TCW GALILEO FUNDS INC, 497, 2000-03-06

TCW GALILEO FUNDS INC
497, 2000-03-06

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TCW Galileo
Funds, Inc.

This prospectus tells you about the Class N shares of nine 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 Aggressive Growth Equities Fund
TCW Galileo Large Cap Growth Fund
TCW Galileo Large Cap Value Fund
TCW Galileo Select Equities Fund
TCW Galileo Small Cap Growth Fund
TCW Galileo Core Fixed Income Fund
TCW Galileo High Yield Bond Fund
TCW Galileo Total Return Mortgage-Backed Securities Fund
TCW Galileo European Equities 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.

March 1, 2000

LOGO

<PAGE>

TABLE OF CONTENTS

General Fund Information

Investment Objectives and Principal Strategies..............................3
Principal Risks.............................................................4
Performance Summary.........................................................6
Fund Expenses and Expense Example...........................................12

TCW Galileo Aggressive Growth Equities Fund
Investment Objectives/Approach..............................................14
Main Risks..................................................................15

TCW Galileo Large Cap Growth Fund
Investment Objectives/Approach..............................................16
Main Risks..................................................................17

TCW Galileo Large Cap Value Fund
Investment Objectives/Approach..............................................18
Main Risks..................................................................19

TCW Galileo Select Equities Fund
Investment Objectives/Approach..............................................20
Main Risks..................................................................21

TCW Galileo Small Cap Growth Fund
Investment Objectives/Approach..............................................22
Main Risks..................................................................23

TCW Galileo Core Fixed Income Fund
Investment Objectives/Approach..............................................24
Main Risks..................................................................25

TCW Galileo High Yield Bond Fund
Investment Objectives/Approach..............................................27
Main Risks..................................................................28

TCW Galileo Total Return Mortgage-Backed Securities Fund
Investment Objectives/Approach..............................................29
Main Risks .................................................................30

TCW Galileo European Equities Fund
Investment Objectives/Approach..............................................31
Main Risks..................................................................32

Risk Considerations.........................................................33
Management of the Funds.....................................................44
Multiple Class Structure....................................................46

Your Investment
Account Policies and Services...............................................46
To Open an Account/ To Add to an Account....................................49
To Sell or Exchange Shares..................................................51
Distributions and Taxes.....................................................52
Financial Highlights........................................................53

For More Information........................................................62

<PAGE>

GENERAL FUND INFORMATION

Investment Objectives and Principal Strategies

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.
<TABLE>
<CAPTION>
<S> <C> <C>

TCW Galileo Funds, Inc. Investment Objectives Principal Investment Strategies
- ----------------------- ---------------------- -------------------------------

TCW Galileo Aggressive Growth Equities Fund Long-term capital appreciation Invests in equity securities
issued by companies that appear to
offer superior growth prospects.
TCW Galileo Large Cap Growth Fund Long-term capital appreciation Invests in equity securities of
large capitalization U.S. companies
with above average earnings prospects.

TCW Galileo Large Cap Value Fund Long-term capital appreciation Invests in equity securities of large
capitalization value companies.

TCW Galileo Select Equities Fund Long-term capital appreciation Invests in common stock of large capitalization
companies.

TCW Galileo Small Cap Growth Fund Long-term capital appreciation Invests in equity securities issued by small
capitalization growth companies.

TCW Galileo Core Fixed Income Fund Maximize current income and Invests in fixed income securities
achieve above average total rated A or higher by Moody's and
return consistent with prudent S&P.
investment management over a
full market cycle

TCW Galileo High Yield Bond Fund Maximize current income and Invest in high yield bonds,
achieve above average total commonly known as "Junk" bonds.
return consistent with
reasonable risk over a full
market cycle

TCW Galileo Total Return Mortgage-Backed Maximize current income and Invests in mortgage-backed securities
Securities Fund achieve above average total guaranteed by, or secured by collateral
return consistent with prudent that is guaranteed by, the United States
investment management over a government, its agencies, instrumentalities or its
full market cycle sponsored corporations, or private issued
mortgage-backed securities rated Aa or higher
by Moody's or AA or higher S&P.

TCW Galileo European Equities Fund Long-term capital appreciation Invests in equity securities issued by European
companies.
</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.

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:

o 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.

o 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.

Each Fund may also be subject (in varying degrees) to the following risks:

o 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.

o 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; in high yield bonds, mortgage-backed securities or foreign or
emerging markets securities, which have all experienced periods of
illiquidity.

o 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.

<PAGE>

o 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. A Fund may be subject
to greater credit risk if it: invests in below investment grade fixed
income securities; in high yield bonds, which are commonly referred to as
"junk bonds"; or in private issued mortgage-backed securities.

o INTEREST RATE RISK

There is the possibility that the value of a 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.

In the case of mortgage-backed securities, rising interest rates tend to
extend the term to maturity of the securities, making them even more
susceptible to interest rate changes. When interest rates drop, not only can
the value of fixed income securities drop, but the yield can drop,
particularly where the yield on the fixed income securities is tied to
changes in interest rates, such as adjustable mortgages. Also when interest
rates drop, the holdings of mortgage-backed securities by a Fund can reduce
returns if the owners of the underlying mortgages pay off their mortgages
sooner than anticipated since the funds prepaid will have to be reinvested at
the then lower prevailing rates. This is known as prepayment risk. When
interest rates rise, the holdings of mortgage-backed securities by a Fund can
reduce returns if the owners of the underlying mortgages pay off their
mortgages later than anticipated. This is known as extension risk.

o 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 High Yield Bond Fund primarily invests in debt
instruments rated below investment grade. The Core Fixed Income Fund may
invest in debt instruments rated below investment grade.

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 [33]. Each of the
Funds, with the exception of the Core Fixed Income, High Yield Bond, and Total
Return Mortgage-Backed Securities Funds, are 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
non-diversified 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.

<PAGE>

Performance Summary

The nine bar charts and tables following show summary performance information
for the Funds. The information provides some indication of the risks of
investing in the Funds by showing how each Fund's performance has varied from
year to year and how each Fund's average annual returns compare with the returns
of a broad-based securities market index. All of the bar charts and tables
assume reinvestment of dividends and distributions.

The bar charts, the Average Annual Total Return tables and the Best and
Worst Quarterly Performance tables show performance of the Funds'
Institutional Class I Shares, which are offered in a different prospectus.
This is because the Funds have not offered Class N shares for a full
calendar year. Although Class N and Institutional Class I shares would have
similar annual returns (because all the Funds' shares represent interests
in the same portfolio of securities), Class N performance would be lower
than Institutional Class performance because of the higher expenses paid by
Class N shares.

All of the Funds' performance information, except that of the European Equities
and Total Return Mortgage-Backed Securities Funds, includes performance of the
predecessor limited partnership of each respective Fund, which were managed by
an affiliate of TCW Funds Management Company using the same investment strategy
as the respective Funds. The performance of the partnerships was calculated
using performance standards applicable to private investment partnerships, which
take into account all elements of total return and reflect the deduction of all
fees and expenses of operations. The predecessor limited partnerships were not
registered under the Investment Company Act of 1940 (the "1940 Act") and,
therefore were not subject to certain investment restrictions imposed by the
1940 Act and Subchapter M of the Internal Revenue Code of 1986, as amended. If
the limited partnerships had been registered under the 1940 Act their
performance could have been adversely affected. As with all mutual funds, past
performance is not a prediction of future results.

Year by year total return (%)
as of December 31 each year

TCW Galileo Aggressive Growth Equities Fund

60.66% 12.38% 12.65% 63.30% 127.59%+

1995 1996 1997 1998 1999*

*The Fund's total return for the period October 31, 1999 to
December 31, 1999 is: 47.71%

+The Class N performance for March 1, 1999 to December 31, 1999 was 104.54%.

Best and worst quarterly performance during this period

Fund Performance

o Aggressive Growth Equities Fund

Quarter ending December 31, 1999 65.37% (Best)
Quarter ending September 30, 1998 -19.98% (Worst)

1 year 5 years From inception or 10 years
o Aggressive Growth Equities Fund 127.59% 49.86% 48.62%
S&P 400 Mid-Cap 14.71% 23.05% 21.36%

TCW Galileo Large Cap Growth Fund

8.70% 59.15% 56.45%+

1997 1998 1999*
</TABLE>

*The Fund's total return for the period October 31, 1999 to
December 31, 1999 is: 24.65%

+The Class N performance for March 1, 1999 to December 31, 1999 was 50.85%.

Best and worst quarterly performance during this period

Fund Performance

o Large Cap Growth Fund

Quarter ending December 31, 1998 29.53% (Best)
Quarter ending September 30, 1998 -3.81% (Worst)

Average Annual Total Return as of December 31

1 year Since inception
o Large Cap Growth Fund 56.45% 48.16%
S&P/BARRA Growth Index 28.27% 31.56%

TCW Galileo Large Cap Value Fund

18.99% 12.82%+

1998 1999*

*The Fund's total return for the period October 31, 1999 to
December 31, 1999 is: 4.32%
+The Class N performance for March 1, 1999 to December 31, 1999 was 11.07%.

Best and worst quarterly performance during this period

Fund Performance
o Large Cap Value Fund

Quarter ending December 31, 1998 20.90% (Best)
Quarter ending September 30, 1999 -11.51% (Worst)

Average Annual Total Return as of December 31

1 year Since inception
o Large Cap Value Fund 12.82% 15.69%
S&P/BARRA Value Index 12.73% 14.31%

TCW Galileo Select Equities Fund

15.41% 10.85% 22.93% -7.04% 26.45% 20.58% 22.70% 37.97% 42.94%+

1991 1992 1993 1994 1995 1996 1997 1998 1999*

*The Fund's total return for the period October 31, 1999 to
December 31, 1999 is: 16.83%

+The Class N performance for March 1, 1999 to December 31, 1999 was 36.90%.

Best and worst quarterly performance during this period

Fund Performance

o Select Equities Fund
Quarter ending December 31, 1999 31.15% (Best)
Quarter ending September 30, 1999 -6.96% (Worst)

Average Annual Total Return as of December 31

1 year 5 years Since inception or 10 years
o Select Equities Fund 42.94% 29.84% 21.93%
S&P 500 21.04% 28.55% 20.30%

TCW Galileo Small Cap Growth Fund

- -11.49% 81.09% 2.74% 13.06% -4.38% 64.29% 17.63% 14.37% 20.26% 126.05%+

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999*

*The Fund's total return for the period October 31, 1999 to
December 31, 1999 is: 56.45%

+The Class N performance for March 1, 1999 to December 31, 1999 was 133.15%.

Best and worst quarterly performance during this period

Fund Performance

o Small Cap Growth Fund
Quarter ending December 31, 1999 80.24% (Best)
Quarter ending September 30, 1998 -22.32% (Worst)

Average Annual Total Return as of December 31

1 year 5 years Since inception or 10 years
o Small Cap Growth Fund 126.05% 43.14% 26.74%
Russell 2000 Index 21.26% 16.69% 13.40%**

**Represents the 10 year return.

TCW Galileo Core Fixed Income Fund

7.82% 16.10% 6.60% 10.65% -7.73% 18.08% 2.03% 8.90% 9.04% -0.86%+

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999*

*The Fund's total return for the period

October 31, 1999 to December 31, 1999 is: -0.21%

+The Class N performance for March 1, 1999 to December 31, 1999 was -0.05%.

Best and worst quarterly performance during this period

Fund Performance

o Core Fixed Income Fund

Quarter ending June 30, 1995 5.93% (Best)
Quarter ending March 31, 1994 -4.54% (Worst)

Average Annual Total Return as of December 31

1 year 5 years Since inception or 10 years
Core Fixed Income Fund -0.87% 7.23% 6.81%
Lehman Brothers Aggregate -0.83% 7.73% 7.70%
Bond Index

TCW Galileo High Yield Bond Fund

-1.51% 30.97% 15.51% 15.48% -0.34% 15.95% 11.96% 12.28% 2.27% 4.31%+

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999*
>

*The Fund's total return for the period October 31, 1999 to
December 31, 1999 is: 2.95%

+The Class N performance for March 1, 1999 to December 31, 1999 was 2.57%.

Best and worst quarterly performance during this period

Fund Performance
o High Yield Bond Fund

Quarter ending March 31, 1991 11.94% (Best)
Quarter ending September 30, 1990 -5.32% (Worst)

Average Annual Total Return as of December 31

1 year 5 years Since inception
o High Yield Bond Fund 4.31% 9.23% 10.30%**
Salomon Brothers High Yield 0.84% 9.50% 10.47%**
Cash Pay Index

**Represents the 10 year return

TCW Galileo Total Return Mortgage-Backed Securities Fund

3.50% -6.20% 20.80% 5.10% 11.90% 7.23% -0.46%+

1993 1994 1995 1996 1997 1998 1999*

*The Fund's total return for the period October 31, 1999 to
December 31, 1999 is: -0.20%

+The Class N performance for March 1, 1999 to December 31, 1999 was -1.10%.

Best and worst quarterly performance during this period

Fund Performance

o Total Return Mortgage-Backed Securities Fund
Quarter ending June 30, 1995 6.81% (Best)
Quarter ending June 30, 1994 -4.78% (Worst)

Average Annual Total Return as of December 31
<TABLE>
<CAPTION>
<S> <C> <C> <C>

1 year 5 years Since inception or 10 years
o Total Return Mortgage-Backed Securities Fund -0.45% 8.69% 6.10%
Lehman Brothers Mortgage-Backed 1.85% 7.97% 6.14%
Securities Index
</TABLE>

TCW Galileo European Equities Fund

25.45% 34.10%+

1998 1999*

*The Fund's total return for the period October 31, 1999 to
December 31, 1999 is: 27.43%
+The Class N performance for March 1, 1999 to December 31, 1999 was 35.21%.

Best and worst quarterly performance during this period

Fund Performance
o European Equities Fund
Quarter ending December 31, 1999 32.91% (Best)
Quarter ending September 30, 1998 -16.22% (Worst)

Average Annual Total Return as of December 31

1 year Since inception
o European Equities Fund 34.10% 28.24%
MSCI Europe Index 16.23% 23.43%

<PAGE>

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>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total
Return
Large Large Small Core High Mortgage-
Aggressive Cap Cap Select Cap Fixed Yield Backed European
Growth Growth Value Equities Growth Income Bond Securities Equity
Equities Fund Fund Fund Fund Fund Fund Fund Fund
Shareholder Transaction Fees

1) Redemption Fees.................... None None None None None None None None None
2) Exchange Fees...................... None None None None None None None None None
3) Contingent Deferred Sales Load..... None None None None None None None None None
4) Sales Load on Reinvested Dividends. None None None None None None None None None
5) Sales Load on Purchases............ None None None None None None None None None

Annual Fund Operating Expenses

Management Fees....................... 1.00% 0.55% 0.55% 0.75% 1.00% 0.40% 0.75% 0.50% 0.75%
Distribution (12b-1) Fees............. 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25%
Other Expenses........................ 0.18% 0.54% 0.55% 0.39% 0.29% 0.35% 0.30% 0.25% 0.70%
Total Annual Fund Operating
Expenses........................... 1.43%(1) 1.34%(2)1.35%(3) 1.39%(4)1.54%(5) 1.00%(6) 1.30%(7) 1.00%(8) 1.70%(9)
</TABLE>

- ---------------------
(1) The Adviser contractually agreed to reduce its fee or to pay the operating
expenses of the Fund to reduce Annual Fund operating expenses to 1.53% of
Net Assets through 12/31/99.
(2) The Adviser contractually agreed to reduce its fee or to pay the operating
expenses of the Fund to reduce Annual Fund operating expenses to 1.39% of
Net Assets through 12/31/99.
(3) The Adviser contractually agreed to reduce its fee or to pay the operating
expenses of the Fund to reduce Annual Fund operating expenses to 1.39% of
Net Assets through 12/31/99.
(4) The Adviser contractually agreed to reduce its fee or to pay the operating
expenses of the Fund to reduce Annual Fund operating expenses to 1.39% of
Net Assets through 12/31/99.
(5) The Adviser contractually agreed to reduce its fee or to pay the operating
expenses of the Fund to reduce Annual Fund operating expenses to 1.63% of
Net Assets through 12/31/99.
(6) The Adviser contractually agreed to reduce its fee or to pay the operating
expenses of the Fund to reduce Annual Fund operating expenses to 1.00% of
Net Assets through 12/31/99.
(7) The Adviser contractually agreed to reduce its fee or to pay the operating
expenses of the Fund to reduce Annual Fund operating expenses to 1.30% of
Net Assets through 12/31/99.
(8) The Adviser contractually agreed to reduce its fee or to pay the operating
expenses of the Fund to reduce Annual Fund operating expenses to 1.00% of
Net Assets through 12/31/99.
(9) The Adviser contractually agreed to reduce its fee or to pay the operating
expenses of the Fund to reduce Annual Fund operating expenses to 1.71% of
Net Assets through 12/31/99.

<PAGE>

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 5 Years 10 Years
------ ------- ------- --------

Aggressive Growth Equities...... $146 $452 $782 $1,713

Large Cap Growth.................. $136 $425 $734 $1,613

Large Cap Value................... $137 $128 $739 $1,624

Select Equities................... $142 $440 $761 $1,669

Small Cap Growth Fund............. $157 $486 $839 $1,834

Core Fixed Income................. $102 $318 $552 $1,225

High Yield Bond................... $132 $412 $713 $1,568

Total Return Mortgage-Backed...... $102 $318 $552 $1,225
Securities

European Equities................. $173 $536 $923 $2,009

<PAGE>

U.S. Equities

TCW Galileo Aggressive Growth Equities Fund

Investment Objectives/Approaches

The Aggressive Growth Equities Fund seeks long-term capital appreciation. To
pursue this goal, the Aggressive Growth Equities Fund anticipates that at least
65% of the value of its total assets will be invested in equity securities
(except when maintaining a temporary defensive position) of issuers which are
characterized as "growth" companies according to criteria established by the
Adviser. These securities include common and preferred stock and convertible
securities. In managing the Aggressive Growth Equities Fund's investments, the
Adviser will focus on emerging companies that exhibit this characteristic.

Concepts to understand
- ----------------------

Emerging growth companies are companies that are likely to show rapid growth
through reinventing an existing industry or pioneering a new industry.

The Adviser utilizes a "bottom-up" approach to identify
securities for investment. First, the Adviser uses
quantitative and qualitative criteria to screen companies.
The Adviser then subjects companies that make it through
this screening process to fundamental analysis, which
generally looks for at least some of the following factors:

o a demonstrated record of consistent earnings growth or
the potential to grow earnings

o an ability to earn an attractive return on equity

o a price/earnings ratio which is less than the Adviser's
internally estimated three-year earnings growth rate

o a large and growing market share

o a strong balance sheet

o significant ownership interest by management and a
strong management team.

Christopher J. Ainley and Douglas S. Foreman are the Fund's
portfolio managers.

<PAGE>

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" and "liquidity
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. This Fund
may be subject to greater price volatility than funds that invest in the
securities of 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 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. In
addition, the Fund may be subject to liquidity risk because it may invest in
debt instruments rated below investment grade.

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 portfolio management which may result in increased
Fund transaction expenses and have tax consequences such as increased realized
gains for investors.

<PAGE>

TCW Galileo Large Cap Growth Fund

Investment Objectives/Approach

The Fund seeks long-term capital appreciation. To pursue this goal, it invests
primarily in equity securities of large capitalization U.S. companies with
above-average earning prospects. It will invest (except when maintaining a
temporary defensive position) at least 65% of the value of its total assets in
companies with a market capitalization of greater than $3 billion at the time of
purchase.

Concepts to understand
- ----------------------

Large capitalization companies are established companies that are considered
known quantities. Large capitalization companies often have the resources to
weather economic shifts, although they can be slower to innovate than small
companies.

Growth companies are companies exhibiting faster than average gains in earnings
and which are expected to continue to show high levels of growth gain.

In managing the Fund's investments, the Adviser seeks to
invest in companies that will have reported earnings that
exceed analysts' expectations (i.e., potential for earnings
surprises). The Adviser utilizes "bottom-up" fundamental
research to identify these companies. The Adviser performs
fundamental research by using techniques such as:

o making company visits

o attending industry conferences

o maintaining communication with company management

The Adviser then uses the information that it has obtained
from its fundamental research to analyze the company's
long-term growth potential, future earnings and cash flow.

The Adviser uses quantitative and qualitative screening
criteria to determine which companies to subject to its
fundamental analysis.

Wendy S. Barker and Douglas S. Foreman are the Fund's
portfolio managers.

<PAGE>

Main Risks

The primary risk affecting this Fund is "price volatility." 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 less susceptible
to price volatility risk because it invests in the securities of large
companies. This is especially true during periods of economic uncertainty or
during economic downturns.

The Fund may engage in active portfolio management which may result in increased
Fund transaction expenses and have tax consequences such as increased realized
gains for investors.

<PAGE>

TCW Galileo Large Cap Value Fund

Investment Objectives/Approach

The Fund seeks long-term capital appreciation. To pursue this goal, the Fund
invests primarily in equity securities of large capitalization companies. The
securities include common and preferred stock and convertible securities. The
Fund will invest (except when maintaining a temporary defensive position) at
least 65% of the value of its total assets in publicly traded equity securities
of companies with a market capitalization of greater than $3 billion at the time
of purchase. The Fund will invest mostly in "value companies."

Concepts to understand
- ----------------------

Large capitalization companies are established companies that are
considered known quantities. Large capitalization companies often
have the resources to weather economic shifts, though they can be
slower to innovate than small companies.

Value companies are companies that appear underpriced according
to certain financial measurements of their intrinsic worth or
business prospects (such as price-to-earnings or price-to-book
ratios). Because a stock can remain undervalued for years, value
investors often look for factors that could trigger a rise in
price.

In managing the Fund's investments, the Adviser seeks to
invest in attractively valued equity securities of companies
where the return on invested capital is improving. The
Adviser utilizes bottom-up fundamental research to identify
these companies. The Adviser performs fundamental research
by using techniques such as:

o making company visits

o financial screening to identify companies

o maintaining a disciplined approach to stock selection
and portfolio construction

The Adviser will use both quantitative and qualitative
screening criteria to supplement the scope of its
fundamental research.

Thomas K. McKissick is the Fund's portfolio manager.

<PAGE>

Main Risks

The primary risk affecting this Fund is "price volatility." 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 less susceptible
to price volatility than funds that invest in the securities of small companies.
This is especially true during periods of economic uncertainty or during
economic downturns.

The Fund may invest some assets in options. This practice is used primarily to
hedge the Fund's portfolio, but it may be used to increase returns; however,
this practice sometimes may reduce returns or increase volatility.

The Fund may engage in active portfolio management which may result in increased
Fund transaction expenses and have tax consequences such as increased realized
gains for investors.

<PAGE>

TCW Galileo Select Equities Fund

Investment Objectives/Approach

The Fund seeks long-term capital appreciation. Performance should be measured
over a full market cycle.

To pursue this goal, the Fund invests primarily in the common stocks of larger
companies. The investment philosophy underlying our strategy is a highly focused
approach which seeks to achieve superior long-term returns by owning shares in
companies that are believed to have strong and enduring business models and
inherent advantages over their competitors. Except when maintaining a temporary
defensive position, the Fund anticipates that at least 65% of the value of its
total assets will be invested in equity securities of these companies. In
implementing its investment policy, the Fund may purchase and sell convertible
securities and foreign securities.

Concepts to understand
- ----------------------

Large capitalization companies are established companies that are considered
known quantities. Large companies often have the resources to weather economic
shifts, though they can be slower to innovate than small companies.

Glen E. Bickerstaff is the Fund's portfolio manager.

Main Risks

The primary risks affecting this Fund are "price volatility" 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.
Although the Fund is subject to price volatility because of its stock
investments, it is subject to less price volatility than funds that invest in
the securities of smaller companies. Because the Fund may invest a portion of
its assets in securities issued by foreign companies, 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:

o a lack of political or economic stability

o foreign controls on investment and currency exchange rates

o withholding taxes

o a lack of adequate company information

In addition, securities traded only through foreign markets may be more volatile
and are often harder to sell. Volatility is a way to measure the changes in the
price of a single security or an entire portfolio. Large and frequent price
changes indicate higher volatility, which generally indicates that there is a
greater chance you could lose money over the short-term. The Fund is also
subject to foreign currency risk. Because foreign securities are generally
denominated and pay dividends or interest in foreign currencies, the value of
the net assets of the Fund as measured in U.S. dollars will be affected
favorably or unfavorably by changes in exchange rates.

The Fund may invest some assets in options, futures and foreign currency
futures, and forward contracts. These practices are used primarily to hedge the
Fund's portfolio but may be used to increase returns; however, such practices
sometimes may reduce returns or increase volatility.

The Fund may engage in active portfolio management which may result in increased
Fund transaction expenses and have tax consequences such as increased realized
gain for investors.

<PAGE>

TCW Galileo Small Cap Growth Fund

Investment Objectives/Approach

The Fund seeks long-term capital appreciation. To pursue this goal, it invests
(except when maintaining a temporary defensive position) at least 65% of the
value of its total assets in equity securities issued by companies with market
capitalizations, at the time of acquisition, within the capitalization range of
the companies comprising the Standard & Poor's Small Cap 600 Index.

Concepts to understand
- ----------------------

Small-Sized Companies seek long term capital appreciation by focusing on small,
fast-growing companies that offer cutting-edge products, services or
technologies. Because these companies are often in their early stages of
development, their stocks tend to fluctuate more than most other securities.

In managing the Fund's investments, the Adviser pursues a
small cap growth investment philosophy. That philosophy
consists of fundamental company-by-company analysis to
screen potential investments and to continuously monitor
securities in the Fund's portfolio.

Douglas S. Foreman, Christopher J. Ainley, Nicholas J.
Capuano and Charles Larsen are the Fund's portfolio
managers.

<PAGE>

Main Risks

The primary risks affecting this Fund are "price volatility" and "liquidity
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. This Fund
may be subject to greater price volatility than funds that invest in the
securities of large or midcap 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 small-size companies may be less liquid
than the securities of large-size companies, the Fund may be more susceptible to
liquidity risk than funds that invest in the securities of large-sized
companies.

The Fund may invest some assets in options. This practice is used primarily to
hedge the Fund's portfolio, but may be used to increase returns; however, such
practice sometimes may reduce returns or increase volatility.

The Fund may engage in active portfolio management which may result in increased
Fund transaction expenses and have tax consequences such as increased realized
gains for investors.

<PAGE>

U.S. Fixed Income

TCW Galileo Core Fixed Income Fund

Investment Objectives/Approach

The Fund seeks to provide maximum current income and achieve above average total
return consistent with prudent investment management over a full market cycle.
To pursue this goal, it invests (except when maintaining a temporary defensive
position) at least 65% of the value of its total assets in fixed income
securities rated A or higher by Moody's or S&P. These securities include, U.S.
Government obligations, bonds, notes, debentures, mortgage-backed securities,
asset-backed securities, foreign securities (government and corporate), and
other securities bearing fixed or variable interest rates of any maturity.

Concepts to understand
- ----------------------

Duration is often used to measure the potential volatility of a bond's price:
bonds with longer durations are more sensitive to changes in interest rates,
making them more volatile than bonds with shorter durations. Bonds with fixed
maturities have a readily determinable duration. Bonds with uncertain payment
schedules, such as mortgage-backed securities, which can be prepaid, have
durations which may vary or lengthen in certain interest rate environments,
making their values even more volatile than when they were acquired.

In managing the Fund's investments, the Adviser uses a
controlled risk approach. The techniques of this approach
attempt to control the principal risk components of the
fixed income markets. These components include:

o security selection within a given sector

o relative performance of the various market sectors

o the shape of the yield curve

o fluctuations in the overall level of interest rates

The Adviser also utilizes active asset allocation in
managing the Fund's investments and monitors the duration of
the Fund's portfolio securities to mitigate the Fund's
exposure to interest rate risk.

Mark L. Attanasio, Philip A. Barach and Jeffrey E. Gundlach
are the Fund's portfolio managers.

<PAGE>

Main Risks

The primary risks affecting this Fund are "credit risk," "interest rate risk"
(including "extension risk" and "prepayment risk"), "foreign investing risk" and
"liquidity 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 invests primarily
in high credit quality securities that have limited susceptibility to this risk.
A portion of the Fund's assets, however, will be invested in low credit quality
securities that may make the Fund subject to greater credit risk, especially
during periods of economic uncertainty or during economic downturns. Debt
securities that are rated below investment grade are considered to be
speculative. Securities rated below investment grade are also known as "junk"
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 as well as
mortgage-backed securities, including collateralized mortgage obligations and
stripped mortgage securities. Its holding of mortgage-backed securities can
reduce returns if the owners of the underlying mortgages pay off their mortgages
sooner than anticipated when interest rates go down. Because this Fund may
invest in mortgage-backed securities, it may be subject to extension risk and
prepayment risk, which are both a type of interest rate risk. Extension risk
refers to the possibility that rising interest rates may cause owners of the
underlying mortgages to pay off their mortgages at a slower than expected rate.
This particular risk may effectively change a security which was considered
short or intermediate term into a long-term security. Long-term securities
generally drop in value more dramatically in response to rising interest rates
than short or intermediate-term securities. Prepayment risk refers to the
possibility that falling interest rates may cause owners of the underlying
mortgages to pay off their mortgages at a faster than expected rate. 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:

o a lack of political or economic stability

o foreign controls on investment and changes in currency exchange rates

o withholding taxes

o a lack of adequate company information

The risks of foreign investing are even more pronounced if the Fund invests in
emerging markets. In addition, securities traded only through foreign markets
may be more volatile and are often harder to sell. Volatility is a way to
measure the changes in the price of a single security or an entire portfolio.
Large and frequent price changes indicate higher volatility, which generally
indicates that there is a greater chance you could lose money over the short
term. The Fund is also subject to foreign currency risk. Because foreign
securities are generally denominated and pay dividends or interest in foreign
currencies, the value of the net assets of the Fund as measured in U.S. dollars
will be affected favorably or unfavorably by changes in exchange rates.
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 the Fund invests in below
grade fixed income securities, it is more susceptible to liquidity risk than
funds that invest in higher quality investments.

The Fund may invest some assets in options, futures and foreign currency
futures, and forward contracts. These practices are used primarily to hedge the
Fund's portfolio, but may also be used to increase returns; however, such
practices sometimes may reduce returns or increase volatility. The Fund may also
invest some assets in interest-only and principal-only securities, which are
sometimes referred to as derivatives. These practices may be used to increase
returns; however, such practices sometimes may reduce returns or increase
volatility and may be very sensitive to changes in interest rates.

The Fund may engage in active portfolio management which may result in increased
Fund transaction expenses and have tax consequences such as increased realized
gains.

<PAGE>

TCW Galileo High Yield Bond Fund

Investment Objectives/Approach

The Fund seeks to maximize income and achieve above average total return
consistent with reasonable risk over a full market cycle. To pursue this goal,
it invests (except when maintaining a temporary defensive position) at least 65%
of the value of its total assets in high yield/below investment grade bonds,
commonly known as "junk" bonds. It also invests in other high yield fixed income
securities, including convertible and non-convertible debt securities and
convertible and non-convertible preferred stocks.

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. This gives the
Fund more credit risk than Galileo's other fixed income funds, but also gives it
the potential for higher returns.

In managing the Fund's investments, the Adviser places
emphasis on securities at the lower-risk end of the high
yield bond/below investment grade spectrum. These securities
are issued by companies that the Adviser believes have
stable to improving business prospects. The Adviser's
investment approach also emphasizes consistent and high
current income. It attempts to reduce the Fund's investment
risk through diversification and by analysis of:

o each issuer

o each issuer's ability to make timely payments of
principal and interest

o broad economic trends and corporate developments

Mark L. Attanasio, Mark D. Senkpiel, and Melissa V. Weiler
are the Fund's portfolio managers.

<PAGE>

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. 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.
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:

o a lack of political or economic stability

o foreign controls on investment and currency exchange rates

o withholding taxes

o a lack of adequate company information

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 portfolio management which may result in increased
Fund transaction expenses and have tax consequences such as increased realized
gains for investors.

<PAGE>

TCW Galileo Total Return Mortgage-Backed Securities Fund

Investment Objectives/Approach

The Fund seeks to maximize current income and achieve above average total return
consistent with prudent investment management over a full market cycle. To
pursue these goals, the Fund invests primarily in mortgage-backed securities of
any maturity or type guaranteed by, or secured by collateral that is guaranteed
by, the United States Government, its agencies, instrumentalities or its
sponsored corporations (collectively, the "Federal Agencies"), and in privately
issued mortgage-backed securities rated Aa or higher by Moody's or AA or higher
by S&P.

Concepts to understand

Duration is often used to measure the potential volatility of a bond's price:
bonds with longer durations are more sensitive to changes in interest rates,
making them more volatile than bonds with shorter durations. Bonds with fixed
maturities have a readily determinable duration. Bonds with uncertain payment
schedules, such as mortgage-backed securities which can be prepaid, have
durations which may vary or lengthen in certain interest rate environments,
making their value even more volatile than when they were acquired.

Weighted average duration is the average duration of the securities in the
portfolio weighted by market value.

Weighted average reset frequency is the average time to the next coupon reset
date of the floating rate securities in the portfolio weighted by market value.

The Fund will invest (except when maintaining a temporary
defensive position) at least 65% of the value of its total
assets in mortgage-backed securities which are guaranteed
by, or secured by collateral which is guaranteed by Federal
Agencies. In managing the Fund's investments, the Adviser
seeks to construct a portfolio with a weighted average
duration for fixed rate securities and a weighted average
reset frequency for floating rate securities of no more than
eight years.

Philip A. Barach, Jeffrey E. Gundlach and Frederick H.
Horton are the Fund's portfolio managers.

<PAGE>

Main Risks

The primary risks affecting this Fund are "credit risk," "interest rate risk"
(including "extension risk" and "prepayment risk"), and "liquidity 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. The Fund may invest a
portion of its assets in mortgage-backed securities which are not guaranteed by
the U.S. Government, which may make the Fund subject to substantial credit risk.
This is especially true during periods of economic uncertainty or during
economic downturns. 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 and
mortgage-backed securities, including collateralized mortgage obligations, and
stripped mortgage securities. Because this Fund invests in mortgage-backed
securities, it may be subject to extension risk and prepayment risk, which are
both a type of interest rate risk. Extension risk is the possibility that rising
interest rates may cause owners of the underlying mortgages to pay off their
mortgages at a slower than expected rate. This particular risk may effectively
change a security which was considered short or intermediate term into a
long-term security. Long-term securities generally drop in value more
dramatically in response to rising interest rates than short or
intermediate-term securities. Prepayment risk refers to the possibility that
falling interest rates may cause owners of the underlying mortgages to pay off
their mortgages at a faster than expected rate. This tends to reduce returns
since the funds prepaid will have to be reinvested at the then lower prevailing
rates. 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 mortgage-backed
securities may be less liquid than other securities, the Fund may be more
susceptible to liquidity risks than funds that invest in other securities.

The Fund may invest some assets in inverse floaters and interest-only and
principal-only securities, which are sometimes referred to as derivatives. These
practices may reduce returns or increase volatility and may be very sensitive to
changes in interest rates.

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 other 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 portfolio management which may result in increased
Fund transaction expenses and have tax consequences, such as increased realized
gains for investors.

<PAGE>

International

TCW Galileo European Equities Fund

Investment Objectives/Approach

The Fund seeks long-term capital appreciation. To pursue this goal, it invests
primarily in the securities of issuers located in Europe. The Fund invests
(except when maintaining temporary defensive position) at least 65% of the value
of its total assets in equity securities issued by European Companies. These
securities include common and preferred stocks, rights or warrants to purchase
common stock and convertible debt or equity securities. The Fund invests in
companies based in at least three European countries.

Concepts to understand
- ----------------------

European Company (i) is organized under the laws of a European country or has a
principal office in Europe; or (ii) derives 50% or more of its gross revenues or
profits from goods produced or sold, investments made, or services performed in
European countries or has at least 50% of its assets situated in Europe; or
(iii) its equity securities are traded principally on a stock exchange or
over-the-counter in a European country.

In managing the Fund's investments, the Adviser seeks to
emphasize companies which are moving towards the North
American concept of shareholder value.

The Fund seeks to invest in companies with prospective
earnings growth higher than the market average.

<PAGE>

Main Risks

The primary risks affecting this Fund are "foreign investing risk," "liquidity
risk," and "price volatility." Because the Fund invests in securities issued by
foreign companies, it is 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:

o a lack of political or economic stability

o foreign controls on investment and currency exchange rates

o withholding taxes

o a lack of adequate company information

The Fund may invest some assets in options, futures and foreign currency futures
and forward contracts. These practices are used primarily to hedge the Fund's
portfolio but may be used to increase returns; however, such practices sometimes
may reduce returns or increase volatility.

The Fund may engage in active portfolio management which may result in increased
Fund transaction expenses and have tax consequences such as increased realized
gains for investors.

<PAGE>

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). Market 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. Certain instruments (such as
inverse floaters and interest-only
securities) behave similarly to leveraged
instruments.

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. High credit quality
investments also react in value to interest rate changes.

<PAGE>

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.

The forward currency market for the purchase or sale of U.S. dollars in most
countries is not highly developed, and in certain countries, there may be no
such market. If a devaluation of a currency is generally anticipated, a Fund may
not be able to contract to sell the currency at an exchange rate more
advantageous than that which would prevail after the anticipated amount of
devaluation, particularly in regards to forward contracts for local Latin
American currencies in view of the relatively small, inactive or even
non-existent market for these contracts. In the event a Fund holds securities
denominated in a currency that suffers a devaluation, the Fund's net asset
values will suffer corresponding reductions. In this regard, in December 1994,
the Mexican government determined to allow the Mexican peso to trade freely
against the U.S. dollar rather than within a controlled band, which action
resulted in a significant devaluation of the Mexican peso against the dollar.
Further, in July 1997, the Thai and Philippine governments allowed the baht and
peso, respectively, to trade freely against the U.S. dollar resulting in a sharp
devaluation of both currencies, and in 1998 Russia did the same, causing a sharp
devaluation of the rule.

With respect to the European Equities Fund especially, investors should
recognize that investing in securities of emerging market countries involves
certain risks, and considerations, including those set forth below, which are
not typically associated with investing in the United States or other developed
countries.

Risks Associated With Emerging Market Countries
- -----------------------------------------------

Investing in emerging market countries involves substantial risks due to limited
information, higher brokerage costs; different accounting standards; thinner
trading markets as compared to those in developed countries; currency blockages
or transfer restrictions; and expropriation, nationalization or other adverse
political or economic developments.

Investing in emerging markets countries involves substantial
risks due to limited information, higher brokerage costs;
different accounting standards; thinner trading markets as
compared to those in developed countries; currency blockages
or transfer restrictions; and expropriation, nationalization
or other adverse political or economic developments.

Political and economic structures in many emerging markets
countries may be undergoing significant evolution and rapid
development, and such countries may lack the social,
political and economic stability characteristics of more
developed countries. Some of these countries may have in the
past failed to recognize private property rights and have at
times nationalized or expropriated the assets of private
companies.

The securities markets of emerging market countries are
substantially smaller, less developed, less liquid and more
volatile than the major securities markets in the United
States and other developed nations. The limited size of many
emerging securities markets and limited trading volume in
issuers compared to the volume of trading in U.S. securities
or securities of issuers in other developed countries could
cause prices to be erratic for reasons apart from factors
that affect the quality of the securities. For example,
limited market size may cause prices to be unduly influenced
by traders who control large positions. Adverse publicity
and investors' perceptions, whether or not based on
fundamental analysis, may decrease the value and liquidity
of portfolio securities, especially in these markets.

In addition, emerging market countries' exchanges' and
broker-dealers are generally subject to less government and
exchange regulation than their counterparts in developed
countries. Brokerage commissions, dealer concessions,
custodial expenses and other transaction costs may be higher
on emerging markets than in developed countries. As a
result, the European Equities Fund has operating expenses
that are expected to be higher than other funds investing in
more established market regions.

In certain emerging market countries governments participate to a significant
degree, through ownership or regulation, in their respective economies. Action
by these governments could have a significant adverse effect on market prices of
securities and payment of dividends. In addition, most emerging market countries
have experienced substantial, and in some periods extremely high, rates of
inflation. Inflation and rapid fluctuation in inflation rates have had and may
continue to have very negative effects on the economies and securities markets
of certain emerging market countries. In addition, many emerging market
countries are grappling with severe recession and government instability.

Many of the currencies of emerging market countries have experienced
devaluations relative to the U.S. dollar, and major devaluations have
historically occurred in certain countries. Any devaluations in the currencies
in which portfolio securities are denominated will have a detrimental impact on
funds investing in emerging market countries. Many emerging market countries are
experiencing currency exchange problems. Countries have and may in the future
impose foreign currency controls and repatriation control.

<PAGE>

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 Aggressive Growth Equities, Large Cap Growth, Large Cap
Value, Select Equities and Small Cap Growth Funds may invest
in convertible securities rated below investment grade. The
High Yield Bond Fund consists of below investment grade
corporate securities while the Core Fixed Income Fund may
invest in debt instruments 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).

<PAGE>

Credit and Market Risks of Mortgage-Backed Securities. The investments by the
Core Fixed Income and Total Return Mortgage-Backed Securities Funds in fixed
rate and floating rate mortgage-backed securities will entail normal credit
risks (i.e., the risk of non-payment of interest and principal) and market risks
(i.e., the risk that interest rates and other factors will cause the

Mortgage-Backed Securities
- --------------------------

Mortgage-Backed securities represent participation interests in pools of
residential mortgage loans purchased from individual lenders by a federal agency
or originated and issued by private lenders.

value of the instrument to decline). Many issuers or
servicers of mortgage-backed securities guarantee timely
payment of interest and principal on the securities, whether
or not payments are made when due on the underlying
mortgages. This kind of guarantee generally increases the
quality of a security, but does not mean that the security's
market value and yield will not change. Like bond
investments, the value of fixed rate mortgage-backed
securities will tend to rise when interest rates fall, and
fall when rates rise. Floating rate mortgage-backed
securities will generally tend to have minimal changes in
price when interest rates rise or fall, but their current
yield will be affected. The value of all mortgage-backed
securities may also change because of changes in the
market's perception of the creditworthiness of the
organization that issued or guarantees them. In addition,
the mortgage-backed securities market in general may be
adversely affected by changes in governmental legislation or
regulation. Fluctuations in the market value of
mortgage-backed securities after their acquisition usually
do not affect cash income from these securities but are
reflected in a Fund's net asset value. Factors that could
affect the value of a mortgage-backed security include,
among other things, the types and amounts of insurance which
a mortgage carries, the amount of time the mortgage loan has
been outstanding, the loan-to-value ratio of each mortgage
and the amount of overcollateralization of a mortgage pool.

Liquidity Risk of Mortgage-Backed Securities. The liquidity of mortgage-backed
securities varies by type of security; at certain times the Core Fixed Income
and Total Return Mortgage-Backed Securities Funds may encounter difficulty in
disposing of investments. Because mortgage-backed securities may be less liquid
than other securities, a Fund may be more susceptible to liquidity risks than
funds that invest in other securities. In the past, in stressed markets, certain
types of mortgage-backed securities, such as inverse floaters, and interest-only
securities, suffered periods of illiquidity if disfavored by the market.

Prepayment, Extension and Redemption Risks of Mortgage-Backed Securities.
Mortgage-backed securities reflect an interest in monthly payments made by the
borrowers who receive the underlying mortgage loans. Although the underlying
mortgage loans are for specified periods of time, such as 20 or 30 years, the
borrowers can, and typically do, pay them off sooner. When that happens, the
mortgage-backed security which represents an interest in the underlying mortgage
loan will be prepaid. A borrower is more likely to prepay a mortgage which bears
a relatively high rate of interest. This means that in times of declining
interest rates, a portion of the Core Fixed Income and Total Return
Mortgage-Backed Securities Funds' higher yielding securities are likely to be
redeemed and a Fund will probably be unable to replace them with securities
having as great a yield. Prepayments can result in lower yields to shareholders.
The increased likelihood of prepayment when interest rates decline also limits
market price appreciation of mortgage-backed securities. This is known as
prepayment risk. Mortgage-backed securities are also subject to extension risk.
Extension risk is the possibility that rising interest rates may cause
prepayments to occur at a slower than expected rate. This particular risk may
effectively change a security which was considered short or intermediate term
into a long-term security. Long-term securities generally fluctuate more widely
in response to changes in interest rates than short or intermediate-term
securities. In addition, a mortgage-backed security may be subject to redemption
at the option of the issuer. If a mortgage-backed security held by a Fund is
called for redemption, the Fund will be required to permit the issuer to redeem
or "pay-off" the security, which could have an adverse effect on a Fund's
ability to achieve its investment objective.

Collateralized Mortgage Obligations. There are certain risks associated
specifically with collateralized mortgage obligations ("CMOs.") CMOs are debt
obligations collateralized by mortgage loans or mortgage pass-through
securities. The average life of CMOs is determined using mathematical models
that incorporate prepayment assumptions and other factors that involve estimates
of future economic and market conditions. These estimates may vary from actual
future results, particularly during periods of extreme market volatility.
Further, under certain market conditions, such as those that occurred in 1994,
the average weighted life of certain CMOs may not accurately reflect the price
volatility of such securities. For example, in periods of supply and demand
imbalances in the market for such securities and/or in periods of sharp interest
rate movements, the prices of CMOs may fluctuate to a greater extent than would
be expected from interest rate movements alone. CMOs issued by private entities
are not obligations issued or guaranteed by the United States Government, its
agencies or instrumentalities and are not guaranteed by any government agency,
although the securities underlying a CMO may be subject to a guarantee.
Therefore, if the collateral securing the CMO, as well as any third party credit
support or guarantees, is insufficient to make payment, the holder could sustain
a loss.

Stripped Mortgage Securities. Part of the investment strategy of the Core Fixed
Income and Total Return Mortgage-Backed Securities Funds involves interest-only
Stripped Mortgage Securities. These investments may be highly sensitive to
changes in interest and prepayment rates and tend to be less liquid than other
CMOs. In addition, prepayments of the underlying mortgages likely would lower a
Fund's returns from stripped securities it holds.

Inverse Floaters. The Total Return Mortgage-Backed Securities Fund invests in
inverse floaters, a class of CMOs with a coupon rate that resets in the opposite
direction from the market rate of interest to which it is indexed such as London
Interbank Offered Rate (LIBOR) or COFI. Any rise in the index rate (as a
consequence of an increase in interest rates) causes a drop in the coupon rate
of an inverse floater while any drop in the index rate causes an increase in the
coupon of an inverse floater. An inverse floater may behave like a security that
is leveraged since its interest rate usually varies by a magnitude much greater
than the magnitude of the change in the index rate of interest. The
"leverage-like" characteristics inherent in inverse floaters are associated with
greater volatility in their market prices.

Adjustable Rate Mortgages. ARMs contain maximum and minimum rates beyond which
the mortgage interest rate may not vary over the lifetime of the security. In
addition, many ARMs provide for additional limitations on the maximum amount by
which the mortgage interest rate may adjust for any single adjustment period.
Alternatively, certain ARMs contain limitations on changes in the required
monthly payment. In the event that a monthly payment is not sufficient to pay
the interest accruing on an ARM, any excess interest is added to the principal
balance of the mortgage loan, which is repaid through future monthly payments.
If the monthly payment for such an instrument exceeds the sum of the interest
accrued at the applicable mortgage interest rate and the principal payment
required at such point to amortize the outstanding principal balance over the
remaining term of the loan, the excess is utilized to reduce the
then-outstanding principal balance of the ARM.

Asset-Backed Securities. Certain asset-backed securities do not have the benefit
of the same security interest in the related collateral as do mortgage-backed
securities; nor are they provided government guarantees of repayment. Credit
card receivables are generally unsecured, and the debtors are entitled to the
protection of a number of state and federal consumer credit laws, many of which
give such debtors the right to set off certain amounts owed on the credit cards,
thereby reducing the balance due. In addition, some issuers of automobile
receivables permit the servicers to retain possession of the underlying
obligations. If the servicer were to sell these obligations to another party,
there is a risk that the purchaser would acquire an interest superior to that of
the holders of the related automobile receivables.

<PAGE>

The Aggressive Growth Equities, Large Cap Growth, Large Cap Value, Select
Equities, Small Cap Growth and European Equities 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.

Like other mutual funds, the investment advisory and management services
provided by the Adviser and the services provided to shareholders by the
Transfer Agent depend on the smooth functioning of their computer systems. There
has been concern that some computer software systems in use today may still not
recognize the year 2000, but revert to 1900 or some other date, due to the
manner in which dates were encoded and calculated. That failure could have a
negative impact on the handling of securities trades, pricing and account
services into the first quarter of the Year 2000, or beyond. The Adviser and the
Transfer Agent have actively worked on necessary changes to their own computer
systems to prepare for the year 2000 issue. To date, it appears that most
companies have made the Year 2000 date transition successfully. While the
possibility has diminished since January 4, 2000, corporate and governmental
data processing errors may still arise and result in production problems for
individual companies. Earnings of individual issuers may be affected by
remediation costs which may be substantial and may not be currently reflected in
financial statements. Individual firms may experience disruptions to their
business due to the failure of their counterparts to address year 2000 problems,
or could experience disruptions which could adversely affect corporate earnings
generally and the value of their securities. Accordingly, the Funds' portfolio
investments may be negatively affected by Year 2000 related developments that
may occur later in the year 2000.

Year 2000

A Fund's portfolio investments may be negatively affected by Year 2000 related
developments that may occur later in the year 2000.

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 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 redenominated 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.

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 a Fund.

<PAGE>

Management of the Funds

Investment Adviser

The Funds' investment adviser is TCW Funds Management Company (the "Adviser")
and is headquartered at 865 South Figueroa Street, Suite 1800, Los Angeles,
California 90017. As of December 31, 1999, the Adviser and its affiliated
companies, which provide a variety of trust, investment management and
investment advisory services, had approximately $70 billion under management or
committed to management.

Investment Sub-Adviser

TCW London International Limited ("TCW London") (regulated by I.M.R.O.),
Sub-Adviser to the European Equities Fund, is headquartered at 16 Charles II
Street, London, England SWIY4QV 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*
Aggressive Growth
Equities Funds

Christopher J. Ainley Managing Director, the Adviser, TCW Asset
Management Company and Trust Company of the West. Prior
to joining TCW in 1994 he was a portfolio manager with
Putnam Investments.

Douglas S. Foreman Group Managing Director and Chief Investment Officer-
U.S. Equities, the Adviser, TCW Asset Management Company
and Trust Company of the West since May 1994.
Previously, he was a portfolio manager with Putnam
Investments.

Large Cap Growth
Fund
Wendy S. Barker Senior Vice President, the Adviser, TCW Asset Management
Company and Trust Company of the West.

Large Cap Value Fund
Thomas K. McKissick Managing Director, the Adviser, TCW Asset Management
Company and Trust Company of the West.

Select Equities Fund
Glen E. Bickerstaff Managing Director, the Adviser, TCW Asset
Management Company and Trust Company of the West since
May 1998. Previously, he was senior portfolio manager
and Vice President of Transamerica Investment Services.

Small Cap Growth
Fund
Christopher J. Ainley Managing Director, the Adviser, TCW Asset Management
Company and Trust Company of the West. Prior to
joining TCW in 1994 he was a portfolio manager with
Putnam Investments.

Nicholas J. Capuano Senior Vice President, The Adviser, TCW Asset
Management Company and Trust Company of the West.

Douglas S. Foreman Group Managing Director and Chief Investment Officer-
U.S. Equities, the Adviser, TCW Asset Management
Company and Trust Company of the West since May 1994.
Previously, he was a portfolio manager with Putnam
Investments.

Charles Larsen Managing Director, the Adviser, TCW Asset Management
Company and Trust Company of the West.
Core Fixed Income
Fund
Mark L. Attanasio Group Managing Director and Chief Investment Officer--
Below Investment Grade Fixed Income, the Adviser, TCW
Asset Management Company and Trust Company of the West
since April 1995. From April 1991 to March 1995 he was
Co-Chief Executive Officer and Chief Portfolio
Strategist of Crescent Capital Corporation, Los
Angeles, CA.

Philip A. Barach Group Managing Director and Chief Investment
Officer--Investment Grade Fixed Income, the Adviser, TCW
Asset Management Company and Trust Company of the West.

Jeffrey E. Gundlach Group Managing Director and Chairman Multi-Strategy
Fixed Income Committee, the Adviser, TCW Asset
Management Company and Trust Company of the West.

High Yield Bond Fund
Mark L. Attanasio Group Managing Director and Chief Investment Officer--
Below Investment Grade Fixed Income, the Adviser, TCW
Asset Management Company and Trust Company of the West
since April 1995. From April 1991 to March 1995 he was
Co-Chief Executive Officer and Chief Portfolio
Strategist of Crescent Capital Corporation, Los
Angeles, CA.

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 since April 1995.
From February 1992 to March 1995 she was a Vice
President and Portfolio Manager of Crescent Capital
Corporation, Los Angeles, CA.
Total Return
Mortgage-Backed
Securities Fund

Philip A. Barach Group Managing Director and Chief Investment Officer--
Investment Grade Fixed Income, the Adviser, TCW
Asset Management Company and Trust Company of the West.

Jeffrey E. Gundlach Group Managing Director and Chairman Multi-Strategy
Fixed Income Committee, the Adviser, TCW Asset
Management Company and Trust Company of the West.

Frederick H. Horton Managing Director, 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.

European Equities
Fund
James M. Burns Managing Director and Executive Vice President, TCW
London International Limited (since August 1993) and
Managing Director, TCW Asset Management Company since
October 1994. Previously Managing Director Dillon, Read
International Asset Management Co. (London).

Saker A. Nusseibeh Managing Director and Executive Vice President, TCW
London International, Limited and Managing Director,
TCW Asset Management Company since July 1996. Previously
Director of Mercury Asset Management (London).

* Positions with the TCW Group, Inc. and its affiliates may have changed over
time.

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)
Aggressive Growth 1.00%
Equities
Large Cap Growth 0.55%
Large Cap Value 0.55%
Select Equities 0.75%
Small Cap Growth 1.00%
Core Fixed Income 0.40%
High Yield Bond 0.75%
Total Return Mortgage- 0.50%
Backed Securities
European Equities 0.75%

The Adviser has retained, at its sole expense, TCW London to provide investment
advisory services with respect to the European Equities Funds. Under the
Sub-Advisory Agreement the Sub-Adviser assist the Adviser in performing its
advisory functions in respect of the Funds.

<PAGE>

The Advisory and Sub-Advisory Agreements provide that the Adviser and
Sub-Adviser, respectively, shall not be liable for any error of judgment or
mistake of law or for any loss suffered by a Fund 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 or
Sub-Adviser in the performance of their duties or from reckless disregard by the
Adviser of their duties under the agreement.

Multiple Class Structure

Each Fund currently offers two classes of shares, Institutional Class shares and
Class N shares. Shares of each class of a Fund represent an equal pro rata
interest in that Fund and generally gives 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 also 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 assets of that 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.

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 normally 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:

o amounts of $100,000 or more

o amounts of $1,000 or more on accounts whose address has been changed
within the last 30 days

o 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.

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:

o 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

o change or discontinue its exchange privilege, or temporarily suspend
this privilege during unusual market conditions

o 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).

TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT
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
TCW Galileo Funds, Inc. (Same, except that you should include a note
DST Systems, Inc. specifying the Fund name, your account number,
P.O. Box 419951 and the name(s) your account is registered in.)
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) 248-4486 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.

<PAGE>

TO SELL OR EXCHANGE SHARES
By Mail

Write a letter of instruction that includes:

o your name(s) and signature(s) as they appear on the account form
o your account number
o the Fund name
o the dollar amount you want to sell or exchange

o 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)

<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.

<PAGE>

Financial Highlights

The financial highlights table is intended to help you understand the Fund's
financial performance for the fiscal years indicated. Certain information
reflects financial results for a single Fund share. "Total return" shows how
much your investment in the Class N shares of the Fund would have increased (or
decreased) during each period, assuming you had reinvested all dividends and
distributions (Class N shares of the Fund commenced operations on March 1,
1999). These figures have been audited by Deloitte & Touche LLP, whose report,
along with the Company's financial statements, are included in the annual
report, which is available upon request.

TCW Galileo Aggressive Growth Equities Fund
Class N

March 1, 1999
through

October 31, 1999

-----------------------
Net Asset Value per Share, Beginning of Period $ 16.07
-----------------------

Income (Loss) from Investment Operations:

Net Investment (Loss) (0.12)
Net Realized and Unrealized Gain on Investments 6.32
-----------------------
Total from Investment Operations 6.20
-----------------------

Net Asset Value per Share, End of Period $ 22.27
=======================

Total Return 38.58% (1)

Ratios/Supplemental Data:

Net Assets, End of Period (in thousands) $ 2,367
Ratio of Net Expenses to Average Net Assets 1.47%(2)(3)
Ratios of Net Investment (Loss) to Average Net Assets (0.92)%(2)
Portfolio Turnover Rate 64.12%

(1) For the period March 1, 1999 (Commencement of offering of Class N shares)
through October 31, 1999 and not indicative of a full year's operating
results.
(2) Annualized.
(3) The Investment Adviser has contractually agreed to reduce its fee, or to
pay the operating expenses of the Fund, to the extent necessary to limit
the annual operating expenses of the Fund to 1.53% of net assets through
October 31, 1999. Had such action not been taken, total annualized
operating expenses, as a percentage of average net assets, would have been
6.83% for the period from March 1, 1999 (Commencement of offering of Class
N shares) to October 31, 1999.

<PAGE>

Financial Highlights

TCW Galileo Large Cap Growth Fund
Class N

March 1, 1999
through

October 31, 1999

Net Asset Value per Share, Beginning of Period $ 13.70
----------------------

Income (Loss) from Investment Operations:

Net Investment (Loss) (0.08)
Net Realized and Unrealized Gain on Investments 2.98
----------------------
Total from Investment Operations 2.90
----------------------

Net Asset Value per Share, End of Period $ 16.60
======================

Total Return 21.17%(1)

Ratios/Supplemental Data:

Net Assets, End of Period (in thousands) $ 86
Ratio of Net Expenses to Average Net Assets 1.46%(2)(3)
Ratio of Net Investment (Loss) to Average Net Assets (0.74)%(2)
Portfolio Turnover Rate 78.02%

(1) For the period March 1, 1999 (Commencement of offering of Class N shares)
through October 31, 1999 and not indicative of a full year's operating
results.
(2) Annualized.
(3) The Investment Adviser has contractually agreed to reduce its fee, or to
pay the operating expenses of the Fund, to the extent necessary to limit
the annual ordinary operating expenses of the Fund to 1.39 % of net assets
through October 31, 1999. Had such action not been taken, total annualized
operating expenses, as a percentage of average net assets, would have been
392.27% for the period ended October 31, 1999.

<PAGE>

Financial Highlights

TCW Galileo Large Cap Value Fund
Class N

March 1, 1999
through

October 31, 1999

--------------------
Net Asset Value per Share, Beginning of Period $ 11.07
--------------------

Income from Investment Operations:

Net Investment Income 0.06
Net Realized and Unrealized Gain on Investments 0.66
--------------------
Total from Investment Operations 0.72
--------------------

Net Asset Value per Share, End of Period $ 11.79
====================

Total Return 6.51%(1)

Ratios/Supplemental Data:

Net Assets, End of Period (in thousands) $ 58
Ratio of Net Expenses to Average Net Assets 1.46%(2)(3)
Ratio of Net Investment Income to Average Net Assets 0.71%(2)
Portfolio Turnover Rate 142.36%

- -----------------------
(1) For the period March 1, 1999 (Commencement of offering of Class N shares)
through October 31, 1999 and not indicative of a full year's operating
results.
(2) Annualized.
(3) The Investment Adviser has contractually agreed to reduce its fee, or to
pay the operating expenses of the Fund, to the extent necessary to limit
the annual ordinary operating expenses of the Fund to 1.39 % of net assets
through October 31, 1999. Had such action not been taken, total annualized
operating expenses, as a percentage of average net assets, would have been
163.61% for the period ended October 31, 1999.

<PAGE>

Financial Highlights

TCW Galileo Select Equities Fund
Class N

March 1, 1999
through

October 31, 1999

--------------------
Net Asset Value per Share, Beginning of Period $ 17.62
--------------------

Income (Loss) from Investment Operations:

Net Investment (Loss) (0.07)
Net Realized and Unrealized Gain on Investments 3.12
--------------------
Total from Investment Operations 3.05
--------------------

Net Asset Value per Share, End of Period $ 20.67
====================

Total Return 17.31%(1)

Ratios/Supplemental Data:

Net Assets, End of Period (in thousands) $ 19,111
Ratio of Expenses to Average Net Assets 1.46%(2)(3)
Ratio of Net Investment (Loss) to Average Net Assets (0.53)%(2)
Portfolio Turnover Rate 48.29%

(1) For the period March 1, 1999 (Commencement of offering of Class N shares)
through October 31, 1999 and not indicative of a full year's operating
results.
(2) Annualized.
(3) The Investment Adviser has contractually agreed to reduce its fee, or to
pay the operating expenses of the Fund, to the extent necessary to limit
the annual ordinary operating expenses of the Fund to 1.39% of net assets
through October 31, 1999. Had such action not been taken, total annualized
operating expenses, as a percentage of average net assets, would have been
2.66% for the period from March 1, 1999 (Commencement of offering of
Advisory class shares) to October 31, 1999.

<PAGE>

Financial Highlights

TCW Galileo Small Cap Growth Fund
Class N

March 1, 1999
through

October 31, 1999

-----------------------
Net Asset Value per Share, Beginning of Period $ 20.62
-----------------------

Income (Loss) from Investment Operations:

Net Investment (Loss) (0.20)
Net Realized and Unrealized Gain on Investments 10.32
-----------------------
Total from Investment Operations 10.12
-----------------------

Net Asset Value per Share, End of Period $ 30.74
=======================

Total Return 49.08% (1)

Ratios/Supplemental Data:

Net Assets, End of Period (in thousands) $671
Ratio of Net Expenses to Average Net Assets 1.53%(2)(3)
Ratios of Net Investment (Loss) to Average Net Assets (1.15)% (2)
Portfolio Turnover Rate 74.52%

(1) For the period March 1, 1999 (Commencement of offering of Class N shares)
through October 31, 1999 and not indicative of a full year's operating
results.
(2) Annualized.
(3) The Investment Adviser has contractually agreed to reduce its fee, or to
pay the operating expenses of the Fund, to the extent necessary to limit
the annual ordinary operating expenses of the Fund to 1.63% of net assets
through October 31, 1999. Had such action not been taken, total annualized
operating expenses, as a percentage of net assets, would have been 35.14%
for the period ended October 31, 1999.

<PAGE>

Financial Highlights

The financial highlights table is intended to help you understand the Fund's
financial performance for the fiscal years indicated. Certain information
reflects financial results for a single Fund share. "Total return" shows how
much your investment in the N Class shares of the Fund would have increased (or
decreased) during each period, assuming you had reinvested all dividends and
distributions (Class N shares of the Fund commenced operations on March 1,
1999). These figures have been audited by Deloitte & Touche LLP, whose report,
along with the Company's financial statements, are included in the annual
report, which is available upon request.

TCW Galileo Core Fixed Income Fund
Class N

March 1, 1999
through

October 31, 1999

-----------------------
Net Asset Value per Share, Beginning of Period $ 9.74
-----------------------

Income (Loss) from Investment Operations:

Net Investment Income 0.37
Net Realized and Unrealized Gain (Loss) on Investments (0.35)
-----------------------
Total from Investment Operations 0.02
-----------------------
Less Distributions:

Distributions from Net Investment Income (0.25)
-----------------------
Net Asset Value per Share, End of Period $ 9.51
=======================

Total Return 0.17%(1)

Ratios/Supplemental Data:

Net Assets, End of Period (in thousands) $ 83
Ratio of Expenses to Average Net Assets 1.00%(2)(3)
Ratio of Net Investment Income to Average Net Assets 5.68%(2)
Portfolio Turnover Rate 136.63%

- -------------------------
(1) For the period March 1, 1999 (Commencement of offering of Class N shares)
through October 31, 1999 and not indicative of a full year's operating
results.
(2) Annualized.
(3) The Investment Adviser has contractually agreed to reduce its fee, or to
pay the operating expenses of the Fund, to the extent necessary to limit
the annual ordinary operating expenses of the Fund to 1.00% of net assets
through October 31, 1999. Had such action not been taken, total annualized
operating expenses, as a percentage of average net assets, would have been
134.10% for the period from March 1, 1999 (Commencement of offering of
Class N shares) to October 31, 1999.

<PAGE>

Financial Highlights

TCW Galileo High Yield Bond Fund
Class N

March 1, 1999
through

October 31, 1999

----------------------------
Net Asset Value per Share, Beginning of Period $ 9.39
----------------------------

Income from Investment Operations:

Net Investment Income 0.55
Net Realized and Unrealized Gain on Investments (0.57)
----------------------------
Total from Investment Operations (0.02)
----------------------------

Less Distributions:

Distributions from Net Investment Income (0.46)
----------------------------
Total Distributions (0.46)
----------------------------

Net Asset Value per Share, End of Period $ 8.91
============================

Total Return (0.24)%(1)

Ratios/Supplemental Data:

Net Assets, End of Period (in thousands) $ 189
Ratio of Expenses to Average Net Assets 1.30%(2)(3)
Ratio of Net Investment Income to Average Net Assets 8.78%(2)(3)
Portfolio Turnover Rate 128.15%

- --------------------------
(1) For the period March 1, 1999 (Commencement of offering of Class N shares)
through October 31, 1999 and not indicative of a full year's operating
results.
(2) Annualized.
(3) The Investment Adviser has contractually agreed to reduce its fee, or to
pay the operating expenses of the Fund, to the extent necessary to limit
the annual ordinary operating expenses of the Fund to 1.30% of net assets
through October 31, 1999. Had such action not been taken, total annualized
operating expenses, as a percentage of average net assets, would have been
47.83% for the period from March 1, 1999 (Commencement of offering of
Advisory Class shares) to October 31, 1999.

<PAGE>

Financial Highlights

TCW Galileo Total Return Mortgage-Backed Securities Fund
Class N

March 1, 1999
through

October 31, 1999

-----------------------
Net Asset Value per Share, Beginning of Period $ 9.40
-----------------------

Income from Investment Operations:

Net Investment Income 0.43
Net Realized and Unrealized Gain on Investments (0.49)
-----------------------
Total from Investment Operations (0.06)
-----------------------

Less Distributions:

Distributions from Net Investment Income (0.11)
-----------------------
Total Distributions (0.11)
-----------------------

Net Asset Value per Share, End of Period $ 9.23
=======================

Total Return (0.69)%(1)

Ratios/Supplemental Data:

Net Assets, End of Period (in thousands) $ 37
Ratio of Expenses to Average Net Assets 1.02%(2)(3)
Ratio of Net Investment Income to Average Net Assets 7.00%(2)(3)
Portfolio Turnover Rate 28.07%

- ------------------
(1) For the period March 1, 1999 (Commencement of offering of Class N shares)
through October 31, 1999 and not indicative of a full year's operating
results.
(2) Annualized.
(3) The Investment Adviser has contractually agreed to reduce its fee, or to
pay the operating expenses of the Fund, to the extent necessary to limit
the annual ordinary operating expenses of the Fund to 1.00% of net assets
through October 31, 1999. Had such action not been taken, total annualized
operating expenses, as a percentage of average net assets, would have been
722.10% for the period from March 1, 1999 (Commencement of offering of
Advisory Class shares) to October 31, 1999.

<PAGE>

Financial Highlights

TCW Galileo European Equities Fund
Class N

March 1, 1999
through

October 31, 1999

---------------------
Net Asset Value per Share, Beginning of Period $ 12.37
---------------------

Income from Investment Operations:

Net Investment Income 0.09
Net Realized and Unrealized Gain on Investments 0.68
---------------------
Total from Investment Operations 0.77
---------------------

Net Asset Value, End of Period $ 13.14
=====================

Total Return 6.23%(1)

Ratios/Supplemental Data:

Net Assets, End of Period (in thousands) $ 149
Ratio of Net Expenses to Average Net Assets 1.69%(2)(3)
Ratios of Net Investment Income to Average Net Assets 1.12%(2)
Portfolio Turnover Rate 95.21 %

- -------------------
(1) For the period March 1, 1999 (Commencement of offering of Class N shares)
through October 31, 1999 and not indicative of a full year's operating
results.
(2) Annualized.
(3) The Investment Adviser contractually agreed to reduce its fee, or to pay
the operating expenses of the Fund to the extent necessary to limit the
annual ordinary operating expenses of the Fund to 1.71% of net assets
through October 31, 1999. Had such action not been taken, total annualized
operating expenses, as a percentage of average net assets, would have been
54.30% for the period March 1, 1999 through October 31, 1999.

<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.
http://www.tcwgalileofunds.com

You may visit the SEC's website at http//www.sec.gov. to view text-only versions
of Fund documents filed with the SEC. You may also obtain copies by visiting the
SEC's Public Reference Room in Washington, DC (phone 1-800-SEC-0330 of
1-202-942-8090) or by sending your request and a duplicating fee to the
Commission's Public Reference Section, 450 Fifth Street, N.W., Washington, DC
20549-0102, or the electronic request at the following E-mail address:
www/[email protected].

TCW Galileo Funds, Inc.

SEC file number: 811-7170

More information on the Fund is available free upon request,
including the following:

Annual/Semi-Annual Report

Describes the Fund's performance, lists portfolio holdings
and contains a letter from the Fund's portfolio manager
discussing recent market conditions, economic trends and
Fund strategies.

Statement of Additional Information (SAI)

Provides more details about the Fund and its 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.

<PAGE>

TCW Galileo
Funds, Inc.

This prospectus tells you about the Institutional Class of seven of the separate
investment funds offered by TCW Galileo Funds, Inc., each of which has different
investment objectives and policies. Please read this document carefully, and
keep it for future reference. Sometimes we will refer to the Funds in this
Prospectus as the Galileo International Funds.

TCW Galileo Asia Pacific Equities Fund

TCW Galileo Emerging Markets Equities Fund

TCW Galileo Emerging Markets Income Fund

TCW Galileo European Equities Fund

TCW Galileo International Equities Fund

TCW Galileo Japanese Equities Fund

TCW Galileo Latin America Equities Fund

March 1, 2000

LOGO

TABLE OF CONTENTS

Page

General Fund Information

Investment Objectives and Principal
Strategies........................... 2

Principal Risks...................... 3

Performance Summary.................. 5

Fund Expenses........................ 9

Expense Example...................... 10

TCW Galileo Asia Pacific Equities
Fund

Investment Objectives/Approach....... 11

Main Risks........................... 12

TCW Galileo Emerging Markets
Equities Fund

Investment Objectives/Approach....... 13

Main Risks........................... 15

TCW Galileo Emerging Markets
Income Fund

Investment Objectives/Approach....... 17

Main Risks........................... 18

TCW Galileo European Equities Fund

Investment Objectives/Approach....... 20

Main Risks........................... 21

TCW Galileo International Equities
Fund

Investment Objectives/Approach....... 22

Main Risks........................... 23

TCW Galileo Japanese Equities Fund

Investment Objectives/Approach....... 24

Main Risks........................... 25

TCW Galileo Latin America Equities
Fund

Investment Objectives/Approach....... 27

Main Risks........................... 29

Risk Considerations.................. 31

Management of the Funds.............. 39

Multiple Class Structure............. 42

Your Investment

Account Policies and Services........ 43

To Open an Account/To Add to an
Account.............................. 46

To Sell or Exchange Shares........... 47

Distributions and Taxes.............. 48

Financial Highlights................. 49

For More Information................ 56

GENERAL FUND INFORMATION

Investment Objectives and Principal Strategies

All of the Galileo Institutional 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.
<TABLE>
<CAPTION>
<S> <C> <C>
TCW Galileo Funds, Inc. Investment Objective Principal Investment Strategies Invests in equity securities
TCW Galileo Asia Pacific Equities Fund Long-term capital of companies in the Asia Pacific Region, except Australia,
appreciation Japan and New Zealand, or securities convertible into such
equity securities.

TCW Galileo Emerging Markets Equities Fund Long-term capital Invests in equity securities of companies in emerging market
appreciation countries around the world.

TCW Galileo Emerging Markets Income Fund High total return from Invests in debt securities issued by
current income and Emerging Market Country governments or their
capital appreciation agencies or instrumentalities or private
corporate issuers.

TCW0 Galileo European Equities Fund Long-term capital Invests in equity securities issued by
appreciation European companies.

TCW Galileo International Equities Fund Long-term capital Invests principally in equity markets
appreciation outside the U.S. through investment in shares of
the Galileo Funds.

TCW Galileo Japanese Equities Fund Long-term capital Invests in equity securities issued by
appreciation Japanese companies.

TCW Galileo Latin America Equities Fund Long-term capital Invests in equity securities issued by
appreciation Latin American companies.
</TABLE>

Under adverse market conditions, each Fund could invest some or all of its
assets in money market securities. Although the Fund will do this only in
seeking to avoid losses, it could have the effect of reducing the benefit from
any upswing in the market.

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 Fund shares will vary as the value of each Fund's portfolio securities
increases or decreases in value. Therefore, the value of an investment in a Fund
could go down as well as up. All investments are subject to:

o 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. Different types of securities tend to go through cycles
of outperformance and underperformance in comparison to the general
securities markets.

o SECURITIES SELECTION RISK

There is the possibility that the specific securities held in the Funds'
portfolio will underperform the 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.

o 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. Each
Fund is subject to foreign investing risk because it invests primarily in
the assets of foreign governments or companies. Because each Fund (except
the Japanese Equities Fund) invests in securities of emerging market
countries, the risk factors listed above are more likely to occur. In
addition, because foreign securities generally are denominated and pay
dividends or interest in foreign currencies, and the Galileo International
Funds hold various foreign currencies, the value of the net assets of these
Funds as measured in United States dollars will be affected favorably or
unfavorably by changes in exchange rates.

Each Fund may also be subject (in varying degrees) to the following risks:

o LIQUIDITY RISK

o PRICE VOLATILITY

There is the possibility that the value of the 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. Each Fund (except the
Emerging Markets Income Fund) is subject to this risk. In addition, the
Emerging Markets Income Fund is subject to price volatility because it
invests in low rated emerging market debt.

Because the Galileo International Funds are non-diversified for Investment
Company Act of 1940 ("1940 Act") purposes, they may invest more than 5% of its
total assets in the securities of any one issuer. Consequently, their 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.

<PAGE>

Performance Summary

The two tables below show each Fund's annual returns and its long-term
performance with respect to its Institutional Class shares. The first table
shows you how the Fund's performance has varied from year to year. The second
compares the Fund's performance over time to that of a broad-based securities
index. Both tables assume reinvestment of dividends and distributions. Except
for the European Equities Fund, the performance information includes the
performance of each Fund's predecessor limited partnership, which were
managed by an affiliate of TCW Investment Management Company, using the same
investment strategy as the Funds. The performance of the partnerships were
calculated using performance standards applicable to private investment
partnerships, which take into account all elements of total return and reflect
the deduction of all fees and expenses of operation. The predecessor limited
partnerships were not registered under the 1940 Act and, therefore, were not
subject to certain investment restrictions imposed by the 1940 Act and
Subchapter M of the Internal Revenue Code of 1986, as amended. If the limited
partnerships had been registered under the 1940 Act their performance might have
been adversely affected. As with all mutual funds, past performance is not a
prediction of the future.

Year by year total return (%)
as of December 31 each year*

TCW Galileo Asia Pacific Equities Fund

94.06% -22.40% 6.90% 20.40% -35.35% -2.19% 114.95%
1993 1994 1995 1996 1997 1998 1999

* The Fund's total return for the period October 31, 1999 to December 31,
1999 is 39.19%

TCW Galileo
Emerging
Markets
Equities Fund

61.70% -22.90% -8.90% 16.40% 0.15% -33.60% 88.23%

1993 1994 1995 1996 1997 1998 1999

* The Fund's total return for the period October 31, 1999 to December 31,
1999 is 36.09%

TCW Galileo
Emerging
Markets
Income Fund

8.90% 10.42% -23.71% 31.86%

1996 1997 1998 1999

* The Fund's total return for the period October 31, 1999 to December 31,
1999 is 7.45%

TCW Galileo European Equities Fund

25.45% 34.09%

1998 1999

* The Fund's total return for the period October 31, 1999 to December 31,
1999 is 27.44%

TCW Galileo International Equities Fund

3.70% 4.90% 5.15% -0.80% 20.85% 46.39%

1994 1995 1996 1997 1998 1999

* The Fund's total return for the period October 31, 1999 to December 31,
1999 is 25.74%

TCW Galileo
Japanese
Equities Fund

-2.39% -15.13% -45.28% 31.30% 96.26%

1995 1996 1997 1998 1999

* The Fund's total return for the period October 31, 1999 to December 31,
1999 is 21.76%

TCW Galileo
Latin America
Equities Fund

17.81% 27.90% 53.53% -22.19% -19.72% 24.40% 33.59% -38.59% -58.31%

1991 1992 1993 1994 1995 1996 1997 1998 1999

* The Fund's total return for the period October 31, 1999 to December 31,
1999 is 40.23%

<PAGE>

Best and worst quarterly performance during this period

Fund Performance
o Asia Pacific Equities Fund
Quarter ending December 31, 1993 51.72% (Best)
Quarter ending December 31, 1997 -31.29% (Worst)

o Emerging Markets Equities Fund
Quarter ending December 31, 1993 42.44% (Best)
Quarter ending September 30, 1998 -24.90% (Worst)

o Emerging Markets Income Fund
Quarter ending December 31, 1998 18.60% (Best)
Quarter ending September 30, 1998 -32.60% (Worst)

o European Equities Fund
Quarter ending December 31, 1999 32.91% (Best)
Quarter ending September 30, 1998 -16.22% (Worst)

o International Equities Fund
Quarter ending December 31, 1999 29.72% (Best)
Quarter ending September 30, 1998 -14.85% (Worst)

o Japanese Equities Fund
Quarter ending December 31, 1998 27.90% (Best)
Quarter ending December 31, 1997 -28.53% (Worst)

o Latin America Equities Fund
Quarter ending December 31, 1999 42.83% (Best)
Quarter ending March 31, 1995 -29.09% (Worst)

<PAGE>

Average annual total return as of Since
December 31, 1999 1 year 5 years inception

o Asia Pacific Equities Fund 114.95% 11.83% 15.44%
MSCI Far East Free (Ex Japan) 59.44% -1.25% 5.01%

o Emerging Markets Equities Fund 88.23% 5.83% 7.95%%
IFC Investable Emerging Markets
Total Return Index 67.11% 2.20% 7.16%

o Emerging Markets Income Fund 31.86% N/A 5.89%
J.P. Morgan Emerging Markets Bond
Index Plus 25.99% N/A 10.39%

o European Equities Fund 34.09% N/A 28.24%
MSCI Europe Index 16.23% N/A 23.43%

o International Equities Fund 46.39% 14.12% 13.42%
MSCI EAFE Index 27.33% 13.16% 13.41%

o Japanese Equities Fund 96.26% N/A 3.39%
TSE First Section Index 76.49% N/A 2.22%
MSCI Japan 61.78% N/A 1.70%

o Latin America Equities Fund 58.31% 5.34% 10.49%
IFC Investable Total Return Latin
America Index 61.82% 5.64% 13.28%

Fund Expenses

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
Institutional Class shares of the Funds have no sales charge (load) or Rule
12b-1 distribution fees.

FEE TABLE
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Asia Emerging Emerging Latin
Pacific Markets Markets European International Japanese America
Equities Equities Income Equities Equities Equities Equities

Shareholder Transaction
Fees

1) Redemption Fees............... None None None None None None None
2) Exchange Fees................. None None None None None None None
3) Contingent Deferred Sales
Load.......................... None None None None None None None
4) Sales Load on Reinvested
Dividends..................... None None None None None None None
5) Sales Load on Purchases....... None None None None None None None

Annual Fund Operating
Expenses

Management Fees............... 1.00% 1.00% 0.75% 0.75% -- 0.75% 1.00%
Distribution (12b-1) Fees..... None None None None None None None
Other Expenses................ 1.05% 1.50% 0.26% 0.26% 0.18% 0.29% 2.24%
Total Annual Fund Operating
Expenses...................... 2.05%1 2.50%2 1.01% 1.01% 0.18% 1.04% 3.24%3
</TABLE>

1 The Adviser voluntarily agreed to reduce its fee or to pay the operating
expenses of the Fund to reduce Annual Fund Operating Expenses to 2.03% of
Net Assets through October 31, 1999.

2 The Adviser voluntarily agreed to reduce its fee or to pay the operating
expenses of the Fund to reduce Annual Fund Operating Expenses to 2.02% of
Net Assets through October 31, 1999.

3 The Adviser voluntarily agreed to reduce its fee or to pay the operating
expenses of the Fund to reduce Annual Fund Operating Expenses to 2.20% of
Net Assets through October 31, 1999.

EXPENSE EXAMPLE

This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds.

1 Year 3 Years 5 Years 10 Years
Asia Pacific Equities.......... $208 $ 643 $ 1,103 $ 2,379
Emerging Markets Equities...... 253 779 1,331 2,836
Emerging Markets Income........ 103 322 558 1,236
European Equities.............. 103 322 558 1,236
International Equities......... 18 58 101 230
Japanese Equities.............. 106 331 574 1,271
Latin America Equities......... 327 998 1,693 3,540

<PAGE>

TCW Galileo Asia Pacific Equities Fund

Investment Objectives/Approach

The Fund seeks long-term capital appreciation. To pursue this goal, it invests
in equity securities of companies in the Asia Pacific Region ("Asia-Pacific
Countries"), except Australia, Japan and New Zealand. At least 65% of the value
of the Fund's total assets will be invested (except when maintaining a
temporary defensive position) in equity securities of Asian Pacific Companies,
or securities convertible into such equity securities.

Concepts to understand

Asia Pacific Company (i) is organized under the laws of an Asia-Pacific Country
or has a principal office in Asia; or (ii) derives 50% or more of its gross
revenues or profits from goods produced or sold, investments made, or services
performed in Asia-Pacific Countries or has at least 50% of its assets situated
in Asia-Pacific Countries; or (iii) its equity securities are traded principally
on a stock exchange or over-the-counter in an Asia-Pacific country.

The Fund will generally invest its portfolio securities
among at least three Asia-Pacific Countries.

In managing the Fund's investments, the Adviser utilizes an
investment process that incorporates both a "top-down" and
"bottom-up" analysis of the Asia-Pacific Countries. The
"top-down" analysis focuses on an evaluation of the global
environment. The Adviser then complements its "top-down"
analysis with a "bottom-up" analysis. The Adviser uses
"bottom-up" analysis to determine country allocation based
on estimated earnings. The key factors that may be used
by the Adviser in assessing the potential for an expansion
(rerating) or contraction (derating) of a stock market's
earnings multiple are:

o liquidity

o historical valuations

o the sustainability of economic growth and political
environment

The Adviser then performs an industry analysis and screens
companies based on certain quantitative analyses.

Mijung Kang and Saker Nusseibeh are the Fund's portfolio
managers.

<PAGE>

Main Risks

The primary risks affecting this Fund are "foreign investing risk," "liquidity
risk" and "price volatility." Because the Fund invests almost all of its assets
in securities issued by foreign companies, it is 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:

o a lack of political or economic stability

o foreign controls on investment and currency exchange rates

o withholding taxes

o a lack of adequate company information

Because the Fund invests in the securities of emerging market countries, these
risks are more pronounced. In addition, securities traded only through foreign
markets may be more volatile and are often harder to sell. The Fund also is
subject to foreign currency risk. Because foreign securities generally are
denominated and pay dividends or interest in foreign currencies, the value of
the net assets of the Fund as measured in U.S. dollars will be affected
favorably or unfavorably by changes in exchange rates. 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 foreign securities may be less liquid than U.S.
securities, the Fund may be more susceptible to liquidity risk than funds that
invest in U.S. securities. 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 the securities of U.S. companies.

The Fund may invest some assets in foreign currency futures, forward contracts,
options and futures. These practices are used primarily to hedge the Fund's
portfolio but may be used to increase returns; however, such practices sometimes
may reduce returns or increase volatility.

The Fund may engage in active portfolio management which may result in increased
Fund transaction expenses and have tax consequences, such as increased realized
gains, for investors.

TCW Galileo Emerging Markets Equities Fund

Investment Objectives/Approach

The Fund seeks long-term capital appreciation. To pursue this goal, it invests
primarily in equity securities of companies in Emerging Market Countries.

The Fund will generally invest its assets among at least five Emerging Market
Countries. At least 65% of the value of its total assets will be invested
(except when maintaining a temporary defensive position) in Emerging Market
Company equity-related securities.

Concepts to understand
- ----------------------

Emerging Market Country is a country that has a developing economy or market and
is considered an emerging or developing country by the International Bank of
Reconstruction and Development or any affiliate thereof (the "World Bank"), as
well as Hong Kong, Israel and Singapore.

Emerging Market Company: (i) is organized under the laws of an Emerging Market
Country or has a principal office in an Emerging Market Country; or (ii) derives
50% or more of its gross revenues or profits from goods produced or sold,
investments made, or services performed in Emerging Market Countries or has at
least 50% of its assets situated in Emerging Market Countries; or (iii) its
equity securities are traded principally on a stock exchange or over-the-counter
in an Emerging Market Country.

In managing the Fund's investments, the Adviser utilizes
both a "top-down view" and a "bottom-up analysis". In
allocating investments among Emerging Market Counties, the
Adviser attempts to integrate an assessment of how the
global environment affects a particular country, with an
analysis of internal political, market and economic
factors. The country economic variables can include such
factors as:

o level of economic activity or GDP growth

o level and direction of local inflation

o level and direction of interest rates

o monetary policy and money supply growth

o current account balances and financing requirements

o the pace and degree of privatization

Based on these analyses, the Adviser estimates the overall
earnings growth rate (in local currency and in U.S. dollars)
of the corporate sector within each country. Market
valuation levels are examined and compared with historical
levels and the levels of other Emerging Market Countries
that have gone through similar stages of economic
development. These analyses and estimates form the basis for
a calculation of the expected return for each market, which
is a key element of country allocation. The next step in the
investment decision process is industry analysis within
sectors, which includes assessing the effects of such
developments as privatization programs, infrastructure
investments, consumer trends and government regulation on
particular industry sectors. The Adviser attempts to
identify the sectors that would benefit from structural
changes. The Adviser also considers the possible impact of
short-term cyclical factors, such as business and political
cycles, on particular industries. These analyses produce
industry weightings for each market.

In selecting Emerging Market Companies for investment, the Adviser can take into
account a variety of factors, such as price/earnings ratio, earnings growth,
quality of management, availability of new products and markets, current and
historical stock prices, sales growth and country factors affecting particular
companies.

Saker Nusseibeh and Michael P. Reilly are the Fund's portfolio managers.

<PAGE>

Main Risks

o a lack of political or economic stability

o foreign controls on investment and currency exchange rates

o withholding taxes

o a lack of adequate company information

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 the
securities of U.S. companies.

The Fund may invest some assets in options, futures, foreign currency futures
and forward contracts. These practices are used primarily to hedge the Fund's
portfolio but may be used to increase returns; however, such practices sometimes
may reduce returns or increase volatility.

The Fund may engage in active portfolio management which may result in increased
Fund transaction expenses and have tax consequences, such as increased realized
gains, for investors.

<PAGE>

TCW Galileo Emerging Markets Income Fund

Investment Objectives/Approach

The Fund seeks high total return from current income and capital appreciation.
To pursue this goal, it invests (except when maintaining a temporary defensive
position) at least 65% of the value of its total assets in debt securities
issued or guaranteed by companies, financial institutions and government
entities in Emerging Market Countries. The debt securities in which the Fund may
invest may consist of securities that are unrated or rated BB or lower by S&P or
Ba or lower by Moody's. Debt securities rated below investment grade are the
equivalent of high yield, high risk bonds, commonly known as "junk bonds."
The Fund will generally invest in at least four Emerging Market Countries.

Concepts to understand
- ----------------------

Emerging Market Company (i) is organized under the laws of an Emerging Market
Country or has a principal office in an Emerging Market Country; or (ii) derives
50% or more of its gross revenues or profits from goods produced or sold,
investments made, or services performed in Emerging Market Countries or has at
least 50% of its assets situated in Emerging Market Countries; or (iii) its
equity securities are traded principally on a stock exchange or over-the-counter
in an Emerging Market Country.

In allocating investments among the various Emerging Market
Countries, the Adviser attempts to analyze internal
political, market and economic factors. The factors include:

o public finances

o monetary policy

o external accounts

o financial markets

o foreign investment regulations

o stability of exchange rate policy and labor conditions

The Fund may invest up to 20% of its total assets in
structured investments that may be either subordinated or
unsubordinated, and in indexed debt securities.

Javier Baz and Nathan B. Sandler are the Fund's portfolio
managers.

Main Risks

The primary risks affecting this Fund are "foreign investing risk," "liquidity
risk," "credit risk," "interest rate risk," and "price volatility." Because the
Fund invests in securities issued by foreign governments or companies, it is
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:

o a lack of political or economic stability

o foreign controls on investment and currency exchange rates

o withholding taxes

o a lack of adequate company information

Because the Fund invests in the securities of emerging market countries, these
risk factors are more pronounced. In addition, securities traded only through
foreign markets may be more volatile and are often harder to sell. The Fund also
is subject to foreign currency risk. Because foreign securities generally are
denominated and pay dividends or interest in foreign currencies, the value of
the net assets of the Fund as measured in U.S. dollars will be affected
favorably or unfavorably by changes in exchange rates. 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 lower quality securities and foreign securities
may be less liquid than higher quality securities, the Fund may be more
susceptible to liquidity risk than funds that invest in higher quality or U.S.
securities. 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 may be
subject to greater credit risk, because it invests in securities that are below
investment grade and have no minimum credit rating. Debt securities that are
rated below investment grade are considered to be speculative. Those securities
rated below investment grade are also commonly known as "junk" bonds. This is
especially true during periods of economic uncertainty or during economic
downturns. Interest rate risk refers to the possibility that the value of the
Fund's portfolio investments may fall when interest rates rise. Changes in
interest rates may have a significant effect on the Fund, because it may hold
securities with long terms to maturity and may use hedging techniques. Price
volatility refers to the possibility that the value of the Fund's portfolio will
change as the value of its investments go up or down. The Fund may be subject to
greater price volatility than funds that invest in the securities of U.S.
issuers.

The Fund may invest some assets in options, swaps, futures, foreign currency
futures and forward contracts. These practices are used primarily to hedge the
Fund's portfolio but may be used to increase returns; however, such practices
sometimes may reduce returns or increase volatility.

The Fund may engage in active portfolio management which may result in increased
Fund transaction expenses and have tax consequences, such as increased realized
gains, for investors.

TCW Galileo European Equities Fund

Investment Objectives/Approach

The Fund seeks long-term capital appreciation. To pursue this goal, it invests
primarily in the securities of European issuers. The Fund invests (except
when maintaining a temporary defensive position) at least 65% of the value of
its total assets in equity securities issued by European companies. These
securities include common and preferred stocks, rights or warrants to purchase
common stock and convertible debt or equity securities. The Fund generally
invests in companies based in at least three European Countries.

The Fund seeks to invest in companies with prospective earnings growth higher
than the market average.

Concepts to understand
- ----------------------

In managing the Fund's investments, the Adviser seeks to
emphasize companies which are moving towards the North
American concept of shareholder value.

James M. Burns and Saker A. Nusseibeh are the Fund's
portfolio managers.

Main Risks

o a lack of political or economic stability

o foreign controls on investment and currency exchange rates

o withholding taxes

o a lack of adequate company information

<PAGE>

TCW Galileo International Equities Fund

Investment Objectives/Approach

This Fund seeks long-term capital appreciation. To pursue its goal, it invests
primarily in equity markets outside the U.S. both in developed and emerging
countries through investment in shares of the Galileo Funds.

In managing the Fund's assets, the Fund allocates its assets, within
predetermined percentage ranges, among certain of the underlying Galileo Funds
which, except for the TCW Galileo Money Market Fund, invest predominantly in
foreign securities. The Fund will invest (except when maintaining a temporary
defensive position) in the following underlying Galileo Funds up to the
percentage limits set forth below:

Fund Investment Limit (Percent of the
Underlying Galileo Funds International Equities Fund's Total Assets)
Asia Pacific Equities Fund 50%
Emerging Markets Equities Fund 35%
European Equities Fund 80%
Japanese Equities Fund 75%
Latin America Equities Fund 50%
Money Market Fund 50%

The Fund may invest directly in Australian and New Zealand securities. The Board
may alter these percentage limits when it deems appropriate.

Each underlying Galileo Fund has a specific investment objective, investment
policies and risks. Investors should read the disclosure contained in the
Prospectus regarding each underlying Galileo Fund's investment objective,
policies, permissible investments and risks. The TCW Galileo Money Market Fund
invests in high credit quality, short-term money market securities.

Saker A. Nusseibeh is the Fund's portfolio manager.

Main Risks

The Fund holds primarily shares of other funds.

The primary risks affecting the Fund are "foreign investing risk," "liquidity
risk" "price volatility," and to a lesser extent, "credit risk." Because the
Fund will invest most of its assets in underlying Galileo Funds, which invest in
securities issued by foreign governments or companies, it is 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:

o a lack of political or economic stability

o foreign controls on investment and currency exchange rates

o withholding taxes

o a lack of adequate company information

Because the Fund invests in underlying Galileo Funds, which invest in the
securities of emerging market countries, these risks are more pronounced. In
addition, securities traded only through foreign markets may be more volatile
and are often harder to sell. The Fund also is subject to foreign currency risk.
Because foreign securities generally are denominated and pay dividends or
interest in foreign currencies, the value of the net assets of those Funds as
measured in U.S. dollars will be affected favorably or unfavorably by changes in
exchange rates. 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 foreign
securities may be less liquid than U.S. securities, the Fund may be more
susceptible to liquidity risk than funds that invest in U.S. securities. Price
volatility refers to the possibility that the value of the Fund's portfolio will
change as the value of its investments go up or down. The Fund may be subject to
greater price volatility than funds that invest in the securities of U.S.
companies.

Investing in the underlying Galileo Funds through the Fund involves certain
additional expenses and taxes that would not be present in direct investments in
the underlying Galileo Funds.

The Fund invests in underlying Galileo Funds, which seek to earn additional
income by making loans of their 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 portfolio management which may have tax
consequences, such as increased realized gains, for investors.

TCW Galileo Japanese Equities Fund

Investment Objectives/approach

The Fund seeks long-term capital appreciation. To pursue this goal, it invests
(except when maintaining a temporary defensive position) at least 65% of the
value of its total assets in equity securities issued by Japanese Companies.
These securities include common and preferred stocks, rights or warrants to
purchase common stock and convertible debt or equity securities.

Concepts to understand
- ----------------------

Japanese Companies (i) are organized under the laws of Japan or have a principal
office in Japan; or (ii) derive 50% or more of their gross revenues or profits
from goods produced or sold, investments made, or services performed in Japan or
have at least 50% of their assets situated in Japan; or (iii) have their equity
securities traded principally on a stock exchange or over-the-counter market in
Japan.

The Fund may invest up to 25% of the value of its total
assets in equity securities of Japanese Companies traded on
the second sections of the main Japanese exchanges and in
the over-the-counter market which generally are smaller
companies. The Fund will invest in companies that the
Adviser believes:

o have potential for good medium term earnings growth

o are undervalued within the Japanese equities market

The Adviser will seek companies that have at least some of
the following characteristics:

o strong balance sheets

o strong management team

o high quality assets

o large market share

The Fund also may invest up to 35% of its total assets in
debt securities of issuers located in Japan or issued or
guaranteed by the Japanese government.

Stephen J. Harker and Peter A. Kirkman are the Fund's
portfolio managers.

Main Risks

The primary risks affecting this Fund are "foreign investing risk," "single
country risk," "liquidity risk," "price volatility" and "credit risk." Because
the Fund invests in securities issued by foreign governments or companies, it is
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:

o a lack of political or economic stability

o foreign controls on investment and currency exchange rates

o withholding taxes

o a lack of adequate company information

In addition, securities traded only through foreign markets may be more volatile
and are often harder to sell. The Fund also is subject to foreign currency risk.
Because foreign securities generally are denominated and pay dividends or
interest in foreign currencies, the value of the net assets of those Funds as
measured in U.S. dollars will be affected favorably or unfavorably by changes in
exchange rates. 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 foreign
securities may be less liquid than U.S. securities, the Fund may be more
susceptible to liquidity risk than funds that invest in U.S. securities. In
addition, because the Fund may invest in the securities of small-sized
companies, these securities may be less liquid than the securities of
large-sized companies. 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. The Fund may be subject to greater price volatility than funds that invest
in the securities of large U.S. companies. The Fund is subject to "single
country" risk. As a "single country" mutual fund, the Fund may exhibit certain
speculative characteristics and thus should not constitute a complete investment
program. The concentration of the Fund's assets in Japanese issuers will subject
the Fund to the risks of adverse social, political or economic events which
occur in Japan. 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. The
Fund may be subject to substantial credit risk because it may invest in
securities that are below investment grade. Debt securities that are rated below
investment grade are considered to be speculative. Those securities rated below
investment grade are also commonly known as "junk" bonds.

The Fund may invest some assets in options, futures, foreign currency futures
and forward contracts. It may also sell securities short. These practices are
used primarily to hedge the Fund's portfolio but may be used to increase
returns; however, such practices sometimes may reduce returns or increase
volatility.

The Fund may engage in active portfolio management which may result in increased
Fund transaction expenses and have tax consequences, such as increased realized
gains, for investors.

TCW Galileo Latin America Equities Fund

Investment Objectives/Approach

The Fund seeks long-term capital appreciation. To pursue this goal, it invests
(except when maintaining a temporary defensive position) at least 65% of the
value of its total assets in Latin American equity securities. The Fund
generally invests its assets among at least three Latin American countries at
all times. Typically, 95% of the Fund's investments will consist of equity
securities of issuers in Brazil, Mexico, Argentina, Chile, Columbia, Peru and
Venezuela.

Concepts to understand
- ----------------------

Latin American securities include (i) debt or equity securities of companies
organized in a country in Latin America or for which the principal trading
market (the exchange or over-the-counter market in which the largest portion of
the shares of the company's securities are traded) is located in Latin America,
(ii) equity securities of companies that derive at least 50% of their gross
revenues or profits from either goods produced or services performed in Latin
America or sales made in Latin America, (iii) equity securities in the form of
Depositary Instruments listed on securities exchanges or traded in other
regulated markets in the United States issued by companies which meet the
requirements set forth in clauses (i) and (ii), (iv) debt securities issued or
guaranteed by the government of a country in Latin America, its agencies or
instrumentalities, or the central bank of such country, and (v) debt securities
denominated in a Latin American currency issued by companies to finance
operations in Latin America.

Other Latin American countries in which the Fund may invest
are: the Bahamas, Barbados, Belize, Bolivia, Costa Rica,
Dominican Republic, Ecuador, El Salvador, French Guinea,
Guatemala, Guyana, Haiti, Honduras, Jamaica, the Netherlands
Antilles, Nicaragua, Panama, Paraguay, Suriname, Trinidad,
Tobago, and Uruguay.

The Fund seeks superior returns by investing in countries,
or sectors within countries, exhibiting strong earnings
growth potential in U.S. dollar terms as well as reasonable
value. Allocation of assets among Latin American countries
is based on the risk adjusted attractiveness of each market.

The Adviser carries out both country political and economic
analysis in order to identify attractive investment
opportunities. This analysis can involve:

o internal research

o in-country visits with government officials, business
leaders, and private sector consultants

o communicating with multilateral agencies such as the
World Bank, IMF, and IADB

o in-country visits with the management of companies in
which the Fund invests

The Adviser uses its research to identify countries with:

o declining interest rates

o a reduction in country risk

o strong economic growth

The Adviser seeks to invest in the equity securities of companies with:

o quality management

o strong earnings growth

o reasonable valuation measures relative to other market proxies

Shannon M. Callan and Michael P. Reilly are the Fund's portfolio managers.

Main Risks

The primary risks affecting this Fund are "foreign investing risk," "liquidity
risk," and "price volatility." Because the Fund invests a portion of its assets
in securities issued by foreign governments or companies, 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:

o a lack of political or economic stability

o foreign controls on investment and currency exchange rates

o withholding taxes

o a lack of adequate company information

Because the Fund invests in the securities of emerging market countries, these
risks are more pronounced. In addition, securities traded only through foreign
markets may be more volatile and are often harder to sell. The Fund also is
subject to foreign currency risk. Because foreign securities generally are
denominated and pay dividends or interest in foreign currencies, and some of the
Funds hold various foreign currencies from time to time, the value of the net
assets of those Funds as measured in U.S. dollars will be affected favorably or
unfavorably by changes in exchange rates. 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 lower quality securities and foreign securities may be less
liquid than higher quality or U.S. securities, the Fund may be more susceptible
to liquidity risk than funds that invest in higher quality or U.S. investments.
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 the
securities of large U.S. companies.

The Fund may engage in active portfolio management which may result in increased
Fund transaction expenses and have tax consequences, such as increased realized
gains, for investors.

<PAGE>

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 type of security, market reactions to political or
economic events, and tax and regulatory effects (including the lack of adequate
regulations for a market or particular type of instrument). Market restrictions
on trading volume can also affect price and liquidity.

General Investment Risk

Since shares of a Fund represent an investment in securities with fluctuating
market prices, the value of Fund 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.

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 long term. The
fewer the number of issuers in which a Fund invests, the
greater the potential volatility of its portfolio.

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.

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 U.S. dollar, the U.S.
dollar value of the foreign security 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. 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 each 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 some of the
Funds hold various foreign currencies from time to time, the
value of the net assets of those Funds as measured in U.S.
dollars will 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 Galileo International 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.

With respect to the Emerging Markets Equities, Emerging Markets Income, and
Latin America Equities Funds, the forward currency market for the purchase or
sale of U.S. dollars in most Latin American countries is not highly developed,
and, in certain countries, there may be no such market. If a devaluation of a
currency is generally anticipated, the Funds may not be able to contract to sell
the currency at an exchange rate more advantageous than that which would prevail
after the anticipated amount of devaluation, particularly in regard to forward
contracts for local currencies in view of the relatively small, inactive or even
non-existent market for these contracts. In the event the Funds hold securities
denominated in a currency that suffers a devaluation, the Funds' net asset
values will suffer corresponding reductions. In this regard, in December 1994,
the Mexican government determined to allow the Mexican peso to trade freely
against the U.S. dollar rather than within a controlled band, which action
resulted in a significant devaluation of the Mexican peso against the dollar.
Further, in July 1997, the Thai and Philippine governments allowed the baht and
peso, respectively, to trade freely against the U.S. dollar resulting in a sharp
devaluation of both currencies, and in 1998 Russia did the same, causing a sharp
devaluation of the ruble.

Investors should recognize that investing in securities of emerging market
countries through investment in the Asia Pacific Equities, Emerging Markets
Equities, Emerging Markets Income, European Equities, International Equities and
Latin America Equities Funds involves certain risks, and considerations,
including those set forth below, which are not typically associated with
investing in the United States or other developed countries.

Risks Associated With
Emerging Market Countries
- -------------------------

Investing in emerging market countries involves substantial
risk due to limited information; higher brokerage costs;
different accounting standards; thinner trading markets as
compared to those in developed countries; currency blockages
or transfer restrictions; and expropriation, nationalization
or other adverse political or economic developments.

Political and economic structures in many emerging market
countries may be undergoing significant evolution and rapid
development, and such countries may lack the social,
political and economic stability characteristics of more
developed countries. Some of these countries may have in the
past failed to recognize private property rights and have at
times nationalized or expropriated the assets of private
companies.

In addition, emerging market countries' exchanges and
broker-dealers are generally subject to less government and
exchange regulation than their counterparts in developed
countries. Brokerage commissions, dealer concessions,
custodial expenses and other transaction costs may be higher
in emerging markets than in developed countries. As a
result, Funds investing in emerging market countries have
operating expenses that are expected to be higher than other
Funds investing in more established market regions.

Many of the emerging market countries may be subject to a greater degree of
economic, political and social instability than is the case in the United
States, Canada, Australia, New Zealand, Japan and Western European and certain
Asian countries. Such instability may result from, among other things, (i)
popular unrest associated with demands for improved political, economic and
social conditions, and (ii) internal insurgencies. Such social, political and
economic instability could disrupt the financial markets in which the Asia
Pacific Equities, Emerging Markets Equities, Emerging Markets Income,
International Equities and Latin America Equities Funds invest and adversely
affect the value of a Fund's assets.

Many of the currencies of emerging market countries have experienced
devaluations relative to the U.S. dollar, and major devaluations have
historically occurred in certain countries. Any devaluations in the currencies
in which portfolio securities are denominated will have a detrimental impact on
Funds investing in emerging market countries. Many emerging market countries are
experiencing currency exchange problems. Countries have and may in the future
impose foreign currency controls and repatriation control.

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 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 downgrades.

The Emerging Markets Income Fund may invest in debt
instruments rated below investment grade. Debt securities
that are rated below investment grade are considered to be
speculative. Those securities rated below investment grade
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 change in value of debt instruments
associated with 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
value of fixed rate securities and falling interest rates will have a positive
effect on value. 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).

Each of the Galileo International Funds are non-diversified for 1940 Act
purposes and as such may invest a larger percentage of its assets in individual
issuers than a diversified investment company. In this regard, the Fund is not
subject to the general limitation that it not invest more than 5% of its total
assets in the securities of any one issuer. To the extent the 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,
the 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 high percentage of a Fund's assets may
be invested in the securities of a limited number of
issuers, a Fund may be more susceptible to any single
economic, political or regulatory occurrence than a
diversified fund.

<PAGE>

Year 2000
- ---------

A Fund's portfolio investments may be negatively affected by
Year 2000 related developments that may occur later in the
year 2000.

Like other mutual funds, the investment advisory and
management services provided by the Adviser and the services
provided to shareholders by the Transfer Agent depend on the
smooth functioning of their computer systems. There has been
concern that some computer software systems in use today may
still not recognize the year 2000, but revert to 1900 or
some other date, due to the manner in which dates were
encoded and calculated. That failure could have a negative
impact on the handling of securities trades, pricing and
account services into the first quarter of the Year 2000, or
beyond. The Adviser and the Transfer Agent have actively
worked on necessary changes to their own computer systems to
prepare for the year 2000 issue. To date, it appears that
most companies have made the Year 2000 date transition
successfully. While the possibility has diminished since
January 4, 2000, corporate and governmental data processing
errors may still arise and result in production problems for
individual companies. Earnings of individual issuers may be
affected by remediation costs which may be substantial and
may not be currently reflected in financial statements.
Individual firms may experience disruptions to their
business due to the failure of their counterparts to address
year 2000 problems, or could experience disruptions which
could adversely affect corporate earnings generally and the
value of their securites. Accordingly, a Fund's portfolio
investments may be negatively affected by Year 2000 related
developments that may occur later in the year 2000.

Certain of the Funds will 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
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.

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.

Like other investment companies and business organizations,
including the companies in which the Funds invest, the Funds
could be adversely affected: (i) if the euro, or EMU as a
whole does not take effect; (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.

Management of the Funds

Investment Adviser

The Funds' investment adviser is TCW Investment Management Company and is
headquartered at 865 South Figueroa Street, Suite 1800, Los Angeles, California
90017. As of December 31, 1999, the Adviser and its affiliated companies, which
provide a variety of trust, investment management and investment advisory
services had approximately $70 billion under management or committed to
management.

Investment Sub-Adviser

TCW London International, Limited ("TCW London") (regulated by I.M.R.O.),
Sub-Adviser to the Asia Pacific Equities, Emerging Markets Equities, European
Equities, Japanese Equities and International Equities Funds, is headquartered
at 16 Charles II Street, London, England SW1Y4QU.

<PAGE>

Portfolio Managers

Listed below are the individuals who have been primarily responsible for the
day-to-day portfolio management of the Funds, including a summary of each
person's business experience during the past five years:

Portfolio Manager(s) Business Experience During Last Five Years*

Javier Baz Managing Director and Chief Investment Officer-
International, the Adviser, TCW Asset Management
Company and Trust Company of the West since January 1994.
Previously Managing Director, Merrill Lynch Capital
Markets-International Emerging Markets Corporate Finance
Group.

James M. Burns Managing Director and Executive Vice President, TCW London
International Limited (since August 1993) and Managing
Director, TCW Asset Management Company since October 1994.
Previously Managing Director Dillon, Read International
Asset Management Co. (London).

Shannon M. Callan Managing Director, the Adviser, TCW Asset Management
Company and Trust Company of the West. Prior to rejoining
the Adviser in 1994, portfolio manager for Moore
Capital, an Offshore hedge fund. Prior to 1993 portfolio
manager/analyst for TCW Asset Management Company.

Stephen J. Harker Managing Director and Executive Vice President, TCW
London International, Limited (since January 1994) and
Managing Director, TCW Asset Management Company (since
October 1994). Previously Assistant Director and Fund
Manager for Prudential Portfolio Managers, Ltd. (England).

Mijung Kang Vice President TCW London International Ltd. since October
1999. Vice President TCW Asia Limited from February 1998
to October 1999. Previously, Fund Manager at Lloyd George
Management (Hong Kong) Limited.

Peter A. Kirkman Vice President TCW London International, Ltd. and TCW
Asset Management Company since March 1996. Previously
Senior Fund Manager Prudential Portfolio Managers, Ltd.
(England).

Saker A. Nusseibeh Managing Director and Executive Vice President, TCW London
International, Limited and Managing Director, TCW Asset
Management Company since July 1996. Previously Director
of Mercury Asset Management (London).

Michael P. Reilly Managing Director, the Adviser, TCW Asset Management
Company and Trust Company of the West.

Nathan B. Sandler Managing Director, the Adviser, TCW Asset Management
Company and Trust Company of the West since September
1993. Previously a Principal of SCS Leveraged Global
Markets, a Fixed income investment Fund.

* Positions with the TCW Group, Inc. and its affiliates may have changed over
time.

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 their assets, to
place orders for the purchase and sale of their 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.
In addition, the Adviser may reimburse third party administrators for retirement
plan shareholder servicing expenses. 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:
<TABLE>
<CAPTION>
<S> <C> <C>
Fund Annual Management Fee (As Percent of Average Net Asset Value)

Asia Pacific Equities 1.00%
Emerging Markets Equities 1.00%
Emerging Markets Income 0.75%
European Equities 0.75%
Latin America Equities 1.00%
International Equities --
Japanese Equities 0.75%
</TABLE>

The Advisory Agreement for International Equities provides that the Fund does
not pay a direct management fee. However, as a "Fund of Funds" investing its
assets in a mix of other Galileo Funds, International Equities will bear its
proportionate share of the management fee of any other Fund in which it invests.

The Adviser has retained, at its sole expense, TCW London to provide investment
advisory services with respect to the Asia Pacific Equities Emerging Markets
Equities, European Equities, International Equities and Japanese Equities Funds.
Under the Sub-Advisory Agreement the Sub-Adviser assists the Adviser in
performing its advisory functions in respect of the Funds.

The Advisory and Sub-Advisory Agreements provide that the Adviser and
Sub-Adviser, respectively, shall not be liable for any error of judgment or
mistake of law or for any loss suffered by a Fund in connection with the matters
to which the agreements relate, except a loss resulting from willful
misfeasance, bad faith or gross negligence on the part of the Adviser or
Sub-Adviser in the performance of their duties or from reckless disregard by
them of their duties under each respective agreement.

Multiple Class Structure

Each Fund currently offers two classes of shares, Institutional Class shares and
Class N shares. Shares of each class of a Fund represents an equal pro rata
interest in that Fund and generally gives 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 also 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 assets of that 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.

YOUR INVESTMENT

Account Policies and Services

Buying shares

You pay no sales charges to invest in a Fund. Your price for Fund 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 the Fund. Orders received by a Fund's 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 Fund's 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 Fund's Board.

Minimums

Initial Additional

All Funds except Money Market Fund $ 250,000 $ 25,000
Money Market Fund $ 100,000 $ 1,000

TCW Galileo Funds, Inc. may waive the minimum and subsequent investments. All
investments must be in U.S. dollars. Third-party checks, except those payable to
an existing shareholder, will normally not be accepted. If your check or wire
does not clear, you will be responsible for any loss a Fund incurs.

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 the 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:

o amounts of $100,000 or more

o amounts of $1,000 or more on accounts whose address has been changed
within the last 30 days

o requests to send the proceeds to a payee or address different than
what is on our records

Exchange privilege

You can exchange from one Class I Galileo Fund into another. You must meet the
investment minimum of the Fund you are exchanging into. 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 Fund shares through certain broker-dealers and financial
organizations and their authorized intermediaries. If purchases and redemptions
of Fund shares are arranged and settlement is made at an investors 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

For any Fund, if your account falls below $250,000 ($100,000 for Money Market
Fund) as a result of redemptions and or exchanges for six months or more, the
Fund may close your account and send you the proceeds upon 60 days' written
notice.

Large Redemption Amounts
- ------------------------

Each Fund also reserves 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 the 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 for the International
Equities Fund, 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:

o 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

o change or discontinue its exchange privilege, or
temporarily suspend this privilege during unusual
market conditions

o 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)

<PAGE>

TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT
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
TCW Galileo Funds, Inc. (Same, except that you should include a note
specifying the Fund name, your account number,
DST Systems, Inc. and the name(s) 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 or the Investor Relations Department
at (800) FUND TCW (386-3829).

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, the Investor Relations Department at TCW Galileo Funds at
(800) FUND TCW (386-3829) or your investment representative at TCW Galileo
Funds.

<PAGE>

TO SELL OR EXCHANGE SHARES

By Mail

Write a letter of instruction that includes:

o your name(s) and signature(s) as on the account form
o your account number
o the Fund name
o the dollar amount you want to sell or exchange
o how and where to send the proceeds

Obtain a signature guarantee or other documentation, if required (see "Account
Policies--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 Fund has 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.

System 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 $25,000 or more. Systematic Withdrawal
plans are subject to a minimum annual withdrawal of $500.

To reach the Transfer Agent, DST Systems, Inc., call toll
free in the U.S.

(800) 248-4486
Outside the U.S.
(816) 843-7166 (collect)

To reach your investment representative or the Investor
Relations Department at TCW Galileo Funds, call toll free in
the U.S.

(800) 386-3829

<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
the Emerging Markets Income Fund will be declared and paid monthly. Dividends
from the net investment income of each other Fund will be declared and paid
annually. The Funds will distribute any net realized long or short-term capital
gains at least annually. Your distributions will be reinvested in the Fund
unless you instruct the Fund otherwise. There are no fees or sales charges on
reinvestments.

In any fiscal year in which the Funds qualify as regulated investment companies
and distribute to shareholders all of their net investment income and net
capital gains, the Funds are relieved of federal income tax.

This is a brief summary of some of the tax laws that affect your investment in
the Fund. Please see the Statement of Additional Information and your tax
adviser for further information.

<PAGE>

Financial Highlights

The financial highlights table is intended to help you understand the Fund's
financial performance for the fiscal years indicated. Certain information
reflects financial results for a single Fund share. "Total return" shows how
much your investment in the Institutional Class shares of the Fund would have
increased (or decreased) during each period, assuming you had reinvested all
dividends and distributions. These figures have been audited by Deloitte &
Touche LLP, whose report, along with Company's financial statements, are
included in the annual report, which is available upon request.

TCW Galileo Asia Pacific Equities Fund
<TABLE>
<CAPTION>
Year Ended October 31
---------------------------------------------------
<S> <C> <C> <C> <C> <C>
1999 1998 1997 1996 1995
Per-Share Data ($)
Net asset value, beginning of year $5.09 $7.37 $9.61 $8.67 $10.19
---------------------------------------------------
Investment operations:
Investment income (loss)--net (0.02) 0.02 (0.01) 0.06 0.06
Net realized and unrealized gain
(loss) on investments (1.04) 0.93 (1.19)
and foreign currency 3.30 (2.10)
---------------------------------------------------
Total from investment operations 3.28 (1.02) (2.11) 0.99 (1.13)
---------------------------------------------------
Distributions:
Dividends from net investment income -- -- (0.08) (0.05) (0.01)
Dividends in excess of net -- -- (0.05) -- (0.22)
investment income
Dividends from net realized gains on -- (1.26) -- -- (0.16)
innvestments ---------------------------------------------------
Total Distributions -- (1.26) (0.13) (0.05) (0.39)
---------------------------------------------------
Net asset value, end of year $8.37 $5.09 $7.37 $9.61 $8.67

Total return 64.44% (14.80)% (22.40)% 11.36% (10.98)%

Ratios/Supplemental Data:
Net assets, end of period ($ x 1,000) $22,070 $8,482 $21,327 $48,266 $46,709
Ratio of expenses to average net assets 2.03%1 2.48% 1.49% 1.43% 1.47%(2)
Ratio of net income (loss) to average net (0.34)% 0.36% (0.02)% 0.66% 0.74%
assets
Portfolio turnover rate 119.72% 190.33% 81.92% 84.81% 102.01%
</TABLE>

1 The Adviser had voluntarily agreed to reduce its fee from the Fund, or to
pay the operating expenses of the Fund, to the extent necessary to limit
the ordinary operating expenses of the Fund to the average of the total
expense ratios as reported by Lipper Analytical Services, Inc. for the
Fund's investment objective which is subject to change on a monthly basis,
through December 31, 1999. Had such action not been taken, total annualized
operating expenses, as a percentage of net assets, would have been 2.05% of
average net assets for the year ended October 31, 1999.

2 The Adviser had voluntarily agreed to reduce its fee from the Fund, or to
pay the operating expenses of the Fund, to the extent necessary to limit
the ordinary operating expenses of the Fund to 1.40% of average net assets
through December 31, 1994. Had such action not been taken, total operating
expenses, as a percentage of net assets, would have been 1.51% for the year
ended October 31, 1995.

<PAGE>

Financial Highlights

The financial highlights table is intended to help you understand the Fund's
financial performance for the fiscal years indicated. Certain information
reflects financial results for a single Fund share. "Total return" shows how
much your investment in the Institutional Class shares of the Fund would have
increased (or decreased) during each period, assuming you had reinvested all
dividends and distributions. These figures have been audited by Deloitte &
Touche LLP, whose report, along with Company's financial statements, are
included in the annual report, which is available upon request.

TCW Galileo Emerging Markets Equities Fund
<TABLE>

Year Ended October 31
----------------------------------------------------
<S> <C> <C> <C> <C> <C>

1999 1998 1997 1996 1995
Per-Share Data ($)
Net asset value, beginning of year $5.57 $8.32 $8.18 $7.19 $9.73
----------------------------------------------------
Investment operations:
Investment income (loss)--net (0.02) 0.09 0.03 0.07 0.04
Net realized and unrealized gain
(loss) on investments 2.32 (2.83) 0.22 0.94 (2.58)
and foreign currency ----------------------------------------------------
Total from investment operations 2.30 (2.74) 0.25 1.01 (2.54)
----------------------------------------------------
Distributions:
Dividends from net investment income -- (0.01) (0.11) (0.02) --
----------------------------------------------------
Total Distributions -- (0.01) (0.11) (0.02) --
Net asset value, end of period $7.87 $5.57 $8.32 $8.18 $7.19

Total return 41.29% (32.97)% 2.82% 14.14% (26.11)%

Ratios/Supplemental Data:
Net assets, end of period ($ x 1,000) $26,591 $18,763 $47,726 $57,639 $51,873
Ratio of expenses to average net assets 2.02%1 1.70% 1.50% 1.41% 1.55%
Ratio of net income to average net assets (0.24)% 1.15% 0.36% 0.82% 0.54%
Portfolio turnover rate 152.93% 102.28% 79.80% 83.76% 74.24%
</TABLE>

1 The Adviser had voluntarily agreed to reduce its fee from the Fund, or to
pay the operating expenses of the Fund, to the extent necessary to limit
the ordinary operating expenses of the Fund to the average of the total
expense ratios as reported by Lipper Analytical Services, Inc. for the
Fund's investment objective, which is subject to change on a monthly basis,
through December 31, 1999. Had such action not been taken, total operating
expenses, as a percentage of net assets, would have been 2.50% for the year
ended October 31, 1999.

<PAGE>

Financial Highlights

The financial highlights table is intended to help you understand the Fund's
financial performance for the fiscal years indicated. Certain information
reflects financial results for a single Fund share. "Total return" shows how
much your investment in the Institutional Class shares of the Fund would have
increased (or decreased) during each period, assuming you had reinvested all
dividends and distributions. These figures have been audited by Deloitte &
Touche LLP, whose report, along with Company's financial statements, are
included in the annual report, which is available upon request.

TCW Galileo Emerging Markets Income Fund

June 3, 1998
Year Ended (Commencement
October 31, 1999 of Operations)
---------------- through
October 31, 1998
----------------

Per-Share Data ($)
Net asset value, beginning of period $6.58 $10.00
------------------------------------
Investment operations:
Investment income--net 0.84 0.37
Net realized and unrealized gain (loss) on 1.25 (3.41)
investments and foreign currency
------------------------------------
Total from investment operations 2.09 (3.04)
------------------------------------
Distributions:
Dividends from net investment income (0.83) (0.37)
Dividends in excess of net investment income -- (0.01)
------------------------------------
Total Distributions (0.83) (0.38)
Net asset value, end of period $7.84 $6.58
Total return 33.31% (30.67)%1

Ratios/Supplemental Data:
Net assets, end of period ($x 1,000) $81,113 $30,090

Ratio of expenses to average net 1.01% 1.53%2
assets
Ratio of net income to average net 11.37% 11.90%2
assets
Portfolio turnover rate 113.00% 68.46%1

- ------------------------
1 For the period June 3, 1998 (commencement of operations) through
October 31, 1998 and not indicative of a full year's operating results.
2 Annualized.

<PAGE>

Financial Highlights

The financial highlights table is intended to help you understand the Fund's
financial performance for the fiscal years indicated. Certain information
reflects financial results for a single Fund share. "Total return" shows how
much your investment in the Institutional Class shares of the Fund would have
increased (or decreased) during each period, assuming you had reinvested all
dividends and distributions. These figures have been audited by Deloitte &
Touche LLP, whose report, along with Company's financial statements, are
included in the annual report, which is available upon request.

TCW Galileo European Equities Fund

November 3, 1997
(Commencement
of Operations
Year Ended through
October 31, 1999 October 31, 998
---------------- ----------------

Per-Share Data ($)
Net asset value, beginning of period $11.70 $10.00
---------------------------------
Investment operations:
Investment income--net 0.07 0.06
Net realized and unrealized gain (loss) on 1.65 1.64
investments and foreign currency ---------------------------------
Total from investment operations 1.72 1.70
---------------------------------
Distributions:
Distribution from net investment income (0.03) --
Distribution from net realized gains (0.28) --
----------------------------------
Total Distribution (0.31) --
----------------------------------
Net asset value, end of period $13.11 $11.70

Total return 15.16% 17.00%1

Ratios/Supplemental Data:
Net assets, end of period ($ x 1,000) $ 95,489 $ 63,994
Ratio of expenses to average net assets 1.01% 1.06%2
Ratio of net income to average net assets 0.58% 0.52%2
Portfolio turnover rate 95.21% 72.05%1
- -----------------------
1 For the period November 3, 1997 (commencement of operations) through
October 31, 1998 and not indicative of a full year's operating results.
2 Annualized.

<PAGE>

Financial Highlights

The financial highlights table is intended to help you understand the Fund's
financial performance for the fiscal years indicated. Certain information
reflects financial results for a single Fund share. "Total return" shows how
much your investment in the Institutional Class shares of the Fund would have
increased (or decreased) during each period, assuming you had reinvested all
dividends and distributions. These figures have been audited by Deloitte &
Touche LLP, whose report, along with Company's financial statements, are
included in the annual report, which is available upon request.

TCW Galileo International Equities Fund
<TABLE>
<CAPTION>
<S> <C> <C>

November 3, 1997
(Commencement
of Operations)
Year Ended through
October 31, 1999 October 31, 1998
---------------- ----------------

Per-Share Data ($)
Net asset value, beginning of period $10.75 $10.00
----------------------------------
Investment operations:
Investment income--net 0.21 0.05
Net realized and unrealized gain 2.73 0.70
(loss) on investments
----------------------------------
Total from investment operations 2.94 0.75
----------------------------------
Less Distributions:
Distributions from Net Investment Income (0.02) --
----------------------------------
Net asset value, end of period $13.67 $10.75

Total return (%) 27.39% 7.50%1

Ratios/Supplemental Data

Net assets, end of period ($ x 1,000) $ 112,336 $ 74,853
Ratio of expenses to average net assets 0.18% 0.17%2
Ratio of net income to average net assets 1.70% 0.50%2
Portfolio turnover rate 27.78% 21.12%1
</TABLE>

1 For the period November 3, 1997 (commencement of operations) through
October 31, 1998 and not indicative of a full year's operating results.
2 Annualized.

<PAGE>

Financial Highlights

The financial highlights table is intended to help you understand the Fund's
financial performance for the fiscal years indicated. Certain information
reflects financial results for a single Fund share. "Total return" shows how
much your investment in the Institutional Class shares of the Fund would have
increased (or decreased) during each period, assuming you had reinvested all
dividends and distributions. These figures have been audited by Deloitte &
Touche LLP, whose report, along with Company's financial statements, are
included in the annual report, which is available upon request.

TCW Galileo Japanese Equities Fund
<TABLE>
<CAPTION>
<S> <C> <C>

November 3, 1997
(Commencement
of Operations)
Year Ended through
October 31, 1999 October 31, 1998
---------------- ----------------
Per-Share Data ($)
Net asset value, beginning of period $8.43 $10.00
-----------------------------------------
Investment operations:
Investment income (loss)--net (0.02) (0.04)
Net realized and unrealized gain (loss) on 6.87 (1.46)
investments and foreign currency
-----------------------------------------
Total from investment operations 6.85 (1.50)
-----------------------------------------
Distributions:
Dividends from net investment income -- (0.07)
Total Distributions -- (0.07)
-----------------------------------------
Net asset value, end of period $15.28 $8.43

Total return 81.26% (14.88)%1

Ratios/Supplemental Data:
Net assets, end of period ($ x 1,000) $ 76,975 $ 28,648
Ratio of expenses to average net assets 1.04% 1.20%2,3
Ratio of net income to average net assets (0.17)% (0.48)%2
Portfolio turnover rate 149.76% 178.53%1
</TABLE>

1 For the period November 3, 1997 (commencement of operations) through
October 31, 1998 and not indicative of a full year's operating results.

2 Annualized.

3 The Adviser had voluntarily agreed to reduce its fee, or to pay the
operating expenses of the Fund, to the extent necessary to limit ordinary
operating expenses of the Fund to 1.20% of net assets through December 31,
1998. Had such action not been taken, total annualized operating expenses
for the period November 3, 1997 (commencement of operations) through
October 31, 1998 would have been 1.51% of average net assets.

<PAGE>

Financial Highlights

The financial highlights table is intended to help you understand the Fund's
financial performance for the fiscal years indicated. Certain information
reflects financial results for a single Fund share. "Total return" shows how
much your investment in the Institutional Class shares of the Fund would have
increased (or decreased) during each period, assuming you had reinvested all
dividends and distributions. These figures have been audited by Deloitte &
Touche LLP, whose report, along with Company's financial statements, are
included in the annual report, which is available upon request.

TCW Galileo Latin America Equities Fund
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>

Year Ended October 31
--------------------------------------------
1999 1998 1997 1996 1995
Per-Share Data ($)
Net asset value, beginning of year $8.57 $12.51 $10.01 $7.92 $14.99
Investment operations:
Investment income--net 0.09 0.13 0.11 0.11 0.06
Net realized and unrealized gain (loss) on
investments and foreign 0.71 (3.80) 2.50 2.03 (5.92)
Currency
--------------------------------------------
Total from investment operations 0.80 (3.67) 2.61 2.14 (5.86)
Distributions:
Dividends from net investment income -- (0.27) (0.11) (0.05) --
Dividends in excess of net realized gains -- -- -- -- (1.21)
--------------------------------------------
Total Distributions -- (0.27) (0.11) (0.05) (1.21)
--------------------------------------------
Net asset value, end of year $9.37 $8.57 $12.51 $10.01 $7.92

Total return 9.34% (29.95)% 26.24% 27.08% (40.95)%

Ratios/Supplemental Data:
Net assets, end of period ($ x 1,000) $7,939 $11,796 $55,336 $68,323 $38,942
Ratio of expenses to average net assets 2.20%1 1.64% 1.46% 1.44% 1.58%
Ratio of net income to average net assets 1.05% 1.13% 0.87% 1.12% 0.59%
Portfolio turnover rate 162.12% 32.33% 21.17% 44.32% 75.62%
</TABLE>

1 The Adviser had voluntarily agreed to reduce its fee from the Fund, or to
pay the operating expenses of the Fund, to the extent necessary to limit
the ordinary operating expenses of the Fund to the average of the total
expense ratios as reported by Lipper Analytical Services, Inc. for the
Fund's investment objective, which is subject to change on a monthly basis,
through October 31, 1999. Had such action not been taken, the total
operating expenses, as a percentage of average net assets, would have been
3.24% for the year ended October 31, 1999.

<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.
http://www.tcwgalileofunds.com

You may visit the SEC's website at http://www.sec.gov to view text-only versions
of Fund documents filed with the SEC. You may also obtain copies by visiting the
SEC's Public Reference Room in Washington, DC (phone 1-800-SEC-0330 or
1-202-942-8090) or by sending your request and a duplicating fee to the
Commission's Public Reference Section, 450 Fifth Street, N.W., Washington DC
20549-0102 or by electronic request at the following E-mail address:
[email protected].

TCW Galileo Funds, Inc.

SEC file number: 811-7170

More information on the Fund is available free upon request,
including the following:

Annual/Semi-Annual Report

Describes the Fund's performance, lists portfolio holdings
and contains a letter from the Fund's portfolio manager
discussing recent market conditions, economic trends and
Fund strategies.

Statement of Additional Information (SAI)

This prospectus tells you about the Institutional Class shares of five of the
separate investment funds offered by TCW Galileo Funds, Inc., each of which has
different investment objectives and policies. Please read this document
carefully, and keep it for future reference. Sometimes we will refer to the
funds in this prospectus as the Galileo Fixed Income Funds.

TCW Galileo Money Market Fund

TCW Galileo Core Fixed Income Fund

TCW Galileo High Yield Bond Fund

TCW Galileo Mortgage-Backed Securities Fund

TCW Galileo Total Return Mortgage-Backed Securities Fund

March 1, 2000

<PAGE>

LOGO

TABLE OF CONTENTS

Page

General Fund Information
Investment Objectives and Principal
Strategies........................... 2

Principal Risks...................... 3

Performance Summary.................. 6

Fund Expenses and Expense
Example.............................. 9

TCW Galileo Money Market Fund
Investment Objectives/Approach....... 10
Main Risks........................... 11

TCW Galileo Core Fixed Income
Fund

Investment Objectives/Approach....... 12
Main Risks........................... 13

TCW Galileo High Yield Bond
Fund

Investment Objectives/Approach....... 21
Main Risks........................... 22

TCW Galileo Mortgage-Backed
Securities Fund
Investment Objectives/Approach....... 15
Main Risks........................... 16

TCW Galileo Total Return
Mortgage-Backed Securities Fund

Investment Objectives/Approach....... 18
Main Risks........................... 19

Risk Considerations.................. 24
Management of the Funds.............. 34
Multiple Class Structure............. 35

Your Investment

Account Policies and Services........ 36
To Open an Account/To Add to an
Account.............................. 40
To Sell or Exchange Shares........... 41
Distributions and Taxes.............. 42
Financial Highlights................. 43

For More Information................ 48

<PAGE>

GENERAL FUND INFORMATION

Investment Objectives and Principal Strategies

All of the Galileo Fixed Income Funds are affected by changes in the economy, or
in securities and other markets. Additionally, changes in interest rates will
affect not only the current return on the Galileo Fixed Income Funds, but the
value of the capital investment will most likely fluctuate up or down. 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.
<TABLE>
<CAPTION>
<S> <C> <C>

TCW Galileo Funds, Inc. Investment Objectives Principal Investment Strategies

TCW Galileo Money Market Fund Current income, preservation of Invests in high credit quality,
capital and liquidity short-term money market securities.

TCW Galileo Core Fixed Income Fund Maximize current income and achieve Invests in fixed income securities
above average total return consistent rated A or higher by Moody's or S&P.
with prudent investment management
over a full market cycle

TCW Galileo High Yield Bond Fund Maximize current income and achieve Invests in high yield bonds, commonly known as
above average total return consistent "junk" bonds.
with reasonable risk over a full market
cycle

TCW Galileo Mortgage-Backed Securities Maximum current income Invests in mortgage-backed securities guaranteed by,
or secured by collateral which is guaranteed by, the
United States Government, its agencies,
instrumentalities or its sponsored corporations, or
private issued mortgage-backed securities rated Aa
or higher by Moody's or AA or higher by S&P.

TCW Galileo Total Return Mortgage- Maximize current income and achieve Invests in mortgage-backed securities guaranteed by,
Backed Securities Fund above average total return consistent or secured by collateral that is guaranteed by, the
with prudent investment management United States Government, its agencies,
over a full market cycle instrumentalities or its sponsored corporations,
or private issued mortgage-backed securities rated
Aa or higher by Moody's or AA or higher by S&P.
</TABLE>

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 fund shares will vary as the value of each Fund's portfolio securities
increases or decreases in value. Therefore, the value of an investment in a Fund
could go down as well as up. All investments are subject to:

o MARKET RISK

o SECURITIES SELECTION RISK

There is the possibility that the specific securities held in a Fund's
portfolio will underperform the 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.

Because the Galileo Funds described in this prospectus are fixed income funds,
each Fund may also be subject (in varying degrees) to the following additional
risks:

o 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 High Yield Bond
Fund is subject to great credit risk because it invests in high yield bond
funds, which are commonly referred to as "junk bonds." The Core Fixed
Income Fund is subject to credit risk because it invests to some degree in
below investment grade fixed income securities.

o INTEREST RATE RISK

There is 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 the
Core Fixed Income, High Yield Bond, Total Return Mortgage-Backed
Securities, and Mortgage-Backed Securities Funds, because each Fund may
hold securities with long terms to maturity.

In the case of mortgage-backed securities, rising interest rates tend to extend
the term to maturity of the securities, making them even more susceptible to
interest rate changes. When interest rates drop, not only can the value of fixed
income securities drop, but the yield can drop, particularly where the yield on
the fixed income securities is tied to changes in interest rates, such as
adjustable mortgages. Also when interest rates drop, the holdings of
mortgage-backed securities by the Core Fixed Income, Total Return
Mortgage-Backed Securities and Mortgage-Backed Securities Funds can reduce
returns if the owners of the underlying mortgages pay off their mortgages sooner
than anticipated since the funds prepaid will have to be reinvested at the then
lower prevailing rates. This is known as prepayment risk. When interest rates
rise, the holdings of mortgage-backed securities by these Funds can reduce
returns if the owners of the underlying mortgages pay off their mortgages later
than anticipated. This is known as extension risk.

o 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 High Yield Bond Fund primarily invests in below
investment grade corporate securities. The Core Fixed Income Fund may
invest in debt instruments rated below investment grade.

o 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. The Core
Fixed Income and High Yield Bond Funds are subject to foreign investing
risk because these Funds may invest a portion of their assets in foreign
company securities. If they invest in "emerging markets," and they may, the
risk is even more pronounced. In addition, because foreign securities
generally are denominated and pay dividends or interest in foreign
currencies, the Core Fixed Income and High Yield Bond Funds may hold
various foreign currencies, the value of the net assets of these Funds as
measured in U.S. dollars can be affected favorably or unfavorably by
changes in exchange rates.

Principal Risks

o 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 the Fund. Each Fund (except the Money Market
Fund) is subject to liquidity risks because it invests in high yield bonds,
mortgage-backed securities or foreign or emerging markets securities, which
have all experienced periods of illiquidity.

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.
Although the Money Market Fund seeks to preserve the value of your investment at
$1.00 per share, it is possible to lose money by investing in the Fund. The
value of the other Galileo Fixed Income Funds will fluctuate in value.

Performance Summary

The two tables below show each Fund's annual returns and its long-term
performance with respect to its Institutional Class shares. The first table
shows you how the Fund's performance has varied from year to year. The second
compares the Fund's performance over time to that of a broad-based securities
market index. Both tables assume reinvestment of dividends and distributions.
Except for the Money Market and Total Return Mortgage-Backed Securities Funds,
the performance information includes performance of the predecessor limited
partnership of each Fund, which were managed by an affiliate of TCW Investment
Management Company, using the same investment strategy as the Funds. The
performance of the partnerships were calculated using performance standards
applicable to private investment partnerships, which take into account all
elements of total return and reflect the deduction of all fees and expenses of
operation. The predecessor limited partnerships were not registered under the
Investment Company Act of 1940 ("1940") and, therefore, were not subject to
certain investment restrictions imposed by the 1940 Act and Subchapter M of the
Internal Revenue Code of 1986, as amended. If the limited partnerships had been
registered under the 1940 Act their performance could have been adversely
affected. As with all mutual funds, past performance is not a prediction of
future results.

<PAGE>

Year by year total return (%)
as of December 31 each year*

TCW Galileo Money Market Fund

8.18% 6.36% 3.91% 2.97% 3.91% 5.75% 5.14% 5.33% 5.25% 4.91%

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

* The Fund's total return for the period October 31, 1999 to December 31,
1999 is 0.88%

TCW Galileo
Core Fixed
Income Fund

7.82% 16.10% 6.60% 10.65% -7.73% 18.08% 2.03% 8.90% 9.04% -0.86%

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

* The Fund's total return for the period October 31, 1999 to December 31,
1999 is -0.21%

TCW Galileo
High Yield
Bond Fund

-1.51% 30.97% 15.51% 15.48% -0.34% 15.95% 11.96% 12.28% 2.27% 4.31%

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

* The Fund's total return for the period October 31, 1999 to December 31,
1999 is 2.93%

TCW Galileo
Mortgage-
Backed
Securities
Fund

8.94% 11.13% 6.59% 4.57% -0.44% 11.58% 7.31% 6.81% 4.09% 5.61

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

* The Fund's total return for the period October 31, 1999 to December 31,
1999 is 0.65%

TCW Galileo Total Return Mortgage-Backed Securities Fund

3.50% -6.20% 20.80% 5.10% 11.90% 7.23% -0.46%

1993 1994 1995 1996 1997 1998 1999

* The Fund's total return for the period October 31, 1999 to December 31,
1999 is -0.20%

Best and worst quarterly performance during this period

Fund Performance
o Money Market Fund
Quarter ending June 30, 1989 2.38% (Best)
Quarter ending December 31, 1993 0.72% (Worst)

o High Yield Bond Fund
Quarter ending March 31, 1991 11.94% (Best)
Quarter ending September 30, 1990 - 5.32% (Worst)

o Core Fixed Income Fund
Quarter ending June 30, 1995 5.93% (Best)
Quarter ending March 31, 1994 -4.54% (Worst)

o Mortgage-Backed Securities Fund
Quarter ending March 31, 1995 3.37% (Best)
Quarter ending June 30, 1994 -1.18% (Worst)

o Total Return Mortgage-Backed Securities Fund
Quarter ending June 30, 1995 6.81% (Best)
Quarter ending June 30, 1994 -4.78% (Worst)

From
Inception
Average annual total return as of or
December 31 1 year 5 years 10 years
o Money Market Fund 4.91% 5.27% 5.16%*
Salomon Brothers 3-Month T-Bill Index 4.73% 5.21% 5.06%*

o Core Fixed Income Fund -0.87% 7.23% 6.81%
Lehman Brothers Aggregate Bond

Index -0.83% 7.73% 7.70%
o High Yield Bond Fund 4.31% 9.23% 10.30%*
Salomon Brothers High Yield Cash Pay

Index 0.84% 9.50% 10.47%*
o Mortgage-Backed Securities Fund 5.61% 7.05% 6.59%
Salomon Brothers 1-Year Treasury

Index 4.24% 5.99% 5.89%
o Total Return Mortgage-Backed
Securities Fund -0.46% 8.69% 6.10%
Lehman Brothers Mortgage-Backed
Securities Index 1.85% 7.97% 6.14%

* Represents the 10 year return.

<PAGE>

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
Institutional Class shares of the Funds have no sales charge (load) or Rule
12b-1 distribution fees.

FEE TABLE
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Total Return
Core High Mortgage- Mortgage-
Money Fixed Yield Backed Backed
Market Income Bond Securities Securities
----- ------ ----- ---------- ------------
Shareholder Transaction Fees

1) Redemption Fees....................... None None None None None
2) Exchange Fees......................... None None None None None
3) Contingent Deferred Sales Load........ None None None None None
4) Sales Load on Reinvested Dividends.... None None None None None
5) Sales Load on Purchases............... None None None None None

Annual Fund Operating Expenses

Management Fees.......................... 0.25% 0.40% 0.75% 0.50% 0.50%
Distribution (12b-1) Fees................ None None None None None
Other Expenses........................... 0.13% 0.19% 0.15% 0.30% 0.19%
Total Annual Fund Operating Expenses..... 0.38% 0.59%1 0.90% 0.80%2 0.69%
</TABLE>
- ---------------------
1 The Adviser voluntarily agreed to reduce its fee or to pay the operating
expenses of the Fund to reduce Annual Fund Operating Expenses to 0.58% of
Net Assets through October 31, 1999.
2 The Adviser voluntarily agreed to reduce its fee or to pay the operating
expenses of the Fund to reduce Annual Fund Operating Expenses to 0.75% of
Net Assets through October 31, 1999.

EXPENSE EXAMPLE

This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds.

1 Year 3 Years 5 Years 10 Years
Money Market.............................. $ 39 $ 122 $ 213 $ 480
Core Fixed Income......................... 60 189 329 738
High Yield Bond........................... 92 287 499 1,108
Mortgage-Backed Securities................ 82 256 444 990
Total Return Mortgage-Backed Securities... 70 221 384 859

TCW Galileo Money Market Fund

Investment Objectives/Approach

The Fund seeks current income, preservation of capital and liquidity. To pursue
these goals, it invests in high credit quality, short-term money market
securities. The Fund also seeks to maintain a constant net asset value of $1.00
per share. To pursue this goal, the Fund invests in money market instruments
that have remaining maturities of 397 days or less (and an average portfolio
maturity of 90 days or less on a dollar-weighted basis).

Concepts to Understand

Maturity is the date on which the principal amount of a note, draft, acceptance,
bond, or other debt instrument becomes due and payable.

If the Fund's board believes that any deviation from a $1.00 amortized cost
price per share may result in material dilution or other unfair results to new
or existing shareholders, it will take steps to eliminate or reduce these
consequences. These steps include:

o selling portfolio securities prior to maturity

o shortening the average maturity of the portfolio

o withholding or reducing dividends

o redeeming shares in kind

o utilizing a net asset value per share determined by using available
market quotations

Main Risks

This portfolio generally has the least investment risk of the Galileo Funds
because it invests in securities that have high credit ratings.

The two primary risks affecting this Fund are "credit risk" and "interest rate
risk." Credit risk refers to the likelihood that the Fund could lose money if a
money market issuer is unable to meet its financial obligations, such as the
payment of principal and/or interest on an investment, or goes bankrupt. This
Fund invests primarily in securities that have limited susceptibility to this
risk. Interest rate risk refers to the possibility that the value of the Fund's
portfolio investment may fall since fixed income securities generally fall in
value when interest rates rise. Short-term money market instruments generally
are affected less by changes in interest rates than fixed income securities with
longer terms to maturity.

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.

TCW Galileo Core Fixed Income Fund

Investment Objectives/Approach

The Fund seeks to provide maximum current income and achieve above average total
return consistent with prudent investment management over a full market cycle.
To pursue this goal, it invests (except when maintaining a temporary defensive
position) at least 65% of the value of its total assets in fixed income
securities rated A or higher by Moody's or S&P. These securities include U.S.
Government obligations, bonds, notes, debentures, mortgage-backed
securities, asset-backed securities, foreign securities (government and
corporate) and other securities bearing fixed or variable interest rates of any
maturity.

Concepts to understand
- ----------------------

o security selection within a given sector

o relative performance of the various market sectors

o the shape of the yield curve

o fluctuations in the overall level of interest rates

Mark L. Attanasio, Philip A. Barach and Jeffrey E. Gundlach
are the Fund's portfolio managers.

Main Risks

The primary risks affecting this Fund are "credit risk," "interest rate risk"
(including "extension risk" and "prepayment risk"), "foreign investing risk" and
"liquidity 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 invests primarily
in high credit quality securities that have limited susceptibility to this risk.
A portion of the Fund's assets, however, will be invested in low credit quality
securities, which may make the Fund more susceptible to credit risk. Debt
securities that are rated below investment grade are considered to be
speculative. Those securities rated below investment grade are also commonly
known as "junk" bonds. This is especially true during periods of economic
uncertainty or during economic downturns. 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 and mortgage-backed securities, including collateralized
mortgage obligations and stripped mortgage securities. Its holding of
mortgage-backed securities can reduce returns if the owners of the underlying
mortgages pay off their mortgage sooner than anticipated when interest rates go
down. Because this Fund invests in mortgage-backed securities, it may be subject
to extension risk and prepayment risk, which are both a type of interest rate
risk. Extension risk refers to the possibility that rising interest rates may
cause owners of the underlying mortgages to pay off their mortgages at a slower
than expected rate. This particular risk may effectively change a security which
was considered short or intermediate term into a long-term security. Long-term
securities generally drop in value more dramatically in response to rising
interest rates than short or intermediate-term securities. Prepayment risk
refers to the possibility that falling interest rates may cause owners of the
underlying mortgages to pay off their mortgages at a faster than expected rate.
This tends to reduce returns since the funds prepaid will have to be reinvested
at the then lower prevailing rates. 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:

o a lack of political or economic stability

o foreign controls on investment and changes in currency exchange rates

o withholding taxes

o a lack of adequate company information

The risks of foreign investing are even more pronounced if the Fund invests in
emerging markets. In addition, securities traded only through foreign markets
may be more volatile and are often harder to sell. Volatility is a way to
measure the changes in the price of a single security or an entire portfolio.
Large and frequent price changes indicate higher volatility, which generally
indicates that there is a greater chance you could lose money over the short
term. The Fund is also subject to foreign currency risk. Because foreign
securities are generally denominated and pay dividends or interest in foreign
currencies, the value of the net assets of the Fund as measured in U.S. dollars
will be affected favorably or unfavorably by changes in exchange rates.
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 the Fund invests in below
investment grade fixed income securities and foreign securities, it is more
susceptible to liquidity risks than funds that invest in higher quality
investments or do not invest in foreign securities.

The Fund may invest some assets in options, futures and foreign currency futures
and forward contracts. These practices are used primarily to hedge the Fund's
portfolio but may also be used to increase returns; however, such practices
sometimes may reduce returns or increase volatility. The Fund may also invest
some assets in interest-only and principal-only securities, which are sometimes
referred to as derivatives. These practices may reduce returns or increase
volatility and be very sensitive to changes in interest rates.

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 portfolio management which may result in increased
Fund transaction expenses and have tax consequences, such as increased realized
gains, for investors.

TCW Galileo High Yield Bond Fund
Investment Objectives/Approach

The Fund seeks to maximize income and achieve above average total return
consistent with reasonable risk over a full market cycle. To pursue this goal,
it invests (except when maintaining a temporary defensive position) at least 65%
of the value of its total assets in high yield/below investment grade bonds,
commonly known as "junk" bonds. It also invests in other high yield fixed income
securities, including convertible and nonconvertible debt securities and
convertible and non-convertible preferred stocks.

Concepts to understand
- ----------------------

Junk bonds are considered to be mostly speculative in nature. This gives the
Fund more credit risk than Galileo's other fixed income funds, but also gives it
the potential for higher returns.

o each issuer

o each issuer's ability to make timely payments of
principal and interest

o broad economic trends and corporate developments

Mark L. Attanasio, Mark D. Senkpiel, and Melissa V. Weiler
are the Fund's portfolio managers.

<PAGE>

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. Debt securities that are rated below investment grade are considered to
be speculative. Those securities rated below investment grade are also commonly
known as "junk" bonds. This is especially true during periods of economic
uncertainty or during economic downturns. 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:

o a lack of political or economic stability

o foreign controls on investment and currency exchange rates

o withholding taxes

o a lack of adequate company information

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 portfolio management which may result in increased
Fund transaction expenses and have tax consequences, such as increased realized
gains, for investors.

<PAGE>

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 and the depth of the market for that
security. Other market risks that can affect value include a market's current
attitudes about type of security, 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).
Market 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. Certain instruments (such as inverse floaters
and interest-only securities) behave similarly to leveraged
instruments.

The Adviser may temporarily invest up to 100% of the 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 the 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.

TCW Galileo Mortgage-Backed Securities Fund

Investment Objectives/Approach

The Fund seeks to maximize current income. To pursue this goal, the Fund invests
primarily in short-term mortgage-backed securities guaranteed by, or secured by
collateral that is guaranteed by, the United States Government, its agencies,
instrumentalities or its sponsored corporations (collectively, the "Federal
Agencies"), and in privately issued mortgage-backed securities rated Aa or
higher by Moody's or AA or higher by S&P.

Concepts to understand
- ----------------------

Duration is often used to measure the potential volatility of a bond's price:
bonds with longer durations are more sensitive to changes in interest rates,
making them more volatile than bonds with shorter durations. Bonds with fixed
maturities have a readily determinable duration. Bonds with uncertain payment
schedules, such as mortgage-backed securities which can be prepaid, have
durations which may vary or lengthen in certain interest rate environments,
making their value even more volatile than they were when acquired.

Weighted average duration is the average duration of the securities in the
portfolio weighted by market value.

Weighted average reset frequency is the average time to the next coupon reset
date of the floating rate securities in the portfolio weighted by market value.

The Fund will invest (except when maintaining a temporary
defensive position) at least 65% of the value of its total
assets in mortgage-backed securities which are guaranteed
by, or secured by collateral which is guaranteed by, Federal
Agencies. In managing the Fund's investments, the Adviser
seeks to construct a portfolio with a weighted average
duration for fixed rate securities and a weighted average
reset frequency for floating rate securities of no more than
two years.

Philip A. Barach, Jeffrey E. Gundlach and Frederick H.
Horton are the Fund's portfolio managers.

Main Risks

The primary risks affecting this Fund are "credit risk," "interest rate risk"
(including "extension risk" and "prepayment risk"), and "liquidity 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. The Fund may invest a
portion of its assets in mortgage-backed securities which are not guaranteed by
the U.S. Government, which may make the Fund subject to substantial credit risk.
This is especially true during periods of economic uncertainty or during
economic downturns. 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 and
mortgage-backed securities, including collateralized mortgage obligations, and
stripped mortgage securities. Its holdings of mortgage-backed securities can
reduce returns if the owners of the underlying mortgages pay off their mortgages
sooner than anticipated when interest rates go down. Because this Fund invests
in mortgage-backed securities, it may be subject to extension risk and
prepayment risk, which are both a type of interest rate risk. Extension risk
refers to the possibility that rising interest rates may cause owners of the
underlying mortgages to pay off their mortgages at a slower than expected rate.
This particular risk may effectively change a security which was considered
short or intermediate term into a long-term security. Long-term securities
generally drop in value more dramatically in response to rising interest rates
than short or intermediate-term securities. Prepayment risk refers to the
possibility that falling interest rates may cause owners of the underlying
mortgages to pay off their mortgages at a faster than expected rate. This tends
to reduce returns since the funds prepaid will have to be reinvested at the then
lower prevailing rates. 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
mortgage-backed securities may be less liquid than other securities, the Fund
may be more susceptible to liquidity risks than funds that invest in other
securities.

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 portfolio management which may result in increased
Fund transaction expenses and have tax consequences, such as increased realized
gains, for investors.

TCW Galileo Total Return Mortgage-Backed Securities Fund

Investment Objectives/Approach

Concepts to understand
- ----------------------

Duration is often used to measure the potential volatility of a bond's price:
bonds with longer durations are more sensitive to changes in interest rates,
making them more volatile than bonds with shorter durations. Bonds with fixed
maturities have a readily determinable duration. Bonds with uncertain payment
schedules, such as mortgage-backed securities which can be prepaid, have
durations which may vary or lengthen in certain interest rate environments,
making their value even more volatile than they were when acquired.

Weighted average duration is the average duration of the securities in the
portfolio weighted by market value.

Weighted average reset frequency is the average time to the next coupon reset
date of the floating rate securities in the portfolio weighted by market value.

Philip A. Barach, Jeffrey E. Gundlach and Frederick H.
Horton are the Fund's portfolio managers.

<PAGE>

Main Risks

The primary risks affecting this Fund are "credit risk," "interest rate risk"
(including "extension risk" and "prepayment risk"), and "liquidity 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. The Fund may invest a
portion of its assets in mortgage-backed securities which are not guaranteed by
the U.S. Government, which may make the Fund subject to substantial credit risk.
This is especially true during periods of economic uncertainty or during
economic downturns. 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 and
mortgage-backed securities, including collateralized mortgage obligations, and
stripped mortgage securities. Because this Fund invests in mortgage-backed
securities, it may be subject to extension risk and prepayment risk, which are
both a type of interest rate risk. Extension risk is the possibility that rising
interest rates may cause owners of the underlying mortgages to pay off their
mortgages at a slower than expected rate. This particular risk may effectively
change a security which was considered short or intermediate term into a
long-term security. Long-term securities generally drop in value more
dramatically in response to rising interest rates than short or intermediate
term securities.

Because mortgage-backed securities may be less liquid than other securities, the
Fund may be more susceptible to liquidity risks than funds that invest in other
securities.

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 portfolio management which may result in increased
Fund transaction expenses and have tax consequences, such as increased realized
gains, for investors.

General Investment Risk

Since shares of the Fund represent an investment in securities with fluctuating
market prices, the value of Fund 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. High credit quality
investments also react in value to interest rate changes.

<PAGE>

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 downgrades.

The High Yield Bond portfolio consists primarily of below
investment grade corporate securities that are commonly
known as junk bonds. In addition, the Core Fixed Income Fund
may invest in debt instruments rated below investment grade.
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. These 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.

<PAGE>

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
currency exchange 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 U.S. dollars, the U.S. dollar value of the foreign security 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 each 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 some of the
Funds may hold various foreign currencies from time to time,
the value of the net assets of those Funds 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 Core Fixed Income Fund is authorized to
enter into certain foreign currency futures and forward
contracts. However, a Fund is not obligated to do so and,
depending on the availability and cost of these devices, the
Fund 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.

With respect to the Core Fixed Income Fund, the forward currency market for the
purchase or sale of U.S. dollars in some countries is not highly developed, and
in certain countries, there may be no such market. If a devaluation of a
currency is generally anticipated, the Fund may not be able to contract to sell
the currency at an exchange rate more advantageous than that which would prevail
after the anticipated amount of devaluation, particularly as regards forward
contracts for local currencies in view of the relatively small, inactive or even
non-existent market for these contracts. In the event the Funds hold securities
denominated in a currency that suffers a devaluation, the Funds' net asset
values will suffer corresponding reductions. In this regard, in December 1994,
the Mexican government determined to allow the Mexican peso to trade freely
against the U.S. dollar rather than within a controlled band, which resulted in
a significant devaluation of the Mexican peso against the dollar. Further, in
July 1997, the Thai and Philippine governments allowed the baht and peso,
respectively, to trade freely against the U.S. dollar resulting in a sharp
devaluation of both currencies, and in 1998 Russia did the same, causing a sharp
devaluation of the ruble.

Credit and Market Risks of Mortgage-Backed Securities. The investments by Core
Fixed Income in fixed rate and floating rate mortgage-backed securities will
entail normal credit risks (i.e., the risk of non-payment of interest and
principal) and market risks (i.e., the risk that interest rates and other
factors will cause the value of the instrument to decline). Many issuers or
servicers of mortgage-backed securities guarantee timely payment of interest and
principal on the securities, whether or not payments are made when due on the
underlying mortgages. This kind of guarantee generally increases the quality of
a security, but does not mean that the security's market value and yield will
not change. Like bond investments, the value of fixed rate mortgage-backed
securities will tend to rise when interest rates fall, and fall when rates rise.
Floating rate mortgage-backed securities will generally tend to have minimal
changes in price when interest rates rise or fall, but their current yield will
be affected. The value of all mortgage-backed securities may also change because

Mortgage-Backed Securities
- --------------------------

Mortgage-backed securities represent participation interests in pools of
residential mortgage loans purchased from individual lenders by a federal agency
or originated and issued by private lenders.

of changes in the market's perception of the
creditworthiness of the organization that issued or
guarantees them. In addition, the mortgage-backed securities
market in general may be adversely affected by changes in
governmental legislation or regulation. Fluctuations in the
market value of mortgage-backed securities after their
acquisition usually do not affect cash income from these
securities but are reflected in the Fund's net asset value.
Factors that could affect the value of a mortgage-backed
security include, among other things, the types and amounts
of insurance which a mortgage carries, the amount of time
the mortgage loan has been outstanding, the loan-to-value
ratio of each mortgage and the amount of
overcollateralization of a mortgage pool.

Liquidity Risk of Mortgage-Backed Securities. The liquidity of
mortgage-backed securities varies by type of security; at certain
times a Fund may encounter difficulty in disposing of
investments. Because mortgage-backed securities may be less
liquid than other securities, a Fund may be more susceptible to
liquidity risks than funds that invest in other securities. In
the past, in stressed markets, certain types of mortgage-backed
securities, such as inverse floaters, and interest-only
securities, suffered periods of illiquidity if disfavored by the
market.

Prepayment, Extension and Redemption Risks of Mortgage-Backed Securities.
Mortgage-backed securities reflect an interest in monthly payments made by the
borrowers who receive the underlying mortgage loans. Although the underlying
mortgage loans are for specified periods of time, such as 20 or 30 years, the
borrowers can, and typically do, pay them off sooner. When that happens, the
mortgage-backed security which represents an interest in the underlying mortgage
loan will be prepaid. A borrower is more likely to prepay a mortgage which bears
a relatively high rate of interest. This means that in times of declining
interest rates, a portion of the Fund's higher yielding securities are likely to
be redeemed and the Fund will probably be unable to replace them with securities
having as great a yield. Prepayments can result in lower yields to shareholders.
The increased likelihood of prepayment when interest rates decline also limits
market price appreciation of mortgage-backed securities. This is known as
prepayment risk. Mortgage-backed securities are also subject to extension risk.
Extension risk is the possibility that rising interest rates may cause
prepayments to occur at a slower than expected rate. This particular risk may
effectively change a security which was considered short or intermediate term
into a long-term security. Long-term securities generally fluctuate more widely
in response to changes in interest rates than short or intermediate-term
securities. In addition, a mortgage-backed security may be subject to redemption
at the option of the issuer. If a mortgage-backed security held by a Fund is
called for redemption, the Fund will be required to permit the issuer to redeem
or "pay-off" the security, which could have an adverse effect on the Fund's
ability to achieve its investment objective.

Stripped Mortgage Securities. Part of the investment strategy of the Core Fixed
Income, Total Return Mortgage-Backed Securities and Mortgage-Backed Securities
Funds involves interest-only Stripped Mortgage Securities. These investments may
be highly sensitive to changes in interest and tend to be less liquid than other
CMOs. In addition, prepayments of the underlying mortgages likely would lower
the Funds' returns from stripped securities they hold.

Inverse Floaters. Total Return Mortgage-Backed and Mortgage-Backed Securities
Funds invest in inverse floaters, a class of CMOs with a coupon rate that resets
in the opposite direction from the market rate of interest to which it is
indexed such as London Interbank Offered Rate (LIBOR) or COFI. Any rise in the
index rate (as a consequence of an increase in interest rates) causes a drop in
the coupon rate of an inverse floater while any drop in the index rate causes an
increase in the coupon of an inverse floater. An inverse floater may behave like
a security that is leveraged since its interest rate usually varies by a
magnitude much greater than the magnitude of the change in the index rate of
interest. The "leverage-like" characteristics inherent in inverse floaters are
associated with greater volatility in their market prices.

Year 2000
- ---------

A Fund's portfolio investments may be negatively affected by year 2000 related
developments that may occur later in the year 2000.

Like other mutual funds, the investment advisory and management services
provided by the Adviser and the services provided to shareholders by the
Transfer Agent depend on the smooth functioning of their computer systems. There
has been concern that some computer software systems in use today may still not
recognize the year 2000, but revert to 1900 or some other date, due to the
manner in which dates were encoded and calculated. That failure could have a
negative impact on the handling of securities trades, pricing and account
services into the first quarter of the Year 2000, or beyond. The Adviser and the
Transfer Agent have actively worked on necessary changes to their own computer
systems to prepare for the year 2000 issue. To date, it appears that most
companies have made the Year 2000 date transition successfully. While the
possibility has diminished since January 4, 2000, corporate and governmental
data processing errors may still arise and result in production problems for
individual companies. Earnings of individual issuers may be affected by
remediation costs which may be substantial and may not be currently reflected in
financial statements. Individual firms may experience disruptions to their
business due to the failure of their counterparts to address year 2000 problems,
or could experience disruptions which could adversely affect corporate earnings
generally and the value of their securites. Accordingly, the Fund's portfolio
investments may be negatively affected by Year 2000 related developments that
may occur later in the year 2000.

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 a Fund.

certain securities (beginning with government and corporate
bonds) have been redenominated 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 invest, the Funds
could be adversely affected: (i) if the euro, or EMU as a
whole does not take effect 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.

Management of the Funds

Investment Adviser

The Funds' investment adviser is TCW Investment Management Company and is
headquartered at 865 South Figueroa Street, Suite 1800, Los Angeles, California
90017. As of December 31, 1999, the Adviser and its affiliated companies, which
provide a variety of trust, investment management and investment advisory
services, had approximately $70 billion under management or committed to
management.

Portfolio Managers

Portfolio Manager(s) Business Experience During Last Five Years*
Mark L. Attanasio Group Managing Director and Chief Investment Officer-
Below Investment Grade Fixed Income, the Adviser, TCW
Asset Management Company and Trust Company of the
West since April 1995. From April 1991 to March 1995
he was Co-Chief Executive Officer and Chief Portfolio
Strategist of Crescent Capital Corporation, Los Angeles.

Philip A. Barach Group Managing Director and Chief Investment
Officer-Investment Grade Fixed Income, the Adviser, TCW
Asset Management Company and Trust Company of the West.

Jeffrey E. Gundlach Group Managing Director and Chairman Multi-Strategy
Fixed Income Committee, the Adviser, TCW Asset
Management Company and Trust Company of the West.

Frederick H. Horton Managing Director, 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.

Melissa V. Weiler Managing Director, the Adviser, TCW Asset
Management Company and Trust Company of the West
since April 1995. From February 1992 to March 1995 she
was a Vice President and Portfolio Manager of Crescent
Capital Corporation, Los Angeles.

* Positions with the TCW Group, Inc. and its affiliates may have changed over
time.

<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 their assets, to
place orders for the purchase and sale of their 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.
In addition, the Adviser may reimburse third party administrators for retirement
plan shareholder servicing expenses. 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:
<TABLE>
<CAPTION>
<S> <C> <C>

Fund Annual Management Fee (As Percent of Average Net Asset Value)

Money Market 0.25%
Core Fixed Income 0.40%*
High Yield Bond 0.75%
Mortgage-Backed Securities 0.50%
Total Return Mortgage-Backed Securities 0.50%
</TABLE>

* The Adviser has voluntarily waived a portion of its advisory fee reducing
it to 0.35% through December 31, 2000.

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 a Fund in
connection with the matters to which the agreement relates, except a loss
resulting from willful misfeasance, bad faith, 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

Each Fund currently offers two classes of shares, Institutional Class 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 also 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 Investment
Company Act of 1940, as amended. Pursuant to the Distribution Plan, each Fund
compensates the Funds' distributor at a rate equal to 0.25% of the average daily
net assets 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.

<PAGE>

YOUR INVESTMENT

Account Policies and Services

Buying shares

You pay no sales charges to invest in a Fund. Your price for Fund 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 the Fund. Orders received by a Fund's 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 Fund's 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 Fund pursuant to procedures
established by the Fund's Board.

Minimums

Initial Additional

All Funds except Money Market Fund $ 250,000 $ 25,000
Money Market Fund $ 100,000 $ 1,000

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 the 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:

o amounts of $100,000 or more

o amounts of $1,000 or more on accounts whose address has been changed
within the last 30 days

o 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 us to
ensure that your signature guarantee will be processed correctly.

Check writing privilege

You may request checks which may be drawn on your Money Market Fund account.
These checks may be drawn in amounts of $1,000 or more, may be made payable to
the order of any person and may be cashed or deposited.

You can set up this service with your New Account Form or by calling
800-248-4486.

Exchange privilege

You can exchange from one Class I Galileo Fund into another. You must meet the
investment minimum for the Fund you are exchanging into. 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 Fund shares through certain broker-dealers and financial
organizations and their authorized intermediaries. If purchases and redemptions
of Fund 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

For any Fund except the Money Market Fund, if your account falls below $250,000
($100,000 for Money Market Fund) as a result of redemptions and or exchanges for
six months or more, the Fund may close your account and send you the proceeds
upon 60 days' written notice. If your account with the Money Market Fund drops
below $10,000 as a result of redemptions and or exchanges, the Fund may close
your account and send you the proceeds upon 30 days' written notice.

Large Redemption Amounts

The Fund also reserves 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 the 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 the TCW Galileo
International Equities Fund, 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:

o 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

o change or discontinue its exchange privilege, or
temporarily suspend this privilege during unusual
market conditions

o 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)

<PAGE>

TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT
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
TCW Galileo Funds, Inc. (Same, except that you should
DST Systems, Inc. include a note specifying the
P.O. Box 419951 Fund name, your account number,
Kansas City, MO 64141-6951 and the name(s) your account
is registered in.)

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 (for all
Galileo Funds except the Money Market Fund)
DST Systems, Inc./AC 9870371170 (for Money
Market Fund only)
FBO TCW Galileo Fund
-------------
(Name on the Fund Account)
(Fund Account Number)

Via Exchange

Call the Transfer Agent at (800) 248-4486 or the Investor Relations Department
at (800) FUND TCW (386-3829). The new account will have the same registration
as the account from which you are exchanging.

<PAGE>

TO SELL OR EXCHANGE SHARES
By Mail

Write a letter of instruction that includes:

o your name(s) and signature(s) as they appear on the account form
o your account number
o the Fund name
o the dollar amount you want to sell or exchange
o 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 Fund has 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 $25,000
($10,000--the Money Market Fund only) 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)

To reach your investment representative or the Investor
Relations Department at TCW Galileo Funds, call toll free in
the U.S.

(800) 386-3829

<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
each Fund except the Money Market Fund will be declared and paid monthly.
Dividends from net investment income for the Money Market Fund will be declared
and paid each weekday exclusive of days the New York Stock Exchange or the
Fund's custodian bank is closed. The Funds will distribute any net realized long
or short-term capital gains at least annually. Your distributions will be
reinvested in the Fund unless you instruct the Fund otherwise. There are no fees
or sales charges on reinvestments.

This is a brief summary of some of the tax laws that affect your investment in
the Fund. Please see the Statement of Additional Information and your tax
adviser for further information.

<PAGE>

Financial Highlights

The financial highlights table is intended to help you understand the Fund's
financial performance for the fiscal years indicated. Certain information
reflects financial results for a single Fund share. "Total return" shows how
much your investment in the Institutional Class shares of the Fund would have
increased (or decreased) during each period, assuming you had reinvested all
dividends and distributions. These figures have been audited by Deloitte &
Touche LLP, whose report, along with the Company's financial statements, are
included in the annual report, which is available upon request.

TCW Galileo Money Market Fund
<TABLE>
<CAPTION>

Year Ended October 31
----------------------------------------------------
<S> <C> <C> <C> <C> <C>

1999 1998 1997 1996 1995
Per-Share Data ($)
Net asset value, beginning of year $1.00 $1.00 $1.00 $1.00 $1.00
----------------------------------------------------
Investment operations:
Investment income--net 0.0434 0.0519 0.0516 0.0509 0.0549
----------------------------------------------------
Distributions:
Dividends from net investment (0.0434) (0.0519) (0.0516) (0.0509) (0.0549)
income

----------------------------------------------------
Net asset value, end of year $1.00 $1.00 $1.00 $1.00 $1.00

Total return 4.85% 5.31% 5.29% 5.21% 5.67%

Ratios/Supplemental Data:
Net assets, end of period ($ x 1,000) $261,300 $242,451 $ 222,771 $233,671 $86,302

Ratio of expenses to average net 0.38% 0.40%1 0.40%1 0.40%1 0.40%1
assets

Ratio of net income to average net 4.76% 5.19% 5.17% 5.04% 5.49%
assets
</TABLE>

1 The Adviser has voluntarily agreed to reduce its fee, or to pay the
operating expenses of the Fund, to the extent necessary to limit the annual
ordinary operating expenses of the Fund to 0.40% of net assets through
December 31, 1998. Had such action not been taken, total annualized
operating expenses as a percentage of average net assets would have been
0.41% for the fiscal year ended October 31, 1998, 0.40% for the fiscal year
ended October 31, 1997, 0.44% for the fiscal year ended October 31, 1996,
0.46% for the fiscal year ended October 31, 1995, and 0.68% for the ten
months ended October 31, 1994.

<PAGE>

Financial Highlights

The financial highlights table is intended to help you understand the Fund's
financial performance for the fiscal years indicated. Certain information
reflects financial results for a single Fund share. "Total return" shows how
much your investment in the Institutional Class shares of the Fund would have
increased (or decreased) during each period, assuming you had reinvested all
dividends and distributions. These figures have been audited by Deloitte &
Touche LLP, whose report, along with the Company's financial statements, are
included in the annual report, which is available upon request.

TCW Galileo Core Fixed Income Fund
<TABLE>
<CAPTION>

Year Ended October 31
-----------------------------------------------------
<S> <C> <C> <C> <C> <C>
1999 1998 1997 1996 1995
Per-Share Data ($)
Net asset value, beginning of year $9.89 $9.62 $9.45 $9.61 $8.94
----------------------------------------------------
Investment operations:
Investment income--net 0.57 0.55 0.58 0.55 0.58
Net realized and unrealized gain (0.50) 0.29 0.19 (0.16) 0.62
(loss) on investments ----------------------------------------------------
Total from investment operations 0.07 0.84 0.77 0.39 1.20
-----------------------------------------------------
Distributions:
Dividends from net investment income (0.54) (0.57) (0.60) (0.55) (0.53)
Net asset value, end of year $9.42 $9.89 $9.62 $9.45 $9.61

Total return (%) 0.69% 9.02% 8.45% 4.26% 13.92%

Ratios/Supplemental Data:
Net assets, end of period ($ x 1,000) $70,666 $162,996 $19,368 $25,006 $36,236
Ratio of expenses to average net assets 0.58%1 0.62% 0.93% 0.76% 0.68%1
Ratio of net income to average net assets 5.83% 5.60% 6.13% 5.85% 6.38%
Portfolio turnover rate 136.63% 272,77% 142.96% 238.73% 223.78%
</TABLE>

1 The Adviser has voluntarily agreed to reduce its fee from the Fund, or to
pay the operating expenses of the Fund, to the extent necessary to limit
the operating expenses. Had such action not been taken, total annualized
operating expenses as a percentage of average net assets would have been
0.59% and 0.72% for the years ended October 31, 1999 and 1995,
respectively.

<PAGE>

Financial Highlights

The financial highlights table is intended to help you understand the Fund's
financial performance for the fiscal years indicated. Certain information
reflects financial results for a single Fund share. "Total return" shows how
much your investment in the Institutional Class shares of the Fund would have
increased (or decreased) during each period, assuming you had reinvested all
dividends and distributions. These figures have been audited by Deloitte &
Touche LLP, whose report, along with the Company's financial statements, are
included in the annual report, which is available upon request.

TCW Galileo High Yield Bond Fund
<TABLE>
<CAPTION>

Year Ended October 31
----------------------------------------------------
<S> <C> <C> <C> <C> <C>

1999 1998 1997 1996 1995
Per-Share Data ($)
Net asset value, beginning of year $9.20 $10.11 $9.77 $9.74 $9.43
-----------------------------------------------------
Investment operations:
Investment income--net 0.80 0.88 0.91 0.89 0.92
Net realized and unrealized gain (0.37) (0.74) 0.34 0.03 0.39
(loss) on investments -----------------------------------------------------
Total from investment operations 0.43 0.14 1.25 0.92 1.31
Distributions:
Dividends from net investment income (0.78) (0.89) (0.91) (0.89) (1.00)
Dividends in excess of net -- (0.01) -- -- --
investment income
Dividends from net realized gains on -- (0.15) -- -- --
investments -----------------------------------------------------
Total Distributions (0.78) (1.05) (0.91) (0.89) (1.00)
Net asset value, end of year $8.85 $9.20 $10.11 $9.77 $9.74
Total return 4.60% 1.18% 13.26% 9.92% 14.65%

Ratios/Supplemental Data:
Net assets, end of period ($ x 1,000) $188,098 $165,702 $208,761 $183,815 $92,652
Ratio of expenses to average net assets 0.90% 0.85% 0.83% 0.90% 0.87%1
Ratio of net income to average net assets 8.60% 8.89% 9.10% 9.21% 9.60%
Portfolio turnover rate 128.15% 92.24% 109.45% 82.56% 36.32%
</TABLE>

1 The Adviser has voluntarily agreed to reduce its fee from the Fund, or to
pay the operating expenses of the Fund, to the extent necessary to limit
the ordinary operating expenses of the Fund. Had such action not been
taken, total annualized operating expenses as a percentage of average net
assets would have been 0.88% for the year ended October 31, 1995.

<PAGE>

Financial Highlights

The financial highlights table is intended to help you understand the Fund's
financial performance for the fiscal years indicated. Certain information
reflects financial results for a single Fund share. "Total return" shows how
much your investment in the Institutional Class shares of the Fund would have
increased (or decreased) during each period, assuming you had reinvested all
dividends and distributions. These figures have been audited by Deloitte &
Touche LLP, whose report, along with the Company's financial statements, are
included in the annual report, which is available upon request.

TCW Galileo Mortgage-Backed Securities Fund
<TABLE>
<CAPTION>

Year Ended October 31
--------------------------------------------------
<S> <C> <C> <C> <C> <C>
1999 1998 1997 1996 1995
Per-Share Data ($)
Net asset value, beginning of year $9.60 $9.70 $9.67 $9.58 $9.41
--------------------------------------------------
Investment operations:
Investment income--net 0.59 0.35 0.58 0.51 0.67
Net realized and unrealized gain (0.09) 0.10 0.05 0.22 0.25
(loss) on investments
--------------------------------------------------
Total from investment operations 0.50 0.45 0.63 0.73 0.92
--------------------------------------------------
Distributions:
Dividends from net investment income (0.51) (0.11) (0.38) (0.46) (0.71)
Dividends in excess of net -- -- (0.22) (0.18) (0.04)
investment income
Dividends from paid-in-capital -- (0.44) -- -- --
--------------------------------------------------
Total Distributions (0.51) (0.55) (0.60) (0.64) (0.75)
Net asset value, end of year $9.59 $9.60 $9.70 $9.67 $9.58
Total return 5.36% 4.73% 6.71% 7.86% 10.16%

Ratios/Supplemental Data:
Net assets, end of period ($ x 1,000) $53,496 $43,639 $53,307 $61,835 $81,366
Ratio of expenses to average net assets 0.75%1 0.83% 0.77% 0.69% 0.61%1
Ratio of net income to average net assets 6.10% 3.61% 6.00% 5.34% 7.13%
Portfolio turnover rate 53.48% 68.40% 109.91% 54.10% 37.83%
</TABLE>

<PAGE>

Financial Highlights

The financial highlights table is intended to help you understand the Fund's
financial performance for the fiscal years indicated. Certain information
reflects financial results for a single Fund share. "Total return" shows how
much your investment in the Institutional Class shares of the Fund would have
increased (or decreased) during each period, assuming you had reinvested all
dividends and distributions. These figures have been audited by Deloitte &
Touche LLP, whose report, along with the Company's financial statements, are
included in the annual report, which is available upon request.

TCW Galileo Total Return Mortgage-Backed Securities Fund
<TABLE>
<CAPTION>

Year Ended October 31
-----------------------------------------------------
<S> <C> <C> <C> <C> <C>
1999 1998 1997 1996 1995
Per-Share Data ($)
Net asset value, beginning of year $9.76 $9.91 $9.56 $9.56 $8.95
-----------------------------------------------------
Investment operations:
Investment income--net 0.62 0.84 0.75 0.68 0.72
Net realized and unrealized gain (0.60) (0.07) 0.32 0.02 0.71
(loss) on investments -----------------------------------------------------
Total from investment operations 0.02 0.77 1.07 0.70 1.43
-----------------------------------------------------
Distributions:
Dividends from net investment income (0.62) (0.86) (0.72) (0.68) (0.82)
Dividends in excess of net (0.20) (0.01) -- (0.02) --
investment income
Dividends from net realized gains on -- (0.05) -- -- --
investments

-----------------------------------------------------
Total Distributions (0.82) (0.92) (0.72) (0.70) (0.82)
Net asset value, end of year $8.96 $9.76 $9.91 $9.56 $9.56
Total return 0.20% 8.20% 11.66% 7.69% 16.84%

Ratios/Supplemental Data:
Net assets, end of period ($ x 1,000) $90,275 $101,501 $81,442 $112,260 $80,159
Ratio of expenses to average net assets 0.69% 0.70% 0.67% 0.68% 0.68%1
Ratio of net income to average net assets 6.62% 8.52% 7.77% 7.15% 7.88%
Portfolio turnover rate 28.07% 27.95% 16.01% 39.28% 23.76%
</TABLE>

<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.
http://www.tcwgalileofunds.com

TCW Galileo Funds, Inc.

SEC file number: 811-7170

More information on the Fund is available free upon request,
including the following:

Annual/Semi-Annual Report

Describes the Fund's performance, lists portfolio holdings
and contains a letter from the Fund's portfolio manager
discussing recent market conditions, economic trends and
Fund strategies.

Statement of Additional Information (SAI)

This prospectus tells you about the Institutional Class shares of nine of the
separate investment funds offered by TCW Galileo Funds, Inc., each of which has
different investment objectives and policies. Please read this document
carefully, and keep it for future reference. Sometimes we will refer to the
funds in this prospectus as the Galileo Equity Funds.

TCW Galileo Aggressive Growth Equities Fund

TCW Galileo Convertible Securities Fund

TCW Galileo Earnings Momentum Fund

TCW Galileo Large Cap Growth Fund

TCW Galileo Large Cap Value Fund

TCW Galileo Select Equities Fund

TCW Galileo Small Cap Growth Fund

TCW Galileo Small Cap Value Fund

TCW Galileo Value Opportunities Fund

March 1, 2000

LOGO

Table of Contents

Page
General Fund Information

Investment Objectives and Principal
Strategies........................... 2
Principal Risks...................... 3
Performance Summary.................. 5
Fund Expenses........................ 9
Expense Example...................... 10

TCW Galileo Aggressive Growth
Equities
Fund

Investment Objectives/Approach....... 11
Main Risks........................... 12

TCW Galileo Convertible Securities
Fund

Investment Objectives/Approach....... 13
Main Risks........................... 14

TCW Galileo Earnings Momentum Fund

Investment Objectives/Approach....... 16
Main Risks........................... 17

TCW Galileo Large Cap Growth Fund

Investment Objectives/Approach....... 19
Main Risks........................... 20

TCW Galileo Large Cap Value Fund

Investment Objectives/Approach....... 21
Main Risks........................... 22

TCW Galileo Select Equities Fund

Investment Objectives/Approach....... 23
Main Risks........................... 24

TCW Galileo Small Cap Growth Fund

Investment Objectives/Approach....... 26
Main Risks........................... 27

TCW Galileo Small Cap Value Fund

Investment Objectives/Approach....... 28
Main Risks........................... 29

TCW Galileo Value Opportunities Fund

Investment Objectives/Approach....... 30
Main Risks........................... 31

Risk Considerations.................. 32
Management of the Funds.............. 38
Multiple Class Structure............. 41

Your Investment

Account Policies and Services........ 42
To Open an Account/To Add to an
Account.............................. 45
To Sell or Exchange Shares........... 46
Distributions and Taxes.............. 47
Financial Highlights................. 48
For More Information................ 56

General Fund Information

Investment Objectives and Principal Strategies

All of the Galileo Equity 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.
<TABLE>
<CAPTION>

<S> <C> <C>
TCW Galileo Funds, Inc. Investment Objectives Principal Investment Strategies
TCW Galileo Aggressive Growth Long-term capital Invests in equity securities issued by
Equities Fund appreciation companies that appear to offer superior
growth prospects.

TCW Galileo Convertible Securities High total return from Invests in convertible securities.
Fund current income and capital
appreciation

TCW Galileo Earnings Momentum Fund Long-term capital Invests in equity securities of companies
appreciation experiencing or expected to experience
accelerating earnings growth.

TCW Galileo Large Cap Growth Fund Long-term capital Invests in equity securities of large
appreciation capitalization U.S. companies with above
average earnings prospects.

TCW Galileo Large Cap Value Fund Long-term capital Invests in equity securities of large
appreciation capitalization value companies.

TCW Galileo Select Equities Fund Long-term capital Invests in common stock of large
appreciation capitalization companies.

TCW Galileo Small Cap Growth Fund Long-term capital Invests in equity securities issued by
appreciation small capitalization growth companies.

TCW Galileo Small Cap Value Fund Long-term capital Invests in equity securities issued by
appreciation small capitalization value companies.

TCW Galileo Value Opportunities Long-term capital Invests in equity securities of companies
Fund appreciation with market capitalizations between $500 million
and $5 billion.
</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 in
seeking to avoid losses, it could have the effect of reducing the benefit from
any upswing in the market.

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 of securities with fluctuating market prices, the
value of 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:

o MARKET RISK

o SECURITIES SELECTION RISK

o PRICE VOLATILITY

Each Fund may also be subject (in varying degrees) to the following risks:

o 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 the Fund. The Earnings Momentum, Aggressive
Growth Equities, Small Cap Growth, Small Cap Value, and Value Opportunities
Funds are subject to liquidity risk because they invest primarily in
securities of small or medium sized companies. The Convertible Securities
Fund is subject to liquidity risk because it may invest in lower quality
securities.

o 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. Each
Fund is subject to foreign investing risk because it may invest in foreign
company securities. In addition, because foreign securities generally are
denominated and pay dividends or interest in foreign currencies, and each
Fund may hold various foreign currencies, the value of the net assets of
these Funds as measured in U.S. dollars can be affected favorably or
unfavorably by changes in exchange rates.

o 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. The Convertible Securities Fund's
portfolio consists, at times, primarily of below investment grade corporate
securities.

Each Fund may be more susceptible to some of the risks discussed on the
previous page 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 32.

Because each Fund is non-diversified for Investment Company Act of 1940 (''1940
Act'') purposes, it may invest more than 5% of its total assets in the
securities of any one issuer. Consequently, its 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.

<PAGE>

Performance Summary

The two tables below show each Fund's annual returns and its long-term
performance with respect to its Institutional Class shares. The first table
shows you how the Fund's performance has varied from year to year. The second
compares the Fund's performance over time to that of a broad-based securities
index. Both tables assume reinvestment of dividends and distributions. The
performance information includes performance of the predecessor limited
partnership of each Fund which were managed by an affiliate of TCW Funds
Management, Inc., using the same investment strategy as the Funds'. The
performance of the partnerships were calculated using performance standards
applicable to private investment partnerships, which take into account all
elements of total return and reflect the deduction of all fees and expenses of
operation. The predecessor limited partnerships were not registered under the
1940 Act and, therefore, were not subject to certain investment restrictions
imposed by the 1940 Act. If the limited partnerships had been registered under
the 1940 Act and Subchapter M of the Internal Revenue Code of 1986, as amended
their performance might have been adversely affected. As with all mutual funds,
past performance is not a prediction of future results.

Year by year total return (%)
as of December 31 each year*

TCW Galileo Aggressive Growth Equities Fund

60.66% 12.38% 12.65% 63.30% 127.59%

1995 1996 1997 1998 1999

* The Fund's
total return
for the period
October 31,
1999 to
December 31,
1999 is: 47.71%

TCW Galileo Convertible Securities Fund

-6.09% 33.28% 14.57% 20.10% -6.71% 22.61% 15.02% 19.26% 12.52% 39.04%

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

* The
Fund's
total
return for
the period
October 31,
1999 to
December 31,
1999 is: 19.17%

TCW
Galileo
Earnings
Momentum
Fund

23.95% -5.70% 26.43% 10.56% 9.94% 7.45% 66.03%

1993 1994 1995 1996 1997 1998 1999

* The
Fund's
total
return for
the period
October 31,
1999 to
December 31,
1999 is:
40.88%

TCW
Galileo
Large Cap
Growth Fund

8.70% 59.15% 56.45%

1997 1998 1999

* The
Fund's
total
return for
the period
October 31,
1999 to
December 31,
1999 is:
24.65%

TCW Galileo Large Cap Value Fund

18.99% 12.82%

1998 1999

* The
Fund's
total
return for
the period
October 31,
1999 to
December 31,
1999 is:
4.32%

TCW
Galileo
Select
Equities
Fund

15.41% 10.85% 22.93% -7.04% 26.45% 20.58% 22.70% 37.97% 42.95%

1991 1992 1993 1994 1995 1996 1997 1998 1999

* The
Fund's
total
return for
the period
October 31,
1999 To
December 31,
1999 is:
16.83%

TCW Galileo
Small Cap
Growth Fund

-11.49% 81.09% 2.74% 13.06% -4.38% 64.29% 17.63% 14.37% 20.26% 126.05%

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

* The Fund's
total return
for the period
October 31,
1999 to
December 31,
1999 is: 56.45%

TCW Galileo
Value
Opportunities
Fund

8.50% 17.10% 0.30% 25.06%

1996 1997 1998 1999

* The Fund's
total return
for the period
October 31,
1999 to
December 31,
1999 is: 11.80%

<PAGE>

Best and worst quarterly performance during this period

Fund Performance
o Aggressive Growth Equities Fund
Quarter ending December 31, 1999 65.37% (Best)
Quarter ending September 30, 1998 -19.98% (Worst)
o Convertible Securities Fund
Quarter ending December 31, 1999 24.80% (Best)
Quarter ending September 30, 1998 -10.34% (Worst)
o Earnings Momentum Fund
Quarter ending December 31, 1999 40.88% (Best)
Quarter ending September 30, 1998 -24.71% (Worst)
o Large Cap Growth Fund
Quarter ending December 31, 1998 29.53% (Best)
Quarter ending September 30, 1998 -3.81% (Worst)
o Large Cap Value Fund
Quarter ending December 31, 1998 20.90% (Best)
Quarter ending September 30, 1999 -11.51% (Worst)
o Select Equities Fund
Quarter ending December 31, 1999 31.15% (Best)
Quarter ending September 30, 1999 -6.96% (Worst)
o Small Cap Growth Fund
Quarter ending December 31, 1999 80.24% (Best)
Quarter ending September 30, 1998 -22.32% (Worst)
o Value Opportunities Fund
Quarter ending December 31, 1998 28.55% (Best)
Quarter ending September 30, 1998 -21.03% (Worst)

<PAGE>

From
Average annual total return as of Inception
December 31, 1999 1 year 5 years or 10 years
o Aggressive Growth Equities Fund 127.59% 49.86% 48.62%
S&P 400 Mid-Cap 14.71% 23.05% 21.36%
o Convertible Securities Fund 39.04% 21.36% 15.52%*
First Boston Convertible Securities Index 42.28% 20.08% 14.83%*
o Earnings Momentum Fund 66.03% 22.35% 19.09%
Russell 2000 Index 21.26% 16.69% 14.67%
o Large Cap Growth Fund 56.45% N/A 48.16%
S&P/BARRA Growth Index 28.27% N/A 31.56%
o Large Cap Value Fund 12.82% N/A 15.69%
S&P/BARRA Value Index 12.73% N/A 14.31%
o Select Equities Fund 42.94% 29.84% 21.93%
S&P 500 21.04% 28.55% 20.30%
o Small Cap Growth Fund 126.05% 43.14% 26.74%*
Russell 2000 Index 21.26% 16.69% 13.40%*
o Value Opportunities Fund 25.06% N/A 15.86%
Wilshire Mid-Cap 750 26.65% N/A 18.84%

* Represents the 10 year return
<PAGE>

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
Institutional Class shares of the Funds have no sales charge (load) or Rule
12b-1 distribution fees.

FEE TABLE
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>

Aggressive Large Large Small Small
Growth Convertible Earnings Cap Cap Select Cap Cap Value
Equities Securities Momentum Growth Value Equities Growth Value Opportunities
Shareholder Transaction Fees

1) Redemption Fees......... None None None None None None None None None
2) Exchange Fees........... None None None None None None None None None
3) Contingent Deferred Sales
Load....................... None None None None None None None None None
4) Sales Load on Reinvested
Dividends.................. None None None None None None None None None
5) Sales Load on Purchases. None None None None None None None None None

Annual Fund Operating Expenses

Management Fees............ 1.00% 0.75% 1.00% 0.55% 0.55% 0.75% 1.00% 1.00% 0.80%
Distribution (12b-1) Fees None None None None None None None None None
Other Expenses............. 0.14% 0.28% 0.46% 0.75% 0.30% 0.13% 0.11% 0.20% 0.38%
Total Annual Fund Operating
Expenses................ 1.14% 1.03% 1.46% 1.30% 0.85% 0.88% 1.14% 1.20%1 1.18%
</TABLE>

1 Estimated. Fund has no operating history.

EXPENSE EXAMPLE

This Example is intended to help you compare the cost of investing in the 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 5 Years 10 Years
Aggressive Growth Equities..... $116 $362 628 $ 1,386
Convertible Securities......... 105 328 569 1,259
Earnings Momentum.............. 149 462 797 1,746
Large Cap Growth............... 132 412 713 1,568
Large Cap Value................ 87 271 471 1,049
Select Equities................ 90 281 488 1,084
Small Cap Growth............... 116 362 628 1,386
Small Cap Value................ 122 381 660 1,455
Value Opportunities............ 120 375 649 1,432

TCW Galileo Aggressive Growth Equities Fund

Investment Objectives/Approach

The Fund seeks long-term capital appreciation. To pursue this goal, the Fund
anticipates that at least 65% of the value of its total assets will be invested
(except when maintaining a temporary defensive position) in equity securities in
issuers which are characterized as "growth" companies according to criteria
established by the Adviser. These securities include common and preferred stock
and convertible securities. In managing the Fund's investments, the Adviser will
focus on emerging companies that exhibit this characteristic.

Concepts to understand
- ----------------------

Emerging growth companies are companies that are likely to show rapid growth
through reinventing an existing industry or pioneering a new industry.

o a demonstrated record of consistent earnings growth or
the potential to grow earnings

o an ability to earn an attractive return on equity

o a price/earnings ratio which is less than the Adviser's
internally estimated three-year earnings growth rate

o a large and growing market share

o a strong balance sheet

o significant ownership interest by management and a
strong management team.

Christopher J. Ainley and Douglas S. Foreman are the Fund's
portfolio managers.

<PAGE>

Main Risks

The Fund may engage in active portfolio management which may result in increased
Fund transaction expenses and have tax consequences, such as increased realized
gains, for investors.
<PAGE>

TCW Galileo Convertible Securities Fund

Investment Objectives/Approach

The Fund seeks high total return from current income and capital appreciation.
To pursue this goal, the Fund (except when maintaining a temporary defensive
position) invests at least 65% of the value of its total assets in convertible
securities.

In managing the Fund's investments, the Adviser considers the following factors
when determining which securities to select:

Concepts to understand
- ----------------------

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.

o the Adviser's own evaluations of the creditworthiness
of the issuers of the securities

o the interest or dividend income generated by the
securities

o the potential for capital appreciation of the
securities and the underlying common stocks

o the protection against price declines relative to the
underlying common stocks

o the prices of the securities relative to other
comparable securities

o whether the securities have protective conditions

o the diversification of the Fund's investments

o the ratings assigned to the securities

Kevin A. Hunter and Thomas D. Lyon are the Fund's portfolio
managers.

<PAGE>

Main Risks

The Fund holds primarily 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.

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 may be subject to
greater credit risk, because it invests in convertible debt securities that are
below investment grade. These securities rated below investment grade are also
commonly known as ''junk'' bonds. Debt securities that are rated below
investment grade are considered to be speculative. 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 prepayment 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.
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 lower quality securities
may be less liquid than higher quality securities, the Fund may be more
susceptible to liquidity risk than funds that invest in higher quality
securities. 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
securities issued by foreign companies, 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:

o a lack of political or economic stability

o foreign controls on investment and changes in currency exchange rates

o withholding taxes

o a lack of adequate company information

The Fund may engage in active portfolio management which may result in increased
Fund transaction expenses and have tax consequences, such as increased realized
gains, for investors.

<PAGE>

TCW Galileo Earnings Momentum Fund

Investment Objectives/Approach

The Fund seeks long-term capital appreciation. To pursue this goal, the Fund
invests primarily in equity securities of companies experiencing or expected to
experience accelerating earnings growth. The Fund will invest primarily in
common stocks, but may also invest in convertible securities, warrants, options
and foreign securities.

Concepts to understand
- ----------------------

Earnings acceleration is the pattern of increasing rate of growth in a company
or industry is typically triggered by a change that causes fundamentals to
improve.

The Adviser uses a ''bottom-up'' approach to identify
industries or companies that are experiencing or expected to
experience an acceleration in earnings growth. It monitors
the following changes in an attempt to identify these
companies:

o changes in general economic, political or demographic
trends

o development of new products or technology

o changes in consumer attitudes

o changes in a company's competitive advantage

o changes in the way a company is operated or valued

Richard C. Farra, Charles Larsen and Lisa Zeller are the
Fund's portfolio managers.

<PAGE>

Main Risks

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. This Fund may be subject to greater price volatility than funds
that invest in the securities of large 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 small-sized companies may be less liquid
than the securities of large-sized companies, the Fund may be more susceptible
to liquidity risk than funds that invest in the securities of large-sized
companies. Because the Fund may invest a portion of its assets in securities
issued by foreign companies, 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:

o a lack of political or economic stability

o foreign controls on investment and currency exchange rates

o withholding taxes

o a lack of adequate company information

In addition, securities traded only through foreign markets may be more volatile
and are often harder to sell. Volatility is a way to measure the changes in the
price of a single security or an entire portfolio. Large and frequent price
changes include higher volatility, which generally indicates that there is a
greater chance you could lose money over the short term. The Fund is also
subject to foreign currency risk. Because foreign securities are generally
denominated and pay dividends or interest in foreign currencies, the value of
the net assets of the Fund as measured in U.S. dollars will be affected
favorably or unfavorably by changes in exchange rates.

The Fund may invest some assets in options. This practice is used primarily to
hedge the Fund's portfolio but it may be used to increase returns; however, this
practice sometimes may reduce returns or increase volatility.

The Fund may engage in active portfolio management which may result in increased
Fund transaction expenses and have tax consequences, such as increased realize
gains, for investors.

<PAGE>

TCW Galileo Large Cap Growth Fund

Investment Objectives/Approach

The Fund seeks long-term capital appreciation. To pursue this goal, the Fund
invests primarily in equity securities of large capitalization U.S. companies
with above-average earnings prospects. It will invest (except when maintaining a
temporary defensive position) at least 65% of the value of its total assets in
companies with a market capitalization of greater than $3 billion at the time of
purchase.

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.

o making company visits

o attending industry conferences

o maintaining communication with company management

The Adviser then uses the information that it has obtained
from its fundamental research to analyze the company's
long-term growth potential, future earnings and cash flow.

The Adviser uses quantitative and qualitative screening
criteria to determine which companies to subject to its
fundamental analysis.

Wendy S. Barker and Douglas S. Foreman are the Fund's
portfolio managers.

<PAGE>

Main Risks

The primary risk affecting this Fund is ''price volatility.'' 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 less susceptible
to price volatility risk because it invests in the securities of large
companies. This is especially true during periods of economic uncertainty or
during economic downturns.

The Fund may engage in active portfolio management which may result in increased
Fund transaction expenses and have tax consequences, such as increased realized
gains, for investors.

<PAGE>

TCW Galileo Large Cap Value Fund

Investment Objectives/Approach

The Fund seeks long-term capital appreciation. To pursue this goal, the Fund
invests primarily in equity securities of large capitalization companies. The
securities include common and preferred stock and convertible securities. The
Fund will invest (except when maintaining a temporary defensive position) at
least 65% of the value its total assets in publicly traded equity securities of
companies with a market capitalization of greater than $3 billion at the time of
purchase. The Fund will invest mostly in "value companies."

Concepts to understand
- ----------------------

Value companies are companies that appear underpriced according to certain
financial measurements of their intrinsic worth or business prospects (such as
price-to-earnings or price-to-book ratios). Because a stock can remain
undervalued for years, value investors often look for factors that could trigger
a rise in price.

o making company visits

o financial screening to identify companies

o maintaining a disciplined approach to stock selection
and portfolio construction

The Adviser will use both quantitative and qualitative
screening criteria to supplement the scope of fundamental
research.

Thomas K. McKissick is the Fund's portfolio manager.

<PAGE>

Main Risks

The primary risk affecting this Fund is "price volatility." 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 less susceptible
to price volatility than funds that invest in the securities of small companies.
This is especially true during periods of economic uncertainty or during
economic downturns.

The Fund may engage in active portfolio management which may result in increased
Fund transaction expenses and have tax consequences, such as increased gains,
for investors.

<PAGE>

TCW Galileo Select Equities Fund

Investment Objectives/Approach

The Fund seeks long-term capital appreciation. Performance should be measured
over a full market cycle.

Concepts to understand
- ----------------------

To pursue this goal, the Fund invests primarily in the
common stocks of larger companies. The investment philosophy
underlying our strategy is a highly focused approach which
seeks to achieve superior long-term returns by owning shares
in companies that are believed to have strong and enduring
business models and inherent advantages over their
competitors. Except when maintaining a temporary defensive
position, the Fund anticipates that at least 65% of the
value of its total assets will be invested in equity
securities of these companies. In implementing its
investment policy, the Fund may purchase and sell
convertible securities and foreign securities.

Glen E. Bickerstaff is the Fund's portfolio manager.

<PAGE>

Main Risks

o a lack of political or economic stability

o foreign controls on investment and currency exchange rates

o withholding taxes

o a lack of adequate company information

The Fund may engage in active portfolio management which may result in increased
Fund transaction expenses and have tax consequences, such as increased realized
gains, for investors.

TCW Galileo Small Cap Growth Fund

Investment Objectives/Approach

Concepts to understand
- ----------------------

Douglas S. Foreman, Christopher J. Ainley, Nicholas J.
Capuano and Charles Larsen are the Fund's portfolio
managers.

<PAGE>

Main Risks

The primary risks affecting this Fund are "price volatility" and "liquidity
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. This Fund
may be subject to greater price volatility than funds that invest in the
securities of large or midcap 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 small-size companies may be less liquid
than the securities of large-size companies, the Fund may be more susceptible to
liquidity risk than funds that invest in the securities of large-sized
companies.

The Fund may invest some assets in options. This practice is used primarily to
hedge the Fund's portfolio but may be used to increase returns; however, such
practice sometimes may reduce returns or increase volatility.

The Fund may engage in active portfolio management which may result in increased
Fund transaction expenses and have tax consequences, such as increased realized
gains, for investors.

<PAGE>

TCW Galileo Small Cap Value Fund

Investment Objectives/Approach

The Fund seeks long-term capital appreciation. To pursue this goal, it invests
(except when maintaining a temporary defensive position) at least 65% of the
value of its total assets in equity securities issued by value companies with
market capitalizations, at the time of acquisition, within the range of the
companies comprising the Standard & Poor's Small Cap 600 Index. These securities
include common and preferred stocks, rights or warrants to purchase common or
preferred stock and convertible securities.

Concepts to understand
- ----------------------

Undervalued Assets: When a company's securities are selling below probable
liquidation values, net working capital or tangible book value.

Undervalued Growth Potential: When a company has a strong potential growth rate
and a strong balance sheet but has securities selling at a market multiple
(based on normalized earnings) and/or a price earnings multiple at a discount to
its peer group of companies.

Turnaround Situation: When a company has a sound balance sheet but has
securities that are selling at a significant market discount to the Adviser's
estimate of the company's 24 month sustainable earnings.

Emerging Growth Company: When a company has the potential for a significant
annual growth rate, a proprietary product and/or pre-eminent market position,
with a price/earnings multiple of generally not more than half the expected
growth rate.

In managing the Fund's investments, the Adviser looks to
invest the Fund's assets in the equity securities of
companies that are in one or more of the following
situations:

o have undervalued assets or undervalued growth potential

o are in a turnaround situation

o are emerging growth companies

The Adviser performs fundamental analysis on each company.
This includes a review of available financial and other
business information, company visits and management
interviews.

Tyler Davis, Nicholas F. Galluccio and Susan I. Schottenfeld
are the Fund's portfolio managers.

<PAGE>

Main Risks

The primary risks affecting this Fund are "price volatility" and "liquidity
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. This Fund
may be subject to greater price volatility than funds that invest in the
securities of large 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 small-size companies may be less liquid than the securities of
large-size companies, the Fund may be susceptible to liquidity risk more than
funds that invest in the securities of large-sized companies.

The Fund may engage in active portfolio management which may result in increased
Fund transaction expenses and have tax consequences, such as increased realized
gains, for investors.

<PAGE>

TCW Galileo Value Opportunities Fund

Investment Objectives/Approach

The Fund seeks long-term capital appreciation. To pursue this goal, the Fund
invests (except when maintaining a temporary defensive position) at least 65% of
the value of its total assets in equity securities of companies with market
capitalizations between $500 million and $5 billion. These equity securities
include common and preferred stocks, rights or warrants to purchase common stock
and convertible securities.

Concepts to understand
- ----------------------

Undervalued Assets: When a company's securities are selling below probable
liquidation values, net working capital or tangible book value.

Undervalued Growth Potential: When a company has a strong potential growth rate
and a strong balance sheet but has securities selling at less than a market
multiple (based on normalized earnings) and/or a price earnings multiple at a
discount to its peer group of companies.

Emerging Growth company: When a company has the potential for a significant
annual growth rate, a proprietary product and/or pre-eminent market position,
with a price/earnings multiple of generally not more than half the expected
growth rate.

In managing the Fund's investments, the Adviser looks to
invest the Fund's assets in the equity securities of
companies that are in one or more of the following
situations:

o have undervalued assets

o have undervalued growth potential

o are in a turnaround situation

o are emerging growth companies

The Adviser also utilizes fundamental analysis on each
company. This includes a review of available financial
information, company visits and management interviews.

Nicholas F. Galluccio and Susan I. Schottenfeld are the
Fund's portfolio managers.

<PAGE>

Main Risks

The primary risks affecting this Fund are "price volatility" and "liquidity
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. This Fund
may be subject to greater price volatility than funds that invest in the
securities of large 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 small-size companies may be less liquid than the securities of
large-size companies, the Fund may be susceptible to liquidity risk more than
funds that invest in the securities of large-sized companies.

The Fund may engage in active portfolio management which may result in increased
Fund transaction expenses and have tax consequences, such as increased realized
gains, for investors.

<PAGE>

Risk Considerations

Please consider the following risks before investing in a Fund.

Prices of many 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.

General Investment Risk
- -----------------------

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 the
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 security 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 each 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 some of the
Funds hold various foreign currencies from time to time, the
value of the net assets of those Funds as measured in United
States dollars will 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, certain of the Funds are authorized to enter
into certain foreign currency futures and forward contracts.
However, a Fund is not obligated to do so and, depending on
the availability and cost of these services, the Fund 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.

The forward currency market for the purchase or sale of U.S. dollars in most
countries is not highly developed, and in certain countries, there may be no
such market. If a devaluation of a currency is generally anticipated, a Fund may
not be able to contract to sell the currency at an exchange rate more
advantageous than that which would prevail after the anticipated amount of
devaluation, particularly in regards to forward contracts for local Latin
American currencies in view of the relatively small, inactive or even
non-existent market for these contracts. In the event the Funds hold securities
denominated in a currency that suffers a devaluation, the Funds' net asset
values will suffer corresponding reductions. In this regard, in December 1994,
the Mexican government determined to allow the Mexican peso to trade freely
against the U.S. dollar rather than within a controlled band, which action
resulted in a significant devaluation of the Mexican peso against the dollar.
Further, in July 1997, the Thai and Philippine governments allowed the baht and
peso, respectively, to trade freely against the U.S. dollar resulting in a sharp
devaluation of both currencies, and in 1998 Russia did the same, causing a sharp
devaluation of the ruble.

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.

Each Galileo Equity Fund may invest in convertible
securities rated below investment grade. Debt securities
that are rated below investment grade are considered to be
speculative. Those securities rated below investment grade
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.

Each of the Galileo Equity Funds is non-diversified for 1940 Act purposes and as
such may invest a larger percentage of its assets in individual issuers than a
diversified investment company. In this regard, the Fund is not subject to the
general limitation that it not invest more than 5% of its total assets in the
securities of any one issuer. To the extent the 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, each 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 high percentage of a Fund's assets may be invested in the
securities of a limited number of issuers, a Fund may be more susceptible to any
single economic, political or regulatory occurrence than a diversified fund.

<PAGE>

Year 2000

A Fund's portfolio investments may be negatively affected by year 2000 related
developments that may occur later in the year 2000.

Like other mutual funds, the investment advisory and management services
provided by the Adviser and the services provided to shareholders by the
Transfer Agent depend on the smooth functioning of their computer systems. There
has been concern that some computer software systems in use today may still not
recognize the year 2000, but revert to 1900 or some other date, due to the
manner in which dates were encoded and calculated. That failure could have a
negative impact on the handling of securities trades, pricing and account
services into the first quarter of the Year 2000, or beyond. The Adviser and the
Transfer Agent have actively worked on necessary changes to their own computer
systems to prepare for the year 2000 issue. To date, it appears that most
companies have made the Year 2000 date transition successfully. While the
possibility has diminished since January 4, 2000, corporate and governmental
data processing errors may still arise and result in production problems for
individual companies. Earnings of individual issuers may be affected by
remediation costs which may be substantial and may not be currently reflected in
financial statements. Individual firms may experience disruptions to their
business due to the failure of their counterparts to address year 2000 problems,
or could experience disruptions which could adversely affect corporate earnings
generally and the value of their securites. Accordingly, the Fund's portfolio
investments may be negatively affected by Year 2000 related developments that
may occur later in the year 2000.

European Economic and Monetary Union

Like other investment companies and business organizations,
including the companies in which the Funds invest, the Funds
could be adversely affected: (i) if the euro, or EMU as a
whole does not take affect; (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.

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 December 31, 1999, the Adviser and its
affiliated companies, which provide a variety of trust, investment management
and investment advisory services, had approximately $70 billion under management
or committed to management.

<PAGE>

Portfolio Managers

Portfolio Manager(s) Business Experience During Last Five Years*
Christopher J. Ainley Managing Director, the Adviser, TCW Asset Management Company and Trust Company of the
West. Prior to joining TCW in 1994 he was a portfolio manager with Putnam Investments.

Wendy S. Barker Senior Vice President, the Adviser, TCW Asset Management Company and Trust Company of
the West.

Glen E. Bickerstaff Managing Director, the Adviser, TCW Asset Management Company and Trust Company of the
West since May 1998. Previously, he was senior portfolio manager and Vice President of
Transamerica Investment Services.

Nicholas J. Capuano Senior Vice President, the Adviser, TCW Asset Management Company and Trust Company of
the West.

Tyler D. Davis Senior Vice President, the Adviser, TCW Asset Management Company and Trust Company of the
West since March 1998. Previously, a Director of Cowen Asset Management Company (March
1996 to February 1998) and prior thereto a Partner with Beck Mack Oliver.

Richard C. Farra Senior Vice President, the Adviser, TCW Asset Management Company and Trust Company of
the West. Previously, he was managing director of the Domestic Equity Group of ARCO
Investment Management Company, a subsidiary of Atlantic Richfield Company (ARCO).

Douglas S. Foreman Group Managing Director and Chief Investment Officer-U.S. Equities, the Adviser, TCW
Asset Management Company and Trust Company of the West since May 1994. Previously, he
was a portfolio manager with Putnam Investments.

Nicholas F. Galluccio Managing Director, 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.

Charles Larsen 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.

Thomas K. McKissick Managing Director, the Adviser, TCW Asset Management Company and Trust Company of the
West.

Susan I. Schottenfeld Managing Director, the Adviser, TCW Asset Management Company and Trust Company of the
West.

Lisa Zeller Senior Vice President, the Adviser, TCW Asset Management Company and Trust Company of
the West.
</TABLE>

* Positions with the TCW Group, Inc. and its affiliates may have changed over
time.

Advisory Agreements

The Fund 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 their assets, to place orders
for the purchase and sale of their 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. In addition, the
Adviser may reimburse third party administrators for retirement plan shareholder
servicing expenses. 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)
Aggressive Growth Equities 1.00%
Convertible Securities 0.75%
Earnings Momentum 1.00%
Large Cap Growth 0.55%
Large Cap Value 0.55%
Select Equities 0.75%
Small Cap Growth 1.00%
Small Cap Value 1.00%
Value Opportunities Fund 0.80%

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 a Fund 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

Each Fund currently offers two classes of shares, Institutional Class 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 also 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 assets 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.

Your Investment

Account Policies and Services

Buying shares

You pay no sales charges to invest in a Fund. Your price for Fund 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 the Fund. Orders received by a Fund's transfer
agent from dealers, brokers or other service providers after 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 Fund's 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 Fund pursuant to procedures
established by the Fund's Board.

Minimums

Initial Additional
All Funds except Money Market Fund $250,000 $25,000
Money Market Fund $100,000 $ 1,000

The TCW Galileo Funds, Inc. may waive the minimum and subsequent investments.
All investments must be in U.S. dollars. Third-party checks, except those
payable to an existing shareholder, will normally not be accepted. If your check
or wire does not clear, you will be responsible for any loss a Fund incurs.

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 the 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:

o amounts of $100,000 or more

o amounts of $1,000 or more on accounts whose address has been changed
within the last 30 days

o requests to send the proceeds to a payee or address different than
what is on our records

Exchange privilege

Third party transactions

You may buy and redeem Fund shares through certain broker-dealers and financial
organizations and their authorized intermediaries. If purchases and redemptions
of Fund 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

Large Redemption Amounts

Each Fund also reserves 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 the 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:

o 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

o change or discontinue its exchange privilege, or
temporarily suspend this privilege during unusual
market conditions

o 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)

<PAGE>

TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT
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
TCW Galileo Funds, Inc. (Same, except that you should include a note
DST Systems, Inc. specifying the Fund name, your account
P.O. Box 419951 number, and the name(s) your account
Kansas City, MO 64141-6951 is registered in.)

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 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 or
the Investor Relations Department at
(800) FUND TCW (386-3829). 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, the Investor Relations Department at TCW Galileo Funds at
(800) FUND TCW (386-3829) or your investment representative at TCW Galileo
Funds.

<PAGE>

TO SELL OR EXCHANGE SHARES
By Mail

Write a letter of instruction that includes:
o your name(s) and signature(s) as on the account
form
o your account number
o the Fund name
o the dollar amount you want to sell or exchange
o 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 Fund has 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 $25,000 or more.
Systematic Withdrawal plans are subject to a minimum annual
withdrawal of $500.

To reach the Transfer Agent, DST Systems, Inc., call toll free in
the U.S.

(800) 248-4486
Outside the U.S.
(816) 843-7166 (collect)

To reach your investment representative or the Investor Relations
Department at TCW Galileo Funds, call toll free in the U.S.

(800) 386-3829

<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
each Fund will be declared and paid annually except for the Convertible
Securities Fund, which will declare and pay dividends quarterly. The Funds will
distribute any net realized long or short-term capital gains at least annually.
Your distributions will be reinvested in the Fund unless you instruct the Fund
otherwise. There are no fees or sales charges on reinvestments.

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 Fund. Please see the Statement of Additional Information and your tax
adviser for further information.

<PAGE>

Financial Highlights

The financial highlights table is intended to help you understand the Fund's
financial performance for the fiscal years indicated. Certain information
reflects financial results for a single Fund share. ''Total return'' shows how
much your investment in the Institutional Class shares of the Fund would have
increased (or decreased) during each period, assuming you had reinvested all
dividends and distributions. These figures have been audited by Deloitte &
Touche LLP, whose report, along with Company's financial statements, are
included in the annual report, which is available upon request.

TCW Galileo Aggressive Growth Equities Fund
<TABLE>
<CAPTION>

<S> <C> <C> <C> <C>
June 3, 1996
(Commencement
of Operations)
through
Year Ended October 31,
October 31 1996
------------------------------------------------------
1999 1998 1997
Per-Share Data ($)
Net asset value, beginning of period $11.35 $9.40 $9.19 $10.00
---------------------------------------------------------
Investment operations:
Investment income (loss) -- net (0.14) (0.11) (0.08) (0.03)
Net realized and unrealized gain
(loss) on investments 12.68 2.06 0.29 (0.78)
---------------------------------------------------------
Total from investment operations 12.54 1.95 0.21 (0.81)
---------------------------------------------------------
Distributions:
Dividends from net realized gains on (1.60) -- -- --
investments ---------------------------------------------------------
Net asset value, end of period $22.29 $11.35 $9.40 $9.19

Total return 121.34% 20.74% 2.28% (8.10)%1

Ratios/Supplemental Data:
Net assets, end of period ($ x 1,000) 168,193 $ 84,904 135,850 $ 92,430

Ratio of expenses to average net assets 1.14% 1.17% 1.12 % 1.20%2,3
Ratio of net income (loss) to average net (0.79)% (1.03)% (0.86)% (0.80)%2
assets
Portfolio turnover rate 64.12% 55.36% 50.45% 19.19%1
</TABLE>

1 For the period June 3, 1996 (commencement of operations) through October 31,
1996 and not indicative of a full year's operating results.

2 Annualized.

3 The Adviser has voluntarily agreed to reduce its fee from the Fund, or to pay
the operating expenses of the Fund, to the extent necessary to limit the
ordinary operating expenses of the Fund to 1.20% of net assets through
December 31, 1996. Had such action not been taken, total annualized operating
expenses, as a percentage of average new assets, would have been 1.27% for
the period June 3, 1996 (commencement of operations) through October 31,
1996.

<PAGE>

Financial Highlights

The financial highlights table is intended to help you understand the Fund's
financial performance for the fiscal years indicated. Certain information
reflects financial results for a single Fund share. "Total return" shows how
much your investment in the Institutional Class shares of the Fund would have
increased (or decreased) during each period, assuming you had reinvested all
dividends and distributions. These figures have been audited by Deloitte &
Touche LLP, whose report, along with the Company's financial statements, are
included in the annual report, which is available upon request.

TCW Galileo Convertible Securities Fund
<TABLE>
<CAPTION>
<S> <C> <C> <C>
January 2, 1997
(Commencement
of Operations)
Year Ended Year Ended through

October 31, October 31, October 31,
1999 1998 1997
------------------------------------------------
Per-Share Data ($)
Net asset value, beginning of period $10.53 $11.41 $10.00
Investment operations:
Investment income-net 0.41 0.37 0.31
Net realized and unrealized gain 2.56 (0.08) 1.43
on investments
---------------------------------------------------
Total from investment operations 2.97 0.29 1.74
Distributions:
Dividends from net investment (0.34) (0.37) (0.33)
income
Dividends in excess of net -- (0.05) --
investment income
Dividends from net realized gains (0.50) (0.75) --
on investments ---------------------------------------------------
Total Distributions (0.84) (1.17) (0.33)
Net asset value, end of period $12.66 $10.53 $11.41

Total return 29.68% 2.69% 17.66%1

Ratios/Supplemental Data:
Net assets, end of period ($ x 1,000) $ 49,830 $ 27,388 $ 36,890
Ratio of expenses to average net assets 1.03% 1.05%3 0.95%2,3
Ratio of net income to average net assets 3.53% 3.34% 3.54%2
Portfolio turnover rate 150.91% 139.65% 141.43%1
</TABLE>

1 For the period January 2, 1997 (commencement of operations) to October 31,
1997 and not indicative of a full year's operating results.
2 Annualized.
3 The Adviser had voluntarily agreed to reduce its fee, or to pay the
operating expenses of the Fund, to the extent necessary to limit the annual
ordinary operating expenses of the Fund to 0.95% of net assets through
December 31, 1997 and 1.05% of net assets through December 31, 1998. Had
such action not been taken, total annualized operating expenses as a
percentage of average net assets would have been 1.51% for the period
January 2, 1997 (commencement of operations) through October 31, 1997 and
1.16% for the year ended October 31, 1998.

<PAGE>

Financial Highlights

The financial highlights table is intended to help you understand the Fund's
financial performance for the fiscal years indicated. Certain information
reflects financial results for a single Fund share. "Total return" shows how
much your investment in the Institutional Class shares of the Fund would have
increased (or decreased) during each period, assuming you had reinvested all
dividends and distributions. These figures have been audited by Deloitte &
Touche LLP, whose report, along with the Company's financial statements, are
included in the annual report, which is available upon request.

TCW Galileo Earnings Momentum Fund
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
November 1, 1994
(Commencement
of Operations)
through
Year Ended October 31 October 31, 1995
--------------------------------------- -----------------
1999 1998 1997 1996 1995
Per-Share Data ($)
Net asset value, beginning of period $10.56 $13.87 $13.01 $11.47 $10.00
-------------------------------------------------------------
Investment operations:
Investment income (loss)-net (0.16) (0.14) (0.12) (0.11) (0.03)
Net realized and unrealized gain 5.26 (2.20) 1.98 1.72 1.51
on investments -------------------------------------------------------------
Total from investment operations 5.10 (2.34) 1.86 1.61 1.48
-------------------------------------------------------------
Distributions:
Dividends in excess of net -- -- -- -- (0.01)
investment income
Dividends from net realized gains (0.54) (0.97) (1.00) (0.07) --
on investments -------------------------------------------------------------
Total Distributions (0.54) (0.97) (1.00) (0.07) (0.01)
Net asset value, end of period $15.12 $10.56 $13.87 $13.01 $11.47

Total return 50.23% (17.76)% 15.53% 13.99% 14.76%

Ratios/Supplemental Data:
Net assets, end of year ($ x 1,000) $21,838 $32,299 $101,667 $ 77,994 $63,411
Ratio of expenses to average net assets 1.46% 1.27% 1.17% 1.13% 1.14%1
Ratio of net income (loss) to average net (1.30)% (1.10)% (0.96)% (0.82)% (0.28)%
assets
Portfolio turnover rate 118.87% 51.25% 93.06% 99.03% 85.91%
</TABLE>

1 The Adviser has voluntarily agreed to reduce its fee from the Fund, or to
pay the operating expenses of the Fund, to the extent necessary to limit
the ordinary operating expenses of the Fund to 1.14% of net assets through
December 31, 1995. Had such action not been taken, total annualized
operating expenses, as a percentage of average net assets, would have been
1.14% for the year ended October 31, 1996 and November 1, 1994
(Commencement of Operations) through October 31, 1995.

<PAGE>

Financial Highlights

The financial highlights table is intended to help you understand the Fund's
financial performance for the fiscal years indicated. Certain information
reflects financial results for a single Fund share. "Total return" shows how
much your investment in the Institutional Class shares of the Fund would have
increased (or decreased) during each period, assuming you had reinvested all
dividends and distributions. These figures have been audited by Deloitte &
Touche LLP, whose report, along with the Company's financial statements, are
included in the annual report, which is available upon request.

TCW Galileo Large Cap Growth Fund

June 3, 1998
Year Ended (Commencement
October 31, of Operations)
1999 through
October 31,
1998
Per-Share Data ($)
Net asset value, beginning of period $11.18 $10.00
------------------------------
Investment operations:
Investment income (loss)-net (0.09) --
Net realized and unrealized gain 6.00 1.18
(loss) on investments
----------------------------------
Total from investment operations 5.91 1.18
----------------------------------
Distributions:
Distributions from Net Realized Gains (0.51) --
----------------------------------
Net asset value, end of period $16.58 $11.18

Total return 54.59% 11.80%1

Ratios/Supplemental Data:
Net assets, end of period ($ x 1,000) $ 23,164 $ 7,800
Ratio of expenses to average net assets 1.30% 0.91%2,3
Ratio of net income (loss) to average net (0.64)% (0.07)%2
assets
Portfolio turnover rate 78.02% 50.76%1

1 For the period June 3, 1998 (commencement of operations) through October
31, 1998 and not indicative of a full year's operating results.

2 Annualized

3 The Adviser has voluntarily agreed to reduce its fee, or to pay the
operating expenses of the Fund, to the extent necessary to limit the annual
ordinary operating expenses of the Fund to 0.91% of net assets through
December 31, 1998. Had such action not been taken, total annualized
operating expenses, as a percentage of average net assets, would have been
2.53% for the period June 3, 1998 (commencement of operations) through
October 31, 1998.

<PAGE>

Financial Highlights

The financial highlights table is intended to help you understand the Fund's
financial performance for the fiscal years indicated. Certain information
reflects financial results for a single Fund share. ''Total return'' shows how
much your investment in the Institutional Class shares of the Fund would have
increased (or decreased) during each period, assuming you had reinvested all
dividends and distributions. These figures have been audited by Deloitte &
Touche LLP, whose report, along with the Company's financial statements, are
included in the annual report, which is available upon request.

TCW Galileo Large Cap Value Fund

Year Ended June 3, 1998
October 31, (Commencement
1999 of Operations)
through
October 31,
1998
Per-Share Data ($)
Net asset value, beginning of period $10.12 $10.00
------------------------------
Investment operations:
Investment income-net 0.09 0.04
Net realized and unrealized gain 1.66 0.08
(loss) on investments
----------------------------------
Total from investment operations 1.75 0.12
----------------------------------
Distributions:
Distributions from net investment income (0.05) --
----------------------------------
Net asset value, end of period $11.82 $10.12

Total return 17.30% 1.20%1

Ratios/Supplemental Data
Net assets, end of period ($ x 1,000) $ 66,234 $ 7,505
Ratio of expenses to average net assets 0.85% 0.55%2,3
Ratio of net income (loss) to average net 0.79% 1.04%2
assets
Portfolio turnover rate 142.36% 83.84%1

- ----------------------------
1 For the period June 3, 1998 (commencement of operations) through October
31, 1998 and not indicative of a full year's operating results.
2 Annualized.
3 The Adviser has voluntarily agreed to reduce its fee, or to pay the
operating expenses of the Fund, to the extent necessary to limit the annual
ordinary operating expenses of the Fund to 0.55% of net assets through
December 31, 1998. Had such action not been taken, total annualized
operating expenses, as a percentage of average net assets, would have been
2.48% for the period June 3, 1998 (commencement of operations) through
October 31, 1998.

<PAGE>

Financial Highlights

The financial highlights table is intended to help you understand the Fund's
financial performance for the fiscal years indicated. Certain information
reflects financial results for a single Fund share. "Total return" shows how
much your investment in the Institutional Class shares of the Fund would have
increased (or decreased) during each period, assuming you had reinvested all
dividends and distributions. These figures have been audited by Deloitte &
Touche LLP, whose report, along with the Company's financial statements, are
included in the annual report, which is available upon request.

TCW Galileo Select Equities Fund

Year Ended October 31
-----------------------------------------
<S> <C> <C> <C> <C> <C>

1999 1998 1997 1996 1995
Per-Share Data ($)
Net asset value, beginning of year $16.89 $19.29 $15.93 $13.69 $11.57
-----------------------------------------------
Investment operations:
Investment income (loss)-net (0.07) (0.02) 0.01 0.11 0.06
Net realized and unrealized gain 6.32 3.38 3.57 2.18 2.11
(loss) on investments
-----------------------------------------------
Total from investment operations 6.25 3.36 3.58 2.29 2.17
-----------------------------------------------
Distributions:
Dividends from net investment income -- -- (0.02) (0.05) (0.05)
Dividends from net realized gains (2.45) (5.76) (0.20) -- --
on investments -----------------------------------------------
Total Distributions (2.45) (5.76) (0.22) (0.05) (0.05)
-----------------------------------------------
Net asset value, end of year $20.69 $16.89 $19.29 $15.93 $13.69

Total return 42.12% 23.83% 22.68% 16.79% 18.85%

Ratios/Supplemental Data:
Net assets, end of period $ 288,546 184,865 $156,113 $231,302 $ 197,721
($ x 1,000)
Ratio of expenses to average net 0.88% 0.86% 0.83% 0.82% 0.85%
assets
Ratio of net income (loss) to (0.39)% (0.14)% 0.08% 0.18% 0.48%
average net assets
Portfolio turnover rate 48.29% 103.51% 39.22% 39.58% 53.77%
</TABLE>

<PAGE>

Financial Highlights

The financial highlights table is intended to help you understand the Fund's
financial performance for the fiscal years indicated. Certain information
reflects financial results for a single Fund share. ''Total return'' shows how
much your investment in the Institutional Class shares of the Fund would have
increased (or decreased) during each period, assuming you had reinvested all
dividends and distributions. These figures have been audited by Deloitte &
Touche LLP, whose report, along with the Company's financial statements, are
included in the annual report, which is available upon request.

TCW Galileo Small Cap Growth Fund
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>

Year Ended October 31
1999 1998 1997 1996 1995
Per-Share Data ($)
Net asset value, beginning of year $16.48 $18.74 $17.17 $13.53 $9.39
---------------------------------------------
Investment operations:
Investment income (loss-net (0.22) (0.18) (0.15) (0.13) (0.07)
Net realized and unrealized gain 14.82 (0.90) 1.91 4.08 4.72
(loss) on investments ---------------------------------------------
Total from investment operations 14.60 (1.08) 1.76 3.95 4.65
---------------------------------------------
Distributions:
Dividends from net investment income -- -- -- (0.01) --
Dividends from net realized gains on (0.27) (1.18) (0.19) (0.30) (0.51)
investments
---------------------------------------------
Total Distributions: (0.27) (1.18) (0.19) (0.31) (0.51)
----------------------------------------------
Net asset value, end of year $30.81 $16.48 $18.74 $17.17 $13.53

Total return 89.63% (5.98)% 10.38% 29.73% 49.89%

Ratios/Supplemental Data:
Net assets, end of period ($ x 1,000) $240,792 $116,050 $144,756 132,444 $ 66,056

Ratio of expenses to average net assets 1.14% 1.13%(1) 1.14% 1.14% 1.21%1
Ratio of net income (loss) to average net (0.94)% (0.95)% (0.89)% (0.76)% (0.61)%
assets
Portfolio turnover rate 74.52% 63.67% 60.52% 45.43% 89.73%
</TABLE>

1 The Adviser has voluntarily agreed to reduce its fee from the Fund, or to
pay the operating expenses of the Fund, to the extent necessary to limit
the ordinary operating expenses of the Fund to 1.09% of net assets through
December 31, 1994. Had such action not been taken, total annualized
operating expenses, as a percentage of average net assets, would have been
1.24% for the year ended October 31, 1995.

<PAGE>

Financial Highlights

The financial highlights table is intended to help you understand the Fund's
financial performance for the fiscal years indicated. Certain information
reflects financial results for a single Fund share. ''Total return'' shows how
much your investment in the Institutional Class shares of the Fund would have
increased (or decreased) during each period, assuming you had reinvested all
dividends and distributions. These figures have been audited by Deloitte &
Touche LLP, whose report, along with the Company's financial statements, are
included in the annual report, which is available upon request.

TCW Galileo Value Opportunities Fund

November 3, 1997
(Commencement
of Operations)
Year Ended through
October 31, 1999 October 31, 1998
---------------- ----------------
Per-Share Data ($)
Net asset value, beginning of period $9.24 $10.00
-------------------------------------
Investment operations:
Investment income (loss)-net (0.01) --
Net realized and unrealized gain 2.00 (0.75)
(loss) on investments
------------------------------------
Total from investment operations 1.99 (0.75)
-------------------------------------
Distributions:
Dividends from net investment income -- -
Dividends from net realized gains on
investments -- --
Dividends in excess of net -- (0.01)
investment income
-------------------------------------
Total Distributions (0.01)
-------------------------------------
Net asset value, end of period $11.23 $9.24

Total return (%) 21.54% (7.49)%1

Ratios/Supplemental Data
Net assets, end of period ($ x 1,000) $ 30,238 $ 28,634
Ratio of expenses to average net assets 1.18% 1.16%2
Ratio of net income (loss) to average net (0.10)% 0.05%2
assets
Portfolio turnover rate 140.07% 97.30%1

1 For the period November 3, 1997 (commencement of operations) through
October 31, 1998 and not indicative of a full year's operating results.

2 Annualized.

<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.
http://www.tcwgalileofunds.com

TCW Galileo Funds, Inc.

SEC file number: 811-7170

More information on the Fund is available free upon request,
including the following:

Annual/Semi-Annual Report Describes the Fund's performance,
lists portfolio holdings and contains a letter from the
Fund's portfolio manager discussing recent market
conditions, economic trends and Fund strategies.

Statement of Additional Information (SAI)

<PAGE>
TCW GALILEO FUNDS, INC.

865 South Figueroa Street, Suite 1800

Los Angeles, California 90017

(800) FUND TCW

THE GALILEO FUNDS

STATEMENT OF ADDITIONAL INFORMATION

March 1, 2000

---------------------------------

This Statement of Additional Information is not a prospectus but contains
information in addition to and more detailed than that set forth in the
Prospectus dated the same date which describes TCW Galileo Money Market Fund;
TCW Galileo Core Fixed Income Fund, TCW Galileo High Yield Bond Funds, TCW
Galileo Mortgage-Backed Securities Fund, TCW Galileo Total Return
Mortgage-Backed Securities Fund (collectively, the "Bond Funds"); TCW Galileo
Aggressive Growth Equities Fund, TCW Galileo Convertible Securities Fund, TCW
Earnings Momentum Fund, TCW Galileo Large Cap Growth Fund, TCW Galileo Large Cap
Value Fund, TCW Galileo Select Equities Fund, TCW Galileo Small Cap Growth Fund,
TCW Galileo Small Cap Value Fund, TCW Galileo Value Opportunities Fund, TCW
Galileo Asia Pacific Equities Fund, TCW Galileo Emerging Markets Equities Fund,
TCW Galileo European Equities Fund, TCW Galileo International Equities Fund, TCW
Galileo Japanese Equities Fund and TCW Galileo Latin America Equities Fund
("collectively, the "Equity Funds"); and TCW Galileo Emerging Markets Income
Fund. Each Fund offers two classes of shares, Institutional Class I shares and
Class N shares. This Statement of Additional Information should be read in
conjunction with the Prospectus. A Prospectus may be obtained without charge by
writing TCW Galileo Funds, Inc., Attention: Investor Relations Department, 865
South Figueroa Street, Suite 1800, Los Angeles, California 90017 or by calling
the Company's Investor Relations Department at (800) FUND TCW. This Statement of
Additional Information, although not in itself a prospectus, is incorporated by
reference into the Prospectus in its entirety.

<PAGE>

TABLE OF CONTENTS

INVESTMENT PRACTICES......................................................1

RISK CONSIDERATIONS......................................................20

INVESTMENT RESTRICTIONS..................................................36

DIRECTORS AND OFFICERS OF THE COMPANY....................................38

INVESTMENT ADVISORY AND SUB-ADVISORY AGREEMENTS..........................42

DISTRIBUTION OF COMPANY SHARES...........................................45

CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES......................46

ADMINISTRATION AGREEMENT.................................................49

CODE OF ETHICS...........................................................49

DETERMINATION OF NET ASSET VALUE.........................................49

HOW TO BUY AND REDEEM SHARES.............................................49

HOW TO EXCHANGE SHARES...................................................50

PURCHASES-IN-KIND........................................................50

DISTRIBUTIONS AND TAXES..................................................51

INVESTMENT RESULTS.......................................................54

ORGANIZATION, SHARES AND VOTING RIGHTS...................................57

TRANSFER AGENT AND CUSTODIANS............................................58

INDEPENDENT AUDITORS.....................................................58

LEGAL COUNSEL............................................................58

FINANCIAL STATEMENTS.....................................................58

<PAGE>

INVESTMENT PRACTICES

In attempting to achieve its investment objective, a Fund may utilize, among
others, one or more of the strategies or securities set forth below. The Funds
may, in addition, invest in other instruments (including derivative investments)
or use other investment strategies that are developed or become available in the
future and that are consistent with their objectives and restrictions. The Fund,
for purposes of calculating certain comparative guidelines, will utilize the
previous month-end range.

Strategies Available to All Funds

Money Market Instruments. All Funds may invest in money market instruments,
although the Bond Funds, Equity Funds and Emerging Markets Income will generally
do so for defensive or temporary purposes only. These instruments include, but
are not limited to:

U.S. Government Securities.
- ----------------------------

Obligations issued or guaranteed as to principal and interest by the United
States or its agencies (such as the Export-Import Bank of the United States,
Federal Housing Administration and Government National Mortgage Association) or
its instrumentalities (such as the Federal Home Loan Bank), including Treasury
bills, notes and bonds;

Bank Obligations.
- ----------------

(All Funds except Money Market) Obligations including certificates of
deposit, bankers' acceptances, commercial paper (see below) and other debt
obligations of banks subject to regulation by the U.S. Government and having
total assets of $1 billion or more, and instruments secured by such obligations,
not including obligations of foreign branches of domestic banks except as
permitted below.

(Money Market Fund) U.S. dollar denominated instruments issued or
guaranteed by the 50 largest bank holding companies in the United States, in
terms of total assets, their subsidiaries and their London branches. Such bank
obligations may be general obligations of the parent bank holding company or may
be limited to the issuing entity by the terms of the specific obligation or by
government regulation;

Eurodollar Certificates of Deposit. (All Funds) Eurodollar certificates of
deposit issued by foreign branches of domestic banks having total assets of $1
billion or more (investments in Eurodollar certificates may be affected by
changes in currency rates or exchange control regulations, or changes in
governmental administration or economic or monetary policy in the United States
and abroad);

Obligations of Savings Institutions.
- -----------------------------------

(All Funds) Certificates of deposit of savings banks and savings and loan
associations, having total assets of $1 billion or more (investments in savings
institutions above $100,000 in principal amount are not protected by federal
deposit insurance);

Fully Insured Certificates of Deposit.
- ----------------------------------------

(All Funds except Money Market) Certificates of deposit of banks and
savings institutions, having total assets of less than $1 billion, if the
principal amount of the obligation is insured by the Bank Insurance Fund or the
Savings Association Insurance Fund (each of which is administered by the Federal
Deposit Insurance Corporation), limited to $100,000 principal amount per
certificate and to 15% or less of the Fund's total assets in all such
obligations and in all illiquid assets, in the aggregate;

Commercial Paper.
- ----------------

The Funds may purchase commercial paper rated within the two highest
ratings categories by Standard & Poor's Corporation ("S&P") or Moody's Investors
Service, Inc. ("Moody's") or, if not rated, the security is determined by the
Adviser to be of comparable quality.

World Bank Securities.
- ---------------------

(Money Market Fund) Obligations of the International Bank for
Reconstruction and Development, also known as the World Bank (these obligations
are supported by subscribed but unpaid commitments of member countries, and
there is no assurance that these commitments will be undertaken or complied with
in the future).

Money Market Mutual Funds.
- -------------------------

(All Funds) Shares of United States money market investment companies not
affiliated with the Adviser, subject to applicable legal restrictions and the
Adviser's determination that such investments are beneficial to the relevant
Fund and appropriate in view of such considerations as yield (taking into
account the advisory fees and expenses of the money market fund), quality and
liquidity.

Other Short-Term Obligations.
- -----------------------------

(All Funds). Debt securities that have a remaining maturity of 397 days or
less and that have a long-term rating within the three highest ratings
categories by S&P or Moody's.

Repurchase Agreements. Repurchase agreements, which may be viewed as a type of
secured lending by a Fund, typically involve the acquisition by a Fund of debt
securities from a selling financial institution such as a bank, savings and loan
association or broker-dealer. The repurchase agreements will provide that the
Fund will sell back to the institution, and that the institution will
repurchase, the underlying security ("collateral") at a specified price and at a
fixed time in the future, usually not more than seven days from the date of
purchase. The collateral will be maintained in a segregated account and, with
respect to United States repurchase agreements, will be marked to market daily
to ensure that the full value of the collateral, as specified in the repurchase
agreement, does not decrease below the repurchase price plus accrued interest.
If such a decrease occurs, additional collateral will be requested and, when
received, added to the account to maintain full collateralization. The Fund will
accrue interest from the institution until the date the repurchase occurs.
Although this date is deemed by each Fund to be the maturity date of a
repurchase agreement, the maturities of the collateral securities are not
subject to any limits and may exceed one year. Repurchase agreements maturing in
more than seven days will be considered illiquid for purposes of the restriction
on each Fund's investment in illiquid and restricted securities.

Lending of Portfolio Securities. Each Fund may, consistent with applicable
regulatory requirements, lend their portfolio securities to brokers, dealers and
other financial institutions, provided such loans are callable at any time by
the Funds (subject to the notice provisions described below), and are at all
times secured by cash, bank letters of credit, other money market instruments
rated A-1, P-1 or the equivalent or securities of the United States Government
(or its agencies or instrumentalities), which are maintained in a segregated
account and that are equal to at least the market value, determined daily, of
the loaned securities. The advantage of such loans is that the Funds continue to
receive the income on the loaned securities while at the same time earning
interest on the cash amounts deposited as collateral, which will be invested in
short-term obligations. A Fund will not lend more than 25% of the value of its
total assets. A loan may be terminated by the borrower on one business day's
notice, or by a Fund on two business day's notice. If the borrower fails to
deliver the loaned securities within two days after receipt of notice, the Fund
could use the collateral to replace the securities while holding the borrower
liable for any excess of replacement cost over collateral. 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. However, loans of
portfolio securities will only be made to firms deemed by the Adviser to be
creditworthy. Upon termination of the loan, the borrower is required to return
the securities to the Funds. Any gain or loss in the marketplace during the loan
period would inure to the Fund.

When voting or consent rights which accompany loaned securities pass to the
borrower, the Fund will call the loaned securities, to be delivered within one
day after notice, to permit the Fund to vote the securities if the matters
involved would have a material effect on the Fund's investment in such loaned
securities. A Fund will pay reasonable finder's, administrative and custodian
fees in connection with a loan of securities.

When-Issued and Delayed Delivery Securities and Forward Commitments. From time
to time, in the ordinary course of business, any Bond Fund, Equity Fund or
Emerging Markets Income may purchase securities on a when-issued or delayed
delivery basis and may purchase or sell securities on a forward commitment
basis. When such transactions are negotiated, the price is fixed at the time of
the commitment, but delivery and payment can take place a month or more after
the date of the commitment. The securities so purchased or sold are subject to
market fluctuation, and no interest or dividends accrue to the purchaser prior
to the settlement date. While a Fund will only purchase securities on a
when-issued, delayed delivery or forward commitment basis with the intention of
acquiring the securities, the Fund may sell the securities before the settlement
date, if it is deemed advisable. At the time a Fund makes the commitment to
purchase or sell securities on a when-issued, delayed delivery or forward
commitment basis, the Fund will record the transaction and thereafter reflect
the value, each day, of such security purchased or, if a sale, the proceeds to
be received, in determining its net asset value. At the time of delivery of the
securities, the value may be more or less than the purchase or sale price. An
increase in the percentage of a Fund's assets committed to the purchase of
securities on a when-issued or delayed delivery basis may increase the
volatility of the Fund's net asset value. The Adviser does not believe that any
Fund's net asset value or income will be adversely affected by its purchase of
securities on such basis.

When, As and If Issued Securities. Emerging Markets Income and the Bond and
Equity Funds may purchase securities on a "when, as and if issued" basis under
which the issuance of the security depends upon the occurrence of a subsequent
event, such as approval of a merger, corporate reorganization, leveraged buyout
or debt restructuring. The commitment for the purchase of any such security will
not be recognized in the portfolio of the Fund until the Adviser determines that
issuance of the security is probable. At such time, the Fund will record the
transaction and, in determining its net asset value, will reflect the value of
the security daily. At such time, the Fund will also establish a segregated
account with its custodian bank in which it will continuously maintain cash or
U.S. Government Securities or other liquid portfolio securities equal in value
to recognized commitments for such securities. Settlement of the trade will
ordinarily occur within three Business Days of the occurrence of the subsequent
event. Once a segregated account has been established, if the anticipated event
does not occur and the securities are not issued, the Fund will have lost an
investment opportunity. Each Fund may purchase securities on such basis without
limit. An increase in the percentage of the Fund's assets committed to the
purchase of securities on a "when, as and if issued" basis may increase the
volatility of its net asset value. The Adviser does not believe that the net
asset value of the Fund will be adversely affected by its purchase of securities
on such basis. Each Fund may also sell securities on a "when, as and if issued"
basis provided that the issuance of the security will result automatically from
the exchange or conversion of a security owned by the Fund at the time of the
sale.

Strategies Available to Money Market, Core Fixed Income, Mortgage-Backed
Securities and Total Return Mortgage-Backed Securities

Reverse Repurchase Agreements. Reverse repurchase agreements involve sales by a
Fund of portfolio securities concurrently with an agreement by the Fund to
repurchase the same securities at a later date at a fixed price. Generally, the
effect of such a transaction is that the Fund can recover all or most of the
cash invested in the portfolio securities involved during the term of the
reverse repurchase agreement, while it will be able to keep the interest income
associated with those portfolio securities. Such transactions are only
advantageous if the interest cost to the Fund of the reverse repurchase
transaction is less than the cost of obtaining the cash otherwise.

Strategies Available to Emerging Markets Income, All Bond Funds and Equity Funds
(Except Aggressive Growth Equities, Small Cap Value, Value Opportunities and
International Equities)

Options. Emerging Markets Income, the Bond Funds and the Equity Funds (except
Aggressive Growth Equities, Small Cap Value, Value Opportunities and
International Equities) may purchase and write (sell) call and put options,
including options listed on U.S. or foreign securities exchanges or written in
over-the-counter transactions ("OTC Options").

Exchange-listed options are issued by the Options Clearing Corporation ("OCC")
(in the U.S.) or other clearing corporation or exchange which assures that all
transactions in such options are properly executed. OTC Options are purchased
from or sold (written) to dealers or financial institutions which have entered
into direct agreements with a Fund. With OTC Options, such variables as
expiration date, exercise price and premium will be agreed upon between a Fund
and the transacting dealer, without the intermediation of a third party such as
the OCC. If the transacting dealer fails to make or take delivery of the
securities or amount of foreign currency underlying an option it has written, in
accordance with the terms of that option, a Fund would lose the premium paid for
the option as well as any anticipated benefit of the transaction. Each Fund will
engage in OTC Option transactions only with brokers or financial institutions
deemed creditworthy by the Fund's management.

Covered Call Writing. Emerging Markets Income, the Bond Funds and the Equity
Funds (except Aggressive Growth Equities, Small Cap Value, Value Opportunities
and International Equities) are permitted to write covered call options on
securities and (for the Equity Funds, except Aggressive Growth Equities, Small
Cap Value, Value Opportunities and International Equities and, for the Bond
Funds, Core Fixed Income and Emerging Markets Income) on the U.S. dollar and
foreign currencies. Generally, a call option is "covered" if a Fund owns, or has
the right to acquire, without additional cash consideration (or for additional
cash consideration held for the Fund by its custodian in a segregated account)
the underlying security (currency) subject to the option except that in the case
of call options on U.S. Treasury bills, a Fund might own U.S. Treasury bills of
a different series from those underlying the call option, but with a principal
amount and value corresponding to the exercise price and a maturity date no
later than that of the security (currency) deliverable under the call option. A
call option is also covered if a Fund holds a call on the same security as the
underlying security (currency) of the written option, where the exercise price
of the call used for coverage is equal to or less than the exercise price of the
call written or greater than the exercise price of the call written if the
marked to market difference is maintained by a Fund in cash, U.S. Government
Securities or other liquid portfolio securities which a Fund holds in a
segregated account maintained with its custodian.

The writer of an option receives from the purchaser, in return for a call it has
written, a "premium"; i.e., the price of the option. Receipt of these premiums
may better enable a Fund to earn a higher level of current income than it would
earn from holding the underlying securities (currencies) alone. Moreover, the
premium received will offset a portion of the potential loss incurred by the
Fund if the securities (currencies) underlying the option are ultimately sold
(exchanged) by the Fund at a loss. Furthermore, a premium received on a call
written on a foreign currency will ameliorate any potential loss of value on the
portfolio security due to a decline in the value of the currency.

However, during the option period, the covered call writer has, in return for
the premium on the option, given up the opportunity for capital appreciation
above the exercise price should the market price of the underlying security (or
the exchange rate of the currency in which it is denominated) increase, but has
retained the risk of loss should the price of the underlying security (or the
exchange rate of the currency in which it is denominated) decline. The premium
received will fluctuate with varying economic market conditions. If the market
value of the portfolio securities (or the currencies in which they are
denominated) upon which call options have been written increases, a Fund may
receive a lower total return from the portion of its portfolio upon which calls
have been written than it would have had such calls not been written.

As regards listed options and certain OTC Options, during the option period, a
Fund may be required, at any time, to deliver the underlying security (currency)
against payment of the exercise price on any calls it has written (exercise of
certain listed and OTC Options may be limited to specific expiration dates).
This obligation is terminated upon the expiration of the option period or at
such earlier time when the writer effects a closing purchase transaction. A
closing purchase transaction is accomplished by purchasing an option of the same
series as the option previously written. However, once the Fund has been
assigned an exercise notice, the Fund will be unable to effect a closing
purchase transaction.

Closing purchase transactions are ordinarily effected to realize a profit on an
outstanding call option, to prevent an underlying security (currency) from being
called, to permit the sale of an underlying security (or the exchange of the
underlying currency) or to enable a Fund to write another call option on the
underlying security (currency) with either a different exercise price or
expiration date or both. A Fund may realize a net gain or loss from a closing
purchase transaction depending upon whether the amount of the premium received
on the call option is more or less than the cost of effecting the closing
purchase transaction. Any loss incurred in a closing purchase transaction may be
wholly or partially offset by unrealized appreciation in the market value of the
underlying security (currency). Conversely, a gain resulting from a closing
purchase transaction could be offset in whole or in part or exceeded by a
decline in the market value of the underlying security (currency).

If a call option expires unexercised, a Fund realizes a gain in the amount of
the premium on the option less the commission paid. Such a gain, however, may be
offset by depreciation in the market value of the underlying security (currency)
during the option period. If a call option is exercised, a Fund realizes a gain
or loss from the sale of the underlying security (currency) equal to the
difference between the purchase price of the underlying security (currency) and
the proceeds of the sale of the security (currency) plus the premium received on
the option less the commission paid.

Covered Put Writing. As a writer of a covered put option, a Fund incurs an
obligation to buy the security underlying the option from the purchaser of the
put, at the option's exercise price at any time during the option period, at the
purchaser's election (certain listed and OTC put options written by a Fund will
be exercisable by the purchaser only on a specific date). A put is "covered" if,
at all times, the Fund maintains, in a segregated account maintained on its
behalf at the Fund's custodian, cash, U.S. Government Securities or other liquid
portfolio securities in an amount equal to at least the exercise price of the
option, at all times during the option period. Similarly, a short put position
could be covered by the Fund by its purchase of a put option on the same
security (currency) as the underlying security of the written option, where the
exercise price of the purchased option is equal to or more than the exercise
price of the put written or less than the exercise price of the put written if
the marked to market difference is maintained by the Fund in cash, U.S.
Government Securities or other liquid portfolio securities which the Fund holds
in a segregated account maintained at its custodian. In writing puts, a Fund
assumes the risk of loss should the market value of the underlying security
(currency) decline below the exercise price of the option (any loss being
decreased by the receipt of the premium on the option written). In the case of
listed options, during the option period, the Fund may be required, at any time,
to make payment of the exercise price against delivery of the underlying
security (currency). The operation of and limitations on covered put options in
other respects are substantially identical to those of call options.

The Funds will write put options for three purposes: (a) to receive the income
derived from the premiums paid by purchasers; (b) when the Adviser wishes to
purchase the security (or a security denominated in the currency underlying the
option) underlying the option at a price lower than its current market price, in
which case it will write the covered put at an exercise price reflecting the
lower purchase price sought; and (c) to close out a long put option position.
The potential gain on a covered put option is limited to the premium received on
the option (less the commissions paid on the transaction) while the potential
loss equals the differences between the exercise price of the option and the
current market price of the underlying securities (currencies) when the put is
exercised, offset by the premium received (less the commissions paid on the
transaction).

Purchasing Call and Put Options. A Fund may purchase a call option in order to
close out a covered call position (see "Covered Call Writing" above), to protect
against an increase in price of a security it anticipates purchasing or, in the
case of a call option on foreign currency, to hedge against an adverse exchange
rate move of the currency in which the security it anticipates purchasing is
denominated vis-a-vis the currency in which the exercise price is denominated.
The purchase of the call option to effect a closing transaction on a call
written over-the-counter may be a listed or an OTC Option. In either case, the
call purchased is likely to be on the same securities (currencies) and have the
same terms as the written option. If purchased over-the-counter, the option
would generally be acquired from the dealer or financial institution which
purchased the call written by the Fund.

A Fund may purchase put options on securities or currencies which it holds in
its portfolio to protect itself against a decline in the value of the security
and to close out written put option positions. If the value of the underlying
security or currency were to fall below the exercise price of the put purchased
in an amount greater than the premium paid for the option, the Fund would incur
no additional loss. In addition, a Fund may sell a put option which it has
previously purchased prior to the sale of the securities (currencies) underlying
such option. Such a sale would result in a net gain or loss depending whether
the amount received on the sale is more or less than the premium and other
transaction costs paid on the put option which is sold. Such gain or loss could
be offset in whole or in part by a change in the market value of the underlying
security (currency). If a put option purchased by a Fund expired without being
sold or exercised, the premium would be lost.

Options on Treasury Bonds and Notes. Because trading interest in options written
on Treasury bonds and notes tends to center on the most recently auctioned
issues, the exchanges on which such securities trade will not continue
indefinitely to introduce options with new expirations to replace expiring
options on particular issues. Instead, the expirations introduced at the
commencement of options trading on a particular issue will be allowed to run
their course, with the possible addition of a limited number of new expirations
as the original ones expire. Options trading on each issue of bonds or notes
will thus be phased out as new options are listed on more recent issues, and
options representing a full range of expirations will not ordinarily be
available for every issue on which options are traded.

Options on Treasury Bills. Because a deliverable Treasury bill changes from week
to week, writers of Treasury bill calls cannot provide in advance for their
potential exercise settlement obligations by acquiring and holding the
underlying security. However, if a Fund holds a long position in Treasury bills
with a principal amount of the securities deliverable upon exercise of the
option, the position may be hedged from a risk standpoint by the writing of a
call option. For so long as the call option is outstanding, a Fund will hold the
Treasury bills in a segregated account with its custodian, so that they will be
treated as being covered.

Options on Foreign Currencies. The Equity Funds (except Aggressive Growth
Equities, Small Cap Value, Value Opportunities and International Equities), Core
Fixed Income and Emerging Markets Income may purchase and write options on
foreign currencies for purposes similar to those involved with investing in
foreign currency forward contracts. For example, in order to protect against
declines in the dollar value of portfolio securities which are denominated in a
foreign currency, a Fund may purchase put options on an amount of such foreign
currency equivalent to the current value of the portfolio securities involved.
As a result, the Fund would be enabled to sell the foreign currency for a fixed
amount of U.S. dollars, thereby "locking in" the dollar value of the portfolio
securities (less the amount of the premiums paid for the options). Conversely, a
Fund may purchase call options on foreign currencies in which securities it
anticipates purchasing are denominated to secure a set U.S. dollar price for
such securities and protect against a decline in the value of the U.S. dollar
against such foreign currency. Each of these Funds may also purchase call and
put options to close out written option positions.

Each of these Funds may also write call options on foreign currency to protect
against potential declines in its portfolio securities which are denominated in
foreign currencies. If the U.S. dollar value of the portfolio securities falls
as a result of a decline in the exchange rate between the foreign currency in
which it is denominated and the U.S. dollar, then a loss to a Fund occasioned by
such value decline would be ameliorated by receipt of the premium on the option
sold. At the same time, however, the Fund gives up the benefit of any rise in
value of the relevant portfolio securities above the exercise price of the
option and, in fact, only receives a benefit from the writing of the option to
the extent that the value of the portfolio securities falls below the price of
the premium received. A Fund may also write options to close out long call
option positions. A put option on a foreign currency would be written by the
Fund for the same reason it would purchase a call option, namely, to hedge
against an increase in the U.S. dollar value of a foreign security which a Fund
anticipates purchasing. Here, the receipt of the premium would offset, to the
extent of the size of the premium, any increased cost to a Fund resulting from
an increase in the U.S. dollar value of the foreign security. However, a Fund
could not benefit from any decline in the cost of the foreign security which is
greater than the price of the premium received. A Fund may also write options to
close out long put and call option positions.

The markets in foreign currency options are relatively new and a Fund's ability
to establish and close out positions on such options is subject to the
maintenance of a liquid secondary market. Although the Funds will not purchase
or write such options unless and until, in the opinion of the Adviser, the
market for them has developed sufficiently to ensure that the risks in
connection with such options are not greater than the risks in connection with
the underlying currency, there can be no assurance that a liquid secondary
market will exist for a particular option at any specific time. In addition,
options on foreign currencies are affected by all of those factors which
influence foreign exchange rates and investments generally.

The value of a foreign currency option depends upon the value of the underlying
currency relative to the U.S. dollar. As a result, the price of the option
position may vary with changes in the value of either or both currencies and
have no relationship to the investment merits of a foreign security, including
foreign securities held in a "hedged" investment portfolio. Because foreign
currency transactions occurring in the interbank market involve substantially
larger amounts than those that may be involved in the use of foreign currency
options, investors may be disadvantaged by having to deal in an odd lot market
(generally consisting of transactions of less than $1 million) for the
underlying foreign currencies at prices that are less favorable than for round
lots.

There is no systematic reporting of last sale information for foreign currencies
or any regulatory requirement that quotations available through dealers or other
market sources be firm or revised on a timely basis. Quotation information
available is generally representative of very large transactions in the
interbank market and thus may not reflect relatively smaller transactions (i.e.,
less than $ l million) where rates may be less favorable. The interbank market
in foreign currencies is a global, around-the-clock market. To the extent that
the U.S. options markets are closed while the markets for the underlying
currencies remain open, significant price and rate movements may take place in
the underlying markets that are not reflected in the options market.

Strategies Available to Emerging Markets Income, All Bond Funds and Equity Funds
(Except Aggressive Growth Equities, Large Cap Growth, Small Cap Value, Value
Opportunities and International Equities)

Futures Contracts. Emerging Markets Income, the Bond Funds and the Equity Funds
(except Aggressive Growth Equities, Large Cap Growth, Small Cap Value, Value
Opportunities and International Equities) may purchase and sell interest rate,
currency, and index futures contracts ("futures contracts"), on securities
eligible for purchase by the Fund. Subject to certain limitations, a Fund may
enter into 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 the Fund's 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.

To the extent futures positions constitute "bona fide hedge" positions as
defined by the rules and regulations of the Commodity Futures Trading Commission
("CFTC"), there is no overall limitation on the percentage of a Fund's assets
which may be committed to futures contracts and options or futures contracts,
provided the aggregate value of such positions does not exceed the value of such
Fund's portfolio securities. With respect to futures positions that are not
"bona fide hedge" positions, no Fund may enter into futures contracts or related
options if, immediately thereafter, the amount of initial margin and premiums
for unexpired futures contracts and options on futures contracts exceeds 5% of
the Fund's liquidation value, after taking into account unrealized profits and
losses on such futures contracts, provided, however, that in the case of an
option that is in-the-money (the exercise price of the call (put) option is less
(more) than the market price of the underlying security) at the time of
purchase, the in-the-money amount may be excluded in calculating the 5%.

A Fund may purchase or sell interest rate futures for the purpose of hedging
some or all of the value of its portfolio securities against changes in
prevailing interest rates or to manage its duration or effective maturity. If
the Adviser anticipates that interest rates may rise and, concomitantly, the
price of certain of its portfolio securities may fall, the Fund may sell futures
contracts. If declining interest rates are anticipated, the Fund may purchase
futures contracts to protect against a potential increase in the price of
securities the Fund intends to purchase. Subsequently, appropriate securities
may be purchased by the Fund in an orderly fashion; as securities are purchased,
corresponding futures positions would be terminated by offsetting sales of
contracts. A Fund may purchase or sell futures on various currencies in which
its portfolio securities are denominated for the purpose of hedging against
anticipated changes in currency exchange rates. A Fund will enter into currency
futures contracts to "lock in" the value of a security purchased or sold in a
given currency vis-a-vis a different currency or to hedge against an adverse
currency exchange rate movement of a portfolio security's denominated currency
vis-a-vis a different currency. Foreign currency futures contracts would be
entered into for the same reason and under the same circumstances as foreign
currency forward contracts. The Adviser will assess such factors as cost
spreads, liquidity and transaction costs in determining whether to utilize
futures contracts or forward contracts in its foreign currency transactions and
hedging strategy.

Initial margin in futures transactions is different from margin in securities
transactions in that initial margin does not involve the borrowing of funds by a
broker's client but is, rather, a good faith deposit on the futures contract
which will be returned to a Fund upon the proper termination of the futures
contract. The margin deposits are marked to market daily and the Fund may be
required to make subsequent deposits of cash or U.S. Government Securities
called "variation margin", with the Fund's futures contract clearing broker,
which are reflective of price fluctuations in the futures contract. Initial
margin requirements are established by the exchanges on which futures contracts
trade and may, from time to time, change. In addition, brokers may establish
margin deposit requirements in excess of those required by the exchanges.

At any time prior to expiration of a futures contract, a Fund may elect to close
the position by taking an opposite position which will operate to terminate the
Fund's position in the futures contract. A final determination of any variation
margin is then made, additional cash is required to be paid by or released to
the Fund and the Fund realizes a loss or gain.

Although many futures contracts call for actual commitment or acceptance of
securities, the contracts usually are closed out before the settlement date
without making or taking delivery. A short futures position is usually closed
out by purchasing futures contracts for the same aggregate amount of the
underlying instruments and with the same delivery date. If the sale price
exceeds the offsetting purchase price, the seller would be paid the difference
and realize a gain. If the offsetting purchase price exceeds the sales price,
the seller would pay the difference and would realize a loss. Similarly, a long
futures position in usually closed out by effecting a futures contract sale for
the same aggregate amount of the specific type of security (currency) and the
same delivery date. If the offsetting sales price exceeds the purchase price,
the purchaser would realize a gain, whereas if the purchase price exceeds the
offsetting sale price, the purchaser would realize a loss. There is no assurance
that a Fund will be able to enter into a closing transactions.

Options on Futures Contracts. Emerging Markets Income, the Bond Funds and the
Equity Funds (except Large Cap Growth, Aggressive Growth Equities, Small Cap
Value, Value Opportunities and International Equities) may also purchase and
write call and put options on futures contracts which are traded on an exchange
and enter into closing transactions with respect to such options to terminate an
existing position. An option on a futures contract gives the purchaser the right
(in return for the premium paid) to assume a position in a futures contract (a
long position if the option is a call and a short position if the option is a
put) at a specified exercise price at any time during the term of the option.

Funds will purchase and write options on futures contracts for identical
purposes to those set forth above for the purchase of a futures contract
(purchase of a call option or sale of a put option) and the sale of a futures
contract (purchase of a put option or sale of a call option), or to close out a
long or short position in futures contracts. If, for example, a Fund wished to
protect against an increase in interest rates and the resulting negative impact
on the value of a portion of its fixed-income portfolio, it might write a call
option on an interest rate futures contract, the underlying security of which
correlates with the portion of the portfolio the Fund seeks to hedge. Any
premiums received in the writing of options on futures contracts may, of course,
provide a further hedge against losses resulting from price declines in portions
of a Fund's portfolio.

Strategies Available to High Yield Bond, Emerging Markets Income and the Equity
Funds (except International Equities)

Convertible Securities. Convertible securities include bonds, debentures, notes,
preferred stock or other securities that may be converted into or exchanged for
common stock or other equity securities of the same or a different issuer.
Convertible securities provide a conversion right for a particular period of
time at a specified price or formula. A convertible security entitles the holder
to receive interest paid or accrued on debt or the dividend paid on preferred
stock until the convertible security matures or is redeemed, converted or
exchanged. Before conversion, convertible securities have characteristics
similar to nonconvertible debt securities in that they ordinarily provide a
stable stream of income with generally higher yields than those of common stocks
of the same or similar issuers. Therefore, they generally entail less risk than
the corporation's common stock, although the extent to which such risk is
reduced depends in large measure upon the proximity of its price to its value as
a nonconvertible fixed income security.
v
The value of a convertible security is a function of its "investment value"
(determined by its yield in comparison with the yields of other securities of
comparable maturity and quality that do not have a conversion privilege), and
its "conversion value" (the security's worth, at market value, if converted into
the underlying common stock). The investment value of a convertible security is
influenced by changes in interest rates, with investment value declining as
interest rates increase and increasing as interest rates decline. The credit
standing of the issuer and other factors may also have an effect on the
convertible security's investment value. The conversion value of a convertible
security is determined by the market price of the underlying common stock. If
the conversion value is low relative to the investment value, the price of the
convertible security is governed principally by its investment value. To the
extent the market price of the underlying common stock approaches or exceeds the
conversion price, the price of the convertible security will be increasingly
influenced by its conversion value. In addition, a convertible security
generally will sell at a premium over its conversion value determined by the
extent to which investors place value on the right to acquire the underlying
common stock while holding a fixed income security.

Strategies Available to Core Fixed Income, Asia Pacific Equities, Emerging
Markets Equities, Emerging Markets Income, European Equities and Latin America
Equities

Sovereign Debt Obligations of Emerging Market Countries. The Core Fixed Income,
Asia Pacific Equities, Emerging Markets Equities, Emerging Markets Income,
European Equities and Latin America Equities may invest in Sovereign Debt of
emerging market countries. Political conditions, in terms of a country or
agency's willingness to meet the terms of its debt obligations, are of
considerable significance. Investors should be aware that the Sovereign Debt
instruments in which these Funds may invest involve great risk and are deemed to
be the equivalent in terms of quality to securities rated below investment grade
by Moody's and S&P.

Sovereign Debt generally offers high yields, reflecting not only perceived
credit risk, but also the need to compete with other local investments in
domestic financial markets. Mexico and certain other emerging market countries
are among the largest debtors to commercial banks and foreign governments. A
foreign debtor's willingness or ability to repay principal and interest due in a
timely manner may be affected by, among other factors, its cash flow situation,
the extent of its foreign reserves, the availability of sufficient foreign
exchange on the date a payment is due, the relative size of the debt service
burden to the economy as a whole, the foreign debtor's policy towards the
International Monetary Fund and the political constraints to which a sovereign
debtor may be subject. Sovereign debtors may default on their Sovereign Debt.
Sovereign debtors may also be dependent on expected disbursements from foreign
governments, multilateral agencies and others abroad to reduce principal and
interest arrearages on their debt. The commitment on the part of these
governments, agencies and others to make such disbursements may be conditioned
on a sovereign debtor's implementation of economic reforms and/or economic
performance and the timely service of such debtor's obligations. Failure to
implement such reforms, achieve such levels of economic performance or repay
principal or interest when due may result in the cancellation of such third
parties' commitments to lend funds to the sovereign debtor, which may further
impair such debtor's ability or willingness to service its debts.

In recent years, some of the emerging market countries in which the Funds expect
to invest have encountered difficulties in servicing their Sovereign Debt. Some
of these countries have withheld payments of interest and/or principal of
Sovereign Debt. These difficulties have also led to agreements to restructure
external debt obligations; in particular, commercial bank loans, typically by
rescheduling principal payments, reducing interest rates and extended new
credits to finance interest payments on existing debt. In the future, holders of
Sovereign Debt may be requested to participate in similar reschedulings to such
debt.

The ability or willingness of the governments of Mexico and other emerging
market countries to make timely payments on their Sovereign Debt is likely to be
influenced strongly by a country's balance of trade and its access to trade and
other international credits. A country whose exports are concentrated in a few
commodities could be vulnerable to a decline in the international prices of one
or more of such commodities. Increased protectionism on the part of a country's
trading partners could also adversely affect its exports. Such events could
extinguish a country's trade account surplus, if any. To the extent that a
country receives payment for its exports in currencies other than hard
currencies, its ability to make hard currency payments could be affected.

The occurrence of political, social and diplomatic changes in one or more of the
countries issuing Sovereign Debt could adversely affect the Funds' investments.
The countries issuing such instruments are faced with social and political
issues and some of them have experienced high rates of inflation in recent years
and have extensive internal debt. Among other effects, high inflation and
internal debt service requirements may adversely affect the cost and
availability of future domestic sovereign borrowing to finance governmental
programs, and may have other adverse social, political and economic
consequences. Political changes or a deterioration of a country's domestic
economy or balance of trade may affect the willingness of countries to service
their Sovereign Debt. There can be no assurance that adverse political changes
will not cause the Funds to suffer a loss of interest or principal on any of its
holdings.

As a result of all of the foregoing, a government obligor may default on its
obligations. If such an event occurs, a Fund may have limited legal recourse
against the issuer and/or guarantor. Remedies must, in some cases, be pursued in
the courts of the defaulting party itself, and the ability of the holder of
foreign government debt securities to obtain recourse may be subject to the
political climate in the relevant country. Bankruptcy, moratorium and other
similar laws applicable to issuers of Sovereign Debt Obligations may be
substantially different from those applicable to issuers of private debt
obligations. In addition, no assurance can be given that the holders of
commercial bank debt will not contest payments to the holders of other foreign
government debt obligations in the event of default under their commercial bank
loan agreements.

Periods of economic uncertainty may result in the volatility of market prices of
Sovereign Debt and in turn, the Funds' net asset value, to a greater extent than
the volatility inherent in domestic securities. The value of Sovereign Debt will
likely vary inversely with changes in prevailing interest rates, which are
subject to considerable variance in the international market.

<PAGE>

Strategies Available to Core Fixed Income, Mortgage-Backed Securities and Total
Return Mortgage-Backed Securities

Guaranteed Mortgage Pass-Through Securities. Core Fixed Income, Mortgage-Backed
Securities and Total Return Mortgage-Backed Securities may invest in mortgage
pass-through securities representing participation interests in pools of
residential mortgage loans purchased from individual lenders by a Federal Agency
or originated by private lenders and guaranteed, to the extent provided in such
securities, by a Federal Agency. Such securities, which are ownership interests
in the underlying mortgage loans, differ from conventional debt securities,
which provide for periodic payment of interest in fixed amounts (usually
semiannually) and principal payments at maturity or on specified call dates.
Mortgage pass-through securities provide for monthly payments (not necessarily
in fixed amounts) that are a "pass-through" of the monthly interest and
principal payments (including any prepayments) made by the individual borrowers
on the pooled mortgage loans, net of any fees paid to the guarantor of such
securities and the servicer of the underlying mortgage loans.

The guaranteed mortgage pass-through securities in which the Funds may invest
include those issued or guaranteed by GNMA, FNMA and FHLMC. GNMA certificates
are direct obligations of the U.S. Government and, as such, are backed by the
"full faith and credit" of the United States. FNMA is a federally chartered,
privately owned corporation and FHLMC is a corporate instrumentality of the
United States. FNMA and FHLMC certificates are not backed by the full faith and
credit of the United States but the issuing agency or instrumentality has the
right to borrow, to meet its obligations, from an existing line of credit with
the U.S. Treasury. The U.S. Treasury has no legal obligation to provide such
line of credit and may choose not to do so.

Certificates for these types of mortgage-backed securities evidence an interest
in a specific pool of mortgages. These certificates are, in most cases,
"modified pass-through" instruments, wherein the issuing agency guarantees the
payment of principal and interest on mortgages underlying the certificates,
whether or not such amounts are collected by the issuer on the underlying
mortgages.

Collateralized Mortgage Obligations and Multiclass Pass-Through Securities. CMOs
are debt obligations collateralized by mortgage loans or mortgage pass-through
securities. Typically, CMOs are collateralized by GNMA, FNMA or FHLMC
certificates, but also may be collateralized by whole loans or private mortgage
pass-through securities (such collateral is collectively hereinafter referred to
as "Mortgage Assets"). Multiclass pass-through securities are equity interests
in a trust composed of Mortgage Assets. Payments of principal of and interest on
the Mortgage Assets, and any reinvestment income thereon, provide the funds to
pay debt service on the CMOs or make scheduled distributions on the multiclass
pass-through securities. CMOs may be issued by Federal Agencies, or by private
originators of, or investors in, mortgage loans, including savings and loan
associations, mortgage banks, commercial banks, investment banks and special
purpose subsidiaries of the foregoing. The issuer of a series of CMOs may elect
to be treated as a Real Estate Mortgage Investment Conduit ("REMIC"). REMICs
include governmental and/or private entities that issue a fixed pool of
mortgages secured by an interest in real property. REMICs are similar to CMOs in
that they issue multiple classes of securities, but unlike CMOs, which are
required to be structured as debt securities, REMICs may be structured as
indirect ownership interests in the underlying assets of the REMICs themselves.
However, there are no effects on a Fund from investing in CMOs issued by
entities that have elected to be treated as REMICs, and all future references to
CMOs shall also be deemed to include REMIC.

In a CMO, a series of bonds or certificates is issued in multiple classes. Each
class of CMOs, often referred to as a "tranche," is issued at a specific fixed
or floating coupon rate and has a stated maturity or final distribution date.
Principal prepayments on the Mortgage Assets may cause the CMOs to be retired
substantially earlier than their stated maturities or final distribution dates.
Interest is paid or accrues on all classes of the CMOs on a monthly, quarterly
or semiannual basis. Certain CMOs may have variable or floating interest rates
and others may be Stripped Mortgage Securities.

The principal of and interest on the Mortgage Assets may be allocated among the
several classes of a CMO series in a number of different ways. Generally, the
purpose of the allocation of the cash flow of a CMO to the various classes is to
obtain a more predictable cash flow to certain of the individual tranches than
exists with the underlying collateral of the CMO. As a general rule, the more
predictable the cash flow is on a CMO tranche, the lower the anticipated yield
will be on that tranche at the time of issuance relative to prevailing market
yields on other mortgage-backed securities. As part of the process of creating
more predictable cash flows on most of the tranches in a series of CMOs, one or
more tranches generally must be created that absorb most of the volatility in
the cash flows on the underlying mortgage loans. The yields on these tranches
are generally higher than prevailing market yields on mortgage-backed securities
with similar maturities. As a result of the uncertainty of the cash flows of
these tranches, the market prices of and yield on these tranches generally are
more volatile. The Funds will not invest in CMO and REMIC residuals.

Private Mortgage Pass-Through Securities. Private mortgage pass-through
securities are structured similarly to the GNMA, FNMA and FHLMC mortgage
pass-through securities and are issued by United States and foreign private
issuers such as originators of and investors in mortgage loans, including
savings and loan associations, mortgage banks, commercial banks, investment
banks and special purpose subsidiaries of the foregoing. These securities
usually are backed by a pool of conventional fixed rate or adjustable rate
mortgage loans. Since private mortgage pass-through securities typically are not
guaranteed by an entity having the credit status of GNMA, FNMA and FHLMC, such
securities generally are structured with one or more types of credit
enhancement.

Mortgage-backed securities are often backed by a pool of assets representing the
obligations of a number of different parties. To lessen the effect of failures
by obligors on underlying assets to make payments, those securities may contain
elements of credit support, which fall into two categories: (i) liquidity
protection and (ii) protection against losses resulting from ultimate default by
an obligor on the underlying assets. Liquidity protection refers to the
provision of advances, generally by the entity administering the pool of assets,
to ensure that the receipt of payments on the underlying pool occurs in a timely
fashion. Protection against losses resulting from default ensures ultimate
payment of the obligations on at least a portion of the assets in the pool. This
protection may be provided through guarantees, insurance policies or letters of
credit obtained by the issuer or sponsor from third parties, through various
means of structuring the transaction or through a combination of such
approaches. The degree of credit support provided for each issue is generally
based on historical information respecting the level of credit risk associated
with the underlying assets. Delinquencies or losses in excess of those
anticipated could adversely affect the return on an investment in a security.
The Funds will not pay any fees for credit support, although the existence of
credit support may increase the price of a security.

Stripped Mortgage Securities. Stripped Mortgage Securities may be issued by
Federal Agencies, or by private originators of, or investors in, mortgage loans,
including savings and loan associations, mortgage banks, commercial banks,
investment banks and special purpose subsidiaries of the foregoing. Stripped
Mortgage Securities not issued by Federal Agencies will be treated by the Funds
as illiquid securities so long as the staff of the Securities and Exchange
Commission maintains its position that such securities are illiquid.

Stripped Mortgage Securities usually are structured with two classes that
receive different proportions of the interest and principal distribution on a
pool of mortgage assets. A common type of Stripped Mortgage Security will have
one class receiving some of the interest and most of the principal from the
mortgage assets, while the other class will receive most of the interest and the
remainder of the principal. In the most extreme case, one class will receive all
of the interest (the interest-only or "IO" class), while the other class will
receive all of the principal (the principal-only or "PO" class). PO classes
generate income through the accretion of the deep discount at which such
securities are purchased, and, while PO classes do not receive periodic payments
of interest, they receive monthly payments associated with scheduled
amortization and principal prepayment from the mortgage assets underlying the PO
class. The yield to maturity on an IO class is extremely sensitive to the rate
of principal payments (including prepayments) on the related underlying mortgage
assets, and a rapid rate of principal payments may have a material adverse
effect on such security's yield to maturity. If the underlying mortgage assets
experience greater than anticipated prepayments of principal, the Fund may fail
to fully recoup its initial investment in these securities.

A Fund may purchase Stripped Mortgage Securities for income, or for hedging
purposes to protect the Fund's portfolio against interest rate fluctuations. For
example, since an IO class will tend to increase in value as interest rates
rise, it may be utilized to hedge against a decrease in value of other
fixed-income securities in a rising interest rate environment.

Mortgage Dollar Rolls. The Funds may enter into mortgage dollar rolls with a
bank or a broker-dealer. A mortgage dollar roll is a transaction in which a Fund
sells mortgage-related securities for immediate settlement and simultaneously
purchases the same type of securities for forward settlement at a discount.
While the Fund begins accruing interest on the newly purchased securities from
the purchase or trade date, it is able to invest the proceeds from the sale of
its previously owned securities, which will be used to pay for the new
securities, in money market investments until the future settlement date. The
use of mortgage dollar rolls is a speculative technique involving leverage, and
is considered to be a form of borrowing by the Fund.

Asset-Backed Securities. Asset-backed securities have structural characteristics
similar to mortgage-backed securities but have underlying assets that are not
mortgage loans or interests in mortgage loans. Various types of assets,
primarily automobile and credit card receivables, are securitized in
pass-through structures similar to mortgage pass-through structures. In general,
the collateral supporting asset-backed securities is of shorter maturity than
mortgage loans and is likely to experience substantial prepayments. As with
mortgage-related securities, asset-backed securities are often backed by a pool
of assets representing the obligations of a number of different parties and use
similar credit enhancement techniques. The cash flow generated by the underlying
assets is applied to make required payments on the securities and to pay related
administrative expenses. The amount of residual cash flow resulting from a
particular issue of asset-backed or mortgage-backed securities depends on, among
other things, the characteristics of the underlying assets, the coupon rates on
the securities, prevailing interest rates, the amount of administrative expenses
and the actual prepayment experience on the underlying assets. Core Fixed
Income, Mortgage-Backed Securities and Total Return Mortgage-Backed Securities
may each invest in any such instruments or variations as may be developed, to
the extent consistent with its investment objectives and policies and applicable
regulatory requirements.

Strategies Available to Mortgage-Backed Securities and Total Return
Mortgage-Backed Securities

Inverse Floaters. Inverse floaters constitute a class of CMOs with a coupon rate
that moves inversely to a designated index, such as LIBOR or COFI. Inverse
floaters have coupon rates that typically change at a multiple of the changes of
the relevant index rate. Any rise in the index rate (as a consequence of an
increase in interest rates) causes a drop in the coupon rate on an inverse
floater while any drop in the index rate causes an increase in the coupon rate
of an inverse floater. In some circumstances, the coupon on an inverse floater
could decrease to zero. In addition, like most other fixed-income securities,
the value of inverse floaters will decrease as interest rates increase and their
average lives will extend. Inverse floaters exhibit greater price volatility
than the majority of mortgage-backed securities. In addition, some inverse
floaters display extreme sensitivity to changes in prepayments. As a result, the
yield to maturity of an inverse floater is sensitive not only to changes in
interest rates but also to changes in prepayment rates on the related underlying
mortgage assets. As described above, inverse floaters may be used alone or in
tandem with interest-only stripped mortgage instruments. The Adviser believes
that, notwithstanding the fact that inverse floaters exhibit price volatility,
the use of inverse floaters as a component of the Fund's overall portfolio, in
light of the Fund's anticipated portfolio composition in the aggregate, is
compatible with the Fund's objective.

Strategies Available to the Equity Funds (Except Aggressive Growth Equities,
Earnings Momentum, Small Cap Value, Value Opportunities and International
Equities), Core Fixed Income and Emerging Markets Income

Forward Currency Transactions. The Equity Funds (except Aggressive Growth
Equities, Earnings Momentum, Small Cap Value, Value Opportunities and
International Equities), Core Fixed Income and Emerging Markets Income may enter
into forward currency transactions. A foreign currency forward contract involves
an obligation to purchase or sell a specific currency at an agreed future date,
at a price set at the time of the contract. These contracts are traded in the
interbank market conducted directly between currency traders. A Fund may enter
into foreign currency forward contracts in order to protect against the risk
that the U.S. dollar value of the Fund's dividends, interest and net realized
capital gains in local currency will decline to the extent of any devaluation of
the currency during the intervals between (a) (i) the time the Fund becomes
entitled to receive or receives dividends, interest and realized gains or (ii)
the time an investor gives notice of a requested redemption of a certain amount
and (b) the time such amount(s) are converted into U.S. dollars for remittance
out of the particular country or countries.

At the maturity of a forward contract, a Fund may either accept or make delivery
of the currency specified in the contract or, prior to maturity, enter into a
closing purchase transaction involving the purchase or sale of an offsetting
contract. Closing purchase transactions with respect to forward contracts are
usually effected with the currency trader who is a party to the original forward
contract.

The cost to a Fund of engaging in forward currency transactions may vary with
factors such as the length of the contract period and the market conditions then
prevailing. Because forward currency transactions are usually conducted on a
principal basis, no fees or commissions are involved, although the price charged
in the transaction includes a dealer's markup. The use of forward currency
contracts does not eliminate fluctuations in the underlying prices of the
securities, but it does establish a rate of exchange that can be achieved in the
future. In addition, although forward currency contracts limit the risk of loss
due to a devaluation of the foreign currency in relation to the U.S. dollar,
they also limit any potential gain if that foreign currency appreciates with
respect to the U.S. dollar.

Strategies Available to the Equity Funds (except International Equities)

Short Sales Against the Box. The Equity Funds (except International Equities)
may from time to time make short sales of securities it owns or has the right to
acquire through conversion or exchange of other securities it owns. A short sale
is "against the box" to the extent that a Fund contemporaneously owns or has the
right to obtain at no added cost securities identical to those sold short. In a
short sale, a Fund does not immediately deliver the securities sold and does not
receive the proceeds from the sale. The Fund is said to have a short position in
the securities sold until it delivers the securities sold, at which time it
receives the proceeds of the sale. When a short sale transaction is closed out
by delivery of the securities, any gain or loss on the transaction is taxable as
a short term capital gain or loss.

To secure its obligation to deliver the securities sold short, a Fund will
deposit in a separate escrow account with its custodian an equal amount of the
securities sold short or securities convertible into or exchangeable for such
securities. The Fund may close out a short position by purchasing and delivering
an equal amount of the securities sold short, rather than by delivering
securities already held by the Fund, because the Fund may want to continue to
receive interest and dividend payments on securities in its portfolio that are
convertible into the securities sold short.

A Fund may make a short sale in order to hedge against market risks when the
Adviser believes that the price of a security may decline, causing a decline in
the value of a security owned by the Fund or a security convertible into or
exchangeable for such security. However, to the extent that in a generally
rising market the Fund maintains short positions in securities rising with the
market, the net asset value of the Fund would be expected to increase to a
lesser extent than the net asset value of an investment company that does not
engage in short sales. A Fund may also make a short sale when it does not want
to sell the security it owns, because, among other reasons, it wishes to defer
recognition of gain or loss for Federal income tax purposes. In such case, any
future losses in the Fund's long position should be reduced by a gain in the
short position. The extent to which such gains or losses are reduced will depend
upon the amount of the security sold short relative to the amount the Fund owns,
either directly or indirectly, and, in the case where the Fund owns convertible
securities, changes in the investment value or conversion premiums.
Additionally, a Fund may use short sales when it is determined that a
convertible security can be bought at a small conversion premium and has a yield
advantage relative to the underlying common stock sold short. The potential risk
in this strategy is the possible loss of any premium over conversion value in
the convertible security at the time of purchase. The purpose of this strategy
is to produce income from the yield advantage and to provide the potential for a
gain should the conversion premium increase.

Strategies Available to Asia Pacific Equities, Latin America Equities, Emerging
Markets Equities and Emerging Markets Income

Investment in Other Investment Vehicles. Investment in other investment
companies or similar investment vehicles may be the sole or most practical means
by which a Fund can participate in certain Latin American, Asian and other
emerging securities markets or invest in particular industries within those
markets. Some of these investment vehicles may be closed-end investment
companies which may trade at a discount from their net asset value. Such
investments may involve the payment of substantial premiums above the value of
such issuers' portfolio securities, and are subject to limitations under the
1940 Act (see below) and market availability. There can be no assurance that
vehicles or funds for investing in certain Latin American, Asian and other
Emerging Markets countries will be available for investment, particularly in the
early stages of the Fund's operations. In addition, special tax considerations
may apply. The Funds do not intend to invest in such vehicles or funds unless,
in the judgment of the Adviser, the potential benefits of such investment
justify the payment of any applicable premium or sales charges. As a shareholder
in an investment company, the Funds would bear their ratable share of that
investment company's expenses, including its advisory and administration fees.
At the same time the Fund would continue to pay their own management and
advisory fees and other expenses. Under the 1940 Act, the Funds generally may
invest up to 10% of its total assets in the aggregate in shares of other
investment companies and up to 5% of its total assets in any one investment
company, as long as that investment does not represent more than 3% of the
voting stock of the acquired investment company at the time such shares are
purchased.

Strategies Available to Asia Pacific Equities, Latin America Equities and
Emerging Markets Equities

Investment for the Purpose of Acquiring Control. The Asia Pacific Equities,
Latin America Equities and Emerging Markets Equities Funds may acquire the
securities of wholly-owned subsidiaries in order to facilitate investing in the
securities of certain foreign issuers. The tax laws of certain countries impose
a capital gains tax on profits derived from securities dispositions. Certain of
these countries have double taxation treaties whereby residents of one country
are exempt from taxation on their investments in the securities of issuers in
another country. The Funds intend to establish wholly-owned subsidiaries in
certain foreign countries to take advantage of these double taxation treaties in
order to avoid the imposition of various taxes, including capital gains

RISK CONSIDERATIONS

The following risk considerations relate to investment practices undertaken by
some or all of the Funds. Generally, since shares of a Fund represent an
investment in securities with fluctuating market prices, shareholders should
understand that the value of their Fund 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. There is no guarantee of
successful performance, that a Fund's objective can be achieved or that an
investment in a Fund will achieve a positive return. Each Fund should be
considered as a means of diversifying an investment portfolio and is not in
itself a balanced investment program.

Prospective investors should consider the following risks.

General

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 type of security, 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). Market restrictions
on trading volume can also affect price and liquidity.

Certain risks exist because of the composition and investment horizon of a
particular portfolio of securities. Prices of many securities tend to be more
volatile in the short-term and lack of diversification in a portfolio can also
increase volatility. Certain Galileo Funds are not diversified. Non-diversified
Funds are not subject to certain regulatory limits, including limits on the size
of their positions in individual issuers. To the extent such funds exceed these
limits, they will be more exposed to risks of particular issuers than a
diversified fund. Such funds will, however, comply with the diversification
requirements of Subchapter M of the Internal Revenue Code of 1986, as amended. 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. Certain instruments (such as inverse floaters) behave
similarly to leveraged instruments. Generally, such securities contain formulas
requiring recalculation of their interest rates in a manner that multiplies the
change in a market rate.

Repurchase Agreements

In the event of a default or bankruptcy by a selling financial institution under
a repurchase agreement, a Fund will seek to sell the underlying security serving
as collateral. However, this could involve certain costs or delays, and, to the
extent that proceeds from any sale were less than the repurchase price, the Fund
could suffer a loss. Each Fund follows procedures designed to minimize the risks
associated with repurchase agreements, including effecting repurchase
transactions only with large, well-capitalized and well-established financial
institutions and specifying the required value of the collateral underlying the
agreement.

Reverse Repurchase Agreements and Mortgage Dollar Rolls

Reverse repurchase agreements and mortgage dollar rolls involve the risk that
the market value of the securities a Fund is obligated to repurchase under the
agreement may decline below the repurchase price. In the event the buyer of
securities under a reverse repurchase agreement or mortgage dollar roll files
for bankruptcy or becomes insolvent, the Fund's use of proceeds of the agreement
may be restricted pending a determination by the other party, or its trustee or
receiver, whether to enforce the Fund's obligation to repurchase the securities.
Reverse repurchase agreements and mortgage dollar rolls are speculative
techniques involving leverage, and are considered borrowings by the Fund. Under
the requirements of the 1940 Act, the Fund is required to maintain an asset
coverage (including the proceeds of the borrowings) of at least 300% of all
borrowings. None of the Funds authorized to utilize these instruments expects to
engage in reverse repurchase agreements or mortgage dollar rolls (together with
other borrowings of the Fund) with respect to greater than 30% of the Fund's
total assets.

Fixed Income Securities

"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.

"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 directly
(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 re-set terms,
including the index chosen, frequency of reset and reset caps or floors, among
other things).

Foreign Securities

The Equity Funds, Emerging Markets Income and Core Fixed Income are each
permitted to invest in securities issued by foreign governments or companies and
Convertible Securities and High Yield Bond may invest in securities issued by
foreign companies. 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. As compared to United States 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
United States, 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 each 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 issues.

Foreign Currency Risks

Because foreign securities generally are denominated and pay dividends or
interest in foreign currencies, and some of the Funds hold various foreign
currencies from time to time, the value of the net assets of those Funds as
measured in United States dollars will 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 Equity Funds, Emerging Markets
Income and Core Fixed Income are authorized to enter into certain foreign
currency future and forward contracts. However, it is not obligated to do so
and, depending on the availability and cost of these devices, the Fund may be
unable to use them to protect against currency risk. While foreign currency
future and forward contracts may be available, the cost of these instruments may
be prohibitively expensive so that the Fund may not to be able to effectively
use them

With respect to Emerging Markets Equities, Emerging Markets Income, Core Fixed
Income and Latin America Equities, the forward currency market for the purchase
or sale of U.S. dollars in most Latin American countries, including Mexico, is
not highly developed, and in certain Latin American countries, there may be no
such market. If a devaluation of a Latin American currency is generally
anticipated, the Fund may not be able to contract to sell the currency at an
exchange rate more advantageous than that which would prevail after the
anticipated amount of devaluation, particularly as regards forward contracts for
local Latin American currencies in view of the relatively small, inactive or
even non-existent market for these contracts. In the event the Funds hold
securities denominated in a currency that suffers a devaluation, the Funds' net
asset values will suffer corresponding reductions. In this regard, in December
1994, the Mexican government determined to allow the Mexican peso to trade
freely against the U.S. dollar rather than within a controlled band, which
action resulted in a significant devaluation of the Mexican peso against the
dollar. Further, in July 1997, the Thai and Philippine governments allowed the
baht and peso, respectively, to trade freely against the U.S. dollar resulting
in a sharp devaluation of both currencies, and in 1998 Russia did the same,
causing a sharp devaluation of the ruble.

Risks Associated With Emerging Market Countries

Political and economic structures in many emerging markets countries may be
undergoing significant evolution and rapid development, and such countries may
lack the social, political and economic stability characteristics of more
developed countries. Some of these countries may have in the past failed to
recognize private property rights and have at times nationalized or expropriated
the assets of private companies.

The securities markets of emerging market countries are substantially smaller,
less developed, less liquid and more volatile than the major securities markets
in the United States and other developed nations. The limited size of many
emerging securities markets and limited trading volume in issuers compared to
volume of trading in U.S. securities or securities of issuers in other developed
countries could cause prices to be erratic for reasons apart from factors that
affect the quality of the securities. For example, limited market size may cause
prices to be unduly influenced by traders who control large positions. Adverse
publicity and investors' perceptions, whether or not based on fundamental
analysis, may decrease the value and liquidity of portfolio securities,
especially in these markets.

In addition, emerging market countries' exchanges' and broker-dealers are
generally subject to less government and exchange regulation than their
counterparts in developed countries. Brokerage commissions, dealer concessions,
custodial expenses and other transaction costs may be higher in emerging markets
than in developed countries. As a result, Funds investing in emerging market
countries have operating expenses that are expected to be higher than other
funds investing in more established market regions.

Many of the emerging market countries may be subject to greater degree of
economic, political and social instability than is the case in the United
States, Canada, Australia, New Zealand, Japan and Western European and certain
Asian countries. Such instability may result from, among other things, (i)
popular unrest associated with demands for improved political, economic and
social conditions, and (ii) internal insurgencies. Such social, political and
economic instability could disrupt the financial markets in which the Asia
Pacific Equities, Emerging Markets Equities, Emerging Markets Income,
International Equities and Latin America Equities Funds invest and adversely
affect the value of a Fund's assets.

Many of the currencies of emerging market countries have experienced
devaluations relative to the U.S. dollar, and major devaluations have
historically occurred in certain countries. Any devaluations in the currencies
in which portfolio securities are denominated will have a detrimental impact on
Funds investing in emerging market countries. Many emerging market countries are
experiencing currency exchange problems. Countries have and may in the future
impose foreign currency controls and repatriation control.

Futures

There are certain risks inherent in the use of futures contracts and options on
futures contracts. Successful use of futures contracts by a Fund is subject to
the ability of the Adviser to correctly predict movements in the direction of
interest rates or changes in market conditions. In addition, there can be no
assurance that there will be a correlation between price movements in the
underlying securities, currencies or index and the price movements in the
securities which are the subject of hedge. Positions in futures contracts and
options on futures contracts may be closed out only on the exchange or board of
trade on which they were entered into, and there can be no assurance that an
active market will exist for a particular contract or option at any particular
time. If a Fund has hedged against the possibility of an increase in interest
rates or a decrease in the value of portfolio securities and interest rates fall
or the value of portfolio securities increase instead, a Fund will lose part or
all of the benefit of the increased value of securities that it has hedged
because it will have offsetting losses in its futures positions. In addition, in
such situations, if a Fund has insufficient cash, it may have to sell securities
to meet daily variation margin requirements at a time when it is disadvantageous
to do so. These sales of securities may, but will not necessarily, be at
increased prices that reflect the decline in interest rates. While utilization
of futures contracts and options on futures contracts may be advantageous to a
Fund, if the Fund is not successful in employing such instruments in managing
its investments, the Fund's performance will be worse than if the Fund not make
such investment in futures contracts and options on futures contracts.

Options

The successful use of options depends on the ability of the Adviser to forecast
interest rate and market movements correctly. For example, if a Fund were to
write a call option based on the Adviser's expectation that the price of the
underlying security would fall, but the price were to rise instead, the Fund
could be required to sell the security upon exercise at a price below the
current market price. Similarly, if a Fund were to write a put option based on
the Adviser's expectation that the price of the underlying security would rise,
but the price were to fall instead, the Fund could be required to purchase the
security upon exercise at a price higher than the current market price.

When it purchases an option, a Fund runs the risk that it will lose its entire
investment in the option in a relatively short period of time, unless the Fund
exercises the option or enters into a closing transaction with respect to the
option during the life of the option. If the price of the underlying security
does not rise (in the case of a call) or fall (in the case of a put) to an
extent sufficient to cover the option premium and transaction costs, the Fund
will lose part or all of its investment in the option. This contrasts with an
investment by the Fund in the underlying security, since the Fund will not lose
any of its investment in such security if the price does not change.

The effective use of options also depends on a Fund's ability to terminate
option positions at times when the Adviser deems it desirable to do so. Although
the Fund will take an option position only if the Adviser believes there is a
liquid secondary market for the option, there is no assurance that the Fund will
be able to effect closing transactions at any particular time or at an
acceptable price.

If a secondary trading market in options were to become unavailable, a Fund
could no longer engage in closing transactions. Lack of investor interest might
adversely affect the liquidity of the market for particular options or series of
options. A market may discontinue trading of a particular option or options
generally. In addition, a market could become temporarily unavailable if unusual
events - such as volume in excess of trading or clearing capability - were to
interrupt its normal operations.

A market may at times find it necessary to impose restrictions on particular
types of options transactions, such as opening transactions. For example, if an
underlying security ceases to meet qualifications imposed by the market or the
Options Clearing Corporation, new series of options on that security will no
longer be opened to replace expiring series, and opening transactions in
existing series may be prohibited. If an options market were to become
unavailable, a Fund which holds an option would be able to realize profits or
limit losses only by exercising the option, and a Fund which acted as option
writer would remain obligated under the option until expiration or exercise.

Special risks are presented by internationally-traded options of the type
certain of the Equity Funds, Emerging Markets Income and Core Fixed Income may
acquire. Because of time differences between the United States and the various
foreign countries, and because different holidays are observed in different
countries, foreign options markets may be open for trading during hours or on
days when U.S. markets are closed. As a result, option premiums may not reflect
the current prices of the underlying interest in the United States.

Risks Associated With Lower Rated Securities

The Convertible Securities and High Yield Bond portfolios consist primarily of
below investment grade corporate securities that are commonly known as junk
bonds. In addition, the Equity Funds may invest in convertible securities and
Asia Pacific Equities, Core Fixed Income, Earnings Momentum, Aggressive Growth
Equities, Emerging Markets Equities, Emerging Markets Income, European Equities
and Latin America Equities may invest in debt instruments rated below investment
grade. Lower rated securities are traded in markets that may be relatively less
liquid and subject to greater changes in liquidity than the markets for higher
rated securities.

High yield/high risk securities can be classified into two categories: (a)
securities issued without an investment grade rating and (b) securities whose
credit ratings have been downgraded below investment grade because of declining
investment fundamentals. The first category includes securities issued by
"emerging credit" companies and companies which have experienced a leveraged
buyout or recapitalization. Although the small and medium size companies that
constitute emerging credit issuers typically have significant operating
histories, these companies generally do not have strong enough operating results
to secure investment grade ratings from the rating agencies. In addition, in
recent years there has been a substantial volume of high yield/high risk
securities issued by companies that have converted from public to private
ownership through leveraged buyout transactions and by companies that have
restructured their balance sheets through leveraged recapitalizations. High
yield/high risk securities issued in these situations are used primarily to pay
existing stockholders for their shares or to finance special dividend
distributions to shareholders. The indebtedness incurred in connection with
these transactions is often substantial and, as a result, often produces highly
leveraged capital structures which present special risks for the holders of such
securities. Also, the market price of such securities may be more volatile to
the extent that expected benefits from the restructuring do not materialize. The
second category of high yield/high risk securities consists of securities of
former investment grade companies that have experienced poor operating
performance due to such factors as cyclical downtrends in their industry, poor
management or increased foreign competition.

Generally, lower-rated debt securities provide a higher yield than higher rated
debt securities of similar maturity but are subject to greater risk of loss of
principal and interest ("credit risk") than higher rated securities of similar
maturity. They are generally considered to be subject to greater risk than
securities with higher ratings particularly in the event of a deterioration of
general economic conditions. The lower ratings of the high yield/high risk
securities which the Fund will purchase reflect a greater possibility that the
financial condition of the issuers, or adverse changes in general economic
conditions, or both, may impair the ability of the issuers to make payments of
principal and interest. The market value of a single lower-rated fixed income
security may fluctuate more than the market value of higher rated securities,
since changes in the creditworthiness of lower rated issuers and in market
perceptions of the issuers' creditworthiness tend to occur more frequently and
in a more pronounced manner than in the case of higher rated issuers. High
yield/high risk fixed income securities also tend to reflect individual
corporate developments to a greater extent than higher rated securities. The
securities in which the Fund invests are frequently subordinated to senior
indebtedness.

Since the high yield bond market is relatively new, its growth has paralleled a
long economic expansion, and it has not weathered a recession in its present
size and form. An economic downturn or increase in interest rates may result in
a higher incidence of high yield bond defaults and is likely to have a negative
effect on the high yield bond market and on the value of the high yield/high
risk bonds in the Fund's portfolio, as well as on the ability of the bonds'
issuers to repay principal and interest.

The economy and interest rates affect high yield/high risk securities
differently from other securities. The prices of high yield bonds have been
found to be less sensitive to interest rate changes than higher-rated
investments, but more sensitive to adverse economic changes or individual
corporate developments. During an economic downturn or substantial period of
rising interest rates, highly leveraged issuers may experience financial stress
which would adversely affect their ability to service their principal and
interest payment obligations, to meet projected business goals, and to obtain
additional financing. If the issuer of a bond owned by the Fund defaults, the
Fund may incur additional expenses to seek recovery. In addition, periods of
economic uncertainty and changes can be expected to result in increased
volatility of market prices of high yield bonds and the Fund's asset value.
Furthermore, the market prices of high yield/high risk bonds structured as zero
coupon or pay-in-kind securities are affected to a greater extent by interest
rate changes and thereby tend to be more volatile than securities which pay
interest periodically and in cash.

To the extent there is a limited retail secondary market for particular high
yield bonds, these bonds may be thinly-traded and the Adviser's ability to
accurately value high yield bonds and the Fund's assets may be more difficult
because there is less reliable, objective data available. In addition, the
Fund's ability to acquire or dispose of the bonds may be negatively-impacted.
Adverse publicity and investor perceptions, whether or not based on fundamental
analysis, may decrease the values and liquidity of high yield bonds, especially
in a thinly-traded market. To the extent the Fund owns or may acquire illiquid
or restricted high yield bonds, these securities may involve special
registration responsibilities, liabilities and costs, and liquidity and
valuation difficulties.

Special tax considerations are associated with investing in lower rated debt
securities structured as zero coupon or pay-in-kind securities. The Fund accrues
income on these securities prior to the receipt of cash payments. The Fund must
distribute substantially all of its income to its shareholders to qualify for
pass-through treatment under the tax laws and may, therefore, have to dispose of
its portfolio securities to satisfy distribution requirements.

Underwriting and dealer spreads associated with the purchase of lower rated
bonds are typically higher than those associated with the purchase of high grade
bonds.

Risks Associated With Mortgage-Backed Securities

Credit and Market Risks of Mortgage-Backed Securities. The investments by Core
Fixed Income, Total Return Mortgage-Backed Securities and Mortgage-Backed
Securities in fixed rate and floating rate mortgage-backed securities will
entail normal credit risks (i.e., the risk of non-payment of interest and
principal) and market risks (i.e., the risk that interest rates and other
factors will cause the value of the instrument to decline). Many issuers or
servicers of mortgage-backed securities guarantee timely payment of interest and
principal on the securities, whether or not payments are made when due on the
underlying mortgages. This kind of guarantee generally increases the quality of
a security, but does not mean that the security's market value and yield will
not change. Like bond investments, the value of fixed rate mortgage-backed
securities will tend to rise when interest rates fall, and fall when rates rise.
Floating rate mortgage-backed securities will generally tend to have minimal
changes in price when interest rates rise or fall. The value of all
mortgage-backed securities may also change because of changes in the market's
perception of the creditworthiness of the organization that issued or guarantees
them. In addition, the mortgage-backed securities market in general may be
adversely affected by changes in governmental legislation or regulation.
Fluctuations in the market value of mortgage-backed securities after their
acquisition usually do not affect cash income from such securities but are
reflected in each Fund's net asset value. The liquidity of mortgage-backed
securities varies by type of security; at certain times a Fund may encounter
difficulty in disposing of investments. Other factors that could affect the
value of a mortgage-backed security include, among other things, the types and
amounts of insurance which a mortgagor carries, the amount of time the mortgage
loan has been outstanding, the loan-to-value ratio of each mortgage and the
amount of overcollateralization of a mortgage pool.

Prepayment and Redemption Risk of Mortgage-Backed Securities. Mortgage-backed
securities reflect an interest in monthly payments made by the borrowers who
receive the underlying mortgage loans. Although the underlying mortgage loans
are for specified periods of time, such as 20 or 30 years, the borrowers can,
and typically do, pay them off sooner. In such an event, the mortgage-backed
security which represents an interest in such underlying mortgage loan will be
prepaid. A borrower is more likely to prepay a mortgage which bears a relatively
high rate of interest. This means that in times of declining interest rates, a
portion of the Fund's higher yielding securities are likely to be redeemed and
the Fund will probably be unable to replace them with securities having as great
a yield. Prepayments can result in lower yields to shareholders. The increased
likelihood of prepayment when interest rates decline also limits market price
appreciation of mortgage-backed securities. In addition, a mortgage-backed
security may be subject to redemption at the option of the issuer. If a
mortgage-backed security held by a Fund is called for redemption, the Fund will
be required to permit the issuer to redeem the security, which could have an
adverse effect on the Fund's ability to achieve its investment objective.

Collateralized Mortgage Obligations. There are certain risks associated
specifically with CMOs. CMOs issued by private entities are not obligations
issued or guaranteed by the United States Government, its agencies or
instrumentalities and are not guaranteed by any government agency, although the
securities underlying a CMO may be subject to a guarantee. Therefore, if the
collateral securing the CMO, as well as any third party credit support or
guarantees, is insufficient to make payment, the holder could sustain a loss. In
addition, the average life of CMOs is determined using mathematical models that
incorporate prepayment assumptions and other factors that involve estimates of
future economic and market conditions. These estimates may vary from actual
future results, particularly during periods of extreme market volatility.
Further, under certain market conditions, such as those that occurred in 1994,
the average weighted life of certain CMOs may not accurately reflect the price
volatility of such securities. For example, in periods of supply and demand
imbalances in the market for such securities and/or in periods of sharp interest
rate movements, the prices of CMOs may fluctuate to a greater extent than would
be expected from interest rate movements alone.

Stripped Mortgage Securities. Part of the investment strategy of Core Fixed
Income, Total Return Mortgage-Backed Securities and Mortgage-Backed Securities
involves interest-only Stripped Mortgage Securities. These investments are
highly sensitive to changes in interest and prepayment rates and tend to be less
liquid than other CMOs.

Inverse Floaters. Total Return Mortgage-Backed and Mortgage-Backed Securities
invest in inverse floaters, a class of CMOs with a coupon rate that resets in
the opposite direction from the market rate of interest to which it is indexed
such as LIBOR or COFI. Any rise in the index rate (as a consequence of an
increase in interest rates) causes a drop in the coupon rate of an inverse
floater while any drop in the index rate causes an increase in the coupon of an
inverse floater. An inverse floater may be considered to be leveraged to the
extent that its interest rate varies by a magnitude that exceeds the magnitude
of the change in the index rate of interest. The higher degree of leverage
inherent in inverse floaters is associated with greater volatility in their
market prices.

Adjustable Rate Mortgages. ARMs contain maximum and minimum rates beyond which
the mortgage interest rate may not vary over the lifetime of the security. In
addition, certain ARMs provide for additional limitations on the maximum amount
by which the mortgage interest rate may adjust for any single adjustment period.
Alternatively, certain ARMs contain limitations on changes in the required
monthly payment. In the event that a monthly payment is not sufficient to pay
the interest accruing on an ARM, any such excess interest is added to the
principal balance of the mortgage loan, which is repaid through future monthly
payments. If the monthly payment for such an instrument exceeds the sum of the
interest accrued at the applicable mortgage interest rate and the principal
payment required at such point to amortize the outstanding principal balance
over the remaining term of the loan, the excess is utilized to reduce the then
outstanding principal balance of the ARM.

Asset-Backed Securities. Certain asset-backed securities do not have the benefit
of the same security interest in the related collateral as do mortgage-backed
securities. Credit card receivables are generally unsecured, and the debtors are
entitled to the protection of a number of state and federal consumer credit
laws, many of which give such debtors the right to set off certain amounts owed
on the credit cards, thereby reducing the balance due. In addition, some issuers
of automobile receivables permit the servicers to retain possession of the
underlying obligations. If the servicer were to sell these obligations to
another party, there is a risk that the purchaser would acquire an interest
superior to that of the holders of the related automobile receivables.

Rating Categories

A description of the rating categories as published by Moody's and S&P is set
forth in the Appendix to this Statement of Additional Information. Ratings
assigned by Moody's and/or S&P to securities acquired by a Fund reflect only the
views of those agencies as to the quality of the securities they have undertaken
to rate. It should be emphasized, however, that ratings are relative and
subjective and are not absolute standards of quality. There is no assurance that
a rating assigned initially will not change. A Fund may retain a security whose
rating has changed or has become unrated.

Restricted Securities

Each Fund may invest in securities which are subject to restrictions on resale
because they have not been registered under the Securities Act of 1933, as
amended (the "Securities Act"), or which are otherwise not readily marketable.
These securities are generally referred to as private placements or restricted
securities. The Adviser, pursuant to procedures adopted by the Board of
Directors of the Company, will make a determination as to the liquidity of each
restricted security purchased by a Fund. If a restricted security is determined
to be "liquid," it will not be included within the category "illiquid
securities," which under each Bond Fund's and Equity Fund's current policies may
not exceed 15% of the Fund's net assets and which under Money Market's current
policies may not exceed 10% of the Fund's net assets.

Limitations on the resale of restricted securities may have an adverse effect on
their marketability, and may prevent a Fund from disposing of them promptly at
reasonable prices. A Fund may have to bear the expense of registering such
securities for resale and the risk of substantial delays in effecting such
registration. The Securities and Exchange Commission has recently adopted Rule
144A under the Securities Act, which permits each Fund to sell restricted
securities to qualified institutional buyers without limitation. The Rule 144A
marketplace of sellers and qualified institutional buyers is new and still
developing and may take a period of time to develop into a mature liquid market.
As such, the market for certain private placements purchased pursuant to Rule
144A may be initially small or may, subsequent to purchase, become illiquid.
Furthermore, the Adviser may not possess all the information concerning an issue
of securities that it wishes to purchase in a private placement to which it
would normally have had access, had the registration statement necessitated by a
public offering been filed with the Securities and Exchange Commission.

Options Transactions

The effective use of options also depends on a Fund's ability to terminate
option positions at times when the Adviser deems it desirable to do so. Prior to
exercise or expiration, an option position can only be terminated by entering
into a closing purchase or sale transaction. If a covered call option writer is
unable to effect a closing purchase transaction or to purchase an offsetting OTC
Option, it cannot sell the underlying security until the option expires or the
option is exercised. Accordingly, a covered call option writer may not be able
to sell an underlying security at a time when it might otherwise be advantageous
to do so. A secured put option writer who is unable to effect a closing purchase
transaction or to purchase an offsetting OTC Option would continue to bear the
risk of decline in the market price of the underlying security until the option
expires or is exercised. In addition, a secured put writer would be unable to
utilize the amount held in cash or U.S. Government Securities or other high
grade short-term obligations as security for the put option for other investment
purposes until the exercise or expiration of the option.

A Fund's ability to close out its position as a writer of an option is dependent
upon the existence of a liquid secondary market. There is no assurance that such
a market will exist, particularly in the case of OTC Options, as such options
will generally only be closed out by entering into a closing purchase
transaction with the purchasing dealer. However, the Fund may be able to
purchase an offsetting option which does not close out its position as a writer
but constitutes an asset of equal value to the obligation under the option
written. If the Fund is not able to either enter into a closing purchase
transaction or purchase an offsetting position, it will be required to maintain
the securities subject to the call, or the collateral underlying the put, even
though it might not be advantageous to do so, until a closing transaction can be
entered into (or the option is exercised or expires).

Among the possible reasons for the absence of a liquid secondary market on an
exchange are: (a) insufficient trading interest in certain options; (b)
restrictions on transactions imposed by an exchange; (c) trading halts,
suspensions or other restrictions imposed with respect to particular classes or
series of options or underlying securities; (d) interruption of the normal
operations on an exchange; (e) inadequacy of the facilities of an exchange or
the OCC or other relevant clearing corporation to handle current trading volume;
or (f) a decision by one or more exchanges to discontinue the trading of options
(or a particular class or series of options), in which event the secondary
market on that exchange (or in that class or series of options) would cease to
exist, although outstanding options on that exchange that had been issued by the
relevant clearing corporation as a result of trades on that exchange would
generally continue to be exercisable in accordance with their terms.

In the event of the bankruptcy of a broker through which a Fund engages in
transactions in options, the Fund could experience delays and/or losses in
liquidating open positions purchased or sold through the broker and/or incur a
loss of all or part of its margin deposits with the broker. Similarly, in the
event of the bankruptcy of the writer of an OTC Option purchased by a Fund, the
Fund could experience a loss of all or part of the value of the option.
Transactions are entered into by a Fund only with brokers or financial
institutions deemed creditworthy by the Fund's management.

Each of the exchanges has established limitations governing the maximum number
of options on the same underlying security or futures contract (whether or not
covered) which may be written by a single investor, whether acting alone or in
concert with others (regardless of whether such options are written on the same
or different exchanges or are held or written on one or more accounts or through
one or more brokers). An exchange may order the liquidation of positions found
to be in violation of these limits and it may impose other sanctions or
restrictions. These position limits may restrict the number of listed options
which a Fund may write.

The hours of trading for options may not conform to the hours during which the
underlying securities are traded. To the extent that the option markets close
before the markets for the underlying securities, significant price and rate
movements can take place in the underlying markets that cannot be reflected in
the option markets.

Futures Contracts and Options on Futures

Positions in futures contracts and options on futures contracts may be closed
out only on the exchange or board of trade on which they were entered into, and
there can be no assurance that an active market will exist for a particular
contract or option at any particular time. If a Fund has hedged against the
possibility of an increase in interest rates or a decrease in the value of
portfolio securities and interest rates fall or the value of portfolio
securities increase instead, a Fund will lose part or all of the benefit of the
increased value of securities that it has hedged because it will have offsetting
losses in its futures positions. In addition, in such situations, if a Fund has
insufficient cash, it may have to sell securities to meet daily variation margin
requirements at a time when it may be disadvantageous to do so. These sales of
securities may, but will not necessarily be at increased prices that reflect the
decline in interest rates. While utilization of futures contracts and options on
futures contracts may be advantageous to the Fund, if the Fund is not successful
in employing such instruments in managing the Fund's investments, the Fund's
performance will be worse than if the Fund did not make such investments.

Each Fund will enter into transactions in futures contracts for hedging purposes
only, including without limitation, futures contracts that are "bona fide
hedges" as defined by the CFTC. In connection with the purchase of sale of
futures contracts, a Fund will be required to either (i) segregate sufficient
cash or other liquid assets to cover the outstanding position or (ii) cover the
futures contract by either owning the instruments underlying the futures
contracts or by holding a portfolio of securities with characteristics
substantially similar to the underlying index or stock index comprising the
futures contracts or by holding a separate offsetting option permitting it to
purchase or sell the same futures contract. A call option is "covered" if
written against securities owned by the Fund writing the option or if written
against related securities the Fund holds. A put option is "covered" if the Fund
writing the option maintains at all time cash, short-term Treasury obligations
or other liquid assets with a value equal to the option exercise price in a
segregated account with the Fund's custodian, or if it has bought and holds a
put on the same security (and on the same amount of securities) where the
exercise price of the put held by the Fund is equal to or greater than the
exercise price of the put written by the Fund.

Exchanges limit the amount by which the price of a futures contract may move on
any day. If the price moves equal the daily limit on successive days, then it
may prove impossible to liquidate a futures position until the daily limit moves
have ceased. In the event of adverse price movements, a Fund would continue to
be required to make daily cash payments of variation margin on open futures
positions. In such situations, if a Fund has insufficient cash, it may have to
sell portfolio securities to meet daily variation margin requirements at a time
when it may be disadvantageous to do so. In addition, a Fund may be required to
take or make delivery of the instruments underlying interest rate futures
contracts it holds at a time when it is disadvantageous to do so. The inability
to close out options and futures positions could also have an adverse impact on
a Fund's ability to effectively hedge its portfolio.

Futures contracts and options thereon which are purchased or sold on foreign
commodities exchanges may have greater price volatility than their U.S.
counterparts. Furthermore, foreign commodities exchanges may be less regulated
and under less governmental scrutiny than U.S. exchanges. Brokerage commissions,
clearing costs and other transaction costs may be higher on foreign exchanges.
Greater margin requirements may limit a Fund's ability to enter into certain
commodity transactions on foreign exchanges. Moreover, differences in clearance
and delivery requirements on foreign exchanges may occasion delays in the
settlement of a Fund's transactions effected on foreign exchanges.

In the event of the bankruptcy of a broker through which a Fund engages in
transactions in futures or options thereon, the Fund could experience delays
and/or losses in liquidating open positions purchased or sold through the broker
and/or incur a loss of all or part of its margin deposits with the broker.
Similarly, in the event of the bankruptcy, of the writer of an OTC option
purchased by a Fund, the Fund could experience a loss of all or part of the
value of the option. Transactions are entered into by a Fund only with brokers
or financial institutions deemed creditworthy by the Adviser.

There is no assurance that a liquid secondary market will exist for futures
contracts and related options in which a Fund may invest. In the event a liquid
market does not exist, it may not be possible to close out a futures position,
and in the event of adverse price movements, a Fund would continue to be
required to make daily cash payments of variation margin. In addition,
limitations imposed by an exchange or board of trade on which futures contracts
are traded may compel or prevent a Fund from closing out a contract which may
result in reduced gain or increased loss to the Fund. The absence of a liquid
market in futures contracts might cause a Fund to make or take delivery of the
underlying securities (currencies) at a time when it may be disadvantageous to
do so.

Compared to the purchase or sale of futures contracts, the purchase of call or
put options on futures contracts involves less potential risk to a Fund because
the maximum amount at risk is the premium paid for the options (plus transaction
costs). However, there may be circumstances when the purchase of a call or put
option on a futures contract would result in a loss to a Fund notwithstanding
that the purchase or sale of a futures contract would not result in a loss, as
in the instance where there is no movement in the prices of the futures contract
or underlying securities (currencies).

Options on foreign currency futures contracts may involve certain additional
risks. Trading options on foreign currency futures contracts is relatively new.
The ability to establish and close out positions on such options is subject to
the maintenance of a liquid secondary market. To reduce this risk, a Fund will
not purchase or write options on foreign currency futures contracts unless and
until, in the Adviser's opinion, the market for such options has developed
sufficiently that the risks in connection with such options are not greater than
the risks in connection with transactions in the underlying foreign currency
futures contracts.

Portfolio Turnover

The portfolio turnover rate is calculated by dividing the lesser of the value of
purchases or sales of portfolio securities for the year by the monthly average
value of portfolio securities. For example, a portfolio turnover rate of 100%
would occur if all of a Fund's securities that are included in the computation
of turnover were replaced once during a period of one year. Securities with
remaining maturities of one year or less at the date of acquisition are excluded
from the calculation.

Certain practices that may be employed by the Funds could result in high
portfolio turnover. For example, portfolio securities may be sold in
anticipation of a rise in interest rates (market decline) or purchased in
anticipation of a decline in interest rates (market rise) and later sold. In
addition, a security may be sold and another of comparable quality purchased at
approximately the same time to take advantage of what the Adviser believes to be
a temporary disparity in the normal yield relationship between the two
securities. These yield disparities may occur for reasons not directly related
to the investment quality of particular issues or the general movement of
interest rates, such as changes in the overall demand for, or supply of, various
types of securities. High portfolio turnover can result in increased transaction
costs for shareholders. High turnover generally results from the Adviser's
effort to maximize return for a particular period.

Brokerage Practices

The Adviser is responsible for the placement of the Funds' portfolio
transactions and the negotiation of prices and commissions, if any, with respect
to such transactions. Fixed income and unlisted equity securities are generally
purchased from a primary market maker acting as principal on a net basis without
a stated commission but at prices generally reflecting a dealer spread. Listed
equity securities are normally purchased through brokers in transactions
executed on securities exchanges involving negotiated commissions. Both fixed
income and equity securities are also purchased in underwritten offerings at
fixed prices which include discounts to underwriters and/or concessions to
dealers. In placing a portfolio transaction, the Adviser seeks to obtain the
best execution for the Fund, taking into account such factors as price
(including the applicable dealer spread or commission, if any), size of order,
difficulty of execution and operational facilities of the firm involved and the
firm's risk in positioning a block of securities.

Consistent with its policy of securing best execution, in selecting
broker-dealers and negotiating any commissions or prices involved in Fund
transactions, the Adviser considers the range and quality of the professional
services provided by such firms. Brokerage services include the ability to most
effectively execute large orders without adversely impacting markets and
positioning securities in order to enable the Adviser to effect orderly
purchases or sales for a Fund. Accordingly, transactions will not always be
executed at the lowest available commission. Consistent with the Conduct Rules
of the National Association of Securities Dealers, Inc., and subject to seeking
the most favorable price and execution available and other such polices as the
Board of Directors may determine, the Adviser may consider sales of shares of a
Fund as a factor in the selection of broker-dealers to execute the Fund's
portfolio transactions. In addition, the Adviser may effect transactions which
cause a Fund to pay a commission or net price in excess of a commission or net
price which another broker-dealer would have charged if the Adviser first
determines that such commission or net price is reasonable in relation to the
value of the brokerage and research services provided by the broker-dealer to
the Fund.

Research services include such items as reports on industries and companies,
economic analyses and review of business conditions, portfolio strategy,
analytic computer software, account performance services, computer terminals and
various trading and/or quotation equipment. They also include advice from
broker-dealers as to the value of securities and availability of securities,
buyers, and sellers. In addition, they include recommendations as to purchase
and sale of individual securities and timing of transactions.

Fixed income securities are generally purchased from the issuer or a primary
market maker acting as principal on a net basis with no brokerage commission
paid by the client. Such securities, as well as equity securities, may also be
purchased from underwriters at prices which include underwriting fees.

The Adviser maintains an internal allocation procedure to identify those
broker-dealers who have provided it with research services and endeavors to
place sufficient transactions with them to ensure the continued receipt of
research services the Adviser believes are useful. When the Adviser receives
products or services that are used both for research and other purposes, it
makes a good faith allocation. While the non-research portion will be paid in
cash by the Adviser, the portion attributable to research may be paid through
brokerage commissions.

Research services furnished by broker-dealers may be used in providing services
for any or all of the clients of the Adviser, as well as clients of affiliated
companies, and may be used in connection with accounts other than those which
pay commissions to the broker-dealers providing the research services. During
the fiscal year ended October 31, 1999, Aggressive Growth Equities, Convertible
Securities, Earnings Momentum, Large Cap Growth, Large Cap Value, Select
Equities, Small Cap Growth, Value Opportunities, Asia Pacific Equities, Emerging
Markets Equities, European Equities, International Equities, Japanese Equities
and Latin American Equities paid $56,700, $5,760, $18,482, $17,712, $197,130,
$124,109, $36,670, $178,759, $108,322, $199,055, $371,228, $8,297, $627,925 and
$51,398, respectively, in brokerage commissions for research services.

For the fiscal year ended October 31, 1999, Aggressive Growth Equities,
Convertible Securities, Earnings Momentum, Large Cap Growth, Large Cap Value,
Select Equities, Small Cap Growth, Value Opportunities, Asia Pacific Equities,
Emerging Markets Equities, European Equities, International Equities, Japanese
Equities and Latin America Equities paid $372,463, $261,448, $220,249, $33,164,
$253,309, $326,907, $610,412, $233,315, $414,037, $211,626, $371,228, $8,297,
$656,897 and $54,510, respectively, in brokerage commissions.

INVESTMENT RESTRICTIONS

The investment restrictions numbered 1 through 8 below have been adopted by the
Company with respect to the Funds as fundamental policies (except as otherwise
provided in 1). A fundamental policy affecting a particular Fund may not be
changed without the vote of a majority of the outstanding shares of the affected
Fund. Investment restrictions 9 and 10 with respect to a Fund may be changed by
vote of a majority of the Company's Board of Directors at any time.

Investment policies adopted by the Company are:

1. No Fund will borrow money, except that (a) a Fund may borrow from banks for
temporary or emergency (not leveraging) purposes including the meeting of
redemption requests that might otherwise require the untimely disposition
of securities, (b) Core Fixed Income, Mortgage-Backed Securities, Total
Return Mortgage-Backed Securities, Latin America Equities and Money Market
may each enter into reverse repurchase agreements, (c) Core Fixed Income,
Mortgage-Backed Securities and Total Return Mortgage-Backed Securities may
utilize mortgage dollar rolls, and (d) each Fund other than Money Market
may enter into futures contracts for hedging purposes subject to the
conditions set forth in paragraph 8 below. The total amount borrowed by a
Fund (including, for this purpose, reverse repurchase agreements and
mortgage dollar rolls) at any time will not exceed 30% (or, in the case of
Money Market, 10%) of the value of the Fund's total assets (including the
amount borrowed) valued at market less liabilities (not including the
amount borrowed) at the time the borrowing is made. As an operating policy,
whenever borrowings pursuant to (a) exceed 5% (or, in the case of Money
Market, 10%) of the value of a Fund's total assets, the Fund will not
purchase any securities.

2. No Fund will issue senior securities as defined in the 1940 Act, provided
that the Funds may (a) enter into repurchase agreements; (b) purchase
securities on a when-issued or delayed delivery basis; (c) purchase or sell
financial futures contracts or options thereon; and (d) borrow money in
accordance with the restrictions described in paragraph 1 above.

3. No Fund will underwrite securities of other companies, except insofar as
the Fund might be deemed to be an underwriter for purposes of the
Securities Act by virtue of disposing of portfolio securities.

4. No Fund will purchase any securities that would cause 25% or more of the
value of the Fund's total assets at the time of purchase to be invested in
the securities of any one particular industry or group of industries,
provided that this limitation shall not apply to any Fund's purchase of
U.S. Government Securities, and, in the case of Money Market, to the
purchase of obligations of domestic branches of United States banks. The
European Equities Fund may invest more than 25% of the value of its total
assets in a single European country, the International Equities Fund may
invest more than 25% of the value of its total assets in shares of
registered investment companies, the Japanese Equities Fund may invest more
than 25% of the value of its total assets in debt securities issued or
guaranteed by the Japanese government and the Emerging Markets Income Fund
may invest more than 25% of the value of its total assets in debt
securities issued or guaranteed by the governments of Emerging Markets
Countries. In determining industry classifications for foreign issuers,
each Fund will use reasonable classifications that are not so broad that
the primary economic characteristic of the companies in a single class are
materially different. Each Fund will determine such classifications of
foreign issuers based on the issuer's principal or major business
activities.

5. No Fund will invest in real estate, real estate mortgage loans, residual
interests in REMICs, oil, gas and other mineral leases (including other
universal exploration or development programs), or real estate limited
partnerships, except that a Fund may purchase securities backed by real
estate or interests therein, or issued by companies, including real estate
investment trusts, which invest in real estate or interests therein, and
except that Core Fixed Income, Total Return Mortgage-Backed Securities and
Mortgage-Backed Securities are not prohibited from investing in real estate
mortgage loans.

6. No Fund may make loans of cash except by purchasing qualified debt
obligations or entering into repurchase agreements.

7. Each Fund may effect short sales of securities or maintain a short position
only if the Fund at the time of sale either owns or has the right to
acquire at no additional cost securities equivalent in kind and amount to
those sold.

8. No Fund will invest in commodities or commodities contracts, except that
each Bond Fund or Equity Fund may enter into futures contracts or purchase
related options thereon if, immediately thereafter, the amount committed to
margin plus the amount paid for premiums for unexpired options on futures
contracts does not exceed 5% of the value of the Fund's total assets, after
taking into account unrealized gains and unrealized losses on such
contracts it has entered into, provided, however, that in the case of an
option that is in-the-money (the exercise price of the call (put) option is
less (more) than the market price of the underlying security) at the time
of purchase, the in-the-money amount may be excluded in calculating the 5%.
The entry into foreign currency forward contracts shall not be deemed to
involve investing in commodities.

9. No Fund will purchase securities on margin, except that a Fund may obtain
any short-term credits necessary for clearance of purchases and sales of
securities. For purposes of this restriction, the deposit or payment of
initial or variation margin in connection with futures contracts and
related options will not be deemed to be a purchase of securities on
margin.

10. No Fund will purchase the securities of an issuer for the purpose of
acquiring control or management thereof except that Asia Pacific Equities,
Emerging Markets Equities and Latin America Equities may acquire the
securities of subsidiaries in order to facilitate investing in the
securities of foreign issuers.

The percentage limitations contained in the restrictions listed above apply,
with the exception of (1), at the time of purchase or initial investment and any
subsequent change in any applicable percentage resulting from market
fluctuations or other changes in total or net assets does not require
elimination of any security from the Fund.

DIRECTORS AND OFFICERS OF THE COMPANY

A board of five directors is responsible for overseeing the Fund's affairs. The
Fund has an executive committee, consisting of Marc I. Stern, Chairman, John C.
Argue and Thomas E. Larkin, which may act for the Board of Directors between
meetings, except where Board action is required by law. The directors and
officers of the Fund, and their business addresses and their principal
occupations for the last five years are set forth below.

Name and Address Principal Occupations and Other Affiliations
<TABLE>
<CAPTION>
<S> <C>

Marc I. Stern* (55) President and Director, The TCW Group, Inc. (formerly TCW Management
Chairman Company); Chairman, the Adviser; President and Vice Chairman, TCW
865 South Figueroa Street Asset Management Company; Chairman, TCW Americas Development, Inc.;
Los Angeles, California 90017 Chairman, TCW London International, Limited and Executive Vice
President, Trust Company of the West. Chairman, Apex Mortgage Capital,
Inc. (Since October 1997). Director of Qualcomm Incorporated (wireless
communications); formerly President of Sun America, Inc. (financial
services company).

Alvin R. Albe* (46) President and Director of the Adviser and Executive Vice President
Director and President and Director of TCW Asset Management Company and Trust Company of
865 South Figueroa Street the West. Mr. Albe is also Executive Vice President of the TCW
Los Angeles, California 90017 Group, Inc. Prior to joining The TCW Group, Inc. and its affiliates
and subsidiaries ("TCW") in 1991, Mr. Albe was President of Oakmont
Corporation, a privately held corporation which administers and manages
assets for several families and individuals.

Thomas E. Larkin, Jr.* (59) President and Director, Trust Company of the West; Vice Chairman and
Director Director, TCW Asset Management Company; Executive Vice President and
865 South Figueroa Street Director, The TCW Group, Inc.; Vice Chairman of the Adviser; Member
Los Angeles, California 90017 of the Board of Trustees of the University of Notre Dame; Director
of Orthopedic Hospital of Los Angeles; Senior Vice President, TCW
Convertible Securities Fund, Inc.

John C. Argue (67) Of Counsel, Argue Pearson Harbison & Myers (law firm); Director,
Director Avery Dennison Corporation (manufacturer of self-adhesive products
444 South Flower Street and office supplies), Apex Mortgage Capital, Inc. (real estate
Los Angeles, California 90071 investment trust); Nationwide Health Properties, Inc. (real estate
investment trust) and TCW Convertible Securities Fund, Inc.;
Advisory Director, LAACO Ltd. (owner and operator of private clubs
and real estate).

Norman Barker, Jr. (77) Former Chairman of the Board, First Interstate Bank of California
Director and former Vice Chairman of the Board, First Interstate Bancorp;
9601 Wilshire Blvd. Director, American Health Properties, Inc., Bank Plus Corp., ICN
Beverly Hills, CA 90210 Pharmaceuticals, Inc., TCW Convertible Securities Fund, Inc.

Richard W. Call (75) Former President, The Seaver Institute (a private foundation);
Director Director, TCW Convertible Securities Fund, Inc. and The Seaver
c/o Mayer, Brown & Platt Institute.
Counsel to the Independent Directors
1675 Broadway
New York, NY 10019

Matthew K. Fong (45) Since 1999 Mr. Fong has been Of Counsel to the Los Angeles based law
Director firm of Sheppard, Mullin, Richter & Hamilton. From 1995 to 1998,
333 South Hope Street Mr. Fong served as State Treasurer for the State of California.
Los Angeles, CA 90071 From 1991 to 1994, Mr. Fong was Vice Chairman of the California
State Board of Equalization, California's elected tax agency. Mr.
Fong is a director of ESS Technology, Inc. and American National
Title and serves as a Regent of Pepperdine University and the Los
Angeles Children's Hospital. Mr. Fong is also a Lt. Colonel in the
U.S. Air Force Reserves.

</TABLE>

- ----------------------
* Directors who are or may be deemed to be "interested persons" of the
Company as defined in the 1940 Act. Messrs. Stern Albe and Larkin are
officers of the Adviser.

<PAGE>

Compensation of Independent Directors

The Company pays each Independent Director an annual fee of $35,000 plus a per
meeting fee of $500 for meetings of the Board of Directors or Committees of the
Board of Directors attended by the Director prorated among the Funds. The
Company also reimburses such Directors for travel and other out-of-pocket
expenses incurred by them in connection with attending such meetings. Directors
and officers of the Company who are employed by the Adviser or an affiliated
company thereof receive no compensation nor expense reimbursement from the
Company.

The following table illustrates the compensation paid to the Company's
Independent Directors by the Company for the fiscal year ended October 31, 1999.

<PAGE>

Name of Independent Director Aggregate Compensation From the Company
- ---------------------------
John C. Argue $40,500
Norman Barker, Jr. $40,500
Richard W. Call $40,500
Matthew K. Fong $19,500

The following table illustrates the total compensation paid to Company's
Independent Directors for the calendar year ended December 31, 1999 by the TCW
Convertible Securities Fund, Inc. in the case of Messrs. Argue, Barker and Call,
as well as from the Company. TCW Convertible Securities Funds, Inc. is included
solely because the Company's Adviser, TCW Investment Management Company also
serves as its investment adviser.

For Service as Director
and Committee Member of Total Cash Compensation
the TCW Convertible from TCW Galileo Funds,
Name of Independent Securities Inc., and TCW Convertible
Director Fund, Inc. Securities Fund, Inc.
- ------------------- ----------------------- -------------------------
John C. Argue $11,250 $51,750
Norman Barker, Jr. $12,750 $53,250
Richard W. Call $12,750 $53,250

The officers of the Company who are not also directors of the Company are:
<TABLE>
<CAPTION>
<S> <C> <C>
Position(s) Held Principal Occupation(s)
Name and Address with Company During Past 5 Years(1)
---------------- ---------------- -----------------------

Michael E. Cahill (49)* Senior Vice Managing Director, General Counsel and Secretary,
President, the Adviser, The TCW Group, Inc., Trust Company of
General the West and TCW Asset Management Company; formerly
Counsel General Counsel and Senior Vice President
and Assistant of Act III Communications (media and entertainment
Secretary business).

Jeffrey Peterson (54)* Senior Vice President Managing Director, Trust Company of the West, TCW
Asset Management Company and the Adviser; President,
TCW Brokerage Services.

Philip K. Holl (50)* Secretary Senior Vice President and Associate General
Counsel, Trust Company of the West, TCW Asset
Management Company and the Adviser; Secretary to
TCW Convertible Securities Fund, Inc.

Peter C. DiBona (41) Treasurer Senior Vice President, Trust Company of the West,
TCW Asset Management Company and the Adviser.
</TABLE>
- ------------------------
(1) Positions with The TCW Group, Inc. and its affiliates may have changed over
time.

* Address is 865 South Figueroa Street, 18th Floor, Los Angeles, California
90017

In addition, Hilary G.D. Lord, Managing Director and Chief Compliance Officer of
Trust Company of the West, TCW Asset Management Company and the Adviser, is an
Assistant Secretary of the Company. The directors and officers of the Company
collectively own less than 1% of the outstanding shares of any Fund.

INVESTMENT ADVISORY AND SUB-ADVISORY AGREEMENTS

The Company and the Adviser are parties to an Investment Management and Advisory
Agreement ("Advisory Agreement"). The Adviser was organized in 1987 as a
wholly-owned subsidiary of The TCW Group, Inc. (formerly TCW Management
Company). Robert A. Day may be deemed to be a control person of the Adviser by
the virtue of the aggregate ownership of Mr. Day and his family of more than 25%
of the outstanding voting stock of The TCW Group, Inc. Under the Advisory
Agreement, the Company retains the Adviser to manage the investment of its
assets, to place orders for the purchase and sale of its portfolio securities,
to administer its day-to-day operations, and to be responsible for overall
management of the Company's business affairs subject to control by the Board of
Directors of the Company. The Adviser is responsible for obtaining and
evaluating economic, statistical, and financial data and for formulating and
implementing investment programs in furtherance of the Company's investment
objectives.

The Adviser has retained, at its sole expense, an affiliated company to act as
Sub-Adviser to certain of the Funds. TCW London International, Limited
(regulated by I.M.R.O.) is a Sub-Adviser to the Asia Pacific Equities, Emerging
Markets Equities, European Equities, Japanese Equities and International
Equities Funds. TCW London is a wholly-owned subsidiary of The TCW Group, Inc.
(the "Sub-Adviser"). The Sub-Adviser provides its respective Funds with
investment advice and portfolio management subject to the overall supervision of
the Adviser.

The Adviser furnishes to the Company office space at such places as are agreed
upon from time to time and all office facilities, business equipment, supplies,
utilities and telephone service necessary for managing the affairs and
investments and arranges for officers or employees of the Adviser to serve,
without compensation from the Company, as officers, directors or employees of
the Company if desired and reasonably required by the Company.

The fee allocable to each Fund is calculated daily by applying the annual
management fee percent for the Fund to the Fund's net asset value. The fee is
payable for each calendar month as soon as practicable after the end of that
month. In addition, prior to fiscal year ended October 31, 1998, each Bond and
Equity Fund and Emerging Markets Income reimbursed the Adviser for the costs of
providing accounting services to the Fund, including maintaining the Fund's
financial books and records, calculating its daily net asset value, and
preparing its financial statements, in an amount not exceeding $35,000 for the
applicable fiscal year (subject to any expense limit described below). Money
Market also reimbursed the Adviser for the Fund's accounting services, but in an
amount not exceeding 0.10% of the Fund's average daily net assets. The total
amounts paid, exclusive of any expense reimbursement by the Adviser and payment
of any accounting fees by the Funds, for the fiscal years ended October 31, 1997
and 1998 were: Money Market - $592,000 and $678,000; Core Fixed Income - $77,000
and $229,000; High Yield Bond - $1,612,000 and $1,530,000; Mortgage-Backed
Securities - $265,000 and $250,000; Total Return Mortgage-Backed Securities -
$512,000 and $439,000; Aggressive Growth Equities - $1,090,000 and $1,002,000;
Earnings Momentum - $828,000 and $594,000; Select Equities - $1,628,000 and
$1,150,000; Small Cap Growth - $1,290,000 and $1,313,000; Asia Pacific Equities
- - $457,000 and $112,000; Emerging Markets Equities - $623,000 and $327,000; and
Latin America Equities - $754,000 and $313,000. During the fiscal period January
2, 1997 to October 31, 1997 and fiscal year ended October 31, 1998, Convertible
Securities paid $198,000 and $237,000, respectively, in advisory fees. During
the fiscal period November 3, 1997 to October 31, 1998 Value Opportunities paid
$274,000 in advisory fees, European Equities paid $412,000 in advisory fees and
Japanese Equities paid $116,000 in advisory fees. During the fiscal period June
3, 1998 to October 31, 1998, Large Cap Growth paid $17,000 in advisory fees,
Large Cap Value paid $19,000 in advisory fees and Emerging Markets Income paid
$71,000 in advisory fees.

For the fiscal year ended October 31, 1999, the total amounts paid in advisory
fees, exclusive of any expense reimbursement by the Adviser, were: Money Market
- - $541,000; Core Fixed Income - $307,000; High Yield Bond - $1,553,000;
Mortgage-Backed Securities - $232,000; Total Return Mortgage-Backed Securities -
$470,000; Aggressive Growth Equities - $1,384,000; Aggressive Growth Equities -
$1,384,000; Convertible Securities - $330,000; Earnings Momentum - $280,000;
Large Cap Growth - $97,000; Large Cap Value - $330,000; Select Equities -
$1,824,000; Small Cap Growth - $1,706,000; Value Opportunities - $235,000; Asia
Pacific Equities - $143,000; Emerging Markets Equities - $212,000; Emerging
Markets Income - $464,000; European Equities - $593,000; Japanese Equities -
$371,000; and Latin America Equities - $70,000.

Except for expenses specifically assumed by the Adviser under the Advisory
Agreement, each Fund bears all expenses incurred in its operations. Fund
expenses include the fee of the Adviser; compensation and expenses of directors
of the Company who are not officers or employees of the Adviser; registration,
filing and other fees in connection with filings with regulatory authorities;
fees and expenses of independent accountants; the expenses of printing and
mailing proxy statements and shareholder reports; custodian and transfer and
dividend disbursing agent charges; brokerage fees and commissions and securities
transaction costs; taxes and corporate fees; legal fees; the fees of any trade
association; the cost of stock certificates, if any, representing shares of the
Fund; the organizational and offering expenses, whether or not advanced by the
Adviser; expenses of shareholder and director meetings; premiums for the
fidelity bond and any errors and omissions insurance; interest and taxes; and
any other ordinary or extraordinary expenses incurred in the course of the
Fund's business.

For the fiscal year ended October 31, 1999, the expenses (annualized) paid by
the Funds' Class I, as a percentage of their average daily net assets, were:
Money Market - 0.38%, Core Fixed Income - 0.58% (after expense reimbursement);
High Yield Bond - 0.90%; Mortgage-Backed Securities - 0.75% (after expense
reimbursement); Total Return Mortgage-Backed Securities - 0.69%; Aggressive
Growth Equities - 1.14%; Convertible Securities - 1.03%; Earnings Momentum -
1.46%; Large Cap Growth - 1.30%; Large Cap Value - 0.79%; Select Equities -
0.88%; Small Cap Growth - 1.14%; Value Opportunities - 1.18%; Asia Pacific
Equities - 2.03% (after expense reimbursement); Emerging Markets Equities -
2.02% (after expense reimbursement); Emerging Markets Income - 1.01%; European
Equities - 1.01%; International Equities - 0.18%; Japanese Equities - 1.04%; and
Latin America Equities - 2.20% (after expense reimbursement).

For the fiscal period March 1, 1999, to October 31, 1999, the expenses
(annualized) paid by the Funds Class N, as a percentage of their average daily
net assets (after expense reimbursement), were: Core Fixed Income - 1.00%; High
Yield Bond - 1.30%; Total Return Mortgage-Backed Securities - 1.02%; Aggressive
Growth Equities - 1.47%; Large Cap Growth - 1.46%; Large Cap Value - 1.46%;
Select Equities - 1.46%; Small Cap Growth - 1.53%; and European Equities -
1.69%.

The Advisory Agreement also provides that each Fund (except for Money Market)
will reimburse the Adviser for the Fund's organizational expenses. Such
organizational expenses will be amortized by each Fund over five years.

The Advisory Agreement was approved by each Fund's shareholders on February 10,
1999, and will continue in effect as to each Fund initially for two years and
thereafter from year to year if such continuance is specifically approved at
least annually by (a) the Board of Directors of the Company or by the vote of a
majority of the outstanding voting securities of the Fund, and (b) vote of a
majority of the directors who are not "interested persons" of the Company or the
Adviser (the Independent Directors), cast in person at a meeting called for the
purpose of voting on such approval. The Advisory Agreement may be terminated
without penalty at any time on 60 days' written notice, by vote of a majority of
the Board of Directors of the Company or by vote of a majority of the
outstanding voting securities of the Fund. The Advisory Agreement terminates
automatically in the event of assignment.

The Company has acknowledged that the name "TCW" is owned by The TCW Group, Inc.
(formerly, TCW Management Company) ("TCW"), the parent of the Adviser. The
Company has agreed to change its name and the name of the Funds at the request
of TCW if any advisory agreement into which TCW or any of its affiliates and the
Company may enter is terminated.

The Advisory Agreement and Sub-Advisory Agreements also provides that the
Adviser and Sub-Advisers shall not be liable to the Company for any actions or
omissions if it acted in good faith without gross negligence, willful
misfeasance, bad faith, or from reckless disregard of their duties.

DISTRIBUTION OF COMPANY SHARES

TCW Brokerage Services ("Distributor") serves as the nonexclusive distributor of
each class of the Company's shares pursuant to an Amended and Restated
Distribution Agreement ("Distribution Agreement") with the Company which is
subject to approval by the Board. The Distribution Agreement is terminable
without penalty, on not less than 60 days' notice, by the Company's Board of
Directors, by vote of holders of a majority of the Company's shares, or by the
Distributor.

The Company offers two classes of shares: Institutional Class I shares and Class
N shares. Shares of the Institutional Class are offered primarily for direct
investment by investors such as pension and profit sharing plans, employee
benefit trusts, endowment, foundations, corporations and high net individuals.
Class N shares are offered through firms which are members of the National
Association of Securities Dealers, Inc. ("NASD"), and which have dealer
agreements with the Distributor and other financial intermediaries.

The Company has adopted a Plan Pursuant to Rule 18f-3 under the 1940 Act (" Rule
18f-3 Plan"). Under the Rule 18f-3 Plan, shares of each class of each Fund
represent an equal pro rata interest in such Fund and, generally, have identical
voting, dividend, liquidation, and other rights, preferences, powers,
restrictions, limitations, qualifications and terms and conditions, except that:
(a) each class has a different designation; (b) each class of shares bears any
class-specific expenses allocated to it; and (c) each class has exclusive voting
rights on any matter submitted to shareholders that relates solely to its
distribution or service arrangements, and each class has separate voting rights
on any matter submitted to shareholders in which the interests of one class
differ from the interests of any other class. In addition, each class may have a
differing sales charge structure, and differing exchange and conversion
features.

The Company also has adopted a distribution plan pursuant to Rule 12b-1 under
the 1940 Act ("Distribution Plan") with respect to the Class N shares of each
Fund. Under the terms of the Distribution Plan, each Fund compensates the
Distributor at a rate equal to 0.25% of the average daily net assets of the Fund
attributable to its Class N shares for distribution and related services. The
Distributor may pay any or all of the fee payable to it for distribution and
related services to the firms that are members of the NASD, subject to
compliance by the firms with the terms of the dealer agreement between the firm
and the Distributor. Under the terms of the Distribution Plan, services which a
firm will provide may include, but are not limited to, the following functions:
providing facilities to answer questions from prospective investors about a
Fund; receiving and answering correspondence, including requests for
prospectuses and statements of additional information; preparing, printing and
delivering prospectuses and shareholder reports to prospective shareholders;
complying with federal and state securities laws pertaining to the sale of Class
N shares; and assisting investors in completing application forms and selecting
dividend and other account options.

For the fiscal period March 1, 1999, to October 31, 1999, the Funds' Class N
made the following payments pursuant to the Distribution Plan: Core Fixed Income
- - $88; High Yield Bond - $252; Total Return Mortgage-Backed Securities- $17;
Aggressive Growth Equities - $2,143; Large Cap Growth - $31; Large Cap Value -
$73; Select Equities - $7,658; Small Cap Growth - $347; and European Equities -
$224.

The Distribution Plan provides that it may not be amended to materially increase
the costs which Class N shareholders may bear under the Plan without the
approval of a majority of the outstanding voting securities of Class N, and by
vote of a majority of both (i) the Board of Directors of the Company, and (ii)
those Directors of the Company who are not "interested persons" of the Company
(as defined in the 1940 Act) and who have no direct or indirect financial
interest in the operation of the Plan or any agreements related to it cast in
person at a meeting called for the purpose of voting on the Plan and any related
amendments.

The Distribution Plan was approved by the Company's Board of Directors on
December 17, 1998 and provides that it shall continue in effect so long as such
continuance is specifically approved at least annually by the by a vote of a
majority of both (i) the Board of Directors of the Company, and (ii) those
Directors of the Company who are not "interested persons" of the Company (as
defined in the 1940 Act) and who have no direct or indirect financial interest
in the operation of the Plan or any agreements related to it cast in person at a
meeting called for the purpose of voting on the Plan and any related amendments.

CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES

As of January 31, 2000, the following owned 5% or more of the outstanding shares
of Class I of the following Funds:

Aggressive Growth Equities -- Tifkat, L.P. (8.88%) and Wachovia Bank of NC TTEE
Freedom Communications Inc. (6.04%); Convertible Securities -- BNY Western Trust
Company Cust. TCW Profit Sharing Trust (5.51%), Buck Foundation (7.91%), Daniel
J. Donohue Living Trust (7.91%), Kings College (9.06%), Maine State Retirement
System (10.35%), Seaver Institute (5.65%), City of Tallahassee (6.02%),
Transition Zone Horticultural Institute Inc. (5.22%) and Yasuda Fire & Marine
Insurance Company of America (8.91%); Earnings Momentum -- State Street Bank
TTEE Goldman Sachs Pension Plan (91.17%); Large Cap Growth -- Carpenters Health
& Welfare Trust for Southern California (39.16%), G.W. and E.G. Mead Foundation
(25.30%), Rosenblatt Family Trust (6.55%) and TCW Capital Investment Corporation
(8.31%); Large Cap Value -- Mac & Co. Mutual Fund Operations (15.20%) and Salk
Institute (39.14%); Select Equities -- Egleston Children's Hospital (6.93%),
Salk Institute (5.36%) and Charles Schwab & Co. Inc. Reinvestment Account
(8.76%); Small Cap Growth -- Mac & Co. Mutual Fund Operations (11.09%) and The
University of Tennessee (8.18%); Value Opportunities -- BNY Western Trust
Company Cust. TCW Profit Sharing Plan (5.43%), G. Fulton Collins III (9.25%),
Harold R. Frank Trust (6.00%), Henry Kravis TTEE Raymond & Bessie Kravis
Foundation (5.63%), G.W. and E.G. Mead Foundation (6.41%), Norred 1987 Trust
(5.96%), Edward D. Robson Trust (7.88%) and Tifkat, L.P. (21.38%); Money Market
- -- BNY Western Trust Company Cust. TCW Profit Sharing Trust (5.62%), Saxon and
Co. (32.82%) and TCW Capital Investment Corporation (11.12%); Core Fixed Income
- -- Bank of America Cust. Hilton Charitable Remainder Trust (28.84%),
Cedars-Sinai Medical Center (10.34%), The Christ Child Society (5.63%), Joseph
B. Gould Foundation (7.58%), G.W. and E.G. Mead Foundation (8.16%) and Saint
Johns Health Center Foundation (9.87%); High Yield Bond -- Collins Investments
Inc. (5.84%), Maine State Retirement System (23.84%) and City of Tallahassee
(10.47%); Mortgage-Backed Securities -- Mac & Co. Mutual Funds Operations
(72.45%), The College Fund/UNCF Endowed Scholarship Fund (9.22%) and United
Negro College Fund (5.49%); Total Return Mortgage-Backed Securities -- Bost &
Co. Mutual Funds Operations (22.17%), Cedars Sinai Medical Center Defined
Benefit Pension Plan (6.13%), Mac & Co. Mutual Funds Operations (33.91%) and St.
Vincents Medical Center Foundation (16.49%); Asia Pacific Equities -- Steven
Heller (12.20%), Sobrato Development Company (63.38%) and TCW Galileo
International Equities Fund (8.99%); Emerging Markets Equities -- Bankers Trust
Company TTEE Cravath Swaine & Moore Retirement Plan (5.97%), Bank of America
Cust. Hilton Charitable Remainder Trust (20.34%), City of Bay City Police & Fire
Retirement System (5.92%), Chase Manhattan Bank Cust. Via Health Pension Plan
(8.08%), Fleet National Bank Cust. University of Massachusetts (7.69%), Salk
Institute (10.60%), City of Southfield Fire and Police Retirement System (9.89%)
and Worcester Polytechnic Institute (12.02%); Emerging Markets Income -- Bank of
America Cust. Hilton Charitable Remainder Trust (13.42%), Claremont McKenna
College (20.10%), Kresge Foundation (5.91%), Maine State Retirement System
(29.18%), University of Pittsburgh (9.33%) and City of Tallahassee (13.23%);
European Equities -- Northern Trust Co. Cust. Modern Woodmen of America
(15.60%), Salk Institute (5.93%) and TCW Galileo International Equities Fund
(57.95%); International Equities -- Barlow Group (7.95%), First Insurance
Company of Hawaii (32.56%), Institute of the Americas (6.34%), Northern Trust
Co. Cust. Kathleen McCarthy (13.88%) and Salk Institute (32.09%); Japanese
Equities -- Bank of America Cust. Hilton Charitable Reminder Trust (41.67%),
Ralph C. Stayer (9.67%), TCW Galileo International Equities Fund (25.92%) and
Tifkat, L.P. (12.88%); and Latin America Equities -- John Estrada MD Pension
Plan Trust (5.34%), Gibson Company Profit Sharing Plan (9.84%), Carla Hills
(10.10%), Henry Kravis TTEE Raymond & Bessie Kravis Foundation (21.86%), Charles
Schwab & Co. Inc. Reinvestment Account (6.22%), TCW Galileo International
Equities Fund (16.24%) and Consuelo Zobel Alger Foundation (8.87%). All
communications to these shareholders can be addressed to TCW Investment
Management Company, 865 South Figueroa Street, 18th Floor, Los Angeles,
California 90017, Attention: Investor Relations Department.

As of January 31, 2000, the following owned 5% or more of the outstanding shares
of Class N of the following Funds: Aggressive Growth Equities -- National
Financial Services Corp FBO Customers, 200 Liberty Street, New York, New York
10281 (18.33%) and Charles Schwab & Co. Reinvestment Account, 101 Montgomery
Street, San Francisco, California 94104 (55.98%); Large Cap Growth -- Martin and
Muriel Jacob, 549 Charles Ave., Kingston, Pennsylvania 18704 (5.62%), D. Jane
Rush, P.O. Box 573, Spicewood, Texas 78669 (10.57%), Charles Schwab & Co. Inc.
Reinvestment Account, 101 Montgomery Street, San Francisco, California 94104
(26.17%), Tucker Anthony Inc., 35306 Pabst Road, Oconomowoc Wisconsin 53066
(30.77%), Jeffrey Kelley IRA, 44630 Albert Drive, Plymouth, Michigan 48170
(10.74%) and John McGrath IRA, 15575 Falcon Ridge Court, Colorado Springs,
Colorado 80921 (10.16%); Large Cap Value -- Douglas and Lynn Allen, 1240 Lorain
Road, San Marino, California 91108 (13.93%) and Charles Schwab & Co. Inc.
Reinvestment Account, 101 Montgomery Street, San Francisco, California 94104
(82.96%); Select Equities -- Resources Trust Company FBO Customers, P.O. Box
3865, Englewood, Colorado 80155 (17.10%) and Charles Schwab & Co. Inc.
Reinvestment Account, 101 Montgomery Street, San Francisco, California 94104
(65.05%); Small Cap Growth -- National Financial Services Corp. FBO Customers,
200 Liberty Street, New York, New York 10281 (11.76%), Resources Trust Company
FBO Customers, P.O. Box 3865 Englewood, Colorado 80155 (18.99%), Charles Schwab
& Co., Inc. Reinvestment Account, 101 Montgomery Street, San Francisco,
California 94104 (42.15%) and Sterling Trust Company FBO Shook National Corp.
Retirement Plan, 1380 Lawrence Street, Denver, Colorado 80204 (5.16%); Core
Fixed Income -- Laurence and Esperanza Mahan, 50 W. Portal Avenue, San
Francisco, California 94127 (10.80%) and Charles Schwab & Co. Inc. Reinvestment
Account, 101 Montgomery Street, San Francisco, California 94014 (89.19%); High
Yield Bond -- Charles Schwab & Co. Inc. Reinvestment Account 101 Montgomery
Street, San Francisco, California 94104 (99.24%); Total Return Mortgage-Backed
Securities -- Robert Horst, 12 Oaktree Lane, Williamsport, Maryland 21795
(27.94%) and Charles Schwab & Co. Inc. Reinvestment Account, 101 Montgomery
Street, San Francisco, California 94104 (72.03%); and European Equities -- Helen
Kilpatrick, 11 Chester Street, London, United Kingdom and Charles Schwab & Co.
Inc. 101 Montgomery Street, San Francisco, California 94104 (17.21%).

ADMINISTRATION AGREEMENT

Investors Bank & Trust Company ("Administrator") serves as the administrator of
the Company pursuant to an Administration Agreement. Under the Administration
Agreement, the Administrator will provide certain administrative services to the
Company, including: fund accounting; calculation of the daily net asset value of
each Fund; monitoring the Company's expense accruals; calculating monthly total
return and yield figures; prospectus and statement of additional information
compliance monitoring; preparing certain financial statements of the Company;
and preparing the Company's Form N-SAR.

CODE OF ETHICS

The Adviser is subject to the Code of Ethics with respect to investment
transactions in which the Adviser's officers, directors and certain other
persons have a beneficial interest to avoid any actual or potential conflict or
abuse of their fiduciary position. The Code of Ethics contains several
restrictions and procedures designed to eliminate conflicts of interest
including: (a) pre-clearance of non-exempt personal investment transactions; (b)
quarterly reporting of personal securities transactions; (c) a prohibition
against personally acquiring securities in an initial public offering, entering
into uncovered short sales and writing uncovered options; (d) a seven day "black
out period" prior or subsequent to a Fund transaction during which portfolio
managers are prohibited from making certain transactions in securities which are
being purchased or sold by a client of such manager; (e) a prohibition, with
respect to certain investment personnel, from profiting in the purchase and
sale, or sale and purchase, of the same (or equivalent) securities within 60
calendar days; and (f) a prohibition against acquiring any security which is
subject to firm wide or, if applicable, a department restriction of the Adviser.
The Code of Ethics provides that exemptive relief may be given from certain of
its requirements, upon application.

DETERMINATION OF NET ASSET VALUE

As discussed in the Prospectus, the Company will not calculate the net asset
value of the Funds on certain holidays, weekends and when there is no activity
in a Fund's shares. On those days, securities held by a Fund may nevertheless be
actively traded, and the value of the Fund's shares could be significantly
affected.

A Fund determines its net asset value per share by subtracting its liabilities
(including accrued expenses and dividends payable) from its total assets (the
market value of the securities the Fund holds plus cash and other assets,
including income accrued but not yet received) and dividing the result by the
total number of shares outstanding.

HOW TO BUY AND REDEEM SHARES

Shares in a Fund may be purchased and redeemed in the manner described in the
Prospectus and in this Statement of Additional Information.

Computation of Public Offering Prices

The Funds offer their shares to the public on a continuous basis. The public
offering price per share of each Fund is equal to its net asset value per share
next computed after receipt of a purchase order. See "Determination of Net Asset
Value", above.

Distributions in Kind

If the Board of Directors determines that it would be detrimental to the best
interests of the remaining shareholders of a Fund to make a redemption payment
wholly in cash, the Fund may pay, in accordance with SEC rules, any portion of a
redemption in excess of the lesser of $250,000 or 1% of the Fund's net assets by
distribution in kind of portfolio securities in lieu of cash. Shareholders
receiving distributions in kind may incur brokerage commissions or other costs
when subsequently disposing of shares of those securities.

HOW TO EXCHANGE SHARES

A shareholder may exchange all or part of its shares of one Fund for shares of
another Fund (subject to receipt of any required state securities law clearances
with respect to certain Funds in the shareholder's state of residence). An
exchange of shares is treated for federal income tax purposes as a redemption
(sale) of shares given in exchange by the shareholder, and an exchanging
shareholder may, therefore, realize a taxable gain or loss in connection with
the exchange. See "Distributions and Taxes" below.

The exchange privilege enables a shareholder to acquire shares in a Fund with
different investment objectives or policies when the shareholder believes that a
shift between Funds is an appropriate investment decision.

Upon receipt of proper instructions and all necessary supporting documents,
shares submitted for exchange are redeemed at the then-current net asset value
and the proceeds are immediately invested, at a price as described above, in
shares of the Fund being acquired. The Company reserves the right to reject any
exchange request.

As described in the Prospectus, the exchange privilege may be terminated or
revised by the Company.

PURCHASES-IN-KIND

The Funds may, at the sole discretion of the Adviser, accept securities in
exchange for shares of a Fund. Securities which may be accepted in exchange for
shares of any Fund must: (1) meet the investment objectives and policies of the
Fund; (2) be acquired for investment and not for resale; (3) be liquid
securities which are not restricted as to transfer either by law or liquidity of
market (determined by reference to liquidity policies established by the Board
of Directors); and (4) have a value which is readily ascertainable as evidenced
by, for example, a listing on a recognized stock exchange.

DISTRIBUTIONS AND TAXES

Each of the Funds intends to qualify as a "regulated investment company" under
the Internal Revenue Code of 1986, as amended (the "Internal Revenue Code"). A
Fund that is a regulated investment company and distributes to its shareholders
at least 90% of its taxable net investment income (including, for this purpose,
its net realized short-term capital gains) and 90% of its tax-exempt interest
income (reduced by certain expenses), will not be liable for federal income
taxes to the extent its taxable net investment income and its net realized
long-term and short-term capital gains, if any, are distributed to its
shareholders. However, a Fund will be taxed on that portion of taxable net
investment income and long-term and short-term capital gains that it retains.
Furthermore, a Fund will be subject to United States corporate income tax (and
possibly state or local income or franchise tax) with respect to such
distributed amounts in any year that it fails to qualify as a regulated
investment company or fails to meet the 90% distribution requirement.

To qualify as a regulated investment company, in addition to the 90%
distribution requirement described above, a Fund must: (a) derive at least 90%
of its gross income from dividends, interest, certain payments with respect to
securities loans and gains from the sale or other disposition of stock or
securities or foreign currencies or other income (including but not limited to
gains from options, futures or forward contracts) derived with respect to its
business in investing in such stock, securities or currencies, and (b) diversify
its holdings so that at the end of each fiscal quarter, (i) at least 50% of the
value of the Fund's assets is represented by cash items, U.S. Government
Securities and other securities, limited in respect of any one issuer, to an
amount not greater than 5% of the Fund's total assets and 10% of the outstanding
voting securities of such issuer, and (ii) not more than 25% of the value of its
total assets is invested in the securities of any one issuer (other than U.S.
Government Securities) or in the securities of two or more issuers (other than
U.S. Government Securities) which the Fund controls (i.e., holds at least 20% of
the combined voting power) and which are engaged in the same or similar trades
or businesses or related trades or businesses.

With respect to the Equity Funds that invest in foreign currency or forward
foreign exchange contracts, Core Fixed Income and Emerging Markets Income, gains
from such foreign currency and forward foreign exchange contracts relating to
investments in stocks, securities or foreign currencies are considered to be
qualifying income for purposes of the 90% gross income test described in clause
(a) above, provided such gains are directly related to the Fund's principal
business of investing in stock or securities. It is currently unclear, however,
who will be treated as the issuer of certain foreign currency instruments or how
foreign currency contracts will be valued for purposes of the asset
diversification requirements applicable to the Fund described in clause (c)
above. Until such time as these uncertainties are resolved, each Fund will
utilize the more conservative, or limited, definition or approach with respect
to determining permissible investments in its portfolio.

Investments in foreign currencies, forward contracts, options, futures contracts
and options thereon may subject a Fund to special provisions of the Internal
Revenue Code that may affect the character of gains and losses realized by the
Fund (i.e., may affect whether gains or losses are ordinary or capital), may
accelerate recognition of income to a Fund, and may defer Fund losses. These
rules also (a) could require a Fund to mark-to-market certain types of the
positions in its portfolio (i.e., treat them as if they had been closed out in a
fully taxable transaction) and (b) may cause the Fund to recognize income
without receiving cash with which to pay dividends or make distributions in
amounts necessary to satisfy the distribution requirements for avoiding income
and excise taxes.

As a general rule, a Fund's gain or loss on a sale or exchange of an investment
will be a long-term capital gain or loss if the Fund has held the investment for
more than one year and will be a short-term capital gain or loss if it has held
the investment for one year or less. Furthermore, as a general rule, a
shareholder's gain or loss on a sale or redemption of Fund shares will be a
long-term capital gain or loss if the shareholder has held his or her Fund
shares for more than one year and will be a short-term capital gain or loss if
he or she has held his or her Fund shares for one year or less. For federal,
state and local income tax purposes, an exchange by a shareholder of shares in
one Fund or securities for shares in a Fund will be treated as a taxable sale
for a purchase price equal to the fair market value of the shares received.

Any loss realized on the disposition by a shareholder of its shares in a Fund
will be disallowed to the extent the shares disposed of are replaced with other
Fund shares, including replacement through the reinvesting of dividends and
capital gains distributions in the Fund, within a period (of 61 days) beginning
30 days before and ending 30 days after the disposition of the shares. In such a
case, the basis of the shares acquired will be increased to reflect the
disallowed loss. Any loss realized by a shareholder on the sale of a Fund share
held by the shareholder for six months or less will be treated as a long-term
capital loss to the extent of any distributions of capital gain dividends (as
defined below) received by the shareholder with respect to such share.

While only the Equity Funds expect to realize a significant amount of net
long-term capital gains, any such realized gains will be distributed as
described in the Prospectus. See "Dividends, Distributions and Taxes" in the
Prospectus. Such distributions ("capital gain dividends"), if any, will be
taxable to shareholders as long-term capital gains, regardless of how long a
shareholder has held Fund shares, and will be designated as capital gain
dividends in a written notice mailed to the shareholder after the close of the
Fund's prior taxable year. A Fund may be subject to taxes in foreign countries
in which each invests. If such a Fund invests in an entity which is classified
as a "passive foreign investment company" ("PFIC") for U.S. tax purposes, the
application of certain technical tax provisions applying to such companies could
result in the imposition of federal income tax with respect to such investments
at the Fund level which could not be eliminated by distributions to the
shareholders of the Fund. It is not anticipated that any taxes at the Fund level
with respect to investments in PFICs will be significant.

In computing its net taxable (and distributable) income and/or gains, a Fund may
choose to take a dividend paid deduction for a portion of the proceeds paid to
redeeming shareholders. This method (sometimes referred to as "equalization")
would permit the Fund to avoid distributing to continuing shareholders taxable
dividends representing earnings included in the net asset value of shares
redeemed. Using this method will not affect the Fund's total return. Since there
are some unresolved technical tax issues relating to use of equalization by a
fund, there can be no assurance that the Internal Revenue Service will agree
with the Fund's methodology and/or calculations which could possibly result in
the imposition of tax, interest or penalties on the Fund. It should also be
noted that a recent proposal submitted to Congress as part of President
Clinton's proposed Budget would (if enacted) limit the use of equalization for
taxable years beginning after the date of enactment.

Under the Internal Revenue Code, a nondeductible excise tax of 4% is imposed on
a Fund to the extent the Fund does not distribute by the end of any calendar
year at least 98% of its ordinary income for that calendar year and at least 98%
of the net amount of its capital gains (both long-term and short-term) for the
one-year period ending on October 31 of such calendar year (or December 31 if
the Fund so elects), plus any undistributed amounts of taxable income for prior
years. For this purpose, however, any income or gain retained by the Fund that
is subject to corporate income tax will be considered to have been distributed
by year-end. Each Fund intends to meet these distribution requirements to avoid
the excise tax liability.

Dividends generally are taxable to shareholders at the time they are paid.
However, dividends declared in October, November and December and made to
shareholders of record in such a month are treated as paid and are taxable as of
December 31, provided that the Fund pays the dividend during January of the
following year.

If a shareholder fails to furnish a correct taxpayer identification number,
fails to report fully dividend or interest income, or fails to certify that it
has provided a correct taxpayer identification number and that it is not subject
to "backup withholding," then the shareholder may be subject to a 31% "backup
withholding" tax with respect to: (a) taxable dividends and distributions, and,
(b) the proceeds of any redemptions of Fund shares. An individual's taxpayer
identification number is his social security number. The 31% "backup
withholding" tax is not an additional tax and may be credited against a
taxpayer's regular federal income tax liability.

Dividends to shareholders who are non-resident aliens may be subject to a 30%
United States withholding tax under provisions of the Code applicable to foreign
individuals and entities unless a reduced rate of withholding or a withholding
exemption is provided under applicable treaty law. Non-resident shareholders
should consult their own tax advisers.

The foregoing is a general and abbreviated summary of the applicable provisions
of the Internal Revenue Code and Treasury Regulations presently in effect. For
the complete provisions, reference should be made to the pertinent Internal
Revenue Code sections and the Treasury Regulations promulgated thereunder. The
Internal Revenue Code and these Regulations are subject to change by legislative
or administrative action.

Each shareholder will receive annual information from its Fund regarding the tax
status of Fund distributions. Shareholders are urged to consult their attorneys
or tax advisers with respect to the applicability of federal, state, local,
estate and gift taxes and non-U.S. taxes to their investment in the Fund.

INVESTMENT RESULTS

From time to time, the Company may quote the performance of a Fund in terms of
yield, actual distributions, total return or capital appreciation in reports or
other communications to shareholders or in other published material.

The Bond Funds may quote a 30-day yield figures which is calculated according to
a formula prescribed by the SEC. The formula can be expressed as follows:

YIELD = 2[(a-b) + 1)6 - 1]
---
cd

Where:

a = dividends and interest earned during the period.

b = expenses accrued for the period (net of reimbursement).

c = the average daily number of shares outstanding during the
period that were entitled to receive dividends.

d = the maximum offering price per share on the last day of the
period.

For the purpose of determining the interest earned (variable "a" in the formula)
on debt obligations that were purchased by one of the Bond Funds at a discount
or premium, the formula generally calls for amortization of the discount or
premium; the amortization schedule will be adjusted monthly to reflect changes
in the market values of the debt obligations.

The yield of Money Market is its net income expressed in annualized terms. The
SEC requires by rule that a yield quotation set forth in an advertisement for a
"money market" fund be computed by a standardized method based on a historical
seven calendar day period. The standardized yield is computed by determining the
net change (exclusive of realized gains and losses and unrealized appreciation
and depreciation) in the value of a hypothetical pre-existing account having a
balance of one share at the beginning of the period, dividing the net change in
account value by the value of the account at the beginning of the base period
return by 365/7. The determination of net change in account value reflects the
value of additional shares purchased with dividends from the original share,
dividends declared on both the original share and such additional shares, and
all fees that are charged to all shareholder accounts, in proportion to the
length of the base period and the Fund's average account size. Money Market may
also calculate its effective yield by compounding the unannualized base period
return (calculated as described above) by adding 1 to the base period return,
raising the sum to a power equal to 365 divided by 7, and subtracting one.

The yield quoted at any time represents the amount being earned on a current
basis for the indicated period and is a function of the types of instruments in
Money Market, their quality and length of maturity, and the Fund's operating
expenses. The length of maturity for the Fund is the average dollar weighted
maturity of the Fund. This means that the Fund has an average maturity of a
stated number of days for all of its issues. The calculation is weighted by the
relative value of the investment.

Each Bond Fund's and Equity Fund's total return may be calculated on an "average
annual total return" basis, and may also be calculated on an "aggregate total
return" basis, for various periods. Average annual total return reflects the
average annual percentage change in the value of an investment in a Fund over
the particular measuring period. Aggregate total return reflects the cumulative
percentage change in value over the measuring period. Average annual total
return figures provided for the Bond Funds and Equity Funds will be computed
according to a formula prescribed by the SEC. The formula for an average annual
total return can be expressed as follows:

P(1+T)n `ERV

Where:

P = hypothetical initial payment of $1,000

T = average annual total return

n = number of years

ERV Ending Redeemable Value of a hypothetical $1,000 payment made
at the beginning of the 1, 5 or 10 year (or other) periods or
the life of the Fund

The formula for calculating aggregate total return can be expressed as follows:

Aggregate Total Return [( ERV ) - 1 ]
---
P

The calculation of average annual total return and aggregate total return
assumes reinvestment of all income dividends and capital gain distributions on
the reinvestment dates during the period and includes all recurring fees charged
to all shareholder accounts.

The ERV assumes complete redemption of the hypothetical investment at the end of
the measuring period and reflects deduction of all nonrecurring charges at the
end of the measuring period covered by the computation. A Fund's net investment
income changes in response to fluctuations in interest rates and the expenses of
the Fund.

A Fund's performance will vary from time to time depending upon market
conditions, the composition of its portfolio and its operating expenses.
Consequently, any given performance quotation should not be considered
representative of the Fund's performance for any specified period in the future.
In addition, because performance will fluctuate, it may not provide a basis for
comparing an investment in a Fund with certain bank deposits or other
investments that pay a fixed yield or return for a stated period of time.

Investors should recognize that, because the Bond Funds will have a high
component of fixed-income securities, in periods of declining interest rates the
yields of the Bond Funds will tend to be somewhat higher than prevailing market
rates, and in periods of rising interest rates yields will tend to be somewhat
lower. In addition, when interest rates are falling, the inflow of net new money
to the Bond Funds from the continuous sale of shares will likely be invested in
portfolio instruments producing lower yields than the balance of the Bond Funds'
securities, thereby reducing the current yields of the Bond Funds. In periods of
rising interest rates, the opposite can be expected to occur.

Comparative performance information may be used from time to time in publishing
information about the Company's shares, including data from Lipper Analytical
Services, Inc., CDA Technologies, Inc., or similar independent services which
monitor the performance of mutual funds or with other appropriate indexes of
investment securities. The performance information may also include evaluations
of the Funds published by nationally recognized ranking services and by
financial publications that are nationally recognized, such as Business Week,
Forbes, Fortune, Institutional Investor, Money and The Wall Street Journal. A
Fund may compare its performance to other investments or relevant indexes
including, but not limited to, the following: High Yield Bond -- First Boston
High Yield Index, Salomon Brothers High Yield Cash Pay Index and Lehman Brothers
Government/Corporate Bond Index; High Yield Bond and Core Fixed Income -- Lehman
Brothers Aggregate Bond Index; Core Fixed Income and Total Return
Mortgage-Backed Securities -- Salomon Brothers Broad Investment Grade Index;
Total Return Mortgage-Backed Securities -- Lehman Brothers Mortgage-Backed
Securities Index; Mortgage-Backed Securities -- Salomon Brothers Three Month
Treasury Bill Benchmark and Salomon Brothers One Year U.S. Treasury Bill Index;
Convertible Securities -- First Boston Convertible Index, NASDAQ Composite and
Standard & Poor's 500 w/income; Select Equities -- Standard & Poor's 500; Large
Cap Growth -- S&P/BARRA Growth Index; Large Cap Value -- S&P/BARRA Value Index;
Small Cap Growth - National Association of Securities Dealers Automated
Quotations System, Lipper Small Company Gross Average and Russell 2000; Small
Cap Value -- Value Line Index and Russell 2000; Earnings Momentum -- Standard &
Poor's 500, Standard & Poor's Midcap 400, and the Russell 2000; Aggressive
Growth Equities -- Standard & Poor's Midcap 400, Russell Midcap Index, and the
Wilshire Midcap Index; Asia Pacific Equities -Morgan Stanley Combined Far East
ex Japan Index; Emerging Markets Equities - International Finance Corporation
Emerging Markets Equities Total Return Investable Index; Emerging Markets Income
- -- Emerging Markets Bond Index Plus; European Equities -- Morgan Stanley Capital
International European Equities Index; International Equities -- Morgan Stanley
Capital International EAFE Index; Japanese Equities -- Morgan Stanley Capital
International Japanese Equities Index; Tokyo Stock Exchange First Section Index;
Latin America Equities -- Baring Securities Emerging Markets Equities Index,
International Finance Corporation Total Return Latin America Investable Index,
and Morgan Stanley Capital International Latin America Index; and Money Market
- -- Donoghue's Money Fund Average and the average yields reported by the Bank
Rate Monitor for money market deposit accounts offered by the 50 leading banks
and thrift institutions in the top five standard metropolitan statistical areas.

ORGANIZATION, SHARES AND VOTING RIGHTS

The Company was incorporated as a Maryland corporation on September 15, 1992 and
is registered with the Securities and Exchange Commission as an open-end,
management investment company. The Company has acknowledged that the name "TCW"
is owned by The TCW Group, Inc. ("TCW"), the parent of the Adviser. The Company
has agreed to change its name and the name of the Funds at the request of TCW if
any advisory agreement into which TCW or any of its affiliates and the Company
may enter is terminated.

The Fund offers two classes of shares: the Institutional Class shares and the
Class N shares. The Institutional Class shares are offered at the current net
asset value. The Class N shares are also offered at the current net asset value,
but will be subject to distribution or service fees imposed under the
Distribution Plan. Shares of each class of a Fund represents an equal
proportionate share in the assets, liabilities, income and expenses of that Fund
and, generally, have identical voting, dividend, liquidation, and other rights,
other than the payment of distribution fees imposed under the Distribution Plan.
All shares issued will be fully paid and nonassessable and will have no
preemptive or conversion rights. Each share has one vote and fractional shares
have fractional votes. As a Maryland corporation, the Company is not required to
hold an annual shareholder meeting in any year in which the selection of
directors is not required to be acted on under the 1940 Act. Shareholder
approval will be sought only for certain changes in the operation of the Funds
and for the election of directors under certain circumstances. Directors may be
removed by a majority of all votes entitled to be cast by shareholders at a
meeting. A special meeting of the shareholders will be called to elect or remove
directors if requested by the holders of ten percent of the Company's
outstanding shares. All shareholders of the Funds will vote together with all
other shareholders of the Funds and with all shareholders of all other funds
that the Company may form in the future on all matters affecting the Company,
including the election or removal of directors. For matters where the interests
of separate Funds or classes of a Fund are not identical, the matter will be
voted on separately by each affected Fund or class. For matters affecting only
one Fund or class of a Fund, only the shareholders of that Fund or class will be
entitled to vote thereon. Voting is not cumulative. Upon request in writing by
ten or more shareholders who have been shareholders of record for at least six
months and hold at least the lesser of shares having a net asset value of
$25,000 or one percent of all outstanding shares, the Company will provide the
requesting shareholders either access to the names and addresses of all
shareholders of record or information as to the approximate number of
shareholders of record and the approximate cost of mailing any proposed
communication to them. If the Company elects the latter procedure, and the
requesting shareholders tender material for mailing together with the reasonable
expenses of the mailing, the Company will either mail the material as requested
or submit the material to the Securities and Exchange Commission for a
determination that the mailing of the material would be inappropriate.

TRANSFER AGENT AND CUSTODIANS

DST Systems, Inc., P.O. Box 419951, Kansas City, MO 64141-6951, serves as
transfer agent for the Fund. Investors Bank & Trust Company, 200 Clarendon
Street, Boston, Massachusetts 02117, serves as custodian for the Company. Chase
Manhattan Bank, 4 New York Plaza, New York, New York 10004; Morgan Guaranty
Trust Company, 60 Wall Street, New York, New York 10260; and The Bank of New
York, 90 Washington Street, New York, New York 10286 act as limited custodians
under the terms of certain repurchase and futures agreements.

INDEPENDENT AUDITORS

Deloitte & Touche LLP, 1000 Wilshire Boulevard, Los Angeles, California 90017

LEGAL COUNSEL

Dechert Price & Rhoads, 1775 Eye Street, N.W., Washington, D.C. 20006-2401

FINANCIAL STATEMENTS

The unaudited and audited financial statements for the period ended April 30,
1999 and October 31, 1999, respectively, including the financial highlights,
appearing in the Company's Semi-Annual Report and Annual Report to shareholders
are incorporated by reference and made a part of this document.

<PAGE>

APPENDIX A

Description of S&P and Moody's Ratings

S&P

AAA - Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.

AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.

A - Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.

BBB - Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.

Fixed income securities rated AAA, AA, A and BBB are considered investment
grade.

BB - Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB- Rating.

B - Debt rated B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The B rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied BB or BB-
rating.

CCC - Debt rated CCC has a currently identifiable vulnerability to default, and
is dependent upon favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The CCC rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
B or B- rating.

CC - The rating CC is typically applied to debt subordinated to senior debt that
is assigned an actual or implied CCC rating.

C - The rating C is typically applied to debt subordinated to senior debt which
is assigned an actual or implied CCC- debt rating. The C rating may be used to
cover a situation where a bankruptcy petition has been filed, but debt service
payments are continued.

CI - The rating CI is reserved for income bonds on which no interest is being
paid.

D - Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The D rating also will be used upon the
filing of a bankruptcy petition if debt service payments are jeopardized.

Plus (+) or Minus (-) - The ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing within the major
categories.

Moody's

Aaa - Bonds which are rated Aaa are judged to be the best quality. They carry
the smallest degree of investment risk and are generally referred to as
"gilt-edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.

Aa - Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities.

A - Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.

Baa - Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured, interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.

Fixed income securities which are rated Aaa, Aa, A and Baa are considered
investment grade.

Ba - Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during other good and bad times over the future. Uncertainty of position
characterizes bonds in this class.

B - Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.

Caa - Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.

Ca - Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.

C - Bonds which are rated C are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.

Moody's applies the numerical modifiers 1, 2 and 3 to each generic rating
classification from Aa through B. The modifier 1 indicates that the issue ranks
in the higher end of its generic rating category; the modifier 2 indicates a
mid-range ranking; and the modifier 3 indicates that the issue ranks in the
lower end of its generic rating category.