUB-ADVISORY AGREEMENT BETWEEN MORGAN STANLEY DEAN WITTER
ADVISORS INC. AND TCW INVESTMENT MANAGEMENT COMPANY:
For .............. 6,342,674
Against .......... 158,865
Abstain .......... 581,611
(3) ELECTION OF TRUSTEES: Michael Bozic
For .............. 6,744,268
Withheld ......... 338,882
Charles A. Fiumefreddo
For .............. 6,755,007
Withheld ......... 328,143
Edwin J. Garn
For .............. 6,742,628
Withheld ......... 340,522
Wayne E. Hedien
For .............. 6,751,717
Withheld ......... 331,433
Manuel H. Johnson
For .............. 6,749,821
Withheld ......... 333,329
Michael E. Nugent
For .............. 6,754,388
Withheld ......... 328,762
Philip J. Purcell
For .............. 6,740,704
Withheld ......... 342,446
John L. Schroeder
For .............. 6,743,435
Withheld ......... 339,715
4
<PAGE>
Morgan Stanley Dean Witter Mid-Cap Equity Trust
Fund Performance November 30, 1999
GROWTH OF $10,000 - CLASS B
($ in Thousands)
Date TOTAL S&P Midcap IX LIPPER
----------------------------------------------------------
February 27, 1996 $10,000 $10,000 $10,000
November 30, 1996 $10,920 $11,284 $11,192
November 30, 1997 $10,850 $14,382 $12,974
November 30, 1998 $15,460 $15,877 $13,451
November 30, 1999 $23,165(3) $19,270 $18,655
------------------------------------------------
---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
- --------------------------------------------------------------------------------
CLASS B SHARES*
- ----------------------------------------------------------------
PERIOD ENDED 11/30/99
- --------------------------
1 Year 115.82%(1) 110.82%(2)
From Inception (2/27/96) 37.82%(1) 37.60%(2)
CLASS C SHARES++
- ----------------------------------------------------------------
PERIOD ENDED 11/30/99
- --------------------------
1 Year 115.18%(1) 114.18%(2)
From Inception (7/28/97) 61.34%(1) 61.34%(2)
CLASS A SHARES+
- ----------------------------------------------------------------
PERIOD ENDED 11/30/99
- --------------------------
1 Year 116.89%(1) 105.51%(2)
From Inception (7/28/97) 62.56%(1) 58.86%(2)
CLASS D SHARES#
- -----------------------------------------------
PERIOD ENDED 11/30/99
- --------------------------
1 Year 116.96%(1)
From Inception (7/28/97) 62.84%(1)
- ---------------
(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 2% contingent deferred sales
charge (CDSC), assuming a complete redemption on November 30, 1999.
(4) The Standard & Poor's Midcap 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 is 5.0%. The CDSC declines to 0% after six
years.
+ The maximum front-end sales charge for Class A 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.
5
<PAGE>
MORGAN STANLEY DEAN WITTER MID-CAP EQUITY TRUST
PORTFOLIO OF INVESTMENTS NOVEMBER 30, 1999
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------- ------------------
<S> <C> <C>
COMMON STOCKS (97.1%)
Accident & Health Insurance (0.6%)
175,000 AFLAC, Inc. .......................... $ 8,378,125
--------------
Advertising (1.9%)
85,700 DoubleClick Inc.* .................... 13,712,000
225,000 Lamar Advertising Co. (Class A)*...... 12,867,187
--------------
26,579,187
--------------
Apparel (0.6%)
100,000 Gucci Group N.V. (Netherlands) ....... 8,325,000
--------------
Auto Parts: O.E.M. (0.3%)
200,000 Gentex Corp.* ........................ 3,725,000
--------------
Biotechnology (3.3%)
359,900 Biogen, Inc.* ........................ 26,272,700
139,400 Genentech, Inc.* ..................... 11,970,975
138,900 Gilead Sciences, Inc.* ............... 6,658,519
--------------
44,902,194
--------------
Books/Magazines (0.0%)
24,400 Playboy Enterprises, Inc. (Class B)* . 507,825
--------------
Broadcasting (5.0%)
359,737 Clear Channel Communications, Inc.* .. 28,913,861
116,100 Hispanic Broadcasting Corp.* ......... 9,556,481
341,200 Univision Communications, Inc.
(Class A)* ......................... 29,855,000
--------------
68,325,342
--------------
Building Materials/DIY Chains (0.7%)
192,000 Lowe's Companies, Inc. ............... 9,564,000
--------------
Cable Television (3.5%)
279,100 Cablevision Systems Corp. (Class A)* . 19,135,794
429,700 EchoStar Communications Corp.
(Class A)* ......................... 28,360,200
--------------
47,495,994
--------------
Catalog/Specialty Distribution (2.4%)
295,200 Amazon.com, Inc.* .................... 25,092,000
186,900 Drugstore.com, Inc.* ................. 7,849,800
--------------
32,941,800
--------------
Clothing/Shoe/Accessory Stores (1.4%)
100,000 Ann Taylor Stores Corp.* ............. 4,318,750
312,100 Talbot's, Inc. (The) ................. 15,136,850
--------------
19,455,600
--------------
Computer Communications (2.1%)
32,800 Foundry Networks, Inc.* .............. 7,714,150
78,600 Juniper Networks, Inc.* .............. 21,762,375
--------------
29,476,525
--------------
Computer Software (8.0%)
77,900 Citrix Systems, Inc.* ................ 7,405,369
110,000 Mercury Interactive Corp.* ........... 9,123,125
91,550 Phone.com, Inc.* ..................... 13,228,975
411,000 Rational Software Corp.* ............. 20,961,000
845,400 Siebel Systems, Inc.* ................ 59,283,675
--------------
110,002,144
--------------
Computer/Video Chains (0.7%)
200,000 Circuit City Stores, Inc. - Circuit
City Group ......................... 9,700,000
--------------
Diversified Commercial Services (4.7%)
324,325 Paychex, Inc. ........................ 12,932,459
275,900 Scient Corp.* ........................ 39,971,012
142,000 Viant Corp.* ......................... 11,786,000
--------------
64,689,471
--------------
Diversified Electronic Products (5.8%)
360,000 Gemstar International Group Ltd.
(Virgin Islands)* .................. 40,590,000
170,000 JDS Uniphase Corp.* .................. 38,876,875
--------------
79,466,875
--------------
<PAGE>
Diversified Financial Services (0.2%)
35,000 Providian Financial Corp. ............ 2,769,375
--------------
E.D.P. Peripherals (0.4%)
66,100 Lexmark International Group, Inc.
(Class A)* ......................... 5,486,300
--------------
Electronic Components (1.3%)
75,000 Rambus Inc.* ......................... 5,268,750
160,000 Solectron Corp.* ..................... 13,180,000
--------------
18,448,750
--------------
Electronic Production Equipment (0.5%)
116,000 Jabil Circuit, Inc.* ................. 7,416,750
--------------
Engineering & Construction (0.9%)
312,400 Metromedia Fiber Network, Inc.
(Class A)* ......................... 12,085,975
--------------
Generic Drugs (0.3%)
86,200 Andrx Corp.* ......................... 4,433,913
--------------
</TABLE>
See Notes to Financial Statements
6
<PAGE>
Morgan Stanley Dean Witter Mid-Cap Equity Trust
Portfolio of Investments November 30, 1999, continued
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ---------------- ------------------
<S> <C> <C>
Internet Services (18.3%)
130,500 Ariba Inc.* ........................... $ 23,522,625
163,000 At Home Corp. (Series A)* ............. 7,915,687
21,900 Commerce One, Inc.* ................... 7,183,200
151,400 Exodus Communications, Inc.* .......... 16,313,350
41,400 Kana Communications, Inc.* ............ 6,080,625
209,500 Portal Software, Inc.* ................ 24,511,500
232,500 Starmedia Network Inc.* ............... 6,873,281
267,200 VeriSign, Inc.* ....................... 49,632,400
205,500 Vignette Corp.* ....................... 42,512,813
315,915 Yahoo! Inc.* .......................... 67,250,406
---------------
251,795,887
---------------
Investment Bankers/Brokers/
Services (3.0%)
1,374,300 E*TRADE Group, Inc.* .................. 41,229,000
---------------
Investment Managers (1.2%)
441,700 Price (T.) Rowe Associates, Inc. ...... 15,873,594
---------------
Life Insurance (1.0%)
298,400 Hartford Life, Inc. (Class A) ......... 13,353,400
---------------
Medical Equipment &
Supplies (0.6%)
103,700 VISX, Inc.* ........................... 8,043,231
---------------
Medical Specialties (1.5%)
200,000 Bard (C.R.), Inc. ..................... 10,862,500
136,700 Minimed, Inc.* ........................ 10,004,731
---------------
20,867,231
---------------
Mid-Sized Banks (0.2%)
100,000 First Tennessee National Corp. ........ 3,287,500
---------------
Motor Vehicles (0.5%)
115,000 Harley-Davidson, Inc. ................. 7,015,000
---------------
Movies/Entertainment (1.0%)
250,000 Westwood One, Inc.* ................... 14,312,500
---------------
Other Consumer Services (4.6%)
295,300 eBay Inc.* ............................ 48,724,500
217,400 Homestore.Com Inc.* ................... 14,144,588
---------------
62,869,088
---------------
Other Pharmaceuticals (0.8%)
109,000 Sepracor, Inc.* ....................... 10,573,000
---------------
Other Specialty Stores (0.4%)
187,500 Bed Bath & Beyond, Inc.* .............. 5,859,375
---------------
Other Telecommunications (3.7%)
307,600 AT&T Canada Inc. (Canada)* ............ 11,573,450
325,000 Broadwing Inc. ........................ 9,465,625
555,516 Global Crossing Ltd. (Bermuda)*........ 24,164,946
128,200 McLeodUSA, Inc. (Class A)* ............ 5,512,600
---------------
50,716,621
---------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------- ------------------
<S> <C> <C>
Precision Instruments (0.4%)
100,000 Waters Corp.* ......................... $ 4,900,000
---------------
Semiconductors (7.0%)
394,400 Altera Corp.* ......................... 21,248,300
452,700 Maxim Integrated Products, Inc.*....... 36,329,175
425,000 Xilinx, Inc.* ......................... 38,010,938
---------------
95,588,413
---------------
Services to the Health Industry (1.2%)
135,000 Express Scripts, Inc. (Class A)* ...... 6,851,250
343,300 MedQuist Inc.* ........................ 9,784,050
---------------
16,635,300
---------------
Smaller Banks (0.6%)
125,000 Zions Bancorporation .................. 8,062,500
---------------
Telecommunications
Equipment (6.5%)
450,500 American Tower Corp. (Class A)*........ 11,769,313
200,000 QUALCOMM Inc.* ........................ 72,450,000
25,000 Sycamore Networks Inc.* ............... 5,568,750
---------------
89,788,063
---------------
TOTAL COMMON STOCKS
(Identified Cost $723,344,313)......... 1,334,945,848
---------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS
- -----------
<S> <C> <C>
SHORT-TERM INVESTMENT (2.7%)
REPURCHASE AGREEMENT
$ 36,810 The Bank of New York 5.375%
due 12/01/99 (dated 11/30/99;
proceeds $36,815,163) (a)
(Identified Cost $36,809,667).......... 36,809,667
--------------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(Identified Cost $760,153,980) (b)......... 99.8% 1,371,755,515
OTHER ASSETS IN EXCESS OF
LIABILITIES ............................... 0.2 3,390,153
----- --------------
NET ASSETS ................................ 100.0% $1,375,145,668
===== --------------
</TABLE>
- --------------------------------
* Non-income producing security.
(a) Collateralized by $37,078,056 U.S. Treasury Note 6.125% due
09/30/00 valued at $37,539,730.
(b) The aggregate cost for federal income tax purposes approximates
identified cost. The aggregate gross unrealized appreciation is
$628,876,349 and the aggregate gross unrealized depreciation is
$17,274,814, resulting in net unrealized appreciation of
$611,601,535.
See Notes to Financial Statements
7
<PAGE>
MORGAN STANLEY DEAN WITTER MID-CAP EQUITY TRUST
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
November 30, 1999
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $760,153,980) .................................. $1,371,755,515
Receivable for:
Shares of beneficial interest sold ............................. 6,788,582
Investments sold ............................................... 755,711
Dividends ...................................................... 41,731
Deferred organizational expenses .................................. 41,081
Prepaid expenses and other assets ................................. 121,603
--------------
TOTAL ASSETS ................................................... 1,379,504,223
==============
LIABILITIES:
Payable for:
Shares of beneficial interest repurchased ...................... 2,629,665
Plan of distribution fee ....................................... 795,036
Investment management fee ...................................... 829,199
Accrued expenses and other payables ............................... 104,655
--------------
TOTAL LIABILITIES .............................................. 4,358,555
--------------
NET ASSETS ..................................................... $1,375,145,668
==============
COMPOSITION OF NET ASSETS:
Paid-in-capital ................................................... $ 743,256,860
Net unrealized appreciation ....................................... 611,601,535
Accumulated undistributed net realized gain ....................... 20,287,273
--------------
NET ASSETS ..................................................... $1,375,145,668
==============
CLASS A SHARES:
Net Assets ........................................................ $19,934,043
Shares Outstanding (unlimited authorized, $.01 par value) ......... 589,256
NET ASSET VALUE PER SHARE ...................................... $33.83
======
MAXIMUM OFFERING PRICE PER SHARE,
(net asset value plus 5.54% of net asset value) ................ $35.70
======
CLASS B SHARES:
Net Assets ........................................................ $1,315,929,755
Shares Outstanding (unlimited authorized, $.01 par value) ......... 39,445,753
NET ASSET VALUE PER SHARE ...................................... $33.36
======
CLASS C SHARES:
Net Assets ........................................................ $34,897,583
Shares Outstanding (unlimited authorized, $.01 par value) ......... 1,049,821
NET ASSET VALUE PER SHARE ...................................... $33.24
======
CLASS D SHARES:
Net Assets ........................................................ $4,384,287
Shares Outstanding (unlimited authorized, $.01 par value) ......... 129,081
NET ASSET VALUE PER SHARE ...................................... $33.97
======
</TABLE>
See Notes to Financial Statements
8
<PAGE>
MORGAN STANLEY DEAN WITTER MID-CAP EQUITY TRUST
FINANCIAL STATEMENTS, continued
STATEMENT OF OPERATIONS
For the year ended November 30, 1999
<TABLE>
<CAPTION>
<S> <C>
NET INVESTMENT LOSS:
INCOME
Interest .................................................. $ 1,334,422
Dividends (net of $6,000 foreign withholding tax) ......... 534,042
------------
TOTAL INCOME ........................................... 1,868,464
------------
EXPENSES
Plan of distribution fee (Class A shares) ................. 16,178
Plan of distribution fee (Class B shares) ................. 4,436,240
Plan of distribution fee (Class C shares) ................. 109,805
Investment management fee ................................. 3,257,327
Management fee ............................................ 1,034,415
Investment advisory fee ................................... 689,610
Transfer agent fees and expenses .......................... 656,717
Shareholder reports and notices ........................... 154,252
Registration fees ......................................... 92,140
Professional fees ......................................... 69,781
Organizational expenses ................................... 33,034
Custodian fees ............................................ 26,780
Trustees' fees and expenses ............................... 21,565
Other ..................................................... 19,200
------------
TOTAL EXPENSES ......................................... 10,617,044
------------
NET INVESTMENT LOSS .................................... (8,748,580)
------------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain ......................................... 44,590,626
Net change in unrealized appreciation ..................... 422,052,427
------------
NET GAIN ............................................... 466,643,053
------------
NET INCREASE .............................................. $457,894,473
============
</TABLE>
See Notes to Financial Statements
9
<PAGE>
MORGAN STANLEY DEAN WITTER 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, 1999 NOVEMBER 30, 1998
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment loss .................................. $ (8,748,580) $ (3,698,987)
Net realized gain .................................... 44,590,626 31,236,102
Net change in unrealized appreciation ................ 422,052,427 37,809,903
--------------- -------------
NET INCREASE ...................................... $ 457,894,473 65,347,018
--------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS FROM NET REALIZED GAIN:
Class A shares ....................................... (707) -
Class B shares ....................................... (54,653) -
Class C shares ....................................... (1,211) -
Class D shares ....................................... (4) -
---------------- -------------
TOTAL DISTRIBUTIONS ............................... (56,575) -
--------------- -------------
Net increase (decrease) from transactions in shares of
beneficial interest ................................ 703,430,965 (26,033,572)
--------------- -------------
NET INCREASE ...................................... 1,161,268,863 39,313,446
NET ASSETS:
Beginning of period .................................. 213,876,805 174,563,359
--------------- -------------
END OF PERIOD ..................................... $1,375,145,668 $213,876,805
=============== =============
</TABLE>
See Notes to Financial Statements
10
<PAGE>
MORGAN STANLEY DEAN WITTER MID-CAP EQUITY TRUST
NOTES TO FINANCIAL STATEMENTS November 30, 1999
1. ORGANIZATION AND ACCOUNTING POLICIES
Morgan Stanley Dean Witter Mid-Cap Equity Trust (the "Fund"), formerly TCW/DW
Mid-Cap Equity Trust, 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 converted to a multiple class
share structure.
The Fund offers Class A shares, Class B shares, Class C shares and Class D
shares. The four classes are substantially the same except that most Class A
shares are subject to a sales charge imposed at the time of purchase and some
Class A shares, and most Class B shares and Class C shares are subject to a
contingent deferred sales charge imposed on shares redeemed within one year,
six years and one year, respectively. Class D shares are not subject to a sales
charge. Additionally, Class A shares, Class B shares and Class C shares incur
distribution expenses.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts and disclosures. Actual results could differ
from those estimates.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS - (1) an equity security listed or traded on the
New York, American or other domestic or foreign stock exchange is valued at its
latest sale price on that exchange prior to the time when assets are valued; if
there were no sales that day, the security is valued at the latest bid price
(in cases where securities are traded on more than one exchange; the securities
are valued on the exchange designated as the primary market pursuant to
procedures adopted by the Trustees); (2) all other portfolio securities for
which over-the-counter market quotations are readily available are valued at
the latest available bid price prior to the time of valuation; (3) when market
quotations are not readily available, including circumstances under which it is
determined by Morgan Stanley Dean Witter Advisors Inc. (the "Investment
Manager") or TCW Investment Management Company (the "Sub-Advisor") 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
11
<PAGE>
MORGAN STANLEY DEAN WITTER MID-CAP EQUITY TRUST
NOTES TO FINANCIAL STATEMENTS November 30, 1999, continued
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 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 - The Investment 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.
12
<PAGE>
MORGAN STANLEY DEAN WITTER MID-CAP EQUITY TRUST
NOTES TO FINANCIAL STATEMENTS November 30, 1999, continued
2. INVESTMENT MANAGEMENT AND SUB-ADVISORY AGREEMENTS
Pursuant to a new Investment Management Agreement that took effect June 28,
1999, the Fund pays the Investment Manager a management fee, accrued daily and
payable monthly, by applying the annual rate of 0.75% to the portion of net
assets not exceeding $500 million and 0.725% to the portion of the 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.
Under a new Sub-Advisory Agreement that took effect June 28, 1999 between the
Investment Manager and the Sub-Advisor, the Sub-Advisor provides the Fund with
investment advice and portfolio management relating to the Fund's investments
in securities, subject to the overall supervision of the Investment Manager. As
compensation for its services provided pursuant to the Sub-Advisory Agreement,
the Investment Manager pays the Sub-Advisor compensation equal to 40% of its
monthly compensation.
Prior to June 28, 1999, pursuant to a Management Agreement with Morgan Stanley
Dean Witter Services Company Inc. (the "Former Manager"), the Fund paid the
Former 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 maintained certain of
the Fund's books and records and furnished, at its own expense, office space,
facilities, equipment, clerical, bookkeeping and certain legal services and
paid the salaries of all personnel, including officers of the Fund who were
employees of the Manager. The Manager also bore the cost of telephone services,
heat, light, power and other utilities provided to the Fund.
Prior to June 28, 1999, pursuant to an Investment Advisory Agreement with the
current Sub-Advisor, the Fund paid 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 had retained the
current Sub-Advisor to invest the Fund's assets, including placing orders for
the purchase and sale of portfolio securities. The current Sub-Advisor obtained
and evaluated such information and advice relating to the economy,
13
<PAGE>
MORGAN STANLEY DEAN WITTER MID-CAP EQUITY TRUST
NOTES TO FINANCIAL STATEMENTS November 30, 1999, continued
securities markets, and specific securities as it considered necessary or
useful to continuously manage the assets of the Fund in a manner consistent
with its investment objective. In addition, the current Sub-Advisor paid the
salaries of all personnel, including officers of the Fund, who were employees
of the current Sub-Advisor.
3. PLAN OF DISTRIBUTION
Shares of the Fund are distributed by Morgan Stanley Dean Witter Distributors
Inc. (the "Distributor"), an affiliate of the Investment Manager. The Fund has
adopted a Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under the
Act. The Plan provides that the Fund will pay the Distributor a fee which is
accrued daily and paid monthly at the following annual rates: (i) Class A - up
to 0.25% of the average daily net assets of Class A; (ii) Class B - 1.0% of the
lesser of: (a) the average daily aggregate gross sales of the Class B shares
since 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
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
14
<PAGE>
MORGAN STANLEY DEAN WITTER MID-CAP EQUITY TRUST
NOTES TO FINANCIAL STATEMENTS November 30, 1999, continued
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 $25,765,238 at November 30,
1999.
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, 1999, the distribution fee was
accrued for Class A shares and Class C shares at the annual rate of 0.24% and
1.0%, respectively.
The Distributor has informed the Fund that for the year ended November 30,
1999, it received contingent deferred sales charges from certain redemptions of
the Fund's Class A shares, Class B shares and Class C shares of $3,082,
$693,550 and $10,375, respectively and received $154,526 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.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales of portfolio securities,
excluding short-term investments, for the year ended November 30, 1999
aggregated $512,599,322 and $310,931,925, respectively.
For the year ended November 30, 1999, the Fund incurred brokerage commissions
of $9,005 with Morgan Stanley & Co., Inc., an affiliate of the Investment
Manager and Distributor, for portfolio transactions executed on behalf of the
Fund.
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager
and Distributor, is the Fund's transfer agent. At November 30, 1999, the Fund
had transfer agent fees and expenses payable of approximately $4,000.
5. FEDERAL INCOME TAX STATUS
As part of the Fund's acquisition of the assets of Morgan Stanley Dean Witter
Mid-Cap Growth Fund ("Mid-Cap Growth"), the Fund obtained a net capital loss
carryover of approximately $18,137,000 from Mid-Cap Growth. Utilization of this
carryover is subject to limitations imposed by the Internal Revenue Code and
Treasury Regulations. During the year ended November 30, 1999, the Fund
utilized
15
<PAGE>
MORGAN STANLEY DEAN WITTER MID-CAP EQUITY TRUST
NOTES TO FINANCIAL STATEMENTS November 30, 1999, continued
approximately $7,851,000 of this carryover. At November 30, 1999, the Fund had
a net capital loss carryover remaining of approximately $10,286,000 which will
be available through November 30, 2005 to offset future capital gains to the
extent provided by regulations.
As of November 30, 1999, the Fund had temporary book/tax differences
attributable to unused capital loss carryover 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
$8,748,580.
16
<PAGE>
MORGAN STANLEY DEAN WITTER MID-CAP EQUITY TRUST
NOTES TO FINANCIAL STATEMENTS November 30, 1999, continued
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, 1999 NOVEMBER 30, 1998
--------------------------------- --------------------------------
SHARES AMOUNT SHARES AMOUNT
--------------- ----------------- --------------- ----------------
<S> <C> <C> <C> <C>
CLASS A SHARES
Sold ................................................ 634,895 $ 17,175,647 70,760 $ 975,219
Reinvestment of distributions ....................... 23 593 - -
Acquisition of Morgan Stanley Dean Witter Mid-Cap
Growth Fund ........................................ 137,952 3,450,632
Repurchased ......................................... (254,595) (6,451,822) (5,127) (68,294)
-------- -------------- ------ -------------
Net increase - Class A .............................. 518,275 14,175,050 65,633 906,925
-------- -------------- ------ -------------
CLASS B SHARES
Sold ................................................ 11,267,017 301,595,088 2,515,413 32,751,132
Reinvestment of distributions ....................... 1,986 50,366 - -
Acquisition of Morgan Stanley Dean Witter Mid-Cap
Growth Fund ........................................ 20,363,981 503,472,815
Repurchased ......................................... (5,905,022) (145,463,060) (4,871,632) (60,224,693)
---------- -------------- ---------- -------------
Net increase (decrease) - Class B ................... 25,727,962 659,655,209 (2,356,219) (27,473,561)
---------- -------------- ---------- -------------
CLASS C SHARES
Sold ................................................ 849,493 22,720,952 41,665 574,086
Reinvestment of distributions ....................... 44 1,113 - -
Acquisition of Morgan Stanley Dean Witter Mid-Cap
Growth Fund ........................................ 264,929 6,532,755
Repurchased ......................................... (110,763) (2,910,576) (3,216) (41,022)
---------- -------------- ---------- -------------
Net increase - Class C .............................. 1,003,703 26,344,244 38,449 533,064
---------- -------------- ---------- -------------
CLASS D SHARES
Sold ................................................ 688,208 18,792,852 - -
Reinvestment of distributions ....................... - 4 - -
Acquisition of Morgan Stanley Dean Witter Mid-Cap
Growth Fund ........................................ 11,712 294,460
Repurchased ......................................... (571,762) (15,830,854) - -
---------- -------------- ---------- -------------
Net increase - Class D .............................. 128,158 3,256,462 - -
---------- -------------- ---------- -------------
Net increase (decrease) in Fund ..................... 27,378,098 $ 703,430,965 (2,252,137) $ (26,033,572)
========== ============== ========== =============
</TABLE>
17
<PAGE>
MORGAN STANLEY DEAN WITTER MID-CAP EQUITY TRUST
NOTES TO FINANCIAL STATEMENTS November 30, 1999, continued
7. ACQUISITION OF MORGAN STANLEY DEAN WITTER MID-CAP GROWTH FUND
On June 28, 1999, the Fund acquired all the net assets of the Morgan Stanley
Dean Witter Mid-Cap Growth Fund ("Mid-Cap Growth") based on the respective
valuations as of the close of business on June 25, 1999, pursuant to a plan of
reorganization approved by the shareholders of Mid-Cap Growth on June 8, 1999.
The acquisition was accomplished by a tax-free exchange of 137,952 Class A
shares of the Fund at a net asset value of $25.02 per share for 223,982 Class A
shares of Mid-Cap Growth; 20,363,981 Class B shares of the Fund at a net asset
value of $24.73 per share for 33,262,962 Class B shares of Mid-Cap Growth;
264,929 Class C shares of the Fund at a net asset value of $24.66 per share for
431,232 Class C shares of Mid-Cap Growth; and 11,712 Class D shares of the Fund
at a net asset value of $25.14 per share for 19,083 Class D shares of Mid-Cap
Growth. The net assets of the Fund and Mid-Cap Growth immediately before the
acquisition were $355,933,256 and $513,750,663, respectively, including
unrealized appreciation of $102,903,526 for Mid-Cap Growth. Immediately after
the acquisition, the combined net assets of the Fund amounted to $869,683,919.
18
<PAGE>
MORGAN STANLEY DEAN WITTER 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 YEAR FOR THE YEAR JULY 28, 1997*
ENDED ENDED THROUGH
NOVEMBER 30, 1999 NOVEMBER 30, 1998 NOVEMBER 30, 1997
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CLASS A SHARES#
SELECTED PER SHARE DATA:
Net asset value, beginning of period ............ $15.60 $10.88 $10.85
------ ------ ------
Income (loss) from investment operations:
Net investment loss ............................ (0.34) (0.18) (0.06)
Net realized and unrealized gain ............... 18.57 4.90 0.09
------ ------ ------
Total income from investment operations ......... 18.23 4.72 0.03
------ ------ ------
Net asset value, end of period .................. $33.83(4) $15.60 $10.88
====== ====== ======
TOTAL RETURN+ ................................... 116.89 % 43.38 % 0.28 %(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ........................................ 1.23 %(3) 1.55 %(3) 1.55 %(2)
Net investment loss ............................. (0.93)%(3) (1.40)%(3) (1.46)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ......... $19,934 $1,107 $58
Portfolio turnover rate ......................... 51 % 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 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.
(4) Includes the effect of a capital gain distribution of $0.004.
See Notes to Financial Statements
19
<PAGE>
MORGAN STANLEY DEAN WITTER MID-CAP EQUITY TRUST
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR ENDED NOVEMBER 30 FEBRUARY 27, 1996*
--------------------------------------------------- THROUGH
1999# 1998# 1997**# NOVEMBER 30, 1996
------------------ ------------------ ------------- -------------------
<S> <C> <C> <C> <C>
CLASS B SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning of period ................... $5.46 $10.85 $10.92 $10.00
------ ------ ------ ------
Income (loss) from investment operations:
Net investment loss ................................... (0.42) (0.26) (0.22) (0.13)
Net realized and unrealized gain ...................... 18.32 4.87 0.15 1.05
------ ------ ------ ------
Total income (loss) from investment operations ......... 17.90 4.61 (0.07) 0.92
------ ------ ------ ------
Net asset value, end of period ......................... $33.36(4) $15.46 $10.85 $10.92
====== ====== ====== ======
TOTAL RETURN+ .......................................... 115.82 % 42.49 % (0.64)% 9.20 %(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ............................................... 1.74 %(3) 2.20 %(3) 2.29 % 2.28 %(2)
Net investment loss .................................... (1.44)%(3) (2.05)%(3) (2.16)% (1.79)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ................ $1,315,930 $212,043 $174,412 $205,274
Portfolio turnover rate ................................ 51 % 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.
(4) Includes the effect of a capital gain distribution of $0.004.
See Notes to Financial Statements
20
<PAGE>
Morgan Stanley Dean Witter Mid-Cap Equity Trust
Financial Highlights, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR FOR THE YEAR JULY 28, 1997*
ENDED ENDED THROUGH
NOVEMBER 30, 1999 NOVEMBER 30, 1998 NOVEMBER 30, 1997
------------------- ------------------- ------------------
<S> <C> <C> <C>
CLASS C SHARES#
SELECTED PER SHARE DATA:
Net asset value, beginning of period ............ $15.45 $10.85 $10.85
------ ------ ------
Income (loss) from investment operations:
Net investment loss ............................ (0.52) (0.28) (0.08)
Net realized and unrealized gain ............... 18.31 4.88 0.08
------ ------ ------
Total income from investment operations ......... 17.79 4.60 -
------ ------ ------
Net asset value, end of period .................. $33.24(4) $15.45 $10.85
====== ====== ======
TOTAL RETURN+ ................................... 115.18 % 42.27 % 0.09 %(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ........................................ 1.99 %(3) 2.30 %(3) 2.32 %(2)
Net investment loss ............................. (1.69)%(3) (2.15)%(3) (2.22)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ......... $34,898 $712 $83
Portfolio turnover rate ......................... 51 % 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 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.
(4) Includes the effect of a capital gain distribution of $0.004.
See Notes to Financial Statements
21
<PAGE>
Morgan Stanley Dean Witter Mid-Cap Equity Trust
Financial Highlights, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR FOR THE YEAR JULY 28, 1997*
ENDED ENDED THROUGH
NOVEMBER 30, 1999 NOVEMBER 30, 1998 NOVEMBER 30, 1997
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CLASS D SHARES#
SELECTED PER SHARE DATA:
Net asset value, beginning of period ............ $15.66 $10.89 $10.85
------ ------ ------
Income (loss) from investment operations:
Net investment loss ............................ (0.21) (0.15) (0.05)
Net realized and unrealized gain ............... 18.52 4.92 0.09
------ ------ ------
Total income from investment operations ......... 18.31 4.77 0.04
------ ------ ------
Net asset value, end of period .................. $33.97(4) $15.66 $10.89
====== ====== ======
TOTAL RETURN+ ................................... 116.96 % 43.80 % 0.37 %(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ........................................ 0.99 %(3) 1.30 %(3) 1.30 %(2)
Net investment loss ............................. (0.69)%(3) (1.15)%(3) (1.19)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ......... $4,384 $15 $10
Portfolio turnover rate ......................... 51 % 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.
(4) Includes the effect of a capital gain distribution of $0.004.
See Notes to Financial Statements
22
<PAGE>
Morgan Stanley Dean Witter Mid-Cap Equity Trust
Report of Independent Accountants
TO THE SHAREHOLDERS AND TRUSTEES
OF MORGAN STANLEY DEAN WITTER 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 Morgan Stanley Dean Witter Mid-Cap
Equity Trust (the "Fund"), formerly TCW/DW Mid-Cap Equity Trust, at November
30, 1999, 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 indicated, 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, 1999 by
correspondence with the custodian, provide a reasonable basis for the opinion
expressed above.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
January 11, 2000
- --------------------------------------------------------------------------------
1999 FEDERAL TAX NOTICE (unaudited)
During the year ended November 30, 1999, the Fund paid shareholders $.004 per
share from long-term capital gains.
- --------------------------------------------------------------------------------
23
<PAGE>
TRUSTEES
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
Wayne E. Hedien
Dr. Manuel H. Johnson
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Mitchell M. Merin
President
Barry Fink
Vice President, Secretary and General Counsel
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
INVESTMENT MANAGER
Morgan Stanley Dean Witter Advisors Inc.
Two World Trade Center
New York, New York 10048
SUB-ADVISOR
TCW Investment Management Company
865 South Figueroa Street, Suite 1800
Los Angeles, CA 90017
This report is submitted for the general information of shareholders of the
Fund. For more detailed information about the Fund, its officers and trustees,
fees, expenses and other pertinent information, please see the prospectus
of the Fund.
This report is not authorized for distribution to prospective investors in the
Fund unless preceded or accompanied by an effective prospectus. Read the
prospectus carefully before investing.
MORGAN STANLEY
DEAN WITTER
MID-CAP
EQUITY TRUST
[GRAPHIC OMITTED]
ANNUAL REPORT
NOVEMBER 30, 1999
