<PAGE> 1
================================================================================
SEMI-ANNUAL REPORTS (UNAUDITED) MAY 31, 1996
THE COWEN
FAMILY OF FUNDS
COWEN INCOME+GROWTH FUND, INC.
COWEN FUNDS, INC.
Opportunity Fund
Government Securities Fund
Intermediate Fixed Income Fund
(LOGO)
COWEN & COMPANY
================================================================================
<PAGE> 2
CONTENTS
Chairman's Letter............................................................. 1
Income + Growth Fund.......................................................... 2
Opportunity Fund.............................................................. 4
Intermediate Fixed Income Fund and
Government Securities Fund.................................................... 6
Statements of Investments..................................................... 8
Statements of Assets and Liabilities..........................................18
Statements of Operations......................................................20
Statements of Changes in Net Assets...........................................22
Notes to Combined Financial Statements........................................26
<PAGE> 3
CHAIRMAN'S LETTER JULY 22, 1996
To Our Shareholders:
Reactions to rising interest rates and strong employment figures dominated
both the equity and bond markets during the Cowen Family of Funds' semi-annual
period ending May 31, 1996. The result was a greater degree of market volatility
than that seen in the calendar year 1995. The portfolio managers' commentary on
the following pages describes how each met the challenge of these economic
fundamentals and market responses as well as what conditions each anticipates
for the remainder of 1996.
As you will see, the Cowen Opportunity Fund significantly outperformed the S&P
500, and both of our fixed income funds either tracked or outperformed their
Lipper category averages. The Income + Growth Fund lagged the indices due to an
overweighting of interest sensitive equities which is a cornerstone of its
dividend-oriented investment style. What is perhaps more important to note about
these six months, though, is that they confirmed the wisdom of our overall
investment philosophy, i.e. stay true to the Funds' long-term objectives, focus
on specific sectors providing value, and earn competitive returns through high
quality portfolio investments.
Three times during the six months ending May 31, 1996, payroll employment
figures were released that were higher than anticipated. While these figures
indicated a growing economy, they also renewed fears of inflation. In all three
cases, the broad markets shrugged off these fears and continued their advance
into record territory. The bond market, having expected the Federal Reserve
Board to cut interest rates further to prevent a recession during these months,
instead saw rates go up across the yield curve, without a change in monetary
policy to that point.
Clearly, this period was no different from any other time in recent history in
that there never has been -- and never will be -- a time when the future of the
investment markets and the economy is certain over the near term. That's why we
are not and do not try to be market timers.
Instead, we remain convinced that the key to the long-term success is strict
adherence to our disciplined investment strategies. In turn, that can be
expected to provide consistently positive long-term performance for the Cowen
Family of Funds shareholders. We appreciate your continued support.
Sincerely,
[SIG]
Joseph M. Cohen
Chairman
<PAGE> 4
COWEN INCOME + GROWTH FUND
Making Tactical Sector Moves
to Reduce Risk and Capture Dividend Increases
Following a very strong 1995 for both the stock market in general and the
Income + Growth Fund in particular, rising interest rates, expectations that
economic growth would pick up in an election year, and reviewed popularity of
technology and economically sensitive stocks during the first several months of
1996 led to a surge of new money into growth-oriented and indexed equity funds.
This, in turn, tended to drive up valuation levels of the stocks represented in
these portfolios, leaving the performance of the lower risk, dividend-paying
companies that meet the Fund's conservative screening criteria lagging in
comparison.
Even so, the Fund's Class A Shares had a positive return of 5.13% for the six
months ending May 31, 1996. This performance compares, for the same period, to
the S&P 500 Index's return of 11.78% and to the Lipper Equity-Income average
return of 9.63%. The Fund's Class B and Class C shares returned 4.67% and 5.28%,
respectively, for the period.
INVESTMENT REVIEW
The Fund's portfolio holdings continued to experience improved earnings and
cash-flow growth and above-average dividend growth. In fact, many of the
companies in the Fund's portfolio raised their dividends in the last six months,
with the rates of increase meeting or exceeding our projections. More
specifically, over the past six months, the Fund has:
- Reduced exposure to the electric utilities sector -- As anticipated in our
last report, this sector was impacted early in 1996 by rising interest rates
and a host of still unresolved regulatory issues.
- Dramatically reduced exposure to the regional telephone sector -- We had
maximized allocation here in 1995 based on the belief that the final
Telecommunications Bill would be most beneficial to the regional companies
at the expense of their long-distance counterparts. As the recognition of
the legislation's potential benefits increased, the telephone stocks
performed very well, exceeding the record high levels seen last in mid-1993.
At these prices, we believed the risks exceeded the potential return
opportunities, and so we sold Bell Atlantic and Pacific Telesis.
- Increased allocation to the energy sector -- While we sold Chevron Corp.
when it reached its sell target, we added Shell Oil and Texaco to maintain
our exposure to large, fully integrated worldwide oil companies. We also
added Consolidated Natural Gas and Equitable Resources to increase exposure
to domestic, fully-integrated natural gas companies; we maintained high
exposure to regulated natural gas distribution companies, such as MCN,
Brooklyn Union Gas, and National Fuel Gas, which were expected to benefit
from higher natural gas prices as well as from their investments in
non-regulated exploration and production activities. We believe current
geopolitics and economics, along with a growing demand/stable supply
equation worldwide, favor higher energy prices ahead.
- Reduced allocation to regional banks -- We sold PNC and First Union Bank, as
our concerns over rising delinquencies and personal bankruptcies grew.
2
<PAGE> 5
- Added a third REIT to the portfolio -- We added Kimco Realty Corp., as we
continue to like the high yields, record of steady dividend growth,
reasonable valuations, tax benefits, and historical inflation hedge
characteristics of these real estate investment trusts.
- Made tactical moves based on the Fund's investment parameters -- These
included opportunities in high quality consumer related companies, such as
Reader's Digest, which we bought during this period, and J.C. Penney, to
which we added. Both have compelling valuations, high yields, and high
dividend growth rates. We sold Tambrands and Bristol-Myers, both of which
hit their yield targets, as well as Dun & Bradstreet, which had a major
change in its fundamentals as it splits into three separate companies, none
of which, we believe, will have the yield characteristics we seek.
LOOKING AHEAD
In short, this semi-annual period was one when the portfolio's holdings were
fundamentally performing well -- growing cash flow, increasing dividends, etc.,
and yet the market was not rewarding these stocks accordingly. We believe that
the cyclical phenomenon of investment styles will become even more pronounced as
we move forward, with various styles moving in and out of favor quickly and
dramatically. We further believe that the real key to success lies in staying
committed to our longstanding low risk, high yield, high quality discipline.
We have positioned the portfolio to participate in what we anticipate will be
a reasonably positive equity market for the remainder of the fiscal year, as we
continue to seek superior risk-adjusted total returns over the long term.
3
<PAGE> 6
COWEN OPPORTUNITY FUND
Focusing on Specific Sectors
In Search for Growth Out of Value
In contrast to 1995, small capitalization stocks overall outperformed large
capitalization stocks during the six months ended May 31, 1996. Thus, the Cowen
Opportunity Fund's investment style -- which focuses on undervalued,
re-emerging, small cap growth stocks -- enjoyed a popularity that it did not for
most of 1995.
The Fund's Class A Shares had a positive return of 18.77% for the semi-annual
period ended May 31, 1996. This significantly outperformed the S&P 500 Index's
return of 11.78% for the same period. Still, growth-oriented stocks outperformed
value-oriented stocks during these months, and so the Fund slightly
underperformed the Lipper Small Cap Growth average of 20.35%. The Fund's Class B
and Class C shares returned 18.27% and 18.97%, respectively, for the period.
INVESTMENT REVIEW
As investors continued to pour money into technology and richly valued growth
stocks throughout 1995, significant undervaluations were left behind in their
wake. We took advantage of these opportunities by finding increasing value.
The Fund first benefited from a cut in two key interest rates by the Federal
Reserve Board on January 31, 1996. With the stage set for continued U.S.
economic growth, punctuated by February's surprises of an employment gain of
705,000 jobs and a first quarter gain in the Gross Domestic Product (GDP) of
2.1%, consumers started to make a strong comeback, especially in the retail
sector. While the Fund was not overweighted in this sector, we participated
through investments in Morton's Restaurant, a restaurant chain; Bombay Company,
a specialty retailer; Lechters, a specialty retailer of kitchen accessories; and
Sports and Recreation, a specialty retailer of name brand sporting equipment.
In particular, two major strategies contributed to the Fund's strong
performance. The first was a portfolio concentration in the energy sector -- in
particular, small exploration and development oil and gas companies and small
oil and gas service companies. Purchases made by the Fund in the summer and fall
of 1995 began to pay off in the winter and spring of 1996, as low valuations
coincided with firmer pricing for oil and gas, which, in turn, led to higher
stock prices. This was especially true for companies adding to their reserves,
like Force Energy, United Meridian and especially Oryx and Parker and Parsley,
both of which were part of the largest natural gas discovery in the world
recently. These energy companies, and the values we had identified in them
months earlier, began to be recognized by the market during the Fund's
semi-annual period.
Similarly, the oil and gas service companies, which had been in a downtrend
since 1980, have seen an increase in the utilization of their services and
equipment recently, as domestic exploration, development, and production come
back to the fore. When there didn't seem to be many attractive valuations in
pure technology companies, we found technology in other platforms as we built
our energy-related holdings. For example, oil equipment and service companies
such as Petroleum Geo Services (PGSAY) use seismic technology to more accurately
determine locations for drilling wells, and Oceaneering International (OII)
provides sub-sea and above-water technology to the oil and gas industry. By
building the Fund's holdings in oil and gas drillers, equipment and
4
<PAGE> 7
service providers, energy-related stocks grew to be the Fund's largest sector.
As the U.S. again becomes more reliant on oil imports from what many consider
less than dependable sources and as the supply/demand equation comes in to
closer balance, we believe that U.S. energy companies will be even more highly
valued in future months. We are continuing to overweight the energy and natural
resource sectors along with individual companies that will benefit from the
prolonged economic cycle.
The second major contributor to the Fund's performance this period was its
position in the technology sector. With the selloff of technology stocks in late
fall and early winter, our fundamental and valuation analyses led us to some
attractively valued technology companies in early 1996. After a rebound of these
stocks in April, many went even higher in May.
Still, the Fund did not participate in the technology sector as aggressively
as many of the momentum growth-oriented funds that make up the Lipper category
average. As you know, our style of buying out-of-favor stocks at low valuations
tends to give the Fund a lower beta (a measure of risk that shows how volatile a
stock is to the overall market) than funds that strictly seek growth.
In fact, our more moderate position in the technology sector served the Fund
well, giving it the upside of the rebound as well as some downside protection in
the next semi-annual period, as advances in many of these technology companies
in April and May gave way to sharp corrections in June. As certain excesses
continue to be wrung out of the technology group, we are seeing additional
opportunistic investments in this sector. Our strategy has allowed us to use
these corrections again to find selected technology and other NASDAQ stocks with
good prices and at reasonable valuations.
LOOKING AHEAD
As we look to the rest of 1996, we anticipate moderate economic growth, and
inflation under control. Based on current economic indicators, our expectations
are that we will sustain this level without inciting inflation. In time, we also
believe that the Japanese and European economies will recover, aided by their
Central Banks, leading to synchronized global growth.
However, we also believe corporate profits in general may be lower in the
U.S., and so we are somewhat cautious as to the near term of the stock market.
We do continue to find many attractive investment opportunities, and given our
approach of growth out of value, we remain confident that we can deliver
superior returns and capital appreciation over the long term.
After all, we have been identifying undervalued small cap stocks through
intensive research since 1988, long before small cap stocks had gained the
popularity they now enjoy, and we are committed to sticking with our discipline,
through good times and bad, with a long-term investment outlook.
5
<PAGE> 8
COWEN INTERMEDIATE FIXED INCOME FUND
COWEN GOVERNMENT SECURITIES FUND
Adjusting Maturity and Sector Allocation to Battle Rising Interest Rates
When a dramatic turnaround in the direction of interest rates began in February
1996, the bond market rally of the previous year ended, and it was once again
the high portfolio quality and flexibility to adjust maturity and sector
weightings shared by the Cowen Intermediate Fixed Income Fund and Cowen
Government Securities Fund that were integral to outperforming some key industry
benchmarks for the six months ended May 31, 1996.
The semi-annual return of the Intermediate Fixed Income Fund's Class A shares
was (0.42)%. This outperformed the Lipper Intermediate Investment Grade Index's
return of (1.05)% but slightly underperformed its benchmark, the Lehman Brothers
Intermediate Government/Corporate Index, which had a return of (0.23)%. The
Fund's Class B and Class C shares returned (0.42)% and (0.31)%, respectively,
for the period. The semi-annual return of the Government Securities Fund's Class
A shares was (1.91)%. While this underperformed the Lehman Brothers Aggregate
Index, which had a return of (1.16)%, it closely tracked the Lipper U.S. General
Government Index's return of (1.92)%. The Fund's Class C shares returned (1.75)%
for the period.
INVESTMENT REVIEW
As anticipated in our last report, interest rate reductions were imminent, and,
in fact, the Federal Reserve Board cut rates in December and in January by 1/4
of 1% each time. At that point, general market expectations were that the
economy was either close to or in a recession, and that to prevent such a
recession, the Fed would have to cut interest rates even further.
In February, evidence unfolded of an economy no longer slowing and of a
Federal Reserve Board that may not be on a steadfast path of dropping rates.
When this data, including higher than anticipated payroll employment figures and
consumer spending rates, was released, inflationary fears were renewed, and
interest rates not only stopped falling but actually began to go up across the
yield curve, as market participants reevaluated economic fundamentals and
security valuations.
Throughout this period, the shape of the already "steep" yield curve -- where
rates increase with maturities -- did not change dramatically, but it did
steepen further. As has often been the case in the past couple of years, it was
the intermediate part of the yield curve, i.e. the five year and ten year
maturity points, that experienced the greatest change along the yield curve.
Yields on 5-year and 10-year Treasury Notes each increased 1.11% over the
six-month period ending May 31.
In response to the directional change in interest rates, our primary strategy
in both Funds was to adopt a slightly defensive posture by shortening average
maturity. In the Intermediate Fixed Income Fund, we shortened average maturity
over the six months from 5.1 years to 4.5 years as of May 31. We also increased
the Fund's exposure to the mortgage sector, as these securities historically
have better relative performance when interest rates are rising. Perhaps most
significantly, we maintained the high quality profile of the portfolio. The only
mortgage securities we hold are GNMAs and FNMAs, which are issued by agencies or
instrumentalities of the U.S. Government. We have avoided collateralized
mortgage obligations (CMOs). As of May 31, the Fund was 59.9% in
6
<PAGE> 9
U.S. Treasury Securities, 19.5% in investment grade corporate securities, and
20.6% in mortgage securities. We remain committed to adding incremental yield
without incurring the volatility of long-term bonds.
We also shortened the average maturity of the Government Securities Fund over
the period from 9.3 years to 7.8 years and its average duration from 5.0 years
to 4.7 years as of May 31. The quickest way to do this was to sell one of the
Fund's largest positions, a longer-duration discounted mortgage security. The
effect of this was to reduce the Fund's exposure to mortgages, although, looking
ahead, we are likely to increase our exposure to this sector. Mortgage-backed
securities continue to offer attractive yields, and previously held concerns
over more rapid pre-payments are diminishing. As of May 31, the Fund was 59.7%
invested in U.S. Treasuries and 40.3% in GNMAs and FNMAs.
LOOKING AHEAD
We believe that economic growth, as measured by GDP, will likely be a moderate
2% or so for 1996, which should mean growth without the customary accompanying
rise in inflation. Thus, with 30-year Treasury yields at about 7% at May 31, the
worst of the rise in bond yields is probably behind us. On the basis of this
fundamental view, we did not adopt a more drastically defensive posture in the
Funds, and we look ahead to attractive yields in the bond market.
At the same time, there is some risk that the Federal Reserve Board may
increase short-term interest rates in the near term, but, in our opinion, the
bond market has already largely reflected that expectation. If such an increase
is made, it will probably be perceived as a move to keep inflation under control
and thus as a plus by the bond market.
Our strategy in both Funds is to maintain our conservative disciplines and
high quality investment criteria and to continue actively managing the
portfolios, making moderate but effective adjustments as market conditions
change.
7
<PAGE> 10
COWEN INCOME + GROWTH FUND, INC.
STATEMENT OF INVESTMENTS
MAY 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
<C> <S> <C>
COMMON STOCKS -- 94.1% of total portfolio
CONSUMER DURABLES -- 2.8%
130,000 Hanson PLC ADR $ 1,901,250
------------
ELECTRICAL UTILITIES -- 16.1%
80,000 Baltimore Gas & Electric 2,190,000
75,000 Central & South West Corp. 2,071,875
90,000 Scana Corp. 2,351,250
85,000 Southern Corp. 1,965,625
75,000 Western Resources, Inc. 2,165,625
------------
10,744,375
------------
INSURANCE -- 3.3%
65,000 Ohio Casualty Corp. 2,218,125
------------
NATURAL GAS DISTRIBUTORS -- 22.2%
90,000 Brooklyn Union Gas Co. 2,407,500
55,000 Consolidated Natural Gas 2,660,625
57,000 Equitable Resources Inc. 1,695,750
100,000 MCN Corp. 2,375,000
70,000 National Fuel Gas Co. 2,406,250
60,000 Piedmont Natural Gas Co. 1,297,500
70,000 Utilicorp United Inc. 1,916,250
------------
14,758,875
------------
PETROLEUM -- 15.0%
23,000 Atlantic Richfield 2,751,375
30,000 Exxon Corp. 2,542,500
25,000 Shell Transport & Trading Co. ADR 2,153,125
30,000 Texaco Inc 2,512,500
------------
9,959,500
------------
PUBLISHING -- 3.1%
48,000 Readers Digest Association 2,034,000
------------
</TABLE>
See notes to combined financial statements
8
<PAGE> 11
COWEN INCOME + GROWTH FUND, INC.
STATEMENT OF INVESTMENTS -- (continued)
MAY 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
<C> <S> <C>
COMMON STOCKS -- (Continued)
REAL ESTATE INVESTMENT TRUSTS -- 8.4%
50,000 Kimco Realty Corp. $ 1,368,750
125,000 New Plan Realty Investment Trust 2,531,250
45,000 Weingarten Realty Investment Trust 1,670,625
------------
5,570,625
------------
REGIONAL BANKS -- 9.7%
52,000 AmSouth Bancorp 1,976,000
60,000 KeyCorp 2,325,000
60,000 National City Corp. 2,137,500
------------
6,438,500
------------
RETAIL -- 3.9%
50,000 JC Penney 2,593,750
------------
TELEPHONE -- 6.3%
50,000 GTE Corp. 2,137,500
45,000 NYNEX Corp. 2,075,625
------------
4,213,125
------------
TOBACCO -- 3.3%
50,000 American Brands, Inc. 2,187,500
------------
TOTAL COMMON STOCKS (Cost $54,948,829) 62,619,625
------------
<CAPTION>
PRINCIPAL
AMOUNT
<C> <S> <C>
SHORT TERM INVESTMENTS -- 5.9%
$2,360,000 Chevron Capital Corp., 5.28%, 06/11/1996 2,360,000
500,000 Ford Motor Credit Corp., 5.27%, 06/10/1996 500,000
1,100,000 General Electric Capital Corp., 5.24%, 06/04/1996 1,099,520
------------
TOTAL SHORT TERM INVESTMENTS
(Cost $3,959,520) 3,959,520
------------
TOTAL INVESTMENTS (Cost $58,908,349) $ 66,579,145
============
</TABLE>
See notes to combined financial statements
9
<PAGE> 12
COWEN OPPORTUNITY FUND
STATEMENT OF INVESTMENTS
MAY 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
<C> <S> <C>
COMMON STOCKS -- 89.18% of total portfolio
OIL/GAS PRODUCTION/EXPLORATION -- 23.52%
45,000 Belden & Blake Corp.* $ 877,500
130,000 COHO Energy Inc.* 828,750
70,000 Enserch Exploration Inc.* 770,000
37,800 HS Resources Inc.* 453,600
20,000 Louisiana Land & Exploration 1,077,500
285,000 Oryx Energy Co.* 4,631,250
162,500 Parker & Parsley Petroleum 3,948,750
59,400 Santa Fe Energy Resources* 712,800
35,000 Seagull Energy Corp.* 787,500
41,000 USX Marathon group 896,875
62,500 Union Texas Petroleum Holdings 1,164,063
33,400 United Meridian Corp.* 951,900
20,000 Valero Energy Corp. 550,000
------------
17,650,488
------------
OIL/GAS SERVICE -- 15.54%
27,000 Baker Hughes Inc. 847,125
300,000 Canadian 88 Energy* 690,284
20,000 Cliffs Drilling Co.* 533,750
50,000 Dreco Energy Services LTD* 1,387,500
75,000 Grant Geophysical Inc.* 318,750
230,000 Kaneb Services Inc.* 833,750
46,000 McDermott International 1,000,500
7,200 Newpark Resources Inc.* 261,000
76,000 Oceaneering International* 1,254,000
50,600 Offshore Logistics* 733,700
51,200 Parker Drilling* 364,800
55,000 Petroleum Geo Services* 1,684,375
30,000 Pool Energy Services Company* 416,250
20,000 Varco International Inc.* 332,500
31,900 Weatherford International* 1,004,850
------------
11,663,134
------------
</TABLE>
See notes to combined financial statements
10
<PAGE> 13
COWEN OPPORTUNITY FUND
STATEMENT OF INVESTMENTS -- (continued)
MAY 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
<C> <S> <C>
COMMON STOCKS -- (Continued)
MINING -- 7.44%
11,000 Agrico Eagle Mines LTD $ 220,000
33,500 Amax Gold Inc.* 226,125
20,000 Ashland Coal Inc. 472,500
37,000 Homestake Mining 763,125
33,000 Newmont Mining Corp. 1,988,250
40,000 Pegasus Gold Inc.* 600,000
20,000 Pittston Minerals Group 280,000
50,000 Santa Fe Pacific Gold Co. 762,500
30,200 TVX Gold Inc.* 271,800
------------
5,584,300
------------
COMPUTER -- SOFTWARE -- 6.33%
11,000 Barra Inc.* 295,625
60,000 Concentra Corp.* 360,000
90,000 Corel Corporation* 1,102,500
80,000 Gerber Scientific Inc. 1,390,000
28,100 Hyperion Software Corp.* 407,400
34,700 Intersolv* 412,062
17,100 MacNeal-Schwendler Corp. 190,238
40,000 Platinum Software Corp.* 430,000
10,000 Progress Software Corp.* 158,750
------------
4,746,575
------------
BUILDING MATERIAL -- 4.64%
170,300 Dravo Corp.* 2,213,900
79,000 Fortress Group Inc.* 711,000
79,900 Hovnanian Enterprises* 559,300
------------
3,484,200
------------
</TABLE>
See notes to combined financial statements
11
<PAGE> 14
COWEN OPPORTUNITY FUND
STATEMENT OF INVESTMENTS -- (continued)
MAY 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
<C> <S> <C>
COMMON STOCKS -- (Continued)
CONSUMER SERVICES -- 4.40%
45,000 Berlitz International Inc.* $ 860,625
88,000 Kinder Care Learning Center* 1,309,000
50,000 Leslies Poolmart* 956,250
10,100 York Group Inc. 176,750
------------
3,302,625
------------
COMPUTER SYSTEMS -- 4.07%
300,000 Concurrent Computer Corp.* 881,250
50,000 Evans & Sutherland Computer Corp.* 1,175,000
70,000 Novell* 997,500
------------
3,053,750
------------
STEEL/IRON -- 3.31%
20,000 Bethlehem Steel Corp.* 255,000
50,000 LTV Corp. 643,750
25,000 National Steel-Class B* 331,250
70,000 Northwest Pipe Co.* 1,137,500
30,000 Republic Engineered Steel* 120,000
------------
2,487,500
------------
TELECOMMUNICATIONS -- 3.05%
30,100 General Instrument Corp.* 929,338
18,000 Gilat Satellite Networks* 360,000
52,800 Scientific Atlanta Inc. 996,600
------------
2,285,938
------------
MEDICAL SUPPLIES -- 2.90%
57,500 Healthdyne Technologies* 761,875
11,500 Teva Pharmaceutical 514,625
45,000 Ventritex* 900,000
------------
2,176,500
------------
</TABLE>
See notes to combined financial statements
12
<PAGE> 15
COWEN OPPORTUNITY FUND
STATEMENT OF INVESTMENTS -- (continued)
MAY 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
<C> <S> <C>
COMMON STOCKS -- (Continued)
HEALTH SERVICES -- 2.43%
70,000 Rehabcare Corp.* $ 1,111,250
26,200 Value Health Inc.* 713,950
------------
1,825,200
------------
TRANSPORTATION/TRUCKING -- 2.20%
16,400 Covenant Transport Inc.* 252,150
26,800 Simon transportation Services* 303,175
58,100 Transport Corp. of America* 740,775
17,600 Wabash National Corp. 358,600
------------
1,654,700
------------
FINANCIAL SERVICES -- 1.74%
13,400 California Financial Holdings 278,888
47,300 Downey Financial Group 1,028,775
------------
1,307,663
------------
ENVIRONMENTAL CONTROL -- 1.72%
300,000 ICF Kaiser International Inc.* 937,500
100,000 Rollins Environmental Services* 350,000
------------
1,287,500
------------
RETAIL/APPAREL -- 1.65%
94,600 Brauns Fashions Corp.* 130,075
65,000 CML Group Inc. 349,375
80,000 Sports & Recreation Inc.* 760,000
------------
1,239,450
------------
BIOTECHNOLOGY -- 1.45%
30,000 Collagen Corp. 645,000
20,000 Matrix Pharmaceutical* 442,500
------------
1,087,500
------------
</TABLE>
See notes to combined financial statements
13
<PAGE> 16
COWEN OPPORTUNITY FUND
STATEMENT OF INVESTMENTS -- (continued)
MAY 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
<C> <S> <C>
COMMON STOCKS -- (Continued)
ELECTRONICS -- 1.31%
45,000 Lo-Jack Corporation* $ 596,250
42,700 Quad Systems Corp.* 384,300
------------
980,550
------------
PAPER PRODUCTS -- .93%
45,000 Stone Container Corp. 697,500
------------
AGRICULTURAL -- .55%
13,700 Agco Corp. 412,712
------------
TOTAL COMMON STOCKS (Cost $58,822,189) 66,927,785
------------
<CAPTION>
PRINCIPAL
AMOUNT
<C> <S> <C>
SHORT TERM INVESTMENTS -- 10.82%
$2,000,000 American Express, 5.25% 6/3/96 2,000,000
2,000,000 American General, 5.24% 6/5/96 2,000,000
1,120,000 G.E. Capital Corp., 5.24% 6/4/96 1,120,000
3,000,000 Household Finance, 5.24% 6/6/96 3,000,000
------------
TOTAL SHORT TERM INVESTMENTS
(Cost $8,120,000) 8,120,000
------------
TOTAL INVESTMENTS (Cost $66,942,189) $ 75,047,785
============
</TABLE>
- ---------------
* Non-income producing security
See notes to combined financial statements
14
<PAGE> 17
COWEN GOVERNMENT SECURITIES FUND
STATEMENT OF INVESTMENTS
MAY 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
MORTGAGE-BACKED SECURITIES -- 40.3%
of total portfolio
FEDERAL NATIONAL MORTGAGE ASS'N (FNMA) CERTIFICATES:
$756,488 7.000%, 12/01/24 $ 721,259
61,539 9.000%, 02/01/25 64,001
GOVERNMENT NATIONAL MORTGAGE ASS'N (GNMA)
CERTIFICATES:
11,303 9.000%, 05/15/21 11,869
14,800 9.500%, 11/15/21 15,859
180,171 8.500%, 03/15/25 184,337
143,729 9.500%, 03/20/25 151,859
184,033 8.000%, 05/15/25 184,377
-----------
TOTAL MORTGAGE-BACKED SECURITIES
(Cost $1,359,300) 1,333,561
-----------
U.S. TREASURY OBLIGATIONS -- 59.7%
50,000 U.S. Treasury Notes, 6.375%, 05/15/99 49,930
275,000 U.S. Treasury Notes, 5.625%, 02/28/01 263,742
200,000 U.S. Treasury Notes, 6.375%, 03/31/01 197,718
325,000 U.S. Treasury Notes, 8.000%, 05/15/01 343,281
175,000 U.S. Treasury Notes, 6.375%, 08/15/02 172,046
650,000 U.S. Treasury Bonds, 8.250%, 05/15/05 680,875
250,000 U.S. Treasury Bonds, 7.625%, 02/15/25 265,272
-----------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $2,012,674) 1,972,864
-----------
TOTAL INVESTMENTS (Cost $3,371,974) $ 3,306,425
===========
</TABLE>
See notes to combined financial statements
15
<PAGE> 18
COWEN INTERMEDIATE FIXED INCOME FUND
STATEMENT OF INVESTMENTS
MAY 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
CORPORATE NOTES -- 19.5% of total portfolio
$ 250,000 American General 8.000%, 02/15/00 $ 257,840
500,000 Ford Capital B 9.875%, 05/15/02 561,690
500,000 GTE Corp. 8.850%, 03/01/98 517,995
500,000 International Paper 9.700%, 03/15/00 541,955
1,000,000 Transamerica Finance 6.750%, 06/01/00 987,730
------------
TOTAL CORPORATE NOTES
(Cost $2,883,555) 2,867,210
------------
MORTGAGE-BACKED SECURITIES -- 20.6%
FEDERAL NATIONAL MORTGAGE ASS'N (FNMA)
CERTIFICATES:
202,523 7.500%, 09/01/10 202,458
981,424 7.000%, 11/01/10 962,708
131,041 9.000%, 04/01/15 136,283
139,341 9.000%, 02/01/25 144,914
GOVERNMENT NATIONAL MORTGAGE ASS'N (GNMA)
CERTIFICATES:
151,676 8.000%, 06/15/01 154,902
57,752 9.000%, 12/15/16 60,972
61,319 10.000%, 12/15/18 67,183
46,522 8.500%, 10/15/21 47,747
77,747 8.000%, 06/15/22 78,356
362,753 8.000%, 02/15/23 365,217
815,916 8.000%, 11/15/24 817,442
------------
TOTAL MORTGAGE-BACKED SECURITIES
(Cost $3,095,226) 3,038,182
------------
</TABLE>
See notes to combined financial statements
16
<PAGE> 19
COWEN INTERMEDIATE FIXED INCOME FUND
STATEMENT OF INVESTMENTS -- (continued)
MAY 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
U.S. GOVERNMENT AND AGENCIES -- 59.9%
$ 830,000 U.S. Treasury Notes, 7.250%, 02/15/98 $ 843,745
725,000 U.S. Treasury Notes, 9.000%, 05/15/98 761,366
1,700,000 U.S. Treasury Notes, 8.875%, 02/15/99 1,802,000
1,200,000 U.S. Treasury Notes, 7.125%, 09/30/99 1,221,192
1,375,000 U.S. Treasury Notes, 7.750%, 01/31/00 1,427,209
1,000,000 U.S. Treasury Notes, 7.125%, 02/29/00 1,017,970
800,000 U.S. Treasury Notes, 6.375%, 03/31/01 790,872
400,000 U.S. Treasury Notes, 6.875%, 05/15/06 400,624
300,000 U.S. Treasury Bonds, 6.875%, 05/15/25 293,250
250,000 U.S. Treasury Bonds, 7.625%, 02/15/25 265,272
------------
TOTAL U.S. GOVERNMENT AND AGENCIES
(Cost $8,992,677) 8,823,500
------------
TOTAL INVESTMENTS (Cost $14,971,458) $ 14,728,892
============
</TABLE>
See notes to combined financial statements
17
<PAGE> 20
STATEMENTS OF ASSETS AND LIABILITIES
MAY 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
INCOME + GROWTH
FUND
<S> <C>
ASSETS:
Investments in securities, at value (cost $58,908,349, $66,942,189,
$3,371,974 and $14,971,458, respectively -- see statements) $ 66,579,145
Cash 5,556
Receivables:
Cowen & Company --
Subscriptions to Common Stock 69,572
Investment securities sold --
Dividends and interest 318,033
Prepaid expenses, etc. 22,487
Deferred organization expenses -- Note 1(E) --
------------
TOTAL ASSETS 66,994,793
------------
LIABILITIES:
Payables:
Cowen & Company 46,976
Redemptions of Common Stock 63,850
Dividends -- Note 1(C) --
Investment securities purchased --
Accrued expenses and other liabilities 27,139
------------
TOTAL LIABILITIES 137,965
------------
NET ASSETS $ 66,856,828
============
NET ASSETS consist of:
Paid-in Capital $ 55,886,690
Accumulated undistributed net investment income 449,199
Accumulated net realized gain (loss) on investments 2,850,143
Net unrealized appreciation (depreciation) on investments 7,670,796
------------
NET ASSETS $ 66,856,828
============
CLASS A
Net assets $ 50,292,672
Outstanding shares of common stock, ($.001 par value) 3,839,129
Net asset value per share $ 13.10
Maximum offering price per share $ 13.75
CLASS B
Net assets $ 2,246,615
Outstanding shares of common stock, ($.001 par value) 172,382
Net asset value per share $ 13.03
CLASS C
Net assets $ 14,317,541
Outstanding shares of common stock, ($.001 par value) 1,089,550
Net asset value per share $ 13.14
</TABLE>
See notes to combined financial statements
18
<PAGE> 21
<TABLE>
<CAPTION>
GOVERNMENT INTERMEDIATE FIXED
OPPORTUNITY FUND SECURITIES FUND INCOME FUND
<S> <C> <C> <C>
$ 75,047,785 $ 3,306,425 $ 14,728,892
1,125,421 14,859 8,133
-- 6,233 1,687
1,419,630 282 348
2,465,566 -- --
39,140 27,362 237,060
22,230 16,860 18,339
-- 22,437 22,708
------------ ----------- ------------
80,119,772 3,394,458 15,017,167
------------ ----------- ------------
64,628 -- --
120,002 8,930 65,096
-- 1,406 10,066
2,111,329 -- --
73,133 17,997 24,231
------------ ----------- ------------
2,369,092 28,333 99,393
------------ ----------- ------------
$ 77,750,680 $ 3,366,125 $ 14,917,774
============ =========== ============
$ 62,646,559 $ 3,425,546 $ 15,260,937
-- -- --
6,998,525 6,128 (100,597)
8,105,596 (65,549) (242,566)
------------ ----------- ------------
$ 77,750,680 $ 3,366,125 $ 14,917,774
============ =========== ============
$ 41,489,100 $ 3,267,243 $ 11,881,634
2,724,668 350,000 1,281,879
$ 15.23 $ 9.33 $ 9.27
$ 15.99 $ 9.80 $ 9.49
$ 7,915,963 $ -- $ 853,155
530,099 -- 91,282
$ 14.93 $ -- $ 9.35
$ 28,345,617 $ 98,882 $ 2,182,985
1,847,660 10,467 236,355
$ 15.34 $ 9.45 $ 9.24
</TABLE>
19
<PAGE> 22
STATEMENTS OF OPERATIONS
SIX MONTHS ENDED MAY 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
INCOME + GROWTH
FUND
<S> <C>
INVESTMENT INCOME:
Dividend income $ 1,660,612
Interest income 80,126
-----------
TOTAL INCOME 1,740,738
-----------
EXPENSES:
Investment management fee -- Note 2(A) 264,248
Service fee -- Class A -- Note 2(C) 63,218
Service and Distribution fees -- Class B -- Note 2(C) 9,817
Professional fees 18,750
Shareholder servicing fees
Class A 33,366
Class B 1,718
Class C 3,906
Directors' fees and expenses -- Note 2(D) 11,132
Federal and state registration fees 23,309
Prospectus and shareholders' reports 25,618
Custodian fees 9,402
Amortization of organization expenses -- Note 1(E) --
Miscellaneous 2,608
-----------
TOTAL EXPENSES 467,092
Less: expenses waived and absorbed --
Notes 2(A, C and D) (58,971)
-----------
NET EXPENSES 408,121
-----------
Net Investment Income (loss) 1,332,617
-----------
Realized and Unrealized Gain (Loss) on Investments --
Note 3:
Net realized gain (loss) on investments 3,170,770
Net unrealized appreciation (depreciation) on
investments (1,070,149)
-----------
Net Realized and Unrealized Gain (Loss) on Investments 2,100,621
-----------
Net Increase (Decrease) in Net Assets Resulting from
Operations $ 3,433,238
===========
</TABLE>
See notes to combined financial statements
20
<PAGE> 23
<TABLE>
<CAPTION>
GOVERNMENT INTERMEDIATE FIXED
OPPORTUNITY FUND SECURITIES FUND INCOME FUND
<S> <C> <C> <C>
$ 148,915 $ -- $ --
137,921 127,606 658,969
------------ --------- ----------
286,836 127,606 658,969
------------ --------- ----------
304,379 11,158 46,655
49,069 4,488 19,660
34,974 293 1,928
16,750 8,163 8,958
38,231 3,306 11,541
8,433 93 408
5,591 351 729
10,528 10,528 10,528
20,934 15,277 18,532
15,189 4,365 4,770
14,312 2,051 4,780
-- 6,939 7,027
3,021 327 863
------------ --------- ----------
521,411 67,339 136,379
(63,509) (61,673) (86,992)
------------ --------- ----------
457,902 5,666 49,387
------------ --------- ----------
(171,066) 121,940 609,582
------------ --------- ----------
7,289,262 12,821 (101,245)
4,595,997 (194,904) (626,471)
------------ --------- ----------
11,885,259 (182,083) (727,716)
------------ --------- ----------
$ 11,714,193 $ (60,143) $ (118,134)
============ ========= ==========
</TABLE>
21
<PAGE> 24
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
INCOME + GROWTH FUND
------------------------------
SIX MONTHS
ENDED YEAR
5/31/96 ENDED
(UNAUDITED) 11/30/95
<S> <C> <C>
OPERATIONS:
Net investment income $ 1,332,617 $ 2,199,784
Net realized gain (loss) on investments 3,170,770 2,758,033
Net unrealized appreciation (depreciation)
on investments (1,070,149) 8,290,131
----------- -----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS 3,433,238 13,247,948
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A (980,333) (1,595,862)
Class B (30,206) (27,580)
Class C (361,040) (326,848)
Net realized gains on investments
Class A (1,843,726) --
Class B (55,280) --
Class C (722,598) --
----------- -----------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS (3,993,183) (1,950,290)
----------- -----------
COMMON STOCK TRANSACTIONS -- NOTE 4
Proceeds from shares sold 10,209,743 25,694,218
Net asset value of shares issued in
reinvestments of distributions 3,800,697 1,811,615
Cost of shares redeemed (16,654,579) (7,156,525)
----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS
FROM COMMON STOCK TRANSACTIONS (2,644,139) 20,349,308
----------- -----------
TOTAL INCREASE (DECREASE)
IN NET ASSETS (3,204,084) 31,646,966
NET ASSETS:
Beginning of period 70,060,912 38,413,946
----------- -----------
End of period $66,856,828 $70,060,912
=========== ===========
Undistributed net investment income $ 449,199 $ 488,161
=========== ===========
</TABLE>
See notes to combined financial statements
22
<PAGE> 25
STATEMENTS OF CHANGES IN NET ASSETS -- (continued)
<TABLE>
<CAPTION>
OPPORTUNITY FUND
------------------------------
SIX MONTHS
ENDED YEAR
5/31/96 ENDED
(UNAUDITED) 11/30/95
<S> <C> <C>
OPERATIONS:
Net investment loss $ (171,066) $ (143,285)
Net realized gain on investments 7,289,262 1,687,515
Net unrealized appreciation
on investments 4,595,997 2,189,742
----------- -----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS 11,714,193 3,733,972
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A --
Class B --
Class C --
Net realized gains on investments
Class A (911,398) (2,076,944)
Class B (154,675) (140,465)
Class C (450,538) (495,100)
----------- -----------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS (1,516,611) (2,712,509)
----------- -----------
COMMON STOCK TRANSACTIONS -- NOTE 4
Proceeds from shares sold 14,107,685 26,834,498
Net asset value of shares issued in
reinvestments of distributions 1,490,967 2,659,316
Cost of shares redeemed (12,488,269) (10,917,159)
----------- -----------
NET INCREASE IN NET ASSETS FROM COMMON
STOCK TRANSACTIONS 3,110,383 18,576,655
----------- -----------
TOTAL INCREASE IN NET ASSETS 13,307,965 19,598,118
NET ASSETS:
Beginning of period 64,442,715 44,844,597
----------- -----------
End of period $77,750,680 $64,442,715
=========== ===========
</TABLE>
See notes to combined financial statements
23
<PAGE> 26
STATEMENTS OF CHANGES IN NET ASSETS -- (continued)
<TABLE>
<CAPTION>
GOVERNMENT
SECURITIES FUND
----------------------------
SIX MONTHS
ENDED YEAR
5/31/96 ENDED
(UNAUDITED) 11/30/95
<S> <C> <C>
OPERATIONS:
Net investment income $ 121,940 $ 215,872
Net realized gain on investments 12,821 28,835
Net unrealized appreciation (depreciation)
on investments (194,904) 180,135
---------- ----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS (60,143) 424,842
---------- ----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A (117,882) (206,111)
Class B (1,751) (7,476)
Class C (2,307) (2,285)
---------- ----------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS (121,940) (215,872)
---------- ----------
COMMON STOCK TRANSACTIONS -- NOTE 4
Proceeds from shares sold 221,767 3,823,786
Net asset value of shares issued in
reinvestments of distributions 107,756 192,488
Cost of shares redeemed (924,725) (642,884)
---------- ----------
NET INCREASE (DECREASE) IN NET ASSETS
FROM COMMON STOCK TRANSACTIONS (595,202) 3,373,390
---------- ----------
TOTAL INCREASE (DECREASE) IN NET
ASSETS (777,285) 3,582,360
NET ASSETS:
Beginning of period 4,143,410 561,050
---------- ----------
End of period $3,366,125 $4,143,410
========== ==========
</TABLE>
See notes to combined financial statements
24
<PAGE> 27
STATEMENTS OF CHANGES IN NET ASSETS -- (continued)
<TABLE>
<CAPTION>
INTERMEDIATE FIXED
INCOME FUND
-----------------------------
SIX MONTHS
ENDED YEAR
5/31/96 ENDED
(UNAUDITED) 11/30/95
<S> <C> <C>
OPERATIONS:
Net investment income $ 609,582 $ 836,318
Net realized gain (loss) on investments (101,245) 238,072
Net unrealized appreciation (depreciation)
on investments (626,471) 475,634
----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS (118,134) 1,550,024
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A (512,204) (708,617)
Class B (24,304) (29,694)
Class C (73,074) (98,007)
Net realized gains on investments
Class A (140,232) --
Class B (5,359) --
Class C (17,397) --
----------- -----------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS (772,570) (836,318)
----------- -----------
COMMON STOCK TRANSACTIONS -- NOTE 4
Proceeds from shares sold 5,298,581 14,174,490
Net asset value of shares issued in
reinvestments of dividends 653,895 744,437
Cost of shares redeemed (7,259,719) (2,230,224)
----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS
FROM COMMON STOCK TRANSACTIONS (1,307,243) 12,688,703
----------- -----------
TOTAL INCREASE (DECREASE) IN NET
ASSETS (2,197,947) 13,402,409
NET ASSETS:
Beginning of Period 17,115,721 3,713,312
----------- -----------
End of Period $14,917,774 $17,115,721
=========== ===========
</TABLE>
See notes to combined financial statements
25
<PAGE> 28
COWEN FUNDS
NOTES TO COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES: Cowen Income + Growth Fund, Inc.
("CIG") and Cowen Funds, Inc. (collectively "the Funds") are registered under
the Investment Company Act of 1940 ("Act") as diversified open-end management
companies. Cowen Funds, Inc. operates as a series company currently issuing
common stock representing its portfolios designated as the Cowen Intermediate
Fixed Income Fund ("CIFIF"), Cowen Government Securities Fund, formerly known as
Cowen Tradition Fixed Income Fund ("CGSF"), and Cowen Opportunity Fund ("COF").
Cowen & Company ("Cowen") acts as the investment manager and distributor of each
of the Funds' shares. These combined financial statements together with the
notes thereto, consist of CIG, COF, CIFIF and CGSF.
On April 19, 1994, shareholders approved amendments to the Funds' Articles of
Incorporation to provide for the issuance of additional classes of shares.
Effective May 9, 1994 (for CIG and COF) and July 11, 1994 (for CIFIF and CGSF),
pursuant to such amendments, the Funds' then existing shares became Class A
shares and the Funds became eligible to issue Class B and Class C shares. Class
A shares are subject to a sales charge imposed at the time of purchase, Class B
shares are subject to a Contingent Deferred Sales Charge and Class C shares are
not subject to a sales charge. Also on April 19, 1994, shareholders approved a
service plan providing for an annual service fee of .25% on Class A and Class B
shares of each fund, and an annual distribution fee of .75% on Class B shares of
CIG, COF and CSGF and of .25% on Class B shares of CIFIF.
(A) Portfolio valuation: Securities whose principal market is on an exchange
are valued at the last sales price on the exchange or, in the absence of
currently reported sales on the exchange, at the most recent bid price in the
over-the-counter market or, in the absence of a recent bid price, the bid
equivalent as obtained from one or more of the major market makers for the
securities to be valued. Securities traded principally in the over-the-counter
market are valued at the most recent bid price. Short-term investments are
carried at amortized cost, which approximates value.
(B) Securities transactions and investment income: Securities transactions are
recorded on a trade date basis. Realized gain and loss from securities
transactions are recorded on the identified cost basis. Dividend income is
recognized on the ex-dividend date and interest income, including amortization
of discount on investments, is recognized on the accrual basis.
(C) Dividends to shareholders: Dividends for CIG and COF are recorded on the
ex-dividend date. Dividends for CGSF and CIFIF are earned on settled shares
daily and paid monthly. To the extent that net realized capital gain can be
offset by capital loss carryovers, if any, it is the policy of each Fund not to
distribute such gain.
(D) Federal income taxes: It is the policy of each Fund to continue to qualify
as a regulated investment company, if such qualification is in the best
interests of its shareholders, by complying with the provisions available to
certain investment companies, as defined in applicable sections of the Internal
Revenue Code, and to make distributions of taxable income sufficient to relieve
it from all, or substantially all, Federal income taxes.
At November 30, 1995, CGSF had an unused capital loss carryover of
approximately $7,000, available for Federal income tax purposes to be applied
against future securities profits, if any. If not applied, the carryovers expire
in fiscal 2002.
(E) Deferred organization expenses: Organization expenses paid by CGSF and
CIFIF are being amortized to operations from
26
<PAGE> 29
January 20, 1993, the date operations commenced, over the period during which it
is expected that a benefit will be realized, not to exceed five years. In the
event that any of the initial shares purchased by Cowen in connection with the
organization of each Fund are redeemed by any holder thereof prior to the
amortization of such expenses, redemption proceeds will be reduced by a pro rata
portion of any unamortized organizational expenses in the same proportion as the
number of initial shares being redeemed bears to the number of initial shares
outstanding at the time of redemption.
(F) During the year ended November 30, 1994, COF adopted Statement of Position
93-2 Determination Disclosure, and Financial Statement Presentation of Income,
Capital Gain, and Return of Capital Distributions by Investment Companies. In
accordance with Federal Income Tax Regulations certain short-term realized gains
are offset against COF's accumulated net investment loss. As of May 31, 1996,
$171,066 was reclassified from accumulated undistributed net investment income
to accumulated net realized gain on investments. Net investment income, net
realized gains, and net assets were not affected by this change.
NOTE 2 - INVESTMENT MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES:
(A) Investment Management Fee: Fees paid by the Funds to Cowen pursuant to the
provisions of Investment Management Agreements ("Agreements") are payable
monthly, based on an annual rate of .75%, .90%, .50% and .60% for CIG, COF,
CIFIF and CGSF, respectively, of the average daily value of each Fund's net
assets. The Agreements further provide that if the aggregate expenses of a Fund,
exclusive of interest, taxes, brokerage and, with the prior written consent of
the necessary state securities commissions, extraordinary expenses, exceed the
expense limitation of any state having jurisdiction over that Fund, Cowen will
reimburse the Fund for such excess. The most restrictive state expense
limitation applicable to the Funds requires reimbursement of expenses in any
year that such expenses, excluding distribution expenses, taxes, interest,
brokerage and extraordinary expenses, exceed 2 1/2% of the first $30 million of
average net assets, 2% of the next $70 million, and 1 1/2% of average net assets
in excess of $100 million. There was no expense reimbursement required for any
Fund for the period ended May 31, 1996; however, since May 9, 1994, Cowen has
voluntarily reimbursed the CIG's expenses in an amount equal to an annual rate
of .20% through August 31, 1995, of .18% from that date through March 31, 1996
and of .14% thereafter, of the average daily value of its net assets, and the
COF's expenses in an amount equal to an annual rate of .22% through March 31,
1996 and of .13% thereafter, of the average daily value of its net assets.
With respect to CGSF and CIFIF, through July 11, 1994, Cowen waived all of
each Fund's Investment Management Fee and has agreed to pay all of each Fund's
expenses. From July 11, 1994 through March 31, 1995, Cowen continued to waive
all of each Fund's Investment Management Fee and to pay all of each Fund's
expenses. With respect to CGSF, Cowen is voluntarily waiving its investment
management fee and service fee and absorbing all other expenses, except for .25%
through March 31, 1996 and .40% thereafter of other expenses and .50% of the
Class B distribution fee. The directors' fees are being waived by directors.
With respect to CIFIF, Cowen is voluntarily waiving its investment management
fee and absorbing all other expenses, except for .25% through March 31, 1996 and
.40% thereafter of other expenses and its service and distribution fees. The
directors' fees are being waived by directors.
Cowen has agreed to maintain these fee and expense reimbursement arrangements
for each Fund through March 31, 1997 (see "Shareholder Servicing and
Distribution Plan" later in this note).
(B) In acting as distributor during the period ended May 31, 1996, Cowen
earned $43,223, $44,307, $7,096 and $11,634 of commissions on sales of the
shares of CIG, COF, CGSF and CIFIF, respectively.
27
<PAGE> 30
(C) Shareholder Servicing and Distribution Plans (the "Plan"): Cowen is paid
monthly fees by each of the Funds 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 each of the Funds 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 Cowen to provide compensation for ongoing servicing and/or
maintenance of shareholder accounts with the Funds. Compensation is paid by
Cowen to persons, including Cowen employees, who respond to inquiries of
shareholders of a Fund regarding their ownership of shares or their accounts
with the Fund or who provide other similar services not otherwise required to be
provided by the Fund's investment advisor, transfer agent or other agent of the
Fund.
In addition, pursuant to the Plan, the Funds pay to Cowen a monthly
distribution fee at the annual rate of .75% for CIG, COF and CGSF and of .25%
for CIFIF of the Funds' average daily net assets attributable to Class B shares.
The distribution fee is used by Cowen to provide (1) initial and ongoing sales
compensation to its registered representatives or those of other broker-dealers
that enter into selected dealer agreements with Cowen in respect of sales of
Class B shares; (2) costs of printing and distributing the Funds' 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.
Payments under the Plan are not tied exclusively to the service and/or
distribution expenses actually incurred by Cowen, and the payments may exceed
expenses actually incurred by Cowen. 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 Cowen and
amounts it receives under the Plan.
(D) Directors who are not officers, directors, partners, stockholders or
employees of Cowen or its affiliates receive from each Fund a fee of $3,000 per
annum plus $500 per meeting attended and reimbursement for travel and out-
of-pocket expenses; however the Directors have agreed to waive their fees from
CGSF and CIFIF until such time as Cowen ceases to waive its Investment
Management Fee.
NOTE 3 - SECURITIES TRANSACTIONS: The aggregate amount of purchases and sales of
investment securities, excluding short-term securities, during the period ended
May 31, 1996, was as follows:
<TABLE>
<CAPTION>
CIG COF CGSF CIFIF
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Purchases $ 17,306,486 $ 71,604,154 $ 1,428,613 $ 8,730,872
- ---------------------------------------------------------------------------
Sales $ 23,593,563 $ 72,270,686 $ 1,861,338 $ 9,635,903
- ---------------------------------------------------------------------------
</TABLE>
At May 31, 1996, the cost of investments for Federal tax purposes was
substantially the same as the cost for financial reporting purposes (see the
Statements of Investments).
At May 31, 1996, accumulated net unrealized appreciation (depreciation) on
investments was as follows:
<TABLE>
<CAPTION>
CIG COF CGSF CIFIF
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Gross
Unrealized
Appreciation $ 8,326,113 $ 6,181,161 $ 7,034 $ 32,257
Gross
Unrealized
Depreciation 655,317 1,075,565 72,583 274,823
- -----------------------------------------------------------------------
Net $ 7,670,796 $ 5,105,596 $ (65,549) $ (242,566)
- -----------------------------------------------------------------------
</TABLE>
NOTE 4 - COMMON STOCK TRANSACTIONS: At May 31, 1996, there were authorized 250
million shares, $.001 par value, of each class of each Fund's Common Stock.
Transactions in the Funds' Common Stock were as follows:
28
<PAGE> 31
COWEN FUNDS
NOTE 4 -- (continued)
COWEN INCOME + GROWTH FUND
<TABLE>
<CAPTION>
SIX MONTHS ENDED MAY 31, 1996
------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
------------------------ --------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
--------- ----------- ------- ---------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Shares Sold 267,579 $ 3,498,551 58,006 $ 761,538 452,871 $ 5,949,655
Dividends Reinvested 204,218 2,651,816 6,439 83,404 81,870 1,065,476
--------- ----------- ------- ---------- --------- ------------
471,797 6,150,367 64,445 844,942 534,741 7,015,131
Shares Redeemed (368,977) (4,835,123) (2,638) (34,645) (904,532) (11,784,811)
--------- ----------- ------- ---------- --------- ------------
Net Increase (Decrease) 102,820 $ 1,315,244 61,807 $ 810,297 (369,791) $ (4,769,680)
========= =========== ======= ========== ========= ============
<CAPTION>
YEAR ENDED NOVEMBER 30, 1995
------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
------------------------ --------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
--------- ----------- ------- ---------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Shares Sold 1,060,509 $12,228,736 98,162 $1,137,116 976,780 $ 12,328,366
Dividends Reinvested 127,170 1,462,254 2,287 26,830 28,022 322,531
--------- ----------- ------- ---------- --------- ------------
1,187,679 13,690,990 100,449 1,163,946 1,004,802 12,650,897
Shares Redeemed (475,701) (5,554,055) (16,349) (204,964) (113,006) (1,397,506)
--------- ----------- ------- ---------- --------- ------------
Net Increase 711,978 $ 8,136,935 84,100 $ 958,982 891,796 $ 11,253,391
========= =========== ======= ========== ========= ============
</TABLE>
29
<PAGE> 32
COWEN FUNDS
NOTE 4 -- (continued)
COWEN OPPORTUNITY FUND
<TABLE>
<CAPTION>
SIX MONTHS ENDED MAY 31, 1996
----------------------------------------------------------------------------
CLASS A CLASS B CLASS C
----------------------- --------------------- ------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
-------- ----------- ------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Shares Sold 202,587 $ 2,856,642 60,118 $ 824,272 731,680 $10,426,770
Dividends Reinvested 69,163 895,655 11,962 152,511 33,954 442,416
-------- ----------- ------ ---------- --------- -----------
271,750 3,752,297 72,080 976,783 765,634 10,869,186
Shares Redeemed (495,700) (6,803,250) (41,018) (545,093) (377,071) (5,139,927)
-------- ----------- ------ ---------- --------- -----------
Net Increase (Decrease) (223,950) $(3,050,953) 31,062 $ 431,690 388,563 $ 5,729,259
======== =========== ====== ========== ========= ===========
<CAPTION>
YEAR ENDED NOVEMBER 30, 1995
----------------------------------------------------------------------------
CLASS A CLASS B CLASS C
----------------------- --------------------- ------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
-------- ----------- ------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Shares Sold 612,055 $ 7,910,141 390,219 $4,909,991 1,067,202 $14,014,366
Dividends Reinvested 173,680 2,028,580 12,026 139,672 42,007 491,064
-------- ----------- ------- ---------- --------- -----------
785,735 9,938,721 402,245 5,049,663 1,109,209 14,505,430
Shares Redeemed (494,999) (6,302,236) (74,159) (956,514) (277,716) (3,658,409)
-------- ----------- ------- ---------- --------- -----------
Net Increase 290,736 $ 3,636,485 328,086 $4,093,149 831,493 $10,847,021
======== =========== ======= ========== ========= ===========
</TABLE>
30
<PAGE> 33
COWEN FUNDS
NOTE 4 -- (continued)
COWEN GOVERNMENT SECURITIES FUND
<TABLE>
<CAPTION>
SIX MONTHS ENDED MAY 31, 1996
------------------------------------------------------------------
CLASS A CLASS B CLASS C
--------------------- -------------------- -----------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
------- ---------- ------- --------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Shares Sold 16,395 $ 157,847 -- $ -- 6,519 $63,920
Dividends Reinvested 10,898 105,006 46 461 237 2,289
------- ---------- ------- --------- ----- -------
27,293 262,853 46 461 6,756 66,209
Shares Redeemed (78,800) (761,758) 15,360 154,719 (832) (8,248)
------- ---------- ------- --------- ----- -------
Net Increase (Decrease) (51,507) $ (498,905) (15,314) $(154,258) 5,924 $57,961
======= ========== ======= ========= ===== =======
<CAPTION>
YEAR ENDED NOVEMBER 30, 1995
------------------------------------------------------------------
CLASS A CLASS B CLASS C
--------------------- -------------------- -----------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
------- ---------- ------- --------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Shares Sold 396,002 $3,717,273 8,201 $ 78,977 2,890 $27,536
Dividends Reinvested 19,120 183,534 687 6,676 235 2,278
------- ---------- ------- --------- ----- -------
415,122 3,900,807 8,888 85,653 3,125 29,814
Shares Redeemed (66,867) (642,735) -- -- (15) (149)
------- ---------- ------- --------- ----- -------
Net Increase 348,255 $3,258,072 8,888 $ 85,653 3,110 $29,665
======= ========== ======= ========= ===== =======
</TABLE>
31
<PAGE> 34
COWEN FUNDS
NOTE 4 -- (continued)
COWEN INTERMEDIATE FIXED INCOME FUND
<TABLE>
<CAPTION>
SIX MONTHS ENDED MAY 31, 1996
-----------------------------------------------------------------------
CLASS A CLASS B CLASS C
------------------------ ------------------ ---------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
--------- ----------- ------ -------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
Shares Sold 413,633 $ 3,960,267 31,006 $301,734 109,018 $1,036,580
Dividends
Reinvested 58,339 555,373 1,458 13,881 8,947 84,641
--------- ----------- ------ -------- ------- ----------
471,972 4,515,640 32,464 315,615 117,965 1,121,221
Shares Redeemed (701,302) (6,552,772) (141) (1,350) (75,094) (705,597)
--------- ----------- ------ -------- ------- ----------
Net Increase
(Decrease) (229,330) $(2,037,132) 32,323 $314,265 42,871 $ 415,624
========= =========== ======= ======== ======= ==========
<CAPTION>
YEAR ENDED NOVEMBER 30, 1995
-----------------------------------------------------------------------
CLASS A CLASS B CLASS C
------------------------ ------------------ ---------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
--------- ----------- ------ -------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
Shares Sold 1,351,821 $12,669,301 24,311 $232,218 136,346 $1,272,971
Dividends
Reinvested 66,831 637,786 1,809 17,211 9,435 89,440
--------- ----------- ------ -------- ------- ----------
1,418,652 13,307,087 26,120 249,429 145,781 1,362,411
Shares Redeemed (218,287) (2,080,755) (1,246) (11,898) (14,385) (137,571)
--------- ----------- ------ -------- ------- ----------
Net Increase 1,200,365 $11,226,332 24,874 $237,531 131,396 $1,224,840
========= =========== ======= ======== ======= ==========
</TABLE>
32
<PAGE> 35
NOTE 5 - ACQUISITION OF EXETER EQUITY TRUST AND EXETER FIXED INCOME TRUST: On
March 29, 1995, CIG acquired all the net assets of Exeter Equity Trust (Equity),
a series of Branch Cabell Investment Trust, pursuant to a plan of reorganization
approved by Equity's shareholders on March 23, 1995.
The acquisition was accomplished by a tax-free exchange of 802,081 shares of
Equity for 722,745 shares of CIG on March 29, 1995. The aggregate net assets of
CIG and Equity immediately before the acquisition were $41,415,373 and
$8,195,936, respectively, of which $194,683 represented unrealized appreciation
of Equity's net assets. Immediately after the acquisition the combined net
assets amounted to $49,611,309.
On March 29, 1995, CGSF acquired all the net assets of Exeter Fixed Income
Trust (Fixed Income), a series of Branch Cabell Investment Trust, pursuant to a
plan of reorganization approved by Fixed Income's shareholders on March 23,
1995.
The acquisition was accomplished by a tax-free exchange of 116,508 shares of
Fixed Income for 115,714 shares of CGSF on March 29, 1995. The aggregate net
assets of CGSF and Fixed Income immediately before the acquisition were
$1,996,507 and $1,086,551, respectively, of which $36,595 represented unrealized
depreciation of Fixed Income's net assets. Immediately after the acquisition the
combined net assets amounted to $3,083,058.
33
<PAGE> 36
Note 6 - FINANCIAL HIGHLIGHTS: Selected data for a share of Common Stock
outstanding throughout each period:
<TABLE>
<CAPTION>
COWEN INCOME + GROWTH FUND -- CLASS A
-------------------------------------------------------------------------------------
FOUR
SIX MONTHS YEAR MONTHS YEAR ENDED JULY 31,
ENDED ENDED ENDED -------------------------------------------
5/31/96 11/30/95 11/30/94 1994 1993 1992 1991
----------- -------- -------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
Beginning of Period $ 13.19 $10.62 $11.06 $ 12.97 $ 12.85 $ 11.30 $ 10.59
------- ------ ------ ------- ------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS
Investment Income -- Net 0.23 0.51 0.19 0.52 0.48 0.46 0.44
Net Realized and
Unrealized Gains
(Losses) on Investments 0.43 2.54 (0.50) (0.44) 0.68 1.57 0.72
------- ------ ------ ------- ------- ------- -------
Net from Investment
Operations 0.66 3.05 (0.31) 0.08 1.16 2.03 1.16
------- ------ ------ ------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends from Net
Investment Income (0.26) (0.48) (0.13) (0.52) (0.49) (0.48) (0.44)
Distributions from Net
Realized Gains on
Investments (0.49) -- -- (1.47) (0.55) -- (0.01)
------- ------ ------ ------- ------- ------- -------
Total Distributions (0.75) (0.48) (0.13) (1.99) (1.04) (0.48) (0.45)
------- ------ ------ ------- ------- ------- -------
NET ASSET VALUE,
End of Period $ 13.10 $13.19 $10.62 $ 11.06 $ 12.97 $ 12.85 $ 11.30
======= ====== ====== ======= ======= ======= =======
Total Return(5) 10.26%(2) 29.50% (8.50%)(2) 0.28% 9.45% 18.49% 11.40%
RATIOS/SUPPLEMENTARY DATA
Net Assets (000 omitted) $50,293 $49,298 $32,104 $34,722 $35,016 $32,956 $32,098
Ratio of Expenses to
Average
Net Assets 0.61%(3) 1.31% 0.47%(3) 1.26% 1.33% 2.02% 2.26%
Ratio of Investment
Income -- Net to Average
Net Assets 1.86%(3) 4.29% 1.65%(3) 4.32% 3.74% 3.84% 4.07%
Decrease Reflected on
Above Ratios Due to
Expense
Reimbursements/Waivers 0.08%(3) 0.19% 0.07%(3) 0.04% -- -- --
Portfolio Turnover Rate 26% 72% 31% 76% 62% 73% 41%
Average Commission Rate
Paid $ .0593
</TABLE>
34
<PAGE> 37
NOTE 6 -- (CONTINUED)
<TABLE>
<CAPTION>
COWEN INCOME + GROWTH FUND -- CLASS B
-----------------------------------------------------
SIX MONTHS YEAR MONTHS 5/17/94(4)
ENDED ENDED ENDED THROUGH
5/31/96 11/30/95 11/30/94 7/31/94
----------- -------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
NET ASSET VALUE,
Beginning of Period $ 13.14 $10.58 $11.04 $ 10.85(1)
------- ------- ------ -------
INCOME FROM INVESTMENT OPERATIONS
Investment Income -- Net 0.20 0.42 0.16 0.09
Net Realized and Unrealized Gains
(Losses) on Investments 0.40 2.54 (0.50) 0.20
------- ------ ------ -------
Net from Investment Operations 0.60 2.96 (0.34) 0.29
------- ------ ------ -------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income (0.22) (0.40) (0.12) (0.10)
Distributions from Net Realized Gains
on Investments (0.49) -- -- --
------- ------ ------ -------
Total Distributions (0.71) (0.40) (0.12) (0.10)
------- ------ ------ -------
NET ASSET VALUE,
End of Period $ 13.03 $13.14 $10.58 $ 11.04
======= ====== ====== =======
Total Return(5) 9.34%(2) 28.49% (9.33%)(2) 13.19%(2)
RATIOS/SUPPLEMENTARY DATA
Net Assets (000 omitted) $ 2,247 $1,453 $ 280 $ 56
Ratio of Expenses to Average Net Assets 1.01%(3) 2.07% 0.75%(3) 0.57%(3)
Ratio of Investment Income -- Net to
Average Net Assets 1.49%(3) 3.44% 1.31%(3) 0.45%(3)
Decrease Reflected on Above Ratios Due
to Expense Reimbursements/Waivers 0.08%(3) 0.19% 0.07%(3) 0.04%(3)
Portfolio Turnover Rate 26% 72% 31% 76%
Average Commission Rate Paid $ .0593
</TABLE>
35
<PAGE> 38
NOTE 6 -- (CONTINUED)
<TABLE>
<CAPTION>
COWEN INCOME + GROWTH FUND -- CLASS C
-------------------------------------------------
SIX FOUR PERIOD FROM
MONTHS YEAR MONTHS 5/19/94(4)
ENDED ENDED ENDED THROUGH
5/31/96 11/30/95 11/30/94 7/31/94
------- -------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
NET ASSET VALUE,
Beginning of Period $13.23 $10.62 $11.06 $10.91(1)
------ ------ ------- ------
INCOME FROM INVESTMENT OPERATIONS
Investment Income -- Net 0.31 0.52 0.20 0.10
Net Realized and Unrealized Gains (Losses)
on Investments 0.37 2.59 (0.50) 0.16
------ ------ ------ ------
Net from Investment Operations 0.68 3.11 (0.30) 0.26
------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income (0.28) (0.50) (0.14) (0.11)
Distributions from Net Realized Gains on
Investments (0.49) -- -- --
------ ----- ------ ------
Total Distributions (0.77) (0.50) (0.14) (0.11)
------ ----- ------ ------
NET ASSET VALUE,
End of Period $13.14 $13.23 $10.62 $11.06
====== ====== ====== ======
Total Return(5) 10.56%(2) 29.99% (8.37%)(2) 10.63%(2)
RATIOS/SUPPLEMENTARY DATA
Net Assets (000 omitted) $14,318 $19,309 $6,029 $4,988
Ratio of Expenses to Average Net Assets 0.44%(3) 0.96% 0.40%(3) 0.28%(3)
Ratio of Investment Income -- Net to
Average Net Assets 2.03%(3) 4.66% 1.68%(3) 1.13%(3)
Decrease Reflected on Above Ratios Due to
Expense Reimbursements/Waivers 0.08%(3) 0.19% 0.07%(3) 0.05%(3)
Portfolio Turnover Rate 26% 72% 31% 76%
Average Commission Rate Paid $.0593
</TABLE>
36
<PAGE> 39
NOTE 6 -- (CONTINUED)
<TABLE>
<CAPTION>
COWEN OPPORTUNITY FUND -- CLASS A
-----------------------------------------------------------------------
SIX MONTHS YEAR ENDED NOVEMBER 30,
ENDED -------------------------------------------------------
5/31/96 1995 1994 1993 1992 1991
----------- ------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
Beginning of Period $ 13.13 $ 12.98 $ 16.06 $ 14.92 $ 14.72 $ 10.78
------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Investment Income (Loss) -- Net(6) (0.04) (0.04) (0.09) (0.16) (0.20) (0.22)
Net Realized and Unrealized Gains
(Losses) on Investments 2.45 0.97 1.22 3.79 2.22 4.16
------- ------- ------- ------- ------- -------
Net from Investment Operations 2.41 0.93 1.13 3.63 2.02 3.94
------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income -- -- -- -- -- --
Distributions from Net Realized Gains
on Investments (0.31) (0.78) (4.21) (2.49) (1.82) --
------- ------- ------- ------- ------- -------
Total Distributions (0.31) (0.78) (4.21) (2.49) (1.82) --
------- ------- ------- ------- ------- -------
NET ASSET VALUE,
End of Period $ 15.23 $ 13.13 $ 12.98 $ 16.06 $ 14.92 $ 14.72
======= ======= ======= ======= ======= =======
Total Return(5) 37.54%(2) 7.91% 9.53% 29.48% 15.33% 36.55%
RATIOS/SUPPLEMENTARY DATA
Net Assets (000 Omitted) $41,489 $38,724 $34,487 $19,147 $13,547 $11,672
Ratio of Expenses to Average Net
Assets 0.70%(3) 1.43% 1.47% 1.63% 2.52% 2.80%
Ratio of Investment Loss -- Net to
Average Net Assets (0.27%)(3) (0.28%) (0.66%) (1.10%) (1.43%) (1.42%)
Decrease Reflected on Above Ratios Due
to Expense Reimbursements/Waivers 0.09%(3) 0.22% 0.14% -- -- --
Portfolio Turnover Rate 114% 148% 152% 167% 145% 97%
Average Commission Rate Paid $ .0588
</TABLE>
37
<PAGE> 40
NOTE 6 -- (CONTINUED)
<TABLE>
<CAPTION>
COWEN OPPORTUNITY FUND -- CLASS B
----------------------------------------
PERIOD FROM
SIX MONTHS YEAR 5/17/94(4)
ENDED ENDED THROUGH
5/31/96 11/30/95 11/30/94
----------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
NET ASSET VALUE,
Beginning of Period $12.93 $12.91 $12.18(1)
------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Investment Income (Loss) -- Net(6) (0.09) (0.14) (0.09)
Net Realized and Unrealized Gains (Losses) on
Investments 2.40 0.94 0.82
------ ------ ------
Net from Investment Operations 2.31 0.80 0.73
------ ------ ------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income -- -- --
Distributions from Net Realized Gains on Investments (0.31) (0.78) --
------ ------ ------
Total Distributions (0.31) (0.78) --
------ ------ ------
NET ASSET VALUE,
End of Period $14.93 $12.93 $12.91
====== ====== ======
Total Return(5) 36.55%(2) 6.97% 11.04%(2)
RATIOS/SUPPLEMENTARY DATA
Net Assets (000 Omitted) $7,916 $6,455 $2,207
Ratio of Expenses to Average Net Assets 1.10%(3) 2.19% 1.32%(3)
Ratio of Investment Loss -- Net to Average Net Assets (0.67%)(3) (1.06%) (0.83%)(3)
Decrease Reflected on Above Ratios Due to Expense
Reimbursements/Waivers 0.09%(3) 0.22% 0.12%(3)
Portfolio Turnover Rate 114% 148% 152%
Average Commission Rate Paid $.0588
</TABLE>
38
<PAGE> 41
NOTE 6 -- (CONTINUED)
<TABLE>
<CAPTION>
COWEN OPPORTUNITY FUND -- CLASS C
----------------------------------------
PERIOD FROM
SIX MONTHS YEAR 5/9/94(4)
ENDED ENDED THROUGH
5/31/96 11/30/95 11/30/94
----------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
NET ASSET VALUE,
Beginning of Period $ 13.20 $12.99 $12.36(1)
------- ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Investment Income (Loss) -- Net(6) (0.01) 0.01 (0.03)
Net Realized and Unrealized Gains (Losses) on
Investments 2.46 0.98 0.66
------- ------ ------
Net from Investment Operations 2.45 0.99 0.63
------- ------ ------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income -- -- --
Distributions from Net Realized Gains on Investments (0.31) (0.78) --
------- ------ ------
Total Distributions (0.31) (0.78) --
------- ------ ------
NET ASSET VALUE,
End of Period $ 15.34 $13.20 $12.99
======= ====== ======
Total Return(5) 37.95%(2) 8.40% 9.04%(2)
RATIOS/SUPPLEMENTARY DATA
Net Assets (000 Omitted) $28,346 $19,264 $8,151
Ratio of Expenses to Average Net Assets 0.50%(3) 1.03% 0.75%(3)
Ratio of Investment Income (Loss) --
Net Assets (0.08%)(3) 0.11% (0.26%)(3)
Decrease Reflected on Above Ratios Due to Expense
Reimbursements/Waivers 0.09%(3) 0.22% 0.13%(3)
Portfolio Turnover Rate 114% 148% 152%
Average Commission Rate Paid $ .0588
</TABLE>
39
<PAGE> 42
NOTE 6 -- (CONTINUED)
<TABLE>
<CAPTION>
COWEN GOVERNMENT
SECURITIES FUND -- CLASS A
---------------------------------------------------
PERIOD FROM
1/20/93
YEAR ENDED (COMMENCEMENT
SIX MONTHS NOVEMBER 30, OF OPERATIONS)
ENDED ----------------- THROUGH
5/31/96 1995 1994 11/30/93
----------- ------ ------ --------------
(UNAUDITED)
<S> <C> <C> <C> <C>
NET ASSET VALUE,
Beginning of Period $ 9.83 $ 9.17 $10.11 $ 9.77
------- ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Investment Income -- Net 0.32 0.69 0.52 0.41
Net Realized and Unrealized Gains (Losses) on
Investments (0.50) 0.66 (0.84) 0.30
------- ------ ------ ------
Net from Investment Operations (0.18) 1.35 (0.32) 0.71
------- ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income (0.32) (0.69) (0.56) (0.37)
Distributions from Net Realized Gains on
Investments -- -- (0.06) --
------- ------ ------ ------
Total Distributions (0.32) (0.69) (0.62) (0.37)
------- ------ ------ ------
NET ASSET VALUE,
End of Period $ 9.33 $ 9.83 $ 9.17 $10.11
======= ====== ====== ======
Total Return(5) (3.82%)(2) 15.23% (3.24%) 8.49%(2)
RATIOS/SUPPLEMENTARY DATA
Net Assets (000 Omitted) $ 3,267 $3,945 $ 488 $ 547
Ratio of Expenses to Average Net Assets 0.15%(3) 0.22% -- --
Ratio of Investment Income -- Net to Average Net
Assets 3.29%(3) 7.08% 5.24% 5.06%(3)
Decrease Reflected on Above Ratios Due to:
Investment Management and Service Fees Waived
by Cowen 0.43%(3) 0.85% 0.78% 0.75%(3)
Other Expenses Waived or Absorbed 1.22%(3) 3.63% 11.85% 16.94%(3)
Portfolio Turnover Rate 39% 289% 210% 122%
</TABLE>
40
<PAGE> 43
NOTE 6 -- (CONTINUED)
<TABLE>
<CAPTION>
COWEN GOVERNMENT
SECURITIES FUND -- CLASS B
---------------------------------------------
PERIOD FROM
YEAR 7/15/94(4)
SIX MONTHS ENDED ENDED THROUGH
5/31/96(7) 11/30/95 11/30/94
---------------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
NET ASSET VALUE,
Beginning of Period $10.01 $ 9.28 $9.52(1)
------ ------ -----
INCOME FROM INVESTMENT OPERATIONS:
Investment Income -- Net 0.14 0.63 0.20
Net Realized and Unrealized Gains (Losses) on
Investments 0.10 0.73 (0.24)
------ ------ -----
Net from Investment Operations 0.24 1.36 (0.04)
------ ------ -----
LESS DISTRIBUTIONS:
Dividends from Net Investment Income (0.14) (0.63) (0.20)
Distributions from Net Realized Gains on Investments -- -- --
------ ------ -----
Total Distributions (0.14) (0.63) (0.20)
------ ------ -----
NET ASSET VALUE,
End of Period --(7) $10.01 $9.28
====== ====== =====
Total Return(5) 4.74%(7) 15.09% (1.27%)(2)
RATIOS/SUPPLEMENTARY DATA
Net Assets (000 Omitted) -- $ 153 $ 60
Ratio of Expenses to Average Net Assets 0.16%(3) 0.75% 0.28%(3)
Ratio of Investment Income -- Net to Average Net Assets 1.24%(3) 6.62% 2.02%(3)
Decrease Reflected on Above Ratios Due to:
Investment Management, Service and Distribution Fees
Waived by Cowen 0.22%(3) 1.10% 0.30%(3)
Other Expenses Waived or Absorbed 0.52%(3) 5.29% 6.05%(3)
Portfolio Turnover Rate 39% 289% 210%
</TABLE>
41
<PAGE> 44
NOTE 6 -- (CONTINUED)
<TABLE>
<CAPTION>
COWEN GOVERNMENT
SECURITIES FUND -- CLASS C
----------------------------------------
PERIOD FROM
SIX MONTHS YEAR 7/11/94(4)
ENDED ENDED THROUGH
5/31/96 11/30/95 11/30/94
----------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
NET ASSET VALUE,
Beginning of Period $9.94 $ 9.17 $9.45(1)
----- ------ -----
INCOME FROM INVESTMENT OPERATIONS:
Investment Income -- Net 0.32 0.70 0.22
Net Realized and Unrealized Gains (Losses) on
Investments (0.49) 0.77 (0.28)
----- ------ -----
Net from Investment Operations (0.17) 1.47 (0.06)
----- ------ -----
LESS DISTRIBUTIONS:
Dividends from Net Investment Income (0.32) (0.70) (0.22)
Distributions from Net Realized Gains on Investments -- -- --
----- ------ -----
Total Distributions (0.32) (0.70) (0.22)
----- ------ -----
NET ASSET VALUE,
End of Period $9.45 $ 9.94 $9.17
===== ====== =====
Total Return(5) (3.5%)(2) 16.52% (1.57%)(2)
RATIOS/SUPPLEMENTARY DATA
Net Assets (000 Omitted) $ 99 $ 45 $ 13
Ratio of Expenses to Average Net Assets 0.16%(3) 0.20% --
Ratio of Investment Income -- Net to Average Net Assets 3.28%(3) 7.12% 2.42%(3)
Decrease Reflected on Above Ratios Due to:
Investment Management Fees Waived by Cowen 0.30%(3) 0.60% 0.24%(3)
Other Expenses Waived or Absorbed 1.64%(3) 5.14% 6.26%(3)
Portfolio Turnover Rate 39% 289% 210%
</TABLE>
42
<PAGE> 45
NOTE 6 -- (CONTINUED)
<TABLE>
<CAPTION>
COWEN INTERMEDIATE
FIXED INCOME FUND -- CLASS A
----------------------------------------------------
PERIOD FROM
1/20/93
YEAR ENDED (COMMENCEMENT
SIX MONTHS NOVEMBER 30, OF OPERATIONS)
ENDED ----------------- THROUGH
5/31/96 1995 1994 11/30/93
----------- ------ ------ --------------
(UNAUDITED)
<S> <C> <C> <C> <C>
NET ASSET VALUE,
Beginning of Period $ 9.71 $ 9.12 $ 9.95 $ 9.77
------- ------- ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Investment Income -- Net 0.31 0.67 0.51 0.40
Net Realized and Unrealized Gains (Losses) on
Investments (0.35) 0.59 (0.68) 0.14
------- ------- ------ ------
Net from Investment Operations (0.04) 1.26 (0.17) 0.54
------- ------- ------ ------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income (0.31) (0.67) (0.53) (0.36)
Distributions from Net Realized Gains on
Investments (0.09) -- (0.13) --
------- ------- ------ ------
Total Distributions (0.40) (0.67) (0.66) (0.36)
------- ------- ------ ------
NET ASSET VALUE,
End of Period $ 9.27 $ 9.71 $ 9.12 $ 9.95
======= ======= ====== ======
Total Return(5) (0.84%)(2) 14.22% (1.77%) 6.50%(2)
RATIOS/SUPPLEMENTARY DATA
Net Assets (000 Omitted) $11,882 $14,667 $2,836 $1,167
Ratio of Expenses to Average Net Assets 0.27%(3) 0.47% 0.12% --
Ratio of Investment Income -- Net to Average
Net Assets 3.26%(3) 6.90% 5.41% 4.93%(3)
Decrease Reflected on Above Ratios Due to:
Investment Management and Service Fees
Waived by Cowen 0.25%(3) 0.50% 0.63% 0.75%(3)
Other Expenses Waived or Absorbed 0.22%(3) 0.86% 3.43% 4.45%(3)
Portfolio Turnover Rate 49% 264% 159% 143%
</TABLE>
43
<PAGE> 46
NOTE 6 -- (CONTINUED)
<TABLE>
<CAPTION>
COWEN INTERMEDIATE FIXED
INCOME FUND -- CLASS B
----------------------------------------
PERIOD FROM
SIX MONTHS YEAR 7/12/94(4)
ENDED ENDED THROUGH
5/31/96 11/30/95 11/30/94
----------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
NET ASSET VALUE,
Beginning of Period $ 9.78 $ 9.17 $ 9.32(1)
------- ------ -------
INCOME FROM INVESTMENT OPERATIONS:
Investment Income -- Net 0.30 0.65 0.20
Net Realized and Unrealized Gains (Losses) on
Investments (0.34) 0.61 (0.15)
------- ------ -------
Net from Investment Operations (0.04) 1.26 0.05
------- ------ -------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income (0.30) (0.65) (0.20)
Distributions from Net Realized Gains on Investments (0.09) -- --
------- ------ -------
Total Distributions (0.39) (0.65) (0.20)
------- ------ -------
NET ASSET VALUE,
End of Period $ 9.35 $ 9.78 $ 9.17
======= ====== =======
Total Return(5) (0.83%)(2) 14.12% 1.25%(2)
RATIOS/SUPPLEMENTARY DATA
Net Assets (000 Omitted) $ 853 $ 577 $ 313
Ratio of Expenses to Average Net Assets 0.40%(3) 0.68% 0.19%(3)
Ratio of Investment Income -- Net to Average Net Assets 3.15%(3) 6.79% 2.15%(3)
Decrease Reflected on Above Ratios Due to:
Investment Management, Service and Distribution Fees
Waived by Cowen 0.25%(3) 0.50% 0.18%(3)
Other Expenses Waived or Absorbed 0.20%(3) 1.25% 1.37%(3)
Portfolio Turnover Rate 49% 264% 159%
</TABLE>
44
<PAGE> 47
NOTE 6 -- (CONTINUED)
<TABLE>
<CAPTION>
COWEN INTERMEDIATE FIXED
INCOME FUND -- CLASS C
----------------------------------------
PERIOD FROM
SIX MONTHS YEAR 7/11/94(4)
ENDED ENDED THROUGH
5/31/96 11/30/95 11/30/94
----------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
NET ASSET VALUE,
Beginning of Period $ 9.68 $ 9.10 $ 9.34(1)
------- ------ -------
INCOME FROM INVESTMENT OPERATIONS:
Investment Income -- Net 0.32 0.69 0.23
Net Realized and Unrealized Gains (Losses) on
Investments (0.35) 0.58 (0.24)
------- ------ -------
Net from Investment Operations (0.03) 1.27 (0.01)
------- ------ -------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income (0.32) (0.69) (0.23)
Distributions from Net Realized Gains on Investments (0.09) -- --
------- ------ -------
Total Distributions (0.41) (0.69) (0.23)
------- ------ -------
NET ASSET VALUE,
End of Period $ 9.24 $ 9.68 $ 9.10
======= ====== =======
Total Return(5) (0.62%)(2) 14.41% (0.36%)(2)
RATIOS/SUPPLEMENTARY DATA
Net Assets (000 Omitted) $ 2,183 $1,872 $ 565
Ratio of Expenses to Average Net Assets 0.15%(3) 0.20% --
Ratio of Investment Income -- Net to Average Net Assets 3.38%(3) 7.23% 1.98%(3)
Decrease Reflected on Above Ratios Due to:
Investment Management Fee Waived by Cowen 0.25%(3) 0.50% 0.16%(3)
Other Expenses Waived or Absorbed 0.18%(3) 0.97% 1.87%(3)
Portfolio Turnover Rate 49% 264% 159%
</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
(6) Based upon average shares outstanding
(7) For the period from December 1, 1995 to February 12, 1996, the day on which
all outstanding shares were presented for redemption.
45
<PAGE> 48
COWEN FAMILY OF FUNDS
Financial Square
New York, NY 10005-3597
DIRECTORS
Joseph M. Cohen, Chairman
James H. Carey
Dr. Peter P. Gil
Dr. Martin J. Gruber
Burton J. Weiss
OFFICERS
Joseph M. Cohen, Chairman of the Board of Directors and Chief Executive Officer
David R. Sarns, President
William Church, Vice President and Senior Investment Officer
Creighton H. Peet, Vice President, Treasurer, Chief Financial Officer and Senior
Investment Officer
William Rechter, Senior Investment Officer(1)
Alan Koepplin, Investment Officer(2)
Gordon G. Ifill, Assistant Investment Officer(2)
Rodd M. Baxter, Secretary
Irwood Schlackman, Controller
<TABLE>
<S> <C>
INVESTMENT ADVISER CUSTODIAN
& DISTRIBUTOR & TRANSFER AGENT
Cowen & Company Investors Fiduciary Trust Co.
Financial Square P.O. Box 419111
New York, NY 10005 Kansas City, MO 64141
LEGAL COUNSEL INDEPENDENT AUDITORS
Willkie Farr & Gallagher Ernst & Young LLP
One Citicorp Center 787 Seventh Avenue
153 East 53rd Street New York, NY 10019
New York, NY 10022
</TABLE>
- ---------------
(1) Cowen Income + Growth and Cowen Opportunity
(2) Cowen Intermediate Fixed Income and Cowen Government Securities
COW/SEMI-ANN 5/96
