-----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, U2M9/TKECFZtvHdP4ZOHvfuXSbQRGLp89EI8HgSfmK719HOmISEAr3xNw/uU8HpZ pDpkohFQOp/mWN+SyKv47A== 0001047469-03-028398.txt : 20030820 0001047469-03-028398.hdr.sgml : 20030820 20030820170153 ACCESSION NUMBER: 0001047469-03-028398 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20030630 FILED AS OF DATE: 20030820 EFFECTIVENESS DATE: 20030820 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TCW CONVERTIBLE SECURITIES FUND INC CENTRAL INDEX KEY: 0000809559 IRS NUMBER: 930939398 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-04980 FILM NUMBER: 03858534 BUSINESS ADDRESS: STREET 1: 865 S FIGUEROA ST STE 1800 CITY: LOS ANGELES STATE: CA ZIP: 90071 BUSINESS PHONE: 2132440000 MAIL ADDRESS: STREET 1: 865 S. FIGUEROA STREET, STREET 2: SUITE 1800 CITY: LOSANGELES STATE: CA ZIP: 90017 N-CSR 1 a2116221zn-csr.txt N-CSR UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number: 811-4980 TCW CONVERTIBLE SECURITIES FUND, INC. (Exact name of registrant as specified in charter) 865 SOUTH FIGUEROA STREET, SUITE 1800, LOS ANGELES, CA 90017 (Address of principal executive offices) PHILIP K. HOLL, ESQ. SECRETARY 865 SOUTH FIGUEROA STREET, SUITE 1800 LOS ANGELES, CA 90017 (Name and address of agent for service) Registrant's telephone number, including area code: (213) 244-0000 Date of fiscal year end: December 31 Date of reporting period: June 30, 2003 Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles. A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. Section 3507. [TCW LOGO]-Registered Trademark- TCW CONVERTIBLE SECURITIES FUND, INC. - ------------------------------- DIRECTORS AND OFFICERS Ernest O. Ellison CHAIRMAN Samuel P. Bell DIRECTOR Richard W. Call DIRECTOR Matthew K. Fong DIRECTOR John A. Gavin DIRECTOR Patrick C. Haden DIRECTOR Charles A. Parker DIRECTOR Robert G. Sims DIRECTOR Alvin R. Albe, Jr. PRESIDENT AND CHIEF EXECUTIVE OFFICER Thomas D. Lyon SENIOR VICE PRESIDENT Thomas E. Larkin, Jr. SENIOR VICE PRESIDENT Hilary G.D. Lord SENIOR VICE PRESIDENT AND ASSISTANT SECRETARY Philip K. Holl SECRETARY AND ASSOCIATE GENERAL COUNSEL Michael E. Cahill GENERAL COUNSEL AND ASSISTANT SECRETARY David S. DeVito TREASURER AND CHIEF FINANCIAL OFFICER George N. Winn ASSISTANT TREASURER - ------------------------------------------------------- SHAREHOLDER INFORMATION INVESTMENT ADVISER TCW Investment Management Company 865 South Figueroa Street Los Angeles, California 90017 - ------------------------------------------------- TRANSFER AGENT, DIVIDEND REINVESTMENT AND DISBURSING AGENT AND REGISTRAR The Bank of New York Church Street Station P.O. Box #11002 New York, New York 10277-0770 - ------------------------------------------------- CUSTODIAN Investors Bank & Trust Company 200 Clarendon Street Boston, Massachusetts 02116 - ------------------------------------------------- INDEPENDENT AUDITORS Deloitte & Touche LLP 350 South Grand Avenue Los Angeles, California 90071 - ------------------------------------------------- LEGAL COUNSEL Dechert 1775 Eye Street N.W. Washington DC, 20006 - ------------------------------------------------- TCW Convertible Securities Fund, Inc. - ----------------------------- - ----------------------------- SEMI-ANNUAL REPORT June 30, 2003 [TCW LOGO]-Registered Trademark- - -------------------------------------------------------------------------------- [TCW LOGO] TCW CONVERTIBLE SECURITIES FUND, INC. The President's Letter - -------------------------------------------------------------------------------- DEAR SHAREHOLDER: Early in the second quarter we saw a quick resolution of the war in Iraq, a pacification of the crisis with North Korea, a drop in energy prices and President Bush lay the groundwork for higher than expected tax relief for equity investors. These factors resulted in the stock market having the best quarter since the fourth quarter of 1998. During this second quarter, the Fund outpaced the CSFB benchmark by more than 100 basis points ("bps") largely due to the Fund's investments in the Pharmaceutical, Media and Financial Services industries. PERFORMANCE OF THE FUND'S SHARES For the six months ended June 30, 2003, the TCW Convertible Securities Fund, Inc., (the "Fund") return on Net Asset Value (NAV) was 13.2%. The Fund's shareholders realized a return of 17.4% from an increase in the market price of the Fund from $4.16 on December 31, 2002, to $4.74 on June 30, 2003 (with dividends reinvested). The total distribution for the period was $0.14. The Fund's market price per share on June 30, 2003 represents a discount of 6.88% to the Fund's NAV of $5.09. FUND STRATEGY AND OUTLOOK For the second quarter of 2003 the Fund's NAV return was 12.0% (1.1% for the first quarter) outpacing the CSFB benchmark, which returned 10.6%, by more than 100 bps. Performance was largely due to investments in the Pharmaceutical, Media and Financial Services industries. The economic news was mixed in the second quarter. The economy experienced, on one hand, higher jobless claims, lower mortgage rates, an ISM manufacturing index hovering just below 50 (contracting) and weaker overall retail sales, but it also showed very positive indications for ISM non-manufacturing and higher auto sales. Economic data has started to show more material improvements in the late second and early third quarters. The Federal Reserve Board (the "Fed") cut the Federal Funds rate an additional 25 basis points--making this the twelfth cut in the last two and a half years--and they still maintain an easing bias, making it clear to the investment community that the Fed is determined to create an interest rate environment which fosters economic growth. Clearly they are becoming more aggressive with their approach to monetary policy by discussing "non-conventional" ways to stimulate the economy. The President's fiscal package was better than the market anticipated, providing greater growth forecasts for third quarter of 2003. The past quarter saw a strong rally in the bond market, which started to fizzle late in the quarter. The 10-year Treasury made a 45-year low, giving the mortgage market another shot in the arm from an already elevated level. Mortgage refinancing has reached record highs and could result in potential cash-outs of over $100 billion in 2003 to homeowners. Spreads on investment grade corporate bonds have tightened by 40 basis points, signaling an improved economic recovery scenario. The strength of the equity markets has added over $2 trillion of wealth to the economy since the middle of March. With interest rates at 40-year lows combined with a cut in the capital gains rate to 15%, it appears money is moving from low yielding fixed 1 - -------------------------------------------------------------------------------- [TCW LOGO] TCW CONVERTIBLE SECURITIES FUND, INC. The President's Letter (continued) - -------------------------------------------------------------------------------- income securities to equities, especially with improved prospects for taxation on dividend and capital gains. Convertible new issuance in the second quarter surpassed even the most optimistic expectations. 113 new deals with proceeds totaling $54.3 billion were priced during the quarter. The onslaught of deals was accompanied with "irrationally exuberant" pricing for a majority of the deals, though that has been correcting rapidly for the last month. The new issues priced approximately 2% cheap in June, up from 0.4% rich in May. NORMAN BARKER, JR. During the first half of 2003, one of the Fund's directors, Norman Barker, Jr., announced his retirement from the board. Norm has served the Fund and its shareholders since the Fund's inception in 1987. On behalf of the Fund and its shareholders, we thank him for his exemplary service and wish him well in his future endeavors. DIVIDEND REINVESTMENT PLAN Shareholders who wish to add to their investment may do so through the Dividend Reinvestment Plan (the "Plan"). Under the Plan, your dividend is used to purchase shares on the open market whenever shares and the related sales commission are selling below the Fund's Net Asset Value per share. If the market price, including commission, is selling above the Net Asset Value, you will receive shares at a price equal to the higher of the Net Asset Value per share on the payment date or 95% of the closing market price on the payment date. To enroll in the Plan, if your shares are registered in your name, write to The Bank of New York, Church Street Station, P.O. Box #11002, New York, New York 10277-0770 or call their toll free number (800) 524-4458. If your shares are held by a brokerage firm, please call your broker. If, however, you need assistance, please call our investor relations department at (877) TCW-MKTS (829-6587). As always, we would be pleased to accommodate your investment needs. Sincerely, /s/ Ernest O. Ellison /s/ Alvin R. Albe Jr. Ernest O. Ellison Alvin R. Albe Jr. Chairman President & Chief Executive Officer
2 - -------------------------------------------------------------------------------- [TCW LOGO] TCW CONVERTIBLE SECURITIES FUND, INC. Schedule of Investments (Unaudited) June 30, 2003 - --------------------------------------------------------------------------------
Principal Market Amount Value - ----------- ------------ FIXED INCOME SECURITIES BANKING & FINANCIAL SERVICES (4.9% OF NET ASSETS) $ 3,310,000 Bear Stearns Co., Inc., Exchangeable Fifth Third Bancorp, 0.25%, due 05/12/10.................... $ 3,607,238 6,165,000 E*TRADE Group, Inc., 6.75%, due 05/15/08.......... 6,577,254 2,620,000 Silicon Valley Bancshares, (144A), 0%, due 06/15/08.................................... 2,454,626* ------------ Total Banking & Financial Services............ 12,639,118 ------------ BEVERAGES, FOOD & TOBACCO (0.9%) 3,300,000 General Mills, Inc., (144A), 0%, due 10/28/22..... 2,355,375* ------------ COMMERCIAL SERVICES (2.8%) 2,650,000 Ikon Office Solutions, (144A), 5%, due 05/01/07.................................... 2,650,000* 4,445,000 Quest Diagnostics, Inc., 1.75%, due 11/30/21...... 4,589,462 ------------ Total Commercial Services..................... 7,239,462 ------------ COMMUNICATIONS (3.2%) 3,115,000 Comverse Technology, Inc., (144A), 0%, due 05/15/23.................................... 3,348,625* 4,565,000 EchoStar Communications Corp., 5.75%, due 05/15/08.................................... 4,856,019+ ------------ Total Communications.......................... 8,204,644 ------------ COMPUTER SERVICES (4.0%) 4,235,000 Micron Technology, Inc., (144A), 2.5%, due 02/01/10.................................... 5,103,175*+ 4,915,000 Morgan Stanley Dean Witter & Co., Exchangeable Cisco Systems, Inc., 0.25%, due 05/15/10........ 5,182,253 ------------ Total Computer Services....................... 10,285,428 ------------ Principal Market Amount Value - ----------- ------------ COMPUTER SOFTWARE (5.5%) $ 5,185,000 Affiliated Computer Services, Inc., 3.5%, due 02/15/06.................................... $ 6,131,262+ 4,905,000 First Data Corp., 2%, due 03/01/08................ 5,493,600 4,145,000 International Game Technology, (144A), 0%, due 01/29/33.................................... 2,683,887* ------------ Total Computer Software....................... 14,308,749 ------------ ELECTRONICS (4.6%) 6,135,000 ASM Lithography Holding N.V., (144A), 5.75%, due 10/15/06.................................... 6,242,362* 2,290,000 Lattice Semiconductor Corp., (144A), 0%, due 07/01/10.................................... 2,215,575*+ 3,665,000 PMC-Sierra, Inc., (144A), 3.75%, due 08/15/06..... 3,435,937* ------------ Total Electronics............................. 11,893,874 ------------ ENTERTAINMENT & LEISURE (2.1%) 5,385,000 Morgan Stanley Dean Witter & Co., Exchangeable The Walt Disney Co., 0.25%, due 12/30/08............ 5,518,952 ------------ HEALTHCARE (2.0%) 8,830,000 Universal Health Services, Inc., 0.426%, due 06/23/20.................................... 5,231,775+ ------------ HEAVY MACHINERY (0.3%) 735,000 Briggs & Stratton Corp., 5%, due 05/15/06......... 847,087 ------------ INDUSTRIAL-DIVERSIFIED (4.3%) 3,565,000 Tyco International Group SA, (144A), 2.75%, due 01/15/18.................................... 3,859,112* 6,560,000 Tyco International Group SA, (144A), 3.125%, due 01/15/23.................................... 7,232,400*+ ------------ Total Industrial--Diversified................. 11,091,512 ------------ INSURANCE (1.2%) 3,300,000 Swiss RE America Holding, (144A), 3.25%, due 11/21/21.................................... 3,097,875* ------------ MEDIA-BROADCASTING & PUBLISHING (1.6%) 5,535,000 Liberty Media Corp., 3.5%, due 01/15/31........... 4,192,762 ------------
+ Security partially or fully lent (Note 3). * Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At June 30, 2003, the value of these securities amounted to $70,519,394 or 27.2% of net assets. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 3 - -------------------------------------------------------------------------------- [TCW LOGO] TCW CONVERTIBLE SECURITIES FUND, INC. Schedule of Investments (Unaudited) (continued) June 30, 2003 - --------------------------------------------------------------------------------
Principal Market Amount Value - ----------- ------------ MEDICAL SUPPLIES (2.9%) $ 7,000,000 Alza Corp., Exchangeable Johnson & Johnson, Inc., 0%, due 07/28/20................................ $ 5,013,750 2,460,000 Medtronic, Inc., 1.25%, due 09/15/21.............. 2,564,550 ------------ Total Medical Supplies........................ 7,578,300 ------------ OIL & GAS (3.0%) 2,580,000 McMoRan Exploration Co., (144A), 6%, due 07/02/08.................................... 2,580,000* 4,680,000 Pride International, Inc., (144A), 3.25%, due 05/01/33.................................... 5,148,000*+ ------------ Total Oil & Gas............................... 7,728,000 ------------ PHARMACEUTICALS (8.6%) 6,540,000 Amgen, Inc., 0%, due 03/01/32..................... 5,166,600 2,650,000 Axcan Pharma, Inc., (144A), 4.25%, due 04/15/08.................................... 3,123,688* 2,597,500 Cell Therapeutic, Inc., (144A), 4%, due 07/01/10.................................... 2,467,625* 2,255,000 Charles River Laboratories International, Inc., 3.5%, due 02/01/22.............................. 2,446,675 535,000 Guilford Pharmaceuticals, Inc., (144A), 5%, due 07/01/08.................................... 518,950*+ 1,795,000 ICOS Corp., (144A), 2%, due 07/01/23.............. 1,624,475*+ 2,795,000 Teva Pharmaceutical Industries, Ltd., 0.75%, due 08/15/21.................................... 3,850,113+ 2,250,000 Teva Pharmaceutical Industries, Ltd., (144A), 0.375%, due 11/15/22............................ 3,166,875* ------------ Total Pharmaceuticals......................... 22,365,001 ------------ RETAIL (2.0%) 2,990,000 Costco Companies, Inc., 0%, due 08/19/17.......... 2,507,863 1,975,000 Gap, Inc., 5.75%, due 03/15/09.................... 2,666,250 ------------ Total Retail.................................. 5,174,113 ------------ TELECOMMUNICATIONS (2.0%) 4,620,000 Telefonos de Mexico, S.A. de C.V., 4.25%, due 06/15/04.................................... 5,191,725 ------------ Principal Market Amount Value - ----------- ------------ TRANSPORTATION (4.5%) $ 9,975,000 Carnival Corp., 0%, due 10/24/21.................. $ 6,384,000 1,210,000 Northwest Airlines Corp., (144A), 6.625%, due 05/15/23.................................... 1,293,188* 3,855,000 United Parcel Service, Inc., 1.75%, due 09/27/07.................................... 3,883,913+ ------------ Total Transportation.......................... 11,561,101 ------------ TOTAL FIXED INCOME SECURITIES (COST: $148,449,552) (60.4%)................ 156,504,853 ------------ Number of Shares - ----------- CONVERTIBLE PREFERRED STOCK AEROSPACE/DEFENSE (1.9%) 85,150 Raytheon, Inc., Class B, $4.125................... 4,853,550+ ------------ AUTOMOTIVE (3.5%) 209,200 Ford Motor Co. Capital Trust II, $3.25............ 9,126,350 ------------ BANKING & FINANCIAL SERVICES (3.5%) 76,700 Household International, Inc., Exchangeable HSBC Holdings PLC, $2.219............................ 2,710,578 29,900 State Street Corp., $13.50........................ 6,261,060 ------------ Total Banking & Financial Services............ 8,971,638 ------------ COMMERCIAL SERVICES (3.9%) 162,050 Cendant Corp., $3.875............................. 7,331,142+ 25,805 Xerox Corp., $6.25................................ 2,705,654 ------------ Total Commercial Services..................... 10,036,796 ------------ COMPUTER SERVICES (2.0%) 314,390 Goldman Sachs Group, Inc., Exchangeable AOL Time Warner, Inc., $0.916............................ 5,088,402 ------------ COMPUTER SOFTWARE (1.0%) 113,700 Electronic Data Systems Corp., $3.813............. 2,515,612 ------------
+ Security partially or fully lent (Note 3). * Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At June 30, 2003, the value of these securities amounted to $70,519,394 or 27.2% of net assets. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 4 - -------------------------------------------------------------------------------- [TCW LOGO] TCW CONVERTIBLE SECURITIES FUND, INC. Schedule of Investments (Unaudited) (continued) June 30, 2003 - --------------------------------------------------------------------------------
Number of Market Shares Value - ----------- ------------ ELECTRIC UTILITIES (2.9%) 176,100 Sempra Energy, $2.125............................. $ 4,864,762 78,700 TXU Corp., $4.0625................................ 2,724,987+ ------------ Total Electric Utilities...................... 7,589,749 ------------ HEALTHCARE (2.1%) 23,300 Express Scripts, Inc., $4.83...................... 2,717,362 52,900 Omnicare Inc., $2.00.............................. 2,849,988 ------------ Total Healthcare.............................. 5,567,350 ------------ INSURANCE (7.7%) 145,700 Chubb Corp., $1.75................................ 3,853,765+ 49,100 Hartford Financial Services Group, Inc., $3.50.... 2,688,225 154,600 Phoenix Companies, Inc., Exchangeable Hilb, Rogal and Hamilton Co., $2.667........................ 5,526,950 59,150 The St. Paul Companies, Inc., $4.50............... 4,146,415 150,150 Travelers Property Casualty Corp., Class A, $1.125.......................................... 3,710,207 ------------ Total Insurance............................... 19,925,562 ------------ MEDIA-BROADCASTING & PUBLISHING (6.3%) 136,400 Equity Securities Trust, Exchangeable Cablevision Systems Corp. $1.406............................ 3,256,550 103,100 Equity Securities Trust, Exchangeable Cablevision Systems Corp., $2.343........................... 2,448,625 166,500 Goldman Sachs Group, Inc., Exchangeable Clear Channel Communications, Inc., $3.096............ 6,610,883 2,050 Radio One, Inc., $65.00........................... 2,129,438+ 1,825 Radio One, Inc., (144A), $65.00................... 1,895,719* ------------ Total Media--Broadcasting & Publishing........ 16,341,215 ------------ OIL & GAS (0.9%) 48,000 Unocal Corp. $3.125............................... 2,406,000 ------------ PAPER & FOREST PRODUCTS (1.0%) 64,150 Boise Cascade Corp., $3.75........................ 2,646,188+ ------------ Number of Market Shares Value - ----------- ------------ TELECOMMUNICATIONS (2.1%) 111,300 Alltel Corp., $3.875.............................. $ 5,565,000 ------------ TRANSPORTATION (0.6%) 1,435,000 Alaska Air Group, Inc., (144A), $35.275........... 1,592,850* ------------ TOTAL CONVERTIBLE PREFERRED STOCK (COST: $93,849,744) (39.4%)........................ 102,226,262 ------------ Principal Amount - ----------- SHORT-TERM INVESTMENTS $ 2,147,978 American Express Centurion Bank, 1.26%, due 07/07/03.................................... 2,147,978** 801,032 Bank of Montreal, 1.15%, due 07/09/03............. 801,033** 2,147,978 Bank of Nova Scotia, 1.03%, due 07/08/03.......... 2,147,978** 6,980,930 Bank of Nova Scotia, 1.05%, due 08/29/03.......... 6,980,930** 2,147,978 Bank of Nova Scotia, 1.16%, due 07/09/03.......... 2,147,978** 9,236,307 BlackRock Tempcash Fund, 1.101%, due 07/01/03..... 9,236,307** 5,369,946 Canadian Imperial Bank of Commerce, 1.535%, due 11/04/03.................................... 5,369,946** 536,995 Comerica Bank, 1.073%, due 11/19/03............... 536,995** 2,147,978 Credit Agricole Indosuez, 0.94%, due 07/01/03..... 2,147,978** 2,147,978 Credit Agricole Indosuez, 1.05%, due 08/26/03..... 2,147,978** 1,610,984 Den Danske Bank, 1.04%, due 07/24/03.............. 1,610,984** 1,073,989 Merrill Lynch & Co., Inc., 1.615%, due 11/26/03.................................... 1,073,989** 413,621 Merrill Lynch Premier Institutional Fund, 1.045%, due 07/01/03.................................... 413,621** 8,914,110 Merrimac Cash Fund (Premium Class), 1.052%, due 07/01/03.................................... 8,914,110**
+ Security partially or fully lent (Note 3). * Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At June 30, 2003, the value of these securities amounted to $70,519,394 or 27.2% of net assets. ** Represents investments of security lending collateral (Note 3). SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 5 - -------------------------------------------------------------------------------- [TCW LOGO] TCW CONVERTIBLE SECURITIES FUND, INC. Schedule of Investments (Unaudited) (continued) June 30, 2003 - --------------------------------------------------------------------------------
Principal Market Amount Value - ----------- ------------ $ 3,758,962 Royal Bank of Canada, 1.3%, due 07/01/03.......... $ 3,758,962** 751,792 Royal Bank of Scotland, 1.125%, due 07/01/03...... 751,793** 5,447,139 Investors Bank & Trust Depository Reserve, 0.75%, due 07/01/03.................................... 5,447,139 ------------ TOTAL SHORT-TERM INVESTMENTS (COST: $55,635,699) (21.4%)........................ 55,635,699 ------------ TOTAL INVESTMENTS (COST: $297,934,995) (121.2%).................................... 314,366,814 LIABILITIES IN EXCESS OF OTHER ASSETS (-21.2%).... (55,088,751) ------------ NET ASSETS (100.0%)............................... $259,278,063 ============
** Represents investments of security lending collateral (Note 3). SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 6 - -------------------------------------------------------------------------------- [TCW LOGO] TCW CONVERTIBLE SECURITIES FUND, INC. Statement of Assets and Liabilities (Unaudited) June 30, 2003 - -------------------------------------------------------------------------------- ASSETS: Investments, at Value (Cost: $297,934,995).................... $314,366,814 Interest and Dividends Receivable............................. 1,140,219 ------------ Total Assets.............................................. 315,507,033 ------------ LIABILITIES: Distributions Payable......................................... 3,059,117 Payables for Securities Purchased............................. 2,580,000 Payables Upon Return of Securities Loaned..................... 50,188,560 Accrued Investment Advisory Fees.............................. 130,561 Other Accrued Expenses........................................ 270,732 ------------ Total Liabilities......................................... 56,228,970 ------------ NET ASSETS........................................................ $259,278,063 ============ Net Assets were comprised of: Common Stock, par value $0.01 per share, (75,000,000 shares authorized, 50,985,279 shares issued and outstanding)....... $ 509,853 Paid-in Capital............................................... 371,085,380 Undistributed Net Realized (Loss) on Investments.............. (123,312,113) Net Unrealized Appreciation of Investments.................... 16,431,819 (Overdistributed) Net Investment Income....................... (5,436,876) ------------ NET ASSETS........................................................ $259,278,063 ============ NET ASSET VALUE PER SHARE......................................... $ 5.09 ============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 7 - -------------------------------------------------------------------------------- [TCW LOGO] TCW CONVERTIBLE SECURITIES FUND, INC. Statement of Operations (Unaudited) Six Months Ended June 30, 2003 - -------------------------------------------------------------------------------- INVESTMENT INCOME: Interest (including security lending fees of $30,805)......... $ 2,607,894 Dividends (net of foreign withholding of taxes of $88)........ 4,480,192 ------------ Total Investment Income................................... 7,088,086 ------------ EXPENSES: Investment Advisory Fees...................................... 743,523 Accounting Fees............................................... 35,504 Administration Fees........................................... 48,989 Audit and Tax Service Fees.................................... 17,773 Transfer Agent Fees........................................... 34,213 Custodian Fees................................................ 7,942 Directors' Fees & Expenses.................................... 49,712 Proxy Costs................................................... 53,107 Listing Fees.................................................. 29,592 Insurance Costs............................................... 4,141 Legal Fees.................................................... 37,016 Printing and Distribution Costs............................... 13,619 Miscellaneous................................................. 13,820 ------------ Total Expenses............................................ 1,088,951 ------------ Net Investment Income..................................... 5,999,135 ------------ NET REALIZED (LOSS) AND CHANGE IN UNREALIZED APPRECIATION OF INVESTMENTS: Net Realized (Loss) on Investments............................ (19,737,291) Change in Unrealized Appreciation of Investments.............. 43,861,871 ------------ Net Realized (Loss) and Change in Unrealized Appreciation of Investments.......................................... 24,124,580 ------------ INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.................. $ 30,123,715 ============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 8 - -------------------------------------------------------------------------------- [TCW LOGO] TCW CONVERTIBLE SECURITIES FUND, INC. Statements of Changes in Net Assets - --------------------------------------------------------------------------------
Six Months Ended June 30, 2003 Year Ended (Unaudited) December 31, 2002 ---------------- ----------------- INCREASE (DECREASE) IN NET ASSETS: Operations: Net Investment Income........................... $ 5,999,135 $ 16,033,572 Net Realized (Loss) on Investments.............. (19,737,291) (61,476,304) Change in Unrealized Appreciation (Depreciation) of Investments................................ 43,861,871 (24,066,081) ------------ ------------- Increase (Decrease) in Net Assets Resulting from Operations........................... 30,123,715 (69,508,813) ------------ ------------- Distributions to Shareholders: From Net Investment Income...................... (7,134,253) (16,033,572) Return of Capital............................... -- (20,060,607) ------------ ------------- Total Distributions to Shareholders......... (7,134,253) (36,094,179) ------------ ------------- Capital Share Transactions: Shares Issued in Reinvestment of Dividends (46,104 for the six months ended June 30, 2003 and 293,492 for the year ended December 31, 2002)......................................... 215,306 2,098,841 ------------ ------------- Increase in Net Assets Resulting from Net Capital Share Transactions.................... 215,306 2,098,841 ------------ ------------- Total Increase (Decrease) in Net Assets..... 23,204,768 (103,504,151) NET ASSETS: Beginning of Period................................. 236,073,295 339,577,446 ------------ ------------- End of Period....................................... $259,278,063 $ 236,073,295 ============ =============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 9 - -------------------------------------------------------------------------------- [TCW LOGO] TCW CONVERTIBLE SECURITIES FUND, INC. Notes to Financial Statements (Unaudited) - -------------------------------------------------------------------------------- NOTE 1--SIGNIFICANT ACCOUNTING POLICIES: TCW Convertible Securities Fund, Inc. (the "Fund") was incorporated in Maryland on January 13, 1987 as a diversified, closed-end investment management company and is registered under the Investment Company Act of 1940, as amended. The Fund commenced operations on March 5, 1987. The Fund's investment objective is to seek a total investment return, comprised of current income and capital appreciation through investment principally in convertible securities. In accordance with the requirements of Rule 35d-1 under the 1940 Act, the Fund will invest, under normal market conditions, at least 80% of its net assets, plus any borrowings for investment purposes in convertible securities. The 80% investment policy described above is non-fundamental and may be changed by the Board of Directors to become effective upon at least 60 days' notice to shareholders. The preparation of the accompanying financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. The following is a summary of the significant accounting policies consistently followed by the Fund in the preparation of its financial statements. The policies are in conformity with accounting principles generally accepted in the United States of America. SECURITY VALUATION: Securities traded on national exchanges are valued at the last reported sales price or the mean of the current bid and asked prices if there are no sales in the trading period. Other securities which are traded on the over-the-counter market are valued at the mean of the current bid and asked prices. Short-term debt securities with maturities of 60 days or less at the time of purchase are valued at amortized cost. Other short-term debt securities are valued on a mark-to-market basis until such time as they reach a remaining maturity of 60 days, where upon they will be valued at amortized value using their value of the 61st day prior to maturity. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME: Security transactions are recorded on the trade date. Dividend income is recorded on the ex-dividend date, while interest income is recorded on the accrual basis. Discounts and premiums on securities purchased are recognized as interest income and expense, respectively, using a constant yield-to-maturity method. Realized gains and losses on investments are recorded on the basis of identified cost. DISTRIBUTIONS: The Fund intends to distribute its investment company taxable income quarterly and to distribute any net realized capital gains at least annually, to the extent required for U.S. federal income tax purposes. The Board of Directors also may, in its discretion, choose to pay distributions in excess of net investment income and net realized capital gains, though it is not required to do so. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from accounting principles generally accepted in the United States of 10 - -------------------------------------------------------------------------------- [TCW LOGO] TCW CONVERTIBLE SECURITIES FUND, INC. Notes to Financial Statements (Unaudited) (continued) - -------------------------------------------------------------------------------- America. These differences may be primarily due to differing treatments for losses deferred due to wash sales and spillover distributions. Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications to paid-in-capital and may affect net investment income per share. REPURCHASE AGREEMENTS: The Fund may invest in repurchase agreements secured by U.S. Government Securities. A repurchase agreement arises when the Fund purchases a security and simultaneously agrees to resell it to the seller at an agreed upon future date. The Fund requires the seller to maintain the value of the securities, marked to market daily, at not less than the repurchase price. If the seller defaults on its repurchase obligation, the Fund could suffer delays, collection expenses and losses to the extent that the proceeds from the sale of the collateral are less than the repurchase price. The Fund did not enter into any repurchase agreements for the six months ended June 30, 2003. NOTE 2--FEDERAL INCOME TAXES: It is the policy of the Fund to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and distribute all of its net taxable income, including any net realized gains on investments, to its shareholders. Therefore, no federal income tax provision is required. For the six months ended June 30, 2003, the Fund recognized on a tax basis a net realized loss of $19,770,531 on security transactions. At June 30, 2003, net unrealized appreciation for federal income tax purposes is comprised of the following components: Appreciated securities...................................... $ 20,236,225 Depreciated securities...................................... (3,904,106) ------------ Net unrealized (depreciation)............................... $ 16,332,119 ============ Cost of securities for federal income tax purposes.......... $298,034,695 ============
NOTE 3--INVESTMENT ADVISORY AND SERVICE FEES: TCW Investment Management Company (the "Advisor") is the investment advisor of the Fund. As compensation for the services rendered, facilities provided, and expenses borne, the Advisor is paid a monthly fee by the Fund computed at the annual rate of 0.75% of the first $100 million of the Fund's average net assets and 0.50% of the Fund's average net assets in excess of $100 million. NOTE 4--PURCHASES AND SALES OF SECURITIES: For the six months ended June 30, 2003, purchases and sales or maturities of investment securities (excluding short-term investments) aggregated $158,442,228 and $159,015,285, respectively. There were no purchases or sales of U.S. Government securities for the six months ended June 30, 2003. NOTE 5--SECURITY LENDING: During the six months ended June 30, 2003, the Fund lent securities to brokers. The brokers provided collateral, which must be maintained at 11 - -------------------------------------------------------------------------------- [TCW LOGO] TCW CONVERTIBLE SECURITIES FUND, INC. Notes to Financial Statements (Unaudited) (continued) - -------------------------------------------------------------------------------- not less than 100% of the value of the loaned securities, to secure the obligation. At June 30, 2003, the cash received from the borrowing broker was invested in short-term investments valued at $50,188,560 which is 102.9% of the value of the loaned securities. NOTE 6--DIRECTORS' FEES: Directors who are not affiliated with the Advisor received, as a group, aggregate fees and expenses of $49,712 from the Fund for the six months ended June 30, 2003. Certain officers and/ or directors of the Fund are also officers and/or directors of the Advisor. NOTE 7--RESTRICTED SECURITIES: The Funds are permitted to invest in securities that are subject to legal or contractual restrictions on resale. These securities generally may be resold in transactions exempt from registration or to the public if the securities are registered. Disposal of these securities may involve time consuming negotiations and expense, and prompt sale at an acceptable price may be difficult. There are no restricted securities (excluding 144A issues) at June 30, 2003. NOTE 8--REPORT OF ANNUAL MEETING OF SHAREHOLDERS: The Annual Meeting of Shareholders of the Fund was held on July 16, 2003. At the meeting, the following matters were submitted to a shareholder vote and approved by a vote of a majority of the Fund's outstanding shares; (i) the election of Ernest O. Ellison, Samuel P. Bell, Richard W. Call, Matthew K. Fong, John A. Gavin, Patrick C. Haden, Charles A. Parker and Robert G. Sims as Directors to serve until the next annual meeting of the Fund's shareholders and until their successors are elected and qualify (each Director received 46,243,475 affirmative votes, votes exceptions 421,338 and votes withheld 1,547,620); and (ii) the ratification of the selection of Deloitte & Touche LLP as independent auditors of the Fund for the fiscal year ending December 31, 2003 (votes for 47,258,220; votes against 515,367 and abstentions 438,846). 50,985,279 shares were outstanding on the record date of this meeting and 48,212,433 shares entitled to vote were present in person or by proxy at the meeting. 12 - -------------------------------------------------------------------------------- [TCW LOGO] TCW CONVERTIBLE SECURITIES FUND, INC. Financial Highlights - --------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED DECEMBER 31, JUNE 30, 2003 ------------------------------------------------------------- (UNAUDITED) 2002 2001 2000 1999 1998 ------------- --------- --------- --------- --------- --------- Net Asset Value Per Share, Beginning of Period................................ $ 4.63 $ 6.70 $ 8.48 $ 11.32 $ 9.37 $ 9.21 -------- -------- -------- -------- -------- -------- Income from Operations: Net Investment Income (5)............. 0.12 0.32 0.38 0.35 0.35 0.35 Impact to Capital for Shares Issued... -- -- (0.01) -- -- (0.01) Impact to Capital for Shares Repurchased........................ -- -- -- 0.02 -- -- Net Realized and Unrealized Gains (Losses) on Securities............. 0.48 (1.68) (1.31) (0.80) 3.15 0.85 -------- -------- -------- -------- -------- -------- Total from Investment Operations.................. 0.60 (1.36) (0.94) (0.43) 3.50 1.19 -------- -------- -------- -------- -------- -------- Less Distributions: Distributions from Net Investment Income............................. (0.14) (0.32) (0.60) (0.35) (0.35) (0.35) Distributions from Net Realized Gain............................... -- -- -- (2.06) (1.20) (0.68) Distributions from Paid-in-Capital.... -- (0.39) (0.24) -- -- -- -------- -------- -------- -------- -------- -------- Total Distributions........... (0.14) (0.71) (0.84) (2.41) (1.55) (1.03) -------- -------- -------- -------- -------- -------- Net Asset Value Per Share, End of Period................................ $ 5.09 $ 4.63 $ 6.70 $ 8.48 $ 11.32 $ 9.37 ======== ======== ======== ======== ======== ======== Market Value Per Share, End of Period... $ 4.74 $ 4.16 $ 8.55 $ 10.38 $ 9.56 $ 9.63 ======== ======== ======== ======== ======== ======== Total Investment Return (1)............. 17.37%(4) (45.11)% (9.27)% 34.95% 16.10% 11.41% Net Asset Value Total Return (2)........ 13.15%(4) (20.75)% (10.89)% (4.79)% 39.16% 13.34% RATIOS/SUPPLEMENTAL DATA: Net Assets, End of Period (in thousands)............................ $259,278 $236,073 $339,577 $352,555 $477,608 $393,588 Ratio of Expenses to Average Net Assets................................ 0.89%(3) 0.83% 0.75% 0.69% 0.68% 0.73% Ratio of Net Investment Income to Average Net Assets.................... 4.92%(3) 5.82% 5.16% 2.88% 3.47% 3.73% Portfolio Turnover Rate................. 65.85%(4) 75.04% 129.57% 159.44% 119.92% 124.51%
(1) Based on market value per share, adjusted for reinvestment of distributions. (2) Based on net asset value per share, adjusted for reinvestment of distributions. (3) Annualized. (4) For the six months ended June 30, 2003 and not indicative of a full year's operating results. (5) Computed using average shares outstanding throughout the period. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 13 [TCW LOGO]-Registered Trademark- ITEM 1. REPORT TO STOCKHOLDERS. [Filed Herewith] ITEM 2. CODE OF ETHICS. Not applicable. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. Not applicable. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Not applicable. ITEM 5-6. [RESERVED] ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 8. [RESERVED] ITEM 9. CONTROLS AND PROCEDURES. (a) The Chief Executive Officer and Chief Financial Officer have concluded that the registrant's disclosure controls and procedures (as defined in rule 30a-2(c) under the Investment Company Act of 1940) provide reasonable assurances that material information relating to the registrant is made known to them by the appropriate persons, based on their evaluation of these controls and procedures as of a date within 90 days of the filing date of this report. (b) There were no significant changes in the registrant's internal controls or in other factors that could significantly affect these controls subsequent to the date of the evaluation described above, including any corrective actions with regard to significant deficiencies and material weaknesses. ITEM 10. EXHIBITS. (a) Not applicable. (b) EX-99.CERT - Section 302 Certifications (filed herewith). EX-99.906CERT - Section 906 Certification (filed herewith). SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (Registrant) TCW Convertible Securities Fund, Inc. By (Signature and Title) /s/ Alvin R. Albe, Jr. ------------------------------- Alvin R. Albe, Jr. Chief Executive Officer Date August 19, 2003 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By (Signature and Title) /s/ Alvin R. Albe, Jr. ------------------------------- Alvin R. Albe, Jr. Chief Executive Officer Date August 19, 2003 By (Signature and Title) /s/ David S. DeVito ------------------------------- David S. DeVito Chief Financial Officer Date August 19, 2003 EX-99.CERT 3 a2116221zex-99_cert.txt EXHIBIT 99.CERT I, Alvin R. Albe, Jr., certify that: 1. I have reviewed this report on Form N-CSR of TCW Convertible Securities Fund, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-2(c) under the Investment Company Act of 1940) for the registrant and have: (a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period for which this report is being prepared; (b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this report (the "Evaluation Date"); and (c) presented in this report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): (a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize, and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: August 19, 2003 /s/ Alvin R. Albe, Jr. ------------------------------- Alvin R. Albe, Jr. Chief Executive Officer I, David S. DeVito, certify that: 1. I have reviewed this report on Form N-CSR of TCW Convertible Securities Fund, Inc. 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-2(c) under the Investment Company Act of 1940) for the registrant and have: (a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period for which this report is being prepared; (b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this report (the "Evaluation Date"); and (c) presented in this report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): (a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize, and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: August 19, 2003 /s/ David S. DeVito ------------------------------- David S. DeVito Chief Financial Officer EX-99.906CERT 4 a2116221zex-99_906cert.txt EXHIBIT 99.906CERT CERTIFICATION Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), each of the undersigned officers of TCW Convertible Securities Fund, Inc. do hereby certify, to such officer's knowledge, that: The semi-annual report on Form N-CSR of TCW Convertible Securities Fund, Inc. for the period ended June 30, 2003 (the "Form N-CSR") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in the Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of TCW Convertible Securities Fund, Inc. Date: August 19, 2003 /s/ Alvin R. Albe, Jr. ------------------------------ Alvin R. Albe, Jr. Chief Executive Officer /s/ David S. DeVito ------------------------------ David S. DeVito Chief Financial Officer A signed original of this written statement required by Section 906 has been provided to TCW Convertible Securities Fund, Inc. and will be retained by TCW Convertible Securities Fund, Inc. and furnished to the Securities and Exchange Commission or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----