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, 2004
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.
ITEM 1. REPORT TO STOCKHOLDERS.
[TCW LOGO]
TCW CONVERTIBLE
SECURITIES FUND, INC.
ANNUAL REPORT
DECEMBER 31, 2004
(THIS PAGE INTENTIONALLY LEFT BLANK)
[TCW LOGO]
TCW CONVERTIBLE SECURITIES FUND, INC.
THE PRESIDENT'S LETTER
DEAR SHAREHOLDER:
The roller coaster ride that was 2004 is finally over. The year started out
where it left off in 2003 as the equity markets rocketed higher in early January
due to strong company earnings and favorable macroeconomic numbers. However,
over the next eight months, these gains were lost due to concerns over rising
oil prices, terrorism, the U.S. presidential election, and rising interest
rates. Reversing course once again, in the fourth quarter the equity markets
rebounded due to President Bush's reelection, falling oil prices and strong
company earnings finishing the year with solid returns.
Against this backdrop, the shareholders of TCW Convertible Securities Fund, Inc.
(the "Fund") realized a total return of 13.02% with dividends reinvested. This
compares favorably with the S&P 500 Index which returned 10.88% and the First
Boston Convertible Securities Index which returned 7.90% for the same period.
The Fund paid four quarterly dividends during the year totaling $0.2385 per
share. The year-end market price of $5.36 represents a discount of 7.3% to the
Fund's net asset value of $5.78 at December 31, 2004.
There were other noteworthy events for the Fund in 2004. In September, we
announced the appointment of director Patrick C. Haden as Chairman of the Board
of the Fund. In addition to being independent of TCW, Mr. Haden is an enormously
capable and well-respected investment professional with deep roots in the
community. Mr. Haden succeeded Ernest O. Ellison as Chairman. Mr. Ellison has
been named Chairman Emeritus and continues to be a very active and involved
member of the Fund's Board of Directors.
In October, the Fund announced that the Board of Directors approved a managed
distribution plan and authorized a new share repurchase program for up to
1,000,000 shares. In addition, the Fund announced changes in the portfolio
construction designed to enhance the potential for increased current yield.
The Board of Directors of the Fund believes in putting the interest of its
shareholders first. As a central part of this commitment, we have made good
corporate governance and reducing the Fund's discount a priority. The managed
distribution plan, share repurchase, and changes in the portfolio are all
efforts to close the discount between the Fund's share price and net asset
value. The managed distribution plan will be a minimum of 7% of the Fund's
year-end net asset value per share. The distribution will be paid quarterly and
based on the year-end net asset value of $5.78 per share, the 2005 quarterly
distributions will be $0.101 per share.
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.
During 2004, the amount of new issue convertibles totaled $45.4 billion. This
was 46% below the same period in 2003. The lower amount of new issuance caused
new issue yields to shrink and negatively impacted the Fund's income. During the
fourth quarter of 2004, the Fund invested approximately 14% of its assets in a
non-convertible high yield instrument. This increased the Fund's overall income
and helped offset the lower yields in the convertible market. At the end of the
year, the portfolio was comprised of 70 securities and is diversified across
sectors.
The Fund continues to emphasize convertible securities that can provide both
income and capital appreciation potential. In addition, the high yield
investment
1
will provide additional income to support the dividend. The Fund's
largest sectors were information technology at 19.1%, financials at 16.7% and
consumer discretionary at 14.2%.
SHARE REPURCHASE PLAN
On January 14, 2005, the Board of Directors of the Fund announced that the Fund
will commence the share repurchase plan formally adopted October 28, 2004. At
that time, the Board of Directors authorized the Fund to adopt a share
repurchase plan, which involved the repurchase of up to 1,000,000 shares of its
common stock. Repurchases will be made on the open market or in block purchase
transactions. The repurchase plan commenced on January 24, 2005. The timing of
the repurchases and the number of shares repurchased will depend upon market
conditions and corporate and regulatory requirements.
As discussed earlier, the Fund is currently trading at a discount. Therefore,
purchases of shares pursuant to the repurchase plan may result in an increase in
the net asset value per share of the remaining shares. In addition, a share
repurchase program and the resulting reduction in the amount of shares
outstanding may result in increased demand, and, consequently, an increase in
the market price of the shares. However, there can be no assurance of any such
effect.
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.
On behalf of the Board and everyone at TCW, I would like to thank you for your
continued support.
Sincerely,
/s/ Alvin R. Albe Jr.
Alvin R. Albe Jr.
President & Chief Executive Officer
February 3, 2005
2
[TCW LOGO]
TCW CONVERTIBLE SECURITIES FUND, INC.
SCHEDULE OF INVESTMENTS--DECEMBER 31, 2004
PRINCIPAL MARKET
AMOUNT VALUE
--------------- --------------
CONVERTIBLE CORPORATE BONDS
COMPUTER SERVICES
(4.6% OF NET ASSETS)
$ 195,000 Computer Associates
International, Inc., 1.625%,
due 12/15/09 $ 322,969+
1,775,000 Computer Associates
International, Inc., (144A),
1.625%, due 12/15/09 2,939,844*
1,110,000 CSG Systems International,
Inc., (144A), 2.5%,
due 06/15/24 1,134,975*+
5,415,000 Morgan Stanley, Exchangeable
Cisco Systems, Inc., 0.25%,
due 05/15/10 5,604,525
2,705,000 Scientific Games Corp., (144A),
0.75%, due 12/01/24 2,830,106*
---------------
Total Computer Services 12,832,419
---------------
COMPUTER SOFTWARE (2.5%)
2,390,000 DST Systems, Inc., (144A),
4.125%, due 08/15/23 3,152,410*
3,770,000 Mercury Interactive Corp.,
0%, due 05/01/08 4,019,762+
---------------
Total Computer Software 7,172,172
---------------
ELECTRIC UTILITIES (2.1%)
1,700,000 Calpine Corp., 6%,
due 09/30/14 1,989,000+
4,345,000 Calpine Corp., (144A),
4.75%, due 11/15/23 3,801,875*+
---------------
Total Electric Utilities 5,790,875
---------------
ELECTRONICS (10.3%)
6,515,000 Agere Systems, Inc., 6.5%,
due 12/15/09 6,922,187+
4,660,000 ASM Lithography Holding
N.V., (144A), 5.75%,
due 10/15/06 5,301,216*
5,390,000 Cypress Semiconductor Corp.,
1.25%, due 06/15/08 5,720,137
$ 2,475,000 Eastman Kodak Co., (144A),
3.375%, due 10/15/33 $ 3,109,219*+
5,575,000 Lehman Brothers Holdings,
Inc., 0.25%, due 08/27/10 5,268,375++
2,705,000 Synaptics, Inc., (144A), 0.75%,
due 12/01/24 2,627,231*
---------------
Total Electronics 28,948,365
---------------
FINANCIAL SERVICES (13.8%)
37,650,000 Dow Jones CDX. NA.
HY Trust 1, Credit Linked
Trust Certificates, (144A),
7.75%, due 12/29/09 38,755,969*+
---------------
HEALTHCARE (1.4%)
2,510,000 Matria Healthcare, Inc.,
(144A), 4.875%,
due 05/01/24 3,884,225*
---------------
INDUSTRIAL-DIVERSIFIED (4.3%)
2,655,000 Tyco International Group SA,
(144A), 2.75%,
due 01/15/18 4,221,450*
4,635,000 Tyco International Group SA,
(144A), 3.125%,
due 01/15/23 7,809,975*
---------------
Total Industrial-Diversified 12,031,425
---------------
INSURANCE (1.0%)
2,830,000 Swiss RE America Holding,
(144A), 3.25%,
due 11/21/21 2,753,873*
---------------
LODGING (1.0%)
2,405,000 Hilton Hotels Corp., 3.375%,
due 04/15/23 2,889,006
---------------
MEDIA-BROADCASTING &
PUBLISHING (1.7%)
1,665,000 Liberty Media Corp.,
Exchangeable Time Warner,
Inc., 0.75%, due 03/30/23 2,012,569
* 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,
2004, the value of these securities amounted to $110,219,463 or 39.3% of
net assets.
+ Security partially or fully lent (Note 5).
++ 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
--------------- --------------
$ 2,315,000 Liberty Media Corp.,
Exchangeable Time Warner,
Inc., (144A), 0.75%,
due 03/30/23 $ 2,798,256*
---------------
Total Media-
Broadcasting &
Publishing 4,810,825
---------------
MEDICAL SUPPLIES (5.0%)
990,000 Cooper Companies, Inc.,
2.625%, due 07/01/23 1,675,575+
1,850,000 Cooper Companies, Inc., (144A),
2.625%, due 07/01/23 3,131,125*
2,325,000 Cytyc Corp., 2.25%,
due 03/15/24 2,819,062+
5,615,000 Fisher Scientific International,
Inc., 3.25%, due 03/01/24 6,323,894+
---------------
Total Medical Supplies 13,949,656
---------------
OIL & GAS (5.3%)
1,410,000 McMoRan Exploration Co.,
(144A), 5.25%, due 10/06/11 2,000,438*
2,580,000 McMoRan Exploration Co.,
(144A), 6%, due 07/02/08 3,911,925*
2,685,000 Pride International, Inc.,
(144A), 3.25%, due 05/01/33 2,923,294*
2,465,000 Schlumberger, Ltd., Series B,
2.125%, due 06/01/23 2,674,525+
2,730,000 SEACOR Holdings, Inc., (144A),
2.875%, due 12/15/24 2,774,363*
500,000 Willbros Group, Inc., (144A),
2.75%, due 03/15/24 645,000*
---------------
Total Oil & Gas 14,929,545
---------------
PHARMACEUTICALS (2.2%)
425,000 Abgenix, Inc., (144A), 1.75%,
due 12/15/11 461,656*
2,650,000 Axcan Pharma, Inc., (144A),
4.25%, due 04/15/08 4,037,938*
$ 840,000 Teva Pharmaceutical Finance II
LLC, Series A, 0.5%,
due 02/01/24 $ 859,950+
840,000 Teva Pharmaceutical Finance II
LLC, Series B, 0.25%,
due 02/01/24 856,800
---------------
Total Pharmaceuticals 6,216,344
---------------
REAL ESTATE (1.1%)
2,605,000 Capital Automotive
REIT, 6%, due 05/15/24 3,025,056
---------------
RETAIL (0.9%)
1,975,000 The Gap, Inc., 5.75%, due
03/15/09 2,629,219
---------------
TOTAL CONVERTIBLE CORPORATE
BONDS (COST: $147,847,638)
(57.2%) 160,618,974
---------------
NUMBER OF
SHARES
---------------
EQUITY SECURITIES
COMMON STOCK
(COST: $3,732,988) (1.3%)
COMMERCIAL SERVICES (1.3%)
672,650 Solectron Corp. 3,581,861**
---------------
CONVERTIBLE PREFERRED STOCK
AUTOMOTIVE (4.2%)
154,485 Ford Motor Co. Capital Trust II,
$3.25 8,168,394
163,350 General Motors Corp.,
$1.3125 3,768,484
---------------
Total Automotive 11,936,878
---------------
BANKING & FINANCIAL
SERVICES (6.6%)
76,700 Household International, Inc.,
Exchangeable HSBC
Holdings PLC, $2.21875 3,585,725
REIT - Real Estate Investment Trust
* 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,
2004, the value of these securities amounted to $110,219,463 or 39.3% of
net assets.
** Non-income producing.
+ Security partially or fully lent (Note 5).
See accompanying Notes to Financial Statements.
4
NUMBER OF MARKET
SHARES VALUE
--------------- --------------
35,300 Lehman Brothers Holdings,
Inc., $1.5625 $ 961,925
33,300 Sovereign Capital Trust
IV, $2.1875 1,623,375
54,755 State Street Corp., $13.50 12,265,120
---------------
Total Banking & Financial
Services 18,436,145
---------------
COMMERCIAL SERVICES (2.7%)
87,085 United Rentals, Inc., $3.25 3,777,312
25,805 Xerox Corp., $6.25 3,814,237
---------------
Total Commercial Services 7,591,549
---------------
COMMUNICATIONS (1.2%)
2,770 Lucent Technologies Capital
Trust I, $77.50 3,295,081
---------------
ELECTRIC UTILITIES (5.3%)
23,200 Aquila, Inc., $1.688 791,700+
97,605 Dominion Resources, Inc.,
$4.375 5,385,844+
95,170 FPL Group, Inc., $4.00 5,733,041+
110,000 Great Plains Energy, Inc.,
$2.00 2,953,500+
---------------
Total Electric Utilities 14,864,085
---------------
FOOD RETAILERS (1.0%)
106,665 Albertson's, Inc., $1.8125 2,709,291
---------------
HEALTHCARE (2.6%)
89,250 Baxter International, Inc.,
$3.50 5,076,094+
41,200 Omnicare, Inc., $2.00 2,272,592
---------------
Total Healthcare 7,348,686
---------------
INSURANCE (7.7%)
145,700 Chubb Corp., $1.75 4,385,570
94,100 Hartford Financial Services
Group, Inc., $3.50 6,187,075
78,450 Phoenix Companies, Inc.,
Exchangeable Hilb, Rogal and
Hamilton Co., $2.667 2,784,975**
70,105 Reinsurance Group of America,
Inc., $2.875 $ 4,311,457
59,150 The St. Paul Companies, Inc.,
$4.50 3,961,867
---------------
Total Insurance 21,630,944
---------------
MEDIA-BROADCASTING &
PUBLISHING (4.1%)
100,750 Equity Securities Trust,
Exchangeable Cablevision
Systems Corp., $1.406 2,519,758
2,050 Radio One, Inc., $65.00 2,091,000
1,825 Radio One, Inc., (144A),
$65.00 1,861,500*
119,230 Sinclair Broadcast Group, Inc.,
$3.00 5,201,409
---------------
Total Media-
Broadcasting &
Publishing 11,673,667
---------------
OIL & GAS (2.3%)
2,880 Chesapeake Energy Corp.,
(144A), $41.25 3,351,600*
59,300 Unocal Corp., $3.125 3,046,538+
---------------
Total Oil & Gas 6,398,138
---------------
REAL ESTATE (0.7%)
40,000 Lexington Corporate Properties
Trust (REIT), $3.25 2,034,000
---------------
TELECOMMUNICATIONS (2.6%)
135,760 Alltel Corp., $3.875 7,195,280
---------------
TELEPHONE SYSTEMS (1.5%)
158,800 CenturyTel, Inc., $1.71875 4,208,200
---------------
TOTAL CONVERTIBLE PREFERRED
STOCK (COST: $108,716,058)
(42.5%) 119,321,944
---------------
TOTAL EQUITY SECURITIES
(COST: $112,449,046)
(43.8%) 122,903,805
---------------
REIT - Real Estate Investment Trust
* 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,
2004, the value of these securities amounted to $110,219,463 or 39.3% of
net assets.
** Non-income producing.
+ Security partially or fully lent (Note 5).
See accompanying Notes to Financial Statements.
5
PRINCIPAL MARKET
AMOUNT VALUE
--------------- --------------
SHORT-TERM INVESTMENTS
$ 1,998,042 Bank of America, 2.26%,
due 02/15/05 $ 1,998,042***
1,130,967 Bank of America, 2.3%,
due 06/09/05 1,130,967***
1,884,945 Bank of Montreal, 2.125%,
due 02/02/05 1,884,945***
5,179,657 Bank of Montreal, 2.26%,
due 01/28/05 5,179,657***
1,281,762 Bank of Nova Scotia, 2.32%,
due 02/08/05 1,281,762***
90,477 Bank of Nova Scotia, 2.33%,
due 01/13/05 90,477***
753,978 Bear Stearns Companies, Inc.,
2.448%, due 09/08/05 753,978***
4,565,336 BGI Institutional Money
Market Fund, 2.255%,
due 01/03/05 4,565,336***
753,978 Citigroup, Inc., 2.055%,
due 01/25/05 753,978***
2,129,987 Citigroup, Inc., 2.08%,
due 01/28/05 2,129,987***
376,989 Credit Suisse First
Boston Corp., 2.33%,
due 09/09/05 376,989***
1,499,790 Delaware Funding Corp.,
2.286%, due 01/14/05 1,499,790***
3,769,889 Den Danske Bank, 2.26%,
due 01/20/05 3,769,889***
1,130,967 Falcon Asset
Securitization Corp., 2.238%,
due 01/18/05 1,130,967***
746,438 Fortis Bank, 2.14%,
due 01/12/05 746,438***
1,507,956 Fortis Bank, 2.26%,
due 01/05/05 1,507,956***
3,754,810 General Electric Capital Corp.,
2.255%, due 02/01/05 3,754,810***
$ 1,879,851 General Electric Capital Corp.,
2.294%, due 01/21/05 $ 1,879,851***
6,408,812 Goldman Sachs Financial
Square Prime Obligations
Fund, 2.05%, due 01/03/05 6,408,812***
739,275 Greyhawk Funding, 2.349%,
due 02/08/05 739,275***
1,658,751 Harris Trust & Savings Bank,
2.23%, due 01/03/05 1,658,751***
654,879 Investors Bank & Trust
Depository Reserve, 1.05%,
due 01/03/05 654,879
1,130,967 Liberty Lighthouse Funding,
2.385%, due 01/27/05 1,130,967***
753,978 Lloyds TSB Bank, 2.28%,
due 02/02/05 753,978***
2,012,709 Merrill Lynch Premier
Institutional Fund, 2.14%,
due 01/03/05 2,012,709***
376,989 Merrimac Cash Fund
(Premium Class), 1.758%,
due 01/03/05 376,989***
1,884,945 Paradigm Funding LLC,
2.245%, due 01/03/05 1,884,945***
1,121,716 Ranger Funding, 2.271%,
due 01/14/05 1,121,716***
3,392,900 Royal Bank of Canada, 2.25%,
due 01/19/05 3,392,900***
784,137 Royal Bank of Scotland, 2.01%,
due 01/20/05 784,137***
60,318 Royal Bank of Scotland, 2.015%,
due 01/21/05 60,318***
3,769,889 Royal Bank of Scotland, 2.36%,
due 02/17/05 3,769,889***
324,210 Svenska Handlesbanken, 2.25%,
due 01/10/05 324,210***
3,566,315 Toronto Dominion Bank,
2.435%, due 03/16/05 3,566,315***
*** Represents investments of security lending collateral (Note 5).
See accompanying Notes to Financial Statements.
6
PRINCIPAL MARKET
AMOUNT VALUE
--------------- --------------
$ 753,978 Wells Fargo & Co., 2.27%,
due 01/25/05 $ 753,978***
---------------
TOTAL SHORT-TERM INVESTMENTS
(COST: $63,830,587)
(22.7%) 63,830,587
---------------
TOTAL INVESTMENTS
(COST: $324,127,271)
(123.7%) 347,353,366
LIABILITIES IN EXCESS OF
OTHER ASSETS (-23.7%) (66,480,694)
---------------
NET ASSETS (100.0%) $ 280,872,672
===============
*** Represents investments of security lending collateral (Note 5).
See accompanying Notes to Financial Statements.
7
INVESTMENTS BY INDUSTRY--DECEMBER 31, 2004
PERCENTAGE OF
INDUSTRY* NET ASSETS
----------------------------------------------------------------------- -------------
Financial Services 13.8%
Electronics 10.3
Insurance 8.7
Oil & Gas 7.6
Electric Utilities 7.4
Banking & Financial Services 6.6
Media-Broadcasting & Publishing 5.8
Medical Supplies 5.0
Computer Services 4.6
Industrial-Diversified 4.3
Automotive 4.2
Healthcare 4.0
Commercial Services 4.0
Telecommunications 2.6
Computer Software 2.5
Pharmaceuticals 2.2
Real Estate 1.8
Telephone Systems 1.5
Communications 1.2
Lodging 1.0
Food Retailers 1.0
Retail 0.9
Short-Term Investments 22.7
-----
Total 123.7%
=====
* THESE CLASSIFICATIONS ARE NOT AUDITED.
See accompanying Notes to Financial Statements.
8
STATEMENT OF ASSETS AND LIABILITIES--DECEMBER 31, 2004
ASSETS:
Investments, at Value (Cost: $324,127,271) $ 347,353,366
Receivables for Securities Sold 632,985
Interest and Dividends Receivable 997,933
---------------
Total Assets 348,984,284
---------------
LIABILITIES:
Distributions Payable 4,666,558
Payables Upon Return of Securities Loaned 63,175,708
Accrued Investment Advisory Fees 138,201
Other Accrued Expenses 131,145
---------------
Total Liabilities 68,111,612
---------------
NET ASSETS $ 280,872,672
===============
Net Assets were comprised of:
Common Stock, par value $0.01 per share, (75,000,000 shares authorized,
48,609,979 shares issued and outstanding) $ 486,100
Paid-in Capital 355,003,289
Undistributed Net Realized (Loss) on Investments (98,092,835)
Net Unrealized Appreciation of Investments 23,226,095
Undistributed Net Investment Income 250,023
---------------
NET ASSETS $ 280,872,672
===============
NET ASSET VALUE PER SHARE $ 5.78
===============
See accompanying Notes to Financial Statements.
9
STATEMENT OF OPERATIONS--YEAR ENDED DECEMBER 31, 2004
INVESTMENT INCOME:
Interest (including net security lending fees of $135,375) $ 4,257,277
Dividends 7,867,073
---------------
Total Investment Income 12,124,350
---------------
EXPENSES:
Investment Advisory Fees 1,627,115
Accounting Fees 53,765
Administration Fees 88,255
Audit and Tax Service Fees 52,795
Transfer Agent Fees 64,098
Custodian Fees 18,919
Directors' Fees and Expenses 77,854
Proxy Costs 105,050
Listing Fees 47,449
Insurance Costs 14,302
Legal Fees 198,385
Printing and Distribution Costs 68,818
Miscellaneous 60,170
---------------
Total Expenses 2,476,975
---------------
Net Investment Income 9,647,375
---------------
NET REALIZED GAIN AND CHANGE IN UNREALIZED DEPRECIATION
OF INVESTMENTS:
Net Realized Gain on Investments 19,334,115
Change in Unrealized (Depreciation) of Investments (10,292,965)
---------------
Net Realized Gain and Change in Unrealized Depreciation
of Investments 9,041,150
---------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 18,688,525
===============
See accompanying Notes to Financial Statements.
10
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED YEAR ENDED
DECEMBER 31, 2004 DECEMBER 31, 2003
------------------ ------------------
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net Investment Income $ 9,647,375 $ 9,968,943
Net Realized Gain (Loss) on Investments 19,334,115 (10,406,842)
Change in Unrealized Appreciation (Depreciation)
of Investments (10,292,965) 60,949,112
------------------ ------------------
Increase in Net Assets Resulting from Operations 18,688,525 60,511,213
------------------ ------------------
Distributions to Shareholders:
From Net Investment Income (11,593,484) (8,199,902)
Return of Capital -- (2,961,779)
------------------ ------------------
Total Distributions to Shareholders (11,593,484) (11,161,681)
------------------ ------------------
Capital Share Transactions:
Shares Issued in Reinvestment of Dividends
(46,104 for the year ended December 31, 2003) -- 215,306
Additional Paid-in Capital (See Note 1) 114,359 --
Shares Redeemed (899,300 for the year ended
December 31, 2004 and 1,476,000 for the year
ended December 31, 2003) (4,697,540) (7,277,321)
------------------ ------------------
(Decrease) in Net Assets Resulting from
Net Capital Share Transactions (4,583,181) (7,062,015)
------------------ ------------------
Total Increase in Net Assets 2,511,860 42,287,517
NET ASSETS:
Beginning of Year 278,360,812 236,073,295
------------------ ------------------
End of Year $ 280,872,672 $ 278,360,812
================== ==================
See accompanying Notes to Financial Statements.
11
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 amortized
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.
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 market discount and premium, losses deferred due to
wash sales and spillover distributions. Permanent book and tax basis differences
relating to shareholder distributions will result in reclassifications to
paid-in capital and may affect net investment income per share.
REPURCHASE AGREEMENTS: The Fund may invest in repurchase agreements secured by
U.S. Government Securities. A repurchase agreement arises when the Fund
purchases a security and simultaneously agrees to resell it to the seller at an
agreed upon future date. The Fund requires the seller to maintain the value of
the securities, marked to market daily, at not less than the repurchase price.
If the seller defaults on its repurchase obligation, the Fund could suffer
delays, collection expenses and losses to the extent that the proceeds from the
sale of the collateral are less than the repurchase price. The Fund did not
enter into any
12
repurchase agreements for the year ended December 31, 2004.
RECLASSIFICATION: The Fund reclassified $114,359 from other liabilities to
paid-in capital at December 31, 2004 in that estimated liabilities related to
the Fund's last rights offering are no longer required.
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, 2004, the Fund has a loss carryforward of
$25,205,089, $61,853,273 and $10,749,289 which will expire in 2009, 2010 and
2011, respectively.
At December 31, 2004, the Fund had undistributed ordinary income of $515,328 on
a tax basis.
Also for the year ended December 31, 2004, the Fund distributed, on a tax basis,
$11,593,484 all of which is characterized as ordinary income.
At December 31, 2004, net unrealized appreciation for federal income tax
purposes is comprised of the following components:
Appreciated securities $ 27,153,649
Depreciated securities (4,478,043)
-------------
Net unrealized appreciation $ 22,675,606
=============
Cost of securities for federal
income tax purposes $ 324,677,760
=============
The following reclassifications have been made for the permanent differences
between book and tax accounting as of December 31, 2004.
INCREASE
(DECREASE)
-------------
Undistributed Net Investment
Income $ 4,184,147
Undistributed Net Realized Loss
on Investments $ (2,900,583)
Paid-in Capital $ (1,283,564)
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, 2004, purchases and sales or maturities of
investment securities (excluding short-term investments) aggregated $248,004,341
and $249,853,307, respectively. There were no purchases or sales of U.S.
Government securities for the year ended December 31, 2004.
NOTE 5--SECURITY LENDING:
During the year ended December 31, 2004, 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,
2004, the cash collateral received from the borrowing brokers was $63,175,708
which is 102.7% of the value of the loaned securities. The Fund receives income,
net of broker fees, by investing the cash collateral in short-term investments.
13
NOTE 6--DIRECTORS' FEES:
Directors who are not affiliated with the Advisor received, as a group,
aggregate fees and expenses of $77,854 from the Fund for the year ended December
31, 2004. Certain officers and/or directors of the Fund are also officers and/or
directors of the Advisor.
NOTE 7--RESTRICTED SECURITIES:
The Fund is 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, 2004.
NOTE 8--SHARE REPURCHASE PLAN:
In 2000, the Fund's Board of Directors approved the Shares Repurchase Plan (the
"Plan") authorizing the Fund to repurchase up to 2 million shares of its common
stock. In 2003, the Board authorized an additional 1 million shares to be
repurchased pursuant to the Plan. The purpose of the Plan was to enhance the
shareholders' value during the time when the stock price traded at a discount to
the Fund's net asset value per share. The Fund completed the Plan in the first
quarter of 2004 repurchasing all 3 million shares authorized. The following is
the summary of the Plan:
2000 2003 2004 TOTAL
------------ ------------ ------------ ------------
Total Shares
Repurchased 624,700 1,476,000 899,300 3,000,000
Cost of Shares
Repurchased $ 7,406,082 $ 7,277,321 $ 4,697,540 $ 19,380,943
Average Price of
Shares
Repurchased $ 11.86 $ 4.93 $ 5.22 $ 6.46
Average Discount
from NAV 9.01% 10.22% 10.56% 9.84%
14
FINANCIAL HIGHLIGHTS
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------
2004 2003 2002 2001 2000
----------- ----------- ----------- ----------- -----------
Net Asset Value Per Share, Beginning of
Year $ 5.62 $ 4.63 $ 6.70 $ 8.48 $ 11.32
----------- ----------- ----------- ----------- -----------
Income from Operations:
Net Investment Income (3) 0.20 0.20 0.32 0.38 0.35
Net Realized and Unrealized Gains (Losses)
on Securities 0.19 1.00 (1.68) (1.31) (0.80)
----------- ----------- ----------- ----------- -----------
Total from Investment Operations 0.39 1.20 (1.36) (0.93) (0.45)
----------- ----------- ----------- ----------- -----------
Less Distributions:
Distributions from Net Investment Income (0.24) (0.16) (0.32) (0.60) (0.35)
Distributions from Net Realized Gain -- -- -- -- (2.06)
Distributions from Paid-in Capital -- (0.06) (0.39) (0.24) --
----------- ----------- ----------- ----------- -----------
Total Distributions (0.24) (0.22) (0.71) (0.84) (2.41)
----------- ----------- ----------- ----------- -----------
Capital Activity:
Impact to Capital for Shares Issued --(4) -- -- (0.01) --
Impact to Capital for Shares Repurchased 0.01 0.01 -- -- 0.02
----------- ----------- ----------- ----------- -----------
Total from Capital Activity 0.01 0.01 -- (0.01) 0.02
----------- ----------- ----------- ----------- -----------
Net Asset Value Per Share, End of Year $ 5.78 $ 5.62 $ 4.63 $ 6.70 $ 8.48
=========== =========== =========== =========== ===========
Market Value Per Share, End of Year $ 5.36 $ 4.98 $ 4.16 $ 8.55 $ 10.38
=========== =========== =========== =========== ===========
Total Investment Return (1) 13.02% 25.14% (45.11)% (9.27)% 34.95%
Net Asset Value Total Return (2) 7.23% 26.82% (20.75)% (10.89)% (4.79)%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Year (in thousands) $ 280,873 $ 278,361 $ 236,073 $ 339,577 $ 352,555
Ratio of Expenses to Average Net Assets 0.90% 0.84% 0.83% 0.75% 0.69%
Ratio of Net Investment Income to Average
Net Assets 3.51% 3.89% 5.82% 5.16% 2.88%
Portfolio Turnover Rate 91.35% 115.16% 75.04% 129.57% 159.44%
(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.
(4) Impact from reclassification as stated in Note 1 is less than $0.01.
See accompanying Notes to Financial Statements.
15
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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, 2004 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 the Standards of the Public Company
Accounting Oversight Board (United States). 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 consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the Fund's
internal control over financial reporting. Accordingly, we express no such
opinion. An audit also includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. Our procedures
included confirmation of securities owned as of December 31, 2004, by
correspondence with the custodian. 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, 2004, 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/ Deloitte & Touche LLP
Los Angeles, California
February 18, 2005
16
VOTING INFORMATION (UNAUDITED)
REPORT OF ANNUAL MEETING OF SHAREHOLDERS:
The Annual Meeting of Shareholders of the Fund was held on July 13, 2004. At the
meeting, the following matters were submitted to a shareholder vote: (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
43,183,030 affirmative votes, votes exception/abstain 359,823 and votes withheld
2,762,670); and (ii) the conversion of the Fund to an open-ended investment
company pursuant to the Fund's Articles of Incorporation, and adoption of an
amendment and restatement of the Articles of Incorporation to effectuate the
proposal (votes for 7,109,110; votes against 13,737,740; and abstentions
835,174). 48,609,979 shares were outstanding on the record date of this meeting
and 46,305,523 shares entitled to vote were present in person or by proxy at the
meeting.
17
PROXY VOTING GUIDELINES
The policies and procedures that the Fund uses to determine how to vote
proxies are available without charge. The Board of Directors of the Fund
has delegated the Fund's proxy voting authority to the Advisor.
DISCLOSURE OF PROXY VOTING GUIDELINES
The proxy voting guidelines of the Advisor are available:
1. By calling (877)829-4768 to obtain a hard copy; or
2. By going to the SEC website at http://www.sec.gov.
When the Fund receives a request for a description of the Advisor's proxy
voting guidelines, it will be sent out via first class mail (or other
means designed to ensure equally prompt delivery) within three business
days of receiving the request.
The Advisor, on behalf of the Fund, shall prepare and file Form N-PX with
the SEC not later than August 31 of each year, which shall include the
Fund's proxy voting record for the most recent twelve-month period ended
June 30 of that year. The Fund's proxy voting record for the most recent
twelve-month period ended June 30 is available:
1. By calling (877)829-4768 to obtain a hard copy; or
2. By going to the SEC website at http://www.sec.gov.
When the Fund receives a request for the Fund's proxy voting record, it
will send the information disclosed in the Fund's most recently filed
report on Form N-PX via first class mail (or other means designed to
ensure equally prompt delivery) within three business days of receiving
the request.
The Fund also discloses its proxy voting record on its website as soon as
is reasonably practicable after its report on Form N-PX is filed with the
SEC.
AVAILABILITY OF QUARTERLY PORTFOLIO SCHEDULE
The Fund files a complete schedule of its portfolio holdings with the SEC
for the first and third quarters of its fiscal year on Form N-Q. The Form
N-Q is available by calling (877)829-4768 to obtain a hard copy. You may
also obtain the Fund's Form N-Q:
1. By going to the SEC website at http://www.sec.gov.; or
2. By visiting the SEC's Public Reference Room in Washington, D.C. and
photocopying it (Phone 1-800-SEC-0330 for information on the operation
of the SEC's Public Reference Room).
CORPORATE GOVERNANCE LISTING STANDARDS
In accordance with Section 303A.12 (a) of the New York Stock Exchange
Listed Company Manual, the Fund's Annual CEO Certification certifying as
to compliance with NYSE's Corporate Governance Listing Standards was
submitted to the Exchange on July 29, 2004.
18
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
------------------------------------------------------------------------------------------------------------------------------------
Samuel P. Bell (68) Mr. Bell has served as a Private investor. Previously, Point 360 (audio visual
c/o Paul, Hastings, director of TCW Convertible President, Los Angeles Business services), Broadway National
Janofsky & Walker LLP Securities Fund, Inc. since Advisors since 1996. Prior to 1996, Bank (banking), and TCW
Counsel to the October 2002. Mr. Bell served as the Area Managing Galileo Funds, Inc. (mutual
Independent Directors Partner of Ernst & Young for the fund).
515 South Flower Street Pacific Southwest Area.
Los Angeles, CA 90071
Richard W. Call (80) Mr. Call has served as a Private Investor. Former President TCW Galileo Funds, Inc.
496 Prospect Terrace director of TCW Convertible of The Seaver Institute (a private (mutual fund).
Pasadena, CA 91103 Securities Fund, Inc. since foundation).
February 1987.
Ernest O. Ellison (73) Mr. Ellison has served as a Vice Chairman of the Board, Trust None.
865 S. Figueroa Street director of TCW Convertible Company of the West and The TCW
Los Angeles, CA 90017 Securities Fund, Inc. since Group, Inc.
January 1987.
Matthew K. Fong (51) Mr. Fong has served as a President, Strategic Advisory Group, Seismic Warning Systems, Inc.,
Strategic Advisory Group director of TCW Convertible Of Counsel Sheppard, Mullin, Richter Viata Inc. (home entertainment
13191 Crossroad Parkway Securities Fund, Inc. since & Hamilton (law firm) since 1999. products), Zero Stage Capital
North City of Industry, May 2001. From 1995 to 1998, Mr. Fong served (private equity partnership),
CA 91746 as Treasurer of the State of TCW Galileo Funds, Inc.
California. (mutual fund).
John A. Gavin (73) Mr. Gavin has served as a Founder and Chairman of Gamma Causeway Capital (investment
c/o Paul, Hastings, director of TCW Convertible Holdings (international capital advisor), TCW Galileo Funds,
Janofsky & Walker LLP Securities Fund, Inc. since consulting firm). Inc. (mutual fund), and
Counsel to the May 2001. Hotchkis and Wiley Funds
Independent Directors (mutual funds).
515 South Flower Street
Los Angeles, CA 90071
19
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 (52) Mr. Haden has served as a General Partner, Riordan, Lewis & Indy Mac Mortgage Holdings
300 South Grand Avenue director of TCW Convertible Haden (private equity partnership). (mortgage banking), Tetra
Los Angeles, CA 90071 Securities Fund, Inc. since Tech, Inc. (environmental
Chairman May 2001. consulting), and TCW Galileo
Funds, Inc. (mutual fund).
Charles A. Parker (70) Mr. Parker has served as a Private Investor. Horace Mann Educators Corp.,
c/o Paul, Hastings, director of TCW Convertible trustee of the Burridge Center
Janofsky & Walker LLP Securities Fund, Inc. since for Research in Security
Counsel to the May 1988. Prices (University of
Independent Directors Colorado), Amerindo Funds
515 South Flower Street (mutual fund), and TCW Galileo
Los Angeles, CA 90071 Funds, Inc. (mutual fund).
Robert G. Sims (73) Mr. Sims has served as a Private Investor. Director, The TCW Group, Inc.
16855 West Bernardo Drive director of TCW Convertible
Suite 250 Securities Fund, Inc. since
San Diego, CA 92127 October 1991.
The officers of the Fund who are not directors of the Fund are:
POSITION(S) HELD
NAME AND ADDRESS WITH COMPANY PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS (1)
------------------------------------------------------------------------------------------------------------------------------------
Alvin R. Albe, Jr. (51)* President and Chief Executive Officer President and Director, 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 and Chief
Executive Officer, TCW Galileo Funds, Inc. and TCW
Premier Funds.
Mohan Kapoor (36)* Senior Vice President Senior Vice President, the Advisor, TCW Asset
Management Company and Trust Company of the West.
Thomas D. Lyon (45)* Senior Vice President Managing Director, the Advisor, TCW Asset Management
Company and Trust Company of the West.
Thomas E. Larkin, Jr. (65)* Senior Vice President Vice Chairman, The TCW Group, Inc., the Advisor, TCW
Asset Management Company and Trust Company of the West.
20
POSITION(S) HELD
NAME AND ADDRESS WITH COMPANY PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS (1)
------------------------------------------------------------------------------------------------------------------------------------
Hilary G.D. Lord (48)* Senior Vice President and Chief Compliance Managing Director and Chief Compliance Officer, the
Officer Advisor, The TCW Group, Inc., TCW Asset Management
Company and Trust Company of the West.
Philip K. Holl (55)* Secretary and Associate General Counsel Senior Vice President and Associate General Counsel,
the Advisor, TCW Asset Management Company and Trust
Company of the West; Secretary and Associate General
Counsel, TCW Galileo Funds, Inc. and TCW Premier Funds.
Michael E. Cahill (53)* Senior Vice President, General Counsel and Group Managing Director, General Counsel and
Assistant Secretary Secretary, the Advisor, The TCW Group, Inc., TCW Asset
Management Company and Trust Company of the West;
Senior Vice President, General Counsel and Assistant
Secretary, TCW Galileo Funds, Inc. and TCW Premier
Funds.
David S. DeVito (42)* Treasurer and Chief Financial Officer Managing Director and 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.
George N. Winn (36)* 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
21
[TCW LOGO]
[TCW LOGO]
TCW CONVERTIBLE SECURITIES FUND, INC.
DIRECTORS AND OFFICERS
Samuel P. Bell
DIRECTOR
Richard W. Call
DIRECTOR
Ernest O. Ellison
DIRECTOR
Matthew K. Fong
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 CHIEF COMPLIANCE OFFICER
John A. Gavin
DIRECTOR
Patrick C. Haden
CHAIRMAN
Charles A. Parker
DIRECTOR
Robert G. Sims
DIRECTOR
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
ITEM2. 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
2003 2004
---- ----
$ 37,275 $ 37,960
(b) AUDIT-RELATED FEES PAID BY REGISTRANT
2003 2004
---- ----
0 0
(c) TAX FEES PAID BY REGISTRANT
2003 2004
---- ----
$ 6,027 $ 4,350
Fees were for the preparation and filing of the registrant's corporate
returns.
(d) ALL OTHER FEES PAID BY REGISTRANT
2003 2004
---- ----
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
(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. SCHEDULE OF INVESTMENTS. Not Applicable.
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
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
- 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
- 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
- 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.
- 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
- 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
- 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.
- 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.
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.
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. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENTS COMPANIES.
Not Applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS. Not Applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Not Applicable.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The Chief Executive Officer and Chief Financial Officer have
concluded that the registrant's disclosure controls and procedures
(as defined in rule 30a-2(c) under the Investment Company Act of
1940) provide reasonable assurances that material information
relating to the registrant is made known to them by the
appropriate persons 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 12. EXHIBITS.
(a) EX-99.CODE - Code of Ethics (filed herewith)
(b) EX-99.CERT - Section 302 Certifications (filed herewith).
EX-99.906CERT - Section 906 Certification (filed herewith).
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) TCW Convertible Securities Fund, Inc.
By (Signature and Title)
/s/ Alvin R. Albe, Jr.
-----------------------------
Alvin R. Albe, Jr.
Chief Executive Officer
Date March 3, 2005
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, 2005
By (Signature and Title)
/s/ David S. Devito
---------------------------
David S. DeVito
Chief Financial Officer
Date March 3, 2005