<PAGE>
As filed with the Securities and Exchange Commission
on January 26, 1999 (to be effective April 1, 1999)
Securities Act File No. 333-40327
Investment Company Act File No 811-8487
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ X ]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 1 [ X ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 [ X ]
Amendment No. 2 [ X ]
(Check appropriate box or boxes)
SG COWEN SERIES FUNDS, INC.
.................................................................
(Exact Name of Registrant as Specified in Charter)
Financial Square
New York, New York 10005
...................................... ........
(address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (212) 495-6000
Rodd M. Baxter, Esq.
SG Cowen Series Funds, Inc.
Financial Square
New York, New York 10005
...........................................
(Name and Address of Agent for Service)
Copies to:
Jon S. Rand, Esq.
Willkie, Farr & Gallagher
787 Seventh Avenue
New York, New York 10019
Approximate Date of Proposed Public Offering
As soon as practicable after the effective
date of this Registration Statement
<PAGE>
It is proposed that this filing will become effective (check appropriate box):
Immediately upon filing pursuant to paragraph (b), or
- ---
on pursuant to paragraph (b), or
- ---
60 days after filing pursuant to paragraph (a), or
- ---
X on April 1, 1999 pursuant to paragraph (a)(1)
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75 days after filing pursuant to paragraph (a)(2)
- ---
on (date) pursuant to paragraph (a)(2) of Rule 485.
- ---
2
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SG Cowen Large Cap Value
Fund
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the accuracy or adequacy of this prospectus, and any
representation to the contrary is a criminal offense.
<TABLE>
<S> <C>
[LOGO] [LOGO]
</TABLE>
<PAGE>
TABLE OF CONTENTS
<TABLE>
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Page
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<S> <C>
Fund Profile............................................. 3
How We Manage the Fund................................... 6
Our investment strategies................................ 6
The securities in which we typically invest.............. 6
The risks of investing in the Fund....................... 7
Who Manages the Fund..................................... 7
Investment adviser....................................... 7
Management Fees.......................................... 8
Portfolio Manager........................................ 8
About Your Account....................................... 8
Choosing share class..................................... 8
How to reduce your sales charge.......................... 9
How to buy shares........................................ 10
How to sell shares....................................... 10
Account minimum.......................................... 10
Special services......................................... 11
Dividends, distributions and taxes....................... 11
Financial Highlights..................................... 12
</TABLE>
2
<PAGE>
Fund Profile:
What are the Fund's goals?
The Fund seeks primarily capital appreciation, with a secondary goal of
current income. Although the Fund will strive to achieve these goals, there is
no assurance that it will.
What are the Fund's main investment strategies?
Under normal conditions, we invest at least 80 percent of the Fund's assets
in equity securities of companies with market capitalizations over $2 billion.
We focus on companies that we believe have the potential for above-average
growth. We focus on stocks that we believe are undervalued at the time we
purchase them.
Additional information about the Fund's investments is available in the
Fund's annual and semi-annual reports to shareholders and the statement of
additional information.
What are the main risks of investing in the Fund?
Investing in any mutual fund involves risk, including the risk that you may
lose part or all of the money you invest. The price of Fund shares will increase
and decrease according to changes in the value of the Fund's investments. The
Fund will be particularly affected by changes in stock prices, which tend to
fluctuate more than bond prices. For further discussion of risk, see "How We
Manage the Fund."
You should keep in mind that an investment in the Fund is not a complete
investment program; it should be considered just one part of your total
investment program. You may wish to discuss this Fund with your financial
adviser to determine whether it is an appropriate choice for you.
3
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How has the Fund performed?
The bar chart and table below can help you evaluate the potential risks and
rewards of investing in the Fund. We show you the Fund's return over its initial
calendar year, as well as the average annual return of all of the Fund's shares
- -- compared to the performance of the S&P 500 Index and the Russell 1000 Index.
You should remember that unlike the Fund, the S&P 500 Index and the Russell 1000
Index are unmanaged and do not include the costs of buying, selling, and holding
the securities. The Fund's past performance is not necessarily an indication of
how it will perform in the future.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
1998 RETURN SG Cowen Income & Growth Fund
<S> <C>
Year-end
return
1998 -3.27
</TABLE>
Calendar year return (Class A)
The maximum Class A sales charge of 4.75%, assessed when you purchase
shares, is not reflected in the total return. If this fee were included, the
returns would be less than that shown. The annual returns shown below do include
the sales charge.
FOOTNOTE TO BAR CHART: During the year illustrated above, the Fund's highest
return in one quarter was +10.09% (12/31/98) and its lowest return in one
calendar quarter (9/30/98) was -16.39%.
annual return as of 12/31/98
<TABLE>
<CAPTION>
1 Year
-----------
<S> <C>
SG Cowen Large Cap Value Fund, Class A......................................... (7.87)%
S&P 500........................................................................ 28.76%
Russell 1000................................................................... 15.63%
SG Cowen Large Cap Value Fund, Class B......................................... (17.75)%*
SG Cowen Large Cap Value Fund, Class I......................................... (0.76%)**
</TABLE>
* From inception April 17, 1998
** From inception February 2, 1998
4
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What are the Fund's fees and expenses?
These tables describe the fees and expenses you may pay in connection with
an investment in the Fund.
Shareholders fees are paid directly from your investment. The Fund may waive
or reduce sales charges. Please see the Statement of Additional Information for
additional information on sales charges.
<TABLE>
<CAPTION>
Share Class A B I
- ------------------------------------------------------------- -------- ------ ------
<S> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a % of
offering price)............................................ 4.75%(1) None None
Maximum Contingent Deferred Sales Charge (Load) (as a % of
purchase price or redemption price, whichever is lower).... None 5%(2) None
Maximum Sales Charge (Load) on Reinvested Dividends.......... None None None
Redemption Fee(3)............................................ None None None
Exchange Fee................................................. None None None
</TABLE>
Annual fund operating expenses are expenses that are deducted from the
Fund's assets.
<TABLE>
<CAPTION>
Share Class A B I
- ---------------------------------------------------------------------- ------ ------ ------
<S> <C> <C> <C>
Management Fees....................................................... 0.75% 0.75% 0.75%
Distribution and Service (12b-1) Fees................................. 0.25% 1.00% 0.0%
Other Expenses........................................................ 0.94% 1.08% 0.88%
Total Operating Expenses(4)........................................... 1.94% 2.83% 1.63%
</TABLE>
Example(5)
This example is intended to help you compare the cost of investing in the
Fund to the cost of investing in other mutual funds. We show the cumulative
amount of Fund expenses on a hypothetical investment of $10,000 assuming an
annual 5% return and the Fund's operating expenses remaining the same. Unless
otherwise indicated, the example assumes that you redeem all of your shares at
the end of each period. This is an example only, and does not represent future
expenses, which may be greater or less than those shown here.
<TABLE>
<CAPTION>
10
1 Year 3 Years 5 Years Years
------- ------- ------- -------
<S> <C> <C> <C> <C>
Class A............................... $ 663 $1,055 $1,472 $2,632
Class B (assumes redemption at end of
period)............................. $ 786 $1,177 $1,694 $3,157
Class B (assumes no redemption)....... $ 286 $ 877 $1,494 $3,157
Class I............................... $ 166 $ 514 $ 887 $1,933
</TABLE>
- ------------
(1) A purchase of Class A shares at $1 million or more will be made at net asset
value.
(2) If you redeem Class B shares during the first year after you buy them, the
shares will be subject to a contingent deferred sales charge of 5%. The
contingent deferred sales charge is 4% during the second year, 3% during the
third and fourth years, 2% during the fifth year, 1% during the sixth year,
and 0% thereafter.
(3) The Fund currently charges $10.00 per redemption for redemptions payable by
wire.
(4) All expenses have been annualized. The above tables do not reflect SG
Cowen's voluntary reimbursement of expenses. The total annual operating
expenses after considering the reimbursement would have been 1.22%, 1.97%
and .97% for Class A, B and I, respectively.
(5) The Fund's actual rate of return may be greater or less than the
hypothetical 5% return we use here.
5
<PAGE>
HOW WE MANAGE THE FUND
Our investment strategies
Using rigorous and disciplined research, we analyze economic and market
conditions, seeking to identify the stocks that we think bring the greatest
returns. The following is a description of how we pursue the Fund's objectives.
We invest primarily in pursuit of the Fund's investment objective of capital
appreciation. To achieve this goal, we blend a number of investment strategies
to manage the Fund. We generally invest at least 80 percent of the Fund's assets
in companies with market capitalization of over $2 billion. All of the companies
in which we invest will have market capitalizations over $1 billion, and the
average weighted market capitalization of the Fund's portfolio will be over $20
billion. We emphasize investing in companies with value characteristics below
the Russell 10000 Value Index. We seek companies that we believe are neglected
or out of favor and whose stock prices are low in relation to current earnings,
cash flow, book value and sales. Generally, we seek companies who have one or
more of the following characteristics: price-to-earnings ratios in the lower 40
percent of the market; price-to-cash flow in the lower 20 percent of the market;
price-to-book in the lower 20 percent; price-to-sales ratios in the lower 20
percent. We seek those companies we believe have reasonable prospects for growth
even though the expectations for these companies are low and their valuations
temporarily depressed. We may also invest in covered call options and purchase
commercial paper.
The securities in which we typically invest
The following is a description of the securities in which we normally
invest. Please see the Statement of Additional Information for additional
descriptions and risk information on these and all the securities in which we
invest.
Equity securities: equity securities include common and preferred stocks;
warrants to purchase common stocks or preferred stocks; securities convertible
into common or preferred stocks, such as convertible bonds and debentures;
American Depository Receipts, commonly known as ADRs, and other securities with
equity characteristics. American Depository Receipts are typically certificates
issued by a U.S. bank which represent a stated number of shares of a foreign
corporation that the bank holds in its vault.
Commercial paper: the short-term, unsecured debt of corporations, usually
maturing in no more than 270 days from date it is issued.
Covered call options: an agreement that gives the buyer the right but not
the obligation to buy a certain amount of a specific security for a specific
price within a certain time period regardless of the market price of the
security. A call option is termed covered when the seller owns the securities
underlying the option.
In particular, the Fund's annual report discusses the relevant market
conditions and investment strategies used by the Fund's investment adviser that
materially affected the Fund's performance during the last fiscal year. You may
obtain these reports at no cost by calling 1-800-309-1111.
Temporary defensive position
For temporary defensive purposes, in attempt to respond to adverse market
economic or political conditions, we may invest up to 20% of the Fund's assets
and in excess of that amount when market conditions
6
<PAGE>
warrant, in fixed-income securities such as corporate bonds, commercial paper,
or short-term money market securities such as obligations issued or guaranteed
by the U.S. Government. To the extent we find it necessary to invest in such
securities, we may not achieve the Fund's goal.
The risks of investing in the Fund
Investing in any mutual fund involves risk, including the risk that you may
receive little or no return on your investment, and the risk that you may lose
part or all of the money you invest. Therefore, before you invest in the Fund
you should carefully evaluate the risks. Because of the nature of the Fund's
investment, you should consider an investment in the Fund to be a long-term
investment that typically provides the best results when held for a number of
years. The following are the chief risks you assume when investing in the Fund:
(1) Market risk is the risk that all or a majority of the securities in a
certain market-- like the stock or bond market-- will decline in value because
of factors such as economic conditions, future expectations or investor
confidence; (2) Liquidity risk is the possibility that securities cannot be
readily sold, or can only be sold at a price significantly lower than their
broadly recognized value; and (3) Industry and security risk is the risk that
the value of securities in a particular industry or the value of an individual
stock or bond will decline because of changing expectations for the performance
of that industry or for the individual company issuing the stock or bond.
Year 2000 risks
Like other mutual funds, the Fund could be adversely affected if the
computer systems used by the Investment Adviser and other service providers do
not properly process and calculate date-related information after January 1,
2000. This is commonly known as the "Year 2000 Problem." This problem may also
adversely affect the issues in which the Fund invests. The Investment Adviser is
taking steps that it believes are reasonably designed to address the Year 2000
Problem with respect to the computer systems that it uses, and to obtain
satisfactory assurances that comparable steps are being taken by the Fund's
other major service providers. At this time, however, there can be no assurance
that these steps will be sufficient to avoid any adverse impact on the Fund.
WHO MANAGES THE FUND
The officers of the Fund conduct the Fund's daily business operations,
subject to the supervision of the Fund's Board of Directors.
Investment adviser
From the Fund's commencement of operations until July 1, 1998, Cowen & Co
("Cowen") served as investment manager to the Fund. On July 1, 1998, Cowen's
business was combined with Societe Generale Securities Corporation, a subsidiary
of Societe Generale ("SG"), to form SG Cowen Securities Corporation ("SG
Cowen"). SG, a leading international commercial and investment bank established
in 1864, has a global network of offices in over 80 countries. Since July 1,
1998, SG Cowen, through its investment management division, SG Cowen Asset
Management, has served as the new investment adviser to the Fund, with the
existing investment management personnel of Cowen continuing to provide
investment management services to the Fund for the same management fee described
below. SG Cowen, which currently manages approximately $6 billion in assets,
manages the Fund's business affairs, including being responsible for the Fund's
investment program, and provides daily administrative services.
7
<PAGE>
Management fees
For managing the Fund and its investments, the adviser is paid a yearly fee
of 0.75% of daily net asset value.
Portfolio Manager
Benedict Capaldi is primarily responsible for the daily management of the
Fund and has had such responsibility since the Fund commenced operations in
1998. He is a Senior Investment Officer, and has served as a Managing Director
and Portfolio Manager of SG Cowen since July 1, 1998. He was a Managing Director
and Portfolio Manager of Cowen Asset Management since December, 1996. Before
joining Cowen, he was a Portfolio Manager for Provident Capital Management,
Inc., Senior Vice President and Portfolio Manager for Radnor Capital Management
and President of Chestnut Hill Advisors, Inc. He is a Chartered Financial
Analyst with 32 years of investment experience.
ABOUT YOUR ACCOUNT
You can choose from a number of share classes. Because each share class has
a different combination of sales charges, fees, and other features, you should
consult your financial adviser to determine which class best suits your
investment goals and time frame.
Choosing a share class
Class A Class A shares have an up-front sales charge of up to 4.75% that
you pay when you buy the shares. If you invest $50,000 or more your front-end
sales charge will be reduced. You may qualify for other reduced sales charges,
as described in "How To Reduce Your Sales Charges," and under certain
circumstances the sales charge may be waived; please see the Fund's Statement of
Additional Information. Class A shares are also subject to an annual 12b-1 fee
no greater than 0.25% of the Fund's average daily net assets, which is lower
than the 12b-1 fee for Class B shares. The 12b-1 plan allows the Fund to pay
distribution fees for the sale and distribution of its shares. Class A shares
are not subject to a contingent deferred sales charge. The offering price
includes a front-end sales charge.
Class A Shares Fees
<TABLE>
<CAPTION>
Sales charge as Sales charge as % Dealer's commission
% of offering of amount as % of offering
Amount of purchase price invested price
- ---------------------------------------- --------------- ----------------- ---------------------
<S> <C> <C> <C>
Up to $49,999........................... 4.75% 5.00% 4.00%
$50,000 to $99,999...................... 4.00% 4.17% 3.25%
$100,000 to $249,999.................... 3.75% 3.90% 3.00%
$250,000 to $499,999.................... 2.50% 2.56% 2.00%
$500,000 to $999,999.................... 2.00% 2.04% 1.50%
$1,000,000 to $2,999,999................ 0% 0% 1.00%
$3,000,000 to $3,999,999................ 0% 0% 0.50%
</TABLE>
If you invest $4 million or more, you will receive Class I shares, which are
not subject to any sales charge or service fee.
8
<PAGE>
Class B Class B shares have no up-front sales charge, so the full amount of
your purchase is invested in the Fund. However, you will pay a contingent
deferred sales charge if you redeem your shares within six years after you buy
them. If you redeem Class B shares during the first year after you buy them, the
shares will be subject to a contingent deferred sales charge of 5%. The
contingent deferred sales charge is 4% during the second year, 3% during the
third and fourth years, 2% during the fifth year, 1% during the sixth year, and
0% thereafter. Under certain circumstances the contingent deferred sales charge
may be waived; please see the Fund's Statement of Additional Information. Class
B shares are subject to an annual 12b-1 fee no greater than 1% of the Fund's
average daily net assets, of which .75% are distribution fees and 0.25% are
service fees paid for providing services and maintaining shareholder accounts.
The 12b-1 plan allows the Fund to pay distribution fees for the sale and
distribution of its shares.
Class I Class I shares have no up-front sales charge, so the full amount of
your purchase is invested in the Fund. Class I shares are not subject to a
contingent deferred sales charge or to an annual 12b-1 fee. Class I shares may
be referred to as institutional shares. They are available exclusively to
certain types of investors such as employee benefit plans of selected dealers of
the Fund, charitable organizations, investment advisory and consulting clients
of SG Cowen, accounts as to which a broker, registered investment adviser, or
bank charges an account management fee and certain omnibus accounts. Please
contact your financial adviser for further information or see the Fund's
Statement of Additional Information.
How to reduce your sales charge
We offer a number of ways to reduce or eliminate the sales charge on shares.
Please refer to the Fund's Statement of Additional Information for detailed
information and eligibility requirements. You can also get additional
information from your financial adviser. You or your financial adviser must
notify us at the time you purchase shares if you are eligible for any of these
programs.
Program
<TABLE>
<S> <C>
Letter of Intent You can use a Letter of Intent to combine all your purchases
of Class A shares in selected SG Cowen Funds over a 13-month
period to qualify for reduced front-end sales charges.
Rights of accumulation You may also combine your previous purchases of Class A shares
in the Fund along with the purchase of Class A shares of
selected other SG Cowen Funds to reduce your front-end sales
charges.
Reinvestment of Up to 30 days after you redeem your Class A shares, you can
redeemed shares reinvest the proceeds without paying a front-end Sales charge.
You may use this privilege only once.
Certain individuals, Qualified individuals, organizations, retirement and profit
employees of SG Cowen, sharing plans, and others may qualify for the purchase of
401(k) and other Class A shares without a sales charge.
retirement plans
Please see your financial adviser to determine whether you qualify for any of these
programs, or consult the Statement of Additional Information.
</TABLE>
9
<PAGE>
How to buy shares
Your financial adviser can handle all the details of purchasing shares,
including opening an account. You can also invest in the Fund by mail. Complete
an investment slip indicating the class of shares you wish to purchase, and mail
it with your check payable to the Fund and class of shares you wish to purchase
to: DST Systems, Inc. ("DST"), 210 West 10th Street, Kansas City, MO 64105. If
you are making an initial purchase by mail, you must include a completed
Investment Application, or an appropriate retirement plan application if you are
opening a retirement account, with your check. If you want to purchase shares by
Federal wire, contact the Fund directly at 1-800-309-1111. There is no charge
for establishing or maintaining an account.
You can open an account with an initial investment of $1,000 and make
additional investments at any time for as little as $100. The price you pay for
shares will depend on when we receive your purchase order. If you are buying
shares in an IRA, or a retirement plan for self-employed persons, the minimum
initial purchase is $500, and additional investments of only $50 after that.
If your order is received before 4:15 p.m. Eastern time on a business day,
you will pay that day's closing share price which is based on the Fund's net
asset value. If your order is received after 4:15 p.m., you will pay the next
business day's price. A business day is any day that the New York Stock Exchange
is open for business. We reserve the right to reject any purchase order.
Normally, we determine the Fund's net asset value (NAV) per share as of 4:15
p.m. Eastern time each day the New York Stock Exchange is open for business. We
calculate the net asset value per share by adding the market value of all the
securities and other assets in the Fund's portfolio, deducting all liabilities,
and dividing the resulting number by the number of shares outstanding. We price
securities and other assets for which market quotations are available at their
market value. Any short-term investments which have a maturity of less than 60
days are priced at amortized cost.
How to sell shares
You can sell your shares back to the Fund by mail or by contacting your
financial adviser. Generally, SG Cowen and other authorized dealers will act on
your oral instructions to redeem shares. If you send a written order to DST to
redeem shares, your request must be signed by all owners of the account, and you
must include a signature guarantee for each owner. If you hold your shares in
certificates, you must submit the certificates with your request to sell the
shares.
When a properly completed request to sell or exchange shares is received by
4:15 p.m. Eastern time on any day the New York Stock Exchange is open for
business, you will receive the net asset value as determined on the business day
your request is received. We will pay you normally within three business days,
but no later than seven days after your request to sell your shares is received.
If you purchased your shares by check, we will wait until your check has
cleared, which can take up to 15 days, before we send you the proceeds from the
sale of your shares.
Account Minimum
If as a result of redemption your account balance falls below the required
minimum amount of $500, you will have 30 days to raise the balance to the
minimum after we notify you in writing. If your account is not at the minimum by
the required time, we may redeem it.
10
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Special Services
To help make investing with us as easy as possible, and to help you build
your investments, we offer the following special services. You can get further
information about these programs by calling Shareholder Services at
1-800-309-1111.
- - You can exchange all or part of your shares for the same class of shares in
certain other SG Cowen funds without paying a sales charge. When you exchange
shares, you are purchasing shares in another fund, so you should be sure get a
copy of the Fund's prospectus and read it carefully before buying shares
through an exchange. For income tax purposes, an exchange is treated as a
concurrent sale and purchase and any gain on the transaction may be subject to
income tax. Therefore, you should consult your tax adviser about the tax
consequences of any exchange.
- - You can automatically invest regular monthly investments of $100 or more
directly from your checking account. No fee is charged for these automatic
transactions, but a service charge of $10.00 will be deducted for checks
returned for insufficient funds. The Fund reserves the right upon notification
to all participants, to impose a fee in the future.
- - You may buy shares in the Fund for your individual or group retirement plan,
including your Individual Retirement Account (IRA), Roth IRA and Education
IRA.
- - Through our Systematic Withdrawal Plan, you can arrange a regular monthly,
quarterly, or annual payment from your account made to you or someone you
designate. If the value of your account is $10,000 or more, you can make
withdrawals of at least $50 monthly.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Fund declares and pays income dividends quarterly, while any net
realized capital gains are generally distributed annually. We automatically
reinvest all dividends and any capital gains, unless you tell us otherwise.
Tax laws are subject to change, so we urge you to consult your tax adviser
about your particular tax situation and how it might be affected by current tax
law. The tax status of your dividends from this Fund is not affected by whether
you reinvest your dividends or receive them in cash. Dividends from short-term
capital gains and net investment income are generally taxable as ordinary
income; dividends from long-term capital gains are taxable as capital gains. In
addition, you may be subject to state and local taxes on distributions.
We will send you a statement each year detailing the amount and tax status
of all dividends and capital gains that you were paid during the prior year
11
<PAGE>
FINANCIAL HIGHLIGHTS
These financial highlights tables are intended to help you understand the
Fund's financial performance since its inception. All information reflects
financial results for each class of a single share in the Fund. This information
has been audited by Ernst & Young LLP, whose report, along with the Fund's
financial statements, is incorporated by reference in the Fund's annual report,
which is available upon request by calling 800-309-1111.
<TABLE>
<CAPTION>
SG Cowen
Large Cap Value Fund
-----------------------------------------------
Class A
-----------------
Period From Class B Class I
1/2/98 ------------- -------------
(Commencement Period From Period From
of Operations) 4/17/98(4) 2/2/98(4)
Through Through Through
11/30/98 11/30/98 11/30/98
----------------- ------------- -------------
<S> <C> <C> <C>
Net Asset Value
Beginning of Period $ 10.00 $ 11.11(1) $ 9.77(1)
------- ------ ------
Income from Investment Operations
Investment Income - Net 0.08 0.01 0.10
Net Realized and Unrealized Gains (Losses)
on Investments (0.49) (1.58) (0.25)
------- ------ ------
Net from Investment Operations (0.41) (1.57) (0.15)
------- ------ ------
Less Distributions:
Dividends from Net Investment Income (0.06) (0.01) (0.08)
------- ------ ------
Total Distributions (0.06) (0.01) (0.08)
------- ------ ------
Net Asset Value
End of Period $ 9.53 $ 9.53 $ 9.54
------- ------ ------
------- ------ ------
Total Return(3)(5) (4.08%) (14.15%) (1.56%)
Ratios / Supplementary Data
Net Assets (000 omitted) $ 12,043 $ 164 $ 1,153
Ratio of Expenses to Average Net Assets 1.11%(3) 1.23%(3) 0.80%(3)
Ratio of Investment Income - Net to
Average Net Assets 0.85%(3) 0.10%(3) 1.01%(3)
Decrease Reflected on Above Ratios Due to
Expense Reimbursements/Waivers 0.66% 0.53%(3) 0.55%(3)
Portfolio Turnover Rate 67%(3) 67%(3) 67%(3)
</TABLE>
- ------------
(1) Based upon the Class A Net Asset Value on the day prior to commencement of
distribution
(2) Annualized
(3) Not Annualized
(4) Commencement of Distribution
(5) Exclusive of Sales Charges
12
<PAGE>
Additional information about the Fund's investments is available in the
Fund's annual and semi-annual reports to shareholders. In the Fund's annual
report, you will find a discussion of the market conditions and investment
strategies that significantly affected the Fund's performance during its last
fiscal year. You can find more detailed information about the Fund in its
current Statement of Additional Information, which we have filed electronically
with the Securities and Exchange Commission (SEC) and which is legally a part of
this prospectus. If you want a free copy of the Statement of Additional
Information, the annual or semi-annual report, or if you have any questions
about investing in this Fund, you can write to us at Financial Square, New York,
NY 10005, or Funds Distributor Inc., the Fund's distributor, at 60 State Street,
Boston, MA 02109, or call toll-free 800-309-1111.
You can find reports and other information about the Fund on the SEC Web
site (http://www.sec.gov), or you can get copies of this information, after
payment of a duplicating fee, by writing to the Public Reference Section of the
SEC, Washington, D.C. 20549-6009. Information about the Fund, including the
Statement of Additional Information, can be reviewed and copied at the
Securities and Exchange Commission's Public Reference Room in Washington, D. C.
You can get information on the public reference room by calling the SEC at
1-800-SEC-0330.
Investment Company Act file number: 811-8487
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STATEMENT OF ADDITIONAL INFORMATION
APRIL 1, 1999
SG COWEN LARGE CAP VALUE FUND
FINANCIAL SQUARE, NEW YORK, NY 10005, (212) 495-6724,
(800) 262-7116
CONTENTS
Page
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History. . . . . . . . . . . . . . . . . . . . . 2
Investment Objectives and Policies . . . . . . . 2
Management of the Fund . . . . . . . . . . . . . 6
Capital Stock . . . . . . . . . . . . . . . 10
Net Asset Value . . . . . . . . . . . . . . 11
Purchase of Shares . . . . . . . . . . . . 11
Exchange Privilege. . . . . . . . . . . . . 14
Redemption of Shares. . . . . . . . . . . . 15
Taxation . . . . . . . . . . . . . . . . . . . . 17
Performance Information. . . . . . . . . . . . . 18
Other Information. . . . . . . . . . . . . . . . 19
Financial Statements . . . . . . . . . . . . . . 19
This Statement of Additional Information is meant to be read in
conjunction with the Prospectus of SG Cowen Large Cap Value Fund (the
"Fund") dated April 1, 1999, and is incorporated by reference in its
entirety into that Prospectus. Because this Statement of Additional
Information is not itself a prospectus, no investment in shares of the Fund
should be made solely upon the information contained herein. Copies of the
Fund's Prospectus may be obtained by calling Funds Distributor, Inc., the
Fund's principal underwriter, at (800) 221-7930 or by contacting SG Cowen
Securities Corporation (SG Cowen) at (800) 262-7116 or any of its account
representatives.
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The Fund's financial statement and report of independent auditors thereon as of
and for the fiscal year ended November 30, 1998 are incorporated by reference to
the Fund's Annual Report, which may be obtained without charge by calling the
toll-free number above. SG Cowen, through its investment management division SG
Cowen Asset Management (SGCAM), is the investment manager to the Fund.
HISTORY
The Fund is a series of Cowen Series Funds, Inc., which was incorporated on
November 6, 1997 under the laws of the State of Maryland and commenced operation
on January 2, 1998. On July 1, 1998, the name of the Fund was changed from
Cowen Large Cap Value Fund to SG Cowen Large Cap Value Fund.
INVESTMENT OBJECTIVES AND POLICIES
The primary investment objective of the Fund, which is a diversified
open-end management investment company, is to provide capital appreciation.
Current income from dividends is a secondary objective of the Fund.
INVESTMENT STRATEGY
Although a consideration in the selection of the Fund's investments,
current income is not the primary objective of the Fund and investors should not
expect dividend income comparable to that of mutual funds with a high level of
dividend income as a primary objective. Because the Fund will invest primarily
in equity securities, it will be subject to general conditions prevailing in
securities markets and the net asset value of the Fund's shares will fluctuate
with changes in the market prices of its portfolio securities. It is anticipated
that the securities in which the Fund will invest will be traded on the New York
or American Stock Exchanges, although the Fund may invest in securities traded
in the over-the-counter market. SGCAM will attempt to avoid investment in
speculative securities or those with speculative characteristics and the Fund
has adopted certain other policies designed to limit investment risk. See
"Investment Restrictions."
In managing the Fund's assets, SG Cowen Asset Management uses the SG Cowen
Large Cap Value approach, which is a five-step investment process seeking to
identify neglected or out-of-favor companies whose stock prices are low in
relation to current earnings, cashflow, book value and sales.
Stocks are selected out of a universe of approximately 650 stocks worldwide,
each with a capitalization in excess of $1 billion. The discipline screens for
these stocks whose price-to-earnings ratios are in the lower 40% of the market
and/or whose price-to-cashflow, price-to-book and/or price-to-sales ratios are
in the lower 20% of the market. For these purposes, the "market" is defined as
the Russell 1000 Value Index. The composition and characteristics of this index
may vary from time to time, but it is not anticipated that these variations
ordinarily would prompt a change in the Fund's value screening methodology. In
addition, independent and fundamental analyses are conducted with the goal of
adding value by selecting those stocks with reasonable prospects when
expectations are low and valuations are temporarily depressed.
SG Cowen Asset Management adheres to a strict risk management and sell
discipline. The approach attempts to control risk both through diversification
across sectors, industries and issues and also by monitoring sector and industry
weightings relative to appropriate benchmarks. It is the practice of this
approach to sell stocks either when they have achieved a relative valuation
target price or in the event that fundamentals fail to improve as expected or
deteriorate causing undue risk. SG Cowen Asset Management may make modifications
of its investment strategy for the Fund as it deems advisable in light of its
experience in managing the Fund or in response to changing market or economic
conditions.
INFORMATION ON INVESTMENT PRACTICES AND RISKS
U.S. GOVERNMENT SECURITIES. Examples of the types of U.S. Government
securities that the Fund may hold include, in addition to those described in the
Prospectus, U.S. Treasury Bills, the obligations of the Federal Housing
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Administration, Farmers Home Administration, Small Business Administration,
General Services Administration, Central Bank for Cooperatives, Federal Farm
Credit Banks, Federal Home Loan Banks, Federal Home Loan Mortgage Corporation,
Federal Intermediate Credit Banks, Federal Land Banks and Maritime
Administration. It is not anticipated that the Fund will in the foreseeable
future invest in excess of five percent of its net assets in U.S. Government
securities that represent interests in pools of mortgages.
LENDING OF SECURITIES. The Fund has the authority to lend securities to
brokers, dealers and the other financial organizations. The Fund will not lend
securities to SG Cowen or its affiliates. By lending its securities, the Fund
can increase its income by continuing to receive interest on the loaned
securities as well as by either investing the cash collateral in short-term
securities or obtaining yield in the form of interest paid by the borrower when
U.S. Government securities are used as collateral. The Fund will adhere to the
following conditions whenever its securities are loaned: (a) the Fund must
receive at least 100 percent cash collateral or equivalent securities from the
borrower; (b) the borrower must increase this collateral whenever the market
value of the loaned securities including accrued income rises above the level of
the collateral; (c) the Fund must be able to terminate the loan at any time; (d)
the Fund must receive reasonable interest on the loan, as well as any dividends,
interest or other distributions on the loaned securities and any increase in
market value; (e) the Fund may pay only reasonable custodian fees in connection
with the loan; and (f) voting rights on the loaned securities may pass to the
borrower; provided, however, that if a material event adversely affecting the
investment occurs, the Fund's Board of Directors must terminate the loan and
regain the right to vote the securities.
COVERED CALL OPTIONS. In an effort to enhance the Fund's performance
through receipt of premiums and generally to assist in the management of its
portfolio, the Fund may engage without limitation in the writing (selling) of
call option contracts on securities at such times as SGCAM shall determine to be
appropriate. The Fund will only write covered call options on securities held
in the portfolio. The premium paid to the writer is the consideration for
undertaking the obligations under the option contract. The writer forgoes the
opportunity to profit from an increase in the market price of the underlying
security above the exercise price except insofar as the premium represents a
profit.
The Fund will purchase options only to close out a call option position. In
order to close out a position, the Fund will make a "closing purchase
transaction" which involves the purchase of a call option on the same security
with the same exercise price and expiration date as a call option which it has
previously written. When a security is sold from the Fund's portfolio, the Fund
will effect a closing purchase transaction so as to close out any existing call
option on that security. The Fund will realize a profit or loss from a closing
purchase transaction if the amount paid to purchase a call option is less or
more than the amount received from the sale thereof.
Options written by the Fund will normally have expiration dates between one
and nine months from the date written. So long as the obligation of the Fund as
the writer of an option continues, the Fund may be assigned an exercise notice
by the broker-dealer through which the option was sold, requiring the Fund to
deliver the underlying security against payment of the exercise price. This
obligation terminates when the option expires or the Fund effects a closing
purchase transaction. The Fund can no longer effect a closing purchase
transaction with respect to an option once it has been assigned an exercise
notice. To secure its obligation to deliver the underlying security when it
writes a call option the Fund will be required to deposit in escrow the
underlying security or other assets in accordance with the rules of the Options
Clearing Corporation (the "Clearing Corporation") and of the national
securities exchange on which the option is written.
An option position may be closed out only where there exists a secondary
market for an option of the same series on a recognized national securities
exchange in the over-the-counter market. In light of this fact and current
trading conditions the Fund expects to write options only on national securities
exchanges and in the over-the-counter market. As of the date of this Statement
of Additional Information, the national securities exchanges on which options
are traded are: The Chicago Board Options Exchange, The Board of Trade of the
City of Chicago, American Stock Exchange, Philadelphia Stock Exchange, Pacific
Stock Exchange and New York Stock Exchange ("NYSE"). Options are also traded
on the national securities exchanges with respect to unlisted securities
reported through the NASDAQ system.
Although the Fund will write only those options for which SGCAM believes
there is an active secondary market so as to facilitate closing purchase
transactions, there is no assurance that sufficient trading interest to create a
liquid secondary market on a securities exchange will exist for any particular
option or at any particular time, and for some
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options no such secondary market may exist. A liquid secondary market in an
option may cease to exist for a variety of reasons. In the past, for example,
higher than anticipated trading activity or order flow, or other unforeseen
events, have at times rendered certain of the facilities of the Clearing
Corporation and the national securities exchanges inadequate and resulted in the
institution of special procedures, such as trading rotations, restrictions on
certain types of orders or trading halts or suspensions in one or more options.
There can be no assurance that similar events, or events that may otherwise
interfere with the timely execution of customer orders, will not recur. In such
event, it might not be possible to effect closing purchase transactions in
particular options. If, as a covered call option writer, the Fund is unable to
effect a closing purchase transaction in a secondary market, it will not be able
to sell the underlying securities until the option expires or it delivers the
underlying security upon exercise. The national securities exchanges have
established limitations governing the maximum number of options of each class
which may be held or written, or exercised within certain time periods, by an
investor or group of investors acting in concert (regardless of whether the
options are written on the same or different national securities exchanges or
are held, written or exercised in one or more accounts or through one or more
brokers). It is possible that the Fund and other clients of SG and certain of
its affiliates may be considered to be such a group. A national securities
exchange may order the liquidation of positions found to be in violtion of these
limits and it may impose certain other sanctions.
In the case of options written by the Fund that are deemed covered by
virtue of the Fund's holding convertible or exchangeable preferred stock or debt
securities, the time required to convert or exchange and obtain physical
delivery of the underlying common stocks with respect to which the Fund has
written options may exceed the time within which the Fund must make delivery in
accordance with an exercise notice. In these instances, the Fund may purchase or
temporarily borrow the underlying securities for purposes of physical delivery.
By so doing, the Fund will not bear any market risk, since the Fund will have
the absolute right to receive from the issuer of the underlying security an
equal number of shares to replace the borrowed stock, but the Fund may incur
additional transaction costs or interest expenses in connection with any such
purchase or borrowing.
REPURCHASE AGREEMENTS. The Fund may engage in repurchase agreement
transactions involving its portfolio securities with banks, registered
broker-dealers and government securities dealers approved by the Fund's Board of
Directors. It is not anticipated that the Fund will in the foreseeable future
invest in excess of five percent of its net assets in repurchase agreements.
Under the terms of a typical repurchase agreement, the Fund would acquire an
underlying debt obligation for a relatively short period (usually not more than
one week) subject to an obligation of the seller to repurchase, and the Fund to
resell, the obligation at an agreed price and time, thereby determining the
yield during the Fund's holding period. Thus, repurchase agreements may be seen
to be loans by the Fund collateralized by the underlying debt obligation. This
arrangement results in a fixed rate of return that is not subject to market
fluctuations during the Fund's holding period. The value of the underlying
securities will be at least equal at all times to the total amount of the
repurchase obligation, including interest. The Fund bears a risk of loss in the
event that the other party to a repurchase agreement defaults on its obligations
and the Fund is delayed in or prevented from exercising its rights to dispose of
the collateral securities, including the risk of a possible decline in the value
of the underlying securities during the period in which the Fund seeks to assert
these rights. SGCAM, acting under the supervision of the Fund's Board of
Directors, reviews the credit-worthiness of those banks and dealers with which
the Fund enters into repurchase agreements to evaluate these risks and monitors
on an ongoing basis the value of the securities subject to repurchase agreements
to ensure that the value is maintained at the required level.
TEMPORARY INVESTMENTS. The Fund may invest up to 20 percent of its
assets, and in excess of that amount when SGCAM believes market conditions
warrant a temporary defensive posture, in corporate bonds rated at least Baa
by Moody's Investors Service, Inc. or BBB by Standard & Poor's Corporation,
commercial paper rated at least Prime-2 by Moody's or A-2 by Standard &
Poor's and obligations issued or guaranteed by the U.S. Government or by its
agencies or instrumentalities and repurchase agreements in respect of such
obligations. Obligations of certain agencies and instrumentalities of the
U.S. Government, such as the Government National Mortgage Association, are
supported by the "full faith and credit" of the U.S. Government; others,
such as those of the Federal National Mortgage Association, are supported by
the discretionary authority of the U.S. Government to purchase the agency's
obligations; and still others, such as those of the Export-Import Bank of the
U.S., are supported by the right of the issuer to borrow from the U.S.
Treasury; and still others, such as those of the Student Loan Marketing
Association, are supported only by the credit of the instrumentality. No
assurance can be given that the U.S. Government would provide financial
support to U.S.
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Government-sponsored instrumentalities if it is not obligated to do so by law.
Bonds rated Baa by Moody's and BBB by S&P, while considered "investment grade"
obligations, may have speculative characteristics.
INVESTMENT RESTRICTIONS
The investment restrictions below have been adopted by the Fund as
fundamental policies, which means that they may not be changed without the vote
of a majority of the outstanding voting securities of the Fund, which is defined
as the lesser of (a) 67 percent or more of the shares present at a shareholders
meeting if the holders of more than 50 percent of the outstanding shares of the
Fund are present or represented by proxy, or (b) more than 50 percent of the
outstanding shares.
The investment policies adopted by the Fund prohibit it from:
1. With respect to 75 percent of its assets, purchasing the securities of any
issuer, other than U.S. Government securities, if as a result more than
five percent of the Fund's total assets would be invested in the securities
of the issuer.
2. Purchasing more than 10 percent of the voting securities of any one issuer
or more than 10 percent of the securities of any class of any one issuer.
This limitation shall not apply to investments in U.S. Government
securities.
3. Purchasing securities on margin, except that the Fund may obtain any
short-term credit necessary for the clearance of purchases and sales of
securities.
4. Making short sales of securities or maintaining a short position.
5. Borrowing money, except that the Fund may borrow for temporary or emergency
(but not leveraging) purposes, including the meeting of redemption requests
that might otherwise require the untimely disposition of securities, in an
amount not exceeding 10 percent of the value of the Fund's total assets
(including the amount borrowed) valued at the lesser of cost or market,
less liabilities (not including the amount borrowed) at the time the
borrowing is made. Whenever borrowing exceed five percent of the value of
the Fund's total assets, the Fund will not make any additional investments.
6. Pledging, hypothecating, mortgaging or otherwise encumbering more than 10
percent of the value of the Fund's total assets, except that this
prohibition shall not prohibit the escrow arrangements contemplated by
writing covered call options or pledging assets to secure permitted
borrowings.
7. Underwriting the securities of the issuers, except insofar as the Fund may
be deemed to be an underwriter under the Securities Act of 1933, as
amended, by virtue of disposing of portfolio securities.
8. Making loans to others, except through entering into repurchase agreements,
purchasing qualified debt obligations or lending portfolio securities.
9. Investing in commodities, except that the Fund may engage in transactions
involving commodity futures and calls and options thereon.
10. Purchasing or selling real estate or interests in real estate, including
interests in real estate limited partnerships, except that the Fund may
purchase and sell securities that are issued by companies that invest or
deal in real estate, including readily-marketable interests in real estate
investment trusts or readily marketable securities of other companies which
invest in real estate.
11. Concentrating more than 25% of the Fund's assets in any one industry.
The Fund also reserves the right to own real estate used principally for
its own office space, although it has no current intention to do so.
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The percentage limitations contained in the restrictions listed above apply at
the time of purchases of securities. If a percentage restriction is adhered to
at the time of an investment, a later increase or decrease in percentage
resulting from a change in values or assets will not constitute a violation of
such restriction.
The investment restrictions numbered 1 through 12 below have been adopted
by the Fund as fundamental policies, which means that they may not be changed
without the vote of a majority of the outstanding voting securities of the Fund,
which is defined as the lesser of (a) 67 percent or more of the shares present
at a shareholders meeting if the holders of more than 50 percent of the
outstanding shares of the Fund are present or represented by proxy, or (b) more
than 50 percent of the outstanding shares. Investment restrictions 13 through 19
may be changed by vote of a majority of the Fund's Directors at any time.
PORTFOLIO TURNOVER
For regulatory reporting purposes, the Fund's turnover rate is calculated
by dividing the lesser of purchases or sales of securities for the fiscal year
by the monthly average of the value of the Fund's securities, with certain other
obligations with less than one year to maturity at the time of purchase
excluded. Thus, a 100 percent turnover rate would occur, for example, if all
included securities were replaced once during the year. The Fund will not
normally engage in the trading of securities for the purpose of realizing short
term profits, but will adjust its holdings as considered advisable in view of
prevailing or anticipated market conditions, and turnover will not be a limiting
factor should SGCAM deem it advisable to purchase or sell securities.
MANAGEMENT OF THE FUND
BOARD OF DIRECTORS
The business and affairs of the Fund is managed under the direction of the
Board of Directors, which has overall supervisory responsibility for the Fund.
By virtue of the responsibilities assumed by SG Cowen under the Investment
Management Agreement, the Fund will not require executive employees other than
its officers, none of whom will devote full time to the affairs of the Fund.
The names of the directors and officers of the Fund, their addresses,
principal occupations during the past five years and other affiliations are set
forth below. Each Director who is an "interested person" of the Fund, as
defined in the 1940 Act, is indicated by an asterisk; unless noted otherwise,
the business address of each such individual is Financial Square, New York, New
York 10005. Each of the directors is also a director of all of the investment
companies of which SGCAM is Investment Manager.
DIRECTORS OF THE FUNDS
James H. Carey, Director, age 65. Managing Director of Briarcliff
Financial Associates, Inc. (since June, 1991) and former Chief Executive
Officer, Director and Treasurer of National Capital Benefits Corporation (since
March, 1994). Mr. Carey is also a Director of Airborne Freight Corporation,
Jonathan Woodner Company, former Director of NCB Insurance Limited (Bermuda),
Director of The Midland Company, The Murray & Isabella Rayburn Foundation,
Nantucket Industries, Inc. and Vice Chairman of the U.S. Committee for UNICEF.
His address is Village View & Canterbury Road, Manchester Center, Vermont 05255.
*Joseph M. Cohen, Chairman and Chief Executive Officer of the Funds, age
60. Chairman of SG Cowen Securities Corporation since July 1, 1998. Prior
thereto, Principal Executive Officer and Class I Limited Partner of Cowen & Co.
("Cowen") and Chairman and President of Cowen Incorporated. Director,
Chairman and Chief Executive Officer of the SG Cowen Mutual Funds.
Dr. Peter P. Gil, Director, age 75. Director, Arthur D. Little Management
Institute Board since 1991, former Executive Board Member and currently Acting
Dean of the Institute; Trustee and Executive Committee Member, Plimoth
Plantation, (Plymouth, Mass.). From July 1988 to July 1994, Dr. Gil served in a
variety of senior administrative positions
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at the Sloan School of Management, Massachusetts Institute of Technology, as
Director, Management of Technology Program, the Senior Executive Program,
External Relations of the School; and Senior Lecturer. Prior to July 1988 he
was Associate Dean of the School. His address is 79 Main Street, New Castle,
New Hampshire 03854-0651.
Dr. Martin J. Gruber, Director, age 60. Former Chairman, Department of
Finance and Nomura Professor of Finance, Leonard N. Stern School of Business
Administration, New York University. He is also a Trustee of BT Pyramid Mutual
Funds, Director of Japan Equity Fund, Inc., and the Taiwan Equity Fund, Inc.;
and a Trustee of BT Leadership Trust and the T.I.A.A. Board. His address is New
York University, 44 West 4th Street, New York, New York 10012.
Burton J. Weiss, Director, age 67. Self-employed consultant since March,
1988. His address is 103 Marin Drive, Chapel Hill, North Carolina 27516.
OFFICERS OF THE FUNDS
Rodd M. Baxter, Secretary, age 48. Director and Senior Counsel of SG Cowen
since July 1, 1998. Prior thereto, he was General Counsel of Cowen Asset
Management and Director of Cowen.
Benedict Capaldi, Senior Investment Officer, age 53. Managing Director and
Portfolio Manager of SG Cowen since July 1, 1998. He was a Managing Director
and Portfolio Manager of Cowen Asset Management since December, 1996. Prior
thereto he was a Portfolio Manger for Provident Capital Management Inc. Senior
Vice President and Portfolio Manger for Radner Capital Management and President
of Chestnut Hill Advisors, Inc.
William Church, Vice President, Senior Investment Officer, age 52.
Managing Director of SG Cowen since July 1, 1998. Prior thereto, he was Chief
Investment Officer of Cowen Asset Management and a Class I Limited Partner of
Cowen and Managing Director of Cowen Incorporated.
Creighton H. Peet, Vice President, Treasurer, Senior Investment Officer,
age 60, Managing Director of SG Cowen since July 1, 1998. Prior thereto, he was
a Class I Limited Partner of Cowen and Managing Director of Cowen Incorporated.
David Sarns, President, age 44. Chief Administrative Officer and Managing
Director of SG Cowen since July 1, 1998. Prior thereto, he was a Chief
Administrative Officer and Class I Limited Partner of Cowen and Managing
Director of Cowen Incorporated.
Irwood Schlackman, Controller, age 58. Vice President of SG Cowen since
July 1, 1998. Prior thereto, he was a Mutual Fund Administrator of Cowen.
COMPENSATION
No officer, director, partner or employee of SG Cowen or its
affiliates will receive any compensation from the Fund for serving as an officer
or director of the Fund. Directors who are not officers, directors, partners,
stockholders or employees of SG Cowen or its affiliates receive from the Fund a
fee of $3,000 per annum plus $500 per meeting and $375 for each audit committee
meeting attended and reimbursement for travel and out of pocket expenses.
COMPENSATION TABLE (for fiscal year ended November 30, 1998)
<TABLE>
<CAPTION>
Name of Aggregate Total
Director Compensation Compensation
from Fund From
Fund and Fund
Complex *
<S> <C> <C>
James H. Carey $5,750 $28,750
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Peter Gil $5,750 $28,750
Martin J. Gruber $5,750 $28,750
Burton J. Weiss $5,750 $28,750
</TABLE>
_____________
*There are seven funds in the complex.
PRINCIPAL HOLDER OF SECURITIES
To the knowledge of the Fund and SG Cowen, none of the Fund directors and
officers, either individually or as a group, beneficially owned more than 1% of
the Funds' outstanding stock as of the close of business on January 15, 1999.
As of January 19, 1999 the following persons owned 5% or more of a class of the
Fund's securities: Class B -- Thomas E. Peeling, IRA (8%) 28509 Lincoln Rd., Bay
Village, OH 44140-1952; Lung Chu (29%) 21059 Manita Ct, Cupertino, CA 95014,
Richard H. Blackwell IRA (31%) 10629 Forest Lane, Chicago Ridge, IL 60415, Renee
Lauria & Alana Lauria, Two Sisters Trust (7%) 28 Felsmere Ave., Stoneham, MA
02180-1454, Arthur Pong (6%) 141 42nd Ave., San Mateo, CA 94403. Class I
- --Salvatore F Cimbolo Jr., IRA (11%) 2122 Century Park Lane, Los Angeles, CA
90067, Emre & Co., (80%) PO Box 1408, Milwaukee, WI 53201-1408.
INVESTMENT MANAGER
Until July 1, 1998, Cowen served as investment manager and principal
underwriter to the Fund. On July 1, 1998, Cowen's business was combined with
Societe Generale Securities Corporation ("SGSC"), a subsidiary of Societe
Generale ("SG"), to form SG Cowen Securities Corporation ("SG Cowen") (the
"Acquisition"). SG, a leading international commercial and investment bank
established in 1864, has a global network of offices in over 80 countries.
Since July 1, 1998, SG Cowen has served as the new investment manager to the
Fund, with the existing investment management personnel of Cowen continuing to
provide investment management services to the Fund.
The management agreement between Cowen and the Fund provided for
automatic termination in the event of its "assignment," which included
consummation of the Acquisition. Accordingly, a new management agreement
between SG Cowen and the Fund (the "New Agreement"), identical in material
respects with the prior management agreement, was approved by the Board of
Directors of the Fund at a meeting held on May 21, 1998. On June 16, 1998,
Cowen and SGSC were granted an exemptive order by the Securities and Exchange
Commission pursuant to which the New Agreement was permitted to be
implemented without shareholder approval beginning on July 1, 1998 and
continuing, for a period of up to 150 days, through the date on which the New
Agreement is approved or disapproved by the shareholders of the Fund.
The shareholders of the Fund approved the continuance of the New Agreement
on September 17, 1998. The New Agreement contains substantially the same terms
and conditions as the corresponding prior management agreement, including the
management fee payable by the Fund.
SG Cowen is a member of the New York, American and other principal national
securities exchanges and of the National Association of Securities Dealers, Inc.
("NASD"). SG Cowen's principal address is 1221 Avenue of Americas, New York,
New York.
Pursuant to the Investment Management Agreement between SGCAM and the Fund,
SGCAM has agreed to be responsible for the Fund's investment program. Subject
to the supervision and direction of the Fund's Boards of Directors, SGCAM
manages the Fund's portfolio in accordance with the stated policies of that
Fund. SGCAM makes investment decisions for the Fund and places the purchase and
sale orders for portfolio transactions. SGCAM also furnishes the Fund
statistical and research data, clerical help, accounting, data processing,
bookkeeping, internal auditing and certain legal and other filings with the SEC
and state Blue Sky authorities, calculates the net asset value of shares of the
Fund and generally assists in all aspects of the Fund's operations. SGCAM
compensates certain securities dealers whose customers are shareholders of the
Fund for providing administrative services to those shareholders that would
otherwise be provided by SGCAM. Such compensation is paid solely from SGCAM's
resources and is not paid directly or indirectly by the Fund.
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Each Class bears its own expenses, which generally includes all costs not
specifically borne by SGCAM. Included among a Class' expenses are (1) transfer
agency fees as identified by the transfer agent as being attributable to a
specific Class; (2) printing and postage expensed related to preparing and
distributing materials such as shareholder reports, prospectuses and proxies to
current shareholders; (3) Blue Sky registration fees incurred by a Class; (4)
SEC registration fees incurred by a Class; (5) the expenses of administrative
personnel and services as required to support the shareholders of a specific
Class; (6) litigation or other legal expenses relating solely to one Class; and
(7) directors' fees incurred as a result of issues relating to one Class. In
addition, each Class will bear an allocable portion of all other Fund expenses
not attributable to a particular Class based on the Class' relative net assets.
For the period ended November 30, 1998, the Fund's Investment Manager
received a fee for services rendered of $83,060. During this same period SG
Cowen voluntarily reimbursed the Fund's expenses in an amount equal to an annual
rate of .22 of 1%.
PRINCIPAL UNDERWRITER
Funds Distributor, Inc. ("FDI"), 60 State Street, Boston, MA 02109, is
the principal underwriter to the Fund.
CUSTODIAN AND TRANSFER AND DIVIDEND AGENT
Investors Fiduciary Trust Company, P.O. Box 41911, Kansas City, MO 64141,
is the custodian of the Funds' assets.
DST Systems, Inc., 210 West 10th Street, Kansas City, MO 64105, is the
Funds' transfer and dividend disbursing agent.
SHAREHOLDER SERVICING AND DISTRIBUTION PLAN (THE "PLAN")
FDI is paid monthly fees by the Fund in connection with (1) the servicing
of shareholder accounts in Class A and Class B shares and (2) providing
distribution related services in respect of Class B shares. A monthly service
fee, authorized pursuant to the Plan adopted by the Fund pursuant to Rule 12b-1
under the Investment Company Act of 1940, as amended (the "1940 Act"), is
calculated at the annual rate of .25% of the value of the average daily net
assets of the Fund attributable to each of Class A and Class B shares and is
used by FDI to provide compensation for ongoing servicing and/or maintenance of
shareholder accounts with the Fund. Compensation paid by FDI includes amounts
paid to SG Cowen employees, who respond to inquiries of shareholders of the Fund
regarding their ownership of shares of their accounts with the Fund or who
provide other similar services not otherwise required to be provided by the
Fund's investment adviser, transfer agent or other agent of the Fund.
In addition, pursuant to the Plan, the Fund pays to FDI a monthly
distribution fee at the annual rate of .75% of the Funds average daily net
assets attributable to Class B shares. The distribution fee is used by FDI to
provide (1) initial and ongoing sales compensation to its registered
representative or those of other broker-dealers that enter into selected dealer
agreements with FDI in respect of sales of Class B shares; (2) costs of printing
and distributing the Fund's Prospectus, Statement of Additional Information and
sales literature to prospective investors in Class B shares; (3) costs
associated with any advertising relating to Class B shares; and (4) payments to,
and expenses of, persons who provide support services in connection with the
distribution of Class B shares. Because these fees are paid out of the Fund's
assets on an on-going basis, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges.
Payments under the Plan are not tied exclusively to the service and/or
distribution expenses actually incurred by FDI, and the payments may exceed
expenses actually incurred by FDI. The Board of Directors evaluates the
appropriateness of the Plan and its payment terms on a continuing basis and in
doing so considers all relevant factors, including expenses borne by SG Cowen
and amounts it received under the Plan.
Pursuant to the Plan, for the period ended November 30, 1998, Class A and
Class B shares of the Fund paid $25,314 and $748 respectively.
9
<PAGE>
PORTFOLIO TRANSACTIONS
Decisions to buy and sell securities and other financial instruments for
the Fund are made by SGCAM, which also is responsible for placing these
transactions, subject to the overall review of the Fund's Board of Directors.
Although investment requirements for the Fund are reviewed independently from
those of the other accounts managed by SGCAM, investments of the type the Fund
may make may also be made by these other accounts. When the Fund and one or more
other accounts managed by SGCAM are prepared to invest in, or desire to dispose
of, the same security or other financial instrument, available investments or
opportunities for sales will be allocated in a manner believed by SGCAM to be
equitable to each. In some cases, this procedure may affect adversely the price
paid or received by the Fund or the size of the position obtained or disposed of
by the Fund.
Portfolio transactions are in most cases effected on U.S. stock exchanges
and involve the payment of negotiated brokerage commissions. There is generally
no stated commission in the case of securities traded in the over-the-counter
markets, but the prices of those securities may include commissions or mark-ups.
Purchases and sales of money market instruments and debt securities usually are
principal transactions. These securities are normally purchased directly from
the issuer or from an underwriter or market maker for the securities. The cost
of securities purchased from underwriters includes an underwriting commission or
concession, and the prices at which securities are purchased from and sold to
dealers include a dealer's mark-up or mark-down. U.S. Government securities are
generally purchased from underwriters or dealers, although certain newly-issued
U.S. Government securities may be purchased directly from the U.S. Treasury or
from the issuing agency or instrumentality.
To the extent consistent with applicable provisions of the Act, other
securities laws and the rules and exemptions adopted by the Securities and
Exchange Commission (the "SEC") thereunder, the Fund's Board of Directors has
determined that portfolio transactions may be effected through SG Cowen if, in
the judgment of SGCAM, the use of SG Cowen normally is likely to result in price
and execution at least as favorable as those of other qualified broker-dealers,
and if, in particular transactions, SG Cowen charges the Fund a rate consistent
with that charged to comparable unaffiliated customers in similar transactions.
Over-the-counter purchases and sales are transacted directly with principal
market makers except in those cases in which better prices and executions may be
obtained elsewhere, and principal transactions are not entered into with
affiliates of the Fund except pursuant to exemptive rules or orders adopted by
SEC.
In selecting brokers or dealers to execute portfolio transactions on behalf
of the Fund, SGCAM seeks the best overall terms available. In assessing the best
overall terms available for any transaction, SGCAM will consider the factors it
deems relevant, including the breadth of the market in the investment, the price
of the investment, the financial condition and execution capability of the
broker or dealer and the reasonableness of the commission, if any, for the
specific transaction and on a continuing basis. In addition, SGCAM is
authorized, in selecting parties to execute a particular transaction and in
evaluating the best overall terms available, to consider the brokerage and
research services, as those terms are defined in Section 28(e) of the Securities
Exchange Act of 1934, provided to the Fund and/or other accounts over which
SGCAM or its affiliates exercise investment discretion. SGCAM's fees under its
agreement with the Fund are not reduced by reason of its receiving brokerage
services. The Fund's Directors periodically review the commissions paid by the
Fund to determine if the commissions paid over representative periods of time
are reasonable in relation to the benefits to the Fund.
For the period ended November 30, 1998 the Fund paid an aggregate of
approximately $42,702 in commissions to broker-dealers for execution of
portfolio transactions, of which $14,410 was paid to SG Cowen.
CAPITAL STOCK
The Fund has an authorized capitalization of 750,000,000 shares with a par
value of $.001 per share and transferable without restriction of which
250,000,000 have been allocated in respect of each Class of the Fund. All shares
of the Fund have equal rights and privileges as to participation in dividends
and distributions and in the net distributable assets of the Fund on
liquidation.
10
<PAGE>
When issued, shares are fully paid and nonassessable, and have no
preemptive, conversion or exchange rights. Each Class represents an identical
interest in the Fund's investment portfolio. As a result, the Classes have the
same rights, privileges and preferences, except with respect to: (1) the
designation of each Class; (2) the effect of the respective sales charges, if
any, for each Class; (3) the distribution and / or service fees, if any, borne
by each Class; (4) the expenses allocable exclusively to each Class; (5) voting
rights on matters exclusively affecting a single Class; and (6) the exchange
privilege of each Class. The Board of Directors does not anticipate that there
will be any conflicts among the interests of the holders of the different
Classes. The Directors, on an ongoing basis, will consider whether any conflict
exists and, if so, take appropriate action. Certain aspects of the shares may be
changed, upon notice to Fund shareholders, to satisfy certain tax regulatory
requirements, if the change is deemed necessary by the Directors.
NET ASSET VALUE
The net asset value per share of the Fund is calculated as of 4:15 p.m.
Eastern time, or such earlier time when the Exchange closes early, on each day
on which the New York Stock Exchange, Inc. is open. The Exchange is currently
open on each Monday through Friday, except (a) January I St, Martin Luther King
Day (the third Monday in January), Washington's Birthday (the third Monday in
February), Good Friday, Memorial Day (the last Monday in May), July 4th, Labor
Day (the first Monday in September), Thanksgiving Day (the fourth Thursday in
November) and December 25th; and (b) the preceding Friday when one of those
holidays falls on a Saturday or the subsequent Monday when one of those holidays
falls on a Sunday. Net asset value per share is computed by dividing the value
of the Fund's net assets by the total number of its shares outstanding. Assets
traded on a securities exchange or other recognized market are valued on the
basis of market quotations. Assets for which quotations are not readily
available are valued at fair value as determined in good faith under procedures
approved by the Board of Directors. High quality money market instruments with
remaining maturities of 60 days or less are valued on the basis of amortized
cost, which involves valuing a portfolio instrument at its market value on the
61st day prior to maturity and thereafter assuming a constant amortization to
maturity of any market discount or premium, generally without regard to the
effect of fluctuating interest rates on the market value of the instrument.
PURCHASE OF SHARES
GENERAL INFORMATION
Shares of the Fund are sold at the net asset value per share next
determined after receipt of an order, plus a sales charge in the case of Class A
shares. Investors whose orders are received not later than 4:15 p.m., New York
time, will become shareholders on that day. Investors whose orders are received
after 4:15 p.m., New York time, will become shareholders on the following
business day. The Fund reserves the right to reject any order to purchase
shares. Certificates for shares will be issued only upon the specific request of
a shareholder.
The minimum initial investment in the Fund is $1,000 and the minimum
subsequent investment is $100, except that the minimum initial and subsequent
investments for purchases of Fund shares through Retirement Plans for
Self-Employed Persons and Individual Retirement Accounts will be $500 and $50,
respectively. The Fund reserves the right to vary these minimums at any time.
RETIREMENT PLANS. Shares may be purchased in connection with various
qualified tax-deferred retirement plans. Forms for establishing these plans are
available through any SG Cowen account representative. Investors urged to
consult with a tax adviser in connection with the establishment of retirement
plans.
AUTOMATIC INVESTMENT PLAN. The Fund offers an Automatic Investment Plan
whereby DST is permitted through preauthorized checks of $ 100 or more ($50 in
the case of Retirement Plans for Self-Employed Persons and Individual Retirement
Accounts) to charge the regular bank account of a shareholder on a regular Basis
to provide systematic additions to the Fund account of the shareholder. While
there is no charge to shareholders for this service, a charge of $10.00 will be
deducted from a shareholder's Fund account for checks returned for insufficient
funds. A shareholder's Automatic Investment Plan may be terminated at any time
without charge or penalty by the shareholder, the Fund, DST or FDI. Further
information regarding the Automatic Investment Plan may be obtained through any
account representative.
11
<PAGE>
Under the Multiple Pricing System, the Fund presently offers three methods
of purchasing shares; enabling investors to choose the Class that, given the
amount of purchase and intended length of investment, best suits their needs.
Account representatives and other persons remunerated on the basis of sales of
shares may receive different levels of compensation for selling one Class of
shares over another. From time to time, registered representatives of
broker-dealers that enter into selected dealer agreements with FDI will receive
additional non-cash compensation in the form of gifts or prizes such as
merchandise or trips. When purchasing shares of the Fund, investors must specify
whether the purchase is for Class A shares, Class B shares or Class I shares, as
described below. In addition, the Distributor will from its own resources make
additional payments to Branch Cabell and Company at a maximum annual rate of
.25% of the net asset value of all shares of the Fund sold by Branch Cabell and
Company.
CLASS A SHARES
The public offering price of Class A shares is the net asset value per
Class A share next determined after a purchase order is received plus a sales
charge, if applicable. Class A shares are subject to a service fee at the annual
rate of .25% of the value of the Fund's average daily net assets attributable to
this Class. The sales charge payable upon the purchase of Class A shares will
vary with the amount of purchase as set forth below.
<TABLE>
<CAPTION>
Sales Charge as a Sales Charge as
Percentage of the a Percentage of
Shares Purchased in Public Offering the Net Amount Dealer
Single Transaction Price Invested Reallowance
- ------------------- ----- -------- -----------
<S> <C> <C> <C>
Up to $49,999 4.75% 5.00% 4.00%
$50,000-$99,999 4.00% 4.17% 3.25%
$100,000-$249,999 3.75% 3.90% 3.00%
$250,000-$499,999 2.50% 2.56% 2.00%
$500,000-$999,999 2.00% 2.04% 1.50%
$1,000,000-$2,999,999 0% 0% 1.00%
$3,000,000-$3,999,999* 0% 0% .50%
</TABLE>
* Investors who purchase $4 million or more of shares will receive Class I
shares, which are not subject to any front-end sales charge or service fee. See
"Class I Shares."
The above schedule of sales charges is applicable to purchases in a single
transaction by, among others: (1) an individual; (2) an individual, his or her
spouse and their children under the age of 21 purchasing shares for his or her
own accounts; (3) a trustee or other fiduciary purchasing shares for a single
trust estate or a single fiduciary account; (4) a pension, profit-sharing or
other employee benefit plan qualified or non-qualified under Section 401 of the
Internal Revenue Code of 1986 (the ""Code''); (5) tax-exempt organizations
enumerated in Section 501(c)(3) or (13) of the Code; (6) employee benefit plans
qualified under Section 401 of the Code of a single employer or of employers who
are ""affiliated persons'' of each other, as defined in the 1940 Act and for
investments in Individual Retirement Accounts of employees of a single employer
through Systematic Payroll Deduction plans; or (7) any other organized group of
persons, whether incorporated or not, provided the organization has been in
existence for at least six months and has some purpose other than the purchase
of redeemable securities of a registered investment company at a discount.
You may benefit from a reduction of the sales charges in accordance with
the above schedule if the cumulative value (at current net asset value) of Class
A shares purchased in a single transaction, together with those Class A shares
previously purchased subject to payment of a sales charge, plus Class A shares
of SG Cowen Opportunity Fund, SG Cowen Income + Growth Fund, Inc., SG Cowen
Intermediate Fixed Income Fund and SG Cowen
12
<PAGE>
Government Securities Fund, each a series of SG Cowen Funds, Inc., previously or
simultaneously purchased subject to a sales charge, amounts to $50,000 or more.
The foregoing schedule of reduced sales charges will also be available to
investors who enter into a written Letter of Intent providing for the purchase,
within a 13-month period, of Class A shares of the Fund, SG Cowen Opportunity
Fund, SG Cowen Income + Growth Fund, Inc., SG Cowen Intermediate Fixed Income
Fund and SG Cowen Government Securities Fund from SG Cowen. Class A shares of
the Fund, SG Cowen Opportunity Fund, SG Cowen Income + Growth Fund, Inc., SG
Cowen Intermediate Fixed Income Fund and SG Cowen Government Securities Fund
previously purchased during a 90-day period prior to the date of receipt by SG
Cowen of the Letter of Intent and still owned by the shareholder may also be
included in determining the applicable reduction.
A shareholder who has redeemed his Class A shares may reinvest all or part
of the redemption proceeds within 30 days without imposition of a sales charge.
This privilege may be exercised only once by a shareholder. Shareholders should
note that no loss will be allowed on the sale of Fund shares to the extent that
the shareholder acquired other shares in the Fund within a period beginning 30
days before the sale or disposition of the shares in which the shareholder
incurred a loss and ending 30 days after such sale.
The Fund offers Class A shares without imposition of a sales charge to (1)
employees of SG Cowen and registered representatives of securities dealers that
participate in distribution of the Fund's shares; (2) Individual Retirement
Accounts for those persons; (3) the spouses, children, parents, grandparents,
siblings, spouse's parents and sibling's children of those persons when purchase
orders on their behalf are placed by those persons; (4) directors and trustees
of registered investment companies whose shares are distributed by SG Cowen,
Individual Retirement Accounts for those persons, employee benefit plans for
those persons, and the spouses and minor children of those persons when purchase
orders on their behalf are placed by those persons; (5) SG Cowen and its
subsidiaries; (6) participants in any pension, profit-sharing or other employee
benefit plan qualified or non-qualified under Section 401 of the Code when
purchase orders are placed by such participants pursuant to such plans; (7)
officers, directors, partners and employees of the Fund's counsel or auditors;
and (8) investors who purchase shares of the Fund to the extent that the
investment represents (a) the proceeds from the redemption made within the
preceding 60 days of shares of another mutual fund not affiliated with SGCAM
whose shares were purchased subject to a sales charge, or (b) the net proceeds
of the sale within the preceding 60 days of shares of any closed-end investment
company. The Distributor pays a sales commission equal to 1.00% of the amount
invested to dealers who sell Class A Shares without imposition of a sales charge
to investors described in items (6) and (8).
CLASS B SHARES
The public offering price of Class B shares is the net asset value per
share next determined after a purchase order is received without imposition of
any front-end sales charge. The Distributor pays a sales commission equal to
4.00% of the amount invested to dealers who sell Class B shares. Class B shares
may be subject upon redemption to a contingent deferred sales charge ("CDSC").
See "Redemption of Shares." Class B shares are subject to a service fee at the
annual rate of .25%, and a distribution fee at the annual rate of .75%, of the
value of the Fund's average daily net assets attributable to this Class. SG
Cowen has adopted guidelines, in view of the relative sales charges, service
fees and distribution fees, directing account representatives that all purchases
of shares should be for Class A shares when the purchase is for $500,000 or more
by an investor not eligible to purchase Class I shares. SG Cowen reserves the
right to vary these guidelines at any time.
CLASS I SHARES
The public offering price of Class I shares is the net asset value per share
next determined after a purchase order is received without imposition of any
sales charge. Class I shares were previously designated as Class C shares.
Certain dealers may refer to Class I shares as ""institutional shares.'' Class I
shares, which are not subject to any service fee or distribution fee, are
available exclusively to (1) employee benefit plans for employees of SG Cowen
and securities dealers that participate in distribution of the Fund's shares;
(2) charitable organizations (as defined in Section 501 (c) (3) of the Code)
investing $100,000 or more; (3) any pension fund, corporation, state or local
government, Taft-Hartley plan, foundation and/or endowment which is a client of
a consulting firm, if such consulting firm has contacted the Fund, SG Cowen or
any subsidiary of SG Cowen with respect to furnishing advice to the client of
that consulting firm or with respect to the purchase of the securities of the
Fund by such client: (4) investors purchasing $4 million or more of shares of
the Fund; (5) accounts as to which a bank, registered investment adviser or
broker-dealer charges an account management fee, provided the bank, registered
investment adviser or broker-dealer has an agreement with SG Cowen relating to
investment in the Fund; (6) investors, and their spouses and minor children, who
are investment advisory clients of SGCAM or any of its subsidiaries or who are
affiliated persons or sponsoring companies of those clients; and
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<PAGE>
(7) purchasers placing orders through a broker that maintains an omnibus account
with the Fund and such purchases are made (i) by investment advisers or
financial planners placing trades for their accounts or the accounts of their
clients, and who charge a fee for their services; (ii) clients of such
investment adviser or financial planner who place trades for their own accounts
if the accounts are linked to a master account of such investment adviser or
financial planner on the books and record of the broker or agent, or (iii) for
retirement and deferred compensation plans and trusts used to fund those plans,
including but not limited to those defined in Section 401 (a), 403 (b) or 457 of
the Internal Revenue Code or "rabbi" Trusts Investors who purchase pursuant
to (7) may be charged a fee by the broker or agent utilized to effect the
transaction. SG Cowen will from its own resources compensate broker-dealers and
service agents at a maximum annual rate of .15%, 15% and .35%, respectively of
the net asset value of shares purchased pursuant to (3), (5) and (7),
respectively.
EXCHANGE PRIVILEGE
Shares of the Fund may be exchanged for shares of the same Class (or the sole
class offered) of the mutual funds listed below for which SG Cowen serves as a
distributor.
- - SG Cowen Standby Reserve Fund, Inc., a money market fund whose investment
objective is the maximization of current income to the extent consistent
with preservation of capital and maintenance of liquidity.
- - SG Cowen Standby Tax-Exempt Reserve Fund, Inc., a money market fund whose
investment objective is the maximization of current income that is exempt
from federal income taxes to the extent consistent with the preservation of
capital and the maintenance of liquidity.
- - SG Cowen Intermediate Fixed Income Fund, a fund that seeks total return
consistent of current income and stability of principal by investing
primarily in high quality intermediate term fixed income securities. The
fund is a series of SG Cowen Funds, Inc.
- - SG Cowen Government Securities Fund, a fund that seeks total return
consistent of current income and appreciation of capital through investing
primarily in securities issued or guaranteed by the U.S. Government, its
agencies, authorities or instrumentalities. This fund is a series of SG
Cowen Funds, Inc.
- - SG Cowen Opportunity Fund, a fund whose investment objectives is
appreciation of capital through investing primarily in equity securities of
small capitalization companies.
- - SG Cowen Income + Growth Fund, Inc., a fund that seeks a high level of
dividend income to the extent consistent with prudent investment management
by investing primarily in income producing equity securities.
For the purposes of this discussion, SG Cowen Standby Reserve Fund,
Inc. and SG Cowen Standby Tax-Exempt Reserve Fund, Inc. are referred to as
"money market funds" and SG Cowen Opportunity Fund, SG Cowen Intermediate
Fixed Income Fund, SG Cowen Income + Growth Fund, Inc., and SG Cowen Government
Securities Fund are referred to as "non-money market funds."
Shares of these mutual funds are available only to investors residing
in states where these mutual funds are qualified for sale. They are sold
pursuant to separate prospectuses that may be obtained through FDI, any SG Cowen
account representative, thorough account representatives of SG Cowen
correspondents, or through any other member of the NASD, or any foreign
nonmember of the NASD, which has entered into a Sales Agreement with FDI with
respect to such funds. An exchange of shares is treated for federal income tax
purposes as a redemption (Sale) of shares given in exchange by the shareholder
and an exchanging shareholder may, therefore, realize a taxable gain or loss in
connection with the exchange. The exchange privilege is subject to termination
and its terms are subject to change upon 60 days' notice to shareholders.
Under the Multiple Pricing System, an exchange of shares of the Fund
with other SG Cowen funds' shares will be limited to shares of the same class or
the sole class (money market funds only) of shares of a fund from which the
14
<PAGE>
exchange is to be effected. For example, if a holder of Class A shares of a
non-money market fund exchanges his shares for shares of a money market fund and
thereafter wishes to exchange those shares for shares of the Fund, he may
receive only Class A shares in the latter transaction. As another example, if a
holder of shares of a money market fund acquired as a result of an initial
investment and not from an exchange wishes to exchange his shares of for share
of a non-money market fund, he may receive Class A shares, Class B shares or
Class I shares (depending on his eligibility for Class I shares) in the exchange
transaction.
Thereafter, any further exchanges would be subject to the principal described
above limiting subsequent exchanges to the same class or the sole class of
shares of other funds.
CLASS A EXCHANGES. A shareholder may effect exchanges among the mutual
funds listed above and the Fund on the basis of relative net asset values
without imposition of a sales charge; provided, however, that where shares of a
money market fund acquired through a direct purchase are exchanged for Class A
shares of the Fund or another non-money market fund, the appropriate sales
charge will be imposed at the time of the exchange. Because a substantially
lower sales charge is paid upon purchase of Class A shares of Cowen Intermediate
Fixed Income Fund, holders of these shares will not be able to exchange their
shares with shares of the Fund or any of the non-money market funds for a period
of 90 days from the date of purchase. After the 90-day waiting period has
expired, Class A shares of SG Cowen Intermediate Fixed Income Fund will be
exchangeable without the imposition of any additional sales charge.
CLASS B EXCHANGES. As described below under "Redemption of Shares," the
CDSC payable by Class B shareholders upon redemption of their shares will vary
with the period of time that the shares are held (the "CDSC holding period").
For purposes of calculating the CDSC holding period, any Class B shares received
in an exchange will be deemed to have been purchased on the same date as the
Class B shares given in exchange. If, however, a Class B shareholder exchanges
his shares for shares of either money market fund, which do not offer a class of
shares subject to a CDSC, such exchange will toll, or suspend, the running of
the CDSC holding period for as long as the money market fund shares are held
and, if those shares are redeemed, a CDSC will be imposed based on the CDSC
holding period without regard to the period during which the money market fund
shares were held. For example, if a holder of Class B shares of the Fund who has
held those shares for a period of more than four but less than five years
exchanges his shares for shares of a money market fund, holds those shares of
the money market fund for a period of one year, and thereafter exchanges those
shares for Class B shares of the Fund, such shareholder will be deemed to have
held the Class B shares for a period of four full years on the date of the last
exchange. If the shareholder were to then immediately redeem his Class B shares
of the Fund, such redemption would be subject to a 2.00% CDSC. Similarly, the
same CDSC would be imposed if at any time the money market fund shares were
redeemed. Conversely, if the shareholder had held his Class B shares of the Fund
for the full six year period, no CDSC would have been imposed upon redemption.
Because a substantially lower CDSC schedule is applicable to Class B shares
of SG Cowen Intermediate Fixed Income Fund, holders of these shares will not be
able to exchange their shares with shares of the Fund or any of the non-money
market funds for a period of 90 days from the date of purchase. After the 90-day
waiting period has expired, if a holder of these shares wanted to exchange all
or a portion of his shares for Class B shares of the Fund or of any of the
non-money market funds that offer Class B shares subject to a higher CDSC than
that imposed by SG Cowen Intermediate Fixed Income Fund, the exchanged Class B
shares will not be subject to the higher applicable CDSC. Upon redemption, the
lower CDSC schedule applicable to Class B shares of SG Cowen Intermediate Fixed
Income Fund will apply.
REDEMPTION OF SHARES
REDEMPTION PROCEDURES
The Fund will redeem shares without charge at the net asset value per share
next determined after receipt of a redemption order in proper form by any CDSC
imposed on Class B shares. Any redemption request received prior to 4:15 p.m.,
New York time, will be transmitted to DST on that day and the proceeds of such
redemption will be transmitted in accordance with the investor's instructions
within seven days. Redemption requests received at or after 4:15 p.m., New York
time, will be effected on the next business day. Proceeds of any redemptions
will not be sent until the check (including a certified or cashier's check) used
for investment has been cleared for payment by the investor's bank, which may
take up to 15 days. Pending such clearance, redemption proceeds will be held
under circumstances resulting in no
15
<PAGE>
earnings to investors. Investors can avoid the inconvenience associated with
check clearance delays by purchasing shares with immediately available funds
held in a brokerage account at a participating securities dealer or by
transmitting funds to DST by wire transfer.
SG Cowen and other selected dealers generally will effect redemptions of
shares upon oral instructions received from the shareholders. If shares are to
be redeemed pursuant to an order sent to DST by the shareholder, DST will
require written redemption instructions signed by the shareholder of record,
which signature must be guaranteed by a i commercial bank or trust company (not
a savings bank) located or having a correspondent in New York City, or by a
member organization of the New York Stock Exchange, Inc. The redemption order
must specify which Class of shares is being redeemed. If certificates have been
issued representing the shares to be redeemed, such certificates must also be
endorsed, or a duly executed stock power must be furnished, with signatures
guaranteed as discussed above, and must be submitted to SG Cowen or DST with the
redemption request. SG Cowen or DST may require further documentation if the
shareholder is a corporation, partnership, trust, estate or other entity. The
payment of redemptions may be wired to a shareholder's commercial bank account.
There is a $10 charge for each federal funds wire transaction. The minimum
amount for wire redemptions is $10,000. A shareholder who wishes to redeem by
wire should contact DST at 1-800-262-7116.
The Fund may suspend the right of redemption or postpone the date of
payment upon redemption (as well as suspend or postpone the recordation of the
transfer of its shares) for such periods as are permitted under the 1940 Act.
The Fund reserves the right to redeem shares in any account, other than an
Individual Retirement Account or other qualified retirement plan, at their net
asset value if the value of the account is less than $250. The shareholder
having the account will first be notified in writing that the account has a
value of less than $250 and will be allowed 60 days to make an additional
investment before the redemption is processed by the Fund.
The Fund offers a Systematic Withdrawal Plan under which a shareholder with
$10,000 or more in the Fund may elect to redeem periodic payments to himself or
a designated payee on a monthly, quarterly or annual basis. For accounts other
than qualified retirement plans, the minimum rate of withdrawal is $50 per month
and the maximum monthly withdrawal is one percent of the current account value
in the Fund as of commencement of participation in the plan. Maintenance of a
Systematic Withdrawal Plan concurrently with purchases of additional shares of
the Fund may be disadvantageous to the shareholder because of the sales charge
on such purchases. A shareholder who elects to use the Systematic Withdrawal
Plan should be aware that such periodic payments will be made from redemptions
of his shares. However, any Class B shares redeemed under the Systematic
Withdrawal Plan will not be subject to a CDSC as described below. Dividends and
distributions paid on his shares may not cover the full amount of each periodic
payment.
CONTINGENT DEFERRED SALES CHARGE - CLASS B SHARES
A CDSC payable to FDI is imposed on any redemption of Class B shares held
less than six years equal to a specified percentage, as set forth below, of the
net asset value of the shares redeemed at the time of purchase or at the time of
redemption, whichever is lower. Class B shares held six years or longer and
Class B shares purchased through reinvestment of dividends or capital gains
distributions are not subject to the CDSC.
Furthermore, no CDSC will be imposed on an amount that represents an
increase in value of the shareholder's account resulting from capital
appreciation.
In circumstances in which the CDSC is imposed, the amount of the charge
will depend on the number of years since the shareholder purchased the shares
being redeemed. The following table sets forth the rates of the CDSC for
redemptions of Class B shares by investors:
<TABLE>
<CAPTION>
YEAR SINCE PURCHASE IN WHICH
REDEMPTION IS EFFECTED CDSC
<C> <S>
Year 1 . . . . . . . . . . . . . . . . . . . . 5.00%
Year 2 . . . . . . . . . . . . . . . . . . . . 4.00%
Year 3 . . . . . . . . . . . . . . . . . . . . 3.00%
16
<PAGE>
Year 4 . . . . . . . . . . . . . . . . . . . . 3.00%
Year 5 . . . . . . . . . . . . . . . . . . . . 2.00%
Year 6 . . . . . . . . . . . . . . . . . . . . 1.00%
Thereafter . . . . . . . . . . . . . . . . . . None
</TABLE>
In determining the applicability and rate of any CDSC, redemptions of Class
B shares are made first of amounts due to capital appreciation, next of shares
representing reinvestment of dividends and capital gains distributions, and then
of other shares held by the shareholder for the longest period of time. As a
result, the CDSC, if any, will be imposed at the lowest possible rate. For
example, assume that an investor owns 100,000 shares that he purchased seven
years ago, 100,000 shares that he purchased more than four but less than five
years ago at $10 per share and 1,000 shares received in respect of reinvestment
of dividends and distributions. The shares now have a net asset value of $20 per
share. The investor may redeem the 100,000 shares he purchased seven years ago
and the 1,000 shares he acquired through reinvestments without paying a CDSC. If
the investor redeems the balance of his shares, he would pay a CDSC based on the
net asset value at the time of purchase ($10 per share). Thus, the investor
would pay a CDSC equal to $20,000 (100,000 shares multiplied by $10 per share
times the applicable rate of 2%).
WAIVERS OF CDSC. The CDSC, if any, will be waived in the case of (1)
redemptions of Class B shares held at the time a shareholder dies or becomes
disabled, including the Class B shares of a shareholder who owns the shares with
his or her spouse as joint tenants with right of survivorship, provided that the
redemption is requested within one year of the death or initial determination of
disability and (2) redemptions in connection with the following retirement plan
distributions: (a) lump-sum or other distributions from a qualified retirement
plan following retirement; (b) distributions from an Individual Retirement
Account, Keogh plan or custodial account under Section 403 (b) (7) of the Code
following attainment of age 59 1/2 (c) a tax-free return of an excess
contribution to an Individual Retirement Account, and (d) distributions pursuant
to Systematic Withdrawal Plans.
TAXATION
The Fund has qualified, and intends to continue to qualify each year, as a
regulated investment company. As such, the Fund will not be subject to federal
income tax on its net investment income and net capital gains, if any, that it
distributes to its shareholders, provided that it distributes at least 90% of
its net investment income in each taxable year. Depending upon the extent to
which it is, or is deemed to be, conducting business in certain states and
localities, the Fund may be subject to taxation in such states or localities.
If for any taxable year the Fund does not qualify for the special federal
income tax treatment afforded regulated investment companies, all of its taxable
income will be subject to federal income tax at regular corporate rates (without
any deductions for distributions to its shareholders.) In such event, dividend
distributions, including amounts derived from interest on tax-exempt
obligations, would be taxable to shareholders to the extent of current and
accumulated earnings and profits, and would be eligible for the dividends
received deductions for corporations in case of corporate shareholders.
In general, if a shareholder fails to furnish a correct taxpayer
identification number, fails to report dividend and interest income in full, or
fails to certify that he or she has provided a correct taxpayer identification
number and that he or she is not subject to withholding, then the shareholder
may be subject to 31% federal backup withholding tax on dividends, capital gains
distribution and the proceeds of redemptions or exchange. An individual's
taxpayer identification number is his or her social security number. The backup
withholding tax is not an additional tax and may be credited against a
shareholder's regular federal income tax liability.
Gain or loss on the sale of a security will generally be long-term capital
gain or loss if the Fund has held the security for more than one year. If a Fund
acquires a debt security at a discount, however, the portion of any gain upon
its sale or redemption that reflects the accrued market discount will be taxed
as ordinary income, rather than capital gain.
In general, when the Fund writes a covered call option on a security, and
either the option expires unexercised or the Fund enters into a closing purchase
transaction, the Fund will normally recognize a short-term capital gain or loss
17
<PAGE>
(except that any losses on certain covered call stock options will be treated as
long-term capital losses). If a call option is exercised, the premium received
will be treated as additional proceeds from the sale of the underlying security.
Although the Fund expects to be relieved of all or substantially all
federal and state income or franchise taxes, depending upon the extent of its
activities in certain states and localities, that portion of the Fund's income
which is treated as earned in any such state or locality could be subject to
state or local tax.
PERFORMANCE INFORMATION
From time to time, the Fund may advertise its "average annual total return"
for the different Classes over various periods of time. These total return
figures show the average percentage change in value of an investment in the Fund
from the beginning date of the measuring period to the end of the measuring
period. These figures reflect changes in the price of the Fund's shares and
assume that any income dividends and/or capital gains distributions made by the
Fund during the period were invested in shares of the Fund. Figures will be
given for recent one, five and ten year periods, or the life of the Fund to the
extent it has not been in existence for any such periods, and may be given for
other periods as well, such as on a year-by-year basis. When considering
"average" total return figures for periods longer than one year, it is important
to note that the Fund's annual total return for any one year in the period might
have been greater or lesser than the average for the entire period. The Fund may
also use "aggregate" total return figures for various periods, representing the
cumulative period (again reflecting changes in share prices and assuming
reinvestment of dividends and distributions). Aggregate total returns may be
shown by means of schedules, charts, or graphs, and may indicate subtotals of
the various components of total return (i.e., change in value of initial
investment, income dividends, and capital gains distributions). The performance
of the Fund also might be compared to rankings prepared by Lipper Analytical
Services, Inc., and Morningstar, Inc. which are widely recognized, independent
services that monitor the performance of mutual funds, as well as to various
unmanaged indices, such as the Standard & Poor's 500 Composite Stock Price
Index. Performance Information may be useful in reviewing the performance of the
Fund and in providing a basis for comparison with other investment alternatives.
Investors should be aware that, because the performance of the Fund changes in
response to fluctuations in interest rates, price fluctuations in securities
markets, the Fund's expenses and other factors, a performance quotation should
not be considered representative of the Fund's performance for any future
period. To the extent any advertisement or sales literature of a Fund describes
the expenses or performance of any Class, it will also disclose the information
for other Classes. Shareholders may make inquiries regarding the Fund, including
current performance quotations, by calling any SG Cowen account representative.
The Fund's "average annual total return" will be computed in accordance
with the following formula prescribed by the Securities and Exchange Commission:
TOTAL RETURN = P(1+T)n = ERV
Where: P = a hypothetical initial payment of $1,000.
T = average annual total return.
n = number of years.
ERV = Ending Redeemable Value of a hypothetical $1,000 investment made at
the beginning of a 1, 5, or 10 year period at the end of the 1, 5, or 10 year
periods (or fractional portion thereof), assuming reinvestment of all dividends
and distributions.
18
<PAGE>
Average Annual Total Return for the period ended November 30, 1998
<TABLE>
<CAPTION>
Average
Annual
Total
Return
---------
Inception*
<S> <C>
Class A Shares -8.65%
Class B Shares -18.44%
Class I Shares -1.56%
</TABLE>
_________
*Inception dates of Class A, Class B shares and Class I shares are January 2,
1998, April 16, 1988 and January 30, 1998, respectively.
The Class A total return figures calculated in accordance with the above
formula assumes that the maximum 4.75% sales load has been deducted from the
hypothetical $1,000 initial investment at the time of purchase. The Class B
total return figures calculated in accordance with the above formula assumes the
deduction of the appropriate contingent deferred sales charge at the end of each
period.
The ERV assumes complete redemption of the hypothetical investment at the
end of the measuring period. A Fund's net investment income changes in response
to fluctuations in interest rates and the expenses of the Fund.
OTHER INFORMATION
Ernst & Young LLP, 787 Seventh Avenue, New York, New York 10019, has been
selected as the Fund's independent auditors.
Willkie Farr & Gallagher, 787 Seventh Avenue, New York, New York 10019,
serves as counsel for the Fund.
FINANCIAL STATEMENTS
The Fund hereby incorporates by reference the financial statements and
related notes and the report of Ernst & Young LLP thereon included in the Fund's
Annual Report to Shareholders for the period ended November 30, 1998. The Fund
will provide copies of the Annual Report to each person who requests a copy of
this Statement of Additional Information. The Fund will also furnish copies of
the Annual Report, without charge, to any shareholder upon request directed to
the Fund, at the address or telephone number given on the cover page of this
Statement of Additional Information.
19
<PAGE>
PART C
OTHER INFORMATION
Item 23. Exhibits:
Exhibit No. Description of Exhibits
- ----------- -----------------------
(a)(1) Articles of Incorporation of Registrant(a)
(a)(2) Articles of Amendment, effective July 1, 1998
(b) By-Laws of Registrant(a)
(c) Not applicable
(d) Investment Management Agreement, July 1, 1998
(e) Distribution Agreement, July 1, 1998
(f) Not Applicable
(g) Custody Agreement with Investors Fiduciary Trust Company(b)
(h) Not applicable
(i)(1) Opinion and consent of Venable Baetjer and Howard(b)
(i)(2) Opinion and consent of Willkie Farr & Gallagher(b)
C-1
<PAGE>
(j) Consent of Independent Auditors
(k) Not Applicable
(l) Not Applicable
(m)(1) Form of Shareholder Servicing and Distribution Plan(a)
(2) Form of Shareholder Servicing Agreement(a)
(3) Form of Distribution Related Services Agreement(a)
(n) Financial Data Schedule
(o) Not Applicable
(a) Incorporated by reference to Registrant's Statement on
Form N-1A filed on November 14, 1997
(b) Incorporate by reference to Pre-Effective No. 1 to
Registrant's Statement on Form N-1A filed on December 24, 1997
Item 24. NONE
Item 25. Indemnification
Reference is hereby made to Registrant's Registration Statement
filed on November 14, 1997.
Item 26. Business and Other Connections of Investment Manager;
Principal Underwriter
SG Cowen Securities Corporation ("SG Cowen") serves as Investment Manager
to Registrant. SG Cowen is also the Investment Manager of SG Cowen Income +
Growth Fund, Inc. ("CI+G"), SG Cowen Standby Tax-Exempt Reserve Fund, Inc.
("CSTXRF"), SG Cowen Standby Reserve Fund, Inc. ("CSRF"), the series of stock
representing the SG Cowen Opportunity Fund ("COF"), SG Cowen Intermediate
Fixed Income Fund ("CIFIF") and SG Cowen Government Securities Fund ("CGSF")
portfolios of SG Cowen Funds, Inc. ("CFI"). SG Cowen is also a registered
broker-dealer and investment banker. Listed below are the names of all of
the Directors and Executive Officers of SG Cowen as of January 15, 1999,
their positions with SG Cowen, and under the heading "Other Business
Activities and Principal Business Addresses", any business, profession,
vocation or employment of a substantial nature (other than business of SG
Cowen) in which they have been engaged for their own account or in the
capacity of director, officer, employee, partner or trustee during the past
two fiscal years of the Registrant.
C-2
<PAGE>
<TABLE>
<CAPTION>
OTHER BUSINESS
NAME POSITION ACTIVITIES
---- -------- ----------
<S> <C> <C>
Cohen, Joseph M. Chairman and Director 7/98 - Present
Chairman 6/67 - 7/98 Cowen & Co.
Welling, Curtis R. President, Chief Executive Officer
and Director 7/98 - Present
President and Chief Executive Officer 3/96 - 7/98 Societe Generale
Securities Incorporation
Peterson, Charles T. Chief Financial Officer 7/98 - Present
Chief Financial Officer 1/90 - 7/98 Cowen & Co.
Bowden, William P., Jr. General Counsel 7/98 - Present
General Counsel 2/97 - Present - Societe Generale
General Counsel 12/96 - 2/97 Credit Suisse
First Boston Corp.
Walsh, James M. Director 7/98 - Present
Chief Operations Officer and Director 9/96 - 7/98 Societe Generale
Securities Corporation
Bouher, Jacques Director 7/98 - Present
General Manager, Int'l Division 11/95 - Present Societe Generale
Paris, France
Guillebert, Jean-Benard Director 7/98 - Present
Chief Executive Officer - General Manager 9/95 - Present - Societe Generale
USA - Paris, France
Huet, Jean Director 7/98 - Present
Chief Executive Officer - General Manager 1/93 - Present - Societe Generale
USA
Joyet, Alain Director 7/98 - Present
Deputy General Manager 12/95 - Present - Societe Generale
Paris, France
Lacaze, Gerald Director 7/98 - Present
Officer 11/78 - Present - Societe Generale
Paris, France
LeRoux, Robert Director 7/98 - Present
Director 6/95 - Present - Societe Generale
Paris, France
Oudet, Jean-Paul Director 7/98 - Present
Director of Debt Currencies 6/93 - Present - Societe Generale
Paris, France
Tuloup, Yves Director 7/98 - Present
Chief Executive Officer - Global Equity 1/96 - Present - Societe Generale
Paris, France
</TABLE>
SG Securities Corporation
1221 Avenue of the Americas
New York, New York 10020
Societe Generale
29, Boulevard Haussmann
75009 Paris, France
C-3
<PAGE>
Item 27. Principal Underwriters.
(a) Funds Distributor, Inc. (the "Distributor") acts as principal
underwriter for the following investment companies.
American Century California Tax-Free and Municipal Funds
American Century Capital Portfolios, Inc.
American Century Government Income Trust
American Century International Bond Funds
American Century Investment Trust
American Century Municipal Trust
American Century Mutual Funds, Inc.
American Century Premium Reserves, Inc.
American Century Quantitative Equity Funds
American Century Strategic Asset Allocations, Inc.
American Century Target Maturities Trust
American Century Variable Portfolios, Inc.
American Century World Mutual Funds, Inc.
BIB Investment Funds
The Brinson Funds
Dresdner RCM Capital Funds, Inc.
Dresdner RCM Equity Funds, Inc.
Founders Funds, Inc.
Harris Insight Funds Trust
HT Insight Funds, Inc. d/b/a Harris Insight Funds
J.P. Morgan Institutional Funds
J.P. Morgan Funds
JPM Series Trust
JPM Series Trust II
LaSalle Partners Funds, Inc.
Kobrick-Cendant Investment Trust
Merrimac Series
Monetta Fund, Inc.
Monetta Trust
The Montgomery Funds I
The Montgomery Funds II
The Munder Framlington Funds Trust
The Munder Funds Trust
The Munder Funds, Inc.
National Investors Cash Management Fund, Inc.
Orbitex Group of Funds
SG Cowen Funds, Inc.
C-4
<PAGE>
SG Cowen Income + Growth Fund, Inc.
SG Cowen Standby Reserve Fund, Inc.
SG Cowen Standby Tax-Exempt Reserve Fund, Inc.
SG Cowen Series Funds, Inc.
St. Clair Funds, Inc.
The Skyline Funds
Waterhouse Investors Family of Funds, Inc.
WEBS Index Fund, Inc.
Funds Distributor is registered with the Securities and Exchange
Commission as a broker-dealer and is a member of the National Association of
Securities Dealers. Funds Distributor is located at 60 State Street, Suite
1300, Boston, Massachusetts 02109. Funds Distributor is an indirect
wholly-owned subsidiary of Boston Institutional Group, Inc., a holding
company all of whose outstanding shares are owned by key employees.
(b) The following is a list of the executive officers, directors and
partners of Funds Distributor, Inc.
<TABLE>
<S> <C>
Director, President and Chief - Marie E. Connolly
Executive Officer
Executive Vice President - George A. Rio
Executive Vice President - Donald R. Roberson
Executive Vice President - William S. Nichols
Senior Vice President, General - Margaret W. Chambers
Counsel, Chief Compliance Officer,
Secretary and Clerk
Senior Vice President - Michael S. Petrucelli
Director, Senior Vice President, - Joseph F. Tower, III
Treasurer and Chief Financial
Officer
Senior Vice President - Paula R. David
Senior Vice President - Allen B. Closser
Senior Vice President - Bernard A. Whalen
Chairman and Director - William J. Nutt
</TABLE>
(c) Not applicable.
C-5
<PAGE>
Item 28. Location of Accounts and Records
(1) SG Cowen Income + Growth Fund, Inc.
Financial Square
New York, New York 10005
(2) Investors Fiduciary Trust Company
127 West 10th Street
Kansas City, Missouri 64105
Item 29. Management Service
Not applicable.
Item 30. Undertakings
Not applicable.
C-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Amendment to
be signed on its behalf by the undersigned, thereto duly authorized, in the City
of New York, and State of New York, on the 25th day of January, 1999.
SG COWEN SERIES FUNDS, INC.
by Rodd M. Baxter,
Attorney-in-Fact
----------------
Joseph M. Cohen, Chairman
Pursuant to the requirements of the Securities Act, this registration
statement has been signed below by the following persons in the capacities
and on the date(s) indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
by Rodd M. Baxter,
Attorney-in-Fact
----------------
Joseph M. Cohen Chairman and Director January 25, 1999
(Chief Executive Officer)
by Rodd M. Baxter,
Attorney-in Fact
----------------
Creighton H. Peet Treasurer (Chief January 25, 1999
Financial and Accounting
Officer)
by Rodd M. Baxter,
Attorney-in Fact
----------------
James H. Carey Director January 25, 1999
by Rodd M. Baxter,
Attorney-in Fact
----------------
Peter P. Gil Director January 25, 1999
by Rodd M. Baxter,
Attorney-in Fact
----------------
Martin J. Gruber Director January 25, 1999
by Rodd M. Baxter,
Attorney-in Fact
----------------
Burton J. Weiss Director January 25, 1999
</TABLE>
C-7
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Description of Exhibits
99(a)(2) Articles of Amendment
99(d) Investment Management Agreement
99(e) Distribution Agreement
99(j) Consent of Independent Auditors
99(n) Financial Data Schedule
<PAGE>
COWEN SERIES FUNDS, INC.
ARTICLES OF AMENDMENT
Cowen Series Funds, Inc., a Maryland corporation having its principal
office in the State of Maryland in Baltimore, Maryland (hereinafter called the
"Corporation"), hereby certifies to the Maryland State Department of Assessments
and Taxation that:
FIRST: The Charter of the Corporation is amended to change its name
by amending ARTICLE II of the Articles of Amendment and Restatement of the
Corporation to read:
ARTICLE II
NAME
----
The name of the Corporation is SG Cowen Series Funds, Inc. (the
"Corporation")
SECOND: The Charter of the Corporation is hereby further amended by
renaming the issued and unissued shares of the Class A Common Stock, Class B
Common Stock, and Class I Common Stock, respectively, of the Corporation's Cowen
Large Cap Value Fund as Class A Common Stock, Class B Common Stock, and Class I
Common Stock, respectively, of the Corporation's SG Cowen Large Cap Value Fund.
THIRD: The Corporation is registered as an open-end investment
company under the Investment Company Act of 1940, as amended.
FOURTH: The amendments to the Charter of the Corporation set forth
herein were approved by at least a majority of the entire Board of Directors of
the Corporation and are limited to changes expressly permitted by Section 2-605
of the Maryland General Corporation Law to be made without action of the
stockholders of the Corporation.
FIFTH: These Articles of Amendment will become effective on July 1,
1998 at 9:00 a.m.
The undersigned President of the Corporation acknowledges these
Articles of Amendment to be the corporate act of the Corporation and states that
to the best of his knowledge, information and belief, the matters and facts set
forth in these Articles with respect to the authorization and approval of the
amendments of the Corporation's Charter are true in all material respects, and
that this statement is made under the penalties of perjury.
<PAGE>
IN WITNESS WHEREOF, Cowen Series Funds, Inc. has caused this
instrument to be signed in its name and on its behalf by its President, and
witnessed by its Secretary, as of the 16th day of June, 1998.
COWEN SERIES FUNDS, INC.
/s/ David R. Sarns
----------------------------------------
David R. Sarns, President
WITNESS:
/s/ Rodd M. Baxter
- -----------------------------------
Rodd M. Baxter, Secretary
<PAGE>
INVESTMENT MANAGEMENT AGREEMENT
SG COWEN LARGE CAP VALUE FUND (of SG Cowen Series Funds, Inc.)
July 1, 1998
SG Cowen Securities Corporation
Financial Square
New York, New York 10005
Dear Sirs:
SG Cowen Large Cap Value Fund (of SG Cowen Series Funds, Inc.) (the
"Fund"), a corporation organized under the laws of the State of Maryland,
herewith confirms its agreement with SG Cowen Securities Corporation ("SG
Cowen"), as follows:
1. INVESTMENT DESCRIPTION: APPOINTMENT
The Fund desires to employ its capital by investing and reinvesting in
investments of the kind and in accordance with the limitations specified in its
Articles of Incorporation, as amended, and in its Prospectuses and Statements of
Additional Information as from time to time in effect, and in such manner and to
such extent as may from time to time be approved by the Board of Directors of
the Fund. Copies of the Fund's Prospectuses, Statements of Additional
Information and Articles of Incorporation, as amended, have been or will be
submitted to SG Cowen. The Fund desires to employ and hereby appoints SG Cowen
to act as investment manager to its portfolio (the "Portfolio"). SG Cowen
accepts the appointment and agrees to furnish the services set forth below for
the compensation set forth below.
2. SERVICES AS INVESTMENT MANAGER
Subject to the supervision and direction of the Board of Directors of the
Fund, SG Cowen will (a) act in strict conformity with the Fund's Articles of
Incorporation and By-Laws, the Investment Company Act of 1940 (the "Act") and
the Investment Advisers Act of 1940, as the same may from time to time be
amended, (b) manage the Portfolio in accordance with the Fund's investment
objective and policies as stated in the Fund's Prospectus and Statement of
Additional Information as from time to time in effect, (c) make general
investment decisions for the Fund including decisions concerning (i) the
specific types of securities to be held by the Fund and the proportion of the
Fund's assets that should be allocated to such investments during particular
market cycles and (ii) the specific issuers whose securities will be purchased
or sold by the Fund, and (d) supply office facilities (which may be in SG
Cowen's own offices); statistical and research data; data processing services;
clerical services; internal auditing and legal services; internal executive and
administrative services; stationery and office supplies; preparation of reports
to shareholders of the Fund; preparation of tax returns, reports to and filings
with the Securities and Exchange Commission and state Blue Sky authorities;
calculation of the net asset value of shares of the Fund; and general assistance
in all aspects of the Fund's operations. In providing those services, SG Cowen
will supervise the Fund's investments generally and conduct a continual program
of evaluation of the Fund's assets.
In connection with the performance of its duties under this Agreement, it
is understood that SG Cowen will from time to time employ or associate with
itself such person or persons as SG Cowen
<PAGE>
may believe to be particularly fitted to assist it in the performance of this
Agreement, it being understood that the compensation of such person or persons
shall be paid by SG Cowen and that no obligation may be incurred on the Fund's
behalf in any such respect.
3. INFORMATION PROVIDED TO THE FUND: BOOKS AND RECORDS
(a) SG Cowen will keep the Fund informed of developments materially
affecting the Fund, and will, on its own initiative, furnish the Fund from time
to time with whatever information SG Cowen believes is appropriate for this
purpose.
(b) In compliance with the requirements of Rule 31a-3 under the Act, SG
Cowen hereby agrees that all records which it maintains for the Fund are the
property of the Fund and further agrees to surrender promptly to the Fund any of
such records upon the Fund's request.
4. STANDARD OF CARE
SG Cowen shall exercise its best judgment in rendering the services listed
in paragraph 2 above. SG Cowen shall not be liable for any error of judgment or
mistake of law or for any loss suffered by the Fund in connection with the
matters to which this Agreement relates, provided that nothing herein shall be
deemed to protect or purport to protect SG Cowen against any liability to the
Fund or to its shareholders to which SG Cowen could otherwise be subject by
reason of willful misfeasance, bad faith or gross negligence on its part in the
performance of its duties or by reason of SG Cowen's reckless disregard of its
obligations and duties under this Agreement.
Any person, even though also a partner, officer, employee, or agent of SG
Cowen, who may be or become a Director, officer, employee or agent of the Fund,
shall be deemed, when rendering services to the Fund or acting on any business
of the Fund, to be rendering such services to or acting solely for the Fund and
not as a Director, officer, employee, or agent or one under the control or
direction of SG Cowen even though paid by it.
3. COMPENSATION
In consideration of the services rendered pursuant to this Agreement, the
Fund will pay SG Cowen on the first business day of each month a fee for the
previous month, calculated daily, at the annual rate of .75 of 1.00% of the
Fund's average daily net assets. The fee for the period from the date the Fund
commences investment operations to the end of the month during which the Fund
commences investment operations shall be prorated according to the proportion
that such period bears to the full monthly period. Upon any termination of this
Agreement before the end of a month, the fee for such part of that month shall
be prorated according to the proportion that such period bears to the full
monthly period and shall be payable upon the date of termination of this
Agreement. For the purpose of determining fees payable to SG Cowen, the value
of the Fund's net assets shall be computed at the times and in the manner
specified in the Fund's Prospectus and the Statement of Additional Information
as from time to time in effect.
6. EXPENSES
SG Cowen will bear all expenses in connection with the performance of its
services under this Agreement. The Fund will bear certain other expenses to be
incurred in its operation, including: taxes, interest, brokerage fees and
commissions, if any; fees of directors of the Fund who are not officers or
employees of SG Cowen; Securities and Exchange Commission fees and state Blue
Sky
-2-
<PAGE>
qualification fees; management, advisory and administration fees; charges of
custodians and transfer and dividend disbursing agents; outside accounting
and bookkeeping expenses; certain insurance premiums; outside auditing and
legal expenses; costs of maintenance of corporate existence; costs
attributable to investor services, including, without limitation, telephone
and personnel expenses; costs of preparing and printing prospectuses and
statements of additional information for regulatory purposes and for
distribution to existing shareholders; costs of shareholders' reports and
meetings of the shareholders, officers or Board of Directors of the Fund; and
any extraordinary expenses.
7. REIMBURSEMENT TO THE FUND
If in any fiscal year the aggregate expenses of the Fund (including fees
pursuant to this Agreement, but excluding interest, taxes, brokerage expenses,
an applicable portion of distribution expenses and, with the prior written
consent of the appropriate state securities commissions, extraordinary expenses)
exceed the applicable expense limitation of any state having jurisdiction over
the Fund, SG Cowen will reimburse the excess expense. SG Cowen's expense
reimbursement obligation will be limited to the amount of its fees received
pursuant to this Agreement, however, SG Cowen shall reimburse the Fund for such
excess expenses regardless of the amount of fees paid to it during such fiscal
year to the extent that the securities regulations of any state in which Fund
shares are registered and qualified for sale so require. This expense
reimbursement, if any, will be estimated, reconciled and paid on a monthly
basis. From time to time SG Cowen, in its sole discretion and as it deems
appropriate, may assume certain expenses of the Fund while retaining the ability
to be reimbursed by the Fund for such amounts prior to the end of the fiscal
year.
8. SERVICES TO OTHER COMPANIES OR ACCOUNTS
The Fund understands that SG Cowen now acts and will continue to act as
investment adviser to fiduciary and other managed accounts and now acts and will
continue to act as investment manager, investment adviser, sub-investment
adviser and/or administrator to one or more other investment companies, and the
Fund has no objection to SG Cowen's so acting, provided that whenever the Fund
and one or more other accounts or investment companies advised by SG Cowen have
available funds for investment, investments suitable and appropriate for each
will be allocated in a manner believed to be equitable to each entity. The Fund
recognizes that in some cases this procedure may adversely affect the size of
the position obtainable for the Fund. In addition, the Fund understands that
the persons employed by SG Cowen to assist in the performance of SG Cowen's
duties hereunder will not devote their full time to such service and nothing
contained herein shall be deemed to limit or restrict the right of SG Cowen or
any affiliate of SG Cowen to engage in and devote time and attention to other
businesses or to render services of whatever kind or nature.
9. TERM OF AGREEMENT
This Agreement shall become effective on the date first written above and
shall continue for an initial two year term and thereafter shall continue
automatically, provided such continuance is specifically approved at least
annually by (a) the Board of Directors of the Fund or (b) a vote of a "majority"
(as defined in the Act) of the Fund's outstanding voting securities, provided
that in either event the continuance is also approved by a majority of the Board
of Directors who are not "interested persons" (as defined in that Act) of any
party to this Agreement, by vote cast in person at a meeting called for the
purpose of voting on such approval. This Agreement is terminable, without
penalty, on 60 days' written notice, by the Board of Directors of the Fund or by
vote of holders of a majority of the Fund's shares, or upon 90 days' written
notice, by SG Cowen. This Agreement will also terminate automatically in the
event of its assignment (as defined in the Act and the Rules thereunder).
-3-
<PAGE>
10. AMENDMENT OF THIS AGREEMENT
No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against which enforcement of the change, waiver, discharge or termination is
sought, and no material amendment of this Agreement shall be effective until
approved by vote of the holders of a majority of the outstanding voting
securities of the Fund.
11. MISCELLANEOUS
The captions in this Agreement are included for convenience of reference
only and in no way define or delimit any of the provisions hereof or otherwise
affect their construction or effect. If any provision of this Agreement shall
be held or made invalid by court decision, statute, rule or otherwise, the
remainder of this Agreement shall not be invalidated or rendered unenforceable
thereby. This Agreement shall inure to the benefit of the parties hereto and
their respective successors and shall be governed by New York law without giving
effect to the conflict of law provisions thereof.
If the foregoing is in accordance with your understanding indicate your
acceptance hereof by signing and returning the enclosed copy hereof.
Very truly yours,
SG COWEN LARGE CAP VALUE FUND
(of SG Cowen Series Funds, Inc.)
By: /s/ David R. Sarns
-----------------------------------
Name: David R. Sarns
Title: President
Accepted and Agreed:
SG COWEN SECURITIES CORPORATION
By: /s/ Kenneth L. Dowd
------------------------------
Name: Kenneth L. Dowd
Title: Managing Director
-4-
<PAGE>
DISTRIBUTION AGREEMENT
July 1, 1998
Funds Distributor, Inc.
60 State Street
Suite 1300
Boston, Massachusetts 02109
Dear Sirs:
This is to confirm that, in consideration of the agreements hereinafter
contained, each of the open-end investment management companies listed on
Schedule A, attached hereto, together with all other open-end management
investment companies subsequently established (including all series and classes
of shares of such series) and made subject to this Agreement in accordance with
paragraph 8.3 below (each a "Fund, collectively the "Funds"), has agreed that
Funds Distributor, Inc. ("FDI"), shall be, for the period of this Agreement, the
distributor of shares of the Fund.
1. Services as Distributor
1.1 FDI will act as agent for the distribution of shares of the
Funds covered by, and in accordance with, each Fund's registration statement on
Form N-1A (the "Registration Statement") under the Securities Act of 1933, as
amended (the "1933 Act"), and the Investment Company Act of 1940, as amended
(the "1940 Act"). As used in this Agreement, the terms "Registration Statement"
and "prospectus" shall mean any Registration Statement and prospectus, including
the statement of additional information incorporated by reference therein, filed
with the Securities and Exchange Commission (the "SEC") and any amendments and
supplements thereto which at any time shall have been filed with the SEC.
1.2 FDI agrees to use its best efforts to solicit orders for the
sale of shares of the Fund at the public offering price, as determined in
accordance with the Registration Statement and prospectus, and will undertake
such advertising and promotion as it believes is reasonable in connection with
such solicitation.
1.3 All activities by FDI as distributor of the Fund's shares shall
comply with all applicable laws, rules and regulations, including, without
limitation, the
<PAGE>
1940 Act, the 1933 Act, the Securities Exchange Act of 1934, and the rules of
the National Association of Securities Dealers, Inc. (the "NASD"), the SEC, the
Funds' Articles of Incorporation and By-Laws. FDI represents and warrants that
it is a broker-dealer registered with the SEC and that it is registered with the
relevant securities regulatory agencies in all fifty states, the District of
Columbia and Puerto Rico. FDI also represents and warrants that it is a member
of the NASD.
1.4 FDI will provide one or more persons during normal business
hours to respond to telephone questions concerning the Fund.
1.5 FDI acknowledges that, whenever in the judgment of the Fund's
officers such action is warranted for any reason, including, without limitation,
market, economic or political conditions, those officers may decline to accept
any orders for, or make any sales of, the Fund's shares until such time as those
officers deem it advisable to accept such orders and to make such sales and each
party shall advise promptly the other party of any such determination.
1.6 FDI will act only on its own behalf as principal should it
choose to enter into selling agreements with selected dealers or others. Any
payments to dealers shall be governed by a separate agreement between FDI and
such dealer and in accordance with the Fund's Registration Statement and
prospectus.
2. Duties of Each Fund
2.1. Each Fund agrees to pay all costs and expenses in connection
with the registration of its shares under the 1933 Act and all expenses in
connection with maintaining facilities for the issue and transfer of shares and
for supplying information, prices and other data to be furnished by the Fund
hereunder, and all expenses in connection with the preparation and printing of
the Fund's prospectus and statement of additional information for regulatory
purposes and for distribution to shareholders; provided however, that the Fund
shall not pay any of the costs of advertising or promotion for the sale of
shares, except as authorized by a plan adopted pursuant to Rule 12b-1 under the
1940 Act. FDI shall also be entitled to compensation for FDI's services as
provided in any distribution plan adopted as to any series and class of the
Fund's shares pursuant to Rule 12b-1.
2.2 Each Fund agrees at its own expense to execute any and all
documents, to furnish any and all information and fees and to take any other
actions that may be reasonably necessary in connection with the qualification of
the Fund's shares for sale in those states that FDI may designate to the Fund
and the Fund may approve.
2.3 Each Fund shall furnish from time to time, for use in connection
with the sale of the Fund's shares, such information and reports with respect to
the Fund and its shares as FDI may reasonably request, all of which shall be
signed by one or more of the Fund's duly authorized officers; and the Fund
warrants that the statements
2
<PAGE>
contained in any such reports, when so signed by one or more of the Fund's
officers, shall be true and correct. The Fund shall also furnish FDI upon
request with: (a) annual audits of the Fund's books and accounts made by
independent public accountants regularly retained by the Fund, (b) semi-annual
unaudited financial statements pertaining to the Fund, (c) quarterly earnings
statements prepared by the Fund, (d) a monthly itemized list of the securities
in the Fund's portfolios, (e) monthly balance sheets as soon as practicable
after the end of each month and (f) from time to time such additional
information regarding the Fund's financial condition as FDI may reasonably
request.
3. Representations and Warranties
The Fund represents to FDI that the Registration Statement and
prospectus have been prepared in conformity with the requirements of the 1933
Act, the 1940 Act and the rules and regulations of the SEC thereunder. The Fund
represents and warrants to FDI that the Registration Statement and prospectus,
when such become effective, will include all statements required to be contained
therein in conformity with the 1933 Act, the 1940 Act and the rules and
regulations of the SEC; that all statements of fact contained in the
Registration Statement and prospectus will be true and correct when such becomes
effective; and that neither any Registration Statement nor any prospectus when
such become effective will include an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein not misleading to a purchaser of the Fund's shares. FDI
may, but shall not be obligated to, propose from time to time such amendment or
amendments to the Registration Statement and such supplement or supplements to
any prospectus or statement of additional information as, in the light of future
developments, may, in the opinion of FDI's counsel, be necessary or advisable.
If the Fund shall not propose such amendment or amendments and/or supplement or
supplements within fifteen days after receipt by the Fund of a written request
from FDI to do so, FDI may, at its option, terminate this Agreement or decline
to make offers of the Fund's securities until such amendments are made. The Fund
shall not file any amendment to the Registration Statement or supplement to any
prospectus or statement of additional information without giving FDI reasonable
notice thereof in advance; provided, however, that nothing contained in this
Agreement shall in any way limit the Fund's right to file at any time such
amendments to the Registration Statement and/or supplements to any prospectus or
statement of additional information, of whatever character, as the Fund may deem
advisable, such right being in all respects absolute and unconditional.
4. Indemnification
4.1 The Fund authorizes FDI and any dealers with whom FDI has
entered into dealer agreements to use any prospectus or statement of additional
information furnished by the Fund from time to time, in connection with the sale
of the Fund's shares. The Fund agrees to indemnify, defend and hold FDI, its
several officers and directors, and any person who controls FDI within the
meaning of Section 15 of the 1933 Act, free and harmless from and against any
and all claims, demands, liabilities and
3
<PAGE>
expenses (including the cost of investigating or defending such claims, demands
or liabilities and any counsel fees incurred in connection therewith) which FDI,
its officers and directors, or any such controlling person, may incur under the
1934 Act, the 1940 Act or common law or otherwise, arising out of or based upon
any untrue statement or alleged untrue statement of a material fact contained in
the Registration Statement, any prospectus or any statement of additional
information, or arising out of or based upon an omission or alleged omission to
state a material fact required to be stated in the Registration Statement, any
prospectus or any statement of additional information, or necessary to make the
statements in any of them not misleading; provided, however, that the Fund's
agreement to indemnify FDI, its officers or directors, and any such controlling
person shall not be deemed to cover any claims, demands, liabilities or expenses
arising out of or based upon any such untrue statement, alleged untrue
statement, omission or alleged omission made in any Registration Statement or
any prospectus in reliance upon information furnished by FDI, its officers,
directors or any such controlling person to the Fund or its representatives for
use in the preparation thereof; and further provided that the Fund's agreement
to indemnify FDI and the Fund's representations and warranties set out in
paragraph 3 of this Agreement will not be deemed to cover any liability to the
Fund or its shareholders to which FDI would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence in the performance of its
duties, or by reason of FDI's reckless disregard of its obligations and duties
under this Agreement ("Disqualifying Conduct"). The Fund's agreement to
indemnify FDI, its officers and directors, and any such controlling person, as
aforesaid, is expressly conditioned upon the Fund's being notified of any action
brought against FDI, its officers or directors, or any such controlling person,
such notification to be given by letter or by telegram addressed to the Fund at
its principal office in New York, New York and sent to the Fund by the person
against whom such action is brought, within ten days after the summons or other
first legal process shall have been served. The failure so to notify the Fund of
any such action shall not relieve the Fund from any liability that the Fund may
have to the person against whom such action is brought by reason of any such
untrue or alleged untrue statement or omission or alleged omission otherwise
than on account of the Fund's indemnity agreement contained in this paragraph
4.1. The Fund will be entitled to assume the defense of any suit brought to
enforce any such claim, demand or liability, but, in such case, such defense
shall be conducted by counsel of good standing chosen by the Fund and approved
by FDI. In the event the Fund elects to assume the defense of any such suit and
retain counsel of good standing approved by FDI, the defendant or defendants in
such suit shall bear the fees and expenses of any additional counsel retained by
any of them; but in case the Fund does not elect to assume the defense of any
such suit, or in case FDI does not approve of counsel chosen by the Fund, the
Fund will reimburse FDI, its officers and directors, or the controlling person
or persons named as defendant or defendants in such suit, for the fees and
expenses of any counsel retained by FDI or them. The Fund's indemnification
agreement contained in this paragraph 4.1 and the Fund's representations and
warranties in this Agreement shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of FDI, its officers and
directors, or any controlling person, and shall survive the delivery of any of
the Fund's shares. This agreement of indemnity will inure exclusively to FDI's
benefit,
4
<PAGE>
to the benefit of its several officers and directors, and their respective
estates, and to the benefit of the controlling persons and their successors. The
Fund agrees to notify FDI promptly of the commencement of any litigation or
proceedings against the Fund or any of it officers or directors in connection
with the issuance and sale of any of the Fund's shares.
4.2 FDI agrees to indemnify, defend and hold the Fund, its several
officers and directors, and any person who controls the Fund within the meaning
of Section 15 of the 1933 Act, free and harmless from and against any and all
claims, demands, liabilities and expenses (including the reasonable costs of
investigating or defending such claims, demands or liabilities and expenses and
any reasonable counsel fees incurred in connection therewith) that the Fund, its
officers or directors or any such controlling person may incur under the 1933
Act, the 1940 Act or common law or otherwise, but only to the extent that such
liability or expense incurred by the Fund, its officers or directors or such
controlling person resulting from such claims or demands shall arise out of or
be based upon (a) any unauthorized sales literature, advertisements,
information, statements or representations or (b) any untrue or alleged untrue
statement of a material fact contained in information furnished in writing by
FDI to the Fund and specifically for use in the Fund's Registration Statement
and prospectus and used in the answers to any of the items of the Registration
Statement or in the corresponding statements made in the prospectus, or shall
arise out of or be based upon any omission or alleged omission to state a
material fact in connection with such information furnished in writing by FDI to
the Fund and required to be stated in such answers or necessary to make such
information not misleading. FDI's agreement to indemnify the Fund, its officers
and directors, and any such controlling person, as aforesaid, is expressly
conditioned upon FDI's being notified of any action brought against the Fund,
its officers or directors, or any such controlling person, such notification to
be given by letter or telegram addressed to FDI at its principal address set
forth above and sent to FDI by the person against whom such action is brought,
within ten days after the summons or other first legal process shall have been
served. FDI shall have the right of first control of the defense of such action,
with counsel of its own choosing, satisfactory to the Fund, if such action is
based solely upon such alleged misstatement or omission on FDI's part, and in
any other event the Fund, its officers or directors or such controlling person
shall each have the right to participate in the defense or preparation of the
defense of any such action. The failure so to notify FDI of any such action
shall not relieve FDI from any liability that FDI may have to the Fund, its
officers or directors, or to such controlling persons by reason of any such
untrue or alleged untrue statement or omission or alleged omission otherwise
than on account of FDI's indemnity agreement contained in this paragraph 4.2 or
any Disqualifying Conduct in connection with the offering and sale of any shares
of the Fund. This agreement of indemnity will inure exclusively to the Fund's
benefit, to the benefit of the Fund's officers and directors, and their
respective estates, and to the benefit of any controlling persons and their
successors. FDI agrees to notify the Fund promptly of the commencement of any
litigation or proceedings against FDI or any of its officers or directors in
connection with the issuance and sale of any of the Fund's shares.
5
<PAGE>
5. Effectiveness of Registration
None of the Fund's shares shall be offered by either FDI or the Fund
under any of the provisions of this Agreement and no orders for the purchase or
sale of the shares hereunder shall be accepted by the Fund if and so long as the
effectiveness of the Registration Statement or any necessary amendments thereto
shall be suspended under any of the provisions of the 1933 Act or if and so long
as a current prospectus as required by Section 5 (b) (2) of the 1933 Act is not
on file with the SEC; provided, however, that nothing contained in this
paragraph 5 shall in any way restrict or have an application to or bearing upon
the Fund's obligation to repurchase its shares from any shareholder in
accordance with the provisions of the Fund's prospectuses, statement of
additional information or articles of incorporation.
6. Notice to FDI
The Fund agrees to advise FDI immediately in writing:
(a) of any request by the SEC for amendments to the Registration
Statement, prospectus or statement of additional information then in effect or
for additional information;
(b) in the event of the issuance by the SEC of any stop order
suspending the effectiveness of the Registration Statement or prospectus then in
effect or the initiation of any proceeding for that purpose;
(c) of the happening of any event that makes untrue any statement of
a material fact made in the Registration Statement or prospectus then in effect
or that requires the making of a change in the Registration Statement or
prospectus in order to make the statements therein not misleading; and
(d) of all actions of the SEC with respect to any amendment to the
Registration Statement or prospectus which may from time to time be filed with
the SEC.
7. Term of Agreement
This Agreement shall become effective with respect to the Fund as of
the date hereof and will continue for an initial two year term and thereafter
shall continue automatically, provided such continuance is specifically approved
at least annually by (a) the Fund's Board of Directors or (b) a vote of a
majority (as defined in the 1940 Act) of the Fund's outstanding voting
securities, provided that in either event the continuance is also approved by a
majority of the Directors of the Fund who are not interested persons (as defined
in the 1940 Act) of any party to this Agreement, by vote cast in person at a
meeting called for the purpose of voting on such approval. This Agreement is
terminable, without penalty, on 60 days' written notice, by the Fund's Board of
Directors or by vote
6
<PAGE>
of the holders of a majority of the Fund's shares, or on 60 days' written
notice, by FDI. This Agreement will also terminate automatically in the event of
its assignment (as defined in the 1940 Act).
8. Miscellaneous
8.1 The Fund recognizes that, except to the extent otherwise agreed to by
the parties hereto, FDI's directors, officers and employees may from time to
time serve as directors, trustees, officers and employees of corporations and
business trusts (including other investment companies), and that FDI or FDI's
affiliates may enter into distribution or other agreements with other
corporations and trusts.
8.2 No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against which an enforcement of the change, waiver, discharge or termination is
sought.
8.3 This Agreement and the Schedule forming a part hereof may be amended
at any time by a writing signed by each of the parties hereto. In the event that
the Directors of any additional funds indicate by vote that such funds are to be
made parties to this Agreement, whether such funds were in existence at the time
of the effective date of this Agreement or subsequently formed, Schedule A
hereto shall be amended to reflect the addition of such new funds and such new
funds shall thereafter become parties hereto. In the event that any of the Funds
listed on Schedule A terminates its registration as a management investment
company, or otherwise ceases operations, Schedule A shall be amended to reflect
the deletion of such Fund and its various classes.
8.4 This Agreement shall be governed by the internal laws of the state of
New York without giving effect to principles of conflicts of laws.
8.5 If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule, or otherwise, the remainder of this Agreement
shall not be affected thereby. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors.
7
<PAGE>
Please confirm that the foregoing is in accordance with your
understanding by indicating your acceptance hereof at the place below indicated,
whereupon it shall become a binding agreement between us.
Very truly yours,
COWEN FUNDS, INC.
COWEN INCOME + GROWTH FUND, INC.
COWEN STANDBY RESERVE FUND, INC.
COWEN STANDBY TAX-EXEMPT RESERVE
FUND, INC.
COWEN SERIES FUNDS, INC.
By: /s/ David R. Sarns
-------------------------------
Name: David R. Sarns
-----------------------------
Title: President
----------------------------
Accepted and Agreed:
FUNDS DISTRIBUTOR. INC.
By: /s/ Marie Connolly
-------------------------------
Name: Marie Connolly
-----------------------------
Title: Pres + CEO
----------------------------
8
<PAGE>
SCHEDULE A
COWEN FAMILY OF FUNDS
Cowen Funds, Inc.
Cowen Intermediate Fixed Income Fund
Class A Shares
Class B Shares
Class I Shares
Cowen Government Securities Fund
Class A Shares
Class B Shares
Class I Shares
Cowen Opportunity Fund
Class A Shares
Class B Shares
Class I Shares
Cowen Income + Growth Fund, Inc.
Class A Shares
Class B Shares
Class I Shares
Cowen Standby Reserve Fund, Inc.
Cowen Standby Tax-Exempt Reserve Fund, Inc.
Cowen Series Funds, Inc.
Cowen Large Cap Value Fund
Class A Shares
Class B Shares
Class I Shares
9
<PAGE>
Exhibit 99(J)
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Financial
Highlights" in the Prospectus, "Other Information" and "Financial Statements" in
the Statement of Additional Information and to the incorporation by reference of
our report on SG Cowen Large Cap Value Fund dated January 8, 1999 in this
Registration Statement (Form N-1A No. 333-40327) of SG Cowen Series Funds, Inc.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
New York, New York
January 26, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 001
<NAME> SG COWEN LARGE CAP VALUE FUND
<S> <C>
<PERIOD-TYPE> 11-MOS
<FISCAL-YEAR-END> NOV-30-1998
<PERIOD-START> JAN-02-1998
<PERIOD-END> NOV-30-1998
<INVESTMENTS-AT-COST> 14,844,210
<INVESTMENTS-AT-VALUE> 13,195,561
<RECEIVABLES> 19,388
<ASSETS-OTHER> 167,807
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 13,382,756
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 22,470
<TOTAL-LIABILITIES> 22,470
<SENIOR-EQUITY> 13,360,286
<PAID-IN-CAPITAL-COMMON> 15,029,337
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 18,469
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (38,871)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (1,648,649)
<NET-ASSETS> 13,360,286
<DIVIDEND-INCOME> 209,298
<INTEREST-INCOME> 29,533
<OTHER-INCOME> 0
<EXPENSES-NET> 133,486
<NET-INVESTMENT-INCOME> 105,345
<REALIZED-GAINS-CURRENT> (38,871)
<APPREC-INCREASE-CURRENT> (1,648,649)
<NET-CHANGE-FROM-OPS> (1,582,175)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 86,876
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 13,360,286
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 83,060
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 212,813
<AVERAGE-NET-ASSETS> 12,128,950
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 002
<NAME> SG COWEN LARGE CAP VALUE FUND CLASS A
<S> <C>
<PERIOD-TYPE> 11-MOS
<FISCAL-YEAR-END> NOV-30-1998
<PERIOD-START> JAN-02-1998
<PERIOD-END> NOV-30-1998
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 0
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 1,263,301
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 12,043,765
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 78,185
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,506,814
<NUMBER-OF-SHARES-REDEEMED> 251,551
<SHARES-REINVESTED> 8,038
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> .08
<PER-SHARE-GAIN-APPREC> (.49)
<PER-SHARE-DIVIDEND> .06
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.53
<EXPENSE-RATIO> 1.11
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 003
<NAME> SG COWEN LARGE CAP VALUE FUND CLASS B
<S> <C>
<PERIOD-TYPE> 7-MOS
<FISCAL-YEAR-END> NOV-30-1998
<PERIOD-START> APR-16-1998
<PERIOD-END> NOV-30-1998
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 0
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 17,196
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 163,960
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
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<TABLE> <S> <C>
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<NAME> SG COWEN LARGE CAP VALUE FUND CLASS I
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