-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QJ9Wxp9s6jqSWkiAWh/Z/uj5wFleofODamarBFkjeCLkWciHHPExYVvPOV4ME7as NZVctOz1w7CBkAO20H4i5Q== 0000950136-03-001287.txt : 20030516 0000950136-03-001287.hdr.sgml : 20030516 20030516133314 ACCESSION NUMBER: 0000950136-03-001287 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20030331 FILED AS OF DATE: 20030516 EFFECTIVENESS DATE: 20030516 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TCW DW TERM TRUST 2003 CENTRAL INDEX KEY: 0000896346 IRS NUMBER: 000000000 STATE OF INCORPORATION: MA FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-07448 FILM NUMBER: 03707980 BUSINESS ADDRESS: STREET 1: C/O MORGAN STANLEY TRUST STREET 2: HARBORSIDE FINANCIAL CENTER, PLAZA TWO CITY: JERSEY CITY STATE: NJ ZIP: 07311 BUSINESS PHONE: (212) 869-6397 MAIL ADDRESS: STREET 1: C/O MORGAN STANLEY TRUST STREET 2: HARBORSIDE FINANCIAL CENTER, PLAZA TWO CITY: JERSEY CITY STATE: NJ ZIP: 07311 N-30D 1 file001.txt ANNUAL REPORT TCW/DW Term Trust 2003 LETTER TO THE SHAREHOLDERS o MARCH 31, 2003 Dear Shareholder: For the 12 months ended March 31, 2003, the net asset value of TCW/DW Term Trust 2003 decreased from $11.01 to $10.87 per share. Based on this change, and including reinvestment of dividends totaling $0.564 per share, the Trust's total return for the period was 4.09 percent. Over the same period, the market price of the Trust's shares on the New York Stock Exchange (NYSE) increased from $10.65 to $10.73. Based on this change and including reinvestment of dividends, the Trust's total return for the period was 6.13 percent. The Market Over the past 12 months, corporate-accounting scandals, terrorism and political tensions in the Middle East and Asia have led many investors to seek the relative safety of the U.S. Treasury market. War events and related uncertainties have dominated the financial markets since the beginning of 2003. The Treasury market rallied as gold rose to multi-year highs and the U.S. dollar fell to multi-year lows. The Federal Reserve has kept the federal funds rate at 1.25 percent since early November, when they implemented a 50-basis-point-rate cut to boost economic growth. The U.S. economy appears to have entered the second Gulf War on a soft note with consumer confidence at a nine-year low due to war concerns, rising energy costs and a stagnant labor market. Housing starts have fallen along with new and existing home sales, although most of the activity in the housing sector remains at historically high levels. Some investors are calling for an interest-rate cut in the near term, but the persistence of geopolitical uncertainties is expected to keep the Fed on hold. The yield on the 10-year Treasury bond fell to a 44-year low of 3.57 percent in early March, but rose rapidly as the stock market recovered and then rallied again to close at 3.80 percent on March 31, 2003, 160 basis points below its yield one year earlier. Yields on many other Treasuries posted significant declines during the period under review as well, including the 2-year note, which fell 224 basis points to close at 1.48 percent. Mortgage-backed securities underperformed relative to longer duration fixed-income sectors during the interest-rate rallies in the second half of 2002 and in the first quarter of 2003 due to duration shortening. The duration of the Lehman Mortgage Index fell to a record low of 0.81 years in February 2003. The Portfolio As of March 31, 2003, approximately 14 percent of the Trust was invested in mortgage pass-through securities issued by agencies of the U.S. government or AAA-rated collateralized mortgage obligations (CMOs) with durations, average lives or expected maturity dates that correspond closely to the termination date of the Trust. An additional 9 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 to that of a specified index. Approximately 51 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 TCW/DW Term Trust 2003 LETTER TO THE SHAREHOLDERS o MARCH 31, 2003 continued its objective of returning the original $10 per share offering price to shareholders at maturity. The remaining 26 percent of the Trust was invested in U.S. government agencies obligations. At March 31, 2003, there was no leverage in the Trust. Looking Ahead The rate on 30-year fixed-rate mortgages fell to an all-time low of 5.61 percent in the week ended March 7, 2003. The decline in mortgage rates caused consumers to refinance their mortgage loans in record numbers. Demand for mortgage products has been strong and is expected to hold steady. Persistent weakness in the economy coupled with the war in Iraq has also supported the flight-to-quality bid for U.S. Treasuries and mortgage products. We continue to minimize the prepayment rate risk inherent in mortgage-backed securities by focusing on certain collateral types and security structures. 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 this period the Trust did not purchase shares of common stock. Plan of Liquidation TCW/DW Term Trust 2003 is scheduled to terminate on or about December 31, 2003. In light of the expected termination of the Trust, the Board of Trustees, on January 28, 2003, adopted a plan of liquidation, which took effect on April 1, 2003. Under this plan, any regular, monthly distributions declared to shareholders after April 1, 2003, (i.e., starting with the distribution declared on April 29, 2003 and paid on May 23, 2003) and up to the Trust's termination date will be deemed to be liquidation distributions. 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 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 /s/ Mitchell M. Merin - -------------------------- ---------------------- Charles A. Fiumefreddo Mitchell M. Merin Chairman of the Board President and CEO 2 TCW/DW Term Trust 2003 RESULTS OF ANNUAL MEETING o MARCH 31, 2003 On October 23, 2002, an annual meeting of the Trust's shareholders was held for the purpose of electing Trustees, the results of which were as follows: (1) Election of Trustees:
Michael Bozic For .................. 63,116,303 Withheld ............. 862,553 Charles A. Fiumefreddo For .................. 61,284,863 Withheld ............. 2,693,993 James F. Higgins For .................. 61,313,098 Withheld ............. 2,665,758
The following Trustees were not standing for reelection at this meeting: Edwin J. Garn, Wayne E. Hedien, Dr. Manuel H. Johnson, Michael E. Nugent and Philip J. Purcell. 3 TCW/DW Term Trust 2003 PORTFOLIO OF INVESTMENTS o MARCH 31, 2003
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE - ----------- ------------- ---------- --------------- Collateralized Mortgage Obligations (22.1%) U.S. Government Agencies (16.6%) $ 2,457 Federal Home Loan Mortgage Corp. 1409 S (PAC) ....................... 24.36+% 11/15/07 $ 3,606,357 26,984 Federal Home Loan Mortgage Corp. 1465 G (PAC) ....................... 7.00 12/15/07 27,986,229 9,213 Federal Home Loan Mortgage Corp. 1544 M ............................. 18.096+ 07/15/08 10,936,414 4,627 Federal Home Loan Mortgage Corp. 1563 SA ............................ 13.524+ 08/15/08 4,849,576 1,945 Federal Home Loan Mortgage Corp. 1576 SA ............................ 11.39 + 09/15/08 1,990,624 27,224 Federal Home Loan Mortgage Corp. 1602 PW (PAC) ...................... 6.50 12/15/21 28,235,551 2,638 Federal National Mortgage Assoc. 1993-101 SA (TAC) .................. 9.227+ 06/25/08 2,736,771 2,514 Federal National Mortgage Assoc. 1993-101 SB (TAC) .................. 23.034+ 06/25/08 2,774,066 221 Federal National Mortgage Assoc. 1993-114 SC ........................ 9.00 + 07/25/08 220,019 15,400 Federal National Mortgage Assoc. 1993-135 S ......................... 13.928+ 07/25/08 17,586,657 2,058 Federal National Mortgage Assoc. 1993-173 S ......................... 16.05 + 09/25/08 2,134,049 1,950 Federal National Mortgage Assoc. 1993-206 N ......................... 6.50 11/25/23 1,947,666 166 Federal National Mortgage Assoc. 1993-233 J ......................... 6.00 06/25/08 167,012 1,362 Federal National Mortgage Assoc. 1993-63 SD (TAC) ................... 12.799+ 05/25/08 1,369,609 762 Federal National Mortgage Assoc. 1993-65 SC ......................... 14.047+ 06/25/12 766,397 5,618 Federal National Mortgage Assoc. 1993-72 SA ......................... 15.720+ 05/25/08 6,392,790 4,518 Federal National Mortgage Assoc. 1993-72 S .......................... 8.75 + 05/25/08 4,861,718 475 Federal National Mortgage Assoc. 1993-86 SD ......................... 17.338+ 05/25/08 476,597 9,019 Federal National Mortgage Assoc. 1993-93 SA ......................... 17.586+ 05/25/08 10,567,259 5,512 Federal National Mortgage Assoc. 1993-95 SE ......................... 18.81 + 06/25/08 6,817,282 2,745 Federal National Mortgage Assoc. 1993-196 SA ........................ 17.33 + 10/25/08 3,237,111 ------------ Total U.S. Government Agencies (Cost $123,107,051)........................................... 139,659,754 ------------ Private Issues (5.5%) 14,026 Bear Stearns Mortgage Securities Inc. 1993-8 A7 (PAC) ............... 7.50 08/25/24 14,001,614 1,802 Bear Stearns Mortgage Securities Inc. 1993-8 A11 (TAC) .............. 7.50 08/25/24 1,797,918 10,230 General Electric Capital Mortgage Services, Inc. 1994-1 A8 .......... 6.50 01/25/24 10,295,235 8,262 Prudential Home Mortgage Securities 1993-23 A12 (PAC) ............... 6.50 07/25/08 8,264,059 5,296 Prudential Home Mortgage Securities 1993-35 A12 ..................... 6.75 09/25/08 5,284,187 7,060 Prudential Home Mortgage Securities 1993-60 A3 (PAC) ................ 6.75 12/25/23 7,122,565 ------------ Total Private Issues ($45,161,778) .......................................................... 46,765,578 ------------ Total Collateralized Mortgage Obligations (Cost $168,268,829) ............................... 186,425,332 ------------
See Notes to Financial Statements 4 TCW/DW Term Trust 2003 PORTFOLIO OF INVESTMENTS o MARCH 31, 2003 continued
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE - ----------- ----------- ---------- --------------- U.S. Government Agency Obligations (25.8%) $ 10,000 Federal Home Loan Bank ............................................. 6.375% 11/14/03 $ 10,319,840 138,000 Federal Home Loan Mortgage Corp. ................................... 6.375 11/15/03 142,450,776 34,000 Federal National Mortgage Assoc. ................................... 3.125 11/15/03 34,409,496 30,000 Federal National Mortgage Assoc. ................................... 4.75 11/14/03 30,659,670 ------------ Total U.S. Government Agency Obligations (Cost $216,733,836) ............................. 217,839,782 ------------ Tax-Exempt Municipal Bonds (9.4%) Educational Facilities Revenue (2.3%) 11,445 Houston Independent School District, Texas, Refg ................... 0.00 08/15/04 11,231,207 8,100 Spring Independent School District, Texas, Refg Ser 1993 ........... 0.00 02/15/04 8,017,299 ------------ 19,248,506 ------------ Electric Revenue (2.1%) 17,500 San Antonio, Texas, Electric & Gas Refg Ser A (Ambac) ETM .......... 0.00 02/01/04 17,339,350 ------------ General Obligation (2.1%) 5,000 Scottsdale, Arizona, Refg (Secondary MBIA) ......................... 0.00 07/01/04 4,920,300 Port of Oakland, California, 3,000 Refg Ser 1993 F (MBIA) .......................................... 0.00 11/01/03 2,979,300 3,500 Refg Ser 1993 F (MBIA) .......................................... 0.00 11/01/04 3,418,695 6,500 New Orleans, Louisiana, Refg (Ambac) ............................... 0.00 09/01/04 6,377,215 ------------ 17,695,510 ------------ Hospital Revenue (1.1%) 10,000 California Statewide Communities Development Authority, UniHealth Ser A (Ambac) ETM ..................................... 0.00 10/01/04 9,803,100 ------------ Other Revenue (0.6%) 5,460 Rosemont, Illinois, Tax Increment Ser C-3 (FGIC) ................... 0.00 12/01/03 5,418,395 ------------ Water & Sewer Revenue (1.2%) 10,000 Houston Texas, Water & Sewer Jr Lien Ser C (Ambac) ................. 0.00 12/01/03 9,922,400 ------------ Total Tax-Exempt Municipal Bonds (Cost $75,853,215)....................................... 79,427,261 ------------ U.S. Government Agency Mortgage Pass-Through Securities (1.1%) 2,363 Federal Home Loan Mortgage Corp. PC Gold ........................... 6.00 06/01/08 2,487,504 639 Federal National Mortgage Assoc. ................................... 5.50 02/01/09 671,003 2,504 Federal National Mortgage Assoc. (ARM) ............................. 6.249 08/01/30 2,579,124 1,425 Federal National Mortgage Assoc. (ARM) ............................. 6.627 07/01/30 1,473,027
See Notes to Financial Statements 5 TCW/DW Term Trust 2003 PORTFOLIO OF INVESTMENTS o MARCH 31, 2003 continued
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE - ----------- ------------ ---------- --------------- $ 580 Federal National Mortgage Assoc. ................ 7.00 % 08/01/08 $ 619,655 892 Federal National Mortgage Assoc. ................ 7.065 07/01/30 906,104 499 Federal National Mortgage Assoc. (ARM) .......... 7.39 07/01/30 502,893 ------------ Total U.S. Government Agency Mortgage Pass-Through Securities 9,239,310 (Cost $8,836,380) ...................................................... ------------ Short-Term Investments (41.1%) Commercial Paper (a) (35.8%) Banking (5.0%) 18,000 Citicorp ........................................ 1.25 04/11/03 17,993,750 8,000 Citicorp ........................................ 1.20 04/17/03 7,995,733 16,000 Citicorp ........................................ 1.25 04/17/03 15,991,111 ------------ 41,980,594 ------------ Finance Corporate (5.0%) 17,000 Novartis Finance Corp. .......................... 1.22 04/09/03 16,995,391 25,000 Novartis Finance Corp. .......................... 1.24 04/21/03 24,982,778 ------------ 41,978,169 ------------ Finance/Rental Leasing (1.8%) 8,000 International Lease Finance Corp. ............... 1.23 04/21/03 7,994,533 6,785 Paccar Financial Corp. .......................... 1.22 04/24/03 6,779,711 750 Paccar Financial Corp. .......................... 1.25 04/25/03 749,375 ------------ 15,523,619 ------------ Financial Conglomerates (4.8%) 1,000 General Electric Capital Corp. .................. 1.25 04/07/03 999,792 20,000 General Electric Capital Corp. .................. 1.26 04/07/03 19,995,800 5,000 General Electric Capital Corp. .................. 1.28 04/07/03 4,998,933 15,000 General Electric Capital Corp. .................. 1.28 09/22/03 14,906,667 ------------ 40,901,192 ------------ Foods & Beverages (0.9%) 7,600 Nestle Capital Corp. ............................ 1.21 04/10/03 7,597,701 ------------ Insurance (8.9%) 33,000 AIG Funding, Inc. ............................... 1.24 04/11/03 32,988,633 42,000 MetLife Funding, Inc. ........................... 1.23 04/17/03 41,977,040 ------------ 74,965,673 ------------
See Notes to Financial Statements 6 TCW/DW Term Trust 2003 PORTFOLIO OF INVESTMENTS o MARCH 31, 2003 continued
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE - ----------- ---------- ------------ --------------- International Banks (7.6%) $ 24,000 BNP Parabas Finance Inc. ..................................... 1.15% 04/16/03 $ 23,988,500 31,000 Barclays U.S. Funding Inc. ................................... 1.21 06/03/03 30,933,316 8,000 UBS Finance (DE) LLC ......................................... 1.23 04/07/03 7,998,360 1,000 UBS Finance (DE) LLC ......................................... 1.26 04/07/03 999,755 ------------ 63,919,931 ------------ Pharmaceuticals: Major (1.8%) 15,000 Schering Corp. ............................................... 1.25 04/04/03 14,998,438 ------------ Total Commercial Paper (Cost $301,866,927)........................................... 301,865,317 ------------ U.S. Government Agency (a) (4.7%) 40,000 Federal National Mortgage Assoc. (Cost $39,674,633)........... 1.29 11/14/03 39,673,200 ------------ Repurchase Agreement (0.6%) 5,000 The Bank of New York (dated 03/31/03; proceeds $5,000,174) (b) (Cost $5,000,000)............................................. 1.25 04/01/03 5,000,000 ------------ Total Short-Term Investments (Cost $346,541,560)..................................... 346,538,517 ------------ Total Investments (Cost $816,233,820) (c)............................... 99.5% 839,470,202 Other Assets in Excess of Liabilities .................................. 0.5 3,875,882 ----- ------------ Net Assets ............................................................. 100.0% $843,346,084 ===== ============
- ------------ ARM Adjustable Rate Mortgage. ETM Escrowed to maturity 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. Rate shown is the rate in effect at March 31, 2003. (a) Purchased on a discount basis. The interest rate shown has been adjusted to reflect a money market equivalent yield. (b) Collateralized by FNMA ARM 4.163% due 03/01/33 valued at $5,100,000. (c) The aggregate cost for federal income tax purposes approximates the aggregate cost for book purposes. The aggregate gross unrealized appreciation is $23,322,699 and the aggregate gross unrealized depreciation is $86,317, resulting in net unrealized appreciation of $23,236,382. Bond Insurance: - --------------- Ambac Ambac Assurance Corporation. FGIC Financial Guaranty Insurance Company. MBIA Municipal Bond Investors Assurance Corporation. See Notes to Financial Statements 7 TCW/DW Term Trust 2003 FINANCIAL STATEMENTS Statement of Assets and Liabilities March 31, 2003
Assets: Investments in securities, at value (cost $816,233,820)................... $839,470,202 Cash ................................... 255,289 Interest receivable .................... 5,911,799 Prepaid expenses ....................... 53,849 ------------ Total Assets ........................ 845,691,139 ------------ Liabilities: Payable for: Investments purchased ............... 1,749,104 Management fee ...................... 280,316 Investment advisory fee ............. 186,877 Accrued expenses ....................... 128,758 ------------ Total Liabilities ................... 2,345,055 ------------ Net Assets .......................... $843,346,084 ============ Composition of Net Assets: Paid-in-capital ........................ $749,048,490 Net unrealized appreciation ............ 23,236,382 Accumulated undistributed net investment income .................... 71,705,890 Accumulated net realized loss .......... (644,678) ------------ Net Assets .......................... $843,346,084 ============ Net Asset Value Per Share, 77,563,380 shares outstanding (unlimited shares authorized of $.01 par value) ................................. $10.87 ======
Statement of Operations For the year ended March 31, 2003
Net Investment Income: Interest Income ............................... $47,227,817 ----------- Expenses Management fee ................................ 3,342,129 Investment advisory fee ....................... 2,228,086 Transfer agent fees and expenses .............. 296,844 Shareholder reports and notices ............... 58,260 Professional fees ............................. 56,901 Custodian fees ................................ 51,951 Registration fees ............................. 15,508 Trustees' fees and expenses ................... 12,382 Other ......................................... 104,229 ----------- Total Expenses ............................. 6,166,290 ----------- Net Investment Income ...................... 41,061,527 ----------- Net Realized and Unrealized Loss: Net realized loss ............................. (64,694) Net change in unrealized appreciation ......... (7,768,596) ----------- Net Loss ................................... (7,833,290) ----------- Net Increase .................................. $33,228,237 ===========
See Notes to Financial Statements 8 TCW/DW Term Trust 2003 FINANCIAL STATEMENTS continued Statement of Changes in Net Assets
FOR THE YEAR FOR THE YEAR ENDED ENDED MARCH 31, 2003 MARCH 31, 2002 ---------------- --------------- Increase (Decrease) in Net Assets: Operations: Net investment income .......................................................... $ 41,061,527 $ 60,630,240 Net realized loss .............................................................. (64,694) (24,007) Net change in unrealized appreciation .......................................... (7,768,596) 2,176,165 ------------ ------------ Net Increase ................................................................. 33,228,237 62,782,398 Dividends to shareholders from net investment income ........................... (43,745,150) (44,006,765) Net decrease from transactions in shares of beneficial interest ................ - (20,550,386) ------------ ------------ Net Decrease ................................................................. (10,516,913) (1,774,753) Net Assets: Beginning of period ............................................................ 853,862,997 855,637,750 ------------ ------------ End of Period (Including accumulated undistributed net investment income of $71,705,890 and $74,237,410, respectively)..................................................... $843,346,084 $853,862,997 ============ ============
See Notes to Financial Statements 9 TCW/DW Term Trust 2003 NOTES TO FINANCIAL STATEMENTS o MARCH 31, 2003 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. 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 are valued by an outside independent pricing service approved by the Trustees. The pricing service uses both a computerized grid matrix of tax-exempt securities and evaluations by its staff, in each case based on information concerning market transactions and quotations from dealers which reflect the bid side of the market each day. The portfolio securities are thus valued by reference to a combination of transactions and quotations for the same or other securities believed to be comparable in quality, coupon, maturity, type of issue, call provisions, trading characteristics and other features deemed to be relevant; 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. Discounts are accreted and premiums are amortized over the life of the respective securities. Interest income is accrued daily. C. Repurchase Agreements -- The Fund may invest directly with institutions in repurchase agreements. The Fund's custodian receives the collateral, which is marked-to-market daily to determine that the value of the collateral does not decrease below the repurchase price plus accrued interest. D. Federal Income Tax Policy -- It is the Trust's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable income to its shareholders. Accordingly, no federal income tax provision is required. 10 TCW/DW Term Trust 2003 NOTES TO FINANCIAL STATEMENTS o MARCH 31, 2003 continued E. Dividends and Distributions to Shareholders -- Dividends and distributions to shareholders are recorded on the ex-dividend date. F. Use of Estimates -- 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. 2. Management/Investment Advisory Agreements Pursuant to a Management Agreement, the Trust pays Morgan Stanley 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 year ended March 31, 2003 were as follows:
PURCHASES SALES/ PREPAYMENTS --------------- ------------------- U.S. Government Agencies ......................... $210,765,745 $257,236,964 Private Issue Collateralized Mortgage Obligations -- 155,021,951 Municipal Bonds .................................. -- 45,695,000
Morgan Stanley Trust, an affiliate of the Manager, is the Trust's transfer agent. At March 31, 2003, the Trust had transfer agent fees and expenses payable of approximately $19,000. 4. Shares of Beneficial Interest Transactions in shares of beneficial interest were as follows:
CAPITAL PAID PAR VALUE IN EXCESS OF SHARES OF SHARES PAR VALUE --------------- ----------- --------------- Balance, March 31, 2001 ................................................. 79,570,980 $ 795,710 $ 771,829,278 Treasury shares purchased and retired (weighted average discount 5.33%)* (2,007,600) (20,076) (20,530,310) Reclassification due to permanent book/tax differences .................. -- -- (224,508) ---------- --------- ------------- Balance, March 31, 2002 ................................................. 77,563,380 775,634 751,074,460 ---------- --------- ------------- Reclassification due to permanent book/tax differences .................. -- -- (2,801,604) ---------- --------- ------------- Balance, March 31, 2003 ................................................. 77,563,380 $ 775,634 $ 748,272,856 ========== ========= =============
- ------------ * The Trustees have voted to retire the shares purchased. 11 TCW/DW Term Trust 2003 NOTES TO FINANCIAL STATEMENTS o MARCH 31, 2003 continued 5. Federal Income Tax Status 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. The tax character of distributions paid was as follows:
FOR THE YEAR FOR THE YEAR ENDED ENDED MARCH 31, 2003 MARCH 31, 2002 ---------------- --------------- Ordinary income ......... $43,745,150 $44,006,765
As of March 31, 2003, the tax-basis components of accumulated earnings were as follows: Undistributed ordinary income ........... $13,227,652 Undistributed tax-exempt income ......... 58,478,238 ----------- Net accumulated earnings ................ 71,705,890 Capital loss carryforward* .............. (580,380) Net unrealized appreciation ............. 23,172,084 ----------- Total accumulated earnings .............. $94,297,594 ===========
*As of March 31, 2003, the Fund had a net capital loss carryforward of $580,380 to offset future capital gains to the extent provided by regulations. As of March 31, 2003, the Fund had temporary book/tax differences attributable to post-October losses (capital losses incurred after October 31 within the taxable year which are deemed to arise on the first business day of the Fund's next taxable year) and permanent book/tax differences attributable to an expired capital loss carryforward and a non-deductible expense. To reflect reclassifications arising from the permanent differences, paid-in-capital was charged $2,801,604, accumulated undistributed net investment income was credited $152,103 and accumulated net realized loss was credited $2,649,501. 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. 12 TCW/DW Term Trust 2003 NOTES TO FINANCIAL STATEMENTS o MARCH 31, 2003 continued Reverse repurchase agreements are collateralized by Trust securities with a market value in excess of the Trust's obligation under the contract. At March 31, 2003, there were no reverse repurchase agreements or dollar rolls outstanding. 7. Dividends The Trust declared the following dividends from net investment income:
DECLARATION AMOUNT RECORD PAYABLE DATE PER SHARE DATE DATE - -------------------- ----------- --------------- --------------- March 25, 2003 $ 0.03 April 4, 2003 April 17, 2003
On January 28, 2003, the Trust's Board of Trustees adopted a plan of liquidation to take effect on April 1, 2003 whereby any dividend distributions declared to shareholders after that date and up to the Trust's termination date will be deemed liquidating distributions. 8. Litigation There is one litigation matter pending, a purported class action filed on behalf of the residents of Florida, 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. This matter, currently pending in Florida State Court, generally alleges violations of state statutory and common law in connection with the marketing of the Trust to customers of one of the underwriters. The action has been settled subject to Court approval. 13 TCW/DW Term Trust 2003 FINANCIAL HIGHLIGHTS Selected ratios and per share data for a share of beneficial interest outstanding throughout each period:
FOR THE YEAR ENDED MARCH 31, ------------------------------------------------------------------ 2003 2002 2001 2000 1999 ------------ ------------ ------------ ------------- ------------- Selected Per Share Data: Net asset value, beginning of period ................... $ 11.01 $ 10.75 $ 9.91 $ 10.36 $ 10.11 ------- ------- ------- ------- ------- Income (loss) from investment operations: Net investment income ................................. 0.53* 0.78* 0.63* 0.73* 0.74 Net realized and unrealized gain (loss) ............... (0.11) 0.03 0.76 (0.57) 0.09 ---------- --------- --------- --------- ------- Total income from investment operations ................ 0.42 0.81 1.39 0.16 0.83 ---------- --------- --------- --------- ------- Less dividends from net investment income .............. (0.56) (0.56) (0.59) (0.64) (0.63) ---------- ---------- ---------- --------- -------- Anti-dilutive effect of acquiring treasury shares* ..... -- 0.01 0.04 0.03 0.05 ---------- ---------- ---------- --------- -------- Net asset value, end of period ......................... $ 10.87 $ 11.01 $ 10.75 $ 9.91 $ 10.36 ========== ========== ========== ========= ======== Market value, end of period ............................ $ 10.73 $ 10.65 $ 10.13 $ 8.875 $ 9.375 ========== ========== ========== ========= ======== Total Return+ .......................................... 6.13% 10.91% 21.43% 1.46 % 10.56% Ratios to Average Net Assets: Operating expenses ..................................... 0.72% 0.74% 0.73% 0.73% 0.74% Interest expense ....................................... -- 0.69% 2.62% 2.38% 2.40% Total expenses ......................................... 0.72% 1.43% 3.35% 3.11% 3.14% Net investment income .................................. 4.79% 7.09% 6.21% 7.31% 6.93% Supplemental Data: Net assets, end of period, in thousands ................ $843,346 $853,863 $855,638 $831,317 $905,779 Portfolio turnover rate ................................ 33% 1% 5% 6% --
- ------------ * 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. See Notes to Financial Statements 14 TCW/DW Term Trust 2003 INDEPENDENT AUDITORS' REPORT To the Shareholders and Board of Trustees of TCW/DW Term Trust 2003: We have audited the accompanying statement of assets and liabilities of TCW/DW Term Trust 2003 (the "Trust"), including the portfolio of investments, as of March 31, 2003, and the related statements of operations for the year then ended and changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of March 31, 2003, by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of TCW/DW Term Trust 2003 as of March 31, 2003, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. Deloitte & Touche LLP New York, New York May 7, 2003 2003 Federal Tax Notice (unaudited) Of the Trust's ordinary income dividends paid during the fiscal year ended March 31, 2003, 0.27% was attributable to qualifying Federal obligations. Please consult your tax advisor to determine if any portion of the dividends you received is exempt from state income tax. 15 TCW/DW Term Trust 2003 TRUSTEE AND OFFICER INFORMATION Independent Trustees:
Term of Office and Position(s) Length of Name, Age and Address of Held with Time Independent Trustee Registrant Served* - ------------------------------------- ------------- ---------------- Michael Bozic (62) Trustee Since c/o Mayer, Brown, Rowe & Maw April 1994 Counsel to the Independent Trustees 1675 Broadway New York, NY Edwin J. Garn (70) Trustee Since c/o Summit Ventures LLC January 1993 1 Utah Center 201 S. Main Street Salt Lake City, UT Wayne E. Hedien (68) Trustee Since c/o Mayer, Brown, Rowe & Maw September 1997 Counsel to the Independent Trustees 1675 Broadway New York, NY Number of Portfolios in Fund Complex Name, Age and Address of Overseen Independent Trustee Principal Occupation(s) During Past 5 Years by Trustee** - ------------------------------------- ------------------------------------------------ -------------- Michael Bozic (62) Retired; Director or Trustee of the Morgan 123 c/o Mayer, Brown, Rowe & Maw Stanley Funds and TCW/DW Term Trust 2003; Counsel to the Independent Trustees formerly Vice Chairman of Kmart Corporation 1675 Broadway (December 1998-October 2000), Chairman and New York, NY Chief Executive Officer of Levitz Furniture Corporation (November 1995-November 1998) and President and Chief Executive Officer of Hills Department Stores (May 1991-July 1995); formerly variously Chairman, Chief Executive Officer, President and Chief Operating Officer (1987-1991) of the Sears Merchandise Group of Sears, Roebuck & Co. Edwin J. Garn (70) Director or Trustee of the Morgan Stanley 123 c/o Summit Ventures LLC Funds and TCW/DW Term Trust 2003; formerly 1 Utah Center United States Senator (R-Utah) (1974-1992) 201 S. Main Street and Chairman, Senate Banking Committee Salt Lake City, UT (1980-1986); formerly Mayor of Salt Lake City, Utah (1971-1974), Astronaut, Space Shuttle Discovery (April 12-19, 1985) and Vice Chairman, Huntsman Corporation (chemical company); member of the Utah Regional Advisory Board of Pacific Corp. Wayne E. Hedien (68) Retired; Director or Trustee of the Morgan 123 c/o Mayer, Brown, Rowe & Maw Stanley Funds and TCW/DW Term Trust 2003; Counsel to the Independent Trustees formerly associated with the Allstate 1675 Broadway Companies (1966-1994), most recently as New York, NY Chairman of The Allstate Corporation (March 1993-December 1994) and Chairman and Chief Executive Officer of its wholly-owned subsidiary, Allstate Insurance Company (July 1989-December 1994). Name, Age and Address of Independent Trustee Other Directorships Held by Trustee - ------------------------------------- ------------------------------------------------ Michael Bozic (62) Director of Weirton Steel Corporation. c/o Mayer, Brown, Rowe & Maw Counsel to the Independent Trustees 1675 Broadway New York, NY Edwin J. Garn (70) Director of Franklin Covey (time management c/o Summit Ventures LLC systems), BMW Bank of North America, Inc. 1 Utah Center (industrial loan corporation), United Space 201 S. Main Street Alliance (joint venture between Lockheed Martin Salt Lake City, UT and the Boeing Company) and Nuskin Asia Pacific (multilevel marketing); member of the board of various civic and charitable organizations. Wayne E. Hedien (68) Director of The PMI Group Inc. (private c/o Mayer, Brown, Rowe & Maw mortgage insurance); Trustee and Vice Counsel to the Independent Trustees Chairman of The Field Museum of Natural 1675 Broadway History; director of various other New York, NY business and charitable organizations.
16 TCW/DW Term Trust 2003 TRUSTEE AND OFFICER INFORMATION continued
Term of Office and Position(s) Length of Name, Age and Address of Held with Time Independent Trustee Registrant Served* - --------------------------------------- ------------- ------------ Dr. Manuel H. Johnson (53) Trustee Since c/o Johnson Smick International, Inc. July 1991 2099 Pennsylvania Avenue, N.W. Suite 950 Washington, D.C. Michael E. Nugent (66) Trustee Since c/o Triumph Capital, L.P. July 1991 445 Park Avenue New York, NY Number of Portfolios in Fund Complex Name, Age and Address of Overseen Independent Trustee Principal Occupation(s) During Past 5 Years by Trustee** - --------------------------------------- ------------------------------------------------- -------------- Dr. Manuel H. Johnson (53) Chairman of the Audit Committee and Director 123 c/o Johnson Smick International, Inc. or Trustee of the Morgan Stanley Funds and 2099 Pennsylvania Avenue, N.W. TCW/DW Term Trust 2003; Senior Partner, Suite 950 Johnson Smick International, Inc., a consulting Washington, D.C. firm; Co-Chairman and a founder of the Group of Seven Council (G7C), an international economic commission; formerly Vice Chairman of the Board of Governors of the Federal Reserve System and Assistant Secretary of the U.S. Treasury. Michael E. Nugent (66) Chairman of the Insurance Committee and 214 c/o Triumph Capital, L.P. Director or Trustee of the Morgan Stanley 445 Park Avenue Funds and TCW/DW Term Trust 2003; director/ New York, NY trustee of various investment companies managed by Morgan Stanley Investment Management Inc. and Morgan Stanley Investments LP (since July 2001); General Partner, Triumph Capital, L.P., a private investment partnership; formerly Vice President, Bankers Trust Company and BT Capital Corporation (1984-1988). Name, Age and Address of Independent Trustee Other Directorships Held by Trustee - --------------------------------------- ---------------------------------------------- Dr. Manuel H. Johnson (53) Director of NVR, Inc. (home construction); c/o Johnson Smick International, Inc. Chairman and Trustee of the Financial 2099 Pennsylvania Avenue, N.W. Accounting Foundation (oversight organization Suite 950 of the Financial Accounting Standards Board); Washington, D.C. Director of RBS Greenwich Capital Holdings (financial holding company). Michael E. Nugent (66) Director of various business organizations. c/o Triumph Capital, L.P. 445 Park Avenue New York, NY
17 TCW/DW Term Trust 2003 TRUSTEE AND OFFICER INFORMATION continued Interested Trustees:
Term of Office and Position(s) Length of Name, Age and Address of Held with Time Interested Trustee Registrant Served* - ------------------------------ ----------------------- ------------ Charles A. Fiumefreddo (69) Chairman of the Board Since c/o Morgan Stanley Trust and Trustee July 1991 Harborside Financial Center, Plaza Two, Jersey City, NJ James F. Higgins (54) Trustee Since c/o Morgan Stanley Trust June 2000 Harborside Financial Center, Plaza Two, Jersey City, NJ Philip J. Purcell (59) Trustee Since 1585 Broadway April 1994 New York, NY Number of Portfolios in Fund Complex Name, Age and Address of Overseen Interested Trustee Principal Occupation(s) During Past 5 Years by Trustee** - ------------------------------ --------------------------------------------------- -------------- Charles A. Fiumefreddo (69) Chairman and Director or Trustee of the 123 c/o Morgan Stanley Trust Morgan Stanley Funds and TCW/DW Term Trust Harborside Financial Center, 2003; formerly Chairman, Chief Executive Plaza Two, Officer and Director of the Investment Manager, Jersey City, NJ the Distributor and Morgan Stanley Services, Executive Vice President and Director of Morgan Stanley DW, Chairman and Director of the Transfer Agent, and Director and/or officer of various Morgan Stanley subsidiaries (until June 1998) and Chief Executive Officer of the Morgan Stanley Funds and the TCW/DW Term Trusts (until September 2002). James F. Higgins (54) Director or Trustee of the Morgan Stanley 123 c/o Morgan Stanley Trust Funds and TCW/DW Term Trust 2003 (since Harborside Financial Center, June 2000); Senior Advisor of Morgan Stanley Plaza Two, (since August 2000); Director of the Distributor Jersey City, NJ and Dean Witter Realty Inc.; Director of AXA Financial, Inc. and The Equitable Life Assurance Society of the United States (financial services); previously President and Chief Operating Officer of the Private Client Group of Morgan Stanley (May 1999-August 2000), President and Chief Operating Officer of Individual Securities of Morgan Stanley (February 1997-May 1999). Philip J. Purcell (59) Director or Trustee of the Morgan Stanley 123 1585 Broadway Funds and TCW/DW Term Trust 2003; New York, NY Chairman of the Board of Directors and Chief Executive Officer of Morgan Stanley and Morgan Stanley DW; Director of the Distributor; Chairman of the Board of Directors and Chief Executive Officer of Novus Credit Services Inc.; Director and/or officer of various Morgan Stanley subsidiaries. Name, Age and Address of Interested Trustee Other Directorships Held by Trustee - ------------------------------ -------------------------------------------- Charles A. Fiumefreddo (69) None c/o Morgan Stanley Trust Harborside Financial Center, Plaza Two, Jersey City, NJ James F. Higgins (54) None c/o Morgan Stanley Trust Harborside Financial Center, Plaza Two, Jersey City, NJ Philip J. Purcell (59) Director of American Airlines, Inc. and its 1585 Broadway parent company, AMR Corporation. New York, NY
- ------------ * Each Trustee serves an indefinite term, until his or her successor is elected. ** The Fund Complex includes all open and closed-end funds (including all of their portfolios) advised by Morgan Stanley Investment Advisors Inc. and any funds that have an investment advisor that is an affiliated person of Morgan Stanley Investment Advisors Inc. (including but not limited to, Morgan Stanley Investment Management Inc., Morgan Stanley Investments LP and Van Kampen Asset Management Inc.). 18 TCW/DW Term Trust 2003 TRUSTEE AND OFFICER INFORMATION continued Officers:
Term of Office and Position(s) Length of Name, Age and Address of Held with Time Executive Officer Registrant Served* - ------------------------------ ------------------- ----------------- Mitchell M. Merin (49) President and President since 1221 Avenue of the Americas Chief Executive May 1999 and New York, NY Officer Chief Executive Officer since September 2002 Barry Fink (48) Vice President, Since 1221 Avenue of the Americas Secretary and February 1997 New York, NY General Counsel Joseph J. McAlinden (60) Vice President Since 1221 Avenue of the Americas July 1995 New York, NY Ronald E. Robison (64) Vice President Since 1221 Avenue of the Americas October 1998 New York, NY Thomas F. Caloia (57) Treasurer Since c/o Morgan Stanley Trust April 1989 Harborside Financial Center, Plaza Two Jersey City, NJ Francis Smith (37) Vice President Since c/o Morgan Stanley Trust and Chief September 2002 Harborside Financial Center, Financial Officer Plaza Two, Jersey City, NJ Name, Age and Address of Executive Officer Principal Occupation(s) During Past 5 Years - ------------------------------ ------------------------------------------------------------------------------------------------ Mitchell M. Merin (49) President and Chief Operating Officer of Morgan Stanley Investment Management (since 1221 Avenue of the Americas December 1998); President, Director (since April 1997) and Chief Executive Officer (since New York, NY June 1998) of the Investment Manager and Morgan Stanley Services; Chairman, Chief Executive Officer and Director of the Distributor (since June 1998); Chairman (since June 1998) and Director (since January 1998) of the Transfer Agent; Director of various Morgan Stanley subsidiaries; President (since May 1999) and Chief Executive Officer (since September 2002) of the Morgan Stanley Funds and TCW/DW Term Trust 2003; Trustee (since December 1999) and President and Chief Executive Officer (since October 2002) of the Van Kampen Open-End Funds and President and Chief Executive Officer (since December 2002) of the Van Kampen Closed-End Funds; previously Chief Strategic Officer of the Investment Manager and Morgan Stanley Services and Executive Vice President of the Distributor (April 1997-June 1998), Vice President of the Morgan Stanley Funds and the TCW/DW Term Trusts (May 1997-April 1999), and Executive Vice President of Morgan Stanley. Barry Fink (48) General Counsel (since May 2000) and Managing Director (since December 2000) of Morgan 1221 Avenue of the Americas Stanley Investment Management; Managing Director (since December 2000), and Director New York, NY (since July 1998) of the Investment Manager and Morgan Stanley Services; Assistant Secretary of Morgan Stanley DW; Vice President, Secretary and General Counsel of the Morgan Stanley Funds and TCW/DW Term Trust 2003 (since February 1997); Managing Director, Director and Secretary of the Distributor; previously, Vice President and Assistant General Counsel of the Investment Manager and Morgan Stanley Services (February 1997 - December 2001). Joseph J. McAlinden (60) Managing Director and Chief Investment Officer of the Investment Manager, Morgan Stanley 1221 Avenue of the Americas Investment Management Inc. and Morgan Stanley Investments LP; Director of the Transfer New York, NY Agent; Chief Investment Officer of the Van Kampen Funds. Ronald E. Robison (64) Managing Director, Chief Administrative Officer and Director (since February 1999) of the 1221 Avenue of the Americas Investment Manager and Morgan Stanley Services and Chief Executive Officer and Director of New York, NY the Transfer Agent; previously Managing Director of the TCW Group Inc. Thomas F. Caloia (57) Executive Director (since December 2002) and Assistant Treasurer of the Investment Manager, c/o Morgan Stanley Trust the Distributor and Morgan Stanley Services; previously First Vice President of the Investment Harborside Financial Center, Manager, the Distributor and Morgan Stanley Services; Treasurer of the Morgan Stanley Funds. Plaza Two Jersey City, NJ Francis Smith (37) Vice President and Chief Financial Officer of the Morgan Stanley Funds and TCW/DW Term Trust c/o Morgan Stanley Trust 2003 (since September 2002); Executive Director of the Investment Manager and Morgan Harborside Financial Center, Stanley Services (since December 2001); previously Vice President of the Investment Manager Plaza Two, and Morgan Stanley Services (August 2000-November 2001) and Senior Manager at Jersey City, NJ PricewaterhouseCoopers LLP (January 1998-August 2000).
- ------------ * Each Officer serves an indefinite term, until his or her successor is elected. 19 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 OFFICERS Charles A. Fiumefreddo Chairman of the Board Mitchell M. Merin President and Chief Executive Officer Barry Fink Vice President, Secretary and General Counsel Joseph J. McAlinden Vice President Ronald E. Robison Vice President Thomas F. Caloia Treasurer Francis Smith Vice President and Chief Financial Officer TRANSFER AGENT Morgan Stanley Trust Harborside Financial Center -- Plaza Two Jersey City, New Jersey 07311 INDEPENDENT AUDITORS Deloitte & Touche LLP Two World Financial Center New York, New York 10281 MANAGER Morgan Stanley Services Company Inc. Harborside Financial Center -- Plaza Two Jersey City, New Jersey 07311 ADVISER TCW Investment Management Company 865 South Figueroa Street, Suite 1800 Los Angeles, CA 90017 TCW/DW TERM TRUST 2003 [GRAPHIC OMITTED] Annual Report March 31, 2003 37932RPT-10777D03-AS-4/03 -----END PRIVACY-ENHANCED MESSAGE-----