COWEN FUNDS INC, 485BPOS, 2000-03-23

COWEN FUNDS INC
485BPOS, 2000-03-23

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<PAGE>

As filed with the Securities and Exchange Commission
on March 23, 2000 (to be effective April 1, 2000)
Securities Act File No. 33-18505
Investment Company Act File No 811-5388

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ X ]

Pre-Effective Amendment No. [ ]

Post-Effective Amendment No. 24 [ X ]

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 [ X ]

Amendment No. 25 [ X ]

(Check appropriate box or boxes)

SG COWEN FUNDS, INC.
--------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)

560 Lexington Avenue
New York, New York 10022
-------------------------------------- --------
(address of Principal Executive Offices) (Zip Code)

Registrant's Telephone Number, including Area Code: (212) 278-7500

Rodd M. Baxter, Esq.
SG Cowen Funds, Inc.
1221 Avenue of the Americas
New York, New York 10020
-------------------------------------------
(Name and Address of Agent for Service)

Copies to:
Jon S. Rand, Esq.
Willkie, Farr & Gallagher
787 Seventh Avenue
New York, New York 10019

Approximate Date of Proposed Public Offering
As soon as practicable after the effective
date of this Registration Statement

<PAGE>

It is proposed that this filing will become effective (check appropriate box):

Immediately upon filing pursuant to paragraph (b), or
- ---

X on April 1, 2000 pursuant to paragraph (b), or
- ---

60 days after filing pursuant to paragraph (a), or
- ---

on pursuant to paragraph (a)(1)
- ---

75 days after filing pursuant to paragraph (a)(2)
- ---

on (date) pursuant to paragraph (a)(2) of Rule 485.
- ---

2
<PAGE>

PROSPECTUS APRIL 1, 2000

SG COWEN INTERMEDIATE
FIXED INCOME FUND

SG COWEN GOVERNMENT
SECURITIES FUND

THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS, AND ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

<TABLE>
<S> <C>
[LOGO] [LOGO]
</TABLE>
<PAGE>
TABLE OF CONTENTS

SG COWEN INTERMEDIATE FIXED INCOME FUND..................... 3

SG COWEN GOVERNMENT SECURITIES FUND......................... 6

HOW WE MANAGE THE FUNDS..................................... 9

Our investment strategies................................... 9

The securities in which we typically invest................. 9

The risks of investing in the Funds......................... 11

WHO MANAGES THE FUNDS....................................... 11

Investment adviser.......................................... 11

Management Fees............................................. 12

Portfolio manager........................................... 12

ABOUT YOUR ACCOUNT.......................................... 12

Choosing a share class...................................... 12

How to reduce your sales charge............................. 14

How to buy shares........................................... 14

How to sell shares.......................................... 15

Account minimum............................................. 15

Special services............................................ 15

DIVIDENDS, DISTRIBUTIONS AND TAXES.......................... 16

FINANCIAL HIGHLIGHTS........................................ 17
</TABLE>

2
<PAGE>
SG COWEN INTERMEDIATE FIXED INCOME FUND ("INTERMEDIATE FUND")

WHAT ARE THE FUND'S GOALS?

The Fund seeks current income and stability of principal through investment
primarily in high quality intermediate term fixed income securities. Although
the Fund will strive to achieve these goals, there is no assurance that it will.

WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?

Under normal market conditions, we invest at least 65% of the Fund's assets
in high quality fixed income securities with a weighted average maturity between
three and ten years. The Fund may also invest in securities issued or guaranteed
by the U.S. Government and its agencies and instrumentalities, preferred stock,
corporate debt obligations, and mortgage related securities. The Fund may also
purchase securities on a when-issued basis. At least 65% of the Fund's assets
will be invested in securities rated in the two highest categories of the
ratings assigned by at least one Nationally Recognized Statistical Rating
Organization (NRSRO), and all of the Fund's assets will be invested in
securities in the four highest ratings assigned by at least one NRSRO, or if
unrated in securities determined by SG Cowen Asset Management to be of
comparable quality, when we buy them.

WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?

The market value of fixed income obligations of the Fund will be affected by
general changes in interest rates, which will result in increases or decreases
in the value of the obligations held by the Fund. The market value of the
obligations held by the Fund can be expected to vary inversely to changes in
prevailing interest rates. You should also recognize that, in periods of
declining interest rates, a Fund's yield will tend to be somewhat higher than
prevailing market rates and, in periods of rising interest rates, a Fund's yield
will tend to be somewhat lower. Also, when interest rates are falling, the
inflow of net new money to a Fund from the continuous sale of its shares will
tend to be invested in instruments producing lower yields than the balance of
its portfolio, thereby reducing the Fund's current yield. In periods of rising
interest rates, the opposite can be expected to occur. In addition, securities
in which the Fund may invest may not yield as high a level of current income as
might be achieved by investing in securities with less liquidity, less
creditworthiness or longer maturities. For further discussion of risk, see "How
We Manage the Fund."

You should keep in mind that an investment in the Fund is not a complete
investment program; it should be considered just one part of your total
investment program. You may wish to discuss this Fund with your financial
adviser to determine whether it is an appropriate choice for you.

3
<PAGE>
INTERMEDIATE FUND

HOW HAS THE FUND PERFORMED?

THE BAR CHART AND TABLE below can help you evaluate the potential risks and
rewards of investing in the Fund. We show how returns have varied since the Fund
commenced operations, as well as the average annual returns of all of the Fund's
shares for one year, five years, and since inception -- compared to the
performance of the Lehman Intermediate Government/Corporate Index. You should
remember that unlike the Fund, the Lehman Intermediate Government/ Corporate
Index is unmanaged and doesn't include the costs of buying, selling, and holding
the securities. The Fund's past performance is not necessarily an indication of
how it will perform in the future.

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
YEAR BY YEAR CLASS A RETURNS
<S> <C>
Year-end returns
1993* 5.74%
1994 (1.43)%
1995 14.92%
1996 3.47%
1997 8.13%
1998 8.94%
1999 (3.35)%
*Since inception
</TABLE>

During the years illustrated above, the Fund's highest return in one quarter
was +5.40% (9/30/98) and its lowest return in one calendar quarter (12/31/99)
was -2.04%.

CALENDAR YEAR RETURNS (CLASS A)

The maximum Class A sales charge of 2.35%, assessed when you purchase
shares, is not reflected in the total returns noted above. If this fee were
included, the returns would be less than those shown. The average annual returns
shown below do include the sales charge.

AVERAGE ANNUAL RETURNS AS OF 12/31/99

<TABLE>
<CAPTION>
1 Year 5 Years Inception*
-------- -------- ----------
<S> <C> <C> <C>
SG Cowen Intermediate Fixed Income Fund, Class A............ (5.66)% 5.74% 4.72%
Lehman Intermediate Government/Corporate Index.............. 0.39% 7.10% 5.90%
</TABLE>

<TABLE>
<CAPTION>
1 Year 5 Years Inception
-------- -------- ---------
<S> <C> <C> <C>
SG Cowen Intermediate Fixed Income Fund, Class B............ (6.50)% 5.87% 5.52%**
SG Cowen Intermediate Fixed Income Fund, Class I............ (3.12)% 6.49% 5.97%***
</TABLE>

* January 20, 1993

** July 12, 1994

*** July 11, 1994

4
<PAGE>
INTERMEDIATE FUND

WHAT ARE THE FUND'S FEES AND EXPENSES?

These tables describe the fees and expenses you may pay in connection with
an investment in the Fund.

SHAREHOLDERS FEES are paid directly from your investment. The Fund may waive
or reduce sales charges. Please see the Statement of Additional Information for
additional information on sales charges.

<TABLE>
<CAPTION>
Share Class A B I
- ----------- -------- -------- --------
<S> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a % of
offering price)........................................... 2.35%(1) None None
Maximum Contingent Deferred Sales Charge (Load) (as a % of
purchase price or redemption price, whichever is lower)... None 3.00%(2) None
Maximum Sales Charge (Load) on Reinvested Dividends......... None None None
Redemption Fees(3).......................................... None None None
Exchange Fee................................................ None None None
</TABLE>

ANNUAL FUND OPERATING EXPENSES are expenses that are deducted from the
Fund's assets.

<TABLE>
<CAPTION>
Share Class A B I
- ----------- -------- -------- --------
<S> <C> <C> <C>
Management Fees............................................. 0.50% 0.50% 0.50%
Distribution and Service (12b-1) Fees....................... 0.25% 0.50% 0.0%
Other Expenses.............................................. 1.45% 1.53% 1.58%
---- ---- ----
Total Operating Expenses(4)................................. 2.20% 2.53% 2.08%
</TABLE>

EXAMPLE(5)

This example is intended to help you compare the cost of investing in the
Fund to the cost of investing in other mutual funds. We show the cumulative
amount of Fund expenses on a hypothetical investment of $10,000 assuming an
annual 5% return and the Fund's operating expenses remaining the same. Unless
otherwise indicated, the example assumes that you redeem all of your shares at
the end of each period. This is an example only, and does not represent future
expenses, which may be greater or less than those shown here.

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Class A................................... $453 $907 $1,387 $2,709
Class B (assumes redemption at end of
period)................................. $556 $988 $1,445 $2,866
Class B (assumes no redemption)........... $256 $788 $1,345 $2,866
Class I................................... $211 $652 $1,119 $2,410
</TABLE>

- ------------
(1) A purchase of Class A shares at $1 million or more will be made at net asset
value.
(2) If you redeem Class B shares during the first year after you buy them, the
shares will be subject to a contingent deferred sales charge of 3%. The
contingent deferred sales charge is 3% during the second year, 2% during the
third and fourth years, 1% during the fifth and sixth years, and 0%
thereafter.
(3) The Fund currently charges $10.00 per redemption for redemptions payable by
wire.

(4) The above table does not reflect SGCAM's voluntary waiver of fees and
reimbursement of expenses. The total annual operating expenses after
considering reimbursement would have been .65%, .90% and .40% for Class A, B
and I, respectively.

(5) The Fund's actual rate of return may be greater or less than the
hypothetical 5% return we use here.

5
<PAGE>
SG COWEN GOVERNMENT SECURITIES FUND ("GOVERNMENT FUND")

WHAT ARE THE FUND'S GOALS?

The Fund seeks total return consisting of current income and appreciation of
capital primarily through investments in U.S. Government securities. Although
the Fund will strive to achieve these goals, there is no assurance that it will.

WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?

Under normal market conditions, at least 65% of the Fund's assets will be
invested in U.S. Government securities. The balance of the Fund's assets will be
invested in mortgage related securities rated in the four highest ratings
assigned by at least one Nationally Recognized Statistical Rating Organization
(NRSRO), or if unrated in securities determined by SG Cowen Asset Management to
be of comparable quality, when we buy them. The Fund may also purchase
securities on a when-issued basis.

Additional information about the Fund's investments is available in the
Fund's annual and semi-annual reports to shareholders and the statement of
additional information.

WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?

The market value of fixed income obligations of the Fund will be affected by
general changes in interest rates, which will result in increases or decreases
in the value of the obligations held by the Fund. The market value of the
obligations held by one Fund can be expected to vary inversely to changes in
prevailing interest rates. You should also recognize that, in periods of
declining interest rates, the Fund's yield will tend to be somewhat higher than
prevailing market rates and, in periods of rising interest rates, a Fund's yield
will tend to be somewhat lower. Also, when interest rates are falling, the
inflow of net new money to a Fund from the continuous sale of its shares will
tend to be invested in instruments producing lower yields than the balance of
its portfolio, thereby reducing the Fund's current yield. In periods of rising
interest rates, the opposite can be expected to occur. In addition, securities
in which the Fund may invest may not yield as high a level of current income as
might be achieved by investing in securities with less liquidity, less
creditworthiness or longer maturities. For further discussion of risk, see "How
We Manage the Fund."

6
<PAGE>
GOVERNMENT FUND

HOW HAS THE FUND PERFORMED?

THE BAR CHART AND TABLE below can help you evaluate the potential risks and
rewards of investing in the Fund. We show how returns have varied since the Fund
commenced operations, as well as the average annual returns of all of the Fund's
shares for one year, five years, and since inception -- compared to the
performance of the Lehman Aggregate Index. You should remember that unlike the
Fund, the Lehman Aggregate Index is unmanaged and doesn't include the costs of
buying, selling, and holding the securities. The Fund's past performance is not
necessarily an indication of how it will perform in the future.

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
YEAR BY YEAR CLASS A RETURNS
<S> <C>
Year-end returns
1993* 7.85%
1994 (2.80)%
1995 15.83%
1996 1.92%
1997 8.57%
1998 10.49%
1999 (2.16)%
*Since inception
</TABLE>

During the years illustrated above, the Fund's highest return in one quarter
was +6.61% (9/30/98) and its lowest return in one calendar quarter (3/31/94) was
- -2.38%.

CALENDAR YEAR RETURNS (CLASS A)

The maximum Class A sales charge of 4.75%, assessed when you purchase
shares, is not reflected in the total returns noted above. If this fee were
included, the returns would be less than those shown. The average annual returns
shown below do include the sales charge.

AVERAGE ANNUAL RETURNS AS OF 12/31/99

<TABLE>
<CAPTION>
1 Year 5 Years Inception*
-------------- -------- ----------
<S> <C> <C> <C>
SG Cowen Government Securities Fund, Class A................ (6.83)% 5.70% 4.79%
Lehman Aggregate Index...................................... (0.82)% 7.73% 6.32%
</TABLE>

<TABLE>
<CAPTION>
1 Year 5 Years Inception
-------- -------- ---------
<S> <C> <C> <C>
SG Cowen Government Securities Fund, Class I................ (2.07%) 7.01% 6.42%**
</TABLE>

* January 20, 1993

** July 11, 1994

There are currently no Class B shares outstanding.

7
<PAGE>
GOVERNMENT FUND

WHAT ARE THE FUND'S FEES AND EXPENSES?

These tables describe the fees and expenses you may pay in connection with
an investment in the Fund.

SHAREHOLDERS FEES are paid directly from your investment. The Fund may waive
or reduce sales charges. Please see the Statement of Additional Information for
additional information on sales charges.

<TABLE>
<CAPTION>
Share Class A B I
- ----------- -------- -------- --------
<S> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a % of
offering price)........................................... 4.75%(1) None None
Maximum Contingent Deferred Sales Charge (Load) (as a % of
purchase price or redemption price, whichever is lower)... None 5.00%(2) None
Maximum Sales Charge (Load) on Reinvested Dividends......... None None None
Redemption Fees(4).......................................... None None None
Exchange fee................................................ None None None
</TABLE>

ANNUAL FUND OPERATING EXPENSES are expenses that are deducted from the
Fund's assets.

<TABLE>
<CAPTION>
Share Class A B* I
- ----------- -------- -------- --------
<S> <C> <C> <C>
Management Fees............................................. 0.60% 0.60% 0.60%
Distribution and Service (12b-1) Fees....................... 0.25% 1.00% 0.0%
Other Expenses.............................................. 5.71% 5.71% 6.03%
------ ------ ------
Total Operating Expenses.................................... 6.56% 7.31% 6.63%
</TABLE>

* Expenses have been estimated based on Class A expenses.

EXAMPLE(5)

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Class A................................... $1,095 $2,306 $3,480 $6,257
Class B (assumes redemption at end of
period)................................. $1,223 $2,418 $3,650 $6,519
Class B (assumes no redemption)........... $ 723 $2,118 $3,450 $6,519
Class I................................... $ 658 $1,941 $3,183 $6,114
</TABLE>

- ------------

(1) A purchase of Class A shares at $1 million or more will be made at net asset
value.

(2) If you redeem Class B shares during the first year after you buy them, the
shares will be subject to a contingent deferred sales charge of 5%. The
contingent deferred sales charge is 4% during the second year, 3% during the
third and fourth years, 2% during the fifth year, 1% during the sixth year,
and 0% thereafter.

(3) The Fund currently charges $10.00 per redemption for redemptions payable by
wire.

8
<PAGE>

(4) The above table does not reflect SGCAM's voluntary waiver of fees and
reimbursement of expenses. The total annual operating expenses after
considering a reimbursement waiver have been .40%, .90% and .40% for Class
A, B and I, respectively.

(5) The Fund's actual rate of return may be greater or less than the
hypothetical 5% return we use here.

HOW WE MANAGE THE FUNDS

OUR INVESTMENT STRATEGIES

We analyze economic and market conditions, seeking to identify the
securities that we think make the best investments in pursuit of our investment
objectives. We blend a number of investment strategies to manage the Funds.

SG COWEN INTERMEDIATE FIXED INCOME FUND

We seek to achieve the Fund's objectives by investing primarily in high
quality fixed income securities. If we anticipate a rise in interest rates, we
will reduce the weighted average maturity of the securities in which we invest,
but in no case will that be less than three years. On the other hand, if we
anticipate a decline in interest rates, we will lengthen the average weighted
maturity, but in no case will that be more than ten years. The maximum remaining
maturity of any investment held by the Fund is 40 years. We invest only in those
securities rated in the highest categories of a nationally recognized
statistical rating organization. If a security is not rated, we invest only in
those which we deem to be of comparable quality of those securities described in
the previous sentence. At least 65% of the Fund's assets will be invested in
securities rated in the two highest categories of the ratings assigned by at
least one Nationally Recognized Statistical Rating Organization (NRSRO), and all
of the Fund's assets will be invested in securities in the four highest ratings
assigned by at least one NRSRO, or if unrated in securities determined by SG
Cowen Asset Management to be of comparable quality, when we buy them.

THE SECURITIES IN WHICH WE TYPICALLY INVEST

The following is a description of the securities in which the Intermediate
Fund normally invests. Please see the Statement of Additional Information for
additional descriptions and risk information on these and all the securities in
which we invest.

U.S. GOVERNMENT SECURITIES

U.S. government securities include U.S. Treasury bills, notes and bonds, as
well as securities issued or guaranteed by U.S. government agencies or
instrumentalities, such as the Federal Home Loan Banks and Farmers Home
Administration. U.S. government securities includes zero coupon bonds which are
bonds that are sold for only a fraction of their par value and don't pay
interest. Instead, the bond increases to its full value when it matures.

CORPORATE BONDS

Corporate bonds are debt obligations issued by a corporation.

DEBENTURE

An unsecured bond backed by the creditworthiness of the issuer, but not by
the issuer's tangible assets.

9
<PAGE>
FLOATING RATE NOTES

A floating rate note is a debt obligation whose interest rate changes
whenever a specified benchmark interest rate, such as the federal funds rate,
changes.

MORTGAGE-BACKED SECURITIES

Fixed income securities that represent pools of mortgages, with investors
receiving principal and interest payments as the underlying mortgage loans are
paid back. Many are issued and guaranteed against default by the U.S. Government
or its agencies or instrumentalities, such as the Federal Home Loan Mortgage
Corporation, the Federal National Mortgage Association and the Government
National Mortgage Association. Others are issued by private financial
institutions, with some fully collateralized by certificates issued or
guaranteed by the government or its agencies or instrumentalities.

NON-CONVERTIBLE FIXED INCOME PREFERRED STOCK

Preferred stock is stock with a fixed dividend rate that must be paid before
the dividend of any common stock, pays a guaranteed rate of interest and cannot
be converted into common stock.

SG COWEN GOVERNMENT SECURITIES FUND

We seek to achieve the Fund's objectives by investing primarily in high
quality fixed income securities. If we anticipate a rise in interest rates, we
will reduce the average weighted maturity of the securities in which we invest,
and if we anticipate a decline in interest rates, we will lengthen the average
weighted maturity. Under normal market conditions, at least 65% of the Fund's
assets will be invested in U.S. government securities. The balance of the Fund's
assets will be invested in mortgage related securities rated in the four highest
ratings assigned by at least one NRSRO, or if unrated in securities determined
by SG Cowen Asset Management to be of comparable quality, when we buy them.

THE SECURITIES IN WHICH WE TYPICALLY INVEST

The following is a description of the securities in which the Government
Fund normally invests. Please see the Statement of Additional Information for
additional descriptions and risk information on these and all the securities in
which we invest.

U.S. GOVERNMENT SECURITIES

MORTGAGE-BACKED SECURITIES

10
<PAGE>
National Mortgage Association and the Government National Mortgage Association.
Others are issued by private financial institutions, with some fully
collateralized by certificates issued or guaranteed by the government or its
agencies or instrumentalities.

THE FOLLOWING APPLIES TO BOTH FUNDS:

PURCHASING SECURITIES ON A WHEN-ISSUED OR DELAYED DELIVERY BASIS

Each Fund may buy or sell securities on a when-issued or delayed delivery
basis, paying for the securities before delivery or taking delivery at a later
date. When-issued securities, although authorized, have not yet been issued.
Buying and selling securities on a delayed delivery basis calls for the delivery
of the securities at an agreed upon date later than the scheduled date.

PORTFOLIO TURNOVER

Both Funds anticipate that their annual portfolio turnover will be less than
100%. A turnover rate of 100% would occur if a Fund sold and replaced within one
year securities valued at 100% of the Fund's net assets. While we do not intend
to engage in short term trading, we sell securities regardless of how long we
have held them in order to take advantage of investment opportunities or to take
advantage of changing economic conditions. We conduct ongoing analysis of the
markets to determine what investments are appropriate for the current economic
and investment environment and then act on that analysis. The Funds do not
anticipate that portfolio turnover will affect the performance or have any tax
consequences for their shareholders.

THE RISKS OF INVESTING IN THE FUND

WHO MANAGES THE FUNDS

The officers of each Fund conduct the Fund's daily business operations,
subject to the supervision of the Fund's Board of Directors.

INVESTMENT ADVISER

From each Fund's commencement of operations until July 1, 1998, Cowen & Co
("Cowen") served as investment manager to the Fund. On July 1, 1998, Cowen's
business was combined with Societe Generale Securities Corporation, a subsidiary
of Societe Generale ("SG"), to form SG Cowen Securities Corporation ("SG
Cowen"). SG, a leading international commercial and investment bank established
in 1864, has a global network of offices in over 80 countries.

11
<PAGE>

From July 1, 1998 through December 31, 1999 SG Cowen through its SG Cowen Asset
Management Division served as the investment manager to the Funds, with the
existing investment management personnel of Cowen continuing to provide
investment management services to the Funds. In January 2000 as a result of an
internal reorganization, the SG Cowen Asset Management Division of SG Cowen was
transferred to SG Cowen Asset Management, Inc. ("SGCAM"). All officers and
employees engaged in providing investment advisory services to the Funds with
SG Cowen have become officers and employees of SGCAM and they will continue to
provide the same services to the Funds for the same management fees described
below. SGCAM which currently manages approximately $3.5 billion in assets,
manages the Funds' business affairs, including being responsible for the Funds'
investment program and provides daily administrative services.

MANAGEMENT FEES

For managing the Intermediate Fund and the Government Fund and their
investments, the adviser is paid a yearly fee of 0.50% and 0.60%, respectively,
of daily net asset value.

PORTFOLIO MANAGER

Alan E. Koepplin is a Senior Investment Officer and is responsible for the
daily management of each Fund's portfolio. He has had such responsibility since
the Funds commenced operations in January, 1993. He has served as a Director and
Portfolio Manager of SG Cowen and then SGCAM since July 1, 1998. Prior thereto
he was a Director and Portfolio Manager of Cowen Asset Management.

ABOUT YOUR ACCOUNT

You can choose from a number of share classes. Because each share class has
a different combination of sales charges, fees, and other features, you should
consult your financial adviser to determine which class best suits your
investment goals and time frame.

CHOOSING A SHARE CLASS

CLASS A Class A shares have an up-front sales charge that you pay when you
buy the shares. If you invest $50,000 or more your front-end sales charge will
be reduced. You may qualify for other reduced sales charges, as described in
"How To Reduce Your Sales Charges," and under certain circumstances the sales
charge may be waived; please see the Fund's Statement of Additional Information.
Class A shares are also subject to an annual 12b-1 fee no greater than 0.25% of
the Fund's average daily net assets, which is lower than the 12b-1 fee for
Class B shares. The 12b-1 plan allows the Fund to pay distribution fees for the
sale and distribution of its shares. Class A shares are not subject to a
contingent deferred sales charge. The offering price includes a front-end sales
charge.

12
<PAGE>
CLASS A SHARES FEES

INTERMEDIATE FUND

<TABLE>
<CAPTION>
Sales Charge as a Sales Charge as a
Percentage of the Percentage of the Dealer
Shares Purchased in Single Transaction Public Offering Price Net Amount Invested Reallowance
- -------------------------------------- --------------------- ------------------- -----------
<S> <C> <C> <C>
Up to $49,999............................ 2.35% 2.40% 2.00%
$50,000 to $99,999....................... 2.25% 2.30% 1.90%
$100,000 to $249,999..................... 2.00% 2.04% 1.75%
$250,000 to $499,999..................... 1.75% 1.78% 1.50%
$500,000 to $999,999..................... 1.45% 1.47% 1.25%
$1,000,000 to $2,999,999................. 0% 0% 0.60%
$3,000,000 to $3,999,999*................ 0% 0% 0.30%
</TABLE>

GOVERNMENT FUND

<TABLE>
<CAPTION>
Sales charge Sales charge as Dealer's commission
as % of % of amount as % of offering
Amount of purchase offering price invested price
- ------------------ -------------- --------------- -------------------
<S> <C> <C> <C>
Up to $49,999................................ 4.75% 5.00% 4.00%
$50,000 to $99,999........................... 4.00% 4.17% 3.25%
$100,000 to $249,999......................... 3.75% 3.90% 3.00%
$250,000 to $499,999......................... 2.50% 2.56% 2.00%
$500,000 to $999,999......................... 2.00% 2.04% 1.50%
$1,000,000 to $2,999,999..................... 0% 0% 1.00%
$3,000,000 to $3,999,999*.................... 0% 0% 0.50%
</TABLE>

*If you invest $4 million or more, you will receive Class I shares, which
are not subject to any sales charge or service fee.

CLASS B Class B shares have no up-front sales charge, so the full amount of
your purchase is invested in the Fund. However, you will pay a contingent
deferred sales charge if you redeem your shares within six years after you buy
them. If you redeem Class B shares of Intermediate Fund during the first year
after you buy them, the shares will be subject to a contingent deferred sales
charge of 3%. The contingent deferred sales charge is 3% during the second year,
2% during the third and fourth years, 1% during the fifth and sixth years, and
0% thereafter. If you redeem Class B shares of Government Fund during the first
year after you buy them, the shares will be subject to a contingent deferred
sales charge of 5%. The contingent deferred sales charge is 4% during the second
year, 3% during the third and fourth years, 2% during the fifth year, 1% during
the sixth year, and 0% thereafter. Under certain circumstances the contingent
deferred sales charge may be waived; please see the Fund's Statement of
Additional Information. Class B Shares of Intermediate Fund are subject to a
service fee at the annual rate of 0.25%, and a distribution fee at the annual
rate of 0.25%, and Class B shares of Government Fund are subject to a service
fee at the annual rate of 0.25%, and a distribution fee at the annual rate of
0.75%, of the value of the respective Fund's average daily net assets
attributable to this Class. The 12b-1 plan allows each Fund to pay distribution
fees for the sale and distribution of its shares.

13
<PAGE>
CLASS I Class I shares have no up-front sales charge, so the full amount of
your purchase is invested in the Funds. Class I shares are not subject to a
contingent deferred sales charge or to an annual 12b-1 fee. Class I shares may
be referred to as institutional shares. They are available exclusively to
certain types of investors such as employee benefit plans of selected dealers of
the Funds, charitable organizations, investment advisory and consulting clients
of SG Cowen, accounts as to which a broker, registered investment adviser, or
bank charges an account management fee and certain omnibus accounts. Please
contact your financial adviser for further information or see the Fund's
Statement of Additional Information.

HOW TO REDUCE YOUR SALES CHARGE

We offer a number of ways to reduce or eliminate the sales charge on shares.
Please refer to the Funds' Statement of Additional Information for detailed
information and eligibility requirements. You can also get additional
information from your financial adviser. You or your financial adviser must
notify us at the time you purchase shares if you are eligible for any of these
programs.

PROGRAM

Letter of intent You can use a Letter of Intent to combine all your purchases
of Class A shares in selected SG Cowen Funds over a 13-month
period to qualify for reduced front-end sales charges.

Rights of accumulation You may also combine your previous purchases of Class A
shares in the Fund along with the purchase of Class A shares
of selected other SG Cowen Funds to reduce your front-end
sales charges.

Reinvestment of redeemed Up to 30 days after you redeem your Class A shares, you can
shares reinvest the proceeds without paying a front-end sales
charge. You may use this privilege only once.

Certain individuals, Qualified individuals, organizations, retirement and profit
employees of SG Cowen, sharing plans, and others may qualify for the purchase of
401(k) and other retirement Class A shares without a sales charge.
plans

Please see your financial adviser to determine whether you qualify for any of these
programs, or consult the Statement of Additional Information.
</TABLE>

HOW TO BUY SHARES

Your financial adviser can handle all the details of purchasing shares,
including opening an account. You can also invest in the Fund by mail. Complete
an investment slip indicating the class of shares you wish to purchase, and mail
it with your check payable to the Fund to: DST Systems, Inc. ("DST"), 210 West
10th Street, Kansas City, MO 64105. If you are making an initial purchase by
mail, you must include a completed Investment Application, or an appropriate
retirement plan application if you are opening a retirement account, with your
check. If you want to purchase shares by Federal wire, contact the Fund directly
at 1-877-293-7298. There is no charge for establishing or maintaining an
account.

14
<PAGE>
You can open an account with an initial investment of $1,000 and make
additional investments at any time for as little as $100. The price you pay for
shares will depend on when we receive your purchase order. If you are buying
shares in an IRA, or a retirement plan for self-employed persons, the minimum
initial purchase is $500, and additional investments of only $50 after that.

If your order is received before 4:15 p.m. Eastern time on a business day,
you will pay that day's closing share price which is based on the Funds' net
asset value. If your order is received after 4:15 p.m., you will pay the next
business day's price. A business day is any day that the New York Stock Exchange
is open for business. We reserve the right to reject any purchase order.

Normally, we determine the Funds' net asset value (NAV) per share as of
4:15 p.m. Eastern time each day the New York Stock Exchange is open for
business. We calculate the net asset value per share by adding the market value
of all the securities and other assets in the Fund's portfolio, deducting all
liabilities, and dividing the resulting number by the number of shares
outstanding. We price securities and other assets for which market quotations
are available at their market value. Any short-term investments which have a
maturity of less than 60 days are priced at amortized cost.

HOW TO SELL SHARES

You can sell your shares back to each Fund by mail or by contacting your
financial adviser. Generally, SG Cowen and other authorized dealers will act on
your oral instructions to redeem shares. If you send a written order to DST to
redeem shares, your request must be signed by all owners of the account, and you
must include a signature guarantee for each owner. If you hold your shares in
certificates, you must submit the certificates with your request to sell the
shares.

When a properly completed request to sell or exchange shares is received by
4:15 p.m. Eastern time on any day the New York Stock Exchange is open for
business, you will receive the net asset value as determined on the business day
your request is received. We will pay you normally within three business days,
but no later than seven days after your request to sell your shares is received.
If you purchased your shares by check, we will wait until your check has
cleared, which can take up to 15 days, before we send you the proceeds from the
sale of your shares.

ACCOUNT MINIMUM

If as a result of redemption your account balance falls below the required
minimum amount of $500, you will have 30 days to raise the balance to the
minimum after we notify you in writing. If your account is not at the minimum by
the required time, we may redeem it.

SPECIAL SERVICES

To help make investing with us as easy as possible, and to help you build
your investments, we offer the following special services. You can get further
information about these programs by calling Shareholder Services at
1-877-293-7298.

- - You can exchange all or part of your shares for the same class of shares in
certain other SG Cowen funds without paying a sales charge. When you exchange
shares, you are purchasing shares in another fund, so you should be sure to
get a copy of the Fund's prospectus and read it carefully before buying shares
through an exchange. For income tax purposes, an exchange is treated as a
concurrent sale and purchase and any gain on the transaction may be subject to
income tax. Therefore, you should consult your tax adviser about the tax
consequences of any exchange.

15
<PAGE>
- - You can automatically invest regular monthly investments of $100 or more
directly from your checking account. No fee is charged for these automatic
transactions, but a service charge of $10.00 will be deducted for checks
returned for insufficient funds. The Funds reserve the right upon notification
to all participants, to impose a fee in the future.

- - You may buy shares in the Funds for your individual or group retirement plan,
including your Individual Retirement Account (IRA), Roth IRA and Education
IRA.

- - Through our Systematic Withdrawal Plan, you can arrange a regular monthly,
quarterly, or annual payment from your account made to you or someone you
designate. If the value of your account is $10,000 or more, you can make
withdrawals of at least $50 monthly.

DIVIDENDS, DISTRIBUTIONS AND TAXES

Each Fund declares income dividends daily and pays them monthly, while any
net realized capital gains are generally distributed annually. We automatically
reinvest all dividends and any capital gains, unless you tell us otherwise.

Tax laws are subject to change, so we urge you to consult your tax adviser
about your particular tax situation and how it might be affected by current tax
law. The tax status of your dividends from a Fund is not affected by whether you
reinvest your dividends or receive them in cash. Dividends from short-term
capital gains and net investment income are generally taxable as ordinary
income; dividends from long-term capital gains are taxable as capital gains. In
addition, you may be subject to state and local taxes on distributions.

We will send you a statement each year detailing the amount and tax status
of all dividends and capital gains that you were paid during the prior year.

16
<PAGE>
FINANCIAL HIGHLIGHTS

These financial highlights tables are intended to help you understand each
Fund's financial performance for the past five years. All information reflects
financial results for a single share in each Fund. The following information for
the year ended November 30, 1999 has been audited by KPMG LLP, Independent
Auditors whose report, thereon appears in the Fund's Annual Report, which is
available upon request by calling (877) 293-7298. The information for fiscal
years ended prior to November 30, 1999 has been audited by other independent
auditors.

<TABLE>
<CAPTION>
SG Cowen Intermediate
Fixed Income Fund - Class A
----------------------------------------------------
Year Ended November 30,
----------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of Year................................. $ 9.80 $ 9.47 $ 9.47 $ 9.71 $ 9.12
------ ------ ------ ------- -------
INCOME FROM INVESTMENT OPERATIONS
Investment Income - Net........................... 0.54 0.53 0.59 0.63 0.67
Net Realized and Unrealized Gains (Losses) on
Investments...................................... (0.67) 0.33 - (0.15) 0.59
------ ------ ------ ------- -------
Net from Investment Operations.................... (0.13) 0.86 0.59 0.48 1.26
------ ------ ------ ------- -------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income.............. (0.54) (0.53) (0.59) (0.63) (0.67)
Distributions from Net Realized Gains on
Investments...................................... - - - (0.09) -
------ ------ ------ ------- -------
Total Distributions............................... (0.54) (0.53) (0.59) (0.72) (0.67)
------ ------ ------ ------- -------
NET ASSET VALUE
End of Year....................................... $ 9.13 $ 9.80 $ 9.47 $ 9.47 $ 9.71
====== ====== ====== ======= =======
Total Return(1)..................................... (1.35)% 9.38% 6.47% 5.21% 14.22%
RATIOS / SUPPLEMENTARY DATA
Net Assets (000 omitted).......................... $5,251 $7,671 $9,341 $11,885 $14,667
Ratio of Expenses to Average Net Assets........... 0.65% 0.65% 0.65% 0.59% 0.47%
Ratio of Investment Income - Net to Average Net
Assets........................................... 5.72% 5.58% 6.29% 6.61% 6.90%
Decrease Reflected on Above Ratios Due to:
Investment Management and Service Fees Waived... 0.50% 0.50% 0.50% 0.50% 0.50%
Other Expenses Waived or Absorbed............... 1.05% 0.51% 0.60% 0.52% 0.86%
Portfolio Turnover Rate........................... 15% 64% 92% 110% 264%
</TABLE>

17
<PAGE>

<TABLE>
<CAPTION>
SG Cowen Intermediate Fixed
Income Fund - Class B
----------------------------------------------------
Year Ended November 30,
----------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of Year....................................... $9.87 $9.54 $9.54 $9.78 $9.17
----- ----- ----- ----- -----
INCOME FROM INVESTMENT OPERATIONS
Investment Income - Net................................. 0.52 0.51 0.53 0.61 0.65
Net Realized and Unrealized Gains (Losses) on
Investments............................................ (0.68) 0.33 - (0.15) 0.61
----- ----- ----- ----- -----
Net from Investment Operations.......................... (0.16) 0.84 0.53 0.46 1.26
----- ----- ----- ----- -----
LESS DISTRIBUTIONS:
Dividends from Net Investment Income.................... (0.52) (0.51) (0.53) (0.61) (0.65)
Distributions from Net Realized Gains on Investments.... - - - (0.09) -
----- ----- ----- ----- -----
Total Distributions..................................... (0.52) (0.51) (0.53) (0.70) (0.65)
----- ----- ----- ----- -----
NET ASSET VALUE
End of Year............................................. $9.19 $9.87 $9.54 $9.54 $9.78
===== ===== ===== ===== =====
Total Return(1)........................................... (1.65)% 9.07% 6.21% 4.96% 14.12%
RATIOS / SUPPLEMENTARY DATA
Net Assets (000 omitted)................................ $ 350 $ 591 $ 630 $ 769 $ 577
Ratio of Expenses to Average Net Assets................. 0.90% 0.90% 0.90% 0.85% 0.68%
Ratio of Investment Income - Net to Average Net
Assets................................................. 5.54% 5.33% 6.03% 6.40% 6.79%
Decrease Reflected on Above Ratios Due to:
Investment Management, Service and Distribution Fees
Waived............................................... 0.50% 0.50% 0.50% 0.50% 0.50%
Other Expenses Waived or Absorbed..................... 1.13% 0.52% 0.54% 0.54% 0.46%
Portfolio Turnover Rate................................. 15% 64% 92% 110% 264%
</TABLE>

18
<PAGE>

<TABLE>
<CAPTION>
SG Cowen Intermediate Fixed
Income Fund - Class I
----------------------------------------------------
Year Ended November 30,
----------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of Year..................................... $9.77 $9.44 $9.44 $ 9.68 $ 9.10
----- ----- ----- ------ ------
INCOME FROM INVESTMENT OPERATIONS
Investment Income - Net............................... 0.57 0.55 0.61 0.65 0.69
Net Realized and Unrealized Gains (Losses) on
Investments.......................................... (0.67) 0.33 - (0.15) 0.58
----- ----- ----- ------ ------
Net from Investment Operations........................ (0.10) 0.88 0.61 0.50 1.27
----- ----- ----- ------ ------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income.................. (0.57) (0.55) (0.61) (0.65) (0.69)
Distributions from Net Realized Gains on
Investments.......................................... - - - (0.09) -
----- ----- ----- ------ ------
Total Distributions................................... (0.57) (0.55) (0.61) (0.74) (0.69)
----- ----- ----- ------ ------
NET ASSET VALUE
End of Year........................................... $9.10 $9.77 $9.44 $ 9.44 $ 9.68
===== ===== ===== ====== ======
Total Return............................................ (1.11)% 9.65% 6.74% 5.46% 14.41%
RATIOS / SUPPLEMENTARY DATA
Net Assets (000 omitted).............................. $ 191 $ 437 $ 701 $1,745 $1,872
Ratio of Expenses to Average Net Assets............... 0.40% 0.40% 0.40% 0.35% 0.20%
Ratio of Investment Income - Net to Average Net
Assets............................................... 5.96% 5.87% 6.63% 6.87% 7.23%
Decrease Reflected on Above Ratios Due to:
Investment Management Fee Waived.................... 0.50% 0.50% 0.50% 0.50% 0.50%
Other Expenses Waived or Absorbed................... 1.18% 0.51% 0.50% 0.42% 0.97%
Portfolio Turnover Rate 15% 64% 92% 110% 264%
</TABLE>

- ---------------

(1) Exclusive of Sales Charges

<PAGE>

<TABLE>
<CAPTION>
SG Cowen Government Securities Fund -
Class A
----------------------------------------------------
Year Ended November 30,
----------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of Year......................................... $10.03 $ 9.58 $ 9.59 $ 9.83 $ 9.17
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Investment Income - Net................................... 0.55 0.55 0.61 0.64 0.69
Net Realized and Unrealized Gains (Losses) on
Investments.............................................. (0.66) 0.48 (0.01) (0.24) 0.66
------ ------ ------ ------ ------
Net from Investment Operations............................ (0.11) 1.03 0.60 0.40 1.35
------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income...................... (0.55) (0.55) (0.61) (0.64) (0.69)
Distributions from Net Realized Gains on Investments...... (0.25) (0.03) - - -
------ ------ ------ ------ ------
Total Distributions....................................... (0.80) (0.58) (0.61) (0.64) (0.69)
------ ------ ------ ------ ------
NET ASSET VALUE
End of Year............................................... $ 9.12 $10.03 $ 9.58 $ 9.59 $ 9.83
====== ====== ====== ====== ======
Total Return(1)............................................. (1.17)% 11.13% 6.55% 4.34% 15.23%
RATIOS / SUPPLEMENTARY DATA
Net Assets (000 Omitted).................................. $1,417 $1,542 $3,433 $2,631 $3,945
Ratio of Expenses to Average Net Assets................... 0.40% 0.40% 0.40% 0.34% 0.22%
Ratio of Investment Income - Net to Average Net Assets.... 5.85% 5.71% 6.47% 6.72% 7.08%
Decrease Reflected on Above Ratios Due to:
Investment Management and Service Fees Waived........... 0.85% 0.85% 0.85% 0.85% 0.85%
Other Expenses Waived or Absorbed....................... 5.31% 2.62% 2.70% 2.72% 3.63%
Portfolio Turnover Rate................................... 53% 69% 184% 107% 289%
</TABLE>

- ---------------

(1) Exclusive of sales charge

20
<PAGE>

<TABLE>
<CAPTION>
SG Cowen Government
Securities Fund -- Class I
----------------------------------------------------
Year Ended November 30,
----------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of Year..................................... $10.15 $ 9.70 $9.71 $9.94 $9.17
------ ------ ----- ----- -----
INCOME FROM INVESTMENT OPERATIONS
Investment Income - Net............................... 0.56 0.56 0.62 0.65 0.70
Net Realized and Unrealized Gains (Losses) on
Investments.......................................... (0.68) 0.48 (0.01) (0.23) 0.77
------ ------ ----- ----- -----
Net from Investment Operations........................ (0.12) 1.04 0.61 0.42 1.47
------ ------ ----- ----- -----
LESS DISTRIBUTIONS:
Dividends from Net Investment Income.................. (0.56) (0.56) (0.62) (0.65) (0.70)
Distributions from Net Realized Gains on
Investments.......................................... (0.25) (0.03) - - -
------ ------ ----- ----- -----
Total Distributions................................... (0.81) (0.59) (0.62) (0.65) (0.70)
------ ------ ----- ----- -----
NET ASSET VALUE
End of Year........................................... $ 9.22 $10.15 $9.70 $9.71 $9.94
====== ====== ===== ===== =====
Total Return(1)......................................... (1.30)% 11.04% 6.55% 4.48% 16.52%
RATIOS / SUPPLEMENTARY DATA
Net Assets (000 omitted).............................. $ 123 $ 127 $ 63 $ 93 $ 45
Ratio of Expenses to Average Net Assets............... 0.40% 0.40% 0.40% 0.36% 0.20%
Ratio of Investment Income - Net to Average Net
Assets............................................... 5.86% 5.60% 6.49% 6.75% 7.12%
Decrease Reflected on Above Ratios Due to:
Investment Management Fees Waived................... 0.60% 0.60% 0.60% 0.60% 0.60%
Other Expenses Waived or Absorbed................... 5.63% 3.66% 3.06% 3.14% 5.14%
Portfolio Turnover Rate............................... 53% 69% 184% 107% 289%
</TABLE>

21
<PAGE>
(This page has been left blank intentionally.)

22
<PAGE>

Additional information about the Fund's investments is available in the
Fund's annual and semi-annual reports to shareholders. In the Fund's annual
report, you will find a discussion of the market conditions and investment
strategies that significantly affected the Fund's performance during its last
fiscal year. You can find more detailed information about the Fund in its
current Statement of Additional Information, which we have filed electronically
with the Securities and Exchange Commission (SEC) and which is legally a part of
this prospectus. If you want a free copy of the Statement of Additional
Information, the annual or semi-annual report, or if you have any questions
about investing in this Fund, you can write to us at Financial Square, New York,
NY 10005, or Funds Distributor Inc., the Fund's distributor, at 60 State Street,
Boston, MA 02109, or call toll-free 1-877-293-7298.

You can find reports and other information about the Fund on the SEC Web
site (http://www.sec.gov), or you can get copies of this information, after
payment of a duplicating fee, by writing to the Public Reference Section of the
SEC, Washington, D.C. 20549-6009. Information about the Fund, including the
Statement of Additional Information, can be reviewed and copied at the
Securities and Exchange Commission's Public Reference Room in Washington, D. C.
You can get information on the public reference room by calling the SEC at
1-800-SEC-0330.

Investment Company Act file number: 811-5388
<PAGE>

PROSPECTUS APRIL 1, 2000

SG COWEN OPPORTUNITY
FUND

[LOGO] [LOGO]
<PAGE>
TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
FUND PROFILE............................................. 3

HOW WE MANAGE THE FUND................................... 6

Our investment strategies................................ 6

The securities in which we typically invest.............. 6

Temporary Defensive Position............................. 7

The risks of investing in the Fund....................... 7

WHO MANAGES THE FUND..................................... 7

Investment adviser....................................... 7

Management fees.......................................... 8

Portfolio manager........................................ 8

ABOUT YOUR ACCOUNT....................................... 8

Choosing a share class................................... 8

How to reduce your sales charge.......................... 9

How to buy shares........................................ 10

How to sell shares....................................... 11

Account minimum.......................................... 11

Special services......................................... 11

DIVIDENDS, DISTRIBUTIONS AND TAXES....................... 12

FINANCIAL HIGHLIGHTS..................................... 13
</TABLE>

2
<PAGE>
FUND PROFILE:

WHAT ARE THE FUND'S GOALS?

The Fund seeks capital appreciation by investing primarily in small
capitalization issuers. Current income is incidental. Although the Fund will
strive to achieve these goals, there is no assurance that it will.

WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?

After analyzing economic and market conditions, seeking to identify the
securities that it thinks make the best investments in pursuit of the investment
objective of capital appreciation, we will develop a diversified portfolio of
securities from a broad group of industry sectors. We invest primarily in common
stocks that we believe have the potential for above-average capital appreciation
over time. Generally, at least 65% of the Fund's assets will be in the stock of
companies with a market capitalization of $1 billion or less.

Additional information about the Fund's investments is available in the
Fund's annual and semi-annual reports to shareholders and the statement of
additional information.

WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?

Investing in any mutual fund involves risk, including the risk that you may
lose part or all of the money you invest. The price of Fund shares will increase
and decrease according to changes in the value of the Fund's investments. The
Fund will be particularly affected by changes in stock prices, which tend to
fluctuate more than bond prices. For further discussion of risk, see "How We
Manage the Fund."

3
<PAGE>
HOW HAS THE FUND PERFORMED?

THE BAR CHART AND TABLE below can help you evaluate the potential risks and
rewards of investing in the Fund. We show how returns have varied over the past
ten calendar years, as well as the average annual returns of all of the Fund's
shares for one, five, and ten years -- compared to the performance of the S&P
500 Index and the Russell 2000 Index. You should remember that unlike the Fund,
the S&P 500 Index and the Russell 2000 Index are unmanaged and don't include the
costs of buying, selling, and holding the securities. The Fund's past
performance is not necessarily an indication of how it will perform in the
future.

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
YEAR BY YEAR CLASS A RETURNS
YEAR-END RETURNS
<S> <C>
1990 6.10%
1991 45.81%
1992 4.92%
1993 31.55%
1994 3.89%
1995 15.52%
1996 25.23%
1997 11.31%
1998 (25.36)%
1999 29.07%
</TABLE>

During the ten years illustrated above, the Fund's highest return in one
quarter was +27.08% (3/31/91) and its lowest return in one calendar quarter
(9/30/90) was -25.60%.

CALENDAR YEAR RETURNS (CLASS A)

AVERAGE ANNUAL RETURNS AS OF 12/31/99

<TABLE>
<CAPTION>
1 Year 5 Years 10 Years
-------- -------- --------
<S> <C> <C> <C>
SG Cowen Opportunity Class A................................ 22.89% 8.11% 12.61%
S&P 500..................................................... 21.04% 28.56% 18.21%
Russell 2000 Index.......................................... 21.26% 16.69% 13.40%
</TABLE>

<TABLE>
<CAPTION>
1 Year 5 Years Inception
-------- -------- ---------
<S> <C> <C> <C>
SG Cowen Opportunity Fund, Class B.......................... 23.04% 8.00% 7.96%*
SG Cowen Opportunity Fund, Class I.......................... 29.49% 9.54% 9.03%**
</TABLE>

* May 17, 1994

** May 9, 1994

4
<PAGE>
WHAT ARE THE FUND'S FEES AND EXPENSES?

These tables describe the fees and expenses you may pay in connection with
an investment in the Fund.

SHAREHOLDERS FEES are paid directly from your investment. The Fund may waive
or reduce sales charges. Please see the Statement of Additional Information for
additional information on sales charges.

<TABLE>
<CAPTION>
Share Class A B I
- ----------- -------- -------- -----
<S> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a % of
offering price)........................................... 4.75%(1) None None
Maximum Contingent Deferred Sales Charge (Load) (as a % of
purchase price or redemption price, whichever is lower)... None 5.00%(2) None
Maximum Sales Charge (Load) on Reinvested Dividends......... None None None
Redemption Fees(3).......................................... None None None
Exchange Fee................................................ None None None
</TABLE>

ANNUAL FUND OPERATING EXPENSES are expenses that are deducted from the
Fund's assets.

<TABLE>
<CAPTION>
Share Class A B I
- ----------- ----- ----- -----
<S> <C> <C> <C>
Management Fees............................................. 0.90% 0.90% 0.90%
Distribution and Service (12b-1) Fees....................... 0.25% 1.00% 0.0%
Other Expenses.............................................. 0.44% 0.47% 0.37%
Total Operating Expenses.................................... 1.59% 2.37% 1.27%
</TABLE>

EXAMPLE(4)

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A............................... $ 629 $ 953 $1,299 $2,274
Class B (assumes redemption at end of
period)............................. $ 740 $1,039 $1,465 $2,706
Class B (assumes no redemption)....... $ 240 $ 739 $1,265 $2,706
Class I............................... $ 129 $ 403 $ 697 $1,534
</TABLE>

- ------------

(1) A purchase of Class A shares at $1 million or more will be made at net asset
value.

(3) The Fund currently charges $10.00 per redemption for redemptions payable by
wire.

(4) The Fund's actual rate of return may be greater or less than the
hypothetical 5% return we use here.

5
<PAGE>
HOW WE MANAGE THE FUND

OUR INVESTMENT STRATEGIES

Under normal conditions, we invest at least 65 percent of the Fund's assets
in equity securities of companies with market capitalizations less than
$1 billion. We may invest up to 10 percent of the Fund's assets in securities of
similar foreign companies or in the American Depository Receipts of such
companies. We may invest up to 35 percent of the Fund's assets in equity
securities of companies other than small capitalization companies, and we may
invest up to 20 percent of the Fund's assets in money market instruments. We may
also write covered call options.

We call our investment strategy the Search for Companies Poised for Growth.
We try to identify those companies who have fallen out of favor and whose stock
is selling below what we believe is its real value. We look for those stocks
with a potential catalyst such as new products, technologies, or management that
will trigger an increase in their value. We analyze each candidate's fundamental
strength, looking for companies with well-positioned product lines and
experienced management with equity ownership. In the course of our rigorous
analysis, we often discover that many individual stocks in a particular industry
or market sector offer attractive investment opportunities. Our analysis finds
that frequently the market undervalues entire industries and sectors, offering a
cluster of candidates that meet our investment criteria. As a result, we may
concentrate our investments in a number of industries our analysis has revealed
as poised for growth.

THE SECURITIES IN WHICH WE TYPICALLY INVEST

The following is a description of the securities in which we normally
invest. Please see the Statement of Additional Information for additional
descriptions and risk information on these and all the securities in which we
invest.

EQUITY SECURITIES: equity securities include common stocks; preferred
stocks; warrants to purchase common stocks or preferred stocks; securities
convertible into common or preferred stocks, such as convertible bonds and
debentures and other securities with equity characteristics.

FOREIGN SECURITIES: foreign securities include the equity securities issued
by companies outside the United States, as well as the American Depository
Receipts of foreign corporations.

AMERICAN DEPOSITORY RECEIPTS: the certificates issued by a U.S. bank which
represent a stated number of shares of a foreign corporation that the bank holds
in its vault. An ADR entitles the holder to all dividends and capital gains
earned by the underlying foreign shares, and an ADR is bought and sold the same
as other securities.

Covered call options: an agreement that gives the buyer the right but not
the obligation to buy a certain amount of a specific security for a specific
price within a certain time period regardless of the market price of the
security. A call option is termed covered when the seller owns the securities
underlying the option.

In particular, the Fund's annual report discusses the relevant market
conditions and investment strategies used by the Fund's investment adviser that
materially affected the Fund's performance during the last fiscal year. You may
obtain these reports at no cost by calling 1-877-293-7298.

6
<PAGE>
TEMPORARY DEFENSIVE POSITION

For temporary defensive purposes, in attempt to respond to adverse market
economic or political conditions, we may invest up to 20% of the Fund's assets
and in excess of that amount when market conditions warrant, in fixed-income
securities such as corporate bonds, commercial paper, or short-term money market
securities such as obligations issued or guaranteed by the U.S. Government. To
the extent we find it necessary to invest in such securities, we may not achieve
the Fund's goal.

THE RISKS OF INVESTING IN THE FUND

Investing in any mutual fund involves risk, including the risk that you may
receive little or no return on your investment, and the risk that you may lose
part or all of the money you invest. Therefore, before you invest in the Fund
you should carefully evaluate the risks. Because of the nature of the Fund's
investment, you should consider an investment in the Fund to be a long-term
investment that typically provides the best results when held for a number of
years. The following are the chief risks you assume when investing in the Fund:
(1) Market risk is the risk that all or a majority of the securities in a
certain market-- like the stock or bond market-- will decline in value because
of factors such as economic conditions, future expectations or investor
confidence; (2) Liquidity risk is the possibility that securities cannot be
readily sold, or can only be sold at a price significantly lower than their
broadly recognized value; and (3) Industry and security risk is the risk that
the value of securities in a particular industry or the value of an individual
stock or bond will decline because of changing expectations for the performance
of that industry or for the individual company issuing the stock or bond. For a
number of reasons, the stocks of smaller companies have historically been more
volatile than the stocks of larger companies. Such stocks may not have as ready
a market as other stocks, and they are more sensitive to changing economic
conditions. In addition, their prospects for growth are less certain. The Fund
may invest in relatively new or lesser known companies. While investments in
such companies may offer opportunities for growth, they also involve greater
risk than investing in larger, more established companies. In addition, some of
the securities in which the Fund invests may lack a significant operating
history and may be dependent on products or services without an established
market share.

FOREIGN RISK is the risk that foreign securities may decline in value
because of political instability, changes in currency exchange rates, or foreign
economic conditions. Foreign markets also may have inadequate regulatory and
accounting standards. Please see the Statement of Additional Information for a
further discussion of these risks and the other risks not discussed here.

WHO MANAGES THE FUND

The officers of the Fund conduct the Fund's daily business operations,
subject to the supervision of the Fund's Board of Directors.

INVESTMENT ADVISER

From the Fund's commencement of operations until July 1, 1998, Cowen & Co.
("Cowen") served as investment manager to the Fund. On July 1, 1998, Cowen's
business was combined with Societe Generale Securities Corporation, a subsidiary
of Societe Generale ("SG"), to form SG Cowen Securities Corporation
("SG Cowen"). SG, a leading international commercial and investment bank
established in 1864, has a global network of offices in over 80 countries. From
July 1, 1998 through December 31, 1999 SG Cowen through its SG Cowen Asset
Management Division served as the investment manager to the Fund, with the
existing investment management personnel of Cowen continuing to provide
investment management services to the

7
<PAGE>

Fund. In January 2000 as a result of an internal reorganization, the SG Cowen
Asset Management Division of SG Cowen was transferred to SG Cowen Asset
Management, Inc ("SGCAM"). All officers and employees engaged in providing
investment advisory services to the Fund with SG Cowen have become officers and
employees of SGCAM and they will continue to provide the same services to the
Fund for the same management fees described below. SGCAM which currently manages
approximately $3.5 billion in assets, manages the Fund's business affairs,
including being responsible for the Fund's investment program and provides daily
administrative services.

MANAGEMENT FEES

For managing the Fund and its investments, the adviser is paid a yearly fee
of 0.90% of daily net asset value.

PORTFOLIO MANAGER

William Church is primarily responsible for the daily management of the
Fund. He has had such responsibility since the Fund commenced operations in
1988. Mr. Church is a Vice President and Senior Investment Officer, and has
served as a Managing Director and Chief Investment Officer of SG Cowen and then
SGCAM since July 1, 1998. Previously, he was a Class I Limited Partner of Cowen
and Managing Director of Cowen Incorporated and Chief Investment Officer of
Cowen Asset Management.

ABOUT YOUR ACCOUNT

CHOOSING A SHARE CLASS

CLASS A Class A shares have an up-front sales charge of up to 4.75% that
you pay when you buy the shares. If you invest $50,000 or more your front-end
sales charge will be reduced. You may qualify for other reduced sales charges,
as described in "How To Reduce Your Sales Charges," and under certain
circumstances the sales charge may be waived; please see the Fund's Statement of
Additional Information. Class A shares are also subject to an annual 12b-1 fee
no greater than 0.25% of the Fund's average daily net assets, which is lower
than the 12b-1 fee for Class B shares. The 12b-1 plan allows the Fund to pay
distribution fees for the sale and distribution of its shares. Class A shares
are not subject to a contingent deferred sales charge. The offering price
includes a front-end sales charge.

8
<PAGE>
CLASS A SHARES FEES

<TABLE>
<CAPTION>
Sales charge Sales charge as Dealer's commission
as % of % of amount as % of offering
Amount of purchase offering price invested price
- ------------------ -------------- --------------- -------------------
<S> <C> <C> <C>
Up to $49,999........................... 4.75% 5.00% 4.00%
$50,000 to $99,999...................... 4.00% 4.17% 3.25%
$100,000 to $249,999.................... 3.75% 3.90% 3.00%
$250,000 to $499,999.................... 2.50% 2.56% 2.00%
$500,000 to $999,999.................... 2.00% 2.04% 1.50%
$1,000,000 to $2,999,999................ 0% 0% 1.00%
$3,000,000 to $3,999,999................ 0% 0% 0.50%
</TABLE>

If you invest $4 million or more, you will receive Class I shares, which are
not subject to any sales charge or service fee.

CLASS I Class I shares have no up-front sales charge, so the full amount of
your purchase is invested in the Fund. Class I shares are not subject to a
contingent deferred sales charge or to an annual 12b-1 fee. Class I shares may
be referred to as institutional shares. They are available exclusively to
certain types of investors such as employee benefit plans of selected dealers of
the Fund, charitable organizations, investment advisory and consulting clients
of SG Cowen, accounts as to which a broker, registered investment adviser, or
bank charges an account management fee and certain omnibus accounts. Please
contact your financial adviser for further information or see the Fund's
Statement of Additional Information.

HOW TO REDUCE YOUR SALES CHARGE

We offer a number of ways to reduce or eliminate the sales charge on shares.
Please refer to the Fund's Statement of Additional Information for detailed
information and eligibility requirements. You can also get additional
information from your financial adviser. You or your financial adviser must
notify us at the time you purchase shares if you are eligible for any of these
programs.

9
<PAGE>
PROGRAM

<TABLE>
<S> <C>
Letter of intent You can use a Letter of Intent to combine all your purchases
of Class A shares in selected SG Cowen Funds over a
13-month period to qualify for reduced front-end sales
charges.

Reinvestment of redeemed Up to 30 days after you redeem your Class A shares, you can
shares reinvest the proceeds without paying a front-end sales
charge. You may use this privilege only once.

Please see your financial adviser to determine whether you qualify for any of these
programs, or consult the Statement of Additional Information.
</TABLE>

HOW TO BUY SHARES

You can open an account with an initial investment of $1,000 and make
additional investments at any time for as little as $100. The price you pay for
shares will depend on when we receive your purchase order. If you are buying
shares in an IRA, or a retirement plan for self-employed persons, the minimum
initial purchase is $500, and additional investments of only $50 after that.

If your order is received before 4:15 p.m. Eastern time on a business day,
you will pay that day's closing share price which is based on the Fund's net
asset value. If your order is received after 4:15 p.m., you will pay the next
business day's price. A business day is any day that the New York Stock Exchange
is open for business. We reserve the right to reject any purchase order.

Normally, we determine the Fund's net asset value (NAV) per share as of
4:15 p.m. Eastern time each day the New York Stock Exchange is open for
business. We calculate the net asset value per share by adding the market value
of all the securities and other assets in the Fund's portfolio, deducting all
liabilities, and dividing the resulting number by the number of shares
outstanding. We price securities and other assets for which market quotations
are available at their market value. Any short-term investments which have a
maturity of less than 60 days are priced at amortized cost.

10
<PAGE>
HOW TO SELL SHARES

You can sell your shares back to the Fund by mail or by contacting your
financial adviser. Generally, SG Cowen and other authorized dealers will act on
your oral instructions to redeem shares. If you send a written order to DST to
redeem shares, your request must be signed by all owners of the account, and you
must include a signature guarantee for each owner. If you hold your shares in
certificates, you must submit the certificates with your request to sell the
shares.

ACCOUNT MINIMUM

SPECIAL SERVICES

- - You can automatically invest regular monthly investments of $100 or more
directly from your checking account. No fee is charged for these automatic
transactions, but a service charge of $10.00 will be deducted for checks
returned for insufficient funds. The Fund reserves the right upon notification
to all participants, to impose a fee in the future.

- - You may buy shares in the Fund for your individual or group retirement plan,
including your Individual Retirement Account (IRA), Roth IRA and Education
IRA.

11
<PAGE>
DIVIDENDS, DISTRIBUTIONS AND TAXES

The Fund pays income dividends and distributions and any net realized
capital gains generally annually. We automatically reinvest all dividends and
any capital gains, unless you tell us otherwise.

Tax laws are subject to change, so we urge you to consult your tax adviser
about your particular tax situation and how it might be affected by current tax
law. The tax status of your dividends from this Fund is not affected by whether
you reinvest your dividends or receive them in cash. Dividends from short-term
capital gains and net investment income are generally taxable as ordinary
income; dividends from long-term capital gains are taxable as capital gains. In
addition, you may be subject to state and local taxes on distributions.

We will send you a statement each year detailing the amount and tax status
of all dividends and capital gains that you were paid during the prior year.

12
<PAGE>
FINANCIAL HIGHLIGHTS

These financial highlights tables are intended to help you understand the
Fund's financial performance for the past five years. All information reflects
financial results for a single share in the Fund. The following information for
the year ended November 30, 1999 has been audited by KPMG, LLP, independent
auditors, whose report thereon appears in the Fund's Annual Report, which is
available upon request by calling (877)293-7298. The information for fiscal
years ended prior to November 30, 1999 has been audited by other independent
auditors.

<TABLE>
<CAPTION>
SG Cowen Opportunity Fund - Class A
---------------------------------------------------
Year Ended November 30,
---------------------------------------------------
1999 1998 1997 1996 1995
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of Year............................... $10.05 $16.47 $16.61 $13.13 $12.98
------- ------- ------- ------- -------

INCOME FROM INVESTMENT OPERATIONS
Investment Loss - Net(2)........................ (0.07) (0.08) (0.08) (0.07) (0.04)
Net Realized and Unrealized Gains (Losses) on
Investments.................................... 1.94 (3.40) 2.00 3.86 0.97
------- ------- ------- ------- -------
Net from Investment Operations.................. 1.87 (3.48) 1.92 3.79 0.93
------- ------- ------- ------- -------

LESS DISTRIBUTIONS:
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 Year..................................... $11.92 $10.05 $16.47 $16.61 $13.13
======= ======= ======= ======= =======
Total Return(1)................................... 18.61% (24.89)% 13.55% 29.63% 7.91%

RATIOS / SUPPLEMENTARY DATA
Net Assets (000 omitted)........................ $19,787 $27,978 $54,809 $43,950 $38,724
Ratio of Expenses to Average Net Assets......... 1.59% 1.46% 1.38% 1.39% 1.43%
Ratio of Investment Loss - Net to Average Net
Assets......................................... (0.67)% (0.67)% (0.53)% (0.46)% (0.28)%
Decrease Reflected on Above Ratios Due to
Expense Reimbursements/ Waivers................ -- 0.01% 0.06% 0.16% 0.22%
Portfolio Turnover Rate......................... 150% 124% 159% 182% 148%
</TABLE>

13
<PAGE>

<TABLE>
<CAPTION>
SG Cowen Opportunity Fund - Class B
------------------------------------------------------
Year Ended November 30,
------------------------------------------------------
1999 1998 1997 1996 1995
------- ------- ------- ------- ----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of Year............................... $9.55 $15.92 $16.23 $12.93 $12.91
------- ------- ------- ------- -------

INCOME FROM INVESTMENT OPERATIONS
Investment Loss - Net(2)........................ (0.15) (0.18) (0.20) (0.18) (0.14)
Net Realized and Unrealized Gains (Losses) on
Investments.................................... 1.84 (3.25) 1.95 3.79 0.94
------- ------- ------- ------- -------
Net from Investment Operations.................. 1.69 (3.43) 1.75 3.61 0.80
------- ------- ------- ------- -------

NET ASSET VALUE
End of Year..................................... $11.24 $9.55 $15.92 $16.23 $12.93
======= ======= ======= ======= =======
Total Return(1)................................... 17.70% (25.56)% 12.72% 28.67% 6.97%

RATIOS / SUPPLEMENTARY DATA
Net Assets (000 omitted)........................ $ 4.608 $ 6,163 $10,629 $ 8,794 $ 6,455
Ratio of Expenses to Average Net Assets......... 2.37% 2.26% 2.15% 2.17% 2.19%
Ratio of Investment Loss - Net to Average Net
Assets......................................... (1.45)% (1.47)% (1.31)% (1.24)% (1.06)%
Decrease Reflected on Above Ratios Due to
Expense Reimbursements/ Waivers................ -- 0.01% 0.06% 0.16% 0.22%
Portfolio Turnover Rate......................... 150% 124% 159% 182% 148%
</TABLE>

14
<PAGE>

<TABLE>
<CAPTION>
SG Cowen Opportunity Fund - Class I
------------------------------------------------------
Year Ended November 30,
----------------------------------------
1999 1998 1997 1996 1995
------- ------- ------- ------- ----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of Year............................... $10.24 $16.69 $16.77 $13.20 $12.99
------- ------- ------- ------- -------

INCOME FROM INVESTMENT OPERATIONS
Investment Loss - Net(2)........................ (0.04) (0.04) (0.03) (0.01) 0.01
Net Realized and Unrealized Gains (Losses) on
Investments.................................... 1.99 (3.47) 2.01 3.89 0.98
------- ------- ------- ------- -------
Net from Investment Operations.................. 1.95 (3.51) 1.98 3.88 0.99
------- ------- ------- ------- -------

NET ASSET VALUE
End of Year..................................... $12.19 $10.24 $16.69 $16.77 $13.20
======= ======= ======= ======= =======
Total Return...................................... 19.04% (24.71)% 13.82% 30.17% 8.40%

RATIOS / SUPPLEMENTARY DATA
Net Assets (000 omitted)........................ $9,339 $19,051 $52,944 $40,369 $19,264
Ratio of Expenses to Average Net Assets......... 1.27% 1.14% 1.02% 1.01% 1.03%
Ratio of Investment Income (Loss) - Net
Assets......................................... (0.35)% (0.34)% (0.19)% (0.07)% 0.11%
Decrease Reflected on Above Ratios Due to
Expense Reimbursements/ Waivers................ -- 0.01% 0.06% 0.15% 0.22%
Portfolio Turnover Rate......................... 150% 124% 159% 182% 148%
</TABLE>

- ---------------

(1) Exclusive of Sales Charges

(2) Based upon average shares outstanding

15
<PAGE>

Investment Company Act file number: 811-5388
<PAGE>

STATEMENT OF ADDITIONAL INFORMATION

April 1, 2000

SG COWEN INTERMEDIATE FIXED INCOME FUND
SG COWEN GOVERNMENT SERURITIES FUND

each a series of

SG COWEN FUNDS, INC.

560 Lexington Avenue, New York, NY 10022
(212) 278-4569, (877) 293-7298

CONTENTS PAGE

History .................................... 2
Investment Objectives and Policies ......... 2
Management of the Fund ..................... 12
Capital Stock............................... 18
Net Asset Value............................. 18
Purchase of Shares......................... 19
Exchange Privilege.......................... 23
Redemption of Shares........................ 25
Code of Ethics.............................. 27
Taxation ................................... 27
Performance Information .................... 28
Other Information........................... 32
Financial Statements ....................... 32
Appendix.................................... 33

This Statement of Additional Information is meant to be read in
conjunction with the Prospectus of SG Cowen Intermediate Fixed Income Fund and
SG Cowen Government Securities Fund (each a "Fund" and, collectively the
"Funds") dated April 1, 2000, and is incorporated by reference in its entirety
into that Prospectus. Because this Statement of Additional Information is not
itself a prospectus, no investment in shares of the Funds should be made solely
upon the information contained herein. Copies of the Funds' Prospectus may be
obtained by calling Funds Distributor, Inc., the Fund's principal underwriter,
at (800) 221-7930 or by contacting SG Cowen Securities Corporation ("SG Cowen")
at (800) 262-7116 or any of its account representatives.

<PAGE>

The Fund's financial statements and reports of independent auditors
thereon as of and for the fiscal year ended November 30, 1999 are incorporated
by reference to the Fund's Annual Report, which may be obtained without charge
by calling the toll-free number above. SG Cowen Asset Management, Inc. ("SG
Cowen Asset Management" or "SGCAM"), is the investment manager to the Funds.

HISTORY

The Funds are a series of SG Cowen Funds, Inc., which was incorporated
on June 26, 1986 under the laws of the State of Maryland and commenced operation
on January 20, 1993. On July 1, 1998, the names of the Funds were changed from
Cowen Intermediate Fixed Income Fund and Cowen Government Securities Fund to SG
Cowen Intermediate Fixed Income Fund and SG Cowen Government Securities Fund,
respectively.

INVESTMENT OBJECTIVES AND POLICIES OF THE FUNDS

The Prospectus discusses the investment objectives of the Funds and the
policies to be employed to achieve those objectives. Supplemental information is
set out below concerning the types of securities and other instruments in which
the Funds may invest, the investment policies and strategies that the Funds may
utilize and certain risks attendant to those investments, policies and
strategies.

RATINGS AS INVESTMENT CRITERIA

In general, the ratings of Moody's Investors Service, Inc. ("Moody's")
and Standard & Poor's Corporation ("S&P") represent the opinions of those
agencies as to the quality of debt obligations that they rate. It should be
emphasized, however, that these ratings are relative and subjective, are not
absolute standards of quality and do not evaluate the market risk of securities.
These ratings will be used by the Funds as initial criteria for the selection of
portfolio securities, but the Funds also will rely upon the independent advice
of SG Cowen, through SG Cowen Asset Management, their investment manager, to
evaluate potential investments. Among the factors that will be considered are
the long term ability of the issuer to pay principal and interest and general
economic trends. The Appendix to this Statement of Additional Information
contains further information concerning the ratings of Moody's and S&P and their
significance.

Subsequent to its purchase by a Fund, an issue of debt obligations may
cease to be rated or its rating may be reduced below the minimum required for
purchase by the Portfolio. Neither event will require the sale of the debt
obligation by the Fund, but SG Cowen Asset Management will consider the event in
its determination of whether the Fund should continue to hold the obligation. In
addition, to the extent that the ratings change as a result of changes in rating
organizations or their rating systems or owing to a corporate restructuring of
Moody's or S&P, the Fund will attempt to use comparable ratings as standards for
its investments in accordance with its investment objectives and policies.

2
<PAGE>

U.S. GOVERNMENT SECURITIES. Each Fund may invest in U.S. Government
Securities, which are obligations issued or guaranteed by the U.S. Government,
its agencies, authorities or instrumentalities. Some U.S. Government Securities,
such as U.S. Treasury bills, Treasury notes and Treasury bonds, which differ
only in their interest rates, maturities and times of issuance, are supported by
the full faith and credit of the United States. Others are supported by: (1) the
right of the issuer to borrow from the U.S. Treasury, such as securities of the
Federal Home Loan Banks; (2) the discretionary authority of the U.S. government
to purchase the agency's obligations, such as securities of the Federal National
Mortgage Association ("FNMA"); or (3) only the credit of the issuer, such as
securities of the Student Loan Marketing Association. Although the Funds invest
in securities that are issued or guaranteed by the U.S. Government, its
agencies, authorities or instrumentalities, the Funds' shares are not
guaranteed, and upon redemption, may be worth more or less than the purchase
price due to fluctuations in net asset value. No assurance can be given that the
U.S. government will provide financial support in the future to U.S. government
agencies, authorities or instrumentalities that are not supported by the full
faith and credit of the United States.

U.S. Government Securities include: (1) securities for which the
payment of principal and interest is backed by an irrevocable letter of credit
issued by the U.S. government or any of its agencies, authorities or
instrumentalities; and (2) participations in loans made to foreign governments
or other entities that are so guaranteed. The secondary market for certain of
these participations is limited and, therefore, may be regarded as illiquid.

U.S. Government Securities may include zero coupon securities that may
be purchased when yields are attractive and /or to enhance portfolio liquidity.
Zero coupon U.S. Government Securities are debt obligations that are issued or
purchased at a significant discount from face value. The discount approximates
the total amount of interest the security will accrue and compound over the
period until maturity or the particular interest payment date at a rate of
interest reflecting the market rate of the security at the time of issuance.
Zero coupon U.S. Government Securities do not require the periodic payment of
interest. These investments benefit the issuer by mitigating its need for cash
to meet debt service, but also require a higher rate of return to attract
investors who are willing to defer receipt of cash. These investments may
experience greater volatility in market value than U.S. Government Securities
that make regular payments of interest. A Fund accrues income on these
investments for tax and accounting purposes, which is distributable to
shareholders and which, because no cash is received at the time of accrual, may
require the liquidation of other portfolio securities to satisfy the Fund's
distribution obligations, in which case the Fund will forego the purchase of
additional income producing assets with these funds. Zero coupon U.S. Government
Securities consist of STRIPS and CUBES, which are issued by the U.S. Treasury as
component parts of U.S. Treasury bonds and represent scheduled interest and
principal payments on the bonds.

Securities issued or guaranteed by the U.S. government or one of its
agencies, authorities or instrumentalities ("U.S. Government Securities") in
which the Funds may invest include debt obligations of varying maturities issued
by the U.S. Treasury or issued or guaranteed by an agency or instrumentality of
the U.S. government, including the Federal Housing Administration, Farmers Home
Administration, The Financing Corporation, Export-Import Bank of the U.S., Small
Business Administration, Government National Mortgage Association ("GNMA"),
General Services Administration, Central Bank for Cooperatives, Federal Farm
Credit Banks, Federal Home Loan Banks, Federal Home Loan Mortgage Corporation
("FHLMC"), Federal Intermediate Credit Banks, Federal Land Banks, Federal
National

3
<PAGE>

Mortgage Association ("FNMA"), Maritime Administration, Tennessee Valley
Authority, District of Columbia Armory Board, Student Loan Marketing Association
and Resolution Trust Corporation. Direct obligations of the U.S. Treasury
include a variety of securities that differ in their interest rates, maturities
and dates of issuance. Because the U.S. government is not obligated by law to
provide support to an instrumentality that it sponsors, a Fund will invest in
obligations issued by an instrumentality of the U.S. government only if SG Cowen
Asset Management determines that the instrumentality's credit risk does not make
its securities unsuitable for investment by the Fund.

CUSTODIAL RECEIPTS. Each Fund may invest up to 25% of its total assets
in custodial receipts or certificates, such as CATs, TlGRs and FICO Strips,
underwritten by securities dealers or banks that evidence ownership of future
interest payments, principal payments or both on certain notes or bonds issued
by the U.S. government, its agencies, authorities or instrumentalities. The
underwriters of these certificates or receipts purchase a U.S. Government
Security and deposit the security in an irrevocable trust or custodial account
with a custodian bank, which then issues receipts or certificates that evidence
ownership of the periodic unmatured coupon payments and the final principal
payment on the U.S. Government Security. Custodial receipts evidencing specific
coupon or principal payments have the same general attributes as zero coupon
U.S. Government Securities, described above. Although typically under the terms
of a custodial receipt a Fund is authorized to assert its rights directly
against the issuer of the underlying obligation, the Fund may be required to
assert through the custodian bank such rights as may exist against the
underlying issuer. Thus, in the event the underlying issuer fails to pay
principal and/or interest when due, a Fund may be subject to delays, expenses
and risks that are greater than those that would have been involved if the Fund
had purchased a direct obligation of the issuer. In addition, in the event that
the trust or custodial account in which the underlying security has been
deposited is determined to be an association taxable as a corporation, instead
of a non-taxable entity, the yield on the underlying security would be reduced
in respect of any taxes paid.

MORTGAGE RELATED SECURITIES. The average maturity of pass-through pools
of mortgage related securities varies with the maturities of the underlying
mortgage instruments. In addition, a pool's stated maturity may be shortened by
unscheduled payments on the underlying mortgages. Factors affecting mortgage
prepayments include the level of interest rates, general economic and social
conditions, the location of the mortgaged property and age of the mortgage.
Because prepayment rates of individual pools vary widely, it is not possible to
accurately predict the average life of a particular pool. Common practice is to
assume that prepayments will result in an average life ranging from two to ten
years for pools of fixed rate 30-year mortgages. Pools of mortgages with other
maturities or different characteristics will have varying average life
assumptions.

Mortgage related securities may be classified as private, governmental
or government related, depending on the issuer or guarantor. Private mortgage
related securities represent pass-through pools consisting principally of
conventional residential mortgage loans created by non-governmental issuers,
such as commercial banks, savings and loan associations and private mortgage
insurance companies. Governmental mortgage related securities are backed by the
full faith and credit of the United States. GNMA, the principal U.S. guarantor
of such securities, is a wholly owned U.S. governmental corporation within the
Department of Housing and Urban Development. Government related mortgage
securities are not backed by the full faith and credit of the United States.
Issuers of these securities include FNMA and FHLMC. FNMA is a

4
<PAGE>

government sponsored corporation owned entirely by private stockholders that is
subject to general regulation by the Secretary of Housing and Urban Development.
Pass-through securities issued by FNMA are guaranteed as to timely payment of
principal and interest by FNMA. FHLMC is a corporate instrumentality of the
United States, the stock of which is owned by the Federal Home Loan Banks.
Participation certificates representing interests in mortgages from FHLMC's
national portfolio are guaranteed as to the timely payment of interest and
ultimate collection of principal by FHLMC.

SG Cowen Asset Management expects that private, governmental entities
may create mortgage loan pools offering pass-through investments in addition to
those described above. The mortgages underlying these securities may be
alternative mortgage instruments, that is, mortgage instruments whose principal
or interest payments may vary or whose terms to maturity may be shorter than
previously customary. As new types of mortgage related securities are developed
and offered to investors, the Funds, consistent with their objectives and
policies, will consider making investments in those new types of securities.

The Funds also may invest in pass-through securities backed by
adjustable rate mortgages that have been introduced by GNMA, FNMA and FHLMC.
These securities bear interest at a rate that is adjusted monthly, quarterly or
annually. The prepayment experience of the mortgages underlying these securities
may vary from that for fixed rate mortgages. The Funds will only purchase
mortgage related securities issued by persons that are governmental agencies or
instrumentalities or fall outside, or are excluded from, the definition of
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act").

GOVERNMENT STRIPPED MORTGAGE SECURITIES. Each Fund may invest up to 10%
of its total assets in government stripped mortgage related securities issued
and guaranteed by the Government National Mortgage Association ("GNMA"), FNMA or
the Federal Home Loan Mortgage Corporation ("FHLMC"). These securities represent
beneficial ownership interests in either periodic principal distributions
("principal-only") or interest distributions ("interest-only") on mortgage
related certificates issued by GNMA, FNMA or FHLMC, as the case may be. The
certificates underlying the government stripped mortgage related securities
represent all or part of the beneficial interest in pools of mortgage loans. The
Funds will invest in government stripped mortgage related securities in order to
enhance yield or to benefit from anticipated appreciation in value of the
securities at times when SG Cowen Asset Management believes that interest rates
will remain stable or increase. In periods of rising interest rates, the
expected increase in the value of government stripped mortgage related
securities may offset all or a portion of any decline in value of the securities
held by a Fund.

Investing in government stripped mortgage related securities involves
the risks normally associated with investing in mortgage related securities
issued by government or government related entities. See "Mortgage Related
Securities" above. In addition, the yields on government stripped mortgage
related securities are extremely sensitive to the prepayment experience on the
mortgage loans underlying the certificates collateralizing the securities. If a
decline in the level of prevailing interest rates results in a rate of principal
prepayments higher than anticipated, distributions of principal will be
accelerated, thereby reducing the yield to maturity on interest-only government
stripped mortgage related securities and increasing the yield to maturity on
principal-only government stripped mortgage related securities. Sufficiently
high prepayment rates could result in a Fund not fully recovering its initial
investment in an interest-only government stripped mortgage related security.
Under current market conditions,

5
<PAGE>

the Funds expect that investments in government stripped mortgage related
securities will consist primarily of interest-only securities. Government
stripped mortgage related securities are currently traded in an over-the-counter
market maintained by several large investment banking firms. There can be no
assurance that a Fund will be able to effect a trade of a government stripped
mortgage related security at a time when it wishes to do so. The Funds will
acquire government stripped mortgage related securities only if a secondary
market for the securities exists at the time of acquisition.

ASSET-BACKED AND RECEIVABLE-BACKED SECURITIES. Each Fund may invest up
to 25% of its total assets in asset-backed and receivable-backed securities. To
date, several types of asset-backed and receivable-backed securities have been
offered to investors, including "Certificates for Automobile Receivables"
("CARssm") and interests in pools of credit card receivables. CARssm represent
undivided fractional interests in a trust, the assets of which consist of a pool
of motor vehicle retail installment sales contracts and security interests in
the vehicles securing the contracts. Payments of principal and interest on
CARssm are passed through monthly to certificate holders and are guaranteed up
to certain amounts and for a certain time period by a letter of credit issued by
a financial institution unaffiliated with the trustee or originator of the
trust.

An investor's return on CARssm may be affected by early prepayment of
principal on the underlying vehicle sales contracts. If the letter of credit is
exhausted, the Fund may be prevented from realizing the full amount due on a
sales contract because of state law requirements and restrictions relating to
foreclosure sales of vehicles and the availability of deficiency judgments
following these sales, because of depreciation, damage or loss of a vehicle,
because of the application of federal and state bankruptcy and insolvency laws
or other factors. As a result, certificate holders may experience delays in
payment if the letter of credit is exhausted. Consistent with the Fund's
investment objective and policies and subject to the review and approval of the
Board of Directors and appropriate disclosure to investors, the Funds also may
invest in other types of assetbacked and receivable-backed securities.

REPURCHASE AGREEMENTS. Each Fund may, without limitation, engage in
repurchase agreement transactions. Under the terms of a typical repurchase
agreement, a Fund would acquire an underlying debt obligation for a relatively
short period (usually not more than one week) subject to an obligation of the
seller to repurchase, and the Fund to resell, the obligation at an agreed-upon
price and time, thereby determining the yield during the Fund's holding period.
Thus, repurchase agreements are the functional equivalent of secured loans
collateralized by the underlying securities. This arrangement results in a fixed
rate of return that is not subject to market fluctuations during the Fund's
holding period. A Fund may enter into repurchase agreements with respect to U.S.
Government Securities with member banks of the Federal Reserve System and
certain non-bank dealers approved by the Board of Directors. Under each
repurchase agreement, the selling institution is required to maintain the value
of the securities subject to the repurchase agreement at not less than their
repurchase price. SG Cowen Asset Management, acting under the supervision of the
Board of Directors, reviews on an ongoing basis the value of the collateral and
the creditworthiness of those non-bank dealers with whom the Fund enters into
repurchase agreements. A Fund will not invest in a repurchase agreement maturing
in more than seven days if the investment, together with all other illiquid
securities held by the Fund, exceeds 15% of the Fund's total assets. See
"Certain Investment Policies." In entering into a repurchase agreement, a Fund
bears a risk of loss in the event that the other party to the transaction
defaults on its obligation and the Fund is delayed in or prevented from

6
<PAGE>

exercising its rights to dispose of the underlying securities, including the
risk of a possible decline in the value of the underlying securities during the
period in which the Fund seeks to assert its rights to them, the risk of
incurring expenses associated with asserting those rights and the risk of losing
all or a part of the income from the agreement.

MORTGAGE DOLLAR ROLLS. To take advantage of attractive financing
opportunities in the mortgage market and to enhance current income, the Funds
may enter into mortgage dollar roll transactions with respect to not more than
25% of the Fund's total assets. A dollar roll transaction involves a sale by the
Fund of a security to a financial institution, such as a bank or broker-dealer,
concurrently with an agreement by the Fund to repurchase a similar security from
the institution at a later date at an agreed upon price. The securities that are
repurchased will bear the same interest rate as those sold, but generally will
be collateralized by different pools of mortgages with different prepayment
histories than those sold. During the period between the sale and repurchase,
the Fund will not be entitled to receive interest and principal payments on the
securities sold. Proceeds of the sale will be invested in additional instruments
for the Fund. The Fund is compensated by the difference between the current
sales price and the forward price for the future purchase (often referred to as
the "drop") as well as by the interest earned on the cash proceeds of the
initial sale. Dollar roll transactions involve the risk that the market value of
the securities sold by the Fund may decline below the repurchase price of those
securities to be purchased. At the time that the Fund enters into a mortgage
dollar roll transaction, it will place in a segregated account maintained with
its custodian or a designated sub-custodian cash, U.S. Government Securities or
other liquid, unencumbered securities having a value equal to the repurchase
price (including accrued interest) and will subsequently monitor the account to
insure that its value is maintained.

For financial reporting and tax purposes, the Funds propose to treat
mortgage dollar rolls as two separate transactions; one involving the purchase
of a security and a separate transaction involving the sale of a security. The
Funds do not currently intend to enter into mortgage dollar rolls that are
accounted for as a financing.

FUTURES CONTRACTS AND COMMODITY OPTIONS. Although there is no present intention
to do so in the foreseeable future, each Fund may enter into futures contracts
and purchase and write (sell) options on these contracts, including but not
limited to interest rate and securities index futures contracts and put and call
options on these futures contracts. These contracts will be entered into only
upon the judgment of SG Cowen Asset Management that such contracts are necessary
or appropriate in the management of the Fund's assets. These contracts will be
entered into on exchanges designated by the Commodity Futures Trading Commission
("CFTC") or, consistent with CFTC regulations, on foreign exchanges. These
transactions may be entered into for bona fide hedging and other permissible
risk management purposes including protecting against anticipated changes in the
value of securities a Fund intends to purchase.

A Fund will not enter into futures contracts and commodity options for
which the aggregate initial margin and premiums exceed 5% of the fair market
value of the Fund's assets after taking into account unrealized profits and
unrealized losses on any contracts it has entered into. All futures and options
on futures positions will be covered by owning the security or segregation of
assets. With respect to long positions in a commodity futures contract or option
(e.g., futures contracts to purchase the underlying commodity and call options
purchased or put options written on these futures contracts or commodities), the
underlying commodity value of

7
<PAGE>

the futures contract at all times will not exceed the sum of cash, short term
U.S. debt obligations or other high quality obligations set aside for this
purpose.

A Fund may lose the expected benefit of these futures or options
transactions and may incur losses if the prices of the underlying commodities
move in an unanticipated manner. In addition, changes in the value of the Fund's
futures and options positions may not prove to be perfectly or even highly
correlated with changes in the value of its portfolio securities. Successful use
of futures and related options is subject to SG Cowen Asset Management's ability
to predict correctly movements in the direction of the securities markets
generally, which ability may require different skills and techniques than
predicting changes in the prices of individual securities. Moreover, futures and
options contracts may only be closed out by entering into offsetting
transactions on the exchange where the position was entered into (or a linked
exchange), and as a result of daily price fluctuation limits there can be no
assurance that an offsetting transaction could be entered into at an
advantageous price at any particular time. Consequently, a Fund may realize a
loss on a futures contract or option that is not offset by an increase in the
value of its portfolio securities that are being hedged or a Fund may not be
able to close a futures or options position without incurring a loss in the
event of adverse price movements.

Futures contracts and options thereon may be undertaken for hedging and
other risk management purposes in an effort to reduce the impact of several
kinds of anticipated price fluctuation risks on the securities held by a Fund.
For example, put options on interest rate futures might be purchased to protect
against declines in the market values of debt securities occasioned by higher
interest rates. If these transactions are successful, the futures or options
positions taken by a Fund will rise in value by an amount which approximately
offsets the decline in value of the portion of the securities held by a Fund
that is being hedged.

On other occasions, a Fund may enter into contracts to purchase the
underlying commodity. For example, futures contracts for the purchase of debt
securities might be entered into to protect against an anticipated increase in
the price of debt securities to be purchased in the future resulting from
decreased interest rates.

A Fund will incur brokerage costs whether or not its hedging is
successful and will be required to post and maintain "margin" as a good-faith
deposit against performance of its obligations under futures contracts and under
options written by the Fund. Futures and options positions are marked to the
market daily and the Fund may be required to make subsequent "variation" margin
payments depending upon whether its positions increase or decrease in value. In
this context margin payments involve no borrowing on the part of the Fund.

LENDING PORTFOLIO SECURITIES. Each Fund may lend portfolio securities
to brokers, dealers and other financial organizations. These loans, if and when
made, may not exceed 33-1/3% of the value of a Fund's total assets. A Fund will
not lend securities to SG Cowen Securities unless the Fund has applied for and
received specific authority to do so from the Securities and Exchange Commission
(the "SEC"). A Fund's loan of securities will be collateralized by cash, letters
of credit or U.S. Government Securities. The cash or instruments collateralizing
a Fund's loan of securities will be maintained at all times in a segregated
account with the Fund's custodian or with a designated sub-custodian in an
amount at least equal to the current market value of the loaned securities. From
time to time, a Fund may pay a part of the interest earned from the investment
of collateral received for securities loaned to the borrower

8
<PAGE>

and/or a third party that is unaffiliated with the Fund and is acting as a
"finder." A Fund will comply with the following conditions whenever it loans
securities: (1) the Fund must receive at least 100% cash collateral or
equivalent securities from the borrower; (2) the borrower must increase the
collateral whenever the market value of the securities loaned rises above the
level of the collateral; (3) the Fund must be able to terminate the loan at any
time; (4) the Fund must receive reasonable interest on the loan, as well as any
dividends, interest or other distributions on the loaned securities and any
increase in market value; (5) the Fund may pay only reasonable custodian fees in
connection with the loan; and (6) voting rights on the loaned securities may
pass to the borrower except that, if a material event adversely affecting the
investment in the loaned securities occurs, the Board of Directors must
terminate the loan and regain the right to vote the securities.

WHEN-ISSUED AND DELAYED-DELIVERY SECURITIES. When a Fund engages in
when-issued or delayed-delivery securities transactions, it relies on the other
party to consummate the trade. Failure of the seller to do so may result in the
Fund's incurring a loss or missing an opportunity to obtain a price considered
to be advantageous.

To secure prices deemed advantageous at a particular time, each Fund
may, without limitation, purchase securities on a when-issued or
delayed-delivery basis, in which case delivery of the securities occurs beyond
the normal settlement period; payment for or delivery of the securities would be
made prior to the reciprocal delivery or payment by the other party to the
transaction. A Fund will enter into when-issued or delayed-delivery transactions
for the purpose of acquiring securities and not for the purpose of leverage.
When-issued securities purchased by the Fund may include securities purchased on
a "when, as and if issued" basis under which the issuance of the securities
depends on the occurrence of a subsequent event, such as approval of a merger,
corporate reorganization or debt restructuring. The Fund will establish with its
custodian, or with a designated sub-custodian, a segregated account consisting
of cash, U.S. Government Securities or other liquid, unencumbered in an amount
equal to the amount of its when-issued or delayed-delivery purchase commitments.

TEMPORARY INVESTMENTS. For temporary defensive purposes during periods when
SG Cowen Asset Management believes that pursuing either Fund's basic investment
strategy may be inconsistent with the best interests of its shareholders, the
Fund may invest its assets in the following money market instruments: U.S.
Government Securities (including those purchased in the form of custodial
receipts), repurchase agreements, certificates of deposit and bankers'
acceptances issued by banks or savings and loan associations having assets of at
least $500 million as of the end of their most recent fiscal year and high
quality commercial paper. Each Fund also may hold a portion of its assets in
money market instruments or cash in amounts designed to pay expenses, to meet
anticipated redemptions or pending investments in accordance with its objectives
and its policies. Any temporary investments may be purchased on a when-issued
basis. To the extent a Fund's assets are invested in money market instruments,
the Fund will not be pursuing its stated investment objectives.

NON-PUBLICLY TRADED SECURITIES. Each Fund may invest up to 10% of its
total assets in non-publicly traded securities, which may be less liquid than
publicly traded securities. Although these securities may be resold in privately
negotiated transactions, the prices realized from these sales could be less than
those " originally paid by the Funds. In addition, companies whose securities
are not publicly traded are not subject to the disclosure and other investor
protection requirements that would be applicable if their securities were
publicly traded. A Fund also may

9
<PAGE>

purchase securities that are not registered under the Securities Act of 1933, as
amended (the " 1933 Act"), but that can be sold to "qualified institutional
buyers" in accordance with Rule 144A under the 1933 Act ("Rule 144A
Securities"). Rule 144A Securities will be considered illiquid and therefore
subject to the Fund's 15% limitation on the purchase of illiquid securities.
This investment practice could have the effect of increasing the level of
illiquidity in a Fund to the extent that qualified institutional buyers become
uninterested for a time in purchasing Rule 144A Securities. The Board of
Directors has instructed SG Cowen Asset Management to determine and monitor on a
daily basis the liquidity of Rule 144A Securities, although the Board of
Directors will retain ultimate responsibility for any determination regarding
liquidity.

INVESTMENT RESTRICTIONS

The investment restrictions numbered 1 through 10 below have been
adopted by SG Cowen Funds, Inc. as fundamental policies of each of the Funds.
Under the 1940 Act, a fundamental policy may not be changed without the vote of
a majority of the outstanding voting securities of a Fund, which is defined in
the 1940 Act as the lesser of (1) 67% or more of the shares present at a Fund
meeting, if the holders of more than 50% of the outstanding shares of the Fund
are present or represented by proxy, or (2) more than 50% of the outstanding
shares of the Fund. Investment restrictions 11 through 16 may be changed by a
vote of a majority of the Board of Directors at any time.

Under the investment restrictions adopted by the Funds:

1. A Fund will not purchase securities (other than U.S. Government
Securities) of any issuer if, as a result of the purchase, more than 5% of the
value of the Fund's total assets would be invested in the securities of the
issuer, except that up to 25% of the value of the Fund's total assets may be
invested without regard to this 5% limitation.

2. The Funds will not purchase more than 10% of the voting securities of
any one issuer, except that this limitation is not applicable to the Fund's
investments in U.S. Government Securities, and up to 25% of the Fund's assets
may be invested without regard to this 10% limitation.

3. A Fund will invest no more than 25% of the value of its total assets
in securities of issuers in any one industry. This limitation is not applicable
to a Fund's investments in U.S. Government Securities.

4. A Fund will not borrow money, except that the Fund may borrow from
banks for temporary or emergency (not leveraging) purposes, including the
meeting of redemption requests that might otherwise require the untimely
disposition of securities, in an amount not to exceed one-third of the value of
the Fund's total assets (including the amount borrowed) valued at market less
liabilities (not including the amount borrowed) at the time the borrowing is
made. Whenever a Fund's borrowings exceed 5% of the value of its total assets,
it will not make any additional investments.

5. A Fund will not lend any funds or other assets, except through
purchasing debt obligations, lending portfolio securities and entering into
repurchase agreements consistent with the Fund's investment objective and
policies.

10
<PAGE>

6. A Fund will not purchase securities on margin, except that the Fund
may obtain any short term credits necessary for the clearance of purchases and
sales of securities. For purposes of this restriction, the deposit or payment of
initial or variation margin in connection with futures contracts or options on
futures contracts will not be deemed to be a purchase of securities on margin.

7. A Fund will not make short sales of securities or maintain a short
position, unless at all times when a short position is open it owns an equal
amount of the securities or securities convertible into or exchangeable for,
without payment of any further consideration, securities of the same issue as,
and equal in amount to, the securities sold short.

8. A Fund will not purchase or sell real estate or real estate limited
partnership interests, except that it may purchase and sell mortgage related
securities and securities of companies that deal in real estate or interests
therein.

9. A Fund will not purchase or sell commodities or commodity contracts
(except financial futures contracts and related options and other similar
contracts).

10. A Fund will not act as an underwriter of securities, except as the
Fund may be deemed an underwriter in connection with dispositions of its
investments.

11. A Fund will not invest in oil, gas or other mineral leases or
exploration or development programs.

12. A Fund will not make investments for the purpose of exercising
control of management.

13. A Fund will not purchase any security if as a result (unless the
security is acquired pursuant to a plan of reorganization or an offer of
exchange) the Fund would own any securities of a registered open-end investment
company or more than 3% of the total outstanding voting stock of any registered
closed-end investment company or more than 5% of the value of the Fund's total
assets would be invested in securities of any one or more registered closed-end
investment companies.

14. A Fund will not purchase any security if as a result the Fund would
then have more than 5% of its total assets invested in securities of companies
(including predecessors) that have been in continuous operation for fewer than
three years.

15. A Fund will not purchase or retain securities of any company if, to
the knowledge of SG Cowen Funds, Inc., any of its officers or Directors or any
officer or director of SG Cowen individually owns more than 1/2 of 1% of the
outstanding securities of the company and together they own beneficially more
than 5% of the securities.

16. A Fund will not invest in excess of 5% of the value of its net
assets in warrants, valued at the lower of cost or market value. Included within
this amount, but not to exceed 2% of the value of the Fund's net assets, may be
warrants that are not listed on the New York or American Stock Exchanges.
Warrants acquired by the Fund in units or attached to securities may be deemed
to be without value.

11
<PAGE>

SG Cowen Funds, Inc. may make commitments more restrictive than the
restrictions listed above so as to permit the sale of shares of a Fund in
certain states. Should SG Cowen Funds, Inc. determine that a commitment is no
longer in the best interests of the Fund and its shareholders, SG Cowen Funds,
Inc. will revoke the commitment by terminating the sale of shares of the Fund in
the state involved. The percentage limitations contained in the restrictions
listed above apply at the time of purchases of securities.

PORTFOLIO TURNOVER

For regulatory reporting purposes, the Fund's turnover rate is
calculated by dividing the lesser of purchases or sales of securities for the
fiscal year by the monthly average of the value of the Fund's securities, with
certain other obligations with less than one year to maturity at the time of
purchase excluded. Thus, a 100 percent turnover rate would occur, for example,
if all included securities were replaced once during the year. The Fund will not
normally engage in the trading of securities for the purpose of realizing short
term profits, but will adjust its holdings as considered advisable in view of
prevailing or anticipated market conditions, and turnover will not be a limiting
factor should SGCAM deem it advisable to purchase or sell securities.

MANAGEMENT OF THE FUND

BOARD OF DIRECTORS

The business and affairs of the Funds are managed under the direction
of the Board of Directors, which has overall supervisory responsibility for the
Funds. By virtue of the responsibilities assumed by SGCAM under the Investment
Management Agreements, the Funds will not require executive employees other than
its officers, none of whom will devote full time to the affairs of the Funds.

The names of the directors and officers of the Funds, their addresses,
principal occupations during the past five years and other affiliations are set
forth below. Each Director who is an "interested person" of the Funds, as
defined in the 1940 Act, is indicated by an asterisk; unless noted otherwise,
the business address of each such individual is 560 Lexington Avenue, New York,
New York 10022. Each of the directors is also a director of all of the
investment companies of which SGCAM is Investment Manager.

DIRECTORS OF THE FUNDS

James H. Carey, Director, age 67. Former Chief Executive Officer,
Director and Treasurer of National Capital Benefits Corporation (from
1995-1997). Mr. Carey is also a Director of Airborne Freight Corporation and of
The Midland Company and Vice Chairman of the U.S. Committee for UNICEF. His
address is 39 Village View, Manchester, VT 05255.

*Philippe H. Collas, Chairman of the Funds, age 50. Chairman and Chief
Executive Officer of Societe Generale Asset Management, S.A., Chairman and
Director of SGCAM. Director and Chairman of the SG Cowen Mutual Funds. His
address is 2 Place de la Coupole, La Defense Cedex, Paris France 92078.

12
<PAGE>

Dr. Martin J. Gruber, Director, age 62. Professor of Finance, Leonard
N. Stern School of Business Administration, New York University. He is also a
Trustee of the BT Alex Brown Mutual Funds, Director of Japan Equity Fund, Inc.
and the Taiwan Equity Fund, Inc.; and a Trustee of the T.I.A.A. CREF Board. His
address is New York University, 44 West 4th Street, New York, New York 10012.

Burton J. Weiss, Director, age 69. Self-employed consultant since
March, 1988. His address is 103 Marin Drive, Chapel Hill, North Carolina 27516.

OFFICERS OF THE FUNDS

Philip J. Bafundo, Treasurer, age 37. Managing Director and Treasurer
of SGCAM since January 2000. Prior thereto Chief Administrative Officer of
Societe Generale Asset Management Corp.

Rodd M. Baxter, Secretary, age 49. Director and Senior Counsel of SG
Cowen since July 1, 1998. Prior thereto, he was General Counsel of Cowen Asset
Management and Director of Cowen. His address is 1221 Avenue of the Americas,
New York, NY 10020.

William Church, Vice President, Senior Investment Officer, age 53.
Managing Director of SGCAM since January 2000. He held the same position at SG
Cowen from July 1, 1998 through December 31, 1999. Prior thereto, he was Chief
Investment Officer of Cowen Asset Management and a Class I Limited Partner of
Cowen and Managing Director of Cowen Incorporated.

Alan Koepplin, Investment Officer, age 47. Director and Portfolio
Manager of SGCAM since January 2000. He held the same position at SG Cowen from
July 1, 1998 through December 31, 1999. Prior thereto, he was a Director and
Senior Vice President of Cowen Asset Management.

Hoan Nguyen-Quang, President, age 54. President and Director of SGCAM
since January 2000. From July 1, 1999 through December 31, 1999, he was a
Managing Director of SG Cowen. Prior thereto he held various executive positions
with Societe Generale.

Irwood Schlackman, Controller, age 59. Vice President SGCAM since
January 2000. He held the same position at SG Cowen from July 1, 1998 through
December 31, 1999. Prior thereto, he was a Mutual Fund Administrator of Cowen.

COMPENSATION

No officer, director, partner or employee of SGCAM or its affiliates
will receive any compensation from the Fund for serving as an officer or
director of the Fund. Directors who are not officers, directors, partners,
stockholders or employees of SGCAM or its affiliates receive from the Fund a fee
of $3,000 per annum plus $500 per meeting and $375 for each audit committee
meeting attended and reimbursement for travel and out of pocket expenses.

13
<PAGE>

COMPENSATION TABLE (for fiscal year ended November 30, 1998)

<TABLE>
<CAPTION>
Name of Aggregate Total Compensation
Director Compensation From
From Each Fund* Each Fund and Fund
Complex * *
<S> <C> <C>
James H. Carey $0 $28,750
Peter Gil*** $0 $28,750
Martin J. Gruber $0 $28,750
Burton J. Weiss $0 $28,750
</TABLE>

- -------------

* The Directors have agreed to waive all fees until such time as
SG Cowen ceases to waive its investment management fee.
** There are seven funds in the complex.
*** Mr. Gill retired from the board on October 25, 1999.

PRINCIPAL HOLDER OF SECURITIES

To the knowledge of the Fund and SGCAM, none of the Fund directors and
officers, either individually or as a group, beneficially owned more than 1% of
the Funds' outstanding stock as of the close of business on February 29, 2000.
As of February 29, 2000 the following persons owned 5% or more of a class of the
Fund's securities: IFIF Class A - Local Union #712 IBEW (5%), 217 Sassafras
Lane, Bever, PA 15009-1709. Class B-Jacqueline Pomeranz IRA (13%) 2225 Demington
Dr., Cleveland Hts., OH 44106, Wexford Clearing Services Corp. FBO Ms. Margaret
Clark Huber (6%), 1717 Bullevue Avenue, Apt 101 A, Richmond, VA 23227-3961.
Jacqueline Pomeranz (9%) 2225 Demington Dr., Cleveland Hts., OH 44106, Barbara B
Enfield (53%) 501 Latane Dr., Richmond, VA 23236-4102, Prudential Securities
Inc. FBO Mr. Anthony Capasso & Marie Capasso JT TEN ((7%) P O Box 196, Northport
NY 11768-0196 Class I - Caponegro Urological Assoc., Pension Trust (29%), 1 Toms
Point Lane, Apt 17B Bldg. 8, Port Washington, NY 11050-2101, Jones Edward D. &
Co., FBO Castel Prop Inc. Profit Sharing Trust (8%), 201 Progress Pkwy.,
Maryland Hts., MO 63043-3003, Valarie N. Solomon (32%) 18 Eastmount Dr.,
Slingerlands, NY 12159-2148, Prudential Securities Inc., FBO Proflow Inc. Profit
Sharing Plan (21%) 303 State Street, North Haven, CT 06473-2131. GSF Class
A--Winifred Plesofsky TR Marital Trust, U/W/O Phillip Plesofsky (5%), 5333
Sheridan Rd. Apt. 33N, Chicago, IL 60640-2576, Susan M. Price (5%), 28
Washington Street, Boxford, MA 01921-1209, Emily M Layne Fam Limited Partn,
Joseph H McGee III Gen Partn, (9%) Richmond, VA 23225-2307, Martin J. Zion &
Jane Zion TTEES, F/B/O Martin J Zion (11%), 2780 South Ocean Blvd-310, Palm
Beach, FL 33480. Class I - National Investor Services FBO 513-90205-14 (22%), 55
Water Street, 32nd Floor, New York, NY 10041-3299, Prudential Securities Inc.,
FBO Mr. David Hungerford TTEE Proflow Inc. Profit Sharing (76%), one New York
Plaza, NY, NY 10005.

14
<PAGE>

INVESTMENT MANAGER

Until July 1, 1998, Cowen served as investment manager and principal
underwriter to 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") (the
"Acquisition"). SG, a leading international commercial and investment bank
established in 1864, has a global network of offices in over 80 countries. From
July 1, 1998 through December 31, 1999, SG Cowen, through its SG Cowen Asset
Management Division, served as the new investment manager to the Funds, with the
existing investment management personnel of Cowen continuing to provide
investment management services to the Funds. In January 2000 as a result of an
internal reorganization, the SG Cowen Asset Management Division of SG Cowen was
transferred to SGCAM. All officers and employees engaged in providing investment
advisory services to the Funds with SG Cowen have become officers and employees
of SCAM and they will continue to provide the same services to the Funds.

Each management agreement between Cowen and the Funds provided for
automatic termination in the event of its "assignment," which included
consummation of the Acquisition. Accordingly, new management agreements between
SG Cowen and the Funds (the "New Agreements"), identical in material respects
with the prior management agreements, were approved by the Board of Directors of
each of the Fund at a meeting held on May 21, 1998. On June 16, 1998, Cowen and
SGSC were granted an exemptive order by the Securities and Exchange Commission
pursuant to which the New Agreements were permitted to be implemented without
shareholder approval beginning on July 1, 1998 and continuing, for a period of
up to 150 days, through the date on which the New Agreements are approved or
disapproved by the shareholders of each of the Funds.

The shareholders of each Fund approved the continuance of their
respective New Agreement on September 17, 1998. The New Agreements contain
substantially the same terms and conditions as the corresponding prior
management agreements, including the management fees payable by each Fund.

SCAM is a registered investment adviser. SGCAM's principal address is
560 Lexington Avenue New York, New York 10022.

Pursuant to each Investment Management Agreement between SGCAM and each
Fund, SGCAM has agreed to be responsible for the Fund's investment program.
Subject to the supervision and direction of the Fund's Boards of Directors,
SGCAM manages the Fund's portfolio in accordance with the stated policies of
that Fund. SGCAM makes investment decisions for the Fund and places the purchase
and sale orders for portfolio transactions. SGCAM also furnishes the Fund
statistical and research data, clerical help, accounting, data processing,
bookkeeping, internal auditing and certain legal and other filings with the SEC
and state Blue Sky authorities, calculates the net asset value of shares of the
Fund and generally assists in all aspects of the Fund's operations. SGCAM
compensates certain securities dealers whose customers are shareholders of the
Fund for providing administrative services to those shareholders that would
otherwise be provided by SGCAM. Such compensation is paid solely from SGCAM's
resources and is not paid directly or indirectly by the Fund.

15
<PAGE>

Each Class bears its own expenses, which generally includes all costs
not specifically borne by SGCAM. Included among a Class' expenses are (1)
transfer agency fees as identified by the transfer agent as being attributable
to a specific Class; (2) printing and postage expensed related to preparing and
distributing materials such as shareholder reports, prospectuses and proxies to
current shareholders; (3) Blue Sky registration fees incurred by a Class; (4)
SEC registration fees incurred by a Class; (5) the expenses of administrative
personnel and services as required to support the shareholders of a specific
Class; (6) litigation or other legal expenses relating solely to one Class; and
(7) directors' fees incurred as a result of issues relating to one Class. In
addition, each Class will bear an allocable portion of all other Fund expenses
not attributable to a particular Class based on the Class' relative net assets.

Since the Funds commenced operations, the Investment Manager has waived
its investment management fees.

PRINCIPAL UNDERWRITER

Funds Distributor, Inc. ("FDI"), 60 State Street, Boston, MA 02109, is
the principal underwriter to the Fund.

CUSTODIAN AND TRANSFER AND DIVIDEND AGENT

State Street Bank and Trust Company, P.O. Box 419111, Kansas City, MO
64141, is the custodian of the Funds' assets.

DST Systems, Inc., 210 West 10th Street, Kansas City, MO 64105, is the
Funds' transfer and dividend disbursing agent.

SHAREHOLDER SERVICING AND DISTRIBUTION PLAN (THE "PLAN")

FDI is paid monthly fees by the 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 the Funds pursuant to
Rule 12b-1 under the Investment Company Act of 1940, as amended (the "1940
Act"), is calculated at the annual rate of .25% of the value of the average
daily net assets of the Fund attributable to each of Class A and Class B shares
and is used by FDI to provide compensation for ongoing servicing and/or
maintenance of shareholder accounts with the Funds. Compensation paid by FDI,
includes amounts paid to SG Cowen employees, who respond to inquiries of
shareholders of the Funds regarding their ownership of shares of their accounts
with the Funds or who provide other similar services not otherwise required to
be provided by the Fund's investment adviser, transfer agent or other agent of
the Funds.

In addition, pursuant to the Plan, the Funds pay to FDI a monthly
distribution fee at the annual rate of .75% for SG Cowen Government Securities
Fund ("GSF") and .25% for SG Cowen Intermediate Fixed Income Fund ("IFIF") of
the Funds average daily net assets attributable to Class B shares. The
distribution fee is used by FDI to provide (1) initial and ongoing sales
compensation to its registered representative or those of other broker-dealers
that enter into, selected dealer agreements with FDI in respect of sales of
Class B shares; (2) costs of printing and distributing the Funds' Prospectus,
Statement of Additional Information and sales

16
<PAGE>

literature to prospective investors in Class B shares; (3) costs associated with
any advertising relating to Class B shares; and (4) payments to, and expenses
of, persons who provide support services in connection with the distribution of
Class B shares. Because these fees are paid out of the Funds' assets on an
on-going basis, over time these fees will increase the cost of your investment
and may cost you more than paying other types of sales charges.

Payments under the Plan are not tied exclusively to the service and/or
distribution expenses actually incurred by FDI, and the payments may exceed
expenses actually incurred by FDI. The Board of Directors evaluates the
appropriateness of the Plan and its payment terms on a continuing basis and in
doing so considers all relevant factors, including expenses borne by SG Cowen
and amounts it received under the Plan.

Pursuant to the Plan, for the fiscal year ended November 30, 1999,
Class A and Class B shares of the IFIF paid $15,776 and $1,745, respectively.
GSF paid $3,651 on class A shares pursuant to the Plan.

PORTFOLIO TRANSACTIONS

Decisions to buy and sell securities and other financial instruments
for each Fund are made by SGCAM, which also is responsible for placing these
transactions, subject to the overall review of the Board of Directors. Although
investment requirements for each Fund are reviewed independently from those of
the other accounts managed by SGCAM, investments of the type a Fund may make may
also be made by these other accounts. When a Fund and one or more other accounts
managed by SGCAM are prepared to invest in, or desire to dispose of, the same
security or other financial instrument, available investments or opportunities
for sales will be allocated in a manner believed by SGCAM to be equitable to
each. In some cases, this procedure may affect adversely the price paid or
received by a Fund or the size of the position obtained or disposed of by a
Fund.

Portfolio transactions effected on U.S. stock exchanges involve the
payment of negotiated brokerage commissions. There is generally no stated
commission in the case of securities traded in the over-the-counter markets, but
the prices of those securities may include commissions or mark-ups. Purchases
and sales of money market instruments and debt securities usually are principal
transactions. These securities are normally purchased directly from the issuer
or from an underwriter or market maker for the securities. The cost of
securities purchased from underwriters includes an underwriting commission or
concession, and the prices at which securities are purchased from and sold to
dealers include a dealer's mark-up or mark-down. U.S. Government securities are
generally purchased from underwriters or dealers, although certain newly-issued
U.S. Government securities may be purchased directly from the U.S. Treasury or
from the issuing agency or instrumentality.

To the extent consistent with applicable provisions of the Act, other
securities laws and the rules and exemptions adopted by the Securities and
Exchange Commission (the "SEC") thereunder, the Board of Directors has
determined that portfolio transactions may be effected through SG Cowen if, in
the judgment of SGCAM, the use of SG Cowen normally is likely to result in price
and execution at least as favorable as those of other qualified broker-dealers,
and if, in particular transactions, SG Cowen charges the Fund a rate consistent
with that charged to comparable unaffiliated customers in similar transactions.
Over-the-counter purchases and sales are transacted directly with principal
market makers except in those cases in which better prices

17
<PAGE>

and executions may be obtained elsewhere, and principal transactions are not
entered into with affiliates of a Fund except pursuant to exemptive rules or
orders adopted by SEC.

In selecting brokers or dealers to execute portfolio transactions on
behalf of each Fund, SGCAM seeks the best overall terms available. In assessing
the best overall terms available for any transaction, SGCAM will consider the
factors it deems relevant, including the breadth of the market in the
investment, the price of the investment, the financial condition and execution
capability of the broker or dealer and the reasonableness of the commission, if
any, for the specific transaction and on a continuing basis. In addition, SGCAM
is authorized, in selecting parties to execute a particular transaction and in
evaluating the best overall terms available, to consider the brokerage and
research services, as those terms are defined in Section 28(e) of the Securities
Exchange Act of 1934, provided to a Fund and/or other accounts over which SGCAM
or its affiliates exercise investment discretion. SGCAM's fees under its
agreement with the Fund are not reduced by reason of its receiving brokerage
services. The Directors periodically review the commissions paid by a Fund to
determine if the commissions paid over representative periods of time are
reasonable in relation to the benefits to the Fund.

For the fiscal years ended November 30, 1997, 1998 and 1999 the Funds
did not pay any commissions.

CAPITAL STOCK

Each Fund is a series of SG Cowen Funds, Inc., which has an authorized
capitalization of 3,000,000,000 shares with a par value of $.001 per share and
transferable without restriction of which 250,000,000 have been allocated in
respect of each Class of each Fund. All shares of a Fund have equal rights and
privileges as to participation in dividends and distributions and in the net
distributable assets of a Fund on liquidation.

When issued, shares are fully paid and nonassessable, and have no
preemptive, conversion or exchange rights. Each Class represents an identical
interest in a Fund's investment portfolio. As a result, the Classes have the
same rights, privileges and preferences, except with respect to: (I) the
designation of each Class; (2) the effect of the respective sales charges, if
any, for each Class; (3) the distribution and / or service fees, if any, borne
by each Class; (4) the expenses allocable exclusively to each Class; (5) voting
rights on matters exclusively affecting a single Class; and (6) the exchange
privilege of each Class. The Board of Directors does not anticipate that there
will be any conflicts among the interests of the holders of the different
Classes. The Directors, on an ongoing basis, will consider whether any conflict
exists and, if so, take appropriate action. Certain aspects of the shares may be
changed, upon notice to Fund shareholders, to satisfy certain tax regulatory
requirements, if the change is deemed necessary by the Directors.

NET ASSET VALUE

18
<PAGE>

(the third Monday in February), Good Friday, Memorial Day (the last Monday in
May), July 4th, Labor Day (the first Monday in September), Thanksgiving Day (the
fourth Thursday in November) and December 25th; and (b) the preceding Friday
when one of those holidays falls on a Saturday or the subsequent Monday when one
of those holidays falls on a Sunday. Net asset value per share is computed by
dividing the value of the Fund's net assets by the total number of its shares
outstanding. Assets traded on a securities exchange or other recognized market
are valued on the basis of market quotations. Assets for which quotations are
not readily available are valued at fair value as determined in good faith under
procedures approved by the Board of Directors. High quality money market
instruments with remaining maturities of 60 days or less are valued on the basis
of amortized cost, which involves valuing a portfolio instrument at its market
value on the 61st day prior to maturity and thereafter assuming a constant
amortization to maturity of any market discount or premium, generally without
regard to the effect of fluctuating interest rates on the market value of the
instrument.

PURCHASE OF SHARES

GENERAL INFORMATION

Shares of a Fund are sold at the net asset value per share next
determined after receipt of an order, plus a sales charge in the case of Class A
shares. Investors whose orders are received not later than 4:15 p.m., New York
time, will become shareholders on that day. Investors whose orders are received
after 4:15 p.m., New York time, will become shareholders on the following
business day. Each Fund reserves the right to reject any order to purchase
shares. Certificates for shares will be issued only upon the specific request of
a shareholder. A shareholder will be entitled to receive dividends declared with
respect to shares of a Fund from the date on which a purchase payment is made
(ordinarily the third business day after purchase order is placed) through the
date on which a redemption order for those shares is placed.

The minimum initial investment in a Fund is $1,000 and the minimum
subsequent investment is $100, except that the minimum initial and subsequent
investments for purchases of Fund shares through Retirement Plans for
Self-Employed Persons and Individual Retirement Accounts will be $500 and $50,
respectively. Each Fund reserves the right to vary these minimums at any time.

RETIREMENT PLANS. Shares may be purchased in connection with various
qualified tax-deferred retirement plans. Forms for establishing these plans are
available through any SG Cowen account representative. Investors urged to
consult with a tax adviser in connection with the establishment of retirement
plans.

AUTOMATIC INVESTMENT PLAN. The Funds offer an Automatic Investment Plan
whereby DST is permitted through preauthorized checks of $ 100 or more ($50 in
the case of Retirement Plans for Self-Employed Persons and Individual Retirement
Accounts) to charge the regular bank account of a shareholder on a regular Basis
to provide systematic additions to the Fund account of the shareholder. While
there is no charge to shareholders for this service, a charge of $10.00 will be
deducted from a shareholder's Fund account for checks returned for insufficient
funds. A shareholder's Automatic Investment Plan may be terminated at any time
without charge or penalty by the shareholder, the Fund, DST or FDI. Further
information regarding the Automatic Investment Plan may be obtained through any
account representative.

19
<PAGE>

Under the Multiple Pricing System, each Funds presently offer three
methods of purchasing shares; enabling investors to choose the Class that, given
the amount of purchase and intended length of investment, best suits their
needs. Account representatives and other persons remunerated on the basis of
sales of shares may receive different levels of compensation for selling one
Class of shares over another. From time to time, registered representatives of
broker-dealers that enter into selected dealer agreements with FDI will receive
additional non-cash compensation in the form of gifts or prizes such as
merchandise or trips. When purchasing shares of the Fund, investors must specify
whether the purchase is for Class A shares, Class B shares or Class I shares, as
described below.

CLASS A SHARES

The public offering price of Class A shares is the net asset value per
Class A share next determined after a purchase order is received plus a sales
charge, if applicable. Class A shares are subject to a service fee at the annual
rate of .25% of the value of the Fund's average daily net assets attributable to
this Class. The sales charge payable upon the purchase of Class A shares will
vary with the amount of purchase as set forth below.

IFIF

<TABLE>
<CAPTION>
Sales Charge as a Sales Charge as
Percentage of the a Percentage of
Shares Purchased in Public Offering the Net Amount Dealer
Single Transaction Price Invested Reallowance
- ------------------ ----- -------- -----------
<S> <C> <C> <C>
Up to $49,999 2.35% 2.40% 2.00%
$50,000-$99,999 2.25% 2.30% 1.90%
$100,000-$249,999 2.00% 2.04% 1.75%
$250,000-$499,999 1.75% 1.78% 1.50%
$500,000-$999,999 1.45% 1.47% 1.25%
$1,000,000-$2,999,999 0% 0% .60%
$3,000,000-$3,999,999* 0% 0% .30%
</TABLE>

GSF
<TABLE>
<CAPTION>
Sales Charge as a Sales Charge as
Percentage of the a Percentage of
Shares Purchased in Public Offering the Net Amount Dealer
Single Transaction Price Invested Reallowance
- ------------------ ----- -------- -----------
<S> <C> <C> <C>
Up to $49,999 4.75% 5.00% 4.00%
$50,000-$99,999 4.00% 4.17% 3.25%
$100,000-$249,999 3.75% 3.90% 3.00%
$250,000-$499,999 2.50% 2.56% 2.00%
$500,000-$999,999 2.00% 2.04% 1.50%
$1,000,000-$2,999,999 0% 0% .80%
$3,000,000-$3,999,999* 0% 0% .40%
</TABLE>

20
<PAGE>

* Investors who purchase $4 million or more of shares will receive Class I
shares, which are not subject to any front-end sales charge or service fee. See
"Class I Shares."

The above schedule of sales charges is applicable to purchases in a
single transaction by, among others: (1) an individual; (2) an individual, his
or her spouse and their children under the age of 21 purchasing shares for his
or her own accounts; (3) a trustee or other fiduciary purchasing shares for a
single trust estate or a single fiduciary account; (4) a pension, profit-sharing
or other employee benefit plan qualified or non-qualified under Section 401 of
the Internal Revenue Code of 1986 (the "Code"); (5) tax-exempt organizations
enumerated in Section 501(c)(3) or (13) of the Code; (6) employee benefit plans
qualified under Section 401 of the Code of a single employer or of employers who
are "affiliated persons" of each other, as defined in the 1940 Act and for
investments in Individual Retirement Accounts of employees of a single employer
through Systematic Payroll Deduction plans; or (7) any other organized group of
persons, whether incorporated or not, provided the organization has been in
existence for at least six months and has some purpose other than the purchase
of redeemable securities of a registered investment company at a discount.

You may benefit from a reduction of the sales charges in accordance
with the above schedule if the cumulative value (at current net asset value) of
Class A shares purchased in a single transaction, together with those Class A
shares previously purchased subject to payment of a sales charge, plus Class A
shares of SG Cowen Income + Growth Fund, Inc., SG Cowen Large Cap Value Fund, SG
Cowen Intermediate Fixed Income Fund and SG Cowen Government Securities Fund,
and SG Cowen Opportunity Fund, previously or simultaneously purchased subject to
a sales charge, amounts to $50,000 or more. The foregoing schedule of reduced
sales charges will also be available to investors who enter into a written
Letter of Intent providing for the purchase, within a 13-month period, of Class
A shares of the Funds, SG Cowen Income + Growth Fund, Inc., SG Cowen Large Cap
Value Fund , and SG Cowen Opportunity Fund from SG Cowen. Class A shares of the
Funds, SG Cowen Income + Growth Fund, Inc., SG Cowen Large Cap Value Fund, SG
Cowen Intermediate Fixed Income Fund, and SG Cowen Government Securities Fund
and SG Cowen Opportunity Fund previously purchased during a 90-day period prior
to the date of receipt by FDI of the Letter of Intent and still owned by the
shareholder may also be included in determining the applicable reduction.

A shareholder who has redeemed his Class A shares may reinvest all or
part of the redemption proceeds within 30 days without imposition of a sales
charge. This privilege may be exercised only once by a shareholder. Shareholders
should note that no loss will be allowed on the sale of Fund shares to the
extent that the shareholder acquired other shares in the Fund within a period
beginning 30 days before the sale or disposition of the shares in which the
shareholder incurred a loss and ending 30 days after such sale.

Each Fund offers Class A shares without imposition of a sales charge to
(1) employees of SG Cowen and registered representatives of securities dealers
that participate in distribution of the Fund's shares; (2) Individual Retirement
Accounts for those persons; (3) the spouses, children, parents, grandparents,
siblings, spouse's parents and sibling's children of those persons when purchase
orders on their behalf are placed by those persons; (4) directors and trustees
of registered investment companies whose shares are advised by SGCAM, Individual
Retirement Accounts for those persons, employee benefit plans for those persons,
and the spouses and minor children of those persons when purchase orders on
their behalf are placed by those persons; (5) SG Cowen and its subsidiaries; (6)
participants in any pension, profit-sharing or other employee

21
<PAGE>

benefit plan qualified or non-qualified under Section 401 of the Code when
purchase orders are placed by such participants pursuant to such plans; (7)
officers, directors, partners and employees of the Fund's counsel or auditors;
and (8) investors who purchase shares of the Fund to the extent that the
investment represents (a) the proceeds from the redemption made within the
preceding 60 days of shares of another mutual fund not affiliated with SGCAM
whose shares were purchased subject to a sales charge, or (b) the net proceeds
of the sale within the preceding 60 days of shares of any closed-end investment
company. The Distributor pays a sales commission equal to 1.00% of the amount
invested to dealers who sell Class A Shares without imposition of a sales charge
to investors described in items (6) and (8).

CLASS B SHARES

The public offering price of Class B shares is the net asset value per
share next determined after a purchase order is received without imposition of
any front-end sales charge. The Distributor pays a sales commission equal to
4.00% and 2.00% of the amount invested to dealers who sell Class B shares of GSF
and IFIF, respectively. Class B shares may be subject upon redemption to a
contingent deferred sales charge ("CDSC"). See "Redemption of Shares of GSF and
IFIF, respectively." Class B shares of each Fund are subject to a service fee at
the annual rate of .25%, and a distribution fee at the annual rate of .75% and
.25% of the value of the GSF and IFIF, respectively, average daily net assets
attributable to this Class. FDI and SG Cowen has adopted guidelines, in view of
the relative sales charges, service fees and distribution fees, directing
account representatives that all purchases of shares should be for Class A
shares when the purchase is for $500,000 or more by an investor not eligible to
purchase Class I shares. SG Cowen reserves the right to vary these guidelines at
any time.

CLASS I SHARES

The public offering price of Class I shares is the net asset value per
share next determined after a purchase order is received without imposition of
any sales charge. Class I shares were previously designated as Class C shares.
Certain dealers may refer to Class I shares as "institutional shares." Class I
shares, which are not subject to any service fee or distribution fee, are
available exclusively to (1) employee benefit plans for employees of SG Cowen
and securities dealers that participate in distribution of the Fund's shares;
(2) charitable organizations (as defined in Section 501 (c) (3) of the Code)
investing $100,000 or more; (3) any pension fund, corporation, state or local
government, Taft-Hartley plan, foundation and/or endowment which is a client of
a consulting firm, if such consulting firm has contacted the Fund, SGCAM, SG
Cowen or any subsidiary of SG Cowen with respect to furnishing advice to the
client of that consulting firm or with respect to the purchase of the securities
of the Fund by such client: (4) investors purchasing $4 million or more of
shares of the Fund; (5) accounts as to which a bank, registered investment
adviser or broker-dealer charges an account management fee, provided the bank,
registered investment adviser or broker-dealer has an agreement with SGCAM or SG
Cowen relating to investment in the Fund; (6) investors, and their spouses and
minor children, who are investment advisory clients of SGCAM or any of its
subsidiaries or who are affiliated persons or sponsoring companies of those
clients; and (7) purchasers placing orders through a broker that maintains an
omnibus account with the Fund and such purchases are made (i) by investment
advisers or financial planners placing trades for their accounts or the accounts
of their clients, and who charge a fee for their services; (ii) clients of such
investment adviser or financial planner who place trades for their own accounts
if the accounts are linked to a master account of such investment adviser or
financial planner on the books and records of the broker or agent, or

22
<PAGE>

(iii) for retirement and deferred compensation plans and trusts used to fund
those plans, including but not limited to those defined in Section 401 (a), 403
(b) or 457 of the Internal Revenue Code or "rabbi" Trusts Investors who purchase
pursuant to (7) may be charged a fee by the broker or agent utilized to effect
the transaction. SG Cowen will from its own resources compensate broker-dealers
and service agents at a maximum annual rate of .15%, 15% and .35%, respectively
of the net asset value of shares purchased pursuant to (3), (5) and (7),
respectively.

EXCHANGE PRIVILEGE

Shares of the Fund may be exchanged for shares of the same Class (or the sole
class offered) of the mutual funds listed below for which SG Cowen serves as a
distributor.

- - SG Cowen Standby Reserve Fund, Inc., a money market fund whose investment
objective is the maximization of current income to the extent consistent
with preservation of capital and maintenance of liquidity.

- - SG Cowen Standby Tax-Exempt Reserve Fund, Inc., a money market fund whose
investment objective is the maximization of current income that is exempt
from federal income taxes to the extent consistent with the preservation of
capital and the maintenance of liquidity.

- - SG Cowen Opportunity Fund, a fund that seeks capital appreciation through
the investment in equity securities of small capitalization companies. This
fund is a series of SG Cowen Funds, Inc.

- - SG Cowen Income + Growth Fund, Inc., a fund that seeks a high level of
dividend income, to the extent consistent with prudent investment
management by investing primarily in income producing equity securities.

- - SG Cowen Large Cap Value Fund, a fund that seeks capital appreciation by
investing in securities which are deemed to be under valued. This fund is a
series of SG Cowen Series Funds, Inc.

For the purposes of this discussion, SG Cowen Standby Reserve Fund,
Inc. and SG Cowen Standby Tax-Exempt Reserve Fund, Inc. are referred to as
"money market funds" and SG Cowen Income + Growth Fund, Inc., SG Cowen
Intermediate Fixed Income Fund, SG Cowen Government Securities Fund and SG Cowen
Opportunity Fund are referred to as "non-money market funds."

Shares of these mutual funds are available only to investors residing
in states where these mutual funds are qualified for sale. They are sold
pursuant to separate prospectuses that may be obtained through FDI, any SG Cowen
account representative, thorough account representatives of SG Cowen
correspondents, or through any other member of the NASD, or any foreign
nonmember of the NASD, which has entered into a Sales Agreement with FDI with
respect to such funds. An exchange of shares is treated for federal income tax
purposes as a redemption (Sale) of shares given in exchange by the shareholder
and an exchanging shareholder may, therefore, realize a taxable gain or loss in
connection with the exchange. The exchange privilege is subject to termination
and its terms are subject to change upon 60 days' notice to shareholders.

23
<PAGE>

Under the Multiple Pricing System, an exchange of shares of the Fund
with other SG Cowen funds' shares will be limited to shares of the same class or
the sole class (money market funds only) of shares of a fund from which the
exchange is to be effected. For example, if a holder of Class A shares of a
non-money market fund exchanges his shares for shares of a money market fund and
thereafter wishes to exchange those shares for shares of the Fund, he may
receive only Class A shares in the latter transaction. As another example, if a
holder of shares of a money market fund acquired as a result of an initial
investment and not from an exchange wishes to exchange his shares of for share
of a non-money market fund, he may receive Class A shares, Class B shares or
Class I shares (depending on his eligibility for Class I shares) in the exchange
transaction.

Thereafter, any further exchanges would be subject to the principal described
above limiting subsequent exchanges to the same class or the sole class of
shares of other funds.

CLASS A EXCHANGES. A shareholder may effect exchanges among the mutual
funds listed above and a Fund on the basis of relative net asset values without
imposition of a sales charge; provided, however, that where shares of a money
market fund acquired through a direct purchase are exchanged for Class A shares
of the Fund or another non-money market fund, the appropriate sales charge will
be imposed at the time of the exchange. Because a substantially lower sales
charge is paid upon purchase of Class A shares of SG Cowen Intermediate Fixed
Income Fund, holders of these shares will not be able to exchange their shares
with shares of the Fund or any of the non-money market funds for a period of 90
days from the date of purchase. After the 90-day waiting period has expired,
Class A shares of SG Cowen Intermediate Fixed Income Fund will be exchangeable
without the imposition of any additional sales charge.

CLASS B EXCHANGES. As described below under "Redemption of Shares," the
CDSC payable by Class B shareholders upon redemption of their shares will vary
with the period of time that the shares are held (the "CDSC holding period").
For purposes of calculating the CDSC holding period, any Class B shares received
in an exchange will be deemed to have been purchased on the same date as the
Class B shares given in exchange. If, however, a Class B shareholder exchanges
his shares for shares of either money market fund, which do not offer a class of
shares subject to a CDSC, such exchange will toll, or suspend, the running of
the CDSC holding period for as long as the money market fund shares are held
and, if those shares are redeemed, a CDSC will be imposed based on the CDSC
holding period without regard to the period during which the money market fund
shares were held. For example, if a holder of Class B shares of the Fund who has
held those shares for a period of more than four but less than five years
exchanges his shares for shares of a money market fund, holds those shares of
the money market fund for a period of one year, and thereafter exchanges those
shares for Class B shares of the Fund, such shareholder will be deemed to have
held the Class B shares for a period of four full years on the date of the last
exchange. If the shareholder were to then immediately redeem his Class B shares
of the Fund, such redemption would be subject to a 2.00% CDSC. Similarly, the
same CDSC would be imposed if at any time the money market fund shares were
redeemed. Conversely, if the shareholder had held his Class B shares of the Fund
for the full six year period, no CDSC would have been imposed upon redemption.

24
<PAGE>

shares wanted to exchange all or a portion of his shares for Class B shares of
the Fund or of any of the non-money market funds that offer Class B shares
subject to a higher CDSC than that imposed by SG Cowen Intermediate Fixed Income
Fund, the exchanged Class B shares will not be subject to the higher applicable
CDSC. Upon redemption, the lower CDSC schedule applicable to Class B shares of
SG Cowen Intermediate Fixed Income Fund will apply.

REDEMPTION OF SHARES

REDEMPTION PROCEDURES

Each Fund will redeem shares without charge at the net asset value per
share next determined after receipt of a redemption order in proper form by any
CDSC imposed on Class B shares. Any redemption request received prior to 4:15
p.m., New York time, will be transmitted to DST on that day and the proceeds of
such redemption will be transmitted in accordance with the investor's
instructions within seven days. Redemption requests received at or after 4:15
p.m., New York time, will be effected on the next business day. Proceeds of any
redemptions will not be sent until the check (including a certified or cashier's
check) used for investment has been cleared for payment by the investor's bank,
which may take up to 15 days. Pending such clearance, redemption proceeds will
be held under circumstances resulting in no earnings to investors. Investors can
avoid the inconvenience associated with check clearance delays by purchasing
shares with immediately available funds held in a brokerage account at a
participating securities dealer or by transmitting funds to DST by wire
transfer.

FDI, SG Cowen and other selected dealers generally will effect
redemptions of shares upon oral instructions received from the shareholders. If
shares are to be redeemed pursuant to an order sent to DST by the shareholder,
DST will require written redemption instructions signed by the shareholder of
record, which signature must be guaranteed by a i commercial bank or trust
company (not a savings bank) located or having a correspondent in New York City,
or by a member organization of the New York Stock Exchange, Inc. The redemption
order must specify which Class of shares is being redeemed. If certificates have
been issued representing the shares to be redeemed, such certificates must also
be endorsed, or a duly executed stock power must be furnished, with signatures
guaranteed as discussed above, and must be submitted to FDI, SG Cowen or DST
with the redemption request. FDI, SG Cowen or DST may require further
documentation if the shareholder is a corporation, partnership, trust, estate or
other entity. The payment of redemptions may be wired to a shareholder's
commercial bank account. There is a $10 charge for each federal funds wire
transaction. The minimum amount for wire redemptions is $10,000. A shareholder
who wishes to redeem by wire should contact DST at 1-800-262-7116.

Each Fund may suspend the right of redemption or postpone the date of
payment upon redemption (as well as suspend or postpone the recordation of the
transfer of its shares) for such periods as are permitted under the 1940 Act.
The Fund reserves the right to redeem shares in any account, other than an
Individual Retirement Account or other qualified retirement plan, at their net
asset value if the value of the account is less than $250. The shareholder
having the account will first be notified in writing that the account has a
value of less than $250 and will be allowed 60 days to make an additional
investment before the redemption is processed by the Fund.

The Funds offer a Systematic Withdrawal Plan under which a shareholder
with $10,000 or more in a Fund may elect to redeem periodic payments to himself
or a designated payee on a

25
<PAGE>

monthly, quarterly or annual basis. For accounts other than qualified retirement
plans, the minimum rate of withdrawal is $50 per month and the maximum monthly
withdrawal is one percent of the current account value in the Fund as of
commencement of participation in the plan. Maintenance of a Systematic
Withdrawal Plan concurrently with purchases of additional shares of a Fund may
be disadvantageous to the shareholder because of the sales charge on such
purchases. A shareholder who elects to use the Systematic Withdrawal Plan should
be aware that such periodic payments will be made from redemptions of his
shares. However, any Class B shares redeemed under the Systematic Withdrawal
Plan will not be subject to a CDSC as described below. Dividends and
distributions paid on his shares may not cover the full amount of each periodic
payment.

CONTINGENT DEFERRED SALES CHARGE - CLASS B SHARES

A CDSC payable to FDI is imposed on any redemption of Class B shares
held less than six years equal to a specified percentage, as set forth below, of
the net asset value of the shares redeemed at the time of purchase or at the
time of redemption, whichever is lower. Class B shares held six years or longer
and Class B shares purchased through reinvestment of dividends or capital gains
distributions are not subject to the CDSC.

Furthermore, no CDSC will be imposed on an amount that represents an
increase in value of the shareholder's account resulting from capital
appreciation.

In circumstances in which the CDSC is imposed, the amount of the charge
will depend on the number of years since the shareholder purchased the shares
being redeemed. The following table sets forth the rates of the CDSC for
redemptions of Class B shares by investors:

<TABLE>
<CAPTION>
CDSC
YEAR SINCE PURCHASE IN WHICH ----
REDEMPTION IS EFFECTED GSF IFIF
---------------------- --- ----
<S> <C> <C>
Year 1.................................................... 5.00% 3.00%
Year 2.................................................... 4.00% 3.00%
Year 3.................................................... 3.00% 2.00%
Year 4 ................................................... 3.00% 2.00%
Year 5 ................................................... 2.00% 1.00%
Year 6 ................................................... 1.00% 1.00%
Thereafter ............................................... None None
</TABLE>

In determining the applicability and rate of any CDSC, redemptions of
Class B shares are made first of amounts due to capital appreciation, next of
shares representing reinvestment of dividends and capital gains distributions,
and then of other shares held by the shareholder for the longest period of time.
As a result, the CDSC, if any, will be imposed at the lowest possible rate. For
example, assume that an investor owns 100,000 shares of GSF that he purchased
seven years ago, 100,000 shares that he purchased more than four but less than
five years ago at $10 per share and 1,000 shares received in respect of
reinvestment of dividends and distributions. The shares now have a net asset
value of $20 per share. The investor may redeem the 100,000 shares he purchased
seven years ago and the 1,000 shares he acquired through reinvestments without
paying a CDSC. If the investor redeems the balance of his shares, he would pay a
CDSC based on the net asset value at the time of purchase ($ 10 per share).
Thus, the investor would pay a CDSC equal to $20,000 (100,000 shares multiplied
by $10 per share times the applicable rate of 2%).

26
<PAGE>

WAIVERS OF CDSC. The CDSC, if any, will be waived in the case of ( 1)
redemptions of Class B shares held at the time a shareholder dies or becomes
disabled, including the Class B shares of a shareholder who owns the shares with
his or her spouse as joint tenants with right of survivorship, provided that the
redemption is requested within one year of the death or initial determination of
disability and (2) redemptions in connection with the following retirement plan
distributions: (a) lump-sum or other distributions from a qualified retirement
plan following retirement; (b) distributions from an Individual Retirement
Account, Keogh plan or custodial account under Section 403 (b) (7) of the Code
following attainment of age 59 1/2 (c) a tax-free return of an excess
contribution to an Individual Retirement Account, and (d) distributions pursuant
to Systematic Withdrawal Plans.

CODE OF ETHICS

The Funds and SGCAM have adopted a code of ethics pursuant to Rule
17j-1 under the 1940 Act with respect to their personnel with access to
information about the purchase or sale of securities by the Funds. The Funds'
distributor will adopt such a code shortly. These codes are designed to protect
the interests of Fund shareholders. While these codes contain provisions
reasonably necessary to prevent personnel subject to the codes from engaging in
unlawful conduct and require compliance review of securities transactions, they
do not prohibit such personnel from investing in securities, including
securities that may be purchased or held by the Funds so long as such
investments are made pursuant to the code's requirements.

TAXATION

Each Fund has qualified, and intends to continue to qualify each year,
as a regulated investment company. As such, the Funds will not be subject to
federal income tax on its net investment income and net capital gains, if any,
provided that they distribute all such net investment income and net realized
securities gains to their shareholders in accordance with subchapter M of the
Code. Depending upon the extent to which it is, or is deemed to be, conducting
business in certain states and localities, the Funds may be subject to taxation
in such states or localities.

If for any taxable year a Fund does not qualify for the special federal
income tax treatment afforded regulated investment companies, all of its taxable
income will be subject to federal income tax at regular corporate rates (without
any deductions for distributions to its shareholders.) In such event, dividend
distributions, including amounts derived from interest on tax-exempt
obligations, would be taxable to shareholders to the extent of current and
accumulated earnings and profits, and would be eligible for the dividends
received deductions for corporations in case of corporate shareholders.

In general, if a shareholder fails to furnish a correct taxpayer
identification number, fails to report dividend and interest income in full, or
fails to certify that he or she has provided a correct taxpayer identification
number and that he or she is not subject to withholding, then the shareholder
may be subject to 31% federal backup withholding tax on dividends, capital gains
distribution and the proceeds of redemptions or exchange. An individual's
taxpayer identification

27
<PAGE>

number is his or her social security number. The backup withholding tax is not
an additional tax and may be credited against a shareholder's regular federal
income tax liability.

Gain or loss on the sale of a security will generally be long-term
capital gain or loss if the Fund has held the security for more than one year.
If a Fund acquires a debt security at a discount, however, the portion of any
gain upon its sale or redemption that reflects the accrued market discount will
be taxed as ordinary income, rather than capital gain.

In general, when the Fund writes a covered call option on a security,
and either the option expires unexercised or the Fund enters into a closing
purchase transaction, the Fund will normally recognize a short-term capital gain
or loss (except that any losses on certain covered call stock options will be
treated as long-term capital losses). If a call option is exercised, the premium
received will be treated as additional proceeds from the sale of the underlying
security.

Although the Funds expect to be relieved of all or substantially all
federal and state income or franchise taxes, depending upon the extent of its
activities in certain states and localities, that portion of the Fund's income
which is treated as earned in any such state or locality could be subject to
state or local tax.

PERFORMANCE INFORMATION

From time to time, a Fund may quote its yield or total return, on a
Class basis in advertisements or in reports and other communications to
shareholders.

From time to time, the Funds may advertise the 30-day "yield" for each
Class. The yield of a Fund refers to the income generated by an investment in
the Class over the 30-day period identified in the advertisement and is computed
by dividing the net investment income per share earned by the Class during the
period by the net asset value per share on the last day of the period. This
income is "annualized" by assuming that the amount of income is generated each
month over a one-year period and is compounded semi-annually. The annualized
income is then shown as a percentage of the net asset value.

TOTAL RETURN

From time to time, the Funds may advertise their "average annual total
return" over various periods of time for each Class. This total return figure
shows the average percentage change in value of an investment in the Class from
the beginning date of the measuring period to the ending date of the measuring
period. The figure reflects changes in the price of shares and assumes that any
income, dividends and/or capital gains distributions made by the Fund during the
period are reinvested in shares of the same Class. Figures will be given for
recent one-, five- and ten-year periods, or for the life of the Class to the
extent that it has not been in existence for the full length of those periods,
and may be given for other periods as well (such as on a year-by-year basis).
When considering "average" total return figures for periods longer than one
year, investors should note that the Fund's annual total return for any one year
in the period might have been greater or less than the average for the entire
period. A Fund also may use "aggregate" total return figures for various
periods, representing the cumulative change in value of an investment in the
Fund for the specific period (again reflecting changes in share prices and
assuming reinvestment of dividends and distributions). Aggregate total returns
may be calculated either

28
<PAGE>

with or without the effect of the sales charge to which Class A shares are
subject or any applicable CDSC for Class B shares and may be shown by means of
schedules, charts or graphs, and may indicate subtotals of the various
components of total return (that is, the change in value of initial investment,
income dividends and capital gains distributions).

It is important to note that yield and total return figures are based
on historical earnings and are not intended to indicate future performance. The
Statement of Additional Information describes the method used to determine the
Funds' yield and total return. Shareholders may make inquiries regarding a Fund,
including current yield quotations or total return figures, to any SG Cowen
account representative. The offering of Class B and Class I shares is expected
to commence in the future. Accordingly, no performance information is available
at this time for these shares.

In reports or other communications to shareholders or in advertising
material, a Fund may compare the performance of its Classes with that of other
mutual funds (or classes thereof) as listed in the rankings prepared by Lipper
Analytical Services, Inc. or similar independent services that monitor the
performance of mutual funds or with other appropriate indexes of investment
securities, such as the Lehman Brothers Government Bond Index, the Lehman
Brothers Corporate Bond Index, the Lehman Brothers Government/Corporate Bond
Index, the Lehman Brothers Intermediate Government/Corporate Bond Index, and the
Lehman Brothers Intermediate Government Bond Index. The performance information
of the Classes also may include evaluations of the Funds published by nationally
recognized ranking services and by financial publications that are nationally
recognized, such as Business Week, Forbes, Fortune, Institutional Investor,
Barron's, Investor's Daily, Kiplingers Personal Finance, The Wall Street
Journal, USA Today, The New York Times and Money.

SG Cowen Funds, Inc. sends to each shareholder a semi-annual report and
an audited annual report, each of which includes a list of the investment
securities held by the Funds. To the extent any advertisement or sales
literature of a Fund describes the expenses or performance of any Class, it will
also disclose the information for other Classes.

YIELD

A Fund's 30-day yield figure described in the Prospectus is calculated
according to a formula prescribed by the SEC, expressed as follows:

YIELD = 2[( a-b +1) - 1]
----------------
cd

Where: a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursement).
c = the average daily number of shares outstanding during
the period that were entitled to receive dividends.
d = the maximum offering price per share on the last day of
the period.

For the purpose of determining the interest earned (variable "a" in the
formula) on debt obligations that were purchased by the Fund at a discount or
premium, the formula generally

29
<PAGE>

calls for amortization of the discount or premium; the amortization schedule
will be adjusted monthly to reflect changes in the market values of the debt
obligations.

Investors should recognize that in periods of declining interest rates,
a Fund's yield will tend to be somewhat higher than prevailing market rates and
in periods of rising interest rates will tend to be somewhat lower. In addition,
when interest rates are falling, the inflow of net new money to a Fund from the
continuous sale of its shares will likely be invested in instruments producing
lower yields than the balance of its portfolio of securities, thereby reducing
the current yield of the Fund. In periods of rising interest rates the opposite
can be expected to occur.

AVERAGE ANNUAL TOTAL RETURN

A Fund's "average annual total return" figures described in the
Prospectus are computed according to a formula prescribed by the SEC, expressed
as follows:

P(1 + T)n = ERV

Where: P = a hypothetical initial payment of $1,000.

T = average annual total return.

n = number of years.

ERV = Ending Redeemable Value of a hypothetical $1,000 investment
made at the beginning of a 1-, 5- or 10-year period at the end of
a 1-, 5- or 10-year period (or fractional portion thereof),
assuming reinvestment of all dividends and distributions.

GSF

Class A Shares/Average Annual Total Return for the periods ended
November 30, 1999:

1 year = -5.86%
5 year = 6.03%
*Inception = 4.94%

*January 20, 1993

Class B Shares/Average Annual Total Return for the periods ended
November 30, 1999:

(As of November 30, 1996, there were no Class B shares outstanding.)

Class I Shares/Average Annual Total Return for the periods ended
November 30, 1999:

1 year = -1.30%
5 year = 7.29%
*Inception = 6.62%

*July 11, 1994

30
<PAGE>

The Class A total return figures calculated in accordance with the above
formula assumes that the maximum 4.75% sales load has been deducted from the
hypothetical $1,000 initial investment at the time of purchase. The Class B
total return figures calculated in accordance with the above formula assumes the
deduction of the appropriate contingent deferred sales charge at the end of each
period.

IFIF

Class A Shares/Average Annual Total Return for the periods ended
November 30, 1999:

1 year = -3.71%
5 year = 6.15%
*Inception = 5.02%

*January 20, 1993

Class B Shares/Average Annual Total Return for the periods ended
November 30, 1999:

1 year = -4.60%
5 year = 6.26%
*Inception = 5.89%

*July 12, 1994

Class I Shares/Average Annual Total Return for the periods ended
November 30, 1999:

1 year = -1.11%
5 year = 6.91%
*Inception = 6.36%

*July 11, 1994

The Class A total return figures calculated in accordance with the
above formula assumes that the maximum 2.35% sales load has been deducted from
the hypothetical $1,000 initial investment at the time of purchase. The Class B
total return figures calculated in accordance with the above formula assumes the
deduction of the appropriate contingent deferred sales charge at the end of each
period.

The ERV assumes complete redemption of the hypothetical investment at
the end of the measuring period. A Fund's net investment income changes in
response to fluctuations in interest rates and the expenses of the Fund.

AGGREGATE TOTAL RETURN

A Fund's aggregate total return figures described in the Prospectus
represent the cumulative change in the value of an investment in the Fund for
the specified period and are computed by the following formula:

31
<PAGE>

ERV-P

Where: P = a hypothetical initial payment of $10,000.

ERV = Ending Redeemable Value of a hypothetical
$10,000 investment made at the beginning of the
1-, 5- or 10-year period at the end of the 1-,
5- or 10-year period (or fractional portion
thereof), assuming reinvestment of all dividends
and distributions.

The ERV assumes complete redemption of the hypothetical investment at
the end of the measuring period.

A Fund's total return figures calculated in accordance with the above
formulas assume that the maximum sales load, 2.35% for Cowen Intermediate Fixed
Income Fund and 4.75% for Cowen Government Securities Fund, have been deducted
from the hypothetical initial investment at the time of purchase. The Class B
aggregate total return figures calculated in accordance with the above formula
assumes the deduction of the appropriate contingent deferred sales charge.

A Fund's performance will vary from time to time depending upon market
conditions, the composition of its portfolio and its operating expenses.
Consequently, any given performance quotation should not be considered
representative of a Fund's performance for any specified period in the future.
In addition, because performance will fluctuate, it may not provide a basis for
comparing an investment in the Fund with certain bank deposits or other
investments that pay a fixed yield for a stated period of time. Investors
comparing a Fund's performance with that of other mutual funds should give
consideration to the quality and maturity of the respective investment
companies' portfolio securities.

OTHER INFORMATION

KPMG LLP, 757 Third Avenue, New York, New York 10017, has been selected
as the Fund's independent auditors.

Willkie Farr & Gallagher, 787 Seventh Avenue, New York, New York 10019,
serves as counsel for the Fund.

FINANCIAL STATEMENTS

The Funds hereby incorporate by reference the financial statements and
related notes and the reports of KPMG LLP thereon included in the Fund's Annual
Report to Shareholders for the year ended November 30, 1999. The Funds will
provide copies of the Annual Reports to each person who requests a copy of this
Statement of Additional Information. The Fund will also furnish copies of the
Annual Reports, without charge, to any shareholder upon request directed to

32
<PAGE>

the Fund, at the address or telephone number given on the cover page of this
Statement of Additional Information.

APPENDIX

DESCRIPTION OF S&P AND MOODY'S RATINGS

DESCRIPTION OF S&P CORPORATE BOND RATINGS:

AAA -- Bonds rated AAA have the highest rating assigned by S&P to a
debt obligation. Capacity to pay interest and repay principal is extremely
strong.

AA -- Bonds rated AA have a very strong capacity to pay interest and
repay principal and differ from the highest rated issues only in small degree.

A -- Bonds rated A have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than bonds in higher rated
categories.

BBB -- Bonds rated BBB are regarded as having an adequate capacity to
pay interest and repay principal. Whereas they normally exhibit adequate
protection parameters, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to pay interest and repay principal
for bonds in this category than for bonds in higher rated categories.

DESCRIPTION OF MOODY'S CORPORATE BOND RATINGS:

Aaa -- Bonds rated Aaa are judged to be the best quality. They carry
the smallest degree of investment risk and are generally referred to as
"gilt-edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of these issues.

Aa -- Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.

A -- Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate but elements
may be present which suggest a susceptibility to impairment sometime in the
future.

33
<PAGE>

Baa -- Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.

Moody's applies the numerical modifiers 1, 2 and 3 to each generic
rating classification from Aa through B. the modifier 1 indicates that the
security ranks in the higher end of its generic rating category; the modifier 2
indicates a mid-range ranking; and the modifier 3 indicates that the issue ranks
in the lower end of its generic rating category.

DESCRIPTION OF S&P COMMERCIAL PAPER RATINGS:

Commercial paper rated A-1 by S&P indicates that the degree of safety
regarding timely payment is either overwhelming or very strong. Those issues
determined to possess overwhelming safety characteristics are denoted A-1+.
Capacity for timely payment on commercial paper rated A-2 is strong, but the
relative degree of safety is not as high as for issues designated A-1.

DESCRIPTION OF MOODY'S COMMERCIAL PAPER RATINGS:

The rating Prime-1 is the highest commercial paper rating assigned by
Moody's. Issuers rated Prime-1 (or related supporting institutions) are
considered to have a superior capacity for repayment of short term promissory
obligations. Issuers rated Prime-2 (or related supporting institutions) are
considered to have a strong capacity for repayment of short term promissory
obligations. This will normally be evidenced by many of the characteristics of
issuers rated Prime-1 but to a lesser degree. Earnings trends and coverage
ratios, while sound, will be more subject to variation. Capitalization
characteristics, while still appropriate, may be more affected by external
conditions. Ample alternative liquidity is maintained.

34
<PAGE>

STATEMENT OF ADDITIONAL INFORMATION

April 1, 2000

SG COWEN OPPORTUNITY FUND

a series of

SG COWEN FUNDS, INC.

560 Lexington Avenue, New York, NY 10022
(212) 278-4569, (877) 293-7298

CONTENTS PAGE

History.......................................... 2
Investment Objectives and Policies............... 2
Management of the Fund........................... 9
Capital Stock.................................... 15
Net Asset Value.................................. 16
Purchase of Shares.............................. 16
Exchange Privilege............................... 20
Redemption of Shares............................. 22
Code of Ethics................................... 24
Taxation......................................... 25
Performance Information.......................... 26
Auditors And Counsel............................. 27
Financial Statements............................. 27

This Statement of Additional Information is meant to be read in
conjunction with the Prospectus of SG Cowen Opportunity Fund (the "Fund") dated
April 1, 2000, and is incorporated by reference in its entirety into that
Prospectus. Because this Statement of Additional Information is not itself a
prospectus, no investment in shares of the Fund should be made solely upon the
information contained herein. Copies of the Fund's Prospectus may be obtained by
calling Funds Distributor, Inc., the Fund's principal underwriter, at (800)
221-7930 or by contacting SG Cowen Securities Corporation ("SG Cowen") at (800)
262-7116 or any of its account representatives.

<PAGE>

The Fund's financial statements and report of independent auditors
thereon as of and for the fiscal year ended November 30, 1999 are incorporated
by reference to the Fund's Annual Report, which may be obtained without charge
by calling the toll-free number above. SG Cowen Asset Management, Inc. ("SG
Cowen Asset Management" or "SGCAM") is the investment manager to the Fund.

HISTORY

The Fund is a series of SG Cowen Funds, Inc., which was incorporated on
June 26, 1986 under the laws of the State of Maryland and commenced operation on
May 31, 1988. On July 1, 1998, the name of the Fund was changed from Cowen
Opportunity Fund to SG Cowen Opportunity Fund.

INVESTMENT OBJECTIVES AND POLICIES

The primary investment objective of the Fund, which is a diversified
open-end management investment company, is to realize capital appreciation. It
seeks to achieve this objective by investing primarily in small capitalization
issues. Current income will be incidental to capital appreciation.

INVESTMENT STRATEGY

The Fund will rely on the expertise and analytical resources of SGCAM
to develop a diversified portfolio composed of securities from a broad group of
industry sectors with a focus on small market capitalization companies.
Investments will include, but not be limited to, companies in the health-care,
biotechnology, telecommunications, computers and software, science and
technology, environmental sciences, energy and financial services industries as
SGCAM deems appropriate from time to time. Investments may be made in well-known
and established companies as well as in relatively new or lesser-known
companies. It is important to note that while investments in smaller, less
seasoned companies may present more opportunities for growth, they also involve
greater risks than customarily are associated with more established companies.
Securities in which the Fund may invest may have limited marketability and,
therefore, may be subject to wide fluctuations in market value. In addition,
certain securities may lack a significant operating history and be dependent on
products or services without an established market share. The Fund has adopted
certain policies designed to limit investment risk. See "Investment
Restrictions."

Current income is not an objective of the Fund, and investors should
not expect income from dividends and interest comparable to that of mutual funds
with current income as a goal. Because the Fund will invest primarily in equity
securities, it will be subject to general conditions prevailing in securities
markets and the net asset value of the Fund's shares will fluctuate with changes
in the market prices of its portfolio securities.

2
<PAGE>

The Fund may invest to a limited degree in securities of companies with
more than $1 billion in market capitalizations. Because investments in large
capitalization issuers are not directly in furtherance of the Fund's investment
objective, the Fund will limit its investment in these securities to not more
than 35 percent of its net assets.

INFORMATION ON INVESTMENT PRACTICES AND RISKS

U.S. GOVERNMENT SECURITIES. Examples of the types of U.S. Government
securities that the Fund may hold include, in addition to those described in the
Prospectus, U.S. Treasury Bills, the obligations of the Federal Housing
Administration, Farmers Home Administration, Small Business Administration,
General Services Administration, Central Bank for Cooperatives, Federal Farm
Credit Banks, Federal Home Loan Banks, Federal Home Loan Mortgage Corporation,
Federal Intermediate Credit Banks, Federal Land Banks and Maritime
Administration. It is not anticipated that the Fund will in the foreseeable
future invest in excess of five percent of its net assets in U.S. Government
securities that represent interests in pools of mortgages.

LENDING OF SECURITIES. The Fund has the authority to lend securities to
brokers, dealers and the other financial organizations. The Fund will not lend
securities to SG Cowen or its affiliates. By lending its securities, the Fund
can increase its income by continuing to receive interest on the loaned
securities as well as by either investing the cash collateral in short-term
securities or obtaining yield in the form of interest paid by the borrower when
U.S. Government securities are used as collateral. The Fund will adhere to the
following conditions whenever its securities are loaned: (a) the Fund must
receive at least 100 percent cash collateral or equivalent securities from the
borrower; (b) the borrower must increase this collateral whenever the market
value of the loaned securities including accrued income rises above the level of
the collateral; (c) the Fund must be able to terminate the loan at any time; (d)
the Fund must receive reasonable interest on the loan, as well as any dividends,
interest or other distributions on the loaned securities and any increase in
market value; (e) the Fund may pay only reasonable custodian fees in connection
with the loan; and (f) voting rights on the loaned securities may pass to the
borrower; provided, however, that if a material event adversely affecting the
investment occurs, the Fund's Board of Directors must terminate the loan and
regain the right to vote the securities. Loans will not be made if as a result
the aggregate of all outstanding loans exceed 30 percent of the value of the
Fund's total assets taken at current market value.

COVERED CALL OPTIONS. In an effort to enhance the Fund's performance
through receipt of premiums and generally to assist in the management of its
portfolio, the Fund may engage without limitation in the writing (selling) of
call option contracts on securities at such times as SGCAM shall determine to be
appropriate. The Fund will only write covered call options on securities held in
the portfolio. The premium paid to the writer is the consideration for
undertaking the obligations under the option contract. The writer forgoes the
opportunity to profit from an increase in the market price of the underlying
security above the exercise price except insofar as the premium represents a
profit.

The Fund will purchase options only to close out a call option
position. In order to close out a position, the Fund will make a "closing
purchase transaction" which involves the purchase

3
<PAGE>

of a call option on the same security with the same exercise price and
expiration date as a call option which it has previously written. When a
security is sold from the Fund's portfolio, the Fund will effect a closing
purchase transaction so as to close out any existing call option on that
security. The Fund will realize a profit or loss from a closing purchase
transaction if the amount paid to purchase a call option is less or more than
the amount received from the sale thereof.

Options written by the Fund will normally have expiration dates between
one and nine months from the date written. So long as the obligation of the Fund
as the writer of an option continues, the Fund may be assigned an exercise
notice by the broker-dealer through which the option was sold, requiring the
Fund to deliver the underlying security against payment of the exercise price.
This obligation terminates when the option expires or the Fund effects a closing
purchase transaction. The Fund can no longer effect a closing purchase
transaction with respect to an option once it has been assigned an exercise
notice. To secure its obligation to deliver the underlying security when it
writes a call option the Fund will be required to deposit in escrow the
underlying security or other assets in accordance with the rules of the Options
Clearing Corporation (the "Clearing Corporation") and of the national securities
exchange on which the option is written.

An option position may be closed out only where there exists a
secondary market for an option of the same series on a recognized national
securities exchange in the over-the-counter market. In light of this fact and
current trading conditions the Fund expects to write options only on national
securities exchanges and in the over-the-counter market. As of the date of this
Statement of Additional Information, the national securities exchanges on which
options are traded are: The Chicago Board Options Exchange, The Board of Trade
of the City of Chicago, American Stock Exchange, Philadelphia Stock Exchange,
Pacific Stock Exchange and New York Stock Exchange ("NYSE"). Options are also
traded on the national securities exchanges with respect to unlisted securities
reported through the NASDAQ system.

Although the Fund will write only those options for which SGCAM
believes there is an active secondary market so as to facilitate closing
purchase transactions, there is no assurance that sufficient trading interest to
create a liquid secondary market on a securities exchange will exist for any
particular option or at any particular time, and for some options no such
secondary market may exist. A liquid secondary market in an option may cease to
exist for a variety of reasons. In the past, for example, higher than
anticipated trading activity or order flow, or other unforeseen events, have at
times rendered certain of the facilities of the Clearing Corporation and the
national securities exchanges inadequate and resulted in the institution of
special procedures, such as trading rotations, restrictions on certain types of
orders or trading halts or suspensions in one or more options. There can be no
assurance that similar events, or events that may otherwise interfere with the
timely execution of customer orders, will not recur. In such event, it might not
be possible to effect closing purchase transactions in particular options. If,
as a covered call option writer, the Fund is unable to effect a closing purchase
transaction in a secondary market, it will not be able to sell the underlying
securities until the option expires or it delivers the underlying security upon
exercise. The national securities exchanges have established limitations
governing the maximum number of options of each class which may be held or
written, or exercised within certain time periods, by an investor or group of
investors acting in concert (regardless of whether the options are written on
the same or different national securities

4
<PAGE>

exchanges or are held, written or exercised in one or more accounts or through
one or more brokers). It is possible that the Fund and other clients of SG and
certain of its affiliates may be considered to be such a group. A national
securities exchange may order the liquidation of positions found to be in
violation of these limits and it may impose certain other sanctions.

In the case of options written by the Fund that are deemed covered by
virtue of the Fund's holding convertible or exchangeable preferred stock or debt
securities, the time required to convert or exchange and obtain physical
delivery of the underlying common stocks with respect to which the Fund has
written options may exceed the time within which the Fund must make delivery in
accordance with an exercise notice. In these instances, the Fund may purchase or
temporarily borrow the underlying securities for purposes of physical delivery.
By so doing, the Fund will not bear any market risk, since the Fund will have
the absolute right to receive from the issuer of the underlying security an
equal number of shares to replace the borrowed stock, but the Fund may incur
additional transaction costs or interest expenses in connection with any such
purchase or borrowing.

VENTURE CAPITAL INVESTMENTS. The Fund may invest up to five percent of
its assets in venture capital investments, i.e., new early stage companies whose
securities are not publicly traded. Venture capital investments may present
significant opportunities for capital appreciation but involve a high degree of
business and financial risk that can result in substantial losses. The
disposition of U.S. venture capital investments, which may include limited
partnership interests, would normally be restricted under federal securities
laws. Generally, restricted securities may be sold only in privately negotiated
transactions, in public offerings registered under the Securities Act of 1933,
as amended ( the "1933 Act") or in transactions pursuant to Rule 144A under the
1933 Act. As a result of these restrictions, the Fund may be unable to dispose
of these investments at times when disposition is deemed appropriate due to
investment of liquidity considerations. Alternatively, the Fund may be forced to
dispose of these investments at less than their fair value. Where registration
is required, the Fund may be obligated to pay part or all the expenses of such
registration.

WARRANTS. A warrant confers upon its holder the right to purchase an
amount of securities at a particular time and price. Because a warrant does not
carry with it the right to dividends or voting rights with respect to the
securities which it entitles a holder to purchase, and because it does not
represent any rights in the assets of the issuer, warrants may be considered
more speculative than certain other types of investments. Also, the value of a
warrant does not necessarily change with the value of the underlying securities
and a warrant ceases to have value if it is not exercised prior to its
expiration date. For so long as the Fund's shares are sold in states so
requiring, the Fund will limit its purchase of warrants to five percent of its
net assets, with no more than two percent of its net assets to be invested in
warrants not listed on the New York Stock Exchange or the American Stock
Exchange. The acquisition of warrants in units or attached to other securities
is not subject to these restrictions.

FOREIGN SECURITIES. The Fund may invest up to 10 percent of its assets
in securities of foreign issuers and up to an additional 10 percent of its
assets in securities of Canadian issuers. There are certain risks involved in
investing in securities of companies in foreign nations that are in addition to
the usual risks inherent in investments in domestic companies. These risks
include

5
<PAGE>

those resulting from fluctuations in currency exchange rates, revaluation of
currencies, future adverse political and economic developments and the possible
imposition of currency exchange blockages or other foreign governmental laws or
restrictions, reduced availability of public information concerning issuers and
the lack of uniform accounting, auditing and financial reporting standards or of
other regulatory practices and requirements comparable to those applicable to
domestic companies. Moreover, securities of many foreign companies may be less
liquid and their prices more volatile than those of securities of comparable
domestic companies. These investments may be in the form of American Depositary
Receipts, which typically are issued by a U.S. bank or trust company to evidence
ownership of underlying securities issued by a foreign corporation. American
Depositary Receipts are not necessarily denominated in the same currency as the
securities into which they may be converted.

REPURCHASE AGREEMENTS. The Fund may engage in repurchase agreement
transactions involving its portfolio securities with banks, registered
broker-dealers and government securities dealers approved by the Fund's Board of
Directors. It is not anticipated that the Fund will in the foreseeable future
invest in excess of five percent of its net assets in repurchase agreements.
Under the terms of a typical repurchase agreement, the Fund would acquire an
underlying debt obligation for a relatively short period (usually not more than
one week) subject to an obligation of the seller to repurchase, and the Fund to
resell, the obligation at an agreed price and time, thereby determining the
yield during the Fund's holding period. Thus, repurchase agreements may be seen
to be loans by the Fund collateralized by the underlying debt obligation. This
arrangement results in a fixed rate of return that is not subject to market
fluctuations during the Fund's holding period. The value of the underlying
securities will be at least equal at all times to the total amount of the
repurchase obligation, including interest. The Fund bears a risk of loss in the
event that the other party to a repurchase agreement defaults on its obligations
and the Fund is delayed in or prevented from exercising its rights to dispose of
the collateral securities, including the risk of a possible decline in the value
of the underlying securities during the period in which the Fund seeks to assert
these rights. SGCAM, acting under the supervision of the Fund's Board of
Directors, reviews the credit-worthiness of those banks and dealers with which
the Fund enters into repurchase agreements to evaluate these risks and monitors
on an ongoing basis the value of the securities subject to repurchase agreements
to ensure that the value is maintained at the required level.

TEMPORARY INVESTMENTS. The Fund may invest up to 20 percent of its
assets, and in excess of that amount when SGCAM believes market conditions
warrant a temporary defensive posture, in corporate bonds rated at least Baa by
Moody's Investors Service, Inc. or BBB by Standard & Poor's Corporation,
commercial paper rated at least Prime-2 by Moody's or A-2 by Standard & Poor's
and obligations issued or guaranteed by the U.S. Government or by its agencies
or instrumentalities and repurchase agreements in respect of such obligations.
Obligations of certain agencies and instrumentalities of the U.S. Government,
such as the Government National Mortgage Association, are supported by the "full
faith and credit" of the U.S. Government; others, such as those of the Federal
National Mortgage Association, are supported by the ' discretionary authority of
the U.S. Government to purchase the agency's obligations; and still others, such
as those of the Export-Import Bank of the U.S., are supported by the right of
the issuer to borrow from the U.S. Treasury; and still others, such as those of
the Student Loan Marketing Association, are supported only by the credit of the
instrumentality. No

6
<PAGE>

assurance can be given that the U.S. Government would provide financial support
to U.S. Government-sponsored instrumentalities if it is not obligated to do so
by law. Bonds rated Baa by Moody's and BBB by S&P, while considered "investment
grade" obligations, may have speculative characteristics.

INVESTMENT RESTRICTIONS

The investment restrictions numbered 1 through 12 below have been
adopted by the Fund as fundamental policies, which means that they may not be
changed without the vote of a majority of the outstanding voting securities of
the Fund, which is defined as the lesser of (a) 67 percent or more of the shares
present at a shareholders meeting if the holders of more than 50 percent of the
outstanding shares of the Fund are present or represented by proxy, or (b) more
than 50 percent of the outstanding shares. Investment restrictions 13 through 18
may be changed by vote of a majority of the Fund's Directors at any time.

The investment policies adopted by the Fund prohibit it from:

1. With respect to 75 percent of its assets, purchasing the securities
of any issuer, other than U.S. Government securities, if as a result
more than five percent of the value of the Fund's total assets would
be invested in the securities of the issuer.

2. Purchasing more than 10 percent of the voting securities of any one
issuer or more than 10 percent of the securities of any class of any
one issuer. This limitation shall not apply to investments in U.S.
Government securities.

3. Purchasing securities on margin, except that the Fund may obtain any
short-term credit necessary for the clearance of purchases and sales
of securities.

4. Making short sales of securities or maintaining a short position.

5. Borrowing money, except that the Fund may borrow from banks for
temporary or emergency (but not leveraging) purposes, including the
meeting of redemption requests that might otherwise require the
untimely disposition of securities, in any amount not exceeding 20
percent of the value of the Fund's total assets (including the
amount borrowed) valued at the lesser of cost or market, less
liabilities (not including the amount borrowed) at the time the
borrowing is made. Whenever borrowings exceed five percent of the
value of the Fund's total assets, the Fund will not make any
additional investments.

6. Pledging, hypothecating, mortgaging or otherwise encumbering more
than 20 percent of the value of the Fund's total assets, except that
this prohibition shall not prohibit collateral arrangements with
respect to borrowings described in Investment Restriction No. 5 or
the escrow arrangements contemplated by writing covered call
options.

7
<PAGE>

7. Underwriting the securities of other issuers, except insofar as the
Fund may be deemed to be an underwriter under the 1933 Act by virtue
of disposing of portfolio securities.

8. Making loans to others, except through purchasing qualified debt
obligations or lending portfolio securities.

9. Investing in securities of other investment companies, except as
they may be acquired as part of a merger, consolidation,
reorganization, acquisition of assets or offer of exchange.

10. Purchasing any securities that would cause more than 25 percent of
the value of the Fund's total assets to be invested in the
securities of issuers conducting their principal business activities
in the same industry; provided that there shall be no limit on the
purchase of U.S. Government securities.

11. Investing in commodities.

11. Purchasing any security if as a result the Fund would then have more
than five percent of its total assets invested in securities of
issuers (including predecessors) that have been in continual
operation for less than three years. This limitation shall not apply
to investments in U.S. Government securities.

12. Purchasing or selling real estate or interests in real estate,
except that the Fund may purchase and sell securities that are
issued by companies that invest or deal in real estate.

13. Writing or selling puts, calls, straddles, spreads or combinations
thereof, except that the Fund may write covered call options and
enter into closing purchase transactions with respect to options it
has written, provided these transactions are conducted in a manner
consistent with, and subject to the limitations set forth in, the
description of these transactions in its Prospectus and this
Statement of Additional Information.

14. Investing in oil, gas or other mineral exploration or development
programs, except that the Fund may invest in the securities of
companies that invest in or sponsor those programs.

15. Purchasing restricted securities, illiquid securities (such as
repurchase agreements with maturities in excess of five business
days) or securities that are not readily marketable or for which no
readily ascertainable market value is available if more than five
percent of the total assets of the fund would be invested in those
securities.

17. Making investments for the purpose of exercising control or
management.

8
<PAGE>

18. Purchasing or retaining the securities of any issuer if, to the
knowledge of the Fund, any of the officers or directors of SG Cowen
Funds, Inc. or SG Cowen individually owns more than 0.5 percent of
the outstanding securities of the issuer and together they own
beneficially more than five percent of the securities.

The percentage limitations contained in the restrictions listed above
apply at the time of purchases of securities. If a percentage restriction is
adhered to at the time of an investment, a later increase or decrease in
percentage resulting from a change in values or assets will not constitute a
violation of such restriction. The Fund may make commitments more restrictive
than the restrictions listed above so as to permit the sale of shares of the
Fund in certain states. Should the Fund determine that and such commitment is no
longer in the best interests of the Fund and its shareholders, the Fund will
revoke the commitment by terminating the sale of shares of the Fund in the state
involved.

PORTFOLIO TURNOVER

MANAGEMENT OF THE FUND

BOARD OF DIRECTORS

The business and affairs of the Fund is managed under the direction of
the Board of Directors, which has overall supervisory responsibility for the
Fund. By virtue of the responsibilities assumed by SGCAM under the Investment
Management Agreement, the Fund will not require executive employees other than
its officers, none of whom will devote full time to the affairs of the Fund.

The names of the directors and officers of the Fund, their addresses,
principal occupations during the past five years and other affiliations are set
forth below. Each Director who is an "interested person" of the Fund, as defined
in the 1940 Act, is indicated by an asterisk; unless noted otherwise, the
business address of each such individual is 560 Lexington Avenue, New York, New
York 10022. Each of the directors is also a director of all of the investment
companies of which SGCAM is Investment Manager.

9
<PAGE>

DIRECTORS OF THE FUNDS

Burton J. Weiss, Director, age 69. Self-employed consultant since
March, 1988. His address is 103 Marin Drive, Chapel Hill, North Carolina 27516.

OFFICERS OF THE FUNDS

Philip J. Bafundo, Treasurer, age 37. Managing Director and Treasurer
of SGCAM since January 2000. Prior thereto Chief Administrative Officer of
Societe Generale Asset Management Corp.

10
<PAGE>

COMPENSATION

COMPENSATION TABLE (for fiscal year ended November 30, 1999)

<TABLE>
<CAPTION>
Name of Aggregate Total
Director Compensation Compensation
from Fund From
Fund and Fund
Complex *
<S> <C> <C>
James H. Carey $5,750 $28,750
Peter Gil* $5,750 $28,750
Martin J. Gruber $5,750 $28,750
Burton J. Weiss $5,750 $28,750
</TABLE>

- -------------

*There are seven funds in the complex.
**Mr. Gil retired from the board on October 25, 1999.

PRINCIPAL HOLDER OF SECURITIES

INVESTMENT MANAGER

Until July 1, 1998, Cowen served as investment manager and principal
underwriter to the Fund. On July 1, 1998, Cowen's business was combined with
Societe Generale Securities Corporation ("SGSC"), a subsidiary of Societe
Generale ("SG"), to form SG Cowen Securities Corporation ("SG Cowen") (the
"Acquisition"). SG, a leading international commercial and investment bank
established in 1864, has a global network of offices in over 80 countries. From
July 1, 1998 through December 31, 1999, SG Cowen, through its SG Cowen Asset
Management Division, served as the new investment manager to the Fund, with the
existing investment management personnel of Cowen continuing to provide
investment management services to the

11
<PAGE>

Fund. In January 2000 as a result of an internal reorganization, the SG Cowen
Asset Management Division of SG Cowen was transferred to SGCAM. All officers and
employees engaged in providing investment advisory services to the Funds with SG
Cowen have become officers and employees of SGCAM and they will continue to
provide the same services to the Fund.

The management agreement between Cowen and the Fund provided for
automatic termination in the event of its "assignment," which included
consummation of the Acquisition. Accordingly, a new management agreement between
SG Cowen and the Fund (the "New Agreement"), identical in material respects with
the prior management agreement, was approved by the Board of Directors of the
Fund at a meeting held on May 21, 1998. On June 16, 1998, Cowen and SGSC were
granted an exemptive order by the Securities and Exchange Commission pursuant to
which the New Agreement was permitted to be implemented without shareholder
approval beginning on July 1, 1998 and continuing, for a period of up to 150
days, through the date on which the New Agreement is approved or disapproved by
the shareholders of the Fund.

The shareholders of the Fund approved the continuance of the New
Agreement on September 17, 1998. The New Agreement contains substantially the
same terms and conditions as the corresponding prior management agreement,
including the management fee payable by the Fund.

SGCAM is a registered investment adviser. SGCAM's principal address is
560 Lexington Avenue, New York, NY 10022.

Pursuant to the Investment Management Agreement between SGCAM and the
Fund, SGCAM has agreed to be responsible for the Fund's investment program.
Subject to the supervision and direction of the Fund's Boards of Directors,
SGCAM manages the Fund's portfolio in accordance with the stated policies of
that Fund. SGCAM makes investment decisions for the Fund and places the purchase
and sale orders for portfolio transactions. SGCAM also furnishes the Fund
statistical and research data, clerical help, accounting, data processing,
bookkeeping, internal auditing and certain legal and other filings with the SEC
and state Blue Sky authorities, calculates the net asset value of shares of the
Fund and generally assists in all aspects of the Fund's operations. SGCAM
compensates certain securities dealers whose customers are shareholders of the
Fund for providing administrative services to those shareholders that would
otherwise be provided by SGCAM. Such compensation is paid solely from SGCAM's
resources and is not paid directly or indirectly by the Fund.

12
<PAGE>

Class. In addition, each Class will bear an allocable portion of all other Fund
expenses not attributable to a particular Class based on the Class' relative net
assets.

For the fiscal years ended November 30, 1997, 1998 and 1999, the Fund's
Investment Manager received fees for services rendered of $981,026, $786,938 and
$353,263, respectively. From December 1, 1996 through March 31, 1997, SG Cowen
voluntarily reimbursed the Fund's expenses in an amount equal to .13 of 1% and
.03 of 1% from April 1, 1997 through March 31, 1998.

PRINCIPAL UNDERWRITER

Funds Distributor, Inc. ("FDI"), 60 State Street, Boston, MA 02109, is
the principal underwriter to the Fund.

CUSTODIAN AND TRANSFER AND DIVIDEND AGENT

State Street Bank and Trust Company, P.O. Box 419111, Kansas City, MO
64141, is the custodian of the Funds' assets.

DST Systems, Inc., 210 West 10th Street, Kansas City, MO 64105, is the
Funds' transfer and dividend disbursing agent.

SHAREHOLDER SERVICING AND DISTRIBUTION PLAN (THE "PLAN")

FDI is paid monthly fees by the Fund in connection with (1) the
servicing of shareholder accounts in Class A and Class B shares and (2)
providing distribution related services in respect of Class B shares. A monthly
service fee, authorized pursuant to the Plan adopted by the Fund pursuant to
Rule 12b-1 under the Investment Company Act of 1940, as amended (the "1940
Act"), is calculated at the annual rate of .25% of the value of the average
daily net assets of the Fund attributable to each of Class A and Class B shares
and is used by FDI to provide compensation for ongoing servicing and/or
maintenance of shareholder accounts with the Fund. Compensation paid by FDI,
includes amounts paid to SG Cowen employees, who respond to inquiries of
shareholders of the Fund regarding their ownership of shares of their accounts
with the Fund or who provide other similar services not otherwise required to be
provided by the Fund's investment adviser, transfer agent or other agent of the
Fund.

In addition, pursuant to the Plan, the Fund pays to FDI a monthly
distribution fee at the annual rate of .75% of the Funds average daily net
assets attributable to Class B shares. The distribution fee is used by FDI to
provide (1) initial and ongoing sales compensation to its registered
representative or those of other broker-dealers that enter into selected dealer
agreements with FDI in respect of sales of Class B shares; (2) costs of printing
and distributing the Fund's Prospectus, Statement of Additional Information and
sales literature to prospective investors in Class B shares; (3) costs
associated with any advertising relating to Class B shares; and (4) payments to,
and expenses of, persons who provide support services in connection with the
distribution of Class B shares. Because these fees are paid out of the Fund's
assets on an on-

13
<PAGE>

going basis, over time these fees will increase the cost of your investment and
may cost you more than paying other types of sales charges.

Pursuant to the Plan, for the fiscal year ended November 30, 1999,
Class A and Class B shares of the Fund paid $53,905 and $51,723 respectively.

PORTFOLIO TRANSACTIONS

Decisions to buy and sell securities and other financial instruments
for the Fund are made by SGCAM, which also is responsible for placing these
transactions, subject to the overall review of the Fund's Board of Directors.
Although investment requirements for the Fund are reviewed independently from
those of the other accounts managed by SGCAM, investments of the type the Fund
may make may also be made by these other accounts. When the Fund and one or more
other accounts managed by SGCAM are prepared to invest in, or desire to dispose
of, the same security or other financial instrument, available investments or
opportunities for sales will be allocated in a manner believed by SGCAM to be
equitable to each. In some cases, this procedure may affect adversely the price
paid or received by the Fund or the size of the position obtained or disposed of
by the Fund.

Portfolio transactions are in most cases effected on U.S. stock
exchanges and involve the payment of negotiated brokerage commissions. There is
generally no stated commission in the case of securities traded in the
over-the-counter markets, but the prices of those securities may include
commissions or mark-ups. Purchases and sales of money market instruments and
debt securities usually are principal transactions. These securities are
normally purchased directly from the issuer or from an underwriter or market
maker for the securities. The cost of securities purchased from underwriters
includes an underwriting commission or concession, and the prices at which
securities are purchased from and sold to dealers include a dealer's mark-up or
mark-down. U.S. Government securities are generally purchased from underwriters
or dealers, although certain newly-issued U.S. Government securities may be
purchased directly from the U.S. Treasury or from the issuing agency or
instrumentality.

To the extent consistent with applicable provisions of the Act, other
securities laws and the rules and exemptions adopted by the Securities and
Exchange Commission (the "SEC") thereunder, the Fund's Board of Directors has
determined that portfolio transactions may be effected through SG Cowen if, in
the judgment of SGCAM, the use of SG Cowen normally is likely to result in price
and execution at least as favorable as those of other qualified broker-dealers,
and if, in particular transactions, SG Cowen charges the Fund a rate consistent
with that charged to comparable unaffiliated customers in similar transactions.
Over-the-counter purchases and sales are transacted directly with principal
market makers except in those cases in which better prices and executions may be
obtained elsewhere, and principal transactions are not

14
<PAGE>

entered into with affiliates of the Fund except pursuant to exemptive rules or
orders adopted by SEC.

In selecting brokers or dealers to execute portfolio transactions on
behalf of the Fund, SGCAM seeks the best overall terms available. In assessing
the best overall terms available for any transaction, SGCAM will consider the
factors it deems relevant, including the breadth of the market in the
investment, the price of the investment, the financial condition and execution
capability of the broker or dealer and the reasonableness of the commission, if
any, for the specific transaction and on a continuing basis. In addition, SGCAM
is authorized, in selecting parties to execute a particular transaction and in
evaluating the best overall terms available, to consider the brokerage and
research services, as those terms are defined in Section 28(e) of the Securities
Exchange Act of 1934, provided to the Fund and/or other accounts over which
SGCAM or its affiliates exercise investment discretion. SGCAM's fees under its
agreement with the Fund are not reduced by reason of its receiving brokerage
services. The Fund's Directors periodically review the commissions paid by the
Fund to determine if the commissions paid over representative periods of time
are reasonable in relation to the benefits to the Fund.

For the fiscal years ended November 30, 1997, 1998 and 1999 the Fund
paid an aggregate of $835,217, $707,150 and $492,805, respectively in
commissions to broker-dealers for execution of portfolio transactions, none of
which was paid to SG Cowen except for $245 in 1997.

CAPITAL STOCK

The Fund has an authorized capitalization of 3,000,000,000 shares with
a par value of $.001 per share and transferable without restriction of which
250,000,000 have been allocated in respect of each Class of the Fund. All shares
of the Fund have equal rights and privileges as to participation in dividends
and distributions and in the net distributable assets of the Fund on
liquidation.

When issued, shares are fully paid and nonassessable, and have no
preemptive, conversion or exchange rights. Each Class represents an identical
interest in the Fund's investment portfolio. As a result, the Classes have the
same rights, privileges and preferences, except with respect to: (1) the
designation of each Class; (2) the effect of the respective sales charges, if
any, for each Class; (3) the distribution and / or service fees, if any, borne
by each Class; (4) the expenses allocable exclusively to each Class; (5) voting
rights on matters exclusively affecting a single Class; and (6) the exchange
privilege of each Class. The Board of Directors does not anticipate that there
will be any conflicts among the interests of the holders of the different
Classes. The Directors, on an ongoing basis, will consider whether any conflict
exists and, if so, take appropriate action. Certain aspects of the shares may be
changed, upon notice to Fund shareholders, to satisfy certain tax regulatory
requirements, if the change is deemed necessary by the Directors.

15
<PAGE>

NET ASSET VALUE

The net asset value per share of the Fund is calculated as of 4:15 p.m.
Eastern time, or such earlier time when the Exchange closes early, on each day
on which the New York Stock Exchange, Inc. is open. The Exchange is currently
open on each Monday through Friday, except (a) January 1st, Martin Luther King
Day (the third Monday in January), Washington's Birthday (the third Monday in
February), Good Friday, Memorial Day (the last Monday in May), July 4th, Labor
Day (the first Monday in September), Thanksgiving Day (the fourth Thursday in
November) and December 25th; and (b) the preceding Friday when one of those
holidays falls on a Saturday or the subsequent Monday when one of those holidays
falls on a Sunday. Net asset value per share is computed by dividing the value
of the Fund's net assets by the total number of its shares outstanding. Assets
traded on a securities exchange or other recognized market are valued on the
basis of market quotations. Assets for which quotations are not readily
available are valued at fair value as determined in good faith under procedures
approved by the Board of Directors. High quality money market instruments with
remaining maturities of 60 days or less are valued on the basis of amortized
cost, which involves valuing a portfolio instrument at its market value on the
61st day prior to maturity and thereafter assuming a constant amortization to
maturity of any market discount or premium, generally without regard to the
effect of fluctuating interest rates on the market value of the instrument.

PURCHASE OF SHARES

GENERAL INFORMATION

Shares of the Fund are sold at the net asset value per share next
determined after receipt of an order, plus a sales charge in the case of Class A
shares. Investors whose orders are received not later than 4:15 p.m., New York
time, will become shareholders on that day. Investors whose orders are received
after 4:15 p.m., New York time, will become shareholders on the following
business day. The Fund reserves the right to reject any order to purchase
shares. Certificates for shares will be issued only upon the specific request of
a shareholder.

The minimum initial investment in the Fund is $1,000 and the minimum
subsequent investment is $100, except that the minimum initial and subsequent
investments for purchases of Fund shares through Retirement Plans for
Self-Employed Persons and Individual Retirement Accounts will be $500 and $50,
respectively. The Fund reserves the right to vary these minimums at any time.

AUTOMATIC INVESTMENT PLAN. The Fund offers an Automatic Investment Plan
whereby DST is permitted through preauthorized checks of $ 100 or more ($50 in
the case of Retirement Plans

16
<PAGE>

for Self-Employed Persons and Individual Retirement Accounts) to charge the
regular bank account of a shareholder on a regular Basis to provide systematic
additions to the Fund account of the shareholder. While there is no charge to
shareholders for this service, a charge of $10.00 will be deducted from a
shareholder's Fund account for checks returned for insufficient funds. A
shareholder's Automatic Investment Plan may be terminated at any time without
charge or penalty by the shareholder, the Fund, DST or FDI. Further information
regarding the Automatic Investment Plan may be obtained through any account
representative.

Under the Multiple Pricing System, the Fund presently offers three
methods of purchasing shares; enabling investors to choose the Class that, given
the amount of purchase and intended length of investment, best suits their
needs. Account representatives and other persons remunerated on the basis of
sales of shares may receive different levels of compensation for selling one
Class of shares over another. From time to time, registered representatives of
broker-dealers that enter into selected dealer agreements with FDI will receive
additional non-cash compensation in the form of gifts or prizes such as
merchandise or trips. When purchasing shares of the Fund, investors must specify
whether the purchase is for Class A shares, Class B shares or Class I shares, as
described below.

CLASS A SHARES

<TABLE>
<CAPTION>
Sales Charge as a Sales Charge as
Percentage of the a Percentage of
Shares Purchased in Public Offering the Net Amount Dealer
Single Transaction Price Invested Reallowance
- ------------------ ----- -------- -----------
<S> <C> <C> <C>
Up to $49,999 4.75% 5.00% 4.00%
$50,000-$99,999 4.00% 4.17% 3.25%
$100,000-$249,999 3.75% 3.90% 3.00%
$250,000-$499,999 2.50% 2.56% 2.00%
$500,000-$999,999 2.00% 2.04% 1.50%
$1,000,000-$2,999,999 0% 0% 1.00%
$3,000,000-$3,999,999* 0% 0% .50%
</TABLE>

* Investors who purchase $4 million or more of shares will receive Class I
shares, which are not subject to any front-end sales charge or service fee. See
"Class I Shares."

The above schedule of sales charges is applicable to purchases in a
single transaction by, among others: (1) an individual; (2) an individual, his
or her spouse and their children under the

17
<PAGE>

age of 21 purchasing shares for his or her own accounts; (3) a trustee or other
fiduciary purchasing shares for a single trust estate or a single fiduciary
account; (4) a pension, profit-sharing or other employee benefit plan qualified
or non-qualified under Section 401 of the Internal Revenue Code of 1986 (the
"Code"); (5) tax-exempt organizations enumerated in Section 501(c)(3) or (13) of
the Code; (6) employee benefit plans qualified under Section 401 of the Code of
a single employer or of employers who are "affiliated persons" of each other, as
defined in the 1940 Act and for investments in Individual Retirement Accounts of
employees of a single employer through Systematic Payroll Deduction plans; or
(7) any other organized group of persons, whether incorporated or not, provided
the organization has been in existence for at least six months and has some
purpose other than the purchase of redeemable securities of a registered
investment company at a discount.

You may benefit from a reduction of the sales charges in accordance
with the above schedule if the cumulative value (at current net asset value) of
Class A shares purchased in a single transaction, together with those Class A
shares previously purchased subject to payment of a sales charge, plus Class A
shares of SG Cowen Income + Growth Fund, Inc., SG Cowen Large Cap Value, SG
Cowen Intermediate Fixed Income Fund and SG Cowen Government Securities Fund,
each a series of SG Cowen Funds, Inc., previously or simultaneously purchased
subject to a sales charge, amounts to $50,000 or more. The foregoing schedule of
reduced sales charges will also be available to investors who enter into a
written Letter of Intent providing for the purchase, within a 13-month period,
of Class A shares of the Fund, SG Cowen Income + Growth Fund, Inc., SG Cowen
Large Cap Value, SG Cowen Intermediate Fixed Income Fund and SG Cowen Government
Securities Fund from SG Cowen. Class A shares of the Fund, SG Cowen Income +
Growth Fund, Inc., SG Cowen Large Cap Value, SG Cowen Intermediate Fixed Income
Fund and SG Cowen Government Securities Fund previously purchased during a
90-day period prior to the date of receipt by FDI of the Letter of Intent and
still owned by the shareholder may also be included in determining the
applicable reduction.

The Fund offers Class A shares without imposition of a sales charge to
(1) employees of SG Cowen and registered representatives of securities dealers
that participate in distribution of the Fund's shares; (2) Individual Retirement
Accounts for those persons; (3) the spouses, children, parents, grandparents,
siblings, spouse's parents and sibling's children of those persons when purchase
orders on their behalf are placed by those persons; (4) directors and trustees
of registered investment companies whose shares are advised by SGCAM, Individual
Retirement Accounts for those persons, employee benefit plans for those persons,
and the spouses and minor children of those persons when purchase orders on
their behalf are placed by those persons; (5) SG Cowen and its subsidiaries; (6)
participants in any pension, profit-sharing or other employee benefit plan
qualified or non-qualified under Section 401 of the Code when purchase orders
are placed by such participants pursuant to such plans; (7) officers, directors,
partners and employees

18
<PAGE>

of the Fund's counsel or auditors; and (8) investors who purchase shares of the
Fund to the extent that the investment represents (a) the proceeds from the
redemption made within the preceding 60 days of shares of another mutual fund
not affiliated with SGCAM whose shares were purchased subject to a sales charge,
or (b) the net proceeds of the sale within the preceding 60 days of shares of
any closed-end investment company. The Distributor pays a sales commission equal
to 1.00% of the amount invested to dealers who sell Class A Shares without
imposition of a sales charge to investors described in items (6) and (8).

CLASS B SHARES

The public offering price of Class B shares is the net asset value per
share next determined after a purchase order is received without imposition of
any front-end sales charge. The Distributor pays a sales commission equal to
4.00% of the amount invested to dealers who sell Class B shares. Class B shares
may be subject upon redemption to a contingent deferred sales charge ("CDSC").
See "Redemption of Shares." Class B shares are subject to a service fee at the
annual rate of .25%, and a distribution fee at the annual rate of .75%, of the
value of the Fund's average daily net assets attributable to this Class. SG
Cowen has adopted guidelines, in view of the relative sales charges, service
fees and distribution fees, directing account representatives that all purchases
of shares should be for Class A shares when the purchase is for $500,000 or more
by an investor not eligible to purchase Class I shares. SG Cowen reserves the
right to vary these guidelines at any time.

CLASS I SHARES

19
<PAGE>

EXCHANGE PRIVILEGE

Shares of the Fund may be exchanged for shares of the same Class (or the sole
class offered) of the mutual funds listed below for which SG Cowen serves as a
distributor.

- - SG Cowen Intermediate Fixed Income Fund, a fund that seeks total return
consistent of current income and stability of principal by investing
primarily in high quality intermediate term fixed income securities. This
fund is a series of SG Cowen Funds, Inc.

- - SG Cowen Government Securities Fund, a fund that seeks total return
consistent of current income and appreciation of capital through investing
primarily in securities issued or guaranteed by the U.S. Government, its
agencies, authorities or instrumentalities. This fund is a series of SG
Cowen Funds, Inc.

- - SG Cowen Large Cap Value Fund, a fund that seeks capital appreciation by
investing in securities which are deemed to be under valued. This fund is a
series of SG Cowen Series Funds, Inc.

For the purposes of this discussion, SG Cowen Standby Reserve Fund,
Inc. and SG Cowen Standby Tax-Exempt Reserve Fund, Inc. are referred to as
"money market funds" and SG Cowen Income + Growth Fund, Inc., SG Cowen Large Cap
Value Fund, Inc, SG Cowen Intermediate Fixed Income Fund and SG Cowen Government
Securities Fund are referred to as "non-money market funds."

Shares of these mutual funds are available only to investors residing
in states where these mutual funds are qualified for sale. They are sold
pursuant to separate prospectuses that may be

20
<PAGE>

obtained through FDI, any SG Cowen account representative, thorough account
representatives of SG Cowen correspondents, or through any other member of the
NASD, or any foreign nonmember of the NASD, which has entered into a Sales
Agreement with FDI with respect to such funds. An exchange of shares is treated
for federal income tax purposes as a redemption (Sale) of shares given in
exchange by the shareholder and an exchanging shareholder may, therefore,
realize a taxable gain or loss in connection with the exchange. The exchange
privilege is subject to termination and its terms are subject to change upon 60
days' notice to shareholders.

Under the Multiple Pricing System, an exchange of shares of the Fund
with other SG Cowen funds' shares will be limited to shares of the same class or
the sole class (money market funds only) of shares of a fund from which the
exchange is to be effected. For example, if a holder of Class A shares of a
non-money market fund exchanges his shares for shares of a money market fund and
thereafter wishes to exchange those shares for shares of the Fund, he may
receive only Class A shares in the latter transaction. As another example, if a
holder of shares of a money market fund acquired as a result of an initial
investment and not from an exchange wishes to exchange his shares for shares of
a non-money market fund, he may receive Class A shares, Class B shares or Class
I shares (depending on his eligibility for Class I shares) in the exchange
transaction.

Thereafter, any further exchanges would be subject to the principal described
above limiting subsequent exchanges to the same class or the sole class of
shares of other funds.

CLASS A EXCHANGES. A shareholder may effect exchanges among the mutual
funds listed above and the Fund on the basis of relative net asset values
without imposition of a sales charge; provided, however, that where shares of a
money market fund acquired through a direct purchase are exchanged for Class A
shares of the Fund or another non-money market fund, the appropriate sales
charge will be imposed at the time of the exchange. Because a substantially
lower sales charge is paid upon purchase of Class A shares of Cowen Intermediate
Fixed Income Fund, holders of these shares will not be able to exchange their
shares with shares of the Fund or any of the non-money market funds for a period
of 90 days from the date of purchase. After the 90-day waiting period has
expired, Class A shares of SG Cowen Intermediate Fixed Income Fund will be
exchangeable without the imposition of any additional sales charge.

21
<PAGE>

the Fund, such shareholder will be deemed to have held the Class B shares for a
period of four full years on the date of the last exchange. If the shareholder
were to then immediately redeem his Class B shares of the Fund, such redemption
would be subject to a 2.00% CDSC. Similarly, the same CDSC would be imposed if
at any time the money market fund shares were redeemed. Conversely, if the
shareholder had held his Class B shares of the Fund for the full six year
period, no CDSC would have been imposed upon redemption.

Because a substantially lower CDSC schedule is applicable to Class B
shares of SG Cowen Intermediate Fixed Income Fund, holders of these shares will
not be able to exchange their shares with shares of the Fund or any of the
non-money market funds for a period of 90 days from the date of purchase. After
the 90-day waiting period has expired, if a holder of these shares wanted to
exchange all or a portion of his shares for Class B shares of the Fund or of any
of the non-money market funds that offer Class B shares subject to a higher CDSC
than that imposed by SG Cowen Intermediate Fixed Income Fund, the exchanged
Class B shares will not be subject to the higher applicable CDSC. Upon
redemption, the lower CDSC schedule applicable to Class B shares of SG Cowen
Intermediate Fixed Income Fund will apply.

REDEMPTION OF SHARES

REDEMPTION PROCEDURES

The Fund will redeem shares without charge at the net asset value per
share next determined after receipt of a redemption order in proper form by any
CDSC imposed on Class B shares. Any redemption request received prior to 4:15
p.m., New York time, will be transmitted to DST on that day and the proceeds of
such redemption will be transmitted in accordance with the investor's
instructions within seven days. Redemption requests received at or after 4:15
p.m., New York time, will be effected on the next business day. Proceeds of any
redemptions will not be sent until the check (including a certified or cashier's
check) used for investment has been cleared for payment by the investor's bank,
which may take up to 15 days. Pending such clearance, redemption proceeds will
be held under circumstances resulting in no earnings to investors. Investors can
avoid the inconvenience associated with check clearance delays by purchasing
shares with immediately available funds held in a brokerage account at a
participating securities dealer or by transmitting funds to DST by wire
transfer.

22
<PAGE>

payment of redemptions may be wired to a shareholder's commercial bank account.
There is a $10 charge for each federal funds wire transaction. The minimum
amount for wire redemptions is $10,000. A shareholder who wishes to redeem by
wire should contact DST at 1-800-262-7116.

The Fund may suspend the right of redemption or postpone the date of
payment upon redemption (as well as suspend or postpone the recordation of the
transfer of its shares) for such periods as are permitted under the 1940 Act.
The Fund reserves the right to redeem shares in any account, other than an
Individual Retirement Account or other qualified retirement plan, at their net
asset value if the value of the account is less than $250. The shareholder
having the account will first be notified in writing that the account has a
value of less than $250 and will be allowed 60 days to make an additional
investment before the redemption is processed by the Fund.

The Fund offers a Systematic Withdrawal Plan under which a shareholder
with $10,000 or more in the Fund may elect to redeem periodic payments to
himself or a designated payee on a monthly, quarterly or annual basis. For
accounts other than qualified retirement plans, the minimum rate of withdrawal
is $50 per month and the maximum monthly withdrawal is one percent of the
current account value in the Fund as of commencement of participation in the
plan. Maintenance of a Systematic Withdrawal Plan concurrently with purchases of
additional shares of the Fund may be disadvantageous to the shareholder because
of the sales charge on such purchases. A shareholder who elects to use the
Systematic Withdrawal Plan should be aware that such periodic payments will be
made from redemptions of his shares. However, any Class B shares redeemed under
the Systematic Withdrawal Plan will not be subject to a CDSC as described below.
Dividends and distributions paid on his shares may not cover the full amount of
each periodic payment.

CONTINGENT DEFERRED SALES CHARGE - CLASS B SHARES

Furthermore, no CDSC will be imposed on an amount that represents an
increase in value of the shareholder's account resulting from capital
appreciation.

23
<PAGE>

<TABLE>
<CAPTION>
YEAR SINCE PURCHASE IN WHICH
REDEMPTION IS EFFECTED CDSC
<S> <C>
Year I ......................................... 5.00%
Year 2.......................................... 4.00%
Year 3.......................................... 3.00%
Year 4 ......................................... 3.00%
Year 5 ......................................... 2.00%
Year 6 ......................................... 1.00%
Thereafter ..................................... None
</TABLE>

In determining the applicability and rate of any CDSC, redemptions of
Class B shares are made first of amounts due to capital appreciation, next of
shares representing reinvestment of dividends and capital gains distributions,
and then of other shares held by the shareholder for the longest period of time.
As a result, the CDSC, if any, will be imposed at the lowest possible rate. For
example, assume that an investor owns 100,000 shares that he purchased seven
years ago, 100,000 shares that he purchased more than four but less than five
years ago at $10 per share and 1,000 shares received in respect of reinvestment
of dividends and distributions. The shares now have a net asset value of $20 per
share. The investor may redeem the 100,000 shares he purchased seven years ago
and the 1,000 shares he acquired through reinvestments without paying a CDSC. If
the investor redeems the balance of his shares, he would pay a CDSC based on the
net asset value at the time of purchase ($ 10 per share). Thus, the investor
would pay a CDSC equal to $20,000 (100,000 shares multiplied by $10 per share
times the applicable rate of 2%).

CODE OF ETHICS

The Fund and SGCAM have adopted a code of ethics pursuant to Rule 17j-1
under the 1940 Act with respect to their personnel with access to information
about the purchase or sale of securities by the Fund. The Fund's distributor
will adopt such a code shortly. These codes are designed to protect the
interests of Fund shareholders. While these codes contain provisions reasonably
necessary to prevent personnel subject to the codes from engaging in unlawful
conduct and require compliance review of securities transactions, they do not
prohibit such

24
<PAGE>

personnel from investing in securities, including securities that may be
purchased or held by the Fund so long as such investments are made pursuant to
the code's requirements.

TAXATION

The Fund has qualified, and intends to continue to qualify each year,
as a regulated investment company. As such, the Fund will not be subject to
federal income tax on its net investment income and net capital gains, if any,
provided that they distribute all such net investment income and net realized
securities gains to their shareholders in accordance with subchapter M of the
Code. Depending upon the extent to which it is, or is deemed to be, conducting
business in certain states and localities, the Fund may be subject to taxation
in such states or localities.

If for any taxable year the Fund does not qualify for the special
federal income tax treatment afforded regulated investment companies, all of its
taxable income will be subject to federal income tax at regular corporate rates
(without any deductions for distributions to its shareholders.) In such event,
dividend distributions, including amounts derived from interest on tax-exempt
obligations, would be taxable to shareholders to the extent of current and
accumulated earnings and profits, and would be eligible for the dividends
received deductions for corporations in case of corporate shareholders.

Although the Fund expects to be relieved of all or substantially all
federal and state income or franchise taxes, depending upon the extent of its
activities in certain states and localities, that portion of the Fund's income
which is treated as earned in any such state or locality could be subject to
state or local tax.

25
<PAGE>

PERFORMANCE INFORMATION

From time to time, the Fund may advertise its "average annual total
return" for the different Classes over various periods of time. These total
return figures show the average percentage change in value of an investment in
the Fund from the beginning date of the measuring period to the end of the
measuring period. These figures reflect changes in the price of the Fund's
shares and assume that any income dividends and/or capital gains distributions
made by the Fund during the period were invested in shares of the Fund. Figures
will be given for recent one, five and ten year periods, or the life of the Fund
to the extent it has not been in existence for any such periods, and may be
given for other periods as well, such as on a year-by-year basis. When
considering "average" total return figures for periods longer than one year, it
is important to note that the Fund's annual total return for any one year in the
period might have been greater or lesser than the average for the entire period.
The Fund may also use "aggregate" total return figures for various periods,
representing the cumulative period (again reflecting changes in share prices and
assuming reinvestment of dividends and distributions). Aggregate total returns
may be shown by means of schedules, charts, or graphs, and may indicate
subtotals of the various components of total return (i.e., change in value of
initial investment, income dividends, and capital gains distributions). The
performance of the Fund also might be compared to rankings prepared by Lipper
Analytical Services, Inc., and Morningstar, Inc. which are widely recognized,
independent services that monitor the performance of mutual funds, as well as to
various unmanaged indices, such as the Standard & Poor's 500 Composite Stock
Price Index. Performance Information may be useful in reviewing the performance
of the Fund and in providing a basis for comparison with other investment
alternatives. Investors should be aware that, because the performance of the
Fund changes in response to fluctuations in interest rates, price fluctuations
in securities markets, the Fund's expenses and other factors, a performance
quotation should not be considered representative of the Fund's performance for
any future period. To the extent any advertisement or sales literature of a Fund
describes the expenses or performance of any Class, it will also disclose the
information for other Classes. Shareholders may make inquiries regarding the
Fund, including current performance quotations, by calling any SG Cowen account
representative.

The Fund's "average annual total return" will be computed in accordance
with the following formula prescribed by the Securities and Exchange Commission:

TOTAL RETURN = P(1+T)n = ERV

Where: P = a hypothetical initial payment of $1,000.

T = average annual total return.

n = number of years.

ERV = Ending Redeemable Value of a hypothetical $1,000 investment made
at the beginning of a 1, 5, or 10 year period at the end of the 1, 5, or 10 year
periods (or fractional portion thereof), assuming reinvestment of all dividends
and distributions.

26
<PAGE>

Class A Shares/Average Annual Total Return for the periods ended
November 30, 1999:

1 year = 12.99%
5 year = 6.13%
10 year = 11.19%

Class B Shares/Average Annual Total Return for the periods ended
November 30, 1999:

1 year = 12.70%
5 year = 5.98%
Since inception (May 17, 1994) = 6.65%

Class I Shares/Average Annual Total Return for the periods ended
November 30, 1999:

1 year = 19.04%
5 year = 7.54%
Since inception (May 9, 1994) = 7.72%

The Class A total return figures calculated in accordance with the
above formula assumes that the maximum 4.75% sales load has been deducted from
the hypothetical $1,000 initial investment at the time of purchase. The Class B
total return figures calculated in accordance with the above formula assumes the
deduction of the appropriate contingent deferred sales charge at the end of each
period.

AUDITORS AND COUNSEL

KPMG LLP, 757 Third Avenue, New York, New York 10017, has been selected
as the Fund's independent auditors.

Willkie Farr & Gallagher, 787 Seventh Avenue, New York, New York 10019,
serves as counsel for the Fund.

FINANCIAL STATEMENTS

The Fund hereby incorporates by reference the financial statements and
related notes and the report of KPMG LLP thereon included in the Fund's Annual
Report to Shareholders for the year ended November 30, 1999 The Fund will
provide copies of the Annual Report to each

27
<PAGE>

person who requests a copy of this Statement of Additional Information. The Fund
will also furnish copies of the Annual Report, without charge, to any
shareholder upon request directed to the Fund, at the address or telephone
number given on the cover page of this Statement of Additional Information.

28
<PAGE>

PART C
OTHER INFORMATION

Item 23. Exhibits:

Exhibit No. Description of Exhibits
- ----------- -----------------------
(a)(1) Articles of Incorporation of Registrant(a)
(a)(2) Articles of Amendment, dated November 11, 1987(a)
(a)(3) Articles of Revival of Registrant(a)
(a)(4) Articles of Amendment, dated April 28, 1994(a)
(a)(5) Articles of Amendment, dated July 8, 1994(a)
(a)(6) Articles of Amendment, dated July 1, 1998(b)
(b)(1) By-Laws(a)
(b)(2) Amendment to the By-Laws, dated February 8, 1988(a)
(b)(3) Amendment to the By-Laws, dated December 15, 1992(a)
(c) Not applicable
(d)(1) Investment Management Agreement, SG Cowen Opportunity Fund
dated July 1, 1998(b)
(d)(2) Investment Management Agreement, SG Cowen Intermediate Fixed
Income Fund dated July 1, 1998(b)
(d)(3) Investment Management Agreement, SG Cowen Government
Securities Fund dated July 1, 1998(b)
(e) Distribution Agreement, dated July 1, 1998(b)
(f) Not applicable
(g) Custody Agreement(a)
(h) Not applicable
(i)(1) Opinion and consent of Willkie Farr & Gallagher, dated
February 16, 1988(a)
(i)(2) Opinion and consent of Venable Baetjer & Howard, dated
February 16, 1988(a)
(i)(3) Opinion and consent of Venable Baetjer & Howard, dated
May 12, 1994(a)
(j) Consent of Independent Auditors
(k) Subscription Agreement(a)
(m)(1) Shareholder Servicing and Distribution Plan, SG Cowen
Opportunity Fund(a)
(m)(2) Shareholder Servicing and Distribution Plan, SG Cowen
Intermediate Fixed Income Fund(a)
(m)(3) Shareholder Servicing and Distribution Plan, SG Cowen
Government Securities Fund(a)
(m)(4) Shareholder Servicing Agreement, SG Cowen Opportunity Fund(a)
(m)(5) Shareholder Servicing Agreement, SG Cowen Intermediate Fixed
Income Fund(a)
(m)(6) Shareholder Servicing Agreement, SG Cowen Government Securities
Fund(a)
(m)(7) Distribution Related Services Agreement, SG Cowen Opportunity
Fund(a)
(m)(8) Distribution Related Services Agreement, SG Cowen Intermediate
Fixed Income Fund(a)
(m)(9) Distribution Related Services Agreement, SG Cowen Government
Securities Fund(a)
(n) Not applicable
(o) Not applicable
(p) Code of Ethics
(a)Incorporated by reference to Post-Effective Amendment No. 19
to Registrant's Registration Statement on Form N-1A filed on
March 26, 1997.
(b)Incorporated by reference to Post-Effective Amendment No. 23
to Registrant's Registration Statement on Form N-1A filed on
January 29, 1999.

Item 24. NONE

C-1
<PAGE>

Item 25. Indemnification

Reference is hereby made to Item 27 of Part C of Registrant's
Registration Statement filed on November 13, 1987.

Item 26. Business and Other Connections of Investment Manager;
Principal Underwriter

SG Cowen Asset Management, Inc. ("SG Cowen") serves as Investment
Manager to Registrant. SG Cowen is also the Investment Manager of SG Cowen
Income + Growth Fund, Inc. ("CI+G"), SG Cowen Standby Tax-Exempt Reserve
Fund, Inc. ("CSTXRF"), SG Cowen Standby Reserve Fund, Inc. ("CSRF"), the
series of stock representing the SG Cowen Large Cap Value Fund, a portfolio
of SG Cowen Series Funds, Inc. ("CFI"). Listed below are the names of all of
the Directors and Executive Officers of SG Cowen as of March 15, 2000,
their positions with SG Cowen, and under the heading "Other Business
Activities and Principal Business Addresses", any business, profession,
vocation or employment of a substantial nature (other than business of SG
Cowen) in which they have been engaged for their own account or in the
capacity of director, officer, employee, partner or trustee during the past
two fiscal years of the Registrant.

C-2

<PAGE>

OTHER BUSINESS
NAME POSITION ACTIVITIES
---- -------- ----------
<S> <C> <C>
Collas, Philippe-Heny Chairman and Director 1/00 - Present
Chairman and CEO 9/95 - Present Societe
Generale Asset Management, S.A.
("SGAM")

Nguyen-Quang, Hoan President and Director 9/99 - Present
Officer 6/99 - 12/99 SG Cowen Securities Corporation
Officer 9/98 - 5/99 SGAM
Officer 1/96 - 8/98 Societe Generale, Paris France

Church, William Director 1/00 - Present
Managing Director 7/98 - 12/99 SG Cowen Securities Corporation
6/82 - 6/98 Cowen & Co.

D'Allest, Christian Director 1/00 - Present
Director 9/95 - Present SGAM

Hauguel, Didier Director 1/00 - Present
Officer 6/95 - Present, Societe Generale, USA.
</TABLE>

SG Cowen Asset Management, Inc.
560 Lexington Avenue
New York, New York 10020

Societe Generale Asset Management, S.A.
2 Place de la Coupole, La Defense Centex
92078 Paris, France

Societe Generale, USA
1221 Avenue of The Americas
New York, NY 10020

C-3
<PAGE>

Item 27. Principal Underwriters.
- -------- -----------------------

(a) Funds Distributor, Inc. (the "Distributor") acts as principal
underwriter for the following investment companies.

American Century California Tax-Free and Municipal Funds
American Century Capital Portfolios, Inc.
American Century Government Income Trust
American Century International Bond Funds
American Century Investment Trust
American Century Municipal Trust
American Century Mutual Funds, Inc.
American Century Premium Reserves, Inc.
American Century Quantitative Equity Funds
American Century Strategic Asset Allocations, Inc.
American Century Target Maturities Trust
American Century Variable Portfolios, Inc.
American Century World Mutual Funds, Inc.
The Brinson Funds
CDC MPT+Funds
Dresdner RCM Capital Funds, Inc.
Dresdner RCM Global Funds, Inc.
Dresdner RCM Investment Funds, Inc.
J.P. Morgan Institutional Funds
J.P. Morgan Funds
JPM Series Trust
JPM Series Trust II
LaSalle Partners Funds, Inc.
Merrimac Series
Monetta Fund, Inc.
Monetta Trust
The Montgomery Funds I
The Montgomery Funds II
The Munder Framlington Funds Trust
The Munder Funds Trust
The Munder Funds, Inc.
National Investors Cash Management Fund, Inc.
Nomura Pacific Basin Fund, Inc.
Orbitex Group of Funds
The Saratoga Advantage Trust
SG Cowen Funds, Inc.
SG Cowen Income + Growth Fund, Inc.

C-4

<PAGE>

SG Cowen Standby Reserve Fund, Inc.
SG Cowen Standby Tax-Exempt Reserve Fund, Inc.
SG Cowen Series Funds, Inc.
The Skyline Funds
St. Clair Funds, Inc.
TD Waterhouse Trust
Waterhouse Investors Family of Funds, Inc.
WEBS Index Fund, Inc.

Funds Distributor is registered with the Securities and Exchange
Commission as a broker-dealer and is a member of the National Association of
Securities Dealers. Funds Distributor is located at 60 State Street, Suite
1300, Boston, Massachusetts 02109. Funds Distributor is an indirect
wholly-owned subsidiary of Boston Institutional Group, Inc., a holding
company all of whose outstanding shares are owned by key employees.

(b) The following is a list of the executive officers, directors and
partners of Funds Distributor, Inc.

<TABLE>
<S> <C>
Director, President and Chief - Marie E. Connolly
Executive Officer
Executive Vice President - George A. Rio
Executive Vice President - Donald R. Roberson
Executive Vice President - William S. Nichols
Senior Vice President, General - Margaret W. Chambers
Counsel, Chief Compliance Officer,
Secretary and Clerk
Director, Senior Vice President, - Joseph F. Tower, III
and Treasurer
Senior Vice President - Paula R. David
Senior Vice President - Gary S. MacDonald
Senior Vice President - Judith K. Benson
Chairman and Director - William J. Nutt
Vice President and Chief Financial - William J. Stetter
Officer
</TABLE>

C-5

<PAGE>

Item 28. Location of Accounts and Records

(1) SG Cowen Funds, Inc.
560 Lexington Avenue
New York, New York 10022

(2) State Street Bank and Trust Company
127 West 10th Street
Kansas City, Missouri 64105

Item 29. Management Service

Not applicable.

Item 30. Undertakings

Not applicable.

C-6
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of the registration statement under Rule
485(b) under the Securities Act and has duly caused this Amendment to be
signed on its behalf by the undersigned, thereto duly authorized, in the City
of New York, and State of New York, on the 22nd day of March, 2000.

SG COWEN FUNDS, INC.

by Rodd M. Baxter,
Attorney-in-Fact
----------------
Philippe H. Collas, Chairman

Pursuant to the requirements of the Securities Act, this registration
statement has been signed below by the following persons in the capacities
and on the date(s) indicated.

Signature Title Date
--------- ----- ----
<S> <C> <C>

by Rodd M. Baxter,
Attorney-in-Fact
----------------
Philippe H. Collas Chairman and Director March 22, 2000
(Chief Executive Officer)

by Rodd M. Baxter,
Attorney-in Fact
----------------
Philip J. Bafundo Treasurer (Chief March 22, 2000
Financial and Accounting
Officer)

by Rodd M. Baxter,
Attorney-in Fact
----------------
James H. Carey Director March 22, 2000

by Rodd M. Baxter,
Attorney-in Fact
----------------
Martin J. Gruber Director March 22, 2000

by Rodd M. Baxter,
Attorney-in Fact
----------------
Burton J. Weiss Director March 22, 2000
</TABLE>

C-7
<PAGE>

INDEX TO EXHIBITS

Exhibit No. Description of Exhibits
99(j) Consent of Independent Auditors
99(p) Code of Ethics

<PAGE>

INDEPENDENT AUDITORS' CONSENT

To the Shareholders and Board of Directors of

SG Cowen Intermediate Fixed Income Fund and SG Cowen Government Securities Fund:

We consent to the incorporation by reference, in the Prospectus and Statement of
Additional Information, of our report dated January 14, 2000, on the statements
of assets and liabilities for the SG Cowen Intermediate Fixed Income Fund and SG
Cowen Government Securities Fund (the Funds) as of November 30, 1999 and the
related statements of operations, the statements of changes in net assets and
the financial highlights for the year then ended. These financial statements and
financial highlights and our report thereon are included in the Annual Report of
the Funds as filed on Form N-30D.

We also consent to the references to our firm under the headings "Financial
Highlights" in the Prospectus and "Financial Statements" and "Other Information"
in the Statement of Additional Information.

KPMG LLP

New York, New York
March 22, 2000
<PAGE>

INDEPENDENT AUDITORS' CONSENT

To the Shareholders and Board of Directors of
SG Cowen Opportunity Fund:

We consent to the incorporation by reference, in the Prospectus and Statement of
Additional Information, of our report dated January 14, 2000, on the statement
of assets and liabilities for the SG Cowen Opportunity Fund (the Fund) as of
November 30, 1999 and the related statement of operations, the statement of
changes in net assets and the financial highlights for the year then ended.
These financial statements and financial highlights and our report thereon are
included in the Annual Report of the Fund as filed on Form N-30D.

We also consent to the references to our firm under the headings "Financial
Highlights" in the Prospectus and "Auditors and Counsel" and "Financial
Statements" in the Statement of Additional Information.

KPMG LLP

New York, New York
March 22, 2000

<PAGE>

SG COWEN ASSET MANAGEMENT, INC.

CODE OF ETHICS

The following standards and procedures shall govern the personal investing
activities of SG Cowen Asset Management, Inc. personnel ("SGCAM"):

This Code of Ethics is based on the following principles: (1) the duty at all
times to place the interest of investment advisory clients or investment company
shareholders first; (2) that all personal securities transactions be conducted
consistent with the Code and in such a manner as to avoid any actual or
potential conflict of interest or any abuse of an individual's position of trust
and responsibility; and (3) that personnel should not take inappropriate
advantage of their positions.

I. ACCESS PERSONS

Access persons includes all SGCAM personnel. A list of access persons
as of March 1, 2000 is attached. In addition to applying to an employee's
personal account, this Code of Ethics will apply to the following accounts with
respect to an employee: (i) accounts of an employee's spouse (including IRA and
Keogh accounts), (ii) accounts of an employee's children and children's spouses
provided that such persons live in the employee's home or are financially
dependent upon the employee, (iii) accounts of any other relative who lives in
the employees home or over whose account the employee has control, (iv) accounts
of a trust of which the employee is a trustee or the beneficiary or as to which
the employee otherwise could be expected to control or influence and (v)
accounts of a partnership or corporation whose accounts the employee could be
expected to control.

II. POLICIES AND RESTRICTIONS

A. INITIAL PUBLIC OFFERINGS - Access persons are prohibited from
acquiring any securities in an initial public offering, in order to preclude any
possibility of their profiting improperly from their positions on behalf of any
investment advisory account.

B. PRIVATE PLACEMENTS - Prior approval of any acquisitions of
securities by access persons in a private placement is required. This prior
approval will take into account, among other factors, whether the investment
opportunity should be reserved for an investment advisory account and whether
the opportunity is being offered to an individual by virtue of his or her
position with the investment advisor; (2) access persons who have been
authorized to acquire securities in a private placement must disclose that
investment when they play a part in any subsequent consideration of any
investment in the issuer; (3) in such circumstances, the investment advisory
account's decisions to purchase securities of the issuer will be subject to an
independent review by investment personnel with no personal interest in the
issuer.

<PAGE>

C. BLACKOUT PERIODS - an access person is prohibited from executing a
personal securities transaction on a day during which any investment advisory
account has a pending "buy" or "sell" order in that same security until that
order is executed or withdrawn. Any profits realized on trades within the
prescribed period must be disgorged.

D. GIFTS - access persons are prohibited from receiving any gift or
other thing of more than de minimis value from any person or entity that does
business with or on behalf of investment advisory accounts.

E SERVICE AS A DIRECTOR - prior authorization is required for access
persons to serve on the boards of directors of publicly traded companies.

III. COMPLIANCE PROCEDURES

A. PRE-CLEARANCE - All personnel securities transactions by access
persons must be effected through a SG Cowen Securities Corporation ("SG Cowen")
registered representative, the SG Cowen employee trading desk or the Qualified
Brokers listed in the attachments. Access persons are responsible for obtaining
pre-clearance authorization of each transaction. Pre-clearance is not required
for transactions in mutual funds, government securities, money market
instruments and index options.

William Romer will review and approve all transactions prior to their
execution. In his absence, pre-clearance authorization can be given by either
William Church, Philip Bafundo or Rodd Baxter. These people cannot pre-clear
their own transactions.

B. RECORDS OF PRE-CLEARANCE AND SECURITIES TRANSACTIONS - Pre-clearance
authorizations and duplicate copies of confirmations of all personal securities
transactions and copies of periodic statements for all securities accounts
should be sent to SG Cowen's Legal Department at 1221 Avenue of the Americas,
8th Floor, New York, NY 10020, Attention of Cathy Smith-Iadicicco.

C. POST-TRADE MONITORING - SG Cowen's legal department will monitor all
personal investment activity by reviewing confirmations and statements.

D. DISCLOSURE OF PERSONAL HOLDINGS - All access persons employed after
March 1, 2000 must disclose to SG Cowen's legal department all personal holdings
upon commencement of their employment. All current access persons must submit
their personal holdings by January 1, 2001. Thereafter all access persons must
submit their personal holdings on an annual basis.

E. CERTIFICATION OF COMPLIANCE - All access persons shall certify
annually to SG Cowen's Legal Department that they have read and understand the
Code of Ethics and recognize that they are subject thereto.

<PAGE>

SG COWEN ASSET MANAGEMENT, INC.
CODE OF ETHICS
CERTIFICATION FORM

I, _________________________________(print name), hereby certify that I have
read and understand the SG Cowen Asset Management, Inc. Code of Ethics and
understand that I am subject to its terms and conditions.

___________________________
Signature

Date:_________________

<PAGE>

SG COWEN ASSET MANAGEMENT

PERSONAL SECURITIES TRANSACTION AUTHORIZATION FORM

EMPLOYEE NAME: ____________________________________________

SECURITY: ____________________________________________

CIRCLE ONE: PURCHASE OR SALE

AUTHORIZED BY: ____________________________________________

DATE: ____________________________________________