<PAGE>
TCW GALILEO FUNDS
OCTOBER 31, 2000
ANNUAL REPORT
U.S. FIXED INCOME
MONEY MARKET
CORE FIXED INCOME
HIGH YIELD BOND
MORTGAGE-BACKED SECURITIES
TOTAL RETURN MORTGAGE-BACKED SECURITIES
[LOGO] TCW-TM- GALILEO FUNDS INC.
--------------------------
THE POWER OF INDEPENDENT THINKING-TM-
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TCW GALILEO FUNDS, INC.
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U.S. FIXED INCOME
TABLE OF CONTENTS OCTOBER 31, 2000
<TABLE>
<S> <C>
Letter To Shareholders............................ 1
Management Discussions............................ 2
Schedules of Investments:
TCW Galileo Money Market Fund................... 11
TCW Galileo Core Fixed Income Fund.............. 13
TCW Galileo High Yield Bond Fund................ 20
TCW Galileo Mortgage-Backed Securities Fund..... 27
TCW Galileo Total Return Mortgage-Backed
Securities Fund............................... 30
Statements of Assets and Liabilities.............. 33
Statements of Operations.......................... 34
Statements of Changes in Net Assets............... 35
Notes to Financial Statements..................... 38
Financial Highlights.............................. 49
Independent Auditors' Report...................... 57
</TABLE>
[TCW LOGO]
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TO OUR SHAREHOLDERS
We are pleased to submit the October 31, 2000 annual reports for the TCW
Galileo Funds. On the following pages we have provided a discussion and
analysis of each Fund's investment performance as well as a graphical analysis
of each Fund's performance since inception.
TCW is committed to providing you with superior professional investment
management and distinctive personal service through the TCW Galileo Funds. The
Fund's long-term investment performance record is among the best in the
industry. In addition, TCW carefully monitors each Fund's overall expense ratio
to maintain their competitiveness.
The Galileo Mutual Funds continue to provide our clients with targeted
investment strategies featuring daily liquidity, competitive management fees, no
front end loads, and no deferred sales charges.
Please call our Shareholder Services Department at (800) FUND-TCW (386-3829) if
you have any questions or would like further information on the TCW Galileo
Funds.
/s/ Marc I. Stern
Marc I. Stern
Chairman of the Board
December 5, 2000
1
<PAGE>
TCW GALILEO CORE FIXED INCOME FUND
--------------------------------------------------------------------------------
MANAGEMENT DISCUSSIONS
The TCW Galileo Core Fixed Income Fund (the "Fund") returned 3.97% for the
fiscal year ended October 31, 2000 for its Institutional ("I") Class shares
versus 7.30% for the Lehman Brothers Aggregate Bond Index. For the Advisory
("N") Class shares the return was 3.71%. The performance of the Fund's two
classes varies because of differing expenses.
The bond market rallied in July and August as evidence of moderating economic
growth and benign inflation reports bolstered investor optimism that the Federal
Reserve would not need to increase short term interest rates any further.
Bond-friendly news emerged from a declining manufacturing sector, productivity
gains, an uptick in unemployment, and PPI, CPI and retail sales coming in below
expectations. By August 24, the 30-year benchmark U.S. Treasury bond yield fell
to 5.66%, its low for the year. Rising oil prices and a heavy new-issue calendar
in the corporate sector soon caused yields in the intermediate-to-long end of
the curve to move higher from that point. By mid-September, the yield on the
30-year Treasury rose to 5.95%, resulting in its worst period of performance all
year. However, declines in the stock market along with a retreat in crude oil
prices in the final trading sessions of September, boosted treasury returns and
brought yields on 10 and 30-year benchmark Treasuries back down to 5.80% and
5.88%, respectively, by quarter end.
Changes in market expectations caused the yield curve to become less inverted in
the third quarter. The yield on the 10-year benchmark U.S. Treasury fell below
the yield on the 30-year for the first time since mid-January. With further rate
hikes by the Fed considered unlikely, investors sold long Treasuries and
reinvested in higher-yielding securities at the short end of the curve, and in
the corporate sector. Long treasuries also fell out of favor amid a growing
consensus that the next administration will be less committed to eliminating
Treasury debt than the Clinton administration. Mortgage spreads to treasuries
tightened, allowing substantial performance gains for the mortgage sector
relative to other fixed-income sectors. Diminishing concern over a reduction in
the supply of outstanding Treasury debt caused spreads on GNMAs to cheapen
relative to FNMA and FHLMC, as the "full faith and credit" guarantee lost
importance in the marketplace. Discounts outperformed premiums for much of the
quarter and the ARM sector improved. The CMO market continued to languish, with
the issuance of agency CMOs down about 50% from last year due to the inverted
yield curve.
Although a "soft landing" scenario for the U.S. economy appears to be the
consensus view, high energy prices continue to pose a threat. For several
reasons, Fed policy is likely to remain on hold until February 2001. Fed Fund
futures actually place a greater probability on the Fed easing, rather than
tightening, in the next year. However, at the last policy meeting, the Fed
retained its risk bias, noting that the risks of higher inflation near term
outweigh the odds of a hard landing. On a dovish note the directive pointed out
that growth "has moderated", compared to the previous directive which stated
that growth "is moderating". Inflation is not a new concern for the Fed and thus
far, wage pressures have been easily offset by increased productivity growth.
The Fed will continue to monitor expectations of rising inflation, and whether
resulting wage pressures begin to overtake productivity gains.
The "3 E's" -- Energy, the Euro and Earnings -- continue to impact the equity
market, and, to a lesser extent, the fixed income market. Oil prices have
declined due to a release from the Strategic Petroleum Reserve. However, the
outlook remains very precarious due to recent turmoil in the middle East. Any
disruption in oil will adversely impact Europe far more than the US, further
strengthening the dollar VIS-A-VIS the yen and the Euro. Government intervention
has arrested the decline of the Euro thus far, but history has taught us that
intervention rarely provides more than a short term solution. Lastly, the
markets have become increasingly skittish about earning prospects, severely
punishing any company (not just unprofitable dot.coms) that
2
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fail to meet its targets. Intel, the second largest company in the world, lost
half its market capitalization or $250 billion almost overnight as the result of
an earnings warning. With the Fed well aware of these potential risks, the
possibility of a Fed rate hike seems remote.
Spread product on high-grade investments profited during the quarter, earning
their incremental yields. However, high yield spreads continued to widen, and
returns in the sector have been negative year-to-date, with nearly 800 basis
points of underperformance versus the Lehman Aggregate Index. Mortgage spreads
tightened modestly over the quarter. FNMA 7.0's started the quarter at 163 basis
points over the 10 year, and ended at 159 basis points over; which is still wide
by historical standards. At this stage the outlook for mortgages is compelling.
This asset class has far less exposure to economic slowdowns than the credit
sectors, due to U.S. Government/ Agency guarantees. Other variables that affect
mortgages on both a fundamental and technical basis are also positive. Supply is
decreasing due to a slowing housing market and an increase in consumer
preference for adjustable as opposed to fixed rate mortgage loans. Interest rate
volatility, which is down because the Fed is on hold for the time being, should
also help mortgage spreads tighten. Finally, prepayments are relatively modest
now, and the mortgage index is trading at a discount to par (97.96), which means
that on balance prepayments increase, rather than decrease returns.
3
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TCW GALILEO CORE FIXED INCOME FUND
--------------------------------------------------------------------------------
MANAGEMENT DISCUSSIONS (CONTINUED)
TCW GALILEO CORE FIXED INCOME FUND - I CLASS
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUALIZED TOTAL RETURN(1)
1-YEAR 3-YEAR 5-YEAR 10-YEAR SINCE INCEPTION
<S> <C> <C> <C> <C>
3.97% 4.50% 5.23% 6.80% 6.67%
</TABLE>
<TABLE>
<CAPTION>
LEHMAN BROTHERS
FUND AGGREGATE BOND INDEX
<S> <C> <C>
Jan 90 $246,935 $247,029
Feb 90 $247,263 $247,829
Mar 90 $248,079 $248,011
Apr 90 $246,298 $245,739
May 90 $252,635 $253,015
Jun 90 $256,013 $257,075
Jul 90 $260,053 $260,631
Aug 90 $256,854 $257,150
Sep 90 $258,403 $259,277
Oct 90 $260,677 $262,569
Nov 90 $265,646 $268,221
Dec 90 $269,561 $272,401
Jan 91 $272,664 $275,768
Feb 91 $274,439 $278,122
Mar 91 $276,116 $280,035
Apr 91 $278,924 $283,069
May 91 $280,637 $284,724
Jun 91 $280,258 $284,580
Jul 91 $284,083 $288,526
Aug 91 $290,245 $294,770
Sep 91 $296,688 $300,743
Oct 91 $299,077 $304,091
Nov 91 $301,789 $306,879
Dec 91 $312,953 $315,993
Jan 92 $306,834 $311,696
Feb 92 $308,421 $313,722
Mar 92 $306,638 $311,954
Apr 92 $307,791 $314,207
May 92 $314,150 $320,136
Jun 92 $319,258 $324,542
Jul 92 $327,070 $331,163
Aug 92 $329,589 $334,518
Sep 92 $332,426 $338,483
Oct 92 $328,062 $333,996
Nov 92 $328,632 $334,071
Dec 92 $333,598 $339,383
Jan 93 $340,000 $345,891
Feb 93 $346,456 $351,946
Mar 93 $349,065 $353,413
Apr 93 $350,629 $355,874
May 93 $348,708 $356,327
Jun 93 $356,522 $362,785
Jul 93 $358,815 $364,837
Aug 93 $367,494 $371,231
Sep 93 $369,097 $372,251
Oct 93 $370,259 $373,642
Nov 93 $366,401 $370,464
Dec 93 $369,116 $372,471
Jan 94 $372,885 $377,500
Feb 94 $363,749 $370,942
Mar 94 $352,346 $361,797
Apr 94 $345,175 $358,908
May 94 $343,588 $358,857
Jun 94 $343,117 $358,064
Jul 94 $349,811 $365,177
Aug 94 $349,906 $365,630
Sep 94 $343,527 $360,248
Oct 94 $342,379 $359,927
Nov 94 $340,849 $359,128
Dec 94 $340,590 $361,608
Jan 95 $346,053 $368,764
Feb 95 $353,500 $377,532
Mar 95 $355,073 $379,848
Apr 95 $359,029 $385,154
May 95 $374,320 $400,058
Jun 95 $376,113 $402,991
Jul 95 $373,514 $402,091
Aug 95 $380,543 $406,944
Sep 95 $384,372 $410,903
Oct 95 $390,037 $416,247
Nov 95 $395,720 $422,484
Dec 95 $402,162 $428,413
Jan 96 $403,188 $431,258
Feb 96 $393,923 $423,762
Mar 96 $389,991 $420,816
Apr 96 $387,706 $418,450
May 96 $386,663 $417,600
Jun 96 $390,232 $423,208
Jul 96 $391,707 $424,366
Aug 96 $391,072 $423,655
Sep 96 $397,251 $431,038
Oct 96 $406,670 $440,586
Nov 96 $413,124 $448,133
Dec 96 $410,311 $443,966
Jan 97 $411,615 $445,342
Feb 97 $412,710 $446,456
Mar 97 $407,655 $441,500
Apr 97 $413,174 $448,122
May 97 $417,500 $452,380
Jun 97 $422,406 $457,763
Jul 97 $433,616 $470,122
Aug 97 $428,773 $466,126
Sep 97 $435,346 $472,978
Oct 97 $441,049 $479,837
Nov 97 $442,196 $482,044
Dec 97 $446,861 $486,913
Jan 98 $452,420 $493,145
Feb 98 $451,954 $492,751
Mar 98 $452,889 $494,426
Apr 98 $455,711 $496,997
May 98 $459,967 $501,718
Jun 98 $464,006 $505,983
Jul 98 $464,720 $507,046
Aug 98 $472,635 $515,310
Sep 98 $485,400 $527,369
Oct 98 $480,823 $524,574
Nov 98 $483,862 $527,564
Dec 98 $487,278 $529,146
Jan 99 $489,729 $532,903
Feb 99 $481,360 $523,577
Mar 99 $485,807 $526,457
Apr 99 $487,046 $528,142
May 99 $482,312 $523,547
Jun 99 $480,561 $521,872
Jul 99 $480,561 $519,628
Aug 99 $479,547 $519,368
Sep 99 $484,122 $525,392
Oct 99 $484,122 $527,336
Nov 99 $485,148 $527,284
Dec 99 $483,082 $524,753
Jan 00 $482,304 $523,021
Feb 00 $485,695 $529,350
Mar 00 $490,153 $536,337
Apr 00 $484,619 $534,782
May 00 $482,763 $534,514
Jun 00 $493,143 $545,632
Jul 00 $494,479 $550,597
Aug 00 $501,733 $558,581
Sep 00 $503,083 $562,100
Oct 00 $503,354 $565,810
</TABLE>
VALUE OF $250,000
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE PERFORMANCE.
INCEPTION 1/1/90
TCW GALILEO CORE FIXED INCOME FUND - N CLASS
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUALIZED TOTAL RETURN
1-YEAR SINCE INCEPTION
<S> <C>
3.71% 2.31%
</TABLE>
<TABLE>
<CAPTION>
LEHMAN BROTHERS
FUND AGGREGATE BOND INDEX
<S> <C> <C>
Mar 99 $2,021 $2,011
Apr 99 $2,021 $2,017
May 99 $1,996 $2,000
Jun 99 $1,989 $1,993
Jul 99 $1,989 $1,985
Aug 99 $1,985 $1,984
Sep 99 $2,003 $2,007
Oct 99 $2,003 $2,014
Nov 99 $2,008 $2,014
Dec 99 $1,999 $2,004
Jan 00 $1,994 $1,998
Feb 00 $2,008 $2,022
Mar 00 $2,026 $2,049
Apr 00 $2,001 $2,043
May 00 $1,993 $2,042
Jun 00 $2,038 $2,084
Jul 00 $2,044 $2,103
Aug 00 $2,073 $2,134
Sep 00 $2,079 $2,147
Oct 00 $2,078 $2,161
</TABLE>
VALUE OF $2,000
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE PERFORMANCE.
INCEPTION 3/1/99
(1) PERFORMANCE DATA INCLUDES THE PERFORMANCE OF THE PREDECESSOR LIMITED
PARTNERSHIP FOR PERIODS BEFORE THE FUND'S REGISTRATION BECAME EFFECTIVE.
THE PREDECESSOR LIMITED PARTNERSHIP WAS NOT REGISTERED UNDER THE INVESTMENT
COMPANY ACT OF 1940, AS AMENDED ("1940 ACT"), AND, THEREFORE WAS NOT
SUBJECT TO CERTAIN INVESTMENT RESTRICTIONS THAT ARE IMPOSED BY THE 1940
ACT. IF THE LIMITED PARTNERSHIP HAD BEEN REGISTERED UNDER THE 1940 ACT, THE
LIMITED PARTNERSHIP'S PERFORMANCE MAY HAVE BEEN LOWER.
4
<PAGE>
TCW GALILEO HIGH YIELD BOND FUND
[ICON]
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MANAGEMENT DISCUSSIONS (CONTINUED)
The TCW Galileo High Yield Bond Fund (the "Fund") returned a negative 1.77% for
the fiscal year ended October 31, 2000 for its Institutional ("I") Class shares.
The Galileo High Yield Bond Fund lagged its benchmark, the Salomon Brothers High
Yield Cash Pay Index, which returned negative 0.67% during this period. The
Fund's performance did, however, compare favorably to the Lipper High Yield
Mutual Fund Average which returned a negative 2.77%. For the Advisory ("N")
Class shares, the performance for the same period was a negative 1.86%. The
performance of the Fund's two classes varies because of differing expenses.
Over the last several months, the high yield market has been beset by numerous
challenges: poor technical conditions which have exacerbated already limited
market liquidity, rising default rates, as well as a series of Federal Reserve
Board interest rate hikes. More recently, a slowing economy and weaker equity
markets have exacerbated the difficult market environment. The Fund has
continued to emphasize higher quality names and the portfolio remains widely
diversified consisting of 161 separate issuers within 24 separate industry
groups. During the year, the Fund benefited from strong performance in the
energy, healthcare and gaming sectors. Unfortunately, the strong performance in
these areas was offset by negative credit developments within the
telecommunications, leisure and automotive sectors.
The Fund seeks to preserve principal while simultaneously generating a high
level of current income by investing in a well-diversified, upper-tier portfolio
of high yield bonds. The Fund emphasizes investments in below investment grade
companies that have good prospects for improved operating results and debt
ratings.
5
<PAGE>
TCW GALILEO HIGH YIELD BOND FUND
--------------------------------------------------------------------------------
MANAGEMENT DISCUSSIONS (CONTINUED)
TCW GALILEO HIGH YIELD BOND FUND - I CLASS
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUALIZED TOTAL RETURN(1)
1-YEAR 3-YEAR 5-YEAR 10-YEAR SINCE INCEPTION
<S> <C> <C> <C> <C>
(1.77)% 1.30% 5.29% 10.25% 8.65%
</TABLE>
<TABLE>
<CAPTION>
SALOMON BROTHERS HIGH YIELD
FUND CASH PAY INDEX
<S> <C> <C>
Feb 89 $251,708 $251,075
Mar 89 $250,796 $251,100
Apr 89 $251,611 $252,833
May 89 $256,108 $257,131
Jun 89 $260,948 $260,859
Jul 89 $262,613 $262,033
Aug 89 $264,462 $261,011
Sep 89 $262,185 $256,783
Oct 89 $259,214 $250,980
Nov 89 $259,971 $251,908
Dec 89 $260,470 $252,462
Jan 90 $257,764 $244,813
Feb 90 $255,076 $242,120
Mar 90 $258,307 $244,686
Apr 90 $261,275 $243,438
May 90 $266,626 $249,841
Jun 90 $271,500 $254,488
Jul 90 $276,265 $258,890
Aug 90 $269,179 $248,871
Sep 90 $257,063 $236,104
Oct 90 $249,698 $227,746
Nov 90 $254,005 $232,347
Dec 90 $256,525 $234,693
Jan 91 $260,645 $238,073
Feb 91 $276,205 $254,262
Mar 91 $287,154 $266,848
Apr 91 $297,914 $276,828
May 91 $300,253 $278,572
Jun 91 $306,534 $284,311
Jul 91 $313,038 $291,703
Aug 91 $317,365 $298,178
Sep 91 $321,741 $300,176
Oct 91 $330,425 $308,371
Nov 91 $333,891 $311,239
Dec 91 $335,981 $315,036
Jan 92 $348,023 $324,109
Feb 92 $352,558 $333,670
Mar 92 $356,929 $338,408
Apr 92 $357,672 $341,319
May 92 $362,507 $347,974
Jun 92 $365,219 $352,463
Jul 92 $371,705 $358,843
Aug 92 $375,898 $363,723
Sep 92 $380,352 $367,360
Oct 92 $375,104 $363,099
Nov 92 $382,910 $368,437
Dec 92 $388,079 $372,858
Jan 93 $397,765 $381,695
Feb 93 $405,673 $389,176
Mar 93 $410,902 $395,480
Apr 93 $413,055 $398,486
May 93 $418,260 $403,866
Jun 93 $425,596 $412,993
Jul 93 $428,290 $417,082
Aug 93 $429,609 $421,836
Sep 93 $430,163 $423,018
Oct 93 $438,960 $430,928
Nov 93 $442,200 $432,910
Dec 93 $448,156 $437,586
Jan 94 $457,397 $446,731
Feb 94 $456,560 $444,676
Mar 94 $438,969 $428,668
Apr 94 $434,781 $424,295
May 94 $438,111 $425,059
Jun 94 $440,565 $425,782
Jul 94 $440,979 $430,380
Aug 94 $443,898 $433,178
Sep 94 $445,856 $432,441
Oct 94 $446,632 $432,917
Nov 94 $443,407 $429,021
Dec 94 $446,613 $433,997
Jan 95 $452,883 $440,594
Feb 95 $466,121 $454,781
Mar 95 $469,015 $459,511
Apr 95 $478,480 $469,712
May 95 $488,012 $483,663
Jun 95 $489,529 $487,242
Jul 95 $498,052 $492,650
Aug 95 $500,104 $496,049
Sep 95 $506,310 $501,754
Oct 95 $512,047 $505,517
Nov 95 $513,096 $509,966
Dec 95 $517,868 $517,462
Jan 96 $527,490 $524,862
Feb 96 $529,917 $527,591
Mar 96 $526,117 $525,428
Apr 96 $530,494 $525,113
May 96 $533,799 $528,158
Jun 96 $536,575 $532,648
Jul 96 $541,748 $536,696
Aug 96 $549,208 $541,204
Sep 96 $560,131 $552,786
Oct 96 $562,842 $558,922
Nov 96 $571,341 $569,318
Dec 96 $579,786 $573,588
Jan 97 $584,760 $578,004
Feb 97 $594,929 $587,195
Mar 97 $587,951 $582,497
Apr 97 $592,290 $587,390
May 97 $607,050 $598,550
Jun 97 $612,210 $608,127
Jul 97 $625,495 $621,506
Aug 97 $625,932 $622,314
Sep 97 $636,323 $632,022
Oct 97 $637,405 $637,394
Nov 97 $643,524 $642,366
Dec 97 $650,989 $648,854
Jan 98 $662,511 $658,840
Feb 98 $666,287 $664,110
Mar 98 $670,745 $670,519
Apr 98 $671,912 $674,415
May 98 $673,592 $678,535
Jun 98 $677,310 $681,548
Jul 98 $680,019 $685,937
Aug 98 $651,934 $648,252
Sep 98 $658,128 $653,438
Oct 98 $644,899 $645,688
Nov 98 $666,452 $673,905
Dec 98 $665,746 $673,419
Jan 99 $676,584 $682,073
Feb 99 $676,049 $676,009
Mar 99 $685,588 $680,207
Apr 99 $694,467 $691,737
May 99 $683,710 $682,903
Jun 99 $684,626 $680,820
Jul 99 $685,735 $682,141
Aug 99 $677,917 $674,017
Sep 99 $673,416 $669,103
Oct 99 $674,547 $663,697
Nov 99 $685,596 $673,984
Dec 99 $694,434 $679,039
Jan 00 $686,295 $672,656
Feb 00 $692,938 $672,656
Mar 00 $675,199 $659,876
Apr 00 $679,574 $663,043
May 00 $672,752 $655,087
Jun 00 $683,684 $668,123
Jul 00 $688,176 $676,274
Aug 00 $690,233 $683,240
Sep 00 $681,502 $677,295
Oct 00 $662,617 $659,157
</TABLE>
VALUE OF $250,000
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE PERFORMANCE.
INCEPTION 2/1/89
TCW GALILEO HIGH YIELD BOND FUND - N CLASS
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUALIZED TOTAL RETURN
1-YEAR SINCE INCEPTION
<S> <C>
(1.86)% (1.33)%
</TABLE>
<TABLE>
<CAPTION>
SALOMON BROTHERS
FUND HIGH YIELD CASH PAY INDEX
<S> <C> <C>
Mar 99 $2,028 $2,012
Apr 99 $2,054 $2,047
May 99 $2,024 $2,020
Jun 99 $2,025 $2,014
Jul 99 $2,028 $2,018
Aug 99 $2,005 $1,994
Sep 99 $1,992 $1,980
Oct 99 $1,993 $1,964
Nov 99 $2,025 $1,994
Dec 99 $2,051 $2,009
Jan 00 $2,030 $1,990
Feb 00 $2,047 $1,990
Mar 00 $1,995 $1,953
Apr 00 $2,010 $1,962
May 00 $1,990 $1,938
Jun 00 $2,022 $1,977
Jul 00 $2,035 $2,001
Aug 00 $2,039 $2,022
Sep 00 $2,014 $2,004
Oct 00 $1,956 $1,950
</TABLE>
VALUE OF $2,000
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE PERFORMANCE.
INCEPTION 3/1/99
(1) PERFORMANCE DATA INCLUDES THE PERFORMANCE OF THE PREDECESSOR LIMITED
PARTNERSHIP FOR PERIODS BEFORE THE FUND'S REGISTRATION BECAME EFFECTIVE.
THE PREDECESSOR LIMITED PARTNERSHIP WAS NOT REGISTERED UNDER THE INVESTMENT
COMPANY ACT OF 1940, AS AMENDED ("1940 ACT"), AND, THEREFORE WAS NOT
SUBJECT TO CERTAIN INVESTMENT RESTRICTIONS THAT ARE IMPOSED BY THE 1940
ACT. IF THE LIMITED PARTNERSHIP HAD BEEN REGISTERED UNDER THE 1940 ACT, THE
LIMITED PARTNERSHIP'S PERFORMANCE MAY HAVE BEEN LOWER.
6
<PAGE>
TCW GALILEO MORTGAGE-BACKED SECURITIES FUND
[ICON]
--------------------------------------------------------------------------------
MANAGEMENT DISCUSSIONS (CONTINUED)
The TCW Galileo Mortgage-Backed Securities Fund (the "Fund") earned a return of
6.21% for the fiscal year ended October 31, 2000, slightly below the 5.79%
return of the Salomon Brothers 1-Year Treasury Index. Over the past 12 months,
the fed funds rate reached its highest level in a decade while 3 and 6 month
Treasury bills posted yield increases of over 100 basis points. In contrast,
yields on longer maturities declined. The 10-year fell 27 basis points to 5.75%
and the 30-year fell 38 basis points to 5.79%. Short term yields rose on news of
economic strength, which led many investors to anticipate further rate hikes by
the Fed. Intermediate and long term yields fell on speculation of a supply
shortage due to the budget surplus. These opposing trends caused the yield curve
to become inverted in mid-January, and the yield on the 10-year remained above
the yield on the 30-year until September.
Evidence of moderating economic growth and benign inflation reports fueled a
bond market rally during the summer. In late August, the 30-year benchmark U.S.
Treasury bond fell to 5.66%, its low for the year. Rising oil prices and a heavy
new issue calendar in the corporate sector soon caused yields in the
intermediate-to-long end of the curve to move higher. By the middle of
September, the yield on the 30-year Treasury rose to 5.95%, resulting in its
worst period of performance all year. However, declines in the stock market and
tensions in the Middle East led investors back to the relative safety of the
U.S. Treasury market, causing yields to decrease once again. Mortgage spreads to
treasuries widened to historic levels in the second quarter of 2000 as the
government debated its support of FHLMC and FNMA. This debate led to unusual
performance differntials between GNMA, FHLMC and FNMA securities. FNMA and FHLMC
recently volunteered to improve their risk profiles, a move which is expected to
promote tightening in both agency and mortgage spreads. Mortgage spreads have
already tightened over 30 basis points this year.
Although a "soft landing" scenario for the U.S. economy appears to be the
consensus view, high energy prices continue to pose a threat. For several
reasons, Fed policy is likely to remain on hold until February 2001. Fed Fund
futures actually place a greater probability on the Fed easing, rather than
tightening, in the next year. However, at the last policy meeting, the Fed
retained its risk bias, noting that the risks of higher inflation near term
outweigh the odds of a hard landing. On a dovish note the directive pointed out
that growth "has moderated", compared to the previous directive which stated
that growth "is moderating". Inflation is not a new concern for the Fed and thus
far, wage pressures have been easily offset by increased productivity growth.
The Fed will continue to monitor expectations of rising inflation, and whether
resulting wage pressures begin to overtake productivity gains. The "3 E's" --
Energy, the Euro and Earnings -- continue to impact the equity market, and, to a
lesser extent, the fixed income market. Any disruption in oil will adversely
impact Europe far more than the US, further strengthening the dollar VIS-A-VIS
the yen and the Euro. Government intervention has arrested the decline of the
Euro thus far, but history has taught us that intervention rarely provides more
than a short term solution. Lastly, the markets have become increasingly
skittish about earning prospects, severely punishing any company (not just
unprofitable dot.coms) that fail to meet its targets. With the Fed well aware of
these potential risks, the possibility of a Fed rate hike seems remote.
At this stage the outlook for mortgages is compelling. This asset class has far
less exposure to economic slowdowns than the credit sectors, due to U.S.
Government/Agency guarantees. Other variables that affect mortgages on both a
fundamental and technical basis are also positive. Supply is decreasing due to a
slowing housing market and an increase in consumer preference for adjustable as
opposed to fixed rate mortgage loans. Interest rate volatility, which is down
because the Fed is on hold for the time being, should also help mortgage spreads
tighten. Finally, prepayments are relatively modest now, and the mortgage index
is trading at a discount to par (98.11), which means that on balance prepayments
increase, rather than decrease returns.
7
<PAGE>
TCW GALILEO MORTGAGE-BACKED SECURITIES FUND
--------------------------------------------------------------------------------
MANAGEMENT DISCUSSIONS (CONTINUED)
We anticipate that more money will flow into MBS this quarter as managers
attempt to minimize credit risk and shun the low Treasury yields now in force.
This will promote further tightening and boost performance.
TCW GALILEO MORTGAGE-BACKED SECURITIES FUND
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUALIZED TOTAL RETURN(1)
1-YEAR 3-YEAR 5-YEAR 10-YEAR SINCE INCEPTION
<S> <C> <C> <C> <C>
6.21% 5.43% 6.17% 6.38% 6.59%
</TABLE>
<TABLE>
<CAPTION>
SALOMON BROTHERS
FUND 1-YEAR TREASURY INDEX
<S> <C> <C>
Feb 90 $251,500 $251,509
Mar 90 $253,512 $252,793
Apr 90 $255,794 $254,077
May 90 $257,584 $256,626
Jun 90 $259,902 $258,781
Jul 90 $261,722 $261,237
Aug 90 $263,554 $262,717
Sep 90 $265,399 $264,536
Oct 90 $267,522 $266,944
Nov 90 $269,930 $268,697
Dec 90 $272,359 $271,386
Jan 91 $274,810 $273,645
Feb 91 $277,009 $275,219
Mar 91 $279,225 $277,206
Apr 91 $281,179 $279,221
May 91 $283,148 $280,458
Jun 91 $285,413 $281,611
Jul 91 $287,981 $283,485
Aug 91 $290,861 $286,044
Sep 91 $294,061 $288,030
Oct 91 $297,001 $290,252
Nov 91 $299,080 $292,529
Dec 91 $302,669 $295,134
Jan 92 $304,183 $295,893
Feb 92 $306,312 $296,699
Mar 92 $307,537 $297,355
Apr 92 $309,075 $299,117
May 92 $310,929 $300,570
Jun 92 $313,417 $302,069
Jul 92 $314,984 $304,281
Aug 92 $316,874 $305,809
Sep 92 $318,775 $307,777
Oct 92 $319,094 $307,467
Nov 92 $320,689 $307,645
Dec 92 $322,613 $309,360
Jan 93 $324,001 $310,991
Feb 93 $324,713 $312,078
Mar 93 $327,311 $313,044
Apr 93 $329,589 $314,149
May 93 $329,589 $314,149
Jun 93 $331,814 $315,602
Jul 93 $330,573 $316,445
Aug 93 $332,983 $317,879
Sep 93 $334,821 $318,798
Oct 93 $335,661 $319,501
Nov 93 $335,493 $320,091
Dec 93 $337,355 $321,206
Jan 94 $338,212 $322,518
Feb 94 $338,040 $322,190
Mar 94 $336,830 $322,181
Apr 94 $333,189 $321,909
May 94 $332,665 $322,537
Jun 94 $332,842 $323,662
Jul 94 $335,834 $325,695
Aug 94 $336,452 $326,792
Sep 94 $334,235 $327,326
Oct 94 $335,304 $328,657
Nov 94 $333,698 $328,469
Dec 94 $335,867 $329,650
Jan 95 $340,042 $332,958
Feb 95 $343,507 $335,882
Mar 95 $347,172 $337,860
Apr 95 $350,127 $340,184
May 95 $355,337 $343,221
Jun 95 $358,709 $345,217
Jul 95 $360,976 $346,913
Aug 95 $363,253 $348,600
Sep 95 $366,686 $350,137
Oct 95 $369,370 $352,096
Nov 95 $371,683 $354,223
Dec 95 $374,749 $356,313
Jan 96 $377,286 $358,609
Feb 96 $379,052 $359,031
Mar 96 $380,435 $360,165
Apr 96 $382,223 $361,402
May 96 $384,620 $362,882
Jun 96 $386,605 $364,888
Jul 96 $389,017 $366,294
Aug 96 $390,635 $368,065
Sep 96 $393,479 $370,539
Oct 96 $397,158 $373,351
Nov 96 $398,802 $375,262
Dec 96 $400,872 $376,537
Jan 97 $402,949 $378,420
Feb 97 $405,036 $379,782
Mar 97 $406,296 $380,807
Apr 97 $409,245 $383,130
May 97 $412,634 $385,544
Jun 97 $414,763 $387,819
Jul 97 $419,043 $390,611
Aug 97 $419,475 $391,978
Sep 97 $422,072 $394,095
Oct 97 $423,810 $396,302
Nov 97 $425,557 $397,649
Dec 97 $428,191 $399,518
Jan 98 $429,407 $402,155
Feb 98 $430,184 $403,241
Mar 98 $432,748 $405,257
Apr 98 $434,877 $407,121
May 98 $436,116 $408,913
Jun 98 $438,267 $410,875
Jul 98 $438,836 $412,889
Aug 98 $441,575 $416,192
Sep 98 $444,326 $419,480
Oct 98 $443,864 $421,703
Nov 98 $443,864 $421,758
Dec 98 $445,719 $423,078
Jan 99 $448,982 $424,707
Feb 99 $450,387 $425,174
Mar 99 $454,143 $427,806
Apr 99 $455,083 $429,371
May 99 $457,450 $430,569
Jun 99 $458,639 $432,610
Jul 99 $460,547 $434,514
Aug 99 $462,588 $435,796
Sep 99 $465,604 $438,036
Oct 99 $467,667 $439,188
Nov 99 $469,252 $440,066
Dec 99 $470,721 $441,034
Jan 00 $471,582 $442,137
Feb 00 $474,921 $444,347
Mar 00 $477,780 $446,391
Apr 00 $480,155 $448,980
May 00 $481,033 $450,642
Jun 00 $484,439 $454,157
Jul 00 $487,355 $456,836
Aug 00 $491,308 $459,623
Sep 00 $494,256 $462,335
Oct 00 $496,702 $464,582
</TABLE>
VALUE OF $250,000
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE PERFORMANCE.
INCEPTION 2/1/90
(1) PERFORMANCE DATA INCLUDES THE PERFORMANCE OF THE PREDECESSOR LIMITED
PARTNERSHIP FOR PERIODS BEFORE THE FUND'S REGISTRATION BECAME EFFECTIVE.
THE PREDECESSOR LIMITED PARTNERSHIP WAS NOT REGISTERED UNDER THE INVESTMENT
COMPANY ACT OF 1940, AS AMENDED ("1940 ACT"), AND, THEREFORE WAS NOT
SUBJECT TO CERTAIN INVESTMENT RESTRICTIONS THAT ARE IMPOSED BY THE 1940
ACT. IF THE LIMITED PARTNERSHIP HAD BEEN REGISTERED UNDER THE 1940 ACT, THE
LIMITED PARTNERSHIP'S PERFORMANCE MAY HAVE BEEN LOWER.
8
<PAGE>
TCW GALILEO TOTAL RETURN MORTGAGE-BACKED SECURITIES FUND
[ICON]
--------------------------------------------------------------------------------
MANAGEMENT DISCUSSIONS (CONTINUED)
The TCW Galileo Total Return Mortgage-Backed Securities Fund (the "Fund") earned
a return of 8.32% for the fiscal year ended October 31, 2000 on its
Institutional ("I") Class shares. The Fund exceeded the 7.57% return of the
Lehman Mortgage Index by 75 basis points. Over the 12-month period ending
October 31, 2000, 3 and 6 month Treasury bills posted yield increases of over
100 basis points, while the 10-year declined 27 basis points to 5.75% and the
30-year fell 38 basis points to 5.79%. Short term yields rose on news of
economic strength, which led many investors to anticipate further rate hikes by
the Fed. Intermediate and long yields fell on speculation of a supply shortage
due to the budget surplus. These opposing trends inverted the yield curve in
mid-January, and the yield on the 10--year remained above the yield on the
30-year until September. For the Advisory ("N") Class shares the return was
8.09%. The performance of the Fund's two classes varies because of differing
expenses.
Evidence of moderating economic growth and benign inflation reports fueled a
bond market rally during the summer. In late August, the 30-year benchmark U.S.
Treasury bond fell to 5.66%, its low for the year. Rising oil prices and a heavy
new issue calendar in the corporate sector soon caused yields in the
intermediate-to-long end of the curve to move higher. By the middle of
September, the yield on the 30-year Treasury rose to 5.95%, resulting in its
worst period of performance all year. However, declines in the stock market and
tensions in the Middle East led investors back to the relative safety of the
U.S. Treasury market, causing yields to decrease once again. Mortgage spreads to
treasuries widened to historic levels in the second quarter of 2000 as the
government debated its support of FHLMC and FNMA. This debate led to unusual
performance differntials between GNMA, FHLMC and FNMA securities. FNMA and FHLMC
recently volunteered to improve their risk profiles, a move which is expected to
promote tightening in both agency and mortgage spreads. Mortgage spreads have
already tightened over 30 basis points this year.
Although a "soft landing" scenario for the U.S. economy appears to be the
consensus view, high energy prices continue to pose a threat. For several
reasons, Fed policy is likely to remain on hold until February 2001. Fed Fund
futures actually place a greater probability on the Fed easing, rather than
tightening, in the next year. However, at the last policy meeting, the Fed
retained its risk bias, noting that the risks of higher inflation near term
outweigh the odds of a hard landing. On a dovish note the directive pointed out
that growth "has moderated", compared to the previous directive which stated
that growth "is moderating". Inflation is not a new concern for the Fed and thus
far, wage pressures have been easily offset by increased productivity growth.
The Fed will continue to monitor expectations of rising inflation, and whether
resulting wage pressures begin to overtake productivity gains. The "3 E's" -
Energy, the Euro and Earnings-continue to impact the equity market, and, to a
lesser extent, the fixed income market. Any disruption in oil will adversely
impact Europe far more than the US, further strengthening the dollar VISA-A-VISA
the yen and the Euro. Government intervention has arrested the decline of the
Euro thus far, but history has taught us that intervention rarely provides more
than a short term solution. Lastly, the markets have become increasingly
skittish about earning prospects, severely punishing any company (not just
unprofitable dot.coms) that fail to meet its targets. With the Fed well aware of
these potential risks, the possibility of a Fed rate hike seems remote.
At this stage the outlook for mortgages is compelling. This asset class has far
less exposure to economic slowdowns than the credit sectors, due to U.S.
Government/Agency guarantees. Other variables that affect mortgages on both a
fundamental and technical basis are also positive. Supply is decreasing due to a
slowing housing market and an increase in consumer preference for adjustable as
opposed to fixed rate mortgage loans. Interest rate volatility, which is down
because the Fed is on hold for the time being, should also help mortgage spreads
tighten. Finally, prepayments are relatively modest now, and the mortgage index
is trading at a discount to par (98.11), which means that on balance prepayments
increase, rather than decrease returns. We anticipate that more money will flow
into MBS this quarter as managers attempt to minimize credit risk and shun the
low Treasury yields now in force. This will promote further tightening and boost
performance.
9
<PAGE>
TCW GALILEO TOTAL RETURN MORTGAGE-BACKED SECURITIES FUND
--------------------------------------------------------------------------------
MANAGEMENT DISCUSSIONS (CONTINUED)
TCW GALILEO TOTAL RETURN MORTGAGE-BACKED SECURITIES FUND - I CLASS
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUALIZED TOTAL RETURN
1-YEAR 3-YEAR 5-YEAR SINCE INCEPTION
<S> <C> <C> <C>
8.32% 5.50% 7.14% 6.56%
</TABLE>
<TABLE>
<CAPTION>
LEHMAN BROTHERS MORTGAGE-
FUND BACKED SECURITIES INDEX
<S> <C> <C>
Jun 93 $250,000 $250,900
Jul 93 $250,250 $251,902
Aug 93 $253,511 $253,088
Sep 93 $256,155 $253,307
Oct 93 $257,295 $254,040
Nov 93 $257,169 $253,543
Dec 93 $258,768 $255,597
Jan 94 $260,823 $258,130
Feb 94 $261,470 $256,329
Mar 94 $254,329 $249,654
Apr 94 $243,754 $247,815
May 94 $244,410 $248,796
Jun 94 $242,164 $248,257
Jul 94 $246,283 $253,227
Aug 94 $247,753 $254,027
Sep 94 $243,313 $250,412
Oct 94 $242,231 $250,269
Nov 94 $239,518 $249,486
Dec 94 $242,765 $251,477
Jan 95 $245,963 $256,859
Feb 95 $253,378 $263,416
Mar 95 $255,350 $264,658
Apr 95 $259,034 $268,420
May 95 $270,730 $276,883
Jun 95 $272,739 $278,457
Jul 95 $271,293 $278,937
Aug 95 $273,911 $281,824
Sep 95 $278,009 $284,303
Oct 95 $283,016 $286,832
Nov 95 $288,048 $290,111
Dec 95 $293,267 $293,734
Jan 96 $295,215 $295,948
Feb 96 $289,039 $293,490
Mar 96 $287,221 $292,430
Apr 96 $285,391 $291,605
May 96 $286,313 $290,755
Jun 96 $290,945 $294,757
Jul 96 $291,257 $295,839
Aug 96 $290,945 $295,834
Sep 96 $297,244 $300,788
Oct 96 $304,770 $306,688
Nov 96 $311,304 $311,078
Dec 96 $308,179 $309,449
Jan 97 $308,583 $311,739
Feb 97 $308,987 $312,768
Mar 97 $306,459 $309,828
Apr 97 $311,130 $314,754
May 97 $313,930 $317,839
Jun 97 $319,069 $321,557
Jul 97 $331,258 $327,603
Aug 97 $326,719 $326,816
Sep 97 $334,005 $330,967
Oct 97 $340,318 $334,641
Nov 97 $341,169 $335,745
Dec 97 $344,956 $338,800
Jan 98 $348,474 $342,154
Feb 98 $346,348 $342,873
Mar 98 $348,839 $344,313
Apr 98 $350,272 $346,276
May 98 $354,602 $348,561
Jun 98 $357,144 $350,234
Jul 98 $357,680 $352,020
Aug 98 $366,729 $355,224
Sep 98 $371,753 $359,522
Oct 98 $368,214 $359,054
Nov 98 $369,157 $360,843
Dec 98 $369,917 $362,376
Jan 99 $371,268 $364,956
Feb 99 $367,963 $363,511
Mar 99 $370,900 $365,950
Apr 99 $373,066 $367,637
May 99 $369,693 $365,641
Jun 99 $367,593 $364,295
Jul 99 $366,186 $361,825
Aug 99 $365,479 $361,815
Sep 99 $369,243 $367,687
Oct 99 $368,937 $369,805
Nov 99 $369,453 $369,990
Dec 99 $368,212 $369,102
Jan 00 $365,296 $365,890
Feb 00 $369,486 $370,135
Mar 00 $376,225 $374,169
Apr 00 $373,682 $374,431
May 00 $372,404 $374,618
Jun 00 $381,833 $382,635
Jul 00 $383,987 $385,084
Aug 00 $392,219 $390,937
Sep 00 $396,141 $395,003
Oct 00 $399,643 $397,839
</TABLE>
VALUE OF $250,000
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE PERFORMANCE.
INCEPTION 6/17/93
TCW GALILEO TOTAL RETURN MORTGAGE-BACKED SECURITIES FUND - N CLASS
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUALIZED TOTAL RETURN
1-YEAR SINCE INCEPTION
<S> <C>
8.09% 4.27%
</TABLE>
<TABLE>
<CAPTION>
LEHMAN BROTHERS MORTGAGE-
FUND BACKED SECURITIES INDEX
<S> <C> <C>
Mar 99 $2,019 $2,013
Apr 99 $2,030 $2,023
May 99 $2,006 $2,012
Jun 99 $1,987 $2,004
Jul 99 $1,970 $1,991
Aug 99 $1,966 $1,991
Sep 99 $1,986 $2,023
Oct 99 $1,984 $2,035
Nov 99 $1,985 $2,036
Dec 99 $1,978 $2,031
Jan 00 $1,963 $2,013
Feb 00 $1,985 $2,036
Mar 00 $2,022 $2,059
Apr 00 $2,007 $2,060
May 00 $1,998 $2,061
Jun 00 $2,051 $2,105
Jul 00 $2,060 $2,119
Aug 00 $2,106 $2,151
Sep 00 $2,124 $2,173
Oct 00 $2,144 $2,189
</TABLE>
VALUE OF $2,000
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE PERFORMANCE.
INCEPTION 3/1/99
10
<PAGE>
TCW GALILEO MONEY MARKET FUND
[ICON]
--------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS OCTOBER 31, 2000
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT FIXED INCOME SECURITIES VALUE
----------- ----------------------- ------------
<C> <S> <C>
AGENCY SECURITIES (15.1% OF NET ASSETS)
$ 5,000,000 Federal Home Loan Mortgage Corp.,
Variable Rate Note, 6.814%, due
12/07/00 $ 4,999,853
5,000,000 Student Loan Marketing Association,
Variable Rate Note, 6.645%, due
11/16/00 4,999,034
10,000,000 Student Loan Marketing Association,
Variable Rate Note, 6.844%, due
10/24/01 10,000,000
5,000,000 Student Loan Marketing Association,
Variable Rate Note, 6.895%, due
12/21/00 5,000,000
10,000,000 Student Loan Marketing Association,
Variable Rate Note, 7.065%, due
11/09/00 9,999,956
------------
TOTAL AGENCY SECURITIES (COST:
$34,998,843) 34,998,843
------------
COMMERCIAL PAPER (70.3%)
10,000,000 American Express Credit Corp., 6.58%,
due 11/01/00 10,000,000
10,000,000 American General, 6.64%, due 11/01/00 10,000,000
10,000,000 Barclays U.S. Funding, 6.48%, due
11/03/00 9,996,400
5,000,000 Bellsouth Telecom, Inc., 6.45%, due
11/10/00 4,991,937
9,250,000 Ciesco L.P., 6.48%, due 11/01/00 9,250,000
2,400,000 Du Pont (E.I.) de Nemours & Co., Inc.,
6.46%, due 11/03/00 2,399,139
7,480,000 Du Pont (E.I.) de Nemours & Co., Inc.,
6.48%, due 11/07/00 7,471,922
2,000,000 Du Pont (E.I.) de Nemours & Co., Inc.,
6.48%, due 11/13/00 1,995,680
7,500,000 General Electric Capital Corp., 6.33%,
due 09/17/01 7,476,519
1,800,000 General Electric Capital Corp., 6.46%,
due 11/03/00 1,799,354
7,000,000 General Motors Acceptance Corp., 6.53%,
due 11/06/00 6,993,651
10,000,000 Household Finance Corp., 6.58%, due
11/01/00 10,000,000
8,500,000 Illinois Tool Works, 6.49%, due 12/05/00 8,447,900
2,000,000 International Lease Finance Corp.,
6.47%, due 11/13/00 1,995,687
6,000,000 International Lease Finance Corp.,
6.49%, due 01/18/01 5,915,630
6,200,000 May Department Stores Co., 6.47%, due
11/03/00 6,197,771
5,000,000 Merrill Lynch & Co., Inc., 7.57%, due
11/09/01 5,046,796
1,800,000 Metlife Funding, Inc., 6.5%, due
11/09/00 1,797,400
11,100,000 Morgan Stanley Dean Witter & Co., 6.58%,
due 11/01/00 11,100,000
10,000,000 Nestle Capital Corp., 6.46%, due
11/02/00 9,998,206
2,850,000 Northern Illinois Gas Co., 6.47%, due
11/01/00 2,850,000
11,000,000 Sara Lee Corp., 6.5%, due 11/02/00 10,998,014
10,000,000 Schering-Plough Corp., 6.45%, due
11/15/00 9,974,917
6,624,000 Walt Disney Co., 6.47%, due 11/08/00 6,615,667
------------
TOTAL COMMERCIAL PAPER (COST:
$163,312,590) 163,312,590
------------
CORPORATE FIXED INCOME SECURITIES
(21.3%)
6,650,000 Associates Corp. of North America,
5.85%, due 01/15/01 6,635,895
5,000,000 Associates Corp. of North America,
6.75%, due 07/15/01 4,992,453
10,000,000 Ford Motor Credit Corp., 6.25%, due
11/08/00 9,999,536
3,900,000 International Lease Finance Corp.,
5.875%, due 01/15/01 3,893,359
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
11
<PAGE>
TCW GALILEO MONEY MARKET FUND
--------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- ------------
<C> <S> <C>
CORPORATE FIXED INCOME SECURITIES
(CONTINUED)
$ 8,800,000 Nationsbank N.A., 5.75%, due 03/15/01 $ 8,769,880
8,000,000 Wal-Mart Stores, Inc., 8.625%, due
04/01/01 8,041,091
7,000,000 Wells Fargo & Co., 6.875%, due 05/10/01 7,002,630
------------
TOTAL CORPORATE FIXED INCOME SECURITIES
(COST: $49,334,844) 49,334,844
------------
TOTAL FIXED INCOME SECURITIES (COST:
$247,646,277) (106.7%) 247,646,277
------------
<CAPTION>
SHORT-TERM INVESTMENTS (COST: $46,318) (0.0%)
---------------------------------------------
<C> <S> <C>
46,318 Investors Bank & Trust Depository Reserve,
5.82%, due 11/01/00 46,318
------------
TOTAL INVESTMENTS (COST: $247,692,595)
(106.7%) 247,692,595
LIABILITIES IN EXCESS OF OTHER ASSETS (-6.7%) (15,517,361)
------------
NET ASSETS (100.0%) $232,175,234
============
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
12
<PAGE>
TCW GALILEO CORE FIXED INCOME FUND
[ICON]
--------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS OCTOBER 31, 2000
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT FIXED INCOME SECURITIES VALUE
---------- ----------------------- -----------
<C> <S> <C>
CORPORATE BONDS
AEROSPACE/DEFENSE (1.5% OF NET ASSETS)
$ 75,000 BE Aerospace, Inc., 9.5%, due 11/01/08 $ 74,250
500,000 Honeywell International, Inc., 7.5%, due
03/01/10 507,700
500,000 Lockheed Martin Corp., 7.95%, due
12/01/05 513,735
-----------
TOTAL AEROSPACE/DEFENSE 1,095,685
-----------
AUTOMOTIVE (0.1%)
70,000 Hayes Lemmerz International, Inc.,
8.25%, due 12/15/08 51,800
-----------
BANKING & FINANCIAL SERVICES (4.3%)
400,000 Abbey National PLC, 6.69%, due 10/17/05 392,500
500,000 Associates Corp. of North America,
5.75%, due 11/01/03 483,730
500,000 CIT Group, Inc., 7.375%, due 03/15/03 498,160
300,000 FleetBoston Financial Corp., 7.25%, due
09/15/05 299,952
50,000 Forest City Enterprises, Inc., 8.5%, due
03/15/08 46,500
200,000 Household Finance Corp., 8%, due
05/09/05 204,680
500,000 Morgan Stanley Dean Witter & Co., 7.75%,
due 06/15/05 509,775
500,000 National Rural Utilities Cooperative
Financial Corp., 5%, due 10/01/02 486,355
60,000 Security Pacific Corp., 11.5%, due
11/15/00 60,075
200,000 Wells Fargo & Co., 7.2%, due 05/01/03 201,624
-----------
TOTAL BANKING & FINANCIAL SERVICES 3,183,351
-----------
BUILDING MATERIALS (0.3%)
75,000 Juno Lighting, Inc., 11.875%, due
07/01/09 64,125
75,000 NCI Building Systems, Inc., 9.25%, due
05/01/09 72,000
50,000 Nortek, Inc., 9.875%, due 03/01/04 45,500
-----------
TOTAL BUILDING MATERIALS 181,625
-----------
CHEMICALS (0.9%)
5,000 GEO Specialty Chemicals, Inc., 10.125%,
due 08/01/08 4,000
600,000 IMC Global, Inc., 6.5%, due 08/01/03 576,582
50,000 ISP Holdings, Inc., 9%, due 10/15/03 41,000
50,000 Polymer Group, Inc., 8.75%, due 03/01/08 35,750
-----------
TOTAL CHEMICALS 657,332
-----------
COMMERCIAL SERVICES (0.3%)
150,000 Stericycle, Inc., 12.375%, due 11/15/09 156,000
50,000 United Rentals, Inc., 9.5%, due 06/01/08 42,625
50,000 Williams Scotsman, Inc., 9.875%, due
06/01/07 42,500
-----------
TOTAL COMMERCIAL SERVICES 241,125
-----------
COMPUTER SERVICES (0.3%)
200,000 Hewlett-Packard Co., 7.15%, due 06/15/05 200,280
100,000 PSINet, Inc., 11%, due 08/01/09 50,000
-----------
TOTAL COMPUTER SERVICES 250,280
-----------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
13
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--------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
---------- -----------
<C> <S> <C>
CONSTRUCTION (0.4%)
$ 200,000 General Electric Global Insurance Corp.,
7%, due 02/15/26 $ 186,148
75,000 Lennar Corp., (144A), 9.95%, due
05/01/10 75,750*
-----------
TOTAL CONSTRUCTION 261,898
-----------
CONTAINERS & PACKAGING (0.5%)
75,000 Anchor Glass Container Corp., 9.875%,
due 03/15/08 36,750
100,000 Consolidated Container Companies, LLC,
(144A), 10.125%, due 07/15/09 90,000*
75,000 Consumers Packaging, Inc., 9.75%, due
02/01/07 14,906
250,000 U.S. Can Corp., (144A), 12.375%, due
10/01/10 245,000*
-----------
TOTAL CONTAINERS & PACKAGING 386,656
-----------
ELECTRONICS (0.4%)
75,000 360networks, Inc., (144A), 13%, due
05/01/08 63,000*
175,000 Amkor Technologies, Inc., 9.25%, due
05/01/06 170,625
80,000 Viasystems, Inc., 9.75%, due 06/01/07 71,600
-----------
TOTAL ELECTRONICS 305,225
-----------
ENERGY & OIL SERVICES (2.2%)
500,000 Anadarko Petroleum Corp., 7.2%, due
03/15/29 467,465
300,000 Coastal Corp., 6.95%, due 06/01/28 267,843
100,000 Forest Oil Corp., 10.5%, due 01/15/06 102,500
100,000 Grey Wolf, Inc., 8.875%, due 07/01/07 96,500
15,000 Gulf Canada Resources, Ltd., 9.25%, due
01/15/04 15,192
50,000 P&L Coal Holdings Corp., 9.625%, due
05/15/08 48,750
300,000 Phillips Petroleum Co., 6.375%, due
03/30/09 281,487
125,000 Pride International, Inc., 10%, due
06/01/09 131,875
200,000 Transcontinental Gas Pipe Lines, 6.25%,
due 01/15/08 188,000
-----------
TOTAL ENERGY & OIL SERVICES 1,599,612
-----------
ENTERTAINMENT & LEISURE (1.0%)
150,000 Horseshoe Gaming Holdings, 8.625%, due
05/15/09 146,250
50,000 International Game Technology, Inc.,
8.375%, due 05/15/09 48,750
75,000 Marvel Enterprises, Inc., 12%, due
06/15/09 48,000
500,000 Viacom, Inc., 7.7%, due 07/30/10 509,805
-----------
TOTAL ENTERTAINMENT & LEISURE 752,805
-----------
FOODS, HOTELS & RESTAURANTS (0.7%)
500,000 Coca-Cola Enterprises, Inc., 5.75%, due
11/01/08 453,360
100,000 New World Pasta Company, Inc., 9.25%,
due 02/15/09 45,000
-----------
TOTAL FOODS, HOTELS & RESTAURANTS 498,360
-----------
HEALTHCARE (0.7%)
75,000 Bio-Rad Laboratories, Inc., (144A),
11.625%, due 02/15/07 77,250*
75,000 Concentra Operating Corp., (144A), 13%,
due 08/15/09 66,750*
100,000 Express Scripts, Inc., 9.625%, due
06/15/09 99,000
50,000 Hanger Orthopedic Group, Inc., 11.25%,
due 06/15/09 35,000
150,000 Hudson Respiratory Care, Inc., 9.125%,
due 04/15/08 90,000
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
14
<PAGE>
[ICON]
--------------------------------------------------------------------------------
OCTOBER 31, 2000
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
---------- -----------
<C> <S> <C>
HEALTHCARE (CONTINUED)
$ 50,000 Prime Medical Services, Inc., 8.75%, due
04/01/08 $ 43,500
75,000 Unilab Finance Corp., 12.75%, due
10/01/09 81,656
-----------
TOTAL HEALTHCARE 493,156
-----------
HOUSEHOLD PRODUCTS (0.0%)
25,000 Home Interiors & Gifts, Inc., 10.125%,
due 06/01/08 11,000
-----------
MACHINERY (0.3%)
250,000 United Tech Corp., 7.5%, due 09/15/29 250,550
-----------
MEDIA--BROADCASTING & PUBLISHING (2.0%)
75,000 American Media Operations, Inc., 10.25%,
due 05/01/09 72,750
100,000 Charter Communications, Inc., 8.625%,
due 04/01/09 90,500
150,000 Classic Cable, Inc., 9.375%, due
08/01/09 114,000
600,000 Clear Channel Communications, Inc.,
7.25%, due 09/15/03 596,550
25,000 Hollinger International Publishing,
Inc., 9.25%, due 03/15/07 25,000
25,000 Primedia, Inc., 7.625%, due 04/01/08 22,625
75,000 Sinclair Broadcasting Group, Inc., 9%,
due 07/15/07 67,500
50,000 Sinclair Broadcasting Group, Inc., 10%,
due 09/30/05 47,375
100,000 Spanish Broadcasting System, Inc.,
9.625%, due 11/01/09 97,500
25,000 STC Broadcasting, Inc., 11%, due
03/15/07 24,750
300,000 UIH Australia/Pacific, Inc., 0%, due
05/15/06 255,000
50,000 WRC Media Corp., 12.75%, due 11/15/09 43,000
-----------
TOTAL MEDIA--BROADCASTING & PUBLISHING 1,456,550
-----------
METALS (0.3%)
175,000 International Wire Group, Inc., Series
B, 11.75%, due 06/01/05 174,125
100,000 Neenah Corp., 11.125%, due 05/01/07 75,000
40,000 Wheeling Pittsburgh Corp., 9.25%, due
11/15/07 3,200#
-----------
TOTAL METALS 252,325
-----------
PAPER & FOREST PRODUCTS (0.6%)
100,000 Packaging Corp. of North America,
9.625%, due 04/01/09 102,250
325,000 Riverwood International Corp., 10.625%,
due 08/01/07 318,500
-----------
TOTAL PAPER & FOREST PRODUCTS 420,750
-----------
POLLUTION CONTROL (0.0%)
25,000 Allied Waste North America, Inc.,
7.625%, due 01/01/06 22,250
50,000 Safety-Kleen Corp., 9.25%, due 05/15/09 500#
50,000 Safety-Kleen Services, Inc., 9.25%, due
06/01/08 1,500#
-----------
TOTAL POLLUTION CONTROL 24,250
-----------
RETAIL (0.6%)
500,000 Target Corp., 6.65%, due 08/01/28 419,815
-----------
TELECOMMUNICATIONS (3.4%)
75,000 Alliance Atlantis Communications Corp.,
13%, due 12/15/09 75,000
100,000 Crown Castle International Corp.,
10.75%, due 08/01/11 102,750
50,000 Echostar Broadband Corp., (144A),
10.375%, due 10/01/07 50,000*
500,000 Exodus Communications, Inc., (144A),
11.625%, due 07/15/10 460,000*
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
15
<PAGE>
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--------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
---------- -----------
<C> <S> <C>
TELECOMMUNICATIONS (CONTINUED)
$ 400,000 Level 3 Communications, Inc., 9.125%,
due 05/01/08 $ 324,000
500,000 Motorola, Inc., 7.5%, due 05/15/25 482,625
100,000 Nextlink Communications, Inc., 10.75%,
due 06/01/09 88,000
100,000 Northern Telecom Capital Corp., 7.4%,
due 06/15/06 99,250
75,000 Primus Telecom Group, Inc., 12.75%, due
10/15/09 38,250
75,000 Rhythms NetConnections, Inc., 12.75%,
due 04/15/09 36,000
100,000 TeleCorp PCS, Inc., (144A), 10.625%, due
07/15/10 101,000*
500,000 Telefonica Europe BV, 8.25%, due
09/15/30 515,210
160,000 US West Capital Funding, Inc., 6.25%,
due 07/15/05 152,928
-----------
TOTAL TELECOMMUNICATIONS 2,525,013
-----------
TEXTILES, CLOTHING & FABRICS (0.0%)
50,000 Westpoint Stevens, Inc., 7.875%, due
06/15/08 34,500
-----------
TRANSPORTATION (0.9%)
300,000 American Airlines, Inc., 7.024%, due
10/15/09 292,209
200,000 Continental Airlines, Inc., 7.056%, due
09/15/09 193,906
150,000 Southwest Airlines Co., 7.375%, due
03/01/27 140,437
-----------
TOTAL TRANSPORTATION 626,552
-----------
UTILITIES (1.0%)
250,000 AES Corp., 9.375%, due 09/15/10 248,575
50,000 Calpine Corp., 8.625%, due 08/15/10 49,804
400,000 Carolina Power & Light Corp., 5.95%, due
03/01/09 364,104
75,000 TNP Enterprises, Inc., (144A), 10.25%,
due 04/01/10 77,625*
-----------
TOTAL UTILITIES 740,108
-----------
TOTAL CORPORATE BONDS (COST:
$17,553,673) (22.7%) 16,720,323
-----------
ASSET BACKED SECURITIES (0.5%)
116,367 Southern Pacific Secured Assets Corp.
(97-3-A4), 6.66%, due 06/25/24 116,231
250,000 Standard Credit Card Master Trust
(93-2-A), 5.95%, due 10/07/04 244,257
-----------
TOTAL ASSET BACKED SECURITIES (COST:
$362,998) 360,488
-----------
COLLATERALIZED MORTGAGE OBLIGATIONS
(35.6%)
1,555,165 ABN Amro Mortgage Corp. (98-4-A6),
6.75%, due 11/25/28 (TAC) 1,436,986
239,195 Bear Stearns Mortgage Securities, Inc.
(97-2-A2), 6.5%, due 04/28/24 236,952
122,455 Bear Stearns Mortgage Securities, Inc.
(97-2-A5), 6.875%, due 01/28/24 117,749
466,265 Citicorp Mortgage Securities (98-5-A1),
6.75%, due 03/25/25 455,920
2,561,447 Federal Home Loan Mortgage Corp.
(1468-ZA), 7%, due 02/15/22 (PAC) 2,467,698
41,429 Federal Home Loan Mortgage Corp.
(1578-O), 7%, due 09/15/23 (PAC) 40,042
781,000 Federal Home Loan Mortgage Corp.
(1588-QD), 6.5%, due 09/15/23 (PAC) 698,066
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
16
<PAGE>
[ICON]
--------------------------------------------------------------------------------
OCTOBER 31, 2000
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
---------- -----------
<C> <S> <C>
COLLATERALIZED MORTGAGE OBLIGATIONS
(CONTINUED)
$ 450,000 Federal Home Loan Mortgage Corp.
(1944-GB), 7.5%, due 04/17/24 $ 450,918
1,000,000 Federal Home Loan Mortgage Corp.
(2018-H), 6.5%, due 01/15/28 (PAC) 976,890
1,000,000 Federal Home Loan Mortgage Corp.
(2043-CH), 6%, due 08/15/26 (PAC) 921,440
1,000,000 Federal Home Loan Mortgage Corp.
(2061-TA), 5.25%, due 10/15/27 (PAC) 847,280
500,000 Federal Home Loan Mortgage Corp.
(2063-PV), 6.25%, due 10/15/26 (PAC) 467,995
2,000,000 Federal Home Loan Mortgage Corp.
(2151-JE), 6%, due 01/15/27 1,775,772
2,536,884 Federal Home Loan Mortgage Corp.
(2211-YL), 7%, due 01/15/30 2,439,641
3,000,000 Federal Home Loan Mortgage Corp.
(2227-QB), 7.5%, due 10/15/27 (PAC) 2,970,147
16,357 Federal Home Loan Mortgage
Corp.-Government National Mortgage
Association (41-K), 8%, due 04/25/24
(TAC) 16,873
900,000 Federal National Mortgage Association,
6.5%, due 04/29/09 857,394
535,683 Federal National Mortgage Association
(94-2-N), 6.5%, due 01/25/24 (TAC) 504,715
359,885 Federal National Mortgage Association
(G3-40-ZC), 6.5%, due 12/25/23 338,648
1,446,582 Financial Asset Securitization, Inc.
(97-NAM1-A4), 7.75%, due 05/25/27 1,436,304
1,000,000 GE Capital Mortgage Services, Inc.
(99-15-A12), 7%, due 08/25/29 962,620
966,698 Norwest Asset Securities Corp.
(97-8-A4), 7.5%, due 06/25/27 943,308
389,457 Norwest Asset Securities Corp.
(97-15-A1), 6.75%, due 10/25/12 386,053
1,980,558 Norwest Asset Securities Corp.
(98-20-A10), 6.75%, due 09/25/28 1,908,050
1,296,762 PNC Mortgage Securities Corp.
(99-4-4A1), 6.5%, due 05/25/29 1,246,494
350,000 Residential Funding Mortgage Securities
I (97-S2-A7), 7%, due 12/25/27 334,035
477,740 Residential Funding Mortgage Securities
I (97-S5-A2), 7.5%, due 04/25/27 470,874
400,000 Residential Funding Mortgage Securities
I (98-S8-A3), 6.5%, due 04/25/28 366,750
-----------
TOTAL COLLATERALIZED MORTGAGE
OBLIGATIONS (COST: $26,396,514) 26,075,614
-----------
FOREIGN GOVERNMENT BONDS & NOTES (5.6%)
CAD720,000 Canada (Government of), 5%, due 09/01/04 458,186
EUR282,000 Federal Republic of Germany, 6%, due
07/04/07 249,599
EUR100,000 Federal Republic of Germany, 6.5%, due
04/23/03 87,773
EUR600,000 Federal Republic of Germany, 6.5%, due
10/14/05 538,489
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
17
<PAGE>
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--------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
---------- -----------
<C> <S> <C>
FOREIGN GOVERNMENT BONDS & NOTES
(CONTINUED)
EUR 816,000 French O.A.T., 5.25%, due 04/25/08 $ 690,006
EUR 69,000 Hypothekenbk In Essen (Germany), 4.25%,
due 07/06/09 52,332
EUR 135,000 Kingdom of Belgium, 6.25%, due 03/28/28 119,123
DKK 680,000 Kingdom of Denmark, 7%, due 12/15/04 81,665
SEK 1,495,000 Kingdom of Sweden, 5%, due 01/15/04 149,888
EUR 200,000 Kingdom of the Netherlands, 6.5%, due
04/15/03 175,851
AUD 55,000 New South Wales Treasury Corp., 5.5%,
due 10/01/02 28,000
$200,000 Province of Manitoba (Canada), 5.5%, due
10/01/08 182,000
200,000 Province of Quebec (Canada), 7%, due
01/30/07 199,262
EUR 316,000 Spain (Government of), 5.25%, due
01/31/03 267,985
$400,000 The Dominion of New Zealand, 8.75%, due
12/15/06 439,520
GBP 75,000 United Kingdom Treasury Strip, 7%, due
06/07/02 110,920
$300,000 United Mexican States Global Bond,
9.875%, due 02/01/10 310,200
-----------
TOTAL FOREIGN GOVERNMENT BONDS & NOTES
(COST: $4,664,583) 4,140,799
-----------
U.S. GOVERNMENT AGENCY OBLIGATIONS
(15.9%)
700,000 Federal Home Loan Mortgage Corp., 5%,
due 01/15/04 669,585
1,350,000 Federal Home Loan Mortgage Corp., 5.75%,
due 07/15/03 1,326,083
1,100,000 Federal Home Loan Mortgage Corp., 6.25%,
due 10/15/02 1,096,057
897,287 Federal Home Loan Mortgage Corp., Pool
#786793, 6.984%, due 10/01/29 881,762
2,050,000 Federal National Mortgage Association,
5.25%, due 01/15/03 2,000,021
850,000 Federal National Mortgage Association,
6%, due 05/15/08 815,864
942,087 Federal National Mortgage Association,
Pool #510299, 6.705%, due 08/01/29 911,197
940,471 Federal National Mortgage Association,
Pool #539431, 6.51%, due 06/01/30 933,418
2,997,693 Federal National Mortgage Association,
Pool #557073, 7.28%, due 06/01/40 2,997,693
-----------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(COST: $11,627,050) 11,631,680
-----------
U.S. TREASURY BONDS (6.3%)
1,950,000 United States Treasury Bonds, 6.125%,
due 11/15/27 1,993,505
1,000,000 United States Treasury Bonds, 8.5%, due
02/15/20 1,281,300
1,000,000 United States Treasury Bonds, 12%, due
08/15/13 1,367,031
-----------
TOTAL U.S. TREASURY BONDS (COST:
$4,544,890) 4,641,836
-----------
U.S. TREASURY NOTES (8.4%)
400,000 United States Treasury Notes, 5.75%, due
06/30/01 398,148
1,250,000 United States Treasury Notes, 5.875%,
due 10/31/01 1,244,713
1,100,000 United States Treasury Notes, 5.875%,
due 11/15/04 1,101,144
1,400,000 United States Treasury Notes, 6%, due
08/15/09 1,414,112
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
18
<PAGE>
[ICON]
--------------------------------------------------------------------------------
OCTOBER 31, 2000
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
---------- -----------
<C> <S> <C>
U.S. TREASURY NOTES (CONTINUED)
$ 950,000 United States Treasury Notes, 6.25%, due
02/15/07 $ 969,599
1,000,000 United States Treasury Notes, 6.5%, due
08/15/05 1,027,680
-----------
TOTAL U.S. TREASURY NOTES (COST:
$6,123,601) 6,155,396
-----------
TOTAL FIXED INCOME SECURITIES (COST:
$71,273,309) (95.0%) 69,726,136
-----------
<CAPTION>
NUMBER OF
SHARES OR
WARRANTS EQUITY SECURITIES
---------- -----------------
<C> <S> <C>
220 Insilco Corp., Warrants, expire 08/15/07 --**
67 WRC Media Corp., Common Stock --**
-----------
TOTAL EQUITY SECURITIES (COST: $0)
(0.0%) --
-----------
<CAPTION>
PRINCIPAL
AMOUNT SHORT-TERM INVESTMENTS
---------- ----------------------
<C> <S> <C>
$ 107,713 American Express Co., 6.54%, due
11/21/00 107,713***
107,713 American Express Co., 6.63%, due
01/18/01 107,713***
53,856 Bank of America, 6.64%, due 01/16/01 53,856***
53,856 Bank of Nova Scotia, 6.53%, due 11/27/00 53,856***
80,785 Bank of Nova Scotia, 6.67%, due 01/05/01 80,785***
53,856 Bayerische Hypo-Und Vereinsbank AG,
6.63%, due 02/01/01 53,856***
535,218 Fleet National Bank, 6.725%, due
04/30/01 535,218***
564,219 Foreign Currency Call Accounts 549,818
2,611,479 Investors Bank & Trust Depository
Reserve, 5.82%, due 11/01/00 2,611,479
317,753 Merrimac Money Market Fund, 6.549%, due
11/01/00 317,753***
-----------
TOTAL SHORT-TERM INVESTMENTS (COST:
$4,486,448) (6.1%) 4,472,047
-----------
TOTAL INVESTMENTS (COST: $75,759,757)
(101.1%) 74,198,183
LIABILITIES IN EXCESS OF OTHER ASSETS
(-1.1%) (828,656)
-----------
NET ASSETS (100.0%) $73,369,527
===========
</TABLE>
NOTES TO THE SCHEDULE OF INVESTMENTS:
AUD - AUSTRALIAN DOLLAR.
CAD - CANADIAN DOLLAR.
DKK - DANISH KRONE.
EUR - EURO CURRENCY.
GBP - BRITISH POUND STERLING.
SEK - SWEDISH KRONA.
PAC - PLANNED AMORTIZATION CLASS.
TAC - TARGET AMORTIZATION CLASS.
* RESTRICTED SECURITY (NOTE 9).
** NON-INCOME PRODUCING.
*** REPRESENTS INVESTMENTS OF SECURITY LENDING COLLATERAL (NOTE 3).
# COMPANY IS NOT MAKING INTEREST PAYMENTS.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
19
<PAGE>
TCW GALILEO HIGH YIELD BOND FUND
--------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT FIXED INCOME SECURITIES VALUE
----------- ----------------------- ------------
<C> <S> <C>
ADVERTISING (0.7% OF NET ASSETS)
$ 1,245,000 Adams Outdoor Advertising, L.P., 10.75%,
due 03/15/06 $ 1,273,012
------------
AEROSPACE/DEFENSE (0.9%)
600,000 BE Aerospace, Inc., 8%, due 03/01/08 549,000
1,295,000 BE Aerospace, Inc., 9.5%, due 11/01/08 1,282,050
------------
TOTAL AEROSPACE/DEFENSE 1,831,050
------------
AUTOMOTIVE (2.2%)
1,075,000 American Axle & Manufacturing Holdings,
Inc., 9.75%, due 03/01/09 959,437
850,000 Hayes Lemmerz International, Inc.,
8.25%, due 12/15/08 629,000
970,000 Hayes Lemmerz International, Inc.,
9.125%, due 07/15/07 780,850
350,000 JL French Automotive Castings, Inc.,
11.5%, due 06/01/09 206,500
1,500,000 Lear Corp., Series B, 8.11%, due
05/15/09 1,383,750
170,000 Navistar International Corp., 8%, due
02/01/08 155,550
475,000 Transportation Manufacturing Operation
Co., 11.25%, due 05/01/09 228,000
------------
TOTAL AUTOMOTIVE 4,343,087
------------
BANKING & FINANCIAL SERVICES (2.2%)
1,225,000 AmeriCredit Corp., 9.875%, due 04/15/06 1,188,250
165,000 Chevy Chase Savings Bank, 9.25%, due
12/01/05 156,750
280,000 Chevy Chase Savings Bank, 9.25%, due
12/01/08 259,000
1,245,000 Forest City Enterprises, Inc., 8.5%, due
03/15/08 1,157,850
1,000,000 GS Escrow Corp., (144A), 7.125%, due
08/01/05 926,630*
650,000 Metris Companies, Inc., 10.125%, due
07/15/06 614,250
------------
TOTAL BANKING & FINANCIAL SERVICES 4,302,730
------------
BUILDING MATERIALS (1.4%)
285,000 Building Materials Corp., 8.625%, due
12/15/06 85,500
700,000 Juno Lighting, Inc., 11.875%, due
07/01/09 598,500
1,500,000 NCI Building Systems, Inc., 9.25%, due
05/01/09 1,440,000
600,000 Nortek, Inc., 9.25%, due 03/15/07 534,000
75,000 Nortek, Inc., 9.875%, due 03/01/04 68,250
------------
TOTAL BUILDING MATERIALS 2,726,250
------------
CHEMICALS (4.8%)
1,305,000 Borden Chemicals & Plastics, L.P., 9.5%,
due 05/01/05 691,650
350,000 General Chemical Industrial Products,
10.625%, due 05/01/09 238,000
1,000,000 Gentek, Inc., 11%, due 08/01/09 997,500
75,000 GEO Specialty Chemicals, Inc., 10.125%,
due 08/01/08 60,000
1,175,000 Huntsman ICI Chemicals, LLC, 10.125%,
due 07/01/09 1,116,250
915,000 Huntsman Industries/Specialty Chemical
Corp., (144A), 9.5%, due 07/01/07 530,700*
1,250,000 ISP Holdings, Inc., 9%, due 10/15/03 1,025,000
1,450,000 Lyondell Chemical Companies, Inc.,
9.625%, due 05/01/07 1,406,500
225,000 Lyondell Chemical Companies, Inc.,
10.875%, due 05/01/09 216,000
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
20
<PAGE>
[ICON]
--------------------------------------------------------------------------------
OCTOBER 31, 2000
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- ------------
<C> <S> <C>
CHEMICALS (CONTINUED)
$ 1,955,000 Polymer Group, Inc., 8.75%, due 03/01/08 $ 1,397,825
750,000 Sterling Chemicals, Inc., Series B,
12.375%, due 07/15/06 716,250
1,215,000 Texas Petrochemicals Corp., 11.125%, due
07/01/06 996,300
------------
TOTAL CHEMICALS 9,391,975
------------
COMMERCIAL SERVICES (2.6%)
750,000 Allied Waste North America, 10%, due
08/01/09 648,750
35,000 Anthony Crane Rentals, L.P., 10.375%,
due 08/01/08 14,700
825,000 Avis Rent A Car, Inc., 11%, due 05/01/09 882,750
1,300,000 Stericycle, Inc., 12.375%, due 11/15/09 1,352,000
175,000 United Rentals, Inc., 9%, due 04/01/09 140,875
425,000 United Rentals, Inc., 9.25%, due
01/15/09 348,500
650,000 United Rentals, Inc., 9.5%, due 06/01/08 554,125
1,365,000 Williams Scotsman, Inc., 9.875%, due
06/01/07 1,160,250
------------
TOTAL COMMERCIAL SERVICES 5,101,950
------------
COMPUTER SERVICES (1.7%)
1,150,000 Anteon Corp., 12%, due 05/15/09 1,023,500
1,230,000 infoUSA, Inc., 9.5%, due 06/15/08 824,100
1,250,000 PSINet, Inc., 10.5%, due 12/01/06 625,000
1,900,000 PSINet, Inc., 11%, due 08/01/09 950,000
------------
TOTAL COMPUTER SERVICES 3,422,600
------------
CONGLOMERATES (0.3%)
620,000 Insilco Corp., 12%, due 08/15/07 607,600
------------
CONSTRUCTION (1.8%)
1,525,000 Atrium Companies, Inc., 10.5%, due
05/01/09 1,326,750
150,000 Hovnanian Enterprises, Inc., 9.125%, due
05/01/09 130,500
600,000 Lennar Corp., (144A), 9.95%, due
05/01/10 606,000*
460,000 Standard Pacific Corp., 8%, due 02/15/08 424,925
1,075,000 Standard Pacific Corp., 9.5%, due
09/15/10 1,075,000
------------
TOTAL CONSTRUCTION 3,563,175
------------
CONTAINERS & PACKAGING (2.7%)
950,000 Anchor Glass Container Corp., 9.875%,
due 03/15/08 465,500
430,000 BWAY Corp., 10.25%, due 04/15/07 393,450
1,400,000 Consolidated Container Companies, LLC,
(144A), 10.125%, due 07/15/09 1,260,000*
700,000 Consumers International, Inc., 10.25%,
due 04/01/05 210,000
665,000 Consumers Packaging, Inc., 9.75%, due
02/01/07 132,169
800,000 Huntsman Packaging Corp., (144A), 13%,
due 06/01/10 624,000*
450,000 Owens-Illinois, Inc., 7.15%, due
05/15/05 324,000
425,000 Owens-Illinois, Inc., 7.5%, due 05/15/10 286,875
425,000 Owens-Illinois, Inc., 8.1%, due 05/15/07 306,000
745,000 Paperboard Industries International,
Inc., 8.375%, due 09/15/07 558,750
750,000 U.S. Can Corp., (144A), 12.375%, due
10/01/10 735,000*
------------
TOTAL CONTAINERS & PACKAGING 5,295,744
------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
21
<PAGE>
TCW GALILEO HIGH YIELD BOND FUND
--------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- ------------
<C> <S> <C>
ELECTRONICS (3.4%)
$ 1,050,000 360networks, Inc., (144A), 13%, due
05/01/08 $ 882,000*
1,325,000 Amkor Technologies, Inc., 9.25%, due
05/01/06 1,291,875
1,410,000 Communications & Power Industries, Inc.,
12%, due 08/01/05 987,000
2,035,000 International Wire Group, Inc., 11.75%,
due 06/01/05 2,024,825
1,740,000 Viasystems, Inc., 9.75%, due 06/01/07 1,557,300
------------
TOTAL ELECTRONICS 6,743,000
------------
ENERGY & OIL SERVICES (6.2%)
1,485,000 Forest Oil Corp., 10.5%, due 01/15/06 1,522,125
875,000 Grey Wolf, Inc., 8.875%, due 07/01/07 844,375
35,000 Gulf Canada Resources, Ltd., 9.25%, due
01/15/04 35,447
275,000 Gulf Canada Resources, Ltd., 9.625%, due
07/01/05 284,768
2,190,000 Magnum Hunter Resources, Inc., 10%, due
06/01/07 2,168,100
2,000,000 Parker Drilling Co., 9.75%, due 11/15/06 1,970,000
1,175,000 Plains Resources, Inc., 10.25%, due
03/15/06 1,186,750
1,100,000 Pride International, Inc., 10%, due
06/01/09 1,160,500
1,800,000 R&B Falcon Corp., 9.5%, due 12/15/08 1,926,000
1,025,000 Trico Marine Services, Inc., Series G,
8.5%, due 08/01/05 978,875
------------
TOTAL ENERGY & OIL SERVICES 12,076,940
------------
ENTERTAINMENT & LEISURE (6.4%)
1,200,000 Anchor Gaming, (144A), 9.875%, due
10/15/08 1,212,000*
1,395,000 Boyd Gaming Corp., 9.25%, due 10/01/03 1,346,175
835,000 Cinemark USA, Inc., Series B, 9.625%,
due 08/01/08 350,700
130,000 Harrahs Operating Company, Inc., 7.875%,
due 12/15/05 126,100
1,165,000 Hollywood Park, Inc., 9.25%, due
02/15/07 1,243,637
675,000 Horseshoe Gaming Holdings, 8.625%, due
05/15/09 658,125
750,000 Imax Corp., 7.875%, due 12/01/05 427,500
1,020,000 Marvel Enterprises, Inc., 12%, due
06/15/09 652,800
1,025,000 MGM Mirage, Inc., 9.75%, due 06/01/07 1,062,156
1,000,000 Park Place Entertainment Inc., 8.875%,
due 09/15/08 980,000
1,000,000 Park Place Entertainment Inc., 9.375%,
due 02/15/07 1,002,500
930,000 Station Casinos, Inc., 9.75%, due
04/15/07 932,325
2,550,000 Station Casinos, Inc., (144A), 9.875%,
due 07/01/10 2,556,375*
------------
TOTAL ENTERTAINMENT & LEISURE 12,550,393
------------
FOODS, HOTELS & RESTAURANTS (3.2%)
1,300,000 Boca Resorts, Inc., 9.875%, due 04/15/09 1,228,500
620,000 Cott Corp., 9.375%, due 07/01/05 610,700
1,025,000 Di Giorgio Corp., 10%, due 06/15/07 881,500
1,230,000 HMH Properties, Inc., 7.875%, due
08/01/08 1,134,675
100,000 ITT Corp., (New), 6.25%, due 11/15/00 99,929
1,050,000 La Quinta/Meditrust, Inc., 7.11%, due
10/17/01 945,000
1,215,000 New World Pasta Company, Inc., 9.25%,
due 02/15/09 546,750
1,115,000 Packaged Ice, Inc., 9.75%, due 02/01/05 925,450
------------
TOTAL FOODS, HOTELS & RESTAURANTS 6,372,504
------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
22
<PAGE>
[ICON]
--------------------------------------------------------------------------------
OCTOBER 31, 2000
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- ------------
<C> <S> <C>
HEALTHCARE (4.9%)
$ 1,200,000 Bio-Rad Laboratories, Inc., (144A),
11.625%, due 02/15/07 $ 1,236,000*
1,850,000 Concentra Operating Corp., (144A), 13%,
due 08/15/09 1,646,500*
1,350,000 Express Scripts, Inc., 9.625%, due
06/15/09 1,336,500
750,000 Hanger Orthopedic Group, Inc., 11.25%,
due 06/15/09 525,000
645,000 Hudson Respiratory Care, Inc., 9.125%,
due 04/15/08 387,000
395,000 Insight Health Services Corp., Series B,
9.625%, due 06/15/08 355,500
890,000 Prime Medical Services, Inc., 8.75%, due
04/01/08 774,300
1,400,000 Tenet Healthcare Corp., 8.125%, due
12/01/08 1,351,000
980,000 Tenet Healthcare Corp., 8.625%, due
01/15/07 975,100
900,000 Unilab Finance Corp., 12.75%, due
10/01/09 979,875
------------
TOTAL HEALTHCARE 9,566,775
------------
HOUSEHOLD PRODUCTS (0.3%)
1,420,000 Home Interiors & Gifts, Inc., 10.125%,
due 06/01/08 624,800
------------
MACHINERY (0.5%)
1,105,000 AGCO Corp., 8.5%, due 03/15/06 1,022,125
------------
MEDIA--BROADCASTING & PUBLISHING (14.9%)
1,500,000 Acme Television Corp., 10.875%, due
09/30/04 1,410,000
1,000,000 Adelphia Communications Corp., 9.375%,
due 11/15/09 860,000
1,400,000 Adelphia Communications Corp., Series B,
9.25%, due 10/01/02 1,372,000
1,700,000 American Media Operations, Inc., 10.25%,
due 05/01/09 1,649,000
500,000 Benedek Communications, 0%, due 05/15/06 425,000
295,000 Century Communications Corp., 9.5%, due
03/01/05 271,400
550,000 Chancellor Media Corp., 8.125%, due
12/15/07 555,500
450,000 Charter Communications Holdings, LLC,
0%, due 04/01/11 263,250
2,000,000 Charter Communications Holdings, LLC,
(144A), 10%, due 04/01/09 1,965,000*
1,075,000 Citadel Broadcasting Corp., 9.25%, due
11/15/08 999,750
400,000 Classic Cable, Inc., 9.375%, due
08/01/09 304,000
2,250,000 Classic Cable, Inc., (144A), 10.5%, due
03/01/10 1,867,500*
585,000 CSC Holdings, Inc., 7.625%, due 07/15/18 519,960
2,100,000 EchoStar DBS Corp., 9.375%, due 02/01/09 2,068,500
750,000 Garden State Newspapers, Inc., 8.625%,
due 07/01/11 660,000
60,000 Hollinger International Publishing,
Inc., 8.625%, due 03/15/05 60,000
225,000 Hollinger International Publishing,
Inc., 9.25%, due 03/15/07 225,000
950,000 K-III Communications Corp., 8.5%, due
02/01/06 902,500
875,000 Lin Holdings Corp., 0%, due 03/01/08 621,250
245,000 Primedia, Inc., 7.625%, due 04/01/08 221,725
495,000 Rogers Cablesystems, Ltd., 10%, due
03/15/05 519,750
625,000 Rogers Communications, Inc., 8.875%, due
07/15/07 625,000
875,000 Sinclair Broadcasting Group, Inc., 9%,
due 07/15/07 787,500
2,200,000 Sinclair Broadcasting Group, Inc., 10%,
due 09/30/05 2,084,500
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
23
<PAGE>
TCW GALILEO HIGH YIELD BOND FUND
--------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- ------------
<C> <S> <C>
MEDIA--BROADCASTING & PUBLISHING
(CONTINUED)
$ 2,000,000 Spanish Broadcasting System, Inc.,
9.625%, due 11/01/09 $ 1,950,000
1,950,000 STC Broadcasting, Inc., 11%, due
03/15/07 1,930,500
2,850,000 UIH Australia/Pacific, Inc., 0%, due
05/15/06 2,422,500
905,000 Von Hoffmann Press, Inc., (144A),
10.875%, due 05/15/07 814,500*
1,075,000 WRC Media Corp., 12.75%, due 11/15/09 924,500
------------
TOTAL MEDIA--BROADCASTING & PUBLISHING 29,280,085
------------
METALS (3.8%)
1,000,000 AK Steel Corp., 9.125%, due 12/15/06 982,500
850,000 California Steel Industries, Series B,
8.5%, due 04/01/09 748,000
1,080,000 Golden Northwest Aluminum, Inc., 12%,
due 12/15/06 1,047,600
990,000 International Wire Group, Inc., Series
B, 11.75%, due 06/01/05 985,050
1,000,000 Jorgensen Earle M. Co., Series B, 9.5%,
due 04/01/05 850,000
1,930,000 Kaiser Aluminum & Chemicals Corp.,
10.875%, due 10/15/06 1,640,500
825,000 Neenah Corp., 11.125%, due 05/01/07 618,750
125,000 Neenah Corp., Sr. Sub. Notes, 11.125%,
due 05/01/07 93,750
890,000 Wheeling Pittsburgh Corp., 9.25%, due
11/15/07 71,200#
725,000 WHX Corp., 10.5%, due 04/15/05 478,500
------------
TOTAL METALS 7,515,850
------------
PAPER & FOREST PRODUCTS (6.7%)
750,000 Building Materials Corp., Series B, 8%,
due 10/15/07 225,000
3,225,000 Packaging Corp. of North America,
9.625%, due 04/01/09 3,297,563
1,565,000 Riverwood International Corp., 10.25%,
due 04/01/06 1,525,875
2,030,000 Riverwood International Corp., 10.625%,
due 08/01/07 1,989,400
875,000 Specialty Paperboard, Inc., 9.375%, due
10/15/06 853,125
4,000,000 Stone Container Corp., 12.25%, due
04/01/02 4,000,000
1,090,000 Sweetheart Cup Co., Inc., 10.5%, due
09/01/03 1,013,700
300,000 Tembec Industries, Inc., 8.625%, due
06/30/09 293,250
------------
TOTAL PAPER & FOREST PRODUCTS 13,197,913
------------
POLLUTION CONTROL (1.4%)
1,560,000 Allied Waste North America, Inc.,
7.625%, due 01/01/06 1,388,400
1,400,000 Allied Waste North America, Inc.,
7.875%, due 01/01/09 1,204,000
415,000 Envirosource, Inc., 9.75%, due 06/15/03 145,250
1,050,000 Mid-American Waste System, Inc., 12.25%,
due 02/15/03 10,500#
700,000 Safety-Kleen Corp., 9.25%, due 05/15/09 7,000#
245,000 Safety-Kleen Services, Inc., 9.25%, due
06/01/08 7,350#
------------
TOTAL POLLUTION CONTROL 2,762,500
------------
RETAIL (0.4%)
1,000,000 J. Crew Operating Corp., 10.375%, due
10/15/07 870,000
------------
TELECOMMUNICATIONS (14.9%)
1,250,000 Alamosa PCS Holdings, Inc., 0%, due
02/15/10 600,000
1,375,000 Alliance Atlantis Communications Corp.,
13%, due 12/15/09 1,375,000
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
24
<PAGE>
[ICON]
--------------------------------------------------------------------------------
OCTOBER 31, 2000
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- ------------
<C> <S> <C>
TELECOMMUNICATIONS (CONTINUED)
$ 1,100,000 CapRock Communications Corp., 11.5%, due
05/01/09 $ 1,058,750
1,075,000 CapRock Communications Corp., 12%, due
07/15/08 1,050,813
1,750,000 Crown Castle International Corp.,
10.75%, due 08/01/11 1,798,125
2,400,000 Echostar Broadband Corp., (144A),
10.375%, due 10/01/07 2,400,000*
3,950,000 Exodus Communications, Inc., (144A),
11.625%, due 07/15/10 3,634,000*
500,000 Frontier Corp., 6%, due 10/15/03 457,540
3,900,000 GT Group Telecom, Inc., 0%, due 02/01/10 1,443,000
1,875,000 KMC Telecom Holdings, Inc., 13.5%, due
05/15/09 600,000
685,000 Level 3 Communications, Inc., 9.125%,
due 05/01/08 554,850
2,350,000 Level 3 Communications, Inc., (144A),
11%, due 03/15/08 2,138,500*
1,025,000 Nextel Communications, Inc., 0%, due
10/31/07 796,938
1,000,000 Nextel Communications, Inc., 9.375%, due
11/15/09 970,000
545,000 Nextlink Communications, Inc., 9.625%,
due 10/01/07 465,975
2,130,000 Nextlink Communications, Inc., 10.75%,
due 11/15/08 1,863,750
1,600,000 Nextlink Communications, Inc., (144A),
0%, due 12/01/09 768,000*
2,400,000 Primus Telecom Group, Inc., 12.75%, due
10/15/09 1,224,000
2,000,000 RCN Corp., 10%, due 10/15/07 1,340,000
1,600,000 Rhythms NetConnections, Inc., 12.75%,
due 04/15/09 768,000
1,295,000 SBA Communications Corp., 0%, due
03/01/08 971,250
2,000,000 TeleCorp PCS, Inc., (144A), 10.625%, due
07/15/10 2,020,000*
1,100,000 Williams Communication Group, Inc.,
10.7%, due 10/01/07 940,500
------------
TOTAL TELECOMMUNICATIONS 29,238,991
------------
TEXTILES, CLOTHING & FABRICS (0.3%)
250,000 Westpoint Stevens, Inc., 7.875%, due
06/15/05 185,000
460,000 Westpoint Stevens, Inc., 7.875%, due
06/15/08 317,400
------------
TOTAL TEXTILES, CLOTHING & FABRICS 502,400
------------
TRANSPORTATION (0.2%)
305,000 International Shipholding Corp., 9%, due
07/01/03 301,950
------------
UTILITIES (3.6%)
1,500,000 AES Corp., 9.375%, due 09/15/10 1,491,450
1,500,000 Calpine Corp., 8.625%, due 08/15/10 1,494,135
825,000 CMS Energy Corp., 7.5%, due 01/15/09 716,991
1,115,000 CMS Energy Corp., 7.625%, due 11/15/04 1,064,301
85,000 CMS Energy Corp., 8.125%, due 05/15/02 83,893
1,737,366 Panda Funding Corp., 11.625%, due
08/20/12 1,702,618
425,000 TNP Enterprises, Inc., (144A), 10.25%,
due 04/01/10 439,875*
------------
TOTAL UTILITIES 6,993,263
------------
MISCELLANEOUS (0.4%)
1,245,000 Jordan Industries, Inc., 0%, due
04/01/09 784,350
------------
TOTAL FIXED INCOME SECURITIES (COST:
$207,391,286) (92.8%) 182,263,012
------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
25
<PAGE>
TCW GALILEO HIGH YIELD BOND FUND
--------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
NUMBER OF
SHARES,
WARRANTS,
OR RIGHTS EQUITY SECURITIES VALUE
----------- ----------------- ------------
<C> <S> <C>
3,300 Classic Communications, Inc., (144A),
Common Stock $ 55,011* **
1,250 Forman Petroleum Corp., Warrants, expire
06/01/04 1**
3,900 GT Group Telecom, Inc., Warrants, expire
02/01/10 253,500**
800 Huntsman Packaging Corp., Warrants,
expire 06/01/10 8,000**
620 Insilco Corp., Warrants, expire 08/15/07 0**
2,920 Terex Corp., Stock Appreciation Rights,
expire 05/15/02 40,880**
1,454 WRC Media Corp., Common Stock 0**
------------
TOTAL EQUITY SECURITIES (COST: $132)
(0.2%) 357,392
------------
<CAPTION>
PRINCIPAL
AMOUNT SHORT-TERM INVESTMENTS
----------- ----------------------
<C> <S> <C>
$ 1,413,200 American Express Co., 6.54%, due
11/21/00 1,413,200***
1,413,200 American Express Co., 6.63%, due
01/18/01 1,413,200***
706,600 Bank of America, 6.64%, due 01/16/01 706,600***
706,600 Bank of Nova Scotia, 6.53%, due 11/27/00 706,600***
1,059,900 Bank of Nova Scotia, 6.67%, due 01/05/01 1,059,900***
706,600 Bayerische Hypo-Und Vereinsbank AG,
6.63%, due 02/01/01 706,600***
4,022,090 Fleet National Bank, 6.725%, due
04/30/01 4,022,090***
10,216,101 Investors Bank & Trust Depository
Reserve, 5.82%, due 11/01/00 10,216,101
4,168,940 Merrimac Money Market Fund, 6.549%, due
11/01/00 4,168,940***
3,000,000 Royal Bank of Scotland, 6.65%, due
01/08/01 3,000,000***
------------
TOTAL SHORT-TERM INVESTMENTS (COST:
$27,413,231) (14.0%) 27,413,231
------------
TOTAL INVESTMENTS (COST: $234,804,649)
(107.0%) 210,033,635
LIABILITIES IN EXCESS OF OTHER ASSETS
(-7.0%) (13,731,550)
------------
NET ASSETS (100.0%) $196,302,085
============
</TABLE>
NOTES TO THE SCHEDULE OF INVESTMENTS:
* RESTRICTED SECURITY (NOTE 9).
** NON-INCOME PRODUCING.
*** REPRESENTS INVESTMENTS OF SECURITY LENDING COLLATERAL (NOTE 3).
# COMPANY IS NOT MAKING INTEREST PAYMENTS.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
26
<PAGE>
TCW GALILEO MORTGAGE-BACKED SECURITIES FUND
[ICON]
--------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS OCTOBER 31, 2000
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT FIXED INCOME SECURITIES VALUE
---------- ----------------------- -----------
<C> <S> <C>
COLLATERALIZED MORTGAGE OBLIGATIONS
(14.8% OF NET ASSETS)
$1,142,539 Collateral Mortgage Obligation Trust
(64-Z), 9%, due 11/20/20 $ 1,182,253
43,635 Federal Home Loan Mortgage Corp.
(1899-D), 7.25%, due 09/15/23 (TAC) 43,515
1,576,838 Federal Home Loan Mortgage Corp.
(2021-AD), 7.5%, due 08/15/24 1,547,981
1,682,290 Federal Home Loan Mortgage Corp.
(2032-AU), 7.5%, due 02/15/27 1,681,970
1,500,000 Federal Home Loan Mortgage Corp.
(2057-HJ), 7%, due 05/15/28 (PAC)(I/O) 499,125
260 Federal National Mortgage Association
(91-130-SQ), 6,606.643%, due 09/25/21
(I/O)(I/F) 27,672
1,094,278 Federal National Mortgage Association
(97-55-T), 7%, due 02/18/27 (TAC) 1,070,340
1,120,100 Federal National Mortgage Association
(G93-8-PH), 6.85%, due 01/25/21 (PAC) 1,113,940
315,550 GE Capital Mortgage Services, Inc.
(97-9-2A7), 7%, due 10/25/27 313,613
399,511 Greenwich Capital Acceptance, Inc.
(91-03), (Private Placement), 9.46%,
due 08/01/19 363,555*
54,758 Guardian Savings and Loan Association
(88-3-A), 6.497%, due 10/25/18 46,544*
54,867 Guardian Savings and Loan Association
(89-3-A), 7.535%, due 05/25/19 46,637*
508,392 Guardian Savings and Loan Association
(89-4-A), 7.504%, due 07/25/19 482,973*
378,418 Guardian Savings and Loan Association
(89-5-A), 7.751%, due 07/25/19 359,497*
175,371 Residential Funding Mortgage Securities
I (97-S12-A10), 6.7%, due 08/25/27
(PAC) 174,558
857 Resolution Trust Corp. (91-6-C2),
3,299.719%, due 08/25/20 (I/O) 17,569
2,002 Resolution Trust Corp. (91-6-D2),
3,262.129%, due 09/25/28 (I/O) 57,062
647,199 Sears Mortgage Securities (88-A-A2),
0.779%, due 05/25/18 (I/O) 6,601*
-----------
TOTAL COLLATERALIZED MORTGAGE
OBLIGATIONS (COST: $9,824,625) 9,035,405
-----------
U.S. GOVERNMENT AGENCY OBLIGATIONS
(80.7%)
15,784 Federal Home Loan Mortgage Corp., Pool
#212346, 9.5%, due 08/01/01 15,877
604,192 Federal Home Loan Mortgage Corp., Pool
#310005, 8.408%, due 11/01/19 604,192
146,177 Federal Home Loan Mortgage Corp., Pool
#410013, 7.549%, due 12/01/24 146,862
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
27
<PAGE>
TCW GALILEO MORTGAGE-BACKED SECURITIES FUND
--------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
---------- -----------
<C> <S> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS
(CONTINUED)
$2,169,338 Federal Home Loan Mortgage Corp., Pool
#610967, 7.413%, due 04/01/28 $ 2,192,764
1,291,661 Federal Home Loan Mortgage Corp., Pool
#755313, 7.006%, due 06/01/28 1,302,576
85,992 Federal Home Loan Mortgage Corp., Pool
#770584, 6.75%, due 05/01/19 85,861
184,266 Federal Home Loan Mortgage Corp., Pool
#785630, 7.074%, due 07/01/26 186,695
57,839 Federal Home Loan Mortgage Corp., Pool
#865006, 8.583%, due 08/01/18 58,861
97,120 Federal Home Loan Mortgage Corp., Pool
#865270, 7.604%, due 12/01/18 98,040
47,492 Federal Home Loan Mortgage Corp., Pool
#865275, 8.425%, due 02/01/19 48,798
28,436 Federal National Mortgage Association,
Pool #096193, 7.987%, due 09/01/18 28,905
100,159 Federal National Mortgage Association,
Pool #163492, 8.5%, due 05/01/16 102,226
180,125 Federal National Mortgage Association,
Pool #111365, 7.787%, due 09/01/19 183,702
337,913 Federal National Mortgage Association,
Pool #284916, 6.791%, due 06/01/27 340,788
291,832 Federal National Mortgage Association,
Pool #303334, 7.4%, due 04/01/25 299,548
83,012 Federal National Mortgage Association,
Pool #313920, 7.671%, due 11/01/27 83,760
81,241 Federal National Mortgage Association,
Pool #358869, 7.239%, due 09/01/26 82,842
22,148 Federal National Mortgage Association,
Pool #369080, 6.975%, due 04/01/27 22,346
279,565 Federal National Mortgage Association,
Pool #376663, 6.67%, due 06/01/27 281,097
41,580 Federal National Mortgage Association,
Pool #392275, 6.989%, due 06/01/27 42,190
1,425,682 Federal National Mortgage Association,
Pool #392536, 7.6%, due 08/01/27 1,422,332
144,510 Federal National Mortgage Association,
Pool #393943, 6.981%, due 07/01/27 146,558
104,905 Federal National Mortgage Association,
Pool #394575, 7.94%, due 07/01/27 105,625
240,420 Federal National Mortgage Association,
Pool #394996, 7.107%, due 08/01/27 245,017
1,590,418 Federal National Mortgage Association,
Pool #396814, 6.637%, due 07/01/27 1,595,873
189,334 Federal National Mortgage Association,
Pool #397897, 7.249%, due 08/01/27 192,378
1,899,452 Federal National Mortgage Association,
Pool #434001, 7.151%, due 12/01/27 1,932,692
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
28
<PAGE>
[ICON]
--------------------------------------------------------------------------------
OCTOBER 31, 2000
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
---------- -----------
<C> <S> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS
(CONTINUED)
$2,655,050 Federal National Mortgage Association,
Pool #457319, 6.78%, due 10/01/28 $ 2,685,270
8,008,595 Federal National Mortgage Association,
Pool #535174, 6.318%, due 07/01/39 7,968,552
1,566,890 Government National Mortgage
Association, Pool #80011, 7.125%, due
11/20/26 1,574,850
1,596,203 Government National Mortgage
Association, Pool #80022, 7.125%, due
12/20/26 1,604,312
1,900,916 Government National Mortgage
Association, Pool #80057, 6.375%, due
04/01/27 1,917,293
3,569,031 Government National Mortgage
Association, Pool #80185, 6%, due
04/20/28 3,568,674
2,198,597 Government National Mortgage
Association, Pool #80186, 6.375%, due
04/20/28 2,205,589
2,808,399 Government National Mortgage
Association, Pool #80298, 6%, due
07/20/29 2,749,817
9,565,482 Government National Mortgage
Association, Pool #80329, 6%, due
10/20/29 9,517,654
3,621,934 Government National Mortgage
Association, Pool #80424, 5.5%, due
07/20/30 3,540,158
-----------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(COST: $49,233,270) 49,180,574
-----------
TOTAL FIXED INCOME SECURITIES
(COST: $59,057,895) (95.5%) 58,215,979
-----------
<CAPTION>
SHORT-TERM INVESTMENTS
----------------------
<C> <S> <C>
6,561 Investors Bank & Trust Depository
Reserve, 5.82%, due 11/01/00 6,561
2,486,872 Repurchase Agreement, Lehman Brothers,
dated 10/31/00, 6.55%, due 11/01/00
(Collateralized by $2,629,324 current
face Federal Home Loan Mortgage Corp.,
Pool #2161, 6.00%, due 10/15/24,
valued at $2,536,614) 2,486,872
-----------
TOTAL SHORT-TERM INVESTMENTS
(COST: $2,493,433) (4.1%) 2,493,433
-----------
TOTAL INVESTMENTS (COST: $61,551,328)
(99.6%) 60,709,412
EXCESS OF OTHER ASSETS OVER LIABILITIES
(0.4%) 215,337
-----------
NET ASSETS (100.0%) $60,924,749
===========
</TABLE>
NOTES TO THE SCHEDULE OF INVESTMENTS:
I/F - INVERSE FLOATING RATE SECURITY WHOSE INTEREST RATE MOVES IN THE OPPOSITE
DIRECTION OF PREVAILING INTEREST RATES.
I/O - INTEREST ONLY SECURITY.
PAC - PLANNED AMORTIZATION CLASS.
TAC - TARGET AMORTIZATION CLASS.
* SECURITY VALUED AT FAIR VALUE AS DETERMINED IN GOOD FAITH UNDER PROCEDURES
ESTABLISHED BY AND UNDER THE GENERAL SUPERVISION OF THE FUND'S BOARD OF
DIRECTORS.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
29
<PAGE>
TCW GALILEO TOTAL RETURN MORTGAGE-BACKED SECURITIES FUND
--------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT FIXED INCOME SECURITIES VALUE
---------- ----------------------- -----------
<C> <S> <C>
COLLATERALIZED MORTGAGE OBLIGATIONS
(67.9% OF NET ASSETS)
$3,887,911 ABN Amro Mortgage Corp. (98-4-A6),
6.75%, due 11/25/28 (TAC) $ 3,592,467
2,013,462 Bear Stearns Mortgage Securities, Inc.
(97-2-A5), 6.875%, due 01/28/24 1,936,070
1,500,000 CMC Securites Corp. III (94-A-A22),
7.411%, due 02/25/24 (I/F) 1,020,000
4,710,119 Countrywide Funding Corp. (93-7-A5), 7%,
due 11/25/23 (TAC) 4,341,684
1,418,798 Federal Home Loan Mortgage Corp.
(1422-SA), 6.37%, due 11/15/07 (I/F) 1,395,274
91,887 Federal Home Loan Mortgage Corp.
(1541-J), 6.5%, due 07/15/23 87,520
3,350,000 Federal Home Loan Mortgage Corp.
(1620-SB), 7.895%, due 11/15/23 (I/F) 2,763,991
3,357,000 Federal Home Loan Mortgage Corp.
(1629-PB), 6%, due 05/15/23 2,985,632
1,782,000 Federal Home Loan Mortgage Corp.
(1662-N), 6.25%, due 01/15/09 1,684,721
733,911 Federal Home Loan Mortgage Corp.
(1717-MA), 6.5%, due 04/15/24 721,545
840,583 Federal Home Loan Mortgage Corp.
(1796-E), 6%, due 09/15/08 804,230
733,233 Federal Home Loan Mortgage Corp.
(1844-E), 6.5%, due 10/15/13 708,153
3,500,000 Federal Home Loan Mortgage Corp.
(2020-D), 6.25%, due 01/15/27 (PAC) 3,259,270
2,000,000 Federal Home Loan Mortgage Corp.
(2061-TA), 5.25%, due 10/15/27 (PAC) 1,694,560
4,000,000 Federal Home Loan Mortgage Corp.
(2121-C), 6%, due 02/15/29 (PAC) 3,537,554
1,000,000 Federal National Mortgage Association
(92-215-PL), 7.25%, due 11/25/21 (PAC) 1,006,420
2,281,101 Federal National Mortgage Association
(93-189-S), 7.221%, due 10/25/23 (I/F) 1,649,282
1,000,000 Federal National Mortgage Association
(93-202-SZ), 10%, due 11/25/23
(TAC)(I/F) 818,960
174,082 Federal National Mortgage Association
(93-223-EA), 6.5%, due 12/25/23 (PAC) 170,520
272,471 Federal National Mortgage Association
(93-2-B), 7.2%, due 11/25/03 272,550
1,946,368 Federal National Mortgage Association
(93-X-130A-NA), 6.5%, due 05/25/23 1,898,721
3,000,000 Federal National Mortgage Association
(94-40-SA), 6.038%, due 03/25/24 (I/F) 2,455,230
1,353,524 Federal National Mortgage Association
(G92-29-J), 8%, due 07/25/22 1,381,678
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
30
<PAGE>
[ICON]
--------------------------------------------------------------------------------
OCTOBER 31, 2000
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
---------- -----------
<C> <S> <C>
COLLATERALIZED MORTGAGE OBLIGATIONS
(CONTINUED)
$ 243,910 GE Capital Mortgage Services, Inc.
(96-12-A2), 7.25%, due 07/25/11 $ 242,705
2,905,504 Residential Accredit Loans, Inc.
(97-QS13-A7), 7.25%, due 12/25/27 2,869,185
2,300,000 Residential Asset Securitization Trust
(98-A12-A16), 6.75%, due 11/25/28 2,209,797
2,817,385 Residential Funding Mortgage Securities
I (95-S21-A6), 7.5%, due 12/26/25 2,814,342
154,537 Residential Funding Mortgage Securities
I (95-S7-A9), 8%, due 05/25/10 (I/O) 23,773
-----------
TOTAL COLLATERALIZED MORTGAGE
OBLIGATIONS (COST: $48,256,455) 48,345,834
-----------
U.S. GOVERNMENT AGENCY OBLIGATIONS
(28.1%)
406,603 Federal Home Loan Mortgage Corp., Pool
#755183, 7.478%, due 12/01/15 414,127
225,384 Federal Home Loan Mortgage Corp., Pool
#846317, 7.25%, due 08/01/26 229,280
667,097 Federal Home Loan Mortgage Corp., Pool
#846510, 7.284%, due 04/01/25 681,386
3,343,595 Federal Home Loan Mortgage Corp., Pool
#846732, 6.49%, due 01/01/30 3,287,694
850,447 Federal Housing Authority (#000-13002),
7.125%, due 03/01/04 827,060
2,786,806 Federal Housing Authority (#012-11216),
7.185%, due 03/25/29 2,710,169
1,822,980 Federal Housing Authority (#044-10592),
7.625%, due 08/01/22 1,800,193
2,522,056 Federal Housing Authority (#112-43055),
9.25%, due 05/25/32 2,559,887
9,563 Federal National Mortgage Association,
Pool #029542, 8.75%, due 07/01/09 9,743
3,400 Federal National Mortgage Association,
Pool #062420, 7.5%, due 03/01/06 3,440
513,646 Federal National Mortgage Association,
Pool #124410, 7.08%, due 07/01/22 525,290
177,056 Federal National Mortgage Association,
Pool #137064, 7.38%, due 03/01/19 179,526
424,620 Federal National Mortgage Association,
Pool #303786, 7.5%, due 02/01/11 428,603
236,588 Federal National Mortgage Association,
Pool #348025, 6.7%, due 06/01/26 237,951
3,299,671 Federal National Mortgage Association,
Pool #519219,
7%, due 02/01/30 3,234,708
17,522 Government National Mortgage
Association, Pool #003933, 8.25%, due
07/15/04 17,785
999 Government National Mortgage
Association, Pool #176192, 8.25%, due
12/15/01 1,003
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
31
<PAGE>
TCW GALILEO TOTAL RETURN MORTGAGE-BACKED SECURITIES FUND
--------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
---------- -----------
<C> <S> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS
(CONTINUED)
$1,513,801 Government National Mortgage
Association, Pool #351003, 7.5%, due
07/15/28 $ 1,515,224
1,389,914 Government National Mortgage
Association, Pool #365618, 7%, due
10/15/33 1,350,065
-----------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(COST: $20,275,442) 20,013,134
-----------
U.S. TREASURY SECURITIES (0.6%)
197,000 Certificates Accrual Treasury Strips,
0%, due 08/15/01 187,828
177,000 Certificates Accrual Treasury Strips,
0%, due 05/15/06 128,049
112,000 Certificates Accrual Treasury Strips,
0%, due 08/15/08 70,975
-----------
TOTAL U.S. TREASURY SECURITIES (COST:
$380,516) 386,852
-----------
TOTAL FIXED INCOME SECURITIES (COST:
$68,912,413) (96.6%) 68,745,820
-----------
<CAPTION>
SHORT-TERM INVESTMENTS (COST: $2,142,902) (3.0%)
------------------------------------------------
<C> <S> <C>
2,142,902 Repurchase Agreement, Lehman Brothers, dated
10/31/00, 6.55%, due 11/01/00 (Collateralized
by $2,228,269 current face Federal Home Loan
Morgage Corp., Pool # 2061, 6.25% due 10/15/20
valued at $2,185,754) 2,142,902
-----------
TOTAL INVESTMENTS (COST: $71,055,315) (99.6%) 70,888,722
EXCESS OF OTHER ASSETS OVER LIABILITIES (0.4%) 274,815
-----------
NET ASSETS (100.0%) $71,163,537
===========
</TABLE>
NOTES TO THE SCHEDULE OF INVESTMENTS:
I/F - INVERSE FLOATING RATE SECURITY WHOSE INTEREST RATE MOVES IN THE OPPOSITE
DIRECTION OF PREVAILING INTEREST RATES.
I/O - INTEREST ONLY SECURITY.
PAC - PLANNED AMORTIZATION CLASS.
TAC - TARGET AMORTIZATION CLASS.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
32
<PAGE>
TCW GALILEO FUNDS, INC.
[ICON]
--------------------------------------------------------------------------------
U.S. FIXED INCOME
STATEMENTS OF ASSETS AND LIABILITIES OCTOBER 31, 2000
<TABLE>
<CAPTION>
TCW GALILEO
TCW GALILEO TOTAL RETURN
TCW GALILEO TCW GALILEO TCW GALILEO MORTGAGE- MORTGAGE-
MONEY CORE FIXED HIGH YIELD BACKED BACKED
MARKET INCOME BOND SECURITIES SECURITIES
FUND FUND FUND FUND FUND
------------ ----------- ----------- ----------- ------------
DOLLAR AMOUNTS IN THOUSANDS
(EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
ASSETS
Investments, at Value
(1) $ 247,693 $ 74,198 $ 210,034 $ 60,709 $ 70,889
Receivables for
Securities Sold -- 461 899 243 37
Receivables for Fund
Shares Sold 1,818 -- 6 -- 272
Interest Receivable 1,677 983 5,531 379 439
------------ ---------- ----------- ---------- ----------
Total Assets 251,188 75,642 216,470 61,331 71,637
------------ ---------- ----------- ---------- ----------
LIABILITIES
Distributions Payable 375 358 1,882 302 391
Payables for Securities
Purchased -- 523 888 -- --
Payables for Fund
Shares Redeemed 18,523 2 2 36 --
Payables Upon Return of
Securities Loaned
(Note 3) -- 1,311 17,197 -- --
Accrued Management Fees 40 21 124 18 27
Other Accrued Expenses 75 57 75 50 55
------------ ---------- ----------- ---------- ----------
Total Liabilities 19,013 2,272 20,168 406 473
------------ ---------- ----------- ---------- ----------
NET ASSETS $ 232,175 $ 73,370 $ 196,302 $ 60,925 $ 71,164
============ ========== =========== ========== ==========
NET ASSETS CONSIST OF:
Paid-in Capital $ 232,175 $ 79,087 $ 240,193 $ 67,392 $ 73,467
Undistributed Net
Realized (Loss) on
Investments and
Foreign Currency -- (4,742) (18,120) (5,548) (735)
Unrealized
(Depreciation) on
Investments and
Foreign Currency -- (1,562) (24,771) (842) (166)
Undistributed
(Overdistributed) Net
Investment Income -- 587 (1,000) (77) (1,402)
------------ ---------- ----------- ---------- ----------
NET ASSETS $ 232,175 $ 73,370 $ 196,302 $ 60,925 $ 71,164
============ ========== =========== ========== ==========
NET ASSETS ATTRIBUTABLE
TO:
Institutional Class
Shares $ 232,175 $ 73,290 $ 195,986 $ 60,925 $ 71,115
============ ========== =========== ========== ==========
Advisory Class Shares $ -- $ 80 $ 316 $ -- $ 49
============ ========== =========== ========== ==========
CAPITAL SHARES
OUTSTANDING:
Institutional Class 232,175,234 7,942,451 25,056,486 6,344,523 7,839,121
============ ========== =========== ========== ==========
Advisory Class -- 8,543 40,013 -- 5,249
============ ========== =========== ========== ==========
NET ASSET VALUE PER
SHARE:
Institutional Class $ 1.00 $ 9.23 $ 7.82 $ 9.60 $ 9.07
============ ========== =========== ========== ==========
Advisory Class $ -- $ 9.32 $ 7.90 $ -- $ 9.33
============ ========== =========== ========== ==========
</TABLE>
(1) THE IDENTIFIED COST FOR THE TCW GALILEO MONEY MARKET FUND, THE TCW GALILEO
CORE FIXED INCOME FUND, THE TCW GALILEO HIGH YIELD BOND FUND, THE TCW
GALILEO MORTGAGE-BACKED SECURITIES FUND AND THE TCW GALILEO TOTAL RETURN
MORTGAGE-BACKED SECURITIES FUND AT OCTOBER 31, 2000 WAS $247,693, $75,760,
$234,805, $61,551 AND $71,055, RESPECTIVELY.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
33
<PAGE>
TCW GALILEO FUNDS, INC.
--------------------------------------------------------------------------------
U.S. FIXED INCOME
STATEMENTS OF OPERATIONS YEAR ENDED OCTOBER 31, 2000
<TABLE>
<CAPTION>
TCW
TCW GALILEO
TCW TCW GALILEO TOTAL RETURN
GALILEO GALILEO TCW MORTGAGE- MORTGAGE-
MONEY CORE FIXED GALILEO BACKED BACKED
MARKET INCOME HIGH YIELD SECURITIES SECURITIES
FUND FUND BOND FUND FUND FUND
------- ---------- ---------- ---------- ------------
DOLLAR AMOUNTS IN THOUSANDS
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
INCOME:
Interest $14,621 $ 4,126 $ 22,036 $4,168 $6,052
EXPENSES:
Management Fees 591 239 1,544 322 408
Accounting Service Fees 64 41 52 28 33
Administration Fees 65 27 52 23 25
Professional Fees 58 33 45 38 44
Transfer Agent Fees:
Institutional Class 41 43 44 38 43
Advisory Class -- 21 21 -- 21
Custodian Fees 15 9 5 6 5
Directors' Fees &
Expenses 11 11 11 11 11
Registration Fees:
Institutional Class 6 20 26 3 19
Advisory Class -- 12 11 -- 11
Distributions Fees:
Advisory Class (Note
6) -- -- 9 -- --
Other 63 59 103 30 39
------- ------- -------- ------ ------
Total Expenses 914 515 1,923 499 659
Less Expenses Borne by
Investment Advisor 11 32(1) 27(1) 27 32(1)
Less Management Fees
Waived by Investment
Advisor -- -- -- 75 --
------- ------- -------- ------ ------
Net Expenses 903 483 1,896 397 627
------- ------- -------- ------ ------
Net Investment Income 13,718 3,643 20,140 3,771 5,425
------- ------- -------- ------ ------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND
FOREIGN CURRENCY
TRANSACTIONS
Net Realized Gain
(Loss) on:
Investments -- (1,573) (9,639) (78) (850)
Foreign Currency -- 50 -- -- --
Change in Unrealized
Appreciation
(Depreciation) on:
Investments -- 382 (14,183) 84 1,300
Foreign Currency -- (127) -- -- --
------- ------- -------- ------ ------
Net Realized and
Unrealized Gain
(Loss) on Investments
and Foreign Currency
Transactions -- (1,268) (23,822) 6 450
------- ------- -------- ------ ------
INCREASE (DECREASE) IN
NET ASSETS RESULTING
FROM OPERATIONS $13,718 $ 2,375 $ (3,682) $3,777 $5,875
======= ======= ======== ====== ======
</TABLE>
(1) RELATES TO ADVISORY CLASS.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
34
<PAGE>
[ICON]
--------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
TCW GALILEO TCW GALILEO CORE
MONEY MARKET FIXED INCOME
FUND FUND
------------------ -----------------
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
------------------ -----------------
2000 1999 2000 1999
-------- -------- ------- --------
DOLLAR AMOUNTS IN THOUSANDS
<S> <C> <C> <C> <C>
OPERATIONS
Net Investment Income $ 13,718 $ 10,300 $ 3,643 $ 4,603
Net Realized (Loss) on
Investments and Foreign
Currency Transactions -- -- (1,523) (1,272)
Change in Unrealized
Appreciation
(Depreciation) on
Investments and Foreign
Currency Transactions -- -- 255 (3,115)
-------- -------- ------- --------
Increase in Net Assets
Resulting from Operations 13,718 10,300 2,375 216
-------- -------- ------- --------
DISTRIBUTIONS TO SHAREHOLDERS
Distributions from Net
Investment Income:
Institutional Class (13,718) (10,300) (3,595) (4,137)
Advisory Class -- -- (5) (2)
-------- -------- ------- --------
Total Distributions to
Shareholders (13,718) (10,300) (3,600) (4,139)
-------- -------- ------- --------
NET CAPITAL SHARE TRANSACTIONS
(NOTE 8)
Institutional Class (29,125) 18,849 3,847 (88,408)
Advisory Class -- -- (1) 84
-------- -------- ------- --------
Increase (Decrease) in Net
Assets Resulting from Net
Capital Share Transactions (29,125) 18,849 3,846 (88,324)
-------- -------- ------- --------
Increase (Decrease) in Net
Assets (29,125) 18,849 2,621 (92,247)
NET ASSETS
Beginning of Year 261,300 242,451 70,749 162,996
-------- -------- ------- --------
End of Year $232,175 $261,300 $73,370 $ 70,749
======== ======== ======= ========
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
35
<PAGE>
TCW GALILEO FUNDS, INC.
--------------------------------------------------------------------------------
U.S. FIXED INCOME
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
TCW GALILEO
TCW GALILEO MORTGAGE-
HIGH YIELD BACKED
BOND FUND SECURITIES FUND
------------------ ----------------
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
------------------ ----------------
2000 1999 2000 1999
-------- -------- ------- -------
DOLLAR AMOUNTS IN THOUSANDS
<S> <C> <C> <C> <C>
OPERATIONS
Net Investment Income $ 20,140 $ 17,734 $ 3,771 $ 2,525
Net Realized (Loss) on
Investments (9,639) (5,518) (78) --
Change in Unrealized
Appreciation
(Depreciation) on
Investments (14,183) (2,104) 84 (103)
-------- -------- ------- -------
Increase (Decrease) in Net
Assets Resulting from
Operations (3,682) 10,112 3,777 2,422
-------- -------- ------- -------
DISTRIBUTIONS TO SHAREHOLDERS
Distributions from Net
Investment Income:
Institutional Class (20,256) (17,287) (3,790) (2,506)
Advisory Class (310) (9) -- --
Distributions in Excess of
Net Investment Income:
Institutional Class (999) -- (77) --
-------- -------- ------- -------
Total Distributions to
Shareholders (21,565) (17,296) (3,867) (2,506)
-------- -------- ------- -------
NET CAPITAL SHARE TRANSACTIONS
(NOTE 8)
Institutional Class 32,923 29,567 7,519 9,941
Advisory Class 339 202 -- --
-------- -------- ------- -------
Increase in Net Assets
Resulting from Net Capital
Share Transactions 33,262 29,769 7,519 9,941
-------- -------- ------- -------
Increase in Net Assets 8,015 22,585 7,429 9,857
NET ASSETS
Beginning of Year 188,287 165,702 53,496 43,639
-------- -------- ------- -------
End of Year $196,302 $188,287 $60,925 $53,496
======== ======== ======= =======
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
36
<PAGE>
[ICON]
--------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
TCW GALILEO TOTAL
RETURN
MORTGAGE-BACKED
SECURITIES FUND
------------------
YEAR ENDED
OCTOBER 31,
------------------
2000 1999
-------- --------
DOLLAR AMOUNTS IN
THOUSANDS
<S> <C> <C>
OPERATIONS
Net Investment Income $ 5,425 $ 6,837
Net Realized Gain (Loss) on
Investments (850) 36
Change in Unrealized Appreciation
(Depreciation) on Investments 1,300 (4,058)
-------- --------
Increase in Net Assets Resulting from
Operations 5,875 2,815
-------- --------
DISTRIBUTIONS TO SHAREHOLDERS
Distributions from Net Investment
Income:
Institutional Class (4,038) (6,750)
Advisory Class (3) --
Distributions in Excess of Net
Investment Income:
Institutional Class (1,402) (1,384)
-------- --------
Total Distributions to Shareholders (5,443) (8,134)
-------- --------
NET CAPITAL SHARE TRANSACTIONS (NOTE 8)
Institutional Class (19,592) (5,907)
Advisory Class 12 37
-------- --------
(Decrease) in Net Assets Resulting
from Net Capital Share Transactions (19,580) (5,870)
-------- --------
(Decrease) in Net Assets (19,148) (11,189)
NET ASSETS
Beginning of Year 90,312 101,501
-------- --------
End of Year $ 71,164 $ 90,312
======== ========
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
37
<PAGE>
TCW GALILEO FUNDS, INC.
--------------------------------------------------------------------------------
U.S. FIXED INCOME
NOTES TO FINANCIAL STATEMENTS
NOTE 1 -- ORGANIZATION
TCW Galileo Funds, Inc., a Maryland corporation (the "Company"), is an open-end
management investment company registered under the Investment Company Act of
1940, (the "1940 Act"), as amended, that currently offers a selection of 21
no-load mutual funds known as the TCW Galileo Funds (the "Funds"). TCW
Investment Management Company (the "Advisor") is the investment advisor to the
Funds. TCW London International, Limited is a sub-advisor for the TCW Galileo
Asia Pacific Equities Fund, the TCW Galileo Emerging Markets Equities Fund, the
TCW Galileo European Equities Fund, the TCW Galileo International Equities Fund,
and the TCW Galileo Japanese Equities Fund. The advisors are registered under
the Investment Advisors Act of 1940. Each Fund has distinct investment
objectives and policies. Investors Bank & Trust Company serves as the
administrator of the Funds.
The Funds' financial statements are separated into three reports: 1) U.S.
Equities Funds, 2) U.S. Fixed Income Funds, and 3) International Funds. However,
all Funds are listed below along with their investment objectives, and are
currently offered by the Company.
U.S. EQUITIES
<TABLE>
<CAPTION>
TCW GALILEO FUND INVESTMENT OBJECTIVE
---------------- --------------------------------------------------
<S> <C>
CONVERTIBLE SECURITIES FUND
TCW Galileo Convertible Securities Fund Seeks high total return from current income and
capital appreciation through investment principal-
ly in convertible securities.
NON-DIVERSIFIED U.S. EQUITY FUNDS
TCW Galileo Aggressive Growth Equities Fund Seeks long-term capital appreciation by investing
primarily in publicly traded equity securities of
medium capitalization companies.
TCW Galileo Earnings Momentum Fund Seeks capital appreciation by investing primarily
in publicly traded equity securities of companies
experiencing or expected to experience accelerat-
ing earnings growth.
TCW Galileo Large Cap Growth Fund Seeks long-term capital appreciation by investing
primarily in publicly traded equity securities of
large capitalization U.S. companies with above av-
erage earnings prospects.
TCW Galileo Large Cap Value Fund Seeks long-term capital appreciation by investing
primarily in publicly traded equity securities of
large capitalization companies.
TCW Galileo Select Equities Fund Emphasizes capital appreciation and preservation
with focus on long-term results.
TCW Galileo Small Cap Growth Fund Seeks long-term capital appreciation by investing
primarily in publicly traded equity securities of
smaller capitalization growth companies.
TCW Galileo Small Cap Value Fund Seeks long-term capital appreciation by investing
primarily in publicly traded equity securities of
smaller capitalization value companies.
</TABLE>
38
<PAGE>
[ICON]
--------------------------------------------------------------------------------
OCTOBER 31, 2000
<TABLE>
<CAPTION>
TCW GALILEO FUND INVESTMENT OBJECTIVE
---------------- --------------------------------------------------
<S> <C>
NON-DIVERSIFIED U.S. EQUITY FUNDS
TCW Galileo Value Opportunities Fund Seeks capital appreciation by investing at least
65% of its total assets, under normal circum-
stances, in publicly traded equity securities
issued by small and medium companies with market
capitalization at the time of purchase between
$500 million and $5 billion.
U.S. FIXED INCOME
<CAPTION>
TCW GALILEO FUND INVESTMENT OBJECTIVE
---------------- --------------------------------------------------
<S> <C>
DIVERSIFIED MONEY MARKET FUND
TCW Galileo Money Market Fund Seeks current income, preservation of capital and
liquidity by investing in short-term money market
securities.
DIVERSIFIED FIXED INCOME FUNDS
TCW Galileo Core Fixed Income Fund Seeks capital appreciation and income by invest-
ing principally in core fixed income securities
emphasizing high quality and liquid investments.
TCW Galileo High Yield Bond Fund Seeks high current income by investing principally
in high yield fixed income securities.
TCW Galileo Mortgage-Backed Securities Fund Seeks income by investing primarily in short-term
mortgage-backed securities.
TCW Galileo Total Return Mortgage-Backed Seeks income by investing primarily in long-term
Securities Fund mortgage-backed securities.
INTERNATIONAL
<CAPTION>
TCW GALILEO FUND INVESTMENT OBJECTIVE
---------------- --------------------------------------------------
<S> <C>
NON-DIVERSIFIED INTERNATIONAL EQUITY FUNDS
TCW Galileo Asia Pacific Equities Fund Seeks long-term capital appreciation by investing
primarily in equity securities of companies in the
Asia Pacific region.
TCW Galileo Emerging Markets Equities Fund Seeks long-term capital appreciation by investing
in equity securities of companies in emerging mar-
ket countries around the world.
TCW Galileo European Equities Fund Seeks long-term capital appreciation by investing
primarily in the securities of issuers located in
Europe.
TCW Galileo International Equities Fund Seeks long-term capital appreciation by investing
in a mix of underlying TCW Galileo Funds.
TCW Galileo Japanese Equities Fund Seeks long-term capital appreciation by investing
primarily in Japanese equity securities.
</TABLE>
39
<PAGE>
TCW GALILEO FUNDS, INC.
--------------------------------------------------------------------------------
U.S. FIXED INCOME
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 1 -- ORGANIZATION (CONTINUED)
INTERNATIONAL (CONTINUED)
<TABLE>
<CAPTION>
TCW GALILEO FUND INVESTMENT OBJECTIVE
---------------- --------------------------------------------------
<S> <C>
NON-DIVERSIFIED INTERNATIONAL EQUITY FUNDS
TCW Galileo Latin America Equities Fund Seeks long-term capital appreciation by investing
primarily in Latin American equity securities.
NON-DIVERSIFIED FIXED INCOME FUND
TCW Galileo Emerging Markets Income Fund Seeks high total return from capital appreciation
and current income by investing at least 65% of
its total assets in debt securities issued or
guaranteed by companies, financial institutions,
and government entities in emerging market
countries.
</TABLE>
The TCW Galileo Small Cap Value Fund commenced operations on June 14, 2000 as a
new TCW Galileo Fund. Currently, it is not being offered to the general public.
Nine funds (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 and TCW Galileo European Equities Fund) offer two classes of
shares, Institutional Class shares and Advisory Class shares. Shares of each
class of the Funds represent an equal pro rata interest in the Funds and
generally give the shareholder the same voting, dividend, liquidation, and other
rights. The Institutional Class shares are offered at the current net asset
value. The Advisory Class shares are also offered at the current net asset
value, but are subject to fees imposed under a distribution plan adopted
pursuant to Rule 12b-1 under the 1940 Act.
Effective November 1, 2000, the TCW Galileo Value Opportunities Fund began
offering Advisory Class shares. Also, the TCW Galileo Technology Fund commenced
operations on November 1, 2000 offering Advisory Class shares.
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies which are in
conformity with accounting principles generally accepted in the United States of
America and which are consistently followed by the Funds in the preparation of
their financial statements.
PRINCIPLES OF ACCOUNTING: The Funds use the accrual method of accounting for
financial reporting purposes.
SECURITY VALUATIONS: The value of securities held in the TCW Galileo Money
Market Fund is determined by using the amortized cost method applied to each
individual security unless, due to special circumstances, the use of such a
method would result in a valuation that does not approximate fair market value.
All other securities, including the bond fund securities, for which
over-the-counter market quotations are readily available, are valued at the
latest bid price.
Securities for which market quotations are not readily available, including
circumstances under which it is determined by the Advisor that sale or bid
prices are not reflective of a security's market value, are valued at their fair
value as determined in good faith under procedures established by and under the
general supervision of the Company's Board of Directors.
40
<PAGE>
[ICON]
--------------------------------------------------------------------------------
OCTOBER 31, 2000
For Funds other than the TCW Galileo Money Market Fund, short-term debt
securities with remaining maturities of 60 days or less at the time of purchase
are valued at amortized cost. Other short-term debt securities are valued on a
marked-to-market basis until such time as they reach a remaining maturity of 60
days, whereupon they will be valued at amortized value using their value on the
61st day prior to maturity.
SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME: Security transactions are
recorded as of the trade date. Interest income is recorded on the accrual basis.
The TCW Galileo Core Fixed Income Fund and the TCW Galileo High Yield Bond Fund
recognize as interest income discounts on securities purchased using a constant
yield to maturity method. Original issue discount is accreted as interest income
using a constant yield to maturity method. Premiums on securities purchased are
not amortized. For the TCW Galileo Mortgage-Backed Securities Fund and the TCW
Galileo Total Return Mortgage-Backed Securities Fund, amortization of premiums
and discounts has been elected as allowed by federal income tax regulations.
Realized gains and losses on investments are recorded on the basis of specific
identification.
FOREIGN CURRENCY TRANSLATION: The books and records of each Fund are maintained
in U.S. dollars as follows: (1) the foreign currency market value of investment
securities, and other assets and liabilities stated in foreign currencies, are
translated using the daily spot rate; and (2) purchases, sales, income and
expenses are translated at the rate of exchange prevailing on the respective
dates of such transactions. The resultant exchange gains and losses are included
in the Statements of Operations with the related net realized gain (loss).
Pursuant to U.S. federal income tax regulations, certain foreign exchange gains
and losses included in realized and unrealized gains and losses are included in,
or are a reduction of, ordinary income for federal income tax purposes. It is
not practicable to separately identify that portion of gains and losses of the
Funds that arise as a result of changes in the exchange rates from the
fluctuations that arise from changes in market prices of investments during the
year.
DOLLAR ROLL TRANSACTIONS: The Funds may enter into dollar roll transactions
with financial institutions to take advantage of opportunities in the mortgage
backed securities market. A dollar roll transaction involves a simultaneous sale
by the Fund of securities that it holds with an agreement to repurchase
substantially similar securities at an agreed upon price and date, but generally
will be collateralized at time of delivery by different pools of mortgages with
different prepayment histories than those securities sold. These transactions
are accounted for as financing transactions as opposed to sales and purchases.
The differential between the sale price and the repurchase price is recorded as
deferred income and recognized between the settlement dates of the sale and
repurchase. During the period between the sale and repurchase, the Fund will not
be entitled to receive interest and principal payments on the securities sold.
Dollar roll transactions involve risk that the market value of the security sold
by the Fund may decline below the repurchase price of the security. There were
no such transactions outstanding as of October 31, 2000.
REPURCHASE AGREEMENTS: The Funds may invest in repurchase agreements secured by
U.S. Government obligations and by other securities. Securities pledged as
collateral for repurchase agreements are held by the Funds' custodian bank until
maturity of the repurchase agreements. Provisions of the agreements ensure that
the market value of the collateral is sufficient in the event of default;
however, in the event of default or bankruptcy by the other party to the
agreements, realization and/or retention of the collateral may be subject to
legal proceedings.
SECURITY LENDING: The Funds may lend their securities to qualified brokers. The
loans are collateralized at all times with cash or securities with a market
value at least equal to the market
41
<PAGE>
TCW GALILEO FUNDS, INC.
--------------------------------------------------------------------------------
U.S. FIXED INCOME
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
value of the securities on loan. As with any extensions of credit, the Funds may
bear the risk of delay in recovery or even loss of rights in the collateral if
the borrowers of the securities fail financially. The Funds receive compensation
for lending their securities (see Note 3).
OPTIONS: Premiums received from call options written are recorded as a
liability. The amount of the liability is subsequently adjusted to reflect the
current market value of the option written. If the option expires unexercised,
premiums received are realized as a gain at expiration date. If the position is
closed prior to expiration, a gain or loss is realized based on premiums
received, less the cost to close the option. When an option is exercised,
premiums received are added to the proceeds from the sale of the underlying
securities and a gain or loss is realized. Call options purchased are accounted
for in the same manner as portfolio securities. The cost of securities acquired
through the exercise of call options is increased by premiums paid. There were
no option contracts entered into during the year ended October 31, 2000.
ALLOCATION OF OPERATING ACTIVITY: Investment income, common expenses and
realized and unrealized gains and losses are allocated among the classes of
shares of the Funds based on the relative net assets of each class. Distribution
fees, which are directly attributable to a class of shares, are charged to that
class' operations (see Note 6). All other expenses are charged to each Fund as
incurred on a specific identification basis.
NET ASSET VALUE: The Net Asset Value of each Fund's shares is determined by
dividing the net assets of the Fund by the number of issued and outstanding
shares on each business day as of 9:00 A.M. Pacific Standard/Daylight Time for
the TCW Galileo Money Market Fund and as of 1:00 P.M. Pacific Standard/Daylight
Time for the other Funds.
DIVIDENDS AND DISTRIBUTIONS: Dividends from net investment income of the TCW
Galileo Money Market Fund are declared each business day. The other fixed income
funds declare and pay, or reinvest, dividends from net investment income
monthly. Distribution of any net long-term and net short-term capital gains
earned by a Fund will be distributed at least annually.
Income and capital gain distributions are determined in accordance with income
tax regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments for foreign currency
transactions, market discount, losses deferred to wash sales and excise tax
regulations. Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and may affect
net investment income per share. Undistributed net investment income may include
temporary book and tax basis differences which will reverse in a subsequent
period. Any taxable income or gain remaining at fiscal year end is distributed
in the following year. Distributions from the TCW Galileo Mortgage-Backed
Securities Fund and the TCW Galileo Total Return Mortgage-Backed Securities Fund
included a return of capital of $0.03 and $0.16 per share, respectively, for the
fiscal year ended October 31, 2000.
USE OF ESTIMATES: The preparation of the accompanying financial statements
requires management to make estimates and assumptions that affect the reported
amount of assets and liabilities at the date of the financial statements and the
reported amounts of income and expenses during the reporting period. Actual
results could differ from these estimates.
42
<PAGE>
[ICON]
--------------------------------------------------------------------------------
OCTOBER 31, 2000
NOTE 3 -- SECURITY LENDING
The Funds listed below loaned securities that were collateralized in cash which
was invested in short-term investments as of October 31, 2000
<TABLE>
<CAPTION>
SECURITIES
MARKET VALUE OF LENDING
LOANED SECURITIES COLLATERAL VALUE INCOME*
------------------ ---------------- -----------------
<S> <C> <C> <C>
TCW Galileo Core Fixed Income Fund $ 1,278,432 $ 1,310,750 $ 3,260
TCW Galileo High Yield Bond Fund 16,758,853 17,197,130 16,517
</TABLE>
* NET OF BROKER FEES.
Securities lending income is included in interest income in the Statements of
Operations.
NOTE 4 -- FEDERAL INCOME TAXES
It is the policy of each Fund to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute all
of its net taxable income, including any net realized gains on investments, to
its shareholders. Therefore, no federal income tax provision is required. At
October 31, 2000 net unrealized appreciation (depreciation) on investments for
federal income tax purposes was as follows (amounts in thousands):
<TABLE>
<CAPTION>
TCW GALILEO
TCW GALILEO TOTAL RETURN
TCW GALILEO TCW GALILEO MORTGAGE- MORTGAGE-
CORE FIXED HIGH YIELD BACKED BACKED
INCOME FUND BOND FUND SECURITIES FUND SECURITIES FUND
----------- ----------- --------------- ---------------
<S> <C> <C> <C> <C>
Unrealized Appreciation $ 494 $ 1,596 $ 117 $ 1,845
Unrealized (Depreciation) (2,143) (26,603) (959) (2,011)
------- -------- ------- -------
Net Unrealized (Depreciation) $(1,649) $(25,007) $ (842) $ (166)
======= ======== ======= =======
Cost of Investments for
Federal Income Tax Purposes $75,847 $235,041 $61,653 $71,055
======= ======== ======= =======
</TABLE>
At October 31, 2000 the following Funds had net realized loss carryforwards for
federal income tax purposes (amounts in thousands):
<TABLE>
<CAPTION>
EXPIRING IN
------------------------------------------------
2002 2003 2004 2005 2006 2007 2008
---- ------ ---- ---- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
TCW Galileo Core Fixed
Income Fund $641 $ 644 $ -- $-- $ -- $1,259 $1,584
TCW Galileo High Yield
Bond Fund -- -- -- -- 2,560 5,718 9,607
TCW Galileo
Mortgage-Backed
Securities Fund 55 4,068 861 73 406 -- 239
TCW Galileo Total Return
Mortgage-Backed
Securities Fund -- -- -- -- -- -- 773
</TABLE>
43
<PAGE>
TCW GALILEO FUNDS, INC.
--------------------------------------------------------------------------------
U.S. FIXED INCOME
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 5 -- FUND EXPENSES
The Funds pay to the Advisor, as compensation for services rendered, facilities
furnished and expenses borne by it, the following annual management fees as a
percentage of daily net asset value:
<TABLE>
<S> <C>
TCW Galileo Money Market Fund 0.25%
TCW Galileo Core Fixed Income Fund 0.40%
TCW Galileo High Yield Bond Fund 0.75%
TCW Galileo Mortgage-Backed Securities Fund 0.50%*
TCW Galileo Total Return Mortgage-Backed
Securities Fund 0.50%
</TABLE>
* CURRENTLY, THE ADVISOR IS WAIVING 0.15% OF THE ANNUAL MANAGEMENT FEE.
The ordinary operating expenses of the TCW Galileo Money Market Fund are limited
to 0.40% of the Fund's daily net assets. The ordinary operating expenses (each
share class) of the other funds are limited to the average of the total expense
ratios as reported by Lipper Analytical Services, Inc. for each Fund's
respective investment objective, which is subject to change on a monthly basis.
At October 31, 2000, the expense ratios reported by Lipper Analytical Services,
Inc. as they relate to the investment objective applicable to each fund were:
<TABLE>
<S> <C>
TCW Galileo Core Fixed Income Fund 1.00%
TCW Galileo High Yield Bond Fund 1.30%
TCW Galileo Mortgage-Backed Securities Fund 1.10%
TCW Galileo Total Return Mortgage-Backed
Securities Fund 1.10%
</TABLE>
Prior to January 15, 2000, the ordinary operating expenses of the TCW Galileo
Mortgage-Backed Securities Fund were limited to 0.53% of daily net assets.
Certain officers and/or directors of the Company are officers and/or directors
of the Advisor.
NOTE 6 -- DISTRIBUTION PLAN
The Company has a distribution plan pursuant to Rule 12b-1 under the 1940 Act
with respect to the Advisory Class 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 Advisory
Class shares for distribution and related services. Distribution fees for the
year ended October 31, 2000 were less than $1,000 for the TCW Galileo Core Fixed
Income Fund and TCW Galileo Total Return Mortgage-Backed Securities Fund and as
a result, are not disclosed in the Statement of Operations.
44
<PAGE>
[ICON]
--------------------------------------------------------------------------------
OCTOBER 31, 2000
NOTE 7 -- PURCHASES AND SALES OF SECURITIES
Investment transactions (excluding short-term investments) for the year ended
October 31, 2000 were as follows (amounts in thousands):
<TABLE>
<CAPTION>
TCW GALILEO
TCW GALILEO TOTAL RETURN
TCW GALILEO TCW GALILEO MORTGAGE- MORTGAGE-
CORE FIXED HIGH YIELD BACKED BACKED
INCOME FUND BOND FUND SECURITIES FUND SECURITIES FUND
----------- ----------- --------------- ---------------
<S> <C> <C> <C> <C>
Purchases at Cost $21,875 $147,458 $ 99 $ --
======= ======== ======= =======
Sales Proceeds $23,157 $123,781 $ 1,399 $12,735
======= ======== ======= =======
U.S. Government Purchases at
Cost $42,663 $ -- $25,213 $ 6,520
======= ======== ======= =======
U.S. Government Sales Proceeds $37,939 $ -- $14,445 $11,921
======= ======== ======= =======
</TABLE>
NOTE 8 -- CAPITAL SHARE TRANSACTIONS
The Declaration of Trust permits the Trustees to issue an unlimited number of
shares of beneficial interest (without par value). Transactions in each Fund's
shares were as follows:
<TABLE>
<CAPTION>
TCW GALILEO MONEY MARKET
FUND YEAR ENDED YEAR ENDED
OCTOBER 31, 2000 OCTOBER 31, 1999
------------------------------ --------------------------------
AMOUNT AMOUNT
SHARES (IN THOUSANDS) SHARES (IN THOUSANDS)
-------------- -------------- ---------------- --------------
<S> <C> <C> <C> <C>
Shares Sold 2,690,124,882 $ 2,690,125 2,699,538,689 $ 2,699,539
Shares Issued upon
Reinvestment of Dividends 8,868,381 8,868 7,371,745 7,372
Shares Redeemed (2,728,118,272) (2,728,118) (2,688,061,688) (2,688,062)
-------------- ----------- -------------- -----------
Net Increase (Decrease) (29,125,009) $ (29,125) 18,848,746 $ 18,849
============== =========== ============== ===========
<CAPTION>
TCW GALILEO CORE FIXED YEAR ENDED YEAR ENDED
INCOME FUND OCTOBER 31, 2000 OCTOBER 31, 1999
INSTITUTIONAL CLASS ------------------------------ --------------------------------
AMOUNT AMOUNT
SHARES (IN THOUSANDS) SHARES (IN THOUSANDS)
-------------- -------------- ---------------- --------------
<S> <C> <C> <C> <C>
Shares Sold 3,161,354 $ 29,393 3,702,145 $ 35,593
Shares Issued upon
Reinvestment of Dividends 232,026 2,149 326,089 3,172
Shares Redeemed (2,951,456) (27,695) (13,006,199) (127,173)
-------------- ----------- -------------- -----------
Net Increase (Decrease) 441,924 $ 3,847 (8,977,965) $ (88,408)
============== =========== ============== ===========
</TABLE>
45
<PAGE>
TCW GALILEO FUNDS, INC.
--------------------------------------------------------------------------------
U.S. FIXED INCOME
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 8 -- CAPITAL SHARE TRANSACTIONS (CONTINUED)
<TABLE>
<CAPTION>
TCW GALILEO CORE FIXED YEAR ENDED PERIOD ENDED
INCOME FUND OCTOBER 31, 2000 OCTOBER 31, 1999 (1)
ADVISORY CLASS ------------------------------ --------------------------------
AMOUNT AMOUNT
SHARES (IN THOUSANDS) SHARES (IN THOUSANDS)
-------------- -------------- ---------------- --------------
<S> <C> <C> <C> <C>
Shares Sold 346 $ 3 8,529 $ 83
Shares Issued upon
Reinvestment of Dividends 500 5 -- --
Shares Redeemed (1,004) (9) 172 1
-------------- ----------- -------------- -----------
Net Increase (Decrease) (158) $ (1) 8,701 $ 84
============== =========== ============== ===========
</TABLE>
(1) FOR THE PERIOD MARCH 1, 1999 (COMMENCEMENT OF OFFERING OF ADVISORY CLASS
SHARES) THROUGH OCTOBER 31, 1999.
<TABLE>
<CAPTION>
TCW GALILEO HIGH YIELD BOND YEAR ENDED YEAR ENDED
FUND OCTOBER 31, 2000 OCTOBER 31, 1999
INSTITUTIONAL CLASS ------------------------------ --------------------------------
AMOUNT AMOUNT
SHARES (IN THOUSANDS) SHARES (IN THOUSANDS)
-------------- -------------- ---------------- --------------
<S> <C> <C> <C> <C>
Shares Sold 13,426,098 $ 115,548 15,528,524 $ 144,250
Shares Issued upon
Reinvestment of Dividends 2,017,244 17,241 1,547,242 14,195
Shares Redeemed (11,639,394) (99,866) (13,828,336) (128,878)
-------------- ----------- -------------- -----------
Net Increase 3,803,948 $ 32,923 3,247,430 $ 29,567
============== =========== ============== ===========
<CAPTION>
TCW GALILEO HIGH YIELD BOND YEAR ENDED PERIOD ENDED
FUND OCTOBER 31, 2000 OCTOBER 31, 1999 (1)
ADVISORY CLASS ------------------------------ --------------------------------
AMOUNT AMOUNT
SHARES (IN THOUSANDS) SHARES (IN THOUSANDS)
-------------- -------------- ---------------- --------------
<S> <C> <C> <C> <C>
Shares Sold 2,850,440 $ 24,955 36,157 $ 345
Shares Issued upon
Reinvestment of Dividends 35,471 309 790 7
Shares Redeemed (2,867,167) (24,925) (15,678) (150)
-------------- ----------- -------------- -----------
Net Increase 18,744 $ 339 21,269 $ 202
============== =========== ============== ===========
</TABLE>
(1) FOR THE PERIOD MARCH 1, 1999 (COMMENCEMENT OF OFFERING OF ADVISORY CLASS
SHARES) THROUGH OCTOBER 31, 1999.
<TABLE>
<CAPTION>
TCW GALILEO MORTGAGE-
BACKED SECURITIES FUND YEAR ENDED YEAR ENDED
OCTOBER 31, 2000 OCTOBER 31, 1999
------------------------------ --------------------------------
AMOUNT AMOUNT
SHARES (IN THOUSANDS) SHARES (IN THOUSANDS)
-------------- -------------- ---------------- --------------
<S> <C> <C> <C> <C>
Shares Sold 4,488,267 $ 43,008 1,189,983 $ 11,464
Shares Issued upon
Reinvestment of Dividends 288,686 2,761 147,725 1,418
Shares Redeemed (4,010,478) (38,250) (306,134) (2,941)
-------------- ----------- -------------- -----------
Net Increase 766,475 $ 7,519 1,031,574 $ 9,941
============== =========== ============== ===========
</TABLE>
46
<PAGE>
[ICON]
--------------------------------------------------------------------------------
OCTOBER 31, 2000
<TABLE>
<CAPTION>
TCW GALILEO TOTAL RETURN YEAR ENDED YEAR ENDED
MORTGAGE-BACKED OCTOBER 31, 2000 OCTOBER 31, 1999
SECURITIES FUND ------------------------------ --------------------------------
INSTITUTIONAL CLASS AMOUNT AMOUNT
SHARES (IN THOUSANDS) SHARES (IN THOUSANDS)
-------------- -------------- ---------------- --------------
<S> <C> <C> <C> <C>
Shares Sold 106,376 $ 953 1,086,156 $ 10,319
Shares Issued upon
Reinvestment of Dividends 593,059 5,250 809,473 7,598
Shares Redeemed (2,930,126) (25,795) (2,226,690) (23,824)
-------------- ----------- -------------- -----------
Net (Decrease) (2,230,691) $ (19,592) (331,061) $ (5,907)
============== =========== ============== ===========
<CAPTION>
TCW GALILEO TOTAL RETURN YEAR ENDED PERIOD ENDED
MORTGAGE-BACKED OCTOBER 31, 2000 OCTOBER 31, 1999 (1)
SECURITIES FUND ------------------------------ --------------------------------
ADVISORY CLASS AMOUNT AMOUNT
SHARES (IN THOUSANDS) SHARES (IN THOUSANDS)
-------------- -------------- ---------------- --------------
<S> <C> <C> <C> <C>
Shares Sold 4,068 $ 38 4,015 $ 37
Shares Issued upon
Reinvestment of Dividends 200 2 16 --
Shares Redeemed (3,050) (28) -- --
-------------- ----------- -------------- -----------
Net Increase 1,218 $ 12 4,031 $ 37
============== =========== ============== ===========
</TABLE>
(1) FOR THE PERIOD MARCH 1, 1999 (COMMENCEMENT OF OFFERING OF ADVISORY CLASS
SHARES) THROUGH OCTOBER 31, 1999.
NOTE 9 -- RESTRICTED SECURITIES
The following restricted securities held by the Funds as of October 31, 2000
were valued both at the date of acquisition and October 31, 2000 in accordance
with the security valuation policy of the Funds described in Note 2. The
restricted securities include securities purchased in private placement
transactions without registration under the Securities Act of 1933, as well as
Rule 144A securities. Such securities generally may be sold only in a privately
negotiated transaction with a limited number of purchasers or in a public
offering registered under the Securities Act of 1933. Each Fund will bear any
costs incurred in connection with the disposition of such securities.
TCW GALILEO CORE FIXED INCOME FUND:
<TABLE>
<CAPTION>
PRINCIPAL DATE OF
AMOUNT INVESTMENT ACQUISITION COST
--------- ----------------------------------- ----------- --------
<C> <S> <C> <C>
$ 75,000 360networks, Inc., (144A), 13%, due 04/20/00 $ 68,717
05/01/08
75,000 Bio-Rad Laboratories, Inc., (144A), 02/14/00 74,124
11.625%, due 02/15/07
75,000 Concentra Operating Corp., (144A), 08/05/99 75,000
13%, due 08/15/09
100,000 Consolidated Container Companies, 06/24/99 99,250
LLC, (144A), 10.125%, due 07/15/09
50,000 Echostar Broadband Corp., (144A), 09/15/00 50,000
10.375%, due 10/01/07
500,000 Exodus Communications, Inc., 06/28/00 500,000
(144A), 11.625%, due 07/15/10
75,000 Lennar Corp., (144A), 9.95%, due 04/28/00 69,398
05/01/10
100,000 TeleCorp PCS, Inc., (144A), 07/11/00 100,000
10.625%, due 07/15/10
75,000 TNP Enterprises, Inc., (144A), 03/31/00 75,000
10.25%, due 04/01/10
250,000 U.S. Can Corp., (144A), 12.375%, 09/26/00 250,000
due 10/01/10
</TABLE>
47
<PAGE>
TCW GALILEO FUNDS, INC.
--------------------------------------------------------------------------------
U.S. FIXED INCOME
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 9 -- RESTRICTED SECURITIES (CONTINUED)
The total value of restricted securities is $1,306,375, which represents 1.8% of
net assets of the Fund at October 31, 2000.
TCW GALILEO HIGH YIELD BOND FUND:
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OR
NUMBER OF DATE OF
SHARES INVESTMENT ACQUISITION COST
---------- ----------------------------------- ----------- ----------
<C> <S> <C> <C>
$1,050,000 360networks, Inc., (144A), 13%, due 04/20/00 $ 989,297
05/01/08
1,200,000 Anchor Gaming, (144A), 9.875%, due 10/12/00 1,191,859
10/15/08
1,200,000 Bio-Rad Laboratories, Inc., (144A), 02/14/00 1,185,984
11.625%, due 02/15/07
2,000,000 Charter Communications Holdings, 02/08/00 1,975,678
LLC, (144A), 10%, due 04/01/09
2,250,000 Classic Cable, Inc., (144A), 10.5%, 11/09/99 2,208,468
due 03/01/10
3,300 Classic Communications, Inc., 05/03/99 --
(144A), Common Stock
1,850,000 Concentra Operating Corp., (144A), 08/05/99 1,756,175
13%, due 08/15/09
1,400,000 Consolidated Container Companies, 06/24/99 1,394,375
LLC, (144A), 10.125%, due 07/15/09
2,400,000 Echostar Broadband Corp., (144A), 09/15/00 2,400,000
10.375%, due 10/01/07
3,950,000 Exodus Communications, Inc., 06/28/00 3,950,000
(144A), 11.625%, due 07/15/10
1,000,000 GS Escrow Corp., (144A), 7.125%, 07/24/00 915,908
due 08/01/05
915,000 Huntsman Industries/Specialty 11/03/98 898,153
Chemical Corp., (144A), 9.5%, due
07/01/07
800,000 Huntsman Packaging Corp., (144A), 05/25/00 778,834
13%, due 06/01/10
600,000 Lennar Corp., (144A), 9.95%, due 04/28/00 555,181
05/01/10
2,350,000 Level 3 Communications, Inc., 02/24/00 2,350,000
(144A), 11%, due 03/15/08
1,600,000 Nextlink Communications, Inc., 11/12/99 983,791
(144A), 0%, due 12/01/09
2,550,000 Station Casinos, Inc., (144A), 06/29/00 2,550,090
9.875%, due 07/01/10
2,000,000 TeleCorp PCS, Inc., (144A), 07/11/00 2,000,000
10.625%, due 07/15/10
425,000 TNP Enterprises, Inc., (144A), 03/31/00 425,000
10.25%, due 04/01/10
750,000 U.S. Can Corp., (144A), 12.375%, 09/26/00 750,000
due 10/01/10
905,000 Von Hoffmann Press, Inc., (144A), 06/18/99 960,698
10.875%, due 05/15/07
</TABLE>
The total value of restricted securities is $28,317,591, which represents 14.4%
of net assets of the Fund at October 31, 2000.
48
<PAGE>
TCW GALILEO MONEY MARKET FUND
[ICON]
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
------------------------------------------------
2000 1999 1998 1997 1996
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value per
Share, Beginning of
Year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT
OPERATIONS:
Net Investment Income 0.0579 0.0434 0.0519 0.0516 0.0509
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Distributions from Net
Investment Income (0.0579) (0.0434) (0.0519) (0.0516) (0.0509)
-------- -------- -------- -------- --------
Net Asset Value per
Share, End of Year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total Return 5.94% 4.85% 5.31% 5.29% 5.21%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Year
(in thousands) $232,175 $261,300 $242,451 $222,771 $233,671
Ratio of Expenses to
Average Net Assets 0.38% 0.38% 0.40%(1) 0.40%(1) 0.40%(1)
Ratio of Net Investment
Income to Average Net
Assets 5.80% 4.76% 5.19% 5.17% 5.04%
</TABLE>
(1) THE INVESTMENT ADVISOR 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 0.40% OF NET ASSETS AS
DISCLOSED IN NOTE 5 OF THE NOTES TO FINANCIAL STATEMENTS. HAD SUCH ACTION
NOT BEEN TAKEN, TOTAL ANNUALIZED OPERATING EXPENSES AS A PERCENTAGE OF
AVERAGE NET ASSETS WOULD HAVE BEEN 0.41%, 0.40% AND 0.44% FOR THE FISCAL
YEARS ENDED OCTOBER 31, 1998, 1997 AND 1996, RESPECTIVELY.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
49
<PAGE>
TCW GALILEO CORE FIXED INCOME FUND
--------------------------------------------------------------------------------
INSTITUTIONAL CLASS
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
--------------------------------------------
2000 1999 1998 1997 1996
------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
Net Asset Value per
Share, Beginning of
Year $ 9.42 $ 9.89 $ 9.62 $ 9.45 $ 9.61
------- ------- -------- ------- -------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS:
Net Investment Income 0.57 0.57 0.55 0.58 0.55
Net Realized and
Unrealized Gain (Loss)
on Investments (0.21) (0.50) 0.29 0.19 (0.16)
------- ------- -------- ------- -------
Total from Investment
Operations 0.36 0.07 0.84 0.77 0.39
------- ------- -------- ------- -------
LESS DISTRIBUTIONS:
Distributions from Net
Investment Income (0.55) (0.54) (0.57) (0.60) (0.55)
------- ------- -------- ------- -------
Net Asset Value per
Share, End of Year $ 9.23 $ 9.42 $ 9.89 $ 9.62 $ 9.45
======= ======= ======== ======= =======
Total Return 3.97% 0.69% 9.02% 8.45% 4.26%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Year
(in thousands) $73,290 $70,666 $162,996 $19,368 $25,006
Ratio of Expenses to
Average Net Assets 0.81% 0.58%(1) 0.62% 0.93% 0.76%
Ratio of Net Investment
Income to Average Net
Assets 6.10% 5.83% 5.60% 6.13% 5.85%
Portfolio Turnover Rate 107.59% 136.63% 272.77% 142.96% 238.73%
</TABLE>
(1) THE INVESTMENT ADVISOR HAS VOLUNTARILY AGREED TO REDUCE ITS FEE, OR TO PAY
THE OPERATING EXPENSES OF THE FUND, TO THE EXTEND NECESSARY TO LIMIT THE
ANNUAL ORDINARY OPERATING EXPENSES OF THE FUND AS DISCLOSED IN NOTE 5 IN
THE NOTES TO FINANCIAL STATEMENTS. HAD SUCH ACTION NOT BEEN TAKEN, TOTAL
ANNUALIZED OPERATING EXPENSES AS A PERCENTAGE OF AVERAGE NET ASSETS WOULD
HAVE BEEN 0.72% FOR THE YEAR ENDED OCTOBER 31, 1999.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
50
<PAGE>
[ICON]
--------------------------------------------------------------------------------
ADVISORY CLASS
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
MARCH 1, 1999
(COMMENCEMENT OF
YEAR ENDED OFFERING OF ADVISORY
OCTOBER 31, CLASS SHARES) THROUGH
2000 OCTOBER 31, 1999
----------- ---------------------
<S> <C> <C>
Net Asset Value per Share, Beginning of
Period $ 9.51 $ 9.74
------- -------
INCOME (LOSS) FROM INVESTMENT
OPERATIONS:
Net Investment Income 0.55 0.37
Net Realized and Unrealized (Loss) on
Investments (0.21) (0.35)
------- -------
Total from Investment Operations 0.34 0.02
------- -------
LESS DISTRIBUTIONS:
Distributions from Net Investment Income (0.53) (0.25)
------- -------
Net Asset Value per Share, End of Period $ 9.32 $ 9.51
======= =======
Total Return 3.71% 0.17% (1)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (in thousands) $ 80 $ 83
Ratio of Expenses to Average Net Assets 1.13%(3) 1.00% (2)(3)
Ratio of Net Investment Income to
Average Net Assets 5.90% 5.68% (2)
Portfolio Turnover Rate 107.59% 136.63% (1)
</TABLE>
(1) FOR THE PERIOD MARCH 1, 1999 (COMMENCEMENT OF OFFERING OF ADVISORY CLASS
SHARES) THROUGH OCTOBER 31, 1999 AND NOT INDICATIVE OF A FULL YEAR'S
OPERATING RESULTS.
(2) ANNUALIZED.
(3) THE INVESTMENT ADVISOR 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 AS DISCLOSED IN NOTE 5 IN
THE NOTES TO THE FINANCIAL STATEMENTS. HAD SUCH ACTION NOT BEEN TAKEN,
TOTAL ANNUALIZED OPERATING EXPENSES, AS A PERCENTAGE OF AVERAGE NET ASSETS,
WOULD HAVE BEEN 40.33% FOR THE YEAR ENDED OCTOBER 31, 2000 AND 134.10% FOR
THE PERIOD FROM MARCH 1, 1999 (COMMENCEMENT OF OFFERING OF ADVISORY CLASS
SHARES) TO OCTOBER 31, 1999, RESPECTIVELY.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
51
<PAGE>
TCW GALILEO HIGH YIELD BOND FUND
--------------------------------------------------------------------------------
INSTITUTIONAL CLASS
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
------------------------------------------------
2000 1999 1998 1997 1996
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value per
Share, Beginning of
Year $ 8.85 $ 9.20 $ 10.11 $ 9.77 $ 9.74
-------- -------- -------- -------- --------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS:
Net Investment Income 0.84 0.80 0.88 0.91 0.89
Net Realized and
Unrealized Gain (Loss)
on Investments (0.97) (0.37) (0.74) 0.34 0.03
-------- -------- -------- -------- --------
Total from Investment
Operations (0.13) 0.43 0.14 1.25 0.92
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Distributions from Net
Investment Income (0.86) (0.78) (0.89) (0.91) (0.89)
Distributions in Excess
of Net Investment
Income (0.04) -- (0.01) -- --
Distributions from Net
Realized Gain -- -- (0.15) -- --
-------- -------- -------- -------- --------
Total Distributions (0.90) (0.78) (1.05) (0.91) (0.89)
-------- -------- -------- -------- --------
Net Asset Value per
Share, End of Year $ 7.82 $ 8.85 $ 9.20 $ 10.11 $ 9.77
======== ======== ======== ======== ========
Total Return (1.77)% 4.60% 1.18% 13.26% 9.92%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Year
(in thousands) $195,986 $188,098 $165,702 $208,761 $183,815
Ratio of Expenses to
Average Net Assets 0.91% 0.90% 0.85% 0.83% 0.90%
Ratio of Net Investment
Income to Average Net
Assets 9.80% 8.60% 8.89% 9.10% 9.21%
Portfolio Turnover Rate 64.29% 128.15% 92.24% 109.45% 82.56%
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
52
<PAGE>
[ICON]
--------------------------------------------------------------------------------
ADVISORY CLASS
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
MARCH 1, 1999
(COMMENCEMENT OF
YEAR ENDED OFFERING OF ADVISORY
OCTOBER 31, CLASS SHARES) THROUGH
2000 OCTOBER 31, 1999
----------- ---------------------
<S> <C> <C>
Net Asset Value per Share, Beginning of
Period $ 8.91 $ 9.39
------- -------
INCOME (LOSS) FROM INVESTMENT
OPERATIONS:
Net Investment Income 0.78 0.55
Net Realized and Unrealized (Loss) on
Investments (0.93) (0.57)
------- -------
Total from Investment Operations (0.15) (0.02)
------- -------
LESS DISTRIBUTIONS:
Distributions from Net Investment Income (0.86) (0.46)
------- -------
Net Asset Value per Share, End of Period $ 7.90 $ 8.91
======= =======
Total Return (1.86)% (0.24)% (1)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (in thousands) $ 316 $ 189
Ratio of Expenses to Average Net Assets 1.27%(3) 1.30% (2)(3)
Ratio of Net Investment Income to
Average Net Assets 8.91% 8.78% (2)(3)
Portfolio Turnover Rate 64.29% 128.15% (1)
</TABLE>
(1) FOR THE PERIOD MARCH 1, 1999 (COMMENCEMENT OF OFFERING OF ADVISORY CLASS
SHARES) THROUGH OCTOBER 31, 1999 AND NOT INDICATIVE OF A FULL YEAR'S
OPERATING RESULTS.
(2) ANNUALIZED.
(3) THE INVESTMENT ADVISOR 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 AS DISCLOSED IN NOTE 5 IN
THE NOTES TO THE FINANCIAL STATEMENTS. HAD SUCH ACTION NOT BEEN TAKEN,
TOTAL ANNUALIZED OPERATING EXPENSES, AS A PERCENTAGE OF AVERAGE NET ASSETS,
WOULD HAVE BEEN 2.05% FOR YEAR ENDED OCTOBER 31, 2000 AND 47.83% FOR THE
PERIOD FROM MARCH 1, 1999 (COMMENCEMENT OF OFFERING OF ADVISORY CLASS
SHARES) TO OCTOBER 31, 1999, RESPECTIVELY.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
53
<PAGE>
TCW GALILEO MORTGAGE-BACKED SECURITIES FUND
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-------------------------------------------
2000 1999 1998 1997 1996
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net Asset Value per
Share, Beginning of
Year $ 9.59 $ 9.60 $ 9.70 $ 9.67 $ 9.58
------- ------- ------- ------- -------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS:
Net Investment Income 0.60 0.59 0.35 0.58 0.51
Net Realized and
Unrealized Gain (Loss)
on Investments (0.02) (0.09) 0.10 0.05 0.22
------- ------- ------- ------- -------
Total from Investment
Operations 0.58 0.50 0.45 0.63 0.73
------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
Distributions from Net
Investment Income (0.42) (0.51) (0.11) (0.38) (0.46)
Distributions in Excess
of Net Investment
Income (0.15) -- -- (0.22) (0.18)
Distributions from
Paid-in-Capital -- -- (0.44) -- --
------- ------- ------- ------- -------
Total Distributions (0.57) (0.51) (0.55) (0.60) (0.64)
------- ------- ------- ------- -------
Net Asset Value per
Share, End of Year $ 9.60 $ 9.59 $ 9.60 $ 9.70 $ 9.67
======= ======= ======= ======= =======
Total Return 6.21% 5.36% 4.73% 6.71% 7.86%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Year
(in thousands) $60,925 $53,496 $43,639 $53,307 $61,835
Ratio of Net Expenses to
Average Net Assets 0.62%(1) 0.75%(1) 0.83% 0.77% 0.69%
Ratio of Net Investment
Income to Average Net
Assets 6.26% 6.10% 3.61% 6.00% 5.34%
Portfolio Turnover Rate 27.97% 53.48% 68.40% 109.91% 54.10%
</TABLE>
(1) THE INVESTMENT ADVISOR 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. HAD SUCH ACTION NOT BEEN
TAKEN, TOTAL ANNUALIZED OPERATING EXPENSES AS A PERCENTAGE OF AVERAGE NET
ASSETS WOULD HAVE BEEN 0.77% AND 0.80% FOR THE YEARS ENDED OCTOBER 31, 2000
AND 1999, RESPECTIVELY.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
54
<PAGE>
TCW GALILEO TOTAL RETURN MORTGAGE-BACKED SECURITIES FUND
[ICON]
--------------------------------------------------------------------------------
INSTITUTIONAL CLASS
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
---------------------------------------------
2000 1999 1998 1997 1996
------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value per
Share, Beginning of
Year $ 8.96 $ 9.76 $ 9.91 $ 9.56 $ 9.56
------- ------- -------- ------- --------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS:
Net Investment Income 0.59 0.62 0.84 0.75 0.68
Net Realized and
Unrealized Gain (Loss)
on Investments 0.12 (0.60) (0.07) 0.32 0.02
------- ------- -------- ------- --------
Total from Investment
Operations 0.71 0.02 0.77 1.07 0.70
------- ------- -------- ------- --------
LESS DISTRIBUTIONS:
Distributions from Net
Investment Income (0.45) (0.62) (0.86) (0.72) (0.68)
Distributions in Excess
of Net Investment
Income (0.15) (0.20) (0.01) -- (0.02)
Distributions from Net
Realized Gain -- -- (0.05) -- --
------- ------- -------- ------- --------
Total Distributions (0.60) (0.82) (0.92) (0.72) (0.70)
------- ------- -------- ------- --------
Net Asset Value per
Share, End of Year $ 9.07 $ 8.96 $ 9.76 $ 9.91 $ 9.56
======= ======= ======== ======= ========
Total Return 8.32% 0.20% 8.20% 11.66% 7.69%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Year
(in thousands) $71,115 $90,275 $101,501 $81,442 $112,260
Ratio of Expenses to
Average Net Assets 0.77% 0.69% 0.70% 0.67% 0.68%
Ratio of Net Investment
Income to Average Net
Assets 6.63% 6.62% 8.52% 7.77% 7.15%
Portfolio Turnover Rate 8.44% 28.07% 27.95% 16.01% 39.28%
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
55
<PAGE>
TCW GALILEO TOTAL RETURN MORTGAGE-BACKED SECURITIES FUND
--------------------------------------------------------------------------------
ADVISORY CLASS
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
MARCH 1, 1999
(COMMENCEMENT OF
YEAR ENDED OFFERING OF ADVISORY
OCTOBER 31, CLASS SHARES) THROUGH
2000 OCTOBER 31, 1999
----------- ---------------------
<S> <C> <C>
Net Asset Value per Share, Beginning of
Period $ 9.23 $ 9.40
------ ------
INCOME (LOSS) FROM INVESTMENT
OPERATIONS:
Net Investment Income 0.58 0.43
Net Realized and Unrealized Gain (Loss)
on Investments 0.12 (0.49)
------ ------
Total from Investment Operations 0.70 (0.06)
------ ------
LESS DESTRIBUTIONS:
Distributions from Net Investment Income (0.60) (0.11)
------ ------
Net Asset Value per Share, End of Period $ 9.33 $ 9.23
====== ======
Total Return 8.09% (0.69)% (1)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (in thousands) $ 49 $ 37
Ratio of Expenses to Average Net Assets 1.02% (3) 1.02% (2)(3)
Ratio of Net Investment Income to
Average Net Assets 6.38% 7.00% (2)
Portfolio Turnover Rate 8.44% 28.07% (1)
</TABLE>
(1) FOR THE PERIOD MARCH 1, 1999 (COMMENCEMENT OF OFFERING OF ADVISORY CLASS
SHARES) THROUGH OCTOBER 31, 1999 AND NOT INDICATIVE OF A FULL YEAR'S
OPERATING RESULTS.
(2) ANNUALIZED.
(3) THE INVESTMENT ADVISOR 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 AS DISCLOSED IN NOTE 5 IN
THE NOTES TO THE FINANCIAL STATEMENTS. HAD SUCH ACTION NOT BEEN TAKEN,
TOTAL ANNUALIZED OPERATING EXPENSES, AS A PERCENTAGE OF AVERAGE NET ASSETS,
WOULD HAVE BEEN 89.63% FOR THE YEAR ENDED OCTOBER 31, 2000 AND 722.10% FOR
THE PERIOD FROM MARCH 1, 1999 (COMMENCEMENT OF OFFERING OF ADVISORY CLASS
SHARES) TO OCTOBER 31, 1999.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
56
<PAGE>
TCW GALILEO FUNDS, INC.
[ICON]
--------------------------------------------------------------------------------
U.S. FIXED INCOME
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of TCW Galileo Funds, Inc.:
We have audited the accompanying statements of assets and liabilities, including
the schedules of investments, of TCW Galileo Money Market Fund, TCW Galileo Core
Fixed Income Fund, TCW Galileo High Yield Bond Fund, TCW Galileo Mortgage Backed
Securities Fund, and TCW Galileo Total Return Mortgage Backed Securities Fund
(the "Galileo U.S. Fixed Income Funds") (five of twenty-one funds comprising TCW
Galileo Funds, Inc.) as of October 31, 2000 and the related statements of
operations for the period then ended, the statements of changes in net assets
for each of the periods ended October 31, 2000 and 1999, and the financial
highlights for each of the respective periods in the periods ended October 31,
2000. These financial statements and financial highlights are the responsibility
of the Funds' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of October 31, 2000 by correspondence with the custodians
and brokers. Where replies were not received from brokers, we performed other
auditing procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the respective Galileo U.S. Fixed Income Funds as of October 31, 2000, the
results of their operations, the changes in their net assets, and the financial
highlights for the respective stated periods in conformity with accounting
principles generally accepted in the United States of America.
/s/ Deloitte & Touche LLP
December 20, 2000
Los Angeles, California
57
<PAGE>
TCW GALILEO FUNDS
OCTOBER 31, 2000
SHAREHOLDER INFORMATION
DIRECTORS AND OFFICERS
Marc I. Stern
Director and Chairman of the Board
Alvin R. Albe, Jr.
Director and President
John C. Argue
Director
Norman Barker, Jr.
Director
Richard W. Call
Director
Matthew K. Fong
Director
Thomas E. Larkin, Jr.
Director
Charles W. Baldiswieier
Senior Vice President
Michael E. Cahill
Senior Vice President,
General Counsel and Assistant Secretary
Jeffrey V. Peterson
Senior Vice President
Robert S. Sant
Senior Vice President
Philip K. Holl
Secretary
Hilary G. D. Lord
Assistant Secretary
Peter C. DiBora
Treasurer
INVESTMENT ADVISOR
TCW Investment Management Company
865 South Figueroa Street
Los Angeles, California 90017
(213) 244-0000
CUSTODIAN & ADMINISTRATOR
Investors Bank & Trust Company
200 Clarendon Street
Boston, Massachusetts 02116
TRANSFER AGENT
PFPC Inc.
400 Bellevue Parkway
Wilmington, Delaware 19809
DISTRIBUTOR
TCW Brokerage Services
865 South Figueroa Street
Los Angeles, California 90017
INDEPENDENT AUDITORS
Deloitte & Touche, LLP
350 South Grand Avenue
Los Angeles, California 90071
USFIAR103100
