<PAGE>
[LOGO OF TCW(R)] TCW Convertible
Securities Fund, Inc.
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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
Thomas D. Lyon Philip K. Holl
Senior Vice President Secretary
Kevin A. Hunter Michael E. Cahill
Senior Vice President General Counsel and Assistant Secretary
Thomas E. Larkin, Jr. Peter C. DiBona
Senior Vice President Treasurer
Hilary G.D. Lord
Senior Vice President
and Assistant Secretary
Alvin R. Albe, Jr.
Senior Vice President
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Shareholder Information
Investment Adviser
TCW Investment Management Company
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
Investors Bank & Trust Company
200 Clarendon Street
Boston, Massachusetts 02116
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Independent Auditors
Deloitte & Touche LLP
350 South Grand Avenue
Los Angeles, California 90071
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Legal Counsel
O'Melveny & Myers LLP
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, 2000
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[LOGO OF TCW(R)]
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[LOGO]
TCW Convertible Securities Fund, Inc.
The President's Letter
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Dear Shareholder:
The first half of 2000 has been one of the most volatile periods in stock
market history. After rising early in the year, stocks corrected significantly
during the second quarter. In particular, the stocks of many of the market's
"high flyers" declined by greater than fifty percent. Despite the overall
negative performance of the market and rising interest rates, convertibles have
performed well, rising modestly year-to-date.
Performance of the Fund's Shares
For the six months ended June 30, 2000, the TCW Convertible Securities
Fund, Inc. (the "Fund") return on Net Asset Value ("NAV") was 14.65%. The Fund's
shareholders realized a return of 14.23% from an increase in the market price of
the Fund from $9.56 per share on December 31, 1999 to $10.50 on June 30, 2000
(with dividends reinvested). The total distribution for the period was $0.42.
This represented the two regular quarterly dividends of $0.21. The Fund's market
price per share on June 30, 2000 represents a discount of 16.40% to the Fund's
NAV. Although relatively high, this discount to NAV compares favorably with
other Funds in the closed-end convertible fund universe.
The Convertible Market
During the first half of 2000, convertible securities have performed well
relative to both stocks and bonds. This was primarily due to the better
performance of the stocks underlying the convertible universe. Many of these
companies are in rapidly growing industries such as technology,
telecommunications and healthcare. While many of these stocks have been
volatile, they posted on average modestly positive returns as opposed to the
negative returns of the overall market.
The convertible new issue market was quite active during the first six
months of 2000. In total, 87 issues with a net value of $33.4 billion were
brought to market. New issuance has been concentrated in the technology,
telecommunications, healthcare and oil service sectors. In general, we have
found pricing to be attractive in some instances and quite unattractive in
others. In addition, the credit quality of many companies issuing convertibles
has been low. As a result, the Fund participated in approximately 20% of the new
issuance this year and focused more on the secondary market.
Fund Performance and Strategy
The Fund's performance was well ahead of both stocks and bonds and
significantly exceeded that of the convertible benchmarks. The table below
recaps the Fund's performance and compares it with its benchmarks.
Table 1
Six months
ended
6/30/00
----------
TCW Convertible Securities Fund, Inc.............. 14.65%*
First Boston Convertible Index.................... 2.10%
Lipper average of convertible mutual funds........ 6.30%*
Standard & Poor's 500 Index (with income)......... -0.42%
_________
* After management fees and expenses at NAV with dividends reinvested.
1
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[LOGO]
TCW Convertible Securities Fund, Inc.
The President's Letter (continued)
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The Fund began 2000 most heavily weighted in the consumer staples, capital
goods and financial services sectors. The majority of investments in the sectors
are concentrated in the media, technology, pharmaceutical, telecommunications
and banking industries. The Fund continues to emphasize companies within these
industries because they have demonstrated the ability to grow their businesses
at above average rates. The Fund continues to de-emphasize mostly in the basic
industries sector due to limited opportunities for organic growth.
Table 2
Fund Sector Allocation
12/31/99 6/30/00
-------- -------
Consumer Staples...................... 34.5% 34.1%
Capital Goods......................... 54.7% 46.2%
Consumer Cyclicals.................... 0.6% 0.5%
Basic Industries...................... 1.2% 1.3%
Credit Sensitive...................... 14.4% 18.7%
During the first half of the year, the Funds benefited primarily from its
holdings in technology, healthcare and financial services. In the technology
sector, holdings in companies such as Intel, STMicroelectronics, Veritas, Siebel
and Solectron performed well. In the healthcare sector, the Fund benefited from
its holdings in biotechnology companies despite the tremendous volatility of the
sector. Finally, the Fund achieved modest but stable returns generated by
holdings in financial services companies such as Citigroup and AIG during this
overall negative and highly volatile market.
The torrid U.S. economy has finally begun to show signs of slowing.
However, the real U.S. GDP growth for the second quarter was stronger than
expected so there is some doubt about whether the deceleration will be
significant. While housing and auto sales have slowed, they remain relatively
robust. With job growth likely to remain firm, consumers should continue to
spend at a healthy pace despite the drag of higher interest rates and gasoline
prices. In addition, business investment could very well accelerate. Orders for
capital goods are strong, capacity utilization is up and corporate profits
remain strong.
Economic growth is likely to remain in the four-percent range in the second
half of the year. Thus, there is a likelihood that the Fed may continue to raise
rates modestly. With resource utilization tight, job markets firm, and prices in
some areas moving upwards, the Fed may feel a Federal Funds rate of 6.75% - 7.0%
is necessary to slow the economy to an acceptable pace. The prospect of a
further rise in rates could unsettle the markets during the second half of the
year. Therefore, the Fund has pared some of its holdings in the most volatile
sectors of the market and will focus on convertible securities with defensive
characteristics.
Dividend Reinvestment Plan
Shareholders who wish to add to their investment may do so through the
Dividend Reinvestment Plan (the "Plan"). Under the Plan, your dividend is used
to purchase shares on the open market whenever shares and the related sales
commission are selling below the Fund's Net Asset Value per share. If the market
price, including commission, is selling above the Net Asset Value, you will
receive shares at a price equal to the
2
<PAGE>
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[LOGO]
TCW Convertible Securities Fund, Inc.
The President's Letter (continued)
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higher of the Net Asset Value per share on the payment date or 95% of the
closing market price.
To enroll in the Plan, if your shares are registered in your name, write to
the Bank of New York, Church Street Station, P.O. Box #11002, New York, New York
10277-0770, or call their toll free number (800) 524-4458. If your shares are
held by a brokerage firm, please call your broker. If, however, you need
assistance, please call our investor relations department at (800) FUND-TCW (386
-3829). As always, we would be pleased to accommodate your investment needs.
We would like to remind you that the Fund may, when appropriate, attempt to
repurchase shares in the open market or in privately negotiated transactions at
a price not above market value or net asset value, whichever is lower at the
time of purchase.
Sincerely,
/s/ Ernest O. Ellison
Ernest O. Ellison
President and Director
August 7, 2000
3
<PAGE>
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[LOGO]
TCW Convertible Securities Fund, Inc.
Schedule of Investments (Unaudited)
June 30, 2000
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<TABLE>
<CAPTION>
Principal Market
Amount Value
----------- ------
<S> <C>
Fixed Income Securities
Advertising (3.9% Of Net Assets)
$ 8,685,000 Interpublic Group of Companies, Inc., (144A), 1.87%,
due 06/01/06................................................... $ 8,435,306*
6,340,000 Lamar Advertising Co., 5.25%, due 09/15/06....................... 7,132,500
4,790,000 Young & Rubicam, Inc., (144A), 3%, due 01/15/05.................. 4,933,700*
----------
Total Advertising........................................... 20,501,506
----------
Automotive (0.6%)
3,770,000 Tower Automotive, Inc., 5%, due 08/01/04......................... 2,959,450
-----------
Banking & Financial Services (4.7%)
10,785,000 E*TRADE Group, Inc., (144A), 6%, due 02/01/07.................... 9,814,350*
4,275,000 Lehman Brothers Holdings, Inc., 0%, due 07/06/04................. 4,531,500
5,800,000 Pinnacle Holdings, Inc., (144A), 5.5%, due 09/15/07.............. 5,017,000*
5,380,000 UBS AG Stamford, Exchangeable Nikkei 225 Index, 0%,
due 12/11/03................................................... 5,506,430
-----------
Total Banking & Financial Services.......................... 24,869,280
-----------
Building Materials (1.8%)
10,220,000 American International Group, Exchangeable Home Depot, Inc.,
(144A), 1%, due 02/14/06....................................... 9,453,500*
-----------
Commercial Services (2.3%)
5,010,000 Akamai Technologies, Inc., (144A), 5.5%, due 07/01/07............ 5,918,062*
7,480,000 Critical Path, Inc., (144A), 5.75%, due 04/01/05................. 6,189,700*
-----------
Total Commercial Services................................... 12,107,762
-----------
Computer Services (5.4%)
9,155,000 Goldman Sachs Group, Inc., Exchangeable Compaq Computer Corp.,
0.5%, due 01/13/07............................................ 8,296,719
4,835,000 Goldman Sachs Group, Inc., Exchangeable Yahoo!, Inc.,
0.25%, due 12/06/04............................................ 5,013,291
$ 9,310,000 IBM Credit Corp., 2%, due 02/04/03............................... $ 10,485,387
4,625,000 Mercury Interactive Corp., (144A), 4.75%, due 07/01/07........... 4,856,250*
-----------
Total Computer Services..................................... 28,651,647
-----------
Computer Software (7.1%)
7,520,000 BEA Systems, Inc., (144A), 4%, due 12/15/06...................... 11,862,800*
5,985,000 Rational Software Corp., (144A), 5%, due 02/01/07................ 8,895,206*
4,725,000 Siebel Systems, Inc., (144A), 5.5%, due 09/15/06................. 17,010,000*
----------
Total Computer Software..................................... 37,768,006
----------
Electronics (19.3%)
10,995,000 ASM Lithography Holding N.V., (144A), 4.25%, due 11/30/04........ 14,733,300*
5,350,000 Burr-Brown Corp., (144A), 4.25%, due 02/15/07.................... 9,061,562*
515,000 Conexant Systems, Inc., 4%, due 02/01/07......................... 404,919
6,450,000 Conexant Systems, Inc., (144A), 4%, due 02/01/07................. 5,071,312*
1,675,000 Conexant Systems, Inc., 4.25%, due 05/01/06...................... 3,699,656
2,495,000 Cypress Semiconductor Corp., 3.75%, due 07/01/05................. 2,398,319
7,370,000 Cypress Semiconductor Corp., 4%, due 02/01/05.................... 8,447,862
3,730,000 Level One Communications, Inc., 4%, due 09/01/04................. 16,094,950
9,570,000 LSI Logic Corp., 4%, due 02/15/05................................ 10,180,088
23,475,000 Solectron Corp., 0%, due 01/27/19................................ 15,933,656
5,985,000 STMicroelectronics N.V., 0%, due 09/22/09........................ 10,271,756
6,610,000 Vitesse Semiconductor Corp., (144A), 4%, due 03/15/05............ 6,147,300*
-----------
Total Electronics........................................... 102,444,680
-----------
Energy & Oil Services (1.3%)
5,925,000 Kerr-McGee Corp., 5.25%, due 02/15/10............................ 6,821,156
-----------
Entertainment & Leisure (2.9%)
14,525,000 Merrill Lynch & Company, Inc., Exchangeable Time
Warner, Inc., 0.25%, due 05/10/06.............................. 15,396,500
-----------
</TABLE>
* Restricted Security (Note 7).
See accompanying Notes to Financial Statements.
4
<PAGE>
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[LOGO]
TCW Convertible Securities Fund, Inc.
Schedule of Investments (Unaudited) (continued)
June 30, 2000
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<TABLE>
<CAPTION>
Principal Market
Amount Value
----------- ----------
<S> <C>
Healthcare (2.6%)
$ 4,015,000 Affymetrix, Inc., (144A), 4.75%, due 02/15/07.................... $ 3,151,775*
2,295,000 Affymetrix, Inc., 5%, due 10/01/06............................... 3,385,125
9,050,000 Human Genome, Inc., (144A), 3.75%, due 03/15/07.................. 7,488,875*
-----------
Total Healthcare............................................ 14,025,775
-----------
Insurance (3.5%)
7,735,000 American International Group, Inc., 0.5%, due 05/15/07........... 7,686,656
3,030,000 American International Group, Inc., 2.25%, due 07/30/04.......... 5,079,038
2,195,000 Berkshire Hathaway, Inc., 1%, due 12/03/01....................... 6,014,300
-----------
Total Insurance............................................. 18,779,994
-----------
Media-Broadcasting & Publishing (6.4%)
21,835,000 Clear Channel Communications, Inc., 2.625%, due 04/01/03......... 28,249,031
5,100,000 News America Holdings, Inc., 0%, due 03/11/13.................... 5,699,250
-----------
Total Media--Broadcasting & Publishing...................... 33,948,281
-----------
Pharmaceuticals (7.7%)
4,640,000 Centocor, Inc., 4.75%, due 02/15/05.............................. 6,304,600
17,420,000 Roche Holdings, Inc., (144A), 0%, due 01/19/15................... 15,982,850*
12,645,000 Sepracor, Inc., (144A), 5%, due 02/15/07......................... 18,635,569*
-----------
Total Pharmaceuticals....................................... 40,923,019
------------
Retail (0.7%)
5,795,000 Amazon.com, Inc., 4.75%, due 02/01/09............................ 3,636,363
-----------
Telecommunications (10.5%)
5,110,000 American Tower Corp., (144A), 5%, due 02/15/10................... 5,212,200*
6,845,000 Echostar Communications, Inc., (144A), 4.875%, due 01/01/07...... 6,562,644*
4,265,000 Exchangeable Certificates Corp., (144A), 0.25%, due 07/17/06..... 4,616,863*
7,000,000 Exodus Communications, Inc., (144A), 4.75%, due 07/15/08......... 10,010,000*
$ 5,825,000 Juniper Networks, Inc., 4.75%, due 03/15/07...................... $ 6,371,094
10,890,000 Nextel Communications, Inc., (144A), 5.25%, due 01/15/10......... 11,366,438*
8,760,000 Telefonos de Mexico, S.A. de C.V., 4.25%, due 06/15/04........... 11,344,200
------------
Total Telecommunications.................................... 55,483,439
------------
Total Fixed Income Securities
(COST: $361,570,433)
(80.7%)..................................................... 427,770,358
------------
Number of
Shares
------------
Equity Securities
Common Stock
Commercial Services (1.1%)
406,800 Cendant Corp..................................................... 5,695,200**
----------
Electronics (2.1%)
53,700 Conexant Systems, Inc............................................ 2,611,162**
116,800 Vitesse Semiconductor Corp....................................... 8,592,100**
----------
Total Electronics........................................... 11,203,262
----------
Telecommunications (1.5%)
54,600 Juniper Networks, Inc............................................ 7,947,713**
----------
Total Common Stock
(Cost: $17,018,514)
(4.7%).................................................... 24,846,175
----------
Convertible Preferred Stock
Banking & Financial Services (6.2%)
243,580 CNB Capital Trust, $1.50......................................... 7,611,875
140,000 Host Marriott Financial Trust, $3.375............................ 4,655,000
162,200 Lehman Brothers Holdings, Inc., Series B,
Exchangeable Lehman Brothers Holdings, Inc., Series A, $1.955.... 5,813,856
113,700 Sovereign Capital Trust II, $3.75................................ 5,571,300
94,960 Titan Capital Trust, (144A), $2.875.............................. 5,199,060***
</TABLE>
* Restricted Security (Note 7).
** Non-income producing.
See accompanying Notes to Financial Statements.
5
<PAGE>
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[LOGO]
TCW Convertible Securities Fund, Inc.
Schedule of Investments (Unaudited) (continued)
June 30, 2000
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<TABLE>
<CAPTION>
Number of Market
Shares Value
---------- --------
<S> <C>
122,020 Westpac Banking Corp., Ltd., $3.125........... $ 4,026,660
------------
Total Banking & Financial Services.... 32,877,751
------------
Electric Utilities (0.5%)
37,880 Alliant Energy Corp., (144A), $4.91........... 2,632,660*
------------
ELECTRONICS (1.0%)
122,000 CS First Boston Corp., Exchangeable Conexant
Systems, Inc., $3.898...................... 5,520,500
------------
Media-Broadcasting & Publishing (1.1%)
53,700 Cox Communications, Inc., $3.50............... 5,960,700
------------
Retail (0.9%)
139,900 Dollar General Corp., $3.352.................. 4,931,475
------------
Telecommunications (4.6%)
35,700 Global Crossing Ltd., $16.875................. 7,880,775
212,160 MediaOne Group, Inc., Exchangeable Vodafone
AirTouch PLC, $3.041....................... 8,592,480
481,118 Morgan Stanley Dean Witter & Co.,
Exchangeable MCI WorldCom, Inc., $0.513.... 3,307,686
2,900 Morgan Stanley Dean Witter & Co., Exchangeable
QUALCOMM, Inc., $100.55.................... 4,751,288
------------
Total Telecommunications.............. 24,532,229
------------
Utilities (1.2%)
85,000 AES Trust III, $3.375......................... 6,077,500
------------
Total Convertible Preferred Stock
(Cost: $78,492,427) (15.5%)......... 82,532,815
------------
Total Equity Securities (Cost: $95,510,941)
(20.2%)............................. 107,378,990
-------------
<CAPTION>
Principal Market
Amount Value
---------- -------
<S> <C>
Short-Term Investments
$ 8,000,000 BNP Paribas, S.A., 6.75%, due 07/05/00.................... $ 8,000,000***
158,866 Credit Agricole II, 6.75%, due 07/07/00................... 158,866***
1,458,546 Den Danske Bancorp, 6.81%, due 07/05/00................... 1,458,546***
1,053,031 Fleet National Bank, 7.26%, due 10/31/00.................. 1,053,031***
3,196,266 Investors Bank & Trust Depository Reserve, 4.85%,
due 07/03/00............................................ 3,196,266
661,598 Morgan Stanley Dean Witter & Co., 6.91%, due 11/22/00..... 661,598***
258,669 Provident Money Market Fund............................... 258,669***
----------
Total Short-Term Investments
(Cost: $14,786,976)
(2.8%).......................................... 14,786,976
------------
TOTAL INVESTMENTS (Cost: $471,868,350)
(103.7%)........................................ 549,936,324
LIABILITIES IN EXCESS OF OTHER ASSETS (-3.7%)............. (19,863,888)
------------
NET ASSETS (100.0%)....................................... $530,072,436
============
</TABLE>
* Restricted Security (Note 7).
*** Represents investments of security lending collateral (Note 5).
See accompanying Notes to Financial Statements.
6
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[LOGO]
TCW Convertible Securities Fund, Inc.
Statement of Assets and Liabilities (Unaudited)
June 30, 2000
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<TABLE>
<S> <C>
Assets:
Investments at Value (Cost: $471,868,350) (Note 1)............ $ 549,936,324
Receivables for Securities Sold............................... 2,078,098
Interest Receivable........................................... 3,495,191
--------------
Total Assets................................................ 555,509,613
--------------
Liabilities:
Distributions Payable......................................... 8,861,354
Payables for Securities Purchased............................. 4,625,000
Payables Upon Return of Securities Loaned (Note 5)............ 11,590,710
Accrued Investment Advisory Fees (Note 3)..................... 242,209
Other Accrued Expenses........................................ 117,904
--------------
Total Liabilities........................................... 25,437,177
--------------
Net Assets..................................................... $ 530,072,436
==============
Net Assets were comprised of:
Common Stock, par value $0.01 per share, (50,000,000 shares
authorized, 42,196,924 shares issued and outstanding)........ $ 421,969
Paid-in Capital............................................... 342,289,725
Undistributed Net Realized Gain on Investments................ 109,292,768
Net Unrealized Appreciation of Investments.................... 78,067,974
--------------
Net Assets..................................................... $ 530,072,436
==============
Net Asset Value per Share...................................... $ 12.56
==============
</TABLE>
See Accompanying Notes to Financial Statements.
7
<PAGE>
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[LOGO]
TCW Convertible Securities Fund, Inc.
Statement of Operations (Unaudited)
Six Months Ended June 30, 2000
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<TABLE>
<S> <C>
Investment Income:
Interest (Note 1) (including security lending fees
of $31,740).................................................. $ 6,435,174
Dividends (Note 1)............................................ 3,223,743
--------------
Total Investment Income................................... 9,658,917
--------------
Expenses:
Investment Advisory Fees (Note 3)............................. 1,426,472
Administration Fees........................................... 69,016
Accounting and Other Service Fees............................. 67,236
Legal Fees (Note 6)........................................... 54,873
Directors' Fees & Expenses (Note 6)........................... 42,268
Transfer Agent Fees........................................... 25,803
Listing Fees.................................................. 24,863
Printing and Distribution Costs............................... 19,377
Proxy Costs................................................... 14,919
Custodian Fees................................................ 14,574
Audit and Tax Service Fees.................................... 10,405
Business Tax Fees............................................. 7,458
Insurance Costs............................................... 3,531
Miscellaneous................................................. 9,944
--------------
Total Expenses............................................ 1,790,739
--------------
Net Investment Income..................................... 7,868,178
--------------
Net Realized Gain and Change in Unrealized (Depreciation)
of Investments:
Net Realized Gain on Investments.............................. 119,372,116
Change in Unrealized (Depreciation) of Investments............ (57,052,688)
--------------
Net Realized Gain and Change in Unrealized (Depreciation)
of Investments.......................................... 62,319,428
--------------
Increase in Net Assets Resulting from Operations................ $ 70,187,606
==============
</TABLE>
See Accompanying Notes to Financial Statements.
8
<PAGE>
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[LOGO]
TCW Convertible Securities Fund, Inc.
Statements of Changes in Net Assets
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<TABLE>
<CAPTION>
Six Months Ended
June 30, 2000 Year Ended
(Unaudited) December 31, 1999
---------------- -----------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
Operations:
Net Investment Income....................... $ 7,868,178 $ 14,831,365
Net Realized Gain on Investments............ 119,372,116 50,315,333
Change in Unrealized Appreciation
(Depreciation) of Investments.............. (57,052,688) 82,201,510
------------ ------------
Increase in Net Assets Resulting from
Operations............................... 70,187,606 147,348,208
------------ ------------
Distributions to Shareholders:
From Net Investment Income.................. (7,868,178) (14,831,365)
From Net Realized Gain on Investments....... (9,854,532) (50,541,068)
------------ ------------
Total Distributions to Shareholders....... (17,722,710) (65,372,433)
------------ ------------
Capital Share Transactions:
Shares Issued in Reinvestment of Dividends
(207,029 for the year ended December 31,
1999)......................... -- 2,043,627
------------ ------------
Total Increase in Net Assets.............. 52,464,896 84,019,402
Net Assets:
Beginning of Period.......................... 477,607,540 393,588,138
------------ ------------
End of Period................................ $530,072,436 $477,607,540
============ ============
</TABLE>
See Accompanying Notes to Financial Statements.
9
<PAGE>
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[LOGO]
TCW Convertible Securities Fund, Inc.
Notes to Financial Statements (Unaudited)
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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 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 may be primarily due to differing treatments for
losses deferred due to wash sales and spillover distributions. Permanent book
and tax basis differences
10
<PAGE>
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[LOGO]
TCW Convertible Securities Fund, Inc.
Notes to Financial Statements (Unaudited) (continued)
--------------------------------------------------------------------------------
relating to shareholder distributions will result in reclassifications to paid
in capital and may affect net investment income per share.
Repurchase Agreements: The Fund may invest in repurchase agreements secured by
U.S. Government Securities. A repurchase agreement arises when the Fund
purchases a security and simultaneously agrees to resell it to the seller at an
agreed upon future date. The Fund requires the seller to maintain the value of
the securities, marked to market daily, at not less than the repurchase price.
If the seller defaults on its repurchase obligation, the Fund could suffer
delays, collection expenses and losses to the extent that the proceeds from the
sale of the collateral are less than the repurchase price.
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, 2000, the Fund realized on a tax basis
net realized gains of $119,372,116 on security transactions.
As of June 30, 2000, net unrealized appreciation (depreciation) for federal
income tax purposes is comprised of the following components:
Appreciated securities............................ $ 91,257,930
Depreciated securities............................ (13,189,956)
------------
Net unrealized appreciation....................... $ 78,067,974
============
Cost of securities for federal income tax
purposes........................................ $471,868,350
============
Note 3--Investment Advisory and Service Fees:
TCW Investment Management Company (the "Advisor") is the Investment Advisor
of the Fund. As compensation for the services rendered, facilities provided, and
expenses borne, the Advisor is paid a monthly fee by the Fund computed at the
annual rate of 0.75% of the first $100 million of the Fund's average net assets
and 0.50% of the Fund's average net assets in excess of $100 million.
NOTE 4--Purchases and Sales of Securities:
For the six months ended June 30, 2000, purchases and sales or maturities
of investment securities (excluding short-term investments) aggregated
$428,294,035 and $459,998,845, respectively. There were no purchases or sales of
U.S. Government securities for the six months ended June 30, 2000.
Note 5--Security Lending:
During the six months ended June 30, 2000, the Fund lent securities to
brokers. The brokers 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, 2000,
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TCW Convertible Securities Fund, Inc.
Notes to Financial Statements (Unaudited) (continued)
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the cash received from the borrowing broker was invested in short-term
investments valued at $11,590,710 which is 103.10% of the value of the loaned
securities.
Note 6--Directors' and Legal Fees:
Directors who are not affiliated with the Advisor received, as a group,
aggregate fees and expenses of $42,268 from the Fund for the six months ended
June 30, 2000. Legal fees totaled $54,873 of which $968 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 Advisor.
Note 7--Restricted Securities:
The following restricted securities held by the Fund at June 30, 2000 were
valued both at the date of acquisition and June 30, 2000, 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 (the "1933 Act"). 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 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, 2000 is $218,258,282, which represents 41% of net assets.
There were no securities deemed illiquid at June 30, 2000.
<TABLE>
<CAPTION>
Principal
Amount or
Number of Date of
Shares Investment Acquisition Cost
------ ---------- ----------- ----
<S> <C> <C> <C>
$ 4,015,000 Affymetrix, Inc., (144A), 4.75%, due 02/15/07 03/14/00 $ 3,313,538
$ 5,010,000 Akamai Technologies, Inc., (144A), 5.5%, due
07/01/07 05/24/00 5,010,000
37,880 Alliant Energy Corp., (144A), $4.91 05/24/00 2,363,146
$10,220,000 American International Group, Exchangeable Home
Depot, Inc., (144A), 1%, due 02/14/06 02/23/00 10,220,000
$ 5,110,000 American Tower Corp., (144A), 5%, due 02/15/10 02/09/00 5,110,000
$10,995,000 ASM Lithography Holding N.V., (144A), 4.25%, due
11/30/04 11/19/99 11,278,462
$ 7,520,000 BEA Systems, Inc., (144A), 4%, due 12/15/06 12/14/99 9,881,114
$ 5,350,000 Burr-Brown Corp., (144A), 4.25%, due 02/15/07 02/18/00 5,401,575
$ 6,450,000 Conexant Systems, Inc., (144A), 4%, due 02/01/07 02/16/00 6,778,158
$ 7,480,000 Critical Path, Inc., (144A), 5.75%, due 04/01/05 03/27/00 7,379,271
</TABLE>
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Notes to Financial Statements (Unaudited) (continued)
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Note 7--Restricted Securities (continued)
<TABLE>
<CAPTION>
Principal
Amount or
Number of Date of
Shares Investment Acquisition Cost
------ ---------- ----------- ----
<S> <C> <C> <C>
$10,785,000 E*TRADE Group, Inc., (144A), 6%, due 02/01/07 02/02/00 $10,537,685
$ 6,845,000 Echostar Communications, Inc., (144A), 4.875%, due
01/01/07 12/03/99 7,038,289
$ 4,265,000 Exchangeable Certificates Corp., (144A), 0.25%,
due 07/17/06 06/24/99 4,265,000
$ 7,000,000 Exodus Communications, Inc., (144A), 4.75%, due
07/15/08 12/02/99 7,021,375
$ 9,050,000 Human Genome, Inc., (144A), 3.75%, due 03/15/07 03/20/00 5,862,261
$ 8,685,000 Interpublic Group of Companies, Inc., (144A),
1.87%, due 06/01/06 05/26/99 7,524,931
$ 4,625,000 Mercury Interactive Corp., (144A), 4.75%, due
07/01/07 06/27/00 4,625,000
$10,890,000 Nextel Communications, Inc., (144A), 5.25%, due
01/15/10 01/21/00 10,982,179
$ 5,800,000 Pinnacle Holdings, Inc., (144A), 5.5%, due
09/15/07 03/15/00 5,800,000
$ 5,985,000 Rational Software Corp., (144A), 5%, due 02/01/07 01/27/00 5,985,000
$17,420,000 Roche Holdings, Inc., (144A), 0%, due 01/19/15 01/12/00 12,541,100
$12,645,000 Sepracor, Inc., (144A), 5%, due 02/15/07 05/08/00 16,521,563
$ 4,725,000 Siebel Systems, Inc., (144A), 5.5%, due 09/15/06 09/15/99 $ 4,774,277
94,960 Titan Capital Trust, (144A), $2.875 02/03/00 4,748,000
$ 6,610,000 Vitesse Semiconductor Corp., (144A), 4%, due
03/15/05 03/07/00 6,489,109
$ 4,790,000 Young & Rubicam, Inc., (144A), 3%, due 01/15/05 01/14/00 4,955,747
</TABLE>
Note 8--Subsequent Events:
The Annual Meeting of Shareholders of the Fund was held on July 19, 2000.
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 37,595,297 affirmative votes; votes opposed/exceptions 295,590 and
votes withheld 234,136); and (ii) the ratification of the selection of Deloitte
& Touche LLP as independent auditors of the Fund for the fiscal year ending
December 31, 2000 (votes for: 37,651,663; votes against 177,800 and abstentions
295,560). 42,196,924 shares were outstanding on the record date of this meeting
and 38,125,023 shares entitled to vote were present in person or by proxy at the
meeting.
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TCW Convertible Securities Fund, Inc.
Notes to Financial Statements (Unaudited) (continued)
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Note 8-- Subsequent Events (continued)
In addition, the Fund's Board of Directors approved a resolution to
authorize the Fund to adopt a share repurchase plan authorizing the Fund to
repurchase up to 2,000,000 shares of its common stock. The repurchase will be
made on the open market or in block purchase transactions. The timing of the
repurchases and the number of repurchased, will depend upon market conditions
and corporate requirements.
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TCW Convertible Securities Fund, Inc.
Financial Highlights
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<TABLE>
<CAPTION>
Six Months
Ended
June 30, 2000 Year Ended December 31,
----------------------------------------------------
(Unaudited) 1999 1998 1997 1996 1995
----------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value Per Share, Beginning of
Period........................................ $ 11.32 $ 9.37 $ 9.21 $ 8.51 $ 8.36 $ 7.47
-------- -------- -------- -------- -------- --------
Income from Operations:
Net Investment Income......................... 0.19 0.35 0.35 0.35 0.36 0.37
Impact to Capital for Shares Issued........... -- -- (0.01) (0.01) -- --
Net Realized and Unrealized Gain on
Securities................................... 1.47 3.15 0.85 1.23 0.77 1.36
-------- -------- -------- -------- -------- --------
Total from Investment Operations............ 1.66 3.50 1.19 1.57 1.13 1.73
-------- -------- -------- -------- -------- --------
Less Distributions:
Distributions from Net Investment Income...... (0.19) (0.35) (0.35) (0.35) (0.36) (0.37)
Distributions from Net Realized Gain.......... (0.23) (1.20) (0.68) (0.52) (0.62) (0.33)
Distributions in Excess of Net Realized
Gain......................................... -- -- -- -- -- (0.14)
-------- -------- -------- -------- -------- --------
Total Distributions......................... (0.42) (1.55) (1.03) (0.87) (0.98) (0.84)
-------- -------- -------- -------- -------- --------
Net Asset Value Per Share, End of Period....... $ 12.56 $ 11.32 $ 9.37 $ 9.21 $ 8.51 $ 8.36
======== ======== ======== ======== ======== ========
Market Value Per Share, End of Period.......... $ 10.50 $ 9.56 $ 9.63 $ 9.63 $ 9.38 $ 9.38
======== ======== ======== ======== ======== ========
Total Investment Return/(2)/................... 14.23%/(1)/ 16.10% 11.41% 12.98% 11.75% 33.60%
Net Asset Value Total Return/(3)/.............. 14.65%/(1)/ 39.16% 13.34% 19.10% 13.94% 24.00%
Ratios/supplemental Data:
Net Assets, End of Period (in thousands)....... $530,072 $477,608 $393,588 $355,061 $271,267 $264,608
Ratio of Expenses to Average Net Assets........ 0.69%/(4)/ 0.68% 0.73% 0.74% 0.77% 0.81%
Ratio of Net Investment Income to Average Net
Assets........................................ 3.05%/(4)/ 3.47% 3.73% 3.95% 4.12% 4.60%
Portfolio Turnover Rate........................ 83.69%/(1)/ 119.92% 124.51% 132.99% 125.72% 108.98%
</TABLE>
/(1)/ For the six months ended June 30, 2000 and not indicative of a full
year's operating results.
/(2)/ Based on market value per share, adjusted for reinvestment of
distributions.
/(3)/ Based on net asset value per share, adjusted for reinvestment of
distributions.
/(4)/ Annualized.
See accompanying Notes to Financial Statements.
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