<PAGE>
TCW/DW TERM TRUST 2003 Two World Trade Center,
Letter to the Shareholders New York, New York 10048
September 30, 2000
DEAR SHAREHOLDER:
For the 6 months ended September 30, 2000, the net asset value of TCW/DW Term
Trust 2003 increased from $9.91 to $10.14 per share. Based on this change, and
including reinvestment of dividends totaling approximately $0.30 per share, the
Trust's total rate of return for the period was 5.78 percent. Over the same
period, the market price of the Trust's shares on the New York Stock Exchange
(NYSE) increased from $8.875 to $9.375 per share. Based on this change, and
including reinvestment of dividends, the Trust's total return for the period
was 9.20 percent.
THE MARKET
The long-awaited evidence of slowing economic growth finally emerged in June,
boosting returns in most sectors of the U.S. bond market. The bond market
rallied for much of the summer on evidence of moderating economic growth and
benign inflation reports. By August 24, the 30-year benchmark U.S. Treasury
bond had fallen to 5.66 percent, its low to date for the year. But rising oil
prices and a heavy new-issue calendar in the corporate sector soon caused
yields in the intermediate to long end of the curve to move higher. By mid
September, the yield on the 30-year Treasury had risen to 5.95 percent.
However, declines in the stock market, along with a retreat in crude oil prices
in the final trading sessions of September, boosted Treasury returns and
brought yields on 10- and 30-year benchmark Treasuries back down to 5.80
percent and 5.88 percent, respectively, by quarter-end.
Changes in market expectations caused the yield curve to become less inverted
over the summer. The yield on the 10-year Treasury bond fell below the yield on
the 30-year for the first time since mid January. With further rate hikes by
the Fed considered unlikely, investors sold long-term Treasuries and reinvested
in higher-yielding securities at the short end of the curve and in the
corporate sector. Long-term Treasuries also fell out of favor amid a growing
consensus that the new administration will be less
<PAGE>
TCW/DW TERM TRUST 2003
Letter to the Shareholders September 30, 2000, continued
committed to eliminating Treasury debt than was the Clinton administration.
Diminished concern over a reduction in the supply of outstanding Treasury debt
caused spreads on GNMAs to cheapen relative to FNMAs and FHLMCs, as the full
faith and credit guarantee lost importance in the marketplace. Mortgage spreads
to Treasuries tightened, resulting in substantial performance gains for the
mortgage sector relative to other fixed-income areas.
THE PORTFOLIO
As of September 30, 2000, approximately 71 percent of the Trust's portfolio was
invested in mortgage pass-through securities issued by U.S. government agencies
or AAA-rated collateralized mortgage obligations (CMOs) with durations, average
lives or expected maturity dates that corresponded closely to the termination
date of the Trust. An additional 17 percent was 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 to that of a specified
index. Approximately 12 percent was invested in AAA-rated municipal bonds and
short-term investments. At September 30, 2000, the Trust's degree of leverage
(the ratio of debt to assets) was 30.1 percent of total portfolio assets.
LOOKING AHEAD
Oil prices have recently declined because of a release from the Strategic
Petroleum Reserve; however, the outlook remains very precarious, due to recent
turmoil in the Middle East. TCW Investment Management Company (TCW), the Fund's
adviser, believes that any disruption in oil could adversely affect Europe far
more than the U.S., further strengthening the dollar vis-a-vis the yen and the
euro. Furthermore, the markets have become increasingly concerned about
earnings prospects. With the Fed well aware of these potential risks, the
possibility of a Fed rate hike seems remote. TCW believes that the outlook for
mortgages is very favorable. According to TCW, this asset class has far less
exposure to economic slowdowns than do the credit sectors due to U.S.
government and agency guarantees. Other variables that affect mortgages on both
a fundamental and a technical basis are highly positive. First, supply is
decreasing as a result of a slowing housing market and an increase in consumer
preference for adjustable as opposed to fixed-rate mortgage loans.
Interest-rate volatility has also declined, because the Fed appears to be on
hold for the time being. Furthermore, prepayments are relatively modest now
and, more importantly, the mortgage index is trading at a discount to par,
which means that every prepayment leads to an increase rather than a decrease
in return. TCW anticipates that more money will flow into mortgage-backed
securities this quarter as managers attempt to minimize credit risk and avoid
the low Treasury yields. These factors all promote further tightening and
performance gains.
2
<PAGE>
TCW/DW TERM TRUST 2003
Letter to the Shareholders September 30, 2000, continued
The Trust's net asset value and NYSE market values will continue to fluctuate
in response to changes in market conditions and interest rates. As stated in
the Trust's original prospectus, the Trust's income and dividends are expected
to decline over the term of the Trust and as the Trust approaches its
termination date.
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
under review, the Trust purchased 2,337,960 shares of common stock at a
weighted average market discount of 7.79 percent.
We appreciate your support of TCW/DW Term Trust 2003 and look forward to
continuing to serve your investment needs.
Very truly yours,
/s/ CHARLES A. FIUMEFREDDO /s/ MITCHELL M. MERIN
-------------------------- ---------------------
CHARLES A. FIUMEFREDDO MITCHELL M. MERIN
Chairman of the Board President
3
<PAGE>
TCW/DW TERM TRUST 2003
Portfolio of Investments September 30, 2000 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
----------- ------------- ---------- -------------
<S> <C> <C> <C> <C>
COLLATERALIZED MORTGAGE OBLIGATIONS (117.5%)
U.S. GOVERNMENT AGENCIES (82.0%)
$ 2,802 Federal Home Loan Mortgage Corp. 1409 S (PAC) .................. 9.66 +% 11/15/07 $ 2,732,342
70,000 Federal Home Loan Mortgage Corp. 1465 G (PAC)++ ................ 7.00 12/15/07 70,050,449
19,608 Federal Home Loan Mortgage Corp. 1507 L++ ...................... 7.00 10/15/22 18,869,312
9,700 Federal Home Loan Mortgage Corp. 1522 K++ ...................... 6.50 12/15/22 9,259,729
860 Federal Home Loan Mortgage Corp. 1524 SA ....................... 8.50 + 05/15/08 866,147
8,281 Federal Home Loan Mortgage Corp. 1535 B++ ...................... 7.00 01/15/23 7,916,320
3,814 Federal Home Loan Mortgage Corp. 1539 SA ....................... 5.407+ 06/15/08 3,567,682
41,257 Federal Home Loan Mortgage Corp. 1542 N (PAC)++ ................ 7.00 01/15/22 40,819,835
38,223 Federal Home Loan Mortgage Corp. 1543 UG (PAC)++ ............... 7.00 01/15/23 37,399,868
17,005 Federal Home Loan Mortgage Corp. 1544 M ........................ 7.176+ 07/15/08 14,863,168
2,213 Federal Home Loan Mortgage Corp. 1556 SA ....................... 7.607+ 08/15/13 2,139,473
12,360 Federal Home Loan Mortgage Corp. 1563 SA ....................... 6.703+ 08/15/08 11,726,550
5,123 Federal Home Loan Mortgage Corp. 1565 IB (TAC) ................. 3.55 + 08/15/08 4,978,435
8,894 Federal Home Loan Mortgage Corp. 1576 SA ....................... 3.748+ 09/15/08 7,643,241
32,363 Federal Home Loan Mortgage Corp. 1602 PW (PAC) ................. 6.50 12/15/21 31,999,531
3,539 Federal Home Loan Mortgage Corp. 1604 S ........................ 2.534+ 11/15/08 3,393,406
2,572 Federal Home Loan Mortgage Corp. 1606 KD (PAC) ................. 3.232+ 11/15/08 2,505,846
10,903 Federal Home Loan Mortgage Corp. 1970 PC (PAC) ................. 6.75 11/15/21 10,845,107
38,369 Federal Home Loan Mortgage Corp. G 15 PA++ ..................... 7.00 12/25/21 37,093,120
6,710 Federal National Mortgage Assoc. 1993-101 SA (TAC) ............. 9.227+ 06/25/08 6,735,103
6,394 Federal National Mortgage Assoc. 1993-101 SB (TAC) ............. 7.98 + 06/25/08 6,602,287
4,126 Federal National Mortgage Assoc. 1993-114 SC ................... 9.00 + 07/25/08 4,000,803
32,200 Federal National Mortgage Assoc. 1993-121 B++ .................. 7.00 03/25/23 30,959,105
19,250 Federal National Mortgage Assoc. 1993-135 S .................... 4.178+ 07/25/08 16,398,498
3,168 Federal National Mortgage Assoc. 1993-135 SB ................... 4.364+ 06/25/08 2,717,459
26,400 Federal National Mortgage Assoc. 1993-141 B .................... 7.00 04/25/23 25,878,075
1,280 Federal National Mortgage Assoc. 1993-141 SA ................... 10.00 + 03/25/23 1,297,105
31,579 Federal National Mortgage Assoc. 1993-165 SM (TAC) ............. 4.712+ 05/25/23 30,497,284
4,792 Federal National Mortgage Assoc. 1993-173 S .................... 3.225+ 09/25/08 4,390,049
71,000 Federal National Mortgage Assoc. 1993-21 H (PAC)++ ............. 7.00 03/25/22 70,467,173
12,210 Federal National Mortgage Assoc. 1993-20 L ..................... 7.00 12/25/22 11,600,087
26,250 Federal National Mortgage Assoc. 1993-206 N++ .................. 6.50 11/25/23 25,328,347
2,948 Federal National Mortgage Assoc. 1993-233 J .................... 6.00 06/25/08 2,895,713
15,398 Federal National Mortgage Assoc. 1993-41C (PAC)++ .............. 7.00 03/25/21 15,222,798
6,943 Federal National Mortgage Assoc. 1993-63 SD (TAC) .............. 6.953+ 05/25/08 6,300,389
4,854 Federal National Mortgage Assoc. 1993-65 SC .................... 7.561+ 06/25/12 4,607,087
15,177 Federal National Mortgage Assoc. 1993-72 SA .................... 5.173+ 05/25/08 13,507,438
12,204 Federal National Mortgage Assoc. 1993-72 S ..................... 8.75 + 05/25/08 12,043,862
3,725 Federal National Mortgage Assoc. 1993-86 SD .................... 8.523+ 05/25/08 3,673,845
9,019 Federal National Mortgage Assoc. 1993-93 SA .................... 8.645+ 05/25/08 9,098,168
9,087 Federal National Mortgage Assoc. 1993-95 SE .................... 8.407+ 06/25/08 9,378,950
10,000 Federal National Mortgage Assoc. 1993-98 N ..................... 7.00 06/25/23 9,731,200
</TABLE>
See Notes to Financial Statements
4
<PAGE>
TCW/DW TERM TRUST 2003
Portfolio of Investments September 30, 2000 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
----------- ------------- ---------- --------------
<S> <C> <C> <C> <C>
$ 9,334 Federal National Mortgage Assoc. 1993-196 SA .............................. 5.945+% 10/25/08 $ 8,666,379
28,799 Federal National Mortgage Assoc. 1993-26 A ................................ 7.00 07/25/23 27,304,445
------------
TOTAL U.S. GOVERNMENT AGENCIES (Cost $691,153,770) ............................................... 677,971,210
------------
PRIVATE ISSUES (35.5%)
7,165 Bear Stearns Mortgage Securities Inc. 1993-6 A7 (PAC) ..................... 7.10 06/25/24 7,110,255
14,026 Bear Stearns Mortgage Securities Inc. 1993-8 A7 (PAC) ..................... 7.50 08/25/24 14,165,416
54,416 Bear Stearns Mortgage Securities Inc. 1993-8 A11 (TAC) .................... 7.50 08/25/24 53,045,087
25,800 Chase Mortgage Finance Corp. 1993-G A10 (PAC) ............................. 7.00 05/25/24 25,485,498
4,718 First Boston Mortgage Securities Corp. 1993-5 A15 ......................... 7.30 03/25/09 4,725,041
36,683 General Electric Capital Mortgage Services, Inc. 1994-1 A8 ................ 6.50 01/25/24 34,514,114
14,252 Prudential Home Mortgage Securities 1993-23 A12 (PAC) ..................... 6.50 07/25/08 13,817,364
22,589 Prudential Home Mortgage Securities 1993-35 A12 ........................... 6.75 09/25/08 21,963,105
18,000 Prudential Home Mortgage Securities 1993-60 A3 (PAC) ...................... 6.75 12/25/23 17,409,440
10,000 Resolution Funding Mortgage Securities I 1997-S 12 A12 (PAC) .............. 6.75 08/25/27 9,769,073
36,408 Resolution Funding Mortgage Securities I 1993-S 40 A8 (TAC) ............... 6.75 11/25/23 35,303,825
5,315 Ryland Mortgage Securities Corp. 1993-3 7 (PAC) ........................... 6.712 08/25/08 4,997,798
26,385 Salomon Brothers Mortgage Securities VII Inc. 1993-3 A7C .................. 7.20 08/25/23 26,351,903
25,429 Salomon Brothers Mortgage Securities VII Inc. 1993-5 A4 ................... 7.293* 10/25/18 25,309,468
------------
TOTAL PRIVATE ISSUES (Cost $298,595,685) ......................................................... 293,967,387
------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost $989,749,455) .................................... 971,938,597
------------
U.S. GOVERNMENT AGENCY MORTGAGE PASS-THROUGH SECURITIES (7.6%)
5,499 Federal Home Loan Mortgage Corp. PC Gold++ ................................ 6.00 06/01/08 5,346,695
1,329 Federal National Mortgage Assoc. .......................................... 5.50 02/01/09 1,277,878
1,551 Federal National Mortgage Assoc. .......................................... 7.00 08/01/08 1,555,029
8,829 Federal National Mortgage Assoc. ARM ...................................... 6.901 07/01/30 8,806,020
19,885 Federal National Mortgage Assoc. ARM ...................................... 7.002 08/01/30 19,798,232
9,208 Federal National Mortgage Assoc. ARM ...................................... 7.41 07/01/30 9,277,241
16,406 Federal National Mortgage Assoc. ARM ...................................... 7.51 07/01/30 16,394,876
------------
TOTAL U.S. GOVERNMENT AGENCY MORTGAGE PASS-THROUGH SECURITIES
(Cost $62,424,583) ............................................................................... 62,455,971
------------
TAX-EXEMPT MUNICIPAL BONDS (16.8%)
Educational Facilities Revenue (4.0%)
5,000 Maricopa County Unified School District # 41, Arizona, Gilbert Refg (FGIC) 0.00 01/01/03 4,505,550
6,000 Maricopa County Unified School District # 28, Arizona, Kyrene Elementary
Refg Ser 1993 B (FGIC) ................................................... 0.00 07/01/04 5,033,880
11,445 Houston Independent School District, Texas, Refg .......................... 0.00 08/15/04 9,493,284
Spring Independent School District, Texas,
8,205 Refg Ser 1993 ............................................................. 0.00 02/15/03 7,326,491
8,100 Refg Ser 1993 ............................................................. 0.00 02/15/04 6,882,651
------------
33,241,856
------------
</TABLE>
See Notes to Financial Statements
5
<PAGE>
TCW/DW TERM TRUST 2003
Portfolio of Investments September 30, 2000 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
----------- ---------- ---------- ---------------
<S> <C> <C> <C> <C>
Electric Revenue (4.6%)
$ 12,840 Austin, Texas, Combined Ser A (MBIA) ......................... 0.00 % 11/15/02 $ 11,617,651
San Antonio, Texas,
12,700 Electric & Gas Refg Ser A (Ambac) ........................... 0.00 02/01/03 11,363,833
17,500 Electric & Gas Refg Ser A (Ambac) ........................... 0.00 02/01/04 14,902,825
-------------
37,884,309
-------------
General Obligation (5.6%)
19,650 North Slope Boro, Alaska, Ser 1992 A (MBIA) .................. 0.00 06/30/02 18,088,611
5,000 Scottsdale, Arizona, Refg (Secondary MBIA) ................... 0.00 07/01/04 4,194,900
Port of Oakland, California,
3,000 Refg Ser 1993 F (MBIA) ...................................... 0.00 11/01/03 2,619,450
3,500 Refg Ser 1993 F (MBIA) ...................................... 0.00 11/01/04 2,917,705
6,500 New Orleans, Louisiana, Refg (Ambac) ......................... 0.00 09/01/04 5,388,305
16,000 Pennsylvania, Second Ser 1992 (Secondary MBIA) ............... 0.00 07/01/04 13,354,880
-------------
46,563,851
-------------
Hospital Revenue (1.0%)
10,000 California Statewide Communities Development Authority,
UniHealth Ser A (Ambac) ..................................... 0.00 10/01/04 8,387,000
-------------
Other Revenue (0.6%)
5,460 Rosemont, Illinois, Tax Increment Ser C-3 (FGIC) ............. 0.00 12/01/03 4,695,818
-------------
Water & Sewer Revenue (1.0%)
10,000 Houston Texas, Water & Sewer Jr Lien Ser C (Ambac) ........... 0.00 12/01/03 8,597,700
-------------
TOTAL TAX-EXEMPT MUNICIPAL BONDS (Cost $136,169,073) ............................... 139,370,534
-------------
SHORT-TERM INVESTMENT (0.5%)
REPURCHASE AGREEMENT
3,766 The Bank of New York (dated 09/29/00; proceeds $3,767,950) (a)
(Cost $3,765,989) ........................................... 6.25 10/02/00 3,765,989
-------------
TOTAL INVESTMENTS (Cost $1,192,109,100) (b) ................................... 142.4% 1,177,531,091
LIABILITIES IN EXCESS OF OTHER ASSETS ......................................... (42.4) (350,541,741)
----- -------------
NET ASSETS .................................................................... 100.0% $ 826,989,350
===== =============
</TABLE>
See Notes to Financial Statements
6
<PAGE>
TCW/DW TERM TRUST 2003
Portfolio of Investments September 30, 2000 (unaudited) continued
---------------
ARM Adjustable Rate Mortgage.
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, 2000.
(a) Collateralized by $3,751,818 Federal Home Loan Mortgage Corp.
6.875% due 01/15/05 valued at $3,841,312.
(b) The aggregate cost for federal income tax purposes approximates the
aggregate cost for book purposes. The aggregate gross unrealized
appreciation is $5,901,432 and the aggregate gross unrealized
depreciation is $20,479,441, resulting in net unrealized depreciation of
$14,578,009.
Bond Insurance:
--------------
Ambac Ambac Assurance Corporation.
FGIC Financial Guaranty Insurance Company.
MBIA Municipal Bond Investors Assurance Corporation.
See Notes to Financial Statements
7
<PAGE>
TCW/DW TERM TRUST 2003
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
September 30, 2000 (unaudited)
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Investments in securities, at value
(cost $1,192,109,100) .................................. $1,177,531,091
Interest receivable ...................................... 5,854,982
Prepaid expenses ......................................... 19,841
--------------
TOTAL ASSETS .......................................... 1,183,405,914
--------------
LIABILITIES:
Reverse repurchase agreements ............................ 354,173,000
Payable for:
Interest .............................................. 1,187,343
Management fee ........................................ 318,607
Shares of beneficial interest repurchased ............. 291,599
Investment advisory fee ............................... 212,405
Accrued expenses and other payables ...................... 233,610
Contingencies (Note 8) ................................... -
--------------
TOTAL LIABILITIES ..................................... 356,416,564
--------------
NET ASSETS ............................................ $ 826,989,350
==============
COMPOSITION OF NET ASSETS:
Paid-in-capital .......................................... $ 792,298,987
Net unrealized depreciation .............................. (14,578,009)
Accumulated undistributed net investment income .......... 54,152,760
Accumulated net realized loss ............................ (4,884,388)
--------------
NET ASSETS ............................................ $ 826,989,350
==============
NET ASSET VALUE PER SHARE,
81,557,980 shares outstanding
(unlimited shares authorized of $.01 par value)......... $10.14
==============
</TABLE>
See Notes to Financial Statements
8
<PAGE>
TCW/DW TERM TRUST 2003
FINANCIAL STATEMENTS, continued
STATEMENT OF OPERATIONS
For the six months ended September 30, 2000 (unaudited)
<TABLE>
<CAPTION>
NET INVESTMENT INCOME:
<S> <C>
INTEREST INCOME ............................... $40,812,976
-----------
EXPENSES
Management fee ................................ 1,605,880
Investment advisory fee ....................... 1,070,587
Transfer agent fees and expenses .............. 93,709
Shareholder reports and notices ............... 63,981
Insurance expenses ............................ 46,239
Professional fees ............................. 39,889
Registration fees ............................. 36,154
Trustees' fees and expenses ................... 5,836
Custodian fees ................................ 2,900
Other ......................................... 16,675
-----------
TOTAL OPERATING EXPENSES ................... 2,981,850
Interest expense .............................. 11,869,022
-----------
TOTAL EXPENSES ............................. 14,850,872
NET INVESTMENT INCOME ...................... 25,962,104
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized loss ............................. (1,834,801)
Net change in unrealized depreciation ......... 18,078,871
-----------
NET GAIN ................................... 16,244,070
-----------
NET INCREASE .................................. $42,206,174
===========
</TABLE>
See Notes to Financial Statements
9
<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, 2000 MARCH 31, 2000
-------------------- ---------------
<S> <C> <C>
(unaudited)
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income ............................................... $ 25,962,104 $ 63,024,112
Net realized gain (loss) ............................................ (1,834,801) 214,788
Net change in unrealized appreciation/depreciation .................. 18,078,871 (49,835,038)
------------- ------------
NET INCREASE ..................................................... 42,206,174 13,403,862
Dividends from net investment income ................................ (25,223,924) (55,079,143)
Decrease from transactions in shares of beneficial interest ......... (21,310,207) (32,786,309)
------------- ------------
NET DECREASE ..................................................... (4,327,957) (74,461,590)
NET ASSETS:
Beginning of period ................................................. 831,317,307 905,778,897
------------- ------------
END OF PERIOD
(Including undistributed net investment income of
$54,152,760 and $53,414,580, respectively) ....................... $ 826,989,350 $831,317,307
============= ============
</TABLE>
See Notes to Financial Statements
10
<PAGE>
TCW/DW TERM TRUST 2003
FINANCIAL STATEMENTS, continued
STATEMENT OF CASH FLOWS
For the six months ended September 30, 2000 (unaudited)
<TABLE>
<CAPTION>
INCREASE (DECREASE) IN CASH:
<S> <C>
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:
Net investment income .................................................. $ 25,962,104
Adjustments to reconcile net investment income to net cash provided by
operating activities:
Decrease in receivables and other assets related to operations ......... 316,251
Increase in payables related to operations ............................. 303,137
Net amortization of discount/premium ................................... (3,746,141)
------------
NET CASH PROVIDED BY OPERATING ACTIVITIES ........................... 22,835,351
------------
CASH FLOWS PROVIDED BY INVESTING ACTIVITIES:
Purchases of investments ............................................... (54,563,940)
Principal sales/prepayments of investments ............................. 91,970,631
Net sales of short-term investments .................................... 609,353
------------
NET CASH PROVIDED BY INVESTING ACTIVITIES ........................... 38,016,044
------------
CASH FLOWS USED FOR FINANCING ACTIVITIES:
Net payments for shares of beneficial interest repurchased ............. (21,222,471)
Net payments for maturities of reverse repurchase agreements ........... (14,405,000)
Dividends to shareholders from net investment income ................... (25,223,924)
------------
NET CASH USED FOR FINANCING ACTIVITIES .............................. (60,851,395)
------------
NET INCREASE (DECREASE) IN CASH ........................................ -
------------
CASH BALANCE AT BEGINNING OF PERIOD .................................... -
------------
CASH BALANCE AT END OF PERIOD .......................................... -
============
Cash paid during the period for interest ............................... $ 10,869,981
============
</TABLE>
See Notes to Financial Statements
11
<PAGE>
TCW/DW TERM TRUST 2003
Notes to Financial Statements September 30, 2000 (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 Investment Management Company (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.
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.
12
<PAGE>
TCW/DW TERM TRUST 2003
Notes to Financial Statements September 30, 2000 (unaudited) continued
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 tax purposes are reported as distributions of paid-in-capital.
2. MANAGEMENT/INVESTMENT ADVISORY AGREEMENTS
Pursuant to a Management Agreement, the Trust pays Morgan Stanley Dean Witter
Services Company Inc. (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.
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.
3. 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, 2000 were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES/PREPAYMENTS
------------- ------------------
<S> <C> <C>
U.S. Government Agencies ................................... $54,563,940 $85,917,577
Private Issue Collateralized Mortgage Obligations .......... - 6,053,054
</TABLE>
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Manager, is the
Trust's transfer agent. At September 30, 2000, the Trust had transfer agent
fees and expenses payable of approximately $1,100.
13
<PAGE>
TCW/DW TERM TRUST 2003
Notes to Financial Statements September 30, 2000 (unaudited) continued
4. 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, 1999 ................................................. 87,467,540 $874,675 $845,520,828
Treasury shares purchased and retired (weighted average discount 7.58%)* (3,571,600) (35,716) (32,750,593)
---------- -------- -------------
Balance, March 31, 2000 ................................................. 83,895,940 838,959 $812,770,235
Treasury shares purchased and retired (weighted average discount 7.79%)* (2,337,960) (23,380) (21,286,827)
---------- -------- -------------
Balance, September 30, 2000 ............................................. 81,557,980 $815,579 $791,483,408
========== ======== ============
</TABLE>
------------
* The Trustees have voted to retire the shares purchased.
5. FEDERAL INCOME TAX STATUS
At March 31, 2000 the Trust had a net capital loss carryover of approximately
$3,050,000 of which $2,754,000 will be available through March 31, 2003 and
$296,000 will be available through the termination date of the Trust to offset
future capital gains to the extent provided by regulations. To the extent that
this carryover loss is used to offset future capital gains, it is probable that
the gains so offset will not be distributed to shareholders.
6. REVERSE REPURCHASE AND DOLLAR ROLL AGREEMENTS
Reverse repurchase and dollar roll agreements involve the risk that the market
value of the securities the Trust is obligated to repurchase under the
agreement may decline below the repurchase price. In the event the buyer of
securities under a reverse repurchase or dollar roll agreement files for
bankruptcy or becomes insolvent, the Trust's use of proceeds may be restricted
pending a determination by the other party, or its trustee or receiver, whether
to enforce the Trust's obligation to repurchase the securities.
Reverse repurchase agreements are collateralized by Trust securities with a
market value in excess of the Trust's obligation under the contract. At
September 30, 2000, securities valued at $368,732,750, were pledged as
collateral.
At September 30, 2000, the reverse repurchase agreements outstanding were
$354,173,000 with a weighted interest rate of 6.60% maturing within 37 days.
The maximum and average daily amounts outstanding during the period were
$374,044,000, and $361,665,721, respectively. The weighted average interest
rate during the period was 6.46%.
14
<PAGE>
TCW/DW TERM TRUST 2003
Notes to Financial Statements September 30, 2000 (unaudited) continued
7. 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>
September 26, 2000 $ 0.047 October 6, 2000 October 20, 2000
October 24, 2000 $ 0.047 November 3, 2000 November 17, 2000
</TABLE>
8. LITIGATION
Four purported class actions have been filed in the Superior Court for the
State of California, County of Orange, against some of the Trust's Trustees and
officers, one of its underwriters, the lead representative of its underwriters,
the 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 litigation filed
motions for judgment 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 judgment on the pleadings. In
August, 1997, plaintiffs filed a motion for class certification. In their
motion, the plaintiffs requested certification of a "nationwide" class of Term
Trust purchasers. On June 1, 1998, the Court granted in part and denied in part
the plaintiff's motion for class certification. The Court ruled that
plaintiff's motion was "granted as to [a California] statewide class," but was
"denied as to a nationwide class." On October 13, 1998, three separate class
actions alleging similar claims on behalf of the residents of the states of
Florida, New Jersey and New York were filed in the state courts of those
states. The defendants removed the Florida action to federal court and the
plaintiff's motion to remand the action to the state court was denied. Motions
to dismiss were filed by the defendants in the Florida action on August 30,
1999, in the New Jersey action on July 26, 1999 and in the New York action on
September 10, 1999. The New Jersey action was dismissed by the court with
prejudice and no appeal was filed. The motion to dismiss the Florida action was
denied January 27, 2000 and the litigation remains
15
<PAGE>
TCW/DW TERM TRUST 2003
Notes to Financial Statements September 30, 2000 (unaudited) continued
pending. The Supreme Court of the State of New York dismissed the New York
action with prejudice on April 25, 2000 and no appeal was filed. 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.
16
<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 FOR THE YEAR ENDED MARCH 31,
MONTHS ENDED ------------------------------------------------------------
SEPTEMBER 30, 2000* 2000* 1999 1998 1997 1996
------------------- ----------- ----------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
(unaudited)
SELECTED PER SHARE DATA:
Net asset value, beginning of period .............. $ 9.91 $ 10.36 $ 10.11 $ 8.97 $ 8.88 $ 7.96
------ ------- ------- ------- ------- -------
Income (loss) from investment operations:
Net investment income ............................ 0.31 0.73 0.74 0.70 0.70 0.63
Net realized and unrealized gain (loss) .......... 0.20 (0.57) 0.09 1.01 (0.10) 0.76
------ -------- ------- ------- -------- -------
Total income from investment operations ........... 0.51 0.16 0.83 1.71 0.60 1.39
------ -------- ------- ------- -------- -------
Less dividends from net investment income ......... (0.30) (0.64) (0.63) (0.63) (0.59) (0.54)
------- -------- -------- -------- -------- --------
Anti-dilutive effect of acquiring treasury shares.. 0.02 0.03 0.05 0.06 0.08 0.07
------- -------- -------- -------- -------- --------
Net asset value, end of period .................... $10.14 $ 9.91 $ 10.36 $ 10.11 $ 8.97 $ 8.88
====== ======= ======= ======= ======= =======
Market value, end of period ....................... $ 9.375 $ 8.875 $ 9.375 $ 9.063 $ 7.875 $ 7.25
======= ======= ======= ======= ======= =======
TOTAL RETURN+ ..................................... 9.20%(1) 1.46% 10.56% 23.65% 17.22% 15.39%
RATIOS TO AVERAGE NET ASSETS:
Operating expenses ................................ 0.73%(2) 0.73% 0.74% 0.74% 0.74% 0.77%
Interest expense .................................. 2.88%(2) 2.38% 2.40% 2.54% 2.42% 2.36%
Total expenses .................................... 3.61%(2) 3.11% 3.14% 3.28% 3.16% 3.13%
Net investment income ............................. 6.31%(2) 7.31% 6.93% 6.97% 7.57% 6.98%
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ........... $826,989 $831,317 $905,779 $934,981 $886,618 $933,698
Portfolio turnover rate ........................... 5%(1) 6% - 2% - 1%
</TABLE>
-------------
* The per share amounts were computed using an average number of shares
outstanding during the period.
+ Total return is based upon the current market value on the last 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
return does not reflect brokerage commissions.
(1) Not annualized.
(2) Annualized.
See Notes to Financial Statements
17
<PAGE>
TCW/DW TERM TRUST 2003
Change in Independent Accountants
On July 1, 2000 PricewaterhouseCoopers LLP resigned as independent accountants
of the Trust.
The reports of PricewaterhouseCoopers LLP on the financial statements of the
Trust for the past two fiscal years contained no adverse opinion or disclaimer
of opinion and were not qualified or modified as to uncertainty, audit scope or
accounting principle.
In connection with its audits for the two most recent fiscal years and through
July 1, 2000, there have been no disagreements with PricewaterhouseCoopers LLP
on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreements if not resolved
to the satisfaction of PricewaterhouseCoopers LLP would have caused them to
make reference thereto in their report on the financial statements for such
years.
The Trust, with the approval of its Board of Trustees and its Audit Committee,
engaged Deloitte & Touche LLP as its new independent accountants as of July 1,
2000.
18
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<PAGE>
TRUSTEES
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
Wayne E. Hedien
James F. Higgins
Dr. Manuel H. Johnson
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Mitchell M. Merin
President
Barry Fink
Vice President, Secretary and General Counsel
Phillip A. Barach
Vice President
Jeffrey E. Gundlach
Vice President
Frederick H. Horton
Vice President
Thomas F. Caloia
Treasurer
TRANSFER AGENT
Morgan Stanley Dean Witter Trust FSB
Harborside Financial Center - Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
Deloitte & Touche LLP
Two World Financial Center
New York, New York 10281
MANAGER
Morgan Stanley Dean Witter Services Company Inc.
Two World Trade Center
New York, New York 10048
ADVISER
TCW Investment Management Company
865 South Figueroa Street, Suite 8100
Los Angeles, CA 90017
The financial statements included herein have been taken from the records of the
Trust without examination by the independent accountants and accordingly they do
not express an opinion thereon.
TCW/DW
TERM TRUST
2003
[GRAPHIC OMITTED]
SEMIANNUAL REPORT
September 30, 2000
