<PAGE>
SoGen Overseas Variable Fund
[GRAPHIC]
Annual Report
December 31, 1998
<PAGE>
SoGen Overseas Variable Fund
THE PRESIDENT'S LETTER
Dear Shareholder:
From February 3, 1997 (commencement of operations) through December 31, 1998,
the value of an investment in your Fund increased at a compounded average an-
nual rate of 0.95%. Over the past twelve months, the rate was 4.21%.
As of December 31, 1998 your Fund's net assets, on an economic basis, were
invested as follows:
<TABLE>
<S> <C>
Foreign stocks(/1/) 90.7%
U.S. dollar bonds 4.0
Foreign currency bonds 4.2
Cash and equivalents 1.1
-----
100.0%
=====
</TABLE>
- --------
(/1/) Includes convertible bonds with moderate premia.
About 38% of the foreign stock portfolio was invested in developed countries
in continental Europe and 24% in Japan. Other relatively large investments were
in New Zealand (8%), Latin America (4%), Australia (3%), Hong Kong (3%) and
Canada (2%).
In 1998, circumstances continued to be hostile to our investment style: small
"value" stocks did poorly by comparison with big "growth" stocks. However, we
remain confident that in the not too distant future, the merits of the compa-
nies we have invested in will be recognized, and the low valuations of their
securities will be seen as appealing.
For example, Societe Immobiliere Marseillaise, the Lazard-run holding company
based in France, provides exposure to successful companies such as Danone,
Pearson and Generali, at a discount of at least 50%.
We intend to be patient, and are thankful for your own patience.
Sincerely yours,
/s/ Jean-Marie Eveillard
Jean-Marie Eveillard
President
February 1, 1999
<PAGE>
SoGen Overseas Variable Fund
INVESTMENT RESULTS
Comparisons of Change in Value of a $10,000 Investment
in SoGen Overseas Variable Fund and Various Indices
---------------------------------------------------
Average Annual Rates of Return as of December 31, 1998
Since Commencement
of Operations
(2/3/97) 1 Year
------------- -----------
0.95% 4.21%
<TABLE>
<CAPTION>
Sogen Overseas Variable Fund Consumer Price Index MSCI EAFE Index
<S> <C> <C> <C>
1/31/97 10000 10000 10000
3/31/97 10010 10031 10200
6/30/97 10760 10056 11524
9/30/97 10590 10119 11443
12/31/97 9770 10157 10547
3/31/98 10610 10163 12098
6/30/98 10510 10226 12227
9/30/98 9310 10263 10489
12/31/98 10182 10320 12656
</TABLE>
Performance is historical and is not indicative of future results. The Fund's
results assume reinvestment of income dividends and capital gains distributions.
The MSCI EAFE Index return assumes reinvestment of dividends. Unlike Fund
returns, the indices do not reflect any fees or expenses.
2
<PAGE>
SoGen Overseas Variable Fund
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
Despite continued concerns over the impact of the Asian crisis on global
economies, U.S. and European stock market indices continued to surge ahead un-
til mid-July, 1998. At that time, three successive developments caused all mar-
kets to reverse course and to fall steeply: Russia devalued its currency and
defaulted on its Ruble denominated obligations, the outlook in Latin America
worsened as Brazil became an area of increased concern, and finally, a large,
highly leveraged U.S. hedge fund nearly collapsed in September. Within a few
weeks, mature stock markets lost 20% to 30% of their value while emerging mar-
kets were once again decimated.
In Asia, Japanese equities weakened further in reaction to the release of de-
teriorating economic data and slow progress made toward the implementation of
long-awaited banking reforms. Global market developments placed other Asian
markets under additional pressure. In Latin America, the possibility of addi-
tional currency devaluations continued to weigh on local stock markets.
In such an environment, smaller capitalization "value" stocks, which repre-
sent the majority of the Fund's holdings, fared even worse than large capital-
ization stocks. As the sense of a crisis subsided, most market indices recov-
ered by the end of the year; yet, these stocks underperformed significantly. In
turn, this negatively impacted the overall performance of the Fund.
SUMMARY OF FUND DATA
The table below covers the period from February 3, 1997 (commencement of op-
erations) to December 31, 1998.
<TABLE>
<CAPTION>
Net Asset
Value of Investment
Investment With Dividends and
Number Net Asset Capital Gains Income Distributions
of Shares Total Net Value Distributions Dividends Reinvested
Outstanding Assets Per Share Per Share Per Share (Cumulative)*
----------- ---------- --------- ------------- ---------- -------------------
<S> <C> <C> <C> <C> <C> <C>
February 3, 1997
(commencement of
operations) 10,000 $ 100,000 $10.00 -- -- $10.00
December 31, 1997 142,378 1,390,537 9.77 -- -- 9.77
December 31, 1998 418,376 4,212,629 10.07 -- $0.11 10.18
</TABLE>
- --------
* The calculation is based on an assumed investment in one share with income
dividends and capital gains distributions reinvested in additional shares.
(No adjustment has been made for any income taxes payable by shareholders on
such dividends.)
3
<PAGE>
SoGen Overseas Variable Fund
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
Number Cost Value
of Shares (Note 1) (Note 1)
--------- ---------- ----------
<C> <S> <C> <C>
Common and Preferred Stocks
United Kingdom (5.57%)
35,000 Antofagasta Holdings plc (18)............... $ 136,043 $ 103,019
3,000 Scottish Media Group plc (12)............... 34,476 35,122
35,000 Lonrho Africa plc (a)(18)................... 46,237 32,212
5,000 Lonrho plc (18)............................. 24,867 26,532
20,000 Royal Doulton plc (9)....................... 52,035 26,200
7,000 McBride plc (9)............................. 12,533 11,608
---------- ----------
306,191 234,693
---------- ----------
Sweden (0.50%)
5,000 Gorthon Lines AB "B' (7).................... 19,778 20,924
---------- ----------
Norway (1.20%)
4,000 Schibsted ASA (12).......................... 66,571 50,537
---------- ----------
Netherlands (3.27%)
2,500 Apothekers Cooperatie OPG U.A. (11)......... 75,027 71,683
2,000 Holdingmaatschappij de Telegraaf NV (12).... 42,778 53,729
1,000 European City Estates NV (16)............... 13,598 12,448
---------- ----------
131,403 137,860
---------- ----------
Belgium (0.27%)
35 Deceuninck Plastics Industries SA (5)....... 6,638 11,366
---------- ----------
Germany (8.31%)
350 Buderus AG (6).............................. 155,275 129,283
100 Axel Springer Verlag AG (12)................ 70,325 84,087
350 Bertlesmann AG D.R.C. (12).................. 42,237 47,194
2,500 Gerresheimer Glas AG (6).................... 36,974 36,788
500 Hornbach Holding AG Pfd. (10)............... 35,290 29,881
50 Suedzucker AG Pfd. (9)...................... 24,569 22,673
---------- ----------
364,670 349,906
---------- ----------
France (11.30%)
55 Societe Immobiliere Marseillaise (17)....... 88,494 127,519
225 Sagem ADP (8)............................... 74,177 92,580
125 Societe Sucriere de Pithiviers-le-Vieil (4). 62,464 60,378
240 Europe 1 Communication (12)................. 52,810 56,031
700 Emin Leydier (3)............................ 42,021 30,305
200 Didot-Bottin (17)........................... 27,847 28,982
175 Legrand ADP (6)............................. 22,098 27,863
125 Robertet SA (9)............................. 25,781 20,573
250 Gaumont SA (12)............................. 19,058 16,995
25 Taittinger C.I. (9)......................... 6,147 14,849
---------- ----------
420,897 476,075
---------- ----------
Switzerland (6.63%)
150 Kuehne & Nagel International AG Bearer (7).. 102,325 125,546
250 Edipresse SA Bearer (12).................... 65,348 71,870
150 Sika Finanz AG Bearer (5)................... 39,408 44,978
100 Societe Generale d'Affichage D.R.C. (12).... 38,400 36,826
---------- ----------
245,481 279,220
---------- ----------
Portugal (0.29%)
1,000 Companhia de Celulose do Caima (3).......... 16,371 12,139
---------- ----------
</TABLE>
4
<PAGE>
SoGen Overseas Variable Fund
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
Number Cost Value
of Shares (Note 1) (Note 1)
--------- -------- --------
<C> <S> <C> <C>
Common and Preferred Stocks (continued)
Turkey (0.68%)
20,000 Usas Ucak Servisi A.S. (13).................... $ 25,749 $ 28,535
-------- --------
Japan (23.09%)
3,000 Fuji Photo Film Co., Ltd. ADR (9).............. 101,581 109,875
700 Toho Co., Ltd. (12)............................ 74,261 95,493
18,000 The Nichido Fire & Marine Insurance Co., Ltd.
(14).......................................... 93,809 88,037
1,000 Secom Co., Ltd. (13)........................... 63,488 82,485
18,000 Nisshinbo Industries, Inc. (9)................. 77,252 62,498
12,000 Okumura Corporation (5)........................ 42,586 52,981
15,000 The Dai-Tokyo Fire & Marine Insurance Co., Ltd.
(14).......................................... 56,282 52,875
2,000 Shimano Inc. (9)............................... 39,126 51,377
5,000 Nitto Kohki Co., Ltd. (6)...................... 42,570 40,978
700 Benesse Corporation (13)....................... 23,961 37,691
7,000 Sotoh Co., Ltd. (9)............................ 44,924 37,013
500 Hirose Electric Co., Ltd. (8).................. 26,088 34,853
3,000 SK Kaken Company Limited (5)................... 31,392 34,369
7,000 Shoei Co., Ltd. (17)........................... 49,491 34,113
5,000 Yomeishu Seizo Co., Ltd. (9)................... 27,263 31,769
1,000 T. Hasegawa Co., Ltd. (9)...................... 19,801 26,658
7,000 Tachi-S Co., Ltd. (6).......................... 33,705 26,402
7,000 Aida Engineering, Ltd. (6)..................... 35,489 25,045
5,000 The Dowa Fire & Marine Insurance Co., Ltd.
(14).......................................... 15,034 18,506
10,000 Iino Kaiun Kaisha, Ltd. (7).................... 22,300 16,744
3,000 Tokyo Tungsten Co., Ltd. (1)................... 16,198 12,955
-------- --------
936,601 972,717
-------- --------
Hong Kong (3.44%)
311,618 CDL Hotels International Limited (16).......... 106,067 80,041
150,000 Shaw Brothers (Hong Kong) Limited (12)......... 89,662 64,860
-------- --------
195,729 144,901
-------- --------
Singapore and Malaysia (6.26%)
70,000 Clipsal Industries Ltd. (5).................... 64,576 70,000
30,000 Times Publishing Limited (12).................. 46,669 46,881
35,000 Delgro Corporation Ltd. (13)................... 36,647 45,367
20,000 Genting Berhad (d)(17)......................... 36,922 43,421
25,000 Tronoh Mines Malaysia Berhad (d)(20)........... 22,481 32,500
50,000 Thakral Corporation Ltd. (8)................... 18,750 25,591
-------- --------
226,045 263,760
-------- --------
Thailand (0.30%)
2,500 The Oriental Hotel Public Company Limited (16). 13,568 12,758
-------- --------
Australia and New Zealand (7.92%)
100,000 Carter Holt Harvey Limited (3)................. 106,544 89,454
20,000 Independent Press Communications Limited 5%
exchangeable preference shares due 11/30/2003
(a)(12)....................................... 94,109 78,930
100,000 Spotless Services Limited (13)................. 78,428 68,488
125,000 Tasman Agriculture Limited (4)................. 54,510 52,620
125,000 Shortland Properties Limited (16).............. 40,427 44,069
-------- --------
374,018 333,561
-------- --------
Canada (2.06%)
3,500 Canadian Pacific Limited (18).................. 95,316 66,063
</TABLE>
5
<PAGE>
SoGen Overseas Variable Fund
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
Number Cost Value
of Shares (Note 1) (Note 1)
--------- ---------- ----------
<C> <S> <C> <C>
Common and Preferred Stocks
(continued)
Canada (continued)
5,000 Legacy Hotels Real Estate Investment
Trust (16).......................... $ 20,746 $ 20,901
---------- ----------
116,062 86,964
---------- ----------
Mexico (2.16%)
30,000 Industrias Penoles, S.A. de C.V. (1). 111,002 90,863
---------- ----------
Miscellaneous (3.65%)
4,500 Banco Latinoamericano de
Exportaciones S.A., Class "E'
(BLADEX) (14)....................... 111,524 74,813
5,000 Freeport McMoRan Copper & Gold Inc.,
Preferred Series "B' (c)(20)........ 104,578 74,375
13,990 Minas de Arcata S.A. (a)(20)......... 14,830 4,567
---------- ----------
230,932 153,755
---------- ----------
Total Common and Preferred Stocks.... 3,807,706 3,660,534
---------- ----------
<CAPTION>
Principal
Amount
---------
<C> <S> <C> <C>
Bonds, Notes and Convertible Bonds
U.S. Dollar Convertible Bonds (5.75%)
$ 65,000 Danka Business Systems plc 6 3/4% due
4/01/2002 (9)....................... 38,374 22,100
25,000 LUKINTER Finance BV 3 1/2% due
5/06/2002 (2)....................... 22,110 9,375
25,000 International Container Terminal
Services, Inc. 1 3/4% due 3/13/2004
(7)................................. 22,006 19,125
25,000 SK Telecom Co. Ltd. 7 3/4% due
4/29/2004 (13)...................... 22,382 22,531
100,000 Scandinavian Broadcasting System SA 7
1/4% due 8/01/2005 (12)............. 99,566 104,875
20,000 P.T. Inti Indorayon Utama 7% due
5/02/2006 (3)....................... 14,279 3,800
30,000 LG Electronics Inc. 1/4% due
12/31/2007 (8)...................... 21,483 24,450
30,000 Samsung Electronics Co. Ltd. 0% due
12/31/2007 (a)(8)................... 24,265 27,000
10,000 Samsung Electronics Co. Ltd. 0% due
12/31/2007 (a)(b)(8)................ 8,704 9,000
---------- ----------
273,169 242,256
---------- ----------
U.S. Dollar Bonds and Notes (0.72%)
50,000 Bangkok Bank Public Co. 8 3/8% due
1/15/2027 (b)(14)................... 18,003 30,500
---------- ----------
Non U.S. Dollar Convertible Bonds
(2.19%)
CAD 15,000 InterTAN, Inc. 9% due 8/30/2000 (10). 10,971 10,557
GBP 10,000 Lonmin Finance plc 6% due 2/27/2004
(18)................................ 14,637 14,302
GBP 20,000 Berisford plc 5% due 1/31/2015 (9)... 26,806 26,615
JPY 5,000,000 Hanshin Electric Railway Co., Ltd. 1
1/2% due 9/30/2005 (7).............. 33,323 40,758
---------- ----------
85,737 92,232
---------- ----------
Non U.S. Dollar Bonds and Notes
(2.44%)
NZD 100,000 Trans Power Finance Limited 8% due
3/15/2002 (15)...................... 55,967 55,628
AUD 65,000 Queensland Treasury Corporation 8%
due 9/14/2007 (19).................. 49,778 47,030
---------- ----------
105,745 102,658
---------- ----------
Total Bonds, Notes and Convertible
Bonds............................... 482,654 467,646
---------- ----------
Total Investments (98.00%)........... $4,290,360* 4,128,180**
==========
Other assets in excess of liabilities
(2.00%)............................. 84,449
----------
Net assets (100.00%)................. $4,212,629
==========
</TABLE>
6
<PAGE>
SoGen Overseas Variable Fund
NOTES TO SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
(a) Non-income producing security.
(b) Security is exempt from registration under the Securities Act of 1933 and
may only be sold to qualified institutional buyers pursuant to Rule 144A
under the Securities Act of 1933.
(c) Commodity-linked security whereby the coupon, dividend and/or redemption
amount is linked to the price of an underlying commodity.
(d) Security for which there are less than three market makers.
* At December 31, 1998 cost is substantially identical for both book and fed-
eral income tax purposes.
** Gross unrealized appreciation and depreciation of securities at December
31, 1998 were $336,581 and $498,761, respectively. (Net depreciation was
$162,180.)
<TABLE>
<CAPTION>
Foreign Currencies Industry Classifications
- ------------------ ------------------------
<S> <C> <C>
CAD--Canadian Dollar (1) Metals and Minerals (11) Health Care
GBP--Pound Sterling (2) Energy (12) Media
JPY--Japanese Yen (3) Forest Products (13) Services
NZD--New Zealand Dollar (4) Agriculture (14) Financial Institutions
AUD--Australian Dollar (5) Building Materials (15) Utilities
(6) Capital Goods (16) Real Estate
(7) Transportation (17) Holding Companies
(8) Electronics (18) Conglomerates
(9) Consumer Products (19) Government Issues
(10) Distribution (20) Gold Related
</TABLE>
- --------
See Notes to Financial Statements.
7
<PAGE>
SoGen Overseas Variable Fund
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<S> <C>
Assets:
Investments, at value (Note 1):
Common and preferred stock (identified cost, $3,807,706).... $3,660,534
Bonds, notes, and convertible bonds (identified cost,
$482,654).................................................. 467,646
----------
Total investments (cost $4,290,360)...................... 4,128,180
Cash......................................................... 94,058
Receivable for Fund shares sold.............................. 3,391
Receivable for investment securities sold.................... 3,178
Receivable for forward currency contracts held, at value
(Notes 1 and 6)............................................. 5,246
Accrued interest and dividends receivable.................... 19,877
Deferred organization costs (Note 1)......................... 54,176
Receivable from SGAM Corp. (Note 2).......................... 11,221
Prepaid expenses (Note 1).................................... 1,006
----------
Total Assets............................................. 4,320,333
----------
Liabilities:
Payable for investment securities purchased.................. 11,267
Payable for forward currency contracts held, at value (Notes
1 and 6).................................................... 62,553
Distribution fees payable (Note 3)........................... 10,454
Directors' fees payable (Note 2)............................. 862
Accrued expenses and other liabilities....................... 22,568
----------
Total Liabilities........................................ 107,704
----------
Net Assets:
Capital stock (par value, $0.001 per share).................. 418
Capital surplus.............................................. 4,333,062
Net unrealized appreciation (depreciation) on:
Investments................................................ (162,180)
Forward currency contracts................................. (57,307)
Foreign currency related transactions...................... 446
Undistributed net realized gains on investments.............. 62,115
Undistributed net investment income.......................... 36,075
------
Net Assets (Note 1)...................................... $4,212,629
==========
Net Asset Value per Share (NAV) (based on 418,376 shares
outstanding; 1,000,000,000 shares authorized) (Note 5)....... $ 10.07
==========
Maximum Offering Price per Share............................... $ 10.07
==========
</TABLE>
- --------
See Notes to Financial Statements.
8
<PAGE>
SoGen Overseas Variable Fund
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<S> <C>
Investment Income:
Income:
Dividends (net of $6,848 foreign taxes withheld)................ $ 70,828
Interest (net of $336 foreign taxes withheld)................... 50,151
--------
Total income from operations................................... 120,979
--------
Expenses:
Investment advisory fees (Note 2)............................... 25,717
Directors' fees (Note 2)........................................ 42,000
Custodian fees.................................................. 32,889
Audit fees...................................................... 24,000
Amortization of deferred organization costs (Note 1)............ 17,571
Printing........................................................ 13,400
Distribution fees (Note 3)...................................... 8,540
Insurance....................................................... 683
Legal fees...................................................... 500
Miscellaneous................................................... 5,000
--------
Total expenses from operations................................. 170,300
--------
Advisory fees waived (Note 2)..................................... (25,717)
Expense reimbursement (Note 2).................................... (88,434)
Expense reduction due to earnings credits (Note 1)................ (4,889)
--------
Net expenses from operations................................... 51,260
--------
Net investment income (Note 1).................................... 69,719
--------
Realized and Unrealized Gains (Losses) on Investments and Foreign
Currency Related Transactions (Notes 1 and 6):
Net realized gain (loss) from:
Investment transactions......................................... 74,669
Foreign currency related transactions........................... (39,806)
--------
34,863
--------
Change in unrealized appreciation (depreciation) of:
Investments..................................................... (81,671)
Foreign currency related transactions........................... (70,102)
--------
(151,773)
--------
Net loss on investments and foreign currency related transactions. (116,910)
--------
Net Decrease in Net Assets Resulting from Operations................ $(47,191)
========
</TABLE>
- --------
See Notes to Financial Statements.
9
<PAGE>
SoGen Overseas Variable Fund
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Period
Year Ended February 3, 1997++
December 31, to December 31,
1998 1997
------------ ------------------
<S> <C> <C>
Operations:
Net investment income (loss).................. $ 69,719 $ (1,057)
Net realized gains from investments and
foreign currency related transactions........ 34,863 18,552
Increase in unrealized depreciation of
investments and foreign currency related
transactions................................. (151,773) (67,268)
---------- ----------
Net decrease in assets resulting from
operations.................................. (47,191) (49,773)
---------- ----------
Distributions to Shareholders:
Dividends paid from net investment income..... (45,275) --
---------- ----------
Decrease in net assets resulting from
distributions............................... (45,275) --
---------- ----------
Fund Share Transactions (Note 5):
Net proceeds from shares sold................. 4,199,368 1,587,377
Net asset value of shares issued for
reinvested
dividends and distributions.................. 45,275 --
Cost of shares redeemed....................... (1,330,085) (247,067)
---------- ----------
Increase in net assets from Fund share
transactions................................ 2,914,558 1,340,310
---------- ----------
Net increase in net assets................... 2,822,092 1,290,537
Net Assets (Note 1):
Beginning of period........................... 1,390,537 100,000
---------- ----------
End of period (including undistributed net
investment income of $36,075 and $9,480,
respectively)................................ $4,212,629 $1,390,537
========== ==========
</TABLE>
- --------
++Commencement of operations
- --------
See Notes to Financial Statements.
10
<PAGE>
SoGen Overseas Variable Fund
NOTES TO FINANCIAL STATEMENTS
Note 1--Significant Accounting Policies
SoGen Variable Funds, Inc. (the "Company") is an open-end, diversified man-
agement investment company registered under the Investment Company Act of 1940,
as amended. The Company consists of one portfolio, SoGen Overseas Variable Fund
(the "Fund"). The following is a summary of significant accounting policies ad-
hered to by the Fund.
a) Security valuation--Portfolio securities held in the Fund are valued 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 and
any restricted securities are valued at fair value as determined in good faith
by the Board of Directors.
b) Deferred organization costs--Costs incurred in connection with the organi-
zation of the Fund have been capitalized and are being amortized on a straight-
line basis over a sixty-month period from the date the Fund commenced invest-
ment operations.
c) Security transactions and income--Security transactions are accounted for
on a trade date basis. The specific identification method is used in determin-
ing realized gains and losses from security transactions. Dividend income is
recorded on the ex-dividend date. Interest income is recorded daily on the ac-
crual basis. In computing investment income, the Fund amortizes discounts on
debt obligations; however, premiums are not amortized.
d) Expenses--Earnings credits reduce custodian fees by the amount of interest
earned on balances with such service providers.
e) Foreign currency translation--The market values of securities which are
not traded in U.S. currency are recorded in the financial statements after
translation to U.S. dollars based on the applicable exchange rates at the end
of the period. The costs of such securities are translated at exchange rates
prevailing when acquired. Related dividends, interest and withholding taxes are
accrued at the rates of exchange prevailing on the respective dates of such
transactions.
The net assets of the Fund are presented at the foreign exchange rates and
market values at the close of the period. The Fund does not isolate that por-
tion of gains and losses on investments which is due to changes in foreign ex-
change rates from that which is due to changes in market prices of the equity
securities. However, for federal income tax purposes the Fund does isolate the
effect of changes in foreign exchange rates from the changes in market prices
for realized gains and losses on debt obligations.
f) Forward currency contracts--In connection with portfolio purchases and
sales of securities denominated in foreign currencies, the Fund may enter into
forward currency contracts. Additionally, the Fund may enter into such con-
tracts to hedge certain other foreign currency denominated investments. These
contracts are valued at current market, and the related realized and unrealized
foreign exchange gains and losses are included in the statement of operations.
In the event that counterparties fail to settle these currency contracts or the
related foreign security trades, the Fund could be exposed to foreign currency
fluctuations.
11
<PAGE>
SoGen Overseas Variable Fund
NOTES TO FINANCIAL STATEMENTS (continued)
g) U.S. income taxes--No provision has been made for U.S. federal income
taxes since it is the intention of the Fund to distribute to shareholders all
taxable net investment income and net realized gains on investments, if any,
within the allowable time limit, and to comply with the provisions of the In-
ternal Revenue Code for a regulated investment company. Such income dividends
and capital gains distributions are declared and paid by the Fund on an annual
basis.
h) Reclassification of capital accounts--On the statements of assets and lia-
bilities, as a result of certain differences in the computation of net invest-
ment income and net realized capital gains under federal income tax rules and
regulations versus generally accepted accounting principles, a reclassification
has been made to increase undistributed net investment income, increase undis-
tributed net realized gains on investments and decrease capital surplus in the
amounts of $2,151, $19,237 and $21,388, respectively.
i) Use of estimates--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make esti-
mates and assumptions that affect the reported amounts of assets and liabili-
ties at the date of the financial statements and the reported amounts of reve-
nues and expenses during the reporting period. Actual results could differ from
those estimates.
Note 2--Investment Advisory Agreement and Transactions with Related Persons
Under the terms of an investment advisory agreement dated August 16, 1996,
the Fund pays Societe Generale Asset Management Corp. ("SGAM Corp.") a monthly
advisory fee at an annual rate of 0.75% of the average daily net assets of the
Fund. In return, SGAM Corp. provides the Fund with advisory services and pays
certain Fund expenses, including salaries and office costs. SGAM Corp. has
agreed to waive its advisory fee and, if necessary, reimburse the Fund through
April 30, 1999 to the extent that the Fund's aggregate expenses exceed 1.50% of
the Fund's average daily net assets. For the year ended December 31, 1998, the
Fund's investment advisory fees of $25,717 were waived in their entirety by
SGAM Corp. In addition, SGAM Corp. voluntarily reimbursed the Fund for expenses
in the amount of $88,434.
For the year ended December 31, 1998, SG Cowen Securities Corporation
("SGCS") or its affiliates received $928 in broker's commissions for portfolio
transactions executed on behalf of the Fund.
Each director who is not an officer of the Company or an employee of SGAM
Corp., SGCS or its corporate affiliates is paid an annual fee of $6,000 plus
$1,000 for each meeting attended. For the year ended December 31, 1998 such
fees amounted to $42,000.
Note 3--Distribution Plan and Agreement
The Company has entered into a Distribution Plan and Agreement (the "Plan")
with SGCS, pursuant to the provisions of Rule 12b-1 under the Investment Com-
pany Act of 1940, whereby the Fund may pay quarterly, a distribution related
fee to SGCS at an annual rate of up to 0.25% of the Fund's average daily net
assets. The Plan provides that SGCS will use amounts payable by the Fund under
the Plan, 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 servic-
ing-related expenses incurred or paid by such insurance companies. For the year
ended December 31, 1998, the distribution fees paid or payable to SGCS by the
Fund were $8,540.
Note 4--Purchases and Sales of Securities
During the year ended December 31, 1998, the aggregate cost of purchases of
investments and proceeds from sales of investments, totaled $3,726,906 and
$638,899, respectively.
12
<PAGE>
SoGen Overseas Variable Fund
NOTES TO FINANCIAL STATEMENTS (continued)
Note 5--Capital Stock
Transactions in shares of capital stock were as follows:
<TABLE>
<CAPTION>
Period from
Year Ended February 3, 1997++ to
December 31, 1998 December 31, 1997
----------------- ---------------------
<S> <C> <C>
Shares sold......................... 403,890 156,221
Shares issued for reinvested
dividends
and distributions.................. 4,602 --
Shares redeemed..................... (132,494) (23,843)
-------- -------
Net increase...................... 275,998 132,378
======== =======
</TABLE>
++Commencement of operations.
Note 6--Commitments
As of December 31, 1998, the Fund had entered into forward currency con-
tracts, as summarized below, resulting in net unrealized depreciation of
$57,307.
Transaction Hedges:
Foreign Currency Purchases
<TABLE>
<CAPTION>
Settlement U.S. $ Value at U.S $ Unrealized Unrealized
Dates Foreign Currency To December 31, To Be Appreciation at Depreciation at
Through Be Received 1998 Delivered December 31, 1998 December 31, 1998
- ---------- ----------------------------- --------------- --------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
1/07/99 3,545 Pound Sterling $ 5,878 $ 5,962 -- $(84)
---------- -------------- ------------ ---------------
Foreign Currency Sales
<CAPTION>
Settlement U.S $ U.S. $ Value at Unrealized Unrealized
Dates Foreign Currency To To Be December 31, Appreciation at Depreciation at
Through Be Delivered Received 1998 December 31, 1998 December 31, 1998
- ---------- ----------------------------- --------------- --------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
1/06/99 109,356 Belgian Franc 3,179 3,178 $ 1 --
---------- -------------- ------------ ---------------
Portfolio Hedges:
<CAPTION>
Settlement U.S $ U.S. $ Value at Unrealized Unrealized
Dates Foreign Currency To To Be December 31, Appreciation at Depreciation at
Through Be Delivered Received 1998 December 31, 1998 December 31, 1998
- ---------- ----------------------------- --------------- --------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
7/15/99 156,000 Australian Dollar 97,706 95,238 2,468 --
7/22/99 230,000 Swiss Franc 171,455 169,426 2,029 --
7/08/99 397,000 Deutsche Mark 239,265 239,812 -- (547)
7/01/99 1,436,000 French Franc 261,818 261,146 672 --
5/05/99 0 Pound Sterling 40,222 40,146 76 --
7/29/99 72,113,000 Japanese Yen 689,148 747,418 -- (58,270)
10/05/01 368,500 New Zealand Dollar 190,969 194,621 -- (3,652)
---------- -------------- ------------ ---------------
1,690,583 1,747,807 5,245 (62,469)
---------- -------------- ------------ ---------------
$1,699,640 $1,756,947 $5,246 $(62,553)
========== ============== ============ ===============
</TABLE>
13
<PAGE>
SoGen Overseas Variable Fund
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
For the Period
Year Ended February 3, 1997++
December 31, to December 31,
1998 1997
------------ ------------------
<S> <C> <C>
Selected Per Share Data
Net asset value, beginning of period........... $ 9.77 $10.00
------ ------
Income from investment operations:
Net investment income (loss)................. 0.12 (0.01)
Net realized and unrealized gains (losses) on
investments................................. 0.29 (0.22)
------ ------
Total from investment operations............ 0.41 (0.23)
------ ------
Less distributions:
Dividends from net investment income......... (0.11) --
------ ------
Net asset value, end of period................. $10.07 $ 9.77
====== ======
Total Return................................... 4.21% (2.30%)@
Ratios and Supplemental Data
Net assets, end of period (000's).............. $4,213 $1,391
Ratio of operating expenses to average net
assets........................................ 1.50%+ 2.00%*+
Ratio of net investment income to average net
assets........................................ 2.04%# (0.14%)*#
Portfolio turnover rate........................ 21.35% 8.88%
</TABLE>
- --------
++ Commencement of operations.
@ Total return is not annualized, as it may not be representative of the total
return for the year.
* Annualized.
+ The annualized ratios of operating expenses to average net assets for the
year ended December 31, 1998 and the period from February 3, 1997 to Decem-
ber 31, 1997 would have been 4.98% and 16.07%, respectively, without the
effect of earnings credits, and the investment advisory fee waiver and ex-
pense reimbursement provided by SGAM Corp.
# The annualized ratios of net investment income to average net assets for
the year ended December 31, 1998 and the period from February 3, 1997 to
December 31, 1997 would have been (1.44%) and (14.20%) respectively, with-
out the effect of earnings credits, and the investment advisory fee waiver
and expense reimbursement provided by SGAM Corp.
- --------
See Notes to Financial Statements.
14
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders of
SoGen Variable Funds, Inc.:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of SoGen Overseas Variable Fund, a portfolio of
SoGen Variable Funds, Inc., as of December 31, 1998, the related statement of
operations for the year then ended, and statements of changes in net assets and
financial highlights for the year then ended and for the period from February
3, 1997 (commencement of operations) to December 31, 1997. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1998, by correspondence with the custodians. As to securities
purchased and sold but not yet received or delivered we performed other
appropriate auditing procedures. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of SoGen
Overseas Variable Fund, a portfolio of SoGen Variable Funds, Inc. as of Decem-
ber 31, 1998, and the results of its operations for the year then ended, and
the changes in its net assets and the financial highlights for the year then
ended and for the period from February 3, 1997 to December 31, 1997, in confor-
mity with generally accepted accounting principles.
KPMG LLP
New York, New York
February 12, 1999
15
<PAGE>
SoGen Overseas Variable Fund
1221 Avenue of the Americas
New York, NY 10020
DIRECTORS AND OFFICERS
Directors
Philippe Collas Dominique Raillard
Jean-Marie Eveillard Nathan Snyder
Fred J. Meyer
Officers
<TABLE>
<S> <C>
Philippe Collas...........................................Chairman of the Board
Jean-Marie Eveillard..................................................President
Philip J. Bafundo.......................Vice President, Secretary and Treasurer
Ignatius Chithelen...............................................Vice President
Sean J. McKeown..................................................Vice President
Edwin S. Olsen...................................................Vice President
Catherine A. Shaffer.............................................Vice President
Elizabeth Tobin..................................................Vice President
Charles de Vaulx.................................................Vice President
Lynn L. Chin...................Assistant Vice President and Assistant Treasurer
Richard M. Boyer.......................................Assistant Vice President
John L. DeVita.........................................Assistant Vice President
Carol Moreno................................................Assistant Secretary
Warren Chan.................................................Assistant Treasurer
</TABLE>
INVESTMENT ADVISER UNDERWRITER
Societe Generale Asset Management Corp. SG Cowen Securities Corporation
1221 Avenue of the Americas 1221 Avenue of the Americas
New York, NY 10020 New York, NY 10020
LEGAL COUNSEL INDEPENDENT AUDITORS
Dechert Price & Rhoads KPMG LLP
30 Rockefeller Plaza 757 Third Avenue
New York, NY 10112 New York, NY 10017
DOMESTIC CUSTODIAN GLOBAL CUSTODIAN
Investors Fiduciary Trust Company The Chase Manhattan Bank
801 Pennsylvania 4 Chase MetroTech Center
Kansas City, MO 64105 Brooklyn, NY 11245
SHAREHOLDER SERVICING AGENT
Investors Fiduciary Trust Company
801 Pennsylvania
Kansas City, MO 64105
This report is not authorized for distribution to prospective investors unless
preceded or accompanied by a currently effective prospectus of SoGen Variable
Funds, Inc.