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TCW Galileo
Funds, Inc.
This prospectus tells you about the Class N shares of three of the separate
investment funds offered by TCW Galileo Funds, Inc., (collectively the "Funds")
each of which has different investment objectives and policies that are designed
to meet different investment goals. Please read this document carefully before
investing, and keep it for future reference.
TCW Galileo Analyst Growth Fund
TCW Galileo Growth & Income Fund
TCW Galileo Health Sciences Fund
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved these securities or determined if this Prospectus is
truthful or complete. Any representation to the contrary is a criminal offense.
November 1, 2000
LOGO
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TABLE OF CONTENTS
<TABLE>
<S> <C>
General Fund Information
Investment Objectives and Principal Strategies........................................................ 3
Principal Risks....................................................................................... 3
Fund Expenses and Expense Example..................................................................... 5
TCW Galileo Analyst Growth Fund
Investment Objectives/Approach........................................................................ 7
Main Risks............................................................................................ 8
TCW Galileo Growth & Income Fund
Investment Objectives/Approach........................................................................ 9
Main Risks............................................................................................ 10
TCW Galileo Health Sciences Fund
Investment Objectives/Approach........................................................................ 12
Main Risks............................................................................................ 13
Risk Considerations................................................................................... 14
Management of the Funds............................................................................... 20
Multiple Class Structure.............................................................................. 21
Your Investment
Account Policies and Services......................................................................... 22
To Open an Account/To Add to an Account............................................................... 24
To Sell or Exchange Shares............................................................................ 25
Distributions and Taxes............................................................................... 26
For More Information........................................................................................... 27
</TABLE>
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General Fund Information
Investment Objectives and Principal Strategies
<TABLE>
<CAPTION>
TCW Galileo Funds, Inc. Investment Objectives Principal Investment Strategies
----------------------- --------------------- -------------------------------
<S> <C> <C>
TCW Galileo Analyst Growth Fund Long-term capital appreciation Invests in equity securities issued
by companies that are believed to
have superior growth prospects.
TCW Galileo Growth & Income Fund Maximize current income and Invests in high yield/below
provide potential for capital investment grade bonds and
appreciation convertible securities.
TCW Galileo Health Sciences Fund Long-term capital appreciation Invests in equity securities of
companies principally engaged in
the development, production or
distribution of products or
services relating to "health sciences."
</TABLE>
Under adverse market conditions, each Fund could invest some or all of its
assets in money market securities. Although the Funds would do this only when
seeking to avoid losses, it could have the effect of reducing the benefit from
any upswing in the market.
All of the Galileo Funds are affected by changes in the economy, or in
securities and other markets. There is also the possibility that investment
decisions the Adviser makes will not accomplish what they were designed to
achieve or that companies in which the Funds invest will have disappointing
performance or not pay their debts.
Principal Risks
Risk is the chance that you will lose money on your investment or that it will
not earn as much as you expect. In general, the greater the risk, the more money
your investment can earn for you--and the more you can lose. Since shares of a
Fund represent an investment in securities with fluctuating market prices, the
value of individual Fund shares will vary as each Fund's portfolio securities
increase or decrease in value. Therefore, the value of an investment in a Fund
could go down as well as up. All investments are subject to:
. MARKET RISK
There is the possibility that the returns from the types of securities
in which a Fund invests will underperform returns from the various
general securities markets or different asset classes. Different types
of securities tend to go through cycles of outperformance and
underperformance in comparison to the general securities markets.
. SECURITIES SELECTION RISK
There is the possibility that the specific securities held in a Fund's
portfolio will underperform other funds in the same asset class or
benchmarks that are representative of the general performance of the
asset class because of the portfolio manager's choice of securities.
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. PRICE VOLATILITY
There is the possibility that the value of a Fund's portfolio will
change as the prices of its investments go up or down. Although stocks
offer the potential for greater long-term growth than most fixed income
securities, stocks generally have higher short-term volatility.
. CONCENTRATION
There is the possibility that because the Health Sciences Fund focuses
its investments in the health sciences sector, its performance may be
more negatively impacted by the health sciences sector's poor
performance than a fund broadly invested over numerous sectors or
industries.
Each Fund may also be subject (in varying degrees) to the following
risks:
. LIQUIDITY RISK
There is the possibility that a Fund may lose money or be prevented
from earning capital gains if it cannot sell a security at the time and
price that is most beneficial to a Fund. A Fund may be subject to
liquidity risk because it invests primarily in securities of medium and
small sized companies; high yield bonds; or foreign securities, which
have all experienced periods of illiquidity.
. FOREIGN INVESTING RISK
There is the likelihood that foreign investments may be riskier than
U.S. investments because of a lack of political stability, foreign
controls on investment and currency exchange rates, fluctuations in
currency exchange rates, withholding taxes, and lack of adequate
company information. A Fund that invests primarily in the assets of
foreign companies or a portion of its assets in foreign company
securities may be subject to foreign investing risk. If a Fund invests
in "emerging markets," the risk is even more pronounced. In addition,
because foreign securities generally are denominated and pay dividends
or interest in foreign currencies, and a Fund may hold various foreign
currencies, the value of the net assets of a Fund as measured in U.S.
dollars can be affected favorably or unfavorably by changes in exchange
rates.
. CREDIT RISK
There is the possibility that a Fund could lose money if an issuer is
unable to meet its financial obligations such as the payment of
principal and/or interest on an instrument, or goes bankrupt. The
Growth & Income Fund may be subject to greater credit risk since it
invests in high yield bonds, which are commonly referred to as "junk
bonds."
. INTEREST RATE RISK
There is the possibility that the value of Growth & Income Fund's
portfolio investments may fall since fixed income securities generally
fall in value when interest rates rise. The longer the term of a fixed
income instrument, the more sensitive it will be to fluctuations in
value from interest rate changes. Changes in interest rates may have a
significant effect on a Fund because it may hold securities with long
terms to maturity.
. JUNK BONDS
These bonds are speculative in nature. They are usually issued by
companies without long track records of sales and earnings, or by those
companies with questionable credit strength. These bonds are considered
"below investment grade." The Growth & Income Fund primarily invests in
high yield/below investment grade bonds.
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Each Fund may be more susceptible to some of these risks than others, as noted
in the description of each Fund. A more detailed explanation of these risks is
presented under the "Risk Considerations" section at page 14. Each of the Funds
is non-diversified for Investment Company Act of 1940 ("1940 Act") purposes, and
may invest more than 5% of its total assets in the securities of any one issuer.
Consequently, each Fund's exposure to credit and market risks associated with
that issuer is increased.
Your investment is not a bank deposit, and it is not insured or guaranteed by
the Federal Deposit Insurance Corporation or any other government agency.
Performance Summary
The Funds do not have a full calendar year of performance. Thus, no bar charts
or annual return tables are included for the Funds.
Fund Expenses and Expense Example
As an investor, you pay certain fees and expenses in connection with the Funds,
which are described in the table below. Annual Fund operating expenses are paid
out of Fund assets, so their effect is included in the share price. The Class N
shares of the Funds have no sales charge (load), but are subject to Rule 12b-1
distribution fees.
FEE TABLE
<TABLE>
<CAPTION>
Analyst Growth & Health
Growth Income Sciences
Fund Fund Fund
Shareholder Transaction Fees
<S> <C> <C> <C>
1) Redemption Fees................... None None None
2) Exchange Fees..................... None None None
3) Contingent Deferred Sales Load.... None None None
4) Sales Load on Reinvested
Dividends......................... None None None
5) Sales Load on Purchases........... None None None
Annual Fund Operating Expenses
Management Fees.................. 0.90% 0.75% 0.90%
Distribution (12b-1) Fees........ 0.25% 0.25% 0.25%
Other Expenses................... 0.45% 0.42% 0.53%
Total Annual Fund Operating...... 1.60%/(1)/ 1.42%/(2)/ 1.68%/(3)/
Expenses.....................
</TABLE>
-------------------------------------
(1) Estimated. Fund has no operating history.
(2) Estimated. Fund has no operating history.
(3) Estimated. Fund has no operating history.
5
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EXPENSE EXAMPLE
This Example is intended to help you compare the cost of investing in a Fund
with the cost of investing in other mutual funds.
This Example shows what you could pay in expenses over time. It uses the same
hypothetical conditions other funds use in their prospectuses: $10,000 Initial
Investment, 5% total return each year and no changes in expenses. The figures
shown would be the same whether or not you sold your shares at the end of a
period. Because actual return and expenses will be higher or lower, the Example
is for comparison purposes only.
1 Year 3 Years
------ -------
Analyst Growth..................... $163 $505
Growth & Income.................... $145 $449
Health Sciences.................... $171 $530
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U.S. Equities
TCW Galileo Analyst Growth Fund
Investment Objectives/Approach
The Fund seeks long-term capital appreciation. To pursue this goal, the
Fund invests at least 65% of the value of its total assets in the equity
securities of companies which are believed to have superior growth prospects.
These equity securities include common and preferred stocks,
convertible securities and rights or warrants to purchase common or preferred
stock. The Fund may also invest in foreign securities listed on a U.S. exchange
or in the form of depositary receipts such as ADRs.
Concepts to understand
----------------------
Growth companies are companies exhibiting faster than average gains in
earnings and which are expected to continue to show high levels of growth gain.
The Fund generally invests in a portfolio with at least 30 issuers
selected by the TCW Equity Research Group. The TCW Equity Research Group
provides comprehensive and in-depth knowledge about general markets and specific
companies. The Fund will invest in the best ideas of each analyst in the TCW
Equity Research Group. The Fund seeks to minimize sector and capitalization risk
by diversifying across market sectors and market capitalization ranges.
A company will be a sell candidate when fundamentals of the company
deteriorate or if the company becomes overvalued.
The Fund seeks to earn additional income by making loans of its
portfolio securities to brokers, dealers and other financial institutions. The
loans will be secured at all times by cash and liquid high grade debt
obligations. As with any extension of credit, there are risks of delay in
recovery and in some cases even loss of rights in the collateral should the
borrower fail financially.
The Fund may engage in active trading of portfolio securities which may
result in increased Fund transaction expenses and have tax consequences such as
increased realized gains for investors.
Brian M. Beitner is the Fund's portfolio manager.
7
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Main Risks
The Fund holds primarily stocks, which may go up or down in value, sometimes
rapidly and unpredictably. Although stocks offer the potential for greater long-
term growth than most fixed income securities, stocks generally have higher
short-term volatility. In addition, the Fund may hold convertible debt
securities. Many convertible debt securities are rated below investment grade
and are considered speculative by rating agencies as to repayment of principal
and interest. The primary risks affecting this Fund are "price volatility,"
"liquidity risk," and "foreign investing risk." Price volatility refers to the
possibility that the value of the Fund's portfolio will change as the prices of
its investments go up or down. Liquidity risk refers to the possibility that the
Fund may lose money or be prevented from earning capital gains if it cannot sell
securities at the time that is most beneficial to the Fund. Foreign investing
risk refers to the likelihood that foreign investments may be riskier than U.S.
investments because of many factors, some of which include:
. a lack of political or economic stability
. foreign controls on investment
. withholding taxes
. a lack of adequate company information
8
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TCW Galileo Growth & Income Fund
Investment Objectives/Approach
The Fund seeks to achieve above average total return by maximizing
income and providing a potential for capital appreciation. The Fund seeks to
achieve this objective by investing as least 65% of its total assets in high
yield/below investment grade bonds, commonly known as "junk" bonds and
convertible securities. The Fund may invest in foreign securities.
Concepts to understand
----------------------
Junk bonds are bonds that have a credit rating of BB or lower by rating agencies
such as Moody's Investors Service, Inc. and Standard & Poor's Corporation. These
bonds are often issued by companies without long track records of sales and
earnings, or by those companies with questionable credit strength. In the event
of a prepayment problem by the issuer of these bonds, they will only be paid if
there is anything left after the payment of senior debt, such as bank loans and
investment grade bonds.
Junk bonds are considered to be mostly speculative in nature.
Convertible securities are corporate securities that are exchangeable for a set
number of another form of security at a prestated price. They can be in the form
of equity or debt.
In managing the Fund's high yield investments, the Adviser places
emphasis on securities at the lower-risk end of the below investment grade
spectrum. These securities are issued by companies that the Adviser believes
have stable to improving business prospects. The Adviser's approach with respect
to high yield securities also emphasizes consistent and high current income. It
attempts to reduce the Fund's high yield bond investment risk through
diversification and by analysis of:
. each issuer
. each issuer's ability to make timely payments of principal and
interest
. broad economic trends and corporate developments
The Adviser considers the following factors when determining which
convertible securities to select:
. the Adviser's own evaluations of the credit worthiness of the issuers
of the securities
. the interest or dividend income generated by the securities
. the potential for capital appreciation of the securities and the
underlying common stocks
. the protection against price declines relative to the underlying
common stocks
. whether the securities have protection conditions
. the prices of the securities relative to other comparative securities
. the diversification of the Fund's investments
. the ratings assigned to the securities
A company will be a sell candidate if, among other factors (i)
fundamentals of the company deteriorate; (ii) the company fails to
meet earnings expectations; or (iii) the company becomes overvalued.
9
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The Fund seeks to earn additional income by making loans of its
portfolio securities to brokers, dealers and other financial institutions. The
loans will be secured at all times by cash and liquid high-grade debt
obligations. As with any extension of credit, there are risks of delay in
recovery and in some cases even loss of rights in the collateral should the
borrower fail financially.
The Fund may engage in active trading of portfolio securities which may
result in increased Fund transaction expenses and have tax consequences such as
increased realized gains for investors.
James M. Hassett, Kevin A. Hunter, Thomas D. Lyon, Mark D. Senkpiel and
Melissa V. Weiler are the Fund's portfolio managers.
10
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Main Risks
The primary risks affecting this Fund are "credit risk," "interest rate risk,"
"liquidity risk" and, to a lesser extent, "foreign investing risk."
Credit risk refers to the likelihood that the Fund could lose money if an issuer
is unable to meet its financial obligations, such as the payment of principal
and/or interest on an instrument, or goes bankrupt. This Fund is subject to high
credit risk, because it invests primarily in high yield/below investment grade
bonds and convertible securities. Debt securities that are rated below
investment grade are considered to be speculative; they are also commonly known
as "junk" bonds. This is especially true during periods of economic uncertainty
or during economic downturns. Below investment grade securities are often issued
by companies without long track records of sales and earnings, or by those
companies with questionable credit strength. In the event of a repayment problem
by the issuer of these securities, they will only be paid if there is anything
left after the payment of senior debt, such as bank loans and investment grade
bonds. Interest rate risk refers to the possibility that the value of the Fund's
portfolio investments may fall since fixed income securities generally fall in
value when interest rates rise. The longer the term of a fixed income
instrument, the more sensitive it will be to fluctuations in value from interest
rate changes. Changes in interest rates may have a significant effect on this
Fund, because it may hold securities with long terms to maturity. Liquidity risk
refers to the possibility that the Fund may lose money or be prevented from
earning capital gains if it cannot sell a security at the time and price that is
most beneficial to the Fund. Because high yield bonds may be less liquid than
higher quality securities, the Fund may be more susceptible to liquidity risk
than funds that invest in higher quality investments. A security whose credit
rating has been lowered may be particularly difficult to sell. Because the Fund
may invest a portion of its assets in foreign company securities, it may be
subject to foreign investing risks. Foreign investing risk refers to the
likelihood that foreign investments may be riskier than U.S. investments because
of many factors, some of which include:
. a lack of political or economic stability
. foreign controls on investment and currency exchange rates
. withholding taxes
. a lack of adequate company information
The Fund holds convertible securities, which may go up or down in value, in
accordance with moves in the convertible securities' underlying stock, sometimes
rapidly and unpredictably. Although stocks offer the potential for greater long
term growth than most fixed income securities, stocks generally have higher
short-term volatility.
11
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TCW Galileo Health Sciences Fund
Investment Objectives/Approach
The Fund seeks long-term capital appreciation. The Fund seeks to
achieve this investment objective by investing at least 65% of the value of its
total assets in the equity securities of companies throughout the world that are
principally engaged in the development, production or distribution of products
or services relating to the "health sciences". It is expected that the Fund will
concentrate its investment in health science companies such as:
. hospitals, clinical test laboratories, convalescent and mental
health care facilities and home care businesses;
. pharmaceutical companies and companies involved in biotechnology,
medical diagnostics, biochemicals, and nuclear research and
development;
. companies that produce and manufacture medical, dental and optical
supplies and equipment;
. companies that provide services to health care companies; and
. HMOs and other health insurance companies.
Concepts to understand
----------------------
Concentration in a specific sector increases risk. A Fund that invests
in a relatively small number of issuers or concentrates its investments in a
particular industry or sector is more susceptible to risks associated with a
single economic, political or regulatory occurrence than a more broadly invested
portfolio might be.
Equity securities include common and preferred stocks, convertible
securities and rights or warrants to purchase common or preferred stock. The
Fund may invest in foreign securities.
A company will become a sell candidate if, among other factors, the
company fails to meet earnings expectations or a "pipeline" product fails.
The Fund seeks to earn additional income by making loans of its
portfolio securities to brokers, dealers and other financial institutions. The
loans will be secured at all times by cash and liquid high grade debt
obligations. As with any extension of credit, there are risks of delay in
recovery and in some cases even loss of rights in the collateral should the
borrower fail financially.
The Fund may engage in active trading of portfolio securities which
may result in increased Fund transaction expenses and have tax consequences such
as increased realized gains for investors.
Husam H. Nazer is the Fund's portfolio manager.
12
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Main Risks
The Fund holds primarily stocks, which may go up or down in value, sometimes
rapidly and unpredictably. Although stocks offer the potential for greater long-
term growth than most fixed income securities, stocks generally have higher
short-term volatility. The Fund may hold convertible debt securities. Many
convertible debt securities are rated below investment grade and are considered
speculative by rating agencies as to repayment of principal and interest.
The primary risks affecting this Fund are "concentration risk," "price
volatility risk," "liquidity risk" and "foreign investing risk."
Concentration risk refers to the fact that the Fund is focused in the health
services sector and is less broadly invested than stock funds investing in a
wide range of industries, and therefore, could experience significant
volatility. It may invest a considerable portion of assets in companies in the
same business, such as pharmaceuticals, or in related businesses, such as
hospital management and managed care. As a sector mutual fund that invests in
health sciences companies, the Fund is subject to the risks associated with this
industry sector. This makes the Fund more vulnerable to price changes of
securities of issuers in health sciences related industries and factors that
affect the health sciences sector than a mutual fund that invests in securities
of companies in a variety of sectors.
Developments that could adversely affect the Fund's share price include:
- increased competition within the health care industry;
- changes in legislation or government regulations;
- reductions in government funding;
- product liability or other litigation; and
- the obsolescence of popular products.
The level of risk will be increased to the extent that the Fund has significant
exposure to small or unseasoned companies (those with less than a three-year
operating history), which may not have established products or more experienced
management.
Price volatility refers to the possibility that the value of the Fund's
portfolio will change as the prices of its investments go up or down. This Fund
may be subject to greater price volatility than funds that invest in securities
of companies in a variety of market sectors or larger companies. Liquidity risk
refers to the possibility that the Fund may lose money or be prevented from
earning capital gains if it cannot sell securities at the time and price that is
most beneficial to the Fund. Because the securities of medium-sized and
small-sized companies may be less liquid than the securities of large-sized
companies, the Fund may be susceptible to liquidity risk more than funds that
invest in the securities of large-sized companies. Foreign investing risk refers
to the likelihood that foreign investments may be riskier than U.S. investments
because of many factors, some of which include:
. a lack of political or economic stability
. foreign controls on investment
. withholding taxes
. a lack of adequate company information
13
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Risk Considerations
Please consider the following risks before investing in a Fund.
Various market risks can affect the price or liquidity of an issuer's
securities. Adverse events occurring with respect to an issuer's performance or
financial position can depress the value of the issuer's securities. The
liquidity in a market for a particular security will affect its value and may be
affected by factors relating to the issuer, as well as the depth of the market
for that security. Other market risks that can affect value include a market's
current attitudes about types of securities, market reactions to political or
economic events, and tax and regulatory effects (including lack of adequate
regulations for a market or particular type of instrument). Exchange or other
regulatory restrictions on trading volume can also affect price and liquidity.
Prices of most securities tend to be more volatile in
the short-term. Therefore an investor who trades
frequently or redeems in the short-term is more
likely to incur loss than an investor who holds
investments for the longer term. The fewer the number
of issuers in which a Fund invests, the greater the
potential volatility of its portfolio. A security
that is leveraged, whether explicitly or implicitly,
will also tend to be more volatile in that both gains
and losses are intensified by the magnifying effects
of leverage.
The Adviser may temporarily invest up to 100% of a
Fund's assets in high quality short-term money market
instruments if it believes adverse economic or market
conditions, such as excessive volatility or sharp
market declines, justify taking a defensive
investment posture. If a Fund attempts to limit
investment risk by temporarily taking a defensive
investment position, it may be unable to pursue its
investment objective during that time, and it may
miss out on some or all of an upswing in the
securities markets.
General Investment Risk
-----------------------
Since shares of a Fund represent an investment in securities with fluctuating
market prices, the value of a Fund's shares will vary as the value of each
Fund's portfolio securities increases or decreases. Therefore, the value of an
investment in a Fund could go down as well as up. This is also true for funds
that invest primarily in fixed income securities.
14
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Investment in foreign securities involves special risks in addition to the usual
risks inherent in domestic investments. These include: political or economic
instability; the unpredictability of international trade patterns; the
possibility of foreign governmental actions such as expropriation,
nationalization or confiscatory taxation; the imposition or modification of
foreign currency or foreign investment controls; the imposition of withholding
taxes on dividends, interest and gains; price volatility; and fluctuations in
currency exchange rates. These risks are more pronounced in emerging market
countries.
Foreign Investing
-----------------
Investing in foreign securities involves risks in addition to the risks
associated with domestic securities. An additional risk is currency risk. While
the price of a Fund's shares is quoted in U.S. dollars, a Fund generally
converts U.S. dollars to a foreign market's local currency to purchase a
security in that market. If the value of that local currency falls relative to
the dollar, the U.S. dollar value of the foreign currency will decrease.
As compared to U.S. companies, foreign issuers
generally disclose less financial and other
information publicly and are subject to less
stringent and less uniform accounting, auditing and
financial reporting standards. Foreign countries
typically impose less thorough regulations on
brokers, dealers, stock exchanges, insiders and
listed companies than does the U.S. and foreign
securities markets may be less liquid and more
volatile than domestic markets. Investment in foreign
securities involves higher costs than investment in
U.S. securities, including higher transaction and
custody costs as well as the imposition of additional
taxes by foreign governments. In addition, security
trading practices abroad may offer less protection to
investors such as the Funds. Settlement of
transactions in some foreign markets may be delayed
or may be less frequent than in the U.S., which could
affect the liquidity of a Fund's portfolio. Also, it
may be more difficult to obtain and enforce legal
judgments against foreign corporate issuers than
against domestic issuers and it may be impossible to
obtain and enforce judgments against foreign
governmental issuers.
Because foreign securities generally are denominated
and pay dividends or interest in foreign currencies,
and the Funds may hold various foreign currencies
from time to time, the value of the net assets of a
Fund as measured in U.S. dollars can be affected
favorably or unfavorably by changes in exchange
rates. Generally, currency exchange transactions will
be conducted on a spot (i.e., cash) basis at the spot
rate prevailing in the currency exchange market. The
cost of currency exchange transactions will generally
be the difference between the bid and offer spot rate
of the currency being purchased or sold.
In order to protect against uncertainty in the level
of future foreign currency exchange rates, the Funds
are authorized to enter into certain foreign currency
futures and forward contracts. However, they are not
obligated to do so and, depending on the availability
and cost of these devices, the Funds may be unable to
use foreign currency futures and forward contracts to
protect against currency uncertainty. Please see the
Statement of Additional Information for further
information.
15
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Fixed income securities are subject to various risks. The two primary (but not
exclusive) risks affecting fixed income instruments are "credit risk" and
"interest rate risk." These risks can affect a security's price volatility to
varying degrees, depending upon the nature of the instrument. In addition, the
depth and liquidity of the market for an individual or class of fixed income
security can also affect its price and, hence, the market value of a Fund.
Fixed Income Securities
-----------------------
Fixed income securities are subject to two primary types of risk: credit risk
and interest rate risk.
"Credit risk" refers to the likelihood that an issuer
will default in the payment of principal and/or
interest on an instrument. Financial strength and
solvency of an issuer are the primary factors
influencing credit risk. In addition, lack of or
inadequacy of collateral or credit enhancements for a
fixed income security may affect its credit risk.
Credit risk of a security may change over its life,
and securities which are rated by rating agencies are
often reviewed and may be subject to downgrade.
The Funds may invest in convertible securities rated
below investment grade. The Growth & Income Fund
invests primarily in debt instruments and convertible
securities rated below investment grade. Debt
instruments that are rated below investment grade are
considered to be speculative; they are also commonly
known as "junk" bonds. Generally, lower-rated debt
securities provide a higher yield than higher rated
debt securities of similar maturity but are subject
to greater credit risk than higher rated securities
of similar maturity. Such securities are regarded as
predominantly speculative with respect to the
issuer's continuing ability to meet principal and
interest payments. Because investment in lower
quality securities involves greater investment risk,
achievement of a Fund's investment objective will be
more dependent on the Adviser's analysis than would
be the case if the Fund were investing in higher
quality bonds. In addition, lower quality securities
may be more susceptible to real or perceived adverse
economic and individual corporate developments than
would investment grade bonds. Moreover, the secondary
trading market for lower quality securities may be
less liquid than the market for investment grade
bonds. This potential lack of liquidity may make it
more difficult for the Adviser to value accurately
certain portfolio securities.
"Interest rate risk" refers to the risks associated with market changes in
interest rates. Interest rate changes may affect the value of a fixed income
security directly (especially in the case of fixed rate securities) and
indirectly (especially in the case of adjustable rate securities). In general,
rises in interest rates will negatively impact the price of fixed rate
securities and falling interest rates will have a positive effect on price. The
degree to which a security's price will change as a result of changes in
interest rates is measured by its "duration." For example, the price of a bond
with a 5 year duration would be expected under normal market conditions to
decrease 5% for every 1% increase in interest rates. Generally, securities with
longer maturities have a greater duration and thus are subject to greater price
volatility from changes in interest rates. Adjustable rate instruments also
react to interest rate changes in a similar manner although generally to a
lesser degree (depending, however, on the characteristics of the reset terms,
including the index chosen, frequency of reset and reset caps or floors, among
other things).
16
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The Health Sciences Fund is also subject to "concentration risk". "Concentration
risk" refers to focusing investment in the securities of industry-specific
issuers that could produce more volatile performance and greater risk relative
to mutual funds that invest in numerous sectors or industries. The more
concentrated a fund's holdings are, the more likely it is that a sector's or
industry's poor performance will hurt the fund significantly.
Concentration
-------------
Concentration means limiting investing to particular sectors or industries.
17
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The Funds are non-diversified for 1940 Act purposes and as such may invest a
larger percentage of their assets in individual issuers than a diversified
investment company.
To the extent each Fund makes investments in excess
of 5% of its assets in a particular issuer, its
exposure to credit and market risks associated with
that issuer is increased. However, a Fund's
investments will be limited so as to qualify for the
special tax treatment afforded "regulated investment
companies" under the Internal Revenue Code of 1986,
as amended.
Non-Diversified Status
----------------------
Because a relatively higher percentage of the non-diversified Funds' assets may
be invested in the securities of a limited number of issuers, these Funds may be
more susceptible to any single economic, political or regulatory occurrence than
a diversified fund.
18
<PAGE>
The Funds may invest in European countries that have agreed to enter into the
European Monetary Union (EMU). EMU is an effort by certain European countries
to, among other things, reduce barriers between countries and eliminate
fluctuations in their currencies. Among other things, EMU establishes
European Economic and Monetary Union
------------------------------------
Many European countries have adopted or are in the process of adopting a single
European currency referred to as the euro. The consequences of the euro
conversion are unclear and may adversely affect the value and/or increase the
volatility of securities held by the Fund.
a single European currency (the euro), which was
introduced on January 1, 1999 and is expected to
replace the existing national currencies of all
initial EMU participants by July 1, 2002. Upon
introduction of the euro, certain securities
(beginning with government and corporate bonds) have
been redonominated in the euro and, thereafter trade
and make dividend and other payments only in euros.
Like other investment companies and business
organizations, including the companies in which the
Funds invests, the Funds could be adversely affected:
(i) if the euro, or EMU as a whole does not take
affect as planned; (ii) if a participating country
withdraws from EMU; or (iii) if the computing,
accounting and trading systems used by the Funds'
service providers, or by other business entities with
which the Funds or their service providers do
business, are not capable of recognizing the euro as
a distinct currency at the time of, and following
euro conversion.
19
<PAGE>
Management of the Funds
Investment Adviser
The Funds' investment adviser is TCW Investment Management Company (the
"Adviser") and is headquartered at 865 South Figueroa Street, Suite 1800, Los
Angeles, California 90017. As of September 30, 2000, the Adviser and its
affiliated companies, which provide a variety of trust, investment management
and investment advisory services, had approximately $85 billion under management
or committed to management.
Portfolio Managers
Listed below are the individuals who have been primarily responsible for the
day-to-day portfolio management of Funds, including a summary of each person's
business experience during the past five years:
Portfolio Manager(s) Business Experience During Last Five Years*
Analyst Growth Fund
Brian M. Beitner Managing Director, the Adviser, TCW Asset
Management Company and Trust Company of the
West since November 1998. Previously, Senior
Vice President of Scudder Kemper Investments.
Growth & Income Fund
James M. Hassett Senior Vice President, the Adviser, TCW Asset
Management Company and Trust Company of the
West.
Kevin A. Hunter Managing Director, the Adviser, TCW Asset
Management Company and Trust Company of the
West.
Thomas D. Lyon Managing Director, the Adviser, TCW Asset
Management Company and Trust Company of the
West since November, 1997. Previously, he was
Vice President -- Portfolio Management with
Transamerica Investment Services.
Mark D. Senkpiel Managing Director, the Adviser, TCW Asset
Management Company and Trust Company of the
West since January 1996. Previously, he was an
Investment Director of Allstate Insurance
Company.
Melissa V. Weiler Managing Director, the Adviser, TCW Asset
Management Company and Trust Company of the
West.
Health Sciences Fund
Husam H. Nazer Vice President, the Adviser, TCW Asset
Management Company and Trust Company of the
West.
*Positions with the TCW Group, Inc. and its affiliates may have changed over
time.
20
<PAGE>
Advisory Agreement
The Funds and the Adviser have entered into an Investment Advisory and
Management Agreement (the "Advisory Agreement"), under the terms of which the
Funds have employed the Adviser to manage the investment of its assets, to place
orders for the purchase and sale of its portfolio securities, and to be
responsible for overall management of the Funds' business affairs, subject to
control by the Board of Directors. The Adviser also pays certain costs of
marketing the Funds, including sales personnel compensation, from legitimate
profits from its investment advisory fees and other resources available to it.
Under the Advisory Agreement, the Funds pay to the Adviser as compensation for
the services rendered, facilities furnished, and expenses paid by it the
following fees:
Fund Annual Management Fee (As Percent of Average Net Asset Value)
---- -------------------------------------------------------------
Analyst Growth 0.90%
Growth & Income 0.75%
Health Sciences 0.90%
The Advisory Agreement provides that the Adviser shall not be liable for any
error of judgment or mistake of law or for any loss suffered by the Funds in
connection with the matters to which the agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence on the part of
the Adviser in the performance of its duties or from reckless disregard by the
Adviser of its duties under the agreement.
Multiple Class Structure
The Funds are authorized to issue two classes of shares, Institutional Class I
shares and Class N shares. Shares of each class of a Fund represent an equal pro
rata interest in that Fund and generally give you the same voting, dividend,
liquidation, and other rights. The Institutional Class shares are offered at the
current net asset value. The Class N shares are offered at the current net asset
value, but will be subject to fees imposed under a distribution plan
("Distribution Plan") adopted pursuant to Rule 12b-1 under the 1940 Act.
Pursuant to the Distribution Plan, each Fund compensates the Funds' distributor
at a rate equal to 0.25% of the average daily net asset of the Fund attributable
to its Class N shares for distribution and related services. Because these fees
are paid out of the Fund's Class N assets on an on-going basis, over time these
fees will increase the cost of your investment and may cost you more than paying
other types of sales charges.
21
<PAGE>
YOUR INVESTMENT
Account Policies and Services
Buying shares
You pay no sales charges to invest in a Fund. Your price for a Fund's shares is
the Fund's net asset value per share (NAV) which is calculated as of the close
of trading on the New York Stock Exchange (usually 4:00 p.m. Eastern time) every
day the exchange is open. Your order will be priced at the next NAV calculated
after your order is accepted by a Fund. Orders received by the Funds' Transfer
Agent from dealers, brokers or other service providers after the NAV for the day
is determined, will receive that same day's NAV if the orders were received by
the dealers, brokers or service providers from their customers prior to 4:00
p.m. and were transmitted to and received by the Transfer Agent generally prior
to 8:00 a.m. Eastern time on the next day. A Funds' investments are valued based
on market value, or where market quotations are not readily available, based on
fair value as determined in good faith by the Funds pursuant to procedures
established by the Funds' Board.
Minimums
Initial IRA Additional
All Funds $ 2,000 $ 500 $ 250
TCW Galileo Funds, Inc. may waive the minimum initial investment. All
investments must be in U.S. dollars. Third-party checks, except those payable to
an existing shareholder, will not be accepted. If your check or wire does not
clear, you will be responsible for any loss a Fund incurs.
Automatic Investment Plan ($100 minimum)
You may arrange to make investments on a regular basis through automatic
deductions from your bank checking account. Please call (800) 248-4486 for more
information and enrollment form.
Selling shares
You may sell shares at any time. Your shares will be sold at the next NAV
calculated after your order is accepted by the Fund's transfer agent. Any
certificates representing Fund shares being sold must be returned with your
redemption request. Your order will be processed promptly, and you will
generally receive the proceeds within a week.
Before selling recently purchased shares, please note that if a Fund has not yet
collected payment for the shares you are selling, it may delay sending the
proceeds for up to fifteen days.
Written sell order
Some circumstances require written sell orders, along with signature guarantees.
These include:
. amounts of $100,000 or more
. amounts of $1,000 or more on accounts whose address has been changed within
the last 30 days
. requests to send the proceeds to a payee or address different than what is
on our records
A signature guarantee helps protect against fraud. You can obtain one from most
banks or securities dealers but not from a notary public. Please call (800)
248-4486 to ensure that your signature guarantee will be processed correctly.
22
<PAGE>
Exchange privilege
You can exchange from one Class N Galileo Fund into another. You can request
your exchange in writing or by phone. Be sure to read the current prospectus for
any Fund into which you are exchanging. Any new account established through an
exchange will have the same privileges as your original account (as long as they
are available).
Third party transactions
You may buy and redeem a Fund's shares through certain broker-dealers and
financial organizations and their authorized intermediaries. If purchases and
redemptions of a Fund's shares are arranged and settlement is made at an
investor's election through a registered broker-dealer, other than the Fund's
distributor, that broker-dealer may, at its discretion, charge a fee for that
service.
Account statements
Every Fund investor automatically receives regular account statements. You will
also be sent a yearly statement detailing the tax characteristics of any
dividends and distributions you have received.
General policies
If your non-retirement account falls below $1,000 as a result of redemptions and
or exchanges for six months or more, a Fund may close your account and send you
the proceeds upon 60 days' written notice.
Unless you decline telephone privileges on your New Account Form, you may be
responsible for any fraudulent telephone order as long as the Transfer Agent
takes reasonable measures to verify the order.
Large Redemption Amounts
------------------------
The Funds also reserve the right to make a "redemption in kind"--payment in
portfolio securities rather than cash--if the amount you are redeeming in any
90-day period is large enough to affect Fund operations (for example, if it
equals more than $250,000 or represents more than 1% of a Fund's assets).
Each Fund restricts excessive trading (usually
defined as more than four exchanges out of the Fund
within a calendar year). You are limited to one
exchange of shares in the same Fund during any 15-day
period except investors in 401(k) and other group
retirement accounts, investors who purchase shares
through certain broker dealers, and asset allocation
accounts managed by the Adviser or an affiliate. Each
Fund reserves the right to:
. refuse any purchase or exchange request that could adversely affect a Fund
or its operations, including those from any individual or group who, in the
Fund's view, are likely to engage in excessive trading
. change or discontinue its exchange privilege, or temporarily suspend this
privilege during unusual market conditions
. delay sending out redemption proceeds for up to seven days (generally
applies only in cases of very large redemptions, excessive trading or
during unusual market conditions).
23
<PAGE>
<TABLE>
<CAPTION>
TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT
<S> <C>
In Writing
Complete the New Account Form. Mail your New
Account Form and a check made payable to TCW
Galileo __________________________ Fund to:
Via Regular Mail (Same except that you should include a note specifying
TCW Galileo Funds, Inc. the Fund name, your account number, and the name(s)
DST Systems, Inc. your account is registered in.)
P.O. Box 419951
Kansas City, MO 64141-6951
Via Express, Registered or Certified Mail
TCW Galileo Funds, Inc.
DST Systems, Inc.
330 W. 9th Street
Poindexter Building, 1st Floor
Kansas City, MO 64105-2005
By Telephone
Please contact the Investor Relations Department at (800)
FUND TCW (386-3829) for a New Account Form.
Wire: Have your bank send your investment to: (Same)
United Missouri Bank of Kansas City, N.A.
ABA No. 101000695
DST Systems, Inc./AC 9870371553
FBO TCW Galileo _______________________
Fund
(Name on the Fund Account)
(Fund Account Number)
Via Exchange
Call the Transfer Agent at (800) 248-4486. The new
account will have the same registration as the account
from which you are exchanging.
If you need help completing the New Account Form, please call the Transfer Agent
at (800) 248-4486.
</TABLE>
24
<PAGE>
TO SELL OR EXCHANGE SHARES
By Mail
Write a letter of instruction that includes:
. your name(s) and signature(s) as they appear on the account form
. your account number
. the Fund name
. the dollar amount you want to sell or exchange
. how and where to send the proceeds
Obtain a signature guarantee or other documentation, if required (see
"Account Policies and Services-Selling Shares").
Mail your letter of instruction to:
Via Regular Mail
TCW Galileo Funds, Inc.
DST Systems, Inc.
P.O. Box 419951
Kansas City, MO 64141-6951
Via Express, Registered or Certified Mail
TCW Galileo Funds, Inc.
DST Systems, Inc.
330 W. 9th Street
Poindexter Building, 1st Floor
Kansas City, MO 64105-2005
By Telephone
Be sure the Funds have your bank account information on file.
Call the Transfer Agent at (800) 248-4486 to request your transaction.
Proceeds will be wired to your bank.
Telephone redemption requests must be for a minimum of $1,000.
Systematic Withdrawal Plan: Call (800) 248-4486 to request a
form to add the plan. Complete the form, specifying the amount
and frequency of withdrawals you would like.
Be sure to maintain an account balance of $2,000 or more.
Systematic Withdrawal plans are subject to a minimum annual
withdrawal of $500.
To reach the Transfer Agent at DST Systems, Inc., call toll free in the U.S.
(800) 248-4486
Outside the U.S.
(816) 843-7166 (collect)
25
<PAGE>
Distributions and Taxes
The amount of dividends of net investment income and distributions of net
realized long and short-term capital gains payable to shareholders will be
determined separately for each Fund. Dividends from the net investment income of
a Fund will be declared and paid annually. Each Fund will distribute any net
realized long or short-term capital gains at least annually. Your distributions
will be reinvested in the same Fund unless you instruct the Fund otherwise.
There are no fees or sales charges on reinvestments.
In any fiscal year in which a Fund qualifies as a regulated investment company
and distributes to shareholders all of its net investment income and net capital
gains, the Fund is relieved of federal income tax.
Generally, all dividends and capital gains are taxable whether they are
reinvested or received in cash--unless you are exempt from taxation or entitled
to tax deferral. Capital gains distributions may be taxable at different rates
depending on the length of time a Fund has held the assets sold. Early each
year, you will be notified as to the amount and federal tax status of all
distributions paid during the prior year. Distributions may also be subject to
state or local taxes. The tax treatment of redemptions from a retirement plan
account may differ from redemptions from an ordinary shareholder account. If you
redeem shares of a Fund or exchange them for shares of another Fund, any gain on
the transaction may be subject to tax. You must provide the Funds with a correct
taxpayer identification number (generally your Social Security Number) and
certify that you are not subject to backup withholding. If you fail to do so,
the IRS can require the Funds to withhold 31% of your taxable distributions and
redemptions. Federal law also requires the Funds to withhold 30% or the
applicable tax treaty rate from dividends paid to nonresident alien, non-U.S.
partnership and non-U.S. corporation shareholder accounts.
This is a brief summary of some of the tax laws that affect your investment in
the Funds. Please see the Statement of Additional Information and your tax
adviser for further information.
26
<PAGE>
FOR MORE INFORMATION
--------------------
For all shareholder account information such as transactions and account
inquiries:
Call (800) 248-4486
For information regarding the TCW Galileo Funds, Inc.:
Call (800) FUND TCW (386-3829)
In writing:
TCW Galileo Funds, Inc.
c/o DST System, Inc.,
P.O. Box 419951
Kansas City, MO 64141-6951
On the Internet:
TCW GALILEO FUNDS, INC.
www.tcwgalileofunds.com
You may visit the SEC's website at www.sec.gov to view text only versions of
-----------
Fund documents filed with the SEC. You can also obtain copies by visiting the
SEC's Public Reference Room in Washington, DC (phone 1-800-SEC-0330) or by
sending your request and a duplicating fee to the SEC's Public Reference
Section, 450 Fifth Street, N.W., Washington, DC 20549-6009 or by electronic
request at the following e-mail address: www. [email protected].
TCW Galileo Funds, Inc.
SEC file number: 811-7170
More information on the Funds is available free upon
request, including the following:
Annual / Semi-Annual Report
Describes the Funds' performance, lists portfolio
holdings and contains a letter from the Funds' portfolio
managers discussing recent market conditions, economic
trends and Fund strategies.
Statement of Additional Information (SAI)
Provides more details about the Funds and their
policies. A current SAI is on file with the Securities
and Exchange Commission (SEC) and is incorporated by
reference and is legally considered part of this
prospectus.
27
