TCW/DW TERM TRUST 2002
Two World Trade Center
New York, New York 10048
DEAR SHAREHOLDER:
- -----------------------------------------------------------------------------
For the fiscal year ended September 30, 1995, TCW/DW Term Trust 2002's net
asset value increased from $7.86 to $9.13 per share. Based on the Trust's net
asset value, and including reinvestment of income dividends totaling $0.675
per share, the Trust's total return for the fiscal year was 26.77 percent. As
of September 30, 1995, the bond market's strength had not yet been reflected
in the market price of the Trust's shares on the New York Stock Exchange
(NYSE), which declined from $8.25 to $7.75 per share. Based on the Trust's
NYSE market price, and including reinvestment of income dividends, the
Trust's total return for the fiscal year based on market value was 2.52
percent. The Trust's investment performance during the fiscal year is largely
attributable to the strength of the rebound in the mortgage-backed securities
market and the effect of leverage on the Fund, as well as to declining
interest rates.
THE MARKET
After a difficult year in 1994, the U.S. bond market has staged an
impressive rally through the third quarter of this year. Between the
beginning of January and the end of June 1995, 3- and 5-year U.S. Treasury
yields declined more than 185 basis points, while 30-year yields fell 125
basis points. Yields rose in July and early August, however, as investors
overreacted to news of a recovering economy. Once these concerns subsided,
yields headed back down.
The Federal Reserve Board's decision in early July to cut short-term
interest rates--an effort to keep the economy from falling into
recession--was widely anticipated. Recently, there have been signs of renewed
growth in the manufacturing sector, and the housing sector has shown
surprising strength. Despite this vigor, inflationary pressures have remained
stable, a positive piece of economic news for the bond market. Thus, the
central bank appears to be satisfied with current economic conditions and is
not expected to alter monetary policy for the short term.
According to the Trust's investment adviser, TCW Funds Management, Inc.
(TCW), lower volatility in the fixed-income market and greatly improved
liquidity helped the mortgage-backed sector's performance this year. The
issuance of new collateralized mortgage obligations (CMOs) has fallen to
one-tenth of the volume generated in previous years, lending support to
mortgage spreads. Prepayment rates tracked seasonal norms earlier in the year
and then began to accelerate as declining interest rates led to increased
refinancing activity and a recovery in the housing sector.
THE PORTFOLIO
Approximately 65 percent of the Trust is invested in AAA-rated fixed-rate
mortgage pass-through securities or CMOs with durations, average lives or
expected maturity dates that correspond closely to the termination date of
the Trust. An additional 20 percent is invested in inverse floating rate CMOs
issued by U.S. government agencies. Inverse floaters have coupons that reset
by a multiple in a direction opposite that of a specified index. The average
lives, durations and expected maturity dates of inverse floaters are more
sensitive to changes in prepayment rates and interest rates than are some
other types of CMOs. As interest rates fell during 1995, the value of these
securities increased. At the end of the fiscal year, 15 percent was invested
in AAA-rated zero coupon municipal bonds and short-term investments. These
holdings play an important role as the Trust seeks to achieve its objective
of returning the original $10 offering price to
<PAGE>
shareholders at maturity. At fiscal year end, the Trust's degree of leverage
(the ratio of debt to equity) had declined to 22 percent of total gross
assets. TCW will continue to use prepayments and a portion of the net
proceeds from the share repurchase plan to further pay down the Trust's
leverage factor.
LOOKING AHEAD
TCW is generally positive regarding the mortgage-backed sector. Although
Congress has yet to agree on a deficit reduction plan--which could renew
inflationary fears among investors--real interest rates are still high
historically. (In the past, periods of strong bond market performance have
correlated with high real rates of interest.) The Trust's net asset and NYSE
market values will continue to fluctuate as the prices of the securities held
in the portfolio respond to changes in market conditions and interest rates.
We would like to remind you that the Trustees have approved a procedure
whereby the Trust may attempt, when appropriate, to reduce or eliminate a
market value discount from net asset value by repurchasing shares in the open
market or in privately negotiated transactions at a price not above market
value or net asset value, whichever is lower at the time of purchase. During
the fiscal year, the Trust purchased 1,038,700 shares of common stock at a
weighted average market discount of 12.48 percent.
We appreciate your support of TCW/DW Term Trust 2002 and look forward to
continuing to serve your investment needs and objectives.
Very truly yours,
Charles A. Fiumefreddo
Chairman of the Board
<PAGE>
TCW/DW TERM TRUST 2002
Portfolio of Investments September 30, 1995
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- ----------- --------- ---------- ---------------
<S> <C> <C> <C> <C>
COLLATERALIZED MORTGAGE
OBLIGATIONS (108.5%)
U.S. GOVERNMENT AGENCIES (57.1%)
$ 727 Federal Home Loan Mortgage Corp. 1385 SB ................... 9.814+% 10/15/07 $ 648,548
3,063 Federal Home Loan Mortgage Corp. 1389 SB ................... 8.813+ 10/15/07 2,686,714
30,000 Federal Home Loan Mortgage Corp. 1465 G (PAC)++ ........... 7.00 12/15/07 29,779,500
15,600 Federal Home Loan Mortgage Corp. 1481 H (PAC)++ ........... 6.875 08/15/21 15,316,080
4,999 Federal Home Loan Mortgage Corp. 1519 J ................... 10.686+ 05/15/08 3,775,766
16,447 Federal Home Loan Mortgage Corp. 1606 SC ................... 6.54+ 11/15/08 10,787,979
11,059 Federal Home Loan Mortgage Corp. 1609 LG (PAC) ............. 4.468+ 11/15/23 8,548,464
19,884 Federal Home Loan Mortgage Corp. 1611 QB (PAC) ............. 8.093+ 11/15/23 17,218,385
18,300 Federal Home Loan Mortgage Corp. 1633 B++ .................. 6.50 09/15/23 17,432,397
18,500 Federal Home Loan Mortgage Corp. 1638 K (PAC)++ ........... 6.50 03/15/23 17,657,880
2,362 Federal National Mortgage Assoc. 1992-138 O ................ 7.50 07/25/22 2,364,715
13,993 Federal National Mortgage Assoc. 1992-150 SV (PAC) ........ 10.796+ 05/25/21 12,786,088
15,703 Federal National Mortgage Assoc. 1992-208 C (TAC)++ ....... 7.50 10/25/07 15,805,823
16,248 Federal National Mortgage Assoc. 1992-214 K++ .............. 7.50 12/25/22 16,367,570
8,333 Federal National Mortgage Assoc. 1993-139 SP (PAC) ........ 6.30+ 12/25/21 5,975,916
30,161 Federal National Mortgage Assoc. 1993-141 A++ .............. 7.00 12/25/22 29,649,271
9,843 Federal National Mortgage Assoc. 1993-179 SV ............... 2.694+ 10/25/21 6,151,473
18,193 Federal National Mortgage Assoc. 1993-190 S ................ 4.705+ 10/25/08 11,916,148
9,068 Federal National Mortgage Assoc. 1993-190 SB (PAC) ........ 4.785+ 10/25/08 8,211,233
5,814 Federal National Mortgage Assoc. 1993-238 SA ............... 6.388+ 07/25/08 4,022,532
20,000 Federal National Mortgage Assoc. G1992-44 SC ...............12.168+ 08/25/20 18,131,200
---------------
TOTAL U.S. GOVERNMENT AGENCIES
(IDENTIFIED COST $283,757,774) ................................................. 255,233,682
---------------
PRIVATE ISSUES (51.4%)
9,022 Bear Stearns Mortgage Securities, Inc 1993-10 A7 (PAC) .... 7.20 07/25/24 8,973,552
3,213 Capstead Securities Corp. IV 1992-15 C ..................... 7.50 06/25/23 3,206,543
19,844 Citicorp Mortgage Securities, Inc. 1992-20 A5 .............. 7.50 12/25/07 19,881,108
19,574 CMC Securities Corp. III 1994-C A9 (PAC) ................... 6.75 03/25/24 18,081,483
11,232 CountryWide Funding Corp. 1994-4 A12 ....................... 6.95 04/25/24 10,558,035
21,117 CountryWide Mortgage Backed Securities, Inc 1993-B A6 (PAC) 6.75 11/25/23 19,554,342
26,402 General Electric Capital Mortgage Services, Inc. 1994-6 A9 6.50 09/25/22 23,178,589
31,411 Prudential Home Mortgage Securities 1992-50 A3 ............. 8.00 12/25/23 31,545,037
13,170 Prudential Home Mortgage Securities 1993-2 A7 .............. 7.00 02/25/08 12,525,391
20,000 Prudential Home Mortgage Securities 1993-60 A3 (PAC)++ .... 6.75 12/25/23 18,358,600
41,182 Resolution Funding Mortgage Securities I 1992-S38 A6 ...... 7.50 02/25/18 41,387,910
16,836 Resolution Funding Mortgage Securities I 1993-S40 A8 (TAC) 6.75 11/25/23 15,638,876
2,274 Resolution Trust Corp. 1993-C1 A1B ......................... 7.75 05/25/24 2,325,006
4,731 Ryland Mortgage Securities Corp. 1992-18 C ................. 7.75 09/25/19 4,768,848
---------------
TOTAL PRIVATE ISSUES
(IDENTIFIED COST $236,341,457) ................................................. 229,983,320
---------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(IDENTIFIED COST $520,099,231) ................................................. 485,217,002
</TABLE>
<PAGE>
TCW/DW TERM TRUST 2002
Portfolio of Investments September 30, 1995 (continued)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- ----------- --------- ---------- ---------------
<S> <C> <C> <C> <C>
MUNICIPAL BONDS (A) (19.3%)
EDUCATION FACILITIES REVENUE (1.0%)
$ 6,600 Austin Independent School District, Texas (PSF Guaranteed) 0.00 % 08/01/03 $ 4,450,644
---------------
ELECTRIC REVENUE (2.7%)
Austin, Texas,
5,195 Combined Utility Ser A (FGIC Insured) .....................0.00 05/15/03 3,540,600
4,355 Combined Utility Ser A (FGIC Insured) (ETM) ...............0.00 05/15/03 3,003,644
8,400 Lower Colorado River Authority, Texas,
Jr Lien 4th Ser (FGIC Insured) ............................0.00 01/01/04 5,502,588
---------------
12,046,832
---------------
INDUSTRIAL DEVELOPMENT REVENUE (3.9%)
Metropolitan Pier & Exposition Authority, Illinois,
6,610 McCormick Place (AMBAC Insured) ...........................0.00 06/15/02 4,723,506
7,400 McCormick Place (AMBAC Insured) ...........................0.00 12/15/02 5,157,356
10,465 Pennsylvania Convention Center Authority,
Ser A (FGIC Insured) (ETM) ................................0.00 09/01/02 7,475,045
---------------
17,355,907
---------------
OTHER REVENUE (6.6%)
33,140 Johnson County, Kansas (AMBAC Insured) (ETM) ...............0.00 06/01/12 10,656,498
17,500 North Slope Boro, Alaska, Ser 1992 A (MBIA Insured) .......0.00 06/30/03 11,789,575
10,400 Texas, Superconducting Supercollider Refg Ser C (FGIC
Insured) ..................................................0.00 04/01/03 7,131,696
---------------
29,577,769
---------------
TAX ALLOCATION (1.9%)
12,370 Harris County, Texas (MBIA Insured) ........................0.00 10/01/02 8,752,146
---------------
TRANSPORTATION REVENUE (1.8%)
12,000 Contra Costa Transportation Authority, California, Sales
Tax (FGIC Insured) (ETM) ..................................0.00 03/01/04 7,903,560
---------------
WATER & SEWER REVENUE (1.4%)
9,500 Pittsburgh, Pennsylvania, Water & Sewer Ser A (FGIC
Insured) (ETM) ............................................0.00 09/01/04 6,103,845
---------------
TOTAL MUNICIPAL BONDS (IDENTIFIED COST $80,404,761) .................. 86,190,703
---------------
SHORT-TERM INVESTMENT (0.4%)
REPURCHASE AGREEMENT
1,756 The Bank of New York (dated 09/29/95; proceeds $1,757,095;
collateralized by $1,942,743 U.S. Treasury Note 6.875% due
07/31/99 valued at $2,019,403) (Identified Cost
$1,756,308) ...............................................5.375 10/02/95 1,756,308
---------------
TOTAL INVESTMENTS (IDENTIFIED COST $602,260,300) (B) ................. 128.2% 573,164,013
LIABILITIES IN EXCESS OF OTHER ASSETS ................................ (28.2) (126,159,041)
---------------
NET ASSETS ........................................................... 100.0% $ 447,004,972
===============
</TABLE>
------------
ETM Escrowed to Maturity.
PAC Planned Amortization Class.
TAC Targeted Amortization Class.
+ Inverse floater: interest rate moves inversely to a designated index,
such as LIBOR (London Inter-Bank Offered Rate) or COFI (Cost of Funds
Index), typically at a multiple of the changes of the relevant index
rate.
++ Some or all of these securities are pledged in connection with
reverse repurchase agreements.
(a) Investments in Texas Municipal Obligations represent 7.2% of net
assets.
(b) The aggregate cost of investments for federal income tax purposes is
$602,260,300; the aggregate gross unrealized appreciation is
$10,378,514 and the aggregate gross unrealized depreciation is
$39,474,801, resulting in net unrealized depreciation of $29,096,287.
See Notes to Financial Statements
<PAGE>
TCW/DW TERM TRUST 2002
Financial Statements
- -----------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
STATEMENT OF OPERATIONS
September 30, 1995
For the year ended September 30, 1995
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $602,260,300) ...... $573,164,013
Interest receivable ................... 3,185,408
Deferred organizational expenses ..... 30,266
Prepaid expenses and other assets .... 72,108
--------------
TOTAL ASSETS ....................... 576,451,795
--------------
LIABILITIES:
Reverse repurchase agreements ......... 128,235,000
Payable for:
Interest ............................. 576,649
Shares of beneficial interest
repurchased .......................... 255,127
Management fee ....................... 170,022
Investment advisory fee .............. 113,348
Accrued expenses and other payables .. 96,677
Contingencies (Note 9) ................
--------------
TOTAL LIABILITIES .................. 129,446,823
--------------
NET ASSETS:
Paid-in-capital ....................... 461,335,665
Net unrealized depreciation ........... (29,096,287)
Accumulated undistributed net
investment income .................... 14,331,874
Accumulated undistributed net realized
gain ................................. 433,720
--------------
NET ASSETS ......................... $447,004,972
==============
NET ASSET VALUE PER SHARE, 48,971,940
shares outstanding (unlimited shares
authorized of $.01 par value) ........ $ 9.13
==============
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
NET INVESTMENT INCOME:
INTEREST INCOME .................. $46,069,090
-------------
EXPENSES
Management fee .................. 1,603,966
Investment advisory fee ......... 1,069,311
Transfer agent fees and expenses 199,647
Professional fees ............... 154,126
Registration fees ............... 52,523
Shareholder reports and notices 41,683
Trustees' fees and expenses .... 40,350
Custodian fees .................. 30,974
Organizational expenses ......... 14,330
Other ........................... 68,123
-------------
TOTAL OPERATING EXPENSES ...... 3,275,033
Interest expense ................ 9,363,220
-------------
TOTAL EXPENSES ................. 12,638,253
-------------
NET INVESTMENT INCOME .......... 33,430,837
-------------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain ............... 433,720
Net change in unrealized
depreciation .................... 61,921,924
-------------
NET GAIN ....................... 62,355,644
-------------
NET INCREASE ................... $95,786,481
=============
</TABLE>
See Notes to Financial Statements
<PAGE>
TCW/DW TERM TRUST 2002
Financial Statements (continued)
STATEMENT OF CHANGES IN NET ASSETS
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE YEAR ENDED
SEPTEMBER 30, 1995 SEPTEMBER 30, 1994
------------------ ------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income ......................................... $ 33,430,837 $ 49,369,201
Net realized gain ............................................. 433,720 99,325
Net change in unrealized appreciation/depreciation ........... 61,921,924 (122,565,499)
------------------ ------------------
Net increase (decrease) ...................................... 95,786,481 (73,096,973)
------------------ ------------------
Dividends and distributions from:
Net investment income ......................................... (33,619,948) (41,923,533)
Net realized gain ............................................. (17,102) (1,284,694)
------------------ ------------------
Total ........................................................ (33,637,050) (43,208,227)
Net decrease from transactions in shares of beneficial interest (8,058,878) --
------------------ ------------------
Total increase (decrease) .................................... 54,090,553 (116,305,200)
NET ASSETS:
Beginning of period ............................................ 392,914,419 509,219,619
------------------ ------------------
END OF PERIOD (including undistributed net investment income
of $14,331,874 and $14,520,985, respectively) .................. $447,004,972 $ 392,914,419
================== ==================
</TABLE>
See Notes to Financial Statements
<PAGE>
TCW/DW TERM TRUST 2002
Financial Statements (continued)
STATEMENT OF CASH FLOWS For the year ended September 30, 1995
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
INCREASE (DECREASE) IN CASH:
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:
Net investment income ........................................................ $ 33,430,837
Adjustments to reconcile net investment income to net cash provided by
operating activities:
Decrease in receivables and other assets related to operations .............. 675,733
Increase in payables related to operations ................................ 371,303
Net amortization of discount/premium ...................................... (4,759,686)
--------------
Net cash provided by operating activities ............................... 29,718,187
--------------
CASH FLOWS PROVIDED BY INVESTING ACTIVITIES:
Purchases of investments ..................................................... (1,654,832)
Principal prepayments/sales of investments ................................... 48,246,236
Net purchases of short-term investments ...................................... (575,790)
--------------
Net cash provided by investing activities ................................. 46,015,614
--------------
CASH FLOWS USED FOR FINANCING ACTIVITIES:
Net payment for shares of beneficial interest purchased ...................... (7,803,751)
Net payments for maturities of reverse repurchase agreements ................. (34,293,000)
Dividends from net investment income ......................................... (33,619,948)
Distributions to shareholders from net realized gains ........................ (17,102)
--------------
Net cash used for financing activities .................................... (75,733,801)
--------------
Net increase in cash ...................................................... --
Cash at beginning of year ...................................................... --
--------------
$
CASH BALANCE AT END OF YEAR .................................................... --
==============
Cash paid during the year for interest ......................................... $ 8,999,661
==============
</TABLE>
See Notes to Financial Statements
<PAGE>
TCW/DW TERM TRUST 2002
Notes to Financial Statements September 30, 1995
- -----------------------------------------------------------------------------
1. ORGANIZATION AND ACCOUNTING POLICIES -- TCW/DW Term Trust 2002 (the
"Trust") is registered under the Investment Company Act of 1940, as amended,
as a diversified, closed-end management investment company. The Trust was
organized as a Massachusetts business trust on August 28, 1992 and commenced
operations on November 30, 1992. The Trust will distribute substantially all
of its net assets on or about December 31, 2002 and will then terminate.
The following is a summary of significant accounting policies:
A. Valuation of Investments -- (1) an equity security listed or traded
on the New York or American 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 a security is traded on more than one exchange,
the security is valued on the exchange designated as the primary market
by the Trustees; (2) all other portfolio securities for which
over-the-counter market quotations are readily available are valued at
the latest available bid price prior to the time of valuation; (3) when
market quotations are not readily available, including circumstances
under which it is determined by the Adviser that sale and 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; (4)
certain of the Trust's portfolio securities may be valued by an outside
pricing service approved by the Trustees. The pricing service utilizes a
matrix system incorporating security quality, maturity and coupon as the
evaluation model parameters, and/or research and evaluations by its
staff, including review of broker-dealer market price quotations, if
available, in determining what it believes is the fair valuation of the
portfolio securities valued by such pricing service; and (5) short-term
debt securities having a maturity date of more than sixty days at time
of purchase are valued on a mark-to-market basis until sixty days prior
to maturity and thereafter at amortized cost based on their value on the
61st day. Short-term debt securities having a maturity date of sixty
days or less at the time of purchase are valued at amortized cost.
B. Accounting for Investments -- Security transactions are accounted for
on the trade date (date the order to buy or sell is executed). Realized
gains and losses on security transactions are determined by the
identified cost method. The Trust amortizes premiums and accretes
discounts on fixed income securities. Interest income is accrued daily.
C. Federal Income Tax Status -- It is the Trust's policy to comply with
the requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable income to its
shareholders. Accordingly, no federal income tax provision is required.
D. Dividends and Distributions to Shareholders -- The Trust 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.
<PAGE>
TCW/DW TERM TRUST 2002
Notes to Financial Statements September 30, 1995 (continued)
E. Organizational Expenses -- Dean Witter InterCapital Inc.
("InterCapital"), an affiliate of Dean Witter Services Company Inc. (the
"Manager"), paid the organizational expenses of the Trust in the amount
of approximately $70,200, which has been reimbursed for the full amount
thereof. Such expenses have been deferred and are being amortized by the
Trust on the straight-line method over a period not to exceed five years
from the commencement of operations.
2. MANAGEMENT AGREEMENT -- Pursuant to a Management Agreement, the Trust pays
its Manager a management fee, accrued weekly and payable monthly, by applying
the annual rate of 0.39% to the Trust's average weekly net assets.
Under the terms of the Management Agreement, the Manager maintains certain
of the Trust'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
Trust who are employees of the Manager. The Manager also bears the cost of
telephone services, heat, light, power and other utilities provided to the
Trust.
3. INVESTMENT ADVISORY AGREEMENT -- Pursuant to an Investment Advisory
Agreement with TCW Funds Management, Inc. (the "Adviser"), the Trust pays its
Adviser an advisory fee, accrued weekly and payable monthly, by applying the
annual rate of 0.26% to the Trust's average weekly net assets.
Under the terms of the Investment Advisory Agreement, the Trust has
retained the Adviser to invest the Trust'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 Trust in a manner consistent with its
investment objective. In addition, the Adviser pays the salaries of all
personnel, including officers of the Trust, who are employees of the Adviser.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES -- The cost of
purchases and proceeds from sales/prepayments of portfolio securities,
excluding short-term investments, for the year ended September 30, 1995 were
as follows:
<TABLE>
<CAPTION>
SALES/
PURCHASES PREPAYMENTS
----------- -------------
--
<S> <C> <C>
U.S. Government Agencies .......................... $ $24,128,559
Private Issue Collateralized Mortgage Obligations 1,654,832 24,117,677
</TABLE>
Dean Witter Trust Company, an affiliate of the Manager, is the Trust's
transfer agent. At September 30, 1995, the Trust had transfer agent fees and
expenses payable of approximately $15,800.
<PAGE>
TCW/DW TERM TRUST 2002
Notes to Financial Statements September 30, 1995 (continued)
5. SHARES OF BENEFICIAL INTEREST -- Transactions in shares of beneficial
interest were as follows:
<TABLE>
<CAPTION>
CAPITAL PAID
PAR VALUE IN EXCESS OF
SHARES OF SHARES PAR VALUE
------------- ----------- --------------
<S> <C> <C> <C>
Balance, September 30, 1993 and 1994 50,010,640 $500,106 $468,894,437
Treasury shares purchased and retired
(weighted average discount 12.48%)* (1,038,700) (10,387) (8,048,491)
------------- ----------- --------------
Balance, September 30, 1995 .......... 48,971,940 $489,719 $460,845,946
============= =========== ==============
<FN>
- ------------
* The Trustees have voted to retire the shares purchased.
</TABLE>
6. REVERSE REPURCHASE AND DOLLAR ROLL AGREEMENTS -- Reverse repurchase and
dollar roll agreements involve the risk that the market value of the
securities the Trust is obligated to repurchase under the agreement may
decline below the repurchase price. In the event the buyer of securities
under a reverse repurchase or dollar roll agreement files for bankruptcy or
becomes insolvent, the Trust's use of proceeds may be restricted pending a
determination by the other party, its trustee or receiver, whether to enforce
the Trust's obligation to repurchase the securities.
Reverse repurchase agreements are collateralized by Trust securities with
a market value in excess of the Trust's obligation under the contract. At
September 30, 1995, securities valued at $135,615,128 were pledged as
collateral.
At September 30, 1995, the reverse repurchase agreements outstanding were
$128,235,000 with a weighted interest rate of 5.83% maturing within 59 days.
The maximum and average daily amounts outstanding during the period were
$178,986,853 and $155,219,778, respectively. The weighted average interest
rate during the period was 6.03%.
7. SELECTED QUARTERLY FINANCIAL DATA -- (unaudited)
<TABLE>
<CAPTION>
QUARTERS ENDED
-------------------------------------------------------------------------------
09/30/95 06/30/95 03/31/95 12/31/94
------------------ ------------------ ------------------ -------------------
PER PER PER PER
TOTAL* SHARE TOTAL* SHARE TOTAL* SHARE TOTAL* SHARE
--------- ------- --------- ------- --------- ------- ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total investment income ......... $10,977 $0.22 $11,303 $0.23 $11,679 $0.23 $ 12,110 $ 0.24
Net investment income ........... 7,887 0.17 8,038 0.16 8,374 0.17 9,132 0.18
Net realized and unrealized gain
(loss) ......................... 6,618 0.15 28,510 0.57 45,815 0.92 (18,587) (0.37)
</TABLE>
<TABLE>
<CAPTION>
QUARTERS ENDED
-----------------------------------------------------------------------------------
09/30/94 06/30/94 03/31/94 12/31/93
-------------------- ------------------- -------------------- ------------------
PER PER PER PER
TOTAL* SHARE TOTAL* SHARE TOTAL* SHARE TOTAL* SHARE
---------- -------- --------- -------- ---------- -------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total investment income ......... $ 13,865 $ 0.28 $18,033 $ 0.36 $ 13,779 $ 0.27 $13,807 $0.28
Net investment income ........... 11,098 0.22 15,303 0.31 11,314 0.23 11,654 0.23
Net realized and unrealized gain
(loss) ......................... (74,254) (1.49) (2,652) (0.05) (65,870) (1.32) 20,310 0.41
</TABLE>
- ------------
* Amounts in thousands.
<PAGE>
TCW/DW TERM TRUST 2002
Notes to Financial Statements September 30, 1995 (continued)
8. DIVIDENDS -- The Trust has declared the following dividends from net
investment income payable to shareholders of record subsequent to September
30, 1995:
<TABLE>
<CAPTION>
DECLARATION AMOUNT PER RECORD PAYABLE
DATE SHARE DATE DATE
- ------------------ ------------- ----------------- -----------------
<S> <C> <C> <C>
September 26, 1995 $.0475 October 6, 1995 October 20, 1995
October 31, 1995 $.0475 November 10, 1995 November 24, 1995
</TABLE>
9. LITIGATION -- Four purported class actions have been filed in the Superior
Court for the State of California, County of Orange, against some of the
Trust's Trustees and officers, one of its underwriters, the lead
representative of its underwriters, the Adviser, the Manager, and other
defendants - but not against the Trust - by certain shareholders of the Trust
and other trusts for which the defendants act in similiar capacities. These
plaintiffs generally allege violations of state statutory and common law in
connection with the marketing of the Trust to customers of one of the
underwriters. Damages, including punitive damages, are sought in an
unspecified amount. On or about October 20, 1995, plaintiffs filed an amended
complaint consolidating these four actions. No defendant has yet responded.
Certain of the defendants in these suits have asserted their right to
indemnification from the Trust. The ultimate outcome of these matters is not
presently determinable, and no provision has been made in the Trust's
financial statements for the effect, if any, of such matters.
<PAGE>
TCW/DW TERM TRUST 2002
Report of Independent Accountants
- -----------------------------------------------------------------------------
To the Shareholders and Trustees of TCW/DW Term Trust 2002
In our opinion, the accompanying statement of assets and liabilities,
including the portfolio of investments, and the related statements of
operations, of changes in net assets, and of cash flows and the financial
highlights present fairly, in all material respects, the financial position
of TCW/DW Term Trust 2002 (the "Trust") at September 30, 1995, the results of
its operations and its cash flows 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 two years in the period then ended and
the period November 30, 1992 (commencement of operations) through September
30, 1993, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Trust'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 September 30, 1995 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
As discussed in Note 9 to the financial statements, certain defendants in
pending litigation have asserted their right to indemnification from the
Trust. The ultimate outcome of the matter cannot be determined at present. No
provision for any liability that may result upon resolution of the matter has
been made in the accompanying financial statements.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
November 8, 1995
<PAGE>
TCW/DW TERM TRUST 2002
Financial Highlights
- -----------------------------------------------------------------------------
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
FOR THE PERIOD
NOVEMBER 30, 1992*
FOR THE YEAR ENDED FOR THE YEAR ENDED THROUGH SEPTEMBER
SEPTEMBER 30, 1995 SEPTEMBER 30, 1994 30, 1993
------------------ ------------------ ------------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ....... $ 7.86 $ 10.18 $ 9.40
------------------ ------------------ ------------------
Net investment income ....................... 0.68 0.99 0.73
Net realized and unrealized gain (loss) .... 1.27 (2.45) 0.65
------------------ ------------------ ------------------
Total from investment operations ............ 1.95 (1.46) 1.38
------------------ ------------------ ------------------
Less dividends and distributions from:
Net investment income ...................... (0.68) (0.84) (0.59)
Net realized gain .......................... -- (0.02) --
------------------ ------------------ ------------------
Total dividends and distributions ........... (0.68) (0.86) (0.59)
Less offering costs charged against capital -- -- (0.01)
------------------ ------------------ ------------------
Net asset value, end of period .............. $ 9.13 $ 7.86 $10.18
================== ================== ==================
Market value, end of period ................. $ 7.75 $ 8.25 $10.25
================== ================== ==================
TOTAL INVESTMENT RETURN+ .................... 2.52% (12.19)% 8.60%(1)
RATIOS TO AVERAGE NET ASSETS:
Operating expenses .......................... 0.80% 0.78 % 0.77%(2)
Interest expense ............................ 2.28% 1.44 % 0.68 %(2)
Total expenses .............................. 3.08% 2.22 % 1.45%(2)
Net investment income ....................... 8.15% 10.85 % 9.05%(2)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands $447,005 $392,914 $509,220
Portfolio turnover rate ................ -- %++ 24 % 29%(1)
</TABLE>
- ------------
* Commencement of operations.
+ Total investment return is based upon the current market value on the
first day of each period reported. Dividends and distributions are
assumed to be reinvested at the prices obtained under the Trust's
reinvestment plan. Total investment return does not reflect sales charges
or brokerage commissions.
++ Less than 0.5%.
(1) Not annualized.
(2) Annualized.
See Notes to Financial Statements
<PAGE>
TRUSTEES
John C. Argue
Richard M. DeMartini
Charles A. Fiumefreddo
John R. Haire
Dr. Manuel H. Johnson
Paul Kolton
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
Sheldon Curtis
Vice President, Secretary and
General Counsel
Philip A. Barach
Vice President
Jeffrey E. Gundlach
Vice President
Thomas F. Caloia
Treasurer
TRANSFER AGENT
Dean Witter Trust Company
Harborside Financial Center--Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
MANAGER
Dean Witter Services Company Inc.
ADVISER
TCW Funds Management, Inc.
T C W / D W
TERM TRUST
2002
ANNUAL REPORT
SEPTEMBER 30, 1995
