<PAGE>
TCW/DW TERM TRUST 2003
Two World Trade Center
New York, New York 10048
DEAR SHAREHOLDER:
- -----------------------------------------------------------------------------
For the six-month period ended September 30, 1995, TCW/DW Term Trust
2003's net asset value increased from $7.96 to $8.87 per share. Based on the
Trust's net asset value, and including reinvestment of income dividends
totaling approximately $0.27 per share, the Trust's total return for the
period was 15.62 percent. For the same period, the market price of the
Trust's shares on the New York Stock Exchange (NYSE) increased from $6.75 to
$7.50 per share. Based on the Trust's NYSE market price, and including
reinvestment of income dividends, the Trust's total return for the period was
15.29 percent. The Trust's investment performance over the last six months 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
Economic reports on the U.S. economy continue to be mixed. Over the last
six months, fixed income investors have reacted strongly to economic reports
that indicated any shift in the trend of the economy. Between the end of
March and the end of June 1995, 3- and 5-year U.S. Treasury yields declined
by approximately 100 basis points and the yield on the 30-year bond fell by
92 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 71 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 18 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, 11 percent was invested
in AAA-rated zero coupon municipal bonds and short-term investments. These
holdings play an
<PAGE>
important role as the Trust seeks to achieve its objective of returning the
original $10 offering price to shareholders at maturity. At fiscal year end,
the Trust's degree of leverage (the ratio of debt to equity) had declined to
28 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 six-month period under review, the Trust purchased 2,379,500 shares of
common stock at a weighted average market discount of 13.97 percent.
We appreciate your support of TCW/DW Term Trust 2003 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 2003
Portfolio of Investments September 30, 1995 (unaudited)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- ----------- ----------------------------------------------------------- ---------- ---------- --------------
<S> <C> <C> <C> <C>
COLLATERALIZED MORTGAGE
OBLIGATIONS (117.0%)
U.S. GOVERNMENT AGENCIES (85.9%)
$ 7,150 Federal Home Loan Mortgage Corp. 1409 S (PAC) ..............10.955+% 11/15/07 $ 6,164,587
70,000 Federal Home Loan Mortgage Corp. 1465 G (PAC)++ ........... 7.00 12/15/07 69,485,500
11,000 Federal Home Loan Mortgage Corp. 1479 M (PAC) .............. 7.50 10/15/22 10,808,600
8,100 Federal Home Loan Mortgage Corp. 1498 N (PAC) .............. 7.50 04/15/23 7,948,935
11,600 Federal Home Loan Mortgage Corp. 1504 B (PAC) .............. 7.00 12/15/22 10,936,828
20,594 Federal Home Loan Mortgage Corp. 1505 LA ................... 7.00 08/15/22 19,457,829
21,675 Federal Home Loan Mortgage Corp. 1507 L .................... 7.00 10/15/22 20,480,491
11,289 Federal Home Loan Mortgage Corp. 1517 O (PAC) .............. 7.50 01/15/23 11,085,572
9,700 Federal Home Loan Mortgage Corp. 1522 K .................... 6.50 12/25/22 8,895,676
2,406 Federal Home Loan Mortgage Corp. 1524 SA ................... 8.50+ 05/15/08 2,111,391
6,334 Federal Home Loan Mortgage Corp. 1527 QD ................... 7.50 01/15/07 6,465,684
17,099 Federal Home Loan Mortgage Corp. 1535 B .................... 7.00 01/15/23 16,179,929
8,166 Federal Home Loan Mortgage Corp. 1539 SA ................... 6.538+ 06/15/08 5,813,046
42,385 Federal Home Loan Mortgage Corp. 1542 N (PAC)++ ........... 7.00 01/15/22 41,748,801
38,223 Federal Home Loan Mortgage Corp. 1543 UG (PAC)++ .......... 7.00 01/15/23 36,184,858
17,005 Federal Home Loan Mortgage Corp. 1544 M .................... 8.138+ 07/15/08 12,519,744
8,461 Federal Home Loan Mortgage Corp. 1556 SA ................... 8.573+ 08/15/13 6,268,652
12,360 Federal Home Loan Mortgage Corp. 1563 SA ................... 7.403+ 08/15/08 9,802,963
16,914 Federal Home Loan Mortgage Corp. 1565 IB (TAC) ............. 4.925+ 08/15/08 13,615,636
17,355 Federal Home Loan Mortgage Corp. 1576 SA ................... 4.532+ 09/15/08 11,578,675
25,363 Federal Home Loan Mortgage Corp. 1602 PW++ ................. 6.50 12/15/21 24,870,451
16,292 Federal Home Loan Mortgage Corp. 1604 S .................... 4.597+ 11/15/08 13,926,884
21,156 Federal Home Loan Mortgage Corp. 1606 KD (PAC) ............. 5.687+ 11/15/08 19,592,229
39,760 Federal Home Loan Mortgage Corp. G 15 PA++ ................. 7.00 12/25/21 39,047,898
12,210 Federal National Mortgage Assoc. 1993-20 L ................. 7.00 12/25/22 11,979,109
32,200 Federal National Mortgage Assoc. 1993-121 B++ .............. 7.00 03/25/23 31,604,622
6,710 Federal National Mortgage Assoc. 1993-101 SA (TAC) ........ 9.23+ 06/25/08 6,223,470
6,394 Federal National Mortgage Assoc. 1993-101 SB (TAC) ........ 9.525+ 06/25/08 4,709,908
4,526 Federal National Mortgage Assoc. 1993-114 SC ............... 9.00+ 07/25/08 3,998,612
19,250 Federal National Mortgage Assoc. 1993-135 S ................10.68+ 07/25/08 13,920,060
12,570 Federal National Mortgage Assoc. 1993-135 SB ............... 5.757+ 06/25/08 9,215,154
26,400 Federal National Mortgage Assoc. 1993-141 B++ .............. 7.00 04/25/23 25,912,128
9,344 Federal National Mortgage Assoc. 1993-141 SA ...............10.00 03/25/23 8,418,521
31,579 Federal National Mortgage Assoc. 1993-165 SM (TAC) ........ 6.337+ 05/25/23 24,830,211
12,378 Federal National Mortgage Assoc. 1993-173 S ................10.35+ 09/25/08 10,428,069
71,000 Federal National Mortgage Assoc. 1993-21 H (PAC)++ ........ 7.00 03/25/22 69,646,030
7,210 Federal National Mortgage Assoc. 1993-24 C (PAC) .......... 7.50 09/25/22 7,277,558
15,398 Federal National Mortgage Assoc. 1993-41 C (PAC) .......... 7.00 03/25/21 15,166,568
9,907 Federal National Mortgage Assoc. 1993-63 SD (TAC) ......... 7.553+ 05/25/08 7,953,236
4,854 Federal National Mortgage Assoc. 1993-65 SC ................ 8.227+ 06/25/12 4,162,621
12,823 Federal National Mortgage Assoc. 1993-72 S ................. 8.75+ 05/25/08 11,576,913
15,947 Federal National Mortgage Assoc. 1993-72 SA ................ 6.255+ 05/25/08 10,948,435
6,579 Federal National Mortgage Assoc. 1993-86 SD ................ 9.427+ 05/25/08 5,491,360
12,330 Federal National Mortgage Assoc. 1993-93 40 K .............. 7.00 04/25/08 12,160,093
</TABLE>
<PAGE>
TCW/DW TERM TRUST 2003
Portfolio of Investments September 30, 1995 (unaudited) (continued)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- ----------- ----------------------------------------------------------- ---------- ---------- --------------
<S> <C> <C> <C> <C>
$ 9,019 Federal National Mortgage Assoc. 1993-93 SA ................9.562+% 05/25/08 $ 7,415,446
13,292 Federal National Mortgage Assoc. 1993-95 SE ................9.474+ 06/25/08 10,870,141
10,000 Federal National Mortgage Assoc. 1993-98 N .................7.00 06/25/23 9,778,100
13,093 Federal National Mortgage Assoc. 1993-196 SA ...............7.073+ 10/25/08 9,639,450
26,250 Federal National Mortgage Assoc. 1993-206 N++ ..............6.50 11/25/23 24,975,825
44,711 Federal National Mortgage Assoc. G 1993-26 A++ .............7.00 07/25/23 43,606,989
--------------
TOTAL U.S. GOVERNMENT AGENCIES
(IDENTIFIED COST $892,884,760) .................................................. 826,899,488
--------------
PRIVATE ISSUES (31.1%)
7,165 Bear Stearns Mortgage Securities Inc. 1993-6 A7 (PAC) .....7.10 06/25/24 7,051,721
14,026 Bear Stearns Mortgage Securities Inc. 1993-8 A7 (PAC) .....7.50 08/25/24 14,209,881
54,416 Bear Stearns Mortgage Securities Inc. 1993-8 A11 (TAC) ....7.50 08/25/24 53,599,760
25,800 Chase Mortgage Finance Corp. 1993-G A10 (PAC) ..............7.00 05/25/24 24,520,836
4,784 First Boston Mortgage Securities Corp. 1993-5 A15 .........7.30 03/25/09 4,855,760
36,683 General Electric Capital Mortgage Services 1994-1 A8 ......6.50 01/25/24 32,668,779
14,252 Prudential Home Mortgage Securities 1993-23 A12 (PAC) .....6.50 07/25/08 13,238,255
27,363 Prudential Home Mortgage Securities 1993-35 A12 ...........6.75 09/25/08 25,563,433
18,000 Prudential Home Mortgage Securities 1993-60 A3 (PAC) ......6.75 12/25/23 16,522,740
36,408 Residential Funding Mortgage Securities I 1993-S 40 A8
(TAC) .....................................................6.75 11/25/23 33,819,506
5,315 Ryland Mortgage Securities Corp. 1993-3 7 (PAC) ...........6.71 08/25/08 5,004,445
28,218 Salomon Brothers Mortgage Securities VII Inc. 1993-3 A7C ..7.20 08/25/23 28,072,395
40,500 Salomon Brothers Mortgage Securities VII Inc. 1993-5 A4 ...7.373* 10/25/18 40,297,500
--------------
TOTAL PRIVATE ISSUES
(IDENTIFIED COST $310,393,772) .................................................. 299,425,011
--------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(IDENTIFIED COST $1,203,278,532) ................................................ 1,126,324,499
--------------
U.S. GOVERNMENT AGENCIES MORTGAGE
PASS-THROUGH SECURITIES (6.6%)
27,892 Federal Home Loan Mortgage Corp. PC Gold ...................6.00 06/01/08 27,046,850
2,680 Federal National Mortgage Assoc. ...........................5.50 02/01/09 2,549,880
28,938 Federal National Mortgage Assoc. ...........................6.50 06/01/00 28,811,220
5,302 Federal National Mortgage Assoc. ...........................7.00 08/01/08 5,315,046
--------------
TOTAL U.S. GOVERNMENT AGENCIES MORTGAGE
PASS-THROUGH SECURITIES
(IDENTIFIED COST $65,145,934) .................................................... 63,722,996
--------------
</TABLE>
<PAGE>
TCW/DW TERM TRUST 2003
Portfolio of Investments September 30, 1995 (unaudited) (continued)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- ----------- ----------------------------------------------------------- ---------- ---------- --------------
<S> <C> <C> <C> <C>
MUNICIPAL BONDS (A) (14.2%)
EDUCATION FACILITIES REVENUE (3.1%)
$ 5,000 Maricopa County Unified School District #41, Arizona,
Gilbert Refg (FGIC Insured) ...............................0.00% 01/01/03 $ 3,491,750
6,465 Maricopa County Unified School District #97, Arizona,
Deer Valley Refg (Secondary MBIA Insured) .................0.00 07/01/04 4,156,155
6,000 Maricopa County Unified School District #28, Arizona,
Kyrene Elementary Refg Ser 1993 B (FGIC Insured) .........0.00 07/01/04 3,857,220
11,445 Houston Independent School District, Texas, Refg
(PSF Guaranteed) ..........................................0.00 08/15/04 7,261,967
Spring Independent School District, Texas,
8,205 Refg Ser 1993 (PSF Guaranteed) ............................0.00 02/15/03 5,662,763
8,100 Refg Ser 1993 (PSF Guaranteed) ............................0.00 02/15/04 5,272,938
--------------
29,702,793
--------------
ELECTRIC REVENUE (3.4%)
12,840 Austin, Texas, Combined Ser A (MBIA Insured) ...............0.00 11/15/02 9,029,858
5,200 Lower Colorado River Authority, Texas, Jr Lien 4th Ser
(FGIC Insured) ............................................0.00 01/01/04 3,406,364
San Antonio, Texas,
12,700 Electric & Gas Refg Ser A (AMBAC Insured) .................0.00 02/01/03 8,782,177
17,500 Electric & Gas Refg Ser A (AMBAC Insured) .................0.00 02/01/04 11,414,725
--------------
32,633,124
--------------
GENERAL OBLIGATION (3.7%)
19,650 North Slope Boro, Alaska Ser 1992 A (MBIA Insured) ........0.00 06/30/02 14,012,612
5,000 Scottsdale, Arizona, Refg (Secondary MBIA Insured) ........0.00 07/01/04 3,217,150
Port of Oakland, California,
3,000 Refg Ser 1993 F (MBIA Insured) ............................0.00 11/01/03 1,986,750
3,500 Refg Ser 1993 F (MBIA Insured) ............................0.00 11/01/04 2,183,300
6,500 New Orleans, Louisiana, Refg (AMBAC Insured) ...............0.00 09/01/04 4,114,955
16,000 Pennsylvania, Second Ser 1992 (Secondary MBIA Insured) ....0.00 07/01/04 10,365,280
--------------
35,880,047
--------------
HOSPITAL REVENUE (0.7%)
10,000 California Statewide Communities Development Authority,
UniHealth Ser A (AMBAC Insured) ...........................0.00 10/01/04 6,226,800
OTHER REVENUE (1.4%)
5,460 Rosemont, Illinois, Tax Increment Ser C-3 (FGIC Insured) ..0.00 12/01/03 3,600,597
16,040 Texas State Public Finance Authority, Refg Ser 1990
(MBIA Insured) ............................................0.00 02/01/05 9,849,843
--------------
13,450,440
--------------
WATER & SEWER REVENUE (1.9%)
Houston, Texas,
10,000 Water & Sewer Jr Lien Ser C (AMBAC Insured) ...............0.00 12/01/03 6,631,300
18,640 Water & Sewer Jr Lien Ser C (AMBAC Insured) ...............0.00 12/01/04 11,650,186
--------------
18,281,486
--------------
TOTAL MUNICIPAL BONDS (IDENTIFIED COST $132,619,731) ............................. 136,174,690
--------------
</TABLE>
<PAGE>
TCW/DW TERM TRUST 2003
Portfolio of Investments September 30, 1995 (unaudited) (continued)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- ----------- ----------------------------------------------------------- ---------- ---------- --------------
<S> <C> <C> <C> <C>
SHORT-TERM INVESTMENTS (0.4%)
U.S. GOVERNMENT AGENCY (b) (0.3%)
$3,000 Federal Home Loan Banks (Amortized Cost $2,999,475) .......6.30 % 10/02/95 $ 2,999,475
--------------
REPURCHASE AGREEMENT (0.1%)
945 The Bank of New York (dated 09/29/95; proceeds $945,237;
collateralized by $995,011 U.S. Treasury Note 7.25% due
05/15/04 valued at $1,086,347) (Identified Cost $944,814) 5.375 10/02/95 944,814
--------------
TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST $3,944,289) .................................................... 3,944,289
--------------
TOTAL INVESTMENTS (IDENTIFIED COST $1,404,988,486) (C) ................138.2% 1,330,166,474
LIABILITIES IN EXCESS OF CASH AND OTHER ASSETS ........................(38.2) (367,679,391)
--------------
NET ASSETS ............................................................100.0% $ 962,487,083
==============
</TABLE>
- ------------
PC Participation Certificate.
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.
* Floating rate securities. Rate shown is the rate in effect at
September 30, 1995.
(a) Investments in Texas Municipal Obligations represent 8.2% of net
assets.
(b) Security was purchased on a discount basis. The interest rate shown
has been adjusted to reflect a money market equivalent yield.
(c) The aggregate cost of investments for federal income tax purposes is
$1,404,988,486; the aggregate gross unrealized appreciation is
$4,248,136 and the aggregate gross unrealized depreciation is
$79,070,148, resulting in net unrealized depreciation of $74,822,012.
See Notes to Financial Statements
<PAGE>
TCW/DW TERM TRUST 2003
Financial Statements
- -------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1995 (unaudited)
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $1,404,988,486) ....... $1,330,166,474
Cash ..................................... 5,715
Interest receivable ...................... 6,929,117
Deferred organizational expenses ........ 16,300
Prepaid expenses and other assets ....... 135,278
--------------
TOTAL ASSETS ........................... 1,337,252,884
--------------
LIABILITIES:
Reverse repurchase agreements ............ 371,979,000
Payable for:
Interest ................................ 1,680,286
Shares of beneficial interest
repurchased ............................. 395,325
Management fee .......................... 365,820
Investment advisory fee ................. 243,880
Accrued expenses and other payables ..... 101,490
Contingencies (Note 10) ..................
--------------
TOTAL LIABILITIES ...................... 374,765,801
--------------
NET ASSETS:
Paid-in-capital .......................... 1,023,086,719
Net unrealized depreciation .............. (74,822,012)
Accumulated undistributed net investment
income .................................. 19,077,469
Accumulated net realized loss ............ (4,855,093)
--------------
NET ASSETS ............................. $ 962,487,083
==============
NET ASSET VALUE PER SHARE,
108,455,040 shares outstanding
(unlimited shares authorized of $.01 par
value) .................................. $ 8.87
==============
</TABLE>
STATEMENT OF OPERATIONS
For the six months ended September 30, 1995 (unaudited)
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
NET INVESTMENT INCOME:
INTEREST INCOME ................... $ 48,446,681
--------------
EXPENSES
Management fee ................... 1,823,252
Investment advisory fee .......... 1,215,502
Professional fees ................ 214,849
Transfer agent fees and expenses 183,948
Shareholder reports and notices . 36,147
Registration fees ................ 31,602
Custodian fees ................... 21,619
Trustees' fees and expenses ..... 19,190
Organizational expenses .......... 3,167
Other ............................ 56,019
--------------
TOTAL OPERATING EXPENSES ....... 3,605,295
Interest expense ................. 11,701,765
--------------
TOTAL EXPENSES .................. 15,307,060
--------------
NET INVESTMENT INCOME ........... 33,139,621
--------------
NET REALIZED AND UNREALIZED GAIN
(LOSS):
Net realized loss ................ (435,485)
Net change in unrealized
depreciation .................... 94,993,860
--------------
NET GAIN ........................ 94,558,375
--------------
NET INCREASE .................... $127,697,996
==============
</TABLE>
See Notes to Financial Statements
<PAGE>
TCW/DW TERM TRUST 2003
Financial Statements (continued)
- -------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX MONTHS FOR THE YEAR
ENDED SEPTEMBER ENDED MARCH
30, 1995 31, 1995
------------------ --------------
(UNAUDITED)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income ......................................... $ 33,139,621 $ 79,177,441
Net realized loss ............................................. (435,485) (4,419,608)
Net change in unrealized depreciation ......................... 94,993,860 (93,989,113)
------------------ --------------
Net increase (decrease) ...................................... 127,697,996 (19,231,280)
------------------ --------------
Dividends and distributions from:
Net investment income ......................................... (29,682,641) (68,772,914)
Net realized gain ............................................. -- (6,315,623)
------------------ --------------
Total ........................................................ (29,682,641) (75,088,537)
Net decrease from transactions in shares of beneficial interest (17,604,848) --
------------------ --------------
Total increase (decrease) .................................... 80,410,507 (94,319,817)
NET ASSETS:
Beginning of period ............................................ 882,076,576 976,396,393
------------------ --------------
END OF PERIOD (including undistributed net investment
income of $19,077,469 and $15,620,489, respectively) ......... $962,487,083 $882,076,576
================== ==============
</TABLE>
- -----------------------------------------------------------------------------
STATEMENT OF CASH FLOWS For the six months ended September 30, 1995
(unaudited)
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
INCREASE (DECREASE) IN CASH:
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:
Net investment income ........................................................ $ 33,139,621
Adjustments to reconcile net investment income to net cash provided by
operating activities:
Decrease in receivables and other assets related to operations .............. 660,767
Decrease in payables related to operations ................................ (33,290)
Net amortization of discount/premium ...................................... (3,278,461)
--------------
Net cash provided by operating activities ............................... 30,488,637
--------------
CASH FLOWS PROVIDED BY INVESTING ACTIVITIES:
Principal prepayments/sales of investments .................................. 28,880,037
Net sales of short-term investments ........................................ 6,262,205
--------------
Net cash provided by investing activities ............................... 35,142,242
--------------
CASH FLOWS USED FOR FINANCING ACTIVITIES:
Net payment for shares of beneficial interest purchased ..................... (17,209,523)
Net payments for maturities of reverse repurchase agreements ............... (18,733,000)
Dividends from net investment income ....................................... (29,682,641)
--------------
Net cash used for financing activities .................................. (65,625,164)
--------------
Net increase in cash .................................................... 5,715
Cash at beginning of period ..................................................... --
--------------
$
CASH BALANCE AT END OF PERIOD ................................................... 5,715
==============
Cash paid during the period for interest ........................................ $ 11,758,958
==============
</TABLE>
See Notes to Financial Statements
<PAGE>
TCW/DW TERM TRUST 2003
Notes to Financial Statements September 30, 1995 (unaudited)
- -----------------------------------------------------------------------------
1. ORGANIZATION AND ACCOUNTING POLICIES -- TCW/DW Term Trust 2003 (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 January 20, 1993, on April 12,
1993 issued 10,640 shares of beneficial interest for $100,016 to Dean Witter
InterCapital Inc. ("InterCapital"), an affiliate of Dean Witter Services
Company Inc. (the "Manager"), and commenced operations on April 29, 1993. The
Trust will distribute substantially all of its net assets on or about
December 31, 2003 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
<PAGE>
TCW/DW TERM TRUST 2003
Notes to Financial Statements September 30, 1995 (unaudited) (continued)
- -------------------------------------------------------------------------------
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 and Offering Costs -- InterCapital paid the
organizational expenses and offering costs of the Trust in the amounts
of approximately $31,600 and $1,130,000, respectively. The Trust has
reimbursed InterCapital for the organizational expenses which 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. Offering costs were charged to capital at the time of
issuance of the Trust's shares.
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 six months ended September 30, 1995
were $-0- and $28,880,037, respectively.
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 $28,500.
<PAGE>
TCW/DW TERM TRUST 2003
Notes to Financial Statements September 30, 1995 (unaudited) (continued)
- --------------------------------------------------------------------------------
5. FEDERAL INCOME TAX STATUS -- At March 31, 1995, the Trust had a net
capital loss carryover of approximately $4,420,000 which will be available
through March 31, 2003 to offset future capital gains to the extent provided
by regulations.
6. SHARES OF BENEFICIAL INTEREST -- Transactions in shares of beneficial
interest were as follows:
<TABLE>
<CAPTION>
CAPITAL PAID IN
PAR VALUE OF EXCESS OF PAR
SHARES SHARES VALUE
------------- ------------ ---------------
<S> <C> <C> <C>
Balance, April 29, 1993 (Note 1) ............ 10,640 $ 106 $ 99,910
Shares issued at close of public offering on
April 29, 1993* ............................ 100,000,000 1,000,000 937,869,060
Shares issued pursuant to an over-allotment
on the public offering on May 5, 1993 ..... 8,000,000 80,000 75,120,000
Shares issued pursuant to an over-allotment
on the public offering on May 26, 1993 .... 3,000,000 30,000 28,170,000
Treasury shares purchased and retired
(weighted average discount 1.17%)** ....... (176,100) (1,761) (1,675,748)
------------- ------------ ---------------
Balance, March 31, 1994 and 1995 ............ 110,834,540 1,108,345 1,039,583,222
Treasury shares purchased and retired
(weighted average discount 13.97%)** ...... (2,379,500) (23,795) (17,581,053)
------------- ------------ ---------------
Balance, September 30, 1995 ................. 108,455,040 $1,084,550 $1,022,002,169
============= ============ ===============
</TABLE>
- ------------
* Net offering costs of $1,130,000.
** The Trustees have voted to retire the shares purchased.
7. 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 $407,083,102 were pledged as
collateral.
At September 30, 1995, the reverse repurchase agreements outstanding were
$371,979,000 with a weighted interest rate of 5.83% maturing within 59 days.
The maximum and average daily amounts outstanding during the period were
$398,566,097 and $384,448,047, respectively. The weighted average interest
rate during the period was 6.12%.
<PAGE>
TCW/DW TERM TRUST 2003
Notes to Financial Statements September 30, 1995 (unaudited) (continued)
- ------------------------------------------------------------------------
8. SELECTED QUARTERLY FINANCIAL DATA
<TABLE>
<CAPTION>
QUARTERS ENDED
--------------------------------------
09/30/95 06/30/95
------------------ ------------------
PER PER
TOTAL* SHARE TOTAL* SHARE
--------- ------- --------- -------
<S> <C> <C> <C> <C>
Total investment income ......... $ 24,122 $ 0.22 $ 24,325 $ 0.22
Net investment income ........... 16,453 0.15 16,687 0.15
Net realized and unrealized gain 15,227 0.16 79,331 0.72
</TABLE>
<TABLE>
<CAPTION>
QUARTERS ENDED
------------------------------------------------------------------------------------
03/31/95 12/30/94 09/30/94 06/30/94
------------------ -------------------- -------------------- --------------------
PER PER PER PER
TOTAL* SHARE TOTAL* SHARE TOTAL* SHARE TOTAL* SHARE
--------- ------- ---------- -------- ---------- -------- ----------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total investment income ......... $ 24,856 $ 0.23 $ 25,839 $ 0.23 $ 27,146 $ 0.25 $ 28,190 $ 0.25
Net investment income ........... 17,047 0.15 18,982 0.17 21,076 0.19 22,072 0.20
Net realized and unrealized gain
(loss) ......................... 79,993 0.73 (18,693) (0.17) (27,581) (0.25) (132,128) (1.19)
</TABLE>
<TABLE>
<CAPTION>
QUARTERS ENDED
---------------------------------------------------------------------------------
03/31/94 12/31/93 09/30/93 06/30/93+
-------------------- -------------------- ------------------ -----------------
PER PER PER PER
TOTAL* SHARE TOTAL* SHARE TOTAL* SHARE TOTAL* SHARE
---------- -------- ---------- -------- --------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total investment income ......... $ 30,243 $ 0.27 $ 29,384 $ 0.27 $ 23,330 $ 0.21 $ 7,765 $ 0.07
Net investment income ........... 24,208 0.22 23,339 0.21 19,332 0.17 6,529 0.06
Net realized and unrealized gain
(loss) ......................... (76,077) (0.69) (34,835) (0.31) 24,823 0.22 16,578 0.16
</TABLE>
- ------------
* Amounts in thousands.
+ For the period April 29, 1993 through June 30, 1993.
9. 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
DATE SHARE DATE PAYABLE DATE
- ------------------ ------------ ----------------- ----------------
<S> <C> <C> <C>
September 26, 1995 $.045 October 6, 1995 October 20, 1995
October 31, 1995 $.045 November 10, 1995 November 24, 1995
</TABLE>
<PAGE>
TCW/DW TERM TRUST 2003
Notes to Financial Statements September 30, 1995 (unaudited) (continued)
- -------------------------------------------------------------------------
10. LITIGATION -- Two purported class action lawsuits, which have been
consolidated for pretrial purposes, were instituted during 1994 in the United
States District Court, Southern District of New York, against the Trust, some
of its Trustees and officers, one of its underwriters, the lead
representative of its underwriters, the Adviser, the Manager, and other
defendants, by certain shareholders of the Trust. The plaintiffs in these
actions generally allege that the defendants made inadequate and misleading
disclosures in the prospectus for the Trust, in particular, as such
disclosure relates to the nature and risks of "inverse floaters," the Trust's
investments in those securities, and the weighted average maturity of the
Trust's portfolio. Damages, including punitive damages, are sought in an
unspecified amount. The defendants have moved to dismiss both complaints for
failure to state a cause of action.
In addition, 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 2003
Financial Highlights
- -----------------------------------------------------------------------------
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
FOR THE SIX MONTHS FOR THE PERIOD
ENDED SEPTEMBER FOR THE YEAR APRIL 29, 1993*
30, 1995 ENDED MARCH THROUGH MARCH
(UNAUDITED) 31, 1995 31, 1994
------------------ -------------- ---------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ...... $ 7.96 $ 8.81 $ 9.40
------------------ -------------- ---------------
Net investment income ...................... 0.30 0.71 0.66
Net realized and unrealized gain (loss) ... 0.88 (0.88) (0.62)
------------------ -------------- ---------------
Total from investment operations ........... 1.18 (0.17) 0.04
------------------ -------------- ---------------
Less dividends and distributions from:
Net investment income ..................... (0.27) (0.62) (0.62)
Net realized gain ......................... -- (0.06) --
------------------ -------------- ---------------
Total dividends and distributions .......... (0.27) (0.68) (0.62)
Less offering costs charged against capital -- -- (0.01)
------------------ -------------- ---------------
Net asset value, end of period ............. $ 8.87 $ 7.96 $ 8.81
================== ============== ===============
Market value, end of period ................ $ 7.50 $ 6.75 $8.875
================== ============== ===============
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
TOTAL INVESTMENT RETURN+ ................15.29%(1) (17.00)% (4.33)%(1)
RATIOS TO AVERAGE NET ASSETS:
Operating expenses ...................... 0.77%(2) 0.76% 0.73%(2)
Interest expense ........................ 2.50%(2) 2.42% 1.06%(2)
Total expenses .......................... 3.27%(2) 3.18% 1.79%(2)
Net investment income ................... 7.09%(2) 9.37% 7.61%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands
$962,487 $882,077 $976,396
Portfolio turnover rate ................. --%(1) --%++ 53%(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
dividend reinvestment plan. Total investment return does not reflect
sales charges brokerage commissions.
++ Less than 0.5%
(1) Not annualized.
(2) Annualized.
See Notes to Financial Statements
<PAGE>
TCW/DW TERM TRUST 2003
Results of Annual Meeting (unaudited)
- -----------------------------------------------------------------------------
On October 31, 1995, an annual meeting of shareholders of the Fund was held
for the purpose of voting on three separate matters, the results of which
were as follows:
ELECTION OF TRUSTEES:
John R. Haire
<TABLE>
<CAPTION>
VOTE: NO. OF SHARES
- ---------- ---------------
<S> <C>
For ....... 77,367,701
Withheld . 2,921,200
</TABLE>
Manuel H. Johnson
<TABLE>
<CAPTION>
VOTE: NO. OF SHARES
- ---------- ---------------
<S> <C>
For ....... 77,394,179
Withheld . 2,894,722
</TABLE>
John L. Schroeder
<TABLE>
<CAPTION>
VOTE: NO. OF SHARES
- ---------- ---------------
<S> <C>
For ....... 77,378,483
Withheld . 2,910,418
</TABLE>
Marc I. Stern
<TABLE>
<CAPTION>
VOTE: NO. OF SHARES
- ---------- ---------------
<S> <C>
For ....... 77,386,689
Withheld . 2,902,212
</TABLE>
INVESTMENT ADVISORY AGREEMENT:
<TABLE>
<CAPTION>
VOTE: NO. OF SHARES
- --------- ---------------
<S> <C>
For ...... 73,629,015
Against . 2,453,938
Abstain . 4,205,948
</TABLE>
RATIFICATION OF PRICE WATERHOUSE LLP AS INDEPENDENT ACCOUNTANTS:
<TABLE>
<CAPTION>
VOTE: NO. OF SHARES
- --------- ---------------
<S> <C>
For ...... 76,314,047
Against . 1,068,981
Abstain . 2,905,873
</TABLE>
<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 Fund without examination by the independent account-
ants and accordingly they do not express an opinion thereon.
T C W / D W
TERM TRUST
2003
SEMIANNUAL REPORT
SEPTEMBER 30, 1995
