<PAGE>
TCW/DW TERM TRUST 2003
Two World Trade Center, New York, New York 10048
LETTER TO THE SHAREHOLDERS September 30, 1997
DEAR SHAREHOLDER:
For the six-month period ended September 30, 1997, TCW/DW Term Trust 2003's
net asset value per share increased from $8.97 to $9.79. Based on this
change, and including reinvestment of dividends totaling approximately $0.32
per share, the Trust's total return on net asset value for the period was
13.31 percent. Over the same period, the market price of the Trust's shares
on the New York Stock Exchange (NYSE) increased from $7.875 to $8.875 per
share. Based on this change, and including reinvestment of dividends, the
Trust's total return for the period was 17.00 percent. This strong investment
performance is largely attributable to the Trust's market discount to net
asset value narrowing from 12.2 percent to 9.3 percent during the fiscal year,
as well as the impressive rally in the fixed-income markets.
THE MARKET
Propelled by reassuring inflation data, a declining federal budget deficit
and a watchful Federal Reserve Board, the fixed-income sector posted strong
returns during the year. However, some economists now doubt the market's
ability to sustain this rally, noting recent indications that the pace of
economic growth may be accelerating. Nonetheless, the Federal Reserve Board
was not expected to raise interest rates at its September meeting and indeed
the central bank did not alter its policy at that time.
Investor demand for mortgage-backed securities is strong and even though
yield spreads have tightened, the sector has retained its yield advantage
over other fixed-income securities. The Trust's investment adviser, TCW Funds
Management, Inc. (TCW), believes that mortgage-backed yield spreads are
positioned to remain relatively stable in the coming months provided the
yield on the 10 year U.S. Treasury note does not fall below six percent,
which would renew mortgage prepayment fears. Issuance of collateralized
mortgage obligations (CMOs) in 1997 is now in excess of $100 billion, which
has helped support the mortgage-backed market as a whole.
<PAGE>
TCW/DW TERM TRUST 2003
LETTER TO THE SHAREHOLDERS, continued
THE PORTFOLIO
Approximately 68 percent of the Trust is invested in AAA-rated mortgage
pass-through securities or CMOs with durations, average lives or expected
maturity dates that correspond closely to the termination date of the Trust.
An additional 20 percent is invested in inverse floating rate CMOs issued by
U.S. government agencies. Inverse floaters have coupons that reset by a
multiple in a direction opposite that of a specified index. The remaining 12
percent is invested in AAA-rated municipal bonds and short-term investments.
The municipal bond holdings play an important role as the Trust seeks to
achieve its objective of returning the original $10 offering price to
shareholders at maturity. At September 30, 1997, the Trust's degree of
leverage (the ratio of debt to assets) was 31 percent of total assets.
LOOKING AHEAD
TCW is generally positive regarding the mortgage-backed sector's long-term
prospects. Although signs of robust economic activity have reappeared in
recent months, real interest rates remain at historically high levels. (In
the past, periods of strong bond market performance have correlated with high
real rates of interest.) The Trust's net asset and NYSE market values will
continue to fluctuate as both respond to changes in market conditions and
interest rates.
We would like to remind you that the Trustees have approved a procedure
whereby the Trust may attempt, when appropriate, to reduce or eliminate a
market value discount from net asset value by repurchasing shares in the open
market or in privately negotiated transactions at a price not above market
value or net asset value, whichever is lower at the time of purchase. During
the period, the Trust repurchased 2,984,500 shares of common stock at a
weighted average market discount of
11.33 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, 1997 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COLLATERALIZED MORTGAGE OBLIGATIONS (124.6%)
U.S. GOVERNMENT AGENCIES (91.8%)
$ 7,150 Federal Home Loan Mortgage Corp. 1409 S (PAC) .................. 10.465+% 11/15/07 $ 6,910,904
70,000 Federal Home Loan Mortgage Corp. 1465 G (PAC)++ ................ 7.00 12/15/07 70,898,751
11,000 Federal Home Loan Mortgage Corp. 1479 M (PAC) .................. 7.50 10/15/22 10,924,617
8,100 Federal Home Loan Mortgage Corp. 1498 N (PAC)++ ................ 7.50 04/15/23 8,040,697
11,600 Federal Home Loan Mortgage Corp. 1504 B (PAC) .................. 7.00 12/15/22 11,395,620
20,594 Federal Home Loan Mortgage Corp. 1505 LA ....................... 7.00 08/15/22 20,350,562
21,675 Federal Home Loan Mortgage Corp. 1507 L ........................ 7.00 10/15/22 21,415,531
11,289 Federal Home Loan Mortgage Corp. 1517 O (PAC) .................. 7.50 01/15/23 11,208,789
9,700 Federal Home Loan Mortgage Corp. 1522 K++ ...................... 6.50 12/15/22 9,311,629
2,406 Federal Home Loan Mortgage Corp. 1524 SA ....................... 8.50 + 05/15/08 2,405,374
5,259 Federal Home Loan Mortgage Corp. 1527 QD ++ .................... 7.50 01/15/07 5,422,608
17,099 Federal Home Loan Mortgage Corp. 1535 B ........................ 7.00 01/15/23 16,848,265
8,166 Federal Home Loan Mortgage Corp. 1539 SA ....................... 7.40 + 06/15/08 7,185,975
42,385 Federal Home Loan Mortgage Corp. 1542 N (PAC)++ ................ 7.00 01/15/22 42,135,874
38,223 Federal Home Loan Mortgage Corp. 1543 UG (PAC)++ ............... 7.00 01/15/23 37,965,874
17,005 Federal Home Loan Mortgage Corp. 1544 M ........................ 7.774+ 07/15/08 14,299,801
8,461 Federal Home Loan Mortgage Corp. 1556 SA ....................... 9.308+ 08/15/13 7,291,867
12,360 Federal Home Loan Mortgage Corp. 1563 SA ....................... 7.936+ 08/15/08 10,834,282
16,914 Federal Home Loan Mortgage Corp. 1565 IB (TAC) ................. 5.425+ 08/15/08 13,885,073
17,355 Federal Home Loan Mortgage Corp. 1576 SA ....................... 5.129+ 09/15/08 12,967,047
32,363 Federal Home Loan Mortgage Corp. 1602 PW++ ..................... 6.50 12/15/21 32,480,695
13,168 Federal Home Loan Mortgage Corp. 1604 S ........................ 5.347+ 11/15/08 12,373,007
12,919 Federal Home Loan Mortgage Corp. 1606 KD (PAC) ................. 6.58 + 11/15/08 12,643,989
39,760 Federal Home Loan Mortgage Corp. G 15 PA++ ..................... 7.00 12/25/21 39,137,462
6,710 Federal National Mortgage Assoc. 1993-101 SA (TAC) ............. 9.227+ 06/25/08 6,808,442
6,394 Federal National Mortgage Assoc. 1993-101 SB (TAC) ............. 10.701+ 06/25/08 6,720,137
4,526 Federal National Mortgage Assoc. 1993-114 SC ................... 9.00 + 07/25/08 4,373,475
32,200 Federal National Mortgage Assoc. 1993-121 B++ .................. 7.00 03/25/23 31,695,709
19,250 Federal National Mortgage Assoc. 1993-135 S .................... 6.035+ 07/25/08 14,948,780
12,570 Federal National Mortgage Assoc. 1993-135 SB ................... 6.221+ 06/25/08 9,820,137
26,400 Federal National Mortgage Assoc. 1993-141 B++ .................. 7.00 04/25/23 25,985,623
9,344 Federal National Mortgage Assoc. 1993-141 SA ................... 10.00 + 03/25/23 9,560,295
31,579 Federal National Mortgage Assoc. 1993-165 SM (TAC) ............. 6.743+ 05/25/23 28,706,211
11,305 Federal National Mortgage Assoc. 1993-173 S .................... 5.55 + 09/25/08 10,253,220
71,000 Federal National Mortgage Assoc. 1993-21 H (PAC)++ ............. 7.00 03/25/22 71,759,870
12,210 Federal National Mortgage Assoc. 1993-20 L ..................... 7.00 12/25/22 12,012,391
7,210 Federal National Mortgage Assoc. 1993-24 C (PAC) ............... 7.50 09/25/22 7,372,225
26,250 Federal National Mortgage Assoc. 1993-206 N++ .................. 6.50 11/25/23 25,277,062
6,463 Federal National Mortgage Assoc. 1993-233 J .................... 6.00 06/25/08 6,321,315
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
TCW/DW TERM TRUST 2003
PORTFOLIO OF INVESTMENTS September 30, 1997 (unaudited) continued
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------------
$11,038 Federal National Mortgage Assoc. 1993-40 K ..................... 7.00 % 04/25/08 $ 10,952,228
15,398 Federal National Mortgage Assoc. 1993-41 C (PAC) ............... 7.00 03/25/21 15,356,370
9,907 Federal National Mortgage Assoc. 1993-63 SD (TAC) .............. 8.009+ 05/25/08 8,940,840
4,854 Federal National Mortgage Assoc. 1993-65 SC .................... 8.733+ 06/25/12 4,581,311
15,947 Federal National Mortgage Assoc. 1993-72 S ..................... 7.079+ 05/25/08 13,649,345
12,823 Federal National Mortgage Assoc. 1993-72 SA .................... 8.75 + 05/25/08 12,354,256
6,579 Federal National Mortgage Assoc. 1993-86 SD .................... 10.116+ 05/25/08 6,554,329
9,019 Federal National Mortgage Assoc. 1993-93 SA .................... 10.261+ 05/25/08 9,044,593
13,292 Federal National Mortgage Assoc. 1993-95 SE .................... 10.287+ 06/25/08 13,383,083
10,000 Federal National Mortgage Assoc. 1993-98 N ..................... 7.00 06/25/23 9,996,800
13,093 Federal National Mortgage Assoc. 1993-196 SA ................... 8.003+ 10/25/08 11,877,374
35,400 Federal National Mortgage Assoc. G 1993-26 A++ ................. 7.00 07/25/23 34,890,695
--------------
TOTAL U.S. GOVERNMENT AGENCIES
(Identified Cost $882,294,176) ...................................................... 861,530,409
--------------
PRIVATE ISSUES (32.8%)
7,165 Bear Stearns Mortgage Securities, Inc. 1993-6 A7 (PAC) ......... 7.10 06/25/24 7,241,522
14,026 Bear Stearns Mortgage Securities, Inc. 1993-8 A7 (PAC) ......... 7.50 08/25/24 14,470,589
54,416 Bear Stearns Mortgage Securities, Inc. 1993-8 A11 (TAC) ........ 7.50 08/25/24 54,168,206
25,800 Chase Mortgage Finance Corp. 1993-G A10 (PAC) .................. 7.00 05/25/24 25,165,588
4,784 First Boston Mortgage Securities Corp. 1993-5 A15 .............. 7.30 03/25/09 4,908,912
36,683 General Electric Capital Mortgage Services 1994-1 A8 ........... 6.50 01/25/24 34,351,542
14,252 Prudential Home Mortgage Securities 1993-23 A12 (PAC) .......... 6.50 07/25/08 13,659,353
27,363 Prudential Home Mortgage Securities 1993-35 A12 ................ 6.75 09/25/08 26,542,146
18,000 Prudential Home Mortgage Securities 1993-60 A3 (PAC) ........... 6.75 12/25/23 16,944,869
36,408 Resolution Funding Mortgage Securities I 1993-S 40 A8 (TAC) .... 6.75 11/25/23 35,171,526
5,315 Ryland Mortgage Securities Corp. 1993-3 7 (PAC) ................ 6.712 08/25/08 5,120,180
28,218 Salomon Brothers Mortgage Securities VII Inc. 1993-3 A7C ....... 7.20 08/25/23 28,663,438
40,500 Salomon Brothers Mortgage Securities VII Inc. 1993-5 A4 ........ 7.362* 10/25/18 40,893,227
--------------
TOTAL PRIVATE ISSUES
(Identified Cost $310,229,093) ...................................................... 307,301,098
--------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(Identified Cost $1,192,523,269) .................................................... 1,168,831,507
--------------
U.S. GOVERNMENT AGENCY MORTGAGE PASS-THROUGH SECURITIES (1.7%)
9,989 Federal Home Loan Mortgage Corp. PC Gold++ ..................... 6.00 06/01/08 9,741,927
2,173 Federal National Mortgage Assoc. ............................... 5.50 02/01/09 2,073,672
4,010 Federal National Mortgage Assoc. ............................... 7.00 08/01/08 4,047,870
--------------
TOTAL U.S. GOVERNMENT AGENCY MORTGAGE PASS-THROUGH SECURITIES
(Identified Cost $16,108,441) ........................................................ 15,863,469
--------------
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
TCW/DW TERM TRUST 2003
PORTFOLIO OF INVESTMENTS September 30, 1997 (unaudited) continued
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------------
MUNICIPAL BONDS (16.6%)
Educational Facilities Revenue (3.6%)
$ 5,000 Maricopa County Unified School District #41, Arizona, Gilbert
Refg (FGIC) .................................................... 0.00% 01/01/03 $ 3,951,700
6,465 Maricopa County Unified School District #97, Arizona,
Deer Valley Refg (Secondary MBIA) ............................. 0.00 07/01/04 4,746,086
6,000 Maricopa County Unified School District #28, Arizona,
Kyrene Elementary Refg Ser 1993 B (FGIC) ...................... 0.00 07/01/04 4,404,720
11,445 Houston Independent School District, Texas, Refg ............... 0.00 08/15/04 8,327,038
Spring Independent School District, Texas,
8,205 Refg Ser 1993 ................................................. 0.00 02/15/03 6,432,392
8,100 Refg Ser 1993 ................................................. 0.00 02/15/04 6,031,260
--------------
33,893,196
--------------
Electric Revenue (4.0%)
12,840 Austin, Texas, Combined Ser A (MBIA) ............................ 0.00 11/15/02 10,206,131
5,200 Lower Colorado River Authority, Texas, Jr Lien 4th Ser (FGIC) .. 0.00 01/01/04 3,893,864
San Antonio, Texas,
12,700 Electric & Gas Refg Ser A (AMBAC) ............................. 0.00 02/01/03 9,973,818
17,500 Electric & Gas Refg Ser A (AMBAC) ............................. 0.00 02/01/04 13,053,950
--------------
37,127,763
--------------
General Obligation (4.3%)
19,650 North Slope Boro, Alaska, Ser 1992 A (MBIA) .................... 0.00 06/30/02 15,846,939
5,000 Scottsdale, Arizona, Refg (Secondary MBIA) ..................... 0.00 07/01/04 3,670,600
Port of Oakland, California,
3,000 Refg Ser 1993 F (MBIA) ........................................ 0.00 11/01/03 2,295,030
3,500 Refg Ser 1993 F (MBIA) ........................................ 0.00 11/01/04 2,544,570
6,500 New Orleans, Louisiana, Refg (AMBAC) ........................... 0.00 09/01/04 4,735,510
16,000 Pennsylvania, Second Ser 1992 (Secondary MBIA) ................. 0.00 07/01/04 11,738,080
--------------
40,830,729
--------------
Hospital Revenue (0.8%)
10,000 California Statewide Communities Development Authority,
UniHealth Ser A (AMBAC) ....................................... 0.00 10/01/04 7,272,500
--------------
Other Revenue (1.7%)
5,460 Rosemont, Illinois, Tax Increment Ser C-3 (FGIC) ............... 0.00 12/01/03 4,116,731
16,040 Texas State Public Finance Authority, Refg Ser 1990 (MBIA) ..... 0.00 02/01/05 11,383,107
--------------
15,499,838
--------------
Water & Sewer Revenue (2.2%)
Houston, Texas,
10,000 Water & Sewer Jr Lien Ser C (AMBAC) ........................... 0.00 12/01/03 7,562,600
18,640 Water & Sewer Jr Lien Ser C (AMBAC) ........................... 0.00 12/01/04 13,378,487
--------------
20,941,087
--------------
TOTAL MUNICIPAL BONDS (Identified Cost $147,356,799) ................................. 155,565,113
--------------
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
TCW/DW TERM TRUST 2003
PORTFOLIO OF INVESTMENTS September 30, 1997 (unaudited) continued
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (0.6%)
U.S. GOVERNMENT AGENCY (a) (0.2%)
$ 1,600 Federal Home Loan Mortgage Corp.
(Amortized Cost $1,598,295) ................................... 5.48% 10/08/97 $ 1,598,295
--------------
REPURCHASE AGREEMENT (0.4%)
4,253 The Bank of New York (dated 09/30/97; proceeds $4,253,732) (b)
(Identified Cost $4,253,112) .................................. 5.25 10/01/97 4,253,112
--------------
TOTAL SHORT-TERM INVESTMENTS
(Identified Cost $5,851,407) ........................................................ 5,851,407
--------------
TOTAL INVESTMENTS (Identified Cost $1,361,839,916) (c) .................... 143.5 % 1,346,111,496
LIABILITIES IN EXCESS OF OTHER ASSETS ..................................... (43.5) (407,950,040)
--------------
NET ASSETS ................................................................ 100.0 % $ 938,161,456
===== ==============
</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 security. Rate shown is the rate in effect at
September 30, 1997.
(a) Security was purchased on a discount basis. The interest rate shown
has been adjusted to reflect a money market equivalent yield.
(b) Collateralized by $3,687,651 U.S. Treasury Bond 7.875% due 02/15/21
valued at $4,338,174.
(c) The aggregate cost for federal income tax purposes approximates
identified cost. The aggregate gross
unrealized appreciation is $13,189,261 and the aggregate gross
unrealized depreciation is $28,917,681,
resulting in net unrealized depreciation of $15,728,420.
Bond Insurance:
- --------------
AMBAC AMBAC Indemnity Corporation.
FGIC Financial Guaranty Insurance Company.
MBIA Municipal Bond Investors Assurance Corporation.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
TCW/DW TERM TRUST 2003
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1997 (unaudited)
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $1,361,839,916)...................................... $1,346,111,496
Interest receivable ................................................... 6,771,175
Deferred organizational expenses ...................................... 3,642
Prepaid expenses....................................................... 74,093
--------------
TOTAL ASSETS ........................................................ 1,352,960,406
--------------
LIABILITIES:
Reverse repurchase agreements.......................................... 411,966,000
Payable for:
Interest............................................................. 1,744,994
Shares of beneficial interest repurchased............................ 426,550
Management fee....................................................... 318,683
Investment advisory fee.............................................. 212,456
Accrued expenses ...................................................... 130,267
Contingencies (Note 9)................................................. --
--------------
TOTAL LIABILITIES.................................................... 414,798,950
--------------
NET ASSETS........................................................... $ 938,161,456
==============
COMPOSITION OF NET ASSETS:
Paid-in-capital........................................................ $ 923,928,337
Net unrealized depreciation............................................ (15,728,420)
Accumulated undistributed net investment income........................ 35,429,048
Accumulated net realized loss ......................................... (5,467,509)
--------------
NET ASSETS........................................................... $ 938,161,456
==============
NET ASSET VALUE PER SHARE,
95,813,240 shares outstanding (unlimited shares authorized of $.01
par value)............................................................ $ 9.79
==============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
TCW/DW TERM TRUST 2003
FINANCIAL STATEMENTS, continued
STATEMENT OF OPERATIONS
For the six months ended September 30, 1997 (unaudited)
<TABLE>
<CAPTION>
<S> <C>
NET INVESTMENT INCOME:
INTEREST INCOME ......................... $ 47,726,915
-------------
EXPENSES
Management fee .......................... 1,792,683
Investment advisory fee ................. 1,195,122
Transfer agent fees and expenses ........ 165,493
Professional fees ....................... 56,928
Shareholder reports and notices ........ 44,831
Insurance expenses ...................... 44,786
Registration fees ....................... 42,729
Trustees' fees and expenses.............. 15,589
Organizational expenses ................. 3,170
Other.................................... 47,763
-------------
TOTAL OPERATING EXPENSES............... 3,409,094
Interest expense......................... 11,535,846
-------------
TOTAL EXPENSES......................... 14,944,940
-------------
NET INVESTMENT INCOME.................. 32,781,975
-------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized loss ....................... (752,116)
Net change in unrealized depreciation .. 75,217,205
-------------
NET GAIN............................... 74,465,089
-------------
NET INCREASE............................. $107,247,064
=============
</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 FOR THE YEAR
MONTHS ENDED ENDED
SEPTEMBER 30, 1997 MARCH 31, 1997
- ------------------------------------------------------ ------------------ --------------
(UNAUDITED)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income ................................. $ 32,781,975 $ 69,139,319
Net realized loss ..................................... (752,116) --
Net change in unrealized depreciation ................. 75,217,205 (7,930,740)
------------------ --------------
NET INCREASE......................................... 107,247,064 61,208,579
Dividends from net investment income................... (30,724,457) (59,785,102)
Net decrease from transactions in shares of beneficial
interest.............................................. (24,979,007) (48,504,089)
------------------ --------------
NET INCREASE (DECREASE).............................. 51,543,600 (47,080,612)
NET ASSETS:
Beginning of period.................................... 886,617,856 933,698,468
------------------ --------------
END OF PERIOD
(Including undistributed net investment income of
$35,429,048 and $33,371,530, respectively) .......... $938,161,456 $886,617,856
================== ==============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
TCW/DW TERM TRUST 2003
FINANCIAL STATEMENTS, continued
STATEMENT OF CASH FLOWS
For the six months ended September 30, 1997 (unaudited)
<TABLE>
<CAPTION>
<S> <C>
INCREASE (DECREASE) IN CASH:
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:
Net investment income ................................................ $ 32,781,975
Adjustments to reconcile net investment income to net cash provided
by operating activities:
Decrease in receivables and other assets related to operations ...... 228,877
Increase in payables related to operations ........................... 376,052
Net amortization of discount/premium ................................. (3,869,928)
--------------
NET CASH PROVIDED BY OPERATING ACTIVITIES .......................... 29,516,976
--------------
CASH FLOWS PROVIDED BY INVESTING ACTIVITIES:
Purchases of investments ............................................. (999,953)
Principal prepayments/sales of investments ........................... 33,064,291
Net sales of short-term investments................................... 487,100
--------------
NET CASH PROVIDED BY INVESTING ACTIVITIES .......................... 32,551,438
--------------
CASH FLOWS USED FOR FINANCING ACTIVITIES:
Net payments for shares of beneficial interest repurchased .......... (24,953,957)
Net payments for maturities of reverse repurchase agreements ........ (6,390,000)
Dividends to shareholders from net investment income ................. (30,724,457)
--------------
NET CASH USED FOR FINANCING ACTIVITIES.............................. (62,068,414)
--------------
NET INCREASE (DECREASE) IN CASH ...................................... --
CASH BALANCE AT BEGINNING OF PERIOD .................................. --
--------------
CASH BALANCE AT END OF PERIOD ........................................ $ --
==============
Cash paid during the period for interest ............................. $ 11,187,410
==============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
TCW/DW TERM TRUST 2003
NOTES TO FINANCIAL STATEMENTS September 30, 1997 (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's investment objective is to provide a high
level of current income and return $10 per share to shareholders on the
termination date. The Trust seeks to achieve its objective by investing in
high quality fixed-income securities. The Trust was organized as a
Massachusetts business trust on January 20, 1993 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 preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts and disclosures. Actual results could differ
from those estimates.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- (1) portfolio securities for which
over-the-counter market quotations are readily available are valued at the
latest available bid price prior to the time of valuation; (2) when market
quotations are not readily available, including circumstances under which it
is determined by TCW Funds Management, Inc. (the "Adviser") that sale and bid
prices are not reflective of a security's market value, portfolio securities
are valued at their fair value as determined in good faith under procedures
established by and under the general supervision of the Trustees; (3) certain
portfolio securities may be valued by an outside pricing service approved by
the Trustees. The pricing service may utilize a matrix system incorporating
security quality, maturity and coupon as the evaluation model parameters,
and/or research and evaluations by its staff, including review of
broker-dealer market price quotations, if available, in determining what it
believes is the fair valuation of the portfolio securities valued by such
pricing service; and (4) short-term debt securities having a maturity date of
more than sixty days at time of purchase are valued on a mark-to-market basis
until sixty days prior to maturity and thereafter at amortized cost based on
their value on the 61st day. Short-term debt securities having a maturity
date of sixty days or less at the time of purchase are valued at amortized
cost.
B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on
the trade date (date the order to buy or sell is executed). Realized gains
and losses on security transactions are determined by the identified cost
method. The Trust amortizes premiums and accretes discounts over the life of
the respective securities. Interest income is accrued daily.
<PAGE>
TCW/DW TERM TRUST 2003
NOTES TO FINANCIAL STATEMENTS September 30, 1997 (unaudited) continued
C. FEDERAL INCOME TAX STATUS -- It is the Trust's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income to its shareholders.
Accordingly, no federal income tax provision is required.
D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Trust records dividends
and distributions to its shareholders on the record date. The amount of
dividends and distributions from net investment income and net realized
capital gains are determined in accordance with federal income tax
regulations which may differ from generally accepted accounting principles.
These "book/tax" differences are either considered temporary or permanent in
nature. To the extent these differences are permanent in nature, such amounts
are reclassified within the capital accounts based on their federal tax-basis
treatment; temporary differences do not require reclassification. Dividends
and distributions which exceed net investment income and net realized capital
gains for financial reporting purposes but not for tax purposes are reported
as dividends in excess of net investment income or distributions in excess of
net realized capital gains. To the extent they exceed net investment income
and net realized capital gains for tax purposes, they are reported as
distributions of paid-in-capital.
E. ORGANIZATIONAL EXPENSES -- Dean Witter InterCapital Inc., an affiliate of
Dean Witter Services Company Inc. (the "Manager"), paid the organizational
expenses in the amount of approximately $31,600 which have been reimbursed
for the full amount thereof. Such expenses have been deferred and are being
amortized on the straight-line method over a period not to exceed five years
from the commencement of operations.
2. MANAGEMENT AGREEMENT
Pursuant to a Management Agreement, the Trust pays the Manager a management
fee, accrued weekly and payable monthly, by applying the annual rate of 0.39%
to the Trust's weekly net assets.
Under the terms of the Management Agreement, the Manager maintains certain of
the Trust's books and records and furnishes, at its own expense, office
space, facilities, equipment, clerical, bookkeeping and certain legal
services and pays the salaries of all personnel, including officers of the
Trust who are employees of the Manager. The Manager also bears the cost of
telephone services, heat, light, power and other utilities provided to the
Trust.
3. INVESTMENT ADVISORY AGREEMENT
Pursuant to an Investment Advisory Agreement, 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 weekly net assets.
<PAGE>
TCW/DW TERM TRUST 2003
NOTES TO FINANCIAL STATEMENTS September 30, 1997 (unaudited) continued
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 proceeds from sales/prepayments of portfolio securities, excluding
short-term investments, for the six months ended September 30, 1997 were
$33,064,291.
Dean Witter Trust FSB, an affiliate of the Manager, is the Trust's transfer
agent. At September 30, 1997, the Trust had transfer agent fees and expenses
payable of approximately $42,000.
5. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
CAPITAL
PAID IN
PAR VALUE EXCESS OF
SHARES OF SHARES PAR VALUE
-------------- ------------ --------------
<S> <C> <C> <C>
Balance, March 31, 1996 .................................................. 105,139,640 $1,051,396 $996,360,037
Treasury shares purchased and retired (weighted average discount 14.66%)*. (6,341,900) (63,419) (48,440,670)
-------------- ------------ --------------
Balance, March 31, 1997 .................................................. 98,797,740 987,977 947,919,367
Treasury shares purchased and retired (weighted average discount 11.33%)*. (2,984,500) (29,845) (24,949,162)
-------------- ------------ --------------
Balance, September 30, 1997 .............................................. 95,813,240 $ 958,132 $922,970,205
============== ============ ==============
</TABLE>
- ------------
* The Trustees have voted to retire the shares purchased.
6. FEDERAL INCOME TAX STATUS
At March 31, 1997 the Trust had a net capital loss carryover of approximately
$4,715,000 which will be available to offset future capital gains to the
extent provided by regulations.
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
<PAGE>
TCW/DW TERM TRUST 2003
NOTES TO FINANCIAL STATEMENTS September 30, 1997 (unaudited) continued
becomes insolvent, the Trust's use of proceeds may be restricted pending a
determination by the other party, or its trustee or receiver, whether to
enforce the Trust's obligation to repurchase the securities.
Reverse repurchase agreements are collateralized by Trust securities with a
market value in excess of the Trust's obligation under the contract. At
September 30, 1997, securities valued at $430,296,181 were pledged as
collateral.
At September 30, 1997, the reverse repurchase agreements outstanding were
$411,966,000 with a weighted interest rate of 5.60% maturing within 63 days.
The maximum and average daily amounts outstanding during the period were
$418,356,000 and $404,103,590, respectively. The weighted average interest
rate during the period was 5.62%.
8. DIVIDENDS
The Trust declared the following dividends from net investment income:
<TABLE>
<CAPTION>
DECLARATION AMOUNT PER RECORD PAYABLE
DATE SHARE DATE DATE
- ------------------ ------------ ---------------- ----------------
<S> <C> <C> <C>
September23,1997 $0.0525 October3,1997 October17,1997
October 28, 1997 $0.0525 November7,1997 November21,1997
</TABLE>
9. LITIGATION
Four purported class actions have been filed in the Superior Court for the
State of California, County of Orange, against some of the Trust's Trustees
and officers, one of its underwriters, the lead representative of its
underwriters, the Adviser, the Manager and other defendants but not against
the Trust by certain shareholders of the Trust and other trusts for which the
defendants act in 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. On or about October
20, 1995, the plaintiffs filed an amended complaint consolidating these four
actions. The defendants thereafter filed answers and affirmative defenses to
the consolidated amended complaint. The defendants' answers deny all of the
material allegations of the plaintiffs' complaint. In 1996, the plaintiffs
voluntarily dismissed, without prejudice, their claims against two defendants
who were independent Trustees of the Trust. In March 1997, all of the
remaining defendants in the litigation filed motions for judgement on the
pleadings, seeking dismissal of all of the claims asserted against them. The
defendants' motions were fully briefed by all parties and were the subject of
a hearing before the Court on April 18, 1997. In July, 1997, the Court denied
the motion for judgement on the pleadings. 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 PERIOD
FOR THE SIX FOR THE YEAR ENDED MARCH 31, APRIL 29, 1993*
MONTHS ENDED ---------------------------- THROUGH
SEPTEMBER 30, 1997 1997 1996 1995 MARCH 31, 1994
- ----------------------------------------------------------------------------------------------------------------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period............... $ 8.97 $ 8.88 $ 7.96 $ 8.81 $ 9.40
------------------ -------- -------- ---------- ---------------
Net investment income.............................. 0.35 0.70 0.63 0.71 0.66
Net realized and unrealized gain (loss)............ 0.76 (0.10) 0.76 (0.88) (0.62)
------------------ -------- -------- ---------- ---------------
Total from investment operations................... 1.11 0.60 1.39 (0.17) 0.04
------------------ -------- -------- ---------- ---------------
Less dividends and distributions from:
Net investment income............................. (0.32) (0.59) (0.54) (0.62) (0.62)
Net realized gain ................................ -- -- -- (0.06) --
------------------ -------- -------- ---------- ---------------
Total dividends and distributions ................. (0.32) (0.59) (0.54) (0.68) (0.62)
------------------ -------- -------- ---------- ---------------
Anti-dilutive effect of acquiring treasury shares 0.03 0.08 0.07 -- --
------------------ -------- -------- ---------- ---------------
Less offering costs charged against capital ...... -- -- -- -- (0.01)
------------------ -------- -------- ---------- ---------------
Net asset value, end of period..................... $ 9.79 $ 8.97 $ 8.88 $ 7.96 $ 8.81
================== ======== ======== ========== ===============
Market value, end of period ....................... $8.875 $7.875 $ 7.25 $ 6.75 $8.875
================== ======== ======== ========== ===============
TOTAL INVESTMENT RETURN+ .......................... 17.00%(1) 17.22% 15.39% (17.00)% (4.33)%(1)
RATIOS TO AVERAGE NET ASSETS:
Operating expenses................................. 0.74%(2) 0.74% 0.77% 0.76% 0.73%(2)
Interest expense................................... 2.52%(2) 2.42% 2.36% 2.42% 1.06%(2)
Total expenses..................................... 3.26%(2) 3.16% 3.13% 3.18% 1.79%(2)
Net investment income.............................. 7.15%(2) 7.57% 6.98% 9.37% 7.61%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in millions ............ $938 $887 $934 $882 $976
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
brokerage commissions.
++ Less than 0.5%.
(1) Not annualized.
(2) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
TRUSTEES
John C. Argue
Richard M. DeMartini
Charles A. Fiumefreddo
John R. Haire
Dr. Manuel H. Johnson
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
Barry Fink
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 FSB
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 accountants and accordingly
they do not express an opinion thereon.
TCW/DW
TERM TRUST
2003
[GRAPHIC OMITTED]
SEMIANNUAL REPORT
SEPTEMBER 30, 1997
