<PAGE>
2002 TARGET TERM TRUST INC.
PORTFOLIO OF INVESTMENTS MAY 31, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
--------- -------------------- -------- ------------
<C> <S> <C> <C> <C>
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION CERTIFICATES - 10.47%
$ 6,963 GNMA.................... 09/15/16 to 09/15/18 9.000% $ 7,351,096
8,000 GNMA TBA................ TBA 8.000 8,205,040
------------
Total Government National Mortgage
Association Certificates
(cost - $15,305,698).............. 15,556,136
------------
FEDERAL HOME LOAN MORTGAGE
CORPORATION CERTIFICATES - 2.75%
961 FHLMC................... 12/01/22 9.500 1,013,429
3,000 FHLMC TBA............... TBA 8.000 3,068,430
------------
Total Federal Home Loan Mortgage
Corporation Certificates
(cost - $3,985,248)............... 4,081,859
------------
FEDERAL NATIONAL MORTGAGE
ASSOCIATION - 0.02%
33 FNMA (cost - $30,416)... 11/01/23 7.000 32,504
------------
COLLATERALIZED MORTGAGE
OBLIGATIONS - 93.36%
FHLMC Series 174, Class
7,180 Z...................... 08/15/21 10.000 7,978,252
FHLMC Series 1016, Class
4,556 Z...................... 11/15/20 9.321 4,815,212
FHLMC Series 1103, Class
10,311+ J...................... 06/15/21 8.500 10,581,788
FHLMC Series 1591, Class
3,831 F...................... 10/15/23 12.000* 4,664,020
FHLMC Series 1629, Class
1,600 QC..................... 12/15/23 10.000* 1,164,752
FNMA REMIC, Trust 1988-
5,183 2, Class Z............. 02/25/18 10.100 5,539,843
CMC Securities Corp.
Series 1992-A, Class
6,565+ A12.................... 10/25/22 7.400 6,427,529
CMC Securities Corp.
Series 1992-B, Class
6,084+ B11 ................... 11/25/23 7.375 5,981,363
CMC Securities Corp.
Series 1993-C, Class C3
7,308+ ....................... 04/25/08 9.552 7,564,098
Collateralized Mortgage
Obligation Trust Series
4,525+ 64, Class Z............ 11/20/20 9.000 4,916,465
Countrywide Mortgage
Trust Series 93-10,
9,683+ Class A4............... 01/25/24 6.750 9,413,716
Countrywide Mortgage
Trust Series 93-I,
4,405+ Class 3................ 04/25/23 7.600 4,388,709
Countrywide Mortgage
Trust Series 94-C,
7,562+ Class A9............... 03/25/24 6.500 7,115,671
First Boston Mortgage
Securities Corp. Series
11,125 93-1, 1A............... 04/25/06 7.400 11,333,958
GE Capital Mortgage
Services, Series 1993-
10,238+ 2F, Class F6........... 11/25/09 7.000 10,039,690
Housing Securities Inc.
Series 1992-F, Class
1,422 F3..................... 08/25/03 5.500 1,413,992
Prudential Home Mortgage
Corp. Series 92-42,
5,308 Class A-2.............. 01/25/08 6.250 5,271,401
Prudential Home Mortgage
Corp. Series 92-42,
7,988+ Class A-6.............. 01/25/08 7.000 7,978,015
Prudential Home Mortgage
Corp. Series 93-32,
6,946+ Class A-3.............. 08/25/23 6.500 6,780,552
4,361 Residential Funding
Mortgage Association
Series 1992-S32,
Class A-16............. 09/25/22 7.750 4,391,255
5,571 Salomon Brothers
Mortgage Securities
VII, Series 1994-6,
Class A1............... 05/25/24 7.017 5,535,979
Structured Asset
Securities Corp. Series
5,479 1993-C1, Class A1A..... 10/25/24 6.600 5,410,523
------------
Total Collateralized Mortgage
Obligations
(cost - $136,531,263)............. 138,706,783
------------
ADJUSTABLE RATE MORTGAGE-BACKED
SECURITIES - 18.33%
FNMA REMIC, Trust 1988-
3,546 12, Class A............ 02/25/18 10.000 3,847,076
Housing Securities Inc.
4,616 Series 1992-5, Class A. 06/25/22 6.706 4,673,979
Ryland Mortgage
Securities Corp. Series
3,049 1991-17, Class A1...... 10/25/21 5.884 3,049,088
Ryland Mortgage
Securities Corp. Series
5,339 1991-L9, Class A2...... 07/25/22 7.194 5,431,983
Ryland Mortgage
Securities Corp. Series
5,376+ 1992-L10, Class A...... 08/25/22 7.403 5,469,707
Saxon Mortgage
Securities Corp. Series
4,677 1993-1, Class A1....... 02/25/23 7.502 4,761,080
------------
Total Adjustable Rate Mortgage-
Backed Securities
(cost - $26,900,405).............. 27,232,913
------------
</TABLE>
1
<PAGE>
2002 TARGET TERM TRUST INC.
PORTFOLIO OF INVESTMENTS (CONTINUED) MAY 31, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
--------- ------------------- --------- ------------
<C> <S> <C> <C> <C>
STRIPPED MORTGAGE-BACKED
SECURITIES - 13.87%
FNMA REMIC, Trust 1991-
$ 6 124, Class SQ***....... 09/25/21 6,478.950%(1)* $ 750,699
FNMA REMIC, Trust 1991-
86 G-15, Class S***....... 06/25/21 690.810(2)* 1,368,067
FNMA REMIC, Trust 1992-
21 G-32, Class SQ***...... 06/25/22 2,364.640(3)* 1,312,023
FNMA REMIC, Trust 1993-
21,288 101, Class A***........ 06/25/08 7.000 2,887,268
FNMA REMIC, Trust 1994-
2,500 25, Class B**.......... 11/25/23 0.000 1,590,625
FNMA Trust 1993-241,
10,000+ Class PD**............. 08/25/22 0.000 8,067,200
Structured Asset
Securities Corp. Series
10 1992-M1, Class A3***... 11/25/02 8,926.300(4) 3,931,100
Structured Asset
Securities Corp. Series
10 1992-M1, Class A4***... 11/25/02 1,575.600(5) 700,592
------------
Total Stripped Mortgage-Backed
Securities
(cost - $20,003,686).............. 20,607,574
------------
ZERO COUPON MUNICIPAL SECURITIES -
8.06%
17,840 Metropolitan Pier &
Exposition Authority,
Illinois
(cost - $11,189,467)... 6/15/01 to 06/15/04 0.000 11,974,744
------------
REPURCHASE AGREEMENT - 2.43%
3,606 Repurchase agreement
dated 05/31/95, with
J.P. Morgan Securities
Inc., collateralized by
$3,728,218 FHLMC ARM,
6.112% due 07/01/34
proceeds: $3,606,616
(cost - $3,606,000).... 06/01/95 6.150 3,606,000
------------
Total Investments (cost -
$217,552,183) 149.29%............ 221,798,513
Liabilities in excess of other
assets - (49.29%)................. (73,232,303)
------------
Net Assets - 100.00%............... $148,566,210
============
</TABLE>
-------
TBA--(To Be Assigned) Securities are purchased on a forward commitment basis
with an approximate (generally +/-2.5%) principal amount and no definite
maturity date. The actual principal amount and maturity date will be determined
upon settlement when the specific mortgage pools are assigned.
REMIC--Real Estate Mortgage Investment Conduit.
* Floating Rate Security.
** Principal Only Security. This security entitles the holder to receive
principal payments from an underlying pool of mortgages. High prepayments
return principal faster than expected and cause the yield to increase. Low
prepayments return principal more slowly than expected and cause the yield
to decrease.
*** Interest Only Security. This security entitles the holder to receive
interest payments from an underlying pool of mortgages. The risk associated
with this security is related to the speed of principal paydowns. High
prepayments would result in a smaller amount of interest being received and
cause the yield to decrease. Low prepayments would result in a greater
amount of interest being received and cause the yield to increase.
+ Entire or partial principal amount pledged as collateral for reverse repur-
chase agreements (with Morgan Stanley, maturing June 22, 1995) and future
transactions.
(1) Annualized yield at date of purchase: 34.570%
(2) Annualized yield at date of purchase: 27.244%
(3) Annualized yield at date of purchase: 32.446%
(4) Annualized yield at date of purchase: 11.000%
(5) Annualized yield at date of purchase: 11.000%
See accompanying notes to financial statements
2
<PAGE>
2002 TARGET TERM TRUST INC.
PORTFOLIO OF INVESTMENTS (CONCLUDED) MAY 31, 1995 (UNAUDITED)
FUTURES CONTRACTS
<TABLE>
<CAPTION>
UNREALIZED
IN EXPIRATION APPRECIATION
CONTRACT TO DELIVER EXCHANGE FOR DATE (DEPRECIATION)
------------------- ------------ ---------- --------------
<C> <S> <C> <C> <C>
20 year United States Treasury
175 Bonds............................ $18,388,469 06/20/95 $(1,383,376)
192 90 day Eurodollar................ 44,563,400 06/20/95 (624,400)
-----------
(2,007,776)
-----------
<CAPTION>
CONTRACT TO RECEIVE
-------------------
<C> <S> <C> <C> <C>
5 year United States Treasury
25 Notes............................ 2,669,141 06/20/95 10,547
10 year United States Treasury
174 Notes............................ 18,533,750 06/20/95 644,750
-----------
655,297
-----------
Total net unrealized
depreciation..................... $(1,352,479)
===========
</TABLE>
See accompanying notes to financial statements
3
<PAGE>
2002 TARGET TERM TRUST INC.
STATEMENT OF ASSETS AND LIABILITIES MAY 31, 1995 (UNAUDITED)
<TABLE>
<S> <C>
Assets
Investments in securities, at value (cost - $217,552,183)........ $221,798,513
Cash............................................................. 22,489
Receivable for investments sold.................................. 8,109,997
Interest receivable.............................................. 1,565,750
Variation margin receivable...................................... 8,976
Deferred organizational expenses and other assets................ 125,418
------------
Total assets..................................................... 231,631,143
------------
Liabilities
Payable for reverse repurchase agreements........................ 68,726,000
Payable for investments purchased................................ 14,132,617
Payable for interest on reverse repurchase agreements............ 94,880
Payable to affiliate............................................. 87,460
Accrued expenses and other liabilities........................... 23,976
------------
Total liabilities................................................ 83,064,933
------------
Net Assets
Capital stock - $0.001 par value; total authorized 200,000,000
shares;
10,756,667 shares issued and outstanding........................ 151,299,209
Undistributed net investment income.............................. 505,830
Accumulated net realized losses from investments and futures
transactions.................................................... (6,132,680)
Net unrealized appreciation of investments and futures contracts. 2,893,851
------------
Net assets applicable to shares outstanding...................... $148,566,210
============
Net asset value per share........................................ $13.81
============
</TABLE>
See accompanying notes to financial statements
4
<PAGE>
2002 TARGET TERM TRUST INC.
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED MAY 31, 1995 (UNAUDITED)
<TABLE>
<S> <C>
Investment income:
Interest................. $ 7,747,750
-----------
Expenses:
Interest expense......... 1,928,680
Investment advisory and
administration.......... 493,473
Legal and audit.......... 41,414
Reports and notices to
shareholders............ 40,658
Custody and accounting... 34,265
Amortization of
organizational expenses. 22,426
Transfer agency and
service fees............ 10,574
Directors' fees and
expenses................ 3,260
Miscellaneous expenses... 7,982
-----------
2,582,732
-----------
Net investment income.... 5,165,018
-----------
Realized and unrealized
gains (losses) from
investment activities:
Net realized gains
(losses) from:
Investment
transactions........... 507,256
Futures transactions.... (1,684,254)
Net change in unrealized
appreciation/depreciation
of:
Investments............. 14,409,193
Futures contracts....... (1,352,479)
-----------
Net realized and
unrealized gains from
investment activities... 11,879,716
-----------
Net increase in net
assets resulting from
operations.............. $17,044,734
===========
</TABLE>
See accompanying notes to financial statements
5
<PAGE>
2002 TARGET TERM TRUST INC.
STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED MAY 31, 1995 (UNAUDITED)
<TABLE>
<S> <C>
Cash flows provided by operating activities:
Interest received................................................ $ 8,317,736
Expenses paid.................................................... (2,606,392)
Sale of short-term portfolio investments, net.................... 5,774,000
Purchase of long-term portfolio investments...................... (88,150,661)
Sale of long-term portfolio investments.......................... 83,564,089
Variation margin on futures...................................... (3,045,709)
-----------
Net cash provided by operating activities........................ 3,853,063
-----------
Cash flows used for financing activities:
Dividends and distributions paid to shareholders................. (5,040,574)
Increase in reverse repurchase agreements........................ 1,210,000
-----------
Net cash used for financing activities........................... (3,830,574)
-----------
Increase in cash................................................. 22,489
Cash at beginning of period...................................... 0
-----------
Cash at end of period............................................ $ 22,489
===========
Reconciliation of net increase in net assets resulting from
operations to net cash provided by operating activities:
Net increase in net assets resulting from operations............. $17,044,734
-----------
Increase in value of investments................................. (9,667,769)
Increase in receivable for investments sold...................... (6,142,275)
Increase in interest receivable.................................. (210,948)
Increase in variation margin receivable.......................... (8,976)
Decrease in deferred organization expenses and other assets...... 14,052
Increase in payable for investments purchased.................... 2,861,957
Increase in payable for interest on reverse repurchase
agreements...................................................... 8,235
Increase in payable to affiliates................................ 8,890
Decrease in accrued expenses & other liabilities................. (54,837)
-----------
Net cash provided by operating activities ....................... $ 3,853,063
===========
</TABLE>
See accompanying notes to financial statements
6
<PAGE>
2002 TARGET TERM TRUST INC.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
MAY 31, 1995 NOVEMBER 30,
(UNAUDITED) 1994
------------ ------------
<S> <C> <C>
From operations:
Net investment income.............................. $ 5,165,018 $ 10,040,857
Net realized gains (losses) from investment
transactions...................................... 507,256 (4,779,676)
Net realized losses from futures transactions...... (1,684,254) --
Net change in unrealized appreciation/depreciation
of investments ................................... 14,409,193 (15,703,581)
Net change in unrealized appreciation/depreciation
of futures contracts.............................. (1,352,479) --
------------ ------------
Net increase (decrease) in net assets resulting
from operations................................... 17,044,734 (10,442,400)
------------ ------------
Dividends and distributions to shareholders from:
Net investment income.............................. (5,040,574) (10,303,811)
Capital gains...................................... -- (579,784)
------------ ------------
Total dividends and distributions.................. (5,040,574) (10,883,595)
------------ ------------
Net increase (decrease) in net assets.............. 12,004,160 (21,325,995)
Net assets:
Beginning of period................................ 136,562,050 157,888,045
------------ ------------
End of period (including undistributed net
investment income of $505,830 and $381,386,
respectively)..................................... $148,566,210 $136,562,050
============ ============
</TABLE>
See accompanying notes to financial statements
7
<PAGE>
NOTES TO FINANCIAL STATEMENTS-(unaudited)
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
2002 Target Term Trust Inc. (the "Trust") was incorporated in Maryland on
October 16, 1992 and is registered with the Securities and Exchange Commission
as a closed-end diversified management investment company. The Trust is
anticipated to terminate on or about November 30, 2002. Prior to December 31,
1992, the Trust, had no activities other than organizational matters and the
sale to Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins"),
investment adviser and administrator of the Trust, of 6,667 shares of common
stock for a total of $100,005. Offering costs of $375,000 were charged to
capital upon receipt of the proceeds from the public offering of the Trust's
shares. Organizational costs of $225,000 have been deferred and are being
amortized on the straight line method over a period not to exceed 60 months
from the date the Trust commenced operations.
Valuation of Investments -- Investments in mortgage backed and U.S. Treasury
obligations are valued based on yield equivalents, a pricing matrix or other
sources, under valuation procedures established by the Trust's Board of
Trustees. Other portfolio securities for which accurate market quotations are
readily available are valued on the basis of quotations furnished by a pricing
service or provided by dealers in such securities. Portfolio securities for
which accurate market quotations are not readily available are valued in
accordance with the Trust's valuation procedures. Short-term debt obligations
maturing in sixty days or less are valued at amortized cost.
The ability of the issuers of the debt securities held by the Trust to meet
their obligations may be affected by economic developments, including those
particular to a specific industry or region.
Investment Transactions and Investment Income -- Investment transactions are
recorded on the trade date. Realized gains and losses from investment
transactions are calculated using the identified cost method. Interest income
is recorded on an accrual basis. Premiums are amortized and discounts are
accreted as adjustments to interest income and identified cost of investments.
The Trust may enter into transactions in which the Trust sells securities for
delivery in the current month and simultaneously contracts to repurchase
substantially similar (same type, coupon and maturity) securities on a
specified future date (the "roll period"). During the roll period the Trust
forgoes principal and interest paid on the securities. The Trust is compensated
by the interest earned on the cash proceeds of the initial sale and by fee
income or a lower repurchase price.
Futures Contracts -- Upon entering into a financial futures contract, the Trust
is required to pledge to a broker an amount of cash and/or U.S. Government
8
<PAGE>
NOTES TO FINANCIAL STATEMENTS-(continued)
securities equal to a certain percentage of the contract amount. This amount is
known as the "initial margin." Subsequent payments, known as "variation
margin," are made or received by the Trust each day, depending on the daily
fluctuations in the value of the underlying financial futures contracts. Such
variation margin is recorded for financial statement purposes on a daily basis
as unrealized gain or loss until the financial futures contract is closed, at
which time the net gain or loss is reclassified to realized.
Using financial futures contracts involves various market risks. The maximum
amount at risk from the purchase of a futures contract is the contract value.
The Trust is subject to a number of guidelines which reduce this risk by
seeking to ensure that financial futures contracts are used for hedging
purposes as well as to manage the average duration of the Trust's portfolio and
not for leverage. However, imperfect correlations between futures contracts and
the portfolio securities being hedged or, market disruptions, do not normally
permit full control of these risks at all times.
Repurchase Agreements -- The Trust's custodian takes possession of the
collateral pledged for investments in repurchase agreements. The underlying
collateral is valued daily on a mark-to-market basis to ensure that the value,
including accrued interest, is at least equal to the repurchase price. In the
event of default of the obligation to repurchase, the Trust has the right to
liquidate the collateral and apply the proceeds in satisfaction of the
obligation. Under certain circumstances, in the event of default or bankruptcy
by the other party to the agreement, realization and/or retention of the
collateral may be subject to legal proceedings.
Borrowings -- The Trust enters into reverse repurchase agreements with
qualified, third party broker-dealers as determined by and under the direction
of the Trust's board of directors. Interest on the value of reverse repurchase
agreements issued and outstanding is based upon competitive market rates at the
time of issuance. At the time the Trust enters into a reverse repurchase
agreement, it establishes and maintains a segregated account with the Trust's
custodian containing liquid high grade securities having a value not less than
the repurchase price, including accrued interest, of the reverse repurchase
agreement.
The average monthly balance of reverse repurchase agreements outstanding during
the six months ended May 31, 1995 was $63,186,667 at a weighted average
interest rate of 6.13%. The maximum amount of reverse repurchase agreements
outstanding at any month-end during the year was $68,726,000 as of May 31, 1995
which was 29.67% of total assets.
Federal Tax Status -- It is the Trust's intention to continue to meet the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute sufficient amounts of its taxable income to
9
<PAGE>
NOTES TO FINANCIAL STATEMENTS-(continued)
shareholders. Therefore, no Federal income tax provision is required. As part
of a tax planning strategy, the Trust intends to retain a portion of its
taxable income and may pay an excise tax.
Dividends and Other Distributions -- Dividends and distributions are recorded
on the ex-dividend date. The Trust intends to pay monthly dividends that over
time will result in the distribution of substantially all of the Trust's net
investment income. The amount of dividends and distributions 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. On or
about November 30, 2002, the Trust will liquidate its assets and will declare
and make a termination distribution to its shareholders in an aggregate amount
equal to the net proceeds of such liquidation after payment of the Trust's
expenses and liabilities, including amounts on any outstanding borrowings by
the Trust.
INVESTMENT ADVISER AND ADMINISTRATOR
The Trust has entered into an Investment Advisory and Administration Contract
("Mitchell Hutchins Contract") with Mitchell Hutchins. The Mitchell Hutchins
Contract provides Mitchell Hutchins with an investment advisory fee and an
administration fee, each computed weekly and payable monthly, at an annual rate
of 0.50% and 0.20%, respectively, of the Trust's average weekly net assets. At
May 31, 1995, the Fund owed Mitchell Hutchins $87,460 in investment advisory
and administration fees.
Under a separate contract with Mitchell Hutchins ("Sub-Advisory Contract"),
Goldman Sachs Funds Management, L.P. serves as the Trust's sub-adviser. Under
the Sub-Advisory Contract, Mitchell Hutchins (not the Trust) will pay the Sub-
Adviser a fee, computed weekly and payable monthly, in an amount equal to one-
half of the investment advisory fee received by Mitchell Hutchins from the
Trust.
10
<PAGE>
NOTES TO FINANCIAL STATEMENTS-(concluded)
INVESTMENTS IN SECURITIES
For federal income tax purposes, the cost of securities owned at May 31, 1995
was substantially the same as the cost of securities for financial statement
purposes.
At May 31, 1995, the components of net unrealized appreciation of investments
were as follows:
<TABLE>
<S> <C>
Gross appreciation (from investments having an excess of value over
cost)............................................................. $5,420,030
Gross depreciation (from investments having an excess of cost over
value)............................................................ (1,173,700)
----------
Net unrealized appreciation of investments......................... $4,246,330
==========
</TABLE>
For the six months ended May 31, 1995, total aggregate purchases and sales of
portfolio securities excluding short-term securities, were $91,012,618 and
$89,706,364, respectively.
FEDERAL INCOME TAX STATUS
At November 30, 1994, the Trust had a net capital loss carryforward of
$4,911,769. The loss carryforward is available as a reduction, to the extent
provided in the regulations, of future net realized capital gains, and will
expire November 30, 2002.
CAPITAL STOCK
There are 200,000,000 shares of $0.001 par value common stock authorized. Of
the 10,756,667 shares outstanding as of May 31, 1995, Mitchell Hutchins owned
6,667 shares.
11
<PAGE>
2002 TARGET TERM TRUST INC.
QUARTERLY RESULTS OF OPERATIONS--(UNAUDITED)
<TABLE>
<CAPTION>
NET REALIZED AND NET
UNREALIZED INCREASE
GAINS (LOSSES) (DECREASE)
FROM IN NET ASSETS
NET INVESTMENT INVESTMENT AND RESULTING FROM
INCOME FUTURES TRANSACTIONS OPERATIONS
--------------------------------------- ----------------
TOTAL PER TOTAL PER TOTAL PER
(000) SHARE (000) SHARE (000) SHARE
QUARTER ENDED -------- ------------------ ---------- -------- ------
<S> <C> <C> <C> <C> <C> <C>
May 31, 1995......... $ 2,612 $0.24 $ 5,632 $ 0.52 $ 8,244 $ 0.76
February 28, 1995.... 2,553 0.24 6,248 0.58 8,801 0.82
-------- ------ ----------- --------- -------- ------
Totals............... $ 5,165 $ 0.48 $ 11,880 $ 1.10 $ 17,045 $ 1.58
======== ====== =========== ========= ======== ======
November 30, 1994.... $ 2,672 $ 0.25 $ (7,122) $(0.66) $ (4,450) $(0.41)
August 31, 1994...... 2,523 0.23 (309) (0.02) 2,214 0.21
May 31, 1994......... 2,440 0.23 (10,767) (1.01) (8,327) (0.78)
February 28, 1994.... 2,406 0.22 (2,285) (0.21) 121 0.01
-------- ------ ----------- --------- -------- ------
Totals............... $ 10,041 $ 0.93 $(20,483) $(1.90) $(10,442) $(0.97)
======== ====== =========== ========= ======== ======
November 30, 1993.... $ 2,437 $ 0.23 $ (3,132) $(0.29) $ (695) $(0.06)
August 31, 1993...... 2,080 0.19 8,062 0.75 10,142 0.94
May 31, 1993......... 3,385 0.32 (3,580) (0.34) (195) (0.02)
February 28, 1993*... 1,650 0.15 5,904 0.56 7,554 0.71
-------- ------ ----------- --------- -------- ------
Totals............... $ 9,552 $ 0.89 $ 7,254 $ 0.68 $ 16,806 $ 1.57
======== ====== =========== ========= ======== ======
</TABLE>
-------
*For the period December 31, 1992 (commencement of operations) to February 28,
1993
12
<PAGE>
2002 TARGET TERM TRUST INC.
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OF COMMON STOCK OUTSTANDING FOR EACH OF
THE PERIODS IS REPRESENTED BELOW:
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE DECEMBER 31, 1992
SIX MONTHS ENDED FOR THE (COMMENCEMENT OF
MAY 31, 1995 YEAR ENDED OPERATIONS) TO
(UNAUDITED) NOVEMBER 30, 1994 NOVEMBER 30, 1993
---------------- ----------------- -----------------
<S> <C> <C> <C>
Net asset value, beginning
of period................ $ 12.70 $ 14.68 $ 14.10
-------- -------- --------
Net investment income..... 0.48 0.93 0.89
Net realized and
unrealized gains (losses)
on
investment and futures
transactions.............. 1.10 (1.90) 0.68
-------- -------- --------
Net increase (decrease) in
net asset value resulting
from operations........... 1.58 (0.97) 1.57
-------- -------- --------
Dividends and
distributions to
shareholders from:
Net investment income..... (0.47) (0.96) (0.84)
Capital gains............. -- (0.05) (0.11)
-------- -------- --------
Total dividends and
distributions to
shareholders.............. (0.47) (1.01) (0.95)
-------- -------- --------
Offering costs charged to
capital.................. -- -- (0.04)
-------- -------- --------
Net asset value, end of
period................... $ 13.81 $ 12.70 $ 14.68
======== ======== ========
Per share market value,
end of period............ $ 12.00 $ 11.25 $ 14.00
======== ======== ========
Total investment return
(1)...................... 11.11% (12.79%) 5.94 %
======== ======== ========
Ratios/Supplemental Data:
Net assets, end of period
(000 omitted)............ $148,566 $136,562 $157,888
Ratio of expenses to
average net assets+...... 3.66 %* 2.72 % 1.79 %*
Ratio of net investment
income to average net
assets.................... 7.32 %* 6.82 % 6.67 %*
Portfolio turnover rate... 43.18 % 107.86 % 354.81 %
Asset coverage++.......... $ 3,162 $ 3,023 $ 3,110
---------------------
</TABLE>
* Annualized
+ This ratio includes 2.73%, 1.82% and 0.91% related to interest expense for
the six months ended May 31, 1995 and for the periods ended November 30, 1994
and 1993 respectively, which represents a cost of leverage to the Trust.
++ Per $1,000 of reverse repurchase agreements outstanding.
(1) Total investment return is calculated assuming a purchase of one share of
common stock at the current market price on the first day of each period
reported and a sale at the current market price on the last day of each
period reported, and assuming reinvestment of dividends to common
stockholders at prices obtained under the Trust's Dividend Reinvestment
Plan. Total investment return does not reflect brokerage commissions and
has not been annualized for periods of less than one year.
13
<PAGE>
2002 TARGET TERM TRUST INC.
GENERAL INFORMATION
THE TRUST
2002 Target Term Trust Inc. (the "Trust") is a diversified closed-end
management investment company whose shares trade on the New York Stock Exchange
("NYSE"). The Trust's investment objective is to manage a portfolio of high
quality fixed-income and adjustable-rate securities in order to return $15 per
share (the initial public offering price) to investors on or about November 30,
2002, while providing high monthly income. The Trust's investment adviser and
administrator is Mitchell Hutchins Asset Management Inc., a wholly owned
subsidiary of PaineWebber Incorporated, which has $44 billion in assets under
management as of June 30, 1995. Goldman Sachs Funds Management, L.P., is sub-
adviser to the Trust.
SHAREHOLDER INFORMATION
The Trust's NYSE trading symbol is "TTR". Weekly comparative net asset value
and market price information about the Trust is published each Monday in the
Wall Street Journal and the New York Times and each Saturday in Barron's, as
well as numerous other newspapers.
An annual meeting of shareholders of the Fund was held on March 16, 1995. At
the meeting, Richard Q. Armstrong, E. Garrett Bewkes, Jr., Richard R. Burt,
John R. Torell III and William D. White were elected as directors to serve
until the annual meeting of shareholders in 1996, or until their successors are
elected and qualified, and the selection of Ernst & Young LLP as the Fund's
independent auditors for the fiscal year ending November 30, 1995 was ratified.
The votes were as follows:
<TABLE>
<CAPTION>
SHARES
SHARES WITHHOLD
VOTED FOR AUTHORITY
-------------- -----------
<S> <C> <C>
Richard Q. Armstrong............ 9,984,035.247 218,161.799
E. Garrett Bewkes, Jr. ......... 10,014,949.968 187,247.078
Richard R. Burt................. 10,026,915.050 175,281.996
John R. Torell III.............. 10,024,691.069 177,505.977
William D. White................ 10,005,022.419 197,174.627
</TABLE>
<TABLE>
<CAPTION>
SHARES SHARES
SHARES VOTED WITHHOLD
VOTED FOR AGAINST AUTHORITY
------------- ----------- ----------
<S> <C> <C> <C>
Ratification of the
selection of Ernst &
Young LLP........... 9,975,278.469 135,950.689 90,967.888
</TABLE>
Broker non-votes and abstentions are included within the "Shares Withhold
Authority" totals.
14
<PAGE>
2002 TARGET TERM TRUST INC.
DISTRIBUTION POLICY
The Trust has established a Dividend Reinvestment Plan under which all
shareholders whose shares are registered in their own names, or in the name of
PaineWebber or its nominee, will have all dividends and other distributions on
their shares automatically reinvested in additional shares, unless such
shareholders elect to receive cash. Shareholders who elect to hold their shares
in the name of another broker or nominee should contract such broker or nominee
to determine whether, or how, they may participate in the Dividend Reinvestment
Plan. Additional shares acquired under the Dividend Reinvestment Plan will be
purchased in the open market, on the NYSE or otherwise, at prices that may be
higher or lower than the net asset value per share at the time of the purchase.
The Trust will not issue any new shares in connection with its Dividend
Reinvestment Plan.
15
