<PAGE>
As filed with the Securities and Exchange Commission on February 28, 1997
REGISTRATION NO. 33-96668
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER [X]
THE SECURITIES ACT OF 1933
PRE-EFFECTIVE AMENDMENT NO.
POST-EFFECTIVE AMENDMENT NO. 1 [X]
AND/OR
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 3 [X]
(CHECK APPROPRIATE BOX OR BOXES.)
SOGEN VARIABLE FUNDS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
1221 AVENUE OF THE AMERICAS
NEW YORK, NY 10020
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 278-5800
JEAN-MARIE EVEILLARD
SOGEN VARIABLE FUNDS, INC.
1221 AVENUE OF THE AMERICAS
NEW YORK, NY 10020
(NAME AND ADDRESS OF AGENT FOR SERVICE)
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: AS SOON AS PRACTICABLE AFTER THE
EFFECTIVE DATE OF THIS REGISTRATION STATEMENT. IT IS PROPOSED THAT THIS FILING
WILL BECOME EFFECTIVE (CHECK APPROPRIATE BOX):
[x] IMMEDIATELY UPON FILING PURSUANT TO PARAGRAPH (B)
[ ] ON (DATE) PURSUANT TO PARAGRAPH (B)
[ ] 60 DAYS AFTER FILING PURSUANT TO PARAGRAPH (A)(1)
[ ] ON (DATE) PURSUANT TO PARAGRAPH (A)(1)
[ ] 75 DAYS AFTER FILING PURSUANT TO PARAGRAPH (A)(2)
[ ] ON (DATE) PURSUANT TO PARAGRAPH (A)(2) OF RULE 485
PURSUANT TO THE PROVISIONS OF RULE 24F-2 UNDER THE INVESTMENT CO. ACT OF
1940, REGISTRANT HAS REGISTERED AN INDEFINITE NUMBER OF SHARES UNDER THE
SECURITIES ACT OF 1933. PURSUANT TO PARAGRAPH (b)(2), THE REGISTRANT NEED NOT
FILE A RULE 24f-2 NOTICE BECAUSE IT DID NOT SELL ANY SECURITIES PURSUANT TO
SUCH DECLARATION DURING THE MOST RECENT FISCAL YEAR.
<PAGE>
SOGEN VARIABLE FUNDS, INC.
CROSS-REFERENCE SHEET
PURSUANT TO RULE 495(A)
UNDER THE SECURITIES ACT OF 1933
<TABLE>
<CAPTION>
FORM N-1A ITEM NO. PROSPECTUS CAPTION
<S> <C> <C>
PART A
Item 1. Cover Page Cover Page
Item 2. Synopsis Not Applicable
Item 3. Condensed Financial Information Not Applicable
Item 4. General Description of Registrant Organization of the Fund; Investment Objective and
Policies; Investment Restrictions; Implementation of
Policies and Risks
Item 5. Management of the Company Management of the Company
Item 6. Capital Stock and Other Securities Dividends, Distributions and Taxes; Capital Stock;
Inquiries
Item 7. Purchase of Securities Being Offered Management of the Company; How to Purchase Shares;
Net Asset Value
Item 8. Redemption or Repurchase How to Redeem Shares
Item 9. Legal Proceedings Not Applicable
FORM N-1A ITEM NO. STATEMENT OF ADDITIONAL
INFORMATION CAPTION
<CAPTION>
PART B
<S> <C> <C>
Item 10. Cover Page Cover Page
Item 11. Table of Contents Table of Contents
Item 12. General Information and History Organization of the Fund
Item 13. Investment Objectives and Policies Investment Objective, Policies and Restrictions
Item 14. Management of the Registrant Management of the Company
Item 15. Control Persons and Principal Holders of Securities Management of the Company
Item 16. Investment Adviser and Other Services Investment Adviser and Other Services; Distribution
of the Fund's Shares; Custody of Portfolio;
Independent Auditors
Item 17. Brokerage Allocation Brokerage Allocation
Item 18. Capital Stock and Other Securities Not Applicable
Item 19. Purchase, Redemption and Pricing of Securities Being Distribution of the Fund's Shares; How to Purchase
Offered Shares; Computation of Net Asset Value
Item 20. Tax Status Tax Status
Item 21. Underwriters Distribution of the Fund's Shares
Item 22. Calculation of Performance Data Investment Objective, Policy and Restrictions
Item 23. Financial Statements Report of Independent Auditors; Statement of Assets
and Liabilities
</TABLE>
<PAGE>
SOGEN OVERSEAS VARIABLE FUND
(Picture of a globe)
Prospectus
February 28, 1997
<PAGE>
PROSPECTUS
SOGEN OVERSEAS VARIABLE FUND
(Picture of a globe)
1221 AVENUE OF THE AMERICAS, NEW YORK, NY 10020
(212) 278-5800
SOCIETE GENERALE ASSET MANAGEMENT CORP.
INVESTMENT ADVISER
SOCIETE GENERALE SECURITIES CORPORATION
DISTRIBUTOR
SoGen Overseas Variable Fund (the "Fund") is a separate portfolio of SoGen
Variable Funds, Inc., an open-end management investment company (the "Company")
that offers its shares only to separate accounts of U.S. insurance companies to
serve as an investment medium for variable life insurance policies and variable
annuity contracts issued by the insurance companies ("Variable Contracts") and
other qualified buyers. The Company currently offers one portfolio; additional
portfolios may be created by the directors from time to time, and the directors
may discontinue the offering of shares of any existing portfolio at any time.
SHARES IN THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
This Prospectus sets forth concisely information about the Fund that an
investor ought to know before investing. This Prospectus should be read in
conjunction with the prospectus of the separate account of the specific
insurance product that accompanies this Prospectus. Both prospectuses should be
read and retained for future reference. A Statement of Additional Information
dated February 28, 1997, containing additional information about the Fund, has
been filed with the Securities and Exchange Commission. It is incorporated
herein by reference and is available free of charge by contacting the Company at
(212) 278-5800.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The Fund's investment objective is long-term growth of capital by investing
primarily in securities of small and medium size non-U.S. companies.
Societe Generale Asset Management Corp. ("SOGEN A.M. Corp."), the Fund's
investment adviser, is also the investment adviser to SoGen International Fund,
Inc. and SoGen Funds, Inc., each of which is a registered open-end management
investment company.
FEBRUARY 28, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Organization of the Company....................................................... 3
Investment Objective and Policies................................................. 3
Investment Restrictions........................................................... 3
Implementation of Policies and Risks.............................................. 4
Management of the Company......................................................... 8
Capital Stock..................................................................... 11
Dividends, Distributions and Taxes................................................ 11
Performance Information........................................................... 12
Net Asset Value................................................................... 13
How to Purchase Shares............................................................ 13
How to Redeem Shares.............................................................. 14
Inquiries......................................................................... 14
</TABLE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL
INFORMATION AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL SECURITIES IN ANY JURISDICTION TO ANYONE TO WHOM IT
IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION.
2
<PAGE>
ORGANIZATION OF THE COMPANY
The Company is an open-end management investment company incorporated under
the laws of Maryland in September 1995. The purpose of the Company is to serve
as an investment medium for Variable Contracts. The Company has a single
portfolio, SoGen Overseas Variable Fund (the "Fund").
INVESTMENT OBJECTIVE AND POLICIES
The Fund seeks long-term growth of capital by investing primarily in
securities of small and medium size non-U.S. companies. The Fund particularly
seeks companies that have growth potential, financial strength and stability,
strong management and fundamental value. However, the Fund may invest in
companies that do not have all of these characteristics.
The Fund may invest in securities traded in mature markets (for example,
Japan, Canada and the United Kingdom) and in emerging markets (Mexico and
Indonesia, for example). A list of the mature and emerging markets in which the
Fund may invest is included in the Statement of Additional Information under
"Investment Policies, Techniques and Risks -- Foreign Securities." There are no
limits on the Fund's geographic asset distribution, but the Fund ordinarily
invests in at least three countries outside the United States.
The equity securities in which the Fund may invest include common and
preferred stocks, warrants or other similar rights, and convertible securities.
The Fund may purchase foreign securities in the form of sponsored or unsponsored
American Depository Receipts (ADRs), Global Depository Receipts (GDRs) and
European Depository Receipts (EDRs) or other securities representing underlying
shares of foreign issuers. The Fund may also invest in any other type of
security, including up to 20% of its total assets in debt securities. Such debt
securities may include lower-rated securities, commonly referred to as "junk
bonds" (i.e., securities rated BB or lower by Standard & Poor's Corporation
("S&P") or Ba or lower by Moody's Investors Service, Inc. ("Moody's")), and
securities that are not rated. There are no restrictions as to the ratings of
debt securities acquired by the Fund or the portion of the Fund's assets that
may be invested in debt securities in a particular rating category. Under normal
market conditions, the Fund invests at least 75% of its total assets, taken at
market value, in foreign securities. The Fund may also invest in "structured
securities" in which the value is linked to the price of an underlying
instrument.
INVESTMENT RESTRICTIONS
The Fund has adopted certain investment restrictions that may not be
changed without shareholder approval. Among other restrictions, the Fund will
not:
1. With respect to 75% of its total assets, invest more than 5% of its
assets (valued at time of investment) in securities of any one issuer,
except in U.S. government obligations, or acquire securities of any one
issuer which at the time of investment represent more than 10% of the
voting securities of the issuer;
3
<PAGE>
2. Borrow money except that in exceptional circumstances the Fund may
borrow from banks for temporary purposes, provided that such borrowings
shall be unsecured and may not exceed 10% of the Fund's net assets at
the time of borrowing (including the amount borrowed). The Fund will not
purchase securities while borrowings exceed 5% of its total assets; or
3. Invest more than 25% of its assets (valued at time of investment) in
securities of companies in any one industry (other than U.S. Government
Securities).
A complete description of the Fund's investment restrictions is included in
the Statement of Additional Information.
IMPLEMENTATION OF POLICIES AND RISKS
In addition to the investment policies described above (and subject to
certain restrictions described herein), the Fund may invest in some or all of
the following securities and employ some or all of the following investment
techniques, some of which may present special risks as described below. A more
complete discussion of these securities and investment techniques and their
associated risks is contained in the Fund's Statement of Additional Information.
Because the Fund's investments will be subject to the market fluctuations
and risks inherent in all investments, there can be no assurance that the Fund's
stated objectives will be realized. SOGEN A.M. Corp. will seek to minimize these
risks through professional management and investment diversification. The value
of shares of the Fund when sold may be higher or lower than when purchased.
SOGEN A.M. Corp. advises certain other investment companies with the same or
similar investment objectives. The Fund, however, is separately managed and the
investments made by the Fund will not necessarily be the same as those made on
behalf of the other investment companies managed by SOGEN A.M. Corp.
FOREIGN SECURITIES.
Under normal conditions, the Fund invests in a diversified portfolio of
foreign securities. From time to time, many foreign economies have grown faster
than the U.S. economy, and the returns on investments in these countries have
exceeded those of similar U.S. investments, although there can be no assurance
that these conditions will continue. International investing allows investors to
achieve greater diversification and to take advantage of changes in foreign
economies and market conditions.
The greater risks involved in foreign investing should be understood and
carefully considered. Investing in foreign securities and other positions which
are generally denominated in foreign currencies, and utilization of forward
foreign currency exchange contracts (see "Currency Exchange Transactions"
below), involve certain risks and opportunities not typically associated with
investing in U.S. securities. These include: fluctuations in the rates of
exchange between the U.S. dollar and foreign currencies; changes in exchange
control regulations or currency restrictions that would prevent cash from being
brought back to the United States; less public information
4
<PAGE>
with respect to issuers of securities; less governmental supervision of stock
exchanges, securities brokers and issuers of securities; different accounting,
auditing and financial reporting standards; different settlement periods and
trading practices; less liquidity and frequently greater price volatility in
foreign markets than in the United States; imposition of foreign taxes; and
sometimes less advantageous legal, operational and financial protections
applicable to foreign sub-custodial arrangements.
Investing in countries outside the United States entails political risk.
There exists the possibility of restrictions on foreign investors, expropriation
of assets, confiscatory taxation, seizure or nationalization of foreign bank
deposits or other assets, establishment of exchange controls, or other adverse
political or social developments that could affect investment in these nations.
Economies in individual markets may differ favorably or unfavorably from the
U.S. economy in such respects as growth of gross domestic product, rates of
inflation, currency depreciation, capital reinvestment, resource
self-sufficiency and balance of payments positions. Many emerging market
countries have experienced extremely high rates of inflation for many years.
That has had and may continue to have very negative effects on the economies and
securities markets of those countries.
The securities markets of emerging countries are substantially smaller,
less developed, less liquid and more volatile than the securities markets of the
United States and other more developed countries. Disclosure and regulatory
standards in many respects are less stringent than in the United States. There
also may be a lower level of monitoring and regulation in emerging markets of
traders, insiders and investors. Enforcement of existing regulations has been
extremely limited.
The Fund is subject to the following guidelines for diversification of
foreign security investments. If the Fund has less than 20% of its assets in
foreign issuers, then all of such investment may be in issuers located in one
country. If the Fund has at least 20% but less than 40% of its assets in foreign
issuers, then such investment must be allocated to issuers located in at least
two different countries. Similarly, if the Fund has at least 40% but less than
60% of its assets in foreign issuers, such investment must be allocated to at
least three different countries. Foreign investments must be allocated to at
least four different countries if at least 60% of the Fund's assets are in
foreign issuers, and to at least five different countries if at least 80% are
invested in foreign issuers. For purposes of such allocations, a company will be
considered located in the country in which it is domiciled, in which it is
primarily traded, from which it derives a significant portion of its revenues or
in which a significant portion of its goods or services are produced. In
addition, the Fund may have no more than 20% of its net assets invested in
securities of issuers located in any one country, except that the Fund may have
35% of its net assets invested in securities of issuers located in any one of
the following countries: Australia, Canada, France, Japan, the United Kingdom,
or Germany. The Fund's investment in U.S. issuers is not subject to the foreign
country diversification guidelines.
5
<PAGE>
CURRENCY EXCHANGE TRANSACTIONS.
The Fund may engage in currency exchange transactions to hedge against
losses in the U.S. dollar value of its portfolio securities resulting from
possible variations in exchange rates and not for speculation. A currency
exchange transaction may be conducted either on a spot (i.e. cash) basis at the
spot rate for purchasing or selling currency prevailing in the foreign exchange
market or through a forward currency exchange contract ("forward contract"). A
forward contract is an agreement to purchase or sell a specified currency at a
specified future date (or within a specified time period) and price set at the
time of the contract. Forward contracts are usually entered into with banks and
broker/dealers, are not exchange-traded and are usually for less than one year,
but may be renewed. Currency exchange transactions may involve currencies of the
different countries in which the Fund may invest. Although forward contracts may
be used to protect the Fund from adverse currency movements, the use of such
hedges may reduce or eliminate the potentially positive effect of currency
revaluations on the Fund's total return.
INVESTMENTS IN DEBT SECURITIES.
The Fund may invest up to 20% of its total assets in debt securities that
are below investment grade quality. The Fund may also invest in debt securities
which are in default. "Investment grade"debt securities are those rated within
the four highest ratings categories of S&P or Moody's or, if unrated, determined
by the Fund's investment adviser to be of comparable quality. The market value
of debt securities generally varies in response to changes in interest rates and
the financial conditions of each issuer. During periods of declining interest
rates, the value of debt securities generally increases. Conversely, during
periods of rising interest rates, the value of such securities generally
declines. These changes in market value will be reflected in the Fund's net
asset value.
Securities rated BBB by S&P or Baa by Moody's (the lowest investment grade
ratings) are considered to be medium grade and to have speculative
characteristics. Debt securities that are rated below investment grade or, if
unrated, are considered by SOGEN A.M. Corp. to be equivalent to below investment
grade (often referred to as "junk bonds"), on balance, are considered
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal according to the terms of the obligation and, therefore,
carry greater investment risk, including the possibility of issuer default and
bankruptcy. They are likely to be less marketable and more adversely affected by
economic downturns than higher-quality debt securities. (For additional
information on these debt securities see "Lower-Rated Debt Securities" in the
Statement of Additional Information.)
OTHER INVESTMENT COMPANIES.
Certain markets are closed in whole or in part to equity investments by
foreigners. The Fund may be able to invest in such markets solely or primarily
through governmentally-authorized investment companies. The Fund generally may
invest up to
6
<PAGE>
10% of its assets in shares of other investment companies and up to 5% of its
assets in any one investment company (in each case measured at the time of
investment), as long as no investment represents more than 3% of the outstanding
voting stock of the acquired investment company at the time of investment.
Investment in another investment company may involve the payment of a
premium above the value of the issuer's portfolio securities, and is subject to
market availability. In the case of a purchase of shares of such a company in a
public offering, the purchase price may include an underwriting spread. The Fund
does not intend to invest in such an investment company unless, in the judgment
of the Fund's investment adviser, the potential benefits of such investment
justify the payment of any applicable premium or sales charge. As a shareholder
in an investment company, the Fund would bear its ratable share of that
investment company's expenses, including its advisory and administration fees.
At the same time, the Fund would continue to pay its own management fees and
other expenses.
"WHEN-ISSUED" OR "DELAYED DELIVERY" SECURITIES.
The Fund may purchase securities on a "when-issued" or "delayed delivery"
basis. When-issued or delayed delivery securities are securities purchased for
future delivery at a stated price and yield. The Fund will generally not pay for
such securities or start earning interest on them until they are received.
Securities purchased on a when-issued or delayed delivery basis are recorded as
assets and are marked-to-market daily. The Fund will not invest more than 25% of
its assets in when-issued or delayed delivery securities, does not intend to
purchase such securities for speculative purposes and will make commitments to
purchase securities on a when-issued or delayed delivery basis with the
intention of actually acquiring the securities. However, the Fund reserves the
right to sell acquired when-issued or delayed delivery securities before their
settlement dates if deemed advisable.
STRUCTURED SECURITIES.
The Fund may invest in structured notes and/or preferred stock, the value
of which is linked to the price of an underlying instrument. Structured
securities have different characteristics and risks than other types of
securities in which the Fund may invest. For example, the coupon, dividend
and/or redemption amounts may be increased or decreased depending on the change
in the value of an underlying instrument. See "Structured Securities" in the
Statement of Additional Information for further information.
TEMPORARY STRATEGIES; CASH RESERVES.
The Fund has the flexibility to respond promptly to changes in market and
economic conditions. In the interest of preserving shareholders' capital, SOGEN
A.M. Corp. may employ a temporary defensive investment strategy if it determines
such a strategy to be warranted. Pursuant to such a defensive strategy, the Fund
temporarily may hold cash (U.S. dollars, foreign currencies, multinational
currency units) and/or
7
<PAGE>
invest up to 100% of its assets in high quality debt securities or money market
instruments of U.S. or foreign issuers. Most or all of the Fund's investments
may be made in the United States and denominated in U.S. dollars. It is
impossible to predict whether, when or for how long the Fund will employ
defensive strategies.
In addition, pending investment of proceeds from new sales of shares or to
meet ordinary daily cash needs, the Fund temporarily may hold cash (U.S.
dollars, foreign currencies or multinational currency units) and may invest any
portion of its assets in money market instruments.
ILLIQUID SECURITIES.
The Fund may invest up to 15% of its total assets in illiquid securities,
including securities acquired in private placements. Because an active trading
market for such securities may not exist, the sale of such securities may be
subject to delay and additional costs. Time deposits and repurchase agreements
maturing in more than seven days are considered to be illiquid. The Fund,
subject to the limitations for illiquid investments stated above, may purchase
securities that have been privately placed but that are not eligible for
purchase and sale under Rule 144A under the Securities Act of 1933. That rule
permits certain qualified institutional buyers, such as the Fund, to trade in
private placed securities that have not been registered for sale under that Act.
Rule 144A securities may or may not be liquid depending on guidelines
established by the Board of Directors. See "Illiquid Securities" in the
Statement of Additional Information.
EXPENSES.
The cost of investing in foreign securities is higher than the cost of
investing in U.S. securities. Investing in the Fund is an efficient way for an
individual to participate in foreign markets, but its expenses, including
advisory and custody fees, are higher than the expenses of a typical domestic
mutual fund.
CHANGE OF OBJECTIVE.
The Fund's investment objective may be changed by the Board of Directors
without shareholder approval. If there were such a change, each shareholder
should consider whether the Fund would remain an appropriate investment in light
of his or her then current financial position and needs. Shareholders will be
notified a minimum of sixty days in advance of any change in investment
objective.
MANAGEMENT OF THE COMPANY
BOARD OF DIRECTORS.
The business and affairs of the Company are managed under the direction of
its Board of Directors.
8
<PAGE>
INVESTMENT ADVISER.
The Company's investment portfolio is managed by SOGEN A.M. Corp., 1221
Avenue of the Americas, New York, New York 10020. SOGEN A.M. Corp. is a
registered investment adviser which is indirectly owned by Societe Generale, one
of France's largest banks. SOGEN A.M. Corp. also serves as investment adviser to
SoGen International Fund, Inc. and SoGen Funds, Inc., each of which is a
registered open-end management investment company. Jean-Marie Eveillard,
President and a director of the Company, is primarily responsible for the
day-to-day management of the Company's investment portfolio. Mr. Eveillard has
been a director and President or Executive Vice President of SOGEN A.M. Corp.
since prior to 1991.
SOGEN A.M. Corp. furnishes investment advice to the Fund consistent with
the Fund's stated investment objective and policies. SOGEN A.M. Corp. also
furnishes the Company with office space and certain facilities and services
required for its business and pays any expenses of the officers of the Company.
For these services and facilities, the Fund pays SOGEN A.M. Corp. a monthly fee
at the annual rate of 0.75% of the average daily net assets of the Fund.
SOGEN A.M. Corp. may waive all or a portion of its fee. The annual fee rate
for the Fund is higher than the rate of fees paid by most United States mutual
funds. The Company believes, however, that the advisory fee rate is not higher
than the rate of fees paid by most other mutual funds that invest significantly
in foreign equity securities.
EXPENSES OF THE COMPANY.
The Company bears all costs of its operations. These costs may include
expenses for custody, portfolio accounting, printing, legal and audit fees, fees
payable pursuant to the Fund's Distribution Plan and Agreement (see
"Distributor; Rule 12b-1 Plan", below), fees and expenses of the independent
directors, organizational expenses and other expenses of its operations, and
may, if applicable, include extraordinary expenses such as expenses for special
consultants or legal expenses. Company expenses directly attributable to a
series of the Company's common stock are charged to that series; other expenses
are allocated proportionately among all the series in relation to the net assets
of each series. Currently, the Company has shares of one series (the Fund)
outstanding.
PORTFOLIO TRANSACTIONS.
SOGEN A.M. Corp. selects the brokers and dealers which execute orders for
the purchase and sale of the Fund's portfolio securities. SOGEN A.M. Corp. seeks
to achieve "best execution" of such orders. "Best execution" means prompt and
reliable execution at the most favorable securities prices, taking into account
a number of
9
<PAGE>
largely judgmental considerations. Consistent with the foregoing, portfolio
transactions may be executed by brokers affiliated with Societe Generale so long
as the commission paid to the affiliated broker is reasonable and fair compared
to the commission that would be charged by an unaffiliated broker in a
comparable transaction. In addition, subject to the policy of best execution and
to applicable regulations, SOGEN A.M. Corp. may consider sales of the Fund's
shares as a factor in the selection of brokers to execute portfolio
transactions.
DISTRIBUTOR; RULE 12B-1 PLAN.
The Fund's shares are distributed through Societe Generale Securities
Corporation ("SGSC"), 1221 Avenue of the Americas, New York, New York 10020.
SGSC is a registered broker-dealer and an affiliate of Societe Generale.
The Fund has adopted a Distribution Plan and Agreement (the "Plan")
pursuant to Rule 12b-1 of the Investment Company Act of 1940. Under the Plan,
the Fund may pay SGSC a quarterly distribution related fee at an annual rate not
to exceed 0.25% of the average daily value of the Fund's net assets. Under the
terms of the Plan, the Fund is authorized to make payments to SGSC for
remittance to an insurance company that is the issuer of a Variable Contract
invested in shares of the Fund in order to pay or reimburse such insurance
company for distribution and shareholder servicing-related expenses incurred or
paid by such insurance company. SGSC bears distribution expenses to the extent
they are not covered by payments under the Plan. Any distribution expenses
incurred by SGSC in any fiscal year of the Fund, which are not reimbursed from
payments under the Plan accrued in such fiscal year, will not be carried over
for payment under the Plan in any subsequent year.
Expenses payable pursuant to this Plan may include, but are not necessarily
limited to: (a) the printing and mailing of Fund prospectuses, statements of
additional information, any supplements thereto and shareholder reports for
existing and prospective Variable Contract owners; (b) those relating to the
development, preparation, printing and mailing of Fund advertisements, sales
literature and other promotional materials describing and/or relating to the
Fund and including materials intended for use within the insurance company, or
for broker-dealer only use or retail use; (c) holding seminars and sales
meetings designed to promote the distribution of Fund shares; (d) obtaining
information and providing explanations to Variable Contract owners regarding
Fund investment objectives and policies and other information about the Fund,
including its performance; (e) training sales personnel regarding the Fund; (f)
compensating sales personnel in connection with the allocation of cash values
and premiums of the Variable Contracts to the Fund; (g) personal service and/or
maintenance of Variable Contract accounts with respect to Fund shares
attributable to such accounts; and (h) financing any other activity that the
Fund's Board of Directors determines is primarily intended to result in the sale
of shares.
10
<PAGE>
As agent, SGSC currently offers shares of the Fund continuously to the
separate accounts of insurance companies in all states in which it is registered
or where permitted by applicable law. SGSC accepts orders for shares at net
asset value. SGSC has made no firm commitment to acquire shares of the Fund.
CAPITAL STOCK
The authorized capital stock of the Company consists of one billion shares
of common stock, par value $0.001 per share, of which 150,000,000 shares have
been designated as shares of the Fund. All shares issued and outstanding are
fully paid and non-assessable and are redeemable at net asset value at the
option of shareholders. Shares have no preemptive or conversion rights and are
freely transferable. The Board of Directors is authorized to classify,
reclassify and issue any unissued shares of the Fund without shareholder
approval. Accordingly, in the future, the Directors may create additional series
of shares with different investment objectives, policies or restrictions. Any
issuance of shares of another series or class would be governed by the
Investment Company Act of 1940, as amended, and Maryland law.
Pursuant to its By-Laws, the Company does not generally hold annual
meetings of shareholders. Shareholder meetings, however, will be held when
required by the Investment Company Act of 1940 or Maryland law, or when called
by the Chairman of the Board, the President or shareholders owning at least 10%
of the outstanding shares of the Fund. The cost of any such notice and meeting
will be borne by the Fund.
Each share of common stock of the Fund is entitled to one vote for each
dollar of net asset value and a proportionate fraction of a vote for each
fraction of a dollar of net asset value, unless a different allocation of voting
rights is required under applicable law for a mutual fund that is an investment
medium for Variable Contracts. Generally, shares of each series vote together on
any matter submitted to shareholders, except when otherwise required by the
Investment Company Act of 1940, or (if shares of more than one series are
outstanding), when a matter affects the interests of each series in a different
way, in which case the shareholders of each series vote separately by class. If
the directors determine that a matter does not affect the interests of a
particular series, then the shareholders of that series will not be entitled to
vote on that matter. An insurance company issuing a Variable Contract invested
in shares of the Fund (or any other series issued in the future) will request
voting instructions from Variable Contract owners and will vote shares in
proportion to the voting instructions received. Currently, the Company has
shares of one series outstanding (the Fund).
DIVIDENDS, DISTRIBUTIONS AND TAXES
It is the policy of the Fund to make annual distributions of net investment
income and net realized capital gains, if any. Unless a shareholder otherwise
elects, income dividends and capital gains distributions will be reinvested in
additional shares of the Fund at net asset value per share calculated as of the
payment date. The Fund pays both income dividends and capital gains
distributions on a per share basis. On the
11
<PAGE>
ex-dividend date of such payment, the net asset value per share of the Fund will
be reduced by the amount of such payment.
The Fund intends to qualify and has elected to be treated as a "regulated
investment company" under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"). To qualify, the Fund must meet certain income,
diversification and distribution requirements. As a regulated investment
company, the Fund generally will not be subject to federal income or excise
taxes on income and capital gains distributed to shareholders within applicable
time limits, although foreign source income received by the Fund may be subject
to foreign withholding taxes.
The Fund also intends to comply with diversification regulations under
Section 817(h) of the Code that apply to mutual funds underlying Variable
Contracts. Generally, the Fund will be required to diversify its investments so
that on the last day of each quarter of a calendar year no more than 55% of the
value of its total assets is represented by any one investment, nor more than
70% is represented by any two investments, no more than 80% is represented by
any three investments, and no more than 90% is represented by any four
investments. For this purpose, securities of a given issuer generally are
treated as one investment, but each U.S. Government agency and instrumentality
is treated as a separate issuer.
Tax consequences to the Variable Contract owners are described in the
prospectus for the pertinent separate account. See "Tax Status" in the Fund's
Statement of Additional Information for more information on taxes.
PERFORMANCE INFORMATION
From time to time, the Fund (or the insurance companies that use the Fund
as an investment medium for Variable Contracts) may illustrate in sales
literature and advertisements the Fund's cumulative total return and its average
annual total return. Total return for the Fund will not be advertised or
included in sales literature unless accompanied by comparable performance
information for a separate account to which the Fund offers its shares (to the
extent required). A cumulative total return reflects the Fund's performance over
a stated period of time based on an assumed initial investment. An average
annual total return reflects the hypothetical annually compounded return that
would have produced the same cumulative total return if the Fund's performance
had been constant over the entire period. Because average annual returns tend to
smooth out variations in the Fund's returns, a prospective investor should
recognize that they are not the same as actual year-by-year results. Both types
of total return will be calculated assuming the reinvestment of all income
dividends and capital gains distributions. The Fund's performance figures will
be based on historical results and are not intended to indicate future
performance.
Quotations of total return for the Fund will not take into account charges
or deductions against any separate account to which the Fund's shares are sold
or charges and deductions against the pertinent Variable Contract, although
comparable performance information for the separate account will take such
charges into account.
12
<PAGE>
From time to time the Fund may discuss in sales literature and
advertisements its performance ratings or other information as published by
recognized mutual fund statistical services, such as Morningstar, Inc. or Lipper
Analytical Services, Inc. or by publications of general interest such as
BUSINESS WEEK or MONEY.
NET ASSET VALUE
The Fund's net asset value per share is computed as of the close of trading
on the New York Stock Exchange ("NYSE") on each day during which the NYSE is
open for trading. The net asset value per share is computed by dividing the
total current value of the assets of the Fund, less its liabilities, by the
total number of shares outstanding at the time of such computation.
Portfolio securities are valued primarily based on market quotations where
available. Short-term investments maturing in sixty days or less are valued at
cost plus interest earned, which approximates value. Securities for which
current market quotations are not readily available are valued at fair value as
determined in good faith by the Company's Board of Directors.
HOW TO PURCHASE SHARES
Shares of the Fund may be offered for purchase by separate accounts of
insurance companies for the purpose of serving as an investment medium for
Variable Contracts. Shares of the Fund are sold at their net asset value
(without a sales charge) next computed after a receipt of a purchase order by an
insurance company whose separate account invests in the Fund. For information on
how to purchase shares, please refer to the prospectus of the pertinent separate
account.
Shares of the Fund are sold to insurance company separate accounts funding
both variable annuity contracts and variable life insurance contracts and may be
sold to insurance companies that are not affiliated. The Company currently does
not foresee any disadvantages to Variable Contract owners arising from offering
the Fund's shares to separate accounts of unaffiliated insurers, or separate
accounts funding both life insurance policies and annuity contracts; however,
due to differences in tax treatment or other considerations, it is theoretically
possible that the interests of owners of various contracts participating in the
Fund might at some time be in conflict. However, the Company's Board of
Directors and insurance companies whose separate accounts invest in the Fund are
required to monitor events in order to identify any material conflicts between
variable annuity contract owners and variable life policy owners, and between
separate accounts of unaffiliated insurers. The Board of Directors will
determine what action, if any, should be taken in the event of such a conflict.
If such a conflict were to occur, one or more insurance company separate
accounts might withdraw their investment in the Fund. This might force the Fund
to sell securities at disadvantageous prices.
13
<PAGE>
HOW TO REDEEM SHARES
Shares of the Fund may be redeemed on any business day. Redemptions are
effected at the per share net asset value next determined after receipt of the
redemption request by an insurance company whose separate account invests in the
Fund. For information on how to redeem shares, please refer to the prospectus of
the pertinent separate account.
Redemption proceeds normally will be paid to the separate account within
seven days following receipt of instructions in proper form. The right of
redemption may be suspended by the Company or the payment date postponed beyond
seven days when the New York Stock Exchange is closed (other than customary
weekend and holiday closings) or for any period during which trading thereon is
restricted because an emergency exists, as determined by the Securities and
Exchange Commission, making disposal of portfolio securities or valuation of net
assets not reasonably practicable, and whenever the Securities and Exchange
Commission has by order permitted such suspension or postponement for the
protection of shareholders.
INQUIRIES
For information about how to buy or redeem shares of the Fund, please
consult the prospectus for the pertinent separate account, or contact your
insurance company. To request additional literature about the Fund, please call
(212) 278-5800.
14
<PAGE>
SOGEN VARIABLE FUNDS, INC.
1221 AVENUE OF THE AMERICAS
NEW YORK, NY 10020
INVESTMENT ADVISER
SOCIETE GENERALE ASSET MANAGEMENT CORP.
1221 Avenue of the Americas
New York, NY 10020
DISTRIBUTOR
SOCIETE GENERALE SECURITIES CORPORATION
1221 Avenue of the Americas
New York, NY 10020
(800) 334-2143
LEGAL COUNSEL
DECHERT PRICE & RHOADS
477 Madison Avenue
New York, NY 10022
INDEPENDENT AUDITORS
KPMG PEAT MARWICK LLP
345 Park Avenue
New York, NY 10154
DOMESTIC CUSTODIAN
INVESTORS FIDUCIARY TRUST COMPANY
127 West 10th Street
Kansas City, MO 64105
GLOBAL CUSTODIAN
THE CHASE MANHATTAN BANK
4 Chase MetroTech Center
Brooklyn, NY 11245
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
SOGEN OVERSEAS VARIABLE FUND
(Picture of a globe)
1221 AVENUE OF THE AMERICAS
NEW YORK, NY 10020
(212) 278-5800
Societe Generale Asset Management Corp.
1221 Avenue of the Americas
New York, NY 10020
Investment Adviser
Societe Generale Securities Corporation
1221 Avenue of the Americas
New York, NY 10020
Distributor
This Statement of Additional Information provides information about SoGen
Overseas Variable Fund (the "Fund"), a separate portfolio of SoGen Variable
Funds, Inc. (the "Company") an open-end management investment company, in
addition to the information contained in the Prospectus of the Fund dated
February 28, 1997. This Statement of Additional Information is not a prospectus.
It relates to and should be read in conjunction with the Prospectus of the
Company, a copy of which can be obtained by writing or by calling the Company at
(212) 278-5800.
FEBRUARY 28, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
STATEMENT OF CROSS-REFERENCED
ADDITIONAL TO CAPTIONS IN
INFORMATION THE PROSPECTUS
PAGE PAGE
<S> <C> <C>
ORGANIZATION OF THE FUND.............................................................. 3 3
INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS....................................... 3 3
MANAGEMENT OF THE COMPANY............................................................. 9 8
INVESTMENT ADVISER AND OTHER SERVICES................................................. 11 9
DISTRIBUTION OF THE FUND'S SHARES..................................................... 12 10
COMPUTATION OF NET ASSET VALUE........................................................ 13 13
HOW TO PURCHASE SHARES................................................................ 13 13
TAX STATUS............................................................................ 13 11
BROKERAGE ALLOCATION.................................................................. 15 9
CUSTODY OF PORTFOLIO.................................................................. 16 --
INDEPENDENT AUDITORS.................................................................. 17 --
REPORT OF INDEPENDENT AUDITORS........................................................ 18 --
STATEMENT OF ASSETS AND LIABILITIES................................................... 19 --
APPENDIX.............................................................................. A-1 --
</TABLE>
2
<PAGE>
ORGANIZATION OF THE FUND
The Fund is a separate portfolio of the Company, which is an open-end
management investment company incorporated under the laws of Maryland in
September 1995. The Company's investment adviser is Societe Generale Asset
Management Corp. ("SOGEN A.M. Corp."), a registered investment adviser. The
Company's distributor is Societe Generale Securities Corporation ("SGSC"), a
registered broker-dealer located in New York.
Pursuant to the laws of Maryland, the Company's jurisdiction of
incorporation, the Board of Directors of the Company has adopted By-Laws that do
not require annual meetings of the Fund's shareholders. The absence of a
requirement that the Company hold annual meetings of the Fund's shareholders
reduces its expenses. Meetings of shareholders will continue to be held when
required by the Investment Company Act of 1940 or Maryland law or when called by
the Chairman of the Board of Directors, the President or shareholders owning 10%
of the Fund's outstanding shares. The cost of any such notice and meeting will
be borne by the Fund.
Under the provisions of the Investment Company Act of 1940, a vacancy in
the office of director of the Company may be filled between meetings of the
shareholders of the Company by vote of the directors then in office if,
immediately after filling such vacancy, at least two-thirds of the directors
then holding office have been elected to the office of director by the
shareholders of the Company. In the event that at any time less than a majority
of the directors of the Company holding office at that time were elected by the
shareholders of the Company, the Board of Directors or the Chairman of the Board
shall, within sixty days, cause a meeting of shareholders to be held for the
purpose of electing directors to fill any vacancies in the Board of Directors.
The staff of the Securities and Exchange Commission has advised the Company
that it interprets Section 16(c) of the Investment Company Act of 1940, which
provides a means for dissident shareholders of common-law trusts to communicate
with other shareholders of such trusts and to vote upon the removal of trustees
upon the request in writing by the record holders of not less than 10 percent of
the outstanding shares of the trust, to apply to investment companies, such as
the Fund, that are incorporated under Maryland law.
INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS
INVESTMENT OBJECTIVE.
The Fund seeks long-term growth of capital by investing primarily in
securities of small and medium size non-U.S. companies. The Fund uses the
techniques and invests in the types of securities described below and in the
Prospectus.
INVESTMENT POLICIES, TECHNIQUES AND RISKS.
FOREIGN SECURITIES. The Fund will invest in foreign securities, which may
entail a greater degree of risk (including risks relating to exchange rate
fluctuations, tax provisions, or expropriation of assets) than does investment
in securities of domestic issuers. The Fund may invest in securities of foreign
issuers directly or in the form of American Depository Receipts (ADRs), Global
Depository Receipts (GDRs), European Depository Receipts (EDRs), or other
securities representing underlying shares of foreign issuers. Positions in these
securities are not necessarily denominated in the same currency as the common
stocks into which they may be converted. ADRs are receipts typically issued by
an American bank or trust company evidencing ownership of the underlying
securities. EDRs are European receipts evidencing a similar arrangement. GDRs
are global offerings where two securities are issued simultaneously in two
markets, usually publicly in non-U.S. markets and privately in the U.S. market.
Generally ADRs, in registered form, are designed for use in the U.S. securities
markets, EDRs, in bearer form, are designed for use in European securities
markets. GDR's are designed for use in the U.S. and European securities markets.
The Fund may invest in both "sponsored" and "unsponsored" ADRs. In a sponsored
ADR, the issuer typically pays some or all of the expenses of the depository and
agrees to provide its regular shareholder communications to ADR holders. An
unsponsored ADR is created independently of the issuer of the underlying
security. The ADR holders generally pay the expenses of the depository and do
not have an undertaking from the issuer of the underlying security to furnish
shareholder communications. Issuers of unsponsored ADRs are not obligated to
disclose material information in the United States and, therefore, there may not
be a correlation between such information and the market value of the ADRs. The
Fund does not expect to invest 5% or more of its total assets in unsponsored
ADRs.
With respect to portfolio securities that are issued by foreign issuers or
denominated in foreign currencies, the investment performance of the Fund is
affected by the strength or weakness of the U.S. dollar against these
currencies. For example, if the dollar falls in value relative to the Japanese
yen, the dollar value of a yen-denominated stock held in the portfolio will rise
even though the price of the stock remains unchanged. Conversely, if
3
<PAGE>
the dollar rises in value relative to the yen, the dollar value of the
yen-denominated stock will fall. (See discussion of transaction hedging and
portfolio hedging under "Currency Exchange Transactions.")
Investors should understand and consider carefully the risks involved in
foreign investing. Investing in foreign securities, positions which are
generally denominated in foreign currencies, and utilization of forward foreign
currency exchange contracts involve certain risks and opportunities not
typically associated with investing in U.S. securities. These considerations
include: fluctuations in the rates of exchange between the U.S. dollar and
foreign currencies; possible imposition of exchange control regulations or
currency restrictions that would prevent cash from being brought back to the
United States; less public information with respect to issuers of securities;
less governmental supervision of stock exchanges, securities brokers, and
issuers of securities; different accounting, auditing and financial reporting
standards; different settlement periods and trading practices; less liquidity
and frequently greater price volatility in foreign markets than in the United
States; imposition of foreign taxes; and sometimes less advantageous legal,
operational and financial protections applicable to foreign sub-custodial
arrangements.
Although the Fund seeks to invest in companies and governments of countries
having stable political environments, there is the possibility of expropriation
or confiscatory taxation, seizure or nationalization of foreign bank deposits or
other assets, establishment of exchange controls, the adoption of foreign
government restrictions, or other adverse political, social or diplomatic
developments that could affect investment in these nations.
The countries in which the Fund invests are included in those listed below.
The Fund may not invest in all the countries listed, and it may invest in other
countries as well, when such investments are consistent with the Fund's
investment objective and policies.
<TABLE>
<CAPTION>
MATURE MARKETS EMERGING MARKETS
<S> <C> <C> <C>
Australia Japan Argentina Nigeria
Austria Luxembourg Brazil Pakistan
Belgium Netherlands Chile People's Republic of China
Canada New Zealand Czech Republic Peru
Denmark Norway Ecuador Philippines
Finland Singapore Greece Poland
France Spain Hungary Portugal
Germany Sweden India South Africa
Hong Kong Switzerland Indonesia South Korea
Ireland United Kingdom Israel Sri Lanka
Italy United States Jamaica Taiwan
Jordan Thailand
Kenya Turkey
Malaysia Uruguay
Mexico Venezuela
Morocco Vietnam
</TABLE>
It may not be feasible for the Fund currently to invest in all of these
countries due to restricted access to their securities markets or inability to
implement satisfactory custodial arrangements.
CURRENCY EXCHANGE TRANSACTIONS. A currency exchange transaction may be
conducted either on a spot (I.E., cash) basis at the spot rate for purchasing or
selling currency prevailing in the foreign exchange market or through a forward
currency exchange contract ("Forward Contract"). A Forward Contract is an
agreement to purchase or sell a specified currency at a specified future date
(or within a specified time period) and price set at the time of the contract.
Forward Contracts are usually entered into with banks and broker/dealers, are
not exchange traded and are usually for less than one year, but may be renewed.
Currency exchange transactions may involve currencies of the different
countries in which the Fund may invest, and serve as hedges against possible
variations in the exchange rates between these currencies and the U.S. dollar.
The Fund's currency transactions are limited to transaction hedging and
portfolio hedging involving either specific transactions or portfolio positions.
Transaction hedging is the purchase or sale of a Forward Contract with respect
to specific payables or receivables of the Fund accruing in connection with the
purchase or sale
4
<PAGE>
of portfolio securities. Portfolio hedging is the use of a Forward Contract with
respect to a portfolio security position denominated or quoted in a particular
currency. The Fund may engage in portfolio hedging with respect to the currency
of a particular country in amounts approximating actual or anticipated positions
in securities denominated in that currency.
If the Fund enters into a Forward Contract, the custodian bank will
segregate liquid assets of the Fund having a value equal to the Fund's
commitment under such Forward Contract.
At the maturity of a Forward Contract to deliver a particular currency, the
Fund may either sell the portfolio security related to such contract and make
delivery of the currency, or it may retain the security and either acquire the
currency on the spot market or terminate its contractual obligation to deliver
the currency by purchasing an offsetting contract with the same currency trader
obligating it to purchase on the same maturity date the same amount of the
currency.
It is impossible to forecast with absolute precision the market value of
portfolio securities at the expiration of a Forward Contract. Accordingly, it
may be necessary for the Fund to purchase additional currency on the spot market
(and bear the expense of such purchase) if the market value of the security is
less than the amount of currency the Fund is obligated to deliver, and if a
decision is made to sell the security and make delivery of the currency.
Conversely, it may be necessary to sell on the spot market some of the currency
received upon the sale of the portfolio security if its market value exceeds the
amount of currency the Fund is obligated to deliver.
If the Fund retains the portfolio security and engages in an offsetting
transaction, the Fund will incur a gain or a loss to the extent that there has
been movement in Forward Contract prices. If the Fund engages in an offsetting
transaction, it may subsequently enter into a new Forward Contract to sell the
currency. Should forward prices decline during the period between the date the
Fund enters into a Forward Contract for the sale of a currency and the date it
enters into an offsetting contract for the purchase of the currency, the Fund
will realize a gain to the extent the price of the currency it has agreed to
sell exceeds the price of the currency it has agreed to purchase. Should forward
prices increase, the Fund will suffer a loss to the extent the price of the
currency it has agreed to purchase exceeds the price of the currency it has
agreed to sell. A default on the contract would deprive the Fund of unrealized
profits or force the Fund to cover its commitments for purchase or sale of
currency, if any, at the current market price.
Hedging against a decline in the value of a currency does not eliminate
fluctuations in the prices of portfolio securities or prevent losses if the
prices of such securities decline. Such transactions also preclude the
opportunity for gain if the value of the hedged currency should rise. Moreover,
it may not be possible for the Fund to hedge against a devaluation that is so
generally anticipated that the Fund is not able to contract to sell the currency
at a price above the devaluation level it anticipates. The cost to the Fund of
engaging in currency exchange transactions varies with such factors as the
currency involved, the length of the contract period and prevailing market
conditions. Since currency exchange transactions are usually conducted on a
principal basis, no fees or commissions are involved.
LOWER-RATED DEBT SECURITIES. The Fund may invest in debt securities,
including lower-rated securities (I.E., securities rated BB or lower by Standard
& Poor's Corporation ("S&P") or Ba or lower by Moody's Investors Service, Inc.
("Moody's"), commonly called "junk bonds") and securities that are not rated.
There are no restrictions as to the ratings of debt securities acquired by the
Fund or the portion of the Fund's assets that may be invested in debt securities
in a particular rating category, except that the Fund will not invest more than
20% of its assets in securities rated below investment grade or unrated
securities considered by the investment adviser to be of comparable credit
quality.
Securities rated BBB by S&P or Baa by Moody's (the lowest investment grade
ratings) are considered to be of medium grade and to have speculative
characteristics. Debt securities rated below investment grade are predominantly
speculative with respect to the issuer's capacity to pay interest and repay
principal. Although lower-rated debt and comparable unrated debt securities may
offer higher yields than do higher rated securities, they generally involve
greater volatility of price and risk of principal and income, including the
possibility of default by, or bankruptcy of, the issuers of the securities. In
addition, the markets in which lower-rated and unrated debt securities are
traded are more limited than those in which higher rated securities are traded.
Adverse publicity and investors' perceptions, whether or not based on
fundamental analysis, may decrease the values and liquidity of lower-rated debt
securities, especially in a thinly traded market. During periods of thin trading
in these markets, the spread between bid and asked prices is likely to increase
significantly, and the Fund may have greater difficulty selling its portfolio
securities. See "Computation of Net Asset Value." Analyses of the
creditworthiness of issuers of lower-rated debt securities may be more complex
than for issuers of higher rated securities, and the ability of the Fund to
achieve its investment objective may, to the extent of investment in
5
<PAGE>
lower-rated debt securities, be more dependent upon such creditworthiness
analyses than would be the case if the Fund were investing in higher rated
securities.
Lower-rated debt securities may be more susceptible to real or perceived
adverse economic and competitive industry conditions than investment grade
securities. The prices of lower-rated debt securities have been found to be less
sensitive to interest rate changes than higher rated investments, but more
sensitive to adverse economic downturns or individual corporate developments. A
projection of an economic downturn or of a period of rising interest rates, for
example, could cause a decline in lower-rated debt securities' prices because
the advent of a recession could lessen the ability of a highly-leveraged company
to make principal and interest payments on its debt securities. If the issuer of
lower-rated debt securities defaults, the Fund may incur additional expenses
seeking recovery.
A more complete description of the characteristics of bonds in each rating
category is included in the appendix to this Statement of Additional
Information.
BANK OBLIGATIONS. The Fund may invest in bank obligations, which may
include bank certificates of deposit, time deposits or bankers' acceptances.
Certificates of deposit and time deposits are negotiable certificates issued
against funds deposited in a commercial bank for a definite period of time and
earning a specified return. Bankers' acceptances are negotiable drafts or bills
of exchange, normally drawn by an importer or exporter to pay for specific
merchandise, which are "accepted" by a bank, meaning in effect that the bank
unconditionally agrees to pay the face value of the instrument on maturity.
Investments in these instruments are limited to obligations of domestic banks
(including their foreign branches) and U.S. and foreign branches of foreign
banks having capital surplus and undivided profits in excess of $100 million.
WHEN-ISSUED OR DELAYED-DELIVERY SECURITIES. The Fund may purchase
securities on a "when-issued" or "delayed delivery" basis. Although the payment
and interest terms of these securities are established at the time the Fund
enters into the commitment, the securities may be delivered and paid for a month
or more after the date of purchase, when their value may have changed. The Fund
makes such commitments only with the intention of actually acquiring the
securities, but may sell the securities before settlement date if the investment
adviser deems it advisable for investment reasons.
At the time the Fund enters into a binding obligation to purchase
securities on a when-issued basis, liquid assets of the Fund having a value at
least as great as the purchase price of the securities to be purchased will be
segregated on the books of the Fund and held by the custodian throughout the
period of the obligation. The use of these investment strategies, as well as any
borrowing by the Fund, may increase net asset value fluctuation.
STRUCTURED SECURITIES. The Fund may invest in structured notes and/or
preferred stock, the value of which is linked to currencies, interest rates,
other commodities, indices or other financial indicators. Structured securities
differ from other types of securities in which the Fund may invest in several
respects. For example, the coupon dividend and/or redemption amount at maturity
may be increased or decreased depending on changes in the value of the
underlying instrument.
Investment in structured securities involves certain risks. In addition to
the credit risk of the security's issuer and the normal risks of price changes
in response to changes in interest rates, the redemption amount may decrease as
a result of changes in the price of the underlying instrument. Further, in the
case of certain structured securities, the coupon and/or dividend may be reduced
to zero, and any further declines in the value of the underlying instrument may
then reduce the redemption amount payable on maturity. Finally, structured
securities may be more volatile than the price of the underlying instrument.
ILLIQUID SECURITIES. The Fund may invest up to 15% of its total assets in
illiquid securities, including certain securities that are subject to legal or
contractual restrictions on resale ("restricted securities").
Generally, restricted securities may be sold only in privately negotiated
transactions or in a public offering with respect to which a registration
statement is in effect under the Securities Act of 1933 (the "1933 Act"). Where
registration is required, the Fund may be obligated to pay all or part of the
registration expenses and a considerable period may elapse between the time of
the decision to sell and the time the Fund may be permitted to sell a security
under an effective registration statement. If, during such a period, adverse
market conditions were to develop, the Fund might obtain a less favorable price
than that which prevailed when it decided to sell. Restricted securities will be
priced at fair value as determined in good faith by the Board of Directors. If,
through the appreciation of illiquid securities or the depreciation of liquid
securities, the Fund should be in a position where more than 15% of the value of
its net assets is invested in illiquid assets, including restricted securities,
the Fund will take appropriate steps to protect liquidity.
6
<PAGE>
Notwithstanding the above, the Fund may purchase securities that have been
privately placed but that are eligible for purchase and sale under Rule 144A
under the 1933 Act. That rule permits certain qualified institutional buyers,
such as the Fund, to trade in privately placed securities that have not been
registered for sale under the 1933 Act. SOGEN A.M. Corp., under the supervision
of the Board of Directors of the Fund, will consider whether securities
purchased under Rule 144A are illiquid and thus subject to the Fund's
restriction on investing in illiquid securities. A determination as to whether a
Rule 144A security is liquid or not is a question of fact. In making this
determination, SOGEN A.M. Corp. will consider the trading markets for the
specific security, taking into account the unregistered nature of a Rule 144A
security. In addition, SOGEN A.M. Corp. could consider (1) the frequency of
trades and quotes, (2) the number of dealers and potential purchasers, (3) the
dealer undertakings to make a market, and (4) the nature of the security and of
market place trades (E.G., the time needed to dispose of the security, the
method of soliciting offers and the mechanics of transfer). The liquidity of
Rule 144A securities would be monitored and if, as a result of changed
conditions, it is determined that a Rule 144A security is no longer liquid, the
Fund's holdings of illiquid securities would be reviewed to determine what
steps, if any, are required to assure that the Fund does not invest more than
the maximum percentage of its assets in illiquid securities. Investing in Rule
144A securities could have the effect of increasing the amount of the Fund's
assets invested in illiquid securities if qualified institutional buyers are
unwilling to purchase such securities.
CHANGE OF OBJECTIVE. The investment objective of the Fund is not a
fundamental policy and, accordingly, may be changed by the Board of Directors
without shareholder approval. Shareholders will be notified a minimum of sixty
days in advance of any change in investment objective.
INVESTMENT RESTRICTIONS.
In pursuing its investment objective, the Fund will not:
1. With respect to 75% of the value of the Fund's total assets, invest more
than 5% of its total assets (valued at time of investment) in securities
of any one issuer, except securities issued or guaranteed by the
government of the United States, or any of its agencies or
instrumentalities, or acquire securities of any one issuer which, at the
time of investment, represent more than 10% of the voting securities of
the issuer;
2. Borrow money except that in exceptional circumstances the Fund may
borrow from banks for temporary purposes, provided that such borrowings
shall be unsecured and may not exceed 10% of the Fund's net assets at
the time of the borrowing (including the amount borrowed). The Fund will
not purchase securities while borrowings exceed 5% of its total assets;
3. Invest more than 25% of its assets (valued at time of investment) in
securities of companies in any one industry other than U.S. Government
Securities;
4. Make loans, but this restriction shall not prevent the Fund from (a)
buying a part of an issue of bonds, debentures, or other obligations
that are publicly distributed, or from investing up to an aggregate of
15% of its total assets (taken at market value at the time of each
purchase) in parts of issues of bonds, debentures or other obligations
of a type privately placed with financial institutions or (b) lending
portfolio securities, provided that the Fund may not lend securities if,
as a result, the aggregate value of all securities loaned would exceed
33% of its total assets (taken at market value at the time of such
loan);*
5. Underwrite the distribution of securities of other issuers; however, the
Fund may acquire "restricted" securities which, in the event of a
resale, might be required to be registered under the Securities Act of
1933 (the "1933 Act") on the grounds that the Fund could be regarded as
an underwriter as defined by the 1933 Act with respect to such resale;
6. Purchase and sell real estate or interests in real estate, although it
may invest in marketable securities of enterprises that invest in real
estate or interests in real estate;
7. Make margin purchases of securities, except for the use of such
short-term credits as are needed for clearance of transactions;
8. Sell securities short or maintain a short position, except short sales
against-the-box.
Restrictions 1 through 8 above (except the portions in parentheses) are
"fundamental," which means that they cannot be changed without the vote of a
majority of the outstanding voting securities of the Fund (defined by the
Investment Company Act of 1940 as the lesser of (i) 67% of the Fund's shares
present at a meeting if more than 50% of the shares outstanding are present or
(ii) more than 50% of the Fund's outstanding shares). In
- ----------------
* The Fund has no present intention of lending its portfolio securities.
7
<PAGE>
addition, the Fund is subject to a number of restrictions that may be changed by
the Board of Directors without shareholder approval. Under those non-fundamental
restrictions, the Fund will not:
a. Invest in companies for the purpose of management or the exercise of
control;
b. Invest in oil, gas or other mineral leases or exploration or development
programs, although it may invest in marketable securities of enterprises
engaged in oil, gas or mineral exploration;
c. Invest more than 10% of its net assets (valued at time of investment) in
warrants, valued at the lower of cost or market; provided that warrants
acquired in units or attached to securities shall be deemed to be
without value for purposes of this restriction;
d. Invest more than 5% of its total assets (valued at time of investment)
in securities of issuers with less than three years' operation
(including predecessors);
e. Purchase or retain securities of a company if all of the directors and
officers of the Fund and of its investment adviser who individually own
beneficially more than 0.5% of the securities of the company
collectively own beneficially more than 5% of such securities;
f. Pledge, mortgage or hypothecate its assets, except as may be necessary
in connection with permitted borrowings or in connection with short
sales;
g. Purchase or sell commodities or commodity contracts, except that it may
enter into forward contracts and may sell commodities received by it as
distributions on portfolio investments; and
h. Purchase or sell put and call options on securities or on futures
contracts.
Notwithstanding the foregoing investment restrictions, the Fund may
purchase securities pursuant to the exercise of subscription rights, provided
that such purchase will not result in the Fund's ceasing to be a diversified
investment company. Japanese and European corporations frequently issue
additional capital stock by means of subscription rights offerings to existing
shareholders at a price substantially below the market price of the shares. The
failure to exercise such rights would result in the Fund's interest in the
issuing company being diluted. The market for such rights is not well developed
in all cases and, accordingly, the Fund may not always realize full value on the
sale of rights. The exception applies in cases where the limits set forth in the
investment restrictions would otherwise be exceeded by exercising rights or
would have already been exceeded as a result of fluctuations in the market value
of the Fund's portfolio securities with the result that the Fund would be forced
either to sell securities at a time when it might not otherwise have done so, or
to forego exercising the rights.
TOTAL RETURN. From time to time the Fund will advertise its average annual
total return. Quotations of average annual returns for each Fund will be
expressed in terms of the average annual compounded rates of return of a
hypothetical investment in the Fund over periods of 1, 5 and 10 years (up to the
life of the Fund), calculated pursuant to the following formula: P(1+T)n=ERV
(where P = a hypothetical initial payment of $1000, T = the average annual
return, n = the number of years, and ERV = the ending redeemable value of a
hypothetical $1000 payment made at the beginning of the period). This
calculation assumes deduction of a proportional share of Fund expenses on an
annual basis and assumes reinvestment of all income dividends and capital gains
distributions during the period.
COMPARISON OF PORTFOLIO PERFORMANCE. From time to time the Fund may discuss
in sales literature and advertisements, specific performance grades or rankings
or other information as published by recognized grades or rankings or other
information as published by recognized mutual fund statistical services, such as
Morningstar, Inc. or Lipper Analytical Services, Inc., or by publications of
general interest such as BARRON'S, BUSINESS WEEK, FINANCIAL WORLD, FORBES,
FORTUNE, KIPLINGER'S PERSONAL FINANCE, MONEY, MORNINGSTAR MUTUAL FUNDS, SMART
MONEY, THE WALL STREET JOURNAL or WORTH. Total return information for the Fund
will not be advertised or included in sales literature unless accompanied by
comparable performance information for a separate account to which the Fund
offers its share. Quotations of total return for the Fund will not take into
account charges and deductions against any separate accounts to which the Fund
shares are sold or charges and deductions against the pertinent variable life
insurance and variable annuity contracts ("Variable Contracts"). The Fund's
total return should not be compared with mutual funds that sell their shares
directly to the public since the figures provided do not reflect charges against
the separate accounts or the Variable Contracts.
PORTFOLIO TURNOVER. Although the Fund will not make a practice of
short-term trading, purchases and sales of securities will be made whenever
appropriate, in the investment adviser's view, to achieve the Fund's investment
objective. The rate of portfolio turnover is calculated by dividing the lesser
of the cost of purchases or the proceeds from sales of portfolio securities
(excluding short-term U.S. government obligations and other short-term
investments) for the particular fiscal year by the monthly average of the value
of the portfolio securities
8
<PAGE>
(excluding short-term U.S. government obligations and short-term investments)
owned by the Fund during the particular fiscal year. The rate of portfolio
turnover is not a limiting factor when management deems portfolio changes
appropriate to achieve the Fund's stated objective. However, it is possible
that, under certain circumstances, the Fund may have to limit its short-term
portfolio turnover to permit it to qualify as a "regulated investment company"
under the Internal Revenue Code of 1986, as amended (the "Code").
MANAGEMENT OF THE COMPANY
The business of the Company is managed by its Board of Directors which
elects officers responsible for the day to day operations of the Fund and for
the execution of the policies formulated by the Board of Directors. Several of
the directors and officers of the Fund are directors or officers of SOGEN A.M.
Corp., SGSC or Societe Generale, Paris, France, the indirect owner of one
hundred percent (100%) of the outstanding voting securities of SOGEN A.M. Corp.,
and the owner of fifty percent (50%) of the outstanding voting securities of
SGSC. Jean-Marie Eveillard, the President and a director of the Company, owns
100% of SOGEN A.M. Corp.'s non-voting Series B common stock which represents
19.9% of the total capital of SOGEN A.M. Corp.
The following table sets forth the principal occupation or employment of
the members of the Board of Directors and principal officers of the Company.
Each of the following persons is also a director and/or officer of SoGen
International Fund, Inc. and SoGen Funds, Inc.
<TABLE>
<CAPTION>
POSITION HELD PRINCIPAL OCCUPATION
NAME AND ADDRESS WITH THE COMPANY DURING PAST FIVE (5) YEARS
<S> <C> <C>
Philippe Collas* Chairman of the Board and Head of Asset Management at Societe Generale
17, cours Valmy Director since September 1995. Head of Human Resource
92972 Paris Management at Societe Generale from September H
France 1991 to 1995. Chief Executive Officer of
Societe Generale Capital Markets (London) from
prior to 1991.
Jean-Marie Eveillard*(1) President and Director Director and President or Executive Vice
1221 Avenue of the Americas President of SOGEN A.M. Corp. from prior to
New York, NY 10020 1991.
Fred J. Meyer(2) Director Chief Financial Officer of Omnicom Group Inc.
437 Madison Avenue from prior to 1991. Director of Sandoz
New York, NY 10022 Corporation, SyStemix, Inc. and Zurich-
American Insurance Cos.
Dominique Raillard(2) Director President of Act 2 International (consulting)
15, boulevard Delessert since July 1995. Group Executive Vice
75016 Paris President of Promodes (consumer
France products) -- U.S. Companies Division from
prior to 1991 to 1995.
Nathan Snyder(1)(2) Director Independent Consultant, from prior to 1991.
163 Parish Rd. S.
New Canaan, CT 06840
Philip J. Bafundo* Vice President, Secretary and Secretary and Treasurer, SOGEN A.M. Corp. since
1221 Avenue of the Americas Treasury January 1991. Certified Public Accountant (New
New York, NY 10020 York).
Ignatius Chithelen* Vice President Securities Analyst, SOGEN A.M. Corp. since
1221 Avenue of the Americas October 1993. Reporter at FORBES from prior to
New York, NY 10020 1991 to April 1992. Private investor from May
1992 to September 1993.
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
POSITION HELD PRINCIPAL OCCUPATION
NAME AND ADDRESS WITH THE COMPANY DURING PAST FIVE (5) YEARS
<S> <C> <C>
Catherine A. Shaffer* Vice President First Vice President, SGSC since January 1991.
1221 Avenue of the Americas
New York, NY 10020
Edwin S. Olsen* Vice President Vice President, SGSC from prior to 1991.
1221 Avenue of the Americas
New York, NY 10020
Elizabeth Tobin* Vice President and Assistant Securities Analyst, SOGEN A.M. Corp. from prior
1221 Avenue of the Americas Secetary to 1991.
New York, NY 10020
Charles de Vaulx* Vice President Securities Analyst, SOGEN A.M. Corp. from prior
1221 Avenue of the Americas to 1991.
New York, NY 10020
</TABLE>
* An "interested person" of the Company as defined in the Investment Company
Act of 1940, as amended.
(1) Member of the Executive Committee. When the Board of Directors is not in
session, the Executive Committee may generally exercise most of the powers
of the Board of Directors.
(2) Member of the Audit Committee.
The Company makes no payments to any of its officers for services. However,
currently each of the Company's directors who are not officers or employees of
SOGEN A.M. Corp., SGSC or Societe Generale are paid by the Company an annual fee
of $6,000 and a fee of $1,000 for each meeting of the Company's Board of
Directors and for each meeting of any Committee of the Board that they attend
(other than those held by telephone conference call). Each director is
reimbursed by the Company for any expenses he may incur by reason of attending
such meetings or in connection with services he may perform for the Company.
COMPENSATION OF DIRECTORS AND CERTAIN OFFICERS. The following table sets
forth information regarding compensation of directors by the Company and by the
fund complex of which the Company is a part for the fiscal year ended December
31, 1996. Officers of the Company and directors who are interested persons of
the Company do not receive any compensation from the Company or any other fund
in the fund complex which is a U.S. registered investment company.
In the column headed "Total Compensation From Registrant and Fund Complex
Paid to Directors," the number in parentheses indicates the total number of
boards in the fund complex on which the director serves.
COMPENSATION TABLE
FISCAL YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
TOTAL
COMPENSATION
PENSION OR FROM
RETIREMENT REGISTRANT
BENEFITS ESTIMATED AND FUND
AGGREGATE ACCRUED ANNUAL COMPLEX
COMPENSATION AS PART OF BENEFITS PAID
FROM FUND UPON TO
NAME OF PERSON, POSITION REGISTRANT EXPENSES RETIREMENT DIRECTORS
<S> <C> <C> <C> <C>
Fred J. Meyer*, Director........................................ $4,000 N/A N/A $ 26,000(3)
Jean-Marie Eveillard**, Director and President.................. $ -- N/A N/A $ --
Dominique Raillard*, Director................................... $4,000 N/A N/A $ 21,400(3)
Nathan Snyder*, Director........................................ $5,000 N/A N/A $ 29,000(3)
Philippe Collas**, Director and Chairman........................ $ -- N/A N/A $ --
</TABLE>
* Member of the Audit Committee.
** "Interested person" of the Company as defined in the Act because of the
affiliation with SOGEN A.M. Corp. the Fund's investment adviser.
As of January 31, 1997, the officers and directors of the Company owned
less than 1% of the outstanding shares of capital stock of the Company. The
Company knows of no person who owns beneficially more than 5% of the capital
stock of the Company.
While the Company is a Maryland corporation, certain of its directors and
officers are non-residents of the United States and may have all, or a
substantial part, of their assets located outside the United States. None of the
10
<PAGE>
officers or directors has authorized an agent for service of process in the
United States. As a result, it may be difficult for U.S. investors to effect
service of process upon non-U.S. directors or officers within the United States
or effectively to enforce judgments of courts of the United States predicated
upon civil liabilities of such officers or directors under the federal
securities laws of the United States.
INVESTMENT ADVISER AND OTHER SERVICES
As described in the Company's Prospectus, SOGEN A.M. Corp. is the Company's
investment adviser and, as such, manages the Fund's portfolio, SOGEN A.M. Corp.
was incorporated in Delaware in February 1990, and is indirectly owned by
Societe Generale, one of France's largest banks.
The persons named below are affiliated with the Company and are also
affiliated persons of SOGEN A.M. Corp., SGSC or Societe Generale. The capacity
in which such persons are affiliated with the Fund and SOGEN A.M. Corp., SGSC or
Societe Generale is also indicated.
<TABLE>
<CAPTION>
OFFICE HELD OFFICE HELD WITH SOGEN A.M. CORP.,
NAME WITH THE COMPANY SGSC OR SOCIETE GENERALE
<S> <C> <C>
Philippe Collas Chairman of the Board and Head of Asset Management, Societe Generale. Chairman of
Director the Board and Director, SOGEN A.M. Corp.
Jean-Marie Eveillard President and Director President and Director, SOGEN A.M. Corp.
Philip J. Bafundo Vice President, Secretary and Secretary and Treasurer, SOGEN A.M. Corp.
Treasurer
Ignatius Chithelen Vice President Securities Analyst, SOGEN A.M. Corp.
Catherine A. Shaffer Vice President First Vice President, SGSC
Edwin S. Olsen Vice President Vice President, SGSC
Elizabeth Tobin Vice President and Assistant Securites Analyst, SOGEN A.M. Corp.
Secretary
Charles de Vaulx Vice President Securities Analyst, SOGEN A.M. Corp.
</TABLE>
Under its investment advisory contract with the Company dated as of August
16, 1996, SOGEN A.M. Corp. furnishes the Company with investment advice
consistent with the Fund's stated investment objective. SOGEN A.M. Corp. also
furnishes the Company with office space and certain facilities required for the
business of the Fund, and statistical and research data, and pays any expenses
of the Company's officers. In return, the Fund pays SOGEN A.M. Corp. a monthly
fee at the annual rate of 0.75% of the average daily value of the Fund's net
assets. This annual fee rate is higher than the rate of fees paid by most U.S.
mutual funds. The Company believes, however, that the advisory fee rate is not
higher than the rate of fees paid by most other mutual funds that invest
significantly in foreign equity securities.
To the extent that the Fund's total expenses, excluding taxes, brokerage
expenses, interest and extraordinary expenses, in any fiscal year exceed the
permissible limits applicable to the Fund in any state in which its shares are
then qualified for sale, SOGEN A.M. Corp. will waive its fees and, if necessary
to meet the limit, reimburse the Fund. The current most stringent limit imposed
by a state is equal to the sum of (a) 2.5% of the first $30,000,000 of the
Fund's daily average net asset value, (b) 2.0% of the next $70,000,000 of the
Fund's daily average net asset value and (c) 1.5% of the excess Fund's daily
average net asset value in excess of $100,000,000. However, expenses
attributable to legal, audit and custodian fees associated with foreign
investments and to certain other payments are excluded from the calculation of
expenses for purposes of the limitation pursuant to waivers or orders granted to
the Fund by relevant state securities authorities.
Under the investment advisory contract between the Company and SOGEN A.M.
Corp., the investment adviser is responsible for the management of the Fund's
portfolio and constantly reviews its holdings in the light of its own research
analyses and those of other relevant sources. Reports of portfolio transactions
are given regularly to the directors of the Company, who review the Fund's
portfolio at meetings held four times a year.
Under the terms of the investment advisory agreement, the Company and each
of its series will discontinue the use of the term "SoGen" in their names or the
use of any marks or symbols owned by the investment adviser if the investment
adviser ceases to act as the Company's investment adviser or if the investment
adviser so requests.
As of the date of this Statement of Additional Information, SOGEN A.M.
Corp. owned of record and beneficially 10,000 shares of the Fund.
11
<PAGE>
DISTRIBUTION OF THE FUND'S SHARES
The Company and SGSC have entered into a distribution contract pursuant to
which SGSC offers, as agent, share of the Fund continuously to the separate
accounts of insurance companies. SGSC is not obligated thereunder to sell any
specific amount of Fund shares.
The Fund has adopted a Distribution Plan and Agreement (the "Plan")
pursuant to Rule 12b-1 of the Investment Company Act of 1940. Under the Plan,
the Fund may pay SGSC a quarterly distribution related fee at an annual rate not
to exceed 0.25% of the average daily value of the Fund's net assets. Under the
terms of the Plan, the Fund is authorized to make payments to SGSC for
remittance to an insurance company that is the issuer of a Variable Contract
invested in shares of the Fund in order to pay or reimburse such insurance
company for distribution and shareholder servicing-related expenses incurred or
paid by such insurance company. Distribution expenses incurred in any fiscal
year, which are not reimbursed from payment under the Plan accrued in such
fiscal year, will not be carried over for payment under the Plan in any
subsequent year.
Expenses payable pursuant to this Plan may include, but are not limited to,
expenses relating to the preparation, printing and distribution of prospectuses
to existing and prospective Variable Contract owners; development, preparation,
printing and mailing of Fund advertisements; expenses relating to holding
seminars and sales meetings designed to promote the distribution of Fund shares;
training sales personnel regarding the Fund; compensating sales personnel in
connection with the allocation of cash values and premiums of the Variable
Contracts to the Fund; and financing any other activity that the Fund's Board of
Directors determines is primarily intended to result in the sale of shares.
The Plan is deemed reasonably likely to benefit the Fund and the Variable
Contract owners in at least one of several ways. Specifically, it is expected
that the insurance companies that issue Variable Contracts invested in shares of
the Fund would have less incentive to educate Variable Contract owners and sales
people concerning the Fund if expenses associated with such services were not
paid by the Fund. In addition, the payment of distribution fees to insurers
should motivate them to maintain and enhance the level of services relating to
the Fund provided to Variable Contract owners, which would, of course, benefit
such Variable Contract owners. The adoption of the Plan would also likely help
to maintain and may lead to an increase in net assets given the foregoing
incentives. Further, it is anticipated that Plan fees may be used to educate
potential and existing owners of Variable Contracts concerning the Fund, the
securities markets and related risks.
The Plan provides that it will continue in effect only so long as its
continuance is approved at least annually by the directors of the Company and by
the directors who are not interested persons of the Company and who have no
direct or indirect financial interest in the operation of the Plan or in any
agreements relating to the Plan (the "Independent Directors"). In the case of an
agreement relating to the Plan, the Plan provides that such agreement may be
terminated, without penalty, by a vote of a majority of the Independent
Directors, or by a majority of the Fund's outstanding voting securities on 60
days' written notice to SGSC, and provides further that such agreement will
automatically terminate in the event of its assignment. The Plan also states
that it may not be amended to increase the maximum amount of the payments
thereunder without the approval of a majority of the outstanding voting
securities (as defined on page 7) of the Fund. No material amendment to the Plan
will, in any event, be effective unless it is approved by a vote of the
directors and the Independent Directors of the Company.
When the Company seeks an Independent Director to fill a vacancy on the
board or as an addition to the board or as a nominee for election by
stockholders, the selection or nomination of the Independent Director is, under
resolutions adopted by the directors, contemporaneously with their adoption of
the Plan, committed to the discretion of the Independent Directors.
The expenses incurred by the Company in connection with its organization,
its registration with the Securities and Exchange Commission and any states
where registered, and the public offering of its shares were advanced on behalf
of the Company by SOGEN A.M. Corp. These organizational expenses will be
deferred and amortized by the Company over a period of 60 months.
The investment advisory contract will continue in effect until August 16,
1997, and thereafter from year to year so long as the continuance of each
contract is specifically approved at least annually by the Board of Directors or
by a vote of a majority of the outstanding voting securities of the Fund (and
any other series of the Company with shares then outstanding) (as defined on
page 7). In addition, the terms of the contract and the renewal thereof must be
approved annually by the vote of a majority of the directors who are not
"interested persons" (as defined in the Investment Company Act of 1940) of SOGEN
A.M. Corp., SGSC or the Company. The investment advisory contract will terminate
automatically in the event of its assignment (as defined in the Investment
Company Act of 1940) and may be terminated, without penalty, on sixty days'
written notice at the
12
<PAGE>
option of either party thereto or by a vote of a majority of the outstanding
voting securities of the Fund (or any other series of the Company with shares
then outstanding).
COMPUTATION OF NET ASSET VALUE
The Fund computes its net asset value once daily as of the close of trading
on each day the New York Stock Exchange is open for trading. The Exchange is
closed on the following days: New Year's Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
The net asset value per share is computed by dividing the total current value of
the assets of the Fund, less its liabilities, by the total number of shares
outstanding at the time of such computation.
A portfolio security, other than a bond, which is traded on a U.S. national
securities exchange or a securities exchange abroad is normally valued at the
price of the last sale on the exchange as of the close of business on the date
on which assets are valued. If there are no sales on such date, such portfolio
securities will be valued at the mean between the closing bid and asked prices.
Securities, other than bonds, traded in the over-the-counter market are valued
at the mean between the last bid and asked prices prior to the time of
valuation, except if such unlisted security is among the NASDAQ designated "Tier
1" securities in which case it is valued at its last sale price. All bonds,
whether listed on an exchange or traded in the over-the-counter market, for
which market quotations are readily available are valued at the mean between the
last bid and asked prices received from dealers in the over-the-counter market
in the United States or abroad, except that when no asked price is available,
bonds are valued at the last bid price alone. Short-term investments maturing in
sixty days or less are valued at cost plus interest earned, which approximates
value. Securities for which current market quotations are not readily available
are valued at fair value as determined in good faith by the Company's Board of
Directors.
HOW TO PURCHASE SHARES
The methods of buying and selling shares and the sales charges applicable
to purchases of shares of the Fund are described in the prospectus of the
pertinent separate account.
TAX STATUS
The Fund intends to qualify annually as a "regulated investment company"
under the Code. In order to qualify as a regulated investment company for a
taxable year, the Fund must, among other things, (a) derive at least 90% of its
gross income from dividends, interest, payments with respect to securities
loans, gains from the sale or other disposition of stock, securities or foreign
currencies and other income derived with respect to the business of investing in
such stock, securities or currencies; (b) derive less than 30% of its gross
income from the sale or other disposition of stock or securities and options,
futures, forward contracts and foreign currencies held for less than three
months (excluding gains from certain hedging transactions and from foreign
currencies (and options, futures and forward contracts on foreign currencies)
that are directly related to the Fund's principal business of investing in such
stocks or securities or options or futures thereon); (c) diversify its holdings
so that, at the end of each fiscal quarter, (i) at least 50% of the market value
of its assets is represented by cash, cash items, U.S. government securities,
securities of other regulated investment companies and other securities, with
such other securities of any one issuer qualifying only if the Fund's investment
is limited to an amount not greater than 5% of the Fund's assets or 10% of the
voting securities of the issuer, and (ii) not more than 25% of the value of its
assets is invested in the securities of any one issuer (other than U.S.
government securities or securities of other regulated investment companies);
and (d) distribute at least 90% of its investment company taxable income (which
includes, among other items, dividends, interest and net short-term capital
gains in excess of net long-term capital losses) for the year.
As a regulated investment company, the Fund generally will not be subject
to U.S. federal income tax on its investment company taxable income and net
capital gains (the excess of net long-term capital gains over net short-term
capital losses), if any, that it distributes to shareholders. The Fund intends
to distribute to its shareholders (the separate accounts and other qualified
investors), at least annually, substantially all of its investment company
taxable income and net capital gains. Amounts not distributed on a timely basis
in accordance with a calendar year distribution requirement are subject to a
non-deductible 4% excise tax. To prevent imposition of the excise tax, the Fund
must distribute during each calendar year an amount equal to the sum of (1) at
least 98% of its ordinary income (not taking into account any capital gains or
losses) for the calendar year, (2) at least 98% of its capital gains in excess
of its capital losses (adjusted for certain ordinary losses) for the one-year
period ending on October 31 of the calendar year, and (3) any ordinary income
and capital gains for previous years that were not distributed during those
years. A distribution will be treated as paid on December 31 of the current
calendar year if it is declared by the Fund in October, November or December
with a record date in such a month and paid
13
<PAGE>
by the Fund during January of the following calendar year. Such distributions
will be taxable to shareholders in the calendar year in which the distributions
are declared, rather than the calendar year in which the distributions are
received. To prevent application of the excise tax, the Fund intends to make its
distributions in accordance with the calendar year distribution requirement. In
some circumstances, the Fund may qualify for an exception to the excise tax
distribution requirements, but the Fund has no obligation to seek to maintain
that exception.
The Treasury Department has indicated in published statements that it would
issue future regulations or rulings addressing the circumstances in which a
Variable Contract owner's control of the investments of a separate account may
cause the contract owner, rather than the insurance company, to be treated as
the owner of the assets held by the separate account. If the contract owner is
considered the owner of the securities underlying the separate account, income
and gains produced by those securities would be included currently in the
contract owner's gross income. It is not known what standards will be set forth
in the regulations or rulings.
In the event that the rules or regulations are adopted there can be no
assurance that the Fund will be able to operate as currently described in the
Prospectus, or that the Fund will not have to change its investment objective or
investment policies.
Investments by the Fund in zero coupon securities will result in income to
the Fund equal to a portion of the excess of the face value of the securities
over their issue price (the "original issue discount") each year that the
securities are held, even though the Fund receives no interest payments. This
income is included in determining the amount of income which the Fund must
distribute in order to meet various distribution requirements.
Certain foreign currency contracts in which the Fund may invest are
"section 1256 contracts." Gains or losses on section 1256 contracts generally
are considered 60% long-term and 40% short-term capital gains or losses;
however, foreign currency gains or losses (as discussed below) arising from
certain section 1256 contracts may be treated as ordinary income or loss. Also,
section 1256 contracts held by the Fund at the end of each taxable year (and,
generally, for purposes of the 4% excise tax, on October 31 of each year) are
"marked-to-market" (that is, treated as sold at fair market value), resulting in
unrealized gains or losses being treated as though they were realized.
Generally, the hedging transactions undertaken by the Fund may result in
"straddles" for U.S. federal income tax purposes. The straddle rules may affect
the character of gains (or losses) realized by the Fund. In addition, losses
realized by the Fund on positions that are part of a straddle may be deferred
under the straddle rules, rather than being taken into account in calculating
the taxable income for the taxable year in which the losses are realized.
Because only a few regulations implementing the straddle rules have been
promulgated, the tax consequences to the Fund of engaging in hedging
transactions are not entirely clear. Hedging transactions may increase the
amount of short-term capital gains realized by the Fund which is taxed as
ordinary income when distributed to shareholders.
The Fund may make one or more of the elections available under the Code
which are applicable to straddles. If the Fund makes any of the elections, the
amount, character and timing of the recognition of gains or losses from the
affected straddle positions will be determined under rules that vary according
to the election(s) made. The rules applicable under certain of the elections may
operate to accelerate the recognition of gains or losses from the affected
straddle positions.
Because the straddle rules may affect the character of gains or losses,
defer losses and/or accelerate the recognition of gain or losses from the
affected straddle positions, the amount which may be distributed to
shareholders, and which will be taxed to them as ordinary income or long-term
capital gains, may be increased or decreased as compared to a fund that did not
engage in such hedging transactions.
The 30% limitation and the diversification requirements applicable to the
Fund's assets may limit the extent to which the Fund will be able to engage in
transactions in foreign currency contracts and to make certain other
investments.
Under the Code, gains or losses attributable to fluctuations in exchange
rates which occur between the time the Fund accrues receivables or liabilities
denominated in a foreign currency and the time the Fund actually collects such
receivables, or pays such liabilities, generally are treated as ordinary income
or ordinary loss. Similarly, on disposition of debt securities denominated in a
foreign currency and on disposition of certain foreign currency contracts, gains
or losses attributable to fluctuations in the value of foreign currency between
the date of acquisition of the security or contract and the date of disposition
also are treated as ordinary gain or loss. These gains or losses, referred to
under the Code as "section 988" gains or losses, may increase or decrease the
amount of the Fund's investment company taxable income to be distributed to its
shareholders as ordinary income.
14
<PAGE>
The Fund may be subject to foreign withholding taxes on income and gains
derived from their investments outside the United States. Such taxes would
reduce the yield on the Fund's investments. Tax treaties between certain
countries and the United States may reduce or eliminate such taxes. If more than
50% of the value of the Fund's total assets at the close of any taxable year
consists of stocks or securities of foreign corporations, the Fund may elect,
for U.S. federal income tax purposes, to treat any foreign country income or
withholding taxes paid by the Fund that can be treated as income taxes under
U.S. income tax principles, as paid by its shareholders. For any year that the
Fund makes such an election, each of its shareholders will be required to
include in his income (in addition to taxable dividends actually received) his
allocable share of such taxes paid by the Fund, and will be entitled, subject to
certain limitations, to credit his portion of these foreign taxes against his
U.S. federal income tax due, if any, or to deduct it (as an itemized deduction)
from his U.S. taxable income, if any.
Generally, a credit for foreign taxes is subject to the limitation that it
may not exceed the shareholder's U.S. tax attributable to his foreign source
taxable income. With respect to the Fund, if the pass through election described
above is made, the source of the Fund's income flows through to its
shareholders. Certain gains from the sale of securities and certain currency
fluctuation gains will not be treated as foreign source taxable income. In
addition, this foreign tax credit limitation must be applied separately to
certain categories of foreign source income, one of which is foreign source
"passive income." For this purpose, foreign "passive income" includes dividends,
interest, capital gains and certain foreign currency gains. As a consequence,
certain shareholders may not be able to claim a foreign tax credit for the full
amount of their proportionate share of foreign taxes paid by the Fund. The
foreign tax credit can be used to offset only 90% of the alternative minimum tax
(as computed under the Code for purposes of this limitation) imposed on
corporations and individuals. If the Fund is not eligible to make the
pass-through election described above, the foreign taxes it pays will reduce its
income, and distributions by the Fund will be treated as U.S. source income.
Each shareholder will be notified within 60 days after the close of the Fund's
taxable year whether, pursuant to the election described above, the foreign
taxes paid by the Fund will be treated as paid by its shareholders for that year
and, if so, such notification will designate (i) such shareholder's portion of
the foreign taxes paid to such country and (ii) the portion of the Fund's
dividends and distributions that represents income derived from sources within
such country.
Investments by the Fund in stock of certain foreign corporations which
generate largely passive investment-type income, or which hold a significant
percentage of assets which generate such income (referred to as "passive foreign
investment companies" or "PFICs"), are subject to special tax rules designed to
prevent deferral of U.S. taxation of the Fund's share of the PFIC's earnings. In
the absence of certain elections to report these earnings on a current basis,
regardless of whether the Fund actually receives any distributions from the
PFIC, the Fund would be required to report certain "excess distributions" from,
and any gain from the disposition of stock of the PFIC, as ordinary income. This
ordinary income would be allocated ratably to the Fund's holding period for the
stock. Any amounts allocated to prior taxable years would be taxable to the Fund
at the highest rate of tax applicable in that year, increased by an interest
charge determined as though the amounts were underpayments of tax. Amounts
allocated to the year of the distribution or disposition would be included in
the Fund's net investment income for that year and, to the extent distributed as
a dividend to the Fund's shareholders, would not be taxable to the Fund.
BROKERAGE ALLOCATION
SOGEN A.M. Corp. is responsible for selecting members of securities
exchanges, brokers and dealers (such members, brokers and dealers being
hereinafter referred to as "brokers") for the execution of the Fund's portfolio
transactions and, when applicable, the negotiation of commissions in connection
therewith.
Purchase and sale orders are usually placed with brokers who are selected
by SOGEN A.M. Corp. as being able to achieve "best execution" of such orders.
"Best execution" means prompt and reliable execution at the most favorable
securities price, taking into account the other considerations as here-in-after
set forth. The determination of what may constitute best execution of a
securities transaction by a broker involves a number of considerations,
including, without limitation, the overall direct net economic result to the
Fund (involving both price paid or received and any commissions and other costs
paid), the efficiency with which the transaction is effected, the ability to
effect the transaction at all where a large block is involved, availability of
the broker to stand ready to execute possibly difficult transactions in the
future, and the financial strength and stability of the broker. Such
considerations are judgmental and are weighed by SOGEN A.M. Corp. in determining
the overall reasonableness of brokerage commissions. While there is no
commitment or understanding to do so, subject to its policy of obtaining best
execution, the Fund may use affiliates of Societe Generale as brokers in the
purchase and sale of securities. SGSC may not, acting as principal, sell any
security or other property to, or purchase any security or other property from,
the Fund, except to the extent that such purchase or sale may be permitted by an
order, rule or regulation of the Securities and Exchange Commission.
15
<PAGE>
SOGEN A.M. Corp. is authorized to allocate brokerage and principal business
to brokers other than SGSC (but not excluding other affiliates of Societe
Generale) who have provided brokerage and research services, as such services
are defined in Section 28(e) of the Securities Exchange Act of 1934, as amended
(the "1934 Act"), for the Fund and/or other accounts, if any, for which SOGEN
A.M. Corp. exercises investment discretion (as defined in Section 3(a)(35) of
the 1934 Act) and, as to transactions as to which fixed minimum commission rates
are not applicable, to cause the Fund to pay a commission for effecting a
securities transaction in excess of the amount another broker would have charged
for effecting the transaction, if SOGEN A.M. Corp. in making the selection in
question determines in good faith that such amount of commission is reasonable
in relation to the value of the brokerage and research services provided by such
broker, viewed in terms of either that particular transaction or of SOGEN A.M.
Corp.'s overall responsibilities with respect to the Fund and the other accounts
as to which it exercises investment discretion. In reaching such determination,
SOGEN A.M. Corp. is not required to place or attempt to place a specific dollar
value on the research or execution services of a broker or on the portion of any
commission reflecting either of said services. In demonstrating that such
determinations were made in good faith, SOGEN A.M. Corp. must be prepared to
show that all commissions were allocated and paid for purposes contemplated by
the Fund's brokerage policy; that the research services provide lawful and
appropriate assistance to SOGEN A.M. Corp. in the performance of its investment
decision-making responsibilities; and that the commissions paid were within a
reasonable range. The determination that commissions were within a reasonable
range will be based on any available information as to the level of commissions
known to be charged by other brokers on comparable transactions, but there will
be taken into account the Fund's policies that (i) obtaining a low commission is
deemed secondary to obtaining a favorable securities price, since it is
recognized that usually it is more beneficial to the Fund to obtain a favorable
price than to pay the lowest commission, and (ii) the quality, comprehensiveness
and frequency of research studies which are provided for SOGEN A.M. Corp. are
useful to SOGEN A.M. Corp. in performing its services under the investment
advisory contract with the Fund. Research services provided by brokers to SOGEN
A.M. Corp. are considered to be in addition to, and not in lieu of, services
required to be performed by SOGEN A.M. Corp. under such investment advisory
contract. Research services provided by brokers include written reports,
responses to specific inquiries and interviews with analysts. These services
also include invitations to meetings arranged by such brokers with the
management of companies in the Fund's portfolios or in which the Fund may
invest.
Consistent with the Rules of Fair Practice of the National Association of
Securities Dealers, Inc. and subject to obtaining prices at least as favorable
as those provided by other qualified brokers, SOGEN A.M. Corp. may consider
sales of shares of the Fund as a factor in the selection of brokers to execute
portfolio transactions.
The Fund has been advised by SOGEN A.M. Corp. that it may combine brokerage
orders for the Fund with orders from its other clients when placing such orders
with brokers for execution. In the event orders are placed for the Fund and one
or more other clients for the purchase or sale of the same security, the Fund
and each such other client may share in each transaction in the proportion that
each customer's order bears to the aggregate of such orders. The Fund's orders
are accorded priority over those received from SOGEN A.M. Corp. for its own
account or from any of its officers, directors or employees.
While SOGEN A.M. Corp. is primarily responsible for the allocation of the
Fund's portfolio transactions to brokers, its polices and practices in this
regard must be consistent with the foregoing and are periodically reviewed by
the Company's Board of Directors. In this connection, the directors periodically
review and discuss with SOGEN A.M. Corp. the commissions paid by the Fund and,
in transactions where the Fund pays commissions which are in excess of the
commissions other brokers would have charged, SOGEN A.M. Corp.'s determinations
that such higher commissions are reasonable in relation to the value of the
brokerage and research services.
CUSTODY OF PORTFOLIO
Portfolio securities of the Fund are held pursuant to a custodian agreement
between the Company and Investors Fiduciary Trust Company, 127 West 10th Street,
Kansas City, MO 64105. Certain of such securities may be deposited in the
book-entry system operated by the Federal Reserve System or with the Depository
Trust Company. The Company's sub-custodian, State Street Bank and Trust, holds
domestic securities issued in physical form. Foreign securities may be held by
certain foreign sub-custodians which are participants in the Global Custody
Division of The Chase Manhattan Bank, N.A. ("Chase"), Woolgate House, Coleman
Street, London, England, EC2P 2HD and in certain foreign branches of Chase.
16
<PAGE>
INDEPENDENT AUDITORS
The Company's independent auditors are KPMG Peat Marwick LLP, Certified
Public Accountants, 345 Park Avenue, New York, NY 10154. KPMG Peat Marwick LLP
audits the Fund's annual financial statements and renders its report
thereon, which will be included in the Annual Report to Shareholders.
17
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Shareholders and Board of Trustees of
SoGen Variable Funds, Inc:
We have audited the accompanying statement of assets and liabilities of
SoGen Variable Funds, Inc. as of December 31, 1996. This financial statement is
the responsibility of the Fund's management. Our responsibility is to express an
opinion on this statement of assets and liabilities based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of cash by correspondence with the custodian. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statement referred to above presents fairly,
in all material respects, the financial position of the SoGen Variable Funds,
Inc. as of December 31, 1996, in conformity with generally accepted accounting
principles.
/s/ KPMG PEAT MARWICK LLP
KPMG PEAT MARWICK LLP
New York, New York
January 24, 1997
18
<PAGE>
SOGEN VARIABLE FUNDS, INC.
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
<TABLE>
<CAPTION>
SOGEN OVERSEAS
VARIABLE FUND
<S> <C>
ASSETS
Cash..................................................................... $100,000
Deferred organization and offering costs (Note 1)........................ 72,854
Prepaid expenses (Note 2)................................................ 23,472
Total assets........................................................ 196,326
LIABILITIES
Organization and offering costs payable (Note 1)......................... $ 72,854
Accrued expenses (Note 2)................................................ 23,472
Total liabilities................................................... 96,326
NET ASSETS (Applicable to 10,000 shares of common stock issued and
outstanding, $0.001 par value; 1,000,000,000 shares authorized).......... $100,000
Calculation of Maximum Offering Price
Net asset value and redemption price per share........................... $ 10.00
Maximum sales charge..................................................... None
Maximum offering price................................................... $ 10.00
</TABLE>
NOTE 1. ORGANIZATION
SoGen Variable Funds, Inc. (the "Company") is a newly-organized, open-end,
diversified management investment company incorporated under the laws of
Maryland in September 1995. The Company consists of one portfolio, SoGen
Overseas Variable Fund (the "Fund"). The Company has had no operations other
than the sale of 10,000 shares of common stock of the Fund to Societe Generale
Asset Management Corp. ("SOGEN A.M. Corp.") on August 9, 1996. Costs incurred
and to be incurred in connection with the organization and initial registration
of the Fund have been paid initially by SOGEN A.M. Corp. The Fund will reimburse
SOGEN A.M. Corp. for such costs, which will be deferred and amortized by the
Fund over the period of benefit, not to exceed 60 months from the date the Fund
commences investment operations. If any of the initial 10,000 shares of the
Company are redeemed by a holder thereof during such amortization period, the
proceeds will be reduced by the unamortized organization expenses in the same
ratio as the number of initial shares being redeemed bears to the number of
initial shares outstanding at the time of redemption.
NOTE 2. PREPAID EXPENSES
Other costs associated with the start-up of the Fund have been paid
initially by SOGEN A.M. Corp. The Fund will reimburse SOGEN A.M. Corp. for such
costs, which will be deferred and amortized by the Fund over the period of
benefit, not to exceed 12 months from the date the Fund commences investment
operations.
NOTE 3. INVESTMENT ADVISORY AGREEMENT AND DISTRIBUTION PLAN AND AGREEMENT
Under the terms of an investment advisory agreement, the Fund pays SOGEN
A.M. Corp. a monthly advisory fee at an annual rate of 0.75% of the average
daily net assets of the Fund.
The Company has entered into a Distribution Plan and Agreement (the
"Agreement") with Societe Generale Securities Corporation (the "Principal
Underwriter"), under which the Fund may pay a distribution related fee to the
Principal Underwriter at an annual rate of up to 0.25% of the Fund's average
daily net assets. The Agreement provides that the Principal Underwriter will use
amounts payable by the Fund under the Agreement, in their entirety for payments
to insurance companies which are the issuers of variable contracts invested in
shares of the Fund, in order to pay or reimburse such insurance companies for
distribution and shareholder servicing-related expenses incurred or paid by such
insurance companies.
The Principal Underwriter, SOGEN A.M. Corp. and the Company are affiliates
of Societe Generale.
NOTE 4. INCOME TAXES
No provision has been made for United States federal income taxes since it
is the intention of the Company to comply with the provisions of the Internal
Revenue Code for a regulated investment company.
19
<PAGE>
APPENDIX
RATINGS OF INVESTMENT SECURITIES
The rating of a rating service represents the service's opinion as to the
credit quality of the security being rated. However, the ratings are general and
are not absolute standards of quality or guarantees as to the creditworthiness
of an issuer. Consequently, the Company's investment adviser believes that the
quality of debt securities in which the Fund invests should be continuously
reviewed. A rating is not a recommendation to purchase, sell or hold a security,
because it does not take into account market value or suitability for a
particular investor. When a security has received a rating from more than one
service, each rating should be evaluated independently. Ratings are based on
current information furnished by the issuer or obtained by the ratings services
from other sources which they consider reliable. Ratings may be changed,
suspended or withdrawn as a result of changes in or unavailability of such
information, or for other reasons.
The following is a description of the characteristics of ratings used by
Moody's Investors Service, Inc. ("Moody's") and Standard & Poor's Corporation
("S&P").
MOODY'S RATINGS.
Aaa -- Bonds rated Aaa are judged to be the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt-edge."
Interest payments are protected by a large or by an exceptionally stable margin
and principal is secure. Although 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 bonds.
Aa -- Bonds rated Aa are judged to be 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 bonds 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 Aaa bonds.
A -- Bonds 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 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.
Ba -- Bonds 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 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 rated Caa are of poor standing. Such bonds may be in default
or there may be present elements of danger with respect to principal or
interest.
Ca -- Bonds rated Ca represent obligations which are speculative in a high
degree. Such bonds are often in default or have other marked shortcomings.
S&P RATINGS.
AAA -- Bonds rated AAA have the highest rating. Capacity to pay principal
and interest is extremely strong.
AA -- Bonds rated AA have a very strong capacity to pay principal and
interest and differ from AAA bonds only in small degree.
A -- Bonds rated A have a strong capacity to pay principal and interest,
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than bonds in higher rated categories.
BBB -- Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit protection parameters,
adverse economic conditions or changing circumstances
A-1
<PAGE>
are more likely to lead to a weakened capacity to pay principal and interest for
bonds in this capacity than for bonds in higher rated categories.
BB -- B -- CCC -- CC -- Bonds rated BB, B, CCC and CC are regarded, on
balance, as predominantly speculative with respect to the issuer's capacity to
pay interest and repay principal in accordance with the terms of the obligation.
BB indicates the lowest degree of speculation among such bonds and CC the
highest degree of speculation. Although such bonds will likely have some quality
and protective characteristics, these are outweighed by large uncertainties or
major risk exposures to adverse conditions.
A-2
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(A) FINANCIAL STATEMENTS
1. Included in the Prospectus:
None.
2. Included in the Statement of Additional Information:
Report of Independent Auditors.
Statement of Assets and Liabilities at December 31, 1996.
Notes to Financial Statement, December 31, 1996.
3. Included in Part C of the Registration Statement:
None.
(B) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
<S> <C>
1 -- Articles of Incorporation of the Registrant.*
2 -- By-Laws of the Registrant.*
4 -- Specimen Certificates representing shares of Common Stock ($0.001 par value).*
5 -- Investment Advisory Contract between the Registrant and Societe Generale Asset Management
Corp. ("SOGEN A.M. Corp.").*
6 (a) -- Distribution Agreement between the Registrant and Societe Generale Securities Corporation
("SGSC").*
6 (b) -- Form of 12b-1 Servicing Agreement Between SGSC and A Life Insurance Company.
8 (a) -- Custody, Investment Accounting and Transfer Agency Agreement between the Registrant and
Investors Fiduciary Trust Company.*
8 (b) -- Global Custody Agreement between the Registrant and The Chase Manhattan Bank, N.A.*
8 (c) -- Form of Subcustodial Agreement.*
9 -- Participation Agreement among the Registrant, A Life Insurance Company and SGSC.*
10 -- Opinion and Consent of Dechert Price & Rhoads.*
11 -- Consent of KPMG Peat Marwick LLP.
13 -- Investment Representation letter of SOGEN A.M. Corp.*
15 -- Rule 12b-1 Distribution Plan and Agreement Between the Registrant and SGSC.*
19 -- Power of Attorney of Messrs. Eveillard*, Collas*, Meyer*, Raillard,* Snyder.*
</TABLE>
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
None. The Registrant is a recently organized corporation and SOGEN A.M.
Corp. owns 100% of the issued and outstanding shares of the common stock of the
Registrant as of the date of this filing.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
The following information is furnished as of February 28, 1997.
<TABLE>
<CAPTION>
TITLE OF CLASS NUMBER OF RECORD HOLDERS
<S> <C>
Shares of Beneficial One
Interest, Par Value
$0.001 per share
</TABLE>
* Previously filed as an Exhibit to the Registration Statement.
C-1
<PAGE>
ITEM 27. INDEMNIFICATION
Registrant is incorporated under the laws of the State of Maryland and is
subject to Section 2-418 of the Corporations and Associations Article of the
General Corporation Law of the State of Maryland controlling the indemnification
of directors and officers. Since Registrant has its executive offices in the
State of New York, and is qualified as a foreign corporation doing business in
such State, the persons covered by the foregoing statute may also be entitled to
and subject to the limitations of the indemnification provisions of Section
721-726 of the New York Business Corporation Law.
The general effect of these statutes is to protect directors, officers,
employees and agents of the Registrant against legal liability and expenses
incurred by reason of their positions with the Registrant. The statutes provide
for indemnification for liability for proceedings not brought on behalf of the
corporation and for those brought on behalf of the corporation, and in each case
place conditions under which indemnification will be permitted, including
requirements that the indemnified person acted in good faith. Under certain
conditions, payment of expenses in advance of final disposition may be
permitted. The By-Laws of the Registrant make the indemnification of its
directors, officers, employees and agents mandatory subject only to the
conditions and limitations imposed by the above-mentioned Section 2-418 of
Maryland Law and by the provisions of Section 17(h) of the Investment Company
Act of 1940 as interpreted and required to be implemented by SEC Release No.
IC-11330 of September 4, 1980.
In referring in its By-Laws to, and making indemnification of directors
subject to the conditions and limitations of, both Section 2-418 of the Maryland
Law and Section 17(h) of the Investment Company Act of 1940 (the "1940 Act"),
the Registrant intends that conditions and limitations on the extent of the
indemnification of directors and officers imposed by the provisions of either
Section 2-418 or Section 17(h) shall apply and that any inconsistency between
the two will be resolved by applying the provisions of said Section 17(h) if the
condition or limitation imposed by Section 17(h) is the more stringent. In
referring in its By-Laws to SEC Release No. IC-11330 as the source for
interpretation and implementation of said Section 17(h), the Registrant
understands that it would be required under its By-Laws to use reasonable and
fair means in determining whether indemnification of a director or officer
should be made and undertakes to use either (1) a final decision on the merits
by a court or other body before whom the proceeding was brought that the person
to be indemnified ("indemnitee") was not liable to the Registrant or to its
security holders by reason of willful malfeasance, bad faith, gross negligence,
or reckless disregard of the duties involved in the conduct of his or her office
("disabling conduct") or (2) in the absence of such a decision, a reasonable
determination, based upon a review of the facts, that the indemnitee was not
liable by reason of such disabling conduct, by (a) the vote of a majority of a
quorum of directors who are neither "interested persons" (as defined in the 1940
Act) of the Registrant nor parties to the proceeding, or (b) an independent
legal counsel in a written opinion. Also, the Registrant will make advances of
attorney's fees or other expenses incurred by a director or officer in his or
her defense only if (in addition to his or her undertaking to repay the advance
if he or she is not ultimately entitled to indemnification) (1) the indemnitee
provides a security for his or her undertaking, (2) the Registrant shall be
insured against losses arising by reason of any lawful advances, or (3) a
majority of a quorum of the non-interested, non-party directors of the
Registrant, or an independent legal counsel in a written opinion, shall
determine, based on a review of readily available facts, that there is reason to
believe that the indemnitee ultimately will be found entitled to
indemnification.
In addition, the Registrant will maintain a directors' and officers' errors
and omissions liability insurance policy protecting directors and officers
against liability for claims made by reason of any acts, errors or omissions
committed in their capacity as directors of officers. The policy will contain
certain exclusions, among which is exclusion from coverage for active or
deliberate dishonest or fraudulent acts and exclusion for fines or penalties
imposed by law or other matters deemed uninsurable.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
SOGEN A.M. Corp. is the Registrant's investment adviser. In addition to the
Registrant, SOGEN A.M. Corp., acts as investment adviser to SoGen International
Fund, Inc., SoGen Funds, Inc., and pension funds and sub-adviser to
non-affiliated investment funds.
C-2
<PAGE>
Reference is made to "Management of the Fund" in the Statement of
Additional Information constituting Part B of this Registration Statement for a
description of the business activities and employment of certain directors and
officers of SOGEN A.M. Corp. within the last two fiscal years of the Registrant.
The directors of SOGEN A.M. Corp. not disclosed in Part B are as follows:
<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL OCCUPATION
<S> <C>
Christian d'Allest.............. Director of Foreign Affiliates, Societe Generale Asset
17, cours Valmy Management Corp.
92972 Paris
France
Jean Roger Huet................. President, New York Branch, Societe Generale
1221 Avenue
of the Americas
New York, NY 10020
Jean-Marie Stein................ President of SogeCap, Insurance Division of
17, cours Valmy Societe Generale
92972 Paris
France
</TABLE>
ITEM 29. PRINCIPAL UNDERWRITERS
(a) SGSC, the Registrant's distributor, acts as principal underwriter for
SoGen International Fund, Inc. and SoGen Funds, Inc., each of which is a
registered investment company.
(b) The directors and officers of SGSC are as follows:
<TABLE>
<CAPTION>
POSITIONS AND OFFICES
WITH
NAME AND PRINCIPAL BUSINESS ADDRESS PRINCIPAL UNDERWRITER POSITIONS AND OFFICES WITH REGISTRANT
<S> <C> <C>
Jacques Bouhet
17, Cours Valmy
92972 Paris
France................................................ Chairman of the Board --
Dominique Beaupere
Alsthorn Alcatel
75382 Paris
Cedex 08.............................................. Director --
Gerard de la Riviere
17, Cours Valmy
92972 Paris
France................................................ Director --
Jean-Bernard Guillebert
17, Cours Valmy
92972 Paris
France................................................ Director --
Jean Huet
1221 Avenue of the Americas
New York, NY 10020....................................
Alain Joyet Director --
1221 Avenue of the Americas
New York, NY 10020....................................
Robert Leroux Director --
17, Cours Valmy
92972, Paris
France................................................ Director --
Jean-Paul Oudet
23 Rue De D'Abeville
75009, Paris
France................................................ Director --
Pierre Prot
29, Boulevard Haussmann
75009, Paris
France................................................ Director --
Alain Tave
17, Cours Valmy
92972, Paris
France................................................ Director --
</TABLE>
C-3
<PAGE>
<TABLE>
<CAPTION>
POSITIONS AND OFFICES
WITH
NAME AND PRINCIPAL BUSINESS ADDRESS PRINCIPAL UNDERWRITER POSITIONS AND OFFICES WITH REGISTRANT
<S> <C> <C>
Yves Tuloup
43, rue Taitbout
75009 Paris,
France................................................ Director --
Curtis Welling
1221 Avenue of the Americas
New York, NY 10020.................................... Director, President --
James Walsh and CEO
1221 Avenue of the Americas
New York, NY 10020.................................... Chief Operating --
Marc Poirier Officer
1221 Avenue of the Americas
New York, NY 10020.................................... Deputy Chief Operating --
Jeffrey Fox Officer
1221 Avenue of the Americas
New York, NY 10020.................................... Chief Financial --
Kenneth Lampert Officer
1221 Avenue of the Americas
New York, NY 10020.................................... Compliance Officer --
Pierre Bergeron
1221 Avenue of the Americas
New York, NY 10020.................................... Secretary --
Governor Tipton
1221 Avenue of the Americas
New York, NY 10020.................................... Assistant Secretary --
Sibyl Peyer
1221 Avenue of the Americas
New York, NY 10020.................................... Assistant Secretary --
</TABLE>
The following officers all have their principal business address at 1221
Avenue of the Americas, New York, NY 10020:
<TABLE>
<S> <C> <C>
Alon, Raz.................................... Vice President --
Balk, Kerry.................................. Assistant Vice President --
Barreau, Jean Marie.......................... Vice President --
Barrocas, Isaac.............................. Vice President --
Barthelemy, Francois......................... Vice President --
Beston, Richard.............................. Vice President --
Bianco, John................................. Vice President --
Bouillon, Pascal............................. Vice President --
Brummer, Andrew Clark........................ Vice President --
Casey, Robert................................ Vice President --
Chen, Mary................................... Vice President --
Condodina, Arthur G.......................... Vice President --
Dawson, Robert............................... Assistant Vice President --
Enderle, John................................ Vice President --
Ferrigno, Philip............................. Assistant Vice President --
Fields, Lauda................................ Vice President --
Finan, William............................... Assistant Vice President --
Freud, Dominic............................... First Vice President --
Frobenius, Gordes............................ Vice President --
Godefroy, Dominique.......................... Assistant Vice President --
Gros, Vincent................................ Vice President --
Gushee, Charles.............................. First Vice President --
Hanson, Markus Sebastian..................... Vice President --
Hernandez, Nancy............................. Assistant Vice President --
Hirshfield, Eric............................. Vice President --
Jernigan, Kenton Leroy....................... Assistant Vice President --
Joseph, Andrew............................... Vice President --
Kwong, Paul.................................. Vice President --
Langley, Linda............................... Assistant Vice President --
Levesque, Marc............................... Vice President --
Marino, Joseph............................... Assistant Vice President --
Marx, Robert................................. Vice President --
</TABLE>
C-4
<PAGE>
<TABLE>
<S> <C> <C>
Meyer, Paul.................................. First Vice President --
Monck, John.................................. First Vice President --
Moyer, Tomothy............................... Senior Vice President --
Moyna, Tom................................... First Vice President --
Mulford, Elizabeth........................... Vice President --
Nakovick, Nancy C............................ Vice President --
Nebenhaus, Harlan............................ Assistant Vice President --
Nora, Kenneth................................ Vice President --
Olsen, Edwin S............................... Vice President Vice President
Paterno, Renee............................... Assistant Vice President --
Pierson, Philippe............................ Vice President --
Pollet, Gillaume............................. First Vice President --
Roland, Robert............................... Vice President --
Ruaudel, Benoit.............................. First Vice President --
Sanders, Bryan L............................. Vice President --
Shaffer, Catherine A......................... First Vice President Vice President
Solomon, Gregory M........................... Vice President --
Texier, Nathalie............................. Vice President --
Thomas, Williams............................. Assistant Vice President --
Toubale, Tarek............................... Vice President --
Tramutola, Richard........................... Vice President --
Zolin, Mattew C.............................. Vice President --
</TABLE>
(c) None.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the Rules promulgated
thereunder are maintained at the offices of the Registrant, 1221 Avenue of the
Americas, New York, NY 10020 with the exception of certain accounts, books and
other documents which are kept by the Registrant's custodian, Investors
Fiduciary Trust Company, 127 West 10th Street, Kansas City, MO 64105.
ITEM 31. MANAGEMENT SERVICES
Not applicable.
ITEM 32. UNDERTAKINGS
The Registrant undertakes to call a meeting of shareholders for the purpose
of voting upon the question of removal of a director, if requested to do so by
the holders of at least 10% of the Fund's outstanding shares, and that it will
assist communication with other shareholders as required by Section 16(c) of the
Investment Company Act of 1940.
C-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, and
the Investment Company Act of 1940, as amended, the Registrant, SoGen Variable
Funds, Inc., has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York
and State of New York, on the 28th day of February, 1997.
SOGEN VARIABLE FUNDS, INC.
BY: /s/ JEAN-MARIE EVEILLARD
(JEAN-MARIE EVEILLARD, PRESIDENT)
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/S/ JEAN-MARIE EVEILLARD President and Director February 28, 1997
JEAN-MARIE EVEILLARD (principal executive officer)
/s/ PHILIP J. BAFUNDO Vice President and Treasurer February 28, 1997
PHILIP J. BAFUNDO (principal financial and
accounting officer)
* Chairman of the Board February 28, 1997
PHILIPPE COLLAS
* Director February 28, 1997
FRED J. MEYER
* Director February 28, 1997
DOMINIQUE RAILLARD
* Director February 28, 1997
NATHAN SNYDER
* By /s/ JEAN-MARIE EVEILLARD
(JEAN-MARIE EVEILLARD, ATTORNEY IN FACT)
</TABLE>
C-6
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT DESCRIPTION PAGE NO.
<S> <C> <C>
1 -- Articles of Incorporation of the Registrant.*
2 -- By-Laws of the Registrant.*
4 -- Specimen Certificates representing shares of Common Stock ($0.001 par
value).*
5 -- Investment Advisory Contract between the Registrant and Societe Generale
Asset Management Corp. ("SOGEN A.M. Corp.")*
6(a) -- Distribution Agreement between the Registrant and Societe Generale
Securities Corporation ("SGSC").*
6(b) -- Form of 12b-1 Servicing Agreement Between SGSC and A Life Insurance
Company.
8(a) -- Custody, Investment Accounting and Transfer Agency Agreement between the
Registrant and Investors Fiduciary Trust Fund.*
8(b) -- Global Custody Agreement between the Registrant and The Chase Manhattan
Bank, N.A.*
8(c) -- Form of Subcustodial Agreement.*
9 -- Participation Agreement among the Registrant, A Life Insurance Company
and SGSC.*
10 -- Opinion and Consent of Dechert Price & Rhoads.*
11 -- Consent of KPMG Peat Marwick LLP.
13 -- Investment Representation letter of SOGEN A.M. Corp.*
15 -- Rule 12b-1 Distribution Plan and Agreement Between the Registrant and
SGSC.*
19 -- Power of Attorney of Messrs. Eveillard*, Collas, Meyer, Raillard*,
Snyder.*
</TABLE>
* Previously filed as an Exhibit to the Registration Statement.
Societe Generale Securities Corporation
1221 Avenue of the Americas, New York, NY 10020
February ___, 1997
[Name and Address of Life Insurance Company]
Re: Participation Agreement dated as of _________________
among [Name of Life Insurance Company],
SoGen Variable Funds, Inc., and
Societe Generale Securities Corporation
(the "Participation Agreement")
Dear Sirs:
Section ____ of the above-captioned Participation Agreement
provides for payment to you by the undersigned, Societe Generale Securities
Corporation ("SGSC"), of amounts primarily intended to finance the distribution
of shares of SoGen Overseas Variable Fund, a portfolio of SoGen Variable Funds,
Inc. (the "Fund"), in accordance with the Fund's Rule 12b-1 Distribution Plan
(the "Plan"). Subject to the terms of the Participation Agreement and the Plan,
we hereby undertake to pay you an amount equal to 0.25% per annum of the average
daily net asset value of outstanding Fund shares attributable to variable life
and/or variable annuity contracts ("Variable Contracts") issued by you. Such
amount will be accrued daily and paid quarterly no later than 15 days after the
end of each calendar quarter.
SGSC will make such payments only if and to the extent
authorized by the Plan, as it may be amended from time to time. Accordingly, as
a condition to receiving such payments, you agree that amounts received by you
hereunder shall be utilized in their entirety to defray the costs:
(a) of the printing and mailing of Fund prospectuses,
statements of additional information, any supplements
thereto and shareholder reports for existing and
prospective Variable Contract owners;
(b) relating to the development, preparation, printing
and mailing of Fund advertisements, sales literature
and other promotional materials describing and/or
relating to the Fund and including materials intended
for use within [Name of Life Insurance Company], or
for broker-dealer only use or retail use;
<PAGE>
(c) of holding seminars and sales meetings designed to
promote the distribution of Fund shares;
(d) of obtaining information and providing explanations
to Variable Contract owners regarding Fund investment
objectives and policies and other information about
the Fund, including the performance of the Fund;
(e) of training sales personnel regarding the Fund;
(f) of compensating sales personnel in connection with
allocation of cash values and premiums of the
Variable Contracts to the Fund; and
(g) of personal service and/or maintenance of Variable
Contract owner accounts with respect to Fund shares
attributable to such accounts.
If the foregoing is consistent with your understanding, please
confirm your agreement by signing below two copies of this letter and returning
one copy to the undersigned.
Very truly yours,
SOCIETE GENERALE
SECURITIES CORPORATION
By:__________________________________
Name:
Title:
Accepted and agreed
to as of the date
first set forth above:
[Name of Life Insurance Company]
By: __________________________________
Name:
Title:
CONSENT OF INDEPENDENT AUDITORS
To the Shareholders and Board of Trustees of
SoGen Variable Funds, Inc.:
We consent to the use of our report dated January 24, 1997, included herein and
to the reference to our firm under the heading "Independent Auditors" in the
Statement of Additional Information.
/s/ KPMG PEAT MARWICK LLP
KPMG PEAT MARWICK LLP
New York, New York
February 28, 1997
