<PAGE>
LOGO TCW CONVERTIBLE
SECURITIES FUND, INC.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DIRECTORS AND OFFICERS
Ernest O. Ellison Coleman W. Morton
President and Director Director
John C. Argue Charles A. Parker
Director Director
Norman Barker, Jr. Lawrence J. Sheehan
Director Director
Richard W. Call Robert G. Sims
Director Director
Ronald E. Robison David K. Sandie
Senior Vice President and Principal Accounting
Chief Operating Officer Officer, Treasurer and
Robert M. Hanisee Assistant Secretary
Senior Vice President Philip K. Holl
Kevin A. Hunter Secretary
Senior Vice President Marie M. Bender
Thomas E. Larkin, Jr. Assistant Secretary
Senior Vice President Michael E. Cahill
Hilary G.D. Lord General Counsel and
Senior Vice President Assistant Secretary
and Assistant Secretary Peter C. DiBona
Assistant Treasurer
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SHAREHOLDER INFORMATION
INVESTMENT ADVISER
TCW Funds Management, Inc.
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
Custodial Trust Company
101 Carnegie Center
Princeton, NJ 08540
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS
Deloitte & Touche LLP
Los Angeles, California 90017
- --------------------------------------------------------------------------------
LEGAL COUNSEL
O'Melveny & Myers LLP
400 S. Hope Street
Los Angeles, California 90071
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TCW CONVERTIBLE SECURITIES FUND, INC.
- -------------------------------------
- -------------------------------------
SEMI-ANNUAL REPORT
JUNE 30, 1997
LOGO
- -------------------------------------------------------------------------------
<PAGE>
- -------------------------------------------------------------------------------
TCW CONVERTIBLE SECURITIES FUND, INC.
The President's Letter
LOGO
- -------------------------------------------------------------------------------
DEAR SHAREHOLDER:
The first half of 1997 was a spectacular period for the U.S. stock market.
The best performance was generated by large capitalization stocks although
small and mid capitalization issues also did well. With interest rates rising
slightly, the returns on high grade and high yield bonds were well below those
of stocks but in positive territory. This backdrop was generally positive for
convertibles with most convertible indices generating returns of 9% to 10%.
PERFORMANCE OF THE FUNDS SHARES
During the first half of 1997, the Fund's return on Net Asset Value ("NAV")
was 8.02%. Despite the positive return on NAV, the Fund's shareholders
realized a return of just 0.74%. This resulted from a decline in the per share
market value of the Fund's shares from $9.375 on December 31, 1996 to $9.00 on
June 30, 1997 and the distribution of $0.42 in dividends. The decline in the
Fund's share price coupled with the increase in NAV, led to a decline in the
Funds premium over NAV from 10.16% on December 31, 1996 to 2.74% on June 30,
1997.
THE CONVERTIBLE MARKET
The convertible market continues to have a multitude of possibilities for
investment. With stocks doing well and dividend yields low, the convertible
market has become fair game for equity investors seeking greater income and
high yield buyers looking for yield with an equity kicker. As a result, the
demand for convertibles has been exceedingly strong in 1997. This demand has
pushed up valuations, in some cases, to levels which we believe are full.
These extended valuations are most evident among convertible bonds which are
selling between 100%-120% of par and have relatively large conversion
premiums. This results in a risk/reward profile which appears marginally
attractive. Despite what appear to be full valuations in some sectors of the
convertible market, other sectors remain attractive. In particular, there are
attractive opportunities among bonds which are trading below issue price,
dollar denominated convertibles issued by foreign companies and the new issue
market.
The new issue market for convertibles continued to be quite robust during
the first half despite the stock market correction which occurred during March
and April. In total, 66 issues with a net value of $11.7 billion came to
market. Generally, these securities were issued by speculative grade
companies. The terms on new issues ranged from cheap to overvalued, thus
selectivity was key. As the year progressed and the stock market appreciated,
demand for convertibles was strong and terms became less favorable.
Specifically, this was reflected in slightly lower coupons/dividends and
higher conversion premiums.
During the last several years, new types of convertible structures have
proliferated. One of the most interesting new structures, called Credit
Enhanced Debt Indexed to Stock ("CrEDITS"), is being issued by Goldman Sachs.
This structure combines a letter of credit from a U.S. financial institution
with a convertible security issued by a foreign company. The letter of credit
guarantees the principal, interest and the premium redemption of the bonds
which have a maturity of five years. In essence, these securities allow
participation in emerging markets equities without the attendant credit risk
and with a minimum rate of return which has ranged from 5 to 155 basis points
below the yield of the five year U.S. Treasury. Given our belief that these
securities offer very attractive potential returns with extremely low risk, we
have participated in the three CrEDITS issues listed in Table 1.
TABLE 1
CREDITS TERMS
<TABLE>
<CAPTION>
Yield
to Conversion
Security Guarantor Rating Put Premium
-------- --------- ------ ----- ----------
<S> <C> <C> <C> <C>
GVC Corp., 0%, due 05/21/02............ Chase Manhattan AA 5.82% 14.0%
Taiwan Semiconductor, 0%, due 07/3/02.. BankAmerica AA- 6.28% 20.0%
Indian Petrochemical, 2.5%, due
03/11/02.............................. BankAmerica AA- 4.61% 16.6%
</TABLE>
1
<PAGE>
- -------------------------------------------------------------------------------
TCW CONVERTIBLE SECURITIES FUND, INC.
The President's Letter (continued)
LOGO
- -------------------------------------------------------------------------------
FUND PERFORMANCE AND STRATEGY
The Fund's performance slightly lagged that of its convertible benchmarks
during the first half of the year. We believe this is primarily a result of
the Fund's strategy to concentrate on convertible securities and limit its
exposure to common stocks. Many competing convertible funds have 20%-30% of
their assets invested in common stocks which increases their returns in robust
markets. However, investing in common stocks is a double edged sword. When the
U.S. stock market suffers a correction, we believe that adhering to a strategy
of investing primarily in convertible securities will prove rewarding.
During the last 10 quarters, large capitalization stocks have seen their
valuations expand significantly. This has led to a large differential in the
performance of these issues relative to smaller stocks. In part, the
underperformance of the Fund relative to large stocks is a result of the
convertible markets significant exposure to mid and small capitalization
companies. Given the high valuations of many large capitalization stocks, it
may be likely that mid and small capitalization issues are due for a period of
relative outperformance. This should benefit convertibles in future periods.
TABLE 2
PERFORMANCE
<TABLE>
<CAPTION>
Total Returns
First Half
-------------
<S> <C>
TCW Convertible Securities Fund, Inc. ............................ +8.0%(a)
First Boston Convertible Index.................................... +9.3%
Lipper average of convertible mutual funds........................ +10.1%(a)
Standard & Poors 500 (with Income)................................ +20.6%
Nasdaq............................................................ +11.7%
Lehman Govt/Corp Bond Index....................................... +2.7%
</TABLE>
- --------
(a) After management fees and expenses.
The Fund began the year most heavily weighted in the consumer staples and
capital goods sectors. The emphasis within these sectors continues to be in
the healthcare, leisure, retail business services and technology industries.
The underweighting in consumer cyclicals and basic industries remains as there
seems to be low unit growth combined with little pricing leverage in many of
these industries. Within the credit sensitive sector, the emphasis continues
to be on niche financial services companies and REITS.
TABLE 3
FUND SECTOR ALLOCATION
<TABLE>
<CAPTION>
December 31, June 30,
1996 1997
------------ --------
<S> <C> <C>
Consumer Staples.......................................... 48.9% 50.8%
Capital Goods............................................. 33.3% 32.9%
Consumer Cyclicals........................................ 1.1% 1.1%
Basic Industries.......................................... 5.6% 5.1%
Credit Sensitive.......................................... 13.0% 11.1%
</TABLE>
During the first half of 1997, the Fund benefitted from its overweighting in
the healthcare, technology, hotel, and specialty insurance areas. In the
healthcare industry, the Fund's holdings in Sandoz, Sepracor, Tenent Exch.
Vencor and Aetna outperformed. In the hotel industry, our holdings in Host
Marriott and Marriott International added incremental value. The technology
area added significant performance as holdings in Motorola, SCI Systems,
Quantum, and XILINX outperformed. Finally, in specialty insurance our holdings
in American Bankers, Penncorp and Financial Security Assurance added value. On
the negative side, holdings in the retail sector underperformed as consumer
spending weakened in the second quarter and our holdings in the pollution
control industry, particularly Thermo Electron and U.S. Filter underperformed.
2
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The U.S. stock market has appreciated to a level which has far surpassed most
forecasts (including ours) made at the beginning of the year. The combination
of a strong bond market, lower inflation, rising interest rates on hold and
strong corporate profits have all fueled a tremendous surge in equity prices.
This has left many stocks, particularly those of the new "Nifty Fifty" at
seemingly extended valuations. Are valuations too high? . . . perhaps. However,
if the current environment of moderate economic growth, low inflation and good
corporate earnings growth continues, stocks could move higher. While we cannot
predict when the market may begin a correction, we do believe that current
valuations leave little room for disappointment. Therefore, if the market
continues to appreciate, we would use such an opportunity to reduce positions
in convertibles which have appreciated significantly and reinvest the proceeds
in convertibles with greater defensive characteristics.
RIGHTS OFFERING
The Fund launched a rights offering earlier this year. The offering was fully
subscribed and the Fund received the proceeds of approximately $51.6 million in
mid-May. These proceeds were invested promptly on behalf of the Funds
investors. This proved to be fortuitous because the market has risen
substantially since the proceeds were invested. Investors were able to purchase
new shares at $8.09. These shares are now worth $9.00 and taking into account
the quarterly dividend of $0.21 per share, the return to investors has been
15.4% on these newly issued shares.
Sincerely,
/s/ Ernest O. Ellison
Ernest O. Ellison
President and Director
July 31, 1997
3
<PAGE>
- --------------------------------------------------------------------------------
TCW CONVERTIBLE SECURITIES FUND, INC.
Schedule of Investments (Unaudited)
LOGO June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Shares or
Principal
Amount Value
--------- -----
<C> <S> <C>
CONSUMER STAPLES (50.8% OF NET ASSETS)
DRUGS AND HOSPITAL SUPPLY (4.9%)
$7,825,000 Sandoz Capital BVI, Ltd., (Switzerland), 2%, due
10/06/02........................................... $12,011,375*
$3,240,000 Sepracor, Inc., 7%, due 12/01/02.................... 4,617,000*
-----------
Total Drugs and Hospital Supply..................... 16,628,375
-----------
ENTERTAINMENT, LEISURE AND MEDIA (7.0%)
71,600 Evergreen Media Corp., $3.00 Convertible Preferred.. 3,920,100*
9,300 Golden Books Family Entertainment, Inc., $4.375
Convertible Preferred.............................. 575,438
52,500 Golden Books Family Entertainment, Inc., $4.375
Convertible Preferred.............................. 3,248,438*
160,600 Merrill Lynch & Company, Inc., Exchangeable Cox
Communications, Inc., $1.3725 Convertible
Preferred.......................................... 3,834,325
7,500 SFX Broadcasting, Inc., $3.25 Convertible Preferred. 416,250
42,600 SFX Broadcasting, Inc., $3.25 Convertible Preferred. 2,364,300*
52,900 TCI Pacific Communications, Inc., $5.00 Convertible
Preferred.......................................... 5,475,150
75,900 U.S. West, Inc., Exchangeable U.S. West Media Group,
$2.25 Convertible Preferred........................ 3,804,488
-----------
Total Entertainment, Leisure and Media.............. 23,638,489
-----------
</TABLE>
<TABLE>
<CAPTION>
Number of
Shares or
Principal
Amount Value
--------- -----
<C> <S> <C>
FOODS, HOTELS AND RESTAURANTS (8.5%)
71,800 Apple South, Inc., $3.50 Convertible Preferred..... $ 4,460,575*
$ 6,160,000 Einstein/Noah Bagel Corp., 7.25%, due 06/01/04..... 5,343,800*
$10,055,000 Hospitality Franchise Service, Inc., 4.75%, due
03/01/03 11,714,075
63,500 Host Marriott Financial Trust, $3.375 Convertible
Preferred......................................... 3,683,000*
$ 3,530,000 Signature Resort, 5.75%, due 01/15/07.............. 3,454,988
-----------
Total Foods, Hotels and Restaurants................ 28,656,438
-----------
HEALTHCARE (13.4%)
71,900 Aetna, Inc., $4.75 Convertible Preferred........... 6,740,625
$ 2,955,000 Alternative Living Services, Inc., 7%, due
06/01/04.......................................... 3,475,819*
$ 915,000 Assisted Living Concepts, Inc., 7%, due 07/31/05... 1,723,631
77,400 Laboratory Corp. of America Holdings, $4.25
Convertible Preferred............................. 4,411,800
54,300 McKesson Corp., $2.50 Convertible Preferred........ 3,312,300*
$ 3,295,000 Morgan Stanley Group, Inc., Exchangeable Johnson &
Johnson, 2%, due 03/29/02......................... 3,801,606
$ 3,910,000 OccuSystems, Inc., 6%, due 12/15/01................ 4,648,013*
$ 590,000 PhyMatrix Corp., 6.75%, due 06/15/03............... 527,313
$ 3,330,000 PhyMatrix Corp., 6.75%, due 06/15/03 2,976,188*
</TABLE>
* Restricted security. (See Note 8)
**Non-income producing.
See accompanying Notes to Financial Statements.
4
<PAGE>
- --------------------------------------------------------------------------------
TCW CONVERTIBLE SECURITIES FUND, INC.
Schedule of Investments (Unaudited) (continued)
LOGO June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Shares or
Principal
Amount Value
--------- -----
<C> <S> <C>
$3,415,000 Physician Resource, 6%, due 12/01/01................ $ 2,825,913*
$ 510,000 Quintiles Transnational Corp., 4.25%, due 05/31/00.. 555,900
$2,880,000 Quintiles Transnational Corp., 4.25%, due 05/31/00.. 3,139,200*
$2,630,000 Sunrise Assisted Living, Inc., 5.5%, due 06/15/02... 2,919,300*
$3,190,000 Tenet Healthcare Corp., Exchangeable Vencor, Inc.,
6%, due 12/01/05................................... 4,047,313
-----------
Total Healthcare.................................... 45,104,921
-----------
RETAIL (8.9%)
$2,470,000 Charming Shoppes, Inc., 7.5%, due 07/15/06.......... 2,420,600
$6,665,000 Home Depot, Inc., 3.25%, due 10/01/01............... 7,631,425
113,500 Kmart Corp., $3.875 Convertible Preferred........... 6,228,313
$3,005,000 Nine West Group, Inc., 5.5%, due 07/15/03........... 2,693,231*
$9,090,000 Staples, Inc., 4.5%, due 10/10/00................... 10,976,175*
-----------
Total Retail........................................ 29,949,744
-----------
SERVICES--BUSINESS (8.1%)
$1,000,000 CUC International, Inc., 3%, due 02/15/02........... 1,055,000
$8,845,000 CUC International, Inc., 3%, due 02/15/02........... 9,331,475*
$5,435,000 Omnicon Group, Inc., 4.25%, due 01/03/07............ 6,440,475*
$3,150,000 Personnel Group of America, Inc., 5.75%, due
07/01/04........................................... 3,370,500*
$3,530,000 U.S. Office Products Company, 5.5%, due 05/15/03 ... 3,278,488
</TABLE>
<TABLE>
<CAPTION>
Number of
Shares or
Principal
Amount Value
--------- -----
<C> <S> <C>
25,300 Vanstar Corp., $3.75 Convertible Preferred........ $ 1,012,000
69,900 Vanstar Corp., $3.75 Convertible Preferred........ 2,796,000*
------------
Total Services--Business.......................... 27,283,938
------------
TOTAL CONSUMER STAPLES (Cost: $153,142,903)....... 171,261,905
------------
CONSUMER CYCLICALS
(COST: $3,419,348) (1.1%)
AUTOMOTIVE (1.1%)
Daimier-Benz Aktiengesellschaft (Germany), $4.363
42,221 Convertible Preferred............................ 3,557,119
------------
CAPITAL GOODS (32.9%)
AEROSPACE AND CONGLOMERATES (3.2%)
$3,215,000 Morgan Stanley Group, Inc., Exchangeable Boeing
Company, 0%, due 09/30/00........................ 3,870,056**
$3,145,000 Hexcel Corp., 7%, due 08/01/03.................... 4,281,131
$2,080,000 Titan Corp., 8.25%, due 11/01/03.................. 2,766,400
------------
Total Aerospace and Conglomerates................. 10,917,587
------------
ELECTRICAL INSTRUMENTS AND COMMUNICATION EQUIPMENT
(1.8%)
$1,405,000 Metricom, Inc., 8%, due 09/15/03.................. 1,025,650*
$4,705,000 Premiere Technologies, Inc., 5.75%, due 07/01/04.. 4,916,725*
------------
Total Electronics--Semiconductors and Instruments. 5,942,375
------------
</TABLE>
* Restricted security. (See Note 8)
**Non-income producing.
See accompanying Notes to Financial Statements.
5
<PAGE>
- --------------------------------------------------------------------------------
TCW CONVERTIBLE SECURITIES FUND, INC.
Schedule of Investments (Unaudited) (continued)
LOGO June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Shares or
Principal
Amount Value
--------- -----
<C> <S> <C>
ELECTRONICS--SEMICONDUCTORS AND INSTRUMENTS
(6.2%)
$3,000,000 Adaptec, Inc., 4.75%, due 02/04/04............... $ 2,981,250*
$2,610,000 Analog Devices, Inc., 3.5%, due 12/01/00......... 3,751,875
$3,410,000 Micron Technology, Inc., 7%, due 07/01/04........ 3,388,688
$3,175,000 Taiwan Semiconductor, (Taiwan), 0%, due 07/03/02 3,286,125* **
$6,445,000 XILINX, Inc., 5.25%, due 11/01/02................ 7,435,919*
-----------
Total Electronics--Semiconductors and
Instruments..................................... 20,843,857
-----------
INFORMATION PROCESSING (6.0%)
$3,375,000 GVC Venture Corp., (Taiwan), 0%, due 05/21/02.... 3,510,000* **
72,100 Morgan Stanley Group, Inc., Exchangeable Cisco
Systems, Inc., $4.00 Convertible Preferred...... 4,830,700
$7,740,000 Safeguard Scientifics, Inc., 6%, due 02/01/06 8,852,625*
65,596 Storage Technology Corp., Common Stock........... 2,919,022**
-----------
Total Information Processing..................... 20,112,347
-----------
OFFICE EQUIPMENT AND SUPPLIES (1.1%)
$3,740,000 Xerox Corp., 2.875%, due 07/01/02................ 3,763,375
-----------
</TABLE>
<TABLE>
<CAPTION>
Number of
Shares or
Principal
Amount Value
--------- -----
<C> <S> <C>
POLLUTION CONTROL (9.5%)
119,900 Republic Industries, Inc., $1.552 Convertible
Preferred....................................... $ 2,937,550
$ 8,830,000 Thermo Electron Corp., 4.25%, due 01/01/03....... 9,602,625*
$ 9,775,000 United States Filter Corp., 4.5%, due 12/15/01 9,506,188
$ 350,000 United Waste Systems, Inc., 4.5%, due 06/01/01... 479,500
$ 1,540,000 United Waste Systems, Inc., 4.5%, due 06/01/01... 2,109,800*
$ 6,830,000 USA Waste Systems, Inc., 4% due 02/01/02......... 7,384,938
------------
Total Pollution Control.......................... 32,020,601
------------
TELECOMMUNICATION EQUIPMENT (5.1%)
35,100 Corning Delaware, $3.00 Convertible Preferred.... 3,053,700
$16,200,000 Motorola, Inc., 0%, due 09/27/13................. 14,296,500**
------------
Total Telecommunications Equipment............... 17,350,200
------------
TOTAL CAPITAL GOODS (Cost: $101,591,999)......... 110,950,342
------------
BASIC INDUSTRIES (5.1%)
ENERGY AND OIL SERVICES (1.7%)
$ 4,565,000 Baker Hughes, Inc., 0%, due 05/05/08............. 3,674,825**
37,600 Hvide Marine, Inc., $3.25 Convertible Preferred.. 1,974,000*
------------
Total Energy and Oil Services.................... 5,648,825
------------
</TABLE>
* Restricted security. (See Note 8)
**Non-income producing.
See accompanying Notes to Financial Statements.
6
<PAGE>
- --------------------------------------------------------------------------------
TCW CONVERTIBLE SECURITIES FUND, INC.
Schedule of Investments (Unaudited) (continued)
LOGO June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Shares or
Principal
Amount Value
--------- -----
<C> <S> <C>
OIL AND GAS-DOMESTIC (1.5%)
$2,790,000 Apache Corp., Euro, 6%, due 01/15/02............. $ 3,302,663
$1,725,000 Morgan Stanley Group, Inc., Exchangeable
Schlumberger, Ltd. (Netherlands), 0%, due
05/01/01........................................ 1,757,344* **
-----------
Total Oil and Gas--Domestic...................... 5,060,007
-----------
OIL AND GAS-INTERNATIONAL (1.1%)
45,400 Occidental Petroleum Corp., Exchangeable Canadian
Occidental Petroleum, $3.00 Convertible
Preferred (Canada).............................. 3,677,400
-----------
PAPER AND PACKAGING (0.8%)
55,000 Crown Cork & Seal Company, Inc., $1.88
Convertible Preferred........................... 2,777,500
-----------
TOTAL BASIC INDUSTRIES (Cost: $15,119,025)....... 17,163,732
-----------
CREDIT SENSITIVE (11.1%)
BUILDING, REAL ESTATE AND REIT'S (2.6%)
$3,090,000 Capstone Capital Corp., 6.55%, due 03/14/02...... 2,993,438
$2,365,000 LTC Properties, Inc., 8.25%, due 07/01/01........ 2,486,206
$2,870,000 LTC Properties, Inc., 8.5%, due 01/01/01......... 3,336,375
-----------
Total Building, Real Estate and REIT's........... 8,816,019
-----------
</TABLE>
<TABLE>
<CAPTION>
Number of
Shares or
Principal
Amount Value
--------- -----
<C> <S> <C>
INSURANCE (3.6%)
61,000 Allstate Corp., Exchangeable PMI Group, Inc., $2.30
Convertible Preferred.............................. $ 3,172,000
29,900 American Bankers Insurance Group, $3.125 Convertible
Preferred.......................................... 2,167,750
50,800 Penncorp Financial, $3.50 Convertible Preferred..... 3,213,100*
101,100 Salomon, Inc., Exchangeable Financial Security
Assurance Holdings, Ltd., $2.30 Convertible
Preferred.......................................... 3,487,950
-----------
Total Insurance..................................... 12,040,800
-----------
SERVICES-FINANCIAL, BANKING AND MISCELLANEOUS (4.9%)
$3,180,000 Berkshire Hathaway, Inc., Exchangeable Salomon,
Inc., 1%, due 12/02/01............................. 3,303,225
17,300 Merrill Lynch & Co., Inc., Exchangeable SunAmerica,
$4.087 Convertible Preferred....................... 1,185,050
121,300 National Australia Bank, Ltd. (Australia), $1.96875
Convertible Preferred.............................. 3,388,819
$5,465,000 Southern Pacific Funding Corp., 6.75%, due 10/15/06. 5,130,265
82,400 SunAmerica Corp., $3.188 Convertible Preferred...... 3,594,697
-----------
Total Services-Financial, Banking and Miscellaneous. 16,602,056
-----------
TOTAL CREDIT SENSITIVE (Cost: $32,997,027).......... 37,458,875
-----------
</TABLE>
* Restricted security. (See Note 8)
**Non-income producing.
See accompanying Notes to Financial Statements.
7
<PAGE>
- --------------------------------------------------------------------------------
TCW CONVERTIBLE SECURITIES FUND, INC.
Schedule of Investments (Unaudited) (continued)
LOGO June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value
--------- -----
<C> <S> <C>
REPURCHASE AGREEMENTS (3.4%)
$ 524,872 Stock Loan Repurchase, Bear Stearns & Co., Inc.,
dated 06/30/97, 3.125%, due 07/01/97
(collateralized by $535,000 U.S. Treasury Bill,
valued at $536,000).............................. $ 524,872
$10,223,950 Stock Loan Repurchase, Bear Stearns & Co., Inc.,
dated 06/30/97, 5.85%, due 07/01/97
(collateralized by $10,425,000 U.S. Treasury
Bill, valued at $10,407,031)..................... 10,223,950
$ 675,214 Cash Repurchase Agreement, Bear Stearns & Co.,
Inc., dated 06/30/97, 6.375%, due 07/01/97
(collateralized by $685,000 U.S. Treasury Bill,
valued at $686,281).............................. 675,214
------------
TOTAL REPURCHASE AGREEMENTS (COST: $11,424,036)... 11,424,036
------------
TOTAL INVESTMENTS (104.4%) (COST: $317,694,338)... 351,816,009
------------
EXCESS OF LIABILITIES OVER OTHER ASSETS (-4.4%)... (14,961,394)
------------
NET ASSETS (100%)................................. $336,854,615
============
</TABLE>
See accompanying Notes to Financial Statements.
8
<PAGE>
- --------------------------------------------------------------------------------
TCW CONVERTIBLE SECURITIES FUND, INC.
Statement of Assets and Liabilities (Unaudited)
LOGO June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments at Value (Cost $317,694,338) (Note 1).............. $351,816,009
Receivables for Securities Sold................................ 9,026,582
Interest and Dividends Receivable.............................. 2,387,703
------------
Total Assets................................................. 363,230,294
------------
LIABILITIES:
Payables for Securities Purchased.............................. 6,915,000
Payable upon Return of Securities Loaned (Note 5).............. 10,748,822
Distributions Payable.......................................... 8,071,873
Accrued Investment Advisory and Service Fees (Note 3).......... 310,720
Accounts Payable............................................... 329,264
------------
Total Liabilities............................................ 26,375,679
------------
NET ASSETS....................................................... $336,854,615
============
Net Assets were comprised of:
Common Stock, par value $0.01 per share, (50,000,000 shares au-
thorized, 38,437,491 shares issued and outstanding)........... $ 384,375
Paid-in Capital................................................ 340,977,671
Distribution of Paid-in Capital (Note 1)....................... (38,629,102)
Net Unrealized Appreciation of Investments..................... 34,121,671
------------
NET ASSETS....................................................... $336,854,615
============
NET ASSET VALUE PER SHARE........................................ $ 8.76
============
</TABLE>
See accompanying Notes to Financial Statements.
9
<PAGE>
- --------------------------------------------------------------------------------
TCW CONVERTIBLE SECURITIES FUND, INC.
Statement of Operations (Unaudited)
LOGO Six Months Ended June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest (Note 1) (including security lending fees of $39,910).... $ 4,859,203
Dividends (Note 1)................................................ 2,041,064
-----------
Total Investment Income......................................... 6,900,267
-----------
EXPENSES:
Investment Advisory Fees (Note 3)................................. 842,661
Custodian Fees.................................................... 56,359
Transfer Agent Fees............................................... 42,151
Proxy Costs....................................................... 32,233
Directors' Fees and Expenses (Note 6)............................. 37,192
Printing and Distribution Costs................................... 24,797
Listing Fees...................................................... 16,601
Audit and Tax Service Fees........................................ 14,878
Accounting and Other Service Fees (Note 3)........................ 12,500
Insurance Costs................................................... 6,644
Business Tax Fees................................................. 5,249
Legal Fees (Note 6)............................................... 2,896
Miscellaneous..................................................... 1,496
-----------
Total Expenses.................................................. 1,095,657
-----------
Net Investment Income........................................... 5,804,610
-----------
NET REALIZED GAINS AND CHANGE IN UNREALIZED APPRECIATION
OF INVESTMENTS:
Net Realized Gains on Investments................................. 3,994,613
Change in Unrealized Appreciation of Investments.................. 17,700,002
-----------
Net Realized Gains and Change in Unrealized
Appreciation of Investments.................................... 21,694,615
-----------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.................... $27,499,225
===========
</TABLE>
See accompanying Notes to Financial Statements.
10
<PAGE>
- --------------------------------------------------------------------------------
TCW CONVERTIBLE SECURITIES FUND, INC.
Statements of Changes in Net Assets
LOGO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1997 Year Ended
(Unaudited) December 31, 1996
---------------- -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net Investment Income..................... $ 5,804,610 $ 11,278,914
Net Realized Gains on Investments......... 3,994,613 24,933,292
Change in Unrealized Appreciation
(Depreciation) of Investments............ 17,700,002 (382,158)
------------ ------------
Increase in Net Assets Resulting from
Operations............................. 27,499,225 35,830,048
------------ ------------
Distributions to Shareholders:
From Net Investment Income................ (5,804,610) (11,278,914)
From Net Realized Gains on Investments.... (4,534,137) (19,904,764)
Distribution in Excess of Net Realized
Gains.................................... (4,449,223) --
------------ ------------
Total Distributions to Shareholders..... (14,787,970) (31,183,678)
------------ ------------
Capital Share Transactions:
Shares Issued through Exercise of Common
Stock Subscription Rights (6,396,283)
(Note 9)................................. 51,583,087 --
Shares Issued in Reinvestment of Dividends
(146,959 for the six months ended June
30, 1997 and 233,869 for the year ended
December 31, 1996)....................... 1,293,576 2,012,418
------------ ------------
Total Increase in Net Assets............ 65,587,918 6,658,788
NET ASSETS:
Beginning of Period......................... 271,266,697 264,607,909
------------ ------------
End of Period............................... $336,854,615 $271,266,697
============ ============
</TABLE>
See accompanying Notes to Financial Statements.
11
<PAGE>
- -------------------------------------------------------------------------------
TCW CONVERTIBLE SECURITIES FUND, INC.
Notes to Financial Statements (Unaudited)
LOGO
- -------------------------------------------------------------------------------
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES:
TCW Convertible Securities Fund, Inc. (the "Fund") was incorporated in Mary-
land on January 13, 1987 as a diversified, closed-end management investment
company and is registered under the Investment Company Act of 1940, as amend-
ed. The Fund commenced operations on March 5, 1987. The Fund's investment ob-
jective 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 de-
termination. 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 val-
ued at amortized cost. Securities for which quotations are not readily avail-
able 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 in-
come tax regulations which may differ from generally accepted accounting prin-
ciples. These differences are 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 reclas-
sifications 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 pur-
chases 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 de-
lays, collection expenses and losses to the extent that the proceeds from the
sale of the collateral are less than the repurchase price.
12
<PAGE>
- -------------------------------------------------------------------------------
TCW CONVERTIBLE SECURITIES FUND, INC.
Notes to Financial Statements (Unaudited) (continued)
LOGO
- -------------------------------------------------------------------------------
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.
During the six months ended June 30, 1997, the Fund realized on a tax basis
net realized gains of $3,994,613 on security transactions.
As of June 30, 1997, net unrealized appreciation (depreciation) for federal
income tax purposes is comprised of the following components:
<TABLE>
<S> <C>
Appreciated securities............................................ $ 37,494,430
Depreciated securities............................................ (3,372,759)
------------
Net unrealized appreciation....................................... $ 34,121,671
============
Cost of securities for federal income tax purposes................ $317,694,338
============
</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, 1997, purchases and sales or maturities of
investment securities (excluding short-term investments) aggregated
$236,136,056 and $194,231,027, respectively. There were no purchases or sales
of U.S. Government securities for the six months ended June 30, 1997.
NOTE 5--SECURITY LENDING:
During the six months ended June 30, 1997, 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, 1997, the cash received from the borrowing broker was invested in over-
night repurchase agreements issued by the borrowing broker which, in turn,
were collateralized by U.S. Treasury securities valued at $10,943,031, 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 $37,192 from the Fund for the period
ended June 30, 1997. Legal fees totaled $2,896 of which $1,013 were paid to
O'Melveny & Myers, of which an individual who is of counsel, serves as a di-
rector of the Fund. Certain officers and/or directors of the Fund are also of-
ficers 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 July 16, 1997. 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, John C. Argue, Norman Barker, Jr.,
Richard W. Call, 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 31,212,605 affirmative votes; votes opposed 319,388 and
votes withheld 337,401); (ii) Renewal of the Investment Advisory and Manage-
ment Agreement for another annual period (votes for: 30,947,323; votes against
383,620 and abstentions 538,451); and (iii) the ratification of the
13
<PAGE>
- --------------------------------------------------------------------------------
TCW CONVERTIBLE SECURITIES FUND, INC.
Notes to Financial Statements (Unaudited) (continued)
LOGO
- --------------------------------------------------------------------------------
selection of Deloitte & Touche LLP as independent auditors of the Fund for the
fiscal year ending December 31, 1997 (votes for: 31,262,618; votes against
185,364 and abstentions 421,412). 38,437,491 shares were outstanding on the
record date for this meeting and 31,869,394 shares entitled to vote were pres-
ent in person or by proxy at the meeting.
NOTE 8--RESTRICTED SECURITIES:
The following restricted securities held by the Fund at June 30, 1997 were
valued both at the date of acquisition and June 30, 1997, 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, 1997 is $149,218,340, which
represents 44.3% of net assets. The total value of illiquid securities at June
30, 1997 is $1,025,650, which represents 0.3% of net assets.
14
<PAGE>
- --------------------------------------------------------------------------------
TCW CONVERTIBLE SECURITIES FUND, INC.
Notes to Financial Statements (Unaudited) (continued)
LOGO June 30, 1997
- --------------------------------------------------------------------------------
NOTE 8--RESTRICTED SECURITIES (CONTINUED)
<TABLE>
<CAPTION>
Number of
Shares or
Principal Date of
Amount Acquisition Cost
--------- ----------- ----------
<C> <S> <C> <C>
$3,000,000 Adaptec, Inc., 4.75%, due 02/04/04......... 01/28/97 $3,006,250
$2,955,000 Alternative Living Services, Inc., 7%, due
06/01/04.................................. 05/14/97 2,955,000
71,800 Apple South, Inc., $3.50 Convertible
Preferred................................. 03/06/97 3,671,000
$8,845,000 CUC International, Inc., 3%, due 02/15/02.. 02/05/97 8,848,199
$6,160,000 Einstein/Noah Bagel Corp., 7.25%, due
06/01/04.................................. 05/22/97 6,052,668
71,600 Evergreen Media Corp., $3.00 Convertible
Preferred................................. 06/11/97 3,580,000
52,500 Golden Books Family Entertainment, Inc.,
$4,375 Convertible Preferred.............. 08/14/96 2,656,238
$3,375,000 GVC Venture Corp., (Taiwan), 0%, due
05/21/02.................................. 05/07/97 3,375,000
63,500 Host Marriott Financial Trust, $3.375
Convertible Preferred..................... 11/25/96 3,248,625
37,600 Hvide Marine, Inc., $3.25 Convertible
Preferred................................. 06/24/97 1,880,000
54,300 McKesson Corp., $2.50 Convertible
Preferred................................. 02/13/97 2,783,850
$1,405,000 Metricom, Inc., 8%, due 09/15/03........... 08/20/96 1,405,000*
</TABLE>
<TABLE>
<CAPTION>
Number of
Shares or
Principal Date of
Amount Acquisition Cost
--------- ----------- ----------
<C> <S> <C> <C>
$ 1,725,000 Morgan Stanley Group, Inc., Exchangeable
Schlumberger, Ltd., (Netherlands), 0%, due
05/01/01.................................. 03/13/97 $1,623,150
$ 3,005,000 Nine West Group, Inc., 5.5%, due 07/15/03.. 06/20/96 3,002,552
$ 3,910,000 OccuSystems, Inc., 6%, due 12/15/01........ 12/19/96 3,896,592
$ 5,435,000 Omnicom Group, Inc., 4.25%, due 01/03/07... 08/18/96 5,484,075
50,800 Pencorp Financial, $3.50 Convertible
Preferred................................. 08/02/96 2,610,300
$ 3,150,000 Personnel Group of America, Inc., 5.75%,
due 07/01/04.............................. 06/17/97 3,164,875
$ 3,330,000 PhyMatrix Corp., 6.75%, due 06/15/03....... 06/21/96 3,312,874
$ 3,415,000 Physician Resource, 6%, due 12/01/01....... 12/06/96 3,362,262
$4,705,000 Premiere Technologies, Inc., 5.75%, due
07/01/04 ................................. 06/25/97 4,705,000
$2,880,000 Quintiles Transnational Corp., 4.29%, due
05/31/00.................................. 04/23/96 2,885,213
$7,740,000 Safeguard Scientifics, Inc.,6%, due
02/01/06.................................. 01/06/97 7,571,082
$ 7,825,000 Sandoz Capital BVI, Ltd., (Switzerland),
2%, due 10/06/02.......................... 09/28/95 7,896,303
$ 3,240,000 Sepracor, Inc., 7%, due 12/01/02 11/10/95 3,432,535
42,600 SFX Broadcasting, Inc., $3.25 Convertible
Preferred................................. 05/22/96 2,119,375
</TABLE>
*Illiquid security.
15
<PAGE>
- --------------------------------------------------------------------------------
TCW CONVERTIBLE SECURITIES FUND, INC.
Notes to Financial Statements (Unaudited) (continued)
LOGO June 30, 1997
- --------------------------------------------------------------------------------
NOTE 8--RESTRICTED SECURITIES (CONTINUED)
<TABLE>
<CAPTION>
Number of
Shares or
Principal Date of
Amount Acquisition Cost
--------- ----------- ----------
<C> <S> <C> <C>
$9,090,000 Staples, Inc., 4.5%, due 10/01/00.......... 09/12/95 $9,334,623
$2,630,000 Sunrise Assisted Living, Inc., 5.5%, due
06/15/02.................................. 06/03/97 2,630,000
$3,175,000 Taiwan Semiconductor, (Taiwan), 0%, due
07/03/02.................................. 06/26/97 3,175,000
$8,830,000 Thermo Electron Corp., 4.25%, due 01/01/03. 11/28/95 9,387,361
$1,540,000 United Waste Systems, Inc., 4.5%, due
06/01/01.................................. 06/01/01 1,540,000
69,900 Vanstar Corp., $3.75 Convertible Preferred. 09/27/96 3,414,122
$6,445,000 XILINX, Inc., 5.25%, due 11/01/02.......... 11/07/95 6,659,621
</TABLE>
NOTE 9--COMMON STOCK SUBSCRIPTION RIGHTS:
Non-transferable rights to subscribe to shares of the Fund's common stock were
issued to shareholders of record on March 21, 1997. The rights entitled the
shareholders to acquire one share of newly issued common stock for each five
rights held. At the termination of the subscription period on April 23, 1997,
6,396,283 shares of common stock were subscribed at a price of $8.09 per share
as of April 23, 1997. Proceeds from the subscriptions totaled $51,583,087, net
of issuance costs.
16
<PAGE>
- -------------------------------------------------------------------------------
TCW CONVERTIBLE SECURITIES FUND, INC.
Financial Highlights
LOGO
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------------------------------------------
Six Months
Ended
June 30,
1997
(Unaudited) 1996 1995 1994 1993 1992 1991 1990 1989 1988
----------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value Per
Share, Beginning
of Period......... $ 8.51 $ 8.36 $ 7.47 $ 8.79 $ 8.36 $ 8.09 $ 6.85 $ 8.36 $ 7.99 $ 7.76
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Income from Opera-
tions:
Net Investment
Income............ 0.17 0.36 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) (0.01) -- -- -- --
Net Realized and
Unrealized Gains
(Losses) on Secu-
rities............ 0.51 0.77 1.36 (0.86) 1.25 0.71 1.65 (1.13) 0.71 0.44
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total from
Investment
Operations..... 0.67 1.13 1.73 (0.48) 1.64 1.11 2.08 (0.67) 1.21 0.99
Less Distributions:
Distributions from
Net Investment
Income............ (0.17) (0.36) (0.37) (0.38) (0.40) (0.41) (0.43) (0.46) (0.50) (0.55)
Distributions from
Net Realized
Gains............. (0.13) (0.62) (0.33) (0.30) (0.81) (0.07) -- -- (0.06) --
Distributions in
Excess of
Net Realized
Gains............. (0.12) -- (0.14) (0.16) -- -- -- -- -- --
Return of Capital
.................. -- -- -- -- -- (0.36) (0.41) (0.38) (0.28) (0.21)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total
Distributions.. (0.42) (0.98) (0.84) (0.84) (1.21) (0.84) (0.84) (0.84) (0.84) (0.76)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net Asset Value Per
Share, End of
Period............ $ 8.76 $ 8.51 $ 8.36 $ 7.47 $ 8.79 $ 8.36 $ 8.09 $ 6.85 $ 8.36 $ 7.99
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
Total Investment
Return (4)........ 0.74% 11.75% 33.6% (7.43)% 13.77% 15.90% 41.38% (3.78)% 20.23% 24.79%
Net Asset Value
Total Return (5).. 8.02% 13.94% 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).... $336,855 $271,267 $264,608 $234,686 $273,230 $215,208 $172,331 $144,593 $175,732 $167,797
Ratio of Expenses
to Average
Net Assets........ 0.76%(6) 0.77% 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............ 4.02%(6) 4.12% 4.60% 4.66% 4.48% 5.04% 5.68% 5.93% 5.90% 6.66%
Portfolio Turnover
Rate.............. 67.21%(2) 125.72% 108.98% 110.04% 173.79% 139.39% 114.13% 99.53% 84.17% 70.62%
Average Commission
Rate Paid by the
Fund (7).......... $ .06 $ 0.06 N/A N/A N/A N/A N/A N/A N/A N/A
<CAPTION>
March 5, 1987
(Commencement)
to
December 31,
1987
-------------
<S> <C>
Net Asset Value Per
Share, Beginning
of Period......... $ 9.30 (3)
--------
Income from Opera-
tions:
Net Investment
Income............ 0.46
Impact to Capital
for Shares
Issued............ (0.03)
Net Realized and
Unrealized Gains
(Losses) on Secu-
rities............ (1.53)
--------
Total from
Investment
Operations..... (1.10)
Less Distributions:
Distributions from
Net Investment
Income............ (0.44)
Distributions from
Net Realized
Gains............. --
Distributions in
Excess of
Net Realized
Gains............. --
Return of Capital
.................. --
--------
Total
Distributions.. (0.44)
--------
Net Asset Value Per
Share, End of
Period............ $ 7.76
========
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)
Average Commission
Rate Paid by the
Fund (7).......... N/A
</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, 1997 and not indicative of a full year's
operating results.
(3) Net of underwriting discount of $0.70.
(4) Based on market value per share, adjusted for reinvestment of distribu-
tions.
(5) Based on net asset value per share, adjusted for reinvestment of distribu-
tions.
(6) Annualized.
(7) For fiscal years beginning on or after September 1, 1995, a fund is re-
quired to disclose its average commission rate per share for security
trades on which commissions are charged. This amount may vary from period
to period and fund to fund depending on the mix of trades executed in var-
ious markets where trading practices and commission rate structures may
differ.
See accompanying Notes to Financial Statements.
17
<PAGE>
[LOGO OF TCW]
