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SUPPLEMENT TO THE PROSPECTUS OF
TCW GALILEO FUNDS, INC.
DATED: MAY 20, 1996
The name of the "TCW Galileo High Grade Fixed Income Fund" on page 1 and
throughout the Prospectus is changed to "TCW Galileo Core Fixed Income Fund".
The following sentence has been added after the last sentence of the
section "Expenses of the Fund" on page 4 of the Prospectus and after the last
sentence of the sixth paragraph under the section "Advisory and Sub-Advisory
Agreements" on page 50 of the Prospectus:
With respect to the Core Fixed Income, the Adviser has agreed to
reduce its annual management fee to 0.35% of the Fund's average net
assets until October 31, 1997.
The section titled "TCW Galileo High Grade Fixed Income Fund" beginning on
page 26 is replaced in its entirety by the following:
TCW GALILEO CORE FIXED INCOME FUND
TCW Galileo Core Fixed Income Fund seeks to provide above-average total
return from capital appreciation and income through investment principally in
high credit quality fixed income instruments, including U.S. government bonds,
corporate bonds, mortgage-backed securities and asset-backed securities. The
Fund invests in high quality securities and applies a controlled risk approach
to the management of those securities. It is a fundamental policy of the Fund
to invest at least 65% of its total assets in fixed income securities rated A or
higher by Moody's and S&P under normal circumstances.
Fixed income securities appropriate for the Fund may include obligations
issued or guaranteed by the United States government, its agencies or
instrumentalities ("U.S. Government Securities"), bonds, notes, mortgages,
debentures, equipment trust certificates, participation certificates, non-
convertible preferred stock, mortgage-backed securities, asset-backed debt
securities, dollar and non-dollar-denominated instruments issued by foreign
governments or companies and corporate and other high-grade securities bearing
fixed or variable stated rates. The Fund is not limited as to the maturities of
the debt securities in which it invests and the Fund's average portfolio
maturity is likely to vary from time to time. Securities in the Fund's
portfolio are typically high grade securities (securities rated A or better by
Moody's or S&P) that will generate less income than securities rated below A;
high grade securities, however, generally have less credit risk and are more
readily marketable than securities rated below A. The Adviser will
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dispose of an investment grade security if all ratings assigned to that security
drop below investment grade and the Adviser determines that the credit
characteristics of the security no longer qualify it for treatment as investment
grade. These dispositions, if any, will be made in a manner intended to minimize
disruptions in the Fund's portfolio.
The controlled risk approach involves techniques intended to control the
principal risk components of the fixed income markets. These components include
security selection within a given sector, relative performance of the various
market sectors, the shape of the yield curve, and fluctuations in the overall
level of interest rates. The Adviser also utilizes active asset allocation in
an effort to obtain incremental returns. However, there can be no assurance
that these approaches will be successful.
The Fund attempts to monitor exposure to changes in the overall level of
interest rates using a statistic called "duration," which measures approximately
the volatility of a bond's price for a given change in interest rates. The
duration of a bond is the present-value-weighted average time to receipt of all
of the bond's cash-flows, including both coupons and principal. The Fund seeks
to control the risks associated with changes in interest rates by limiting the
difference in the weighted average duration of all of the portfolio securities
in the Fund compared to the market's duration.
The Fund may invest up to 20% of its total assets in securities rated below
A by Moody's and S&P, but will hold no more than 15% of its total assets in
securities rated below investment grade. Securities rated below investment
grade are regarded by the rating agencies as predominantly speculative with
respect to the issuer's continuing ability to meet principal and interest
payments, and generally involve more risk of loss of principal and income than
investment grade securities. Also, their yields and market value tend to
fluctuate more than higher-rated securities. The greater risks and fluctuations
in yield and value occur because investors generally perceive issuers of lower-
rated securities to be less creditworthy. For a further discussion of the risks
associated with high yield lower rated securities, see page 58 of this
Prospectus.
The Fund may also invest up to 20% of its total assets in securities issued
by foreign governments or companies which are investment grade-rated or
equivalent and which are denominated in foreign currencies. In conjunction with
making these investments, the Fund may attempt to hedge the currency risk of
such securities by purchasing or selling foreign currency futures contracts (and
options on such contracts) and foreign currency
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forward contacts with respect to such foreign currencies. To mitigate the
effects of foreign currency exchange rate fluctuations on the Fund's portfolio,
the Fund will also limit its investment in securities denominated in any single
foreign currency to not more than 5% of its total assets.
The Fund may enter into repurchase agreements and purchase and sell
securities on a when issued, forward commitment or when, as and if issued basis.
The Fund may also engage in interest rate hedging transactions by investing in
or writing options on U.S. Government Securities. Subject to certain
limitations, the Fund may enter into repurchase agreements, futures contracts or
options on such contracts to attempt to protect against possible changes in the
market value of securities held in or to be purchased by the Fund resulting from
interest rate or market fluctuations, to protect unrealized gains in the value
of its portfolio securities, to facilitate the sale of such securities for
investment purposes, to manage its effective maturity or duration, or to
establish a position in the derivatives markets as a temporary substitute for
purchasing or selling particular securities. The Fund may invest in
collateralized mortgage obligations ("CMOs"). The Fund may also invest in
stripped mortgage securities (including interest-only securities) which are
highly sensitive to changes in interest and prepayment rates and exhibit great
price volatility than other CMOs. The Fund also may enter into reverse
repurchase agreements for temporary borrowing purposes and may borrow money
through the use of mortgage dollar rolls as part of its investment strategy.
See "Risk Considerations - Reverse Repurchase Agreements and Mortgage Dollar
Rolls" and "Risk Considerations - Risk Associated with Mortgage Backed
Securities". See the Appendix to this Prospectus and the Statement of
Additional Information for a greater discussion of these investment practices
and types of securities.
The last two sentences of the sixth paragraph on page 28 under the section
heading "TCW High Yield Bond Fund" is hereby replaced by the following:
The Fund may invest in securities of foreign companies. The Fund will not
invest more than 10% of the value of its total assets, measured at the time
of purchase, in Eurodollar securities which are fixed income securities of
a U.S. or foreign issuer that are issued in U.S. dollars outside the United
States. This 10% limit shall not apply to securities issued or guaranteed
by Canadian companies, provided that the interest and principal on such
securities is payable in U.S. dollars. The interest on Eurodollar
securities is payable in U.S. dollars outside the United States. The Fund
will not invest more than 5% of the value of its total assets, at the time
of purchase, in non-dollar denominated foreign securities. Foreign
securities investments may be affected by changes in currency rates or
exchange control regulations, changes in governmental administration or
economic or monetary policy (in the United States and abroad) or changed
circumstances in dealings between nations. For a discussion of the risks
of foreign securities, see "Risk Considerations - Foreign Securities". In
addition, see the Appendix to this Prospectus and the Statement of
Additional Information for a greater discussion of these investment
practices and types of securities.
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The first sentence of the first paragraph on page 32 under the section
heading "TCW Galileo Mid-Cap Growth Fund" is hereby replaced by the following:
The Mid-Cap Growth Fund seeks long-term growth of capital by investing at
least 65% of total assets under normal circumstances in publicly-traded
equity securities issued by medium-sized companies whose market
capitalizations, at time of acquisition, are in the $300 million to $5
billion range and that, in the opinion of the Adviser, exhibit superior
earnings growth prospects and attractive stock market valuations.
The second sentence of the second paragraph on page 32 under the section
heading "TCW Galileo Mid-Cap Growth Fund" is hereby replaced by the following:
Quantitative and qualitative criteria will also be used to screen the
companies within the $300 million to $5 billion market capital range
thereby providing the Adviser with a list of potential investment
securities.
The subsection entitled "Portfolio Management" pertaining to the Core Fixed
Income Fund on page 47 is hereby amended by substituting the following
individuals:
Mark L. Attanasio Group Managing Director, the Adviser since April 1995.
From April 1991 to March 1995 he was Co-Chief Executive
Officer and Chief Portfolio Strategist of Crescent
Capital Corporation and prior to April 1991 a Managing
Director of Drexel Burnham Lambert.
Philip A. Barach Group Managing Director, the Adviser, TCW Asset
Management Company and Trust Company of the West; Vice
President, several TCW/DW Funds since September 1992.
Walter J. Blasberg, CFA Managing Director, the Adviser, TCW Asset Management
Company and Trust Company of the West since June 1995.
Prior to its acquisition by TCW, he was President and
Chief Executive Officer of Continental Asset
Management.
Jeffrey E. Gundlach Group Managing Director, the Adviser, TCW Asset
Management Company and Trust Company of the West; Vice
President, several TCW/DW Funds since September 1992.
Frederick H. Horton Managing Director and Deputy Chief Investment Officer -
Domestic Fixed Income, the Adviser, TCW Asset
Management Company and Trust Company of the West;
Senior Portfolio Manager for Dewey Square Investors
from June 1992 through September 1993; before June 1992
Head of Mortgage Strategies and Senior Portfolio
Manager for Putnam Companies; Vice President several
TCW/DW Funds since December 1994.
October 31, 1996
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