UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-4980
TCW CONVERTIBLE SECURITIES FUND, INC.
(Exact name of registrant as specified in charter)
865 SOUTH FIGUEROA STREET, SUITE 1800, LOS ANGELES, CA 90017
(Address of principal executive offices)
PHILIP K. HOLL, ESQ.
SECRETARY
865 SOUTH FIGUEROA STREET, SUITE 1800
LOS ANGELES, CA 90017
(Name and address of agent for service)
Registrant's telephone number, including area code: (213) 244-0000
Date of fiscal year end: December 31
Date of reporting period: December 31, 2003
Form N-CSR is to be used by management investment companies to file
reports with the Commission not later than 10 days after the transmission to
stockholders of any report that is required to be transmitted to stockholders
under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1).
The Commission may use the information provided on Form N-CSR in its regulatory,
disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form
N-CSR, and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. Section 3507.
1
ITEM 1. REPORT TO STOCKHOLDERS.
[TCW CONVERTIBLE SECURITIES FUND, INC. LOGO]
TCW CONVERTIBLE
SECURITIES FUND, INC.
ANNUAL REPORT
DECEMBER 31, 2003
[TCW CONVERTIBLE SECURITIES FUND, INC. LOGO]
TCW CONVERTIBLE SECURITIES FUND, INC.
THE PRESIDENT'S LETTER
DEAR SHAREHOLDER:
After three down years, equities rallied across the board in 2003, fueled by
economic recovery, fiscal stimulus and all-time lows in interest rates. Falling
jobless claims, improving manufacturing activity and growing consumer confidence
played a vital role in the recovery. The Fed maintained an accommodative bias
and injected plenty of liquidity into the system. The resulting ease in credit
conditions enabled the financial markets to regain a sound footing. This benign
environment contributed to the outstanding absolute returns of the TCW
Convertible Securities Fund, Inc.
PERFORMANCE OF THE FUND'S SHARES
For the year ended December 31, 2003, the market price of the TCW Convertible
Securities Fund, Inc. (the "Fund") returned 25.1% with dividends reinvested,
while Net Asset Value increased by 26.8%. For the same period, the S&P 500 Index
delivered a total return of 28.7% while the CS First Boston Convertible
Securities Index generated a total return of 28.0%.
For most of the year, the market price of the Fund traded at a discount to Net
Asset Value. The discount averaged 8.6% with a high of 14.7%. The Fund paid a
total dividend of 22 cents per share in 2003. The income of the Fund is highly
dependent on the level of short- and intermediate-term interest rates, which
were at 40-year lows in 2003. As rates rise or fall, Fund income is likely to
move in unison, albeit with a lag.
PORTFOLIO STRUCTURE AND STRATEGY
The Fund managers use a top-down strategy in determining sector allocations and
portfolio characteristics. Following that determination, the Fund buys
individual securities with strong and improving business fundamentals for the
portfolio. The Fund does not purchase securities that may be in default or where
the dividends are in arrears.
The portfolio structure was balanced throughout the year, providing moderate
income and capital appreciation. In the first half of 2003, rich pricing
conditions favored issuers more than investors, and yields dropped. This reduced
income in the third and fourth quarters of 2003. During the year, the portfolio
comprised about 65 securities, diversified across all sectors. The aggregate
composition of the portfolio was investment grade.
At year-end, the portfolio maintained a similar profile. We continued to
emphasize balanced securities that provide both income and capital appreciation
potential. The portfolio maintained an above average weighting in media,
financial services, consumer discretionary and healthcare sectors. The portfolio
was underweight in basic materials and industrial commodity sectors. The largest
sectors were information technology at 24%, healthcare at 16%, financial
services at 16% and consumer discretionary at 20%.
SHARE REPURCHASE PLAN
During the year, the Fund's shares traded at a significant discount to NAV. When
the discount approached 15%, the Fund's Board of Directors reinstituted the
share repurchase plan adopted in 2000 for purposes of enhancing shareholder
value. In 2000, the Fund repurchased 624,700 shares, leaving a balance of
1,375,300 shares. In 2003, the Board of Directors approved a resolution
authorizing the Fund to repurchase up to 1,000,000 additional shares. For the
year ended December 31, 2003, the Fund has repurchased 1,476,000 shares at an
average price of $4.93 per share (average discount of 10.22% from NAV). The Fund
expects to continue to repurchase its outstanding shares if the shares trade at
a sufficient discount. The precise timing of the repurchases and the number of
shares repurchased will depend on market conditions and corporate and regulatory
requirements.
1
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, including the related sales
commission, are selling below the Fund's Net Asset Value per share. If the
market price, including commission, is selling above the Net Asset Value, you
will receive shares at a price equal to the higher of the Net Asset Value per
share on the payment date or 95% of the closing market price on the payment
date.
To enroll in the Plan, if your shares are registered in your name, write to The
Bank of New York, Church Street Station, P.O. Box #11002, New York, New York
10277-0770, or call toll free at (800) 524-4458. If your shares are held by a
brokerage firm, please call your broker. If you need assistance, please call our
investor relations department at (877) 829-4768 or visit our website at
www.tcw.com. As always, we would be pleased to accommodate your investment
needs.
DISCLOSURE OF PORTFOLIO INFORMATION
It is the policy of the Fund to provide certain unaudited information regarding
its portfolio composition as of month-end (the "Portfolio Holdings") to
shareholders and others upon request to the Fund, beginning on the 15th calendar
day after the end of the month (or, if not a business day, the next business
day).
Shareholders and others who wish to obtain Portfolio Holdings for a particular
month may make a request by contacting the Fund between 7:00 a.m. and 5:00 p.m.
Pacific time, Monday through Friday, toll free at (877) 829-4768 beginning on
the 15th day following the end of that month (or, if not a business day, the
next business day).
Persons making requests will be asked to provide their name and a mailing
address, e-mail address or fax number. The Fund reserves the right to refuse to
fulfill a request if it believes that providing Portfolio Holdings would be
contrary to its best interests.
In addition to the policy stated above, the Fund may disclose Portfolio Holdings
at other times to analysts or rating agencies. The disclosure of Portfolio
Holdings in this context is conditioned on the recipient agreeing to treat such
Portfolio Holdings as confidential (provided that analysts and rating agencies
may publish portfolio positions upon the consent of the Fund), and to not allow
the Portfolio Holdings to be used by it or its employees in connection with the
purchase or sale of Fund shares. In addition, Portfolio Holdings are provided or
otherwise available to third-party service providers of the Fund, including the
Fund's custodian, pricing services, and administrators, as necessary for the
provision of services to the Fund.
Sincerely,
/s/ Ernest O. Ellison /s/ Alvin R. Albe Jr.
Ernest O. Ellison Alvin R. Albe Jr.
Chairman President &
Chief Executive Officer
2
TCW CONVERTIBLE SECURITIES FUND, INC.
SCHEDULE OF INVESTMENTS -- DECEMBER 31, 2003
PRINCIPAL MARKET
AMOUNT VALUE
----------- ----------------
FIXED INCOME SECURITIES
AUTOMOTIVE (1.0% OF NET ASSETS)
$ 1,595,000 Wabash National Corp.,
(144A), 3.25%, due
08/01/08 $ 2,805,206*
----------------
BANKING & FINANCIAL
SERVICES (6.1%)
3,485,000 Bear Stearns Co., Inc.,
Exchangeable Fifth Third
Bancorp, 0.25%,
due 05/12/10 3,781,225
6,165,000 E*TRADE Group, Inc., 6.75%,
due 05/15/08 7,498,181+
4,285,000 Legg Mason, Inc., 0%,
due 06/06/31 2,742,400
2,620,000 Silicon Valley Bancshares,
(144A), 0%, due 06/15/08 3,094,875*
----------------
Total Banking &
Financial Services 17,116,681
----------------
COMMERCIAL SERVICES (1.2%)
4,915,000 Manpower, Inc., 0%,
due 08/17/21 3,434,356
----------------
COMMUNICATIONS (1.4%)
255,000 Comverse Technology, Inc., 0%,
due 05/15/23 300,900
3,115,000 Comverse Technology, Inc.,
(144A), 0%, due 05/15/23 3,675,700*
----------------
Total Communications 3,976,600
----------------
COMPUTER SERVICES (8.7%)
195,000 Computer Associates
International, Inc., 1.625%,
due 12/15/09 299,325+
3,635,000 Computer Associates
International, Inc., (144A),
1.625%, due 12/15/09 5,579,725*
$ 2,370,000 Mercury Interactive Corp., 0%,
due 05/01/08 $ 2,710,806+
4,235,000 Micron Technology, Inc.,
(144A), 2.5%, due 02/01/10 5,574,319*+
5,415,000 Morgan Stanley, Exchangeable
Cisco Systems, Inc., 0.25%,
due 05/15/10 6,799,074
2,555,000 Yahoo!, Inc., (144A), 0%,
due 04/01/08 3,286,369*+
----------------
Total Computer Services 24,249,618
----------------
COMPUTER SOFTWARE (3.4%)
2,390,000 DST Systems, Inc., (144A),
4.125%, due 08/15/23 2,862,025*
4,145,000 International Game Technology,
(144A), 0%, due 01/29/33 3,321,181*
3,005,000 Veritas Software Corp., (144A),
0.25%, due 08/01/13 3,290,475*
----------------
Total Computer Software 9,473,681
----------------
ELECTRONICS (4.0%)
2,235,000 Dupont Photomasks, Inc.,
1.25%, due 05/15/08 2,626,125
2,195,000 JDS Uniphase Corp., (144A),
0%, due 11/15/10 2,258,106*
5,575,000 Lehman Brothers Holdings,
Inc., 0.25%, due 08/27/10 6,212,222@
----------------
Total Electronics 11,096,453
----------------
ENTERTAINMENT & LEISURE (2.2%)
5,680,000 Morgan Stanley, Exchangeable
The Walt Disney Co., 0.25%,
due 12/30/08 6,169,616
----------------
HEALTHCARE (2.9%)
1,945,000 AmeriSource Health Corp., 5%,
due 12/01/07 2,343,725
8,830,000 Universal Health Services, Inc.,
0.426%, due 06/23/20 5,860,913
----------------
Total Healthcare 8,204,638
----------------
* Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At December 31,
2003, the value of these securities amounted to $81,053,855 or 29.1% of net
assets.
+ Security partially or fully lent (Note 3).
@ Security convertible into a basket of four technology companies: Applied
Materials, Inc., Xilinx, Inc., Texas Instruments, Inc., and Maxim Integrated
Products, Inc.
See accompanying Notes to Financial Statements.
3
PRINCIPAL MARKET
AMOUNT VALUE
----------- ----------------
HEAVY MACHINERY (0.4%)
$ 735,000 Briggs & Stratton Corp., 5%,
due 05/15/06 $ 1,018,894
----------------
INDUSTRIAL-DIVERSIFIED (4.9%)
3,565,000 Tyco International Group SA,
(144A), 2.75%,
due 01/15/18 4,567,656*
6,560,000 Tyco International Group SA,
(144A), 3.125%,
due 01/15/23 9,003,600*
----------------
Total Industrial-
Diversified 13,571,256
----------------
INSURANCE (1.0%)
2,830,000 Swiss RE America Holding,
3.25%, due 11/21/21 2,681,425
----------------
LODGING (1.6%)
1,525,000 Hilton Hotels Corp., 3.375%,
due 04/15/23 1,656,531+
2,455,000 Mandalay Resort Group,
1.92%, due 03/21/33 2,709,706+
----------------
Total Lodging 4,366,237
----------------
MEDIA-BROADCASTING &
PUBLISHING (3.5%)
2,245,000 Alloy, Inc., (144A), 5.375%,
due 08/01/23 2,177,650*
4,695,000 Liberty Media Corp., (144A),
Exchangeable Time Warner
Inc., 0.75%, due 03/30/23 5,563,575*
1,665,000 Liberty Media Corp.,
Exchangeable Time Warner
Inc., 0.75%, due 03/30/23 1,973,025+
----------------
Total Media-
Broadcasting
& Publishing 9,714,250
----------------
MEDICAL SUPPLIES (3.4%)
$ 7,000,000 Alza Corp., Exchangeable
Johnson & Johnson, Inc.,
0%, due 07/28/20 $ 5,101,250
825,000 Cooper Companies, Inc.,
2.625%, due 07/01/23 1,052,906+
2,625,000 Cooper Companies, Inc.,
(144A), 2.625%,
due 07/01/23 3,350,156*
----------------
Total Medical Supplies 9,504,312
----------------
OIL & GAS (3.8%)
2,580,000 McMoRan Exploration Co.,
(144A), 6%, due 07/02/08 3,966,750*
2,880,000 Pride International, Inc., 2.5%,
due 03/01/07 3,571,200+
170,000 Pride International, Inc.,
(144A), 2.5%, due 03/01/07 210,800*
2,685,000 Pride International, Inc.,
(144A), 3.25%,
due 05/01/33 2,856,169*+
----------------
Total Oil & Gas 10,604,919
----------------
PHARMACEUTICALS (6.7%)
6,540,000 Amgen, Inc., 0%,
due 03/01/32 4,962,225
2,650,000 Axcan Pharma, Inc., (144A),
4.25%, due 04/15/08 3,544,375*
2,270,000 Gilead Sciences, Inc., 2%,
due 12/15/07 3,109,900+
2,795,000 Teva Pharmaceutical
Industries, Ltd., 0.75%,
due 08/15/21 3,782,194
2,250,000 Teva Pharmaceutical
Industries, Ltd., (144A),
0.375%, due 11/15/22 3,158,775*
----------------
Total Pharmaceuticals 18,557,469
----------------
* Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At December 31,
2003, the value of these securities amounted to $81,053,855 or 29.1% of net
assets.
+ Security partially or fully lent (Note 3).
See accompanying Notes to Financial Statements.
4
PRINCIPAL MARKET
AMOUNT VALUE
----------- ----------------
RETAIL (3.2%)
$ 2,785,000 Best Buy Co., Inc., 2.25%,
due 01/15/22 $ 3,042,613
3,475,000 Costco Companies, Inc., 0%,
due 08/19/17 2,958,094
1,975,000 Gap, Inc., 5.75%,
due 03/15/09 3,039,031
----------------
Total Retail 9,039,738
----------------
TELECOMMUNICATIONS (3.7%)
6,705,000 Liberty Media Corp.,
Exchangeable Viacom Inc.,
Class B, 3.25%,
due 03/15/31 7,006,725+
2,800,000 Lucent Technologies, Inc.,
2.75%, due 06/15/25 3,309,250
----------------
Total Telecommunications 10,315,975
----------------
TRANSPORTATION (3.2%)
685,000 Alaska Air Group, Inc., 3.67%,
due 03/21/23 880,088+
1,435,000 Alaska Air Group, Inc., (144A),
3.67%, due 03/21/23 1,843,688*
4,135,000 Carnival Corp., 0%,
due 10/24/21 2,946,188
1,600,000 JetBlue Airways Corp., (144A),
3.5%, due 07/15/33 1,682,080*
1,210,000 Northwest Airlines Corp.,
(144A), 6.625%,
due 05/15/23 1,418,725*+
----------------
Total Transportation 8,770,769
----------------
TOTAL FIXED INCOME SECURITIES
(COST: $162,775,312)
(66.3%) 184,672,093
----------------
NUMBER OF MARKET
SHARES VALUE
----------- ----------------
EQUITY SECURITIES
CONVERTIBLE PREFERRED STOCK
AUTOMOTIVE (3.5%)
171,085 Ford Motor Co. Capital
Trust II, $3.25 $ 9,623,531
----------------
BANKING & FINANCIAL
SERVICES (5.6%)
76,700 Household International,
Inc., Exchangeable HSBC
Holdings PLC, $2.219 3,528,200
97,250 Lehman Brothers Holdings,
Inc., $4.125 4,935,437
29,900 State Street Corp., $13.50 7,280,052
----------------
Total Banking &
Financial Services 15,743,689
----------------
COMMERCIAL SERVICES (3.9%)
65,750 Cendant Corp., $3.875 3,287,500+
263,950 Solectron Corp., $1.8125 4,421,162
25,805 Xerox Corp., $6.25 3,306,266
----------------
Total Commercial
Services 11,014,928
----------------
ELECTRIC UTILITIES (1.3%)
105,800 TXU Corp., $4.0625 3,583,975+
----------------
HEALTHCARE (2.2%)
50,800 Baxter International,
Inc., $3.50 2,800,350+
52,900 Omnicare, Inc., $2.00 3,352,537
----------------
Total Healthcare 6,152,887
----------------
INSURANCE (6.5%)
31,000 Anthem, Inc., $3.00 2,743,500
145,700 Chubb Corp., $1.75 4,219,472
49,100 Hartford Financial Services
Group, Inc., $3.50 2,988,962
* Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At December 31,
2003, the value of these securities amounted to $81,053,855 or 29.1% of net
assets.
+ Security partially or fully lent (Note 3).
See accompanying Notes to Financial Statements.
5
NUMBER OF MARKET
SHARES VALUE
----------- ----------------
78,450 Phoenix Companies,
Inc., Exchangeable Hilb,
Rogal and Hamilton Co.,
$2.667 $ 2,701,622
42,150 Scottish RE Group, Ltd.,
$1.469 1,133,835
59,150 The St. Paul Companies,
Inc., $4.50 4,314,993
----------------
Total Insurance 18,102,384
----------------
MEDIA-BROADCASTING &
PUBLISHING (3.4%)
100,750 Equity Securities Trust,
Exchangeable Cablevision
Systems Corp., $1.406 2,619,500
103,100 Equity Securities Trust,
Exchangeable Cablevision
Systems Corp., $2.343 2,590,388
2,050 Radio One, Inc., $65.00 2,203,750
1,825 Radio One, Inc.,
(144A), $65.00 1,961,875*
----------------
Total Media-
Broadcasting &
Publishing 9,375,513
----------------
OIL & GAS (2.1%)
27,250 Amerada Hess Corp., $3.50 1,502,156+
13,800 Chesapeake Energy Corp.,
$5.00 1,516,206+
50,700 Unocal Corp., $3.125 2,750,475
----------------
Total Oil & Gas 5,768,837
----------------
PAPER & FOREST PRODUCTS (1.2%)
64,150 Boise Cascade Corp., $3.75 3,311,744
----------------
TELECOMMUNICATIONS (3.2%)
111,300 Alltel Corp., $3.875 $ 5,578,913
74,500 Motorola, Inc., $3.50 3,250,063+
----------------
Total Telecommunications 8,828,976
----------------
TOTAL CONVERTIBLE PREFERRED
STOCK (COST: $79,788,714)
(32.9%) 91,506,464
----------------
COMMON STOCK
(COST: $273,130) (0.1%)
PHARMACEUTICALS (0.1%)
24,830 NitroMed, Inc. 177,659**
----------------
TOTAL EQUITY SECURITIES
(COST: $80,061,844)
(33.0%) 91,684,123
----------------
PRINCIPAL
AMOUNT
-----------
SHORT-TERM INVESTMENTS
$ 971,810 Bank of Montreal, 1.06%,
due 01/15/04 971,810***
1,285,614 Bank of Nova Scotia, 1.08%,
due 03/03/04 1,285,614***
1,285,614 Bank of Nova Scotia, 1.08%,
due 03/10/04 1,285,614***
3,214,034 Bank of Nova Scotia, 1.08%,
due 03/12/04 3,214,034***
1,928,420 Bank of Scotland, 1.06%,
due 04/02/04 1,928,420***
964,210 Bank of the West, 1.075%,
due 01/14/04 964,210***
642,807 Bear Stearns & Co., 1.135%,
due 06/10/04 642,807***
1,285,613 BNP Paribas, 0.97%,
due 01/07/04 1,285,613***
* Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At December 31,
2003, the value of these securities amounted to $81,053,855 or 29.1% of net
assets.
** Non-income producing.
*** Represents investments of security lending collateral (Note 3).
+ Security partially or fully lent (Note 3).
See accompanying Notes to Financial Statements.
6
PRINCIPAL MARKET
AMOUNT VALUE
----------- ----------------
$ 3,214,034 BNP Paribas, 1%,
due 01/21/04 $ 3,214,034***
2,571,227 Canadian Imperial
Bank of Commerce, 1.005%,
due 11/04/04 2,571,227***
642,807 Citigroup, Inc., 1.09%,
due 02/06/04 642,807***
5,013,893 Credit Agricole Indosuez, 0.98%,
due 01/02/04 5,013,893***
964,210 Credit Suisse First Boston
Corp., 1.14%,
due 09/08/04 964,210***
1,285,613 Den Danske Bank, 1.02%,
due 01/30/04 1,285,613***
1,221,333 Dreyfus Cash Management
Plus Fund, 0.935%,
due 01/02/04 1,221,333***
321,403 Falcon Asset Securitization
Corp., 1.091%,
due 01/13/04 321,403***
449,965 Goldman Sachs Financial
Square Prime Obligations
Fund, 0.955%,
due 01/02/04 449,965***
2,420,546 Investors Bank &
Trust Depository Reserve,
0.75%, due 01/01/04 2,420,546
9,320,698 Merrimac Cash Fund
(Premium Class), 0.976%,
due 01/02/04 9,320,698***
1,607,017 Royal Bank of Canada, 1.05%,
due 02/27/04 1,607,017***
961,116 Sheffiled Receivables
Corp., 1.091%,
due 01/06/04 961,116***
$ 962,750 Sheffiled Receivables
Corp., 1.091%,
due 01/21/04 $ 962,750***
642,807 Southtrust Bank, 1.09%,
due 02/17/04 642,807***
964,210 Toronto Dominion Bank, 1.1%,
due 01/08/04 964,210***
1,607,017 Wells Fargo & Co., 1.04%,
due 01/30/04 1,607,017***
----------------
TOTAL SHORT-TERM
INVESTMENTS
(COST: $45,748,768)
(16.4%) 45,748,768
----------------
TOTAL INVESTMENTS
(COST: $288,585,924)
(115.7%) 322,104,984
LIABILITIES IN EXCESS OF
OTHER ASSETS (-15.7%) (43,744,172)
----------------
NET ASSETS (100.0%) $ 278,360,812
================
*** Represents investments of security lending collateral (Note 3).
See accompanying Notes to Financial Statements.
7
TCW CONVERTIBLE SECURITIES FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES -- DECEMBER 31, 2003
ASSETS:
Investments, at Value (Cost: $288,585,924) $ 322,104,984
Receivables for Securities Sold 1,477,536
Interest and Dividends Receivable 1,011,479
----------------
Total Assets 324,593,999
----------------
LIABILITIES:
Distributions Payable 1,988,015
Payables for Fund Shares Redeemed 539,204
Payables Upon Return of Securities Loaned 43,328,222
Accrued Investment Advisory Fees 135,952
Other Accrued Expenses 241,794
----------------
Total Liabilities 46,233,187
----------------
NET ASSETS $ 278,360,812
================
Net Assets were comprised of:
Common Stock, par value $0.01 per share, (75,000,000 shares authorized,
49,509,279 shares issued and outstanding) $ 495,093
Paid-in Capital 360,861,040
Undistributed Net Realized (Loss) on Investments (114,526,366)
Net Unrealized Appreciation of Investments 33,519,060
(Overdistributed) Net Investment Income (1,988,015)
----------------
NET ASSETS $ 278,360,812
================
NET ASSET VALUE PER SHARE $ 5.62
================
See accompanying Notes to Financial Statements.
8
TCW CONVERTIBLE SECURITIES FUND, INC.
STATEMENT OF OPERATIONS -- YEAR ENDED DECEMBER 31, 2003
INVESTMENT INCOME:
Interest (including security lending fees of $85,142) $ 4,517,564
Dividends (net of foreign withholding of taxes of $88) 7,604,492
----------------
Total Investment Income 12,122,056
----------------
EXPENSES:
Investment Advisory Fees 1,537,105
Accounting Fees 73,612
Administration Fees 99,551
Audit and Tax Service Fees 46,735
Transfer Agent Fees 64,768
Custodian Fees 18,878
Directors' Fees & Expenses 95,860
Proxy Costs 59,491
Listing Fees 49,565
Insurance Costs 11,204
Legal Fees 35,650
Printing and Distribution Costs 39,168
Miscellaneous 21,526
----------------
Total Expenses 2,153,113
----------------
Net Investment Income 9,968,943
----------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net Realized (Loss) on Investments (10,406,842)
Change in Unrealized Appreciation of Investments 60,949,112
----------------
Net Realized and Unrealized Gain on Investments 50,542,270
----------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 60,511,213
================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
9
TCW CONVERTIBLE SECURITIES FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED YEAR ENDED
DECEMBER 31, 2003 DECEMBER 31, 2002
----------------- -----------------
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net Investment Income $ 9,968,943 $ 16,033,572
Net Realized (Loss) on Investments (10,406,842) (61,476,304)
Change in Unrealized Appreciation (Depreciation)
of Investments 60,949,112 (24,066,081)
---------------- ----------------
Increase (Decrease) in Net Assets Resulting
from Operations 60,511,213 (69,508,813)
---------------- ----------------
Distributions to Shareholders:
From Net Investment Income (8,199,902) (16,033,572)
Return of Capital (2,961,779) (20,060,607)
---------------- ----------------
Total Distributions to Shareholders (11,161,681) (36,094,179)
---------------- ----------------
Capital Share Transactions:
Shares Issued in Reinvestment of Dividends
(46,104 for the year ended December 31, 2003 and 293,492
for the year ended December 31, 2002) 215,306 2,098,841
Shares Repurchased (1,476,000 for the
year ended December 31, 2003) (7,277,321) --
---------------- ----------------
Increase (Decrease) in Net Assets Resulting from
Net Capital Share Transactions (7,062,015) 2,098,841
---------------- ----------------
Total Increase (Decrease) in Net Assets 42,287,517 (103,504,151)
NET ASSETS:
Beginning of Year 236,073,295 339,577,446
---------------- ----------------
End of Year $ 278,360,812 $ 236,073,295
================ ================
See accompanying Notes to Financial Statements.
10
TCW CONVERTIBLE SECURITIES FUND, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES:
TCW Convertible Securities Fund, Inc. (the "Fund") was incorporated in Maryland
on January 13, 1987 as a diversified, closed-end investment management company
and is registered under the Investment Company Act of 1940, as amended. The Fund
commenced operations on March 5, 1987. The Fund's investment objective is to
seek a total investment return, comprised of current income and capital
appreciation through investment principally in convertible securities. In
accordance with the requirements of Rule 35d-1 under the 1940 Act, the Fund will
invest, under normal market conditions, at least 80% of its net assets, plus any
borrowings for investment purposes in convertible securities. The 80% investment
policy described above is non-fundamental and may be changed by the Board of
Directors to become effective upon at least 60 days' notice to shareholders.
The preparation of the accompanying financial statements requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
income and expenses during the reporting period. Actual results could differ
from those estimates.
The following is a summary of the significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with accounting principles generally accepted in the
United States of America.
SECURITY VALUATION: Securities traded on national exchanges are valued at the
last reported sales price or the mean of the current bid and asked prices if
there are no sales in the trading period. Other securities which are traded on
the over-the-counter market are valued at the mean of the current bid and asked
prices. Short-term debt securities with maturities of 60 days or less at the
time of purchase are valued at amortized cost. Other short-term debt securities
are valued on a mark-to-market basis until such time as they reach a remaining
maturity of 60 days, where upon they will be valued at amortized value using
their value of the 61st day prior to maturity.
SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME: Security transactions are
recorded on the trade date. Dividend income is recorded on the ex-dividend date,
while interest income is recorded on the accrual basis. Discounts, including
original issue discounts, and premiums on securities purchased are recognized as
interest income and expense, respectively, using a constant yield-to-maturity
method. Realized gains and losses on investments are recorded on the basis of
identified cost.
DISTRIBUTIONS: Distributions to shareholders are recorded on ex-dividend date.
The Fund intends to distribute its investment company taxable income quarterly
and to distribute any net realized capital gains at least annually, to the
extent required for U.S. federal income tax purposes. The Board of Directors
also may, in its discretion, choose to pay distributions in excess of net
investment income and net realized capital gains, though it is not required to
do so.
Income and capital gain distributions are determined in accordance with income
tax regulations which may differ from accounting principles generally accepted
in the United States of America. These differences may be primarily due to
differing treatments for losses deferred due to wash sales and spillover
distributions. Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid-in-capital and may affect
net investment income per share.
11
A reclassification of $544,702 was made on December 31, 2003, between
overdistributed net investment income and undistributed net realized loss on
investments as a result of permanent differences between book and tax.
REPURCHASE AGREEMENTS: The Fund may invest in repurchase agreements secured by
U.S. Government Securities. A repurchase agreement arises when the Fund
purchases a security and simultaneously agrees to resell it to the seller at an
agreed upon future date. The Fund requires the seller to maintain the value of
the securities, marked to market daily, at not less than the repurchase price.
If the seller defaults on its repurchase obligation, the Fund could suffer
delays, collection expenses and losses to the extent that the proceeds from the
sale of the collateral are less than the repurchase price. The Fund did not
enter into any repurchase agreements for the year ended December 31, 2003.
NOTE 2--FEDERAL INCOME TAXES:
It is the policy of the Fund to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and distribute all of
its net taxable income, including any net realized gains on investments, to its
shareholders. Therefore, no federal income tax provision is required.
For the year ended December 31, 2003, the Fund recognized on a tax basis a net
realized loss of $10,690,734 on security transactions which will be carried
forward to 2011. The Fund also has a loss carryforward of $42,470,592 and
$61,853,273 which will expire in 2009 and 2010, respectively.
Also for the year ended December 31, 2003, the fund distributed, on a tax basis,
$13,248,795 of which $10,287,016 is characterized as ordinary income and
$2,961,779 as return of capital.
At December 31, 2003, net unrealized appreciation for federal income tax
purposes is comprised of the following components:
Appreciated securities $ 35,704,331
Depreciated securities $ (2,342,775)
---------------
Net unrealized (depreciation) $ 33,361,556
===============
Cost of securities for federal
income tax purposes $ 288,743,428
===============
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 year ended December 31, 2003, purchases and sales or maturities of
investment securities (excluding short-term investments) aggregated $289,462,995
and $298,991,800, respectively. There were no purchases or sales of U.S.
Government securities for the year ended December 31, 2003.
NOTE 5--SECURITY LENDING:
During the year ended December 31, 2003, 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 December 31,
2003, the cash received from the borrowing broker was invested in short-term
investments valued at $43,328,222 which is 102.7% of the value of the loaned
securities.
12
NOTE 6--DIRECTORS' FEES:
Directors who are not affiliated with the Advisor received, as a group,
aggregate fees and expenses of $95,860 from the Fund for the year ended December
31, 2003. Certain officers and/or directors of the Fund are also officers and/or
directors of the Advisor.
NOTE 7--RESTRICTED SECURITIES:
The Funds are permitted to invest in securities that are subject to legal or
contractual restrictions on resale. These securities generally may be resold in
transactions exempt from registration or to the public if the securities are
registered. Disposal of these securities may involve time consuming negotiations
and expense, and prompt sale at an acceptable price may be difficult. There are
no restricted securities (excluding 144A issues) at December 31, 2003.
NOTE 8--SHARE REPURCHASE PLAN:
On November 12, 2003, the Fund reinstituted the Share Repurchase Plan (the
"Plan") adopted in 2000 for purposes of enhancing stockholder value and reducing
the discount at which the Fund's shares trade from their net asset value. In
2000, the Board of Directors authorized the Fund to adopt the Plan authorizing
the Fund to repurchase up to 2,000,000 shares of its common stock. During 2000,
the Fund repurchased 624,700 shares, leaving a balance of 1,375,300 shares. In
addition, the Board of Directors approved a resolution authorizing the Fund to
repurchase up to 1,000,000 additional shares. For the year ended December 31,
2003, the Fund has repurchased 1,476,000 shares at an average discount of 10.22%
from net asset value per share. The Fund expects to continue to repurchase its
outstanding shares if the shares trade at a sufficient discount although the
precise timing of the repurchases and the number of shares repurchased will
depend upon market conditions and corporate and regulatory requirements.
13
TCW CONVERTIBLE SECURITIES FUND, INC.
FINANCIAL HIGHLIGHTS
YEAR ENDED DECEMBER 31,
2003 2002 2001 2000 1999
--------------------------------------------------------------------------------
Net Asset Value Per Share, Beginning of
Year $ 4.63 $ 6.70 $ 8.48 $ 11.32 $ 9.37
------------ ------------ ------------ ------------ ------------
Income from Operations:
Net Investment Income (3) 0.20 0.32 0.38 0.35 0.35
Impact to Capital for Shares Issued -- -- (0.01) -- --
Impact to Capital for Shares Repurchased 0.01 -- -- 0.02 --
Net Realized and Unrealized Gains (Losses)
on Securities 1.00 (1.68) (1.31) (0.80) 3.15
------------ ------------ ------------ ------------ ------------
Total from Investment Operations 1.21 (1.36) (0.94) (0.43) 3.50
------------ ------------ ------------ ------------ ------------
Less Distributions:
Distributions from Net Investment Income (0.16) (0.32) (0.60) (0.35) (0.35)
Distributions from Net Realized Gain -- -- -- (2.06) (1.20)
Distributions from Paid-in-Capital (0.06) (0.39) (0.24) -- --
------------ ------------ ------------ ------------ ------------
Total Distributions (0.22) (0.71) (0.84) (2.41) (1.55)
------------ ------------ ------------ ------------ ------------
Net Asset Value Per Share, End of Year $ 5.62 $ 4.63 $ 6.70 $ 8.48 $ 11.32
============ ============ ============ ============ ============
Market Value Per Share, End of Year $ 4.98 $ 4.16 $ 8.55 $ 10.38 $ 9.56
============ ============ ============ ============ ============
Total Investment Return (1) 25.14% (45.11)% (9.27)% 34.95% 16.10%
Net Asset Value Total Return (2) 26.82% (20.75)% (10.89)% (4.79)% 39.16%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Year (in thousands) $ 278,361 $ 236,073 $ 339,577 $ 352,555 $ 477,608
Ratio of Expenses to Average Net Assets 0.84% 0.83% 0.75% 0.69% 0.68%
Ratio of Net Investment Income to Average
Net Assets 3.89% 5.82% 5.16% 2.88% 3.47%
Portfolio Turnover Rate 115.16% 75.04% 129.57% 159.44% 119.92%
(1) Based on market value per share, adjusted for reinvestment of distributions.
(2) Based on net asset value per share, adjusted for reinvestment of
distributions.
(3) Computed using average shares outstanding throughout the period.
See accompanying Notes to Financial Statements.
14
TCW CONVERTIBLE SECURITIES FUND, INC.
INDEPENDENT AUDITORS' REPORT
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS OF TCW
CONVERTIBLE SECURITIES FUND, INC.:
We have audited the accompanying statement of assets and liabilities of TCW
Convertible Securities Fund, Inc., (the "Fund"), including the schedule of
investments, as of December 31, 2003 and the related statement of operations for
the year then ended, the statements of changes in net assets for each of the two
years in the period then ended, and the financial highlights for each of the
five years in the period then ended. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of December 31, 2003 by correspondence with the custodian.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Fund as of December 31, 2003, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended, and the financial highlights for each of the five years in the
period then ended in conformity with accounting principles generally accepted in
the United States of America.
/s/ Deloittte Touche LLP
Los Angeles, California
February 19, 2004
15
TCW CONVERTIBLE SECURITIES FUND, INC.
VOTING INFORMATION (UNAUDITED)
REPORT OF ANNUAL MEETING OF SHAREHOLDERS:
The Annual Meeting of Shareholders of the Fund was held on July 16, 2003. At the
meeting, the following matters were submitted to a shareholder vote and approved
by a vote of a majority of the Fund's outstanding shares; (i) the election of
Ernest O. Ellison, Samuel P. Bell, Richard W. Call, Matthew K. Fong; John A.
Gavin, Patrick C. Haden, Charles A. Parker and Robert G. Sims as Directors to
serve until the next annual meeting of the Fund's shareholders and until their
successors are elected and qualify (each Director received 46,243,475
affirmative votes, votes exceptions 421,338 and votes withheld 1,547,620); and
(ii) the ratification of the selection of Deloitte & Touche LLP as independent
auditors of the Fund for the fiscal year ending December 31, 2003 (votes for
47,258,220; votes against 515,367 and abstentions 438,846). 50,985,279 shares
were outstanding on the record date of this meeting and 48,212,433 shares
entitled to vote were present in person or by proxy at the meeting.
16
TCW CONVERTIBLE SECURITIES FUND, INC.
DIRECTORS AND OFFICERS (UNAUDITED)
A board of eight directors is responsible for overseeing the operations of the
TCW Convertible Securities Fund, Inc. The directors of the Fund, and their
business addresses and their principal occupations for the last five years are
set forth below.
NAME, ADDRESS,
AGE AND TERM OF OFFICE AND PRINCIPAL OCCUPATION(S) OTHER DIRECTORSHIPS
POSITION WITH FUNDS LENGTH OF TIME SERVED DURING PAST 5 YEARS HELD BY DIRECTOR
---------------------------------------------------------------------------------------------------
Ernest O. Ellison (72) Mr. Ellison has Vice Chairman of the None.
865 S. Figueroa Street served as Chairman Board, Trust Company
Los Angeles, CA 90017 and a director of of the West and The
Director TCW Convertible TCW Group, Inc.
Securities Fund,
Inc. since January
1987.
Samuel P. Bell (67) Mr. Bell has served President, Los Point 360 (audio
333 South Hope Street as a director of TCW Angeles Business visual services),
Suite 2660 Convertible Advisors since 1996. TCW Premier Funds
Los Angeles, CA 90071 Securities Fund, Previously Mr. Bell (mutual fund) and
Director Inc. since October served as the Area TCW Galileo Funds,
2002. Managing Partner of Inc. (mutual fund).
Ernst & Young for
the Pacific
Southwest Area.
Richard W. Call (79) Mr. Call has served Private Investor. TCW Premier Funds
496 Prospect Terrace as a director of TCW Former President of (mutual fund) and
Pasadena, CA 91103 Convertible The Seaver Institute TCW Galileo Funds,
Director Securities Fund, (a private Inc. (mutual fund).
Inc. since February foundation).
1987.
Matthew K. Fong (50) Mr. Fong has served President, Strategic Seismic Warning
Strategic Advisory Group as a director of TCW Advisory Group, Of Systems, Inc., Viata
13191 Crossroad Parkway Convertible Counsel Sheppard, Inc. (home
North City of Industry, Securities Fund, Mullin, Richter & entertainment
CA 91746 Inc. since May 2001. Hamilton (law firm) products), TCW
Director since 1999. From Galileo Funds, Inc.
1995 to 1998, (mutual fund) and
Mr. Fong served as TCW Premier Funds
Treasurer of the (mutual fund).
State of California.
John A. Gavin (72) Mr. Gavin has served Founder and Chairman Causeway Capital,
c/o Paul, Hastings, as a director of TCW of Gamma Holdings TCW Galileo Funds,
Janofsky & Walker LLP Convertible (international Inc. (mutual fund),
Counsel to the Securities Fund, capital consulting TCW Premier Funds
Independent Directors Inc. since May 2001. firm). (mutual fund) and
515 South Flower Street Hotchkis and Wiley
Los Angeles, CA 90071 Funds (mutual
Director funds).
17
NAME, ADDRESS,
AGE AND TERM OF OFFICE AND PRINCIPAL OCCUPATION(S) OTHER DIRECTORSHIPS
POSITION WITH FUNDS LENGTH OF TIME SERVED DURING PAST 5 YEARS HELD BY DIRECTOR
---------------------------------------------------------------------------------------------------
Patrick C. Haden (50) Mr. Haden has served General Partner, Indy Mac Mortgage
300 South Grand Avenue as a director of TCW Riordan, Lewis & Holdings (mortgage
Los Angeles, CA 90071 Convertible Haden (private banking), Bradshaw
Director Securities Fund, equity partnership). International Inc.
Inc. since May 2001. (housewares),
Financial Pacific
Insurance Group,
Inc., Tetra Tech,
Inc. (environmental
consulting), TCW
Premier Funds
(mutual fund) and
TCW Galileo Funds,
Inc. (mutual fund).
Charles A. Parker (69) Mr. Parker has Private Investor. Horace Mann
c/o Paul, Hastings, served as a director Educators Corp.,
Janofsky & Walker LLP of TCW Convertible trustee of the
Counsel to the Securities Fund, Burridge Center for
Independent Directors Inc. since May 1988. Research in Security
515 South Flower Street Prices (University
Los Angeles, CA 90071 of Colorado),
Director Amerindo Funds
(mutual fund), TCW
Galileo Funds, Inc.
(mutual fund), and
TCW Premier Funds
(mutual fund).
Robert G. Sims (72) Mr. Sims has served Private Investor, None.
16855 West Bernardo as a director of TCW Director, The TCW
Drive Convertible Group, Inc.
Suite 250 Securities Fund,
San Diego, CA 92127 Inc. since October
Director 1991.
The officers of the Fund who are not directors of the Fund are:
POSITION(S) HELD PRINCIPAL OCCUPATION(S)
NAME AND ADDRESS WITH COMPANY DURING PAST 5 YEARS (1)
-------------------------------------------------------------------------------------------------------
Alvin R. Albe, Jr. (50)* President and Chief President and Director,
Executive Officer the Advisor, Executive
Vice President and
Director of TCW Asset
Management Company and
Trust Company of the
West; Executive Vice
President, The TCW Group,
Inc.; President, TCW
Galileo Funds, Inc. and
TCW Premier Funds.
18
POSITION(S) HELD PRINCIPAL OCCUPATION(S)
NAME AND ADDRESS WITH COMPANY DURING PAST 5 YEARS (1)
-------------------------------------------------------------------------------------------------------
Mohan Kapoor (35)* Senior Vice President Senior Vice President,
the Advisor, TCW Asset
Management Company and
Trust Company of the
West.
Thomas D. Lyon (44)* Senior Vice President Managing Director, the
Advisor, TCW Asset
Management Company and
Trust Company of the
West.
Thomas E. Larkin, Jr. (64)* Senior Vice President Vice Chairman, The TCW
Group, Inc., the Advisor,
TCW Asset Management
Company and Trust Company
of the West.
Hillary G.D. Lord (47)* Senior Vice President and Managing Director and
Assistant Secretary Chief Compliance Officer,
the Advisor, The TCW
Group, Inc., TCW Asset
Management Company and
Trust Company of the
West.
Philip K. Holl (53)* Secretary and Associate Senior Vice President and
General Counsel Associate General
Counsel, the Advisor, TCW
Asset Management Company
and Trust Company of the
West; Secretary, TCW
Galileo Funds, Inc. and
TCW Premier Funds.
Michael E. Cahill (52)* General Counsel and Managing Director,
Assistant Secretary General Counsel and
Secretary, the Advisor,
The TCW Group, Inc., TCW
Asset Management Company
and Trust Company of the
West; Senior Vice
President and General
Counsel, TCW Galileo
Funds, Inc. and TCW
Premier Funds.
David S. DeVito (40)* Treasurer and Chief Managing Director and
Financial Officer Chief Financial Officer,
the Advisor, The TCW
Group, Inc., TCW Asset
Management Company and
Trust Company of the
West; Treasurer and Chief
Financial Officer, TCW
Galileo Funds, Inc. and
TCW Premier Funds.
19
POSITION(S) HELD PRINCIPAL OCCUPATION(S)
NAME AND ADDRESS WITH COMPANY DURING PAST 5 YEARS (1)
-------------------------------------------------------------------------------------------------------
George N. Winn (35)* Assistant Treasurer Vice President, the Advisor,
TCW Asset Management Company
and Trust Company of the West.
(1) POSITIONS WITH THE TCW GROUP, INC. AND ITS AFFILIATES MAY HAVE CHANGED OVER
TIME.
* ADDRESS IS 865 SOUTH FIGUEROA STREET, 18TH FLOOR, LOS ANGELES, CALIFORNIA
90017
20
[TCW CONVERTIBLE SECURITIES FUND, INC. LOGO]
TCW CONVERTIBLE SECURITIES FUND, INC.
DIRECTORS AND OFFICERS
Ernest O. Ellison
CHAIRMAN
Samuel P. Bell
DIRECTOR
Richard W. Call
DIRECTOR
Matthew K. Fong
DIRECTOR
John A. Gavin
DIRECTOR
Patrick C. Haden
DIRECTOR
Charles A. Parker
DIRECTOR
Robert G. Sims
DIRECTOR
Alvin R. Albe, Jr.
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Mohan Kapoor
SENIOR VICE PRESIDENT
Thomas D. Lyon
SENIOR VICE PRESIDENT
Thomas E. Larkin, Jr.
SENIOR VICE PRESIDENT
Hilary G.D. Lord
SENIOR VICE PRESIDENT AND ASSISTANT SECRETARY
Philip K. Holl
SECRETARY AND ASSOCIATE GENERAL COUNSEL
Michael E. Cahill
GENERAL COUNSEL AND ASSISTANT SECRETARY
David S. DeVito
TREASURER AND CHIEF FINANCIAL OFFICER
George N. Winn
ASSISTANT TREASURER
SHAREHOLDER INFORMATION
INVESTMENT ADVISER
TCW Investment Management Company
865 South Figueroa Street
Los Angeles, California 90017
TRANSFER AGENT, DIVIDEND REINVESTMENT AND DISBURSING AGENT AND REGISTRAR
The Bank of New York
Church Street Station
P.O. Box #11002
New York, New York 10277-0770
CUSTODIAN
Investors Bank & Trust Company
200 Clarendon Street
Boston, Massachusetts 02116
INDEPENDENT AUDITORS
Deloitte & Touche LLP
350 South Grand Avenue
Los Angeles, California 90071
LEGAL COUNSEL
Dechert
1775 Eye Street N.W.
Washington DC, 20006
ITEM 2. CODE OF ETHICS. The registrant has adopted a code of ethics that
applies to its principal executive officer and principal financial
officer or persons performing similar functions. The registrant
hereby undertakes to provide any person, without charge, upon
request, a copy of the code of ethics. To request a copy of the
code of ethics, please contact the registrant at (877) 829-4768.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. The registrant has an audit
committee financial expert, Samuel P. Bell, who is independent of
management, serving on its audit committee.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) AUDIT FEES PAID BY REGISTRANT
2002 2003
---- ----
$ 34,650 $ 37,275
(b) AUDIT-RELATED FEES PAID BY REGISTRANT
2002 2003
---- ----
0 0
(c) TAX FEES PAID BY REGISTRANT
2002 2003
---- ----
$ 6,043 $ 6,027
Fees were for the preparation and filing of the registrant's
corporate returns.
(d) ALL OTHER FEES PAID BY REGISTRANT
2002 2003
---- ----
0 0
(e)(1) The registrant's audit committee approves each specific
service the auditor will perform for the registrant. Accordingly,
the audit committee has not established pre-approval policies or
procedures for services that the auditor may perform for the
registrant.
(e)(2) None
2
(f) Not applicable.
(g) No non-audit fees except as disclosed in Item 4(c) above
were billed by the registrant's accountant for services
rendered to the registrant, or rendered to the
registrant's investment adviser (not including any
sub-adviser whose role is primarily portfolio management
and is subcontracted with or overseen by another
investment adviser), and any entity controlling,
controlled by, or under common control with the adviser
that provides ongoing services to the registrant for each
of the last two fiscal years of the registrant.
(h) Not applicable.
ITEM 5. AUDIT OF COMMITTEE OF LISTED REGISTRANTS.
(a) The registrant has a separately-designated standing audit
committee established in accordance with Section
3(a)(58)(A) of the Securities Exchange Act of 1934, as
amended. The registrant's audit committee members,
consisting solely of independent directors are:
Samuel P. Bell
Richard W. Call
Matthew K. Fong
John A. Gavin
Patrick C. Haden
Charles A. Parker
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
PROXY VOTING GUIDELINES AND PROCEDURES
(JANUARY 2004)
INTRODUCTION
Certain affiliates of The TCW Group, Inc. (these affiliates are collectively
referred to as "TCW") act as investment advisors for a variety of clients,
including mutual funds. In connection with these investment advisory duties, TCW
exercises voting responsibilities for its clients through the corporate proxy
voting process. TCW believes that the right to vote proxies is a significant
asset of its clients' holdings. In order to provide a basis for making decisions
in the voting of proxies for its clients, TCW has established a proxy voting
committee (the "PROXY COMMITTEE") and adopted these proxy voting guidelines and
procedures (the "GUIDELINES"). The Proxy Committee meets quarterly (or at such
other frequency as determined by the Proxy Committee) to review the Guidelines
and other proxy voting issues. The members of the Proxy Committee include TCW
personnel from the investment, legal and marketing departments. TCW also uses
3
an outside proxy voting service (the "OUTSIDE SERVICE") to help manage the proxy
voting process. The Outside Service facilitates TCW's voting according to the
Guidelines (or, if applicable, according to guidelines submitted by TCW's
clients) and helps maintain TCW's proxy voting records. Under specified
circumstances described below involving potential conflicts of interest, the
Outside Service may also be requested to help decide certain proxy votes.
PHILOSOPHY
The Guidelines provide a basis for making decisions in the voting of proxies for
clients of TCW. When voting proxies, TCW's utmost concern is that all decisions
be made solely in the interests of the client and with the goal of maximizing
the value of the client's investments. With this goal in mind, the Guidelines
cover various categories of voting decisions and generally specify whether TCW
will vote for or against a particular type of proposal. TCW's underlying
philosophy, however, is that its portfolio managers, who are primarily
responsible for evaluating the individual holdings of TCW's clients, are best
able to determine how best to further client interests and goals. The portfolio
managers may, in their discretion, take into account the recommendations of TCW
management, the Proxy Committee, and the Outside Service.
GUIDELINES
The proxy voting decisions set forth below refer to proposals by company
management except for the categories of "Shareholder Proposals" and "Social
Issue Proposals." The voting decisions in these latter two categories refer to
proposals by outside shareholders.
GOVERNANCE
- FOR director nominees in uncontested elections
- FOR management nominees in contested elections
- FOR ratifying auditors, except AGAINST if the previous auditor was
dismissed because of a disagreement with the company or if the non-audit
services exceed 51% of fees
- FOR changing the company name
- FOR approving other business
- FOR adjourning the meeting
- FOR technical amendments to the charter and/or bylaws
- FOR approving financial statements
CAPITAL STRUCTURE
- FOR increasing authorized common stock
- FOR decreasing authorized common stock
- FOR amending authorized common stock
- FOR the issuance of common stock, except AGAINST if the issued common stock
has superior voting rights
- FOR approving the issuance or exercise of stock warrants
- FOR authorizing preferred stock, except AGAINST if the board has unlimited
rights to set the terms and conditions of the shares
- FOR increasing authorized preferred stock, except AGAINST if the board has
unlimited rights to set the terms and conditions of the shares
4
- FOR decreasing authorized preferred stock
- FOR canceling a class or series of preferred stock
- FOR amending preferred stock
- FOR issuing or converting preferred stock, except AGAINST if the shares
have voting rights superior to those of other shareholders
- FOR eliminating preemptive rights
- FOR creating or restoring preemptive rights
- AGAINST authorizing dual or multiple classes of common stock
- FOR eliminating authorized dual or multiple classes of common stock
- FOR amending authorized dual or multiple classes of common stock
- FOR increasing authorized shares of one or more classes of dual or multiple
classes of common stock, except AGAINST if it will allow the company to
issue additional shares with superior voting rights
- FOR a stock repurchase program
- FOR A stock split
- FOR a reverse stock split, except AGAINST if the company does not intend to
proportionally reduce the number of authorized shares
MERGERS AND RESTRUCTURING
- FOR merging with or acquiring another company
- FOR recapitalization
- FOR restructuring the company
- FOR bankruptcy restructurings
- FOR liquidations
- FOR reincorporating in a different state
- FOR a leveraged buyout of the company
- FOR spinning off certain company operations or divisions
- FOR the sale of assets
- AGAINST eliminating cumulative voting
- FOR adopting cumulative voting
BOARD OF DIRECTORS
- FOR limiting the liability of directors
- FOR amending director liability provisions
- AGAINST indemnifying directors and officers
- AGAINST amending provisions concerning the indemnification of directors and
officers
- FOR setting the board size
- FOR allowing the directors to fill vacancies on the board without
shareholder approval
- AGAINST giving the board the authority to set the size of the board as
needed without shareholder approval
- FOR a proposal regarding the removal of directors, except AGAINST if the
proposal limits the removal of directors to cases where there is legal
cause
- FOR non-technical amendments to the company's certificate of incorporation,
except AGAINST if an amendment would have the effect of reducing
shareholders' rights
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- For non-technical amendments to the company's by laws, except against if an
amendment would have the effect of reducing shareholder's rights
ANTI-TAKEOVER PROVISIONS
- AGAINST a classified board
- AGAINST amending a classified board
- FOR repealing a classified board
- AGAINST ratifying or adopting a shareholder rights plan (poison pill)
- AGAINST redeeming a shareholder rights plan (poison pill)
- AGAINST eliminating shareholders' right to call a special meeting
- AGAINST limiting shareholders' right to call a special meeting
- FOR restoring shareholders' right to call a special meeting
- AGAINST eliminating shareholders' right to act by written consent
- AGAINST limiting shareholders' right to act by written consent
- FOR restoring shareholders' right to act by written consent
- AGAINST establishing a supermajority vote provision to approve a merger
or other business combination
- FOR amending a supermajority vote provision to approve a merger or other
business combination, except AGAINST if the amendment would increase the
vote required to approve the transaction
- FOR eliminating a supermajority vote provision to approve a merger or other
business combination
- AGAINST adopting supermajority vote requirements (lock-ins) to change
certain bylaw or charter provisions
- AGAINST amending supermajority vote requirements (lock-ins) to change
certain bylaw or charter provisions
- FOR eliminating supermajority vote requirements (lock-ins) to change
certain bylaw or charter provisions
- AGAINST expanding or clarifying the authority of the board of directors to
consider factors other than the interests of shareholders in assessing a
takeover bid
- AGAINST establishing a fair price provision
- AGAINST amending a fair price provision
- FOR repealing a fair price provision
- FOR limiting the payment of greenmail
- AGAINST adopting advance notice requirements
- FOR opting out of a state takeover statutory provision
- AGAINST opt into a state takeover statutory provision
COMPENSATION
- FOR adopting a stock incentive plan for employees, except decide on a
CASE-BY-CASE basis if the plan dilution is more than 15% of outstanding
common stock or if the potential dilution from all company plans, including
the one proposed, is more than 20% of outstanding common stock
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- FOR amending a stock incentive plan for employees, except decide on a
CASE-BY-CASE basis if the minimum potential dilution from all company
plans, including the one proposed, is more than 20% of outstanding common
stock
- FOR adding shares to a stock incentive plan for employees, except decide on
a CASE-BY-CASE basis if the plan dilution is more than 15% of outstanding
common stock or if the potential dilution from all company plans, including
the one proposed, is more than 20% of outstanding common stock
- FOR limiting per-employee option awards
- FOR extending the term of a stock incentive plan for employees
- FOR adopting a stock incentive plan for non-employee directors, except
decide on a CASE-BY-CASE basis if the plan dilution is more than 5% of
outstanding common equity or if the minimum potential dilution from all
plans, including the one proposed, is more than 10% of outstanding common
equity
- FOR amending a stock incentive plan for non-employee directors, except
decide on a CASE-BY-CASE basis if the minimum potential dilution from all
plans, including the one proposed, is more than 10% of outstanding common
equity
- FOR adding shares to a stock incentive plan for non-employee directors,
except decide on a CASE-BY-CASE basis if the plan dilution is more than 5%
of outstanding common equity or if the minimum potential dilution from all
plans, including the one proposed, is more than 10% of the outstanding
common equity
- FOR adopting an employee stock purchase plan, except AGAINST if the
proposed plan allows employees to purchase stock at prices of less than 75%
of the stock's fair market value
- FOR amending an employee stock purchase plan, except AGAINST if the
proposal allows employees to purchase stock at prices of less than 75% of
the stock's fair market value
- FOR adding shares to an employee stock purchase plan, except AGAINST if the
proposed plan allows employees to purchase stock at prices of less than 75%
of the stock's fair market value
- FOR adopting a stock award plan, except decide on a CASE-BY-CASE basis if
the plan dilution is more than 5% of the outstanding common equity or if
the minimum potential dilution from all plans, including the one proposed,
is more than 10% of the outstanding common equity
- FOR amending a stock award plan, except AGAINST if the amendment shortens
the vesting requirements or lessens the performance requirements
- FOR adding shares to a stock award plan, except decide on a CASE-BY-CASE
basis if the plan dilution is more than 5% of the outstanding common equity
or if the minimum potential dilution from all plans, including the one
proposed, is more than 10% of the outstanding common equity
- FOR adopting a stock award plan for non-employee directors, except decide
on a CASE-BY-CASE basis if the plan dilution is more than 5% of the
outstanding common equity or if the minimum potential dilution from all
plans, including the one proposed, is more than 10% of the outstanding
common equity
- FOR amending a stock award plan for non-employee directors, except decide
on a CASE-BY-CASE basis if the minimum potential dilution from all plans is
more than 10% of the outstanding common equity.
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- FOR adding shares to a stock award plan for non-employee directors, except
decide on a CASE-BY-CASE basis if the plan dilution is more than 5% of the
outstanding common equity or if the minimum potential dilution from all
plans, including the one proposed, is more than 10% of the outstanding
common equity
- FOR approving an annual bonus plan
- FOR adopting a savings plan
- FOR granting a one-time stock option or stock award, except decide on a
CASE-BY-CASE basis if the plan dilution is more than 15% of the outstanding
common equity
- FOR adopting a deferred compensation plan
- FOR approving a long-term bonus plan
- FOR approving an employment agreement or contract
- FOR amending a deferred compensation plan
- FOR exchanging underwater options (options with a per-share exercise price
that exceeds the underlying stock's current market price)
- FOR amending an annual bonus plan
- FOR reapproving a stock option plan or bonus plan for purposes of OBRA
- FOR amending a long-term bonus plan
SHAREHOLDER PROPOSALS
- FOR requiring shareholder ratification of auditors
- AGAINST requiring the auditors to attend the annual meeting
- AGAINST limiting consulting by auditors
- AGAINST requiring the rotation of auditors
- AGAINST restoring preemptive rights
- FOR asking the company to study sales, spin-offs, or other strategic
alternatives
- FOR asking the board to adopt confidential voting and independent
tabulation of the proxy ballots
- AGAINST asking the company to refrain from counting abstentions and broker
non-votes in vote tabulations
- AGAINST eliminating the company's discretion to vote unmarked proxy
ballots.
- FOR providing equal access to the proxy materials for shareholders
- AGAINST requiring the improvement of annual meeting reports
- AGAINST changing the annual meeting location
- AGAINST changing the annual meeting date
- AGAINST asking the board to include more women and minorities as directors.
- AGAINST seeking to increase board independence
- AGAINST limiting the period of time a director can serve by establishing a
retirement or tenure policy
- AGAINST requiring minimum stock ownership by directors
- AGAINST providing for union or employee representatives on the board of
directors
- FOR increasing disclosure regarding the board's role in the development and
monitoring of the company's long-term strategic plan
- FOR increasing the independence of the nominating committee
- FOR creating a nominating committee of the board
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- AGAINST urging the creation of a shareholder committee
- AGAINST asking that the chairman of the board of directors be chosen from
among the ranks of the non-employee directors
- AGAINST asking that a lead director be chosen from among the ranks of the
non-employee directors
- FOR adopting cumulative voting
- AGAINST requiring directors to place a statement of candidacy in the proxy
statement
- AGAINST requiring the nomination of two director candidates for each open
board seat
- AGAINST making directors liable for acts or omissions that constitute a
breach of fiduciary care resulting from a director's gross negligence
and/or reckless or willful neglect
- FOR repealing a classified board
- AGAINST asking the board to redeem or to allow shareholders to vote on a
poison pill shareholder rights plan
- FOR eliminating supermajority provisions
- FOR reducing supermajority provisions
- AGAINST repealing fair price provisions
- FOR restoring shareholders' right to call a special meeting
- FOR restoring shareholders' right to act by written consent
- FOR limiting the board's discretion to issue targeted share placements or
requiring shareholder approval before such block placements can be made
- FOR seeking to force the company to opt out of a state takeover statutory
provision
- AGAINST reincorporating the company in another state
- FOR limiting greenmail payments
- AGAINST restricting executive compensation
- FOR enhance the disclosure of executive compensation
- AGAINST restricting director compensation
- AGAINST capping executive pay
- AGAINST calling for directors to be paid with company stock
- AGAINST calling for shareholder votes on executive pay
- AGAINST calling for the termination of director retirement plans
- AGAINST asking management to review, report on, and/or link executive
compensation to non-financial criteria, particularly social criteria
- AGAINST seeking shareholder approval to reprice or replace underwater stock
options
- FOR banning or calling for a shareholder vote on future golden parachutes
- AGAINST seeking to award performance-based stock options
- AGAINST establishing a policy of expensing the costs of all future stock
options issued by the company in the company's annual income statement
- AGAINST requesting that future executive compensation be determined without
regard to any pension fund income
- FOR creating a compensation committee
- AGAINST requiring that the compensation committee hire its own independent
compensation consultants-separate from the compensation consultants working
with corporate management-to assist with executive compensation issues
- FOR increasing the independence of the compensation committee
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- FOR increasing the independence of the audit committee
- FOR increasing the independence of key committees
SOCIAL ISSUE PROPOSALS
- FOR asking the company to develop or report on human rights policies
- FOR asking the company to review its operations' impact on local groups,
except AGAINST if the proposal calls for action beyond reporting
- AGAINST asking the company to limit or end operations in Burma
- FOR asking management to review operations in Burma
- FOR asking management to certify that company operations are free of forced
labor
- AGAINST asking management to implement and/or increase activity on each of
the principles of the U.S. Business Principles for Human Rights of Workers
in China.
- AGAINST asking management to develop social, economic, and ethical criteria
that the company could use to determine the acceptability of military
contracts and to govern the execution of the contracts
- AGAINST asking management to create a plan of converting the company's
facilities that are dependent on defense contracts toward production for
commercial markets
- AGAINST asking management to report on the company's government contracts
for the development of ballistic missile defense technologies and related
space systems
- AGAINST asking management to report on the company's foreign military sales
or foreign offset activities
- AGAINST asking management to limit or end nuclear weapons production
- AGAINST asking management to review nuclear weapons production
- AGAINST asking the company to establish shareholder-designated contribution
programs
- AGAINST asking the company to limit or end charitable giving
- FOR asking the company to increase disclosure of political spending and
activities
- AGAINST asking the company to limit or end political spending
- FOR requesting disclosure of company executives' prior government service
- AGAINST requesting affirmation of political nonpartisanship
- FOR asking management to report on or change tobacco product marketing
practices, except AGAINST if the proposal calls for action beyond reporting
- AGAINST severing links with the tobacco industry
- AGAINST asking the company to review or reduce tobacco harm to health
- FOR asking management to review or promote animal welfare, except AGAINST
if the proposal calls for action beyond reporting
- FOR asking the company to report or take action on pharmaceutical drug
pricing or distribution, except AGAINST if the proposal asks for more than
a report
- AGAINST asking the company to take action on embryo or fetal destruction
- FOR asking the company to review or report on nuclear facilities or nuclear
waste, except AGAINST if the proposal asks for cessation of nuclear-related
activities or other action beyond reporting
- FOR asking the company to review its reliance on nuclear and fossil fuels,
its development or use of solar and wind power, or its energy efficiency,
except vote AGAINST if the proposal asks for more than a report.
10
- AGAINST asking management to endorse the Ceres principles
- FOR asking the company to control generation of pollutants, except AGAINST
if the proposal asks for action beyond reporting or if the company reports
its omissions and plans to limit their future growth or if the company
reports its omissions and plans to reduce them from established levels
- FOR asking the company to report on its environmental impact or plans,
except AGAINST if management has issued a written statement beyond the
legal minimum
- FOR asking management to report or take action on climate change, except
AGAINST if management acknowledges a global warming threat and has issued
company policy or if management has issued a statement and committed to
targets and timetables or if the company is not a major emitter of
greenhouse gases
- FOR asking management to report on, label, or restrict sales of
bioengineered products, except AGAINST if the proposal asks for action
beyond reporting or calls for a moratorium on sales of bioengineered
products
- AGAINST asking the company to preserve natural habitat
- AGAINST asking the company to review its developing country debt and
lending criteria and to report to shareholders on its findings
- AGAINST requesting the company to assess the environmental, public health,
human rights, labor rights, or other socioeconomic impacts of its credit
decisions
- FOR requesting reports and/or reviews of plans and/or policies on fair
lending practices, except AGAINST if the proposal calls for action beyond
reporting
- AGAINST asking the company to establish committees to consider issues
related to facilities closure and relocation of work
- FOR asking management to report on the company's affirmative action
policies and programs, including releasing its EEO-1 forms and providing
statistical data on specific positions within the company, except AGAINST
if the company releases its EEO-1 reports
- AGAINST asking management to drop sexual orientation from EEO policy
- AGAINST asking management to adopt a sexual orientation non-discrimination
policy
- FOR asking management to report on or review Mexican operations
- AGAINST asking management to adopt standards for Mexican operations
- AGAINST asking management to review or implement the MacBride principles
- AGAINST asking the company to encourage its contractors and franchisees to
implement the MacBride principles
- FOR asking management to report on or review its global labor practices or
those of its contractors, except AGAINST if the company already reports
publicly using a recognized standard or if the resolution asks for more
than a report
- AGAINST asking management to adopt, implement, or enforce a global
workplace code of conduct based on the International Labor Organization's
core labor conventions
- FOR requesting reports on sustainability, except AGAINST if the company has
already issued a report in GRI format
CONFLICT RESOLUTION
Individual portfolio managers, in the exercise of their best judgment and
discretion, may from time to time override the Guidelines and vote proxies in a
manner that they believe will enhance the economic value of clients' assets,
keeping in mind the best interests of the beneficial owners.
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A portfolio manager choosing to override the Guidelines must deliver a written
rationale for each such decision to TCW's Proxy Specialist (the "PROXY
SPECIALIST"), who will maintain such documentation in TCW's proxy voting records
and deliver a quarterly report to the Proxy Committee of all votes cast other
than in accordance with the Guidelines. If the Proxy Specialist believes there
is a question regarding a portfolio manager's vote, she will obtain the approval
of TCW's Director of Research (the "DIRECTOR OF RESEARCH") for the vote before
submitting it. The Director of Research will review the portfolio manager's vote
and make a determination. If the Director of Research believes it appropriate,
she may elect to convene the Proxy Committee.
It is unlikely that serious conflicts of interest will arise in the context of
TCW's proxy voting, because TCW does not engage in investment banking or the
managing or advising of public companies. In the event a potential conflict of
interest arises in the context of voting proxies for TCW's clients, the primary
means by which TCW will avoid a conflict is by casting such votes solely in the
interests of its clients and in the interests of maximizing the value of their
portfolio holdings. In this regard, if a potential conflict of interest arises,
but the proxy vote to be decided is predetermined hereunder to be cast either in
favor or against, then TCW will vote accordingly. On the other hand, if a
potential conflict of interest arises and either there is no predetermined vote
or such vote is to be decided on a case-by-case basis, then TCW will undertake
the following analysis.
First, if a potential conflict of interest is identified because the issuer
soliciting proxy votes is itself a client of TCW's (or because an affiliate of
such issuer, such as a pension or profit sharing plan sponsored by such issuer,
is a client of TCW's), then the Proxy Committee will determine whether such
relationship is material to TCW. In making this determination, a conflict of
interest will usually not be deemed to be material unless the assets managed for
that client by TCW exceed, in the aggregate, 0.25% (25 basis points) or more of
TCW's total assets under management. If such a material conflict is deemed to
have arisen, then TCW will refrain completely from exercising its discretion
with respect to voting the proxy with respect to such vote and will, instead,
refer that vote to an outside service for its independent consideration as to
how the vote should be cast. Second, a potential conflict of interest may arise
because an employee of TCW sits on the Board of a public company. The Proxy
Specialist is on the distribution list for an internal chart that shows any
Board seats in public companies held by TCW personnel. If there is a vote
regarding such a company, and the portfolio manager wants to vote other than in
accordance with the Guidelines, the Proxy Specialist will confirm that the
portfolio manager has not spoken with the particular Board member and will
provide the Proxy Committee with the facts and vote rationale so that it can
vote the securities. The vote by the Proxy Committee will be documented.
Finally, if a portfolio manager conflict is identified with respect to a given
proxy vote, the Proxy Committee will remove such vote from the conflicted
portfolio manager and, as a group, the Proxy Committee will consider and cast
the vote
PROXY VOTING INFORMATION AND RECORDKEEPING
Upon request, TCW provides proxy voting records to its clients. These records
state how votes were cast on behalf of client accounts, whether a particular
matter was proposed by the company or a shareholder, and whether or not TCW
voted in line with management recommendations.
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TCW is prepared to explain to clients the rationale for votes cast on behalf of
client accounts. To obtain proxy voting records, a client should contact the
Proxy Specialist.
TCW or an outside service will keep records of the following items: (i) these
Proxy Voting Guidelines and any other proxy voting procedures; (ii) proxy
statements received regarding client securities (unless such statements are
available on the SEC's Electronic Data Gathering, Analysis, and Retrieval
(EDGAR) system); (iii) records of votes cast on behalf of clients (if maintained
by an outside service, that outside service will provide copies of those records
promptly upon request); (iv) records of written requests for proxy voting
information and TCW's response (whether a client's request was oral or in
writing); and (v) any documents prepared by TCW that were material to making a
decision how to vote, or that memorialized the basis for the decision.
Additionally, TCW or an outside service will maintain any documentation related
to an identified material conflict of interest.
TCW or an outside service will maintain these records in an easily accessible
place for at least FIVE YEARS from the end of the fiscal year during which the
last entry was made on such record. For the first TWO YEARS, TCW or an outside
service will store such records at its principal office.
INTERNATIONAL PROXY VOTING
While TCW utilizes these Proxy Voting Guidelines for both international and
domestic portfolios and clients, there are some significant differences between
voting U.S. company proxies and voting non-U.S. company proxies. For U.S.
companies, it is relatively easy to vote proxies, as the proxies are
automatically received and may be voted by mail or electronically. In most
cases, the officers of a U.S. company soliciting a proxy act as proxies for the
company's shareholders.
For proxies of non-U.S. companies, however, it is typically both difficult and
costly to vote proxies. The major difficulties and costs may include: (i)
appointing a proxy; (ii) knowing when a meeting is taking place; (iii) obtaining
relevant information about proxies, voting procedures for foreign shareholders,
and restrictions on trading securities that are subject to proxy votes; (iv)
arranging for a proxy to vote; and (v) evaluating the cost of voting. Also,
proxy votes against management rarely succeed. Furthermore, the operational
hurdles to voting proxies vary by country. As a result, TCW considers
international proxy voting on a case-by-case basis. However, when TCW believes
that an issue to be voted is likely to affect the economic value of the
portfolio securities, that its vote may influence the ultimate outcome of the
contest, and that the benefits of voting the proxy exceed the expected costs,
TCW will make every reasonable effort to vote such proxies. In addition, TCW
will attempt to implement, to the extent appropriate, uniform voting procedures
across countries.
ITEM 8. [RESERVED]
ITEM 9. CONTROLS AND PROCEDURES.
(a) The Chief Executive Officer and Chief Financial Officer have
concluded that the registrant's disclosure controls and
procedures (as defined in rule 30a-2(c)
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under the Investment Company Act of 1940) provide reasonable
assurances that material information relating to the registrant
is made known to them by the appropriate persons as of a date
within 90 days of the filing date of this report, based on their
evaluation of these controls and procedures required by Rule
30a-3(b) under the Investment Company Act of 1940 and 15d-15(b)
under the Exchange Act.
(b) There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the
Investment Company Act of 1940) that occurred during the
registrant's last fiscal half-year that have materially affected,
or are reasonably likely to materially affect, the registrant's
internal control over financial reporting.
ITEM 10. EXHIBITS.
(a) EX-99.CODE - Code of Ethics
(b) EX-99.CERT - Section 302 Certifications (filed herewith).
EX-99.906CERT - Section 906 Certification (filed herewith).
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) TCW Convertible Securities Funds, Inc.
By (Signature and Title)
/s/ Alvin R. Albe, Jr.
------------------------------
Alvin R. Albe, Jr.
Chief Executive Officer
Date March 3, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)
/s/ Alvin R. Albe, Jr.
------------------------------
Alvin R. Albe, Jr.
Chief Executive Officer
Date March 3, 2004
By (Signature and Title)
------------------------------
David S. DeVito
Chief Financial Officer
Date March 3, 2004
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