<PAGE>
[LOGO OF TCW]
TCW CONVERTIBLE SECURITIES FUND, INC.
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DIRECTORS AND OFFICERS
Ernest O. Ellison Coleman W. Morton
President and Director Director
Norman Barker, Jr. Charles A. Parker
Director Director
Richard W. Call Lawrence J. Sheehan
Director Director
Edmund W. Clarke Robert G. Sims
Director Director
Ronald E. Robison David K. Sandie
Senior Vice President and Principal Accounting Officer,
Chief Operating Officer Treasurer and Assistant Secretary
Robert M. Hanisee Philip K. Holl
Senior Vice President Secretary
Kevin A. Hunter Marie M. Bender
Senior Vice President Assistant Secretary
Thomas E. Larkin, Jr. Michael E. Cahill
Senior Vice President General Counsel and
Assistant Secretary
Hilary G.D. Lord
Senior Vice President
and Assistant Secretary
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SHAREHOLDER INFORMATION
INVESTMENT ADVISER
TCW Funds Management, Inc.
865 South Figueroa Street
Los Angeles, California 90017
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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
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CUSTODIAN
Custodial Trust Company
101 Carnegie Center
Princeton, New Jersey 08540
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INDEPENDENT AUDITORS
Deloitte & Touche LLP
1000 Wilshire Boulevard
Los Angeles, California 90017
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LEGAL COUNSEL
O'Melveny & Myers
400 S. Hope Street
Los Angeles, California 90071
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TCW CONVERTIBLE SECURITIES FUND, INC.
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SEMI-ANNUAL REPORT
JUNE 30, 1996
[LOGO OF TCW]
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<PAGE>
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[LOGO OF TCW] TCW CONVERTIBLE SECURITIES FUND, INC.
The President's Letter
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DEAR SHAREHOLDER:
The performance of the stock market was very good for the first six months
of 1996. The combination of strong corporate earnings and significant fund flows
into U.S. equity mutual funds has propelled stock prices significantly higher
than their levels at the beginning of the year. While stocks have done well, the
bond market has delivered negative returns as interest rates have moved
significantly higher. Given that convertibles are hybrid in nature, their re-
turns were good in the first half as they captured approximately 75%-80% of the
upside of the S&P 500.
PERFORMANCE OF THE FUND'S PORTFOLIO
As shown in Table 1 below, the return for TCW Convertible Securities Fund,
Inc. (the "Fund") exceeded the Lipper Average of Convertible Mutual Funds,
while slightly trailing that of the First Boston Convertible Securities Index.
Convertibles captured roughly three quarters of the upside of the S&P 500 In-
dex (with income) despite a significant rise in interest rates. This perfor-
mance was achieved primarily because the equities underlying convertibles
outperformed the S&P 500 Index (with income) by about two percentage points.
TABLE 1
PERFORMANCE DATA
<TABLE>
<CAPTION>
Six Months
Ended
June 30, 1996
-------------
<S> <C>
TCW Convertible Securities Fund, Inc. ............................ 7.5%
Lipper Average of Convertible Mutual Funds........................ 7.0%
First Boston Convertible Securities Index......................... 8.1%
S&P 500 Index (with income)....................................... 10.1%
</TABLE>
The convertible new issue market was very active during the first six
months of 1996. There were 89 issues with a net value of $11.5 billion which
were brought to market. If this pace were to be sustained, total new issuances
would rival that of 1993 which was a record year. Although 1996 has been an
excellent year for the convertible new issuance market, we believe the market's
recent volatility will slow activity during the remainder of the year.
During the first half of 1996, the level of undervaluation in the
convertible market continued to dissipate. New issue terms had become somewhat
aggressive, particularly in non-investment grade issues. Some of these issues
had coupon/dividend yields and/or call protection which were insufficient.
However, as the year progressed and the markets became more difficult, terms
cheap-ened. Several of the more recent issues have been priced attractively and
have had very short maturities of four to seven years. We believe this short
maturity paper is very defensive and particularly appropriate for the current
market environment.
Table 2 shows the average performance of the new issues which have come to
market in 1996 and the same figures for bonds with maturities of 7 years or
less. These figures are calculated only for securities whose underlying stocks
moved +/-5% from the date of issue. Clearly, convertibles continue to offer
compelling risk reward tradeoffs versus their underlying common stocks, and
short maturities are having a substantial beneficial impact on the level of
downside protection.
TABLE 2
CONVERTIBLE NEW ISSUES
PARTICIPATION IN UNDERLYING STOCKS
RISE/DECLINE
<TABLE>
<CAPTION>
Rise Decline
---- -------
<S> <C>
83.7% 37.1%
</TABLE>
MATURITIES 7 YEARS OR LESS
<TABLE>
<CAPTION>
Rise Decline
---- -------
<S> <C>
80.1% 33.2%
</TABLE>
During the first six months of the year, interest rates increased
significantly. As seen in Table 3, the increase was most pronounced in the
intermedi ate maturities most relevant to convertibles. The major impact of
rising rates was reflected in lower investment values and some compression in
conversion premiums.
1
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[LOGO OF TCW] TCW CONVERTIBLE SECURITIES FUND, INC.
The President's Letter (continued)
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TABLE 3
U.S. TREASURY SECURITIES YIELD
<TABLE>
<CAPTION>
3 6 1 3 5 10 30
Months Months Year Years Years Years Years
------ ------ ---- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
June 30, 1996...................... 5.16% 5.37% 5.69% 6.28% 6.47% 6.71% 6.87%
December 31, 1995.................. 5.08 5.16 5.14 5.22 5.38 5.57 5.95
Increase........................... 0.08 0.21 0.55 1.06 1.09 1.14 0.92
</TABLE>
Your Fund has benefitted from its holdings in business services,
pharmaceuticals, pollution control, airlines, and insurance. Issues in such
companies as Omnicom, Danka, First Financial Management, Alco Standard, U.S.
Filter, Aegon, and Elan were liquidated as the prices rose to over 150% of cost
and the convertibles became equity substitutes. Other issues, such as General
Instruments, American Airlines, Delta, Altera, Quantum Health, and GME were also
liquidated with profits of 20%-50%. In contrast to 1995, the Fund's holdings in
technology detracted from performance as companies such as National
Semiconductor, Analog Devices, Motorola, Silicon Graphics, and Quantum Corp. saw
their stock prices decline substantially. In addition, our holdings in health
care services (Integrated Health Services and Healthsource) and in cable stocks
(Comcast, Telecommunications, Inc. and Cox) also hurt performance.
Looking forward, we believe the Fund is structured relatively
conservatively. Most of the equity equivalent convertibles with little downside
protection have been sold and the proceeds reinvested in short maturity
convertibles selling near par. The Fund is approximately 80% bonds and 20%
preferred stocks with most holdings concentrated in non-cyclical industries such
as health care, leisure, and business services. However, we are still investing
in technology companies which we believe have outstanding future prospects. In
many cases, the stocks are down significantly from their highs and the
convertible structure has a short maturity or put which provides excellent
downside protection.
PERFORMANCE OF THE FUND'S SHARE PRICE
The performance of the Fund's shares has lagged the underlying performance
of the Fund's securities during the first six months of 1996. The premium over
NAV contracted from 12.14% at the beginning of the year to 0.76% at the end of
the first half. This 11.38% contraction in premium offset the good NAV
performance (+7.46%) and led to a negative 3.33% return to shareholders. This
negative return consisted of two quarterly distributions of $0.21 per share and
a decline in the per share market price which fell from $9.375 at the beginning
of the year to $8.625 on June 30, 1996.
CASH DISTRIBUTIONS
The Fund's Board of Directors have continued the policy of paying out a
quarterly dividend of $0.21 per share. These dividends are paid from income, if
sufficient, from capital gains if available, and then from principal.
ECONOMIC/MARKET OUTLOOK
The economy showed renewed growth following the weak first quarter. In the
second quarter, real GDP growth should approximate 4.0-4.5%. Employment growth
has been particularly strong with the unemployment rate falling to 5.3%. The
only signs of weakness have been in June retail sales and in the shares of
cyclical stocks. It is our belief that our forecast of 2%-3% real GDP growth for
the year will be on target. The economy should slow down in the second half of
the year as consumer and capital spending moderate. This moderate growth should
allow interest rates to trade in a range of 6.5%-7.5%. We do not believe rates
can go lower because it appears that inflation, driven by higher prices for food
and gasoline, and wage increases, will move up to the 3.5% range by next year.
The market appears to have entered a more difficult and volatile period.
There is tremendous uncertainty about the direction of the economy, and interest
rates. In addition, certain sectors of the market that had be-
2
<PAGE>
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come extended are seeing their valuations contract. Given the state of the
economy, interest rates and inflation, the market could correct 10%-15%. The
"wild card" is the level of mutual fund redemptions. With over $1 trillion
dollars in U.S. stock mutual funds, the liquidation of only 5% of the funds'
assets in a difficult market could cause meaningful dislocations. Will this
happen? . . . who knows, but we continue to believe a more defensive posture is
warranted and have structured the portfolio accordingly.
Sincerely,
/s/ Ernest O. Ellison
Ernest O. Ellison
President and Director
July 19, 1996
3
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[LOGO OF TCW] TCW CONVERTIBLE SECURITIES FUND, INC.
Schedule of Investments (Unaudited)
June 30, 1996
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<TABLE>
<CAPTION>
Number of
Shares or
Principal
Amount Value
--------- -----
<S> <C>
CONSUMER STAPLES (45.0% OF NET ASSETS)
ENTERTAINMENT, LEISURE & MEDIA (11.0%)
$8,750,000 Coleman Worldwide Corp., Exchangeable Coleman
Company, 0%, due 05/27/13.......................... $ 2,892,375
$3,025,000 Comcast Corp., 3.375%, due 09/09/05................. 2,854,844
$2,660,000 Imax Corp., 5.75%, due 04/01/03..................... 2,753,100*
$2,185,000 International Cabletel, Inc., 7%, due 06/15/08...... 2,154,956*
98,300 Merrill Lynch & Company, Inc., Exchangeable Cox
Communications, Inc., $1.3725 Convertible
Preferred.......................................... 2,174,888
$5,800,000 News America Holdings, Exchangeable News Corp.
(Australia), 0%, due 03/11/13...................... 2,820,250
$2,850,000 Scholastic Corp., 5%, due 08/15/05.................. 2,992,500*
39,200 SFX Broadcasting, Inc., $3.25 Convertible Preferred. 2,048,200*
59,300 TCI Communications, Inc., $2.125 Convertible
Preferred.......................................... 2,616,612
$3,130,000 Tele-Communications International, Inc., 4.5%, due
02/15/06........................................... 2,723,100
$1,065,000 Thomas Nelson, Inc., 5.75%, due 11/30/99............ 1,037,043*
$2,725,000 United Communications, 2.75%, due 04/04/06.......... 2,731,813*
-----------
Total Entertainment, Leisure & Media.............. 29,799,681
-----------
FOODS, HOTELS & RESTAURANTS (4.2%)
$2,475,000 HFS, Inc., 4.75%, due 03/01/03...................... 2,945,250
$5,105,000 Marriott Corp., 0%, due 03/01/11.................... 2,775,844*
$5,395,000 Sandoz Capital BVI, Ltd. (Switzerland), 2%, due
10/06/02........................................... 5,765,906*
-----------
Total Foods, Hotels & Restaurants................. 11,487,000
-----------
HEALTHCARE (15.0%)
$2,725,000 Alza Corp., 5%, due 05/01/06........................ $ 2,650,063
$1,815,000 American Medical Response, 5.25%, due 02/01/01...... 1,987,425*
$1,345,000 ARV Assisted Living, Inc., 6.75%, due 04/01/06...... 1,304,650*
$ 630,000 Assisted Living Concepts, Inc., 7%, due 07/31/05.... 863,100*
$2,500,000 Complete Management, Inc., 8%, due 08/15/03......... 2,625,000
$1,195,000 Emeritus Corp., 6.25%, due 01/01/06................. 1,212,925*
$3,325,000 Healthsource, Inc., 5%, due 03/01/03................ 2,576,875*
$3,520,000 Integrated Health Services, Inc., 5.75%, due
01/01/01........................................... 3,449,600
$3,900,000 Morgan Stanley Group, Inc., Exchangeable Johnson &
Johnson, 2%, due 03/29/02.......................... 3,792,749
$2,400,000 Multicare Companies, Inc., Euro, 7%, due 03/15/03... 2,952,000
$3,010,000 Phymatrix Corp., 6.75%, due 06/15/03................ 2,964,850*
$2,260,000 Quantum Health Resources, Inc., 4.75%, due 10/01/00. 2,028,350
$2,810,000 Quintiles Transnational Corp., 4.25%, due 05/31/00.. 2,824,050*
$1,920,000 Renal Treatment Centers, Inc., 5.625%, due 07/15/06. 1,972,800*
$2,455,000 Sepracor, Inc., 7%, due 12/01/02.................... 2,455,000*
$2,700,000 Sterling House Corp., 6.75%, due 06/30/06........... 2,686,500*
$2,350,000 Tenet Healthcare Corp., Exchangeable................
Vencor, Inc., 6%, due 12/01/05.................... 2,420,500
-----------
Total Healthcare.................................. 40,766,437
-----------
RETAIL (8.8%)
$4,440,000 Baby Superstore, Inc., 4.875%, due 10/01/00......... 3,502,050
$2,380,000 Federated Department Stores, Inc., 5%, due 10/01/03. 2,772,700
</TABLE>
* Restricted security. (See Note 7)
See accompanying Notes to Financial Statements.
4
<PAGE>
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[LOGO OF TCW] TCW CONVERTIBLE SECURITIES FUND, INC.
Schedule of Investments (Unaudited) (continued)
June 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Shares or
Principal
Amount Value
--------- -----
<S> <C>
72,200 K-Mart Corp., $3.875 Convertible Preferred......... $ 3,916,850
$2,005,000 Nine West Group, Inc., 5.5%, due 07/15/03.......... 2,017,531*
$7,680,000 Staples, Inc., 4.5%, due 10/01/00.................. 8,352,000*
$2,005,000 Sunglass Hut International, Inc., 5.25%, due
04/15/03.......................................... 2,042,594*
$1,215,000 William-Sonoma, Inc., 5.25%, due 04/15/03.......... 1,300,050*
------------
Total Retail..................................... 23,903,775
------------
SERVICES--BUSINESS (6.0%)
$3,180,000 Corporate Express, 4.5%, due 07/01/00.............. 3,148,200*
$2,185,000 Omincom Group, Inc., 4.5%, due 09/01/00............ 3,648,950*
43,700 SCI Finance LLC, Exchangeable Service Corporation
International, $3.125 Convertible Preferred....... 4,222,513
$2,645,000 UBS Securities, Inc., Exchangeable General Motors,
2%, due 05/22/02.................................. 2,625,162
$2,880,000 U.S. Office Products Company, 5.5%, due 05/15/03... 2,847,600*
------------
Total Services--Business......................... 16,492,425
------------
TOTAL CONSUMER STAPLES (Cost: $117,917,429)...... 122,449,318
------------
CONSUMER CYCLICALS (2.1%)
AUTOMOTIVE (2.1%)
43,600 Federal Mogul Corp., $3.875 Convertible Preferred.. 2,452,500
$3,000,000 Magna International, Inc., (Canada), 5%, due
10/15/02.......................................... 3,142,500
------------
TOTAL CONSUMER CYCLICALS (Cost: $5,478,741)...... 5,595,000
------------
CAPITAL GOODS (32.4%)
BUILDING MATERIALS (2.6%)
27,300 Greenfield Capital Trust, $3.00 Convertible
Preferred......................................... $ 1,405,950*
$3,065,000 New World Infrastructure, 5%, due 07/15/01......... 2,934,738*
48,700 Owens-Corning Fiberglass Corp., $3.25 Convertible
Peferred.......................................... 2,788,075*
-----------
Total Building Materials......................... 7,128,763
-----------
ELECTRONICS--SEMICONDUCTORS & INSTRUMENTS (10.1%)
$1,095,000 Altera Corp., 5.75%, due
06/15/02.......................................... 1,095,000*
$3,730,000 Analog Devices, Inc., 3.5%,
due 12/01/00...................................... 4,252,200
219,750 National Semiconductor Corp., Common Stock......... 3,406,125**
$2,060,000 Park Electrochemical Corp., 5.5%, due 03/01/06..... 1,658,300
$2,500,000 Richey Electronics, Inc., 7%, due 03/01/06......... 2,562,500*
$2,975,000 SCI Systems, Inc., 5%, due 05/01/06................ 3,101,437*
$2,955,000 Solectron Corp., 6%, due 03/01/06.................. 2,703,825*
$1,285,000 Thermo Electron Corp., Exchangeable Thermo Optek,
Inc., 5%, due 10/15/00............................ 1,362,100*
$ 765,000 Thermo Electron Corp., Exchangeable ThermoQuest
Corp., 5%, due 08/15/00........................... 810,900*
$7,110,000 Xilinx, Inc., 5.25%, due 11/01/02.................. 6,505,650*
-----------
Total Electronics--Semiconductors & Instruments.. 27,458,037
-----------
INFORMATION PROCESSING (4.8%)
$3,140,000 Apple Computer, Inc., 6%, due 06/01/01............. 2,998,700*
$3,400,000 Quantum Corp., 5%, due 03/01/03.................... 3,128,000*
</TABLE>
* Restricted security. (See Note 7)
**Non-income producing.
See accompanying Notes to Financial Statements.
5
<PAGE>
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[LOGO OF TCW] TCW CONVERTIBLE SECURITIES FUND, INC.
Schedule of Investments (Unaudited) (continued)
June 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Shares or
Principal
Amount Value
--------- -----
<S> <C>
$ 7,505,000 Silicon Graphics, Inc., 0%, due 11/02/13........... $ 3,865,075*
$ 2,670,000 Storage Technology Corp., 8%, due 05/31/15......... 3,157,275
-----------
Total Information Processing..................... 13,149,050
-----------
OFFICE EQUIPMENT & SUPPLIES (0.9%)
$ 1,985,000 Danka Business Systems PLC (Great Britain), 6.75%,
due 04/01/02...................................... 2,339,819
-----------
POLLUTION CONTROL (9.8%)
$ 2,620,000 Molten Metal Technology, Inc., 5.5%, due 05/01/06.. 2,567,600*
$ 8,120,000 Thermo Electron Corp., 4.25%, due 01/01/03......... 9,825,200*
$ 1,520,000 United States Filter Corp., 5%, due 10/15/00....... 2,616,300
$ 4,865,000 United States Filter Corp., 6%, due 09/15/05....... 6,592,075*
$ 2,000,000 United Waste Systems, Inc., 4.5%, due 06/01/01..... 2,190,000*
$ 3,076,000 WMX Technologies, Inc., 2%, due 01/24/05........... 2,768,400
-----------
Total Pollution Control.......................... 26,559,575
-----------
TELECOMMUNICATION EQUIPMENT (4.2%)
55,000 Corning Delaware, $3.00 Convertible Preferred...... 3,141,875
$10,575,000 Motorola, Inc., 0%, due 09/27/13................... 8,327,813
-----------
Total Telecommunication Equipment................ 11,469,688
-----------
TOTAL CAPITAL GOODS
(Cost: $84,290,731).............................. 88,104,932
-----------
BASIC INDUSTRIES (9.9%)
OIL & GAS--DOMESTIC (3.3%)
$2,500,000 Apache Corp., Euro, 6%, due 01/15/02............... 3,018,750
67,900 Enron Corp., Exchangeable Enron Oil and Gas
Company, $1.36 Convertible Preferred.............. 1,756,912
47,500 Occidental Petroleum Corp., $3.875 Convertible
Preferred......................................... 2,832,187*
$1,380,000 Pennzoil Company, Exchangeable Chevron Corp.,
4.75%, due 10/01/03............................... 1,483,500
-----------
Total Oil & Gas--Domestic........................ 9,091,349
-----------
OIL & GAS--INTERNATIONAL (3.6%)
$1,710,000 Nabors Industries, Inc., 5%, due 05/15/06........... 1,923,750
82,400 Occidental Petroleum Corp., Exchangeable Canadian
Occidental Petroleum, $3.00 Convertible Preferred.. 5,119,100
97,400 Sun Company, Inc., $1.80 Convertible Preferred...... 2,873,300
-----------
Total Oil & Gas--International.................... 9,916,150
-----------
PAPER & PACKAGING (2.0%)
$2,660,000 Advance Agro Public Company, 3.5%, due 06/17/01.... 2,633,400*
60,000 Crown Cork & Seal Company, Inc., $1.88 Convertible
Preferred......................................... 2,730,000
-----------
Total Paper & Packaging.......................... 5,363,400
-----------
METALS (1.0%)
97,700 Freeport-McMoran Copper & Gold, Inc., $1.25 2,662,324
Convertible Preferred............................. -----------
TOTAL BASIC INDUSTRIES
(Cost: $24,485,473).............................. 27,033,223
-----------
</TABLE>
* Restricted security. (See Note 7)
See accompanying Notes to Financial Statements.
6
<PAGE>
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[LOGO OF TCW] TCW CONVERTIBLE SECURITIES FUND, INC.
Schedule of Investments (Unaudited) (continued)
June 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Shares or
Principal
Amount Value
--------- -----
<S> <C>
CREDIT SENSITIVE (11.6%)
BUILDING, REAL ESTATE AND REIT'S (2.6%)
$2,605,000 Liberty Property Trust, 8%, due 07/01/01............. $ 2,670,125
$ 990,000 LTC Properties, Inc., 7.75%, due 01/01/02............ 975,150
$3,180,000 LTC Properties, Inc., 8.5%, due 01/01/01............. 3,406,575
-----------
Total Building, Real Estate, and REIT's............ 7,051,850
-----------
INSURANCE (4.7%)
67,900 Allstate Corp., Exchangable PMI Group, Inc., $2.30
Convertible Preferred............................... 2,682,050
$4,950,000 Republic of Italy, Exchangeable Istituto Nazionale
delle Assicurazioni S.P.A., (Italy), 5%, due
06/28/01............................................ 5,061,375
97,400 Saloman, Inc., Exchangeable Financial Security
Assurance, $2.30 Convertible Preferred ............. 2,678,500
45,700 St. Paul Companies, Inc.,
$3.00 Convertible Preferred......................... 2,399,250
-----------
Total Insurance.................................... 12,821,175
-----------
SERVICES--FINANCIAL & MISCELLANEOUS (3.3%)
55,000 Advanta Corp., $2.4975 Convertible Preferred......... 2,511,375
$3,670,000 MBL International Finance Bermuda Trust, Exchangeable
Mitsubishi Bank, Ltd. (Japan), 3%, due 11/30/02..... 4,284,725
$1,690,000 Santa Fe Pacific Pipeline Partners L.P., 10.42%, due
08/15/10............................................ 2,070,250
-----------
Total Services--Financial & Miscellaneous.......... 8,866,350
-----------
TELECOMMUNICATIONS (1.0%)
43,000 MFS Communications Company, Inc., $2.68 Convertible
Preferred........................................... 2,730,500
------------
TOTAL CREDIT SENSITIVE
(Cost: $29,301,255).............................. 31,469,875
------------
REPURCHASE AGREEMENTS (2.5%)
$ 233,615 Stock Loan Repurchase, Bear Stearns & Co., Inc.,
dated 06/28/96, 2.938%, due 07/01/96,
(collateralized by $230,000 U.S. Treasury Bill,
valued at $239,588)................................. 233,615
$6,539,620 Stock Loan Repurchase, Bear Stearns & Co., Inc.,
dated 06/28/96, 6%, due 07/01/96,
(collateralized by $6,700,000 U.S. Treasury
Bill, valued at $6,675,161)......................... 6,539,620
$ 157,635 Cash Repurchase Agreement, Bear Stearns & Co.,
Inc., dated 06/28/96, 5.8%, due 07/01/96,
(collateralized by $155,000 U.S. Treasury Bill,
valued at $161,461)................................. 157,635
------------
Total Repurchase Agreements
(Cost: $6,930,870)................................ 6,930,870
------------
TOTAL INVESTMENTS (103.5%) (COST: $268,404,499).... 281,583,218
EXCESS OF LIABILITIES OVER OTHER ASSETS (-3.5%).... (9,611,461)
------------
NET ASSETS (100%).................................. $271,971,757
============
</TABLE>
See accompanying Notes to Financial Statements.
7
<PAGE>
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[LOGO OF TCW] TCW CONVERTIBLE SECURITIES FUND, INC.
Statement of Assets and Liabilities (Unaudited)
June 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments at Value (Cost $268,404,499) (Note 1)......................... $281,583,218
Receivables for Securities Sold........................................... 2,661,374
Interest Receivable....................................................... 2,260,477
Dividends Receivable...................................................... 201,453
------------
Total Assets............................................................ 286,706,522
------------
LIABILITIES:
Payables for Securities Purchased......................................... 768,375
Payable upon Return of Securities Loaned (Note 5)......................... 6,773,235
Distributions Payable..................................................... 6,673,818
Accrued Investment Advisory and Service Fees (Note 3)..................... 418,218
Accounts Payable.......................................................... 101,119
------------
Total Liabilities....................................................... 14,734,765
------------
NET ASSETS.................................................................. $271,971,757
============
Net Assets were comprised of:
Common Stock, par value $0.01 per share, (50,000,000 shares
authorized, 31,780,084 shares issued and outstanding).................... $ 317,801
Paid-in Capital........................................................... 287,197,669
Distribution of Paid-in Capital (Note 1).................................. (34,179,879)
Net Unrealized Appreciation of Investments................................ 13,178,719
Accumulated Realized Gains on Securities Sold ............................ 5,457,447
------------
NET ASSETS.................................................................. $271,971,757
============
NET ASSET VALUE PER SHARE................................................... $ 8.56
============
</TABLE>
See accompanying Notes to Financial Statements.
8
<PAGE>
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[LOGO OF TCW] TCW CONVERTIBLE SECURITIES FUND, INC.
Statement of Operations (Unaudited)
For the Six Months Ended June 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest (including security lending fees of $23,817)............ $ 5,459,262
Dividends........................................................ 1,173,550
-----------
Total Investment Income........................................ 6,632,812
-----------
EXPENSES:
Investment Advisory Fees (Note 3)................................ 951,063
Custodian Fees................................................... 57,988
Transfer Agent Fees.............................................. 42,384
Directors' Fees and Expenses (Note 6)............................ 37,397
Proxy Costs...................................................... 32,411
Printing and Distribution Costs.................................. 22,439
Listing Fees..................................................... 16,693
Audit and Tax Service Fees....................................... 14,960
Accounting and Other Service Fees (Note 3)....................... 12,465
Insurance Costs.................................................. 10,642
Business Tax Fees................................................ 5,278
Legal Fees (Note 6).............................................. 5,010
Miscellaneous.................................................... 2,374
-----------
Total Expenses................................................. 1,211,104
-----------
Net Investment Income.......................................... 5,421,708
-----------
NET REALIZED GAIN AND CHANGE IN UNREALIZED (DEPRECIATION)
OF INVESTMENTS:
Net Realized Gain on Investments................................. 17,859,424
Change in Unrealized (Depreciation) of Investments............... (3,625,108)
-----------
Net Realized Gain and Change in Unrealized
(Depreciation) of Investments................................. 14,234,316
-----------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................... $19,656,024
===========
</TABLE>
See accompanying Notes to Financial Statements.
9
<PAGE>
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[LOGO OF TCW] TCW CONVERTIBLE SECURITIES FUND, INC.
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended
June 30, 1996 Year Ended
(Unaudited) December 31, 1995
------------- -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net Investment Income..................................................... $ 5,421,708 $ 11,649,611
Net Realized Gain on Investments.......................................... 17,859,424 15,154,221
Change in Unrealized Appreciation
(Depreciation) of Investments............................................ (3,625,108) 27,541,572
------------ ------------
Increase in Net Assets Resulting from Operations........................ 19,656,024 54,345,404
------------ ------------
Distributions to Shareholders:
From Net Investment Income................................................ (5,421,708) (11,649,611)
From Net Realized Gain on Investments..................................... -- (10,376,404)
Distribution in Excess of Realized Gains.................................. (7,912,973) (4,489,004)
------------ ------------
Total Distributions to Shareholders..................................... (13,344,681) (26,515,019)
------------ ------------
Capital Share Transactions:
Shares Issued in Reinvestment of Dividends (119,704 for
the six months ended June 30, 1996 and 260,547 for
the year ended December 31, 1995, respectively).......................... 1,042,505 2,091,302
------------ ------------
Total Increase in Net Assets............................................ 7,363,848 29,921,687
NET ASSETS:
Beginning of Period......................................................... 264,607,909 234,686,222
------------ ------------
End of Period............................................................... $271,971,757 $264,607,909
============ ============
</TABLE>
See accompanying Notes to Financial Statements.
10
<PAGE>
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[LOGO OF TCW] 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 management investment
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.
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 generally accepted accounting
principles.
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 immediately preceding the time of
determination. 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. Securities for which quotations are not readily available
and unregistered securities are valued at fair value as determined in good faith
by, or under the direction of, the Board of Directors.
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. Original issue
discount is accreted as interest income using a constant yield to maturity.
Discounts on securities purchased are recognized as interest income at the
time the security is sold using a constant yield to maturity. Premiums on
securities purchased are not amortized. Realized and unrealized gains and
losses on investments are recorded on the basis of identified cost.
DISTRIBUTIONS: The Fund's Board of Directors has adopted a policy under which
it has declared quarterly dividends of $0.21 per share. Payments to
shareholders under the distribution policy are reflected in the financial
statements in the following order; first from net investment income and,
depending upon the results achieved each year, secondly from net realized
capital gains, thirdly as a distribution in excess of net investment income or
capital gains which may become taxable to shareholders in the subsequent year
and, lastly, as a return of capital which is not taxable to shareholders.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments for
market discount, 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 AGREEMENT: 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.
11
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[LOGO OF TCW] TCW CONVERTIBLE SECURITIES FUND, INC.
Notes to Financial Statements (Unaudited) (continued)
- -------------------------------------------------------------------------------
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 gain on
investments, to its shareholders. Therefore, no federal income tax provision is
required.
During the six months ended June 30, 1996, the Fund realized on a tax basis
a net realized gain of $17,859,424 on security transactions.
As of June 30, 1996, net unrealized appreciation (depreciation) for federal
income tax purposes is comprised of the following components:
<TABLE>
<S> <C>
Appreciated securities............................................ $ 19,750,434
Depreciated securities............................................ (6,571,715)
------------
Net unrealized appreciation....................................... $ 13,178,719
============
Cost of securities for federal income tax purposes................ $268,404,499
============
</TABLE>
NOTE 3--INVESTMENT ADVISORY AND SERVICE FEES:
TCW Funds Management, Inc. is the Investment Adviser of the Fund and also
furnishes the Fund with accounting and other services and office space. As
compensation for the services rendered, facilities provided, and expenses borne,
the Adviser 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. In addition, the Fund
reimburses the Adviser for the costs of providing accounting services to the
Fund (up to a maximum of $25,000 per year).
NOTE 4--PURCHASES AND SALES OF SECURITIES:
For the six months ended June 30, 1996, purchases and sales or maturities
of investment securities (excluding short-term investments) aggregated
$189,208,457 and $198,558,960, respectively.
NOTE 5--SECURITY LENDING:
During the six months ended June 30, 1996, the Fund lent securities to a
bro-ker. The broker provided collateral, which must be maintained at not less
than 100% of the value of the loaned securities, to secure the obligation. At
June 30, 1996, the cash received from the borrowing broker was invested in
overnight repurchase agreements issued by the borrowing broker which, in turn,
were collateralized by U.S. Treasury securities valued at $6,914,749, or 102%,
of the value of the loaned securities.
NOTE 6--DIRECTORS' AND LEGAL FEES:
Directors who are not affiliated with the Investment Adviser received, as a
group, aggregate fees and expenses of $37,397 from the Fund for the six months
ended June 30, 1996. Legal fees totaled $5,010 of which $2,986 were paid to
O'Melveny & Myers, of which an individual who is of counsel, serves as a
director of the Fund. Certain officers and/or directors of the Fund are also
officers and/or directors of the Investment Adviser.
NOTE 7--REPORT OF ANNUAL MEETING OF SHAREHOLDERS
The Annual Meeting of Shareholders of the Fund was held on May 22, 1996. 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 voting securities:
(i) the election of Ernest O. Ellison, Norman Barker, Jr., Richard W. Call,
Edmund W. Clarke, Coleman W. Morton, Charles A. Parker, Lawrence J. Sheehan 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 25,143,288 affirmative votes; votes withheld 249,992 and exceptions
253,931); (ii) Renewal of the Investment Advisory and Management Agreement for
another annual period (votes for: 24,732,136; votes against 390,891 and
abstentions 524,184); and (iii) the ratification of the
12
<PAGE>
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[LOGO OF TCW] TCW CONVERTIBLE SECURITIES FUND, INC.
Notes to Financial Statements (Unaudited) (continued)
- --------------------------------------------------------------------------------
selection of Deloitte & Touche LLP as independent auditors of the Fund for the
fiscal year ending December 31, 1996 (votes for: 25,120,530; votes against
194,289 and abstentions 332,392). 31,718,395 shares were outstanding on the
record date for this meeting and 25,647,211 shares entitled to vote were present
in person or by proxy at the meeting.
NOTE 8--RESTRICTED SECURITIES:
The following restricted securities held by the Fund at June 30, 1996 were
valued both at the date of acquisition and June 30, 1996, in accordance with the
Security Valuation policy of the Fund described in Note 1. The restricted
securities were purchased in private placement transactions without registration
under the Securities Act of 1933. Such securities generally may be sold only in
a privately negotiated transaction with a limited number of purchasers, in a
public offering registered under the Securities Act of 1933 (the "1933 Act") or
in accordance with Rule 144A under the 1933 Act. The Fund may classify a Rule
144A security as liquid if it can be reasonably expected that the Fund would be
able to dispose of the security within seven days in the ordinary course of
business at approximately its carrying value. Rule 144A securities for which
such a determination is not made and other restricted securities are deemed
illiquid and are subject to an aggregate limitation of no more than 15% of the
Fund's investment portfolio. The Fund will bear any costs incurred in connection
with the disposition of restricted securities. The total value of restricted
securities at June 30, 1996 is $128,366,874, which represents 47.2% of net
assets. The total value of illiquid securities at June 30, 1996 is $17,760,593,
which represents 6.5% of net assets.
13
<PAGE>
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[LOGO OF TCW] TCW CONVERTIBLE SECURITIES FUND, INC.
Notes to Financial Statements (Unaudited) (continued)
June 30, 1996
- --------------------------------------------------------------------------------
NOTE 8--RESTRICTED SECURITIES (CONTINUED)
<TABLE>
<CAPTION>
Number of
Shares or
Principal Date of
Amount Acquisition Cost
--------- ----------- ----------
<C> <S> <C> <C>
$2,660,000 Advance Agro Public Company, 3.5%, due 06/17/01.................. 06/07/96 $2,660,000*
$1,095,000 Altera Corp., 5.75%, due 06/15/02................................ 06/06/96 1,173,840
$1,815,000 American Medical Response, 5.25%, due 02/01/01................... 01/03/96 1,815,000*
$3,140,000 Apple Computer, Inc., 6%, due 06/01/01........................... 06/04/96 3,140,000
$1,345,000 ARV Assisted Living, Inc., 6.75%, due 04/01/06................... 03/28/96 1,345,000*
$ 630,000 Assisted Living Concepts, Inc., 7%, due 07/31/05................. 08/02/95 630,000*
$3,180,000 Corporate Express, 4.5%, due 07/01/00............................ 06/19/96 3,177,225
$1,195,000 Emeritus Corp., 6.25%, due 01/01/06.............................. 02/08/96 1,195,000*
27,300 Greenfield Capital Trust, $3.00 Convertible Preferred............ 04/18/96 1,365,000
$3,325,000 Healthsource, Inc., 5%, due 03/01/03............................. 03/01/96 3,215,285
$2,660,000 Imax Corp., 5.75%, due 04/01/03.................................. 04/02/96 2,660,000
$2,185,000 International Cabletel, Inc., 7%, due 06/15/08................... 04/12/95 2,185,000
$5,105,000 Marriott Corp., 0%, due 03/01/11 ................................ 03/19/96 2,753,922
$2,620,000 Molten Metal, Technology, Inc., 5.5%, due 05/01/06............... 04/26/96 2,620,000
$3,065,000 New World Infrastructure, 5%, due 07/15/01....................... 05/15/96 3,065,000
$2,005,000 Nine West Group, Inc., 5.5%, due 07/15/03........................ 06/20/96 2,005,000
$2,185,000 Omnicom Group, Inc., 4.5%, due 09/01/00.......................... 08/18/93 2,268,963
48,700 Owens-Corning Fiberglas Corp., $3.25 Convertible Preferred....... 05/03/95 2,435,000
$3,010,000 Phymatrix Corp., 6.75%, due 06/15/03............................. 06/21/96 3,010,000
$3,400,000 Quantum Corp., 5%, due 03/01/03.................................. 02/21/96 3,399,022
$2,810,000 Quintiles Transnational Corp., 4.25%, due 05/31/00............... 04/23/96 2,817,313
$1,920,000 Renal Treatment Centers, Inc., 5.625%, due 07/15/06.............. 06/06/96 1,920,538
$2,500,000 Richey Electronics, Inc., 7%, due 03/01/06....................... 02/21/96 2,500,000*
$5,395,000 Sandoz Capital BVI, Ltd. (Switzerland),
2%, due 10/06/02................................................ 09/28/95 4,935,880
$2,850,000 Scholastic Corp., 5%, due 08/15/05............................... 08/04/95 2,890,313
$2,975,000 SCI Systems, Inc., 5%, due 05/01/06.............................. 04/17/96 2,975,000
</TABLE>
*Illiquid security.
See accompanying Notes to Financial Statements.
14
<PAGE>
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TCW CONVERTIBLE SECURITIES FUND, INC.
[LOGO OF TCW] Notes to Financial Statements (Unaudited) (continued)
June 30, 1996
- --------------------------------------------------------------------------------
NOTE 8--RESTRICTED SECURITIES (CONTINUED)
<TABLE>
<CAPTION>
Number of
Shares or
Principal Date of
Amount Acquisition Cost
--------- ----------- ----------
<C> <S> <C> <C>
$2,455,000 Sepracor, Inc., 7%, due 12/01/02.......... 11/01/95 $2,444,858
39,200 SFX Broadcasting, Inc., $3.25 Convertible
Preferred................................ 05/22/96 1,960,000
$7,505,000 Silicon Graphics, Inc., 0%, due 11/02/13.. 12/22/95 3,986,885
$2,955,000 Solectron Corp., 6%, due 03/01/06......... 02/15/96 2,961,675
$7,680,000 Staples, Inc., 4.5%, due 10/01/00......... 09/12/95 7,750,630
$2,700,000 Sterling House Corp., 6.75%, due 06/30/06. 05/17/96 2,700,000*
$2,005,000 Sunglass Hut International, 5.25%, due
04/15/03................................. 06/20/96 2,005,000
$8,120,000 Thermo Electron Corp., 4.25%, due
01/01/03................................. 11/28/95 8,385,894
$1,285,000 Thermo Electron Corp., Exchangeable Thermo
Optek, Inc., 5%, due 10/15/00............ 09/28/95 1,285,000*
$ 765,000 Thermo Electron Corp., Exchangeable
ThermoQuest Corp., 5%, due 08/15/00...... 07/20/95 765,000*
</TABLE>
<TABLE>
<CAPTION>
Principal Date of
Amount Acquisition Cost
--------- ----------- ----------
<C> <S> <C> <C>
$1,065,000 Thomas Nelson, Inc., 5.75%, due 11/30/99.. 08/03/93 $1,187,750*
$2,880,000 U.S. Office Products Company, 5.5%, due
05/15/03................................. 05/14/96 2,865,927
$2,725,000 United Communications, 2.75%, due
04/04/06................................. 03/28/96 2,725,000
$4,865,000 United States Filter Corp., 6%, due
09/15/05................................. 09/13/95 5,379,571
$2,000,000 United Waste Systems, Inc., 4.5%, due
06/01/01................................. 05/31/96 2,000,000
$1,215,000 William Sonoma, Inc. 5.25%, due 04/15/03.. 04/10/96 1,215,000*
$7,110,000 Xilinx, Inc., 5.25%, due 11/01/02......... 11/07/95 6,986,702
</TABLE>
*Illiquid security.
See accompanying Notes to Financial Statements.
15
<PAGE>
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[LOGO OF TCW] TCW CONVERTIBLE SECURITIES FUND, INC.
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended
June 30, Year Ended December 31,
1996 --------------------------------------------------------------------------------
(Unaudited) 1995 1994 1993 1992 1991 1990 1989 1988
----------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value Per
Share, Beginning
of Period................... $ 8.36 $ 7.47 $ 8.79 $ 8.36 $ 8.09 $ 6.85 $ 8.36 $ 7.99 $ 7.76
-------- -------- -------- -------- -------- -------- -------- -------- --------
Income from Operations:
Net Investment Income....... 0.17 0.37 0.38 0.40 0.41 0.43 0.46 0.50 0.55
Impact to Capital for
Shares Issued.............. -- -- -- (0.01) (0.01) -- -- -- --
Net Realized and
Unrealized Gain
(Loss) on Securities....... 0.45 1.36 (0.86) 1.25 0.71 1.65 (1.13) 0.71 0.44
-------- -------- -------- -------- -------- -------- -------- -------- --------
Total from Investment
Operations............... 0.62 1.73 (0.48) 1.64 1.11 2.08 (0.67) 1.21 0.99
Less Distributions:
Dividends from
Net Investment
Income..................... (0.17) (0.37) (0.38) (0.40) (0.41) (0.43) (0.46) (0.50) (0.55)
Distributions from Net
Realized Gains............. -- (0.33) (0.30) (0.81) (0.07) -- -- (0.06) --
Distribution in Excess of
Net Realized Gains........ (0.25) (0.14) (0.16) -- -- -- -- -- --
Return of Capital........... -- -- -- -- (0.36) (0.41) (0.38) (0.28) (0.21)
-------- -------- -------- -------- -------- -------- -------- -------- --------
Total Distributions....... (0.42) (0.84) (0.84) (1.21) (0.84) (0.84) (0.84) (0.84) (0.76)
-------- -------- -------- -------- -------- -------- -------- -------- --------
Net Asset Value Per Share,
End of Period............... $ 8.56 $ 8.36 $ 7.47 $ 8.79 $ 8.36 $ 8.09 $ 6.85 $ 8.36 $ 7.99
======== ======== ======== ======== ======== ======== ======== ======== ========
Total Investment Return (4).. (3.33)%(2) 33.6% (7.43)% 13.77% 15.90% 41.38% (3.78)% 20.23% 24.79%
Net Asset Value Total Return
(5)......................... 7.46 %(2) 24.0% (5.70)% 16.12% 13.35% 31.20% (8.25)% 15.97% 13.24%
Ratios/Supplemental
Data:
Net Assets, End of Period
(in thousands).............. $271,972 $264,608 $234,686 $273,230 $215,208 $172,331 $144,593 $175,732 $167,797
Ratio of Expenses to
Average Net Assets.......... 0.88 %(6) 0.81% 0.79% 0.80% 0.88% 0.94% 0.94% 0.95% 0.94%
Ratio of Net Investment
Income to Average Net
Assets...................... 3.95 %(6) 4.60% 4.66% 4.48% 5.04% 5.68% 5.93% 5.90% 6.66%
Portfolio Turnover Rate...... 69.52 %(2) 108.98% 110.04% 173.79% 139.39% 114.13% 99.53% 84.17% 70.62%
<CAPTION>
March 5, 1987
(Commencement)
to
December 31,
1987
--------------
<S>.......................... <C>
Net Asset Value Per
Share, Beginning
of Period................... $ 9.30 (3)
--------
Income from Operations:
Net Investment Income....... 0.46
Impact to Capital for
Shares Issued.............. (0.03)
Net Realized and
Unrealized Gain
(Loss) on Securities....... (1.53)
--------
Total from Investment
Operations............... (1.10)
Less Distributions:
Dividends from
Net Investment
Income..................... (0.44)
Distributions from Net
Realized Gains............. --
Distribution in Excess of
Net Realized Gains........ --
Return of Capital........... --
--------
Total Distributions....... (0.44)
--------
Net Asset Value Per Share,.... $ 7.76
End of Period................ ========
Total Investment Return (4)... (32.61)%(1)
Net Asset Value Total Return
(5).......................... (13.49)%(1)
Ratios/Supplemental Data:
Net Assets, End of Period
(in thousands)............... $162,989
Ratio of Expenses to
Average Net Assets........... 0.83 %(6)
Ratio of Net Investment
Income to Average Net
Assets....................... 6.12 %(6)
Portfolio Turnover Rate....... 76.91 %(1)
</TABLE>
(1) For the period March 5, 1987 (commencement) to December 31, 1987 and not
indicative of a full year's operating results.
(2) For the six months ended June 30, 1996 and not indicative of a full year's
operating results.
(3) Net of underwriting discount of $.70.
(4) Based on market value per share, adjusted for reinvestment of distributions.
(5) Based on net asset value per share, adjusted for reinvestment of
distributions.
(6) Annualized.
See accompanying Notes to Financial Statements.
16
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[LOGO OF TCW]
