<DOCUMENT>
<TYPE>497
<SEQUENCE>1
<FILENAME>d497.txt
<DESCRIPTION>PROSPECTUS AND SAI
<TEXT>

<PAGE>

PROSPECTUS

                      TCW Convertible Securities Fund, Inc.

                        10,513,198 Shares of Common Stock

[TCW LOGO]
                        Issuable Upon Exercise of Rights
                  to Subscribe for Such Shares of Common Stock

                               ---------------

   TCW Convertible Securities Fund, Inc. (the "Fund"), is issuing to its
shareholders of record ("Record Date Shareholders") as of the close of
business on June 29, 2001, rights ("Rights") entitling the holders thereof to
subscribe for an aggregate of 10,513,198 shares (the "Shares") of the Fund's
Common Stock (the "Offer") at the rate of one share of Common Stock for each
four Rights held. The Offer also entitles the Record Date Shareholders to
subscribe, subject to certain limitations and subject to allotment, for any
Shares not acquired by exercise of primary subscription rights. The Rights are
non-transferable and will not be admitted for trading on the New York Stock
Exchange ("NYSE"). THE SUBSCRIPTION PRICE PER SHARE (the "Subscription Price")
WILL BE THE GREATER OF (1) NET ASSET VALUE PER SHARE ON AUGUST 3, 2001; OR (2)
90% OF THE AVERAGE OF THE CLOSING SALE PRICES OF A SHARE OF THE FUND'S COMMON
STOCK AT THE CLOSE OF BUSINESS ON AUGUST 3, 2001 AND THE FOUR PRECEDING
BUSINESS DAYS.

   THE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON AUGUST 2, 2001
(THE "EXPIRATION DATE").

   Under the terms of the Offer, shareholders who do not fully exercise their
Rights will, upon completion of the Offer, own a smaller proportional interest
in the Fund than would be the case if they exercised their Rights. Such
shareholders would also forego the opportunity to purchase shares of the Fund
at a discount from market price if such market price remains above net asset
value at the end of the offering period. This Prospectus tells investors
briefly the information they should know before investing in the Fund. This
Prospectus should be read and retained for future reference. The telephone
number for all questions and inquiries relating to the Offer is 1-888-385-
1532.

   The Fund is a closed-end diversified management investment company whose
investment objective is to seek a total investment return, comprised of
current income and capital appreciation, through investment principally in
convertible securities.

   A Statement of Additional Information dated June 26, 2001 has been filed
with the Securities and Exchange Commission and contains additional
information regarding the Fund. The Table of Contents of the Statement of
Additional Information is found in Appendix B to this Prospectus. A copy may
be obtained without charge by calling (800) 386-3829 or writing the Fund at
865 South Figueroa Street, Suite 1800, Los Angeles, California 90017. The
Fund's telephone number is (213) 244-0000. The Statement of Additional
Information is incorporated herein by reference.

   NEITHER THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE OR OTHER
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.

<TABLE>
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
<CAPTION>
                                                    Underwriting
                                                      Discounts    Proceeds to the
                                Subscription Price and Commissions   Fund(1)(2)
----------------------------------------------------------------------------------
<S>                             <C>                <C>             <C>
Per Share.....................        $9.25             None            $9.25
----------------------------------------------------------------------------------
Total.........................     $97,247,081          None         $97,247,081
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
</TABLE>
(1) Estimated based on an assumed subscription price per share of $9.25.

(2) Before deduction of expenses incurred by the Fund, estimated at $345,000.

June 26, 2001
<PAGE>

                                   FEE TABLE

<TABLE>
<CAPTION>
                                                          Shareholder
                                                     Transaction Expenses*
                                                 ------------------------------
   <S>                                           <C>
   Sales Load (as a percentage of offering
    price).....................................               None
   Dividend Reinvestment and Cash Purchase Plan
    Fees.......................................               None

<CAPTION>
                                                        Annual Expenses
                                                 ------------------------------
                                                 (as a percentage of net assets
                                                 attributable to common shares)
   <S>                                           <C>
   Management Fees.............................               0.55%
   Other Expenses..............................               0.14%
                                                              ----
   Total Annual Expenses.......................               0.69%
                                                              ====
</TABLE>

<TABLE>
<CAPTION>
   Example                                     1 Year 3 Years 5 Years 10 Years
   -------                                     ------ ------- ------- --------
   <S>                                         <C>    <C>     <C>     <C>
   You would pay the following expenses* on a
    $1,000 investment, assuming five percent
    annual return:............................  $ 7     $22     $38     $86
</TABLE>
--------
*  Excludes brokerage commissions paid on purchases and sales of shares of
   Common Stock of the Fund.

   The foregoing information is intended to assist you in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. The example is included to provide a means for you to compare
expense levels of investment companies with different fee structures over
varying investment periods. To facilitate such comparison, all investment
companies are required to utilize a hypothetical five percent annual return
assumption. This assumption is unrelated to the Fund's prior performance and
is not a projection of future performance. The example should not be
considered a representation of past or future expenses. Actual expenses may be
greater or lesser than those shown.

                                       2
<PAGE>

                              PROSPECTUS SUMMARY

   The following summary is qualified in its entirety by reference to the more
detailed information included elsewhere in this Prospectus.

Terms of the Offer

   TCW Convertible Securities Fund, Inc. (the "Fund") is issuing to
shareholders of record ("Record Date Shareholders") as of the close of
business on June 29, 2001 (the "Record Date") rights ("Rights") to subscribe
for an aggregate of 10,513,198 shares of Common Stock (sometimes referred to
herein as the "Shares") of the Fund. Each Record Date Shareholder is being
issued one Right for each full share of Common Stock owned on the Record Date.
The Rights entitle the holder thereof to acquire at the Subscription Price (as
hereinafter defined) one Share for each four Rights held. Rights may be
exercised at any time during the period (the "Subscription Period"), which
commences on the date of this Prospectus and ends at 5:00 p.m., New York City
time, on August 2, 2001 (the "Expiration Date"). The right to acquire one
additional Share for each four Rights held during the Subscription Period is
hereinafter referred to as the "Primary Subscription."

   In addition, any Record Date Shareholder who fully exercises all Rights
initially issued to him (other than those Rights which cannot be exercised
because they represent the right to acquire less than one Share) is entitled
to subscribe for Shares which were not subscribed for by other shareholders in
the Primary Subscription (the "Over-Subscription Privilege"). For purposes of
determining the number of Shares a Record Date Shareholder may acquire
pursuant to the Offer, broker-dealers whose shares are held of record by Cede
& Company, Inc. ("Nominee"), nominee for The Depository Trust Company, or by
any other depository or nominee, will be deemed to be the holders of the
Rights that are issued to Nominee or such other depository or nominee on their
behalf. Shares acquired pursuant to the Over-Subscription Privilege are
subject to allotment, which is more fully discussed under "The Offer--Over-
Subscription Privilege."

   The subscription price per share will be the greater of (1) net asset value
per share on August 3, 2001; or (2) 90% of the average of the closing sale
prices of a share of the Fund's Common Stock at the close of business on
August 3, 2001 and the four preceding business days. Since the Expiration Date
is prior to the Pricing Date, Record Date Shareholders who choose to exercise
their Rights will not know the Subscription Price at the time they exercise
such Rights. The steps for subscribing, including how to pay, are specified
below in "Steps to Subscribe."

   Rights will be evidenced by subscription certificates ("Subscription
Certificates") and may be exercised by completing a Subscription Certificate
and delivering it, together with payment, either by means of a notice of
guaranteed delivery or a check, to The Bank of New York, Church Street
Station, New York, New York (the "Subscription Agent"). A Rights holder will
have no right to rescind a purchase after the Subscription Agent has received
the holder's Subscription Certificate or notice of guaranteed delivery. The
Rights are non-transferable. Only the shares issued pursuant to an exercise of
Rights, and not the Rights, will be listed on the NYSE.

Important Dates to Remember

<TABLE>
<CAPTION>
   Event                                                       Date
   -----                                                       ----
   <S>                                            <C>
   Record Date................................... June 29, 2001
   Subscription Period........................... June 29 through August 2, 2001
   Expiration Date............................... August 2, 2001
   Pricing Date.................................. August 3, 2001
   Confirmation to Participants.................. August 8, 2001
   Final Settlement for Shares................... August 15, 2001
</TABLE>

                                       3
<PAGE>

Steps to Subscribe

   Complete, sign and date the enclosed Subscription Certificate. Write a
check or money order for $9.25 for each Share subscribed for through the
Primary Subscription and Over-Subscription Privilege. Mail the Subscription
Certificate and payment in the enclosed envelope to The Bank of New York.

   Alternatively, follow the instructions for the enclosed notice of
guaranteed delivery. If shares are held by your broker or other nominee,
contact your broker or other nominee for assistance.

Information Regarding the Fund

   The Fund has been engaged in business as a closed-end diversified
management investment company since January 13, 1987. The Fund's investment
objective is to seek a total investment return, comprised of current income
and capital appreciation, through investment principally in convertible
securities. Convertible securities are corporate securities that are
exchangeable for a set number of another form of security at a prestated price
and can be in the form of equity or debt. No assurance can be given that the
Fund's investment objective will be achieved. The Fund's outstanding common
stock, par value $.01 per share (the "Common Stock"), is listed and traded on
the NYSE under the symbol CVT. The average weekly trading volume of the Common
Stock on the NYSE during the 12 month period ended December 31, 2000 was
approximately 213,000 shares. As of December 31, 2000, the net assets of the
Fund were $352.6 million.

Information Regarding the Investment Adviser

   The Fund's investment adviser is TCW Investment Management Company
("Investment Adviser"). The Investment Adviser is a wholly-owned subsidiary of
The TCW Group, Inc., whose direct and indirect subsidiaries provide a variety
of trust, investment management and investment advisory services and had, as
of March 31, 2001, approximately $75 billion of assets under management and
committed to management, of which approximately $2.0 billion were represented
by investments in convertible securities. The Fund pays the Investment Adviser
a monthly fee computed at the annual rate of 0.75 % of the first $100 million
of the Fund's average net assets, and 0.50% of the Fund's average net assets
in excess of $100 million. Since the Investment Adviser's fees are based on
the Fund's average net assets, the Investment Adviser will benefit from the
Offer. In addition, a director who is an "interested person" of the Fund could
benefit indirectly from the Offer because of his interest in the Investment
Adviser.

Special Considerations and Risk Factors

   The following summarizes certain matters that should be considered, among
others, in connection with the Offer.

Dilution.....................  As a result of the terms of the Offer,
                               shareholders who do not fully exercise their
                               Rights will, at the completion of the Offer,
                               own a smaller proportional interest in the Fund
                               than would otherwise be the case. Such
                               shareholders would also forego the opportunity
                               to purchase shares of the Fund at a discount
                               from market price if such market price remains
                               above net asset value at the end of the
                               offering period.

Discount From Net Asset        The Fund's shareholders may dispose of their
Value........................  Shares on the NYSE or other markets on which
                               the Shares may trade. Because the Fund is a
                               closed-end fund, the Fund's shareholders do not
                               have the right to redeem their Shares at net
                               asset value. The market price for shares of
                               closed-end investment companies varies from net
                               asset value and such shares frequently trade at
                               a discount from net asset value. The

                                       4
<PAGE>

                               Fund's shares have traded in the market at,
                               above and below net asset value since the
                               commencement of Fund's operations. During the
                               past two years, the Fund's shares have
                               generally traded in the market at a discount
                               below net asset value. Beginning in January
                               2001, the Fund's shares have traded at a
                               premium above net asset value.

Anti-Takeover Provisions.....  Certain provisions of the Fund's Articles of
                               Incorporation may be regarded as "anti-
                               takeover" provisions. These provisions require
                               the affirmative vote or consent of the holders
                               of at least two-thirds of the outstanding
                               shares of the Fund for a merger or
                               consolidation of the Fund with an open-end
                               investment company, a merger or consolidation
                               of the Fund with a closed-end investment
                               company with different voting requirements,
                               dissolution of the Fund, a sale of all or
                               substantially all of the assets of the Fund or
                               an amendment to the Fund's Articles of
                               Incorporation making the Common Stock a
                               redeemable security or reducing the two-thirds
                               vote required by the Articles of Incorporation.

Investment Risk..............  The Fund holds primarily convertible
                               securities, which may go up or down in value,
                               in accordance with moves in the price of the
                               stock into which the securities are
                               convertible, sometimes rapidly and
                               unpredictably. Although stocks offer the
                               potential for greater long-term growth than
                               most fixed income securities, stocks generally
                               have higher short-term volatility.

                               The primary risks affecting this Fund are
                               "credit risk," "interest rate risk," "liquidity
                               risk", and, to a lesser extent, "foreign
                               investing risk."

                               Credit risk refers to the liklihood that the
                               Fund could lose money if an issuer in which the
                               Fund invests is unable to meet its financial
                               obligations, such as the payment of principal
                               and/or interest on an instrument or goes
                               bankrupt. This Fund may be subject to greater
                               credit risk because it invests in convertible
                               debt securities that are below investment
                               grade. Securities rated below investment grade
                               are also commonly known as "junk" bonds. Debt
                               securities rated below investment grade are
                               considered to be speculative. This is
                               especially true during periods of economic
                               uncertainty or during economic downturns. Below
                               investment grade securities are often issued by
                               companies without long track records of sales
                               or earnings, or by those companies with
                               questionable credit strength. In the event of a
                               repayment problem by the issuer of these
                               securities, they will only be paid if there is
                               anything left after the payment of senior debt,
                               such as bank loans and investment grade secured
                               bonds. Interest rate risk refers to the
                               possibility that the value of the Fund's
                               portfolio securities may fall since fixed
                               income securities generally fall in value when
                               interest rates rise. The longer the term of a
                               fixed income security, the more sensitive it
                               will be to fluctuations in value from interest
                               rate changes. Liquidity risk refers to the
                               possibility that the Fund may lose money or be
                               prevented from earning capital gains if it
                               cannot sell a security at the time and price
                               that is most beneficial to the Fund. Because
                               lower quality securities may be less

                                       5
<PAGE>

                               liquid than higher quality securities, the Fund
                               may be more susceptible to liquidity risk than
                               funds that invest in higher quality securities.
                               A security whose credit rating has been lowered
                               may be particularly difficult to sell. Because
                               the Fund may invest a portion of its assets in
                               securities issued by foreign companies, it may
                               be subject to foreign investing risk. Foreign
                               investing risk refers to the likelihood that
                               foreign investments may be riskier than U.S.
                               investments because of many factors, some of
                               which include:

                                  . a lack of political or economic stability

                                  . changes in currency exchange rates

                                  . a lack of adequate company information

                                  . foreign controls on investment

                                  . withholding taxes

Distributions................  Since July, 1988, the Fund has made quarterly
                               distributions of $0.21 per share. These
                               distributions have required payments
                               substantially in excess of the Fund's current
                               net investment income. The portion, if any, of
                               a distribution which equals the Fund's current
                               net investment income should be considered a
                               dividend. The remainder constitutes a payment
                               out of the Fund's net realized capital gains
                               for each period to the extent available. Any
                               excess distribution is paid from paid-in
                               capital.

                                       6
<PAGE>

                             FINANCIAL HIGHLIGHTS

  The information below for the fiscal years ended December 31, 1991 through
 2000 has been audited by Deloitte & Touche LLP, whose report, along with the
    Fund's financial statements are included in the annual report, which is
      available upon request. The following information should be read in
 conjunction with the financial statements and related notes thereto included
                  in the Statement of Additional Information.

<TABLE>
<CAPTION>
                                                           Year Ended December 31,
                          ----------------------------------------------------------------------------------------------------
                            2000       1999      1998      1997      1996      1995      1994       1993      1992      1991
                          --------   --------  --------  --------  --------  --------  --------   --------  --------  --------
<S>                       <C>        <C>       <C>       <C>       <C>       <C>       <C>        <C>       <C>       <C>
Net Asset Value Per
Share, Beginning of
Period..................  $  11.32   $   9.37  $   9.21  $   8.51  $   8.36  $   7.47  $   8.79   $   8.36  $   8.09  $   6.85
                          --------   --------  --------  --------  --------  --------  --------   --------  --------  --------
Income from Operations:
 Net Investment Income..      0.35       0.35      0.35      0.35      0.36      0.37      0.38       0.40      0.41      0.43
 Impact to Capital for
 Shares Issued..........       --         --      (0.01)    (0.01)      --        --        --       (0.01)    (0.01)      --
 Impact to Capital for
 Shares Repurchased.....      0.02        --        --        --        --        --        --         --        --        --
 Net Realized and
 Unrealized Gain (Loss)
 on Securities..........     (0.80)      3.15      0.85      1.23      0.77      1.36     (0.86)      1.25      0.71      1.65
                          --------   --------  --------  --------  --------  --------  --------   --------  --------  --------
  Total from Investment
  Operations............     (0.43)      3.50      1.19      1.57      1.13      1.73     (0.48)      1.64      1.11      2.08
Less Distributions:
 Dividends from Net
 Investment Income......     (0.35)     (0.35)    (0.35)    (0.35)    (0.36)    (0.37)    (0.38)     (0.40)    (0.41)    (0.43)
 Distribution from Net
 Realized Gains.........     (2.06)     (1.20)    (0.68)    (0.52)    (0.62)    (0.33)    (0.30)     (0.81)    (0.07)      --
 Distribution in Excess
 of Net Realized Gains..       --         --        --        --        --      (0.14)    (0.16)       --        --        --
 Return of Capital......       --         --        --        --        --        --        --         --      (0.36)    (0.41)
                          --------   --------  --------  --------  --------  --------  --------   --------  --------  --------
  Total Distributions...     (2.41)     (1.55)    (1.03)    (0.87)    (0.98)    (0.84)    (0.84)     (1.21)    (0.84)    (0.84)
                          --------   --------  --------  --------  --------  --------  --------   --------  --------  --------
Net Asset Value Per
Share, End of Period....  $   8.48   $  11.32  $   9.37  $   9.21  $   8.51  $   8.36  $   7.47   $   8.79  $   8.36  $   8.09
                          ========   ========  ========  ========  ========  ========  ========   ========  ========  ========
Per Share Market Price,
End of Period...........  $  10.38   $   9.56  $  9.625  $  9.625  $  9.375  $  9.375  $  7.750   $  9.250  $  9.125  $  8.750
                          ========   ========  ========  ========  ========  ========  ========   ========  ========  ========
Total Investment
Return(1)...............     34.95 %    16.10%    11.41%    12.98%    11.75%     33.6%    (7.43)%    13.77%    15.90%    41.38%
Net Asset Value Total
Return(2)...............     (4.79)%    39.16%    13.34%    19.10%    13.94%     24.0%    (5.70)%    16.12%    13.35%    31.20%

Ratios/Supplemental
Data:
 Net Assets, End of
 Period (in thousands)..   352,555   $477,608  $393,588  $355,061  $271,267  $264,608  $234,686   $273,230  $215,208  $172,331
 Ratio of Expenses to
 Average Net Assets.....      0.69 %     0.68%     0.73%     0.74%     0.77%     0.81%     0.79%      0.80%     0.88%     0.94%
 Ratio of Net Investment
 Income to Average Net
 Assets.................      2.88 %     3.47%     3.73%     3.95%     4.12%     4.60%     4.66%      4.48%     5.04%     5.68%
 Portfolio Turnover
 Rate...................    159.44 %   119.92%   124.51%   132.99%   125.72%   108.98%   110.04%    173.79%   139.39%   114.13%
 Average Commission Rate
 Paid by the Fund(3)....  $   0.05   $   0.06  $   0.06  $   0.06  $   0.06       N/A       N/A        N/A       N/A       N/A
</TABLE>
----
(1) Based on market value per share, adjusted for reinvestment of
    distributions.
(2) Based on net asset value per share, adjusted for reinvestment of
    distributions.
(3) For fiscal years beginning on or after September 1, 1995, a fund is
    required to disclose its average commission rate per share for security
    trades on which commissions are charged. This amount may vary from period
    to period and fund to fund depending on the mix of trades executed in
    various markets where trading practices and commission rate structures may
    differ.

                                       7
<PAGE>

                                   THE OFFER

Terms of the Offer

   The Fund is issuing to Record Date Shareholders Rights to subscribe for the
Shares. Each Record Date Shareholder is being issued one non-transferable
Right for each share of Common Stock owned on the Record Date. The Rights
entitle the holder to acquire through the Primary Subscription at the
Subscription Price one Share for each four Rights held. No Rights will be
issued for fractional shares. Rights may be exercised at any time during the
Subscription Period which ends at 5:00 p.m., New York City time, on August 2,
2001.

   In addition, any Record Date Shareholder who fully exercises all Rights
initially issued to him (other than those Rights which cannot be exercised
because they represent the right to acquire less than one Share) is entitled
to subscribe for Shares which were not subscribed for by other shareholders in
the Primary Subscription. For purposes of determining the maximum number of
Shares a Record Date Shareholder may acquire pursuant to the Offer, broker-
dealers whose shares are held of record by Nominee or by any other depository
or nominee will be deemed to be the holders of the Rights that are issued to
Nominee or such other depository or nominee on their behalf. Shares acquired
pursuant to the Over-Subscription Privilege are subject to allotment, which is
more fully discussed below under "Over-Subscription Privilege."

   Rights will be evidenced by Subscription Certificates. The number of Rights
issued to each holder will be stated on the Subscription Certificate delivered
to such holder. The method by which Rights may be exercised and Shares paid
for is explained in the sections titled "Method of Exercise of Rights" and
"Payment for Shares." A Rights holder will have no right to rescind a purchase
after the Subscription Agent has received the holder's Subscription
Certificate or notice of guaranteed delivery. Shares issued pursuant to an
exercise of Rights will be listed on the NYSE.

   The Rights are non-transferable. Only the underlying Shares, and not the
Rights, will be admitted for trading on the NYSE. Since fractional Shares will
not be issued, Rights holders who receive, or who are left with, fewer than
four Rights will be unable to exercise such Rights and will not be entitled to
receive any cash in lieu of such fractional Shares. The Fund will not offer or
sell any Shares which are not subscribed through the Primary Subscription or
the Over-Subscription Privilege.

Purposes of the Offer

   The Board of Directors of the Fund has determined that the Offer is in the
best interests of the Fund and its shareholders. The Offer will increase the
assets of the Fund available for investment thereby permitting the Fund to be
in a better position more fully to take advantage of investment opportunities
that may arise. The larger number of outstanding shares of Common Stock after
the Offer should help create a more efficient and active market for the Common
Stock and help reduce the effect on market price of individual transactions.
In addition, increasing the size of the Fund may lower the Fund's expenses as
a percentage of net assets. The Offer also seeks to reward the long-term
shareholder by giving existing shareholders the right to purchase additional
shares at a price that may be below market without incurring any commission
charge. There can be no assurance that the Fund will achieve any of the
foregoing objectives or benefits through the Offer.

   The purpose of setting the determination of the Subscription Price
subsequent to the Expiration Date is to attract the maximum participation of
shareholders in the offer, with minimum dilution to non-participating
shareholders. Non-participating shareholders will have their voting rights
diluted to the extent they do not subscribe for Additional Shares in the
Offer. This will result in a non-participating shareholder having a lower
percentage of voting stock.

   The Investment Adviser will benefit from the Offer because the Investment
Adviser's fee is based on the average net assets of the Fund. It is not
possible to state precisely the amount of additional compensation the
Investment Adviser will receive as a result of the Offer because the proceeds
of the Offer will be invested in

                                       8
<PAGE>

additional portfolio securities which will fluctuate in value. However,
assuming that all Rights are exercised and the Fund receives the maximum
proceeds of the Offer, the annual compensation to be received by the
Investment Adviser would be increased by approximately 13% assuming the net
asset value per share of $8.48 as of December 31, 2000. Three of the Fund's
eight directors who voted to authorize the Offer are "interested persons" of
the Fund and of the Investment Adviser within the meaning of the Investment
Company Act of 1940 ("1940 Act"). One of these Directors, Mr. Ernest O.
Ellison, could benefit indirectly from the Offer because of his indirect
ownership interest in the Investment Adviser.

   The Fund may, in the future and at its discretion, choose to make
additional rights offerings from time to time for a number of shares and on
terms which may or may not be similar to the Offer. If all the Shares are
subscribed for in this Offering, the Fund will have a total of 22,434,008
remaining authorized but unissued shares of Common Stock available for
issuance without shareholder approval.

Over-Subscription Privilege

   If some Record Date Shareholders do not exercise all of the Rights issued
to them, any Shares for which subscriptions have not been received from Record
Date Shareholders will be offered, by means of the Over-Subscription
Privilege, to those Record Date Shareholders who have exercised all the Rights
initially issued to them (other than those Rights which cannot be exercised
because they represent the right to acquire less than one Share) and who wish
to acquire more than the number of Shares for which the Rights issued to them
are exercisable. Record Date Shareholders who exercise all the Rights
initially issued to them will have the opportunity to indicate on the
Subscription Certificate how many Shares they are willing to acquire pursuant
to the Over-Subscription Privilege. If sufficient Shares remain after the
Primary Subscriptions have been exercised, all over-subscriptions will be
honored in full. If sufficient Shares are not available to honor all over-
subscriptions, the available Shares will be allocated among those who
oversubscribe based on the number of Rights originally issued to them by the
Fund. The percentage of remaining Shares each over-subscribing shareholder may
acquire will be rounded up or down to result in delivery of whole Shares. The
allocation process may involve a series of allocations in order to assure that
the total number of Shares available for over-subscriptions is distributed on
a pro rata basis.

The Subscription Price

   The Subscription Price for the Shares to be issued pursuant to the Rights
will be the greater of (1) net asset value per Share at the close of business
on August 3, 2001 (the "Pricing Date"); or (2) 90% of the average of the
closing sale prices of a share of the Fund's Common Stock at the close of
business on August 3, 2001 and the four preceding business days.

   The Fund announced the Offer before the start of trading on the NYSE on
April 19, 2001. The net asset values per share of Common Stock at the close of
business on April 19, 2001 and April 20, 2001 were $8.10 and $8.07,
respectively, and the last reported sale prices of a share of the Fund's
Common Stock on the NYSE on April 19, 2001 and April 20, 2001 were $10.15 and
$10.11, respectively.

Expiration of the Offer

   The Offer will expire at 5:00 p.m., New York City time, on August 2, 2001.
Rights will expire on the Expiration Date and thereafter may not be exercised.
Since the Expiration Date is prior to the Pricing Date, Record Date
Shareholders who decide to acquire Shares in the Primary Subscription or
pursuant to the Over-Subscription Privilege will not know, when they make such
decision, the purchase price for such Shares.

Subscription Agent

   The Subscription Agent is The Bank of New York, Church Street Station, New
York, New York. The Subscription Agent will receive from the Fund a fee
estimated to be $125,000 for the processing of the exercise

                                       9
<PAGE>

of Rights and reimbursement for all out-of-pocket expenses related to the
Offer. The Subscription Agent is also the Fund's dividend disbursing agent,
transfer agent and registrar.

Information Agent

   Any questions or requests for assistance regarding how to subscribe for
Shares or for additional copies of this Prospectus or Subscription
Certificates or notices of guaranteed delivery may be directed to the
Information Agent at its telephone number and address listed below:

Georgeson Shareholder
111 Commerce Road
Carlstadt. New Jersey 07072-2586

Toll Free--1-888-385-1532

   The Information Agent will receive a fee estimated to be $10,000 and
reimbursement for all out-of-pocket expenses related to the Offer.

Method of Exercise of Rights

   Rights may be exercised by filling in and signing the reverse side of the
Subscription Certificate and mailing it in the envelope provided. In addition,
Rights may be exercised by delivering the completed and signed Subscription
Certificate to the Subscription Agent, together with payment for the Shares as
described below under "Payment for Shares." Rights may also be exercised
through a Rights holder's broker, or other nominee if such shareholder's
shares of Common Stock are held in such broker's or nominee's name. Such
brokers or nominees may charge a servicing fee for exercising such Rights.
Fractional Shares will not be issued, and Rights holders who receive, or who
are left with, fewer than four Rights will not be able to exercise such
Rights.

   Completed Subscription Certificates must be received by the Subscription
Agent prior to 5:00 p.m., New York City time, on August 2, 2001 (unless
payment is effected by means of a notice of guaranteed delivery as described
below under "Payment for Shares") (August 2, 2001 is hereinafter referred to
as the Expiration Date). The Subscription Certificate and payment should be
delivered to the offices of the Subscription Agent by one of the methods
described below:

(1) By mail:
    The Bank of New York
    Tender and Exchange Department
    P.O. Box 11248
    Church Street Station New York, New York 10286-1248

(2) By Hand, Express Mail or Overnight Courier:
    The Bank of New York
    Tender and Exchange Department
    101 Barclay Street
    Receive & Delivery Window-Street Level
    New York, New York 10286

Payment for Shares

   Holders of Rights who acquire Shares in the Primary Subscription or
pursuant to the Over-Subscription Privilege may choose between the following
methods of payment.

   (1) A subscription will be accepted by the Subscription Agent if, prior to
5:00 p.m., New York City time, on the Expiration Date, the Subscription Agent
has received a completed and executed notice of guaranteed delivery by
facsimile (telecopy) or otherwise from a bank, a trust company or a NYSE
member, guaranteeing

                                      10
<PAGE>

delivery of (i) payment of the full Subscription Price for the Shares
subscribed for on Primary Subscription and any additional Shares subscribed
for pursuant to the Over-Subscription Privilege, and (ii) a properly completed
and executed Subscription Certificate. The Subscription Agent will not honor a
notice of guaranteed delivery if a properly completed and executed
Subscription Certificate and full payment is not received by the Subscription
Agent by the close of business on the third Business Day after the Expiration
Date. The notice of guaranteed delivery may be delivered to the Subscription
Agent in the same manner as Subscription Certificates at the addresses set
forth above, or may be transmitted to the Subscription Agent together with a
completed Subscription Certificate by facsimile transmission (telecopy number
(212) 815-6213; confirm by telephone (800) 507-9357.

   (2) Alternatively, a holder of Rights can send the Subscription Certificate
together with payment in the form of a check for the Shares acquired on
Primary Subscription and additional Shares subscribed for pursuant to the
Over-Subscription Privilege to the Subscription Agent based on an assumed
purchase price of $9.25 Share. To be accepted, payment, together with the
executed Subscription Certificate, must be received by the Subscription Agent
at its Tender and Exchange Department, P.O. Box 11248, Church Street Station,
New York, New York 10286-1248 or its Tender and Exchange Department, 101
Barclay Street, Receive and Deliver Window-Street Level, New York, New York
10286 prior to 5:00 p.m., New York City time, on the Expiration Date. The
Subscription Agent will deposit all stock purchase checks received by it prior
to the final due date into a segregated interest-bearing account (which
interest will accrue to the benefit of the Fund and be retained by the Fund)
pending proration and distribution of Shares. Interest on this account will
accrue to the benefit of the Fund.

   A PAYMENT PURSUANT TO THIS METHOD MUST BE IN UNITED STATES DOLLARS BY MONEY
ORDER OR CHECK DRAWN ON A BANK LOCATED IN THE UNITED STATES. PAYMENT MUST BE
PAYABLE TO TCW CONVERTIBLE SECURITIES FUND, INC., AND MUST ACCOMPANY AN
EXECUTED SUBSCRIPTION CERTIFICATE FOR SUCH SUBSCRIPTION CERTIFICATE TO BE
ACCEPTED. THE SUBSCRIPTION AGENT WILL NOT ACCEPT CASH AS A MEANS OF PAYMENT
FOR SHARES.

   Within three Business Days following the Pricing Date (the "Confirmation
Date"), a confirmation will be sent by the Subscription Agent to each holder
of Rights (or, if the Fund's shares are held by Nominee or any other
depository or nominee, to Nominee or such other depository or nominee),
showing (1) the number of Shares acquired pursuant to the Primary
Subscription, (2) the number of Shares, if any, acquired pursuant to the Over-
Subscription Privilege, (3) the per Share and total purchase price for the
Shares, and (4) any additional amount payable by such holder to the Fund or
any excess to be refunded by the Fund to such holder, in each case based on
the Subscription Price as determined on the Pricing Date. If any such
shareholder exercises his right to acquire Shares pursuant to the Over-
Subscription Privilege, any such excess payment which would otherwise be
refunded to him will be applied by the Fund toward payment for Shares acquired
pursuant to exercise of the Over-Subscription Privilege. Any payment required
from a holder of Rights must be received by the Subscription Agent within ten
Business Days after the Confirmation Date. Any excess payment to be refunded
by the Fund to a holder of Rights, or to be paid to a holder of Rights as a
result of exercises by Record Date Stockholders of their Over-Subscription
Privileges will be mailed by the Subscription Agent to him within fifteen
Business Days after the Confirmation Date. All payments by a holder of Rights
must be in United States dollars by money order or check drawn on a bank
located in the United States of America and payable to TCW Convertible
Securities Fund, Inc.

   Whichever of the two methods described above is used, issuance and delivery
of certificates for the Shares purchased are subject to collection of any
checks or money orders and actual payment pursuant to any notice of guaranteed
delivery.

   A Rights holder will have no right to rescind a purchase after the
Subscription Agent has received payment, either by means of a notice of
guaranteed delivery or a check.

                                      11
<PAGE>

   If a holder of Rights who acquires Shares pursuant to the Primary
Subscription or the Over-Subscription Privilege does not make payment of any
amounts due, the Fund reserves the right to take any or all of the following
actions: (1) find other purchasers for such subscribed-for and unpaid-for
Shares; (2) apply any payment actually received by it toward the purchase of
the greatest whole number of Shares which could be acquired by such holder
upon exercise of the Primary Subscription and/or the Over-Subscription
Privilege, and/or (3) exercise any and all other rights or remedies to which
it may be entitled, including, without limitation, the right to set off
against payments actually received by it with respect to such subscribed
Shares and to enforce the relevant guaranty of payment.

   Holders who hold shares of Common Stock for the account of others, such as
brokers, trustees or depositaries for securities, should notify the respective
beneficial owners of such shares as soon as possible to ascertain such
beneficial owners' intentions and to obtain instructions with respect to the
Rights. If the beneficial owner so instructs, the record holder of such Rights
should complete Subscription Certificates and submit them to the Subscription
Agent with the proper payment. In addition, beneficial owners of Common Stock
or Rights held through such a holder should contact the holder and request the
holder to effect transactions in accordance with the beneficial owner's
instructions.

   The instructions accompanying the Subscription Certificates should be read
carefully and followed in detail. DO NOT SEND SUBSCRIPTION CERTIFICATES OR
PAYMENTS TO THE FUND.

   THE METHOD OF DELIVERY OF SUBSCRIPTION CERTIFICATES AND PAYMENT OF THE
SUBSCRIPTION PRICE TO THE SUBSCRIPTION AGENT WILL BE AT THE ELECTION AND RISK
OF THE RIGHTS HOLDERS, BUT IF SENT BY MAIL IT IS RECOMMENDED THAT SUCH
CERTIFICATES AND PAYMENTS BE SENT BY REGISTERED MAIL, PROPERLY INSURED, WITH
RETURN RECEIPT REQUESTED, AND THAT A SUFFICIENT NUMBER OF DAYS BE ALLOWED TO
ENSURE DELIVERY TO THE SUBSCRIPTION AGENT AND CLEARANCE OF PAYMENT PRIOR 5:00
P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE. BECAUSE UNCERTIFIED PERSONAL
CHECKS MAY TAKE SEVERAL BUSINESS DAYS TO CLEAR, YOU ARE STRONGLY URGED TO PAY,
OR ARRANGE FOR PAYMENT, BY MEANS OF CERTIFIED OR CASHIER'S CHECK OR MONEY
ORDER.

   All questions concerning the timeliness, validity, form and eligibility of
any exercise of Rights will be determined by the Fund, whose determination
will be final and binding. The Fund in its sole discretion may waive any
defect or irregularity, or permit a defect or irregularity to be corrected
within such time as it may determine, or reject the purported exercise of any
Right. Subscriptions will not be deemed to have been received or accepted
until all irregularities have been waived or cured within such time as the
Fund determines in its sole discretion. Neither the Fund nor the Subscription
Agent will be under any duty to give notification of any defect or
irregularity in connection with the submission of Subscription Certificates or
incur any liability for failure to give such notification.

Notice of Net Asset Value Decline

   The Fund has undertaken, as required by the Securities and Exchange
Commission's registration form, to suspend the Offer until it amends this
Prospectus if subsequent to June 26, 2001, the effective date of the Fund's
registration statement relating to the Offering, and prior to the Expiration
Date, the Fund's net asset value declines more than 10% from its net asset
value as of June 26, 2001. In such event, the Fund will notify shareholders of
any such decline and permit them to cancel their exercise of Rights. With this
exception, a shareholder will have no right to rescind an exercise of Rights
after the Subscription Agent receives a Subscription Certificate or notice of
guaranteed delivery.

Purchase and Sale of Rights

   The Rights are non-transferable and, therefore, may not be purchased or
sold. The Rights will not be admitted to trading on the NYSE. However, the
Shares to be issued pursuant to the Rights will be listed and admitted to
trading on the NYSE, along with the existing outstanding shares of Common
Stock.

                                      12
<PAGE>

Delivery of Stock Certificates

   Participants in the Fund's Dividend Reinvestment Plan (the "Plan") will
have their Shares acquired on Primary Subscription and pursuant to the Over-
Subscription Privilege credited to their shareholder distribution reinvestment
accounts in the Plan, unless they request the issuance of stock certificates
for the Shares so acquired. Shareholders whose Shares are held of record by
Nominee or by any other depository or nominee on their behalf or their broker-
dealers' behalf will have their Shares acquired on Primary Subscription and
pursuant to the Over-Subscription Privilege credited to the account of Nominee
or such other depository or nominee. With respect to all other shareholders,
stock certificates for all Shares acquired on Primary Subscription and
pursuant to the Over-Subscription Privilege will be mailed within fifteen
business days after the Confirmation Date and after payment for the Shares
subscribed for has cleared.

Foreign Shareholders

   The Fund has been advised by outside legal counsel that this rights
offering has been qualified or is believed to be exempt from qualification
only under the federal laws of the United States and the laws of each of the
States in the United States. Residents of other jurisdictions may not purchase
the Shares of Common Stock offered hereby unless they certify that their
purchases of such Shares are effected in accordance with the applicable laws
of such jurisdictions.

Federal Income Tax Consequences

   For Federal income tax purposes, neither the receipt nor the exercise of
the Rights will result in taxable income to holders of Common Stock, and no
loss or deduction will be allowed if Rights expire without being exercised.

   A shareholder's holding period for a Share acquired upon exercise of a
Right begins on the date of exercise. In the absence of a special election
under Section 307 of the Internal Revenue Code of 1986, as amended (the
"Code") by the shareholder, the shareholder's basis for determining gain or
loss upon the sale of a Share acquired upon exercise of a Right will be equal
to the Subscription Price. A shareholder's gain or loss recognized upon a sale
of that Share will be capital gain or loss if the Share was held as a capital
asset at the time of sale. Net capital gains are generally subject to a
maximum tax rate of 20% so long as the asset was held for more than twelve
(12) months.

   The foregoing discussion is for general information only and is based upon
existing laws, regulations and judicial and administrative pronouncements.
Shareholders are advised to consult their own tax advisers with regard to the
Federal income tax consequences of exercising any Rights, as well as the tax
consequences arising under the laws of any state, foreign country or other
jurisdiction.

Dilution

   As a result of the terms of the Offer, shareholders who do not fully
exercise their Rights will, at the completion of the Offer, own a smaller
proportional interest in the Fund than would otherwise be the case. Such
shareholders would also forego the opportunity to purchase shares of the Fund
at a discount from market price if such market price remains above net asset
value at the end of the offering period.

                                      13
<PAGE>

                    SPECIAL CONSIDERATIONS AND RISK FACTORS

Market Price Premium or Discount from Net Asset Value

   Shares of the Fund are listed and traded on the NYSE. Since the Fund is a
closed-end investment company, shareholders do not have the right to redeem
shares at net asset value. The market price for shares of closed-end
investment companies generally varies from per share net asset value and such
shares frequently trade at a discount from net asset value. Shares of the Fund
have traded at, above and below net asset value since the commencement of
operations. Prior to 1990, the Fund's shares generally traded at a discount
from the net asset value. From 1990 through 1999, the Fund's shares generally
traded at a premium above net asset value. During 1999 and 2000 the Fund's
shares generally traded at a discount below the Fund's net asset value. To the
extent that shares trade at a premium above net asset value, a reduction in
such premium or a change from a premium to a discount would adversely affect
an investor's return.

Anti-Takeover Provisions

   Certain provisions of the Fund's Articles of Incorporation may be regarded
as "anti-takeover" provisions. These provisions require the affirmative vote
or consent of the holders of at least two-thirds of the outstanding shares of
the Fund for a merger or consolidation of the Fund with an open-end investment
company, a merger or consolidation of the Fund with a closed-end investment
company with different voting requirements, dissolution of the Fund, a sale of
all or substantially all of the assets of the Fund or an amendment to the
Fund's Articles of Incorporation making the Common Stock a redeemable security
or reducing the two-thirds vote required by the Articles of Incorporation.

Investments

   Many convertible securities which the Fund purchases are unrated or rated
BB or lower by Standard & Poor's ("S&P") or Ba or lower by Moody's Investors
Service Inc. ("Moody's"). Ratings below BB/Ba are considered by the rating
agencies to be speculative and are commonly referred to as "junk bonds."
Prices of convertible securities generally fluctuate in response to changes in
interest rates as well as to changes in the prices of the underlying common
stocks. The Fund may use certain investment techniques which involve
additional risks. These investment techniques include options, short sales
against the box, forward commitments, lending of portfolio securities,
investment in foreign securities and foreign issuers, repurchase agreements,
and stock index futures.

Distributions

   Commencing in July, 1988, the Fund has made quarterly distributions of
$0.21 per share. These distributions have required payments substantially in
excess of the Fund's current net investment income. The portion, if any, of a
distribution which equals the Fund's current net investment income should be
considered a dividend. The remainder constitutes a payment out of the Fund's
net realized capital gains for each period to the extent available; any excess
will be from paid-in capital.

                                      14
<PAGE>

                                USE OF PROCEEDS

   The net proceeds of the Offer, assuming all Shares offered hereby are sold,
are estimated to be approximately $97,000,000, based upon an assumed
Subscription Price of $9.25 and after deducting expenses payable by the Fund
estimated at approximately $345,000. If less than all of the Shares offered
are sold, the proceeds from the Offer would be reduced accordingly, but there
would be no material reduction in the expenses of the Offer. The Fund will
invest the net proceeds of the Offer in accordance with its investment
objective and policies. The Investment Adviser anticipates that such
investment will not take more than three months from the Expiration Date.

                          DESCRIPTION OF COMMON STOCK

General

   The Fund, which was incorporated under the laws of the State of Maryland on
January 13, 1987, is authorized to issue 75,000,000 shares of Common Stock,
par value $.01 per share. The shares of Common Stock have no preemptive,
conversion, exchange or redemption rights. Each share has equal voting,
dividend, distribution and liquidation rights. The shares outstanding are
fully paid and non-assessable. Shareholders are entitled to one vote per
share. All voting rights for the election of directors are non-cumulative.

   The following chart shows the number of shares of Common Stock authorized
and outstanding as of March 30, 2001:

<TABLE>
<CAPTION>
                                                             Shares
                                                             Held by
                                                               the
                                                              Fund
                                                    Shares   for its   Shares
   Title of Class                                 Authorized Account Outstanding
   --------------                                 ---------- ------- -----------
   <S>                                            <C>        <C>     <C>
   Common Stock $.01 par value................... 75,000,000 624,700 41,991,357
</TABLE>

Share Price Data

   The Fund's shares are listed and traded on the New York Stock Exchange (the
"NYSE"). The following table sets forth for the quarters indicated the high
and low sale prices on the NYSE and the average weekly volume of trading of
the Fund's shares for the quarter. Also set forth are the related net asset
values per share of Common Stock, as calculated for such day or for the
preceding Friday business day and the premium (or discount) to net asset value
represented by such market prices.

<TABLE>
<CAPTION>
                                  Net Asset
                                Value Related    Premium
                  Market Price       to       (or Discount)
                  ------------- ------------- ----------------
                   High   Low    High   Low    High      Low      Avg. Weekly
                  Price  Price  Price  Price  Price     Price    Trading Volume
Quarter Ended     ------ ------ ------ ------ ------   -------   --------------
<S>               <C>    <C>    <C>    <C>    <C>      <C>       <C>
 03/31/99........  9.938  9.875  9.720  9.370   2.24 %   0.052 %    239,050
 06/30/99........ 10.313  9.625 10.120 10.100   1.91 %  (4.70 )%    181,400
 09/30/99........ 10.063  9.125 10.280  9.890  (2.11)%  (7.74 )%    139,692
 12/31/99........ 10.750  9.188 12.150  9.860 (11.52)%  (6.82 )%    185,793
 03/31/00........ 11.000  9.000 13.770 10.960 (20.12)% (17.80 )%    289,523
 06/30/00........ 10.875  9.688 12.660 11.930 (14.10)% (18.79 )%    164,262
 09/30/00........ 12.063 10.188 12.610 12.020  (4.34)% (15.24 )%    205,569
 12/31/00........ 12.063  9.780 12.610 10.140  (4.34)%  (0.04 )%    191,807
 03/31/01........ 10.890  9.650  9.320  7.380  16.85 %   30.76 %    394,784
</TABLE>

                                      15
<PAGE>

Repurchase of Shares

   The Fund's shareholders do not have the right to require redemption of
their shares by the Fund. The Fund, however, may repurchase its shares in the
open market from time to time, although nothing herein shall be considered a
commitment to repurchase such shares. Any such repurchases shall be subject to
the Maryland General Corporation Law and to limitations imposed by the 1940
Act. In 2000, the Fund's Board of Directors authorized the Fund to repurchase
up to two million of its shares. The Fund repurchased 624,700 shares during
2000 which added $0.02 to the Fund's net asset value at December 31, 2000.
Subject to the Fund's investment restriction with respect to borrowings, the
Fund may incur debt in an amount not exceeding 5% of total assets to finance
share repurchase transactions. Shares repurchased by the Fund will be held as
treasury shares until reissued.

   The Fund does not expect to consider the repurchase of any of its shares
except at a price below net asset value.

Anti-Takeover Provisions of the Articles of Incorporation

   The Fund has provisions in its Articles of Incorporation that could have
the effect of limiting the ability of other entities or persons to acquire
control of the Fund, to cause it to engage in certain transactions or to
modify its structure. The affirmative vote or consent of the holders of at
least two-thirds of the outstanding shares of the Fund is required to
authorize any of the following actions: (1) merger or consolidation of the
Fund with an open-end investment company; (2) merger or consolidation with a
closed-end investment company unless such company's charter has the same
voting requirements; (3) dissolution of the Fund; (4) sale of all or
substantially all of the assets of the Fund; or (5) amendment to the Articles
of Incorporation of the Fund which makes the Common Stock a redeemable
security (as such term is defined in the 1940 Act) or which reduces the two-
thirds vote required to authorize the actions in (1) through (5) hereof.

   Reference is made to the Articles of Incorporation of the Fund, on file
with the Securities and Exchange Commission (the "SEC"), for the full text of
these provisions. These provisions could have the effect of depriving
shareholders of an opportunity to sell their shares at a premium over
prevailing market prices by discouraging a third party from seeking to obtain
control of the Fund in a tender offer or similar transaction.

   The Board of Directors has determined that the two-thirds voting
requirements described above, which are greater than the minimum requirements
under Maryland law or the 1940 Act, are in the best interests of the Fund and
its shareholders generally.

Possible Future Conversion to Open-End Investment Company

   If shares of the Fund's Common Stock have traded on the principal
securities exchange where listed at an average discount from net asset value
of more than 10%, determined on the basis of the discount as of the end of the
last trading day in each week during the period of 12 calendar weeks preceding
December 31 in any year, the Fund will submit to its shareholders at the next
succeeding annual meeting of shareholders a proposal, to the extent consistent
with the 1940 Act, to amend the Fund's Articles of Incorporation to provide
that, upon the adoption of such amendment by the holders of two-thirds of the
Fund's outstanding shares of Common Stock, the Fund will convert from a
closed-end to an open-end investment company. If the Fund converted to an
open-end investment company, it would be able to continuously issue and offer
for sale shares of its Common Stock. Also, each share of the Fund's Common
Stock could be presented to the Fund at the option of the holder thereof for
redemption at net asset value per share and the Fund could be required to
liquidate portfolio securities to meet requests for redemption. In addition,
shares of the Fund would no longer be listed on the NYSE.

   As described above, the Fund may repurchase its shares in the open market
from time to time. The Fund cannot predict whether any such repurchases would
increase or decrease the discount from net asset value. To the extent that any
such repurchase decreased the discount to below 10% during the measurement
period, the Fund would not be required to submit to shareholders a proposal to
convert the Fund to an open end investment company at the next annual meeting
of shareholders.

                                      16
<PAGE>

                       INVESTMENT OBJECTIVE AND POLICIES

General

   The investment objective of the Fund is to seek total investment return
comprised of current income and capital appreciation through investment
principally in convertible securities and use of certain other investment
techniques. The Fund is designed primarily for long-term investment and not as
a trading vehicle. There can be no assurance that the Fund's objective will be
achieved.

   The Fund's investment objective and fundamental policies may be changed
only with the approval of the holders of a majority of the Fund's outstanding
voting securities. A "majority of the Fund's outstanding voting securities,"
when used in this Prospectus, means the lesser of (1) 67% of the shares
represented at a meeting at which more than 50% of the outstanding shares are
present in person or represented by proxy, or (2) more than 50% of the
outstanding shares.

   The Fund has adopted a fundamental policy that under normal market
conditions it will invest at least 65% of its total assets in convertible
securities. Securities obtained upon the conversion of convertible securities
may be retained in the Fund's portfolio to permit orderly disposition or to
establish long-term holding periods for Federal income tax purposes during
years in which such gains are accorded favorable tax treatment. For temporary
periods of not greater than two months after conversion, such securities will
be considered to be convertible securities for purposes of computing whether
65% of the Fund's total assets are invested in convertible securities. The
Fund would convert a convertible security which it holds when necessary to
permit orderly disposition of the investment when a convertible security
reaches maturity or has been called for redemption. Conversion could also
occur to facilitate a sale of the position or if the dividend rate on the
underlying common stock increased above the yield on the convertible security.

   The remainder of the Fund's total assets may be invested in other
securities, including nonconvertible equity and investment grade debt
securities, options (as described below), securities issued or guaranteed by
the United States Government, its agencies and instrumentalities ("U.S.
Government Securities"), repurchase agreements (as described below), and money
market securities (as described below). Investment grade debt securities are
those rated Baa or higher by Moody's or BBB or higher by S&P. United States
Government agencies or instrumentalities include, but are not limited to, the
Federal National Mortgage Association, the Government National Mortgage
Association, and the Federal Home Loan Mortgage Corporation.

   The Fund may invest in certain "hybrid securities" consisting of debt
obligations with an investment return coupled to the performance of a common
stock index, such as the Standard & Poor's 500 Composite Stock Price Index.
Such hybrid securities are usually zero coupon obligations payable at maturity
at the higher of (1) face value or (2) face value multiplied by the value of
the specified index at maturity and divided by a specified amount which may be
110% to 120% of the value of the index at the date of issue. These hybrid
securities will be purchased by the Fund only if the debt obligation is
investment grade. In addition to the credit risk of the issuer, the investment
is subject to loss of value in the event the index declines. The Fund does not
intend to invest more than 5% of its total assets in such hybrid securities.

   In selecting convertible securities for the Fund, the following factors,
among others, are considered by the Investment Adviser: (1) the Investment
Adviser's own evaluations of the creditworthiness of the issuer of the
securities; (2) the interest or dividend income generated by the securities;
(3) the potential for capital appreciation of the securities and the
underlying common stock; (4) the protection against price declines relative to
the underlying stocks; (5) the prices of the securities relative to other
comparable securities; (6) whether the securities are entitled to the benefits
of sinking funds or other protective conditions; (7) diversification of the
Fund's investments; and (8) the ratings assigned to the securities.

   When business or financial conditions warrant, the Fund may take a
temporary "defensive" position by investing up to 100% of its total assets in
(1) U.S. Government Securities; (2) money market securities such as
certificates of deposit, bankers' acceptances and interest-bearing savings
deposits of banks having total assets of

                                      17
<PAGE>

more than $5 billion and which are members of the Federal Deposit Insurance
Corporation, and commercial paper rated P-1 by Moody's or A-l by S&P or, if
not rated, issued by companies which have an outstanding debt issue rated Aa3
or higher by Moody's or AA- or higher by S&P; (3) other debt securities rated
Aa3 or higher by Moody's or AA- or higher by S&P; and (4) repurchase
agreements as described below.

Convertible Securities

   A convertible security is a bond, debenture, note, preferred stock or other
security that may be converted into or exchanged for a prescribed amount of
common stock of the same or a different issuer within a particular period of
time at a specified price or formula.

   A convertible security entitles the holder to receive interest paid or
accrued on debt or the dividend paid on preferred stock until the convertible
security matures or is redeemed, converted or exchanged. Before conversion,
convertible securities have characteristics similar to non-convertible debt
securities in that they ordinarily provide a stable stream of income with
generally higher yields than those of common stocks of the same or similar
issuers. Convertible securities rank senior to common stock in a corporation's
capital structure and, therefore, generally entail less risk than the
corporation's common stock, although the extent to which such risk is reduced
depends in large measure upon the degree to which the convertible security
sells above its value as a fixed income security.

   The value of a convertible security is a function of its "investment value"
(determined by its yield in comparison with the yields of other securities of
comparable maturity and quality that do not have a conversion privilege), and
its "conversion value" (the security's worth, at market value, if converted
into the underlying common stock).

   The investment value of a convertible security is influenced by changes in
interest rates, with investment value declining as interest rates increase and
increasing as interest rates decline. The credit standing of the issuer and
other factors may also have an effect on the convertible security's investment
value. The conversion value of a convertible security is determined by the
market price of the underlying common stock. If the conversion value is low
relative to the investment value, the price of the convertible security is
governed principally by its investment value. To the extent the market price
of the underlying common stock approaches or exceeds the conversion price, the
price of the convertible security will be increasingly influenced by its
conversion value. In addition, a convertible security generally will sell at a
premium over its conversion value determined by the extent to which investors
place value on the right to acquire the underlying common stock while holding
a fixed income security.

   A convertible security may be subject to redemption at the option of the
issuer at a price established in the Convertible security's governing
instrument. If a convertible security held by the Fund is called for
redemption, the Fund will be required to permit the issuer to redeem the
security, convert it into the underlying common stock or sell it to a third
party. Any of these actions could have an adverse effect on the Fund's ability
to achieve its investment objective. The Fund has from time to time acquired
privately negotiated securities issued by a major brokerage firm and
consisting of notes with detachable warrants to purchase shares of publicly-
traded common stock. These investments are designed to permit the Fund to have
an interest in common stocks of companies which are considered attractive by
the Investment Adviser but which do not have outstanding convertible
securities. The combination of notes and warrants produces investment
characteristics similar to those of conventional convertible securities. These
instruments are normally unsecured obligations, and thus subject to the credit
risks of the issuing brokerage firm. In addition, they are normally
unregistered securities subject to the risks described below under
"Unregistered convertible securities." The Investment Adviser may acquire
similar "synthetic" or "derivative" instruments or combinations of instruments
that it believes possess properties comparable to those of standard
convertible securities and are consistent with the Fund's objectives. In
deciding whether and on what terms to acquire any such instruments, the
Investment Adviser weighs the risks against the expected total returns and
considers substantially the same factors described above with respect to the
evaluation of convertible securities generally.

                                      18
<PAGE>

Unregistered Convertible Securities

   The Fund may invest up to 15% of its total assets in illiquid unregistered
convertible securities. There is no percentage limitation on investments in
unregistered convertible securities which are determined to be liquid.
Unregistered securities are securities that have been sold in the United
States without registration under the Securities Act of 1933 and, as a result,
are subject to restrictions on resale. Unregistered securities generally may
be resold only in a privately negotiated transaction with a limited number of
purchasers or in a public offering registered under the Securities Act of
1933. Considerable delay could be encountered in either event. These
difficulties and delays may result in the Fund not being able to realize a
favorable price upon disposition of unregistered securities, and in some cases
might make disposition of such unregistered securities at the time desired by
the Fund impossible. In those instances where the Fund determines to have
unregistered securities held by it registered prior to sale and the Fund does
not have a contractual commitment from the issuer or seller to pay the costs
of such registration, the gross proceeds from the sale of the securities would
be reduced by the registration costs and underwriting discounts in the event
of a public offering. When unregistered convertible securities are converted
into common stock and the common stock is publicly traded (as is typically the
case), such common stock normally may be resold beginning one year following
the acquisition of the unregistered convertible securities, subject to the
volume limitations and certain other conditions of Rule 144 under the
Securities Act of 1933. Beginning two years after the acquisition of the
unregistered convertible securities, the common stock received upon conversion
ordinarily may be resold without restriction. The Fund may not invest more
than 15% of its total assets (determined at the time of investment) in
illiquid securities, including repurchase agreements with maturities in excess
of seven days.

   Rule 144A has been adopted by the SEC to provide a "safe harbor" for the
resale of certain unregistered securities among qualified institutional
investors without registration under the Securities Act of 1933. Unregistered
securities eligible for resale pursuant to Rule 144A which the Board of
Directors or the Investment Adviser has determined under Board-approved
guidelines to be liquid are excluded from the 15% limitation on the Fund's
investments in restricted and other illiquid securities. At December 31, 2000,
38% of the Fund's net assets were invested in restricted securities determined
to be liquid and none of the Fund's net assets were invested in restricted
securities considered to be illiquid.

Risks of Lower-Rated Securities

   Convertible securities are generally not investment grade. This means they
are not rated within the four highest categories by S&P or Moody's. Appendix A
to this Prospectus contains a description of the S&P and Moody's ratings. To
the extent that convertible securities or other debt securities acquired by
the Fund are rated lower than investment grade or are not rated, there is a
greater risk as to the timely repayment of the principal of, and timely
payment of interest or dividends on, such securities. The Fund will purchase
convertible securities and other debt securities rated BB or lower by S&P or
Ba or lower by Moody's. Debt securities rated BB or lower by S&P or Ba or
lower by Moody's are considered to be speculative and are commonly referred to
as "junk bonds." Decisions to purchase and sell these securities are based on
the Investment Adviser's evaluation of their investment potential and risks
and not on the ratings assigned by credit agencies. Because investment in
lower-rated securities involves greater investment risk, the Fund's
performance may depend to a significant degree on the Investment Adviser's
investment analysis, including its analysis of the equity characteristics of
the underlying common stocks. Although the growth of the market for lower-
rated securities in the 1980s and 1990s has paralleled a long economic
expansion, some issuers have been affected by adverse market or economic
conditions. Lower-rated securities may be more susceptible to real or
perceived adverse economic and competitive industry conditions than investment
grade securities. A projection of an economic downturn, for example, could
cause a decline in prices of lower-rated securities because the advent of a
recession could lessen the ability of a highly leveraged company to make
principal and interest payments on its senior securities. In addition, the
secondary trading market for lower-rated securities may be less liquid than
the market for higher grade securities. The limited liquidity of the market
may also adversely affect the ability of the Fund's Directors to arrive at a
fair value for certain securities at times and could make it difficult for the
Fund to sell certain securities.

                                      19
<PAGE>

   Prices of lower-rated fixed income securities may decline rapidly in the
event a significant number of holders decide to sell. Changes in expectations
regarding an issuer, an industry or lower-rated securities generally could
reduce market liquidity for such securities and make their sale by the Fund
more difficult, at least in the absence of price concessions. An economic
downturn or an increase in interest rates could severely disrupt the market
for high yield bonds and adversely affect the value of outstanding bonds and
the ability of the issuers to repay principal and interest, meet projected
business goals and obtain additional financing. Where it deems it appropriate
and in the best interests of the Fund shareholders, the Fund may incur
additional expenses to seek recovery on a debt security on which the issuer
has defaulted and to pursue litigation to protect the interests of security
holders of its portfolio companies.

   While credit ratings are only one factor the Investment Adviser reviews in
evaluating lower-rated debt securities, certain risks are associated with
using credit ratings. Credit rating agencies may fail to timely change the
credit ratings to reflect subsequent events; however, the Investment Adviser
monitors the issuers of lower-rated debt securities in its portfolio in an
attempt to determine if the issuers will have sufficient cash flow and profits
to meet required principal and interest payments. Achievement of the Fund's
investment objective may be more dependent upon the Investment Adviser's
credit analysis than would be the case if the Fund concentrated its
investments in higher quality debt securities. Credit ratings for individual
securities may change from time to time and the Fund may retain a portfolio
security whose rating has been downgraded.

   Convertible securities in which the Fund invests include convertible debt
instruments not producing immediate cash income, such as zero-coupon
convertible securities, when their effective yield premiums or conversion
privileges over comparable instruments producing cash income make these
investments attractive. Prices of non-cash-paying instruments may be more
sensitive to changes in the issuer's financial condition, fluctuations in
interest rates and market demand/supply imbalances than cash-paying securities
with similar credit ratings, and thus may be more speculative. In addition,
the non-cash interest income accrued on such instruments is income for federal
income tax purposes and thus required to be included in distributions to
shareholders (without providing the corresponding cash flow with which to pay
such distributions which must be made from cash assets or by liquidation of
portfolio securities).

   As of May 31, 2001, the percentage of the Fund's net assets invested in
convertible securities (including preferred stock) within the various rating
categories (based on the S&P ratings), and the nonrated convertible
securities, determined on a dollar weighted average, were as follows:

<TABLE>
         <S>                                              <C>
         AAA.............................................  7.46%
         AA..............................................  5.54%
         A...............................................  5.51%
         BBB............................................. 14.08%
         BB.............................................. 11.73%
         B............................................... 31.66%
         CCC.............................................  4.88%
         CC..............................................     0
         D...............................................     0
         Nonrated........................................ 16.79%
         Common Stocks/Warrants..........................     0
         Cash and Equivalents............................  2.35%
                                                          -----
         Total Net Assets................................   100%
</TABLE>

Foreign Securities and Foreign Issuers

   The Fund may invest in Eurodollar convertible securities of foreign
issuers. Eurodollar convertible securities are fixed income securities of a
U.S. issuer or a foreign issuer that are issued in U.S. dollars outside the
United States and are convertible into or exchangeable for equity securities
of the same or a different issuer. Interest and dividends on Eurodollar
securities are payable in U.S. dollars outside of the United States. The Fund
may invest

                                      20
<PAGE>

without limitation in Eurodollar convertible securities that are convertible
into or exchangeable for foreign equity securities listed, or represented by
ADRs listed, on the NYSE or the American Stock Exchange or convertible into or
exchangeable for publicly traded common stock of U.S. companies. Also, the
Fund may invest up to 15% of its total assets, measured at time of investment,
in Eurodollar convertible securities that are convertible into or exchangeable
for foreign equity securities which are not listed, or represented by ADRs
listed, on the NYSE or American Stock Exchange. Investments in securities of
foreign issuers may be affected favorably or unfavorably by changes in
currency rates and in exchange control regulations. There may be less publicly
available information about a foreign company than about a U.S. company, and
foreign companies are not subject to as stringent accounting, auditing and
financial reporting standards and requirements as those applicable to U.S.
companies. Securities of some foreign companies may be less liquid or more
volatile than securities of U.S. companies, and foreign brokerage commissions
and custodian fees are generally higher than in the United States. Investments
in foreign securities may also be subject to other risks different from those
affecting U.S. investments, including local political or economic
developments, expropriation or nationalization of assets and imposition of
withholding taxes on dividend or interest payments.

                                      21
<PAGE>

                             INVESTMENT PRACTICES

Lending of Portfolio Securities

   The Fund may, consistent with applicable regulatory requirements, lend its
portfolio securities to brokers, dealers and other financial institutions,
provided such loans are callable at any time by the Fund (subject to the
notice provisions described below), and are at all times secured by cash, bank
letters of credit, other money market instruments rated A-1, P-1 or the
equivalent or U.S. Government Securities, which are maintained in a segregated
account and that are equal to at least the market value, determined daily, of
the loaned securities. The advantage of such loans is that the Fund continues
to receive the income on the loaned securities while at the same time earning
interest on the cash amounts deposited as collateral, which will be invested
in short-term obligations. The Fund will not lend more than 25% of the value
of its total assets. A loan may be terminated by the borrower on one business
day's notice, or by the Fund on two business day's notice. If the borrower
fails to deliver the loaned securities within two days after receipt of
notice, the Fund could use the collateral to replace the securities while
holding the borrower liable for any excess of replacement cost over
collateral. As with any extension of credit, there are risks of delay in
recovery and in some cases even loss of rights in the collateral should the
borrower fail financially.

Other Investments and Investment Practices

   The Fund may from time to time, (1) write (sell) covered call options on
common stocks that it owns or has an immediate right to acquire through
conversion or exchange of other securities on an amount up to 5% of its total
assets; or (2) purchase put options on such common stocks on an amount up to
2% of its total assets. The Fund may from time to time make short sales of
securities it owns or has the right to acquire through conversion or exchange
of other securities it owns. The Fund may enter into forward commitments for
the purchase of securities which may include purchases on a "when issued" or a
"delayed delivery" basis. The Fund may enter into "repurchase agreements"
pertaining to U.S. Government Securities with financial institutions such as
banks, savings and loan associations or broker-dealers. The Fund may purchase
stock index futures contracts in anticipatory hedge transactions to reduce the
risk of not participating in the stock market when the Fund is less than fully
invested. The Fund's investment in stock index futures will be limited to 5%
or less of its total assets. Additional information regarding such investments
and investment practices and the risks related thereto is set forth in the
Statement of Additional Information.

Investment Restrictions

   The Fund has adopted certain fundamental investment restrictions which,
like its investment objectives, cannot be changed without approval by a
majority (as defined in the 1940 Act vote of the Fund's shareholders. These
restrictions are listed in the Statement of Additional Information.

                                      22
<PAGE>

                            MANAGEMENT OF THE FUND

   A board of nine directors is responsible for overseeing the Fund's affairs.
The Investment Adviser, which is headquartered at 865 South Figueroa Street,
Suite 1800, Los Angeles, California 90017, selects investments for the Fund,
provides administrative services and manages the Fund's business. The
Investment Adviser is a wholly-owned subsidiary of The TCW Group, Inc. On
April 11, 2001, The Societe Generale Group and The TCW Group, Inc. entered
into an agreement under which SG Asset Management, a wholly-owned subsidiary
of The Societe Generale Group, will acquire a majority interest of The TCW
Group, Inc.

   As of March 31, 2001, the Investment Adviser and its affiliated companies,
which provide a variety of trust investment management and investment advisory
services, had approximately $75 billion under management on committed to
management.

Portfolio Management

   Kevin A. Hunter and Thomas D. Lyon, Senior Vice Presidents of the Fund,
have been primarily responsible for the day-to-day management of the Fund's
investment portfolio since 1988 and November, 1997, respectively.

<TABLE>
<CAPTION>
           Name              Business Experience During Last Five Years*
           ----              -------------------------------------------
     <C>               <S>
     Kevin A. Hunter.. Managing Director, the Investment Adviser, TCW Asset
                       Management Company and Trust Company of the West.
     Thomas D. Lyon... Managing Director, the Investment Adviser, TCW Asset
                       Management Company and Trust Company of the West since
                       November, 1997. Previously, he was Vice President--
                       Portfolio Management with Transamerica Investment
                       Services.
</TABLE>
--------
*  Positions with The TCW Group, Inc. and its affiliated may have changed over
   time.

Advisory Agreement

   Under the Amended and Restated Investment Advisory Agreement, the Fund pays
the Investment Adviser a monthly fee computed at an annual rate of 0.75% of
the first $100,000,000 of average net assets and 0.50% of average net assets
in excess of $100,000,000. For the last fiscal year, advisory fees equaled
0.55% of the Fund's average net assets.

   The Fund also pays for shareholder service agent fees, custodian fees,
legal and audit fees, directors' fees, reports to shareholders and proxy
statements, and all other expenses incurred in the operation of the Fund,
except those assumed by the Investment Adviser. For the last fiscal year, the
Fund's total operating expenses were including investment advisory fees, were
0.69% of average net assets.

Administration Agreement

   Investors Bank & Trust Company, 200 Clarendon Street, Boston, Massachusetts
02117 ("Administrator") serves as the administrator of the Fund pursuant to an
Administration Agreement. Under the Administration Agreement, the
Administrator will provide certain administrative services to the Fund,
including: fund accounting; calculation of the net asset value of the Fund;
monitoring the Fund's expense accruals; calculating monthly total return and
yield figures; prospectus and statement of additional information compliance
monitoring; preparing certain financial statements of the Fund, and preparing
the Fund's Form N-SAR. The Administrator receives an administration fee based
on the assets of the Fund and TCW Galileo Funds, Inc., an open-end investment
company managed by the Investment Adviser, as follows: 0.0375% of the first
$750 million in assets; 0.0300% of the next $750 million in assets; and
0.0200% thereafter. The Administrator also receives an accounting fee based on
the assets of the Fund and TCW Galileo Funds, Inc., as follows 0.03% of the
first $1.25 billion in assets; 0.02% of the next $1.75 billion in assets; and
0.01% thereafter.

                                      23
<PAGE>

                       DETERMINATION OF NET ASSET VALUE

   The Fund calculates and makes available for weekly publication the net
asset value of its shares. Net asset value per share is determined by dividing
the value of the Fund's assets (including interest and dividends accrued but
not collected), less its liabilities (including accrued expenses), by the
number of outstanding shares. Each listed security and each security traded on
the National Association of Securities Dealers Automated Quotations National
Market System is valued at the last sale price or the mean of the reported
closing bid and asked prices if there are no sales in the trading period
immediately preceding the time of determination. Other securities which are
traded on the over-the-counter market are valued at the mean of the latest
available bid and asked prices. Securities for which quotations are not
readily available, unregistered securities and other assets are valued at fair
value as determined in good faith by, or under the direction of, the Board of
Directors. Notwithstanding the foregoing, short-term debt securities with
maturities of 60 days or less are valued at amortized cost.

                   DISTRIBUTIONS; DIVIDEND REINVESTMENT PLAN

Distribution Policy

   Since July, 1988, the Fund's policy has been to make quarterly
distributions of $0.21 per share to shareholders of record at the end of each
calendar quarter. This distribution policy requires payments substantially in
excess of the Fund's current net investment income. Only the portion, if any,
of a distribution which equals the Fund's current net investment income should
be considered a dividend. The remainder constitutes a payment out of the
Fund's net realized capital gains for each period to the extent available; any
excess will be from paid-in capital. A notice accompanies each quarterly
distribution to identify the estimated source of the distribution. See
"Taxation" for information concerning the federal income tax treatment of
distributions by the Fund to its shareholders.

   For years in which the Fund distributes amounts in excess of its net
investment income and net realized capital gains, such distributions will
decrease the Fund's total assets and, therefore, have the likely effect of
increasing the Fund's expense ratio. In addition, in order to make such
distributions, the Fund may have to sell a portion of its investment portfolio
at a time when independent investment judgment might not dictate such action.

   After expiration or offset of the Fund's capital loss carryovers, described
under "Taxation," the Fund's distributions for the third and/or fourth
quarters of a calendar year may, but need not, include net long-term capital
gains realized during the year. The Fund may retain for reinvestment and pay
federal income taxes on the excess of its net realized long-term capital gains
over its net realized short-term capital losses, if any, although the Fund
reserves the authority to distribute such excess in any year. The Fund's
distribution policy is subject to change and may be affected by future events,
including changes in tax or legal requirements.

Dividend Reinvestment Plan

   Shareholders of record (other than brokers or nominees of banks and other
financial institutions) are eligible to participate in the Plan, pursuant to
which dividends and any payment out of the Fund's net realized capital gains
for the year and paid-in capital distributed to shareholders will be paid in
or reinvested in additional shares of the Fund (the "Dividend Shares"). The
Bank of New York (the "Agent"), Dividend Reinvestment Department, P.O. Box
1958, Newark, New Jersey 07101-9774 acts as agent for participants under the
Plan.

   A shareholder may join the Plan by signing and returning an authorization
form which may be obtained from the Agent. A shareholder may elect to withdraw
from the Plan at any time by written notice to the Agent and thereby elect to
receive cash in lieu of Dividend Shares. There is no penalty for withdrawal
from the Plan and shareholders who have previously withdrawn from the Plan may
rejoin it at any time. The Federal income tax consequences of participating in
the Plan are described below under "Taxation."

                                      24
<PAGE>

   Commencing not more than five business days before the dividend payment
date, purchases of the Fund's shares may be made by the Agent, on behalf of
the participants in the Plan, from time to time to satisfy dividend
reinvestments under the Plan. Such purchases by the Agent may be made when the
price plus estimated commissions of the Fund's Common Stock on the NYSE is
lower than the Fund's most recently calculated net asset value per share. If
the Agent determines on the dividend payment date that the shares purchased as
of such date are insufficient to satisfy the dividend reinvestment
requirements, the Agent, on behalf of the participants in the Plan, will
obtain the necessary additional shares as follows. To the extent that
outstanding shares are not available at a cost of less than per share net
asset value, the Agent, on behalf of the participants in the Plan, will accept
payment of the dividend, or the remaining portion thereof, in authorized but
unissued shares of the Fund on the dividend payment date. Such shares will be
issued at a per share price equal to the higher of (1) the net asset value per
share on the payment date, or (2) 95% of the closing market price per share on
the payment date. If the closing sale or offer price, plus estimated
commissions, of the Common Stock on the NYSE on the payment date is less than
the Fund's net asset value per share on such day, then the Agent will purchase
additional outstanding shares on the NYSE or elsewhere. There are no brokerage
charges with respect to shares issued directly by the Fund to satisfy the
dividend reinvestment requirements. However, each participant will pay a pro
rata share of brokerage commissions incurred with respect to the Agent's open
market purchases of shares. In each case, the cost per share of shares
purchased for each shareholder's account will be the average cost, including
brokerage commissions, of any shares purchased in the open market plus the
cost of any shares issued by the Fund.

   Shareholders participating in the Plan may receive benefits not available
to shareholders not participating in the Plan. If the market price plus
commissions of the Fund's shares is above the net asset value, participants in
the Plan will receive shares of the Fund at a discount of up to 5% from the
current market value. However, if the market price plus commissions is below
the net asset value, participants will receive distributions in shares at
prices below the net asset value. Also, since the Fund does not redeem its
shares, the price on resale may be more or less than the net asset value.

   In the case of foreign participants whose dividends are subject to United
States income tax withholding and in the case of any participants subject to
31% federal backup withholding, the Agent will reinvest dividends after
deduction of the amount required to be withheld.

   Experience under the Plan may indicate that changes are desirable.
Accordingly, the Fund reserves the right to amend or terminate the Plan. There
is no direct service charge to participants in the Plan; however, the Fund
reserves the right to amend the Plan to include a service charge payable by
the participants.

                                      25
<PAGE>

                                   TAXATION

General

   The Fund has qualified, and intends to qualify, each year as a regulated
investment company under Subchapter M of the Code. In order to qualify as a
regulated investment company for any taxable year, the Fund must (1) derive at
least 90% of its gross income from dividends, interest, certain payments with
respect to securities loans and gains from the sale or other disposition of
stock or securities or foreign currencies or other income derived with respect
to its business of investing in such stock, securities or currencies; and (2)
distribute at least 90% of its investment company taxable income (net
investment income and the excess of net short-term capital gain over net long-
term and mid-term capital loss) for the taxable year.

   As a regulated investment company, the Fund is not subject to Federal
income tax on its investment company taxable income and net capital gains (any
net long-term capital gains in excess of the sum of net short-term capital
losses and capital loss carryovers from prior years), if any, that it
distributes to its shareholders. The Fund intends to distribute annually to
its shareholders all of its investment company taxable income and net capital
gains. The Fund is subject to a nondeductible 4% excise tax measured with
respect to certain undistributed amounts of ordinary income and capital gain
net income. The Fund intends to distribute sufficient amounts to avoid
liability for the excise tax.

   Distributions of investment company taxable income generally are taxable to
shareholders as ordinary income, regardless of whether such distributions are
paid in cash or are invested in additional shares of the Fund's stock.

   A capital gain distribution, whether paid in cash or reinvested in shares,
is taxable to shareholders as long-term or mid-term capital gain, regardless
of the length of time a shareholder has held his shares or whether such gain
was realized by the Fund before the shareholder acquired such shares and was
reflected in the price paid for the shares. In the event a distribution
constitutes a return of capital, a shareholder reduces the tax cost basis for
his stock by the amount of the nontaxable distribution. If such distribution
exceeds the shareholder's tax cost basis, the excess is treated as a capital
gain.

   The Fund sends written statements and notices to shareholders regarding the
tax status of all dividends and distributions made during each calendar year.

   Shareholders who reinvest either distributions of investment company
taxable income or capital gain distributions in additional shares of the
Fund's stock are treated as receiving distributions of an amount equal to the
fair market value, determined as of the payment date, of the shares received
if the shares are purchased from the Fund. Such value may exceed the amount of
the cash distribution that would have been paid. If outstanding shares are
purchased in the open market, the taxable distribution equals the cash
distribution that would have been paid. In either event, the cost basis in the
shares received equals the amount recognized as a taxable distribution.

   A portion of the distributions of investment company taxable income paid by
the Fund is eligible for the 70% dividends received deduction allowed to
certain corporations. The eligible portion generally equals the proportion
that dividends from U.S. corporations bear to the Fund's gross income,
provided that the Fund designates such proportion as being eligible for the
deduction in the statement provided annually to shareholders. However, a
dividend received by the Fund is not treated as an "eligible dividend" if (1)
it has been received with respect to any share of stock that the Fund has held
for 45 days (90 days in the case of certain preferred stock) or less
(excluding any day more than 45 days (or 90 days in the case of certain
preferred stock) after the date on which the stock becomes ex-dividend); or
(2) to the extent that the Fund is under an obligation (pursuant to a short
sale or otherwise) to make related payments with respect to positions in
substantially similar or related property. The dividends received deduction is
not available for capital gain dividends. The Fund sends written notice to
shareholders regarding the tax status of all distributions made during each
calendar year.

                                      26
<PAGE>

Disqualification as a Regulated Investment Company

   If for any taxable year the Fund does not qualify as a regulated investment
company, all of its taxable income will be subject to tax at regular corporate
rates without any deduction for distributions to shareholders, and such
distributions will be taxable as ordinary dividends to the extent of the
Fund's current and accumulated earnings and profits.

Backup Withholding

   The Fund generally will be required to withhold tax at the rate of 31% with
respect to distributions of investment company taxable income and capital gain
distributions payable to a non corporate shareholder if the shareholder fails
to provide a correct taxpayer identification number or is otherwise subject to
backup withholding.

Foreign Withholding Taxes

   To the extent that the Fund invests in Eurodollar convertible securities,
dividends and interest received by the Fund on such securities may be subject
to foreign withholding taxes. The Fund will be entitled to claim a deduction
for such foreign withholding taxes for U.S. Federal income tax purposes.
However, any such taxes will reduce the income available for distribution to
the Fund's shareholders.

Other Taxation

   Distributions to shareholders who are nonresident aliens may be subject to
a 30% United States withholding tax under provisions of the Code applicable to
foreign individuals and entities unless a reduced rate of withholding or a
withholding exemption is provided under applicable treaty law. Nonresident
shareholders are urged to consult their own tax advisers concerning the
applicability of the United States withholding tax.

   The foregoing is only a brief summary of the Federal tax laws applicable to
investors in the Fund. Investors may also be subject to state and local taxes.
Investors should consult their own tax advisers regarding specific questions
as to Federal, state or local taxes.

                                      27
<PAGE>

        CUSTODIAN, TRANSFER AGENT, DIVIDEND-PAYING AGENT AND REGISTRAR

   The custodian of the assets of the Fund is Investors Bank & Trust Company,
200 Clarendon Street, Boston, Massachusetts 02117.

   The transfer agent, dividend disbursing agent and registrar for the Fund's
shares is The Bank of New York, 101 Barclay Street, New York, New York 10286.

                                   AUDITORS

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

                                 LEGAL MATTERS

   Counsel to the Fund is Dechert, 1775 Eye Street, NW, Washington, DC 20006.

                            REPORTS TO SHAREHOLDERS

   The Fund sends unaudited semi-annual and audited annual reports to its
stockholders, including a list of investments held.

                              FURTHER INFORMATION

   This Prospectus does not contain all of the information included in the
Registration Statement filed with the Securities and Exchange Commission under
the Securities Act and the Act, with respect to the Fund's Shares offered
hereby, certain portions of which have been omitted pursuant to the rules and
regulations of the Securities and Exchange Commission. The Registration
Statement, including exhibits filed therewith, may be examined at the office
of the Securities and Exchange Commission in Washington, D.C.

   Statements contained in this Prospectus as to the contents of any contract
or other document referred to are not necessarily complete, and, in each
instance, reference is made to the copy of such contract or other document
filed as an exhibit to the Registration Statement, of which this Prospectus
forms a part, each such statement being qualified in all respects by such
reference.

                                      28
<PAGE>

                            DESCRIPTION OF RATINGS

                                  APPENDIX A

   Description of Standard & Poor's Corporation ("S&P") and Moody's Investors
Service, Inc. ("Moody's") senior securities ratings.

Moody's:

   Aaa--Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such issues.

   Aa--Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long term risk appear somewhat larger than in the Aaa
securities.

   A--Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may
be present which suggest a susceptibility to impairment sometime in the
future.

   Baa--Bonds which are rated Baa are considered as medium grade obligations
(i.e., they are neither highly protected nor poorly secured). Interest
payments and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable
over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.

   Fixed income securities which are rated Aaa, Aa, A and Baa are considered
investment grade.

   Ba--Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.

   B--Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.

   Caa--Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal
or interest.

   Ca--Bonds which are rated Ca represent obligations which are speculative in
a high degree. Such issues are often in default or have other marked
shortcomings.

   C--Bonds which are rated C are the lowest rated class of bonds and issues
so rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.

   Note: Moody's applies numerical modifiers, 1, 2, and 3 in each generic
rating classification from Aa through B in its corporate bond rating system.
The modifier 1 indicates that the security ranks in the higher end of its
generic rating category; the modifier 2 indicates a mid-range ranking; and the
modifier 3 indicates that the issue ranks in the lower end of its generic
rating category.

                                      A-1
<PAGE>

S&P:

   AAA--Debt rated AAA has the higher rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.

   AA--Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.

   A--Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.

   BBB--Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.

   Fixed income securities rated AAA, AA, A and BBB are considered investment
grade.

   BB--Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure
to adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB-rating.

   B--Debt rated B has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial or economic conditions will likely impair capacity or
willingness to pay interest any repay principal. The B rating category is also
used for debt subordinated to senior debt that is assigned an actual or
implied BB or BB-rating.

   CCC--Debt rated CCC has a currently identifiable vulnerability to default,
and is dependent upon favorable business, financial and economic conditions to
meet timely payment of interest repayment of principal. In the event of
adverse business financial, or economic conditions, it is not likely to have
capacity to pay interest and repay principal. The CCC rating category is also
used for debt subordinated to senior debt that is assigned an actual or
implied B or B-rating.

   CC--The rating CC is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC rating.

   C--The rating C is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC- debt rating. The C rating may be
used to cover a situation where a bankruptcy petition has been filed, but debt
service payments are continued.

   CI--The rating CI is reserved for income bonds on which no interest is
being paid.

   D--Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if
the applicable grace period has not expired, unless S&P believes that such
payments will be made during such grace period. The D rating also will be used
upon the filing of a bankruptcy petition if debt service payments are
jeopardized.

   Plus (+) or Minus (-): The ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.

                                      A-2
<PAGE>

Preferred Stock Ratings:

   Both Moody's and S&P use the same designations for corporate bonds as they
do for preferred stock except in the case of Moody's preferred stock ratings
the initial letter rating is not capitalized. While the descriptions are
tailored for preferred stocks the relative quality distinctions are comparable
to those described above for corporate bonds.

   No person has been authorized to give any information or to make any
representations not contained in this Prospectus in connection with the Offer
made by this Prospectus, and, if given or made, such information must not be
relied upon as having been authorized by the Fund or the Investment Adviser.
This Prospectus does not constitute an offering by the Fund in any
jurisdiction in which such offering may not lawfully be made.

                                      A-3
<PAGE>

                               TABLE OF CONTENTS

                      STATEMENT OF ADDITIONAL INFORMATION

                                   APPENDIX B

<TABLE>
<S>                                                                         <C>
Investment Policies........................................................  B-2

  Options..................................................................  B-3

  Short Sales Against the Box..............................................  B-3

  When-Issued and Delayed Delivery Securities and Forward Commitments......  B-3

  Repurchase Agreements....................................................  B-4

  Stock Index Futures......................................................  B-4

Investment Restrictions....................................................  B-6

Management of the Fund.....................................................  B-7

  Directors and Officers...................................................  B-7

Investment Advisory and Other Services..................................... B-11

  Investment Adviser....................................................... B-11

  Investment Advisory Management Agreement................................. B-11

  Fees and Expenses........................................................ B-12

Portfolio Transactions and Brokerage....................................... B-13

  General.................................................................. B-13

  Portfolio Turnover....................................................... B-14

Taxation................................................................... B-14

Principal Shareholders of the Fund......................................... B-15

Code of Ethics............................................................. B-15

Independent Auditors....................................................... B-16

Custodian.................................................................. B-16

Financial Statements....................................................... B-16
</TABLE>
<PAGE>

-------------------------------------------------------------------------------
-------------------------------------------------------------------------------

   No person has been authorized to give any information or to make any
representations not contained in this Prospectus in connection with the Offer
made by this Prospectus, and, if given or made, such information must not be
relied upon as having been authorized by the Fund or the Investment Adviser.
This Prospectus does not constitute an offering by the Fund in any
jurisdiction in which such offering may not lawfully be made.

                               ----------------

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                            Page
                                                                            ----
<S>                                                                         <C>
Fee Table .................................................................   2
Prospectus Summary.........................................................   3
Financial Highlights.......................................................   7
The Offer..................................................................   8
Special Considerations and Risk Factors....................................  14
Use of Proceeds............................................................  15
Description of Common Stock................................................  15
Investment Objective and Policies..........................................  17
Investment Practices.......................................................  22
Management of the Fund.....................................................  23
Determination of Net Asset Value...........................................  24
Distributions; Dividend Reinvestment Plan..................................  24
Taxation...................................................................  26
Custodian, Transfer Agent, Dividend-Paying Agent and Registrar.............  28
Auditors...................................................................  28
Legal Matters..............................................................  28
Reports to Shareholders....................................................  28
Further Information........................................................  28
Appendix A................................................................. A-1
Appendix B................................................................. B-1
</TABLE>

-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
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                             10,513,918 Shares of
                                 Common Stock
                            Issuable Upon Exercise
                            of Rights to Subscribe
                              For Such Shares of
                                 Common Stock

                                TCW Convertible
                             Securities Fund, Inc.


                               ----------------

                                  PROSPECTUS
                                 June 26, 2001

                               ----------------


-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
<PAGE>

                  PART B - STATEMENT OF ADDITIONAL INFORMATION
                     TCW CONVERTIBLE SECURITIES FUND, INC.
                                 June 26, 2001

This Statement of Additional Information is not a Prospectus but contains
information in addition to that set forth in the Prospectus dated June 26, 2001
and should be read in conjunction with the Prospectus.  A Prospectus may be
obtained without charge by calling (800) 386-3829 or writing the Fund at 865
South Figueroa Street, Suite 1800, Los Angeles, California 90017.

<TABLE>
<S>                                                                           <C>
Investment Policies                                                           B-2
     Options...............................................................   B-3
     Short Sales Against the Box...........................................   B-3
     When-Issued and Delayed Delivery Securities and Forward Commitments...   B-3
     Repurchase Agreements.................................................   B-4
     Stock Index Futures...................................................   B-4
Investment Restrictions....................................................   B-6
Management of the Fund.....................................................   B-7
     Directors and Officers................................................   B-7
Investment Advisory and Other Services.....................................   B-11
     Investment Adviser....................................................   B-11
     Investment Advisory Management Agreement..............................   B-11
     Fees and Expenses.....................................................   B-12
Portfolio Transactions and Brokerage.......................................   B-13
     General...............................................................   B-13
     Portfolio Turnover....................................................   B-14
Taxation...................................................................   B-14
Principal Shareholders of the Fund.........................................   B-15
Code of Ethics.............................................................   B-15
Independent Auditors.......................................................   B-16
Custodian..................................................................   B-16
Financial Statements.......................................................   B-16
</TABLE>

                                      B-1
<PAGE>

                              INVESTMENT POLICIES

     The following supplements information set forth in the Prospectus.  Readers
must also refer to the Prospectus.

Options

  The Fund may from time to time, and to the extent described below, (1) write
(sell) covered call options on common stocks that it owns or has an immediate
right to acquire through conversion or exchange of other securities; or (2)
purchase put options on such common stocks. The Fund may also enter transactions
with respect to such options. All options written or purchased by the Fund must
be listed on a national securities exchange. The requirements for qualification
as a "regulated investment company" may limit the degree to which the Fund may
utilize option strategies.

  Many currently traded convertible securities are convertible into common
stocks against which listed call options may be written. A call option gives the
purchaser the right to buy, and the writer has the obligation to sell, the
underlying security at the option exercise price during the option period. The
Fund may only write "covered" call options, that is, options on common stock
that it holds in its portfolio or that it has an immediate right to acquire
through conversion or exchange of securities held in its portfolio. The Fund may
write call options on up to 5% of its total assets, taken at market value,
determined as of the date the options are written.

  The Fund will write covered call options in order to receive premiums which it
is paid for writing options. Such premiums represent a gain to the Fund if the
option expires unexercised. Such gain may offset possible declines in the market
values of the common stocks or convertible securities held in its portfolio. If,
for example, the market price of a common stock underlying a convertible
security held by the Fund declines and the convertible security also declines in
value, such decline will be offset in part (or wholly) by the receipt of the
premium for writing the call options on such stock. However, if the market price
of the underlying common stock increases and the convertible security held by
the Fund also increases in value, such increase may be offset in part (or
wholly) by a loss resulting from the need to buy back at higher prices the
covered call options written by the Fund or through the lost opportunity for any
participation in the capital appreciation of the underlying security above the
exercise price.

  In addition to writing covered call options, the Fund may invest up to 2% of
its total assets, taken at market value, determined as of the date the options
are written, in the purchase of put options on common stock that it owns or may
acquire through the conversion or exchange of other securities that it owns. A
put option gives the holder the right to sell the underlying security at the
option exercise price at any time during the option period. Any losses realized
by the Fund in connection with its purchase of put options will be limited to
the premiums paid by the Fund for the purchase of such options plus any
transaction costs.

  The Fund intends to purchase put options on particular securities in order to
protect against a decline in the market value of the underlying security below
the exercise price less the premium paid for the option. The authority to
purchase put options will allow the Fund to protect the unrealized gain in an
appreciated security in its portfolio without actually selling the security. In
addition, the Fund will continue to receive interest or dividend income on the
security. The Fund may sell a put option which it has previously

                                      B-2
<PAGE>

purchased prior to the sale of the securities underlying such option. Such sales
will result in a net gain or loss depending on whether the amount received on
the sale is more or less than the premium and other transaction costs paid for
the put option that is sold. Such gain or loss may be wholly or partially offset
by a change in the value of the underlying security which the Fund owns or has
the right to acquire.

Short Sales Against the Box

  The Fund may from time to time make short sales of securities it owns or has
the right to acquire through conversion or exchange of other securities it owns.
A short sale is "against the box" to the extent that the Fund contemporaneously
owns or has the right to obtain at no added cost securities identical to those
sold short. In a short sale, the Fund does not immediately deliver the
securities sold and does not receive the proceeds from the sale. The Fund is
said to have a short position in the securities sold until it delivers the
securities sold, at which time it receives the proceeds of the sale. The Fund
may not make short sales or maintain a short position if to do so would cause
more than 25% of the Fund's total assets, taken at market value, to be held as
collateral for such sales.

  To secure its obligation to deliver the securities sold short, the Fund will
deposit in escrow in a separate account with its custodian an equal amount of
the securities sold short or securities convertible into or exchangeable for
such securities. The Fund may close out a short position by purchasing and
delivering an equal amount of the securities sold short, rather than by
delivering securities already held by the Fund, because the Fund may want to
continue to receive interest and dividend payments on securities in its
portfolio that are convertible into the securities sold short.

  The Fund may make a short sale in order to hedge against market risks when the
Investment Adviser believes that the price of a security may decline, causing a
decline in the value of a security owned by the Fund or a security convertible
into or exchangeable for such security, or when the Fund does not want to sell
the security it owns. In such case, any future losses in the Fund's long
position should be reduced by a gain in the short position. Conversely, any gain
in the long position should be reduced by a loss in the short position. The
extent to which such gains or losses are reduced will depend upon the amount of
the security sold short relative to the amount the Fund owns, either directly or
indirectly, and, in the case where the Fund owns convertible securities, changes
in the investment values or conversion premiums. Additionally, the Fund may use
short sales when it is determined that a convertible security can be bought at a
small conversion premium and has a yield advantage relative to the underlying
common stock sold short. The potential risk in this strategy is the possible
loss of any premium over conversion value in the convertible security at the
time of purchase. The purpose of this strategy is to produce income from the
yield advantage and to provide the potential for a gain should the conversion
premium increase.

When-Issued and Delayed Delivery Securities and Forward Commitments

  From time to time, in the ordinary course of business, the Fund may purchase
securities on a when-issued or delayed delivery basis and may purchase or sell
securities on a forward commitment basis.  When such transactions are
negotiated, the price is fixed at the time of the commitment, but delivery and
payment can take place a month or more after the date of the commitment.  The
securities so purchased or sold are subject to market fluctuation, and no
interest or dividend accrue to the purchaser prior to the settlement date.
While the Fund will only purchase securities on a when-issued, delayed delivery
or forward commitment basis with the intention of acquiring the securities, the
Fund may sell the securities before the settlement date, if it is deemed
advisable.  At the time the Fund makes the commitment to

                                      B-3
<PAGE>

purchase or sell securities on a when-issued, delayed delivery or forward
commitment basis, the Fund will record the transaction and thereafter reflect
the value, each day, or such security purchased or, if a sale, the proceeds to
be received, in determining its net asset value. At the time of delivery of the
securities, the value may be more or less than the purchase or sale price. An
increase in the percentage of the Fund's assets committed to the purchase of
securities on a when-issued or delayed delivery basis may increase the
volatility of the Fund's net asset value. The Investment Adviser does not
believe the Fund's net asset value or income will be adversely affected by its
purchase of securities on such a basis.

Repurchase Agreements

  The Fund may enter into repurchase agreements with financial institutions such
as banks, savings and loan associations or broker-dealers. In a repurchase
agreement the Fund purchases a security and simultaneously agrees to resell it
to the seller at an agreed upon future date. The resale price is greater than
the purchase price, reflecting an agreed upon market rate of return which is
effective for the period of time the Fund's money is invested in the repurchase
agreement and which is not related to the coupon rate on the purchased security.
Such agreements permit the Fund to earn interest on temporarily available cash.
The Fund requires the seller to maintain the value of the securities, marked to
market daily, at not less than the repurchase price. If the seller defaults on
its repurchase obligation, the Fund could suffer delays, collection expenses and
losses to the extent that the proceeds from the sale of the collateral are less
than the repurchase price. The Fund will not invest more than 5% of its total
assets, taken at market value, in repurchase agreements maturing in more than
seven days.

Stock Index Futures

  The Fund may purchase stock index futures contracts ("futures") in
anticipatory hedge transactions to reduce the risk of not participating in the
stock market when the Fund is less than fully invested. Such purchases will be
made when the Investment Adviser anticipates that the purchase of stock index
futures with a portion of its assets is desirable as a temporary substitute for
being fully invested in convertible securities. The Fund will not engage in
futures transactions for purposes of speculation. Thus, the Fund will not
purchase stock index futures contracts with aggregate settlement prices in
excess of the value of the cash, U.S. Government securities and other liquid
portfolio securities held by the Fund.

  A stock index assigns relative value to the common stocks included in the
index (for example, the Standard & Poor's 500 Composite Stock Price Index), and
the stock index fluctuates with changes in the market value of such stocks. When
the Fund buys a future, it agrees to pay or receive an amount of cash equal to a
specified dollar amount times the difference between the stock index value at
the close of the last trading date of the future and the price at which the
future is purchased. No physical delivery of the stocks included in the index
underlying the future is made. As it purchases convertible securities, the Fund
may close out a future before its settlement date by effecting an offsetting
transaction. A futures purchase is closed out by effecting a sale of a futures
contract of the same type with the same settlement date. If the offsetting sales
price exceeds the purchase price, the Fund realizes a gain, whereas if the
purchase price exceeds the offsetting sale price, the Fund realizes a loss.

  In purchasing stock index futures contracts the Fund will comply with rules
and interpretations of the Commodity Futures Trading Commission ("CFTC"), under
which the Fund is excluded from regulation as a "commodity pool operator." CFTC
regulations allow unlimited use of futures for "bona fide hedging" purposes, as
defined in CFTC regulations, and limit the aggregate initial margin on non-
hedging futures to

                                      B-4
<PAGE>

5% of the fair market value of the Fund's total assets. The extent to which the
Fund may engage in futures transactions may also be limited by the requirements
of the Internal Revenue Code of 1986, as amended (the "Code") for qualification
as a regulated investment company.

  The risk of loss in trading futures contracts in speculative strategies can be
substantial. Because the futures portfolio strategies of the Fund are engaged in
only for hedging purposes, however, TCW Investment Management Company (the
"Investment Adviser") does not believe that the Fund is subject to the same
degree of risk sometimes associated with futures transactions. Nevertheless,
utilization of futures transactions by the Fund does involve certain risk.

  There can be no assurance that hedging transactions will be successful, as
they will depend upon the Investment Adviser's ability to predict changes in
general stock market conditions and the future direction of stock prices and
interest rates. There is imperfect correlation (or no correlation) between the
price movements of the futures contracts and price movements of the convertible
securities that the Fund intends to purchase. To compensate for the imperfect
correlation of movements of prices of a stock index future and the convertible
securities being hedged, the Fund will purchase stock index futures contracts in
a lesser dollar amount than the dollar amount of the convertible securities that
the Fund intends to purchase because the historical volatility of the price of
convertible securities is less than the historical volatility of the stock
index. Nevertheless, the price of the stock index future may move less than the
price of the convertible securities that are subject to the anticipatory hedge
resulting in the hedge not being fully effective or the value of futures
contracts may decline while the value of the convertible securities that the
Fund intends to purchase may increase. The latter situation may occur if both
stock market prices and interest rates decline during the period the Fund owns
stock index futures.  The price of stock index futures may not correlate
perfectly with movement in the stock index, due to certain market distortions.
This might result from decisions by a significant number of market participants
holding stock index futures positions to close out their futures contracts
through offsetting transactions rather than to make additional margin deposits.
Also, increased participation by speculators in the futures market may cause
temporary price distortions. Due to the possibility of such price distortion in
the futures markets and because of the imperfect correlation between movements
in the stock index futures and the stock index, a correct forecast of general
market trends by the Investment Adviser may not result in a fully successful
hedging transaction over a short time frame. Thus if the Investment Adviser's
predictions are incorrect, the Fund would have been better off if no hedge had
been made. Hedging transactions through the use of stock index futures requires
skills different from those needed to select portfolio securities. The Fund has
not invested in stock index futures during the past five years.

  Futures positions may be closed out only on an exchange or board of trade
which provides a market for such futures. Although the Fund intends to purchase
futures which have an active market, there is no assurance that a liquid market
will exist for any particular contract or at any particular time. Thus, it may
not be possible to close a futures position in anticipation of adverse price
movements.

  The settlement procedure in connection with the Fund's entry into a futures
transaction requires the deposit of cash or U.S. Government securities,
constituting initial margin, in a special segregated account with the Fund's
Custodian in the name and for the benefit of the Fund's futures commission
merchant ("FCM"). Subsequent payments, called maintenance margin, are made to
and from the FCM (a process known as "marking to market") on a daily basis as
the value of the long and short positions in the futures contract fluctuates.
U.S. Government securities are obligations issued or guaranteed as to principal
and interest by the United States or its agencies (such as the Federal Housing
Administration or Government

                                      B-5
<PAGE>

National Mortgage Association or its instrumentalities (such as the Federal Home
Loan Bank), including Treasury bills, notes and bonds.

  The Fund, on a daily basis, will monitor amounts of maintenance margin due to
it and will promptly demand payment and transfer those amounts from its FCM to
its custodian (for the general or segregated custodial account, as appropriate).

  Initial margin held by the custodian will continue to be regarded as the
Fund's assets, unless and until such amounts are owed to such FCM. In the event
of insolvency of an FCM, amounts held by the custodian in the segregated account
for the benefit of the FCM and by the FCM for the benefit of the Fund may become
subject to Federal bankruptcy laws and bankruptcy regulations of the CFTC, which
provide for pro rata distribution to customers of the FCM of all customer
property.

Investment Restrictions

  The following restrictions are fundamental policies which may not be changed
without the approval of the holders of a majority of the Fund's outstanding
voting securities. The investment percentage limitations set forth below and
other percentage limitations set forth in the Prospectus apply at the time of
initial purchase or investment.  Subsequent changes in relative size of a
portfolio position due to market fluctuations or other changes in total or net
assets, including market fluctuations occurring during the execution of a
purchase or sale order for the Fund, do not require elimination of any security
from the Fund's investment portfolio.

 The Fund will not:

  1. Purchase the securities of any issuer (other than U.S. Government
securities), if immediately thereafter the Fund with respect to 75% of its total
assets would (a) have more than 5% of its total assets invested in the
securities of such issuer, or (b) own more than 10% of the outstanding voting
securities of such issuer.

  2. Invest 25% or more of its total assets in securities of issuers conducting
their principal business activities in the same industry; provided that there is
no limitation with respect to investments in U.S. Government securities.

  3. Make loans of money to other persons (except the Fund may invest in
repurchase agreements and in unregistered convertible securities as provided in
(11) below); provided that for purposes of this restriction the acquisition of a
portion of an issue of publicly distributed convertible securities and other
debt securities and investment in U.S. Government securities, short-term
commercial paper, certificates of deposit, and bankers' acceptances shall not be
deemed to be the making of a loan; and provided further that the Fund may lend
portfolio securities representing up to 25% of its total assets, taken at market
value, to securities firms and financial institutions if it receives collateral
in cash or U.S. Government securities required to be maintained at all times in
an amount equal to at least 100% of the current market value of the loaned
securities.

  4. Engage in underwriting of securities of other issuers, except that
portfolio securities, including unregistered securities, may be acquired under
circumstances where, if sold, the Fund might be deemed to be an underwriter
under the Securities Act of 1933.

                                      B-6
<PAGE>

  5. Borrow money or issue senior securities (as defined in the Investment
Company Act of 1940), except that the Fund may borrow in amounts not exceeding
5% of the value of its total assets (not including the amount borrowed) for
temporary or emergency purposes or for the purpose of financing repurchase of
its shares. For the purpose of this investment restriction, collateral or escrow
arrangements with respect to margin for futures contracts are not deemed to be a
pledge of assets and neither such arrangements nor the purchase of futures
contracts are deemed to be the issuance of a senior security.

  6. Purchase or sell commodities or commodity contracts, including futures
contracts or options on futures contracts in a contract market or other futures
market, except that the Fund may purchase stock index futures contracts as
described under "Investment Objective and Policies- Stock Index Futures."

  7. Purchase or sell real estate or real estate mortgage loans; provided that
the Fund may invest in securities secured by real estate or interests therein or
issued by companies that invest in real estate or interests therein.

  8. Purchase securities on margin, except for short-term credits as may be
necessary for the clearance of transactions.

  9. Make short sales of securities or maintain a short position except as
described under "Investment Objective and Policies--Short Sales Against the
Box."

  10. Purchase or sell (write) call options except as described under
"Investment Objective and Policies--Options."

  11. Invest more than 15% of its total assets taken at market value, in
unregistered convertible securities, including any unregistered common stock
acquired upon conversion or exchange of unregistered convertible securities,
excluding, however, restricted securities eligible for resale pursuant to Rule
144A under the Securities Act of 1933 which the Board of Directors, or the
Fund's Investment Adviser has determined under Board-approved guidelines, are
liquid.

For purposes of applying the terms of investment restriction number 2, the
Investment Adviser will make reasonable determinations as to the appropriate
industry classification to assign to each issuer of securities in which the Fund
invests.  As a general matter, an "industry" is considered to be a group of
companies whose principal activities, products or services offered give them a
similar economic risk profile vis a vis issuers active in other sectors of the
economy.  The definition of what constitutes a particular "industry" is
therefore an evolving one, particularly for issuers in industries that are new
or are undergoing rapid development. Some issuers could reasonably fall within
more than one industry category. For example, some companies that sell goods
over the Internet (including issuers of securities in which the Fund invests)
were initially classified as Internet companies, but over time have evolved the
economic risk profiles of retail companies. The Investment Adviser will use its
best efforts to assign each issuer to the category which it believes is most
appropriate.

                             MANAGEMENT OF THE FUND
Directors and Officers

  A board of nine directors is responsible for overseeing the Fund's affairs.
The Fund has an executive committee, consisting of Ernest O. Ellison, Chairman,
John C. Argue and Norman Barker, Jr., which may act for the Board of Directors
between meetings, except where Board action is required by

                                      B-7
<PAGE>

law. The directors and officers of the Fund, their business addresses and their
principal occupations for the last five years are set forth below.

<TABLE>
<CAPTION>
                                                                                Principal Occupation During
         Name and Address                            Office                              Past 5 Years
-----------------------------------   ------------------------------------   ------------------------------------
<S>                                   <C>                                    <C>
Earnest O. Ellison* (70)                     President and Director          Vice Chairman of the Board and
865 S. Figueroa St.                                                          Chairman of the Investment Policy
Los Angeles, CA  90017                                                       Committee of the Investment
                                                                             Adviser, TCW Asset Management
                                                                             Company and Trust Company of the
                                                                             West; Vice Chairman, The TCW Group,
                                                                             Inc.

John C. Argue (69)                                  Director                 Former Senior Partner and of
444 South Flower Street                                                      Counsel, Argue Pearson Harbison &
Suite 1450                                                                   Myers (law firm); Director, Apex
Los Angeles, CA.  90071                                                      Mortgage Capital, Inc. (real estate
                                                                             investment trust), Avery Dennison
                                                                             Corporation (manufacturer of
                                                                             self-adhesive products and office
                                                                             supplies), Nationwide Health
                                                                             Properties, Inc. (real estate
                                                                             investment trust) and TCW Galileo
                                                                             Funds, Inc.  He is Chairman of the
                                                                             Rose Hills Foundation, the Amateur
                                                                             Athletic Foundation and the
                                                                             University of Southern California
                                                                             Board of Trustees.

Norman Barker, Jr. (78)                             Director                 Former Chairman of the Board, First
9611 Wilshire Blvd.                                                          Interstate Bank of California and
Beverly Hills, CA.  90017                                                    Former Vice Chairman of the Board,
                                                                             First Interstate Bancorp; Director,
                                                                             Bank Plus Corp. ICN
                                                                             Pharmaceuticals, Inc., and TCW
                                                                             Galileo Funds, Inc.

Richard W. Call (76)                                Director                 Former President, The Seaver
c/o Mayer Brown & Platt                                                      Institute (a private foundation);
Counsel to the Independent                                                   Director, TCW Galileo Funds, Inc.
Directors                                                                    and The Seaver Institute.
1675 Broadway
New York, New York  10019

Matthew K. Fong (45)                               Director                  Since 1999, Mr. Fong has been
333 South Hope Street                                                        Of Counsel to the Los Angeles law
Los Angeles, CA 90071                                                        firm Sheppard, Mullin, Richter & Hamilton.
                                                                             From 1995 to 1998, Mr. Fong served
                                                                             as Treasurer of the State of California.
                                                                             Director of ESS Technology, Inc.
                                                                             (computer hardware and software designer)
                                                                             and American National Title. Regent of
                                                                             Pepperdine University and the Los Angeles
                                                                             Children's Hospital. Lt. Colonel US Air
                                                                             Force Reserves.

</TABLE>
                                                   B-8
<PAGE>

<TABLE>
<CAPTION>
                                                                                Principal Occupation During
         Name and Address                            Office                              Past 5 Years
-----------------------------------   ------------------------------------   ------------------------------------
<S>                                   <C>                                    <C>
John A. Gavin (70)                                  Director                 Founder and Chairman of Gamma
c/o Mayer Brown & Platt                                                      Holdings (international capital and
Counsel to the Independent                                                   consulting firm); Member, Latin
 Directors                                                                   America Strategy Board of Hicks,
1675 Broadway                                                                Muse, Tate & Furst (leveraged
New York, NY 10019                                                           buyout firm); Director,
                                                                             International Wire Group
                                                                             (electrical wire manufacturer),
                                                                             KKCF, Inc. (home furnishings
                                                                             manufacturer), Apex Mortgage
                                                                             Capital, Inc. (real estate
                                                                             investment trust); Trustee and
                                                                             Director of certain mutual funds
                                                                             advised by Merrill Lynch. From 1981
                                                                             to 1986, Mr. Gavin was the United
                                                                             States Ambassador to Mexico.

Patrick C. Haden (48)                               Director                 General Partner, Riordan, Lewis &
300 South Grand Avenue                                                       Haden (venture capital firm);
Los Angeles, CA 90071                                                        Director, Tetra Tech, Inc.
                                                                             (environmental consulting), Elkay
                                                                             Plastics Co., Inc., Financial
                                                                             Pacific Insurance Group, Inc. and
                                                                             IndyMac Mortgage Holdings (mortgage
                                                                             banking).

Charles A. Parker (66)                              Director                 Formerly, Director and Executive
c/o Mayer Brown & Platt                                                      Vice President, The Continental
Counsel to the Independent                                                   Corporation; formerly Chairman and
 Directors                                                                   Chief Executive Officer,
1675 Broadway                                                                Continental Asset Management
New York, New York  10019                                                    Corporation; Director, Horace Mann
                                                                             Educators Corp; Trustee, the
                                                                             Burridge Center for Research in
                                                                             Security Prices (University of
                                                                             Colorado)

Robert G. Sims* (69)                                Director                 Private Investor, Director, The TCW
865 S. Figueroa St.                                                          Group, Inc.
Los Angeles, CA  90017
</TABLE>

*   Directors who are or may be deemed to be "interested persons" of the Fund as
    defined in the Investment Company Act of 1940. Mr. Ellison is an officer of
    the Fund and a shareholder and director of The TCW Group, Inc., the parent
    corporation of the Investment Adviser. Mr. Sims is a director of the Fund
    and is a shareholder of and has served as a director of the parent
    corporation during the past two years.

  The following table illustrates the compensation paid to the Fund's
independent directors (the "Independent Directors") by the Fund for the fiscal
year ended December 31, 2000.  The Independent Directors receive no pension or
retirement benefits. Messrs. Fong, Gavin and Haden were elected to the Board of
Directors at the Annual Shareholders meeting held June 26, 2001.

<TABLE>
<CAPTION>
                                   Aggregate Compensation
Name of Independent Directors         From the Fund
--------------------------------   ----------------------
<S>                                <C>
     John C. Argue..............         $12,000
     Norman Barker, Jr..........          12,750
     Richard W. Call............          11,250
     Charles A. Parker..........          10,500
</TABLE>

                                      B-9
<PAGE>

  The following table illustrates the compensation paid to the Fund's
Independent Directors for the calendar year ended December 31, 2000 by the TCW
Galileo Funds, Inc. in the case of Messrs. Argue, Barker and Call, as well as
from the Fund.  The TCW Galileo Funds, Inc. are included solely because the
Fund's Investment Adviser also serves as their adviser.

<TABLE>
<CAPTION>
                                                           Total Cash
                                                           Compensation
                                                            from the
                                     For Service as        TCW Galileo
                                  Director and Committee    Funds, Inc.
Name of Independent Director         Member of the Fund    and the Fund
-------------------------------   ----------------------   -------------
<S>                               <C>                      <C>
John C. Argue..................           $12,000              $50,000
Norman Barker, Jr..............            12,750               50,750
Richard W. Call................            11,250               48,750
</TABLE>

The following information relates to the executive officers of the Fund who are
not directors of the Fund.  The business address of each is 865 South Figueroa
Street, Los Angeles, California 90017.  Several of such officers own common
stock of The TCW Group, Inc. the parent corporation of the Investment Adviser.

<TABLE>
<CAPTION>
                                                                                          Principal Occupation During
                  Name                                      Office                                   Past 5 Years
-----------------------------------------   ---------------------------------------   ------------------------------------------
<S>                                         <C>                                       <C>
Alvin R. Albe, Jr. (47)                              Senior Vice President            President and Director of the Investment
                                                                                      Adviser; Executive Vice President and
                                                                                      Director of TCW Asset Management Company
                                                                                      and Trust Company of the West; Executive
                                                                                      Vice President, The TCW Group, Inc.; and
                                                                                      President and Director, TCW Galileo
                                                                                      Funds, Inc.

Thomas E. Larkin, Jr. (61)                           Senior Vice President            Vice Chairman, the Investment Adviser,
                                                                                      TCW Asset Management Company; Trust
                                                                                      Company of the West and the TCW Group,
                                                                                      Inc.; Director, TCW Galileo Funds, Inc.,
                                                                                      Member of the Board of Trustees of the
                                                                                      University of Notre Dame; Director of
                                                                                      Orthopedic Hospital of Los Angeles

Kevin A. Hunter (42)                                 Senior Vice President            Managing Director, the Investment
                                                                                      Adviser, TCW Asset Management Company,
                                                                                      and Trust Company of the West.

Thomas D. Lyon (41)                                  Senior Vice President            Managing Director, the Investment
                                                                                      Adviser, TCW Asset Management Company and
                                                                                      Trust Company of the West.  Portfolio
                                                                                      Manager, Transamerica Investment Services
                                                                                      prior to October, 1997.
</TABLE>

                                      B-10
<PAGE>

<TABLE>
<CAPTION>
                                                                                          Principal Occupation During
                  Name                                      Office                                   Past 5 Years
-----------------------------------------   ---------------------------------------   ------------------------------------------
<S>                                         <C>                                       <C>
Michael E. Cahill (50)                      General Counsel and Assistant Secretary   Managing Director, General Counsel and
                                                                                      Secretary, the Investment Adviser, TCW
                                                                                      Asset Management Company, Trust Company
                                                                                      of the West and the TCW Group, Inc.

Philip K. Holl (51)                                        Secretary                  Senior Vice President, Associate General
                                                                                      Counsel and Assistant Secretary, the
                                                                                      Investment Adviser, Trust Company of the
                                                                                      West, and TCW Asset Management Company;
                                                                                      Secretary, TCW Galileo Funds, Inc.

Peter C. DiBona (42)                                       Treasurer                  Senior Vice President, the Investment
                                                                                      Adviser, TCW Asset Management Company and
                                                                                      Trust Company of the West; Treasurer, TCW
                                                                                      Galileo Funds. Inc.

Hilary G.D. Lord (44)                                 Assistant Secretary             Managing Director, Chief Compliance
                                                                                      Officer and Assistant Secretary, the
                                                                                      Investment Adviser, Trust Company of the
                                                                                      West, and TCW Asset Management Company;
                                                                                      Senior Vice President and Assistant
                                                                                      Secretary, TCW Galileo Funds, Inc.

George N. Winn (32)                                   Assistant Treasurer             Assistant Vice President, the Investment
                                                                                      Adviser, TCW Asset Management Company and
                                                                                      Trust Company of the West; Assistant
                                                                                      Treasurer, TCW Galileo Funds, Inc.
</TABLE>

                     INVESTMENT ADVISORY AND OTHER SERVICES

Investment Adviser

  TCW Investment Management Company, 865 South Figueroa Street, Los Angeles,
California 90017 was organized in 1987 as a wholly-owned subsidiary of The TCW
Group, Inc.

Investment Advisory and Management Agreement

  The Fund and the Investment Adviser have entered into an Amended and Restated
Investment Advisory and Management Agreement (the "Advisory Agreement"). The
Fund has retained the Investment Adviser to manage the investment of the Fund's
assets, to place orders for the purchase and sale of the Funds portfolio
securities and to administer day-to-day operations, subject to control by the
Board of Directors of the Fund. The Investment Adviser is responsible for
obtaining and evaluating economic, statistical, and financial data and for
formulating and implementing investment programs in furtherance of the Fund's
investment objective and policies.

                                      B-11
<PAGE>

    The Investment Adviser furnishes to the Fund office space at such place as
may be agreed upon from time to time and all office facilities, business
equipment, supplies, utilities and telephone service necessary for managing the
affairs and investments and keeping the general accounts and records of the Fund
(exclusive of the necessary records of any transfer agent, registrar, custodian,
administrator or accounting, dividend disbursing or reinvesting agent) and
arranges for officers or employees of Investment Adviser to serve, without
compensation from the Fund, as officers, directors or employees of the Fund if
desired and reasonably required by the Fund.

  The Advisory Agreement may be continued from year to year if such continuance
is specifically approved at least annually by (1) the Board of Directors of the
Fund or by the vote of a majority of the outstanding voting securities of the
Fund, and (2) the vote of a majority of the directors who are not "interested
persons of the Fund or the Investment Adviser, cast in person at a meeting
called for the purpose of voting on such approval. The Advisory Agreement may be
terminated without penalty at any time on 60 days' written notice, by vote of a
majority of the Board of Directors of the Fund or by vote of a majority of the
outstanding voting securities of the Fund, or on 90 days' written notice by the
Investment Adviser. The Advisory Agreement terminates automatically in the event
of assignment.

Fees and Expenses

  As compensation for services rendered, facilities provided and expenses borne,
the Investment Adviser is paid a monthly fee computed at an annual rate of 0.75%
of the first $100,000,000 of the Fund's average net assets and .50% of the
Fund's average net assets in excess of $100,000,000. Average net assets are
determined by taking the average of the weekly determinations of net asset value
for each week which ends during the month.  For the fiscal years ended December
31, 1998, 1999 and 2000, the Investment Adviser received advisory fees of
$2,126,460, $2,380,623 and $2,797,585, respectively.

  Except for expenses specifically assumed by the Investment Adviser under the
Advisory Agreement, the Fund bears all expenses incurred in its operations. Such
Fund expenses include the fee of the Investment Adviser; compensation and
expenses of directors of the Fund who are not affiliated persons of the
Investment Adviser as defined in the Investment Company Act of 1940;
registration, filing and other fees in connection with filings with regulatory
authorities; fees and expenses of listing and maintaining the listing of the
Fund's shares on any national securities exchange; fees and expenses of
independent auditors; the expenses of printing and mailing proxy statements and
shareholder reports; administrator, accounting agent, sub-accounting agent,
custodian and transfer and dividend disbursing agent charges and expenses;
brokerage commissions and securities transaction costs incurred by the Fund;
taxes and corporate fees; legal fees incurred in connection with the affairs of
the Fund; the fees of any trade association of which the Fund is a member; the
cost of stock certificates representing shares of the Fund; the organizational
and offering expenses of the Fund, whether or not advanced by the Investment
Adviser; expenses of shareholder and director meetings; premiums for the
fidelity bond and any errors and omissions insurance maintained by the Fund;
interest and taxes; and any other ordinary or extraordinary expenses incurred by
the Fund in the course of its business.

          Investors Bank & Trust Company, the Fund's administrator, received
administration and accounting fees of $96,648 for the period September 1, 1999
to December 31, 1999 and $266,802 for the fiscal year ended December 31, 2000.

                                      B-12
<PAGE>

                      PORTFOLIO TRANSACTIONS AND BROKERAGE

General

  Subject to policies established by the Board of Directors of the Fund, the
Investment Adviser is responsible for the placement of the Fund's portfolio
transactions and the allocation of the brokerage. Total brokerage commissions
paid by the Fund for the fiscal years ended December 31, 1998, 1999 and 2000
were $439,000, $528,000 and $332,000, respectively. During the fiscal year ended
December 31, 2000, $110,948 in brokerage commissions were paid to brokers
selected primarily on the basis of research and other services provided to the
Investment Adviser and affiliated companies.

  In selecting broker-dealers the Investment Adviser seeks to obtain the best
execution, taking into account such factors as price (including the applicable
dealer spread or commission, if any), size of order, difficulty of execution and
operational facilities of the firm involved and the firm's risk in positioning a
large order. Brokerage services include the ability to most effectively execute
large orders without adversely impacting markets and positioning securities in
order to enable the Investment Adviser to effect orderly sales for the  Fund.
Accordingly, transactions will not always be executed at the lowest available
commission. In addition, the Investment Adviser may effect transactions which
cause the Fund to pay a commission in excess of a commission which another
broker-dealer would have charged if the Investment Adviser first determines that
such commission is reasonable in relation to the value of the brokerage and
research services provided by the broker-dealer.  The Investment Adviser may
select broker-dealers in which other of its clients or clients of its
affiliates, and indirectly the Investment Adviser or its affiliates, have some
financial interest.

  Research services include such items as reports on industries and companies,
economic analyses and review of business conditions, portfolio strategy,
analytic computer software, account performance services, computer terminals and
various trading and/or quotation equipment. Research services also includes
advice from broker dealers as to the value of securities; availability of
securities, buyers and sellers; recommendations as to purchase and sale of
individual securities and timing of said transactions.

  Fixed income securities are generally purchased from the issuer or a primary
market maker acting as principal on a net basis with no brokerage commission
paid by the client. Such securities, as well as equity securities, may also be
purchased from underwriters at prices which include underwriting fees.

  The Investment Adviser maintains an internal allocation procedure to identify
those broker-dealers who have provided it with research services and endeavors
to place sufficient transactions with them to ensure the continued receipt of
research services the Investment Adviser believes are useful.  When the
Investment Adviser receives products or services that are used both for research
and other purposes such as corporate administration or marketing, it makes a
good faith allocation.  While the non-research portion will be paid in cash by
the Investment Adviser, the portion attributable to research may be paid through
brokerage commissions.

Research services furnished by broker-dealers may be used in services for any or
all of the clients of the Investment Adviser, as well as clients of affiliated
companies, and may be used in connection with accounts other than those which
pay commissions to the broker-dealers providing the research services.

                                      B-13
<PAGE>

  Usually in the placement of unregistered securities, the issuer or other
seller of the securities pays all costs of the placement including the fee of
any broker-dealer involved. The Fund attempts to make all of its investments in
unregistered securities on this basis. The Fund may pay commissions or
underwriting discounts in connection with its sale of unregistered securities in
privately negotiated transactions or in underwritten public offerings.

  When the Fund and one or more of the other advisory accounts managed by the
Investment Adviser or its affiliates seek to acquire, or to sell, the same
security at the same time, available investments or opportunities for sales will
be allocated in a manner the Investment Adviser believes to be equitable. In
some cases, this procedure may affect adversely the price paid or received by
the Fund or the size of the position purchased or sold by the Fund.

Portfolio Turnover

  The Fund's portfolio turnover rates (the lesser of the value of securities
purchased or securities sold, divided by the average value of securities owned
during the year) for the fiscal years ended December 31, 1998, 1999 and 2000,
were, 124.51%, 119.92% and 159.44%, respectively. For purposes of this
calculation, securities, including options, with a maturity or expiration date
at the time of purchase of one year or less are excluded. The annual turnover
rate may vary greatly from year to year and may exceed 100%, which is higher
than that of many other investment companies. The principal reason for the
higher turnover rate in 2000 was tax loss selling designed to reduce taxable
distributions. A 100% turnover rate occurs for example, if all the Fund's
portfolio securities are replaced during one year. Such high portfolio activity
(over 100% turnover rate) increases the Fund's transaction costs, including
brokerage commissions.

                                    TAXATION

Futures and Hedging Transactions

  The stock index futures contracts which the Fund may purchase are "section
1256 contracts" under the Code. With respect to section 1256 contracts closed
out by the Fund, any realized gain or loss will be treated as long-term capital
gain or loss to the extent of 60% thereof and short-term capital gain or loss to
the extent of 40% thereof (hereinafter "60/40 gain or loss"). Open section 1256
contracts held by the Fund on December 31 of any tax year will be required to be
treated as sold at market value on such day for Federal income tax purposes
(i.e, "marked-to-market"). Gain or loss recognized under this marked-to-market
rule is 60/40 gain or loss.

  Certain of the hedging transactions undertaken by the Fund (i.e., the writing
of covered call options, the acquisition of put options on its stocks and short
sales) may constitute "straddles" for Federal income tax purposes. The Code
generally provides with respect to straddles (1) "loss deferral" rules which may
postpone recognition for tax purposes of losses from certain closing purchase
transactions or other dispositions of a position in a straddle to the extent of
unrealized gains in the offsetting position, (2) "wash sale" rules which may
postpone recognition for tax purposes of losses when a position forming part of
a straddle is sold and a new offsetting position is acquired within a prescribed
period, and (3) "short sale" rules which may terminate the holding period of
securities owned by the Fund when offsetting positions are established and which
may convert certain losses from short-term to long-term. Because only a few
regulations implementing the straddle rules have been promulgated, the tax
consequences of

                                      B-14
<PAGE>

certain hedging transactions to the Fund are not entirely clear. Straddle
transactions may increase the amount of short-term capital gain realized by the
Fund which is taxable as ordinary income when distributed to shareholders.

  Because application of the straddle rules may affect the character of gains or
losses, defer losses and/or accelerate the recognition of gains or losses from
the affected straddle positions, the amount which must be distributed to
shareholders, and which will be taxed to shareholders as ordinary income or
long-term capital gain, may be increased or decreased substantially as compared
to a fund that does not engage in such hedging transactions.

                       PRINCIPAL SHAREHOLDERS OF THE FUND

  On March 30, 2001, Cede & Co., Box 20, Bowling Green Station, New York, New
York 10004, held 38,241,242 shares (84%) of the Fund as nominee for the
beneficial owners.

  On March 30, 2001, all officers and directors of the Fund, as a group, owned
less than 1% of the outstanding shares of common stock.

                                 CODE OF ETHICS

  The Investment Adviser and Fund are subject to a Code of Ethics with respect
to investment transactions in which the Adviser's officers, directors and
certain other persons have a beneficial interest to avoid any actual or
potential conflict or abuse of their fiduciary position.  Such persons, subject
to the Code of Ethics, may invest in securities, including those securities that
may be purchased or sold by the Fund. The Investment Adviser's Code of Ethics
contains several restrictions and procedures designed to eliminate conflicts of
interest including: (a) pre-clearance of non-exempt personal investment
transactions; (b) quarterly reporting of personal securities transactions; (c) a
prohibition against personally acquiring securities in an initial public
offering entering into uncovered short sales or writing uncovered options; (d) a
seven day "black out period" prior or subsequent to a Fund transaction during
which portfolio managers are prohibited from making certain transactions in
securities which are being purchased or sold by a client of such manager; (e) a
prohibition, with respect to certain investment personnel, from profiting in the
purchase an sale, or sale and purchase, of the same (or equivalent) securities
within 60 calendar days; and (f) a prohibition against acquiring any security
which is subject to firm wide or, if applicable, a department restriction of the
Investment Adviser.  The Code of Ethics provides that exemptive relief may be
given from certain of its requirements, upon application.

  The Code of Ethics can be reviewed and copied at the Securities and Exchange
Commission's Public Reference Room in Washington, D.C. (phone 1-202-942-8090)
or, after paying a duplicating fee, by sending a written request to the
Securities and Exchange Commission's Public Reference Section, 450 Fifth Street,
N.W., Washington, DC 20549-0102 or by an electronic request at the following e-
mail address:  www.publicinfo@sec.gov

                                      B-15
<PAGE>

                              INDEPENDENT AUDITORS

  Deloitte & Touche LLP, 250 South Grand Avenue, Los Angeles, California 90071
serves as the Fund's independent auditors and performs the annual audit of the
Fund.

                                   CUSTODIAN

  Investors Bank & Trust Company, 200 Clarendon Street, Boston, Massachusetts
02117 is the custodian of the Fund's assets.

                              FINANCIAL STATEMENTS

  The audited financial statements for the year ended December 31, 2000,
including the financial highlights, appearing in the Fund's Annual Report to
Shareholders are incorporated by reference and made a part of this document.  An
annual Report to Shareholders may be obtained without charge by calling (800)
386-3829 or writing the Fund at 865 Figueroa Street, Suite 1800, Los Angeles,
California 90017.

                                      B-16
</TEXT>
</DOCUMENT>
