<PAGE> 1
- --------------------------------------------------------------------------------
ANNUAL REPORTS NOVEMBER 30, 1997
THE COWEN
FAMILY OF FUNDS
COWEN INCOME+GROWTH FUND, INC.
COWEN FUNDS, INC.
Opportunity Fund
Government Securities Fund
Intermediate Fixed Income Fund
(COWEN & COMPANY LOGO)
COWEN & COMPANY
- --------------------------------------------------------------------------------
<PAGE> 2
----------------------------
CONTENTS
Chairman's Letter............................................................. 1
Cowen Income + Growth Fund.................................................... 2
Cowen Opportunity Fund........................................................ 5
Cowen Intermediate Fixed Income Fund and
Cowen Government Securities Fund.............................................. 8
Statements of Investments.....................................................12
Statements of Assets and Liabilities..........................................26
Statements of Operations......................................................28
Statements of Changes in Net Assets...........................................30
Notes to Combined Financial Statements........................................34
Report of Ernst & Young LLP...................................................53
<PAGE> 3
CHAIRMAN'S LETTER JANUARY 21, 1998
To Our Shareholders:
The economic environment that served as the backdrop for the Cowen Family of
Funds' fiscal year included a variety of contradictory elements. The Dow Jones
Industrial Average posted returns of greater than 20% for the third year in a
row, an unprecedented performance boosted by moderate growth, low inflation and
falling interest rates. On the other hand, we also witnessed an Asian economic
downturn that, as of press time, is still unfolding.
For investors concerned about the economic turmoil in Southeast Asia, the U.S.
stock and bond markets proved to be a safe haven. Although the American stock
market suffered turbulence in October, it quickly recovered. Meanwhile, the
Treasury market was in great demand, boosting prices and lowering yields. For
the first time in years, the 30-year Treasury bond yield fell below 6%.
To participate in the markets with confidence requires intensive fundamental
research. It requires the ability to make changes in the portfolio or to have
the patience to stay the course. Indeed, the market volatility both here and
abroad reinforces the advantage of professional investment management.
The Cowen Family of Funds posted strong returns for the fiscal year ended
November 30, 1997 by employing disciplined investment strategies that come from
decades of experience in the investment field. Details on the Funds'
performance, investment strategies, 1998 outlook and portfolio manager
commentary can be found on the following pages.
As we approach the new millennium, Cowen continues its efforts to provide
competitive long-term performance through the Cowen Family of Funds. Your
Investment Executive is prepared to discuss how these funds, as well as Cowen's
other services, can help you meet your financial objectives.
Sincerely,
/s/ JOSEPH M. COHEN
Joseph M. Cohen
Chairman
<PAGE> 4
COWEN INCOME + GROWTH FUND
Seeking Value With an Eye on Income
Despite the Asian economic crisis and the worst one-day stock plunge in U.S.
history, the U.S. stock market posted a strong double-digit performance for the
third year in a row. Low inflation, falling interest rates and advancing
corporate profits continued to be the formula for strong, though volatile
stock-price returns.
PERFORMANCE
For the fiscal year ending November 30, 1997, the total annual return of the
Income + Growth Fund's Class A Shares was 19.21%. In comparison, the Lipper
Equity-Income Index average return was 23.78% and the Standard & Poor's 500
Index returned 28.51% during the same period. The Fund's Class B and Class C
shares returned 18.34% and 19.57% respectively, for the period.
DEFENSIVE POSITIONING
PAYS OFF
Although the Fund has been reducing its interest-rate sensitivity, its relative
returns are still positively impacted by falling interest rates because it
contains higher-than-average dividend yield. The reason: dividends look
increasingly attractive when fixed-income investments offer less yield.
Since last spring, interest rates have fallen sharply due to diminishing
inflation fears arising from the Asia economic crisis. As a result, the Fund's
total return since May 31, 1997 is 14.7%, while the S&P 500 Index was up 13.6%
for the same period. In contrast, interest rates were rising during early 1997,
and the Fund underperformed at that time.
The high-dividend characteristic contributes to the Fund's stability and
attempts to lower risk. Although investors have been rewarding high-risk
portfolios in recent years, we have elected to maintain a low-risk portfolio.
According to Morningstar, Inc., a mutual fund industry research firm, the Fund's
"beta," or measure of price volatility, is 0.49. A beta of 1 suggests that a
portfolio has an equal volatility to the stock market as a whole.
As a result, the Fund strives to outperform in weak markets and tends to
underperform in strong markets. For instance, while the S&P 500 Index was up 8%
in July 1997, the Fund was up about 6%. However, in August, when the S&P 500
Index was down 6%, the Fund was only down about 0.5%.
TWO-PRONGED
STOCK SELECTION
There are essentially two sides to the portfolio: core and contrarian. Our core
companies have very high yields but relatively low dividend growth rates. These
companies have lower returns on investment and therefore do not have the
opportunity to reinvest their earnings in high-growth areas, so they pay them
out as dividends. Included in this part of the portfolio are electric utilities,
natural gas companies, some of the oil companies and REITs.
For example, in the energy area, we continue to hold large integrated oil
companies such as Mobil and Texaco. Due to technological advances, we believe
that these companies can generate tremendous cash flow, even with oil and gas at
modest price levels. Within electric utilities, we own high-quality companies
such as Baltimore Gas & Electric, New Century (formerly Public Service of
Colorado) and UtiliCorp. These stocks
--
2
<PAGE> 5
yield more than 5% and operate in service areas with good demographics and a
favorable regulatory environment. Their management teams understand how to
compete in this new era of deregulation. We also own a number of regional
telephone companies such as SBC Corp and GTE.
Finally, nearly 10% of the portfolio is invested in real estate investment
trusts. REITs are in a special category because they generate 6%-7% yields as
well as steady growth. REITs are defensive for a number of reasons. One reason
is their high yield. A second reason is that if the stock market starts to go
down because inflation heats up, then the underlying real estate offers a hedge.
REITs are an attractive way for foreign investors and U.S. pension funds to
own real estate. During the 1980s, they attempted to buy the buildings directly,
and they wound up with some empty buildings that they couldn't sell. REITs allow
them to invest in a diversified portfolio of properties with excellent
liquidity.
On the contrarian side, the companies are growing much faster and have lower
dividend payout rates. Using a value discipline, we purchase companies with
strong fundamentals that may be out of favor or ignored by Wall Street. Although
dividend yields are lower, we still require them to yield 25% more than the S&P
500 Index, or have a faster dividend growth rate than the S&P 500. Currently,
the portfolio's overall yield is about 3.5%, about twice the market average.
Examples of contrarian stocks include Philip Morris and RJR, tobacco companies
that are reinvesting their tremendous cash flows in non-tobacco areas. In
retailing, we have significant exposure to J.C. Penney and Sears Roebuck. In
financial services, roughly 15% of the portfolio, we own a number of large
super-regional banks such as BankOne, NationsBank and Fleet Financial. The
consolidation trend in the banking industry is still in the early stages.
LOOKING FORWARD
We continue to see a market environment characterized by low inflation, low
interest rates and, by and large, growing corporate profits. In such an
environment, our mission continues to be to identify good, strong fundamental
companies where we either get a high and rising dividend stream, or we have a
contrarian opportunity where we think the valuation is extremely compelling.
Since every stock we buy must pay a dividend, we believe that this helps
protect the portfolio against rising interest rates. In addition, we've
diversified the portfolio and have worked hard to minimize its risk. We know
we're doing our job right if we capture 80%-90% of the upside when the market is
moving higher. If the market turns bearish, then we expect to hold up better
than the average mutual fund portfolio.
--
3
<PAGE> 6
COMPARISON OF CHANGE IN VALUE OF $10,000
INVESTMENT IN COWEN INCOME + GROWTH FUND, INC.,
CLASS "A" SHARES AND THE S&P 500
Cowen Income & Growth Fund Chart
<TABLE>
<CAPTION>
Cowen Income + Growth Fund, Inc. S&P 500
<S> <C> <C>
7/31/87 10,000 10,000
7/31/88 9,233 8,829
7/31/89 11,865 11,648
7/31/90 11,448 12,405
7/31/91 12,754 13,988
7/31/92 15,111 15,777
7/31/93 16,538 17,155
7/31/94 16,586 18,045
11/30/94* 16,116 18,054
11/30/95 20,870 24,718
11/30/96 24,598 31,643
11/30/97 $29,322 $39,933
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN**
- ---------------------------------------------------------------
1 YEAR 5 YEAR 10 YEAR
- ------------------- ------------------- -------------------
<S> <C> <C>
13.53% 13.14% 11.32%
- ---------------------------------------------------------------
</TABLE>
* Fund changed fiscal year to one ending on November 30.
** Includes initial maximum sales charge of 4.75%.
Performance of other classes will be greater than or less than the line shown
based on the differences in loads and fees paid by shareholders investing in the
different classes.
CLASS B AND CLASS C SHARES
ANNUALIZED RETURN OF THE CLASS:
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
----------------------------------------
1 YEAR INCEPTION***
---------------------- -------------
<S> <C> <C>
Class "B" shares**** 13.34% 16.92%
Class "C" shares 19.57% 18.54%
</TABLE>
- ---------------
*** Inception dates of Class "B" shares and Class "C" shares are May 17, 1994
and May 9, 1994 respectively.
**** After deduction of Contingent Deferred Sales Charge.
All performance figures assume reinvestment of dividends and capital
gains.
Past performance is not predictive of future results.
--
4
<PAGE> 7
COWEN OPPORTUNITY FUND
Making Money In Small Caps Through Stock and Sector Selection
As a group, the small-capitalization market continued to underperform the large
market averages in 1997. Although this phenomenon showed signs of abating last
summer, it re-emerged in the fall with the stock market sell-off in October.
After the Asian stock markets plummeted, foreign investors once again sought
liquidity in the largest brand-name U.S. corporations, virtually ignoring
smaller domestic companies.
PERFORMANCE
For the fiscal year ending November 30, 1997, the Cowen Opportunity Fund Class A
shares produced a total return of 13.55%. In contrast, the unmanaged Russell
2000 Index generated a total return of 23.41% for the same period, while the
Standard & Poor's 500 Index was up 28.51%. The Fund's Class B and Class C shares
returned 12.72% and 13.82%, respectively, for the period.
As of November 30, 1997, the Cowen Opportunity Fund had an annualized return
of 15.94% since its inception on March 31, 1988. For the same time period, it
has outperformed both the Lipper Small Cap Fund Index and the Russell 2000,
which had annualized returns of 14.06% and 14.24%, respectively.
During the most recent two year period, small-capitalization technology and
small-capitalization health care, two traditional areas of growth, have been
among the poorest performers of the Russell 2000. While these traditional growth
areas have been weak, the Fund's performance has been bolstered by individual
stock selection and good performance by energy stocks through mid 1997. Health
care is looking attractive again and the current volatility in small-cap
technology is beginning to present attractive entry points.
HIGHLIGHTS:
ENERGY, HEALTH CARE
AND CABLE TV
Our investment process attempts to identify companies that are undervalued in
the marketplace. In some cases, companies that are rebuilding and adding to
their business value are recognized by other companies before they are
recognized by the marketplace, which results in consolidation. During 1997, our
portfolio held Chicago Docks, HealthSource, Louisiana Land, Dreaco, Standard
Financial, Healthdyne and Universal Hospital -- which were all acquired.
Although the portfolio employs a bottom-up strategy focusing on company
specifics, it is not unusual to have large positions in the portfolio invested
in certain sectors. That continued to be the case in 1997 in these four sectors:
- - Energy -- Energy continues to be the largest sector in the portfolio.
Exploration and production companies, oil service and drillers all appreciated
in value through mid-1997. The valuation and performance disparity between
large- and small-capitalization stocks is vividly demonstrated in the energy
area. In 1997, the large multi-national companies were up 22% compared to a 3%
decline for the small domestic producers. Yet, our small-capitalization
domestic group is producing 10%+ gains in reserves and cash flows this year
and next compared to flat production growth for the majors. Currently, our
small-capitalization exploration and production companies are now selling at
about 5X cash flow, which is at the low end of historical valuations.
- - Health Care -- Health care is our second largest sector weighting. Two niche
HMOs, Sierra (up 37% in 1997) and Mid-Atlantic Medical (flat for the
year) -- the most important providers in their regions, offer good value and
growth potential to
--
5
<PAGE> 8
our portfolio. We also believe another health care area, the generic drug
sector, has a strong tailwind to its back. Mylan (up 27%) and Alpharma (up
56%) are our two generic drug choices.
Biotechnology is neither classic value nor classic growth as viewed by the
investment community. Yet our analysis has identified several biotechechnology
and/or small pharmaceutical companies with well-positioned products that
should not only grow but perhaps become acquisition targets. For example, we
invested in ICN Pharmaceuticals earlier in the year; rising 150% during 1997,
it is one of the best contributors to the Russell 2000 Index. Currently, there
are less than 10 profitable biotechechnology companies but by 2000, there
could by as many as 100.
- - Cable Television -- After some years of underperformance, the cable TV
industry made a comeback in 1997. The stocks were selling at attractive
valuations and we felt the catalysts were visible to warrant investment in
selected companies such as Cablevision Systems (up over 200% in 1997), Comcast
Corp. (up 77%), and TCA Cable (up 50%). We saw cable as a direct link into the
home, a hidden asset that could be transformed and magnified by technology and
the Internet. After we invested in these stocks, Microsoft recognized this as
well by investing in Comcast. Even though satellite TV is having some
competitive impact, the cable companies have upgraded their services and
boosted the number of channels, making them the easier choice for most
consumers.
- - Technology -- We continue to underweight technology, the poorest performing
group of the Russell 2000, up only 1% in 1997. With Intel's and Microsoft's
new product offerings delayed until mid-1998 and the absence of the normal
price/performance upgrades, combined with the year 2000 problem taking up
managers' time and budgets, many companies are reporting declining earnings
and prospects. However, several special situation software companies are in
the portfolio and the technology sell-off is creating even more value
opportunities.
LOOKING FORWARD:
THE CASE FOR SMALL CAPS
Over the past sixty years, small-capitalization stocks have outperformed
large-capitalization stocks by about two percentage points annually. However,
small-capitalization stocks have significantly lagged large companies for the
past three years. Now, we believe that the stage is set for small caps to
outperform for the following reasons:
- - Attractive valuations -- Small-capitalization stocks are generally selling at
a discount to large-capitalization stocks, despite the much stronger sales and
earnings growth prospects of most small-capitalization companies.
- - Flight from emerging markets -- Emerging markets in Southeast Asia had drained
capital that otherwise might go to high-growth, smaller domestic companies.
- - Strengthening dollar -- The strong dollar and the severely weakened Asian
currencies will have a disproportionately negative impact on U.S.
multinational earnings. Small companies doing most of their business in the
U.S. are not affected as much by a rising dollar.
- - New tax law -- The capital gains tax cut should benefit small-capitalization
companies because most of their returns come from capital appreciation, rather
than dividends, which are taxed at ordinary income rates.
We have great enthusiasm for our portfolio and are adhering to our investment
discipline of searching for companies poised for growth.
--
6
<PAGE> 9
COMPARISON OF CHANGE IN VALUE OF $10,000
INVESTMENT IN COWEN OPPORTUNITY FUND,
CLASS "A" SHARES AND THE S&P 500 AND THE RUSSELL 2000
LOGO
<TABLE>
<CAPTION>
COWEN
OPPORTUNITY S&P RUSSELL
FUND 500 2000
<S> <C> <C> <C>
3/31/88* 10000 10000 10000
11/30/88 9099 10827 10094
11/30/89 10970 14158 12145
11/30/90 11235 13653 9442
11/30/91 15341 16440 13680
11/30/92 17693 19466 16908
11/30/93 22910 21429 20112
11/30/94 25094 21722 19890
11/30/95 27079 29740 25557
11/30/96 35076 38072 29777
11/30/97 39652 48047 36149
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN**
- -----------------------------------------------------------------
1 YEAR 5 YEAR INCEPTION*
- ------------------- ------------------- -------------------
<S> <C> <C>
8.15% 16.49% 15.37%
- -----------------------------------------------------------------
</TABLE>
Performance of other classes will be greater than or less than the line shown
based on the differences in loads and fees paid by shareholders investing in the
different classes.
**Includes initial maximum sales charge of 4.75%.
CLASS B AND CLASS C SHARES
ANNUALIZED RETURN OF THE CLASS:
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL
RETURN
----------------------
1 YEAR INCEPTION***
------ -----------
<S> <C> <C>
Class "B" shares**** 7.72% 14.43%
Class "C" shares 13.82% 15.84%
</TABLE>
- ---------------
*** Inception dates of Class "B" shares and Class "C" shares are May 17, 1994
and May 9, 1994 respectively.
**** After deduction of Contingent Deferred Sales Charge.
All performance figures assume reinvestment of dividends and capital gains.
Past performance is not predictive of future results.
--
7
<PAGE> 10
COWEN INTERMEDIATE FIXED INCOME FUND
COWEN GOVERNMENT SECURITIES FUND
Inflation Outlook Bodes Well for Bonds
During a volatile year, it was our ability to shift among asset classes that was
key to our competitive performance in the Cowen Intermediate Fixed Income Fund
and the Cowen Government Securities Fund. In addition, our high quality focus
regarding credit and our strategy regarding interest-rate sensitivity added
stability to both Funds.
PERFORMANCE
For the fiscal year ending November 30, 1997, the total annual return of the
Intermediate Fixed Income Fund's Class A shares was 6.47%, slightly
outperforming its benchmark. The Lehman Brothers Intermediate
Government/Corporate Index, an unmanaged benchmark of intermediate government
and corporate bonds, reflected an increase of 6.33%. The Fund's Class B and
Class C shares returned 6.21% and 6.74%, respectively.
The total annual return for the Government Securities Fund's Class A shares
was 6.55%, somewhat below its unmanaged benchmark, the Lehman Brothers Aggregate
Index, which reflected a return of 7.55%. The Fund's Class C shares returned
6.55%.
Two factors were behind the Intermediate Fixed Income Fund outperforming its
benchmark. One was due to our overweighting in corporate bonds, which
outperformed government bonds over the year. The second factor was our shifting
the average maturity of the Fund as rates declined. The Government Securities
Fund's slight underperformance reflects our strategy to lower the portfolio's
sensitivity to interest rates in comparison to the benchmark and maintain
exposure to the mortgage sector of the bond market for the year.
ASIA AFFECTS BONDS, TOO
Although the economic turmoil in Asia was a negative for stocks, its impact on
bonds was generally positive. It lowered inflation expectations in the U.S. at a
time when the actual level of inflation was already declining. In addition, it
created a tremendous demand for U.S. government bonds as investors sought the
world's safest haven for their funds. The net result of these factors was that
long-term interest rates, after rising for the first several months of the
fiscal year, proceeded to decline steadily. In April 1997, the 30-year Treasury
bond peaked at about 7.1%, but then began a descent towards 6% by November 30,
1997. Since bond prices move inversely to interest rates, this development was a
positive one for the bond market.
However, intermediate bonds were not quite as positively impacted. While the
30-year U.S. Treasury bond yield dropped about 0.32 percentage points from
November 30, 1996 to November 30, 1997, the yield on five-year notes was
essentially unchanged. Interest rates on short-term securities actually rose on
a year-to-year basis, driven by Federal Reserve Board policy. During the year,
the Fed raised short-term rates once in March 1997 by 0.25 percentage points. In
addition, in an effort to generate capital appreciation, institutional investors
shifted from the short end of the maturity spectrum to the longer end, as it
became apparent that the rate of inflation was dropping. Indeed, subsequent to
November 30, 1997, yields on 30-year U.S. Treasury bonds fell to 5.9%, the
lowest level in four years.
Amid this activity, we took an active approach to managing both these Funds.
In addition to responding to these actions as they unfolded and
--
8
<PAGE> 11
adjusting maturities when necessary, we followed these three strategies:
- - Strategy 1: Keep Quality High -- The Intermediate Fixed Income Fund maintains
a preference for higher credit quality. While we did have some BBB-rated paper
in the portfolio from time to time, such as bonds issued by Long Island
Savings Bank, the overall credit quality of the corporate bond portfolio was
A, as rated by Moody's Investor Service, a national bond rating agency.
Higher-quality corporate bonds tend to outperform lower-quality bonds in
periods of economic uncertainty.
To amplify the portfolio's yield, we continue to invest in preferred stock,
such as those issued by McDonald's, which have characteristics very similar to
fixed-income securities. Preferred shares pay higher yields than corporate
bonds because the preferred's repayment obligation is junior to that of the
senior corporate debt. However, credit quality is of minimal concern with a
company with the financial strength of McDonald's, which is rated Aa3 by
Moody's.
- - Strategy 2: Keep Interest-Rate Sensitivity Low -- As 1997 got underway, we
shortened the maturity and duration of both funds as it became apparent that
the Federal Reserve Board was going to raise short-term interest rates. For
instance, the Intermediate Fund's duration had come down from 4.8 years at
November 30, 1996 to 4.2 years in March 1997. By September, the duration was
further shortened to 3.7 years as it seemed that the Fed might have to raise
rates again due to tight labor markets. However, the absence of inflation
forestalled that additional Fed action.
- - Strategy 3: Emphasize Corporates, De-emphasize Mortgages -- During the year,
we continued to emphasize corporate bonds, which outperformed until the late
fall when the Asia crisis caused the stock market to fall sharply. Although
corporate bonds don't do as well when the economy weakens, we don't believe
that the U.S. economy will slow to the point where it makes corporate
creditworthiness a significant issue for higher quality issues.
Mortgage-backed securities do not raise credit concerns, and they pay
substantially higher yields than corporates. However, mortgage-backed bonds
underperform when interest rates fall, as mortgage holders refinance, forcing
investors to reinvest at lower rates.
At mid-year, the Government Fund contained 60% mortgages and 40% Treasury
bonds. By November 30, 1997, that proportion was reversed to 40% mortgages and
60% Treasury bonds. The mortgage component of the Intermediate Fixed Income
Fund was also reduced from 30% at mid-year to 26% at November 30, 1997.
LOOKING FORWARD
We expect U.S. economic growth to slow from 3% to 2.5% or so in 1998. In
addition, inflation expectations continue to fall. Currently, short-term
interest rates, at 5.5%, are not much lower than 30-year rates. Investors are
demanding virtually no inflation premium to extend their maturity commitment,
resulting in a flat yield curve. Assuming an inflation rate of 1-2%, bonds today
are offering a very high real rate of return. Combined with the potential for
further stock market turbulence abroad and in the U.S., bonds also offer
something else stocks can't provide: relative price stability.
Our expectation is to continue to position the funds with high-quality
securities while searching for extra yield. In addition, we plan to maintain a
slightly longer average maturity to take advantage of the downward trend in
interest rates.
--
9
<PAGE> 12
COMPARISON OF CHANGE IN VALUE OF $10,000
INVESTMENT IN COWEN INTERMEDIATE FIXED INCOME FUND
IN CLASS "A" SHARES AND THE
LEHMAN INTERMEDIATE GOVERNMENT/CORPORATE INDEX
<TABLE>
<CAPTION>
COWEN INTERMEDIATE LEHMAN INTERMEDIATE
FIXED INCOME FUND GOVERNMENT/CORPORATE INDEX
<S> <C> <C>
1/20/93* 10000 10000
11/30/93 10316 10720
11/30/94 10133 10521
11/30/95 11575 12051
11/30/96 12178 12620
11/30/97 13087 13419
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN**
- ---------------------------------------------------
1 YEAR INCEPTION*
- ------------------------ ------------------------
<S> <C>
3.95% 5.49%
- ---------------------------------------------------
</TABLE>
Performance of other classes will be greater than or less than the line shown
based on the differences in loads and fees paid by shareholders investing in the
different classes.
** Includes initial maximum sales charge of 2.35%.
CLASS B AND CLASS C SHARES
ANNUALIZED RETURN OF THE CLASS:
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL
RETURN
----------------------
1 YEAR INCEPTION***
------ -----------
<S> <C> <C>
Class "B" shares**** 3.21% 7.02%
Class "C" shares 6.74% 7.70%
</TABLE>
- ---------------
*** Inception dates of Class "B" shares and Class "C" shares are July 12, 1994
and July 11, 1994 respectively.
**** After deduction of Contingent Deferred Sales Charge.
All performance figures assume reinvestment of dividends and capital
gains.
Past performance is not predictive of future results.
--
10
<PAGE> 13
COMPARISON OF CHANGE IN VALUE OF $10,000
INVESTMENT IN COWEN GOVERNMENT SECURITIES FUND,
CLASS "A" SHARES AND THE LEHMAN AGGREGATE INDEX
<TABLE>
<CAPTION>
COWEN GOVERNMENT LEHMAN AGGREGATE
SECURITIES FUND INDEX
<S> <C> <C>
1/20/93* 10000 10000
11/30/93 10228 10799
11/30/94 9896 10470
11/30/95 11404 12317
11/30/96 11899 12884
11/30/97 12801 13857
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN**
- ---------------------------------------------------
1 YEAR INCEPTION*
- ------------------------ ------------------------
<S> <C>
1.47% 5.00%
- ---------------------------------------------------
</TABLE>
Performance of other classes will be greater than or less than the line shown
based on the differences in loads and fees paid by shareholders investing in the
different classes.
** Includes initial maximum sales charge of 4.75%.
CLASS C SHARES
ANNUALIZED RETURN OF THE CLASS:
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
-------------------------------------
1 YEAR INCEPTION***
--------------------- -----------
<S> <C> <C>
Class "C" shares 6.55% 7.78%
</TABLE>
- ---------------
*** Inception date of Class "C" shares is July 11, 1994.
All performance figures assume reinvestment of dividends and capital gains.
Past performance is not predictive of future results.
--
11
<PAGE> 14
COWEN INCOME + GROWTH FUND, INC.
STATEMENT OF INVESTMENTS
NOVEMBER 30, 1997
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
<C> <S> <C>
COMMON STOCKS -- 97.3% of total portfolio
CHEMICALS -- 2.2%
25,000 Du Pont (E.I.) De Nemour $ 1,514,062
------------
CONSUMER PRODUCTS -- 8.3%
28,000 Eastman Kodak, Co. 1,697,500
26,000 Fortune Brands, Inc. 940,875
37,000 Kimberly-Clark Corp. 1,926,313
50,000 Readers Digest Association 1,196,875
------------
5,761,563
------------
ENERGY -- 25.2%
35,000 Baker Hughes, Inc. 1,465,625
30,000 Coastal Corp. 1,756,875
32,000 Consolidated Natural Gas 1,932,000
40,000 K N Energy 1,870,000
65,000 Keyspan Energy Corp. 2,165,313
50,000 MCN Energy 1,909,375
23,000 Mobil Corp. 1,654,563
14,000 Murphy Oil Corp. 770,000
8,000 Schlumberger Ltd 658,500
23,000 Sonat, Inc. 1,001,938
24,000 Texaco, Inc. 1,356,000
18,000 Tidewater, Inc. 1,009,125
------------
17,549,314
------------
FINANCIAL SERVICES -- 8.2%
18,700 Banc One Corp. 960,712
20,000 Fleet Financial Group, Inc. 1,321,250
28,000 NationsBank Corp. 1,681,750
38,000 Ohio Casualty Corp. 1,733,750
------------
5,697,462
------------
DIVERSIFIED MANUFACTURING -- 3.2%
42,000 Engelhard Corp. 748,125
25,000 PPG Industries, Inc. 1,448,437
------------
2,196,562
------------
</TABLE>
See notes to combined financial statements
--
12
<PAGE> 15
COWEN INCOME + GROWTH FUND, INC.
STATEMENT OF INVESTMENTS -- (continued)
NOVEMBER 30, 1997
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
<C> <S> <C>
COMMON STOCKS -- (Continued)
NATURAL RESOURCES -- 4.0%
75,000 Cyprus Amax Minerals Corp. $ 1,373,437
46,000 Newmont Mining Corp. 1,382,875
------------
2,756,312
------------
PHARMACEUTICALS/HEALTH CARE -- 5.7%
34,000 Bausch & Lomb, Inc. 1,347,250
22,000 Pfizer, Inc. 1,600,500
31,000 Pharmacia & Upjohn, Inc. 1,046,250
------------
3,994,000
------------
REAL ESTATE INVESTMENT TRUSTS -- 8.8%
45,000 Kimco Realty Corp. 1,546,875
50,000 New Plan Realty Investment Trust 1,212,500
100,000 United Dominion Realty Trust 1,468,750
46,000 Weingarten Realty Investment Trust 1,917,625
------------
6,145,750
------------
RETAIL -- 4.1%
21,000 J C Penney Corp. 1,349,250
32,000 Sears Roebuck & Co. 1,466,000
------------
2,815,250
------------
TELEPHONE/COMMUNICATIONS -- 5.5%
40,000 GTE Corp. 2,022,500
13,000 SBC Communications 946,563
15,000 Sprint Corp. 878,438
------------
3,847,501
------------
TOBACCO -- 7.5%
31,000 Phillip Morris Co's, Inc. 1,348,500
55,000 RJR Nabisco Holdings Corp. 2,004,062
60,000 UST, Inc. 1,852,500
------------
5,205,062
------------
</TABLE>
See notes to combined financial statements
--
13
<PAGE> 16
COWEN INCOME + GROWTH FUND, INC.
STATEMENT OF INVESTMENTS -- (continued)
NOVEMBER 30, 1997
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
<C> <S> <C>
COMMON STOCKS -- (Continued)
UTILITIES -- 14.6%
39,000 Baltimore Gas & Electric $ 1,196,812
22,000 Cinergy Corp. 783,750
40,000 Eastern Enterprises, Inc. 1,610,000
35,000 New Century Energies, Inc. 1,548,750
65,000 Scana Corp. 1,795,625
50,000 Southern Co. 1,200,000
59,000 UtiliCorp United, Inc. 2,017,063
------------
10,152,000
------------
TOTAL COMMON STOCKS (Cost $60,090,479) 67,634,838
------------
PRINCIPAL
AMOUNT
SHORT TERM INVESTMENTS -- 2.7%
$1,000,000 Ford Financial Capital Corp., 5.54%, 12/01/1997 1,000,000
850,000 General Electric Capital Corp., 5.68%, 12/05/1997 850,000
------------
TOTAL SHORT-TERM INVESTMENTS(Cost $1,850,000) 1,850,000
------------
TOTAL INVESTMENTS -- 100.0%
(Cost $61,940,480) $ 69,484,838
============
</TABLE>
See notes to combined financial statements
--
14
<PAGE> 17
COWEN OPPORTUNITY FUND
STATEMENT OF INVESTMENTS
NOVEMBER 30, 1997
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
<C> <S> <C>
COMMON STOCK -- 89.1% of total portfolio
OIL & GAS EXPLORATION -- 21.0%
35,000 Abraxas Petroleum Corp.* $ 560,000
280,000 Arakis Energy Corp.* 822,500
47,700 Barrett Resources Corp.* 1,413,112
618,700 Canadian 88 Energy Corp.* 1,824,753
34,300 Devon Energy Corp. 1,333,413
188,900 Enserch Exploration, Inc.* 1,582,037
30,700 Forest Oil Corp.* 489,281
81,400 HS Resources, Inc.* 1,297,313
151,000 Hurricane Hydrocarbons* 927,812
92,000 Magnum Hunter Resources, Inc.* 529,000
3,800 Murphy Oil Corp. 209,000
20,600 Nuevo Energy Co.* 858,763
4,000 Ocean Energy, Inc.* 223,750
113,400 Oryx Energy Co.* 3,061,800
204,400 Petromet Resources Ltd.* 495,193
25,000 Pinnacle Resources Ltd.* 337,945
31,900 Pioneer Natural Resources Co.* 1,018,806
16,900 Pogo Producing Co. 530,237
172,000 Rigel Energy Corp.* 1,485,622
60,000 Rio Alto Exploration Ltd.* 474,000
158,200 Santa Fe Energy Resources* 1,769,863
24,500 Seagull Energy Corp.* 558,906
125,000 Summit Resources Ltd.* 460,834
111,900 Titan Exploration, Inc.* 1,328,812
62,600 United Meridian Corp.* 1,881,913
-------------
25,474,665
-------------
</TABLE>
See notes to combined financial statements
--
15
<PAGE> 18
COWEN OPPORTUNITY FUND
STATEMENT OF INVESTMENTS -- (continued)
NOVEMBER 30, 1997
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
<C> <S> <C>
COMMON STOCKS -- (Continued)
OIL & GAS EQUIPMENT & SERVICES -- 12.7%
17,900 Benton Oil & Gas Co.* $ 258,431
322,000 Black Sea Energy Ltd.* 542,678
40,000 Canadian Fracmaster Ltd.* 573,014
53,200 Global Marine, Inc. 1,399,825
30,000 Hanover Compressor Co.* 630,000
39,200 Nabors Industries, Inc.* 1,374,450
103,200 Oceaneering International, Inc.* 2,128,500
42,400 Offshore Logistics* 954,000
58,600 Parker Drilling Co.* 772,787
15,600 Petroleum Geo Services-ADR* 1,003,275
81,500 Pride International, Inc.* 2,251,438
45,600 Reading & Bates Corp.* 1,749,900
38,400 Weatherford Enterra, Inc.* 1,730,400
-------------
15,368,698
-------------
UTILITIES -- 9.9%
12,700 Central Hudson Gas & Electric Co. 488,950
17,700 Central Louisiana Electric Co. 514,406
17,300 DPL, Inc. 454,125
15,100 Eastern Utilities Associates 362,400
24,200 Empire District Electric Co. 455,263
13,700 Keyspan Energy Corp. 456,381
14,000 Madison Gas & Electric Co. 285,250
12,000 New Century Energies, Inc. 531,000
211,300 Niagra Mohawk Power Corp.* 2,020,556
7,900 NIPSCO Industries 369,819
20,400 Northeast Utilities 263,925
8,100 Orange & Rockland Utilities, Inc. 323,494
9,000 Otter Tail Power Co. 312,750
11,200 Puget Sound Energy, Inc. 309,400
16,600 St. Joseph Light & Power Co. 280,125
11,900 SCANA Corp. 328,737
29,500 Sierra Pacific Resources 999,313
15,300 Texas Utilities, Inc. 612,000
</TABLE>
See notes to combined financial statements
--
16
<PAGE> 19
COWEN OPPORTUNITY FUND
STATEMENT OF INVESTMENTS -- (continued)
NOVEMBER 30, 1997
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
<C> <S> <C>
COMMON STOCKS -- (Continued)
UTILITIES -- (Continued)
34,900 TNP Enterprises, Inc. $ 959,750
34,500 Union Electric Co. 1,373,531
10,400 WPL Holdings, Inc. 317,200
-------------
12,018,375
-------------
PHARMACEUTICALS -- 5.7%
46,400 Alpharma, Inc. 1,061,400
31,600 Ascent Pediatrics, Inc.* 252,800
37,300 Carter-Wallace, Inc.* 617,781
35,000 Columbia Laboratories, Inc.* 481,250
45,200 IVAX Corp.* 319,225
32,000 Kos Pharmaceuticals, Inc.* 536,000
163,200 Mylan Labs, Inc. 3,621,000
-------------
6,889,456
-------------
METALS & MINING -- 5.3%
129,100 Amax Gold, Inc. 282,406
73,900 Armco, Inc. 392,594
15,000 Asarco, Inc. 373,125
110,600 Battle Mountain Gold Co. 559,913
28,400 Birmingham Steel Corp.* 434,875
203,600 Canyon Resources Corp.* 241,775
40,200 Cyprus Amax Minerals Co. 736,162
30,000 Getchell Gold Corp.* 787,500
56,400 Hecla Mining Co.* 278,475
20,000 Homestake Mining 210,000
20,000 Newmont Mining Corp. 601,250
157,800 Royal Oak Mines, Inc. 246,562
300,200 TVX Gold, Inc.* 788,025
28,500 Worthington Industries 516,563
-------------
6,449,225
-------------
</TABLE>
See notes to combined financial statements
--
17
<PAGE> 20
COWEN OPPORTUNITY FUND
STATEMENT OF INVESTMENTS -- (continued)
NOVEMBER 30, 1997
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
<C> <S> <C>
COMMON STOCKS -- (Continued)
BROADCASTING -- 4.1%
50,000 Adelphia Communications Cl A* $ 725,000
15,500 Cablevision Systems* 1,270,031
83,000 Comcast Corp. Special Cl A 2,324,000
15,200 TCA Cable TV, Inc. 630,800
-------------
4,949,831
-------------
HEALTH CARE SERVICES/HMO'S -- 4.0%
150,000 IntegraMed America, Inc.* 290,625
189,700 Mid-Atlantic Medical Services* 2,525,381
20,000 Morrison Health Care, Inc. 357,500
83,200 Physician Reliance Network* 816,400
50,000 Renex Corp.* 362,500
12,100 Sierra Health Services* 440,138
-------------
4,792,544
-------------
CONSUMER SERVICES -- 3.4%
16,500 Aim Safety Co.* 220,147
30,100 American Safety Razor Co.* 571,900
9,000 American Woodmark Corp. 198,000
43,900 Berlitz International, Inc.* 1,133,169
35,300 Marker International* 163,263
65,900 Sotheby's Holdings* 1,124,419
27,400 York Group, Inc. 664,450
-------------
4,075,348
-------------
SOFTWARE -- 3.4%
16,000 Barra, Inc.* 446,000
18,900 Evans & Sutherland Computer Corp.* 585,900
18,200 Gerber Scientific, Inc.* 364,000
18,500 Information Resources, Inc.* 275,187
234,900 Novell, Inc.* 2,172,825
28,500 Platinum Software Corp.* 222,656
-------------
4,066,568
-------------
BIOTECH -- 3.3%
19,800 Biogen, Inc.* 693,000
50,000 Cephalon, Inc.* 506,250
</TABLE>
See notes to combined financial statements
--
18
<PAGE> 21
COWEN OPPORTUNITY FUND
STATEMENT OF INVESTMENTS -- (continued)
NOVEMBER 30, 1997
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
<C> <S> <C>
COMMON STOCKS -- (Continued)
BIOTECH -- (Continued)
14,300 COR Therapeutics, Inc.* $ 325,325
49,000 Genzyme Corp.* 1,313,813
100,000 IBAH, Inc.* 343,750
25,000 Matrix Pharmaceuticals, Inc.* 89,062
31,900 Neopath, Inc.* 526,350
19,700 Onyx Pharmaceuticals, Inc.* 142,825
-------------
3,940,375
-------------
TRUCKING/TRANSPORT/PARTS -- 3.2%
16,400 Covenant Transportation, Inc.* 262,400
13,500 Keystone Automotive Industries, Inc.* 313,031
18,400 Kirby Corp.* 341,550
23,500 Simon Transportation Services, Inc.* 540,500
29,000 Stewart & Stevenson Services, Inc. 630,750
35,000 Titan International, Inc. 700,000
52,800 Transport Corp. of America, Inc.* 851,400
14,100 Walbro Corp. 205,331
-------------
3,844,962
-------------
RETAILERS -- 2.5%
26,300 Ann Taylor Stores Corp.* 374,775
6,500 Brylane, Inc.* 336,375
10,400 Homebase, Inc.* 87,100
50,000 Lechters, Inc.* 287,500
38,400 Michael Stores, Inc.* 1,243,200
19,600 Williams-Sonoma, Inc.* 747,250
-------------
3,076,200
-------------
FINANCIAL SERVICES -- 2.5%
24,900 Alliance Bancorp 647,400
46,900 American Banknote Corp.* 252,087
30,600 Compass Bancshares, Inc. 1,224,000
44,435 IBS Financial Corp 774,835
7,000 Sovereign Bancorp, Inc. 132,563
-------------
3,030,885
-------------
</TABLE>
See notes to combined financial statements
--
19
<PAGE> 22
COWEN OPPORTUNITY FUND
STATEMENT OF INVESTMENTS -- (continued)
NOVEMBER 30, 1997
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
<C> <S> <C>
COMMON STOCKS -- (Continued)
ELECTRONICS/ELECTRICAL -- 2.2%
10,700 General Signal Corp. $ 436,694
100,200 Lo-Jack Corp* 1,390,275
21,200 Tokheim Corp.* 398,825
17,500 Vanguard Cellular Systems* 243,906
52,800 Visioneer, Inc.* 191,400
-------------
2,661,100
-------------
BUILDING CONSTRUCTION -- 1.6%
152,100 Dravo Corp.* 1,511,494
10,000 USG Corp.* 468,750
-------------
1,980,244
-------------
ENVIRONMENTAL -- 1.5%
38,900 Calgon Carbon Corp. 427,900
190,000 ICF Kaiser International, Inc.* 403,750
94,000 Laidlaw Environmental Services* 423,000
25,400 Ohm Corp.* 215,900
10,200 U.S. Filter Corp.* 320,025
-------------
1,790,575
-------------
RESTAURANTS/FOOD PRODUCTS -- 1.1%
11,100 Boston Beer Company, Inc. 105,450
34,650 Flowers Industries, Inc. 690,834
13,000 Red Hook Ale Brewery, Inc.* 88,563
412,500 PT Cahaya Kalbar 188,781
31,200 Scheld Vineyards, Inc.* 312,000
-------------
1,385,628
-------------
MEDICAL SUPPLIES/SERVICES -- 0.7%
50,000 Collaborative Clinical Research, Inc.* 262,500
12,400 Healthworld Corp.* 130,200
13,300 Heartstream, Inc.* 159,600
8,400 Hologic, Inc.* 217,350
5,700 Thoratec Labs Corp.* 29,212
-------------
798,862
-------------
</TABLE>
See notes to combined financial statements
--
20
<PAGE> 23
COWEN OPPORTUNITY FUND
STATEMENT OF INVESTMENTS -- (continued)
NOVEMBER 30, 1997
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
<C> <S> <C>
COMMON STOCKS -- (Continued)
PAPER PRODUCTS -- 0.5%
7,200 Bowater, Inc. $ 323,100
19,600 Stone Container Corp.* 245,000
-------------
568,100
-------------
COMPUTER -- 0.3%
6,117 Structural Dynamics Research* 102,077
13,500 Versant Object Technology* 201,656
-------------
303,733
-------------
REAL ESTATE -- 0.2%
58,200 Atlantic Gulf Communities 254,625
-------------
TOTAL COMMON STOCKS (Cost $103,253,917) 107,719,999
-------------
<CAPTION>
PRINCIPAL
AMOUNT
<C> <S> <C>
SHORT TERM INVESTMENTS -- 10.9%
$2,000,000 American Express Corp., 5.53%, 12/03/1997 2,000,000
2,800,000 Associates Corp., 5.52%, 12/02/1997 2,800,000
1,200,000 Ford Motor Credit Corp., 5.55%, 12/04/1997 1,200,000
1,000,000 Ford Motor Credit Corp., 5.62%, 12/05/1997 1,000,000
3,300,000 General Electric Capital Corp., 5.45%, 12/01/1997 3,300,000
2,900,000 Prudential Funding Corp., 5.56%, 12/08/1997 2,900,000
-------------
TOTAL SHORT-TERM INVESTMENTS (Cost $13,200,000) 13,200,000
-------------
TOTAL INVESTMENTS -- 100.0%
(Cost $116,453,917) $ 120,919,999
=============
</TABLE>
- ---------------
* Non-income producing securities
See notes to combined financial statements
--
21
<PAGE> 24
COWEN GOVERNMENT SECURITIES FUND
STATEMENT OF INVESTMENTS
NOVEMBER 30, 1997
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
MORTGAGE-BACKED SECURITIES -- 42.5%
OF TOTAL PORTFOLIO
FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC)
CERTIFICATES:
$169,243 8.500%, 01/01/10 $ 176,883
41,561 8.000%, 05/01/17 43,245
FEDERAL NATIONAL MORTGAGE ASS'N (FNMA) CERTIFICATES:
150,294 9.000%, 02/01/15 160,064
GOVERNMENT NATIONAL MORTGAGE ASS'N (GNMA)
CERTIFICATES:
35,555 8.000%, 05/15/02 36,201
8,787 10.000%, 04/15/16 9,741
9,283 10.000%, 07/15/17 10,341
10,306 10.000%, 11/15/17 11,481
8,071 9.000%, 05/15/21 8,693
11,569 9.500%, 11/15/21 12,557
67,806 9.500%, 03/20/25 71,357
162,132 8.000%, 05/15/25 167,754
225,269 7.750%, 08/15/26 231,359
518,035 8.000%, 01/15/26 535,678
-----------
TOTAL MORTGAGE-BACKED SECURITIES 1,475,354
-----------
U.S. TREASURY OBLIGATIONS -- 57.5%
300,000 5.875%, 02/15/00 300,375
300,000 6.000%, 07/31/02 301,734
650,000 5.750%, 08/15/03 645,938
500,000 5.875%, 11/15/05 498,905
250,000 6.000%, 02/15/26 246,055
-----------
TOTAL U.S. TREASURY NOTES 1,993,007
-----------
TOTAL INVESTMENTS (Cost $3,451,176) $ 3,468,361
===========
</TABLE>
See notes to combined financial statements
--
22
<PAGE> 25
COWEN INTERMEDIATE FIXED INCOME FUND
STATEMENT OF INVESTMENTS
NOVEMBER 30, 1997
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
<C> <S> <C>
CUMULATIVE PREFERRED STOCK -- 9.5%
OF TOTAL PORTFOLIO
8,600 McDonalds Corp. 7.50%, 09/30/36 $ 221,988
20,000 Merrill Lynch TOPRS 7.750%, 12/31/36 528,750
10,000 Paine Webber Group Capital Trust II, 8.08%,
03/01/37 256,250
------------
TOTAL CUMULATIVE PREFERRED STOCK 1,006,988
------------
<CAPTION>
PRINCIPAL
AMOUNT
<C> <S> <C>
CORPORATE NOTES -- 17.4%
$ 800,000 Long Island Savings Bank 7.00%, 06/13/02 813,472
1,000,000 Sears Roebuck Acceptance 7.010%, 09/19/02 1,024,480
------------
TOTAL CORPORATE NOTES 1,837,952
------------
MORTGAGE-BACKED SECURITIES -- 26.4%
FEDERAL NATIONAL MORTGAGE ASS'N (FNMA)
CERTIFICATES:
164,081 9.000%, 02/01/02 168,963
66,381 9.000%, 05/01/09 69,480
88,624 9.500%, 03/01/10 95,326
164,780 7.500%, 09/01/10 168,951
813,972 7.000%, 11/01/10 825,075
70,532 9.000%, 04/01/15 75,117
98,045 9.500%, 07/01/22 105,765
FEDERAL HOME LOAN MORTGAGE CORP (FHLMC)
CERTIFICATES:
176,502 8.000%, 01/01/08 182,317
</TABLE>
See notes to combined financial statements
--
23
<PAGE> 26
COWEN INTERMEDIATE FIXED INCOME FUND
STATEMENT OF INVESTMENTS -- (CONTINUED)
NOVEMBER 30, 1997
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
GOVERNMENT NATIONAL MORTGAGE ASS'N (GNMA)
CERTIFICATES:
95,163 8.000%, 06/15/01 $ 96,570
49,983 9.000%, 12/15/16 54,170
44,738 10.000%, 12/15/18 49,876
41,032 8.500%, 10/15/21 43,379
64,728 8.000%, 06/15/22 67,317
770,387 7.750%, 07/15/26 791,210
------------
TOTAL MORTGAGE-BACKED SECURITIES 2,793,516
------------
U.S. TREASURY NOTES -- 46.7%
450,000 7.125%, 02/29/00 462,303
1,000,000 6.250%, 10/31/01 1,013,120
350,000 6.625%, 04/30/02 360,062
400,000 6.250%, 06/30/02 406,000
610,000 6.000%, 07/31/02 613,526
1,000,000 6.250%, 02/15/03 1,016,870
650,000 5.875%, 11/15/05 648,577
400,000 6.500%, 10/15/06 415,936
------------
TOTAL U.S. TREASURY NOTES 4,936,394
------------
TOTAL INVESTMENTS (Cost $10,437,108) $ 10,574,850
============
</TABLE>
See notes to combined financial statements
--
24
<PAGE> 27
(This page intentionally left blank)
--
25
<PAGE> 28
STATEMENTS OF ASSETS AND LIABILITIES
NOVEMBER 30, 1997
<TABLE>
<CAPTION>
INCOME + GROWTH
FUND
<S> <C>
ASSETS:
Investments in securities, at value (cost $61,940,480, $116,453,917,
$3,451,176 and $10,437,108, respectively -- see statements) $ 69,484,838
Cash 16,844
Receivables:
Cowen & Company --
Subscriptions to Common Stock 7,806
Investment securities sold 721,105
Dividends and interest 215,230
Prepaid expenses, etc. 26,179
Deferred organization expenses -- Note 1(E) --
----------------
TOTAL ASSETS 70,472,002
----------------
LIABILITIES:
Payables:
Custodian --
Cowen & Company 46,161
Redemptions of Common Stock 33,251
Investment securities purchased --
Dividends -- Note 1(C) --
Accrued expenses and other liabilities 87,434
----------------
TOTAL LIABILITIES 166,846
----------------
NET ASSETS $ 70,305,156
================
NET ASSETS consist of:
Paid-in Capital $ 51,337,217
Accumulated undistributed net investment income 284,184
Accumulated net realized gain (loss) on investments 11,139,397
Net unrealized appreciation on investments 7,544,358
----------------
NET ASSETS $ 70,305,156
================
CLASS A
Net assets $ 55,383,399
Outstanding shares of common stock, ($.001 par value) 3,805,392
Net asset value per share $ 14.55
Maximum offering price per share $ 15.28
CLASS B
Net assets $ 4,477,505
Outstanding shares of common stock, ($.001 par value) 309,556
Net asset value per share $ 14.46
CLASS C
Net assets $ 10,444,252
Outstanding shares of common stock, ($.001 par value) 714,745
Net asset value per share $ 14.61
</TABLE>
See notes to combined financial statements
--
26
<PAGE> 29
<TABLE>
<CAPTION>
GOVERNMENT INTERMEDIATE FIXED
OPPORTUNITY FUND SECURITIES FUND INCOME FUND
<S> <C> <C>
$120,919,999 $ 3,468,361 $ 10,574,850
42,153 -- 27,524
-- 3,377 214
198,510 1,112 959
148,928 1,413 924
75,382 37,808 93,655
24,958 18,336 18,599
-- 1,732 1,741
------------- ----------- -------------
121,409,930 3,532,139 10,718,466
------------- ----------- -------------
-- 2,266 --
101,880 -- --
127,922 5,395 5,000
2,719,373 -- --
-- 590 6,303
78,626 27,187 35,351
------------- ----------- -------------
3,027,801 35,438 46,654
------------- ----------- -------------
$118,382,129 $ 3,496,701 $ 10,671,812
============= =========== =============
$ 93,405,830 $ 3,468,546 $ 10,792,818
-- -- --
20,513,170 10,970 (258,748)
4,463,129 17,185 137,742
------------- ----------- -------------
$118,382,129 $ 3,496,701 $ 10,671,812
============= =========== =============
$ 54,808,818 $ 3,433,338 $ 9,341,194
3,327,348 358,390 985,998
$ 16.47 $ 9.58 $ 9.47
$ 17.29 $ 10.06 $ 9.70
$ 10,629,220 $ -- $ 629,693
667,744 -- 65,980
$ 15.92 $ -- $ 9.54
$ 52,944,091 $ 63,363 $ 700,925
3,172,077 6,535 74,216
$ 16.69 $ 9.70 $ 9.44
</TABLE>
--
27
<PAGE> 30
STATEMENT OF OPERATIONS
YEAR ENDED NOVEMBER 30, 1997
<TABLE>
<CAPTION>
INCOME + GROWTH
FUND
<S> <C>
INVESTMENT INCOME:
Dividend income $ 2,477,646
Interest income 148,927
-----------
TOTAL INCOME 2,626,573
-----------
EXPENSES:
Investment management fee -- Note 2(A) 509,586
Service fee -- Class A -- Note 2(C) 132,392
Service and Distribution fees -- Class B -- Note 2(C) 34,831
Professional fees 37,295
Shareholder servicing fees:
Class A 48,535
Class B 4,277
Class C 4,595
Directors' fees and expenses -- Note 2(D) 25,144
Federal and state registration fees 39,056
Prospectus and shareholders' reports 50,953
Custodian fees 16,977
Amortization of organization expenses -- Note 1(E) --
Miscellaneous 5,515
-----------
TOTAL EXPENSES 909,156
Less: expenses waived and absorbed --
Note 2(A, C and D) (95,123)
-----------
NET EXPENSES 814,033
-----------
Net Investment Income (loss) 1,812,540
-----------
Realized and Unrealized Gain (Loss) on Investments --
Note 3:
Net realized gain (loss) on investments 11,441,727
Net unrealized appreciation (depreciation) on
investments (1,147,980)
-----------
Net Realized and Unrealized Gain (Loss) on Investments 10,293,747
-----------
Net Increase in Net Assets Resulting from Operations $12,106,287
===========
</TABLE>
See notes to combined financial statements
--
28
<PAGE> 31
<TABLE>
<CAPTION>
GOVERNMENT INTERMEDIATE FIXED
OPPORTUNITY FUND SECURITIES FUND INCOME FUND
<S> <C> <C>
$ 573,584 $ -- $ 79,163
347,829 204,103 734,794
------------ --------- ----------
921,413 204,103 813,957
------------ --------- ----------
981,026 17,765 58,455
125,629 7,192 25,142
101,214 -- 3,072
33,317 17,869 17,674
60,206 4,397 15,177
14,752 -- 547
12,229 337 770
23,942 23,942 23,942
37,634 25,191 24,824
30,212 2,009 9,474
50,765 4,168 7,600
-- 13,803 13,978
9,178 602 1,801
------------ --------- ----------
1,480,104 117,275 202,456
(65,302) (105,431) (127,477)
------------ --------- ----------
1,414,802 11,844 74,979
------------ --------- ----------
(493,389) 192,259 738,978
------------ --------- ----------
21,161,722 22,741 (108,743)
(7,282,985) (15,850) 42,946
------------ --------- ----------
13,878,737 6,891 (65,797)
------------ --------- ----------
$ 13,385,348 $ 199,150 $ 673,181
============ ========= ==========
</TABLE>
--
29
<PAGE> 32
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
INCOME + GROWTH FUND
-------------------------------
YEAR ENDED
NOVEMBER 30,
-------------------------------
1997 1996
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 1,812,540 $ 2,441,778
Net realized gain on investments 11,441,727 8,408,735
Net unrealized appreciation (depreciation)
on investments (1,147,980) (48,607)
----------- ------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS 12,106,287 10,801,906
----------- ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A (1,400,730) (1,959,683)
Class B (61,229) (68,567)
Class C (342,805) (625,281)
Net realized gains on investments
Class A (6,585,113) (1,843,725)
Class B (328,686) (55,281)
Class C (1,476,639) (722,597)
----------- ------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS (10,195,202) (5,275,134)
----------- ------------
COMMON STOCK TRANSACTIONS -- NOTE 4
Proceeds from shares sold 7,271,542 12,200,391
Net asset value of shares issued in
reinvestments of distributions 9,461,206 4,990,142
Cost of shares redeemed (15,154,516) (25,962,378)
----------- ------------
NET INCREASE (DECREASE) IN NET ASSETS
FROM COMMON STOCK TRANSACTIONS 1,578,232 (8,771,845)
----------- ------------
TOTAL INCREASE (DECREASE)
IN NET ASSETS 3,489,317 (3,245,073)
NET ASSETS:
Beginning of year 66,815,839 70,060,912
----------- ------------
End of year $70,305,156 $ 66,815,839
=========== ============
Undistributed net investment income $ 284,184 $ 276,408
=========== ============
</TABLE>
See notes to combined financial statements
--
30
<PAGE> 33
STATEMENTS OF CHANGES IN NET ASSETS -- (continued)
<TABLE>
<CAPTION>
OPPORTUNITY FUND
-------------------------------
YEAR ENDED
NOVEMBER 30,
-------------------------------
1997 1996
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment loss $ (493,389) $ (297,291)
Net realized gain on investments 21,161,722 11,722,237
Net unrealized appreciation (depreciation)
on investments (7,282,985) 8,236,515
------------ ------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS 13,385,348 19,661,461
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A -- --
Class B -- --
Class C -- --
Net realized gains on investments
Class A (5,387,688) (911,398)
Class B (1,131,024) (154,675)
Class C (4,941,727) (450,538)
------------ ------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS (11,460,439) (1,516,611)
------------ ------------
COMMON STOCK TRANSACTIONS -- NOTE 4
Proceeds from shares sold 33,576,368 27,354,999
Net asset value of shares issued in
reinvestments of distributions 11,254,779 1,490,968
Cost of shares redeemed (21,486,018) (18,321,441)
------------ ------------
NET INCREASE IN NET ASSETS FROM COMMON
STOCK TRANSACTIONS 23,345,129 10,524,526
------------ ------------
TOTAL INCREASE IN NET ASSETS 25,270,038 28,669,376
NET ASSETS:
Beginning of year 93,112,091 64,442,715
------------ ------------
End of year $118,382,129 $ 93,112,091
============ ============
</TABLE>
See notes to combined financial statements
--
31
<PAGE> 34
STATEMENTS OF CHANGES IN NET ASSETS -- (continued)
<TABLE>
<CAPTION>
GOVERNMENT
SECURITIES FUND
-----------------------------
YEAR ENDED NOVEMBER 30,
-----------------------------
1997 1996
----------- -----------
<S> <C> <C>
OPERATIONS:
Net investment income $ 192,259 $ 229,001
Net realized gain (loss) on investments 22,741 (5,078)
Net unrealized depreciation on investments (15,850) (96,320)
---------- ----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS 199,150 127,603
---------- ----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A (186,809) (221,638)
Class B -- (1,751)
Class C (5,450) (5,612)
---------- ----------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS (192,259) (229,001)
---------- ----------
COMMON STOCK TRANSACTIONS -- NOTE 4
Proceeds from shares sold 2,808,408 308,567
Net asset value of shares issued in
reinvestments of distributions 176,668 205,999
Cost of shares redeemed (2,218,648) (1,833,196)
---------- ----------
NET INCREASE (DECREASE) IN NET ASSETS
FROM COMMON STOCK TRANSACTIONS 766,428 (1,318,630)
---------- ----------
TOTAL INCREASE (DECREASE) IN NET
ASSETS 773,319 (1,420,028)
NET ASSETS:
Beginning of year 2,723,382 4,143,410
---------- ----------
End of year $3,496,701 $2,723,382
========== ==========
</TABLE>
See notes to combined financial statements
--
32
<PAGE> 35
STATEMENTS OF CHANGES IN NET ASSETS -- (continued)
<TABLE>
<CAPTION>
INTERMEDIATE FIXED
INCOME FUND
-----------------------------
YEAR ENDED
NOVEMBER 30,
-----------------------------
1997 1996
----------- -----------
<S> <C> <C>
OPERATIONS:
Net investment income $ 738,978 $1,073,450
Net realized loss on investments (108,743) (151,102)
Net unrealized appreciation (depreciation)
on investments 42,946 (288,658)
----------- -----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS 673,181 633,690
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A (634,241) (885,315)
Class B (37,105) (50,276)
Class C (67,632) (137,858)
Net realized gains on investments
Class A -- (140,232)
Class B -- (5,359)
Class C -- (17,397)
----------- -----------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS (738,978) (1,236,437)
----------- -----------
COMMON STOCK TRANSACTIONS -- NOTE 4
Proceeds from shares sold 555,972 6,747,241
Net asset value of shares issued in
reinvestments of dividends 644,002 1,056,981
Cost of shares redeemed (4,861,788) (9,917,773)
----------- -----------
NET DECREASE IN NET ASSETS FROM COMMON
STOCK TRANSACTIONS (3,661,814) (2,113,551)
----------- -----------
TOTAL DECREASE IN NET ASSETS (3,727,611) (2,716,298)
NET ASSETS:
Beginning of Year 14,399,423 17,115,721
----------- -----------
End of Year $10,671,812 $14,399,423
=========== ===========
</TABLE>
See notes to combined financial statements
--
33
<PAGE> 36
COWEN FUNDS
NOTES TO COMBINED FINANCIAL STATEMENTS
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 ("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.
The Funds' financial statements are prepared in accordance with generally
accepted accounting principals which may require the use of management estimates
and assumptions. Actual results could differ from these estimates.
(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, 1997, CIFIF had an unused capital loss carryover of
approximately $260,000, respectively, available for Federal income tax purposes
to be applied against future securities profits, if any. If not applied, the
carryovers expire $150,000 in fiscal 2004 and $110,000 in fiscal 2005.
(E) Deferred organization expenses: Organization expenses paid by CGSF and
CIFIF are being amortized to operations from 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) Dividends from net investment income and distributions from realized gains
from investment transactions are determined in accordance with Federal income
tax regulations, which may differ from investment income and realized gains
deter-
--
34
<PAGE> 37
mined under generally accepted accounting principles. These "book/tax"
differences are either considered temporary or permanent in nature. To the
extent these differences are permanent in nature, such amounts are reclassified
within the capital accounts based on their federal tax-basis treatment;
temporary differences do not require reclassification. Dividends and
distributions which exceed net investment income and net realized capital gains
for financial reporting purposes, but not for tax purposes are reported as
dividends in excess of net investment income or distributions in excess of net
realized capital gains. To the extent they exceed net investment income and net
realized capital gains for tax purposes, they are reported as distributions of
paid-in capital. As of November 30, 1997, COF reclassified $493,389 from
accumulated undistributed net investment loss to accumulated net realized gain
on investments. Net investment loss, net realized gains, and net assets were not
affected by this change.
(G) Options Transactions: When the Fund writes an option, the premium received
by the Fund is recorded as a liability and is subsequently adjusted to the
current market value of the option written. Premiums received from writing
options which expire unexercised are recorded by the Fund on the expiration date
as realized gains from options written. The difference between the premium and
the amount paid on effecting a closing purchase transaction, including brokerage
commissions, is also treated as a realized gain, or if the premium is less than
the amount paid for the closing purchase transaction, as a realized loss. If a
call option is exercised, the premium is added to the proceeds from the sale of
the underlying security in determining whether the Fund has realized a gain or
loss.
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. 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% through March 31, 1997
and .03% 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 voluntarily waived its investment
management fee and service fee and absorbed 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 voluntarily waived its investment management fee
and absorbed 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, 1998 (see "Shareholder Servicing and
Distribution Plan" later in this note).
(B) In acting as distributor during the year ended November 30, 1997, Cowen
earned $52,586, $171,587, $3,449 and $2,115 of commissions on sales of the
shares of CIG, COF, CGSF and CIFIF, respectively.
(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
--
35
<PAGE> 38
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 $375 for each audit committee 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
November 30, 1997, was as follows:
<TABLE>
<CAPTION>
CIG COF CGSF CIFIF
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Purchases $ 48,662,653 $ 169,434,478 $ 6,088,310 $ 10,782,419
- -----------------------------------------------------------------------------
Sales $ 55,942,641 $ 162,566,694 $ 5,312,906 $ 14,323,208
- -----------------------------------------------------------------------------
</TABLE>
At November 30, 1997, 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 November 30, 1997, accumulated net unrealized appreciation on investments
was as follows:
<TABLE>
<CAPTION>
CIG COF CGSF CIFIF
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Gross
Unrealized
Appreciation $ 10,179,197 $ 13,564,347 $ 19,614 $ 152,569
Gross
Unrealized
Depreciation 2,634,839 9,101,218 2,429 14,827
- -----------------------------------------------------------------------
Net $ 7,544,358 $ 4,463,129 $ 17,185 $ 137,742
- -----------------------------------------------------------------------
</TABLE>
NOTE 4 - COMMON STOCK TRANSACTIONS: At November 30, 1997, 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:
--
36
<PAGE> 39
COWEN INCOME + GROWTH FUND
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30, 1997
------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
----------------------- --------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
-------- ----------- ------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Shares Sold 292,820 $ 3,852,077 126,969 $1,667,527 133,903 $ 1,751,938
Dividends Reinvested 604,764 7,459,293 27,818 341,929 134,161 1,659,984
-------- ----------- ------- ---------- ---------- ------------
897,584 11,311,370 154,787 2,009,456 268,064 3,411,922
Shares Redeemed (738,269) (9,849,044) (25,573) (336,753) (365,423) (4,988,719)
-------- ----------- ------- ---------- ---------- ------------
Net Increase (Decrease) 159,315 $ 1,462,326 129,214 $1,672,703 (97,359) $ (1,556,797)
========= =========== ======== ========== ========== =============
<CAPTION>
YEAR ENDED NOVEMBER 30, 1996
------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
----------------------- --------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
-------- ----------- ------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Shares Sold 323,430 $ 4,240,149 84,994 $1,114,910 519,587 $ 6,845,332
Dividends Reinvested 273,319 3,559,882 9,145 118,830 100,573 1,311,430
-------- ----------- ------- ---------- ---------- ------------
596,749 7,800,031 94,139 1,233,740 620,160 8,156,762
Shares Redeemed (686,981) (9,077,987) (24,372) (318,947) (1,267,397) (16,565,444)
-------- ----------- ------- ---------- ---------- ------------
Net Increase (Decrease) (90,232) $(1,277,956) 69,767 $ 914,793 (647,237) $ (8,408,682)
========= =========== ======= ========== ========== =============
</TABLE>
--
37
<PAGE> 40
COWEN OPPORTUNITY FUND
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30, 1997
--------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
------------------------ ----------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
--------- ----------- -------- ----------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Shares Sold 741,851 $11,608,130 163,706 $ 2,491,829 1,236,846 $ 19,476,409
Dividends Reinvested 371,816 5,276,074 78,957 1,090,397 340,886 4,888,308
--------- ----------- -------- ----------- --------- ------------
1,113,667 16,884,204 242,663 3,582,226 1,577,732 24,364,717
Shares Redeemed (431,730) (6,760,538) (116,660) (1,791,282) (812,964) (12,934,198)
--------- ----------- -------- ----------- --------- ------------
Net Increase 681,937 $10,123,666 126,003 $ 1,790,944 764,768 $ 11,430,519
========= =========== ======== =========== ========= ============
<CAPTION>
FOR YEAR ENDED NOVEMBER 30, 1996
--------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
------------------------ ----------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
--------- ----------- -------- ----------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Shares Sold 307,594 $ 4,456,116 102,767 $ 1,463,700 1,457,942 $ 21,435,183
Dividends Reinvested 69,163 895,655 11,962 152,511 33,954 442,416
--------- ----------- -------- ----------- --------- ------------
376,757 5,351,771 114,729 1,616,211 1,491,896 21,877,599
Shares Redeemed (679,963) (9,608,731) (72,025) (1,007,199) (543,685) (7,705,512)
--------- ----------- -------- ----------- --------- ------------
Net Increase (Decrease) (303,206) $(4,256,960) 42,704 $ 609,012 948,211 $ 14,172,087
========= =========== ======== =========== ========= ============
</TABLE>
--
38
<PAGE> 41
COWEN GOVERNMENT SECURITIES FUND
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30, 1997
---------------------------------------------------------------------
CLASS A CLASS B CLASS C
----------------------- -------------------- ------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
-------- ----------- ------- --------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Shares Sold 293,373 $ 2,789,659 -- -- 1,869 $ 18,749
Dividends Reinvested 18,113 171,273 -- -- 564 5,395
-------- ----------- ------- --------- ------ --------
311,486 2,960,932 -- -- 2,433 24,144
Shares Redeemed 227,332 2,165,635 -- -- 5,430 53,013
-------- ----------- ------- --------- ------ --------
Net Increase (Decrease) 84,154 $ 795,297 -- -- (2,997) $(28,869)
========= =========== ======== ========== ======= ========
<CAPTION>
YEAR ENDED NOVEMBER 30, 1996
---------------------------------------------------------------------
CLASS A CLASS B CLASS C
----------------------- -------------------- ------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
-------- ----------- ------- --------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Shares Sold 23,793 $ 226,905 -- $ -- 8,386 $ 81,662
Dividends Reinvested 20,988 199,947 46 462 583 5,590
-------- ----------- ------- --------- ------ --------
44,781 426,852 46 462 8,969 87,252
Shares Redeemed (172,053) (1,640,548) (15,360) (154,719) (3,980) (37,929)
-------- ----------- ------- --------- ------ --------
Net (Decrease) (127,272) $(1,213,696) (15,314) $(154,257) 4,989 $ 49,323
========= =========== ======== ========== ======== =========
</TABLE>
--
39
<PAGE> 42
COWEN INTERMEDIATE FIXED INCOME FUND
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30, 1997
--------------------------------------------------------------------------
CLASS A CLASS B CLASS C
----------------------- -------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
-------- ----------- ------- --------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Shares Sold 30,116 $ 281,334 9,789 $ 92,277 19,548 $ 182,361
Dividends Reinvested 59,500 556,082 2,693 25,340 6,732 62,580
-------- ----------- ------- --------- -------- -----------
89,616 837,416 12,482 117,617 26,280 244,941
Shares Redeemed (358,684) (3,347,408) (27,141) (255,788) (137,044) (1,258,592)
-------- ----------- ------- --------- -------- -----------
Net Increase (Decrease) (269,068) $(2,509,992) (14,859) $(138,171) (110,763) $(1,013,651)
========= =========== ======== ========== ========= ===========
<CAPTION>
YEAR ENDED NOVEMBER 30, 1996
--------------------------------------------------------------------------
CLASS A CLASS B CLASS C
----------------------- -------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
-------- ----------- ------- --------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Shares Sold 564,602 $ 5,378,480 29,055 $ 282,806 114,335 $ 1,085,955
Dividends Reinvested 93,189 880,449 3,251 30,724 15,529 145,808
-------- ----------- ------- --------- -------- -----------
657,791 6,258,929 32,306 313,530 129,864 1,231,763
Shares Redeemed (913,933) (8,525,965) (10,626) (99,472) (138,370) (1,292,336)
-------- ----------- ------- --------- -------- -----------
Net Increase (Decrease) (256,142) $(2,267,036) 21,680 $ 214,058 (8,506) $ (60,573)
========= =========== ======== ========== ========= ===========
</TABLE>
--
40
<PAGE> 43
NOTE 5 - FINANCIAL HIGHLIGHTS: Selected data for a share of Common Stock
outstanding throughout each period:
<TABLE>
<CAPTION>
COWEN INCOME + GROWTH FUND -- CLASS A
----------------------------------------------------------------------------------------
YEAR ENDED FOUR YEAR ENDED
NOVEMBER 30, MONTHS JULY 31,
--------------------------------------- ENDED -----------------------
1997 1996 1995 11/30/94 1994 1993
------- ------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
Beginning of Period $ 14.40 $ 13.19 $ 10.62 $11.06 $ 12.97 $ 12.85
------- ------- ------- -------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Investment Income -- Net 0.36 0.48 0.51 0.19 0.52 0.48
Net Realized and Unrealized Gains
(Losses) on Investments 1.97 1.74 2.54 (0.50) (0.44) 0.68
------- ------- ------- -------- ------- -------
Net from Investment Operations 2.33 2.22 3.05 (0.31) 0.08 1.16
------- ------- ------- -------- ------- -------
LESS DISTRIBUTIONS:
Dividends from Net Investment
Income (0.36) (0.52) (0.48) (0.13) (0.52) (0.49)
Distributions from Net Realized
Gains on Investments (1.82) (0.49) -- -- (1.47) (0.55)
------- ------- ------- -------- ------- -------
Total Distributions (2.18) (1.01) (0.48) (0.13) (1.99) (1.04)
------- ------- ------- -------- ------- -------
NET ASSET VALUE,
End of Period $ 14.55 $ 14.40 $ 13.19 $10.62 $ 11.06 $ 12.97
======= ======= ======= ====== ======= =======
Total Return(5) 19.21% 17.86% 29.50% (8.50%)(2) 0.28% 9.45%
RATIOS/SUPPLEMENTARY DATA
Net Assets (000 omitted) $55,383 $52,502 $49,298 $32,104 $34,722 $35,016
Ratio of Expenses to Average
Net Assets 1.21% 1.24% 1.31% 0.47%(3) 1.26% 1.33%
Ratio of Investment Income -- Net
to Average Net Assets 2.65% 3.56% 4.29% 1.65%(3) 4.32% 3.74%
Decrease Reflected on Above Ratios
Due to Expense
Reimbursements/Waivers 0.14% 0.15% 0.19% 0.07%(3) 0.04% --
Portfolio Turnover Rate 75% 79% 72% 31% 76% 62%
Average Commission Rate Paid(8) $ .0600 $ .0612
</TABLE>
--
41
<PAGE> 44
NOTE 5 -- (CONTINUED)
<TABLE>
<CAPTION>
COWEN INCOME + GROWTH FUND -- CLASS B
---------------------------------------------------------------------
FOUR PERIOD FROM
YEAR ENDED NOVEMBER 30, MONTHS 5/17/94(4)
---------------------------------- ENDED THROUGH
1997 1996 1995 11/30/94 7/31/94
------ ------ ------ -------- -----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
Beginning of Period $14.31 $13.14 $10.58 $11.04 $ 10.85(1)
------ ------ ------ -------- -------
INCOME FROM INVESTMENT
OPERATIONS
Investment Income -- Net 0.27 0.37 0.42 0.16 0.09
Net Realized and Unrealized
Gains (Losses) on
Investments 1.95 1.73 2.54 (0.50) 0.20
------ ------ ------ -------- -----------
Net from Investment
Operations 2.22 2.10 2.96 (0.34) 0.29
------ ------ ------ -------- -----------
LESS DISTRIBUTIONS:
Dividends from Net
Investment Income (0.25) (0.44) (0.40) (0.12) (0.10)
Distributions from Net
Realized Gains on
Investments (1.82) (0.49) -- -- --
------ ------ ------ -------- -----------
Total Distributions (2.07) (0.93) (0.40) (0.12) (0.10)
------ ------ ------ -------- -----------
NET ASSET VALUE,
End of Period $14.46 $14.31 $13.14 $10.58 $ 11.04
======= ====== ====== ========= ===========
Total Return(5) 18.34% 16.89% 28.49% (9.33%)(2) 13.19%(2)
RATIOS/SUPPLEMENTARY DATA
Net Assets (000 omitted) $4,478 $2,581 $1,453 $ 280 $ 56
Ratio of Expenses to
Average Net Assets 1.99% 2.04% 2.07% 0.75%(3) 0.57%(3)
Ratio of Investment
Income -- Net to Average
Net Assets 1.84% 2.76% 3.44% 1.31%(3) 0.45%(3)
Decrease Reflected on Above
Ratios Due to Expense
Reimbursements/Waivers 0.14% 0.15% 0.19% 0.07%(3) 0.04%(3)
Portfolio Turnover Rate 75% 79% 72% 31% 76%
Average Commission Rate
Paid(8) $.0600 $.0612
</TABLE>
--
42
<PAGE> 45
NOTE 5 -- (CONTINUED)
<TABLE>
<CAPTION>
COWEN INCOME + GROWTH FUND -- CLASS C
------------------------------------------------------------------------
YEAR ENDED FOUR PERIOD FROM
NOVEMBER 30, MONTHS 5/19/94(4)
------------------------------------- ENDED THROUGH
1997 1996 1995 11/30/94 7/31/94
------- ------- ------- -------- -----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
Beginning of Period $ 14.45 $ 13.23 $ 10.62 $11.06 $ 10.91(1)
------- ------- ------- -------- -------
INCOME FROM INVESTMENT
OPERATIONS
Investment Income -- Net 0.41 0.58 0.52 0.20 0.10
Net Realized and
Unrealized Gains
(Losses) on Investments 1.97 1.69 2.59 (0.50) 0.16
------- ------- ------- -------- -------
Net from Investment
Operations 2.38 2.27 3.11 (0.30) 0.26
------- ------- ------- -------- -------
LESS DISTRIBUTIONS:
Dividends from Net
Investment Income (0.40) (0.56) (0.50) (0.14) (0.11)
Distributions from Net
Realized Gains on
Investments (1.82) (0.49) -- -- --
------- ------- ------- -------- -------
Total Distributions (2.22) (1.05) (0.50) (0.14) (0.11)
------- ------- ------- -------- -------
NET ASSET VALUE,
End of Period $ 14.61 $ 14.45 $ 13.23 $10.62 $ 11.06
======= ======= ======= ====== =======
Total Return(5) 19.57% 18.25% 29.99% (8.37%)(2) 10.63%(2)
RATIOS/SUPPLEMENTARY DATA
Net Assets (000 omitted) $10,444 $11,733 $19,309 $6,029 $ 4,988
Ratio of Expenses to
Average Net Assets 1.05% 0.90% 0.96% 0.40%(3) 0.28%(3)
Ratio of Investment
Income -- Net to Average
Net Assets 2.98% 3.90% 4.66% 1.68%(3) 1.13%(3)
Decrease Reflected on
Above Ratios Due to
Expense
Reimbursements/Waivers 0.14% 0.16% 0.19% 0.07%(3) 0.05%(3)
Portfolio Turnover Rate 75% 79% 72% 31% 76%
Average Commission Rate
Paid(8) $ .0600 $ .0612
</TABLE>
--
43
<PAGE> 46
NOTE 5 -- (CONTINUED)
<TABLE>
<CAPTION>
COWEN OPPORTUNITY FUND -- CLASS A
-------------------------------------------------------------------
YEAR ENDED NOVEMBER 30,
-------------------------------------------------------------------
1997 1996 1995 1994 1993
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
Beginning of Year $ 16.61 $ 13.13 $ 12.98 $ 16.06 $ 14.92
------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Investment Income (Loss) -- Net(6) (0.08) (0.07) (0.04) (0.09) (0.16)
Net Realized and Unrealized Gains (Losses)
on Investments 2.00 3.86 0.97 1.22 3.79
------- ------- ------- ------- -------
Net from Investment Operations 1.92 3.79 0.93 1.13 3.63
------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income -- -- -- -- --
Distributions from Net Realized Gains on
Investments (2.06) (0.31) (0.78) (4.21) (2.49)
------- ------- ------- ------- -------
Total Distributions (2.06) (0.31) (0.78) (4.21) (2.49)
------- ------- ------- ------- -------
NET ASSET VALUE,
End of Period $ 16.47 $ 16.61 $ 13.13 $ 12.98 $ 16.06
======= ======= ======= ======= =======
Total Return(5) 13.55% 29.63% 7.91% 9.53% 29.48%
RATIOS/SUPPLEMENTARY DATA
Net Assets (000 Omitted) $54,809 $43,950 $38,724 $34,487 $19,147
Ratio of Expenses to Average Net Assets 1.38% 1.39% 1.43% 1.47% 1.63%
Ratio of Investment Loss -- Net to Average
Net Assets (0.53%) (0.46%) (0.28%) (0.66%) (1.10%)
Decrease Reflected on Above Ratios Due to
Expense Reimbursements/Waivers 0.06% 0.16% 0.22% 0.14% --
Portfolio Turnover Rate 159% 182% 148% 152% 167%
Average Commission Rate Paid(8) $ .0252 $ .0575
</TABLE>
--
44
<PAGE> 47
NOTE 5 -- (CONTINUED)
<TABLE>
<CAPTION>
COWEN OPPORTUNITY FUND -- CLASS B
------------------------------------------------------------
PERIOD FROM
YEAR ENDED NOVEMBER 30, 5/17/94(4)
--------------------------------------- THROUGH
1997 1996 1995 11/30/94
------- ------ ------ -----------
<S> <C> <C> <C> <C>
NET ASSET VALUE,
Beginning of Period $ 16.23 $12.93 $12.91 $ 12.18(1)
------- ------ ------ -------
INCOME FROM INVESTMENT OPERATIONS:
Investment Income (Loss) -- Net(6) (0.20) (0.18) (0.14) (0.09)
Net Realized and Unrealized Gains (Losses) on
Investments 1.95 3.79 0.94 0.82
------- ------ ------ -------
Net from Investment Operations 1.75 3.61 0.80 0.73
------- ------ ------ -------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income -- -- -- --
Distributions from Net Realized Gains on
Investments (2.06) (0.31) (0.78) --
------- ------ ------ -------
Total Distributions (2.06) (0.31) (0.78) --
------- ------ ------ -------
NET ASSET VALUE,
End of Period $ 15.92 $16.23 $12.93 $ 12.91
======= ======= ======= =======
Total Return(5) 12.72% 28.67% 6.97% 11.04%(2)
RATIOS/SUPPLEMENTARY DATA
Net Assets (000 Omitted) $10,629 $8,794 $6,455 $ 2,207
Ratio of Expenses to Average Net Assets 2.15% 2.17% 2.19% 1.32%(3)
Ratio of Investment Loss -- Net to Average
Net Assets (1.31%) (1.24%) (1.06%) (0.83%)(3)
Decrease Reflected on Above Ratios Due to
Expense Reimbursements/Waivers 0.06% 0.16% 0.22% 0.12%(3)
Portfolio Turnover Rate 159% 182% 148% 152%
Average Commission Rate Paid(8) $ .0252 $.0575
</TABLE>
--
45
<PAGE> 48
NOTE 5 -- (CONTINUED)
<TABLE>
<CAPTION>
COWEN OPPORTUNITY FUND -- CLASS C
--------------------------------------------------------------
PERIOD FROM
YEAR ENDED NOVEMBER 30, 5/9/94(4)
----------------------------------------- THROUGH
1997 1996 1995 11/30/94
------- ------- ------- -----------
<S> <C> <C> <C> <C>
NET ASSET VALUE,
Beginning of Period $ 16.77 $ 13.20 $ 12.99 $ 12.36(1)
------- ------- ------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Investment Income (Loss) -- Net(6) (0.03) (0.01) 0.01 (0.03)
Net Realized and Unrealized Gains (Losses) on
Investments 2.01 3.89 0.98 0.66
------- ------- ------- -----------
Net from Investment Operations 1.98 3.88 0.99 0.63
------- ------- ------- -----------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income -- -- -- --
Distributions from Net Realized Gains on
Investments (2.06) (0.31) (0.78) --
------- ------- ------- -----------
Total Distributions (2.06) (0.31) (0.78) --
------- ------- ------- -----------
NET ASSET VALUE,
End of Period $ 16.69 $ 16.77 $ 13.20 $ 12.99
======= ======= ======= ==============
Total Return(5) 13.82% 30.17% 8.40% 9.04%(2)
RATIOS/SUPPLEMENTARY DATA
Net Assets (000 Omitted) $52,944 $40,369 $19,264 $ 8,151
Ratio of Expenses to Average Net Assets 1.02% 1.01% 1.03% 0.75%(3)
Ratio of Investment Income (Loss) --
Net Assets (0.19%) (0.07%) 0.11% (0.26%)(3)
Decrease Reflected on Above Ratios Due to
Expense Reimbursements/Waivers 0.06% 0.15% 0.22% 0.13%(3)
Portfolio Turnover Rate 159% 182% 148% 152%
Average Commission Rate Paid(8) $ .0252 $ .0575
</TABLE>
--
46
<PAGE> 49
NOTE 5 -- (CONTINUED)
<TABLE>
<CAPTION>
COWEN GOVERNMENT SECURITIES FUND -- CLASS A
----------------------------------------------------------------------
PERIOD FROM
1/20/93
(COMMENCEMENT
YEAR ENDED NOVEMBER 30, OF OPERATIONS)
------------------------------------------------ THROUGH
1997 1996 1995 1994 11/30/93
------ ------ ------ ------ --------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
Beginning of Period $9.59 $9.83 $9.17 $10.11 $ 9.77
------ ------ ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Investment Income -- Net 0.61 0.64 0.69 0.52 0.41
Net Realized and Unrealized
Gains (Losses) on
Investments (0.01) (0.24) 0.66 (0.84) 0.30
------ ------ ------ ------ ------
Net from Investment Operations 0.60 0.40 1.35 (0.32) 0.71
------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from Net Investment
Income (0.61) (0.64) (0.69) (0.56) (0.37)
Distributions from Net
Realized Gains on
Investments -- -- -- (0.06) --
------ ------ ------ ------ ------
Total Distributions (0.61) (0.64) (0.69) (0.62) (0.37)
------ ------ ------ ------ ------
NET ASSET VALUE,
End of Period $9.58 $9.59 $9.83 $9.17 $10.11
===== ===== ===== ===== ======
Total Return(5) 6.55% 4.34% 15.23% (3.24%) 8.49%(2)
RATIOS/SUPPLEMENTARY DATA
Net Assets (000 Omitted) $3,433 $2,631 $3,945 $ 488 $ 547
Ratio of Expenses to Average
Net Assets 0.40% 0.34% 0.22% -- --
Ratio of Investment Income --
Net to Average Net Assets 6.47% 6.72% 7.08% 5.24% 5.06%(3)
Decrease Reflected on Above
Ratios Due to:
Investment Management and
Service Fees Waived by
Cowen 0.85% 0.85% 0.85% 0.78% 0.75%(3)
Other Expenses Waived or
Absorbed 2.70% 2.72% 3.63% 11.85% 16.94%(3)
Portfolio Turnover Rate 184% 107% 289% 210% 122%
</TABLE>
--
47
<PAGE> 50
NOTE 5 -- (CONTINUED)
<TABLE>
<CAPTION>
COWEN GOVERNMENT
SECURITIES FUND -- CLASS B
-------------------------------------
YEAR ENDED NOVEMBER PERIOD FROM
30, 7/15/94(4)
-------------------- THROUGH
1996(7) 1995 11/30/94
------ ------ -----------
<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) 2.37%(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 0.60%(3) 5.29% 6.05%(3)
Portfolio Turnover Rate 107% 289% 210%
</TABLE>
--
48
<PAGE> 51
NOTE 5 -- (CONTINUED)
<TABLE>
<CAPTION>
COWEN GOVERNMENT
SECURITIES FUND -- CLASS C
--------------------------------------------------
PERIOD FROM
YEAR ENDED NOVEMBER 30, 7/11/94(4)
------------------------------- THROUGH
1997 1996 1995 11/30/94
----- ----- ----- -----------
<S> <C> <C> <C> <C>
NET ASSET VALUE,
Beginning of Period $9.71 $9.94 $9.17 $9.45(1)
----- ----- ----- -----
INCOME FROM INVESTMENT OPERATIONS:
Investment Income -- Net 0.62 0.65 0.70 0.22
Net Realized and Unrealized Gains (Losses) on
Investments (0.01) (0.23) 0.77 (0.28)
----- ----- ----- -----
Net from Investment Operations 0.61 0.42 1.47 (0.06)
----- ----- ----- -----
LESS DISTRIBUTIONS:
Dividends from Net Investment Income (0.62) (0.65) (0.70) (0.22)
Distributions from Net Realized Gains on
Investments -- -- -- --
----- ----- ----- -----
Total Distributions (0.62) (0.65) (0.70) (0.22)
----- ----- ----- -----
NET ASSET VALUE,
End of Period $9.70 $9.71 $9.94 $9.17
===== ===== ===== =====
Total Return(5) 6.55% 4.48% 16.52% (1.57%)(2)
RATIOS/SUPPLEMENTARY DATA
Net Assets (000 Omitted) $ 63 $ 93 $ 45 $ 13
Ratio of Expenses to Average Net Assets 0.40% 0.36% 0.20% --
Ratio of Investment Income -- Net to Average Net
Assets 6.49% 6.75% 7.12% 2.42%(3)
Decrease Reflected on Above Ratios Due to:
Investment Management Fees Waived by Cowen 0.60% 0.60% 0.60% 0.24%(3)
Other Expenses Waived or Absorbed 3.06% 3.14% 5.14% 6.26%(3)
Portfolio Turnover Rate 184% 107% 289% 210%
</TABLE>
--
49
<PAGE> 52
NOTE 5 -- (CONTINUED)
<TABLE>
<CAPTION>
COWEN INTERMEDIATE
FIXED INCOME FUND -- CLASS A
--------------------------------------------------------------
PERIOD FROM
1/20/93
(COMMENCEMENT
YEAR ENDED NOVEMBER 30, OF OPERATIONS)
------------------------------------------ THROUGH
1997 1996 1995 1994 11/30/93
------- ------- ------- ------ ---------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
Beginning of Period $ 9.47 $ 9.71 $ 9.12 $9.95 $ 9.77
------- ------- ------- ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Investment Income -- Net 0.59 0.63 0.67 0.51 0.40
Net Realized and Unrealized Gains (Losses)
on Investments -- (0.15) 0.59 (0.68) 0.14
------- ------- ------- ------ ------
Net from Investment Operations 0.59 0.48 1.26 (0.17) 0.54
------- ------- ------- ------ ------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income (0.59) (0.63) (0.67) (0.53) (0.36)
Distributions from Net Realized Gains on
Investments -- (0.09) -- (0.13) --
------- ------- ------- ------ ------
Total Distributions (0.59) (0.72) (0.67) (0.66) (0.36)
------- ------- ------- ------ ------
NET ASSET VALUE,
End of Period $ 9.47 $ 9.47 $ 9.71 $9.12 $ 9.95
======= ======= ======= ===== =======
Total Return(5) 6.47% 5.21% 14.22% (1.77%) 6.50%(2)
RATIOS/SUPPLEMENTARY DATA
Net Assets (000 Omitted) $ 9,341 $11,885 $14,667 $2,836 $ 1,167
Ratio of Expenses to Average Net Assets 0.65% 0.59% 0.47% 0.12% --
Ratio of Investment Income -- Net to
Average Net Assets 6.29% 6.61% 6.90% 5.41% 4.93%(3)
Decrease Reflected on Above Ratios Due to:
Investment Management and Service Fees
Waived by Cowen 0.50% 0.50% 0.50% 0.63% 0.75%(3)
Other Expenses Waived or Absorbed 0.60% 0.52% 0.86% 3.43% 4.45%(3)
Portfolio Turnover Rate 92% 110% 264% 159% 143%
</TABLE>
--
50
<PAGE> 53
NOTE 5 -- (CONTINUED)
<TABLE>
<CAPTION>
COWEN INTERMEDIATE FIXED
INCOME FUND -- CLASS B
-----------------------------------------------------
YEAR ENDED PERIOD FROM
NOVEMBER 30, 7/12/94(4)
---------------------------------- THROUGH
1997 1996 1995 11/30/94
------ ------ ------ -----------
<S> <C> <C> <C> <C>
NET ASSET VALUE,
Beginning of Period $9.54 $9.78 $9.17 $9.32(1)
------ ------ ------ -----
INCOME FROM INVESTMENT OPERATIONS:
Investment Income -- Net 0.53 0.61 0.65 0.20
Net Realized and Unrealized Gains (Losses) on
Investments -- (0.15) 0.61 (0.15)
------ ------ ------ -----
Net from Investment Operations 0.53 0.46 1.26 0.05
------ ------ ------ -----
LESS DISTRIBUTIONS:
Dividends from Net Investment Income (0.53) (0.61) (0.65) (0.20)
Distributions from Net Realized Gains on
Investments -- (0.09) -- --
------ ------ ------ -----
Total Distributions 0.53 (0.70) (0.65) (0.20)
------ ------ ------ -----
NET ASSET VALUE,
End of Period $9.54 $9.54 $9.78 $9.17
===== ===== ===== =====
Total Return(5) 6.21% 4.96% 14.12% 1.25%(2)
RATIOS/SUPPLEMENTARY DATA
Net Assets (000 Omitted) $ 630 $ 769 $ 577 $ 313
Ratio of Expenses to Average Net Assets 0.90% 0.85% 0.68% 0.19%(3)
Ratio of Investment Income -- Net to Average Net
Assets 6.03% 6.40% 6.79% 2.15%(3)
Decrease Reflected on Above Ratios Due to:
Investment Management, Service and
Distribution Fees Waived by Cowen 0.50% 0.50% 0.50% 0.18%(3)
Other Expenses Waived or Absorbed 0.54% 0.54% 0.46% 1.25%
Portfolio Turnover Rate 92% 110% 264%
</TABLE>
--
51
<PAGE> 54
NOTE 5 -- (CONTINUED)
<TABLE>
<CAPTION>
COWEN INTERMEDIATE FIXED
INCOME FUND -- CLASS C
-----------------------------------------------------
YEAR ENDED PERIOD FROM
NOVEMBER 30, 7/11/94(4)
---------------------------------- THROUGH
1997 1996 1995 11/30/94
------ ------ ------ -----------
<S> <C> <C> <C> <C>
NET ASSET VALUE,
Beginning of Period $9.44 $9.68 $9.10 $ 9.34(1)
------ ------ ----- -------
INCOME FROM INVESTMENT OPERATIONS:
Investment Income -- Net 0.61 0.65 0.69 0.23
Net Realized and Unrealized Gains (Losses) on
Investments -- (0.15) 0.58 (0.24)
------ ------ ----- -------
Net from Investment Operations 0.61 0.50 1.27 (0.01)
------ ------ ----- -------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income (0.61) (0.65) (0.69) (0.23)
Distributions from Net Realized Gains on
Investments -- (0.09) -- --
------ ------ ----- -------
Total Distributions (0.61) (0.74) (0.69) (0.23)
------ ------ ----- -------
NET ASSET VALUE,
End of Period $9.44 $9.44 $9.68 $ 9.10
===== ===== ===== =======
Total Return(5) 6.74% 5.46% 14.41% (0.36%)(2)
RATIOS/SUPPLEMENTARY DATA
Net Assets (000 Omitted) $ 701 $1,745 $1,872 $ 565
Ratio of Expenses to Average Net Assets 0.40% 0.35% 0.20% --
Ratio of Investment Income -- Net to Average Net
Assets 6.63% 6.87% 7.23% 1.98%(3)
Decrease Reflected on Above Ratios Due to:
Investment Management Fee Waived by Cowen 0.50% 0.50% 0.50% 0.16%(3)
Other Expenses Waived or Absorbed 0.50% 0.42% 0.97% 1.87%(3)
Portfolio Turnover Rate 92% 110% 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.
(8) Disclosure required for years beginning after September 1, 1995.
--
52
<PAGE> 55
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Stockholders and Boards of Directors
Cowen Income + Growth Fund, Inc. and
Cowen Funds, Inc.
We have audited the accompanying statements of assets and liabilities,
including the statements of investments, of Cowen Income + Growth Fund, Inc. and
Cowen Funds, Inc. (comprising, respectively, Cowen Opportunity Fund, Cowen
Intermediate Fixed Income Fund and Cowen Government Securities Fund) as of
November 30, 1997, and the related statements of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended and the financial highlights (see Note 5) for each of the
periods indicated therein. These financial statements and financial highlights
are the responsibility of the Funds' management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. These standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
November 30, 1997, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Cowen
Income + Growth Fund, Inc. and each of the respective portfolios constituting
Cowen Funds, Inc. at November 30, 1997, the results of their operations for the
year then ended, the changes in their net assets for each of the two years in
the period then ended and the financial highlights for each of the indicated
periods, in conformity with generally accepted accounting principles.
Ernst & Young LLP Logo
New York, New York
January 9, 1998
--
53
<PAGE> 56
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)
Benedict Capaldi, Investment Officer(3)
Paul D. Houk, Investment Officer(3)
Gordon G. Ifill, Assistant Investment Officer(2)
Rodd M. Baxter, Secretary
Irwood Schlackman, Controller
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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
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(1) Cowen Income + Growth and Cowen Opportunity
(2) Cowen Intermediate Fixed Income and Cowen Government Securities
(3) Cowen Income + Growth COW/ANN 11/97
