TCW Strategic
Income Fund, Inc.

Directors and Officers

Alvin R. Albe, Jr.

Director, President and Chief Executive Officer

Samuel P. Bell

Director

Richard W. Call

Director

Matthew K. Fong

Director

Jeffrey E. Gundlach

Senior Vice President and Portfolio Manager

Thomas D. Lyon

Senior Vice President

Hilary G.D. Lord

Senior Vice President and Chief Compliance Officer

Philip K. Holl

Secretary and Associate General Counsel

John A. Gavin

Director

Patrick C. Haden

Chairman

Charles A. Parker

Director

William C. Sonneborn

Director

Michael E. Cahill

Senior Vice President, 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

State Street Bank & Trust Co.
200 Clarendon Street
Boston, Massachusetts 02116

Independent Registered Public Accounting Firm

Deloitte & Touche LLP
350 South Grand Avenue
Los Angeles, California 90071

Legal Counsel

Dechert LLP
1775 Eye Street N.W.
Washington DC, 20006

TCW Strategic
Income Fund, Inc.

SEMI-ANNUAL REPORT

June 30, 2007

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TCW Strategic Income Fund, Inc.

THE PRESIDENT'S LETTER

Dear Shareholder:

We are pleased to present the 2007 semi-annual report of the TCW Strategic Income Fund, Inc. ("TSI" or "the Fund"). TSI is a multi-asset class closed-end fund with a 75% fixed income and 25% equity asset allocation at June 30, 2007. The fixed income portfolio consists of collateralized debt obligation equity, high yield, asset-backed and mortgage-backed securities, while the equity portfolio consists of convertible and large cap value securities. The Fund had a modest leverage position represented by $16.4 million of borrowings at June 30, 2007. As of July 25, 2007, the Fund had no leverage. In October 2004, the Board of Directors approved a managed distribution plan which pays a minimum of 7% of the Fund's net asset value ("NAV") based on the prior year-end NAV. Based on this policy, the Fund will pay a minimum of 39 cents per share in 2007.

The mortgage-backed securities orientation of the fixed income portfolio has made the first six months difficult for the Fund, as the sector has been under pressure because of the difficulties in the subprime area. For the six months ended June 30, 2007, including dividends reinvested, the Fund's shareholders realized a negative return of (2.14%) as the Fund's NAV declined (5.31%). The Fund's discount narrowed from 8.8% to 5.9% and the Fund declared two quarterly dividends totaling 19.6 cents. The negative returns are primarily the result of mark-to-market price declines in the Fund's asset-backed and collateralized debt obligation equity securities. The Fund held securities representing approximately 18% of total assets, which have some exposure to subprime mortgage loans and pricing for these securities has reached distressed levels with little liquidity in the marketplace. The Fund's investment policies do not require sales due to mark-to-market write-downs or rating changes on securities.

On behalf of the Board and everyone at TCW, I would like to thank you for your continued support. .

Very truly yours,

 

Alvin R. Albe, Jr.
President & Chief Executive Officer

July 25, 2007

1

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TCW Strategic Income Fund, Inc.

SCHEDULE OF INVESTMENTS—JUNE 30, 2007 (UNAUDITED)

Principal Amount								Value
				Fixed Income Securities
				Asset Backed Securities (14.3% of Net Assets)
				Banking (14.3%)
$	2,500,000			Ameriquest Mortgage Securities, Inc. (06-R2-M10), 7.82%, due 04/25/36				$	1,736,000	*
	2,661,000			Argent Securities, Inc. (06-W3-M10), (144A), 7.82%, due 04/25/36					1,596,600	* **
	2,000,000			Argent Securities, Inc. (06-W4-M10), 7.82%, due 05/25/36					700,000	*
	2,000,000			Carrington Mortgage Loan Trust (06-2FRE-10), (144A), 7.32%, due 10/25/36					1,000,000	* **
	2,000,000			Carrington Mortgage Loan Trust (06-NC1-M10), (144A), 8.32%, due 01/25/36					1,460,000	* **
	1,500,000			Countrywide Asset-Backed Certificates (06-26-B), (144A), 7.07%, due 06/25/37					952,500	* **
	2,000,000			Countrywide Asset-Backed Certificates (06-5-B), 7.72%, due 08/25/36					1,539,600	*
	2,000,000			Countrywide Asset-Backed Certificates (06-6-B), (144A), 8.32%, due 09/25/36					1,461,600	* **
	2,000,000			Countrywide Asset-Backed Certificates (07-6-M8), 7.32%, due 09/25/37					1,864,800	*

 

Principal Amount								Value
$	1,993,000			First Franklin Mortgage Loan Asset Backed Certificate (06-17FF-B), (144A), 7.82%, due 12/25/36				$	1,447,117	* **
	2,000,000			First Franklin Mortgage Loan Asset Backed Certificate (06-FF5-M10), (144A), 7.32%, due 04/25/36					1,290,000	* **
	2,000,000			First Franklin Mortgage Loan Asset Backed Certificate (06-FF7-M10), (144A), 7.32%, due 05/25/36					1,336,200	* **
	2,000,000			Fremont Home Loan Trust (06-2-M9), 7.72%, due 02/25/36					1,200,000	*
	2,000,000			HSI Asset Securitization Corp. Trust (06-OPT3-M9), 7.32%, due 02/25/36					1,693,800	*
	1,740,000			HSI Asset Securitization Corp. Trust (07-HE2-M8), 7.821%, due 04/25/37					1,590,534	*
	2,000,000			JP Morgan Mortgage Acquisition Corp. (06-NC1-M10), (144A), 7.82%, due 04/25/36					1,100,000	* **
	1,000,000			Residential Asset Mortgage Products, Inc. (06-NC3-M9), 7.37%, due 03/25/36					768,600	*
	2,000,000			Saxon Asset Securities Trust (06-2-B4), 7.82%, due 09/25/36					1,353,000	*

 

  *  Illiquid security.

  **  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 June 30, 2007, the value of these securities amounted to $108,687,067 or 44.6% of net assets. These securities (unless otherwise noted) are determined to be liquid by the Advisor under procedures established by and under the general supervision of the Company's Board of Directors.

See accompanying Notes to Financial Statements.
2

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TCW Strategic Income Fund, Inc.

SCHEDULE OF INVESTMENTS—JUNE 30, 2007 (UNAUDITED) (CONT'D)

Principal Amount								Value
$	1,000,000			Saxon Asset Securities Trust (07-1-B2), 7.57%, due 02/25/37				$	990,000	*
	2,000,000			Securitized Asset Backed Receivables LLC Trust (07-BR1-B2), 7.57%, due 02/25/37					1,700,000	*
	2,000,000			Soundview Home Equity Loan Trust (06-OPT2-M9), (144A), 7.82%, due 05/25/36					1,496,600	* **
	2,000,000			Soundview Home Equity Loan Trust (06-OPT3-M9), (144A), 7.82%, due 06/25/36					1,476,600	* **
	2,000,000			Structured Asset Securities Corp. (06-NC1-B1), (144A), 7.82%, due 05/25/36					800,000	* **
	2,000,000			Structured Asset Securities Corp. (06-WF1-M9), 7.32%, due 02/25/36					1,606,800	*
	2,700,000			Structured Asset Securities Corp. (07-EQ1-M9), 7.82%, due 03/25/37					2,558,250	*
				Total Banking					34,718,601
				Total Asset Backed Securities (Cost: $43,947,847)					34,718,601

 

Principal Amount								Value
				Collateralized Debt Obligations (18.2%)
				Banking (0.4%)
$	1,000,000			FM Leveraged Capital Fund (06-2-E), (144A), 9.11%, due 11/15/20				$	929,943	* **
				Diversified Financial Services-Multi-Sector Holdings (1.1%)
	476,583			Mantoloking CDO, Ltd. (06-1A-E), (144A), 8.86%, due 08/28/46					289,006	* **
	1,500	(1)		Mantoloking CDO, Ltd., (144A), 0%, due 09/28/46					972,493	* **
	1,944,652			Marathon Structured Finance CDO, Ltd. (06-1A-E), (144A), 10.86%, due 07/26/46					1,450,781	* **
				Total Diversified Financial Services- Multi-Sector Holdings					2,712,280
				Diversified Financial Services-Specialized Finance (13.8%)
	1,500	(1)		ACA CLO, Ltd. (06-2), (144A), 0%, due 01/07/21					1,203,869	* **
	4,000,000			ARES VR CLO, Ltd. (06-1A), (144A), 0%, due 02/24/18					3,343,211	* **

 

  *  Illiquid security.

  **  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 June 30, 2007, the value of these securities amounted to $108,687,067 or 44.6% of net assets. These securities (unless otherwise noted) are determined to be liquid by the Advisor under procedures established by and under the general supervision of the Company's Board of Directors.

  (1)  Represents number of preferred shares.

  CDO  –  Collateralized Debt Obligation.

  CLO  –  Collateralized Loan Obligation.

See accompanying Notes to Financial Statements.
3

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TCW Strategic Income Fund, Inc.

SCHEDULE OF INVESTMENTS—JUNE 30, 2007 (UNAUDITED) (CONT'D)

Principal Amount								Value
$	2,000,000			Avenue CLO, Ltd. (07-6A), (144A), 0%, due 07/17/19				$	1,874,120	* **
	1,000	(1)		Centurion CDO VII, Ltd., (144A), 0%, due 01/30/16					722,723	* **
	2,000,000			Clydesdale CLO, Ltd. (06-1A), (144A), 0%, due 12/19/18					1,841,645	* **
	1,000,000			CW Capital Cobalt (06-2A-K), (144A), 8.86%, due 04/26/50					883,620	* **
	1,000,000			CW Capital Cobalt II, (06-2A-PS), (144A), 0%, due 04/26/50					919,580	* **
	1,908,230			De Meer Middle Market CLO, Ltd. (06-1A), (144A), 0%, due 10/20/18					1,729,701	* **
	942,609			De Meer Middle Market CLO, Ltd. (06-1A-E), (144A), 9.36%, due 10/20/18					914,181	* **
	2,000,000			Duane Street CLO (06-3-A), (144A), 0%, due 01/11/21					1,699,917	* **
	2,000	(1)		FM Leveraged Capital Fund II, (06-1A-PS), (144A), 0%, due 11/20/20					1,771,731	* **
	2,000,000			Galaxy CLO, Ltd. (06-6I), 0%, due 06/13/18					1,940,601	*
	2,000,000			Galaxy CLO, Ltd. (06-7A), (144A), 0%, due 10/13/18					1,877,051	* **

 

Principal Amount								Value
$	3,000,000			Katonah, Ltd. (8A), (144A), 0%, due 05/20/18				$	2,654,230	* **
	2,000,000			LCM CDO, LP (5I), 5.36%, due 03/21/19					1,890,052	*
	3,500,000			Octagon Investment Partners X, Ltd. (06-10A), (144A), 0%, due 10/18/20					3,254,070	* **
	3,000,000			Prospect Park CDO, Ltd. (06-1I), 0%, due 07/15/20					2,547,111	*
	1,750,000			Vertical CDO, Ltd. (06-1), (144A), 0%, due 04/22/46					1,730,312	* **
	1,000,000	(1)		WhiteHorse III, Ltd. (144A), 0%, due 05/01/18					803,440	* **
				Total Diversified Financial Services- Specialized Finance					33,601,165
				Thrifts & Mortgage Finance (2.9%)
	1,000,000			Bering CDO, Ltd. (06-1A), 0%, due 09/07/46					445,372	*
	1,000,000			Bering CDO, Ltd. (06-1A-1C), (144A), 11.82%, due 09/07/46					650,234	* **
	2,000,000			Fortius Funding, Ltd. (06-2-A), (144A), 0%, due 02/03/42					809,458	* **

 

  *  Illiquid security.

  **  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 June 30, 2007, the value of these securities amounted to $108,687,067 or 44.6% of net assets. These securities (unless otherwise noted) are determined to be liquid by the Advisor under procedures established by and under the general supervision of the Company's Board of Directors.

  (1)  Represents number of preferred shares.

  CDO  –  Collateralized Debt Obligation.

  CLO  –  Collateralized Loan Obligation.

See accompanying Notes to Financial Statements.
4

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TCW Strategic Income Fund, Inc.

SCHEDULE OF INVESTMENTS—JUNE 30, 2007 (UNAUDITED) (CONT'D)

Principal Amount								Value
$	1,000,000			Fortius Funding, Ltd. (06-2-AE), (144A), 11.36%, due 02/03/42				$	381,384	* **
	1,000	(1)		Fortius I Funding, Ltd., (144A), 0%, due 07/12/41					567,741	* **
	991,799			GSC ABS CDO, Ltd. (06-3GA-D), (144A), 8.57%, due 06/02/42					687,336	* **
	1,500,000			Hudson Mezzanine Funding (06-1-AE), (144A), 12.1%, due 04/12/42					515,977	* **
	1,500,000			Hudson Mezzanine Funding (06-1A-INC), (144A), 0%, due 04/12/42					524,024	* **
	1,000,000			IXIS ABS CDO, Ltd. (06-1I-E), 11.61%, due 12/13/46					812,343	*
	2,000,000			Vertical CDO, Ltd. (06-2A), (144A), 0%, due 05/09/46					779,789	* **
	1,968,739			Vertical CDO, Ltd. (06-2A-C), (144A), 11.61%, due 05/09/46					951,398	* **
				Total Thrifts & Mortgage Finance					7,125,056
				Total Collateralized Debt Obligations (Cost: $53,859,398)					44,368,444

 

Principal Amount								Value
				Collateralized Mortgage Obligations (30.4%)
				Banking (3.2%)
$	6,138,672			GSR Mortgage Loan Trust (03-7F-1A4), 5.25%, due 06/25/33				$	5,372,013
	3,915,010			GSR Mortgage Loan Trust (06-1F-1A5), 1.265%, due 02/25/36 (I/F)(TAC)					2,367,358
				Total Banking					7,739,371
				U.S. Government Agency Obligations (27.2%)
	2,023,000			Federal Home Loan Mortgage Corp. (2684-SN), 1.65%, due 10/15/33 (I/F)					1,152,323
	5,688,598			Federal Home Loan Mortgage Corp. (2691-CO), 0%, due 10/15/33 (P/O)					3,252,342
	1,950,546			Federal Home Loan Mortgage Corp. (2870-EO), 0%, due 10/15/34 (P/O)					894,638
	3,144,097			Federal Home Loan Mortgage Corp. (2951-NS), 0%, due 03/15/35 (I/F)					1,559,586

 

  *  Illiquid security.

  **  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 June 30, 2007, the value of these securities amounted to $108,687,067 or 44.6% of net assets. These securities (unless otherwise noted) are determined to be liquid by the Advisor under procedures established by and under the general supervision of the Company's Board of Directors.

  (1)  Represents number of preferred shares.

  I/F  –  Inverse Floating rate security whose interest rate moves in the opposite direction of prevailing interest rates.

  P/O  –  Principal Only Security.

  TAC  –  Target Amortization Class.

  CDO  –  Collateralized Debt Obligation.

  CLO  –  Collateralized Loan Obligation.

See accompanying Notes to Financial Statements.
5

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TCW Strategic Income Fund, Inc.

SCHEDULE OF INVESTMENTS—JUNE 30, 2007 (UNAUDITED) (CONT'D)

Principal Amount								Value
$	1,768,119			Federal Home Loan Mortgage Corp. (2962-GT), 0%, due 04/15/35 (I/F)(TAC)				$	1,598,221
	987,732			Federal Home Loan Mortgage Corp. (2990-JK), 0.72%, due 03/15/35 (I/F)					592,423
	1,642,242			Federal Home Loan Mortgage Corp. (3019-SQ), 0%, due 06/15/35 (I/F)					948,889
	2,749,188			Federal Home Loan Mortgage Corp. (3035-TP), 6.5%, due 12/15/33 (I/F)					2,726,975
	2,165,544			Federal Home Loan Mortgage Corp. (3062-HO), 0%, due 11/15/35 (P/O)					1,300,063
	1,639,202			Federal Home Loan Mortgage Corp. (3074-LO), 0%, due 11/15/35 (P/O)					1,052,081
	437,399			Federal Home Loan Mortgage Corp. (3076-ZQ), 5.5%, due 11/15/35 (PAC)					400,294
	1,880,785			Federal Home Loan Mortgage Corp. (3081-PO), 0%, due 07/15/33 (P/O)					1,355,649
	2,672,157			Federal Home Loan Mortgage Corp. (3092-CS), 5.571%, due 12/15/35 (I/F)(TAC)					2,375,655

 

Principal Amount								Value
$	2,782,123			Federal Home Loan Mortgage Corp. (3092-LO), 0%, due 12/15/35 (P/O)(TAC)				$	2,217,630
	2,819,318			Federal Home Loan Mortgage Corp. (3092-OL), 0%, due 12/15/35 (P/O)					1,920,604
	2,453,230			Federal Home Loan Mortgage Corp. (3146-SB), 4.143%, due 04/15/36 (I/F)					1,949,019
	1,508,246			Federal Home Loan Mortgage Corp. (3153-NK), 4.07%, due 05/15/36 (I/F)					1,172,845
	2,558,672			Federal Home Loan Mortgage Corp. (3161-SA), 3.96%, due 05/15/36 (I/F)					2,104,848
	2,300,018			Federal Home Loan Mortgage Corp. (3171-GO), 0%, due 06/15/36 (P/O)(PAC)					1,882,680
	7,371,658			Federal Home Loan Mortgage Corp. (3171-OJ), 0%, due 06/15/36 (P/O)					3,975,240
	1,719,530			Federal Home Loan Mortgage Corp. (3186-SB), 3.227%, due 07/15/36 (I/F)					1,290,838
	6,326,848			Federal Home Loan Mortgage Corp. (3225-AO), 0%, due 10/15/36 (P/O)					3,916,888

 

  I/F  –  Inverse Floating rate security whose interest rate moves in the opposite direction of prevailing interest rates.

  P/O  –  Principal Only Security.

  PAC  –  Planned Amortization Class.

  TAC  –  Target Amortization Class.

See accompanying Notes to Financial Statements.
6

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TCW Strategic Income Fund, Inc.

SCHEDULE OF INVESTMENTS—JUNE 30, 2007 (UNAUDITED) (CONT'D)

Principal Amount								Value
$	3,384,461			Federal National Mortgage Association (05-1-GZ), 5%, due 02/25/35				$	3,116,064
	1,982,564			Federal National Mortgage Association (05-44-TS), 2.1%, due 03/25/35 (I/F)(TAC)					1,317,612
	3,102,558			Federal National Mortgage Association (05-69-HO), 0%, due 08/25/35 (P/O)					2,039,777
	1,668,606			Federal National Mortgage Association (05-87-ZQ), 4.5%, due 10/25/25					1,606,718
	1,488,786			Federal National Mortgage Association (05-92-DT), 6%, due 10/25/35 (TAC)					1,377,567
	1,723,438			Federal National Mortgage Association (06-14-SP), 6.111%, due 03/25/36 (I/F)(TAC)					1,664,322
	1,784,955			Federal National Mortgage Association (06-15-LO), 0%, due 03/25/36 (P/O)					1,287,455
	2,749,161			Federal National Mortgage Association (06-44-C), 0%, due 12/25/33 (P/O)					1,926,942
	3,630,609			Federal National Mortgage Association (06-45-SP), 3.703%, due 06/25/36 (I/F)					2,533,693
	2,149,854			Federal National Mortgage Association (06-57-SA), 3.483%, due 06/25/36 (I/F)					1,703,164

 

Principal Amount								Value
$	2,000,000			Federal National Mortgage Association (06-67-DS), 1.892%, due 07/25/36 (I/F)				$	1,249,925
	2,442,049			Federal National Mortgage Association (25-62-BO), 0%, due 07/25/35 (P/O)					1,987,364
	7,071,509			Government National Mortgage Association (05-45-DK), 0.72%, due 06/16/35 (I/F)					4,861,875
				Total U.S. Government Agency Obligations					66,312,209
				Total Collateralized Mortgage Obligations (Cost: $76,260,543)					74,051,580
				Other Fixed Income (21.0%)
				Financial Services (21.0%)
	54,000,000			Dow Jones CDX, NA. HY Trust I, (144A), 7.625%, due 06/29/12					51,197,400	** † #
				Total Other Fixed Income (Cost: $53,740,857)					51,197,400
				Total Fixed Income Securities (Cost: $227,808,645) (83.9%)					204,336,025

 

  **  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 June 30, 2007, the value of these securities amounted to $108,687,067 or 44.6% of net assets. These securities (unless otherwise noted) are determined to be liquid by the Advisor under procedures established by and under the general supervision of the Company's Board of Directors.

  ^†  Security partially or fully lent (Note 5).

  #  Index bond which consists of high yield credit default swaps, and tracks the B rated high yield index.

  I/F  –  Inverse Floating rate security whose interest rate moves in the opposite direction of prevailing interest rates.

  P/O  –  Principal Only Security.

  TAC  –  Target Amortization Class.

See accompanying Notes to Financial Statements.
7

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TCW Strategic Income Fund, Inc.

SCHEDULE OF INVESTMENTS—JUNE 30, 2007 (UNAUDITED) (CONT'D)

Principal Amount								Value
				Convertible Securities
				Convertible Corporate Bonds (8.5%)
				Banking (2.5%)
$	1,713,000			Euronet Worldwide, Inc., 3.5%, due 10/15/25				$	1,784,586
	1,868,000			SLM Corp., 5.305%, due 07/25/35					1,873,679
	2,185,000			Wachovia Corp., 9.5%, due 09/20/07					2,404,156
				Total Banking					6,062,421
				Electronics (2.0%)
	1,407,000			Agere Systems, Inc., 6.5%, due 12/15/09					1,435,745
	1,443,000			Fairchild Semiconductor Corp., 5%, due 11/01/08					1,435,208
	1,416,000			LSI Logic Corp., 4%, due 05/15/10					1,383,545
	643,000			Xilinx, Inc., (144A), 3.125%, due 03/15/37					655,989	**
				Total Electronics					4,910,487
				Healthcare Providers (0.8%)
	2,256,000			Omnicare, Inc., 3.25%, due 12/15/35					1,910,877
				Insurance (1.0%)
	78,387			XL Capital, Ltd., 7%, due 02/15/09					2,303,010
				Media-Broadcasting & Publishing (0.9%)
	602,000			Ciena Corp., 0.875%, due 06/15/17					646,398

 

Principal Amount								Value
$	1,543,000			Ciena Corp., 3.75%, due 02/01/08				$	1,529,406
				Total Media- Broadcasting & Publishing					2,175,804
				Medical Supplies (0.2%)
	301,000			Integra LifeSciences Holdings Corp., (144A), 2.375%, due 06/01/12					295,859	**
	301,000			Integra LifeSciences Holdings Corp., (144A), 2.75%, due 06/01/10					297,304	**
				Total Medical Supplies					593,163
				Pharmaceuticals (0.4%)
	301,000			Sciele Pharma, Inc., 2.625%, due 05/15/27					312,122
	673,000			United Therapeutics Corp., (144A), 0.5%, due 10/15/11					696,737	**
				Total Pharmaceuticals					1,008,859
				Real Estate (0.7%)
	1,517,000			Affordable Residential Communities, Inc., (144A), 7.5%, due 08/15/25					1,789,908	**
				Total Convertible Corporate Bonds (Cost: $20,515,457)					20,754,529

 

  **  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 June 30, 2007, the value of these securities amounted to $108,687,067 or 44.6% of net assets. These securities (unless otherwise noted) are determined to be liquid by the Advisor under procedures established by and under the general supervision of the Company's Board of Directors.

See accompanying Notes to Financial Statements.
8

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TCW Strategic Income Fund, Inc.

SCHEDULE OF INVESTMENTS—JUNE 30, 2007 (UNAUDITED) (CONT'D)

Number of Shares								Value
				Convertible Preferred Stocks (9.4%)
				Aerospace & Defense (0.9%)
	15,000			Northrop Grumman Corp., $1.75				$	2,165,625
				Airlines (0.9%)
	33,650			Bristow Group, Inc., $1.375					2,145,187
				Automobiles (1.4%)
	32,785			Ford Motor Co. Capital Trust II, $1.625					1,270,419
	40,800			General Motors Corp., $1.125					902,700
	57,950			General Motors Corp., $1.3125					1,280,695
				Total Automobiles					3,453,814
				Commercial Services (0.4%)
	20,640			United Rentals, Inc., $1.625					1,019,100	***
				Containers & Packaging (0.5%)
	47,561			Smurfit-Stone Container Corp., $1.75					1,117,683
				Electric Utilities (0.6%)
	31,100			AES Corp., $1.6875					1,562,775	***
				Financial Services (0.2%)
	5,024			Vale Capital, Ltd., $2.75					244,166
	3,012			Vale Capital, Ltd., $2.75					146,082
				Total Financial Services					390,248

 

Number of Shares								Value
				Food & Staples Retailing (0.8%)
	28,760			Rite Aid Corp., $1.75				$	2,006,010
				Household Products (0.0%)
	59			Owens-Illinois, Inc., $0.59					2,507	***
				Insurance (0.8%)
	24,705			Reinsurance Group of America, Inc., $1.4375					1,889,933
				Media (0.6%)
	1,500			Interpublic Group of Companies, Inc., (144A), $1.28125					1,603,688	**
				Oil, Gas & Consumable Fuels (0.7%)
	15,945			Chesapeake Energy Corp., $1.125					1,618,418
				Road & Rail (0.8%)
	1,360			Kansas City Southern, $1.28125					1,962,480
				Utilities (0.8%)
	30,400			Entergy Corp., $1.90625					2,014,000
				Total Convertible Preferred Stocks (Cost: $20,740,254)					22,951,468
				Total Convertible Securities (Cost: $41,255,711) (17.9%)					43,705,997

 

  **  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 June 30, 2007, the value of these securities amounted to $108,687,067 or 44.6% of net assets. These securities (unless otherwise noted) are determined to be liquid by the Advisor under procedures established by and under the general supervision of the Company's Board of Directors.

  ***  Non-income producing.

See accompanying Notes to Financial Statements.
9

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TCW Strategic Income Fund, Inc.

SCHEDULE OF INVESTMENTS—JUNE 30, 2007 (UNAUDITED) (CONT'D)

Number of Shares								Value
				Common Stock
				Aerospace & Defense (0.1%)
	3,700			Honeywell International, Inc.				$	208,236
				Apparel Retailers (0.0%)
	5,000			The Gap, Inc.					95,500
				Automobiles (0.1%)
	6,800			General Motors Corp.					257,040	†
				Biotechnology (0.2%)
	5,300			Genentech, Inc.					400,998	***
				Capital Markets (0.1%)
	3,400			Merrill Lynch & Co., Inc.					284,172
				Chemicals (0.2%)
	7,900			Du Pont (E.I.) de Nemours & Co.					401,636
	4,000			Lyondell Chemical Co.					148,480
				Total Chemicals					550,116
				Commercial Services & Supplies (0.1%)
	5,900			Waste Management, Inc.					230,395
				Computers & Peripherals (0.3%)
	6,000			Hewlett-Packard Co.					267,720
	3,400			International Business Machines Corp.					357,850
				Total Computers & Peripherals					625,570
				Consumer Finance (0.1%)
	2,100			Capital One Financial Corp.					164,724

 

Number of Shares								Value
				Containers & Packaging (0.2%)
	14,500			Packaging Corp. of America				$	366,995
				Diversified Financial Services (0.4%)
	8,800			Citigroup, Inc.					451,352
	10,000			JPMorgan Chase & Co.					484,500
				Total Diversified Financial Services					935,852
				Diversified Telecommunication Services (0.5%)
	11,000			AT&T, Inc.					456,500
	10,468			BCE, Inc.					395,586	†
	18,000			Qwest Communications International, Inc.					174,600	***
	15,037			Windstream Corp.					221,946
				Total Diversified Telecommunication Services					1,248,632
				Electric Utilities (0.1%)
	8,000			American Electric Power Co., Inc.					360,320
				Financial Services (0.0%)
	2,100			The Blackstone Group, LP					61,467	***
				Food Products (0.3%)
	12,100			Kraft Foods, Inc., Class A					426,525
	17,200			Sara Lee Corp.					299,280
				Total Food Products					725,805

 

  ADR  –  American Depositary Receipt. Shares of a foreign based corporation held in U.S. banks entitling the shareholder to all dividends and capital gains.

  ***  Non-income producing.

  ^†  Security partially or fully lent (Note 5).

See accompanying Notes to Financial Statements.
10

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TCW Strategic Income Fund, Inc.

SCHEDULE OF INVESTMENTS—JUNE 30, 2007 (UNAUDITED) (CONT'D)

Number of Shares								Value
				Forest Products & Paper (0.1%)
	9,700			Louisiana-Pacific Corp.				$	183,524
				Health Care Providers & Services (0.2%)
	4,800			Aetna, Inc.					237,120
	27,840			Tenet Healthcare Corp.					181,238	***
				Total Health Care Providers & Services					418,358
				Health Care Technology (0.1%)
	3,200			Cerner Corp.					177,504	***†
				Household Durables (0.1%)
	3,000			Sony Corp. (ADR)					154,110
				Household Products (0.1%)
	4,700			Kimberly-Clark Corp.					314,383
				Industrial Conglomerates (0.1%)
	8,500			General Electric Co.					325,380
				Insurance (0.3%)
	2,700			American International Group, Inc.					189,081
	3,100			Chubb Corp.					167,834
	6,000			The Travelers Companies, Inc.					321,000
				Total Insurance					677,915
				Leisure Equipment & Products (0.1%)
	8,400			Mattel, Inc.					212,436

 

Number of Shares								Value
				Media (0.3%)
	5,800			Clear Channel Communications, Inc.				$	219,356
	5,550			Comcast Corp., Class A					156,066	***
	12,300			Regal Entertainment Group, Class A					269,739	†
				Total Media					645,161
				Oil, Gas & Consumable Fuels (0.3%)
	5,200			Chevron Corp.					438,048
	4,800			ConocoPhillips					376,800
				Total Oil, Gas & Consumable Fuels					814,848
				Paper & Forest Products (0.1%)
	7,500			MeadWestvaco Corp.					264,900
				Personal Products (0.1%)
	9,200			Avon Products, Inc.					338,100
				Pharmaceuticals (0.2%)
	13,300			Pfizer, Inc.					340,081
	5,500			Watson Pharmaceuticals, Inc.					178,915	***
				Total Pharmaceuticals					518,996
				Real Estate Investment Trust (REITs) (0.1%)
	9,600			CapitalSource, Inc.					236,064
				Retailers (0.1%)
	10,200			Circuit City Stores, Inc.					153,816
	3,000			Macy's, Inc.					119,340
				Total Retailers					273,156

 

  ^†  Security partially or fully lent (Note 5).

  ***  Non-income producing.

See accompanying Notes to Financial Statements.
11

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TCW Strategic Income Fund, Inc.

SCHEDULE OF INVESTMENTS—JUNE 30, 2007 (UNAUDITED) (CONT'D)

Number of Shares								Value
				Road & Rail (0.2%)
	6,400			CSX Corp.				$	288,512
	1			Kansas City Southern					37	***
	1,400			Union Pacific Corp.					161,210
				Total Road & Rail					449,759
				Semiconductors & Semiconductor Equipment (0.2%)
	16,200			Intel Corp.					384,912
				Software (0.1%)
	7,900			Salesforce.com, Inc.					338,594	***†
				Textiles, Apparel & Luxury Goods (0.0%)
	2,587			Hanesbrands, Inc.					69,927	***
				Thrifts & Mortgage Finance (0.3%)
	8,000			Fannie Mae					522,640
	10,900			New York Community Bancorp, Inc.					185,518
				Total Thrifts & Mortgage Finance					708,158
				Wireless Telecommunication Services (0.3%)
	23,699			Alcatel-Lucent (ADR)					331,786
	4,000			Alltel Corp.					270,200
	6,000			Nokia Oyj (ADR)					168,660
				Total Wireless Telecommunication Services					770,646
				Total Common Stock (Cost: $13,099,906) (6.1%)					14,792,653

 

Principal Amount								Value
				Short-Term Investments5
$	692,762			Banco Bilbao Vizcaya Argentaria, 5.3%, due 08/10/07				$	692,762	****
	1,154,602			Bank of America, 5.27%, due 07/16/07					1,154,602	****
	1,154,602			Bank of America, 5.27%, due 08/17/07					1,154,602	****
	2,309,203			Bank of America, 5.3%, due 09/17/07					2,309,203	****
	1,154,601			Bank of Montreal, 5.28%, due 07/03/07					1,154,601	****
	923,682			Bank of Montreal, 5.29%, due 07/02/07					923,682	****
	461,841			Bank of Montreal, 5.31%, due 08/14/07					461,841	****
	1,154,601			Bank of Nova Scotia, 5.285%, due 07/11/07					1,154,601	****
	692,761			Barclays PLC, 5.295%, due 07/16/07					692,761	****
	461,840			Barclays PLC, 5.32%, due 09/04/07					461,840	****
	2,302,767			Barton Capital Corp., 5.295%, due 07/02/07					2,302,767	****
	692,761			Barton Capital Corp., 5.312%, due 07/12/07					692,761	****
	1,154,601			BNP Paribas, 5.35%, due 07/02/07					1,154,601	****
	461,840			CAFCO LLC, 5.315%, due 07/16/07					461,840	****
	1,154,601			Calyon, 5.38%, due 07/02/07					1,154,601	****
	2,309,202			Canadian Imperial Bank of Commerce, 5.3%, due 07/30/07					2,309,202	****
	692,761			CRC Funding LLC, 5.315%, due 07/16/07					692,761	****

 

  ⁵  Short-Term Investments consist of Certificate of Deposits, Commercial Papers, Discounts Notes, and Time Deposits.

  ADR  –  American Depositary Receipt. Shares of a foreign based corporation held in U.S. banks entitling the shareholder to all dividends and capital gains.

  ***  Non-income producing.

  ****  Represents investment of security lending collateral (Note 5).

  ^†  Security partially or fully lent (Note 5).

See accompanying Notes to Financial Statements.
12

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TCW Strategic Income Fund, Inc.

SCHEDULE OF INVESTMENTS—JUNE 30, 2007 (UNAUDITED) (CONT'D)

Principal Amount								Value
$	1,154,601			Credit Suisse (USA), Inc., 5.29%, due 07/13/07				$	1,154,601	****
	692,761			Credit Suisse (USA), Inc., 5.29%, due 07/18/07					692,761	****
	2,309,202			Credit Suisse (USA), Inc., 5.29%, due 07/19/07					2,309,202	****
	461,840			Danske Corp., 5.281%, due 07/09/07					461,840	****
	1,381,782			Fairway Finance Corp., 5.309%, due 07/03/07					1,381,782	****
	323,288			Falcon Asset Securitization Corp., 5.311%, due 07/17/07					323,288	****
	230,920			First Tennessee Bank, 5.3%, due 07/18/07					230,920	****
	461,840			Fortis Bank, 5.29%, due 07/06/07					461,840	****
	461,840			Fortis Bank, 5.29%, due 07/09/07					461,840	****
	461,840			Fortis Bank, 5.3%, due 07/20/07					461,840	****
	923,681			Fortis Bank, 5.3%, due 07/26/07					923,681	****
	230,920			Greyhawk Funding LLC, 5.288%, due 07/12/07					230,920	****
	280,046			Investors Bank & Trust Depository Reserve					280,046
	1,839,249			Jupiter Securitization Corp., 5.293%, due 07/12/07					1,839,249	****
	692,761			Jupiter Securitization Corp., 5.323%, due 07/26/07					692,761	****
	230,920			Lexington Parker Capital CP, 5.29%, due 07/03/07					230,920	****
	230,920			Liberty Street Funding Corp., 5.292%, due 07/18/07					230,920	****

 

Principal Amount								Value
$	369,472			Liberty Street Funding Corp., 5.326%, due 07/31/07				$	369,472	****
	1,154,601			Lloyds TSB Bank PLC, 5.28%, due 07/17/07					1,154,601	****
	230,920			Morgan Stanley, 5.445%, due 08/01/07					230,920	****
	1,385,521			National Energy Group, 5.32%, due 07/02/07					1,385,521	****
	461,840			Old Line Funding Corp., 5.322%, due 07/12/07					461,840	****
	461,840			Paradigm Funding LLC, 5.31%, due 07/16/07					461,840	****
	2,299,042			Park Avenue Receivables Corp., 5.303%, due 07/19/07					2,299,042	****
	2,299,665			Park Avenue Receivables Corp., 5.332%, due 07/26/07					2,299,665	****
	1,154,601			Rabobank Nederland, 5.33%, due 07/02/07					1,154,601	****
	2,294,328			Ranger Funding Co. LLC, 5.304%, due 08/02/07					2,294,328	****
	1,143,042			Ranger Funding Co. LLC, 5.327%, due 08/02/07					1,143,042	****
	923,681			Royal Bank of Scotland, 5.27%, due 07/11/07					923,681	****
	461,840			Sheffield Receivables Corp., 5.293%, due 07/06/07					461,840	****
	923,681			Skandinaviska Enskilda Banken AB, 5.29%, due 07/19/07					923,681	****
	1,576,559			Svenska Handelsbanken, 5.3%, due 07/02/07					1,576,559	****
	646,577			Wells Fargo Bank, 5.26%, due 07/02/07					646,577	****

 

  ****  Represents investment of security lending collateral (Note 5).

See accompanying Notes to Financial Statements.
13

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TCW Strategic Income Fund, Inc.

SCHEDULE OF INVESTMENTS—JUNE 30, 2007 (UNAUDITED) (CONT'D)

Principal Amount								Value
$	1,154,601			Wells Fargo Bank, 5.28%, due 07/12/07				$	1,154,601	****
	1,847,362			Wells Fargo Bank, 5.28%, due 07/13/07					1,847,362	****
				Total Short-Term Investments (Cost: $52,086,612) (21.4%)					52,086,612
				TOTAL INVESTMENTS (Cost: $334,250,874) (129.3%)					314,921,287
				LIABILITIES IN EXCESS OF OTHER ASSETS (-29.3%)					(71,420,840	)
				NET ASSETS (100.0%)				$	243,500,447

 

  ****  Represents investment of security lending collateral (Note 5).

See accompanying Notes to Financial Statements.
14

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TCW Strategic Income Fund, Inc.

INVESTMENTS BY INDUSTRY—JUNE 30, 2007 (UNAUDITED)

Industry				Percentage of Net Assets
Aerospace & Defense					1.0	%
Airlines					0.9
Apparel Retailers					0.0	**
Automobiles					1.5
Banking					20.4
Biotechnology					0.2
Capital Markets					0.1
Chemicals					0.2
Commercial Services					0.4
Commercial Services & Supplies					0.1
Computers & Peripherals					0.3
Consumer Finance					0.1
Containers & Packaging					0.7
Diversified Financial Services					0.4
Diversified Financial Services- Multi-Sector Holdings					1.1
Diversified Financial Services- Specialized Finance					13.8
Diversified Telecommunication Services					0.5
Electric Utilities					0.7
Electronics					2.0
Financial Services					21.2
Food & Staples Retailing					0.8
Food Products					0.3
Forest Products & Paper					0.1
Health Care Providers & Services					0.2
Health Care Technology					0.1
Healthcare Providers					0.8

 

Industry				Percentage of Net Assets
Household Durables					0.1	%
Household Products					0.1
Industrial Conglomerates					0.1
Insurance					2.1
Leisure Equipment & Products					0.1
Media					0.9
Media-Broadcasting & Publishing					0.9
Medical Supplies					0.2
Oil, Gas & Consumable Fuels					1.0
Paper & Forest Products					0.1
Personal Products					0.1
Pharmaceuticals					0.6
Real Estate					0.7
Real Estate Investment Trust (REITs)					0.1
Retailers					0.1
Road & Rail					1.0
Semiconductors & Semiconductor Equipment					0.2
Software					0.1
Textiles, Apparel & Luxury Goods					0.0	**
Thrifts & Mortgage Finance					3.2
U.S. Government Agency Obligations					27.2
Utilities					0.8
Wireless Telecommunication Services					0.3
Short-Term Investments					21.4
Total					129.3	%

 

  **  Value rounds to less than 0.1% of net assets

See accompanying Notes to Financial Statements.
15

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TCW Strategic Income Fund, Inc.

STATEMENT OF ASSETS AND LIABILITIES—JUNE 30, 2007 (UNAUDITED)

Assets:
Investments, at Value (Cost: $334,250,874)(1)				$	314,921,287
Receivables for Securities Sold					1,804,131
Interest and Dividends Receivable					1,913,794
Foreign Tax Reclaim Receivable					554
Total Assets					318,639,766
Liabilities:
Payables Upon Return of Securities Loaned					51,806,566
Payable for Borrowings					16,400,000
Distributions Payable					4,665,778
Payables for Securities Purchased					1,845,130
Other Accrued Expenses					183,115
Accrued Investment Advisory Fees					127,965
Interest Payable on Borrowings					88,887
Accrued Directors' Fees and Expenses					20,875
Accrued Compliance Expense					1,003
Total Liabilities					75,139,319
Net Assets				$	243,500,447
Net Assets consist of:
Common Stock, par value $0.01 per share (75,000,000 shares authorized, 47,609,979 shares issued and outstanding)				$	476,100
Paid-in Capital					345,597,212
Accumulated Net Realized (Loss) on Investments					(77,463,760	)
Distributions in Excess of Net Investment Income					(5,779,518	)
Net Unrealized Depreciation on Investments					(19,329,587	)
Net Assets				$	243,500,447
Net Asset Value per Share				$	5.11
Market Price per Share				$	4.81

 

(1)  The market value of securities lent at June 30, 2007 was $50,109,624.

See accompanying Notes to Financial Statements.
16

---

TCW Strategic Income Fund, Inc.

STATEMENT OF OPERATIONS—SIX MONTHS ENDED JUNE 30, 2007 (UNAUDITED)

Investment Income:
Interest (including net security lending income of $30,527)				$	9,526,423
Dividends (net of foreign withholding of taxes of $2,487)					1,505,823
Total Investment Income					11,032,246
Expenses:
Investment Advisory Fees					698,831
Interest Expense					622,533
Audit and Tax Service Fees					49,303
Administration Fees					49,252
Legal Fees					48,349
Proxy Expense					41,154
Directors' Fees and Expenses					37,827
Printing and Distribution Costs					24,935
Listing Fees					23,579
Insurance Expense					20,355
Transfer Agent Fees					19,348
Accounting Fees					19,344
Miscellaneous					10,579
Custodian Fees					9,745
Compliance Expense					3,671
Net Expenses					1,678,805
Net Investment Income					9,353,441
Net Realized Gain and Change in Unrealized Depreciation on Investments:
Net Realized Gains on Investments					5,051,154
Change in Unrealized Depreciation on Investments					(28,090,667	)
Net Realized Gains and Change in Unrealized Depreciation on Investments					(23,039,513	)
Decrease in Net Assets from Operations				$	(13,686,072	)

 

See accompanying Notes to Financial Statements.
17

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TCW Strategic Income Fund, Inc.

STATEMENTS OF CHANGES IN NET ASSETS

				Six Months Ended June 30, 2007 (Unaudited)				Year Ended December 31, 2006
Increase (Decrease) in Net Assets:
Operations:
Net Investment Income				$	9,353,441			$	14,262,911
Net Realized Gain on Investments					5,051,154				10,103,945
Change in Unrealized Appreciation (Depreciation) on Investments					(28,090,667	)			5,128,441
Increase (Decrease) in Net Assets Resulting from Operations					(13,686,072	)			29,495,297
Distributions to Shareholders:
From Net Investment Income					(9,331,558	)			(17,901,357	)
Total Increase (Decrease) in Net Assets					(23,017,630	)			11,593,940
Net Assets:
Beginning of Period					266,518,077				254,924,137
End of Period				$	243,500,447			$	266,518,077
Distributions in Excess of Net Investment Income				$	(5,779,518	)		$	(5,801,401	)

 

See accompanying Notes to Financial Statements.
18

---

TCW Strategic Income Fund, Inc.

STATEMENT OF CASH FLOWS—SIX MONTHS ENDED JUNE 30, 2007 (UNAUDITED)

Cash Flows From Operating Activities:
Net Decrease in Net Assets From Operations				$	(13,686,072	)
Adjustments to Reconcile Net Decrease in Net Assets Resulting From Operations to Net Cash Provided by Operating Activities:
Investments Purchased					(106,885,195	)
Investments Sold					127,340,355
Net Increase in Short-Term Investments					(25,809,339	)
Net Amortization/Accretion of Premium/(Discount)					(44,213	)
Decrease in Interest and Dividends Receivable					304,701
Increase in Foreign Tax Reclaim Receivable					(554	)
Increase in Payable Upon Return of Securities Loaned					41,299,875
Increase in Accrued Directors' Fees and Expenses					772
Increase in Accrued Compliance Expense					419
Decrease in Accrued Investment Advisory Fees					(153,434	)
Decrease in Interest Payable on Borrowings					(570,778	)
Increase in Other Accrued Expenses					5,068
Realized and Unrealized (Gain)/Loss on Investments					23,039,513
Net Cash Provided by Operating Activities					44,841,118
Cash Flows Used in Financing Activities:
Distributions to Shareholders					(9,141,118	)
Net Repayments on Borrowings					(35,700,000	)
Net Cash Used in Financing Activities					(44,841,118	)
Net Change in Cash					—
Cash at Beginning of Period					—
Cash at End of Period				$	—
Supplemental Disclosure of Cash Flow Information:
Interest paid during the year				$	1,193,311

 

See accompanying Notes to Financial Statements.
19

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TCW Strategic Income Fund, Inc.

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Note 1—Significant Accounting Policies:

TCW Strategic Income 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 return comprised of current income and capital appreciation by investing in convertible securities, marketable equity securities, investment-grade debt securities, high-yield debt securities, options, securities issued or guaranteed by the United States Government, its agencies and instrumentalities ("U.S. Government Securities"), repurchase agreements, mortgage related securities, asset-backed securities, money market securities and other securities without limit believed by the Fund's investment advisor to be consistent with the Fund's investment objective.

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 specific identified cost.

Distributions: Distributions to shareholders are recorded on ex-dividend date. The Fund declares and pays, or reinvests, dividends quarterly based on the managed distribution plan adopted by the Fund's Board of Directors. Under the Plan, the Fund will distribute a cash dividend equal to 7% of the Fund's net asset value on an annualized basis. The distribution will be based on the Fund's net asset value from the previous calendar year-end. The source for the dividend comes from net investment income and net realized capital gains measured on a fiscal year basis. Any portion of the distribution that exceeds income and capital gains will be treated as a return of capital. Under certain conditions (which the Fund presently meets), federal tax regulations cause some or all of the return of capital to be taxed as ordinary income. 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

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TCW Strategic Income Fund, Inc.

NOTES TO FINANCIAL STATEMENTS (CONT'D)

reclassifications to paid-in capital and may affect net investment income per share.

Repurchase Agreements: The Fund may invest in repurchase agreements secured by U.S. Government Securities. A repurchase agreement arises when the Fund purchases a security and simultaneously agrees to resell it to the seller at an agreed-upon future date. The Fund requires the seller to maintain the value of the securities, marked to market daily, at not less than the repurchase price. If the seller defaults on its repurchase obligation, the Fund could suffer delays, collection expenses and losses to the extent that the proceeds from the sale of the collateral are less than the repurchase price.

Note 2—Federal Income Taxes:

It is the policy of the Fund to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and distribute all of its net taxable income, including any net realized gains on investments, to its shareholders. Therefore, no federal income tax provision is required.

At June 30, 2007, net unrealized appreciation for federal income tax purposes is comprised of the following components:

Appreciated securities				$	6,361,627
Depreciated securities					(26,762,734	)
Net unrealized appreciation				$	(20,401,107	)
Cost of securities for federal Income tax purposes				$	335,322,394

 

The Fund adopted Financial Accounting Standards Board ("FASB") Interpretation No. 48 ("FIN No. 48"), Accounting for Uncertainty in Income Taxes, during the six months ended June 30, 2007. The adoption of FIN No. 48 did not have a material effect on the net asset value, financial condition or results of operations of the Fund, as there was no liability for unrecognized tax benefits and no change to the beginning net asset value of the Fund. As of and during the six months ended June 30, 2007, the Fund did not have a liability for any unrecognized tax benefits.

The Fund is subject to examination by U.S. federal and state tax authorities for returns filed after 2004 and 2003, respectively.

Note 3—Investment Advisory and Service Fees:

TCW Investment Management Company (the "Advisor") is the investment advisor to 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 managed assets and 0.50% of the Fund's average managed assets in excess of $100 million.

In addition to the management fees, the Fund reimburses, with approval by the Fund's Board of Directors, a portion of the Advisor's costs associated in support of the Fund's Rule 38a-1 compliance obligations, which is included in the Statement of Operations.

Note 4—Purchases and Sales of Securities:

For the six months ended June 30, 2007, purchases and sales or maturities of investment securities (excluding short-term investments) aggregated $86,942,645 and $122,219,072, respectively, for non-U.S. Government Securities and aggregated $18,131,148 and $6,289,901, respectively, for U.S. Government Securities.

Note 5—Security Lending:

During the six months ended June 30, 2007, the Fund lent securities to brokers. The brokers provided collateral, which must be maintained at not less than 100% of the value of the loaned securities, to secure the obligation. At June 30, 2007, the cash collateral received from borrowing brokers was $51,806,566,

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TCW Strategic Income Fund, Inc.

NOTES TO FINANCIAL STATEMENTS (CONT'D)

which was 103.39% of the value of loaned securities. The Fund receives income, net of broker fees, by investing the cash collateral in short-term investments.

Note 6—Directors' Fees:

Directors who are not affiliated with the Advisor received, as a group, fees and expenses of $37,827 from the Fund for the six months ended June 30, 2007. 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 were no restricted securities (excluding 144A issues) at June 30, 2007.

Note 8—Loan Outstanding:

The Fund is permitted to have bank borrowings for investment purposes. The Fund has entered into a line of credit agreement with The Bank of New York which permits the Fund to borrow up to $100 million at a rate, per annum, equal to the Federal Funds Rate plus 0.75%. The average daily loan balance during the period for which loans were outstanding amounted to $18,610,236, and the weighted-average interest rate was 6.0043%. Interest expense for the line of credit was $622,533 for the six months ended June 30, 2007. The outstanding borrowing under the line of credit was $16,400,000 at June 30, 2007.

Note 9—Recently Issued Accounting Pronouncements:

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, Fair Value Measurements ("FAS 157"). FAS 157 defines fair value, establishes a framework for measuring fair value in accordance with accounting principles generally accepted in the United States of America and expands disclosure about fair value measurements. FAS 157 is effective for fiscal years beginning after November 15, 2007, and will be disclosed accordingly in the future financial reports.

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TCW Strategic Income Fund, Inc.

FINANCIAL HIGHLIGHTS

				Six Months Ended June 30, 2007				Year Ended December 31,
				(Unaudited)				2006				2005				2004				2003				2002
Net Asset Value Per Share, Beginning of Period				$	5.60			$	5.35			$	5.78			$	5.62			$	4.63			$	6.70
Income from Operations:
Net Investment Income (1)					0.20				0.30				0.21				0.20				0.20				0.32
Net Realized and Unrealized Gains (Losses) on Securities					(0.49	)			0.33				(0.25	)			0.19				1.00				(1.68	)
Total from Investment Operations					(0.29	)			0.63				(0.04	)			0.39				1.20				(1.36	)
Less Distributions:
Distributions from Net Investment Income					(0.20	)			(0.38	)			(0.40	)			(0.24	)			(0.16	)			(0.32	)
Distributions from Paid-in-Capital					—				—				—				—				(0.06	)			(0.39	)
Total Distributions					(0.20	)			(0.38	)			(0.40	)			(0.24	)			(0.22	)			(0.71	)
Capital Activity:
Impact to Capital for Shares Issued					—				—				—				—	(2)			—				—
Impact to Capital for Shares Repurchased					—				—				0.01				0.01				0.01				—
Total From Capital Activity					—				—				0.01				0.01				0.01				—
Net Asset Value Per Share, End of Period				$	5.11			$	5.60			$	5.35			$	5.78			$	5.62			$	4.63
Market Value Per Share, End of Period				$	4.81			$	5.11			$	4.69			$	5.36			$	4.98			$	4.16
Total Investment Return (3)					(2.14	)%(5)			17.50	%			(5.17	)%			13.02	%			25.14	%			(45.11	)%
Net Asset Value Total Return (3)					(5.31	)%(5)			12.16	%			(0.36	)%			7.23	%			26.82	%			(20.75	)%
Ratios/Supplemental Data:
Net Assets, End of Period (in thousands)				$	243,500			$	266,518			$	254,924			$	280,873			$	278,361			$	236,073
Ratio of Expenses Before Interest Expense to Average Net Assets					0.82	%(6)			1.00	%			0.89	%			0.90	%			0.84	%			0.83	%
Ratio of Interest Expense to Average Net Assets					0.48	%(6)			0.55	%			—				—				—				—
Ratio of Total Expenses to Average Net Assets					1.30	%(6)			1.55	%			0.89	%			0.90	%			0.84	%			0.83	%
Ratio of Net Investment Income to Average Net Assets					7.22	%(6)			5.52	%			3.73	%			3.51	%			3.89	%			5.82	%
Portfolio Turnover Rate					37.27	%(5)			174.33	%			56.04	%			91.35	%			115.16	%			75.04	%

 

(1)  Computed using average shares outstanding throughout the period.

(2)  Impact from reclassification of $114,359 from other accrued expenses to paid-in capital is less than $0.01. The Fund reclassified the amount in 2004 in that the estimated liabilities related to the Fund's last rights offering are no longer required.

(3)  Based on market price per share, adjusted for reinvestment of distributions.

(4)  Based on net asset value per share, adjusted for reinvestment of distributions.

(5)  For the six months ended June 30, 2007 and not indicative of a full year's operating results.

(6)  Annualized.

See accompanying Notes to Financial Statements.
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TCW Strategic Income Fund, Inc.

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 June 19, 2007.

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TCW Strategic Income Fund, Inc.

APPROVAL OF ADVISORY AND MANAGEMENT AGREEMENT

TCW Strategic Income Fund, Inc. (the "Fund") and TCW Investment Management Company (the "Advisor") are parties to an Investment Advisory and Management Agreement ("Advisory Agreement"), pursuant to which the Advisor is responsible for managing the investments of the Fund. At a meeting held on May 7, 2007, the Board of Directors of the Fund re-approved the Advisory Agreement. The full Board of Directors, including the Independent Directors, considered the sufficiency of the information provided to assist them in their review of the Advisory Agreement and made assessments with respect to the Advisory Agreement. The Advisor provided materials to the Board for its evaluation, and the Independent Directors were advised by independent legal counsel with respect to these and other relevant matters. The Independent Directors requested information from the Advisor, reviewed the material and determined that the material received was sufficient to allow the Board to make a determination regarding the Advisory Agreement. Discussed below are the factors considered by the Board in approving the Advisory Agreement. This discussion is not intended to be all-inclusive. The Board reviewed a variety of factors and considered a significant amount of information, including information received on an ongoing basis at Board and committee meetings. The approval determination was made on the basis of each Director's business judgment after consideration of all the information taken as a whole. Individual Directors may have given different weight to certain factors and assigned various degrees of materiality to information received in connection with the contract review process.

In evaluating the Advisory Agreement, the Board of Directors, including the Independent Directors, considered the following factors, among others:

•  Nature, Extent and Quality of Services. The Board considered the benefits to shareholders of continuing to retain the Advisor as the investment advisor to the Fund, particularly in light of the nature, extent, and quality of services provided by the Advisor. The Board evaluated the Advisor's experience in serving as manager of the Fund noting that the Advisor serves a variety of other investment advisory clients. The Board considered the benefit to shareholders of a fund that is part of a larger organization that provides investment advisory services to mutual funds, separate accounts, commingled funds and collective trusts. The Board also considered the ability of the Advisor to provide an appropriate level of support and resources to the Fund and whether the Advisor has sufficiently qualified personnel. The Board noted the background and experience of the Advisor's senior management and portfolio management personnel, and that the management expertise and amount of attention expected to be given to the Fund by the Advisor is substantial. The Board considered the Advisor's ability to attract and retain qualified business professionals. The Board also considered the breadth of the Advisor's compliance program as well as the Advisor's compliance operations with respect to the Fund. In this regard, the Board noted the significant efforts of the Advisor's compliance staff in administering the Fund's compliance program. The Board concluded that it was satisfied with the nature, extent and quality of the investment management services anticipated to be provided to the Fund by the Advisor under the Advisory Agreement.

•  Investment Performance. The Board was provided with a report prepared by an independent third-party consultant (the "Report"), which provided a comparative analysis of the performance of the Fund to similar funds, including the short- and long-term performance of the Fund. The Board reviewed

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TCW Strategic Income Fund, Inc.

APPROVAL OF ADVISORY AND MANAGEMENT AGREEMENT (CONT'D)

information in the Report regarding the performance and expense levels of the Fund as compared to other funds in its peer group and category, and considered the rankings given the Fund in the Report. The Board noted that because the Fund changed its investment policies in 2006 it had less than one year of relative comparative performance. The Board concluded that the Advisor should continue to provide investment management services to the Fund consistent with its objectives and strategy.

•  Reasonableness of Advisory Fees and Profitability. The Board considered information in the Report and in materials prepared by the Advisor regarding the advisory fees charged under other investment advisory contracts with the Advisor and other investment advisers for other registered investment companies or other types of clients, as well as the total expenses of the Fund. The Board noted that the Advisor does not manage any separate accounts in a manner substantially similar to the current strategy of the Fund. The Board also noted that the management fee charged to the Fund was lower than the median management fee charged to funds in its category as presented in the Report and that the Fund's expenses were lower than the median expenses of the funds in the Fund's category. The Board also considered the cost of services to be provided and profits to be realized by the Advisor and its affiliates from the relationship with the Fund, including the overall financial soundness of the Advisor. The Board reviewed profitability information provided by the Advisor. The Board recognized the difficulty in evaluating a manager's profitability with respect to the Fund in the context of a manager with multiple lines of business and noted that other profitability methodologies may be reasonable. Based on their evaluation of this information, the Board concluded that the contractual management fee of the Fund under the Advisory Agreement is fair and bears a reasonable relationship to the services rendered.

•  Economies of Scale. The Board considered the potential of the Advisor to experience economies of scale as the Fund grows in size. The Board noted that the Fund currently has a relatively low asset size and that, as a closed-end fund, there is limited potential for the Fund to experience significant asset growth other than through capital appreciation and income production. The Board noted the Advisory Agreement has a breakpoint. On this basis, the Board concluded that the current fee structure reflected in the Advisory Agreement is appropriate.

•  Ancillary Benefits. The Board considered ancillary benefits to be received by the Advisor and its affiliates as a result of the Advisor's relationship with the Fund, including commission practices (such as soft dollars) and compensation for certain compliance support services. The Board noted that, in addition to the fees the Advisor received under the Advisory Agreement, the Advisor could receive additional benefits from the Fund in the form of reports, research and other services obtainable from brokers and their affiliates in return for brokerage commissions paid to such brokers. The Board concluded that any potential benefits to be derived by the Advisor from its relationship with the Fund are consistent with the services provided by the Advisor to the Fund.

After consideration of these factors, the Board (i) concluded that the compensation payable under the Advisory Agreement is fair and bears a reasonable relationship to the services rendered and that the renewal of the Agreement would be in the best interests of the Fund and its shareholders, and (ii) approved the renewal of the Advisory Agreement for an additional one-year period subject to the terms of the Agreement.

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