TCW/DW TERM TRUST 2002
Two World Trade Center
New York, New York 10048
DEAR SHAREHOLDER:
- -----------------------------------------------------------------------------
Over the six-month period ended March 31, 1996, TCW/DW Term Trust 2002's
net asset value increased from $9.13 to $9.16 per share. Based on this change,
and including reinvestment of income dividends totaling approximately $0.29
per share, the Trust's total return for the period was 3.91 percent. For the
same period, the market price of the Trust's shares on the New York Stock
Exchange (NYSE) remained constant at $7.75 per share. On this basis, and
including reinvestment of dividends, the Trust's total return for the period
was 3.68 percent.
THE MARKET
Reports on the U.S. economy during the fourth quarter of 1995 and early
1996 indicated weaker overall economic conditions and culminated in a decision
by the Federal Reserve Board to cut short-term interest rates in January.
Between early October 1995 and the end of January, the yield on the 5-year
U.S. Treasury note declined 79 basis points. However, strong employment
reports released during February and March prompted concerns over a stronger
economy and a return of inflationary fears. The stronger economic data
resulted in a sharp rise in interest rates during March, with intermediate
U.S. Treasury yields retreating to October 1995 levels.
Despite the mixed economic reports released during the last few months,
inflation reports have remained stable, a positive piece of economic news for
the bond market. Thus, the Federal Reserve Board 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), the recent rise in interest rates reduced mortgage prepayment risk
which aided the mortgage-backed sector's recent performance. The issuance of
new collateralized mortgage obligations (CMOs) is currently at a fraction of
the volume generated in previous years, lending support to mortgage yield
spreads.
THE PORTFOLIO
Approximately 65 percent of the Trust is invested in AAA-rated fixed rate
CMOs with durations, average lives or expected maturity dates that correspond
closely to the termination date of the Trust. An additional 19 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 remaining 16 percent is invested in AAA-rated
municipal bonds and short-term investments. The portfolio's municipal bond
holdings play an important role as the Trust seeks to achieve its objective of
returning the original $10 offering price to shareholders at maturity. As of
March 31, 1996, the Trust's degree of leverage (the ratio of debt to assets)
was 26 percent of total assets.
LOOKING AHEAD
TCW is generally positive regarding the mortgage-backed sector's long-term
prospects. Although hopes that Congress will pass a definitive
deficit-reduction plan have waned in recent months, real interest
<PAGE>
rates (minus inflation) remain historically high. (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 both 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 six-month period under review, the Trust purchased 1,230,900 shares of
common stock at a weighted average market discount of 13.64 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,
/s/ Charles A. Fiumefreddo
Charles A. Fiumefreddo
Chairman of the Board
<PAGE>
TCW/DW TERM TRUST 2002
Results of Annual Meeting (unaudited)
- -----------------------------------------------------------------------------
***
On December 20, 1995, an annual meeting of the Trust's shareholders was held
for the purpose of voting on three separate matters, the results of which were
as follows:
(1) Election of Trustees
Richard M. DeMartini
For .................................................... 38,214,455
Withheld ............................................... 709,458
Paul Kolton
For .................................................... 38,194,286
Withheld ............................................... 729,627
Thomas E. Larkin, Jr.
For .................................................... 38,212,710
Withheld ............................................... 711,203
John L. Schroeder
For .................................................... 38,222,119
Withheld ............................................... 701,794
Marc I. Stern
For .................................................... 38,210,330
Withheld ............................................... 713,583
The following Trustees were not standing for reelection at
this meeting: John C. Argue, Charles A. Fiumefreddo,
John R. Haire, Dr. Manuel H. Johnson and Michael E. Nugent.
(2)Continuance of Currently Effective Investment Advisory
Agreement between the Trust and TCW Funds Management:
For .................................................... 36,967,116
Against ................................................ 561,958
Abstain ................................................ 1,394,839
(3)Ratification of Price Waterhouse LLP as Independent
Accountants for the Fiscal Year ending September 30, 1996:
For .................................................... 37,616,287
Against ................................................ 454,476
Abstain ................................................ 853,150
In addition, a shareholder proposal to amend the Trust's Declaration of Trust
to require each Trustee within 30 days of election to become a shareholder of
the Trust failed to obtain the necessary quorum of a majority of outstanding
shares in order to be presented at the Meeting.
<PAGE>
TCW/DW TERM TRUST 2002
Portfolio of Investments March 31, 1996 (unaudited)
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- ------------ -------- ---------- -------
<C> <S> <C> <C> <C>
COLLATERALIZED MORTGAGE
OBLIGATIONS (113.5%)
U.S. GOVERNMENT AGENCIES (58.7%)
$ 727 Federal Home Loan Mortgage Corp. 1385 SB ................... 10.073+% 10/15/07 $ 702,815
3,063 Federal Home Loan Mortgage Corp. 1389 SB ................... 10.20 + 10/15/07 2,705,950
30,000 Federal Home Loan Mortgage Corp. 1465 G (PAC)++ ........... 7.00 12/15/07 29,578,200
15,600 Federal Home Loan Mortgage Corp. 1481 H (PAC)++ ........... 6.875 08/15/21 15,170,376
4,941 Federal Home Loan Mortgage Corp. 1519 J .................... 16.613+ 05/15/08 4,352,313
16,447 Federal Home Loan Mortgage Corp. 1606 SC ................... 6.931+ 11/15/08 11,209,512
10,943 Federal Home Loan Mortgage Corp. 1609 LG (PAC) ............. 5.552+ 11/15/23 8,517,667
19,884 Federal Home Loan Mortgage Corp. 1611 QB (PAC)++ .......... 10.062+ 11/15/23 16,851,918
18,300 Federal Home Loan Mortgage Corp. 1633 B++ .................. 6.50 09/15/23 17,206,758
18,500 Federal Home Loan Mortgage Corp. 1638 K (PAC)++ ........... 6.50 03/15/23 17,328,580
2,094 Federal National Mortgage Assoc. 1992-138 O++ .............. 7.50 07/25/22 2,083,203
13,993 Federal National Mortgage Assoc. 1992-150 SV (PAC) ........ 11.107+ 05/25/21 13,542,549
15,703 Federal National Mortgage Assoc. 1992-208 C (TAC)++ ....... 7.50 10/25/07 15,702,342
16,248 Federal National Mortgage Assoc. 1992-214 K++ .............. 7.50 12/25/22 16,028,322
8,333 Federal National Mortgage Assoc. 1993-139 SP (PAC) ........ 8.34 + 12/25/21 6,482,250
29,935 Federal National Mortgage Assoc. 1993-141 A++ .............. 7.00 12/25/22 29,074,063
9,843 Federal National Mortgage Assoc. 1993-179 SV ............... 5.218+ 10/25/21 6,452,954
18,193 Federal National Mortgage Assoc. 1993-190 S ................ 4.986+ 10/25/08 11,967,269
8,907 Federal National Mortgage Assoc. 1993-190 SB (PAC) ........ 6.003+ 10/25/08 8,207,828
5,814 Federal National Mortgage Assoc. 1993-238 SA ............... 6.77 + 07/25/08 4,173,347
20,000 Federal National Mortgage Assoc. G1992-44 SC ............... 12.501+ 08/25/20 19,300,000
------------
TOTAL U.S. GOVERNMENT AGENCIES
(IDENTIFIED COST $284,134,688) .................................................. 256,638,216
------------
PRIVATE ISSUES (54.8%)
9,022 Bear Stearns Mortgage Securities, Inc 1993-10 A7 (PAC) .... 7.20 07/25/24 8,685,028
393 Capstead Securities Corp. IV 1992-15 C ..................... 7.50 06/25/23 391,296
19,844 Citicorp Mortgage Securities , Inc. 1992-20 A5 ............. 7.50 12/25/07 19,887,260
19,574 CMC Securities Corp. III 1994-C A9 (PAC) ................... 6.75 03/25/24 17,600,941
11,232 Country Wide Funding Corp. 1994-4 A12 ...................... 6.95 04/25/24 10,080,677
21,117 Country Wide Mortgage Backed Securities, Inc 1993-B A6 (PAC) 6.75 11/25/23 18,530,167
27,270 General Electric Capital Mortgage Services, Inc. 1994-6 A9 6.50 09/25/22 23,386,807
27,144 Prudential Home Mortgage Securities 1992-50 A3 ............. 8.00 12/25/23 27,348,697
13,170 Prudential Home Mortgage Securities 1993-2 A7 .............. 7.00 02/25/08 12,614,290
21,869 Prudential Home Mortgage Securities 1993-34 A1 ............. 7.00 08/25/23 21,828,381
20,000 Prudential Home Mortgage Securities 1993-60 A3 (PAC)++ .... 6.75 12/25/23 17,825,200
41,182 Resolution Funding Mortgage Securities I 1992-S38 A6 ...... 7.50 02/25/18 41,439,388
16,836 Resolution Funding Mortgage Securities I 1993-S40 A8 (TAC) 6.75 11/25/23 15,230,773
4,731 Ryland Mortgage Securities Corp. 1992-18 C ................. 7.75 09/25/19 4,690,787
------------
TOTAL PRIVATE ISSUES
(IDENTIFIED COST $248,534,749) .................................................. 239,539,692
------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(IDENTIFIED COST $532,669,437) .................................................. 496,177,908
------------
MUNICIPAL BONDS (A) (20.3%)
EDUCATIONAL FACILITIES REVENUE (1.0%)
6,600 Austin Independent School District, Texas .................. 0.00 08/01/03 4,570,500
------------
ELECTRIC REVENUE (2.8%)
Austin, Texas,
5,195 Combined Utility Ser A (FGIC) ............................. 0.00 05/15/03 3,635,773
4,355 Combined Utility Ser A (FGIC) (ETM) ....................... 0.00 05/15/03 3,062,784
8,400 Lower Colorado River Authority, Texas,
Jr Lien 4th Ser (FGIC) .................................... 0.00 01/01/04 5,696,964
------------
12,395,521
------------
</TABLE>
<PAGE>
TCW/DW TERM TRUST 2002
Portfolio of Investments March 31, 1996 (unaudited) (continued)
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- ----------- -------- ---------- -------
<C> <S> <C> <C> <C>
INDUSTRIAL DEVELOPMENT REVENUE (4.1%)
Metropolitan Pier & Exposition Authority, Illinois,
$ 6,610 McCormick Place (AMBAC) ................................... 0.00% 06/15/02 $ 4,858,020
7,400 McCormick Place (AMBAC) ................................... 0.00 12/15/02 5,305,504
10,465 Pennsylvania Convention Center Authority,
Ser A (FGIC) (ETM) ........................................ 0.00 09/01/02 7,659,020
-------------
17,822,544
-------------
OTHER REVENUE (7.0%)
17,500 North Slope Boro, Alaska, Ser 1992 A (MBIA) ................ 0.00 06/30/03 12,171,075
33,140 Johnson County, Kansas (AMBAC) (ETM) ....................... 0.00 06/01/12 10,901,734
10,400 Texas, 1992 Refg Ser C (FGIC) .............................. 0.00 04/01/03 7,323,264
-------------
30,396,073
-------------
TAX ALLOCATION (2.1%)
12,370 Harris County, Texas (MBIA) ................................ 0.00 10/01/02 8,988,042
-------------
TRANSPORTATION REVENUE (1.9%)
12,000 Contra Costa Transportation Authority, California, Sales Tax
(FGIC) (ETM) .............................................. 0.00 03/01/04 8,089,560
-------------
WATER & SEWER REVENUE (1.4%)
9,500 Pittsburgh, Pennsylvania, Water & Sewer Ser A
(FGIC) (ETM) .............................................. 0.00 09/01/04 6,246,820
-------------
TOTAL MUNICIPAL BONDS (IDENTIFIED COST $82,812,988) .............................. 88,509,060
-------------
SHORT-TERM INVESTMENT (1.1%)
REPURCHASE AGREEMENT
4,893 The Bank of New York (dated 03/29/96; proceeds $4,894,698;
collateralized by $4,668,928 U.S. Treasury Bond 7.25% due
05/15/16 valued at $4,990,720) (Identified Cost
$4,892,863) ............................................... 4.50 04/01/96 4,892,863
-------------
TOTAL INVESTMENTS (IDENTIFIED COST $620,375,288) (B) .................. 134.9% 589,579,831
LIABILITIES IN EXCESS OF OTHER ASSETS ................................. (34.9) (152,462,185)
------ -------------
NET ASSETS ............................................................ 100.0% $ 437,117,646
====== =============
</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 5.9% of net
assets.
(b) The aggregate cost of investments for federal income tax purposes is
$620,375,288; the aggregate gross unrealized appreciation is
$11,417,779 and the aggregate gross unrealized depreciation is
$42,213,236, resulting in net unrealized depreciation of $30,795,457.
Bond Insurance:
- ---------------
AMBAC AMBAC Indemnity Corporation.
FGIC Financial Guaranty Insurance Company.
MBIA Municipal Bond Investors Assurance Corporation.
See Notes to Financial Statements
<PAGE>
TCW/DW TERM TRUST 2002
Financial Statements
- -----------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
March 31, 1996 (unaudited)
- -----------------------------------------------------------------------------
ASSETS:
Investments in securities, at value
(identified cost $620,375,288) .... $589,579,831
Interest receivable ................. 3,255,188
Deferred organizational expenses ... 23,082
Prepaid expenses and other assets .. 53,697
------------
TOTAL ASSETS ...................... 592,911,798
------------
LIABILITIES:
Reverse repurchase agreements ...... 154,295,000
Payable for:
Interest ........................... 825,212
Shares of beneficial interest
repurchased ....................... 285,726
Management fee ..................... 175,427
Investment advisory fee ............ 116,951
Payable to bank ..................... 13,447
Accrued expenses and other payables 82,389
Contingencies (Note 8) .............. --
------------
TOTAL LIABILITIES ................. 155,794,152
------------
NET ASSETS:
Paid-in-capital ..................... 451,384,472
Net unrealized depreciation ......... (30,795,457)
Accumulated undistributed net
investment income .................. 16,528,631
------------
NET ASSETS ........................ $437,117,646
============
NET ASSET VALUE PER SHARE,
47,741,040 shares outstanding
(unlimited shares authorized of
$.01 par value) .................... $9.16
=====
- -----------------------------------------------------------------------------
STATEMENT OF OPERATIONS
For the six months ended March 31, 1996 (unaudited)
- -----------------------------------------------------------------------------
NET INVESTMENT INCOME:
INTEREST INCOME .................... $22,125,949
-----------
EXPENSES
Management fee .................... 890,139
Investment advisory fee .......... 593,426
Transfer agent fees and expenses .. 82,572
Shareholder reports and notices ... 62,680
Professional fees ................. 46,308
Insurance expenses ................ 37,369
Custodian fees .................... 34,170
Registration fees ................. 28,254
Trustees' fees and expenses ...... 13,707
Organizational expenses .......... 7,185
Other ............................. 12,170
-----------
TOTAL OPERATING EXPENSES ........ 1,807,980
Interest expense .................. 4,129,841
-----------
TOTAL EXPENSES ................... 5,937,821
-----------
NET INVESTMENT INCOME ............ 16,188,128
-----------
NET REALIZED AND UNREALIZED LOSS:
Net realized loss ................. (180,032)
Net change in unrealized
depreciation ..................... (1,699,170)
-----------
NET LOSS ......................... (1,879,202)
-----------
NET INCREASE ..................... $14,308,926
===========
See Notes to Financial Statements
<PAGE>
TCW/DW TERM TRUST 2002
Financial Statements (continued)
- -----------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
MARCH 31, 1996 SEPTEMBER 30, 1995
-------------- ------------------
(UNAUDITED)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income ....................................... $ 16,188,128 $ 33,430,837
Net realized gain (loss) .................................... (180,032) 433,720
Net change in unrealized depreciation ....................... (1,699,170) 61,921,924
------------ ------------
Net increase ............................................... 14,308,926 95,786,481
------------ ------------
Dividends and distributions from:
Net investment income ....................................... (13,991,371) (33,619,948)
Net realized gain ........................................... (253,688) (17,102)
------------ ------------
Total ...................................................... (14,245,059) (33,637,050)
------------ ------------
Net decrease from transactions in shares of beneficial
interest .................................................... (9,951,193) (8,058,878)
------------ ------------
Total increase (decrease) .................................. (9,887,326) 54,090,553
NET ASSETS:
Beginning of period .......................................... 447,004,972 392,914,419
------------ ------------
END OF PERIOD (Including undistributed net investment income of
$16,528,631 and $14,331,874, respectively) .................. $437,117,646 $447,004,972
============ ============
</TABLE>
- -----------------------------------------------------------------------------
STATEMENT OF CASH FLOWS For the six months ended March 31, 1996 (unaudited)
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
INCREASE (DECREASE) IN CASH:
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:
Net investment income ........................................................ $ 16,188,128
Adjustments to reconcile net investment income to net cash provided by
operating activities:
Increase in receivables and other assets related to operations ............. (44,185)
Increase in payables related to operations .................................. 243,283
Net amortization of discount/premium ........................................ (2,542,790)
------------
Net cash provided by operating activities ................................. 13,844,436
------------
CASH FLOWS USED FOR INVESTING ACTIVITIES:
Purchases of investments ..................................................... (23,290,438)
Principal prepayments/sales of investments ................................... 10,674,763
Net purchases of short-term investments ...................................... (3,136,555)
------------
Net cash used for investing activities .................................... (15,752,230)
------------
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:
Net payments for shares of beneficial interest repurchased ................... (9,920,594)
Net payments from maturities of reverse repurchase agreements ............... 26,060,000
Dividends to shareholders from net investment income ......................... (13,991,371)
Distributions to shareholders from capital gains ............................. (253,688)
------------
Net cash provided by financing activities ................................. 1,894,347
------------
Net decrease in cash ...................................................... (13,447)
Cash at beginning of period .................................................... --
------------
CASH BALANCE AT END OF PERIOD .................................................. $ (13,447)
============
Cash paid during the period for interest ....................................... $ 3,881,278
============
</TABLE>
See Notes to Financial Statements
<PAGE>
TCW/DW TERM TRUST 2002
Notes to Financial Statements March 31, 1996 (unaudited)
- -----------------------------------------------------------------------------
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) 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; (2) 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; (3)
certain 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 (4) short-term debt
securities having a maturity date of more than sixty days at time of
purchase are valued on a mark-to-market basis until sixty days prior to
maturity and thereafter at amortized cost based on their value on the
61st day. Short-term debt securities having a maturity date of sixty days
or less at the time of purchase are valued at amortized cost.
B. Accounting for Investments -- Security transactions are accounted for
on the trade date (date the order to buy or sell is executed). Realized
gains and losses on security transactions are determined by the
identified cost method. The Trust amortizes premiums and accretes
discounts over the life of the respective 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.
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
<PAGE>
TCW/DW TERM TRUST 2002
Notes to Financial Statements March 31, 1996 (unaudited) (continued)
- -----------------------------------------------------------------------------
amount of approximately $70,200 which have been reimbursed for the full
amount thereof. Such expenses have been deferred and are being amortized
on the straight-line method over a period not to exceed five years from
the commencement of operations.
2. MANAGEMENT AGREEMENT -- Pursuant to a Management Agreement, the Trust pays
a management fee, accrued weekly and payable monthly, by applying the annual
rate of 0.39% to the Trust's 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 an
advisory fee, accrued weekly and payable monthly, by applying the annual rate
of 0.26% to the Trust's 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 six months ended March 31, 1996 were
as follows:
SALES/
PURCHASES PREPAYMENTS
----------- -------------
U.S. Government Agencies ......................... $ -- $ 829,821
Private Issue Collateralized Mortgage Obligations 23,290,438 9,844,942
Dean Witter Trust Company, an affiliate of the Manager, is the Trust's
transfer agent. At March 31, 1996, the Trust had transfer agent fees and
expenses payable of approximately $11,000.
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, 1994 and 1995 .................. 48,971,940 $489,719 $460,845,946
Treasury shares purchased and retired (weighted
average discount 13.64%)* ............................ (1,230,900) (12,309) (9,938,884)
----------- --------- ------------
Balance, March 31, 1996 ............................... 47,741,040 $477,410 $450,907,062
=========== ========= ============
<FN>
- ------------
* The Trustees have voted to retire the shares purchased.
</TABLE>
<PAGE>
TCW/DW TERM TRUST 2002
Notes to Financial Statements March 31, 1996 (unaudited) (continued)
- -----------------------------------------------------------------------------
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, or 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 March
31, 1996, securities valued at $159,548,456 were pledged as collateral.
At March 31, 1996, the reverse repurchase agreements outstanding were
$154,295,000 with a weighted interest rate of 5.33% maturing within 30 days.
The maximum and average daily amounts outstanding during the period were
$154,872,000 and $143,057,585, respectively. The weighted average interest
rate during the period was 5.77%.
7. DIVIDENDS -- The Trust declared the following dividends from net investment
income payable to shareholders of record subsequent to March 31, 1996:
DECLARATION AMOUNT PER RECORD PAYABLE
DATE SHARE DATE DATE
------------- ------------ -------- ---------
March 26, 1996 $0.0475 April 4, 1996 April 19, 1996
April 23, 1996 $0.0475 May 3, 1996 May 17, 1996
8. 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 Advisor, 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, the plaintiffs filed an
amended complaint consolidating these four actions. All defendants except two
of the Trustees have filed answers and affirmative defenses to the
consolidated amended complaint. The two Trustees have an indefinite extension
in which to respond to the complaint.
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
Financial Highlights
- -----------------------------------------------------------------------------
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX FOR THE FOR THE NOVEMBER 30, 1992*
MONTHS ENDED YEAR ENDED YEAR ENDED THROUGH
MARCH 31, 1996 SEPTEMBER 1995++++ SEPTEMBER 30, 1994 SEPTEMBER 30, 1993
-------------- -------------------- ------------------ ------------------
(UNAUDITED)
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period .. $ 9.13 $ 7.86 $ 10.18 $ 9.40
------ ------ ------- ------
Net investment income .................. 0.35 0.68 0.99 0.73
Net realized and unrealized gain (loss) (0.05) 1.25 (2.45) 0.65
------ ------ ------- ------
Total from investment operations ...... 0.30 1.93 (1.46) 1.38
------ ------ ------- ------
Less dividends and distributions from:
Net investment income ................. (0.29) (0.68) (0.84) (0.59)
Net realized gain ..................... (0.01) -- (0.02) --
------ ------ ------- ------
Total dividends and distributions ..... (0.30) (0.68) (0.86) (0.59)
------ ------ ------- ------
Anti-dilutive effect of acquiring
treasury shares ....................... 0.03 0.02 -- --
Less offering costs charged against
capital ............................... -- -- -- (0.01)
------ ------ ------- ------
Net asset value, end of period ......... $ 9.16 $ 9.13 $ 7.86 $10.18
====== ====== ======= ======
Market value, end of period ............ $ 7.75 $ 7.75 $ 8.25 $10.25
====== ====== ======= ======
TOTAL INVESTMENT RETURN+ ............... 3.68%(1) 2.52% (12.19)% 8.60%(1)
RATIOS TO AVERAGE NET ASSETS:
Operating expenses ..................... 0.79%(2) 0.80% 0.78% 0.77%(2)
Interest expense ....................... 1.81%(2) 2.28% 1.44% 0.68%(2)
Total expenses ......................... 2.60%(2) 3.08% 2.22% 1.45%(2)
Net investment income .................. 7.09%(2) 8.15% 10.85% 9.05%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands $437,118 $447,005 $392,914 $509,220
--
Portfolio turnover rate ................ 2%(1) %++ 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 brokerage
commissions.
++ Less than 0.5%.
++++ Restated for comparative purposes.
(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.
The financial statements included herein have been taken from the records of
the Trust without examination by the independent accountants and accordingly
they do not express an opinion thereon.
T C W / D W
TERM TRUST
2002
SEMIANNUAL REPORT
MARCH 31, 1996
