<PAGE> 1
TCW/ DW TERM TRUST 2003
Two World Trade Center
New York, New York 10048
DEAR SHAREHOLDER:
- --------------------------------------------------------------------------------
Interest rates rose sharply throughout 1994, causing the prices of
fixed-income securities, in general, and TCW/DW Term Trust 2003's net asset
value (NAV), in particular, to decline. For the fiscal year ended March 31,
1995, the Trust's NAV decreased from $8.81 per share to $7.96 per share. Based
on this change, and including reinvestment of dividends totaling $0.68 per
share, the Trust's total return for the fiscal year was -1.40 percent. During
the same period, the Trust's per share value on the New York Stock Exchange
(NYSE) decreased from $8.875 per share to $6.75 per share. On the basis of this
market price change, and including reinvestment of dividends, total return for
the fiscal year was -17.00 percent.
THE MARKET
The abrupt increase in interest rates during 1994 led to severe price
declines throughout all sectors of the fixed-income market, especially the
mortgage-backed sector. As mortgage prepayments fell from record highs to record
lows, mortgage terms were extended. The resultant widespread selling of
mortgage-backed securities compromised the sector's liquidity and produced
further, dramatic price declines among mortgage-backed securities. Over the
remainder of the Trust's fiscal year mortgage-backed performance improved
gradually. The decline in the issuance of new pass-through securities and
collateralized mortgage obligations (CMOs) helped the mortgage sector recover.
Once evidence of a slowdown in economic growth began to accumulate during the
first quarter of 1995, the market's inflation fears ebbed and interest rates
fell on average by 65 basis points (0.65 percentage points).
THE PORTFOLIO
Approximately 66 percent of the Trust is invested in AAA-rated fixed rate
collateralized mortgage obligations (CMOs) with durations, average lives or
expected maturities that correspond closely to the Trust's termination date.
Another 18 percent is invested in inverse floating rate CMOs (also known as
inverse floaters) issued by agencies of the U.S. government. The interest rate
or coupon on an inverse floater resets by a multiple in a direction opposite to
that of a specified index. In addition, the average lives, durations and
expected maturities of inverse floaters are more sensitive to changes in
prepayment rates and interest rates than some other types of CMOs. However,
inverse floaters can provide a portfolio with strong call protection and
attractive projected yields and total rates of return. As interest rates fell in
the first quarter, the value of these securities has increased. Approximately 10
percent of the Trust is invested in AAA-rated zero coupon municipal bonds and
short-term investments, which play a role in striving to achieve the Trust's
objective of returning the original offering price of $10 to shareholders when
the Trust terminates. The remaining 6 percent of the Trust is invested in
mortgage pass-through securities issued by agencies of the U.S. government.
Leverage has declined to less than 30 percent of total
<PAGE> 2
gross assets. We will continue to use mortgage prepayments that we receive to
pay down leverage further.
LOOKING AHEAD
The Trust's investment adviser, TCW Funds Management, Inc. (TCW), is
generally positive regarding the mortgage-backed sector, but does not rule out
the possibility of additional rate hikes by the Federal Reserve Board later this
year. The U.S. dollar's weakness is also of concern, as it has some inflationary
implications. In the past, periods of strong bond market performance have been
correlated with high real rates of interest. With today's real interest rates
remaining high, even after the recent bond market rally, TCW anticipates
continued near-term bond market strength. The Trust's value per share, both NAV
and on the NYSE, will continue to fluctuate as the prices of the portfolio's
securities respond to changing market conditions and interest rates.
We would like to remind you that the Trustees have approved a procedure
whereby the Trust, when appropriate, may attempt 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.
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> 3
TCW/ DW TERM TRUST 2003
PORTFOLIO OF INVESTMENTS March 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Coupon Maturity
(in thousands) Rate Date Value
- --------------- ------ ---------- --------------
<C> <S> <C> <C> <C>
COLLATERALIZED MORTGAGE
OBLIGATIONS (119.0%)
U.S. GOVERNMENT AGENCIES (87.0%)
$ 7,150 Federal Home Loan Mortgage Corp.
1409 S (PAC)................................. 6.02%+ 11/15/07 $ 5,646,269
70,000 Federal Home Loan Mortgage Corp. 1465 G
(PAC)++...................................... 7.00 12/15/07 65,153,480
11,000 Federal Home Loan Mortgage Corp.
1479 M (PAC)................................. 7.50 10/15/22 10,083,007
16,100 Federal Home Loan Mortgage Corp. 1498 N
(PAC)++...................................... 7.50 4/15/23 14,701,280
11,600 Federal Home Loan Mortgage Corp. 1504 B
(PAC)++...................................... 7.00 12/15/22 10,185,577
20,594 Federal Home Loan Mortgage Corp. 1505 LA....... 7.00 8/15/22 18,277,093
21,675 Federal Home Loan Mortgage Corp. 1507 L........ 7.00 10/15/22 19,239,033
11,289 Federal Home Loan Mortgage Corp. 1517 O
(PAC)++...................................... 7.50 1/15/23 10,330,880
9,700 Federal Home Loan Mortgage Corp. 1522 K........ 6.50 12/15/22 8,251,053
2,406 Federal Home Loan Mortgage Corp. 1524 SA....... 8.50+ 5/15/08 1,936,946
6,334 Federal Home Loan Mortgage Corp. 1527 QD....... 7.50 1/15/07 6,265,175
17,099 Federal Home Loan Mortgage Corp. 1535 B........ 7.00 1/15/23 15,191,726
8,166 Federal Home Loan Mortgage Corp. 1539 SA....... 7.89+ 6/15/08 5,096,024
42,385 Federal Home Loan Mortgage Corp. 1542 N
(PAC)++...................................... 7.00 1/15/22 39,601,068
38,223 Federal Home Loan Mortgage Corp. 1543 UG
(PAC)++...................................... 7.00 1/15/23 34,261,197
17,005 Federal Home Loan Mortgage Corp. 1544 M........ 4.472+ 7/15/08 12,169,021
8,461 Federal Home Loan Mortgage Corp. 1556 SA....... 9.727+ 8/15/13 5,433,243
12,360 Federal Home Loan Mortgage Corp. 1563 SA....... 8.239+ 8/15/08 8,447,294
16,914 Federal Home Loan Mortgage Corp.
1565 IB (TAC)................................ 4.55+ 8/15/08 11,099,703
17,355 Federal Home Loan Mortgage Corp. 1576 SA....... 5.469+ 9/15/08 9,892,150
25,363 Federal Home Loan Mortgage Corp.
1602 PW++.................................... 6.50 12/15/21 22,988,770
16,812 Federal Home Loan Mortgage Corp. 1604 S........ 4.034+ 11/15/08 12,467,181
22,433 Federal Home Loan Mortgage Corp. 1606 KD
(PAC)........................................ 5.017+ 11/15/08 17,680,107
39,760 Federal Home Loan Mortgage Corp. G 15 PA++..... 7.00 12/25/21 35,229,825
9,019 Federal National Mortgage Assoc. 1993-93 SA.... 10.658+ 5/25/08 6,789,808
6,710 Federal National Mortgage Assoc. 1993-101 SA
(TAC)........................................ 9.227+ 6/25/08 5,707,643
6,394 Federal National Mortgage Assoc. 1993-101 SB
(TAC)........................................ 11.371+ 6/25/08 4,470,135
4,526 Federal National Mortgage Assoc. 1993-114 SC... 9.00+ 7/25/08 3,714,342
32,200 Federal National Mortgage Assoc. 1993-121
B++.......................................... 7.00 3/25/23 29,284,548
12,570 Federal National Mortgage Assoc. 1993-135 SB... 5.292+ 6/25/08 8,394,260
</TABLE>
<PAGE> 4
TCW/ DW TERM TRUST 2003
PORTFOLIO OF INVESTMENTS March 31, 1995 (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Coupon Maturity
(in thousands) Rate Date Value
- --------------- ------ ---------- --------------
<C> <S> <C> <C> <C>
$19,250 Federal National Mortgage Assoc. 1993-135 S.... 5.107%+ 7/25/08 $ 12,705,000
26,400 Federal National Mortgage Assoc. 1993-141
B++.......................................... 7.00 4/25/23 24,014,786
9,344 Federal National Mortgage Assoc. 1993-141 SA... 10.00+ 3/25/23 7,615,569
31,579 Federal National Mortgage Assoc.
1993-165 SM (TAC)............................ 5.795+ 5/25/23 21,305,937
12,594 Federal National Mortgage Assoc. 1993-173 S.... 4.50+ 9/25/08 8,189,784
13,093 Federal National Mortgage Assoc. 1993-196 SA... 8.509+ 10/25/08 8,624,771
12,210 Federal National Mortgage Assoc. 1993-20 L..... 7.00 12/25/22 11,081,650
26,250 Federal National Mortgage Assoc. 1993-206
N++.......................................... 6.50 11/25/23 23,031,068
71,000 Federal National Mortgage Assoc. 1993-21 H
(PAC)++...................................... 7.00 3/25/22 65,711,139
7,210 Federal National Mortgage Assoc.
1993-24 C (PAC).............................. 7.50 9/25/22 6,563,357
12,330 Federal National Mortgage Assoc. 1993-40 K..... 7.00 4/25/08 11,544,764
15,398 Federal National Mortgage Assoc.
1993-41 C (PAC).............................. 7.00 3/25/21 14,494,861
9,907 Federal National Mortgage Assoc. 1993-63 SD
(TAC)........................................ 8.269+ 5/25/08 6,919,249
4,854 Federal National Mortgage Assoc. 1993-65 SC.... 9.022+ 6/25/12 3,531,553
12,823 Federal National Mortgage Assoc. 1993-72 S..... 8.75+ 5/25/08 10,711,386
15,947 Federal National Mortgage Assoc. 1993-72 SA.... 7.548+ 5/25/08 9,847,149
6,579 Federal National Mortgage Assoc. 1993-86 SD.... 10.508+ 5/25/08 4,932,197
13,292 Federal National Mortgage Assoc. 1993-95 SE.... 10.75+ 6/25/08 9,815,147
10,000 Federal National Mortgage Assoc. 1993-98 N++... 7.00 6/25/23 9,262,500
44,711 Federal National Mortgage Assoc. G 1993-26
A++.......................................... 7.00 7/25/23 39,555,198
--------------
TOTAL U.S. GOVERNMENT AGENCIES
(IDENTIFIED COST $903,086,961)............................................ 767,444,903
--------------
PRIVATE ISSUES (32.0%)
7,165 Bear Stearns Mortgage Securities Inc. 1993-6 A7
(PAC)........................................ 7.10 6/25/24 6,543,938
54,416 Bear Stearns Mortgage Securities Inc. 1993-8
A11 (TAC).................................... 7.50 8/25/24 49,110,440
14,026 Bear Stearns Mortgage Securities Inc. 1993-8 A7
(PAC)........................................ 7.50 8/25/24 13,333,859
25,800 Chase Mortgage Finance Corp. 1993-G A10
(PAC)++...................................... 7.00 5/25/24 23,087,775
4,784 First Boston Mortgage Securities Corp.
1993-5 A15................................... 7.30 3/25/09 4,579,187
36,683 General Electric Capital Mortgage Services
1994-1 A8.................................... 6.50 1/25/24 30,227,342
14,252 Prudential Home Mortgage Securities
1993-23 A12 (PAC)............................ 6.50 7/25/08 12,756,808
27,363 Prudential Home Mortgage Securities
1993-35 A12.................................. 6.75 9/25/08 24,894,378
</TABLE>
<PAGE> 5
TCW/ DW TERM TRUST 2003
PORTFOLIO OF INVESTMENTS March 31, 1995 (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Coupon Maturity
(in thousands) Rate Date Value
- --------------- ------ ---------- --------------
<C> <S> <C> <C> <C>
$18,000 Prudential Home Mortgage Securities 1993-60 A3
(PAC)........................................ 6.75% 12/25/23 $ 15,954,804
36,408 Residential Funding Mortgage Securities I
1993-S 40 A8 (TAC)........................... 6.75 11/25/23 32,604,458
5,315 Ryland Mortgage Securities Corp.
1993-3 7 (PAC)............................... 6.712 8/25/08 4,682,185
28,218 Salomon Brothers Mortgage Securities VII Inc.
1993-3 A7C................................... 7.20 8/25/23 26,586,661
40,500 Salomon Brothers Mortgage Securities VII Inc.
1993-5 A4.................................... 7.374+++ 10/25/18 37,842,188
--------------
TOTAL PRIVATE ISSUES
(IDENTIFIED COST $310,361,478)............................................ 282,204,023
--------------
TOTAL COLLATERALIZED
MORTGAGE OBLIGATIONS
(IDENTIFIED COST $1,213,448,439).......................................... 1,049,648,926
--------------
U.S. GOVERNMENT AGENCIES MORTGAGE
PASS-THROUGH SECURITIES (9.0%)
45,120 Federal Home Loan Mortgage Corp. .............. 6.00 6/01/08 41,933,060
2,806 Federal National Mortgage Assoc. .............. 5.50 2/01/09 2,534,711
30,832 Federal National Mortgage Assoc. .............. 6.50 6/01/00 29,810,916
5,609 Federal National Mortgage Assoc. .............. 7.00 8/01/08 5,449,203
--------------
TOTAL U.S. GOVERNMENT AGENCIES MORTGAGE
PASS-THROUGH SECURITIES
(IDENTIFIED COST $84,473,852)............................................. 79,727,890
--------------
MUNICIPAL BONDS (14.5%) (b)
EDUCATIONAL FACILITIES REVENUE (3.2%)
6,465 Maricopa County Unified School District #97,
Arizona, Deer Valley Refg.
(Secondary MBIA Insured)..................... 0.00 7/01/04 3,896,197
6,000 Maricopa County Unified School District #28,
Arizona, Kyrene Elementary Refg Ser 1993 B
(FGIC Insured)............................... 0.00 7/01/04 3,615,960
5,000 Maricopa County Unified School District #41,
Arizona, Gilbert Refg (FGIC Insured)......... 0.00 1/01/03 3,286,000
8,100 Spring Independent School District, Texas, Refg
Ser 1993 (PSF Guaranteed).................... 0.00 2/15/04 4,951,368
8,205 Spring Independent School District, Texas, Refg
Ser 1993 (PSF Guaranteed).................... 0.00 2/15/03 5,328,163
11,445 Houston Independent School District, Texas,
Refg (PSF Guaranteed)........................ 0.00 8/15/04 6,804,854
--------------
27,882,542
--------------
</TABLE>
<PAGE> 6
TCW/ DW TERM TRUST 2003
PORTFOLIO OF INVESTMENTS March 31, 1995 (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Coupon Maturity
(in thousands) Rate Date Value
- --------------- ------ ---------- --------------
<C> <S> <C> <C> <C>
ELECTRIC REVENUE (3.5%)
$ 5,200 Lower Colorado River Authority, Texas, Jr Lien
4th Ser (FGIC Insured)....................... 0.00% 1/01/04 $ 3,200,288
12,700 San Antonio, Texas, Electric & Gas Refg Ser A
(AMBAC Insured).............................. 0.00 2/01/03 8,264,652
17,500 San Antonio, Texas, Electric & Gas Refg Ser A
(AMBAC Insured).............................. 0.00 2/01/04 10,720,675
12,840 Austin, Texas, Combined Ser A (MBIA Insured)... 0.00 11/15/02 8,490,835
--------------
30,676,450
--------------
GENERAL OBLIGATION (3.8%)
3,000 Port of Oakland, California, Refg Ser 1993 F
(MBIA Insured)............................... 0.00 11/01/03 1,873,650
3,500 Port of Oakland, California, Refg Ser 1993 F
(MBIA Insured)............................... 0.00 11/01/04 2,056,740
19,650 North Slope Boro, Alaska Ser 1992 A (MBIA
Insured)..................................... 0.00 6/30/02 13,119,912
5,000 Scottsdale, Arizona, Refg
(Secondary MBIA Insured)..................... 0.00 7/01/04 3,013,300
6,500 New Orleans, Louisiana, Refg (AMBAC Insured)... 0.00 9/01/04 3,881,670
16,000 Pennsylvania, Second Ser 1992
(Secondary MBIA Insured)..................... 0.00 7/01/04 9,835,680
--------------
33,780,952
--------------
HOSPITAL REVENUE (0.7%)
10,000 California Statewide Communities Development
Authority, UniHealth Ser A (AMBAC Insured)... 0.00 10/01/04 5,862,800
--------------
OTHER REVENUE (1.4%)
5,460 Rosemont, Illinois, Tax Increment Ser C-3 (FGIC
Insured)..................................... 0.00 12/01/03 3,371,605
16,040 Texas State Public Finance Authority, Refg Ser
1990 (MBIA Insured).......................... 0.00 2/01/05 9,247,220
--------------
12,618,825
--------------
WATER & SEWER REVENUE (1.9%)
10,000 Houston, Texas, Water & Sewer Jr Lien Ser C
(AMBAC Insured).............................. 0.00 12/01/03 6,216,900
18,640 Houston, Texas, Water & Sewer Jr Lien Ser C
(AMBAC Insured).............................. 0.00 12/01/04 10,903,282
--------------
17,120,182
--------------
</TABLE>
<PAGE> 7
TCW/ DW TERM TRUST 2003
PORTFOLIO OF INVESTMENTS March 31, 1995 (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Coupon Maturity
(in thousands) Rate Date Value
- --------------- ------ ---------- --------------
<C> <S> <C> <C> <C>
TOTAL MUNICIPAL BONDS
(IDENTIFIED COST $129,212,148)............................................ 127,941,751
--------------
SHORT-TERM INVESTMENTS (1.2%)
COMMERCIAL PAPER (a) (0.6%)
FINANCIAL SERVICES
$ 5,000 General Electric Capital Corp.
(Amortized Cost $4,995,000).................. 6.01% 4/07/95 $ 4,995,000
--------------
U.S. GOVERNMENT AGENCIES(a) (0.5%)
3,000 Federal Home Loan Mortgage Corp. .............. 6.15 4/03/95 2,998,975
1,000 Federal National Mortgage Assoc. .............. 5.98 4/07/95 999,005
--------------
TOTAL U.S. GOVERNMENT AGENCIES
(AMORTIZED COST $3,997,980)............................................... 3,997,980
--------------
REPURCHASE AGREEMENT (0.1%)
1,160 The Bank of New York
(dated 3/31/95; proceeds $1,160,522,
collateralized by $1,199,415 U.S. Treasury Bill
6.10% due 9/07/95 valued at $1,169,035)
(Identified Cost $1,160,333)................... 5.875 4/03/95 1,160,333
--------------
TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST $10,153,313)............................................. 10,153,313
--------------
TOTAL INVESTMENTS
(IDENTIFIED COST $1,437,287,752) (c)................... 143.7% 1,267,471,880
LIABILITIES IN EXCESS OF OTHER ASSETS.................... (43.7) (385,395,304)
----- --------------
NET ASSETS............................................... 100.0% $ 882,076,576
----- --------------
----- --------------
</TABLE>
- ---------------
<TABLE>
<C> <S>
PAC Planned Amortization Class.
TAC Targeted Amortization Class.
+ Inverse floater-coupon rate moves inversely to a designated index, such as LIBOR (London
Inter-Bank Offering 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 March 31, 1995.
(a) Securities were purchased on a discount basis. The interest rates shown have been adjusted to
reflect a money market equivalent yield.
(b) Investments in Texas Municipal Obligations represent 8.4% of net assets.
(c) The aggregate cost of investments for federal income tax purposes is $1,437,287,752; the
aggregate gross unrealized appreciation is $215,268 and the aggregate gross unrealized
depreciation is $170,031,140, resulting in net unrealized depreciation of $169,815,872.
</TABLE>
See Notes to Financial Statements
<PAGE> 8
TCW/ DW TERM TRUST 2003
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
March 31, 1995
STATEMENT OF OPERATIONS
For the year ended March 31, 1995
- --------------------------------------------------------------------------------
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost
$1,437,287,752).................. $1,267,471,880
Interest receivable................ 7,586,908
Deferred organizational expenses... 19,467
Prepaid expenses and other
assets........................... 135,087
--------------
TOTAL ASSETS.............. 1,275,213,342
--------------
LIABILITIES:
Reverse repurchase agreements...... 390,712,000
Payable for:
Interest......................... 1,737,479
Management fee................... 327,529
Investment advisory fee.......... 218,353
Accrued expenses and other
payables......................... 141,405
Contingencies (Note 10)
--------------
TOTAL LIABILITIES......... 393,136,766
--------------
NET ASSETS:
Paid-in-capital.................... 1,040,691,567
Net unrealized depreciation........ (169,815,872)
Accumulated undistributed net
investment income................ 15,620,489
Accumulated net realized loss...... (4,419,608)
--------------
NET ASSETS................ $ 882,076,576
=============
NET ASSET VALUE PER SHARE,
110,834,540 shares outstanding
(unlimited shares authorized of
$.01 par value).................. $7.96
=====
NET INVESTMENT INCOME:
INTEREST INCOME.................. $ 106,030,628
--------------
EXPENSES
Management fee................. 3,294,585
Investment advisory fee........ 2,196,390
Transfer agent fees and
expenses..................... 423,838
Registration fees.............. 137,091
Shareholder reports and
notices...................... 125,918
Professional fees.............. 111,793
Custodian fees................. 61,254
Trustees' fees and expenses.... 40,682
Organizational expenses........ 6,319
Other.......................... 60,930
--------------
TOTAL OPERATING EXPENSES..... 6,458,800
Interest expense............... 20,394,387
--------------
TOTAL EXPENSES............... 26,853,187
--------------
NET INVESTMENT INCOME........ 79,177,441
--------------
NET REALIZED AND UNREALIZED
LOSS:
Net realized loss.............. (4,419,608)
Net change in unrealized
depreciation................. (93,989,113)
--------------
NET LOSS..................... (98,408,721)
--------------
NET DECREASE................. $ (19,231,280)
=============
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the period
For the year ended April 29, 1993* through
March 31, 1995 March 31, 1994
------------------ -----------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income...................................... $ 79,177,441 $ 73,407,989
Net realized gain (loss)................................... (4,419,608) 6,315,623
Net change in unrealized depreciation...................... (93,989,113) (75,826,759)
--------------- -------------------
Net increase (decrease).................................. (19,231,280) 3,896,853
--------------- -------------------
Dividends and distributions from:
Net investment income...................................... (68,772,914) (68,192,027)
Net realized gain.......................................... (6,315,623) --
--------------- -------------------
Total.................................................... (75,088,537) (68,192,027)
Net increase from transactions in shares of beneficial
interest................................................... -- 1,040,591,551
--------------- -------------------
Total increase (decrease)................................ (94,319,817) 976,296,377
NET ASSETS:
Beginning of period.......................................... 976,396,393 100,016
--------------- -------------------
END OF PERIOD (including undistributed net investment income
of $15,620,489 and $5,215,962, respectively)............... $882,076,576 $ 976,396,393
============ =================
</TABLE>
- ---------------
* Commencement of operations
See Notes to Financial Statements
<PAGE> 9
TCW/ DW TERM TRUST 2003
FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
STATEMENT OF CASH FLOWS
For the year ended March 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INCREASE (DECREASE) IN CASH:
CASH FLOWS FROM OPERATING ACTIVITIES:
Net investment income....................................................... $ 79,177,441
Adjustments to reconcile net investment income to net cash
from operating activities:
Decrease in receivables and other assets related to operations........... 730,196
Increase in payables related to operations............................... (406,400)
Net amortization of discount/premium..................................... (6,801,404)
-------------
Net cash from operating activities.................................. 72,699,833
-------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investments.................................................... (3,172,821)
Principal prepayments/sales of investments.................................. 85,281,945
Net purchases of short-term investments..................................... (2,832,420)
-------------
Net cash from investing activities.................................. 79,276,704
-------------
CASH FLOWS USED IN FINANCING ACTIVITIES:
Net payment from maturities of reverse repurchase agreements................ (76,888,000)
Dividends to shareholders from net investment income........................ (68,772,914)
Distributions to shareholders from capital gains............................ (6,315,623)
-------------
Net cash used in financing activities............................... (151,976,537)
-------------
Net increase in cash........................................................ --
Cash at beginning of year................................................... --
-------------
CASH BALANCE AT END OF YEAR................................................. $ --
============
Cash paid during the year for interest........................................ $ 20,719,372
============
</TABLE>
See Notes to Financial Statements
<PAGE> 10
TCW/ DW TERM TRUST 2003
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
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 accrues discounts on fixed
income securities. Interest income is accrued daily.
C. Federal Income Tax Status -- It is the Trust's policy to comply with
the requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable income to its
shareholders. Accordingly, no federal income tax provision is required.
D. Dividends and Distributions to Shareholders -- The Trust records
dividends and distributions to its shareholders on the record date. The
amount of dividends and distributions from net investment income and net
realized capital gains are determined in accordance with federal income tax
regulations which may differ from generally accepted accounting principles.
These "book/tax" differences are either considered temporary or permanent
in nature. To the extent these differences are permanent in nature, such
amounts are reclassified within the capital accounts based on their federal
tax-basis treatment; temporary differences do not require reclassification.
Dividends and distributions which exceed net investment income and net
realized capital gains for financial reporting purposes but not for
<PAGE> 11
TCW/ DW TERM TRUST 2003
NOTES TO FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
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 the
Adviser an advisory fee, accrued weekly and payable monthly, by applying the
annual rate of 0.26% to the Trust's average weekly net assets.
Under the terms of the Investment Advisory Agreement, the Trust has
retained the Adviser to invest the Trust's assets, including placing orders for
the purchase and sale of portfolio securities. The Adviser obtains and evaluates
such information and advice relating to the economy, securities markets, and
specific securities as it considers necessary or useful to continuously manage
the assets of the Trust in a manner consistent with its investment objective. In
addition, the Adviser pays the salaries of all personnel, including officers of
the Trust, who are employees of the Adviser.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES -- The cost of
purchases and proceeds from sales/prepayments of portfolio securities, excluding
short-term investments, for the year ended March 31, 1995 were as follows:
<TABLE>
<CAPTION>
Sales/
Purchases Prepayments
---------- ------------
<S> <C> <C>
U.S. Government Agencies....................... $ 67,571 $83,866,566
Private Issue Collateralized Mortgage
Obligations.................................. -- 1,415,379
Municipal Bonds................................ 3,105,250 --
</TABLE>
Dean Witter Trust Company, an affiliate of the Manager, is the Trust's
transfer agent. At March 31, 1995, the Trust had transfer agent fees and
expenses payable of approximately $42,000.
5. FEDERAL INCOME TAX STATUS -- At March 31, 1995 the Trust had net capital
loss carryovers of approximately $4,420,000 which will be available through
March 31, 2003 to offset future capital gains to the extent provided by
regulations.
<PAGE> 12
TCW/ DW TERM TRUST 2003
NOTES TO FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
6. SHARES OF BENEFICIAL INTEREST -- Transactions in shares of beneficial
interest were as follows:
<TABLE>
<CAPTION>
Capital
Par Value Paid in
of Excess of
Shares Shares Par 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
option on the public offering on May 5,
1993......................................... 8,000,000 80,000 75,120,000
Shares issued pursuant to an over-allotment
option 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%)** during fiscal year
ended March 31, 1994......................... (176,100) (1,761) (1,675,748)
----------- ---------- --------------
Balance, March 31, 1994 and March 31, 1995..... 110,834,540 $1,108,345 $1,039,583,222
=========== ========== =============
</TABLE>
- ------------------
* Net of offering costs of approximately $1,130,000.
** The Trustees have voted to retire the shares purchased.
7. SELECTED QUARTERLY FINANCIAL DATA -- (unaudited)
<TABLE>
<CAPTION>
Quarter Ended
--------------------------------------------------------------------------------------------
3/31/95 12/30/94 9/30/94 6/30/94
------------------- ------------------- ------------------- --------------------
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>
Quarter Ended
--------------------------------------------------------------------------------------------
For the period
April 29, 1993*
through
3/31/94 12/31/93 9/30/93 June 30, 1993
------------------- ------------------- ------------------- --------------------
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>
- ------------------
* Commencement of operations.
** Totals expressed in thousands.
8. REVERSE REPURCHASE AND DOLLAR ROLL AGREEMENTS -- Reverse repurchase
agreements and dollar rolls 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
<PAGE> 13
TCW/ DW TERM TRUST 2003
NOTES TO FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
repurchase agreement or dollar roll files for bankruptcy or becomes insolvent,
the Trust's use of proceeds of the agreement 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 and the Trust's use of the
proceeds of the reverse repurchase agreement may also effectively be restricted
pending such decision.
Reverse repurchase agreements are collateralized by Trust securities with a
market value in excess of the Trust's obligation under the contract. Securities
valued at $421,500,621 were pledged as collateral at March 31, 1995.
At March 31, 1995, the reverse repurchase agreements outstanding were
$390,712,000 with a weighted interest rate of 6.13% maturing within 27 days. The
maximum and average daily amounts outstanding during the year were $441,157,000
and $412,341,972, respectively. The weighted average interest rate during the
year was 4.97%.
9. DIVIDENDS -- Subsequent to March 31, 1995, the Trust declared the following
dividends from net investment income payable to shareholders of record:
<TABLE>
<CAPTION>
Declaration Amount per Record Payable
Date Share Date Date
- ------------ ----------- -------- --------
<S> <C> <C> <C>
3/28/95 $0.045 4/07/95 4/21/95
4/25/95 0.045 5/05/95 5/19/95
</TABLE>
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 similar 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. No defendant has yet responded to
any of these state court complaints pending an anticipated consolidation and
submission by the plaintiffs of an amended, consolidated 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> 14
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
period
April
For the 29,
year 1993*
ended through
March 31, 1995 March 31, 1994
-------------- --------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period..................... $ 8.81 $ 9.40
-------- --------
Net investment income.................................... 0.71 0.66
Net realized and unrealized loss......................... (0.88) (0.62)
-------- --------
Total from investment operations......................... (0.17) 0.04
-------- --------
Less dividends and distributions:
Net investment income.................................. (0.62) (0.62)
Net realized gain on investments....................... (0.06) --
-------- --------
Total.................................................... (0.68) (0.62)
Less offering costs charged against capital.............. -- (0.01)
-------- --------
Net asset value, end of period........................... $ 7.96 $ 8.81
======== ========
Market value, end of period.............................. $ 6.75 $ 8.875
======== ========
TOTAL INVESTMENT RETURN +................................ (17.00%) (4.33%)(1)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands)................. $882,077 $976,396
Ratios to average net assets:
Operating expenses..................................... 0.76% 0.73%(2)
Interest expense....................................... 2.42% 1.06%(2)
Total expenses...................................... 3.18% 1.79%(2)
Net investment income.................................... 9.37% 7.61%(2)
Portfolio turnover rate.................................. 0%++ 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 brokerage commissions.
++ Less than 0.5%.
(1) Not annualized.
(2) Annualized.
See Notes to Financial Statements
<PAGE> 15
TCW/ DW TERM TRUST 2003
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Trustees of TCW/DW Term Trust 2003
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations, of
changes in net assets, and of cash flows and the financial highlights present
fairly, in all material respects, the financial position of TCW/DW Term Trust
2003 (the "Trust") at March 31, 1995, the results of its operations and its cash
flows for the year then ended, and the changes in its net assets and the
financial highlights for the year then ended and for the period April 29, 1993
(commencement of operations) through March 31, 1994, in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Trust's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at March 31, 1995 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
As discussed in Note 10 to the financial statements, the Trust is one of several
defendants in litigation. The ultimate outcome of the litigation cannot be
determined at present. No provision for any liability that may result upon
resolution of the matters has been made in the accompanying financial
statements.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
May 15, 1995
<PAGE> 16
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.
TCW/DW
TERM TRUST
2003
[FIGURE]
Annual Report
March 31, 1995
<PAGE> 17
EDGAR APPENDIX
Colage of watch, Twenty Dollar Bill, Calendar and a series of dates ranging
from 1993 to 2003.
