<PAGE>
ANNUAL REPORTS NOVEMBER 30, 1998
THE SG COWEN
FAMILY OF FUNDS
SG COWEN INCOME + GROWTH FUND, INC.
SG COWEN OPPORTUNITY FUND
SG COWEN GOVERNMENT SECURITIES FUND
SG COWEN INTERMEDIATE FIXED INCOME FUND
SG COWEN LARGE CAP VALUE FUND
[LOGO] [LOGO]
<PAGE>
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CONTENTS
<TABLE>
<S> <C>
Chairman's Letter ...................................... 1
SG Cowen Income + Growth Fund, Inc. .................... 2
SG Cowen Opportunity Fund .............................. 5
SG Cowen Intermediate Fixed Income Fund and
SG Cowen Government Securities Fund .................... 8
SG Cowen Large Cap Value Fund .......................... 12
Statements of Investments .............................. 15
Statements of Assets and Liabilities ................... 30
Statements of Operations ............................... 32
Statements of Changes in Net Assets .................... 34
Notes to Combined Financial Statements ................. 39
Report of Ernst & Young LLP ............................ 59
</TABLE>
<PAGE>
CHAIRMAN'S LETTER
January 15, 1999
TO OUR SHAREHOLDERS:
Despite volatility in the second half of 1998, the U.S. stock market posted
another year of double-digit gains during the SG Cowen Family of Funds fiscal
year ended November 30, 1998. Meanwhile, the bond market performed extremely
well, as interest rates declined.
The stock market's performance was dominated by large-capitalization growth
companies in industries such as technology. This made it a challenging year for
us because our three equity funds, the SG Cowen Income + Growth Fund, the SG
Cowen Opportunity Fund and the SG Cowen Large Cap Value Fund, focus on dividend
paying companies, small-cap stocks and value, respectively. Some mutual fund
families practice "style drift" when their investment styles are temporarily out
of favor. At SG Cowen, we adhere to our investment disciplines, which have and,
we believe, will continue to reward investors over the long term. The portfolio
managers' commentary on the following pages describes how each addressed these
challenges and what conditions they anticipate in the coming year.
We are pleased to report that the SG Cowen Intermediate Fixed Income Fund and
the SG Cowen Government Securities Fund both outperformed their respective
indexes during the fiscal year. This was due to our being overweighted in
Treasury bonds, underweighted in mortgages and our strategy of consistently
extending maturities.
It is our belief that participating in today's markets with confidence
requires a disciplined investment strategy. We will continue to abide by this
belief and manage the funds with a strict adherence to their respective
disciplines. In addition, we will also seek to realize the advantages brought to
us by our new association with Societe Generale, one of the world's largest
commercial and investment banks.
We appreciate your continued support and would like to take this opportunity
to renew our commitment to providing you with long-term performance that is
consistent with the investment disciplines of the SG Cowen Family of Funds.
Sincerely,
/s/ Joseph M. Cohen
Joseph M. Cohen
Chairman
<PAGE>
SG COWEN INCOME + GROWTH FUND
SEEKING STABILITY IN A GYRATING MARKET
After a harrowing year that included a 20% summer sell-off, the Standard &
Poor's 500 Index remarkably posted double-digit returns for the Fund's fiscal
year ended November 30, 1998. Much of the S&P 500 Index performance came from a
narrow band of technology stocks outside our investment universe. As a result,
lower-risk, higher-yield value funds, such as the SG Cowen Income + Growth Fund,
underperformed the broadly based market indices.
PERFORMANCE
For the fiscal year ended November 30, 1998, the total annual return for the SG
Cowen Income + Growth Fund's Class A shares was 3.98%. In comparison, the Lipper
Equity-Income Index return was 11.50% while the S&P 500 Index returned 23.74%
during the same period. The Fund's Class B and Class I shares returned 3.11% and
4.22%, respectively, for the fiscal year.
The reason for the Fund's underperformance is quite simple: The SG Cowen
Income + Growth Fund invests in stocks that focus on dividends and value. In
much of 1998, investors did not pay attention to the income side of the total
return equation, nor were they much interested in value. Instead, the market's
focus was on growth. As a result, growth stocks outperformed value stocks by a
historically wide margin when viewed over the entire fiscal year.
A large component of our yield universe consists of utilities and real estate
investment trusts (REITs). These industries did quite well early in the fiscal
year as concerns over the Asian economic crisis, the prospect of a U.S.
corporate profit slowdown and high valuations in growth stocks led to favorable
price performance in these types of defensive issues. Many of these companies
reached our target valuations early in 1998 and we reduced our exposure there.
However, the yield component of the Fund still maintains positions in these
sectors, and utility industry performance was roughly flat for the fiscal year,
while REITs declined substantially.
Investors became concerned when some high-profile REITs with rapid growth
plans wouldn't be able to sell additional equity enabling them to continue to
grow. In contrast, we invest in REITs that are more conservative and can
continue to grow from internally generated funds. For example, we own Weingarten
Realty and Kimco Realty, REITs that reward their shareholders with steady
high-quality cash flow and dividend growth year after year.
The other major reason that we have underperformed is our exposure to the
energy group. From a value perspective, the energy companies are extremely
attractive on a price/earnings, price/book, and dividend yield basis. However,
oil prices continued to plummet in 1998, and energy stocks fell accordingly. For
tax purposes, we realized some losses in these energy issues late in the fiscal
year, which is why the Fund's cash position was approximately 10% on November
30, 1998, double its normal level, and our energy component was reduced from 20%
to 12%.
With the proceeds from sales of electric utilities and REITs, we added to our
holdings in the food industry. We believe that the food industry offers
defensive characteristics such as above-average dividend levels and the ability
to grow their dividends. Purchases during the fiscal year included Campbell
Soup, ConAgra, Dean Foods and Interstate Bakeries. These companies appear to be
very inexpensive, generating excess cash flow compared to what has been typical
for the industry.
Although it was a challenging year, we did have some notable successes.
In the pharmaceutical industry, we more than doubled our money with Pfizer,
the maker of the male impotency drug Viagra. Other successful health care
investments included Pharmacia & Upjohn and Bausch & Lomb, a maker of
over-the-counter eye products and sunglasses.
2
<PAGE>
In the utilities area, New Century Energies, a Colorado-based natural gas
company, provided a total return of about 15%, while Utilicorp, a Kansas City-
based electric and natural gas utility, returned about 12% during the period. In
telecommunications, we earned excellent returns from GTE, Bell Atlantic, SBC
Communications and Sprint.
Eastman Kodak proved to be a stock that illustrates our value-investing style.
Early in 1998, we purchased the stock at $80, after which the company reported a
disappointing quarter, taking the stock down to $65. We concluded that the new
management team was going to be successful in reducing costs and returning the
business to previous levels of profitability, and we bought more shares. Another
flurry of bad news sent the stock down to $50, and we bought more. Following
several quarters of improved earnings, the shares posted a sharp recovery and,
toward the end of August, we profitably sold Kodak at $86, with an average cost
basis of $71.
LOOKING FORWARD
Despite pressures to the contrary, the Fund does not suffer from style drift.
Our gross dividend yield is still above 3%, which is consistent with the Fund's
objective that states that the primary purpose is dividend income and the
secondary objective is capital appreciation.
The benefits of a value and income style became very evident during the market
instability that we saw during the third calendar quarter. During that period,
the Fund's total return declined far less than the market. When viewing the
overall results of a fiscal year, these intense periods of market instability
are often forgotten or minimized. However, the conditions that brought about
that market instability-- concerns about emerging markets, hedge funds with too
much leverage and weak corporate profits--are not that far from view in 1999.
Meanwhile, many companies in sectors that we typically select from are selling
at extremely cheap valuations. At the other end of the spectrum, the marketplace
is valuing many technology and Internet-based companies at levels that defy
rational logic. Needless to say, the discrepancy in valuation and performance
between growth and value is as wide as it has ever been. However, when viewed
over a long-term time horizon, growth should not continue to dominate value like
it has over the past few years.
3
<PAGE>
COMPARISON OF CHANGE IN VALUE OF $10,000
INVESTMENT IN SG COWEN INCOME + GROWTH FUND, INC.,
CLASS A SHARES AND THE S&P 500
AND THE LIPPER EQUITY INCOME FUND INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SG COWEN INCOME LIPPER EQUITY
+ GROWTH INCOME FUND
FUND, INC. S & P 500 INDEX
<S> <C> <C> <C>
7/31/88 $10,000 $10,000 $10,000
7/31/89 $12,116 $13,193 $12,451
7/31/90 $11,690 $14,051 $12,511
7/31/91 $13,024 $15,843 $13,950
7/31/92 $15,431 $17,870 $16,067
7/31/93 $16,889 $19,430 $18,266
7/31/94 $16,937 $20,438 $19,173
11/30/94* $16,457 $20,448 $18,811
11/30/95 $21,312 $27,996 $24,018
11/30/96 $25,119 $35,839 $29,221
11/30/97 $29,943 $45,229 $36,084
11/30/98 $31,135 $55,966 $40,234
$ in thousands
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN**
- ---------------------------------------------------------------------------------------
1 YEAR 5 YEAR 10 YEAR
<S> <C> <C>
-0.99% 11.13% 11.78%
</TABLE>
- -------------
* FUND CHANGED FISCAL YEAR TO 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 I SHARES
ANNUALIZED RETURN OF THE CLASS:
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
--------------------------------------------------------
1 YEAR INCEPTION***
<S> <C> <C>
Class B shares**** -1.89% 13.88%
Class I shares 4.22% 15.24%
</TABLE>
- -------------
*** Inception dates of Class "B" shares and Class "I" 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>
SG COWEN OPPORTUNITY FUND
SMALL-CAP STOCKS REMAIN OUT OF FAVOR DURING 1998
During the fiscal year ended November 30, 1998, the disparity in performance
between the S&P 500 Index and the Russell 2000 was among the largest ever, as
investor confidence remained shaken by overseas economic events. The Asian
slowdown led to a surplus of goods such as agriculture, energy and metals, which
in turn led to a recession in countries representing half the world's
population. Even though the Federal Reserve Board and other central banks acted
decisively to lower interest rates in the fall, money managers with concerns
regarding liquidity were not quite ready to abandon the largest stocks.
PERFORMANCE
For the fiscal year ended November 30, 1998, the SG Cowen Opportunity Fund Class
A shares produced a total return of -24.89%. In contrast, the unmanaged Russell
2000 Index generated a total return of -6.62% for the same period, while the
Standard & Poor's 500 Index was up 23.74%. The Fund's Class B and Class I shares
returned -25.56% and -24.71%, respectively, for the fiscal year.
Although the Fund underperformed its benchmarks in the most recent period, it
has turned in a much stronger performance when viewed over a long-time horizon.
As of November 30, 1998, the SG Cowen Opportunity Fund had an annualized return
of 11.33% since its inception on March 31, 1988 -- about in line with both the
Lipper Small Cap Fund Index and the Russell 2000.
In April, the SG Cowen Opportunity Fund began its second decade of investing
in small-cap stocks. During this time, we have seen the demand for small-cap
stocks ebb and flow. Although small-cap stocks have underperformed large-cap
stocks over the past few years, historically, small caps outperform on average
by about 2% per year. However, this outperformance is not smooth and
predictable. Moreover, the growth and value styles of investing have also ebbed
and flowed over the years, with growth clearly dominating during the most recent
fiscal year. Our disciplined value approach, which assesses an individual
company's basic business value and then uncovers the catalyst that triggers that
value, has been successful when viewed over a long-time horizon, and we believe
is poised to rebound again.
SEARCHING FOR REJUVENATION
Our strategy is to seek companies that have fallen out of favor and are selling
at attractive valuations. We then evaluate potential catalysts that can
rejuvenate companies such as new products, technologies or management. Our
research team analyzes a candidate's fundamental strength, preferring companies
with improving balance sheets and cash flows, well-positioned product lines and
experienced management with equity ownership.
During the fiscal year, an abnormally high number of companies in our
portfolio were either merged or acquired, reflecting an increase in their
business value. For example, Dravo Corp., which specializes in environmental
scrubbing of coal-fired utilities, nearly doubled to $13 when it was acquired by
Carmeuse Lime, Inc.
Other strong performers during the period included retailer Ann Taylor, up
150%, software maker Novell, up 120%, and electric utility Niagra Mohawk, up
50%. Ann Taylor experienced a turnaround with new management, which freshened
the stores and refocused the product on women's professional attire. Novell also
brought in new management and successfully warded off Microsoft, which attempted
to take their large corporate multi-user market. Niagra Mohawk, an electric
utility, was one of the best-performing stocks in one of the best-performing
groups, as states slowed down deregulation and allowed utilities some additional
time to prepare for the new competitive environment.
5
<PAGE>
Generally, our overweighting in utilities as well as our stock selection in
technology and consumer goods helped performance, while our overweighting in
energy was a negative.
DIRECTION FROM HERE
ENERGY: The supply/demand dynamics of oil seem to be improving. Oil producing
countries such as Saudi Arabia and Venezuela are in a recession and must cut
back production to move prices higher. In addition, the top 20 oil companies are
cutting back production about 5% in 1999 to reduce supply. On the demand side,
there is a sense that Southeast Asia is coming out of the doldrums, as
interest-rate cuts lead to growth opportunities. Meanwhile, energy companies are
selling at steep discounts because the market has turned away from the entire
group.
HEALTH CARE: We have increased our holdings in generic pharmaceutical
companies, regional HMOs, medical device companies and biotechnology.
Pharmaceuticals and commercial insurance companies are two of only a few areas
that have pricing power in this near-zero inflation economy. Meanwhile, HMO
stocks are very inexpensive across the board, and the industry is consolidating.
TECHNOLOGY: Our Internet exposure has been modest as low barriers to entry
combined with high valuations will, we believe, lead to dislocations before the
ultimate winners are finally determined. We continue to focus on selected names
that have a combination of unit growth and attractive valuations such as Novell.
LOOKING FORWARD
Once in place, small-cap outperformance historically has come in waves: nine
consecutive years after 1974 and four consecutive years of superior results
after 1990. Another wave of outperformance began in 1996 but was curtailed in
October 1997 by global economic concerns. Historically, small caps have bounced
back after tough periods.
The stage was set for the next bounce-back after the Fed's September 29th rate
cut, and the subsequent move by more than 40 countries to reduce interest rates.
While it is deflation today versus inflation then, this armada of interest rate
cuts is similar to the central bank coordinated moves in 1980-81. As the central
banks are successful once again, then investors will have more confidence, and
they'll begin moving back into small-cap names. Although it requires patience,
we believe that with such attractive valuations and a return of confidence,
small caps should begin another period of excellent performance.
6
<PAGE>
COMPARISON OF CHANGE IN VALUE OF $10,000
INVESTMENT IN SG COWEN OPPORTUNITY FUND,
CLASS A SHARES AND THE S&P 500 AND THE RUSSELL 2000
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SG COWEN
OPPORTUNITY RUSSELL
FUND S&P 500 2000
<S> <C> <C> <C>
11/30/88 $10,000 $10,000 $10,000
11/30/89 $11,488 $13,077 $12,032
11/30/90 $11,765 $12,620 $9,354
11/30/91 $16,064 $15,185 $13,553
11/30/92 $18,528 $17,980 $16,751
11/30/93 $23,991 $19,793 $19,925
11/30/94 $26,278 $20,064 $19,705
11/30/95 $28,356 $27,470 $25,319
11/30/96 $36,731 $35,166 $29,500
11/30/97 $41,709 $44,379 $35,813
11/30/98 $31,328 $54,915 $33,442
$ in thousands $ in thousands
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN*
- -------------------------------------
1 YEAR 5 YEAR 10 YEAR
<S> <C> <C>
-28.45 % 4.46% 12.10%
</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 I SHARES
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
------------------------------
1 YEAR INCEPTION**
<S> <C> <C>
Class B shares*** -29.28 % 4.14%
Class I shares -24.71 % 5.38%
</TABLE>
- -------------
**INCEPTION DATES OF CLASS "B" SHARES AND CLASS "I" 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>
SG COWEN INTERMEDIATE FIXED INCOME FUND
SG COWEN GOVERNMENT SECURITIES FUND
QUALITY + LONGER MATURITIES = STRONG PERFORMANCE
The key to our success during the fiscal year was our focus on the Treasury
market as well as our strategy of extending duration, a measure of interest-rate
sensitivity. The Asian economic crisis created a global flight to quality,
boosting demand for Treasury securities. In addition, the global deflationary
environment pushed interest rates down and rewarded long-duration assets.
PERFORMANCE
Both funds outperformed their benchmarks during the fiscal year ended November
30, 1998. The total annual return for the SG Cowen Government Securities Fund's
Class A shares was 11.13%. In comparison, the Lehman Brothers Aggregate Index,
its unmanaged benchmark of government bonds, reflected a return of 9.45%. The
Fund's Class I shares returned 11.04%. THE WALL STREET JOURNAL ranked SG Cowen
Government Securities Fund 10th out of 183 U.S. Government bond funds as tracked
by Lipper Analytical Services for the 12 months ending November 30, 1998.
The total annual return of the SG Cowen Intermediate Fixed Income Fund's Class
A shares was 9.38%. In comparison, the Lehman Brothers Intermediate
Government/Corporate Index, an unmanaged benchmark of intermediate government
and corporate bonds, reflected an increase of 8.87%. The Fund's Class B and
Class I shares returned 9.07% and 9.65%, respectively.
THE FLIGHT TO QUALITY
There were two reasons why the SG Cowen Government Fund Securities Fund
significantly outperformed. During the fiscal year, interest rates trended
lower, and we responded by consistently extending the average maturity and
duration of the Fund. On November 30, 1998, the Fund's duration was 6.73 years.
In comparison, the Lehman Brothers Aggregate Index duration was 4.57 years.
In addition, we overweighted Treasury bonds and underweighted the mortgage
component. Treasury bonds outperformed all other fixed-income classes, as global
investors sought safety and liquidity during much of 1998. Mortgages
underperformed, as falling interest rates induced homeowners to refinance at
lower rates, making mortgage securities less attractive. As of November 30,
1998, 72% of the Fund was invested in U.S. Government securities, up from 58% a
year ago.
The SG Cowen Intermediate Fixed Income Fund also had a longer than average
duration during the year. For example, on November 30, 1998, its duration was
5.36 years, compared to the Lehman Brothers Intermediate Government/Corporate
Index of 3.40 years.
The Fund also benefited from being underweighted in corporate bonds. A year
ago, on November 30, 1997, 47% was invested in U.S. Governments, 26% was
invested in mortgages and 27% was invested in corporates. In contrast, as of
November 30, 1998, 64% was invested in U.S. Governments, 13% was invested in
mortgages and 22% was invested in corporates.
The few corporate bonds in the portfolio tended to be higher-quality corporate
securities. When Russia defaulted on its debt in August and the imprudent use of
leverage by some hedge funds was simultaneously uncovered, investors became very
concerned about credit quality in all sectors, and lower-quality corporates
substantially underperformed. Even blue-chip corporate bonds were penalized for
having very slight credit concerns, as investors began to fear that the U.S.
economy was heading toward a recession in 1999.
Instead, the Federal Reserve Board acted decisively by lowering interest rates
three times within a six-week period. Throughout the world, more than 40 central
banks followed suit, and a global recession
8
<PAGE>
was averted. Remarkably, the U.S. economy was able to stave off the economic
difficulties of Asia, Russia and Latin America. U.S. Gross Domestic Product
approached 4% in 1998, although it is likely to moderate in 1999. Meanwhile, the
rate of U.S. inflation continues to move lower, but has not crossed the line to
deflation.
INTEREST RATES LIKELY TO FALL FURTHER
The Federal Reserve Board reversed its policy during the year, moving from a
tightening bias earlier in 1998 to an easing posture in the fall. In a series of
three rate cuts, short-term interest rates fell from 5.5% to 4.75%. Between
November 30, 1997 and November 30, 1998, the five-year Treasury note yield
dropped from 5.82% to 4.54%, or 134 basis points. In contrast, the 30-year bond
dropped from 6.04% to 5.07%, a drop of 96 basis points.
Our current strategy assumes that interest rates will continue to fall, and
that U.S. Treasury bonds will remain the best performing fixed-income asset.
Although corporate yields are still quite high in relation to Treasury bonds, we
are not increasing our allocation to corporates because we still believe that
there are significant risks present in that sector with the continued heavy
issuance of new supply. We also do not foresee increasing our exposure to
mortgages because we believe that interest rates will continue to move lower.
LOOKING FORWARD
The Asian economic crisis is primarily the result of overcapacity in the region,
which exerts deflationary forces throughout the world. It is partly why the
price of oil has plummeted to $10 a barrel, and why the U.S. inflation rate
remains under 2%, despite decade-long economic prosperity. Nevertheless, global
conditions are setting the stage for a U.S. economic slowdown in 1999.
We will continue to keep the interest rate sensitivity of the portfolio high
because we continue to believe there is some room for interest rates to move
lower, as they have generally done every year since the early 1980s. We will
also continue to minimize the credit risk of the portfolio by emphasizing U.S.
Treasury Securities.
Of course, trends and cycles don't last forever. If the economy strengthens
and interest rates change direction, then we will make decisive changes to the
portfolio. We will keep a keen eye for signs that commodity prices have bottomed
out and are rising, that the labor market is tightening or that U.S.
multinational corporations have improved pricing power. But as of now, our
outlook for 1999 is not substantially different from our experience in 1998.
9
<PAGE>
COMPARISON OF CHANGE IN VALUE OF $10,000
INVESTMENT IN SG COWEN INTERMEDIATE FIXED INCOME FUND,
CLASS A SHARES AND THE
LEHMAN INTERMEDIATE GOVERNMENT/CORPORATE INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SG COWEN LEHMAN INTERMEDIATE
INTERMEDIATE GOVERNMENT/CORPORATE
FIXED INCOME FUND INDEX
<S> <C> <C>
1/20/93 $10,000 $10,000
11/30/93 $10,316 $10,720
11/30/94 $10,133 $10,521
11/30/95 $11,575 $12,051
11/30/96 $12,178 $12,620
11/30/97 $13,087 $13,419
11/30/98 $14,182 $14,609
$ in thousands
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN**
- -----------------------------------------
1 YEAR 5 YEAR INCEPTION*
<S> <C> <C>
6.78% 6.06% 6.14%
</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 I SHARES
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
--------------------------------
1 YEAR INCEPTION***
<S> <C> <C>
Class B shares**** 6.07 % 7.69%
Class I shares 9.65 % 8.14%
</TABLE>
- -------------
***INCEPTION DATES OF CLASS "B" SHARES AND CLASS "I" 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>
COMPARISON OF CHANGE IN VALUE OF $10,000
INVESTMENT IN SG COWEN GOVERNMENT SECURITIES FUND,
CLASS A SHARES AND THE LEHMAN AGGREGATE INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SG COWEN LEHMAN
GOVERNMENT AGGREGATE
SECURITIES FUND INDEX
<S> <C> <C>
1/20/93* $10,000 $10,000
11/30/93 $10,228 $10,799
11/30/94 $9,896 $10,470
11/30/95 $11,404 $12,317
11/30/96 $11,899 $12,884
11/30/97 $12,801 $13,857
11/30/98 $14,090 $15,166
$ in thousands
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN**
- -----------------------------------------
1 YEAR 5 YEAR INCEPTION*
<S> <C> <C>
5.83% 5.59% 6.02%
</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 I SHARES
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
--------------------------------
1 YEAR INCEPTION***
<S> <C> <C>
Class I shares 11.04 % 8.52%
</TABLE>
- -------------
***INCEPTION DATE OF CLASS I 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>
SG COWEN LARGE CAP VALUE FUND
PATIENCE IN A YEAR DOMINATED BY GROWTH
Investors continued to prefer growth over value in 1998, particularly in the
latter part of the year when technology dominated the market. The Fund's results
were positively impacted by being overweighted in financial services. In
addition, the Fund was helped by its underemphasis on old-line industrial and
commodity companies adversely affected by Asia's recession. However, the
portfolio's overweighting in energy hurt results.
PERFORMANCE
For the eleven months ended November 30, 1998, the total cumulative return for
the SG Cowen Large Cap Value Fund Class A shares was -4.08%. In contrast, the
unmanaged Russell 1000 Value Index generated a total return of 11.82% for the
same period, while the Standard & Poor's 500 Index was up 21.68%. The Fund's
Class B* and Class I* shares returned -14.15% and -1.56%, respectively, for the
fiscal period. Since the Fund commenced operations on January 2, 1998, it does
not yet have full-year performance totals.
The following factors affected the Fund's performance in its inaugural period:
POSITIVE: UNDERWEIGHT CYCLICALS. Since the Asian crisis surfaced, our
strategy was to avoid economically sensitive companies in basic industries,
chemicals and metals. These stocks began to seriously underperform during the
third quarter as investors began to worry about Asia, Latin America, the
collapse of Russia and the U.S. economy. Being underweighted in this area was a
net positive for the portfolio.
NEGATIVE: OVERWEIGHT ENERGY. Although we continued to avoid international
oil companies, we believed that oil service, supply and drilling stocks were
attractive, having come down as much as 50% in price. Our reasoning was that,
historically, these stocks can outperform for four or five years once the oil
cycle turns. Instead, the stocks continued to fall in value as the price of oil
declined. As we were adding to our positions, oil and commodity prices continued
to slide, and our exposure to secondary energy stocks was approaching 25% of the
portfolio. Although these companies had a good rebound in the fall, oil prices
collapsed again, and the stocks fell flat. Indeed, the merger announcement of
Exxon and Mobil reflects management expectations that energy prices will remain
depressed, and the best thing to do is merge and squeeze out costs. So, energy
has been the driving theme in the portfolio during the year, and it has been a
negative one. Many of these stocks are selling at or near book value. They're
very cheap, but until we get some indication that oil prices have stabilized and
started to move up again, the stocks may continue to languish.
POSITIVE: OVERWEIGHT IN FINANCIAL SERVICES. Early in the year, the group
was at our maximum of 25% of the portfolio, and included a combination of banks,
brokerages and insurance companies. The group did very well through the middle
of the year, hitting our price targets. A number of mergers took place,
including the combination of BankAmerica and NationsBank, Banc One and First
Chicago/NBD, First Union and CoreStates Financial, benefiting the Fund. We were
able to sell them at good prices and reduce our exposure before the group sold
off in August and September. When their prices became attractive, we added back
certain positions, and the stocks have done quite well. We continue to think
that Banc One is attractive, as the company works to be a leading player in the
credit card field. BankAmerica appears cheap, given its exposure to Russian debt
and hedge funds. However, we think it will work through these
*The inception dates for Class B and Class I shares were April 17, 1998 and
February 2, 1998, respectively.
12
<PAGE>
problems. We also like MBIA, which insures municipal bonds, a business that is
very stable and predictable.
LOOKING FORWARD
The Fund invests in large-capitalization stocks that are statistically cheap
based on four factors of value: price/book, price/cash flow, price/sales and
price/earnings. The next step is to look for stocks within that universe that
are selling below where they normally sell relative to the market. A further
analysis sifts for companies in which there are near-term catalysts that would
return the stock price to its normal valuation level.
We believe the portfolio's valuation characteristics are increasingly
favorable in relation to the S&P 500 Index. For example, on November 30, 1998,
the Fund's P/E ratio on forward earnings was 14.7 compared to the S&P 500, which
was 23.8. The portfolio's price/book ratio was about 3.1 compared to 8.6 for the
S&P. The portfolio's dividend yield was 2.3% compared to 1.4% for the S&P 500
Index.
As value managers, we do not rely heavily on macroeconomic forecasts. However,
we continue to believe that the Asian economic situation is serious, and that is
why we continue to avoid economically sensitive stocks that we might otherwise
purchase under normal circumstances. Similarly, we are not making any
predictions as to when the price of oil will rebound. However, we do believe
that demand will catch up to supply, and that energy stock prices are extremely
inexpensive by historical standards.
By accumulating positions in stocks with extremely good value, we recognize
that there will be periods of underperformance compared to the major market
indexes. However, once an industry group or a company's stock is ignited by a
catalyst, a value portfolio can and will outperform the market. Although it is
certainly difficult to wait, a key ingredient for value investors is patience
and a long-term view, particularly in a year such as 1998 when growth was so
dominant.
13
<PAGE>
COMPARISON OF CHANGE IN VALUE OF $10,000
INVESTMENT IN SG COWEN LARGE CAP VALUE FUND,
CLASS A SHARES AND THE S&P 500 AND THE RUSSELL 1000
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SG COWEN
LARGE CAP RUSSELL
VALUE S & P 500 1000
<S> <C> <C> <C>
1/2/98 $10,000 $10,000 $10,000
11/30/98 $9,135 $12,168 $11,182
$ in thousands
</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%.
RETURN OF THE CLASS:
<TABLE>
<CAPTION>
AVERAGE ANNUAL
TOTAL RETURN
----------------
INCEPTION*
<S> <C>
Class A shares** -8.65%
Class B shares*** -18.44%
Class I shares -1.56%
</TABLE>
- -------------
*INCEPTION DATES OF CLASS A, CLASS B SHARES AND CLASS I SHARES ARE JANUARY 2,
1998, APRIL 16, 1998 AND JANUARY 30, 1998, 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.
14
<PAGE>
SG COWEN INCOME + GROWTH FUND, INC.
STATEMENT OF INVESTMENTS
NOVEMBER 30, 1998
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
<C> <S> <C>
COMMON STOCKS - 89.2% OF TOTAL PORTFOLIO
CHEMICALS - 5.8%
25,000 Du Pont (E.I.) De Nemour $ 1,468,750
100,000 RPM, Inc./Ohio 1,637,500
------------
3,106,250
------------
CONSUMER PRODUCTS - 3.4%
35,000 Kimberly-Clark Corp. 1,841,875
------------
DIVERSIFIED MANUFACTURING - 4.2%
50,000 Engelhard Corp. 965,625
30,000 Allied Signal, Inc. 1,320,000
------------
2,285,625
------------
ENERGY - 10.4%
33,000 Coastal Corp. 1,150,875
25,000 Consolidated Natural Gas 1,357,813
15,000 Halliburton Co. 440,625
7,000 Mobil Corp. 603,313
12,000 Murphy Oil Corp. 478,500
6,050 Schlumberger Ltd 270,359
23,000 Texaco, Inc. 1,323,938
------------
5,625,423
------------
FINANCIAL SERVICES - 8.5%
20,000 Banc One Corp. 1,026,250
19,000 BankAmerica Corp. 1,238,563
18,000 Mellon Bank Corp. 1,132,875
30,000 Ohio Casualty Corp. 1,215,000
------------
4,612,688
------------
FOOD - 9.0%
15,000 Campbell Soup Co. 856,875
38,000 ConAgra, Inc. 1,194,625
35,000 Dean Foods Co. 1,592,500
45,000 Interstate Bakeries 1,181,250
------------
4,825,250
------------
PHARMACEUTICALS/HEALTH CARE - 4.4%
32,000 Bausch & Lomb, Inc. 1,776,000
11,000 Pharmacia & Upjohn, Inc. 572,688
------------
2,348,688
------------
</TABLE>
SEE NOTES TO COMBINED FINANCIAL STATEMENTS
15
<PAGE>
SG COWEN INCOME + GROWTH FUND, INC.
STATEMENT OF INVESTMENTS - (CONTINUED)
NOVEMBER 30, 1998
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
<C> <S> <C>
REAL ESTATE INVESTMENT TRUSTS - 9.0%
16,000 Kimco Realty Corp. $ 619,000
48,000 New Plan Excel Realty Investment Trust 1,050,000
125,000 United Dominion Realty Trust 1,351,563
40,000 Washington Real Estate Investment Trust 700,000
25,000 Weingarten Realty Investment Trust 1,135,938
------------
4,856,501
------------
RETAIL - 4.2%
48,000 Intimate Brands, Inc. 1,383,000
18,000 Sears Roebuck & Co. 853,875
------------
2,236,875
------------
TELEPHONE/COMMUNICATIONS - 2.8%
24,000 GTE Corp. 1,488,000
------------
TOBACCO - 9.3%
30,000 Phillip Morris Co's, Inc. 1,678,125
70,000 RJR Nabisco Holdings Corp. 2,016,875
37,000 UST, Inc. 1,285,750
------------
4,980,750
------------
TRANSPORTATION - 1.4%
25,000 Norfolk Southern Corp. 759,375
------------
UTILITIES - 16.8%
28,000 Cinergy Corp. 967,750
13,000 Eastern Enterprises, Inc. 527,313
53,350 Illinova Corp. 1,443,784
25,000 K N Energy 1,093,750
55,000 Keyspan Energy Corp. 1,632,813
49,000 MCN Energy 927,938
11,000 New Century Energies, Inc. 528,683
35,000 Utilicorp United, Inc. 1,231,563
27,000 Washington Gas Light Co. 688,500
------------
9,042,094
------------
Total Common Stocks
(Cost $42,469,611) $48,009,394
------------
</TABLE>
SEE NOTES TO COMBINED FINANCIAL STATEMENTS
16
<PAGE>
SG COWEN INCOME + GROWTH FUND, INC.
STATEMENT OF INVESTMENTS - (CONTINUED)
NOVEMBER 30, 1998
<TABLE>
<CAPTION>
PRINCIPAL DESCRIPTION VALUE
AMOUNT
<C> <S> <C>
SHORT TERM INVESTMENTS - 10.8%
Ford Motor Credit Corp., 4.92%,
$1,700,000 12/10/1998 $ 1,700,000
General Electric Capital Corp., 4.85%,
2,100,000 12/01/1998 2,100,000
General Electric Capital Corp., 5.05%,
2,000,000 12/07/1998 2,000,000
------------
Total Short Term Investments
(Cost $5,800,000) $ 5,800,000
------------
TOTAL INVESTMENTS - 100%
(Cost $48,269,611) $53,809,394
------------
------------
</TABLE>
SEE NOTES TO COMBINED FINANCIAL STATEMENTS
17
<PAGE>
SG COWEN OPPORTUNITY FUND
STATEMENT OF INVESTMENTS
NOVEMBER 30, 1998
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
<C> <S> <C>
COMMON STOCKS - 100% OF TOTAL PORTFOLIO
OIL & GAS EXPLORATION - 21.04%
29,900 Barrett Resources* $ 730,681
20,000 Basin Exploration* 232,500
21,800 Bellwether Exploration* 121,263
193,700 Canadian 88 Energy* 644,529
6,400 Chieftain International* 102,400
21,000 Cliffs Drilling* 332,063
21,700 Devon Energy 714,744
259,800 EEX Corporation* 925,538
55,200 Forest Oil* 469,200
51,800 HS Resources* 450,013
25,000 Meridian Resources* 96,875
42,000 Nuevo Energy* 622,125
99,740 Ocean Energy* 810,388
47,200 Oryx Energy* 651,950
45,100 Pioneer Natural Res 597,575
37,000 Precision Drilling 400,063
12,100 Rio Alto Exploration* 119,208
150,000 Santa Fe Energy* 1,153,116
97,700 Seagull Energy* 799,919
31,700 Snyder Oil 408,138
82,900 Titan Exploration* 611,383
15,000 Union Pacific Resources 167,813
------------
11,161,484
------------
METALS & MINING - 14.87%
37,900 Armco Steel* 149,231
57,500 Barrick Gold 1,150,000
273,600 Battle Mountain Gold 1,282,500
19,500 Birmingham Steel 95,063
34,400 Cambior 178,450
30,000 Coeur D'Alene Mines 151,875
50,900 Cyprus Amax Minerals 578,988
46,900 Hecla Mining Co* 196,394
60,600 Homestake Mining 651,450
45,000 Inco LTD 520,313
62,800 Kaiser Aluminum* 412,125
164,064 Kinross Gold* 410,160
54,000 LTV Steel 297,000
</TABLE>
SEE NOTES TO COMBINED FINANCIAL STATEMENTS
18
<PAGE>
SG COWEN OPPORTUNITY FUND
STATEMENT OF INVESTMENTS - (CONTINUED)
NOVEMBER 30, 1998
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
<C> <S> <C>
METALS & MINING - (CONTINUED)
23,300 Newmont Mining $ 463,086
20,000 Placer Dome 291,250
6,400 Reynolds Metals 351,200
3,400 Texas Industries 98,388
275,200 TVX Gold* 516,000
8,900 WHX Corporation* 94,006
------------
7,887,479
------------
OIL & GAS EQUIPMENT & SVCS - 9.80%
43,000 BJ Services* 593,938
60,100 Global Marine* 563,438
11,700 Halter Marine* 81,169
21,000 Hanover Compressor* 475,125
22,800 Marine Drilling* 198,075
26,700 Nabors* 353,775
33,900 Noble Drilling 391,969
29,400 Offshore Logistics* 365,663
38,200 Parker Drilling* 143,250
28,900 Petroleum Geo Services* 406,406
57,700 Pride Int'l* 436,356
14,300 Rowan Companies* 140,317
18,600 Smith Int'l* 448,725
34,600 Tuboscope Inc* 287,613
46,100 Varco Int'l* 314,056
------------
5,199,875
------------
HEALTH CARE SERVICES/HMOS - 9.16%
70,000 Coventry Health Care* 520,625
34,700 Humana* 687,494
241,500 Mid Atlantic Medical* 2,143,312
54,700 Physician Reliance Network* 505,975
27,100 Trigon Healthcare* 1,004,394
------------
4,861,800
------------
TECHNOLOGY/SOFTWARE - 6.97%
15,400 Brooks Automation* 246,400
17,900 Information Resources* 149,913
18,400 Mentor Graphics* 158,700
128,300 Novell* 2,124,969
110,000 Object Design* 687,500
</TABLE>
SEE NOTES TO COMBINED FINANCIAL STATEMENTS
19
<PAGE>
SG COWEN OPPORTUNITY FUND
STATEMENT OF INVESTMENTS - (CONTINUED)
NOVEMBER 30, 1998
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
<C> <S> <C>
TECHNOLOGY/SOFTWARE - (CONTINUED)
21,000 Santa Cruz Operation* $ 94,500
12,200 Triquint Semiconductor* 236,375
------------
3,698,357
------------
CONSUMER SERVICES - 6.41%
38,900 Berlitz* 1,145,119
93,800 Reader's Digest 2,257,063
------------
3,402,182
------------
TECHNOLOGY/HARDWARE/OTHER - 5.51%
5,500 KLA Instruments* 187,344
116,700 Oceaneering International* 1,451,456
83,100 Sequent Computer Systems* 1,059,525
25,800 Tokheim Corp* 222,525
------------
2,920,850
------------
RESTAURANTS/FOOD PRODUCTS - 4.54%
21,700 Aqua Penn Water* 279,388
24,500 Brinker Int'l* 623,219
21,000 CKE Restaurant 513,188
21,350 Flowers Inds Inc 487,047
35,100 Scheid Vineyards* 166,725
21,100 Tasty Baking 338,919
------------
2,408,486
------------
RETAILERS - 3.49%
26,600 Brylane* 422,275
15,700 Claire's Stores 266,900
17,700 Comp USA* 263,288
23,300 Homebase* 133,975
42,500 Lechters* 128,828
35,300 Michael Stores* 635,400
------------
1,850,666
------------
UTILITIES - 2.73%
11,100 MCN Energy 210,206
22,300 Niagara Mohawk* 342,863
3,300 North Carolina Natural Gas 106,425
13,800 St Joseph Light & Power 245,813
8,300 Washington Gas & Light 211,674
</TABLE>
SEE NOTES TO COMBINED FINANCIAL STATEMENTS
20
<PAGE>
SG COWEN OPPORTUNITY FUND
STATEMENT OF INVESTMENTS - (CONTINUED)
NOVEMBER 30, 1998
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
<C> <S> <C>
UTILITIES - (CONTINUED)
35,600 Western Gas Resourcess $ 331,525
------------
1,448,506
------------
PHARMACEUTICALS - 2.31%
7,200 Alza Corporation* 376,200
50,900 Cor Therapeutics* 598,075
35,600 Kos Pharmaceuticals* 253,650
------------
1,227,925
------------
ENVIRONMENTAL - 2.06%
6,100 ATG Inc* 38,888
54,600 Calgon Corporation 395,850
163,000 ICF Kaiser* 275,063
112,100 Safety Kleen* 385,344
------------
1,095,145
------------
MEDICAL SUPPLIES/SERVICES - 1.69%
18,400 Carter Wallace 326,600
25,000 Fuisz Tech* 303,125
14,500 Mentor Corp. 268,250
------------
897,975
------------
TELECOMMUNICATIONS - 1.63%
38,000 Allegiance Telecomm* 508,250
11,100 Teradyne* 355,894
------------
864,144
------------
TRUCKING/TRANSPORT/PARTS - 1.52%
18,400 Kirby Corporation* 365,700
35,300 Transport Corp of America* 441,250
------------
806,950
------------
FINANCIAL SERVICES - 1.44%
14,900 Alliance Bancorp 290,550
6,400 Bank of Commerce (CA) 94,400
17,500 Guaranty Bancshares 181,563
18,500 PBOC Holdings* 198,875
------------
765,388
------------
</TABLE>
SEE NOTES TO COMBINED FINANCIAL STATEMENTS
21
<PAGE>
SG COWEN OPPORTUNITY FUND
STATEMENT OF INVESTMENTS - (CONTINUED)
NOVEMBER 30, 1998
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
<C> <S> <C>
MACHINERY/EQUIPMENT - 1.44%
8,400 Case Corp. $ 203,700
20,800 New Holland NV 284,700
27,700 Stewart & Stevenson 275,269
------------
763,669
------------
AGRICULTURAL - 0.86%
15,200 Agrium Inc. 149,150
5,000 Potash Corp. 308,438
------------
457,588
------------
PAPER - 0.64%
5,400 Boise Cascade 171,113
3,000 Georgia Pacific 170,250
------------
341,363
------------
BUILDING CONSTRUCTION - 0.62%
7,000 American Woodmark 213,500
2,000 Southdown Inc. 116,500
------------
330,000
------------
ELECTRICAL EQUIPMENT - 0.53%
7,800 Creative Technology* 135,038
5,500 Tektronix 147,469
------------
282,507
------------
SHIPBUILDING - 0.45%
8,500 Newport News Shipbuilding 239,063
------------
BROADCASTING - 0.23%
19,000 Central European Media* 123,500
------------
REAL ESTATE - 0.03%
16,600 Atlantic Gulf Communities* 16,600
------------
TOTAL INVESTMENTS
(Cost $65,656,513) - 100% $53,051,502
------------
------------
</TABLE>
- -------------
* Non-income producing security
SEE NOTES TO COMBINED FINANCIAL STATEMENTS
22
<PAGE>
SG COWEN GOVERNMENT SECURITIES FUND
STATEMENT OF INVESTMENTS
NOVEMBER 30, 1998
<TABLE>
<CAPTION>
PRINCIPAL DESCRIPTION VALUE
AMOUNT
<C> <S> <C>
MORTGAGE-BACKED SECURITIES - 27.9% OF
TOTAL PORTFOLIO
Federal Home Loan Mortgage Corporation
(FHLMC) Certificates:
$130,881 8.500%, 01/01/10 $ 136,349
Federal National Mortgage Ass'n (FNMA)
Certificates:
94,132 9.00% 2/01/15 99,300
Government National Mortgage Ass'n
(GNMA) Certificates:
23,631 8.000%, 05/15/02 23,998
7,043 10.000%, 04/15/16 7,606
2,971 10.000%, 07/15/17 3,216
2,519 10.000%, 11/15/17 2,727
5,345 9.000%, 05/15/21 5,733
8,419 9.500%, 11/15/21 9,087
31,572 9.500%, 03/20/25 33,106
108,769 8.000%, 05/15/25 113,120
-----------
Total Mortgage-Backed Securities 434,242
-----------
U.S. TREASURY OBLIGATIONS 72.1%
200,000 5.875%, 11/15/05 213,844
300,000 5.625%, 02/15/06 315,936
250,000 5.500%, 02/15/08 263,985
300,000 6.000%, 02/15/26 329,532
-----------
Total U.S. Treasury Obligations 1,123,297
-----------
TOTAL INVESTMENTS
(Cost $1,467,471) $1,557,539
-----------
-----------
</TABLE>
SEE NOTES TO COMBINED FINANCIAL STATEMENTS
23
<PAGE>
SG COWEN INTERMEDIATE FIXED INCOME FUND
STATEMENT OF INVESTMENTS
NOVEMBER 30, 1998
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
<C> <S> <C>
CUMULATIVE PREFERRED STOCK - 17.6% OF
TOTAL PORTFOLIO
20,000 Citigroup Capital 6.850%, 01/22/38 $ 500,000
8,600 McDonalds Corp. 7.500%, 09/30/36 223,600
20,000 Merrill Lynch TOPRS 7.750%, 12/31/36 527,500
Paine Webber Group Capital Trust II,
10,000 8.080%, 03/01/37 254,375
-----------
Total Cumulative Preferred Stock 1,505,475
-----------
<CAPTION>
PRINCIPAL
AMOUNT
<C> <S> <C>
CORPORATE NOTES - 4.7%
$ 400,000 Long Island Savings Bank 7.00%, 06/13/02 404,084
-----------
MORTGAGE-BACKED SECURITIES - 13.3%
Federal National Mortgage Ass'n (FNMA)
Certificates:
109,379 9.000%, 02/01/02 111,556
56,998 9.000%, 05/01/09 59,150
66,479 9.500%, 03/01/10 71,298
115,780 7.500%, 09/01/10 119,072
281,216 7.500%, 4/01/11 288,842
21,485 9.000%, 04/01/15 22,660
70,217 9.500%, 07/01/22 75,652
Federal Home Loan Mortgage Corporation
(FHLMC) Certificates:
116,870 8.000%, 01/01/08 120,646
Government National Mortgage Ass'n
(GNMA) Certificates:
53,815 8.000%, 06/15/01 54,446
43,553 9.000%, 12/15/16 46,739
29,811 10.000%, 12/15/18 32,301
30,333 8.500%, 10/15/21 32,315
49,550 8.000%, 06/15/22 51,672
47,913 8.000%, 06/15/27 49,830
-----------
Total Mortgage-Backed Securities 1,136,179
-----------
</TABLE>
SEE NOTES TO COMBINED FINANCIAL STATEMENTS
24
<PAGE>
SG COWEN INTERMEDIATE FIXED INCOME FUND
STATEMENT OF INVESTMENTS - (CONTINUED)
NOVEMBER 30, 1998
<TABLE>
<CAPTION>
PRINCIPAL DESCRIPTION VALUE
AMOUNT
<C> <S> <C>
U.S. TREASURY OBLIGATIONS - 64.3%
$ 435,000 6.000%, 07/31/02 $ 454,440
500,000 5.750%, 11/30/02 519,530
600,000 6.250%, 02/15/03 635,532
400,000 5.750%, 08/15/03 418,188
650,000 5.875%, 11/15/05 694,993
800,000 5.625%, 02/15/06 842,496
400,000 6.500%, 10/15/06 443,624
1,000,000 5.500%, 02/15/08 1,055,940
400,000 5.500%, 08/15/28 422,936
-----------
Total U.S. Treasury Obligations 5,487,679
-----------
TOTAL INVESTMENTS
(Cost $8,217,587) $8,533,417
-----------
-----------
</TABLE>
SEE NOTES TO COMBINED FINANCIAL STATEMENTS
25
<PAGE>
SG COWEN LARGE CAP VALUE FUND
STATEMENT OF INVESTMENTS
NOVEMBER 30, 1998
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
<C> <S> <C>
COMMON STOCK - 95.5% OF TOTAL PORTFOLIO
AUTO PARTS & EQUIPMENT - 2.8%
4,940 Dana Corp $ 192,660
10,280 Meritor Automotive Inc 181,828
------------
374,488
------------
BANKS - 15.7%
8,765 Banc One Corp 449,754
8,600 BankAmerica Corp 560,613
3,460 Bank of New York 118,505
7,730 BankBoston Corporation 321,760
8,570 Fleet Financial Group Inc 357,262
4,270 Keycorp 131,036
1,880 National City Corp. 126,430
------------
2,065,360
------------
CHEMICALS - 1.8%
1,700 Du Pont (E.I.) De Nemour 99,875
6,160 IMC Global Inc 140,910
------------
240,785
------------
COMPUTER HARDWARE/SERVICES - 1.1%
900 Int'l Business Machines 148,500
------------
ELECTRIC AND GAS UTILITIES - 5.5%
6,670 Baltimore Gas & Electric 204,686
8,250 Cinergy Corp 285,140
5,020 New Century Energies Inc 241,274
------------
731,100
------------
FINANCIAL (DIVERSIFIED) - 4.7%
3,990 AMBAC Financial Group 243,390
5,720 MBIA Inc 370,370
------------
613,760
------------
INSURANCE - 4.0%
2,700 Allstate Corp 110,025
5,288 Conseco, Inc. 175,165
6,736 St. Paul Companies 237,444
------------
522,634
------------
</TABLE>
SEE NOTES TO COMBINED FINANCIAL STATEMENTS
26
<PAGE>
SG COWEN LARGE CAP VALUE FUND
STATEMENT OF INVESTMENTS - (CONTINUED)
NOVEMBER 30, 1998
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
<C> <S> <C>
MACHINERY (DIVERSIFIED) - 0.8%
3,080 Dover Corp $ 109,725
------------
MANUFACTURING - 1.7%
5,290 York International Corp 222,180
------------
MORTGAGE LENDER - 3.0%
5,520 Federal National Mortgage Association 401,580
------------
NATURAL GAS - 6.0%
5,580 Consolidated Nat.Gas 303,064
13,180 MCN Energy Group Inc 249,596
8,090 Sonat Inc 240,172
------------
792,832
------------
OIL (DOMESTIC & INTERNATIONAL) - 5.9%
8,200 Burlington Resources 292,125
29,570 Ocean Energy* 240,256
2,890 Phillips Petroleum Co 121,380
4,600 Ultramar Diamond Shamrock 118,450
------------
772,211
------------
OIL & GAS (DRILLING & EQUIP) - 10.6%
11,920 Cooper Cameron Corp.* 290,550
43,540 Noble Drilling Corp.* 503,431
3,770 Smith International* 90,951
5,340 Tidewater Inc. 123,154
21,160 Weatherford International* 386,179
------------
1,394,265
------------
RAILROADS - 0.8%
2,410 CSX Corp 100,467
------------
RESTAURANTS - 2.0%
13,200 Wendys International 264,000
------------
RETAIL - 8.8%
3,930 Federated Department Stores* 163,832
6,870 Nine West* 85,875
6,830 Sears Roebuck & Co 323,998
</TABLE>
SEE NOTES TO COMBINED FINANCIAL STATEMENTS
27
<PAGE>
SG COWEN LARGE CAP VALUE FUND
STATEMENT OF INVESTMENTS - (CONTINUED)
NOVEMBER 30, 1998
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
<C> <S> <C>
RETAIL - (CONTINUED)
5,250 Tommy Hilfiger Corp* $ 317,625
13,860 Toys R Us Inc* 273,735
------------
1,165,065
------------
SEMICONDUCTORS/ELECTRONICS - 3.8%
6,560 KLA-Tencor Instruments* 223,450
2,600 Rockwell International 127,237
3,710 Varian Associates Inc 146,777
------------
497,464
------------
SERVICE - 1.2%
3,560 H&R Block 159,978
------------
TELEPHONE - 7.2%
5,640 Bell Atlantic Corp 313,725
6,350 GTE Corp 393,700
3,080 Sprint Corp 224,070
1,540 Sprint Corp, PCS Group* 24,640
------------
956,135
------------
TOBACCO - 8.1%
9,650 Philip Morris Cos Inc 539,797
18,160 RJR Nabisco Hldgs Corp 523,235
------------
1,063,032
------------
Total Common Stocks
(Cost $14,244,210) $12,595,561
------------
<CAPTION>
PRINCIPAL
AMOUNT
<C> <S> <C>
SHORT TERM INVESTMENTS - 4.5%
General Electric Capital Corp., 5.05%,
$600,000 12/07/1998 $ 600,000
------------
Total Short Term Investments
(Cost $600,000) $ 600,000
------------
TOTAL INVESTMENTS - 100.0%
(Cost $14,844,210) $13,195,561
------------
------------
</TABLE>
- -------------
* Non-income producing security
SEE NOTES TO COMBINED FINANCIAL STATEMENTS
28
<PAGE>
(This page intentionally left blank)
29
<PAGE>
Statements of Assets and Liabilities
November 30, 1998
<TABLE>
<CAPTION>
INCOME + GROWTH OPPORTUNITY
FUND FUND
<S> <C> <C>
ASSETS
Investments in securities,
at value - (cost
$48,269,611, $65,656,513,
$1,467,471, $8,217,587 and
$14,844,210, respectively
- see statements) $53,809,394 $53,051,502
Cash 48,413
Receivables:
SG Cowen Securities
Corporation - -
Subscriptions to Common
Stock 16,687 3,829
Investment Securities sold 623,108 1,563,913
Dividends and Interest 139,671 17,939
Prepaid expenses 26,748 24,490
Deferred organization
expenses -
Note I (E) - -
------------------- -------------------
TOTAL ASSETS 54,664,021 54,661,673
------------------- -------------------
LIABILITIES
Payables:
Custodian - 198,394
SG Cowen Securities
Corporation 46,303 56,372
Redemptions of Common Stock 50,084 360,791
Investment securities
purchased 1,230,565 777,440
Dividends - Note I (C) - -
Accrued expenses and other
liabilities 63,683 76,158
------------------- -------------------
TOTAL LIABILITIES 1,390,635 1,469,155
------------------- -------------------
NET ASSETS $53,273,386 $53,192,518
------------------- -------------------
------------------- -------------------
Net Assets consist of:
Paid-in capital $44,805,433 $69,773,652
Accumulated undistributed
net Investment Income 214,558 -
Accumulated net realized
gain (loss) on investments 2,713,612 (3,976,123)
Net unrealized appreciation
(depreciation) on
investments 5,539,783 (12,605,011)
------------------- -------------------
NET ASSETS $53,273,386 $53,192,518
------------------- -------------------
------------------- -------------------
Class A
Net Assets $44,642,850 $27,978,225
Outstanding shares of common
stock, ($.001 par value) 3,619,070 2,784,610
Net asset value per share $ 12.34 $ 10.05
Maximum offering price per
share $ 12.96 $ 10.55
Class B
Net assets $ 2,710,508 $ 6,163,332
Outstanding shares of common
stock, ($.001 par value) 221,358 645,057
Net asset value per share $ 12.24 $ 9.55
Class I
Net assets $ 5,920,028 $19,050,961
Outstanding shares of common
stock, ($.001 par value) 477,982 1,859,823
Net asset value per share $ 12.39 $ 10.24
</TABLE>
SEE COMBINED NOTES TO FINANCIAL STATEMENTS
30
<PAGE>
<TABLE>
<CAPTION>
GOVERNMENT INTERMEDIATE FIXED LARGE CAP
SECURITIES FUND INCOME FUND VALUE FUND
<S> <C> <C> <C>
ASSETS
Investments in securities,
at value - (cost
$48,269,611, $65,656,513,
$1,467,471, $8,217,587 and
$14,844,210, respectively
- see statements) $ 1,557,539 $ 8,533,417 $13,195,561
Cash 51,216 77,716 52,737
Receivables:
SG Cowen Securities
Corporation 4,200 213 -
Subscriptions to Common
Stock 30,000 287 2,635
Investment Securities sold 3,767 11,037 -
Dividends and Interest 18,720 83,449 16,753
Prepaid expenses 22,497 22,650 27,120
Deferred organization
expenses -
Note I (E) - - 87,950
------------------- ------------------- -------------------
TOTAL ASSETS 1,687,939 8,728,769 13,382,756
------------------- ------------------- -------------------
LIABILITIES
Payables:
Custodian - - -
SG Cowen Securities
Corporation - - 4,715
Redemptions of Common Stock - 2,349 4,854
Investment securities
purchased - - -
Dividends - Note I (C) 727 5,242 -
Accrued expenses and other
liabilities 17,970 22,570 12,901
------------------- ------------------- -------------------
TOTAL LIABILITIES 18,697 30,161 22,470
------------------- ------------------- -------------------
NET ASSETS $ 1,669,242 $ 8,698,608 $13,360,286
------------------- ------------------- -------------------
------------------- ------------------- -------------------
Net Assets consist of:
Paid-in capital $ 1,540,900 $ 8,478,483 $15,029,337
Accumulated undistributed
net Investment Income - - 18,469
Accumulated net realized
gain (loss) on investments 38,274 (95,705) (38,871)
Net unrealized appreciation
(depreciation) on
investments 90,068 315,830 (1,648,649)
------------------- ------------------- -------------------
NET ASSETS $ 1,669,242 $ 8,698,608 $13,360,286
------------------- ------------------- -------------------
------------------- ------------------- -------------------
Class A
Net Assets $ 1,542,394 $ 7,670,632 $12,043,765
Outstanding shares of common
stock, ($.001 par value) 153,732 782,931 1,263,301
Net asset value per share $ 10.03 $ 9.80 $ 9.53
Maximum offering price per
share $ 10.53 $ 10.04 $ 10.01
Class B
Net assets - $ 590,955 $ 163,960
Outstanding shares of common
stock, ($.001 par value) - 59,878 17,196
Net asset value per share - $ 9.87 $ 9.53
Class I
Net assets $ 126,848 $ 437,021 $ 1,152,561
Outstanding shares of common
stock, ($.001 par value) 12,501 44,747 120,853
Net asset value per share $ 10.15 $ 9.77 $ 9.54
</TABLE>
31
<PAGE>
Statements of Operations
Year ended November 30, 1998
<TABLE>
<CAPTION>
INCOME + GROWTH OPPORTUNITY
FUND FUND
<S> <C> <C>
INVESTMENT INCOME
Dividend Income $ 2,129,291 $ 445,902
Interest Income 24,369 240,326
------------------- -------------------
Total Income 2,153,660 686,228
------------------- -------------------
EXPENSES:
Investment management fee -
Note 2(A) 475,785 786,938
Service fee - Class A - Note
2(C) 128,673 107,681
Service and Distribution
fees - Class B - Note 2(C) 38,959 88,251
Professional fees 30,062 37,661
Shareholder servicing fees
Class A 39,014 45,744
Class B 3,729 12,425
Class I 3,423 11,789
Directors' fees and expenses
- Note 2(D) 25,855 24,644
Federal and state
registration fees 33,845 42,575
Prospectus and shareholders'
reports 8,293 40,598
Custodian fees 4,554 27,688
Amortization of organization
expenses - Note 1(E) - -
Bookkeeping Fees - -
Miscellaneous 5,358 7,432
------------------- -------------------
Total Expenses 797,550 1,233,426
Less: Expenses waived and
absorbed - Note 2(A,
C, and D) (32,994) (11,012)
------------------- -------------------
Net Expenses 764,556 1,222,414
------------------- -------------------
Net Investment Income (loss) 1,389,104 (536,186)
------------------- -------------------
Realized and Unrealized Gain
(Loss) on investments - Note
3:
Net realized gain (loss)
on investments 3,036,017 (3,542,215)
Net Unrealized
appreciation
(depreciation) on
investments (2,004,575) (17,068,140)
------------------- -------------------
Net Realized and Unrealized
Gain (Loss) on Investments 1,031,442 (20,610,355)
------------------- -------------------
Net Increase (Decrease) in Net
Assets resulting from
Operations $ 2,420,546 $(21,146,541)
------------------- -------------------
------------------- -------------------
</TABLE>
SEE NOTES TO COMBINED FINANCIAL STATEMENTS
32
<PAGE>
<TABLE>
<CAPTION>
GOVERNMENT INTERMEDIATE LARGE CAP
SECURITIES FUND FIXED INCOME FUND VALUE FUND
<S> <C> <C> <C>
INVESTMENT INCOME
Dividend Income $ - $ 98,764 $ 209,298
Interest Income 156,628 522,669 29,533
------------------- ------------------- -------------------
Total Income 156,628 621,433 238,831
------------------- ------------------- -------------------
EXPENSES:
Investment management fee -
Note 2(A) 15,470 50,069 83,060
Service fee - Class A - Note
2(C) 6,259 21,865 25,314
Service and Distribution
fees - Class B - Note 2(C) - 2,903 748
Professional fees 14,910 14,871 17,599
Shareholder servicing fees
Class A 3,087 11,344 11,039
Class B - 828 311
Class I 560 964 675
Directors' fees and expenses
- Note 2(D) 24,644 24,644 21,895
Federal and state
registration fees 28,483 27,442 6,222
Prospectus and shareholders'
reports 986 3,657 456
Custodian fees 3,155 3,366 14,478
Amortization of organization
expenses - Note 1(E) 1,732 1,741 19,767
Bookkeeping Fees - - 9,695
Miscellaneous 439 1,094 1,554
------------------- ------------------- -------------------
Total Expenses 99,725 164,788 212,813
Less: Expenses waived and
absorbed - Note 2(A,
C, and D) (89,412) (99,964) (79,327)
------------------- ------------------- -------------------
Net Expenses 10,313 64,824 133,486
------------------- ------------------- -------------------
Net Investment Income (loss) 146,315 556,609 105,345
------------------- ------------------- -------------------
Realized and Unrealized Gain
(Loss) on investments - Note
3:
Net realized gain (loss)
on investments 38,276 162,727 (38,871)
Net Unrealized
appreciation
(depreciation) on
investments 72,883 179,663 (1,648,649)
------------------- ------------------- -------------------
Net Realized and Unrealized
Gain (Loss) on Investments 111,159 342,390 (1,687,520)
------------------- ------------------- -------------------
Net Increase (Decrease) in Net
Assets resulting from
Operations $ 257,474 $ 898,999 $(1,582,175)
------------------- ------------------- -------------------
------------------- ------------------- -------------------
</TABLE>
33
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
INCOME + GROWTH FUND
-------------------------------
YEAR ENDED NOVEMBER 30,
1998 1997
<S> <C> <C>
OPERATIONS:
Net investment income $ 1,389,104 $ 1,812,540
Net realized gain on investments 3,036,017 11,441,727
Net unrealized (depreciation) on investments (2,004,575) (1,147,980)
------------- -------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS 2,420,546 12,106,287
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A (1,180,546) (1,400,730)
Class B (62,786) (61,229)
Class I (215,316) (342,805)
Net realized gains on investments
Class A (9,027,631) (6,585,113)
Class B (739,839) (328,686)
Class I (1,694,332) (1,476,639)
------------- -------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS (12,920,450) (10,195,202)
------------- -------------
COMMON STOCK TRANSACTIONS - NOTE 4
Proceeds from shares sold 2,185,781 7,271,542
Net asset value of shares issued in
reinvestments of distributions 12,156,461 9,461,206
Cost of shares redeemed (20,874,108) (15,154,516)
------------- -------------
NET INCREASE (DECREASE) IN NET ASSETS FROM
COMMON STOCK TRANSACTIONS (6,531,866) 1,578,232
------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (17,031,770) 3,489,317
NET ASSETS:
Beginning of year 70,305,156 66,815,839
------------- -------------
End of year $ 53,273,386 $ 70,305,156
------------- -------------
Undistributed net investment income $ 214,558 $ 284,184
------------- -------------
------------- -------------
</TABLE>
SEE NOTES TO COMBINED FINANCIAL STATEMENTS
34
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS - (CONTINUED)
<TABLE>
<CAPTION>
OPPORTUNITY FUND
-------------------------------
YEAR ENDED NOVEMBER 30,
1998 1997
<S> <C> <C>
OPERATIONS:
Net investment (loss) $ (536,186) $ (493,389)
Net realized gain (loss) on investments (3,542,215) 21,161,722
Net unrealized (depreciation) on investments (17,068,140) (7,282,985)
------------- -------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS (21,146,541) 13,385,348
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net realized gains on investments
Class A (9,734,658) (5,387,688)
Class B (1,954,564) (1,131,024)
Class I (9,241,687) (4,941,727)
------------- -------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS (20,930,909) (11,460,439)
------------- -------------
COMMON STOCK TRANSACTIONS - NOTE 4
Proceeds from shares sold 12,413,889 33,576,368
Net asset value of shares issued in
reinvestments of distributions 20,168,020 11,254,779
Cost of shares redeemed (55,694,070) (21,486,018)
------------- -------------
NET INCREASE (DECREASE) IN NET ASSETS FROM
COMMON STOCK TRANSACTIONS (23,112,161) 23,345,129
------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (65,189,611) 25,270,038
NET ASSETS:
Beginning of year 118,382,129 93,112,091
------------- -------------
End of year $ 53,192,518 $118,382,129
------------- -------------
------------- -------------
</TABLE>
SEE NOTES TO COMBINED FINANCIAL STATEMENTS
35
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS - (CONTINUED)
<TABLE>
<CAPTION>
GOVERNMENT SECURITIES FUND
-------------------------------
YEAR ENDED NOVEMBER 30,
1998 1997
<S> <C> <C>
OPERATIONS:
Net investment income $ 146,315 $ 192,259
Net realized gain on investments 38,276 22,741
Net unrealized appreciation (depreciation) on
investments 72,883 (15,850)
------------- -------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS 257,474 199,150
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A (142,150) (186,809)
Class I (4,165) (5,450)
Net realized gains on investments
Class A (10,775) -
Class I (197) -
------------- -------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS (157,287) (192,259)
------------- -------------
COMMON STOCK
TRANSACTIONS - NOTE 4
Proceeds from shares sold 105,815 2,808,408
Net asset value of shares issued in
reinvestments of distributions 144,861 176,668
Cost of shares redeemed (2,178,322) (2,218,648)
------------- -------------
NET INCREASE (DECREASE) IN NET ASSETS FROM
COMMON STOCK TRANSACTIONS (1,927,646) 766,428
------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (1,827,459) 773,319
NET ASSETS:
Beginning of year 3,496,701 2,723,382
------------- -------------
End of year $ 1,669,242 $ 3,496,701
------------- -------------
------------- -------------
</TABLE>
SEE NOTES TO COMBINED FINANCIAL STATEMENTS
36
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS - (CONTINUED)
<TABLE>
<CAPTION>
INTERMEDIATE FIXED INCOME FUND
-------------------------------
YEAR ENDED NOVEMBER 30,
1998 1997
<S> <C> <C>
OPERATIONS:
Net investment income $ 556,609 $ 738,978
Net realized gain (loss) on investments 162,727 (108,743)
Net unrealized appreciation on investments 179,663 42,946
------------- -------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS 898,999 673,181
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A (485,699) (634,241)
Class B (30,785) (37,105)
Class I (40,125) (67,632)
------------- -------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS (556,609) (738,978)
------------- -------------
COMMON STOCK
TRANSACTIONS - NOTE 4
Proceeds from shares sold 814,243 555,972
Net asset value of shares issued in
reinvestments of distributions 469,619 644,002
Cost of shares redeemed (3,599,456) (4,861,788)
------------- -------------
NET (DECREASE) IN NET ASSETS FROM COMMON STOCK
TRANSACTIONS (2,315,594) (3,661,814)
------------- -------------
TOTAL (DECREASE) IN NET ASSETS (1,973,204) (3,727,611)
NET ASSETS:
Beginning of year 10,671,812 14,399,423
------------- -------------
End of year $ 8,698,608 $ 10,671,812
------------- -------------
------------- -------------
</TABLE>
SEE NOTES TO COMBINED FINANCIAL STATEMENTS
37
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS - (CONTINUED)
<TABLE>
<CAPTION>
LARGE CAP
VALUE FUND
------------------------
PERIOD FROM
JANUARY 2, 1998
(COMMENCEMENT OF
OPERATIONS) TO
NOVEMBER 30,
1998
<S> <C>
OPERATIONS:
Net investment income $ 105,345
Net realized (loss) on investments (38,871)
Net unrealized (depreciation) on investments (1,648,649)
-----------
NET DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS (1,582,175)
-----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A (78,185)
Class B (109)
Class I (8,582)
-----------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS (86,876)
-----------
COMMON STOCK
TRANSACTIONS - NOTE 4
Proceeds from shares sold 17,852,421
Net asset value of shares issued in
reinvestments of distributions 86,029
Cost of shares redeemed (2,909,113)
-----------
NET INCREASE IN NET ASSETS FROM COMMON STOCK
TRANSACTIONS 15,029,337
-----------
TOTAL INCREASE IN NET ASSETS, REPRESENTING NET
ASSETS AT NOVEMBER 30, 1998 $ 13,360,286
-----------
-----------
Undistributed net investment income $ 18,469
-----------
-----------
</TABLE>
SEE NOTES TO COMBINED FINANCIAL STATEMENTS
38
<PAGE>
SG COWEN FUNDS
NOTES TO COMBINED FINANCIAL STATEMENTS
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES: SG Cowen Income + Growth Fund, Inc.
("CIG"), SG Cowen Funds, Inc. and SG Cowen Series Funds, Inc. (collectively "the
Funds") are registered under the Investment Company Act of 1940 ("Act") as
diversified open-end management companies. SG Cowen Funds, Inc. operates as a
series company currently issuing common stock representing its portfolios
designated as the SG Cowen Intermediate Fixed Income Fund ("CIFIF"), SG Cowen
Government Securities Fund ("CGSF"), and SG Cowen Opportunity Fund ("COF"). SG
Cowen Series Funds, Inc. operates as a series company currently issuing common
stock representing its portfolio designated as the SG Cowen Large Cap Value Fund
("LgCapValue"). Until July 1, 1998, Cowen & Co. ("Cowen") served as investment
manager and principal underwriter to the above-referenced Funds (the "Funds").
On July 1, 1998, Cowen's business was combined with Societe Generale Securities
Corporation ("SGSC"), a subsidiary of Societe Generale ("SG"), to form SG Cowen
Securities Corporation ("SG Cowen"). SG, a leading international commercial and
investment bank established in 1864, has a global network of offices in over 80
countries. Since July 1, 1998, SG Cowen has served as the new investment manager
to the Funds, with the existing investment management personnel of SG Cowen
continuing to provide investment management services to the Funds, and Funds
Distributor Inc. has served as the new principal underwriter to the Funds. SG
Cowen is also a selected dealer of the Funds' shares. Additionally, effective as
of July 1, 1998, the names of the Funds have been changed, as indicated above,
in order to reflect the Funds' new management by SG Cowen. These combined
financial statements together with the notes thereto, consist of CIG, COF,
CIFIF, CGSF and LgCapValue. 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, COF, and LgCapValue 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, 1998, COF, CIFIF and LgCapValue had unused capital loss
carryovers of approximately $2,200,000, $97,000 and $39,000,
39
<PAGE>
SG COWEN FUNDS
NOTES TO COMBINED FINANCIAL STATEMENTS - (CONTINUED)
NOTE 1 - (CONTINUED)
respectively, available for Federal income tax purposes to be applied against
future securities profits, if any. If not applied, the carryovers expire in
fiscal 2006, 2005 and 2006, respectively.
(E) DEFERRED ORGANIZATION EXPENSES: Organization expenses paid by LgCapValue
are being amortized to operations from January 2, 1998, 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 SG Cowen in connection with the organization of the 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 or
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
determined 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, 1998, COF reclassified $536,186 from
accumulated undistributed net investment loss to paid-in capital ($520,017) and
accumulated net realized loss on investments ($16,169). Net investment loss, net
realized gains, and net assets were not affected by this change.
(G) OPTIONS TRANSACTIONS: When a 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 SG Cowen pursuant to the
provisions of Investment Management Agreements ("Agreements") are payable
monthly, based on an annual rate of .75%, .90%, .50%, .60% and .75% for CIG,
COF, CIFIF, CGSF and LgCapValue, respectively, of the average daily value of
each Fund's net assets. SG Cowen has voluntarily reimbursed the CIG's expenses
in an amount equal to an annual rate of .14% from December 1, 1996 through March
31, 1998, of the average daily value of its net assets, and the COF's expenses
in
40
<PAGE>
SG COWEN FUNDS
NOTES TO COMBINED FINANCIAL STATEMENTS - (CONTINUED)
NOTE 2 - (CONTINUED)
an amount equal to an annual rate of .13% from December 1, 1996 through March
31, 1997 and .03% from April 1, 1997 through March 31, 1998.
With respect to LgCapValue, SG Cowen has voluntarily reimbursed all expenses,
other than Investment Management Fee and distribution fees, in excess of .22% of
the average daily value of its net assets since its inception.
With respect to CGSF and CIFIF, SG Cowen has voluntarily waived its Investment
Management Fee for the period from December 1, 1996 through November 30, 1998.
With respect to CGSF, SG Cowen is voluntarily absorbing all other expenses,
except for .40% of other expenses and .50% of the Class B distribution fee. With
respect to CIFIF, SG Cowen is voluntarily absorbing all other expenses, except
for .40% of other expenses and its service and distribution fees. The directors
fees are being waived by directors of both Funds.
SG Cowen has agreed to maintain these fee and expense reimbursement
arrangements for each Fund through March 31, 1999 (see "Shareholder Servicing
and Distribution Plan" later in this note).
(B) In acting as distributor (and a selected dealer after July 1, 1998) during
the year ended November 30, 1998, SG Cowen earned $8,443, $26,678, $1,431,
$5,105 and $21,450 of commissions on sales of the shares of CIG, COF, CGSF,
CIFIF and LgCapValue, respectively.
(C) SHAREHOLDER SERVICING AND DISTRIBUTION PLANS (THE "PLAN"): SG Cowen (until
June 30, 1998 and Funds Distributor Inc. after that date) is paid monthly fees
by each of the Funds in connection with (1) the servicing of shareholder
accounts in Class A and Class B shares and (2) providing distribution related
services in respect of Class B shares. A monthly-service fee, authorized
pursuant to the Plan adopted by each of the Funds pursuant to Rule 12b-1 under
the Investment Company Act of 1940, as amended (the "1940 Act"), is calculated
at the annual rate of .25% of the value of the average daily net assets of the
Fund attributable to each of Class A and Class B shares and is used to provide
compensation for ongoing servicing and/or maintenance of shareholder accounts
with the Funds. Compensation is paid to persons 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 SG Cowen (until June 30,
1998 and Funds Distributor, Inc. after that date) a monthly distribution fee at
the annual rate of .75% for CIG, COF, CGSF and Large Cap Value and of .25% for
CIFIF of the Funds' average daily net assets attributable to Class B shares. The
distribution fee is used 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 SG Cowen Funds 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 SG Cowen, and the payments may exceed
expenses actually incurred by SG 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 SG Cowen
and amounts it receives under the Plan.
(D) Directors who are not officers, directors, partners, stockholders or
employees of SG 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;
41
<PAGE>
SG COWEN FUNDS
NOTES TO COMBINED FINANCIAL STATEMENTS - (CONTINUED)
NOTE 2 - (CONTINUED)
however the Directors have agreed to waive their fees from CGSF and CIFIF until
such time as SG 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, 1998, was as follows:
<TABLE>
<CAPTION>
CIG COF CGSF
<S> <C> <C> <C>
- --------------------------------------------------------
Purchases $ 38,665,478 $ 101,873,137 $ 1,765,711
<CAPTION>
- --------------------------------------------------------
<S> <C> <C> <C>
Sales 59,334,586 135,997,819 3,791,119
<CAPTION>
- --------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CIFIF LGCAP VALUE
<S> <C> <C>
- ----------------------------------------------------
Purchases $ 6,331,952 $ 22,219,963
<CAPTION>
- ----------------------------------------------------
<S> <C> <C>
Sales 8,722,315 7,936,882
<CAPTION>
- ----------------------------------------------------
</TABLE>
At November 30, 1998, the cost of investments for Federal tax purposes was
substantially the same as the cost for financial reporting purposes (see the
Statements of Investments), except that due to wash sale transactions, the cost
of investments for COF was approximately $67,425,645.
At November 30, 1998, accumulated net unrealized appreciation (depreciation)
on investments was as follows:
<TABLE>
<CAPTION>
CIG COF CGSF
<S> <C> <C> <C>
- -----------------------------------------------------------
Gross Unrealized
Appreciation $ 5,871,878 $ 4,586,671 $ 90,174
Gross Unrealized
Depreciation 332,095 17,191,682 106
<CAPTION>
- -----------------------------------------------------------
<S> <C> <C> <C>
Net $ 5,539,783 $ (12,605,011) $ 90,068
<CAPTION>
- -----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CIFIF LGCAP VALUE
<S> <C> <C>
- ---------------------------------------------------
Gross Unrealized
Appreciation $ 321,522 $ 700,950
Gross Unrealized
Depreciation 5,692 2,349,599
<CAPTION>
- ---------------------------------------------------
<S> <C> <C>
Net $ 315,830 $ (1,648,649)
<CAPTION>
- ---------------------------------------------------
</TABLE>
42
<PAGE>
SG COWEN FUNDS
NOTES TO COMBINED FINANCIAL STATEMENTS - (CONTINUED)
NOTE 4 - COMMON STOCK TRANSACTIONS: At November 30, 1998, 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:
SG COWEN INCOME + GROWTH FUND, INC.
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30, 1998
-----------------------------------------------------------------------------
CLASS A CLASS B CLASS I
------------------------- ------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
----------- ------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Shares Sold 66,898 $ 842,445 11,942 $ 148,973 95,443 $ 1,194,363
Dividends Reinvested 797,851 9,628,793 64,869 778,531 144,276 1,749,137
----------- ------------ ----------- ----------- ----------- -----------
864,749 10,471,238 76,811 927,504 239,719 2,943,500
Shares Redeemed (1,051,071) (12,860,553) (165,009) (2,038,404) (476,482) (5,975,151)
----------- ------------ ----------- ----------- ----------- -----------
Net (Decrease) (186,322) $ (2,389,315) (88,198) $(1,110,900) (236,763) $(3,031,651)
----------- ------------ ----------- ----------- ----------- -----------
----------- ------------ ----------- ----------- ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30, 1997
-----------------------------------------------------------------------------
CLASS A CLASS B CLASS I
------------------------- ------------------------ ------------------------
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) (4,968,719)
----------- ------------ ----------- ----------- ----------- -----------
Net Increase (Decrease) 159,315 $ 1,462,326 129,214 $ 1,672,703 (97,359) $(1,556,797)
----------- ------------ ----------- ----------- ----------- -----------
----------- ------------ ----------- ----------- ----------- -----------
</TABLE>
43
<PAGE>
SG COWEN FUNDS
NOTES TO COMBINED FINANCIAL STATEMENTS - (CONTINUED)
NOTE 4 - (CONTINUED)
SG COWEN OPPORTUNITY FUND
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30, 1998
------------------------------------------------------------------------------
CLASS A CLASS B CLASS I
------------------------- ------------------------ -------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
----------- ------------ ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Shares Sold 105,810 $ 1,273,618 25,685 $ 318,364 823,633 $ 10,821,907
Dividends Reinvested 715,467 9,107,891 155,170 1,893,068 708,428 9,167,061
----------- ------------ ----------- ----------- ----------- ------------
821,277 10,381,509 180,855 2,211,432 1,532,061 19,988,968
Shares Redeemed (1,364,015) (16,830,066) (203,541) (2,378,860) (2,844,314) (36,485,144)
----------- ------------ ----------- ----------- ----------- ------------
Net (Decrease) (542,738) $ (6,448,557) (22,686) $ (167,428) (1,312,253) $(16,496,176)
----------- ------------ ----------- ----------- ----------- ------------
----------- ------------ ----------- ----------- ----------- ------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30, 1997
------------------------------------------------------------------------------
CLASS A CLASS B CLASS I
------------------------- ------------------------ -------------------------
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
----------- ------------ ----------- ----------- ----------- ------------
----------- ------------ ----------- ----------- ----------- ------------
</TABLE>
44
<PAGE>
SG COWEN FUNDS
NOTES TO COMBINED FINANCIAL STATEMENTS - (CONTINUED)
NOTE 4 - (CONTINUED)
SG COWEN GOVERNMENT SECURITIES FUND
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30, 1998
----------------------------------------------------------------------------
CLASS A CLASS B CLASS I
------------------------ ------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Shares Sold 4,447 $ 43,248 - - 6,269 $ 62,567
Dividends Reinvested 14,460 140,506 - - 439 4,355
----------- ----------- ----------- ----------- ----------- -----------
18,907 183,754 - - 6,708 66,922
Shares Redeemed (223,565) (2,171,094) - - (742) (7,228)
----------- ----------- ----------- ----------- ----------- -----------
Net Increase (Decrease) (204,658) $(1,987,340) - - 5,966 $ 59,694
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30, 1997
----------------------------------------------------------------------------
CLASS A CLASS B CLASS I
------------------------ ------------------------ ------------------------
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)
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
</TABLE>
45
<PAGE>
SG COWEN FUNDS
NOTES TO COMBINED FINANCIAL STATEMENTS - (CONTINUED)
NOTE 4 - (CONTINUED)
SG COWEN INTERMEDIATE FIXED INCOME FUND
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30, 1998
----------------------------------------------------------------------------
CLASS A CLASS B CLASS I
------------------------ ------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Shares Sold 62,313 $ 596,958 9,711 $ 93,993 13,024 $ 123,292
Dividends Reinvested 43,194 415,034 1,781 17,249 3,905 37,336
----------- ----------- ----------- ----------- ----------- -----------
105,507 1,011,992 11,492 111,242 16,929 160,628
Shares Redeemed (308,574) (2,985,623) (17,594) (168,968) (46,397) (444,865)
----------- ----------- ----------- ----------- ----------- -----------
Net (Decrease) (203,067) $(1,973,631) (6,102) $ (57,726) (29,468) $(284,237)
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30, 1997
----------------------------------------------------------------------------
CLASS A CLASS B CLASS I
------------------------ ------------------------ ------------------------
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 (Decrease) (269,068) $(2,509,992) (14,659) $(138,171) (110,764) $(1,013,651)
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
</TABLE>
SG COWEN LARGE CAP VALUE FUND
<TABLE>
<CAPTION>
PERIOD ENDED NOVEMBER 30, 1998
-----------------------------------------------------------------------------
CLASS A CLASS B CLASS I
------------------------- ------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
----------- ------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Shares Sold 1,506,814 $ 16,004,343 25,536 $ 260,462 152,955 $ 1,587,616
Dividends Reinvested 8,038 77,339 12 109 880 8,581
----------- ------------ ----------- ----------- ----------- -----------
1,514,852 16,081,682 25,548 260,571 153,835 1,596,197
Shares Redeemed (251,551) (2,493,403) (8,352) (83,023) (32,982) (332,687)
----------- ------------ ----------- ----------- ----------- -----------
Net Increase 1,263,301 $ 13,588,279 17,196 $ 177,548 120,853 $ 1,263,510
----------- ------------ ----------- ----------- ----------- -----------
----------- ------------ ----------- ----------- ----------- -----------
</TABLE>
46
<PAGE>
SG COWEN FUNDS
NOTES TO COMBINED FINANCIAL STATEMENTS - (CONTINUED)
NOTE 5 - FINANCIAL HIGHLIGHTS: Selected data for a share of Common Stock
outstanding throughout each period:
<TABLE>
<CAPTION>
SG COWEN INCOME + GROWTH FUND, INC. - CLASS A
-------------------------------------------------------------------
YEAR
ENDED
YEAR ENDED NOVEMBER 30, FOUR MONTHS JULY 31,
----------------------------------------- ENDED --------
1998 1997 1996 1995 11/30/94 1994
-------- -------- -------- -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of Period $ 14.55 $ 14.40 $ 13.19 $ 10.62 $ 11.06 $ 12.97
-------- -------- -------- -------- ----------- --------
INCOME FROM INVESTMENT OPERATIONS
Investment Income - Net 0.29 0.36 0.48 0.51 0.19 0.52
Net Realized and Unrealized Gains
(Losses) on Investments 0.19 1.97 1.74 2.54 (0.50) (0.44)
-------- -------- -------- -------- ----------- --------
Net from Investment Operations 0.48 2.33 2.22 3.05 (0.31) 0.08
-------- -------- -------- -------- ----------- --------
LESS DISTRIBUTIONS:
Dividends from Net Investment
Income (0.30) (0.36) (0.52) (0.48) (0.13) (0.52)
Distributions from Net Realized
Gains on Investments (2.39) (1.82) (0.49) - - (1.47)
-------- -------- -------- -------- ----------- --------
Total Distributions (2.69) (2.18) (1.01) (0.48) (0.13) (1.99)
-------- -------- -------- -------- ----------- --------
NET ASSET VALUE
End of Period $ 12.34 $ 14.55 $ 14.40 $ 13.19 $ 10.62 $ 11.06
-------- -------- -------- -------- ----------- --------
-------- -------- -------- -------- ----------- --------
Total Return(5) 3.98% 19.21% 17.86% 29.50% (8.50)%(2) 0.28%
RATIOS / SUPPLEMENTARY DATA
Net Assets (000 omitted) $ 44,643 $ 55,383 $ 52,502 $ 49,298 $32,104 $34,722
Ratio of Expenses to Average Net
Assets 1.20% 1.21% 1.24% 1.31% 0.47%(3) 1.26%
Ratio of Investment Income - Net to
Average Net Assets 2.22% 2.65% 3.56% 4.29% 1.65%(3) 4.32%
Decrease Reflected on Above Ratios
Due to Expense Reimbursements/
Waivers 0.05% 0.14% 0.15% 0.19% 0.07%(3) 0.04%
Portfolio Turnover Rate 62% 75% 79% 72% 31% 76%
</TABLE>
47
<PAGE>
SG COWEN FUNDS
NOTES TO COMBINED FINANCIAL STATEMENTS - (CONTINUED)
NOTE 5 - (CONTINUED)
<TABLE>
<CAPTION>
SG COWEN INCOME + GROWTH FUND, INC. - CLASS B
-----------------------------------------------------------------------
PERIOD
YEAR ENDED NOVEMBER 30, FOUR FROM
MONTHS 5/17/94(4)
-------------------------------------------- ENDED THROUGH
1998 1997 1996 1995 11/30/94 7/31/94
-------- -------- -------- -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of Period $14.46 $14.31 $13.14 $10.58 $ 11.04 $ 10.85(1)
-------- -------- -------- -------- ----------- --------
INCOME FROM INVESTMENT OPERATIONS
Investment Income - Net 0.17 0.27 0.37 0.42 0.16 0.09
Net Realized and Unrealized Gains
(Losses) on Investments 0.20 1.95 1.73 2.54 (0.50) 0.20
-------- -------- -------- -------- ----------- --------
Net from Investment Operations 0.37 2.22 2.10 2.96 (0.34) 0.29
-------- -------- -------- -------- ----------- --------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income (0.20) (0.25) (0.44) (0.40) (0.12) (0.10)
Distributions from Net Realized Gains on
Investments (2.39) (1.82) (0.49) - - -
-------- -------- -------- -------- ----------- --------
Total Distributions (2.59) (2.07) (0.93) (0.40) (0.12) (0.10)
-------- -------- -------- -------- ----------- --------
NET ASSET VALUE
End of Period $12.24 $14.46 $14.31 $13.14 $ 10.58 $ 11.04
-------- -------- -------- -------- ----------- --------
-------- -------- -------- -------- ----------- --------
Total Return(5) 3.11% 18.34% 16.89% 28.49% (9.33)%(2) 13.19%(2)
RATIOS / SUPPLEMENTARY DATA
Net Assets (000 omitted) $2,711 $4,478 $2,581 $1,453 $ 280 $ 56
Ratio of Expenses to Average Net Assets 1.97% 1.99% 2.04% 2.07% 0.75%(3) 0.57%(3)
Ratio of Investment Income - Net to
Average Net Assets 1.43% 1.84% 2.76% 3.44% 1.31%(3) 0.45%(3)
Decrease Reflected on Above Ratios Due
to Expense Reimbursements/Waivers 0.06% 0.14% 0.15% 0.19% 0.07%(3) 0.04%(3)
Portfolio Turnover Rate 62% 75% 79% 72% 31% 76%
</TABLE>
48
<PAGE>
SG COWEN FUNDS
NOTES TO COMBINED FINANCIAL STATEMENTS - (CONTINUED)
NOTE 5 - (continued)
<TABLE>
<CAPTION>
SG COWEN INCOME + GROWTH FUND, INC. - CLASS I
----------------------------------------------------------------------------
FOUR PERIOD FROM
YEAR ENDED NOVEMBER 30, MONTHS 5/9/94(4)
----------------------------------------------- ENDED THROUGH
1998 1997 1996 1995 11/30/94 7/31/94
-------- -------- -------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of Period $14.61 $ 14.45 $ 13.23 $ 10.62 $11.06 $10.91(1)
-------- -------- -------- -------- -------- -----------
INCOME FROM INVESTMENT OPERATIONS
Investment Income - Net 0.35 0.41 0.58 0.52 0.20 0.10
Net Realized and Unrealized Gains
(Losses) on Investments 0.16 1.97 1.69 2.59 (0.50) 0.16
-------- -------- -------- -------- -------- -----------
Net from Investment Operations 0.51 2.38 2.27 3.11 (0.30) 0.26
-------- -------- -------- -------- -------- -----------
LESS DISTRIBUTIONS:
Dividends from Net Investment
Income (0.34) (0.40) (0.56) (0.50) (0.14) (0.11)
Distributions from Net Realized
Gains on Investments (2.39) (1.82) (0.49) - - -
-------- -------- -------- -------- -------- -----------
Total Distributions (2.73) (2.22) (1.05) (0.50) (0.14) (0.11)
-------- -------- -------- -------- -------- -----------
NET ASSET VALUE
End of Period $12.39 $ 14.61 $ 14.45 $ 13.23 $10.62 $11.06
-------- -------- -------- -------- -------- -----------
-------- -------- -------- -------- -------- -----------
Total Return(5) 4.22% 19.57% 18.25% 29.99% (8.37)%(2) 10.63%(2)
RATIOS / SUPPLEMENTARY DATA
Net Assets (000 omitted) $5,920 $ 10,444 $ 11,733 $ 19,309 $6,029 $4,988
Ratio of Expenses to Average Net
Assets 0.91% 1.05% 0.90% 0.96% 0.40%(3) 0.28%(3)
Ratio of Investment Income - Net to
Average Net Assets 2.50% 2.98% 3.90% 4.66% 1.68%(3) 1.13%(3)
Decrease Reflected on Above Ratios
Due to Expense Reimbursements/
Waivers 0.06% 0.14% 0.16% 0.19% 0.07%(3) 0.05%(3)
Portfolio Turnover Rate 62% 75% 79% 72% 31% 76%
</TABLE>
49
<PAGE>
SG COWEN FUNDS
NOTES TO COMBINED FINANCIAL STATEMENTS - (CONTINUED)
NOTE 5 - (continued)
<TABLE>
<CAPTION>
SG COWEN OPPORTUNITY FUND - CLASS A
-----------------------------------------------------------------
YEAR ENDED NOVEMBER 30,
-----------------------------------------------------------------
1998 1997 1996 1995 1994
--------- --------- --------- ---------- --------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of Year $ 16.47 $ 16.61 $ 13.13 $ 12.98 $ 16.06
--------- --------- --------- ---------- --------
INCOME FROM INVESTMENT OPERATIONS
Investment Income (Loss) - Net (6) (0.08) (0.08) (0.07) (0.04) (0.09)
Net Realized and Unrealized Gains (Losses) on
Investments (3.40) 2.00 3.86 0.97 1.22
--------- --------- --------- ---------- --------
Net from Investment Operations (3.48) 1.92 3.79 0.93 1.13
--------- --------- --------- ---------- --------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income - - - - -
Distributions from Net Realized Gains on Investments (2.94) (2.06) (0.31) (0.78) (4.21)
--------- --------- --------- ---------- --------
Total Distributions (2.94) (2.06) (0.31) (0.78) (4.21)
--------- --------- --------- ---------- --------
NET ASSET VALUE
End of Year $ 10.05 $ 16.47 $ 16.61 $ 13.13 $ 12.98
--------- --------- --------- ---------- --------
--------- --------- --------- ---------- --------
Total Return(5) (24.89)% 13.55% 29.63% 7.91% 9.53%
RATIOS / SUPPLEMENTARY DATA
Net Assets (000 omitted) $ 27,978 $ 54,809 $ 43,950 $ 38,724 $ 34,487
Ratio of Expenses to Average Net Assets 1.46% 1.38% 1.39% 1.43% 1.47%
Ratio of Investment Loss - Net to Average Net Assets (0.67)% (0.53)% (0.46)% (0.28)% (0.66)%
Decrease Reflected on Above Ratios Due to Expense
Reimbursements/Waivers 0.01% 0.06% 0.16% 0.22% 0.14%
Portfolio Turnover Rate 124% 159% 182% 148% 152%
</TABLE>
50
<PAGE>
SG COWEN FUNDS
NOTES TO COMBINED FINANCIAL STATEMENTS - (CONTINUED)
NOTE 5 - (continued)
<TABLE>
<CAPTION>
SG COWEN OPPORTUNITY FUND - CLASS B
--------------------------------------------------------
PERIOD FROM
YEAR ENDED NOVEMBER 30, 5/17/94(4)
----------------------------------------- THROUGH
1998 1997 1996 1995 11/30/94
------- -------- ------- ------- -----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of Period $15.92 $ 16.23 $12.93 $12.91 $12.18(1)
------- -------- ------- ------- -----------
INCOME FROM INVESTMENT OPERATIONS
Investment Income (Loss) - Net(6) (0.18) (0.20) (0.18) (0.14) (0.09)
Net Realized and Unrealized Gains
(Losses) on Investments (3.25) 1.95 3.79 0.94 0.82
------- -------- ------- ------- -----------
Net from Investment Operations (3.43) 1.75 3.61 0.80 0.73
------- -------- ------- ------- -----------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income - - - - -
Distributions from Net Realized Gains
on Investments (2.94) (2.06) (0.31) (0.78) -
------- -------- ------- ------- -----------
Total Distributions (2.94) (2.06) (0.31) (0.78) -
------- -------- ------- ------- -----------
NET ASSET VALUE
End of Period $ 9.55 $ 15.92 $16.23 $12.93 $12.91
------- -------- ------- ------- -----------
------- -------- ------- ------- -----------
Total Return(5) (25.56)% 12.72% 28.67% 6.97% 11.04%(2)
RATIOS / SUPPLEMENTARY DATA
Net Assets (000 omitted) $6,163 $ 10,629 $8,794 $6,455 $2,207
Ratio of Expenses to Average Net
Assets 2.26% 2.15% 2.17% 2.19% 1.32%(3)
Ratio of Investment Loss - Net to
Average Net Assets (1.47)% (1.31)% (1.24)% (1.06)% (0.83)%(3)
Decrease Reflected on Above Ratios Due
to Expense Reimbursements/Waivers 0.01% 0.06% 0.16% 0.22% 0.12%(3)
Portfolio Turnover Rate 124% 159% 182% 148% 152%
</TABLE>
51
<PAGE>
SG COWEN FUNDS
NOTES TO COMBINED FINANCIAL STATEMENTS - (CONTINUED)
NOTE 5 - (continued)
<TABLE>
<CAPTION>
SG COWEN OPPORTUNITY FUND - CLASS I
-----------------------------------------------------------
PERIOD FROM
YEAR ENDED NOVEMBER 30, 5/9/94(4)
-------------------------------------------- THROUGH
1998 1997 1996 1995 11/30/94
-------- -------- -------- -------- -----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of Period $ 16.69 $ 16.77 $ 13.20 $ 12.99 $12.36(1)
-------- -------- -------- -------- -----------
INCOME FROM INVESTMENT OPERATIONS
Investment Income (Loss) - Net(6) (0.04) (0.03) (0.01) 0.01 (0.03)
Net Realized and Unrealized Gains
(Losses) on Investments (3.47) 2.01 3.89 0.98 0.66
-------- -------- -------- -------- -----------
Net from Investment Operations (3.51) 1.98 3.88 0.99 0.63
-------- -------- -------- -------- -----------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income - - - - -
Distributions from Net Realized Gains
on Investments (2.94) (2.06) (0.31) (0.78) -
-------- -------- -------- -------- -----------
Total Distributions (2.94) (2.06) (0.31) (0.78) -
-------- -------- -------- -------- -----------
NET ASSET VALUE
End of Period $ 10.24 $ 16.69 $ 16.77 $ 13.20 $12.99
-------- -------- -------- -------- -----------
-------- -------- -------- -------- -----------
Total Return(5) (24.71)% 13.82% 30.17% 8.40% 9.04%(2)
RATIOS / SUPPLEMENTARY DATA
Net Assets (000 omitted) $ 19,051 $ 52,944 $ 40,369 $ 19,264 $8,151
Ratio of Expenses to Average Net
Assets 1.14% 1.02% 1.01% 1.03% 0.75%(3)
Ratio of Investment Income (Loss) -
Net Assets (0.34)% (0.19)% (0.07)% 0.11% (0.26)%(3)
Decrease Reflected on Above Ratios Due
to Expense Reimbursements/Waivers 0.01% 0.06% 0.15% 0.22% 0.13%(3)
Portfolio Turnover Rate 124% 159% 182% 148% 152%
</TABLE>
52
<PAGE>
SG COWEN FUNDS
NOTES TO COMBINED FINANCIAL STATEMENTS - (CONTINUED)
NOTE 5 - (continued)
<TABLE>
<CAPTION>
SG COWEN GOVERNMENT SECURITIES FUND - CLASS A
---------------------------------------------------------------
YEAR ENDED NOVEMBER 30,
---------------------------------------------------------------
1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of Year $ 9.58 $ 9.59 $ 9.83 $ 9.17 $ 10.11
----------- ----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS
Investment Income - Net 0.55 0.61 0.64 0.69 0.52
Net Realized and Unrealized Gains (Losses) on Investments 0.48 (0.01) (0.24) 0.66 (0.84)
----------- ----------- ----------- ----------- -----------
Net from Investment Operations 1.03 0.60 0.40 1.35 (0.32)
----------- ----------- ----------- ----------- -----------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income (0.55) (0.61) (0.64) (0.69) (0.56)
Distributions from Net Realized Gains on Investments (0.03) - - - (0.06)
----------- ----------- ----------- ----------- -----------
Total Distributions (0.58) (0.61) (0.64) (0.69) (0.62)
----------- ----------- ----------- ----------- -----------
NET ASSET VALUE
End of Year $ 10.03 $ 9.58 $ 9.59 $ 9.83 $ 9.17
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Total Return(5) 11.13% 6.55% 4.34% 15.23% (3.24%)
RATIOS / SUPPLEMENTARY DATA
Net Assets (000 Omitted) $ 1,542 $ 3,433 $ 2,631 $ 3,945 $ 488
Ratio of Expenses to Average Net Assets 0.40% 0.40% 0.34% 0.22% -
Ratio of Investment Income - Net to Average Net Assets 5.71% 6.47% 6.72% 7.08% 5.24%
Decrease Reflected on Above Ratios Due to:
Investment Management and Service Fees Waived 0.85% 0.85% 0.85% 0.85% 0.78%
Other Expenses Waived or Absorbed 2.62% 2.70% 2.72% 3.63% 11.85%
Portfolio Turnover Rate 69% 184% 107% 289% 210%
</TABLE>
53
<PAGE>
SG COWEN FUNDS
NOTES TO COMBINED FINANCIAL STATEMENTS - (CONTINUED)
NOTE 5 - (continued)
<TABLE>
<CAPTION>
SG COWEN GOVERNMENT
SECURITIES FUND -- CLASS I
---------------------------------------------------------------------
PERIOD FROM
YEAR ENDED NOVEMBER 30, 7/11/94(4)
------------------------------------------------ THROUGH
1998 1997 1996 1995 11/30/94
--------- ----------- ----------- ----------- -------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of Period $ 9.70 $ 9.71 $ 9.94 $ 9.17 $ 9.45(1)
--------- ----------- ----------- ----------- ------
INCOME FROM INVESTMENT OPERATIONS
Investment Income - Net 0.56 0.62 0.65 0.70 0.22
Net Realized and Unrealized Gains (Losses) on
Investments 0.48 (0.01) (0.23) 0.77 (0.28)
--------- ----------- ----------- ----------- ------
Net from Investment Operations 1.04 0.61 0.42 1.47 (0.06)
--------- ----------- ----------- ----------- ------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income (0.56) (0.62) (0.65) (0.70) (0.22)
Distributions from Net Realized Gains on
Investments (0.03) - - - -
--------- ----------- ----------- ----------- ------
Total Distributions (0.59) (0.62) (0.65) (0.70) (0.22)
--------- ----------- ----------- ----------- ------
NET ASSET VALUE
End of Period $ 10.15 $ 9.70 $ 9.71 $ 9.94 $ 9.17
--------- ----------- ----------- ----------- ------
--------- ----------- ----------- ----------- ------
Total Return(5) 11.04% 6.55% 4.48% 16.52% (1.57%)(2)
RATIOS / SUPPLEMENTARY DATA
Net Assets (000 omitted) $ 127 $ 63 $ 93 $ 45 $ 13
Ratio of Expenses to Average Net Assets 0.40% 0.40% 0.36% 0.20% -
Ratio of Investment Income - Net to Average Net
Assets 5.60% 6.49% 6.75% 7.12% 2.42%(3)
Decrease Reflected on Above Ratios Due to:
Investment Management Fees Waived 0.60% 0.60% 0.60% 0.60% 0.24%(3)
Other Expenses Waived or Absorbed 3.66% 3.06% 3.14% 5.14% 6.26%(3)
Portfolio Turnover Rate 69% 184% 107% 289% 210%
</TABLE>
54
<PAGE>
SG COWEN FUNDS
NOTES TO COMBINED FINANCIAL STATEMENTS - (CONTINUED)
NOTE 5 - (continued)
<TABLE>
<CAPTION>
SG COWEN INTERMEDIATE
FIXED INCOME FUND - CLASS A
-----------------------------------------------------------
YEAR ENDED NOVEMBER 30,
-----------------------------------------------------------
1998 1997 1996 1995 1994
----------- ----------- --------- --------- -----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of Year $ 9.47 $ 9.47 $ 9.71 $ 9.12 $ 9.95
----------- ----------- --------- --------- -----------
INCOME FROM INVESTMENT OPERATIONS
Investment Income - Net 0.53 0.59 0.63 0.67 0.51
Net Realized and Unrealized Gains (Losses) on Investments 0.33 - (0.15) 0.59 (0.68)
----------- ----------- --------- --------- -----------
Net from Investment Operations 0.86 0.59 0.48 1.26 (0.17)
----------- ----------- --------- --------- -----------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income (0.53) (0.59) (0.63) (0.67) (0.53)
Distributions from Net Realized Gains on Investments - - (0.09) - (0.13)
----------- ----------- --------- --------- -----------
Total Distributions (0.53) (0.59) (0.72) (0.67) (0.66)
----------- ----------- --------- --------- -----------
NET ASSET VALUE
End of Year $ 9.80 $ 9.47 $ 9.47 $ 9.71 $ 9.12
----------- ----------- --------- --------- -----------
----------- ----------- --------- --------- -----------
Total Return(5) 9.38% 6.47% 5.21% 14.22% (1.77)%
RATIOS / SUPPLEMENTARY DATA
Net Assets (000 omitted) $ 7,671 $ 9,341 $ 11,885 $ 14,667 $ 2,836
Ratio of Expenses to Average Net Assets 0.65% 0.65% 0.59% 0.47% 0.12%
Ratio of Investment Income - Net to Average Net Assets 5.58% 6.29% 6.61% 6.90% 5.41%
Decrease Reflected on Above Ratios Due to:
Investment Management and Service Fees Waived 0.50% 0.50% 0.50% 0.50% 0.63%
Other Expenses Waived or Absorbed 0.51% 0.60% 0.52% 0.86% 3.43%
Portfolio Turnover Rate 64% 92% 110% 264% 159%
</TABLE>
55
<PAGE>
SG COWEN FUNDS
NOTES TO COMBINED FINANCIAL STATEMENTS - (CONTINUED)
NOTE 5 - (continued)
<TABLE>
<CAPTION>
SG COWEN INTERMEDIATE FIXED
INCOME FUND - CLASS B
-----------------------------------------------------------------------
YEAR ENDED PERIOD FROM
NOVEMBER 30, 7/12/94(4)
-------------------------------------------------- THROUGH
1998 1997 1996 1995 11/30/94
----------- ----------- ----------- ----------- -------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of Period $ 9.54 $ 9.54 $ 9.78 $ 9.17 $ 9.32(1)
----------- ----------- ----------- ----------- ------
INCOME FROM INVESTMENT OPERATIONS
Investment Income - Net 0.51 0.53 0.61 0.65 0.20
Net Realized and Unrealized Gains (Losses) on
Investments 0.33 - (0.15) 0.61 (0.15)
----------- ----------- ----------- ----------- ------
Net from Investment Operations 0.84 0.53 0.46 1.26 0.05
----------- ----------- ----------- ----------- ------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income (0.51) (0.53) (0.61) (0.65) (0.20)
Distributions from Net Realized Gains on Investments - - (0.09) - -
----------- ----------- ----------- ----------- ------
Total Distributions (0.51) (0.53) (0.70) (0.65) (0.20)
----------- ----------- ----------- ----------- ------
NET ASSET VALUE
End of Period $ 9.87 $ 9.54 $ 9.54 $ 9.78 $ 9.17
----------- ----------- ----------- ----------- ------
----------- ----------- ----------- ----------- ------
Total Return(5) 9.07% 6.21% 4.96% 14.12% 1.25%(2)
RATIOS / SUPPLEMENTARY DATA
Net Assets (000 omitted) $ 591 $ 630 $ 769 $ 577 $ 313
Ratio of Expenses to Average Net Assets 0.90% 0.90% 0.85% 0.68% 0.19%(3)
Ratio of Investment Income - Net to Average Net
Assets 5.33% 6.03% 6.40% 6.79% 2.15%(3)
Decrease Reflected on Above Ratios Due to:
Investment Management, Service and Distribution
Fees Waived 0.50% 0.50% 0.50% 0.50% 0.18%(3)
Other Expenses Waived or Absorbed 0.52% 0.54% 0.54% 0.46% 1.25%(3)
Portfolio Turnover Rate 64% 92% 110% 264% 159%
</TABLE>
56
<PAGE>
SG COWEN FUNDS
NOTES TO COMBINED FINANCIAL STATEMENTS - (CONTINUED)
NOTE 5 - (continued)
<TABLE>
<CAPTION>
SG COWEN INTERMEDIATE FIXED
INCOME FUND - CLASS I
---------------------------------------------
PERIOD
YEAR ENDED FROM
NOVEMBER 30, 7/11/94(4)
--------------------------------- THROUGH
1998 1997 1996 1995 11/30/94
------ ------ ------ ------ ---------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of Period $9.44 $9.44 $ 9.68 $ 9.10 $9.34(1)
------ ------ ------ ------ ---------
INCOME FROM INVESTMENT OPERATIONS
Investment Income - Net 0.55 0.61 0.65 0.69 0.23
Net Realized and Unrealized Gains (Losses) on
Investments 0.33 - (0.15) 0.58 (0.24)
------ ------ ------ ------ ---------
Net from Investment Operations 0.88 0.61 0.50 1.27 (0.01)
------ ------ ------ ------ ---------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income (0.55) (0.61) (0.65) (0.69) (0.23)
Distributions from Net Realized Gains on
Investments - - (0.09) - -
------ ------ ------ ------ ---------
Total Distributions (0.55) (0.61) (0.74) (0.69) (0.23)
------ ------ ------ ------ ---------
NET ASSET VALUE
End of Period $9.77 $9.44 $ 9.44 $ 9.68 $9.10
------ ------ ------ ------ ---------
------ ------ ------ ------ ---------
Total Return(5) 9.65% 6.74% 5.46% 14.41% (0.36%)(2)
RATIOS / SUPPLEMENTARY DATA
Net Assets (000 omitted) $ 437 $ 701 $1,745 $1,872 $ 565
Ratio of Expenses to Average Net Assets 0.40% 0.40% 0.35% 0.20% -
Ratio of Investment Income - Net to Average Net
Assets 5.87% 6.63% 6.87% 7.23% 1.98%(3)
Decrease Reflected on Above Ratios Due to:
Investment Management Fee Waived 0.50% 0.50% 0.50% 0.50% 0.16%(3)
Other Expenses Waived or Absorbed 0.51% 0.50% 0.42% 0.97% 1.87%(3)
Portfolio Turnover Rate 64% 92% 110% 264% 159%
</TABLE>
57
<PAGE>
SG COWEN FUNDS
NOTES TO COMBINED FINANCIAL STATEMENTS - (CONTINUED)
NOTE 5 - (continued)
<TABLE>
<CAPTION>
SG COWEN
LARGE CAP VALUE FUND
------------------------------------------------------------
CLASS A
---------------------
PERIOD FROM CLASS B CLASS I
1/2/98 ----------------- -----------------
(COMMENCEMENT PERIOD FROM PERIOD FROM
OF OPERATIONS) 4/17/98(4) 2/2/98(4)
THROUGH THROUGH THROUGH
11/30/98 11/30/98 11/30/98
--------------------- ----------------- -----------------
<S> <C> <C> <C>
NET ASSET VALUE
Beginning of Period $ 10.00 $ 11.11(1) $ 9.77(1)
-------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Investment Income - Net 0.08 0.01 0.10
Net Realized and Unrealized Gains (Losses)
on Investments (0.49) (1.58) (0.25)
-------- ------- -------
Net from Investment Operations (0.41) (1.57) (0.15)
-------- ------- -------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income (0.06) (0.01) (0.08)
Distributions from Net Realized Gains on
Investments - - -
-------- ------- -------
Total Distributions (0.06) (0.01) (0.08)
-------- ------- -------
NET ASSET VALUE
End of Period $ 9.53 $ 9.53 $ 9.54
-------- ------- -------
-------- ------- -------
Total Return(3)(5) (4.08%) (14.15%) (1.56%)
RATIOS / SUPPLEMENTARY DATA
Net Assets (000 omitted) $ 12,044 $ 164 $ 1,153
Ratio of Expenses to Average Net Assets 1.11%(3) 1.23%(3) 0.80%(3)
Ratio of Investment Income - Net to
Average Net Assets 0.85%(3) 0.10%(3) 1.01%(3)
Decrease Reflected on Above Ratios Due to
Expense Reimbursements/Waivers 0.66% 0.53%(3) 0.55%(3)
Portfolio Turnover Rate 67%(3) 67%(3) 67%(3)
</TABLE>
- -------------
(1) Based upon the Class A Net Asset Value on the day prior to commencement of
distribution
(2) Annualized
(3) Not Annualized
(4) Commencement of Distribution
(5) Exclusive of Sales Charges
(6) Based upon average shares outstanding
58
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
STOCKHOLDERS AND BOARDS OF DIRECTORS
SG COWEN INCOME + GROWTH FUND, INC.,
SG COWEN FUNDS, INC. AND SG COWEN SERIES FUNDS, INC.
We have audited the accompanying statements of assets and liabilities,
including the statements of investments, of SG Cowen Income + Growth Fund, SG
Cowen Funds, Inc. (comprising, respectively, SG Cowen Opportunity Fund, SG Cowen
Government Securities Fund and SG Cowen Intermediate Fixed Income Fund) and SG
Cowen Series Funds, Inc. (consisting of SG Cowen Large Cap Value Fund) as of
November 30, 1998, and the related statements of operations for the periods then
ended, the statements of changes in net assets for each of the periods indicated
therein 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, 1998, 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 SG
Cowen Income + Growth Fund, Inc. and each of the respective portfolios
constituting SG Cowen Funds, Inc. and SG Cowen Series Funds, Inc. at November
30, 1998, the results of their operations for the periods then ended, the
changes in their net assets and the financial highlights for each of the
indicated periods, in conformity with generally accepted accounting principles.
[LOGO]
New York, New York
January 8, 1999
59
<PAGE>
SG COWEN OPPORTUNITY FUND
TAX INFORMATION (UNAUDITED)
In order to meet certain requirements of the Internal Revenue Code we are
advising you that $9,281,552 of the capital gain distributions paid during the
year ended November 30, 1998 are subject to a maximum Federal income tax rate of
20%. The information necessary to complete your income tax returns was included
with the Form 1099DIV sent to you in January, 1998.
60
<PAGE>
SG COWEN FAMILY OF FUNDS
Financial Square
New York, NY 10005-3597
DIRECTORS
<TABLE>
<S> <C>
JOSEPH M. COHEN, Chairman
JAMES H. DR. MARTIN J.
CAREY GRUBER
DR. PETER P. BURTON J. WEISS
GIL
</TABLE>
OFFICERS
JOSEPH M. COHEN, CHAIRMAN OF THE BOARD OF DIRECTORS AND CHIEF EXECUTIVE OFFICER
DAVID R. SARNS, PRESIDENT
WILLIAM CHURCH, SENIOR INVESTMENT OFFICER
CREIGHTON H. PEET, TREASURER, CHIEF FINANCIAL OFFICER AND SENIOR INVESTMENT
OFFICER
WILLIAM RECHTER, SENIOR INVESTMENT OFFICER(1)
ALAN KOEPPLIN, INVESTMENT OFFICER(2)
BENEDICT CAPALDI, INVESTMENT OFFICER(4)
PAUL D. HOUK, INVESTMENT OFFICER(3)
GORDON G. IFILL, ASSISTANT INVESTMENT OFFICER(2)
RODD M. BAXTER, SECRETARY
IRWOOD SCHLACKMAN, CONTROLLER
<TABLE>
<S> <C>
INVESTMENT ADVISER CUSTODIAN
SG Cowen Securities Corporation Investors Fiduciary
Financial Square Trust Co.
New York, NY 10005 P.O. Box 419111
Kansas City, MO 64141
DISTRIBUTOR TRANSFER AGENT
Funds Distributor, Inc. DST, Inc.
60 State Street, Suite 1300 210 West 10th Street
Boston, MA 02109 Kansas City, MO 64105
LEGAL COUNSEL INDEPENDENT AUDITORS
Willkie Farr & Gallagher Ernst & Young LLP
787 Seventh Avenue 787 Seventh Avenue
New York, NY 10019 New York, NY 10019
</TABLE>
- ------------
(1) SG Cowen Income + Growth and SG Cowen Opportunity
(2) SG Cowen Intermediate Fixed Income and SG Cowen Government Securities
(3) SG Cowen Income + Growth
(4) SG Cowen Income + Growth and SG Cowen Large Cap Value COW ANN 11/98
