<PAGE>
SoGen International Fund
SoGen Overseas Fund
SoGen Gold Fund
SoGen Money Fund
[LOGO OF SOGEN FUNDS APPEARS HERE]
Prospectus
July 31, 1998
<PAGE>
PROSPECTUS
SOGEN INTERNATIONAL FUND
SOGEN OVERSEAS FUND
SOGEN GOLD FUND
SOGEN MONEY FUND
-------------------------
[LOGO OF SOGEN FUNDS APPEARS HERE]
1221 Avenue of the Americas
New York, NY 10020
(800) 334-2143
----------------
Societe Generale Asset Management Corp.
Investment Adviser
SG Cowen Securities Corporation
Principal Underwriter
----------------
SoGen International Fund, SoGen Overseas Fund, SoGen Gold Fund and SoGen
Money Fund (each individually a "Fund" or collectively the "Funds") are four
portfolios of SoGen Funds, Inc. (the "Company"), an open-end management
investment company. Additional funds may be created by the Directors from time
to time.
SHARES IN THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
This Prospectus sets forth concisely information about the Funds that an
investor ought to know before investing. It should be read and retained for
future reference. A Statement of Additional Information dated July 31, 1998,
containing additional information about the Funds, has been filed with the
Securities and Exchange Commission. It is incorporated herein by reference and
is available free of charge by contacting the Company at (800) 334-2143.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------------
<PAGE>
The Funds and their investment objectives are:
SOGEN INTERNATIONAL FUND. Long-term growth of capital by investing primarily
in common stocks (and in securities convertible into common stocks) of the
United States and foreign companies (See Page 9).
SOGEN OVERSEAS FUND. Long-term growth of capital by investing primarily in
securities of small and medium size non-U.S. companies. (See pages 9 and 10.)
SOGEN GOLD FUND. Growth of capital by investing primarily in securities of
companies engaged in mining, processing, dealing in or holding gold or other
precious metals both in the United States and in foreign countries. (See pages
10 and 11.)
SOGEN MONEY FUND. As high a level of current income as is considered
consistent with the preservation of capital and liquidity by investing
exclusively in U.S. dollar-denominated money market instruments which mature
in 397 days or less. An investment in SoGen Money Fund is neither insured nor
guaranteed by the U.S. Government and there can be no assurance that the Fund
will be able to maintain a stable net asset value of $1.00 per share. (See
pages 11 and 12.)
----------------
JULY 31, 1998
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Fee Table.................................................................. 4
Financial Highlights....................................................... 5
Organization of the Company................................................ 9
International Fund Investment Objective and Policies....................... 9
Overseas Fund Investment Objective and Policies............................ 9
Gold Fund Investment Objective and Policies................................ 10
Money Fund Investment Objective and Policies............................... 11
Investment Restrictions.................................................... 13
Implementation of Policies and Risks....................................... 13
Management of the Company.................................................. 18
Capital Stock.............................................................. 20
Dividends, Capital Gains Distributions and Taxes........................... 20
Performance and Yield Information.......................................... 22
Net Asset Value............................................................ 23
How to Purchase Shares..................................................... 23
How to Redeem Shares....................................................... 28
Shareholder Services....................................................... 30
Inquiries.................................................................. 33
Shareholders' Reference Guide.............................................. 34
</TABLE>
----------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND THE STATEMENT OF
ADDITIONAL INFORMATION AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY SOGEN
FUNDS, INC. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL SECURITIES IN
ANY JURISDICTION TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH
JURISDICTION.
3
<PAGE>
FEE TABLE
<TABLE>
<CAPTION>
SOGEN SOGEN SOGEN SOGEN
INTERNATIONAL INTERNATIONAL OVERSEAS OVERSEAS SOGEN SOGEN
FUND FUND FUND FUND GOLD MONEY
CLASS A CLASS I CLASS A CLASS I FUND FUND
------------- ------------- -------- -------- ----- -----
<S> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION
EXPENSES
Maximum Sales Load
Imposed on Purchases
(as a percentage of
public offering price). 3.75% None 3.75% None 3.75% None
==== ==== ==== ==== ==== ====
ANNUAL FUND OPERATING
EXPENSES (as a
percentage of average
net assets)
Management Fees........ 0.75% 0.75% 0.75% 0.75% 0.75% 0.15%
12b-1 Fees............. 0.25%* None 0.25%* None 0.25%* None
Other Expenses......... 0.18% 0.18% 0.22% 0.22% 0.55% 0.60%
---- ---- ---- ---- ---- ----
Total Fund Operating
Expenses............... 1.18% 0.93% 1.22% 0.97% 1.55% 0.75%**
==== ==== ==== ==== ==== ====
</TABLE>
- --------
* 12b-1 fees paid by a Fund may cause long-term shareholders to pay more than
the economic equivalent of the maximum front-end sales charges permitted
under rules adopted by the National Association of Securities Dealers, Inc.
** After investment advisory fee waiver and the effect of earnings credits.
Without such waiver and credits, "Total Fund Operating Expenses" would have
been 1.01%. As long as this temporary expense limitation continues, it may
lower the Fund's expenses and increase its total return.
EXAMPLE
An investor in a Fund would pay the following expenses on a $1,000
investment, assuming a 5% annual return, with or without redemption, at the
end of each time period:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
International Fund
Class A..................................... $49 $74 $100 $175
Class I..................................... $ 9 $30 $ 51 $114
Overseas Fund
Class A..................................... $49 $75 $102 $180
Class I..................................... $10 $31 $ 54 $119
Gold Fund.................................... $53 $85 $119 $215
Money Fund................................... $ 8 $24 $ 42 $ 93
</TABLE>
The information set forth above is to assist an investor in understanding
the various costs and expenses to which an investment in a Fund would be
subject. "Other Expenses" for the Money Fund have been restated to reflect the
expected level of expense reimbursement for the current fiscal year. For
further information, see "Management of the Company" and "How to Purchase
Shares."
This example should not be considered a representation of past or future
expenses, and actual expenses may be greater or less than those shown above.
The assumed 5% return is hypothetical and should not be considered a
representation of past or future annual returns, which may be greater or less
than the assumed amount.
Societe Generale Asset Management Corp. ("SGAM Corp."), the investment
adviser, has voluntarily agreed to limit the total expenses of the Money Fund
(excluding interest, taxes, brokerage and extraordinary expenses) to an annual
rate of 0.75% of the Fund's average net assets until July 31, 1999. After July
31, 1999, the expense limitation may be terminated or revised at any time.
4
<PAGE>
FINANCIAL HIGHLIGHTS
The following financial highlights and the related financial statements for
each of the years in the nine year period ended March 31, 1998 have been
audited by KPMG Peat Marwick LLP, independent auditors, whose report thereon
is unqualified and appears in the SoGen International Fund, Inc. March 31,
1998 Annual Report to Shareholders, which is incorporated by reference in the
Statement of Additional Information and is available without charge from the
Company. The financial highlights and the related financial statements for the
one year period ended March 31, 1989 have been audited by other auditors whose
report thereon dated May 5, 1989 expressed an unqualified opinion. This
information should be read in conjunction with the Financial Statements and
notes thereto, which also appear in the SoGen International Fund, Inc. Annual
Report to Shareholders. As of July 31, 1998, SoGen International Fund Inc.
became SoGen International Fund, a separate investment portfolio of SoGen
Funds, Inc., pursuant to an Agreement and Plan of Reorganization dated April
27, 1998.
<TABLE>
<CAPTION>
SOGEN INTERNATIONAL FUND CLASS A SHARES
-------------------------------------------------------------------------------------
FOR THE YEAR ENDED MARCH 31,
-------------------------------------------------------------------------------------
1998 1997 1996 1995 1994 1993 1992 1991(A) 1990 1989
------ ------ ------ ------ ------ ------ ------ ------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SELECTED PER SHARE DATA
Net asset value,
beginning of year...... $26.68 $26.09 $23.20 $23.32 $20.12 $18.44 $17.51 $17.71 $17.31 $16.91
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income from investment
operations:
Net investment income... 1.47 1.03 1.06 0.10 0.53 0.64 0.69 0.78 0.64 0.71
Net realized and
unrealized gains on
investments............ 2.10 1.39 3.37 0.49 3.37 2.02 1.45 0.20 1.48 1.26
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from investment
operations............. 3.57 2.42 4.43 0.59 3.90 2.66 2.14 0.98 2.12 1.97
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Less distributions:
Dividends from net
investment income...... (1.36) (1.09) (0.81) (0.15) (0.47) (0.64) (0.84) (0.71) (0.71) (0.80)
Distributions from
capital gains.......... (1.47) (0.74) (0.73) (0.56) (0.23) (0.34) (0.37) (0.47) (1.01) (0.77)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total distributions..... (2.83) (1.83) (1.54) (0.71) (0.70) (0.98) (1.21) (1.18) (1.72) (1.57)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of
year................... $27.42 $26.68 $26.09 $23.20 $23.32 $20.12 $18.44 $17.51 $17.71 $17.31
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN*........... 14.35% 9.48% 19.57% 2.63% 19.50% 14.87% 12.53% 6.03% 12.18% 11.94%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year
(millions)............. $4,035 $3,908 $3,033 $1,922 $1,781 $ 650 $ 355 $ 240 $ 176 $ 126
Ratios of operating
expenses to average net
assets:................ 1.18%** 1.21%** 1.25%** 1.26% 1.28% 1.31% 1.37% 1.30% 1.38% 1.39%
Ratios of net investment
income to average net
assets: 2.80%** 3.08%** 3.71%** 2.70% 2.34% 3.69% 4.00% 4.84% 4.32% 4.23%
Portfolio turnover rate. 20.63% 12.85% 9.64% 12.96% 23.96% 17.94% 24.25% 24.14% 30.62% 33.05%
Average commission rate
paid#.................. $0.028 $0.003 $0.013 -- -- -- -- -- -- --
</TABLE>
- --------
* Does not give effect to deduction of the sales load.
** The ratio of operating expenses to average net assets for the years ended
March 31, 1998, 1997 and 1996 would have been 1.19%, 1.21% and 1.25%,
respectively, without the effect of earnings credits. The ratio of net
investment income to average net assets for the years ended March 31, 1998,
1997 and 1996 would have been 2.80%, 3.08% and 3.71%, respectively, without
the effect of earnings credits.
# Average commission rate paid is expressed on a per share basis. Not all
commissions are computed on a per share basis; therefore, commissions
expressed as a percentage of transactions may be higher. Due to Securities
and Exchange Commission disclosure guidelines, average commissions per
share are calculated only for the periods subsequent to the year ended
March 31, 1995.
5
<PAGE>
The following financial highlights and the related financial statements for
the period from August 31, 1993 to March 31, 1994 and the fiscal years ended
March 31, 1995, 1996, 1997 and 1998 have been audited by KPMG Peat Marwick
LLP, independent auditors, whose report thereon is unqualified and appears in
the SoGen Funds, Inc. March 31, 1998 Annual Report to Shareholders, which is
incorporated by reference in the Statement of Additional Information and is
available without charge from the Company. This information should be read in
conjunction with the Financial Statements and notes thereto, which also appear
in the SoGen Funds, Inc. Annual Report to Shareholders.
<TABLE>
<CAPTION>
SOGEN OVERSEAS FUND CLASS A SHARES
-----------------------------------------------------------
YEAR YEAR YEAR YEAR PERIOD FROM
ENDED ENDED ENDED ENDED AUGUST 31, 1993
MARCH 31, MARCH 31, MARCH 31, MARCH 31, TO MARCH 31,
1998 1997 1996 1995 1994
--------- --------- --------- --------- ---------------
<S> <C> <C> <C> <C> <C>
SELECTED PER SHARE DATA
Net asset value,
beginning of year...... $ 13.84 $ 13.26 $ 11.65 $11.54 $10.00
------- ------- ------- ------ ------
Income (loss) from
investment operations:
Net investment income
(loss)................ 0.88 0.61 0.48 0.14 (0.01)
Net realized and
unrealized gains on
investments........... 0.31 0.95 1.74 0.04 1.55
------- ------- ------- ------ ------
Total from investment
operations............ 1.19 1.56 2.22 0.18 1.54
------- ------- ------- ------ ------
Less distributions:
Dividends from net
investment income..... (0.83) (0.60) (0.44) (0.05) --
Distributions from
capital gains......... (0.68) (0.38) (0.17) (0.02) --
------- ------- ------- ------ ------
Total distributions.... (1.51) (0.98) (0.61) (0.07) --
------- ------- ------- ------ ------
Net asset value, end of
year................... $ 13.52 $ 13.84 $ 13.26 $11.65 $11.54
======= ======= ======= ====== ======
TOTAL RETURN+++......... 10.00% 12.16% 19.47% 1.56% 15.35%++
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year
(millions)............. $ 1,007 $ 953 $ 647 $ 439 $ 120
Ratio of operating
expenses to average net
assets................. 1.22%** 1.27%** 1.37% 1.40% 1.72%*
Ratio of net investment
income to average net
assets................. 2.20%** 2.28%** 3.31% 2.29% (0.23)%*
Portfolio turnover rate. 22.13% 15.18% 9.46% 3.16% 6.11%
Average commission rate
paid#.................. $0.0177 $0.0207 $0.0190 -- --
</TABLE>
- --------
*Annualized.
**The ratios of operating expenses to average net assets and net investment
income to average net assets for the year ended March 31, 1998 for SoGen
Overseas Fund would have been the same without the effect of earnings
credits. The ratio of operating expenses to average net assets and net
investment income to average net assets for the year ended March 31, 1997
for SoGen Overseas Fund would have been the same and 2.27%, respectively,
without the effect of earnings credits.
++Total return disclosed for the period ended March 31, 1994 is not
annualized. The annualized total return for the period ended March 31,
1994 was 26.40% for SoGen Overseas Fund.
+++Does not give effect to deduction of the sales load.
#Average commission rate paid is expressed on a per share basis. Not all
commissions are computed on a per share basis; therefore, commissions
expressed as a percentage of transactions may be higher. Due to Securities
and Exchange Commission disclosure guidelines, average commissions per share
are calculated only for the periods subsequent to the year ended March 31,
1995.
6
<PAGE>
<TABLE>
<CAPTION>
SOGEN GOLD FUND
------------------------------------------------------------
YEAR YEAR YEAR YEAR PERIOD FROM
ENDED ENDED ENDED ENDED AUGUST 31, 1993
MARCH 31, MARCH 31, MARCH 31, MARCH 31, TO MARCH 31,
1998 1997 1996 1995 1994
--------- --------- --------- --------- ---------------
<S> <C> <C> <C> <C> <C>
SELECTED PER SHARE DATA
Net asset value,
beginning of year...... $10.60 $ 12.25 $ 11.28 $11.42 $10.00
------ ------- ------- ------ ------
Income from investment
operations:
Net investment income
(loss)................ 0.13 0.26 0.24 0.08 (0.01)
Net realized and
unrealized gains
(losses) on
investments........... (3.03) (1.75) 1.35 (0.10) 1.43
------ ------- ------- ------ ------
Total from investment
operations............ (2.90) (1.49) 1.59 (0.02) 1.42
------ ------- ------- ------ ------
Less distributions:
Dividends from net
investment income..... (0.39) (0.14) (0.35) (0.04) --
Distributions from
capital gains......... -- (0.02) (0.27) (0.08) --
------ ------- ------- ------ ------
Total distributions.... (0.39) (0.16) (0.62) (0.12) --
------ ------- ------- ------ ------
Net asset value, end of
year................... $ 7.31 $ 10.60 $ 12.25 $11.28 $11.42
====== ======= ======= ====== ======
TOTAL RETURN+++......... (27.23)% (12.21)% 14.81% (0.14)% 14.15%++
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year
(millions)............. $ 31 $ 53 $ 63 $ 51 $ 22
Ratio of operating
expenses to average net
assets................. 1.55%** 1.45%** 1.41% 1.46% 2.27%*
Ratio of net investment
income to average net
assets................. 1.47%** 1.20%** 1.29% 0.79% (0.32)%*
Portfolio turnover rate. 11.20% 16.83% 22.40% 11.56% 4.55%
Average commission rate
paid# ................. $0.013 $0.0009 $0.0002 -- --
</TABLE>
- --------
*Annualized.
**The ratios of operating expenses to average net assets and net investment
income to average net assets for the year ended March 31, 1998 for SoGen
Gold Fund would have been 1.56% and 1.46%, respectively, without the effect
of earnings credits. The ratio of operating expenses to average net assets
and net investment income to average net assets for the year ended March 31,
1997 for SoGen Gold Fund would have been 1.46% and 1.19%, respectively,
without the effect of earnings credits.
++Total return disclosed for the period ended March 31, 1994 is not
annualized. The annualized total return for the period ended March 31, 1994
was 24.34% for SoGen Gold Fund.
++Does not give effect to deduction of the sales load.
# Average commission rate paid is expressed on a per share basis. Not all
commissions are computed on a per share basis; therefore, commissions
expressed as a percentage of transactions may be higher. Due to Securities
and Exchange Commission disclosure guidelines, average commissions per
share are calculated only for the periods subsequent to the year ended
March 31, 1995.
7
<PAGE>
<TABLE>
<CAPTION>
SOGEN MONEY FUND
-----------------------------------------------------------
YEAR YEAR YEAR YEAR PERIOD FROM
ENDED ENDED ENDED ENDED AUGUST 31, 1993
MARCH 31, MARCH 31, MARCH 31, MARCH 31, TO MARCH 31,
1998 1997 1996 1995 1994
--------- --------- --------- --------- ---------------
<S> <C> <C> <C> <C> <C>
SELECTED PER SHARE DATA
Net asset value,
beginning of year...... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ ------ ------ ------
Income from investment
operations:
Net investment income
(loss)................ 0.05 0.05 0.05 0.04 0.01
Net realized and
unrealized gains on
investments........... -- -- -- -- --
------ ------ ------ ------ ------
Total from investment
operations............ 0.05 0.05 0.05 0.04 0.01
------ ------ ------ ------ ------
Less distributions:
Dividends from net
investment income..... (0.05) (0.05) (0.05) (0.04) (0.01)
Distributions from
capital gains......... -- -- -- -- --
------ ------ ------ ------ ------
Total distributions.... (0.05) (0.05) (0.05) (0.04) (0.01)
------ ------ ------ ------ ------
Net asset value, end of
year................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ====== ======
TOTAL RETURN............ 4.97% 4.61% 5.03% 4.13% 1.25%++
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year
(millions)............. $ 19 $ 13 $ 8 $ 10 $ 6
Ratio of operating
expenses to average net
assets................. 0.75%+ 0.75%+ 0.75%+ 0.75%+ 0.75%*+
Ratio of net investment
income to average net
assets................. 4.92%+ 4.63%+ 4.98%+ 4.14%+ 2.18%*+
</TABLE>
- --------
* Annualized.
+ Without the effect of earnings credits, and the investment advisory fee
waiver and expense reimbursement provided by SGAM Corp., the ratio of
operating expenses to average net assets for SoGen Money Fund for the years
ended March 31, 1998, 1997, 1996, 1995 and for the period ended March 31,
1994 would have been 1.01%, 1.14%, 0.97%, 1.55% and 4.00%, respectively. On
the same basis, the ratio of net investment income to average net assets
for the years ended March 31, 1998, 1997, 1996, 1995 and for the period
ended March 31, 1994 would have been 4.66%, 4.26%, 4.76%, 3.34% and
(1.07%), respectively.
++ Total return disclosed for the period ended March 31, 1994 is not
annualized. The annualized total return for the period ended March 31, 1994
was 2.14% for SoGen Money Fund.
8
<PAGE>
ORGANIZATION OF THE COMPANY
The Company is an open-end management investment company incorporated under
the laws of Maryland in May 1993. The Company has four portfolios, SoGen
International Fund, SoGen Overseas Fund, SoGen Gold Fund and SoGen Money Fund
(referred to herein as the "International Fund," "Overseas Fund," "Gold Fund"
and "Money Fund," respectively). Each Fund is a separate, diversified
portfolio of assets and has a different investment objective which it pursues
through separate investment policies, as described below. The difference in
objectives and policies among the Funds affects the degree of risk and return
of each Fund.
INTERNATIONAL FUND INVESTMENT OBJECTIVE AND POLICIES
The International Fund's investment objective is to provide long-term growth
of capital. In seeking to achieve this objective, the Fund will normally
invest its assets primarily in common stocks (and in securities convertible
into common stocks) of United States and foreign companies. However, the Fund
reserves the right to invest a portion of its assets in fixed-income
securities of domestic or foreign issuers which, in addition to the income
they may provide, appear to offer potential for long-term growth of capital.
When deemed appropriate by the Fund's investment adviser for short-term
investment or defensive purposes, the Fund may hold a portion of its assets in
short-term debt instruments including commercial paper and certificates of
deposit.
The foregoing investment objective is part of the fundamental policy of the
Fund and may not be changed without the approval of a majority of the
outstanding voting securities of the Fund (defined by the Investment Company
Act of 1940 as (i) 67 percent or more of the voting securities present at a
meeting of stockholders, if the holders of more than 50 percent of the
outstanding voting securities of such company are present or represented by
proxy; or (ii) more than 50 percent of the outstanding voting securities of
such company, whichever is less).
OVERSEAS FUND INVESTMENT OBJECTIVE AND POLICIES
The Overseas Fund seeks long-term growth of capital by investing primarily
in securities of small and medium size non-U.S. companies. The Fund
particularly seeks companies that have growth potential, financial strength
and stability, strong management and fundamental value. However, the Fund may
invest in companies that do not have all of these characteristics.
The Fund may invest in securities traded in mature markets (for example,
Japan, Canada and the United Kingdom) and in emerging markets (Mexico and
Indonesia, for example). A list of the mature and emerging markets in which
the Fund may invest is included in the Statement of Additional Information
under "Investment Policies, Techniques and Risks--Foreign Securities." There
are no limits on the Fund's geographic asset distribution, but the Fund
ordinarily invests in at least three countries outside the United States.
The equity securities in which the Fund may invest include common and
preferred stocks, warrants or other similar rights, and convertible
securities. The Fund may purchase foreign securities in the form of sponsored
or unsponsored American Depository Receipts (ADRs), Global Depository Receipts
(GDRs) and European Depository Receipts (EDRs) or other securities
representing underlying shares of foreign issuers. The Fund may also invest in
any
9
<PAGE>
other type of security, including up to 20% of its total assets in debt
securities. Such debt securities may include lower-rated securities, commonly
referred to as "junk bonds" (i.e., securities rated BB or lower by Standard &
Poor's Corporation ("S&P") or Ba or lower by Moody's Investors Service, Inc.
("Moody's")), and securities that are not rated. There are no restrictions as
to the ratings of debt securities acquired by the Fund or the portion of the
Fund's assets that may be invested in debt securities in a particular rating
category. Under normal market conditions, the Fund invests at least 75% of its
total assets, taken at market value, in foreign securities. The Fund may also
invest in "structured securities" in which the value is linked to the price of
an underlying instrument.
GOLD FUND INVESTMENT OBJECTIVE AND POLICIES
The Gold Fund seeks growth of capital by investing primarily in securities
of companies engaged in mining, processing, dealing in or holding gold or
other precious metals such as silver, platinum and palladium, both in the
United States and in foreign countries. Gold-related investments have provided
protection against loss of purchasing power during periods of extensive price
inflation and/or following periods of extensive credit expansion. Under normal
circumstances, at least 65% of the value of the Fund's total assets will be
invested in securities (which may include both equity and, to a limited
extent, debt securities) consisting of issuers engaged in gold operations,
including securities of gold mining finance companies as well as operating
companies with long-, medium- or short-life mines. Up to 35% of the Fund's
assets may be invested in equity and, to a limited extent, debt securities
unrelated to the precious metals industry where the investment adviser
believes such securities are consistent with the Fund's investment objective.
The Fund's investment adviser is of the belief that a gold-based investment
medium will, over the medium term, protect capital from adverse monetary and
political developments of a national or international nature and may offer
better opportunity for capital growth than many other forms of investment.
Investments in gold may provide more of a hedge against currencies with
declining buying power, devaluation and inflation than other types of
investments. In those periods when investments in gold and gold-related
securities appreciate in value relative to the U.S. dollar, the Fund's
investments may serve to offset erosion in the purchasing power of the U.S.
dollar.
As indicated, the investment adviser is of the belief that the price of gold
and gold-related securities generally are likely to experience significant
appreciation in the relatively near future. If, however, this expected bull
market in gold-related securities does not develop or if it does but the
investment adviser should conclude that any price appreciation that occurs is
not likely to continue, the investment adviser expects that it will recommend
to the Company's Board of Directors that the Company seek the vote of the Gold
Fund's shareholders to liquidate the Gold Fund. Liquidation would involve the
sale of all of the Gold Fund's assets, followed by the distribution of the
proceeds, less accrued liabilities, to shareholders. The decision to recommend
liquidation will not, however, affect the right of Gold Fund shareholders to
redeem their shares or to exchange their shares for shares of the Money Fund,
International Fund or Overseas Fund, in the latter two cases without payment
of any additional sales charge. Potential investors should carefully weigh the
consequences of investing in, and paying the related sales charge for, a fund
that may have a limited term from the date of this Prospectus.
10
<PAGE>
The Fund anticipates that it will normally invest in common stocks and
securities convertible into common stocks, such as convertible preferreds,
convertible debentures and sponsored or unsponsored American Depository
Receipts (ADRs), Global Depository Receipts (GDRs) and European Depository
Receipts (EDRs) for those securities, all of which may be traded on a
securities exchange or over-the-counter. The Fund may invest up to 20% of its
total assets in debt securities, including lower-rated securities, commonly
referred to as "junk bonds" (i.e., securities rated BB or lower by S&P or Ba
or lower by Moody's and securities that are not rated). There are no
restrictions as to the ratings of debt securities acquired by the Fund or the
portion of the Fund's assets that may be invested in debt securities in a
particular rating category. The market performance of non-convertible debt
securities of companies engaged in mining and processing gold can be expected
to be comparable to that of other debt obligations of similar quality and
generally will not react to fluctuations in the price of gold. An investment
in the debt instruments of gold-related companies, therefore, cannot be
expected to provide the hedge against inflation that may be provided through
investment in equity securities of companies engaged in such activities.
Investment in such debt securities can serve to reduce the risk of fluctuation
in net asset value of a portfolio composed primarily of gold-related equity
investments. The Fund may also invest in "structured securities" in which the
value is linked to the price of an underlying instrument.
Because of the Fund's policy of investing primarily in securities of
companies engaged in gold mining, processing, dealing in or holding gold and
other precious metals, a substantial part of the Fund's assets will generally
be invested in securities of companies domiciled or operating in one or more
foreign countries. (See "Implementation of Policies and Risks.")
MONEY FUND INVESTMENT OBJECTIVE AND POLICIES
The Money Fund seeks as high a level of current income as is considered
consistent with the preservation of capital and liquidity. The Fund pursues
its objective by investing exclusively in the following types of U.S. dollar-
denominated money market instruments which mature in 397 days or less and
which the Fund's investment adviser has determined to present minimal credit
risk:
1. Bank certificates of deposit, time deposits or bankers' acceptances of
domestic banks (including their foreign branches) and U.S. and foreign
branches of foreign banks having capital surplus and undivided profits
in excess of $100 million.
2. Commercial paper rated Prime-1 or Prime-2 by Moody's, A-1 or A-2 by S&P,
Duff 2 or higher by Duff & Phelps, Inc. ("Duff"), or F-2 or higher by
Fitch Investors Service, Inc. ("Fitch"); commercial paper or notes of
issuers with an unsecured debt issue outstanding currently rated Aa or
higher by Moody's, AA or higher by S&P, AA or higher by Duff, or AA or
higher by Fitch where the obligation is on the same or a higher level of
priority and collateralized to the same extent as the rated issue;
investments in other corporate obligations such as publicly traded
bonds, debentures and notes rated Aa by Moody's, AA by S&P, Duff or
Fitch; and other similar securities which, if unrated by Moody's, S&P,
Duff or Fitch, are determined by the Fund's investment adviser, using
guidelines approved by the Board of Directors, to be at least equal in
quality to one or more of the above referenced securities.
Notwithstanding the foregoing, the Fund may invest no more than 5% of
its total assets in securities that are accorded the second highest
rating by the requisite number of nationally recognized statistical
rating organizations. (For a description of the ratings, see
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<PAGE>
"Appendix--Ratings of Investment Securities" in the Statement of
Additional Information.)
3. Obligations of, or guaranteed by, the U.S. or Canadian governments,
their agencies or instrumentalities.
4. Repurchase agreements involving obligations that are suitable for
investment under the categories set forth above.
To the extent that the Fund purchases Eurodollar certificates of deposit,
consideration will be given to their marketability and possible restrictions
on international currency transactions and to regulations imposed by the
domicile country of the foreign issuer. Eurodollar certificates of deposit may
not be subject to the same regulatory requirements as certificates of deposit
issued by U.S. banks and associated income may be subject to the imposition of
foreign taxes.
The Fund may invest in repurchase agreements, which are instruments under
which the Fund acquires ownership of a security from a broker/dealer or bank
that agrees to repurchase the security at a mutually agreed upon time and
price (which price is higher than the purchase price), thereby determining the
yield during the Fund's holding period. Maturity of the securities subject to
repurchase may exceed 397 days. In the event of a bankruptcy or other default
of a seller of a repurchase agreement, the Fund might have expenses in
enforcing its rights, and could experience losses, including a decline in the
value of the underlying security and loss of income. The Fund will only enter
into repurchase agreements with banks and other recognized financial
institutions such as broker/dealers which are deemed by the Fund's investment
adviser to be creditworthy.
The Fund may invest in commercial paper issued in reliance on the so-called
"private placement" exemption from registration afforded by Section 4(2) of
the Securities Act of 1933, and resold to qualified institutional buyers under
Securities Act Rule 144A ("Section 4(2) paper"). Section 4(2) paper is
restricted as to disposition under the federal securities laws, and generally
is sold to institutional investors such as the Fund which agree that they are
purchasing the paper for investment and not with a view to public
distribution. Any resale by the purchaser must be in an exempt transaction and
may be accomplished in accordance with Rule 144A. Section 4(2) paper normally
is resold to other institutional investors, like the Fund, through or with the
assistance of the issuer or investment dealers who make a market in the
Section 4(2) paper, thus providing liquidity. The investment adviser will
carefully monitor the Fund's investments in these securities, focusing on such
factors, among others, as valuation, liquidity and availability of
information. Investment in Section 4(2) paper could have the effect of
reducing the Fund's liquidity to the extent that qualified institutional
buyers become, for a time, uninterested in purchasing these restricted
securities.
The Fund may invest in asset-backed securities, i.e., securities backed by
automobile receivables and credit-card receivables and other securities backed
by other types of receivables. Credit support for asset-backed securities may
be based on the underlying assets or provided by a third party. Credit
enhancement techniques include letters of credit, insurance bonds, limited
guarantees (which are generally provided by the issuer), senior-subordinated
structures and over collateralization. Asset-backed securities purchased by
the Fund will be subject to the same quality requirements as other securities
purchased by the Fund.
CHANGE OF OBJECTIVE. The investment objective of the Overseas Fund, Gold
Fund or Money Fund may be changed by the Board of Directors without
shareholder approval. If there
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<PAGE>
were such a change, each shareholder should consider whether a Fund would
remain an appropriate investment in light of his or her then current financial
position and needs. Shareholders will be notified a minimum of sixty days in
advance of any change in investment objective.
INVESTMENT RESTRICTIONS
The Funds have adopted the following investment restrictions (not including
the percentage of the International Fund's assets that may be invested in
short-term debt instruments for short-term defensive purposes) that may not be
changed without shareholder approval. Among other restrictions, each Fund will
not:
1. With respect to 75% of its total assets, invest more than 5% of its
assets (valued at time of investment) in securities of any one issuer,
except in U.S. government obligations, or acquire securities of any one
issuer which at the time of investment represent more than 10% of the
voting securities of the issuer;
2. Borrow money, except unsecured borrowings from banks as a temporary
measure in exceptional circumstances, and such borrowings may not exceed
10% of a Fund's net assets at the time of the borrowing. A Fund will not
purchase securities while borrowings exceed 5% of its total assets;
3. (International Fund)--Purchase the securities of any issuer if such
purchase would cause more than 25% of the value of its total assets to
be invested in securities of any one issuer or industry, with the
exception of the securities of the United States government and its
corporate instrumentalities and, under the circumstances described
below, certificates of deposit and other short-term bank instruments. In
fact, the Fund intends to diversify its investments among various
issuers and industries and will not purchase certificates of deposit or
other short-term bank instruments, except to the extent deemed
appropriate for the short-term investment of cash or as a temporary
defensive measure. The Fund will limit its purchases of certificates of
deposit and other short-term bank instruments to those issued by United
States banks and savings and loan associations, including foreign
branches of such banks, and United States branches or agencies of
foreign banks, which have total assets (as of the date of their most
recently published financial statements) of at least $1 billion; or
4. (Overseas Fund, Gold Fund and Money Fund)--Invest more than 25% of its
assets (valued at time of investment) in securities of companies in any
one industry (other than U.S. Government Securities), except that the
Gold Fund will, as a matter of fundamental policy, concentrate its
investments in the precious metals industry and the Money Fund may
concentrate its investments in U.S. bank obligations.
A complete description of the Funds' investment restrictions is included in
the Statement of Additional Information. Unless otherwise stated, each Fund's
investment restrictions and policies may be changed by the Board of Directors
without a vote of shareholders.
IMPLEMENTATION OF POLICIES AND RISKS
In addition to the investment policies described above (and subject to
certain restrictions described herein), the Funds may invest in some or all of
the following securities and employ
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<PAGE>
some or all of the following investment techniques, some of which may present
special risks as described below. A more complete discussion of these
securities and investment techniques and their associated risks is contained
in the Funds' Statement of Additional Information.
Because the Funds' investments will be subject to the market fluctuations
and risks inherent in all investments, there can be no assurance that the
Funds' stated objectives will be realized. SGAM Corp. will seek to minimize
these risks through professional management and investment diversification.
The value of shares of the International Fund, Overseas Fund and Gold Fund
when sold may be higher or lower than when purchased. Although the Money Fund
is designed to maintain a stable share price of $1.00, there can be no
assurance that the Fund will be able to do so.
GOLD FUND.
FLUCTUATIONS IN THE PRICE OF GOLD. Due to the Gold Fund's policy of
concentrating its investments in gold and other precious metal-related
issuers, investment in the Fund's shares involves special considerations,
including changes in U.S. or foreign tax, currency or mining laws and
increased environmental costs. The price of gold has been subject to dramatic
downward and upward price movements over short periods of time and may be
affected by unpredictable international monetary and political policies such
as currency devaluations or revaluations, economic conditions within an
individual country, trade imbalances, or trade or currency restrictions
between countries. The price of gold, in turn, is likely to affect the market
prices of securities of companies mining or processing gold, and accordingly,
the value of the Fund's investments in such securities may also be affected.
Gold-related investments as a group have performed less well than the stock
market in general during periods when the U.S. dollar is strong, inflation is
low and general economic conditions are stable.
MONEY FUND.
VARIABLE RATE SECURITIES. The Money Fund may invest in instruments having
rates of interest that are adjusted periodically or which "float" continuously
according to formulae intended to minimize fluctuation in the values of the
instruments ("Variable Rate Securities"). The interest rates of Variable Rate
Securities ordinarily are determined by reference to, or are a percentage of,
an objective standard such as a bank's prime rate, the 90-day U.S. Treasury
Bill rate, or the rate of return on commercial paper or bank certificates of
deposit. Generally, the changes in the interest rates on Variable Rate
Securities reduce the fluctuations in the market values of such securities.
Accordingly, as interest rates decrease or increase, the potential for capital
appreciation or depreciation is less than for fixed-rate obligations. Some
Variable Rate Securities ("Variable Rate Demand Securities") have a demand
feature entitling the purchaser to resell the securities at an amount
approximately equal to amortized cost or the principal amount thereof plus
accrued interest. The Fund will determine the maturity of Variable Rate
Securities in accordance with Securities and Exchange Commission rules which
allow the Fund to consider certain of such instruments as having maturities
shorter than the maturity date on the face of the instrument. Under such
rules, the maturity date of Variable Rate Demand Securities may be considered
to be the longer of the period remaining until the next readjustment of the
interest rate or the period remaining until the principal amount can be
recovered through demand.
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<PAGE>
INVESTMENT POLICIES APPLICABLE TO MORE THAN ONE FUND.
The following additional investment policies are applicable to more than one
Fund and supplement those set forth above for the Funds.
POLICIES APPLICABLE TO ALL FUNDS:
FOREIGN INVESTMENTS. The International Fund, Overseas Fund and Gold Fund
provide investors with an opportunity to place a portion of their assets in a
diversified portfolio of foreign securities. In addition, the Money Fund may
invest in U.S. dollar-denominated high quality foreign debt securities. From
time to time, many foreign economies have grown faster than the U.S. economy,
and the returns on investments in these countries have exceeded those of
similar U.S. investments, although there can be no assurance that these
conditions will continue. International investing allows investors to achieve
greater diversification and to take advantage of changes in foreign economies
and market conditions.
Investors should understand and consider carefully the greater risks
involved in foreign investing. Investing in foreign securities and other
positions which are generally denominated in foreign currencies, and
utilization of forward foreign currency exchange contracts (see "Currency
Exchange Transactions" below), involve certain risks and opportunities not
typically associated with investing in U.S. securities. These include:
fluctuations in the rates of exchange between the U.S. dollar and foreign
currencies; changes in exchange control regulations or currency restrictions
that would prevent cash from being brought back to the United States; less
public information with respect to issuers of securities; less governmental
supervision of stock exchanges, securities brokers and issuers of securities;
different accounting, auditing and financial reporting standards; different
settlement periods and trading practices; less liquidity and frequently
greater price volatility in foreign markets than in the United States;
imposition of foreign taxes; and sometimes less advantageous legal,
operational and financial protections applicable to foreign sub-custodial
arrangements.
Investing in countries outside the United States entails political risk.
There exists the possibility of restrictions on foreign investors,
expropriation of assets, confiscatory taxation, seizure or nationalization of
foreign bank deposits or other assets, establishment of exchange controls, or
other adverse political or social developments that could affect investment in
these nations. Economies in individual markets may differ favorably or
unfavorably from the U.S. economy in such respects as growth of gross domestic
product, rates of inflation, currency depreciation, capital reinvestment,
resource self-sufficiency and balance of payments positions. Many emerging
market countries have experienced extremely high rates of inflation for many
years. That has had and may continue to have very negative effects on the
economies and securities markets of those countries.
The securities markets of emerging countries are substantially smaller, less
developed, less liquid and more volatile than the securities markets of the
United States and other more developed countries. Disclosure and regulatory
standards in many respects are less stringent than in the United States. There
also may be a lower level of monitoring and regulation in emerging markets of
traders, insiders and investors. Enforcement of existing regulations has been
extremely limited.
Since the Money Fund will invest only in U.S. dollar-denominated securities,
the return on its shares will not be subject to the risk of adverse changes in
the exchange rates between the
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<PAGE>
U.S. dollar and foreign currencies. In addition, the Money Fund does not
intend to invest in the securities markets of emerging countries.
RESTRICTED AND ILLIQUID SECURITIES. Each Fund may invest up to 15% of its
net assets (10% in the case of the International Fund and the Money Fund) in
illiquid securities, including securities acquired in private placements.
Because an active trading market for such securities may not exist, the sale
of such securities may be subject to delay and additional costs. Time deposits
and repurchase agreements maturing in more than seven days are considered to
be illiquid. A Fund, subject to the limitations for illiquid investments
stated above, may purchase securities that have been privately placed but that
are not eligible for purchase and sale under Rule 144A under the Securities
Act of 1933. That rule permits certain qualified institutional buyers, such as
the Funds, to trade in private placed securities that have not been registered
for sale under that Act. Rule 144A securities may or may not be liquid
depending on guidelines established by the Board of Directors. See "Restricted
and Illiquid Securities" in the Statement of Additional Information.
POLICIES APPLICABLE TO THE INTERNATIONAL FUND, OVERSEAS FUND AND GOLD FUND:
STRUCTURED SECURITIES. The International Fund may invest up to 5% of its net
assets in structured notes and/or preferred stock, the value of which is
linked to the price of gold or other commodities. The Overseas Fund and the
Gold Fund may invest in structured notes and/or preferred stock, the value of
which is linked to the price of an underlying instrument. Structured
securities have different characteristics and risks than other types of
securities in which the Funds may invest. For example, the coupon, dividend
and/or redemption amounts may be increased or decreased depending on the
change in the value of an underlying instrument. See "Structured Securities"
in the Statement of Additional Information for further information.
CURRENCY EXCHANGE TRANSACTIONS. A Fund may engage in currency exchange
transactions to hedge against losses in the U.S. dollar value of its portfolio
securities resulting from possible variations in exchange rates and not for
speculation. A currency exchange transaction may be conducted either on a spot
(i.e. cash) basis at the spot rate for purchasing or selling currency
prevailing in the foreign exchange market or through a forward currency
exchange contract ("forward contract"). A forward contract is an agreement to
purchase or sell a specified currency at a specified future date (or within a
specified time period) and price set at the time of the contract. Forward
contracts are usually entered into with banks and broker/dealers, are not
exchange-traded and are usually for less than one year, but may be renewed.
Currency exchange transactions may involve currencies of the different
countries in which a Fund may invest. Although forward contracts may be used
to protect a Fund from adverse currency movements, the use of such hedges may
reduce or eliminate the potentially positive effect of currency revaluations
on the Fund's total return.
INVESTMENTS IN DEBT SECURITIES. Each of the International Fund, Overseas
Fund and Gold Fund may invest up to 20% (up to 100% in the case of the
International Fund) of its total assets in debt securities that are below
investment grade quality. The Funds may also invest in debt securities which
are in default. "Investment grade" debt securities are those rated within the
four highest ratings categories of S&P or Moody's or, if unrated, determined
by the Funds' investment adviser to be of comparable quality. The market value
of debt securities generally varies in response to changes in interest rates
and the financial conditions of each issuer.
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<PAGE>
During periods of declining interest rates, the value of debt securities
generally increases. Conversely, during periods of rising interest rates, the
value of such securities generally declines. These changes in market value
will be reflected in each Fund's net asset value.
Securities rated BBB by S&P or Baa by Moody's (the lowest investment grade
ratings) are considered to be medium grade and to have speculative
characteristics. Debt securities that are unrated, are considered by SGAM
Corp. to be equivalent to below investment grade (often referred to as "junk
bonds"). On balance, debt securities that are below investment grade are
considered predominantly speculative with respect to the issuer's capacity to
pay interest and repay principal according to the terms of the obligation and,
therefore, carry greater investment risk, including the possibility of issuer
default and bankruptcy. They are likely to be less marketable and more
adversely affected by economic downturns than higher-quality debt securities.
(For additional information on these debt securities see "Lower-Rated Debt
Securities" in the Statement of Additional Information.)
EXPENSES. The cost of investing in foreign securities is higher than the
cost of investing in U.S. securities. Investing in each Fund is an efficient
way for an individual to participate in foreign markets, but its expenses,
including advisory and custody fees, are higher than the expenses of a typical
mutual fund that invests in domestic equities.
POLICIES APPLICABLE TO THE OVERSEAS FUND, GOLD FUND AND MONEY FUND:
"WHEN-ISSUED" or "DELAYED DELIVERY" SECURITIES. The Funds may purchase
securities on a "when-issued" or "delayed delivery" basis. When-issued or
delayed delivery securities are securities purchased for future delivery at a
stated price and yield. The Funds will generally not pay for such securities
or start earning interest on them until they are received.
Securities purchased on a when-issued or delayed delivery basis are recorded
as assets on the day following the purchase and are marked-to-market daily. A
Fund will not invest more than 25% of its assets in when-issued or delayed
delivery securities, does not intend to purchase such securities for
speculative purposes and will make commitments to purchase securities on a
when-issued or delayed delivery basis with the intention of actually acquiring
the securities. However, the Funds reserve the right to sell acquired when-
issued or delayed delivery securities before their settlement dates if deemed
advisable.
POLICIES APPLICABLE TO THE INTERNATIONAL FUND AND THE OVERSEAS FUND:
INVESTMENT IN OTHER INVESTMENT COMPANIES. Certain markets are closed in
whole or in part to equity investments by foreigners. The International Fund
and the Overseas Fund may be able to invest in such markets solely or
primarily through governmentally-authorized investment companies. Each Fund
generally may invest up to 10% of its assets in shares of other investment
companies and up to 5% of its assets in any one investment company (in each
case measured at the time of investment), as long as no investment represents
more than 3% of the outstanding voting stock of the acquired investment
company at the time of investment. These restrictions do not apply to certain
investment companies known as private investment companies and "qualified
purchaser" investment companies.
Investment in another investment company may involve the payment of a
premium above the value of the issuer's portfolio securities, and is subject
to market availability. In the case of a purchase of shares of such a company
in a public offering, the purchase price may include
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<PAGE>
an underwriting spread. The Fund does not intend to invest in such an
investment company unless, in the judgment of the Fund's investment adviser,
the potential benefits of such investment justify the payment of any
applicable premium or sales charge. As a shareholder in an investment company,
the Fund would bear its ratable share of that investment company's expenses,
including its advisory and administration fees. At the same time, the Fund
would continue to pay its own management fees and other expenses.
POLICIES APPLICABLE TO THE OVERSEAS FUND AND THE GOLD FUND:
TEMPORARY STRATEGIES; CASH RESERVES. The Overseas Fund and the Gold Fund
each has the flexibility to respond promptly to changes in market and economic
conditions. In the interest of preserving shareholders' capital, SGAM Corp.
may employ a temporary defensive investment strategy if it determines such a
strategy to be warranted. Pursuant to such a defensive strategy, a Fund
temporarily may hold cash (U.S. dollars, foreign currencies, multinational
currency units) and/or invest up to 100% of its assets in high quality debt
securities or money market instruments of U.S. or foreign issuers. Most or all
of a Fund's investments may be made in the United States and denominated in
U.S. dollars. It is impossible to predict whether, when or for how long a Fund
will employ defensive strategies.
In addition, pending investment of proceeds from new sales of shares or to
meet ordinary daily cash needs, a Fund temporarily may hold cash (U.S.
dollars, foreign currencies or multinational currency units) and may invest
any portion of its assets in money market instruments.
MANAGEMENT OF THE COMPANY
BOARD OF DIRECTORS.
The business and affairs of the Company are managed under the direction of
its Board of Directors.
INVESTMENT ADVISER.
The Company's portfolios are managed by SGAM Corp., 1221 Avenue of the
Americas, New York, New York 10020. SGAM Corp. is a registered investment
adviser which is indirectly owned by Societe Generale, one of France's largest
banks. Jean-Marie Eveillard, President and Director of the Company, is
primarily responsible for the day-to-day management of the Company's
investment portfolios. Mr. Eveillard has been a Director and President or
Executive Vice President of SGAM Corp. since prior to 1993.
SGAM Corp. furnishes investment advice to the Funds consistent with each
Fund's stated investment objective and policies. SGAM Corp. also furnishes the
Company with office space and certain facilities and services required for its
business and pays any compensation and expenses of the officers of the
Company.
For these services and facilities, each Fund pays SGAM Corp. a fee, paid, as
indicated, at an annual rate of the average daily net assets of that Fund as
follows:
<TABLE>
<S> <C>
International Fund.......................... 1.00% of the first $25 million
and 0.75% of the excess over $25
million
Overseas Fund............................... 0.75%
Gold Fund................................... 0.75%
Money Fund.................................. 0.40%
</TABLE>
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<PAGE>
Advisory fees are paid monthly, except that the advisory fees for the
International Fund are paid quarterly. The annual fee rates listed above for
the International Fund, Overseas Fund and Gold Fund are higher than the rate
of fees paid by most United States mutual funds that invest in domestic equity
securities. The Company believes, however, that the advisory fee rates are not
higher than the rate of fees paid by most other mutual funds that invest
significantly in foreign equity securities. For the fiscal year ended March
31, 1998, the International Fund, Overseas Fund, Gold Fund and Money Fund paid
advisory fees equal to 0.75%, 0.75%, 0.75% and 0.40%, respectively, of their
average daily net asset values, and each of the Funds' total expenses,
including the advisory fee, equaled 1.18%, 1.22%, 1.55% and 0.75%,
respectively, of their average daily net asset values.
YEAR 2000.
Like other investment companies, financial and business organizations and
individuals around the world, the Funds could be adversely affected if the
computer systems used by SGAM Corp., SG Cowen Securities Corporation, the
Funds' principal underwriter ("SG Cowen"), or other service providers to the
Funds do not properly process and calculate date-related information and data
from and after January 1, 2000. This is commonly known as the "Year 2000
Problem." SGAM Corp. and SG Cowen are taking steps that they believe are
reasonably designed to address the Year 2000 Problem with respect to computer
systems that they use and are taking steps to obtain reasonable assurances
that comparable steps are being taken by the Funds' other service providers.
At this time, however, there can be no assurance that these steps will be
sufficient to avoid any adverse impact to the Funds.
The Year 2000 Problem is expected to impact corporations, which may include
issuers of portfolio securities held by the Funds, to varying degrees based
upon various factors, including, but not limited to, the corporation's
industry sector and degree of technological sophistication. In this regard,
the Funds occasionally invest in issuers located in emerging markets. Such
issuers may not be applying the same diligence to the Year 2000 Problem as are
issuers in more mature markets. The Funds are unable to predict what impact,
if any, the Year 2000 Problem will have on the issuers of securities held in
the Funds' portfolios.
PORTFOLIO TRANSACTIONS.
SGAM Corp. selects the brokers and dealers which execute orders for the
purchase and sale of each Fund's portfolio securities. SGAM Corp. seeks to
achieve "best execution" of such orders. "Best execution" means prompt and
reliable execution at the most favorable securities prices, taking into
account a number of largely judgmental considerations. Consistent with the
foregoing, portfolio transactions may be executed by brokers affiliated with
Societe Generale so long as the commission paid to the affiliated broker is
reasonable and fair compared to the commission that would be charged by an
unaffiliated broker in a comparable transaction. In addition, subject to the
consideration of best price and execution and to applicable regulations, SGAM
Corp. may consider sales of the Funds' shares as a factor in the selection of
brokers to execute portfolio transactions.
PRINCIPAL UNDERWRITER.
The Funds' shares are offered, in states and countries in which such offer
is lawful, to investors either through selected securities dealers or directly
by the Funds' principal underwriter, SG Cowen, 1221 Avenue of the Americas,
New York, New York 10020. SG Cowen is a registered broker-dealer and an
affiliate of Societe Generale.
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<PAGE>
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT.
DST Systems, Inc. ("DST"), P.O. Box 419324, Kansas City, Missouri, 64141-
6324, serves as transfer agent and dividend disbursing agent for each of the
Funds.
CAPITAL STOCK
The authorized capital stock of SoGen Funds, Inc. consists of 3 billion
shares of common stock, par value $0.001 per share, of which 250,000,000
shares have been designated as Class A shares of the International Fund,
250,000,000 shares have been designated as Class I shares of the International
Fund,150,000,000 shares have been designated as Class A shares of the Overseas
Fund, 150,000,000 shares have been designated as Class I shares of the
Overseas Fund, 200,000,000 shares have been designated as shares of the Gold
Fund and 2,000,000,000 shares have been designated as shares of the Money
Fund. All shares issued and outstanding are fully paid and non-assessable and
are redeemable at net asset value at the option of shareholders. Shares have
no preemptive rights and are freely transferable.
The Board of Directors is authorized to reclassify and issue any unissued
shares of the Funds without shareholder approval. Accordingly, in the future,
the directors may create additional series of shares with different investment
objectives, policies or restrictions. Any issuance of shares of another series
or class would be governed by the Investment Company Act of 1940 and Maryland
law.
Pursuant to its By-Laws, the Company does not generally hold annual meetings
of shareholders. Shareholder meetings, however, will be held when required by
the Investment Company Act of 1940 or Maryland law, or when called by the
Chairman of the Board, the President or shareholders owning at least 10% of
the outstanding shares of a Fund. The cost of any such notice and meeting will
be borne by the individual Fund for which the meeting was called.
Each share of common stock of the International Fund, Overseas Fund, Gold
Fund and Money Fund is entitled to one vote for each dollar of net asset value
and a proportionate fraction of a vote for each fraction of a dollar of net
asset value. Generally, shares of each Fund vote together on any matter
submitted to shareholders, except when otherwise required by the Investment
Company Act of 1940 or when a matter affects the interests of each Fund in a
different way, in which case the shareholders of each Fund vote separately by
class. If the directors determine that a matter does not affect the interests
of a Fund, then the shareholders of that Fund will not be entitled to vote on
that matter. Approval of the investment advisory contracts and the
distribution plan and agreement are matters to be determined separately by
each Fund.
DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES
The Money Fund intends to declare a dividend of its net investment income
daily and pays such dividends monthly. The Money Fund intends to distribute
net realized capital gains, if any, at least annually.
It is the policy of the International Fund, Overseas Fund and Gold Fund to
make periodic distributions but no less than annual distributions of net
investment income and net realized capital gains, if any. Unless a shareholder
otherwise elects income dividends and capital gains
20
<PAGE>
distributions will be reinvested in additional shares of the Funds at net
asset value per share calculated as of the payment date. The Funds pay both
income dividends and capital gains distributions on a per share basis. As a
result, on the ex-dividend date of such payment, the net asset value per share
of the International Fund, Overseas Fund and Gold Fund will be reduced by the
amount of such payment. The net asset value per share of the Money Fund is
expected, however, to remain constant at $1.00 per share.
Each Fund intends to qualify and has elected to be treated as a "regulated
investment company" under Subchapter M of the Internal Revenue Code of 1986,
as amended. To qualify, a Fund must meet certain income, diversification and
distribution requirements. As a regulated investment company, a Fund generally
will not be subject to federal income or excise taxes on income and capital
gains distributed to shareholders within applicable time limits, although
foreign source income received by a Fund may be subject to foreign withholding
taxes.
Shareholders normally will be taxed on the dividends and capital gains
distributions they receive from a Fund whether received in additional shares
or cash. Dividend payments representing taxable net investment income and any
net short-term capital gains will be taxable as ordinary income. If any
portion of the income of a Fund consists of dividends received from U.S.
corporations, a portion of the dividends paid by such Fund may qualify for the
dividends-received deduction available to corporate shareholders.
Distributions of any net long-term capital gain designated as capital gains
distributions will be taxable to individual shareholders at a maximum 20%
capital gains rates, regardless of how long they have held their shares. A
distribution will be treated as paid on December 31 of the current calendar
year if it is declared by a Fund in October, November or December with a
record date in such a month and paid by the Fund during January of the
following calendar year.
Upon the sale or other disposition of shares of a Fund, a shareholder may
realize a capital gain or loss which may be eligible for reduced federal tax
rates, generally depending upon the shareholder's holding period for the
shares.
Information regarding the tax status of income dividends and capital gains
distributions will be sent to shareholders by January 31 of each year.
BACKUP WITHHOLDING.
The Funds are generally required by the Internal Revenue Service ("IRS") to
withhold 31% of the amount of taxable interest, dividends, and capital gains
distributions and (except in the case of the Money Fund) redemption proceeds
paid to shareholders who have not complied with IRS regulations. In order to
avoid this withholding requirement, a U.S. shareholder must certify on the New
Account Application or on a separate Form W-9 that their Social Security or
Taxpayer Identification Number is correct and that he is exempt from, or is
not currently subject to, backup withholding. A non-U.S. shareholder is
generally subject to this 31% withholding on interest, dividends and capital
gains distributions and redemption proceeds unless he certifies on the New
Account Application or on a separate Form W-8 that he is a non-resident alien
and is not engaged in a trade or business in the United States regarding his
Fund shares.
NON-UNITED STATES SHAREHOLDERS.
Under current U.S. law, the Funds will ordinarily be obligated to withhold
30% of any ordinary income dividend payments to non-U.S. shareholders unless a
tax treaty exists between
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<PAGE>
the U.S. and the shareholder's country of residence which provides for
withholding on a different basis. Non-U.S. shareholders may incur a U.S.
estate tax liability if they die owning a Fund's shares. Such shareholders
should consult their tax advisers as to the tax liability they may incur to
the United States as a result of owning a Fund's shares and as to the
availability of any credits against taxes payable to their own countries for
taxes paid to the United States.
The foregoing information is intended for general information only. Fund
distributions also may be subject to state, local and foreign taxes.
Shareholders should consult their own tax advisers regarding the particular
tax consequences of an investment in a Fund.
PERFORMANCE AND YIELD INFORMATION
INTERNATIONAL FUND, OVERSEAS FUND AND GOLD FUND.
From time to time each of the International Fund, Overseas Fund and Gold
Fund may illustrate in sales literature and advertisements its cumulative
total return and its average annual total return. A cumulative total return
reflects a Fund's performance over a stated period of time based on an assumed
initial investment. An average annual total return reflects the hypothetical
annually compounded return that would have produced the same cumulative total
return if a Fund's performance had been constant over the entire period.
Because average annual returns tend to smooth out variations in a Fund's
returns, a prospective investor should recognize that they are not the same as
actual year-by-year results. Both types of total return will be calculated
assuming the deduction of the maximum sales commission of 3.75% for the Class
A shares and the reinvestment of all income dividends and capital gain
distributions. A Fund's performance figures will be based on historical
results and are not intended to indicate future performance.
MONEY FUND.
From time to time quotations of the Money Fund's "current yield" and
"effective yield" may be included in advertisements and communications to
shareholders. Both yield figures are based on historical earnings and are not
intended to indicate future performance. The "yield" of the Fund refers to the
net income generated by an investment in the Fund over a specified seven-day
period. This income is then "annualized," i.e., the amount generated by the
investment during that week is assumed to be generated each week over a 52-
week period and is shown as a percentage of the investment. The "effective
yield" is expressed similarly but, when annualized, the income earned by an
investment in the Fund is assumed to be reinvested. The "effective yield" will
be slightly higher than the "current yield" because of the compounding effect
of this assumed reinvestment. "Current yield" and "effective yield" for the
Fund will vary based on changes in market conditions, the level of interest
rates and the level of the Fund's expenses. The Fund may include in its
advertisements and communications to shareholders total return quotations
which include unrealized gains and losses.
PERFORMANCE RATINGS.
From time to time the Funds may discuss in sales literature and
advertisements, their performance ratings or other information as published by
recognized mutual fund statistical services, such as Morningstar, Inc. or
Lipper Analytical Services, Inc. or by publications of general interest such
as Business Week or Money.
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<PAGE>
NET ASSET VALUE
Each Fund's net asset value per share is computed as of the close of trading
on the New York Stock Exchange ("NYSE") on each day during which the NYSE is
open for trading. The net asset value per share is computed by dividing the
total current value of the assets of a Fund, less its liabilities, by the
total number of shares outstanding at the time of such computation.
In the case of the International Fund, Overseas Fund and Gold Fund,
portfolio securities are valued primarily based on market quotations where
available. Short-term investments maturing in sixty days or less are valued at
cost plus interest earned, which approximates value. In the case of the Money
Fund, portfolio securities are valued at their amortized cost, which
approximates market value, subject to guidelines and procedures established by
the Board of Directors in accordance with applicable SEC regulations.
Securities for which current market quotations are not readily available are
valued at fair value as determined in good faith by the Board of Directors of
the Company.
HOW TO PURCHASE SHARES
The minimum initial and subsequent investment amounts generally required for
each Fund and each class of shares within a Fund are listed in the table
below:
<TABLE>
<CAPTION>
MINIMUM
INITIAL INVESTMENT
AMOUNT NEEDED TO MINIMUM SUBSEQUENT
OPEN AN ACCOUNT INVESTMENT AMOUNT
------------------ ------------------
<S> <C> <C>
International Fund
Class A................................. $ 1,000 $100
Class I*................................ $1 million $100
Overseas Fund
Class A................................. $ 1,000 $100
Class I*................................ $1 million $100
Gold Fund................................. $ 1,000 $100
Money Fund................................ $ 10,000 $100
</TABLE>
- --------
* The current net asset value of a shareholder's account in any class of any
of the SoGen Funds may qualify for purposes of meeting the initial minimum
investment amount for the International Fund Class I shares and the Overseas
Fund Class I shares.
The Automatic Investment Program and Automatic Exchange Program each require
a minimum initial investment of $100 per Fund (see "Shareholder Services") and
an account with the Money Fund that is opened by an exchange (see "Shareholder
Services--Exchange Privilege") requires a minimum investment of $1,000.
"Starter" checks and third-party checks will not be accepted for purposes of
opening a new account. The Funds reserve the right to waive the initial
minimum investment amounts, at the discretion of the principal underwriter,
for certain investors, including Fund employees and directors and officers of
SGAM Corp. A Fund's shares may be purchased through authorized dealers or
through SG Cowen, the Funds' principal underwriter. A completed and signed
application is required for the initial account opened with the Funds. If
there is no application accompanying this Prospectus, please call (800) 334-
2143 to obtain one.
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<PAGE>
The principal underwriter reserves the right to limit the purchase of a
Fund's shares when it is in the best interest of the Fund.
PURCHASES THROUGH DEALERS.
Investors may purchase a Fund's shares through selected securities dealers
with whom SG Cowen has sales agreements. A prospective investor may obtain
additional New Account Applications from such authorized dealers. For a list
of authorized dealers, please contact SG Cowen at (212) 278-5800. Authorized
dealers and financial service firms may charge the investor a transaction fee
in addition to the applicable sales load.
Authorized dealers and financial service firms are responsible for promptly
transmitting purchase orders to SG Cowen, the Funds' principal underwriter.
PURCHASES THROUGH SG COWEN.
Shares of a Fund may be purchased through SG Cowen by mailing a check made
payable to The SoGen Funds along with the completed New Account Application to
The SoGen Funds, c/o DST, P.O. Box 419324, Kansas City, MO 64141-6324. Shares
may also be purchased through SG Cowen by Automated Clearing House ("ACH")
transfer or by bank wire. Please call (800) 334-2143 for procedures as to how
to establish and administer the ACH purchase option, and please call prior to
wiring any funds. See "Shareholders' Reference Guide" at the back of this
Prospectus for wiring instructions.
PUBLIC OFFERING PRICE.
The public offering price at which transactions will be effected will be
equal to the net asset value per share plus, in the case of the International
Fund Class A shares, the Overseas Fund Class A shares and the Gold Fund
shares, a sales charge as described below. The net asset value per share of
the Money Fund is expected to remain constant at $1.00 per share. Orders for
shares received by DST prior to the close of trading on the NYSE, or orders
received by dealers prior to such time and transmitted to SG Cowen prior to
the latter's close of business, will be effected based on the net asset value
determined as of the close of trading on the NYSE that day. Net asset value
per share is calculated as set forth in the section of this Prospectus
entitled "Net Asset Value." Class I shares and shares of the Money Fund are
not subject to sales charges. The sales charges currently in effect are as
follows:
<TABLE>
<CAPTION>
SALES CHARGE DEALER
SALES CHARGE EXPRESSED AS DISCOUNT AS
AS PERCENT OF APPROXIMATE PERCENT OF
PUBLIC PERCENT OF NET PUBLIC
INVESTMENT AMOUNTS OFFERING PRICE AMOUNT INVESTED OFFERING PRICE
- ------------------ -------------- --------------- --------------
<S> <C> <C> <C>
Less than $25,000................ 3.75% 3.90% 3.35%
$25,000 or more but less than
$50,000......................... 3.25% 3.35% 2.85%
$50,000 or more but less than
$100,000........................ 2.75% 2.83% 2.35%
$100,000 or more but less than
$500,000........................ 2.00% 2.04% 1.60%
$500,000 or more but less than
$1,000,000...................... 1.00% 1.01% 0.80%
$1,000,000 and over.............. 0.00% 0.00% 0.00%
</TABLE>
Sales charges applicable to persons residing in countries outside the United
States may vary from those listed above.
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<PAGE>
SG Cowen reallows discounts to selected dealers with whom it has sales
agreements and is entitled to retain the balance over the dealer discounts. SG
Cowen may from time to time reallow the entire sales load, and may provide
additional promotional incentives, to dealers selling a Fund's shares. Such
additional promotional incentive may include financial assistance in
connection with pre-approved conferences or seminars, sales or training
programs for invited sales personnel and payment for travel expenses for such
seminars or training programs. In some instances the entire reallowance or
incentives may be offered only to certain dealers which have sold or may sell
significant amounts of a Fund's shares. Authorized dealers to whom
substantially the entire sales charge is reallowed may be deemed to be
underwriters as that term is defined under the Securities Act of 1933.
SGAM Corp. may from time to time pay a concession to a dealer which employs
a registered representative whose client invests in a Fund. Such amount will
be paid from the resources of SGAM Corp.
REDUCING THE SALES CHARGE.
As shown in the table above, the size of the total investment in a Fund will
affect the sales charge. Described below are several methods to reduce the
applicable sales charge. In order to obtain a reduction in the sales charge,
an investor must notify, at the time of purchase, his dealer, SG Cowen or DST
of the applicability of one of the following:
AGGREGATION. The investment schedule above applies to the total amount being
invested by any "person," which term includes an individual, his spouse,
parents and children; a trustee or other fiduciary purchasing for a single
trust, estate or single fiduciary account (including a pension, profit-sharing
or other employee benefit trust created pursuant to a plan qualified under the
Internal Revenue Code) although more than one beneficiary is involved; or any
U.S. bank or investment adviser purchasing shares for its investment advisory
clients or customers. Any such person purchasing for several accounts at the
same time, may combine these investments into a single transaction in order to
reduce the applicable sales charge. Individual accounts and
corporate/partnership accounts may not be aggregated for purposes of reducing
the sales charge.
CONCURRENT PURCHASES. The sales load associated with an investment may be
reduced by combining concurrent purchases of the International Fund Class A
shares, the Overseas Fund Class A shares and the Gold Fund shares and shares
of other funds advised by SGAM Corp., offered subsequent to the date of this
Prospectus subject to a sales load ("SoGen Load Funds"), by any "person," as
described above in "Aggregation." The concurrent purchase discount does not
apply to purchases of the International Fund Class I shares, the Overseas Fund
Class I shares and the Money Fund shares. The applicable sales load will be
based on the total dollar amount of the investment in shares of two or more
SoGen Load Funds that are concurrently purchased.
RIGHTS OF ACCUMULATION. A Fund's shares may be purchased at a reduced sales
charge by a "person" (as defined above in "Aggregation") who is already a
shareholder by taking into account not only the amount then being invested,
but also the current net asset value of the shares of any SoGen Load Fund
already held by such person. If the current net asset value of the qualifying
shares already held plus the net asset value of the current purchase exceeds a
point in the schedule of sales charges at which the charge is reduced to a
lower percentage,
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<PAGE>
the entire current purchase is eligible for the reduced charge. To be entitled
to a reduced sales charge pursuant to the Rights of Accumulation, the investor
must notify his dealer, SG Cowen or DST at the time of purchase that he wishes
to take advantage of such entitlement, and give the numbers of his accounts,
and those accounts held in the name of his spouse, parents or children and the
specific relationship of each such other person to the investor.
LETTER OF INTENTION. A person (as defined above in "Aggregation") may also
qualify for a reduced sales charge by completing the Letter of Intention (the
"Letter") contained in the New Account Application or a form for this purpose
which may be obtained by contacting the Funds at (800) 334-2143. This enables
the investor to aggregate purchases of shares of any SoGen Load Fund during a
thirteen-month period for purposes of calculating the applicable sales charge.
Applicable shares of any SoGen Load Fund currently owned by the investor will
be credited as purchases toward the completion of the Letter at the greater of
their net asset value on the date the Letter is executed or their cost. No
retroactive adjustment will be made if purchases exceed the amount indicated
in the Letter. For each investment made, the investor must notify his dealer,
SG Cowen or DST that a Letter is on file along with all account numbers
associated with the Letter.
The Letter is not a binding obligation on the investor. However, 5% of the
amount specified in the Letter will be held in escrow, and if the investor's
purchases are less than the amount specified, the investor will be requested
to remit to the appropriate Fund an amount equal to the difference between the
sales charge paid and the sales charge applicable to the aggregate purchases
actually made. If not remitted within 20 days after written request, an
appropriate number of escrowed shares will be redeemed in order to realize the
difference. However, the sales charge applicable to the investment will in no
event be higher than if the shareholder had not submitted a Letter. Either the
shareholder or the Company may cancel the arrangement at will.
SALES AT NET ASSET VALUE. International Fund Class A shares, Overseas Fund
Class A shares and Gold Fund shares may be sold at net asset value (i.e.,
without a sales charge) (i) to registered representatives or employees of
authorized dealers, the spouse, parents or children of such person, or to any
trust, pension, profit-sharing or other benefit plan for only such persons,
(ii) to banks or trust companies or their affiliates when the bank, trust
company or affiliate is authorized to make investment decisions on behalf of a
client, (iii) to investment advisers and financial planners who place trades
for their own accounts or the accounts of their clients and who charge a
management, consulting or other fee for their services, (iv) to clients of
such investment advisers and financial planners who place trades for their own
accounts if the accounts are linked to the master account of such investment
adviser or financial planner on the books and records of the broker, agent,
investment adviser or financial institution, and (v) to 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 and "rabbi trusts." Investors may be charged a fee if
they effect transactions in Fund shares through a broker or agent. Shares of
the Funds may also be sold at net asset value to current officers, directors
and employees of the Company, SGAM Corp., SG Cowen, U.S. branches and
affiliates of Societe Generale, employees of certain firms providing services
to the Funds (such as the custodian and the shareholder servicing agent), and
to the spouse, parents and children of any such person, or to any trust,
pension, profit-sharing or other benefit plan for only such persons. A Fund
may also issue shares at net asset
26
<PAGE>
value in connection with the acquisition of, or merger or consolidation with,
another investment company. The sales of shares at net asset value described
in this section are made upon the written assurance of the purchaser that the
purchase is made for investment purposes and that the shares will not be
resold except through redemption. Such notice must be given to SG Cowen or DST
at the time of purchase on a form for this purpose as available from the
Funds.
REINSTATEMENT PRIVILEGE.
In addition, an investor is entitled to a one-time per account privilege to
reinvest in any SoGen Load Fund, the proceeds of a full or partial redemption
of shares from a SoGen Load Fund at the then applicable net asset value
without payment of a sales charge. To exercise this privilege the investor
must submit to SG Cowen or DST, within 60 calendar days after the redemption,
both a written request for reinstatement and a check or bank wire in an amount
not exceeding the redemption proceeds. An investor may also transfer an
investment in any SoGen Load Fund to an IRA or other tax qualified retirement
plan account in any SoGen Load Fund without payment of a sales charge. Such a
transfer involves a redemption of a Fund's shares and a reinvestment of the
proceeds and, hence, may involve a taxable transaction for income tax
purposes.
Reinstatement will not prevent recognition of a gain realized on the
redemption, but a loss may be disallowed for tax purposes. The amount of gain
or loss resulting from the redemption may be affected by exercise of the
reinstatement privilege if the shares redeemed were held for 90 days or less,
or if a shareholder reinvests in the Funds within 30 days.
BOOKSHARE ACCOUNT PLAN.
To facilitate the handling of transactions with shareholders, the Funds use
a bookshare account plan for shareholder accounts. DST, as the Funds' transfer
agent, automatically opens and maintains an account for each of the Funds'
shareholders directly registered with a Fund. All interests in shares, full
and fractional (rounded to three decimal places), are reflected in a
shareholder's book account. After any purchase, a confirmation is mailed to
the shareholder indicating the amount of full and fractional shares purchased,
the price per share and a statement of his account. Beginning on July 31,
1998, stock certificates will not be issued for the shares of any Fund.
CONDITIONS OF PURCHASE.
The Company and SG Cowen each reserves the right to refuse any order for
purchase of shares and to cancel any purchase due to nonpayment. Share
purchases are not binding on the Company or SG Cowen until they are confirmed
by DST as paid. All payments must be made in U.S. dollars, and all checks must
be drawn on U.S. banks. No cash will be accepted. As a condition of this
offering, if an investor's purchase is canceled due to nonpayment or because
his check or ACH transfer does not clear, the investor will be responsible for
any loss a Fund may incur as a result thereof.
RULE 12B-1 PLAN (INTERNATIONAL FUND CLASS A, OVERSEAS FUND CLASS A AND GOLD
FUND).
The International Fund (on behalf of its Class A shares), Overseas Fund (on
behalf of its Class A shares) and Gold Fund have each adopted a Distribution
Plan and Agreement (the
27
<PAGE>
"Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under
the Plan, each Fund may pay SG Cowen a quarterly distribution related fee at
an annual rate not to exceed 0.25% of the average daily net asset value
attributable to the participating class of shares. SG Cowen is obligated to
use the amounts received under the Plan for payments to qualifying dealers
(not to exceed 0.25% of the average daily net asset value of accounts of
participating classes originated by such dealers) for their assistance in the
distribution of a Fund's shares and the provision of shareholder services and
for other expenses such as advertising costs and the payment for the printing
and distribution of prospectuses to prospective investors. SG Cowen bears
distribution expenses to the extent they are not covered by payments under the
Plan. Any distribution expenses incurred by SG Cowen in any fiscal year of a
Fund which are not reimbursed from payments under the Plan accrued in such
fiscal year, will not be carried over for payment under the Plan in any
subsequent year. Class I shares and shares of the Money Fund do not
participate in the Plan and are not charged with any portion of the payments
made under the Plan.
HOW TO REDEEM SHARES
Shareholders have the right to redeem all or any part of their shares of a
Fund for cash at the net asset value next computed after receipt of the
redemption request in proper form as further described below. Neither the
Company nor SG Cowen currently charges a fee or commission upon the redemption
of a Fund's shares. Shareholders may redeem either through authorized dealers,
through SG Cowen or by telephone. Shares held in the dealer's "street name"
must be redeemed through the dealer.
REDEMPTIONS THROUGH DEALERS.
Shareholders who have an account with an authorized dealer may submit a
redemption request to such dealer. Authorized dealers are responsible for
promptly transmitting redemption requests to SG Cowen. Dealers may impose a
charge for handling redemption transactions placed through them and may have
particular requirements concerning redemptions. Accordingly, shareholders
should contact their authorized dealers for more information.
REDEMPTIONS THROUGH SG COWEN.
Shareholders may redeem their Fund shares through SG Cowen by transmitting
written redemption instructions to The SoGen Funds, c/o DST, P.O. Box 419324,
Kansas City, MO 64141-6324.
REDEMPTIONS BY TELEPHONE.
Unless contrary instructions are elected in the New Account Application or
Special Options Form, shareholders may redeem a Fund's shares in non-
retirement accounts by telephone by calling DST at (800) 334-2143. Telephone
redemption requests received prior to the close of business on the NYSE on any
Fund business day will be effected on that day. Such requests received after
the close of business on the NYSE will be effected on the following business
day. Shareholders may not make a redemption request by telephone if the
proceeds are to be wired to a bank account number or mailed to an address
other than the one previously designated by the shareholder. Such requests
must be in writing accompanied by a signature
28
<PAGE>
guarantee. Shareholders who would like to change wiring instructions should
send written notification, signed by all of the account's registered
shareholders and accompanied by a signature guarantee, to DST at the address
listed above. (See "Redemption Price" below for acceptable guarantors. See
"Receiving Redemption Proceeds" below for change of address procedures.) There
is a $100,000 maximum on telephone redemptions by check. There is no
limitation on redemptions by ACH transfer or by bank wire; however, a fee will
be deducted from proceeds sent by bank wire. Telephone redemption privileges
may be difficult to implement and may be modified or suspended without notice
during periods of drastic economic or market changes. DST has instituted
procedures it believes are reasonably designed to ensure that redemption
instructions communicated by telephone are genuine, and could be liable for
losses caused by unauthorized or fraudulent instructions in the absence of
such procedures. DST will require a form of personal identification prior to
acting upon telephone instructions, will provide a written confirmation of
such transaction and will record a shareholder's instructions. TELEPHONE
REDEMPTION PRIVILEGES MAY BE MODIFIED OR TERMINATED AT ANY TIME BY THE COMPANY
UPON WRITTEN NOTICE TO SHAREHOLDERS.
REDEMPTION PRICE.
Orders to redeem shares received in proper form by DST prior to the close of
trading on the NYSE, or redemption orders received by dealers prior to such
time and transmitted to SG Cowen prior to the latter's close of business, will
be effected at the net asset value determined as of the close of trading on
the NYSE that day.
Redemption requests must meet all the following requirements to be
considered in proper form:
1. Written and signed instructions from the registered owner(s) must be
received by DST (except for telephone redemptions).
2. A letter or a stock power signed by the registered owner(s) must be
signature guaranteed by an acceptable guarantor. A guarantee is required
for such redemptions to be paid by check greater than $100,000, or where
the redemption proceeds are to be sent to an address other than the
address of record, to a person other than the registered shareholder(s)
for the account or to a bank account number other than the one
previously designated by the shareholder. A signature guarantee is not
required for any amount redeemed by ACH transfer or bank wire when a
pre-designated bank has been identified by the shareholder. Any one of
the following guarantors is normally acceptable: (a) a commercial bank
or trust company; (b) a member firm of a domestic stock exchange; (c) a
foreign branch of any institution included in paragraph (a) or (b); (d)
a national securities exchange; or (e) a savings association. Guarantees
from a notary public are not acceptable.
3. All certificates, if any, to be redeemed must be received by DST in
negotiable form.
4. In the case of shares held of record in the name of a corporation,
trust, fiduciary or partnership, evidence of authority to sign and a
stock power with signature(s) guaranteed must be received by DST.
RECEIVING REDEMPTION PROCEEDS.
Payment of the redemption price will generally be made within three business
days after receipt of the redemption request in proper form, but the Company
may suspend the right of
29
<PAGE>
redemption and postpone payment during any period when (i) trading on the NYSE
is restricted or such exchange is closed, other than customary weekend and
holiday closings, (ii) the Securities and Exchange Commission ("SEC") has by
order permitted such suspension, or (iii) an emergency, as defined by the
rules of the SEC, exists, making disposal of portfolio securities or
determination of a Fund's net asset value not reasonably practicable.
The Funds will not mail redemption proceeds for any shares until checks or
ACH transfers received in payment for such shares have cleared, which may take
up to fifteen days. Investors who wish to avoid any such delay should purchase
shares by bank wire.
In addition, any change of address will require a fifteen-day holding period
before the proceeds of any redemption will be released to the new address.
Shareholders will have the ability to use the exchange privilege during this
holding period. Shareholders can avoid the fifteen-day holding period if
either the redemption or change of address request is signed by all registered
owners and is accompanied by a signature guarantee for each owner. The
fifteen-day holding period can also be avoided by establishing bank wire
redemption instructions through the New Account Application or Special Options
Form.
Redemption proceeds are normally paid in the form of a check. Proceeds can
also be sent to a shareholder's bank account by ACH transfer or by bank wire
when a pre-designated bank has been identified in the New Account Application
or Special Options Form. Proceeds sent by ACH transfer should generally be
credited to a shareholder's account on the second business day after the
redemption. Proceeds sent by bank wire should be credited on the business day
following the redemption; however, a fee will be deducted from such proceeds.
The amount realized on a redemption may be more or less than the investor's
cost, depending on the net asset value of a Fund's shares at the time of such
redemption, and a gain or loss may be recognized for tax purposes.
MINIMUM ACCOUNT SIZE.
Due to the relatively high cost of maintaining smaller accounts, the Company
reserve the right to redeem shares in any account if the value of that account
drops below $500, except accounts for shareholders currently participating in
the Automatic Investment program described below. The Company also reserves
the right to redeem shares in any Class I account if the value of that Class I
account drops below $100,000. A shareholder will be allowed at least 60 days
to make an additional investment to bring his account value to the stated
minimum before the redemption is processed.
SHAREHOLDER SERVICES
The Company offers the following shareholder services:
EXCHANGE PRIVILEGE.
Shareholders or authorized parties are entitled to exchange some or all of
their International Fund Class A shares, Overseas Fund Class A shares or Gold
Fund shares for shares of the Money Fund and shares of other SoGen Load Funds.
Shareholders or authorized parties are also entitled to exchange some or all
of their International Fund Class I shares or
30
<PAGE>
Overseas Fund Class I shares for Class I shares of any other SoGen Fund and
shares of the Money Fund. Such shares exchanged will be valued at their
respective net asset values computed as of the close of trading on the NYSE on
the day the exchange is requested.
An exchange of shares pursuant to the exchange privilege may result in a
shareholder realizing a taxable gain or loss for income tax purposes. The
exchange privilege is available to shareholders residing in any state in which
the shares of the Fund being acquired may legally be sold. There is no charge
for the exchange privilege. Any exchange, however, must meet the applicable
minimum investment amount for the Fund into which the exchange is being made
as set forth on Page 23. Upon exchanges of shares of the Money Fund for shares
of any SoGen Load Fund, payment of the applicable sales load must be made,
unless a sales load has already been paid on such shares. For additional
information concerning exchanges, or to effect exchanges, contact the Funds at
(800) 334-2143.
Exchanges by telephone may be difficult to implement in times of drastic
economic or market changes. The exchange privilege should not be used to take
advantage of short-term swings in the securities markets. The Company reserves
the right to limit or terminate the exchange privilege as to any shareholder
who makes exchanges more than four times a year (other than through the
Automatic Exchange Program or a similar periodic investment program). The
Company can modify or revoke the exchange privilege for all shareholders upon
written notice or without notice in times of drastic economic or market
changes.
CONVERSION.
Class A shares of the International Fund or the Overseas Fund having an
aggregate value not less than $1 million may be converted into Class I shares
of the same Fund upon the election of the shareholder. Such conversions shall
take place at net asset value, shall not result in the realization of income
or gain for Federal income tax purposes and shall be tax free to shareholders.
For additional information concerning conversions, or to effect a conversion,
contact your dealer, financial intermediary or the Funds at (800) 334-2143.
AUTOMATIC EXCHANGE PROGRAM.
Shareholders who wish to automatically exchange shares of one Fund for
another on a monthly basis can do so by means of the Automatic Exchange
Program. The minimum exchange amount is $100. If the balance in the account
the shareholder is exchanging from falls below the designated automatic
exchange amount, all remaining shares will be exchanged and the program will
be discontinued. All conditions with respect to exchange transactions apply as
discussed in "Exchange Privilege" above.
TELEPHONE PRIVILEGES.
Unless contrary instructions are elected in the New Account Application or
Special Options Form, the account will be entitled to make telephone
purchases, redemptions, exchanges, conversions and account maintenance
requests. Neither the Company nor its agents will be liable for following
instructions communicated by telephone that are reasonably believed to be
genuine. Reasonable procedures will be employed on behalf of each Fund to
confirm that the instructions are genuine. Such procedures include, but are
not limited to, written confirmation of telephone transactions, tape recording
telephone conversations and requiring specific personal information prior to
acting upon telephone instructions.
31
<PAGE>
Any owner(s), trustee(s) or other fiduciary entity as indicated in the
account registration, investment professional of record and/or other parties
that can provide specific personal information will be allowed to initiate any
of the above referenced telephone transactions. Personal information may
include a combination of the following items: (i) the fund and account number,
(ii) the account registration, (iii) the social security or tax identification
number on the account, (iv) the address of record, (v) designated bank account
information and any other information deemed appropriate to allow access to
the account.
Certain retirement accounts are not eligible for all the telephone
privileges referenced above. Please call (800) 334-2143 with all inquiries
pertaining to telephone privileges.
AUTOMATIC INVESTMENT PROGRAM.
Investors may make regular semi-monthly, monthly or quarterly investments of
$100 (or more) in shares of any SoGen Load Fund or the Money Fund,
automatically from a checking or savings account. Upon written authorization,
DST will debit the investor's designated bank account as indicated and use the
proceeds to purchase shares of a Fund for the investor's account. Because
approval by the investor's bank is required, establishment of an Automatic
Investment Program may require at least thirty days. To establish an Automatic
Investment Program, indication must be made on the New Account Application or
Special Options Form, and a check (minimum $100 if a new account is being
established), savings account deposit slip or savings account statement must
be forwarded to DST. Shares purchased through Automatic Investment Program
payments are subject to the redemption restrictions for recent purchases
described in "How to Redeem Shares." The Company may amend or cease to offer
the Automatic Investment Program at any time.
DIVIDEND DIRECTION PLAN.
Shareholders in a Fund may elect to have income dividends and capital gains
distributions on their Fund shares invested without the payment of any sales
charge in shares of the Money Fund or shares of any SoGen Load Fund in which
they have an existing account and maintain a minimum account balance. All
dividends and distributions so invested are taxable for U.S. federal income
tax purposes as though received in cash. For further information about this
privilege, contact DST in writing at the appropriate address listed in the
Shareholder's Reference Guide or by telephone at (800) 334-2143.
SYSTEMATIC WITHDRAWAL PLAN.
A shareholder who owns shares of a Fund with a current net asset value of
$10,000 or more may use those shares to establish a Systematic Withdrawal Plan
to receive a monthly or quarterly check in a stated amount of not less than
$50 on or about the 25th day of the month. Dividends and distributions on
shares invested under a Systematic Withdrawal Plan may not be taken in cash
but must be reinvested, which will be done at net asset value. A Fund's shares
will be redeemed as necessary to meet withdrawal payments. Withdrawals in
excess of dividends and distributions will reduce and may deplete the invested
principal and may result in a gain or loss for tax purposes. Purchases of
additional shares made concurrently with withdrawals of shares are undesirable
because of sales charges incurred when purchases are made. Accordingly, a
shareholder may not maintain a Systematic Withdrawal Plan while simultaneously
making regular purchases. New accounts established by check, after the 10th of
the month, will not begin distribution until the following month due to the
fifteen-day hold on
32
<PAGE>
check purchases. The Company may amend or cease to offer the Systematic
Withdrawal Plan at any time.
RETIREMENT PLANS.
The Company offers a variety of retirement plans such as IRA, Roth IRA, SEP-
IRA, SIMPLE IRA, Education IRA and 403(b)(7) plans which allow investors to
save for retirement and defer taxes on investment income, if any. The tax
benefits of these plans may not be available for all persons. Investors should
consult their tax advisers regarding their eligibility.
Retirement plans may purchase International Fund Class I shares or Overseas
Fund Class I shares provided they meet the minimum initial investment amount
of $1 million or the plan has or expects to have 100 or more participants and
will be domiciled in an omnibus or pooled account within each Fund and will
not require a Fund to pay any type of administrative fee or payment per
participant account to any third party.
For appropriate applications, please contact the Funds at (800) 334-2143.
SHAREHOLDER STATEMENTS AND REPORTS.
A confirmation statement is mailed to shareholders for each transaction in a
Fund, and a summary statement and tax reporting are provided at year end. Each
Fund also provides shareholders with an annual Prospectus as well as annual
and semi-annual reports.
ACCOUNT MAINTENANCE.
Shareholders will often need to update certain account information during
their relationship with the Funds. Please call (800) 334-2143 with any
questions concerning the legal requirements necessary to execute your request.
INQUIRIES
For information on how to buy shares of a Fund or to request additional
literature about any of the Funds, or for account information, shareholder
services or information on how to redeem shares, please call (800) 334-2143.
33
<PAGE>
SHAREHOLDERS' REFERENCE GUIDE
TELEPHONE NUMBERS:
For Fund Information, Account & Shareholder Services: (800) 334-2143
MAIL:
Direct Purchases, Redemptions
and Account Updates: The SoGen Funds
c/o DST Systems, Inc.
P.O. Box 419324
Kansas City, MO 64141-6324
OVERNIGHT MAIL: The SoGen Funds
c/o DST Systems, Inc.
330 West 9th Street
Kansas City, MO 64105-1807
WIRING INSTRUCTIONS:
You may wire funds to us at: IFTC, Kansas City, MO
ABA Routing #101003621
Account #7534116
Reference: (Your account number and fund name)
To avoid rejection of your wire, you must inform us of your intention to
wire funds to us AND include the fund name and your SoGen Fund account number
in the reference section of the wire.
AUTOMATIC INVESTMENT PROGRAM--Regular investments of at least $100,
automatically from your checking or savings account. Because approval by your
bank is required, establishment of an Automatic Investment Program may require
at least thirty days. See the "Automatic Investment Program" section of the
Prospectus for details.
SYSTEMATIC WITHDRAWAL PLAN--With a minimum net asset value of $10,000, you
may establish a Systematic Withdrawal Plan to receive, not less than $50, on a
monthly or quarterly basis. Distributions are made on or about the 25th of the
month. New accounts established by check after the 10th of the month, will not
begin distribution until the following month due to the fifteen-day hold on
check purchases. Please see the "Systematic Withdrawal Plan" section of the
Prospectus for details.
INVESTMENT THROUGH ACH--A convenient way for you to invest or redeem shares
in your SoGen Fund account. Please contact your financial representatives or
the Funds directly at (800) 334-2143 for further information.
34
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<PAGE>
SOGEN FUNDS, INC.
1221 AVENUE OF THE AMERICAS
NEW YORK, NY 10020
INVESTMENT ADVISER
Societe Generale Asset Management Corp.
1221 Avenue of the Americas
New York, NY 10020
UNDERWRITER
SG Cowen Securities Corporation
1221 Avenue of the Americas
New York, NY 10020
(212) 278-5800
LEGAL COUNSEL
Dechert Price & Rhoads
30 Rockefeller Plaza
New York, NY 10112
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
757 Third Avenue
New York, NY 10017
DOMESTIC CUSTODIAN
Investors Fiduciary Trust Company
127 West 10th Street
Kansas City, MO 64105
GLOBAL CUSTODIAN
The Chase Manhattan Bank
4 Chase MetroTech Center
Brooklyn, NY 11245
SHAREHOLDER SERVICING AGENT
DST Systems, Inc.
P.O. Box 419324
Kansas City, MO 64141-6324
(800) 334-2143
<PAGE>
[LOGO OF SOGEN FUNDS APPEARS HERE]
The SoGen Funds
1221 Avenue of the Americas, New York, NY 10020, (800) 334-2143
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
- -----------------------------------
SOGEN INTERNATIONAL FUND
SOGEN OVERSEAS FUND
SOGEN GOLD FUND
SOGEN MONEY FUND
-------------------------
[LOGO OF SOGEN FUNDS APPEARS HERE]
1221 AVENUE OF THE AMERICAS
NEW YORK, NY 10020
(800) 334-2143
----------------
Societe Generale Asset Management Corp.
1221 Avenue of the Americas
New York, NY 10020
Investment Adviser
SG Cowen Securities Corporation
1221 Avenue of the Americas
New York, NY 10020
Principal Underwriter
----------------
This Statement of Additional Information provides information about SoGen
International Fund, SoGen Overseas Fund, SoGen Gold Fund and SoGen Money Fund,
four separate portfolios of SoGen Funds, Inc. (the "Company"), an open-end
management investment company, in addition to the information contained in the
Prospectus of the Company dated July 31, 1998. This Statement of Additional
Information is not a prospectus. It relates to and should be read in
conjunction with the Prospectus of the Company, a copy of which can be
obtained by writing or by calling the Company at (800)-334-2143.
----------------
July 31, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
STATEMENT OF CROSS-REFERENCED
ADDITIONAL TO CAPTIONS IN THE
INFORMATION PAGE PROSPECTUS PAGE
---------------- ------------------
<S> <C> <C>
ORGANIZATION OF THE FUNDS.................. 3 9
INVESTMENT OBJECTIVES, POLICIES AND RE-
STRICTIONS................................ 3 9
MANAGEMENT OF THE COMPANY.................. 18 18
INVESTMENT ADVISER AND OTHER SERVICES...... 21 18
DISTRIBUTION OF THE FUNDS' SHARES.......... 23 27
COMPUTATION OF NET ASSET VALUE............. 26 23
HOW TO PURCHASE SHARES..................... 27 23
TAX STATUS................................. 28 20
BROKERAGE ALLOCATION....................... 33 19
CUSTODY OF PORTFOLIO....................... 35 --
INDEPENDENT AUDITORS....................... 35 --
FINANCIAL STATEMENTS....................... 35 --
APPENDIX................................... 36 --
</TABLE>
SAI-2
<PAGE>
ORGANIZATION OF THE FUNDS
SoGen International Fund, SoGen Overseas Fund, SoGen Gold Fund and SoGen
Money Fund, (each individually referred to as a "Fund", collectively, the
"Funds" or, alternatively, the "International Fund," the "Overseas Fund," the
"Gold Fund," and the "Money Fund," respectively) are four separate portfolios
of SoGen Funds, Inc. (the "Company"), an open-end management investment
company incorporated under the laws of Maryland in May 1993. Each Fund is a
separate, diversified portfolio of assets and has a different investment
objective which it pursues through separate investment policies, as described
below. The Company's investment adviser is Societe Generale Asset Management
Corp. ("SGAM"), a registered investment adviser. The Company's principal
underwriter is SG Cowen Securities Corporation ("SG Cowen"), a registered
broker-dealer located in New York.
Pursuant to the laws of Maryland, the Company's jurisdiction of
incorporation, the Board of Directors of the Company has adopted By-Laws of
the Company that do not require annual meetings of the Funds' shareholders.
The absence of a requirement that the Company hold annual meetings of the
Funds' shareholders reduces its expenses. Meetings of shareholders will
continue to be held when required by the Investment Company Act of 1940 or
Maryland law or when called by the Chairman of the Board of Directors, the
President or shareholders owning 10% of a Fund's outstanding shares. The cost
of any such notice and meeting will be borne by each Fund.
Under the provisions of the Investment Company Act of 1940, a vacancy in the
office of Director of the Company may be filled between meetings of the
shareholders of the Company by vote of the Directors then in office if,
immediately after filling such vacancy, at least two-thirds of the Directors
then holding office have been elected to the office of Director by the
shareholders of the Funds. In the event that at any time less than a majority
of the Directors of the Company holding office at that time were elected by
the shareholders of the Funds, the Board of Directors or the Chairman of the
Board shall, within sixty days, cause a meeting of shareholders to be held for
the purpose of electing directors to fill any vacancies in the Board of
Directors.
The staff of the Securities and Exchange Commission has advised the Funds
that it interprets Section 16(c) of the Investment Company Act of 1940, which
provides a means for dissident shareholders of common-law trusts to
communicate with other shareholders of such trusts and to vote upon the
removal of trustees upon the request in writing by the record holders of not
less than 10 percent of the outstanding shares of the trust, to apply to
investment companies, such as the Company, that are incorporated under
Maryland law.
INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS
INVESTMENT OBJECTIVES OF THE FUNDS.
INTERNATIONAL FUND. The International Fund's investment objective is to
provide long-term growth of capital. In seeking to achieve this objective, the
Fund will normally invest its assets primarily in common stocks (and in
securities convertible into common stocks) of United States and foreign
companies. However, the Fund reserves the right to invest a portion of its
assets in fixed-income securities of domestic or foreign issuers which, in
addition to the income
SAI-3
<PAGE>
they may provide, appear to offer potential for long-term growth of capital.
When deemed appropriate by the Fund's investment adviser for short-term
investment or defensive purposes, the Fund may hold a portion of its assets in
short-term debt instruments including commercial paper and certificates of
deposits.
OVERSEAS FUND. The Overseas Fund seeks long-term growth of capital by
investing primarily in securities of small and medium size non-U.S. companies.
The Fund uses the techniques and invests in the types of securities described
below and in the Prospectus. The Fund particularly seeks companies that have
growth potential, financial strength and stability, strong management and
fundamental value. However, the Fund may invest in companies that do not have
all of these characteristics.
GOLD FUND. The Gold Fund seeks growth of capital by investing primarily in
securities of companies engaged in mining, processing, dealing in or holding
gold or other precious metals such as silver, platinum and palladium, both in
the United States and in foreign countries. Gold-related investments have
provided protection against loss of purchasing power during periods of
extensive price inflation and/or following periods of extensive credit
expansion. Under normal circumstances, at least 65% of the value of the Fund's
total assets will be invested in securities (which may include both equity
and, to a limited extent, debt securities) consisting of issuers engaged in
gold operations, including securities of gold mining finance companies as well
as operating companies with long, medium or short-life mines. Up to 35% of the
Fund's assets may be invested in equity and, to a limited extent, debt
securities unrelated to the precious metals industry where the investment
adviser believes such securities are consistent with the Fund's investment
objective.
MONEY FUND. The Money Fund seeks as high a level of current income as is
considered consistent with the preservation of capital and liquidity. The Fund
pursues its objective by investing exclusively in U.S. dollar-denominated
money market instruments which mature in 397 days or less and which the Fund's
investment adviser has determined to present minimal credit risk.
Investors should refer to the Funds' Prospectus for further discussion of
the Funds' investment objectives and policies. There can be no assurance that
the Funds' stated objectives will be realized.
INVESTMENT POLICIES, TECHNIQUES AND RISKS.
GOLD FUND.
FLUCTUATIONS IN THE PRICE OF GOLD (GOLD FUND). The price of gold has been
subject to substantial upward and downward price movements over short periods
of time and may be affected by unpredictable international monetary and
political policies, such as currency devaluations or revaluations, economic
conditions within an individual country, trade imbalances or trade or currency
restrictions between countries and world inflation rates and interest rates.
The price of gold, in turn, is likely to affect the market prices of
securities of companies mining, processing or dealing in gold, and
accordingly, the value of the Fund's investments in such securities also may
be affected.
SAI-4
<PAGE>
MONEY FUND.
ASSET-BACKED SECURITIES (MONEY FUND). The Money Fund can invest a portion of
its assets in debt obligations known as "Asset-Backed Securities" which are
Eligible Securities (as that term is hereinafter defined). The credit quality
of most Asset-Backed Securities depends primarily on the credit quality of the
assets underlying such securities, how well the entity issuing the security is
insulated from the credit risk of the originator (or any other affiliated
entities), and the amount and quality of any credit support provided to the
securities. The rate of principal payments on Asset-Backed Securities
generally depends on the rate of principal payments received on the underlying
assets, which in turn may be affected by a variety of economic and other
factors. As a result, the yield on any Asset-Backed Security is difficult to
predict with precision and actual yield to maturity may be more or less than
the anticipated yield to maturity. Asset-Backed Securities may be classified
as "Pass-Through Certificates" or "Collateralized Obligations." Where deemed
appropriate by the Board of Directors, Asset-Backed Securities may be valued
using prices provided by a pricing service. The stated maturity of a
particular Asset-Backed Security will be treated as the instrument's maturity
for purposes of the Fund's portfolio maturity requirements, unless there
exists an associated demand feature, enabling the Fund to treat the instrument
as having a shorter maturity.
"Pass-Through Certificates" are Asset-Backed Securities which represent an
undivided fractional ownership interest in the underlying pool of assets.
Pass-Through Certificates usually provide for payments of principal and
interest received to be passed through to their holders, usually after
deduction for certain costs and expenses incurred in administering the pool.
Because Pass-Through Certificates represent ownership interests in the
underlying assets, the holders thereof bear directly the risk of any defaults
by the obligors on the underlying assets not covered by any credit support.
Asset-Backed Securities issued in the form of debt instruments, also known
as Collateralized Obligations, are generally issued as the debt of a special
purpose entity organized solely for the purpose of owning such assets and
issuing such debt. The assets collateralizing such Asset-Backed Securities are
pledged to a trustee or custodian for the benefit of the holders thereof. Such
issuers generally hold no assets other than those underlying the Asset-Backed
Securities and any credit support provided. As a result, although payments on
such Asset-Backed Securities are obligations of the issuers, in the event of
default on the underlying assets not covered by any credit support, the
issuing entities are unlikely to have sufficient assets to satisfy their
obligations on the related Asset-Backed Securities.
METHODS OF ALLOCATING CASH FLOWS. While many Asset-Backed Securities are
issued with only one class of security, many others are issued in more than
one class, each with different payment terms. Multiple class Asset-Backed
Securities are issued for two main reasons. First, multiple classes may be
used as a method of providing credit-support. This is accomplished typically
through creation of one or more classes whose right to payments on the Asset-
Backed Security is made subordinate to the right to such payments of the
remaining class or classes. Second, multiple classes may permit the issuance
of securities with payment terms, interest rates or other characteristics
differing both from those of each other and from those of the underlying
assets. Examples include so-called "multi-tranche CMOs" (collateralized
mortgage obligations with serial maturities such that all principal payments
received on the mortgages underlying the securities are first paid to the
class with the earliest stated maturity, and then sequentially to the class
with the next stated maturity), "Strips" (Asset-Backed Securities entitling
the holder to disproportionate interests with respect to the allocation of
SAI-5
<PAGE>
interest and principal of the assets backing the security), and securities
with a class or classes having characteristics which mimic the characteristics
of non-Asset-Backed Securities, such as floating interest rates (i.e.,
interest rates which adjust as a specified benchmark changes) or scheduled
amortization of principal.
TYPES OF CREDIT SUPPORT. Asset-Backed Securities are often backed by a pool
of assets representing the obligations of a number of different parties. To
lessen the effect of failures by obligors on these underlying assets to make
payments, such securities may contain elements of credit support. Such credit
support falls into two classes: liquidity protection and protection against
ultimate default on the underlying assets. Liquidity protection refers to the
provision of advances, generally by the entity administering the pool of
assets, to ensure that scheduled payments on the underlying pool are made in a
timely fashion. Protection against ultimate default ensures payment on at
least a portion of the assets in the pool. Such protection may be provided
through guarantees, insurance policies or letters of credit obtained from
third parties, through various means of structuring the transaction, or
through a combination of such approaches. Examples of Asset-Backed Securities
with credit support arising out of the structure of the transaction include
"senior-subordinated securities" (multiple class Asset-Backed Securities with
certain classes subordinate to other classes as to the payment of principal
thereon, with the result that defaults on the underlying assets are borne
first by the holders of the subordinated class) and Asset-Backed Securities
that have "reserve funds" (where cash or investments, sometimes funded from a
portion of the initial payments on the underlying assets, are held in reserve
against future losses) or that have been "over-collateralized" (where the
scheduled payments on, or the principal amount of, the underlying assets
substantially exceed that required to make payment on the Asset-Backed
Securities and pay any servicing or other fees). The degree of credit support
provided on each issue is based generally on historical information respecting
the level of credit risk associated with such payments. Delinquency or loss in
excess of that anticipated could adversely affect the return on an investment
in an Asset-Backed Security.
CREDIT CARD RECEIVABLE SECURITIES. The Fund may invest in Asset-Backed
Securities backed by receivables from revolving credit card agreements
("Credit Card Receivable Securities"). Most of the Credit Card Receivable
Securities issued publicly to date have been Pass-Through Certificates. In
order to lengthen the maturity of Credit Card Receivable Securities, most such
securities provide for a fixed period during which only interest payments on
the underlying accounts are passed through to the security holder and
principal payments received on such accounts are used to fund the transfer to
the pool of assets supporting the related Credit Card Receivable Securities of
additional credit card charges made on an account. The initial fixed period
usually may be shortened upon the occurrence of specified events which signal
a potential deterioration in the quality of the assets backing the security,
such as the imposition of a cap on interest rates. The ability of the issuer
to extend the life of an issue of Credit Card Receivable Securities thus
depends upon the continued generation of additional principal amounts in the
underlying accounts during the initial period and the non-occurrence of
specified events. Competitive, regulatory and general economic factors could
adversely affect the rate at which new receivables are created in an account
and conveyed to an issuer, shortening the expected weighted average life of
the related Credit Card Receivable Security and reducing its yield. An
acceleration in cardholders' payment rates or any other event which shortens
the period during which additional credit card charges on an account may be
transferred to the pool of assets supporting the related Credit Card
Receivable Security could have a similar effect on the weighted average life
and yield.
SAI-6
<PAGE>
Credit card holders are entitled to the protection of a number of state and
federal consumer credit laws, many of which give such holder the right to set
off certain amounts against balances owed on the credit card, thereby reducing
amounts paid on accounts. In addition, unlike most other Asset-Backed
Securities, accounts are unsecured obligations of the cardholder.
INVESTMENT POLICIES APPLICABLE TO MORE THAN ONE FUND.
POLICIES APPLICABLE TO ALL FUNDS:
FOREIGN SECURITIES. Each Fund may (and the International Fund and the
Overseas Fund will) invest in foreign securities, which may entail a greater
degree of risk (including risks relating to exchange rate fluctuations, tax
provisions, or expropriation of assets) than does investment in securities of
domestic issuers. The Funds may invest in securities of foreign issuers
directly or in the form of American Depository Receipts (ADRs), Global
Depository Receipts (GDRs), European Depository Receipts (EDRs), or other
securities representing underlying shares of foreign issuers. Positions in
these securities are not necessarily denominated in the same currency as the
common stocks into which they may be converted. ADRs are receipts typically
issued by an American bank or trust company evidencing ownership of the
underlying securities. EDRs are European receipts evidencing a similar
arrangement. GDRs are global offerings where two securities are issued
simultaneously in two markets, usually publicly in non-U.S. markets and
privately in the U.S. market. Generally ADRs, in registered form, are designed
for use in the U.S. securities markets, EDRs, in bearer form, are designed for
use in European securities markets. GDR's are designed for use in the U.S. and
European securities markets. Each of the Funds (except the Money Fund) may
invest in both "sponsored" and "unsponsored" ADRs. In a sponsored ADR, the
issuer typically pays some or all of the expenses of the depository and agrees
to provide its regular shareholder communications to ADR holders. An
unsponsored ADR is created independently of the issuer of the underlying
security. The ADR holders generally pay the expenses of the depository and do
not have an undertaking from the issuer of the underlying security to furnish
shareholder communications. Issuers of unsponsored ADRs are not obligated to
disclose material information in the United States and, therefore, there may
not be a correlation between such information and the market value of the
ADRs. Each Fund does not expect to invest 5% or more of its total assets in
unsponsored ADRs.
With respect to portfolio securities that are issued by foreign issuers or
denominated in foreign currencies, the investment performance of a Fund is
affected by the strength or weakness of the U.S. dollar against these
currencies. For example, if the dollar falls in value relative to the Japanese
yen, the dollar value of a yen-denominated stock held in the portfolio will
rise even though the price of the stock remains unchanged. Conversely, if the
dollar rises in value relative to the yen, the dollar value of the yen-
denominated stock will fall. (See discussion of transaction hedging and
portfolio hedging under "Currency Exchange Transactions.")
Investors should understand and consider carefully the risks involved in
foreign investing. Investing in foreign securities, positions which are
generally denominated in foreign currencies, and utilization of forward
foreign currency exchange contracts involve certain risks and opportunities
not typically associated with investing in U.S. securities. These
considerations include: fluctuations in the rates of exchange between the U.S.
dollar and foreign currencies;
SAI-7
<PAGE>
possible imposition of exchange control regulations or currency restrictions
that would prevent cash from being brought back to the United States; less
public information with respect to issuers of securities; less governmental
supervision of stock exchanges, securities brokers, and issuers of securities;
different accounting, auditing and financial reporting standards; different
settlement periods and trading practices; less liquidity and frequently
greater price volatility in foreign markets than in the United States;
imposition of foreign taxes; and sometimes less advantageous legal,
operational and financial protections applicable to foreign sub-custodial
arrangements.
Although the Funds seek to invest in companies and governments of countries
having stable political environments, there is the possibility of
expropriation or confiscatory taxation, seizure or nationalization of foreign
bank deposits or other assets, establishment of exchange controls, the
adoption of foreign government restrictions, or other adverse political,
social or diplomatic developments that could affect investment in these
nations.
The countries in which the International Fund and the Overseas Fund invest
are included in those listed below. The International Fund and the Overseas
Fund may not invest in all the countries listed, and they may invest in
countries that are not listed, when such investments are consistent with the
Funds' investment objective and policies. In addition, the Gold Fund may
invest in gold-related investments in any countries deemed suitable by the
investment adviser.
<TABLE>
<CAPTION>
MATURE MARKETS EMERGING MARKETS
- -------------- -----------------------------------------------------------------------
<S> <C> <C>
Australia Argentina Nigeria
Austria Brazil Pakistan
Belgium Chile People's Republic of China
Canada Czech Republic Peru
Denmark Ecuador Philippines
Finland Greece Poland
France Hungary Portugal
Germany India South Africa
Hong Kong Indonesia South Korea
Ireland Israel Sri Lanka
Italy Jamaica Taiwan
Japan Jordan Thailand
Luxembourg Kenya Turkey
Netherlands Malaysia Uruguay
New Zealand Mexico Venezuela
Norway Morocco Vietnam
Singapore
Spain
Sweden
Switzerland
United Kingdom
United States
</TABLE>
It may not be feasible for the International Fund, Overseas Fund or Gold
Fund currently to invest in all of these countries due to restricted access to
their securities markets or inability to implement satisfactory custodial
arrangements.
SAI-8
<PAGE>
Since the Money Fund will invest only in U.S. dollar-denominated securities,
the return on its shares will not be subject to the risk of adverse changes in
the exchange rates between the U.S. dollar and foreign currencies. In
addition, the Money Fund does not intend to invest in the securities markets
of emerging countries.
RESTRICTED AND ILLIQUID SECURITIES. Each Fund may invest up to 15% of its
net assets (10% in the case of the Money Fund and the International Fund) in
illiquid securities, including certain securities that are subject to legal or
contractual restrictions on resale ("restricted securities").
Generally, restricted securities may be sold only in privately negotiated
transactions or in a public offering with respect to which a registration
statement is in effect under the Securities Act of 1933 (the "1933 Act").
Where registration is required, a Fund may be obligated to pay all or part of
the registration expenses and a considerable period may elapse between the
time of the decision to sell and the time the Fund may be permitted to sell a
security under an effective registration statement. If, during such a period,
adverse market conditions were to develop, the Fund might obtain a less
favorable price than that which prevailed when it decided to sell. Restricted
securities will be priced at fair value as determined in good faith by the
Board of Directors. If, through the appreciation of illiquid securities or the
depreciation of liquid securities, a Fund should be in a position where more
than 15% of the value of its net assets (10% in the case of the International
Fund and the Money Fund) is invested in illiquid assets, including restricted
securities, the Fund will take appropriate steps to protect liquidity.
Notwithstanding the above, a Fund may purchase securities that have been
privately placed but that are eligible for purchase and sale under Rule 144A
under the 1933 Act. That rule permits certain qualified institutional buyers,
such as the Funds, to trade in privately placed securities that have not been
registered for sale under the 1933 Act. SGAM Corp., under the supervision of
the Board of Directors of the Company, will consider whether securities
purchased under Rule 144A are illiquid and thus subject to a Fund's
restriction on investing in illiquid securities. A determination as to whether
a Rule 144A security is liquid or not is a factual issue requiring an
evaluation of a number of factors. In making this determination, SGAM Corp.
will consider the trading markets for the specific security, taking into
account the unregistered nature of a Rule 144A security. In addition, SGAM
Corp. could consider (1) the frequency of trades and quotes, (2) the number of
dealers and potential purchasers, (3) the dealer undertakings to make a
market, and (4) the nature of the security and of market place trades (e.g.,
the time needed to dispose of the security, the method of soliciting offers
and the mechanics of transfer). The liquidity of Rule 144A securities would be
monitored and if, as a result of changed conditions, it is determined that a
Rule 144A security is no longer liquid, a Fund's holdings of illiquid
securities would be reviewed to determine what steps, if any, are required to
assure that the Fund does not invest more than the maximum percentage of its
assets in illiquid securities. Investing in Rule 144A securities could have
the effect of increasing the amount of a Fund's assets invested in illiquid
securities if qualified institutional buyers are unwilling to purchase such
securities.
BANK OBLIGATIONS. Each Fund may invest in bank obligations, which may
include bank certificates of deposit, time deposits or bankers' acceptances.
Certificates of deposit and time deposits are negotiable certificates issued
against funds deposited in a commercial bank for a definite period of time and
earning a specified return. Bankers' acceptances are negotiable drafts or
bills of exchange, normally drawn by an importer or exporter to pay for
specific
SAI-9
<PAGE>
merchandise, which are "accepted" by a bank, meaning in effect that the bank
unconditionally agrees to pay the face value of the instrument on maturity.
Investments in these instruments are limited to obligations of domestic banks
(including their foreign branches) and U.S. and foreign branches of foreign
banks having capital surplus and undivided profits in excess of $100 million.
POLICIES APPLICABLE TO THE INTERNATIONAL FUND, OVERSEAS FUND AND GOLD FUND:
STRUCTURED SECURITIES. The International Fund may invest in structured notes
and/or preferred stock, the value of which is linked to the price of a
referenced commodity. The Overseas Fund may invest in structured notes and/or
preferred stock, the value of which is linked to currencies, interest rates,
other commodities, indices or other financial indicators, and the Gold Fund
may invest in structured notes and/or preferred stock, the value of which is
linked to the price of gold or other precious metals. Structured securities
differ from other types of securities in which the Funds may invest in several
respects. For example, the coupon dividend and/or redemption amount at
maturity may be increased or decreased depending on changes in the value of
the underlying instrument.
Investment in structured securities involves certain risks. In addition to
the credit risk of the security's issuer and the normal risks of price changes
in response to changes in interest rates, the redemption amount may decrease
as a result of changes in the price of the underlying instrument. Further, in
the case of certain structured securities, the coupon and/or dividend may be
reduced to zero, and any further declines in the value of the underlying
instrument may then reduce the redemption amount payable on maturity. Finally,
structured securities may be more volatile than the price of the underlying
instrument.
CURRENCY EXCHANGE TRANSACTIONS. A currency exchange transaction may be
conducted either on a spot (i.e., cash) basis at the spot rate for purchasing
or selling currency prevailing in the foreign exchange market or through a
forward currency exchange contract ("Forward Contract"). A Forward Contract is
an agreement to purchase or sell a specified currency at a specified future
date (or within a specified time period) and price set at the time of the
contract. Forward Contracts are usually entered into with banks and
broker/dealers, are not exchange traded and are usually for less than one
year, but may be renewed.
Currency exchange transactions may involve currencies of the different
countries in which the International Fund, Overseas Fund and Gold Fund may
invest, and serve as hedges against possible variations in the exchange rates
between these currencies and the U.S. dollar. A Fund's currency transactions
are limited to transaction hedging and portfolio hedging involving either
specific transactions or portfolio positions. Transaction hedging is the
purchase or sale of a Forward Contract with respect to specific payables or
receivables of a Fund accruing in connection with the purchase or sale of
portfolio securities. Portfolio hedging is the use of a Forward Contract with
respect to a portfolio security position denominated or quoted in a particular
currency. A Fund may engage in portfolio hedging with respect to the currency
of a particular country in amounts approximating actual or anticipated
positions in securities denominated in that currency.
At the maturity of a Forward Contract to deliver a particular currency, a
Fund may either sell the portfolio security related to such contract and make
delivery of the currency, or it may retain the security and either acquire the
currency on the spot market or terminate its
SAI-10
<PAGE>
contractual obligation to deliver the currency by purchasing an offsetting
contract with the same currency trader obligating it to purchase on the same
maturity date the same amount of the currency.
It is impossible to forecast with absolute precision the market value of
portfolio securities at the expiration of a Forward Contract. Accordingly, it
may be necessary for a Fund to purchase additional currency on the spot market
(and bear the expense of such purchase) if the market value of the security is
less than the amount of currency the Fund is obligated to deliver, and if a
decision is made to sell the security and make delivery of the currency.
Conversely, it may be necessary to sell on the spot market some of the
currency received upon the sale of the portfolio security if its market value
exceeds the amount of currency the Fund is obligated to deliver.
If a Fund retains the portfolio security and engages in an offsetting
transaction, the Fund will incur a gain or a loss to the extent that there has
been movement in Forward Contract prices. If a Fund engages in an offsetting
transaction, it may subsequently enter into a new Forward Contract to sell the
currency. Should forward prices decline during the period between the date a
Fund enters into a Forward Contract for the sale of a currency and the date it
enters into an offsetting contract for the purchase of the currency, the Fund
will realize a gain to the extent the price of the currency it has agreed to
sell exceeds the price of the currency it has agreed to purchase. Should
forward prices increase, the Fund will suffer a loss to the extent the price
of the currency it has agreed to purchase exceeds the price of the currency it
has agreed to sell. A default on the contract would deprive the Fund of
unrealized profits or force the Fund to cover its commitments for purchase or
sale of currency, if any, at the current market price.
Hedging against a decline in the value of a currency does not eliminate
fluctuations in the prices of portfolio securities or prevent losses if the
prices of such securities decline. Such transactions also preclude the
opportunity for gain if the value of the hedged currency should rise.
Moreover, it may not be possible for a Fund to hedge against a devaluation
that is so generally anticipated that the Fund is not able to contract to sell
the currency at a price above the devaluation level it anticipates. The cost
to a Fund of engaging in currency exchange transactions varies with such
factors as the currency involved, the length of the contract period and
prevailing market conditions. Since currency exchange transactions are usually
conducted on a principal basis, no fees or commissions are involved.
LOWER-RATED DEBT SECURITIES. Each of the International Fund, Overseas Fund
and Gold Fund may invest in debt securities, including lower-rated securities
(i.e., securities rated BB or lower by Standard & Poor's Corporation ("S&P")
or Ba or lower by Moody's Investors Service, Inc. ("Moody's"), commonly called
"junk bonds") and securities that are not rated. There are no restrictions as
to the ratings of debt securities acquired by a Fund or the portion of a
Fund's assets that may be invested in debt securities in a particular rating
category, except that the Overseas Fund and the Gold Fund will not invest more
than 20% of its assets in securities rated below investment grade or unrated
securities considered by the investment adviser to be of comparable credit
quality.
Securities rated BBB by S&P or Baa by Moody's (the lowest investment grade
ratings) are considered to be of medium grade and to have speculative
characteristics. Debt securities rated below investment grade are
predominantly speculative with respect to the issuer's capacity to
SAI-11
<PAGE>
pay interest and repay principal. Although lower-rated debt and comparable
unrated debt securities may offer higher yields than do higher rated
securities, they generally involve greater volatility of price and risk of
principal and income, including the possibility of default by, or bankruptcy
of, the issuers of the securities. In addition, the markets in which lower-
rated and unrated debt securities are traded are more limited than those in
which higher rated securities are traded. Adverse publicity and investors'
perceptions, whether or not based on fundamental analysis, may decrease the
values and liquidity of lower-rated debt securities, especially in a thinly
traded market. During periods of thin trading in these markets, the spread
between bid and asked prices is likely to increase significantly, and a Fund
may have greater difficulty selling its portfolio securities. See "Computation
of Net Asset Value." Analyses of the creditworthiness of issuers of lower-
rated debt securities may be more complex than for issuers of higher rated
securities, and the ability of the Fund to achieve its investment objective
may, to the extent of investment in lower-rated debt securities, be more
dependent upon such creditworthiness analyses than would be the case if the
Fund were investing in higher rated securities.
Lower-rated debt securities may be more susceptible to real or perceived
adverse economic and competitive industry conditions than investment grade
securities. The prices of lower-rated debt securities have been found to be
less sensitive to interest rate changes than higher rated investments, but
more sensitive to adverse economic downturns or individual corporate
developments. A projection of an economic downturn or of a period of rising
interest rates, for example, could cause a decline in lower-rated debt
securities' prices because the advent of a recession could lessen the ability
of a highly-leveraged company to make principal and interest payments on its
debt securities. If the issuer of lower-rated debt securities defaults, a Fund
may incur additional expenses seeking recovery.
A more complete description of the characteristics of bonds in each rating
category is included in the appendix to this Statement of Additional
Information.
POLICIES APPLICABLE TO THE OVERSEAS FUND, GOLD FUND AND MONEY FUND:
WHEN-ISSUED OR DELAYED-DELIVERY SECURITIES. Each Fund may purchase
securities on a "when-issued" or "delayed delivery" basis. Although the
payment and interest terms of these securities are established at the time a
Fund enters into the commitment, the securities may be delivered and paid for
a month or more after the date of purchase, when their value may have changed.
A Fund makes such commitments only with the intention of actually acquiring
the securities, but may sell the securities before settlement date if the
investment adviser deems it advisable for investment reasons.
At the time a Fund enters into a binding obligation to purchase securities
on a when-issued basis, liquid assets of the Fund having a value at least as
great as the purchase price of the securities to be purchased will be
segregated on the books of the Fund and held by the custodian throughout the
period of the obligation. The use of these investment strategies, as well as
any borrowing by a Fund, may increase net asset value fluctuation.
POLICIES APPLICABLE TO THE OVERSEAS FUND AND THE GOLD FUND:
CHANGE OF OBJECTIVE.
The investment objectives of the Overseas Fund, the Gold Fund and the Money
Fund are not fundamental policies of the Funds and, accordingly, may be
changed by the Board of Directors without shareholder approval. Shareholders
will be notified a minimum of sixty days in advance of any change in
investment objective.
SAI-12
<PAGE>
The investment objective of the International Fund, on the other hand, is a
fundamental policy of the Fund and may not be changed without shareholder
approval.
INVESTMENT RESTRICTIONS.
In pursuing its investment objective, each Fund will not:
1. With respect to 75% of the value of a Fund's total assets, invest more
than 5% of its total assets (valued at time of investment) in securities of
any one issuer, except securities issued or guaranteed by the government of
the United States, or any of its agencies or instrumentalities, or acquire
securities of any one issuer which, at the time of investment, represent
more than 10% of the voting securities of the issuer;
2. Borrow money except unsecured borrowings from banks as a temporary
measure in exceptional circumstances, and such borrowings may not exceed
10% of a Fund's net assets at the time of the borrowing. A Fund will not
purchase securities while borrowings exceed 5% of its total assets;
3. (INTERNATIONAL FUND)--Purchase the securities of any issuer if such
purchase would cause more than 25% of the value of its total assets to be
invested in securities of any one issuer or industry, with the exception of
the securities of the United States government and its corporate
instrumentalities and, under the circumstances described below,
certificates of deposit and other short-term bank instruments. In fact, the
Fund intends to diversify its investments among various issuers and
industries and will not purchase certificates of deposit or other short-
term bank instruments except to the extent deemed appropriate for the
short-term investment of cash or a temporary defensive measure. The Fund
will limit its purchases of certificates of deposit and other short-term
bank instruments to those issued by United States banks and savings and
loan associations, including foreign branches of such banks, and United
States branches or agencies of foreign banks, which have total assets (as
of the date of their most recently published financial statements) of at
least $1 billion.
4. (OVERSEAS FUND, GOLD FUND AND MONEY FUND)--Invest more than 25% of its
assets (valued at time of investment) in securities of companies in any one
industry other than U.S. Government Securities (except that the Gold Fund
will, as a matter of fundamental policy, concentrate its investments in the
precious metals industry and the Money Fund may concentrate its investments
in U.S. bank obligations);
5. (INTERNATIONAL FUND)--Purchase or sell its portfolio securities from
or to any of its officers, directors or employees, its investment adviser
or its principal underwriter, except to the extent that such purchase or
sale may be permitted by an order, rule or regulation of the Securities and
Exchange Commission.
6. Make loans, but this restriction shall not prevent a Fund from (a)
buying a part of an issue of bonds, debentures, or other obligations that
are publicly distributed, or from investing up to an aggregate of 15% of
its total assets (taken at market value at the time of each purchase) in
parts of issues of bonds, debentures or other obligations of a type
privately placed with financial institutions or (b) lending portfolio
securities, provided that a Fund may not lend securities if, as a result,
the aggregate value of all securities loaned would exceed 33% of its total
assets (taken at market value at the time of such loan);*
- --------
* The Funds have no present intention of lending their portfolio securities.
SAI-13
<PAGE>
7. (INTERNATIONAL FUND)--Engage in the underwriting of securities of
other issuers, except to the extent it may be deemed to be an underwriter
in selling portfolio securities as part of an offering registered under the
1933 Act.
8. (OVERSEAS FUND, GOLD FUND AND MONEY FUND)--Underwrite the distribution
of securities of other issuers; however, a Fund may acquire "restricted"
securities which, in the event of a resale, might be required to be
registered under the 1933 Act on the grounds that the Fund could be
regarded as an underwriter as defined by the 1933 Act with respect to such
resale;
9. (INTERNATIONAL FUND)--Purchase or sell real estate or interests
therein, commodities or commodity contracts. The Fund may, however, invest
in real estate investment trusts and companies holding real estate and may
sell commodities received by it as distributions on portfolio investments.
(To the extent the Fund's portfolio includes a commodity distributed to it,
the Fund will be subject to the risk of change in the value of such
commodity.)
10. (OVERSEAS FUND, GOLD FUND AND MONEY FUND)--Purchase and sell real
estate or interests in real estate, although it may invest in marketable
securities of enterprises that invest in real estate or interests in real
estate;
11. (OVERSEAS FUND, GOLD FUND AND MONEY FUND)--Make margin purchases of
securities, except for the use of such short term credits as are needed for
clearance of transactions; and
12. Sell securities short or maintain a short position, except, in the
case of Overseas Fund, the Gold Fund and Money Fund, short sales against-
the-box.
Restrictions 1 through 12 above (except the portions in parentheses) are
"fundamental," which means that they cannot be changed without the vote of a
majority of the outstanding voting securities of a Fund (defined by the
Investment Company Act of 1940, as amended ("1940 Act"), as the lesser of (i)
67% of a Fund's shares present at a meeting if more than 50% of the shares
outstanding are present or (ii) more than 50% of a Fund's outstanding shares).
In addition, each Fund is subject to a number of restrictions that may be
changed by the Board of Directors without shareholder approval. Under those
non-fundamental restrictions, a Fund will not:
A (INTERNATIONAL FUND)--With respect to 100% of its assets, purchase
securities of any issuer, other than the United States government and its
corporate instrumentalities, if, immediately after such purchase, more than
5% of the value of its total assets would be invested in the securities of
such issuer.
B. (INTERNATIONAL FUND)--With respect to 100% of its assets, purchase 10%
or more of the voting securities of any one issuer.
C. Invest in companies for the purpose of management or the exercise of
control;
D. (INTERNATIONAL FUND)--Purchase Securities on margin;
E. (INTERNATIONAL FUND)--Purchase interests in oil, gas or other mineral
exploration programs or leases; however, this policy will not prohibit the
acquisition of securities of companies engaged in the production or
transmission of oil, gas or other minerals.
F. (OVERSEAS FUND, GOLD FUND AND MONEY FUND)--Invest in oil, gas or other
mineral leases or exploration or development programs, although it may
invest in marketable securities of enterprises engaged in oil, gas or
mineral exploration;
G. (INTERNATIONAL FUND)--Purchase warrants which are not offered in units
or attached to other portfolio securities if, immediately after such
purchase, more than 5% of the Fund's net assets would be invested in such
unattached warrants, valued at the lower
SAI-14
<PAGE>
of cost or market. The Fund will not purchase unattached warrants not
listed on the New York or American Stock Exchange if, immediately after
such purchase, more than 2% of the Fund's net assets would be invested in
such unattached, unlisted warrants.
H. (OVERSEAS FUND, GOLD FUND AND MONEY FUND)--Invest more than 10% of its
net assets (valued at time of investment) in warrants, valued at the lower
of cost or market; provided that warrants acquired in units or attached to
securities shall be deemed to be without value for purposes of this
restriction;
I. (OVERSEAS FUND, GOLD FUND AND MONEY FUND)--Pledge, mortgage or
hypothecate its assets, except as may be necessary in connection with
permitted borrowings or in connection with short sales;
J. (OVERSEAS FUND, GOLD FUND AND MONEY FUND)--Purchase or sell
commodities or commodity contracts, except that it may enter into forward
contracts and may sell commodities received by it as distributions on
portfolio investments; and
K. Purchase or sell put and call options on securities or on futures
contracts.
L. (INTERNATIONAL FUND)--Purchase illiquid securities or securities the
proceeds from the sale of which could not readily be repatriated to the
United States if, immediately after such purchase, more than 10% of the
value of its net assets would be invested in such securities.
In addition, under normal circumstances the International Fund will invest
in at least three foreign countries.
Among the types of fixed income securities in which the International Fund
may invest from time to time are United States government obligations. United
States government obligations include Treasury Notes, Bonds and Bills which
are direct obligations of the United States government backed by the full
faith and credit of the United States, and securities issued by agencies and
instrumentalities of the United States government, which may be (i) guaranteed
by the United States Treasury, such as the securities of the Government
National Mortgage Association, or (ii) supported by the issuer's right to
borrower from the Treasury and backed by the credit of the federal agency or
instrumentality itself, such as securities of the Federal Intermediate Land
Banks, Federal Land Banks, Bank of Cooperatives, Federal Home Loan Banks,
Tennessee Valley Authority and Farmers Home Administration.
The Money Fund will only purchase securities that present minimal credit
risks and which are First Tier or Second Tier Securities (otherwise referred
to as "Eligible Securities"). An Eligible Security is:
(1) a security with a remaining maturity of 397 days or less: (a) that is
rated by the requisite nationally recognized statistical rating organizations
designated by the Securities and Exchange Commission (currently Moody's, S&P,
Duff and Phelps, Inc., Fitch Investors Services, Inc., Thompson Bankwatch,
and, with respect to debt issued by banks, bank holding companies, United
Kingdom building societies, broker/dealers and broker/ dealers' parent
companies, and bank-supported debt, IBCA Limited and its affiliate, IBCA,
Inc.--collectively, the "NRSROs") in one of the two highest rating categories
for short-term debt obligations (the requisite NRSROs being any two or, if
only rated by one, that one NRSRO), or (b) that itself was unrated by any
NRSRO, but was issued by an issuer that has outstanding a class of short-term
debt obligations (or any security within that class) meeting the requirements
of subparagraph 1(a) above that is of comparable priority and security;
SAI-15
<PAGE>
(2) a security that at the time of issuance was a long-term security but has
a remaining maturity of 397 days or less and: (a) whose issuer received a
rating in one of the two highest rating categories for short-term debt
obligations from the requisite NRSROs (the requisite NRSROs being any two or,
if only rated by one, that one NRSRO) with respect to a class of short-term
debt obligations (or any security within that class) that is currently
comparable in priority and security with the subject security or (b) which has
long-term ratings from the requisite NRSROs (the requisite NRSROs being any
two or, if only rated by one, that one NRSRO) which are in one of the two
highest categories; or
(3) a security not rated by an NRSRO but deemed by the investment adviser
pursuant to guidelines adopted by the Board of Directors, to be of comparable
quality to securities described in (1) and (2) and to present minimal credit
risks.
A First Tier Security is any Eligible Security which qualifies as such
because it carries (or other relevant securities issued by its issuer carry)
top NRSRO ratings (a single top rating is sufficient if only one NRSRO rates
the security) or has been determined, pursuant to guidelines adopted by the
Board of Directors, to be of comparable quality to such a security. A Second
Tier Security is any other Eligible Security.
The Money Fund will limit its investments in the First Tier Securities of
any one issuer to no more than five percent of its assets. (Repurchase
agreements collateralized by non-Government securities will be taken into
account when making this calculation.) Moreover, the Money Fund's total
holdings of Second Tier Securities will not exceed 5% of its assets, with
investment in the Second Tier Securities of any one issuer being limited to
the greater of 1% of the Fund's assets or $1 million. In addition, the
underlying securities involved in repurchase agreements collateralized by non-
Government securities will be First Tier Securities at the time the repurchase
agreements are executed.
Notwithstanding the foregoing investment restrictions, the Overseas Fund and
the Gold Fund may purchase securities pursuant to the exercise of subscription
rights, provided that such purchase will not result a Fund's ceasing to be a
diversified investment company. Japanese and European corporations frequently
issue additional capital stock by means of subscription rights offerings to
existing shareholders at a price substantially below the market price of the
shares. The failure to exercise such rights would result in a Fund's interest
in the issuing company being diluted. The market for such rights is not well
developed in all cases and, accordingly, a Fund may not always realize full
value on the sale of rights. The exception applies in cases where the limits
set forth in the investment restrictions would otherwise be exceeded by
exercising rights or would have already been exceeded as a result of
fluctuations in the market value of a Fund's portfolio securities with the
result that a Fund would be forced either to sell securities at a time when it
might not otherwise have done so, or to forego exercising the rights.
TOTAL RETURN. From time to time the International Fund, Overseas Fund and
Gold Fund advertise their average annual total return. During the one year
period ended March 31, 1998, average annual rates of return were 10.06%, 5.87%
and (29.85%), for the International Fund (formerly SoGen International Fund,
Inc.) Class A shares, the Overseas Fund Class A shares and the Gold Fund,
respectively. Quotations of average annual returns for each Fund will be
expressed in terms of the average annual compounded rates of return of a
hypothetical investment in each Fund over periods of 1, 5 and 10 years (up to
the life of the Fund),
SAI-16
<PAGE>
calculated pursuant to the following formula: P(1 + T)n = ERV (where P = a
hypothetical initial payment of $1,000, T = the average annual return, n = the
number of years, and ERV = the ending redeemable value of a hypothetical
$1,000 payment made at the beginning of the period). This calculation assumes
deduction of a proportional share of Fund expenses on an annual basis and
deduction of the maximum sales charge of 3.75% on the amount initially
invested, and assumes reinvestment of all income dividends and capital gains
distributions during the period.
Under the same assumptions utilized in the preceding calculation, an
investment in the International Fund (formerly SoGen International Fund, Inc.)
Class A shares over the ten year period from March 31, 1988 to March 31, 1998
would have increased at an average annual compounded rate of return of 11.76%,
an investment in the International Fund (formerly SoGen International Fund,
Inc.) Class A shares over the five year period from March 31, 1993 to
March 31, 1998 would have increased at an average annual compounded rate of
return of 12.06%, and an investment in the International Fund (formerly SoGen
International Fund, Inc.) Class A shares over the one year period from March
31, 1997 to March 31, 1998 would have increased at an average annual
compounded rate of 10.06%.
CURRENT YIELD AND EFFECTIVE YIELD. From time to time the Money Fund may
advertise its current yield and effective yield. Current yield will be based
on income per share received by a hypothetical investment over a given 7-day
period (less expenses accrued during the period) and then "annualized" (i.e.,
assuming that the 7-day yield would be received over 52 weeks, stated in terms
of an annual percentage return on the investment). Effective yield is
calculated in a manner similar to that used to calculate current yield, but
when annualized, the income earned by an investment in the Money Fund is
assumed to be reinvested. The effective yield will be slightly higher than the
current yield because of this assumed reinvestment. The Money Fund's current
and effective 7-day yields for the seven days ended March 31, 1998 were 4.86%
and 4.98%, respectively. Current yield and effective yield for the Money Fund
will vary based on changes in market conditions, the level of interest rates
and the level of the Fund's expenses and no reported yield figures should be
considered an indication of the performance that may be expected in the
future.
COMPARISON OF PORTFOLIO PERFORMANCE. From time to time the Company may
discuss in sales literature and advertisements, specific performance grades or
rankings or other information as published by recognized grades or rankings or
other information as published by recognized mutual fund statistical services,
such as Morningstar, Inc. or Lipper Analytical Services, Inc., or by
publications of general interest such as Barron's, Business Week, Financial
World, Forbes, Fortune, Kiplinger's Personal Finance, Money, Morningstar
Mutual Funds, Smart Money, The Wall Street Journal or Worth.
PORTFOLIO TURNOVER. Although the International Fund, Overseas Fund and Gold
Fund will not make a practice of short-term trading, purchases and sales of
securities will be made whenever appropriate, in the investment adviser's
view, to achieve a Fund's investment objective. The rate of portfolio turnover
is calculated by dividing the lesser of the cost of purchases or the proceeds
from sales of portfolio securities (excluding short-term U.S. government
obligations and other short-term investments) for the particular fiscal year
by the monthly average of the value of the portfolio securities (excluding
short-term U.S. government obligations and short-term investments) owned by a
Fund during the particular fiscal year. The rates of portfolio turnover for
the International Fund, Overseas Fund and Gold Fund during the
SAI-17
<PAGE>
fiscal year ended March 31, 1996 were 9.64%, 9.46% and 22.40%, respectively,
during the fiscal year ended March 31, 1997 were 12.85%, 15.18% and 16.83%,
respectively, and during the fiscal year ended March 31, 1998 were 20.63%,
22.13% and 11.20%, respectively. The rate of portfolio turnover is not a
limiting factor when management deems portfolio changes appropriate to achieve
a Fund's stated objective. However, it is possible that, under certain
circumstances, a Fund may have to limit its short-term portfolio turnover to
permit it to qualify as a "regulated investment company" under the Internal
Revenue Code of 1986, as amended (the "Code").
MANAGEMENT OF THE COMPANY
The business of the Company is managed by its Board of Directors which
elects officers responsible for the day to day operations of the Funds and for
the execution of the policies formulated by the Board of directors. Several of
the directors and officers of the Company are Directors or officers of SGAM
Corp., SG Cowen or Societe Generale, Paris, France, the indirect owner of one
hundred percent (100%) of the outstanding voting securities of SGAM Corp., and
the owner of one hundred percent (100%) of the outstanding voting securities
of SG Cowen. Jean-Marie Eveillard, the President and a director of the
Company, owns 100% of SGAM Corp.'s non-voting Series B common stock which
represents 19.9% of the total capital of SGAM Corp.
The following table sets forth the principal occupation or employment of the
members of the Board of Directors and principal officers of the Company. Each
of the following persons is also a director and/or officer of SoGen Variable
Funds, Inc.
<TABLE>
<CAPTION>
POSITION HELD WITH PRINCIPAL OCCUPATION DURING
NAME, ADDRESS AND AGE THE COMPANY THE PAST FIVE (5) YEARS
- --------------------- ------------------ ---------------------------
<S> <C> <C>
Philippe Collas, 48,* Chairman of the Board Head of Asset Management at
17, cours Valmy and Director Societe Generale since September
92972 Paris France 1995. Head of Human Resource
Management at Societe Generale
from prior to 1993.
Jean-Marie Eveillard, President and Director Director and President or
58,*(1) Executive Vice President of SGAM
1221 Avenue of the Corp. from prior to 1993.
Americas
New York, NY 10020
Fred J. Meyer, 67, (2) Director Chief Financial Officer of
437 Madison Avenue Omnicom Group Inc. from prior to
New York, NY 10022 1993. Director of Novartis
Corporation, and Zurich-American
Insurance Cos.
Dominique Raillard, 59, Director President of Act 2 International
(2) (consulting) since July 1995.
15, boulevard Delessert Group Executive Vice President
75016 Paris France of Promodes (consumer
Products) --U.S. Companies
Division from prior to 1993 to
1995.
</TABLE>
SAI-18
<PAGE>
<TABLE>
<CAPTION>
POSITION HELD WITH PRINCIPAL OCCUPATION DURING
NAME, ADDRESS AND AGE THE COMPANY THE PAST FIVE (5) YEARS
- --------------------- ------------------ ---------------------------
<S> <C> <C>
Nathan Snyder, 63, Director Independent Consultant from prior
(1)(2) to 1993.
163 Parish Rd. S.
New Canaan, CT 06840
Philip J. Bafundo, 35,* Vice President, Secretary and Treasurer, SGAM
1221 Avenue of the Secretary and Treasurer Corp. from prior to 1993.
Americas Certified Public Accountant (New
New York, NY 10020 York).
Ignatius Chithelen, 43,* Vice President Securities Analyst, SGAM Corp.
1221 Avenue of the since October 1993. Private
Americas investor prior to 1993.
New York, NY 10020
Charles de Vaulx, 36,* Vice President Senior Vice President, SGAM Corp.
1221 Avenue of the from May 1998. Associate
Americas Portfolio Manager, SGAM Corp.
New York, NY 10020 from December 1996 to 1998.
Securities Analyst, SGAM Corp.
from prior to 1993 to 1996.
Sean J. McKeown, 42,* Vice President Operations Manager, SGAM Corp.
1221 Avenue of the since June 1997. Vice President,
Americas Citibank Investment Products &
New York, NY 10020 Distribution from October 1993
to June 1997. Vice President,
Citicorp Investment Services
from prior to October 1993.
Edwin S. Olsen, 58,* Vice President Vice President, SG Cowen from
1221 Avenue of the prior to 1993.
Americas
New York, NY 10020
Catherine A. Shaffer, Vice President First Vice President, SG Cowen
42,* from prior to 1993.
1221 Avenue of the
Americas
New York, NY 10020
Elizabeth Tobin, 44,* Vice President Senior Vice President, SGAM Corp.
1221 Avenue of the from May 1998. Associate
Americas Portfolio Manager, SGAM Corp.
New York, NY 10020 from December 1996 to 1998.
Securities Analyst, SGAM Corp.
from prior to 1993 to 1996.
</TABLE>
- --------
* An "interested person" of the Company as defined in the 1940 Act.
(1) Member of the Executive Committee. When the Board of Directors is not in
session, the Executive Committee may generally exercise most of the powers
of the Board of Directors.
(2) Member of the Audit Committee.
The Company makes no payments to any of its officers for services. However,
currently each of the Company's Directors who are not officers or employees of
SGAM Corp., SG Cowen or Societe Generale are paid by the Company an annual fee
of $6,000 and a fee of $1,000 for each meeting of the Company's Board of
Directors and for each meeting of any Committee of
SAI-19
<PAGE>
the Board that they attend (other than those held by telephone conference
call). Each director is reimbursed by the Company for any expenses he may
incur by reason of attending such meetings or in connection with services he
may perform for the Company. During the fiscal year ended March 31, 1998, an
aggregate of $39,000 was paid or accrued for directors' fees and expenses by
the Company. See Note 2 of Notes to the Financial Statements on page 22 of the
Company's Annual Report to Shareholders for a description of various
transactions during the Company's most recent fiscal year between the Company
and its directors and affiliates of its directors.
During the fiscal year ended March 31, 1998, an aggregate of $39,000 was
paid or accrued for directors' fees and expenses by SoGen International Fund,
Inc. See Note 2 of Notes to the Financial Statements on page 23 of the SoGen
International Fund, Inc.'s Annual Report to Shareholders for a description of
various transactions during the SoGen International Fund, Inc.'s most recent
fiscal year between the SoGen International Fund, Inc. and its directors and
affiliates of its directors.
COMPENSATION OF DIRECTORS AND CERTAIN OFFICERS. The following table sets
forth information regarding compensation of directors by the Company and by
the fund complex of which the Company is a part for the fiscal year ended
March 31, 1998. Officers of the Company and directors who are interested
persons of the Company do not receive any compensation from the Company of any
other fund in the fund complex which is a U.S. registered investment company.
In the column headed "Total Compensation From Registrant and Fund Complex Paid
to Directors," the number in parentheses indicates the total number of boards
in the fund complex on which the director served as of March 31, 1998.
COMPENSATION TABLE
FISCAL YEAR ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
PENSION OR TOTAL
RETIREMENT COMPENSATION
BENEFITS ESTIMATED FROM
AGGREGATE ACCRUED AS ANNUAL REGISTRANT AND
COMPENSATION PART OF BENEFITS FUND COMPLEX
FROM FUND UPON PAID TO
NAME OF PERSON, POSITION REGISTRANT EXPENSES RETIREMENT DIRECTORS
- ------------------------ ------------ ---------- ---------- --------------
<S> <C> <C> <C> <C>
Philippe Collas**, Director
and Chairman................ $ -- N/A N/A $ --
Jean-Marie Eveillard**,
Director and President...... $ -- N/A N/A $ --
Fred J. Meyer*, Director..... $26,000 N/A N/A $39,000(3)
Dominique Raillard*,
Director.................... $18,200 N/A N/A $27,300(3)
Nathan Snyder*, Director..... $26,000 N/A N/A $39,000(3)
</TABLE>
- --------
* Member of the Audit Committee.
** "Interested person" of the Company as defined in the 1940 Act because of
the affiliation with SGAM Corp., the Fund's investment adviser.
SAI-20
<PAGE>
The directors and officers of the Company, as a group, owned less than 1% of
the outstanding shares of capital stock of the Company at June 30, 1998. The
following persons owned of record 5% or more of the outstanding shares of
capital stock of the Company as of June 30, 1997:
<TABLE>
<CAPTION>
TYPE OF SHARE
OWNERSHIP OWNER OWNERSHIP
--------- ----- ---------
<S> <C> <C>
Of Record Only...................... Charles Schwab & Co. Inc. 26.54%
101 Montgomery Street
San Francisco, CA 94104-4122
</TABLE>
The directors and officers of SoGen International Fund, Inc., as a group,
owned less than 1% of the outstanding shares of capital stock of SoGen
International Fund, Inc. at June 30, 1998. The following persons owned of
record 5% or more of the outstanding shares of capital stock of SoGen
International Fund, Inc. as of June 30, 1997:
<TABLE>
<CAPTION>
TYPE OF SHARE
OWNERSHIP OWNER OWNERSHIP
--------- ----- ---------
<S> <C> <C>
Of Record Only...................... Charles Schwab & Co. Inc. 14.97%
101 Montgomery Street
San Francisco, CA 94104-4122
</TABLE>
While the Company is a Maryland corporation, certain of its directors and
officers are non-residents of the United States and may have all, or a
substantial part, of their assets located outside the United States. None of
the officers or directors has authorized an agent for service of process in
the United States. As a result, it may be difficult for U.S. investors to
effect service of process upon non-U.S. directors or officers within the
United States or effectively to enforce judgments of courts of the United
States predicated upon civil liabilities of such officers or directors under
the federal securities laws of the United States.
INVESTMENT ADVISER AND OTHER SERVICES
As described in the Company's Prospectus, SGAM Corp. is the Company's
investment adviser and, as such, manages the International Fund, Overseas
Fund, Gold Fund and Money Fund. SGAM Corp. was incorporated in Delaware in
February 1990, and is indirectly owned by Societe Generale, one of France's
largest banks.
The persons named below are affiliated with the Company and are also
affiliated persons of SGAM Corp., SG Cowen or Societe Generale. The capacity
in which such persons are affiliated with the Company and SGAM Corp., SG Cowen
or Societe Generale is also indicated.
<TABLE>
<CAPTION>
OFFICE HELD WITH SGAM CORP.,
NAME OFFICE HELD WITH THE COMPANY SG COWEN OR SOCIETE GENERALE
- ---- ---------------------------- ----------------------------
<S> <C> <C>
Philippe Collas Chairman of the Board Head of Asset Management, Societe
and Director Generale. Chairman of the Board
and Director, SGAM Corp.
</TABLE>
SAI-21
<PAGE>
<TABLE>
<CAPTION>
OFFICE HELD WITH SGAM CORP.,
NAME OFFICE HELD WITH THE COMPANY SG COWEN OR SOCIETE GENERALE
- ---- ---------------------------- ----------------------------
<S> <C> <C>
Jean-Marie Eveillard President and Director President and Director, SGAM
Corp.
Philip J. Bafundo Vice President, Secretary and Treasurer, SGAM
Secretary and Treasurer Corp.
Ignatius Chithelen Vice President Securities Analyst, SGAM Corp.
Charles de Vaulx Vice President Senior Vice President, SGAM Corp.
Sean J. McKeown Vice President Operations Manager, SGAM Corp.
Edwin S. Olsen Vice President Vice President, SG Cowen
Catherine A. Shaffer Vice President First Vice President, SG Cowen
Elizabeth Tobin Vice President Senior Vice President, SGAM Corp.
</TABLE>
Under its investment advisory contracts with the Company, which became
effective August 17, 1993 (in the case of SoGen Overseas Fund, SoGen Gold Fund
and SoGen Money Fund) and July 31, 1998 (in the case of SoGen International
Fund), SGAM Corp. furnishes the Company with investment advice consistent with
each Fund's stated investment objective. SGAM Corp. also furnishes the Company
with office space and certain facilities required for the business of the
Funds, and statistical and research data, and pays any compensation and
expenses of the Company's officers. Until July 31, 1998, SGAM Corp. provided
substantially similar services for SoGen International Fund, Inc. pursuant to
an investment advisory contract which became effective April 26, 1990 and was
amended on July 10, 1992. Pursuant to an Agreement and Plan of Merger dated
April 27, 1998, SoGen International Fund, Inc. became a portfolio of the
Company. The Company adopted a new investment advisory contract, on behalf of
SoGen International Fund, with SGAM Corp. on substantially the same terms as
the previous investment advisory contract in effect for SoGen International
Fund, Inc.
In return for the services listed above, each Fund pays SGAM Corp. a fee at
the annual rate of the average daily value of the Fund's net assets as follows:
<TABLE>
<S> <C>
International Fund...................... 1.00% of the first $25 million and
0.75% of the excess over $25 million
Overseas Fund........................... 0.75%
Gold Fund............................... 0.75%
Money Fund.............................. 0.40%
</TABLE>
Advisory fees are paid monthly, except that advisory fees for the
International Fund are paid quarterly. The annual fee rates listed above for
the International Fund, Overseas Fund and Gold Fund, respectively, are higher
than the rate of fees paid by most U.S. mutual funds that invest primarily in
domestic equity securities. The Company believes, however, that the advisory
fee rates are not higher than the rate of fees paid by most other mutual funds
that invest significantly in foreign equity securities.
SAI-22
<PAGE>
The Overseas Fund and the Gold Fund paid investment advisory fees for the
fiscal year ended March 31, 1996 in the amount of $3,991,923 and $392,561,
respectively; for the fiscal year ended March 31, 1997, the investment advisory
fees were $5,899,446 and $449,545; respectively, and for the fiscal year ended
March 31, 1998, the investment advisory fees were $7,798,589 and $283,300,
respectively. For the fiscal year ended March 31, 1998, $37,399 of the
investment advisory fee of $60,497 for the Money Fund was waived by SGAM Corp.
SoGen International Fund, Inc. paid investment advisory fees under its
investment advisory contract for the fiscal years ended March 31, 1996, 1997
and 1998 in the amount of $18,408,301, $26,404,805 and $30,954,079,
respectively.
Under the investment advisory contracts between the Company and SGAM Corp.,
the investment adviser is responsible for the management of each of the Funds'
portfolios and constantly reviews their holdings in the light of its own
research analyses and those of other relevant sources. Reports of portfolio
transactions are given regularly to the directors of the Company, who review
each Fund's portfolio at meetings held four times a year.
Under the terms of the investment advisory contracts, a Fund will discontinue
the use of the term "SoGen" in a Fund's name or the use of any marks or symbols
owned by the investment adviser if the investment adviser ceases to act as a
Fund's investment adviser or if the investment adviser so requests.
As of the date of this Statement of Additional Information, SGAM Corp. owned
of record and beneficially, approximately 6,400 shares of the Overseas Fund,
4,000 shares of the Gold Fund and 18,300 shares of the Money Fund. SGAM Corp.
did not own any shares of the International Fund.
A Fund may, with the approval of the Company's Board of Directors, from time
to time enter into arrangements with institutions to provide sub-transfer agent
services and other related services where a number of persons hold Fund shares
through one account registered with the Fund's transfer agent, DST Systems,
Inc. ("DST") in the name of that institution. Under those arrangements, a Fund
may compensate the institution rendering such services on a per sub-account
basis.
DISTRIBUTION OF THE FUNDS' SHARES
The Company and SG Cowen have entered into an underwriting contract pursuant
to which SG Cowen offers, as agent, shares of each Fund to investors, either
directly or through selected securities dealers, in states and countries in
which a Fund's shares are qualified and in which SG Cowen is qualified as a
dealer or where such qualification is not required.
Pursuant to the Distribution Plan and Agreement (the "Plan") between the
Company and SG Cowen, adopted by the International Fund (on behalf of its Class
A shares), the Overseas Fund (on behalf of its Class A shares) and the Gold
Fund in accordance with the provisions of Rule 12b-1 under the Investment
Company Act of 1940, each participating class of shares of a Fund may pay SG
Cowen a quarterly distribution fee of up to, on an annual basis, 0.25% of the
average daily net asset value attributable to that class of shares. Under the
Plan, SG Cowen must apply the full amount of fees received from a Fund to the
payment of fees to dealers for their assistance in the sale of the shares of
the participating class of the Fund and for the
SAI-23
<PAGE>
provision to shareholder services and for other distribution related expenses
such as the payment of advertising costs and the payment for the preparation,
printing and distribution of prospectuses to investors. SG Cowen bears a Fund's
distribution costs to the extent they exceed payments under the Plan. For the
fiscal year ended March 31, 1998, the Company paid SG Cowen $2,699,569 pursuant
to the Plan, $12,600 of which was paid by SG Cowen to Societe Generale and
subsidiaries of Societe Generale. SG Cowen and SGAM Corp. bear the Company's
distribution costs to the extent they exceed payments under the Plan. The Class
I shares of the International Fund, the Class I shares of the Overseas Fund and
the Money Fund do not participate in the Plan.
Before becoming a portfolio of the Company, SoGen International Fund, Inc.
participated in a substantially similar Distribution Plan and Agreement (the
"Distribution Plan"). For the fiscal year ended March 31, 1998, SoGen
International Fund, Inc. paid SG Cowen $10,136,493 pursuant to the Distribution
Plan, $117,850 of which was paid by SG Cowen to Societe Generale and
subsidiaries of Societe Generale.
Substantially all of the amounts paid to SG Cowen under the Plan (and the
Distribution Plan) are paid to dealers selling shares of the Funds, including
Societe Generale and certain of its subsidiaries, for their assistance in
selling shares of the Funds. A dealer selling shares normally receives a fee,
calculated on a quarterly basis, equal to 0.25% of the average daily net asset
value attributable to the participating classes of shares of a Fund held by the
dealer's customers. SG Cowen has retained $1,122,041 of the amount paid to it
pursuant to the Plan with respect to the fiscal year ended March 31, 1998, as
reimbursement for expenses incurred in promoting the sale of the Company's
shares, including printing and distribution of prospectuses and sales
literature for advertising. SG Cowen has also retained $2,292,442 of the amount
paid to it pursuant to the Distribution Plan with respect to the fiscal year
ended March 31, 1998, as reimbursement for expenses incurred in promoting the
sale of SoGen International Fund, Inc.'s shares, including printing and
distribution of prospectuses and sales literature for advertising. Distribution
expenses incurred in any fiscal year which are not reimbursed from payments
under the Plan accrued in such fiscal year will not be carried over for payment
under the Plan in any subsequent year.
The Plan provides that it will continue in effect only so long as its
continuance is approved at least annually by the directors of the Company and
by the directors who are not interested persons of the Company and who have no
direct or indirect financial interest in the operation of the Plan or in any
agreements relating to the Plan (the "Independent Directors"). In the case of
an agreement relating to the Plan, the Plan provides that such agreement may be
terminated, without penalty, by a vote of a majority of the Independent
Directors, or, as to a Fund, by a majority of the Fund's outstanding voting
securities on 60 days' written notice to SG Cowen, and provides further that
such agreement will automatically terminate in the event of its assignment. The
Plan also states that it may not be amended to increase the maximum amount of
the payments thereunder without the approval of a majority of the outstanding
voting securities (as defined on page 14) of a Fund. No material amendment to
the Plan will, in any event, be effective unless it is approved by a vote of
the directors and the Independent Directors of the Company.
When the Company seeks an Independent Director to fill a vacancy on the Board
or as an addition to the Board or as a nominee for election by stockholders,
the selection or
SAI-24
<PAGE>
nomination of the Independent Director is, under resolutions adopted by the
directors, contemporaneously with their adoption of the Plan, committed to the
discretion of the Independent Directors.
With respect to the fiscal year ended March 31, 1998, SG Cowen, the principal
underwriter of the Company's shares and SoGen International Fund, Inc.'s
shares, Societe Generale (including subsidiaries) and SGAM Corp. received
commissions and other compensation in connection with the operations of the
Company and SoGen International Fund, Inc. as follows:
SOGEN FUNDS, INC.
<TABLE>
<CAPTION>
(1) (2) (3) (4) R(5)
NET
UNDERWRITING
DISCOUNTS COMMISSIONS ON
NAME OF PRINCIPAL AND DEALER REPURCHASES OR BROKERAGE OTHER
UNDERWRITER OR AFFILIATE COMMISSIONS REDEMPTIONS COMMISSIONS COMPENSATION
- ------------------------ ------------ -------------- ----------- ------------
<S> <C> <C> <C> <C>
SG Cowen................ $285,064 $ 0 $51,125 $2,699,569*
Societe Generale
(including
subsidiaries).......... $ 2,742 $ 0 $18,477 $ 12,600**
SGAM Corp............... $ 0 $ 0 $ 0 $8,125,981***
</TABLE>
- --------
* For the period reported, the Company's distribution fee paid or payable to
SG Cowen pursuant to the Plan. Substantially all of such amount was paid or
will be paid to dealers, including Societe Generale and certain
subsidiaries, selling shares of the Company.
** Amounts paid to Societe Generale as a dealer of the Company's shares
pursuant to the Plan, which amount is included in the $2,699,569 paid to SG
Cowen under the Plan.
*** The Company's investment advisory fee paid or payable to SGAM Corp. for the
fiscal year ended March 31, 1998.
SOGEN INTERNATIONAL FUND, INC.
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5)
NET
UNDERWRITING
DISCOUNTS COMMISSIONS ON
NAME OF PRINCIPAL AND DEALER REPURCHASES OR BROKERAGE OTHER
UNDERWRITER OR AFFILIATE COMMISSIONS REDEMPTIONS COMMISSIONS COMPENSATION
- ------------------------ ------------ -------------- ----------- ------------
<S> <C> <C> <C> <C>
SG Cowen................ $1,208,699 $ 0 $93,977 $10,136,493*
Societe Generale
(including
subsidiaries).......... $ 52,682 $ 0 $ 9,267 $ 117,850**
SGAM Corp............... $ 0 $ 0 $ 0 $30,954,079***
</TABLE>
- --------
* For the period reported, SoGen International Fund, Inc.'s distribution fee
paid or payable to SG Cowen pursuant to its Distribution Plan.
Substantially all of such amount was paid or will be paid to dealers,
including Societe Generale and certain subsidiaries, selling shares of
SoGen International Fund, Inc.
** Amounts paid to Societe Generale as a dealer of SoGen International Fund,
Inc.'s shares pursuant to the Distribution Plan, which amount is included
in the $10,136,493 paid to SG Cowen under the Distribution Plan.
*** SoGen International Fund, Inc.'s investment advisory fee paid or payable to
SGAM Corp. for the fiscal year ended March 31, 1998.
During the three years ended March 31, 1996, 1997 and 1998, the aggregate
amount of sales charges on sales of the Company's shares was $2,263,995,
$2,098,953 and $1,523,084, respectively. During the years ended March 31, 1996
and 1997, SG Cowen received net underwriting discounts and dealer commissions
of $477,279 and $462,833, respectively. Societe
SAI-25
<PAGE>
Generale received dealer commissions of $8,988 and $8,694 for the fiscal year
ended March 31, 1996 and 1997, respectively.
During the three years ended March 31, 1996, 1997 and 1998, the aggregate
amount of sales charges on sales of SoGen International Fund, Inc.'s shares was
$16,232,673, $14,480,187 and $7,485,957, respectively. During the years ended
March 31, 1996 and 1997, SG Cowen received net underwriting discounts and
dealer commissions of $3,005,037 and $2,670,354, respectively, and Societe
Generale received dealer commissions of $36,119 and $126,060, respectively.
SGAM Corp. has entered into agreements with SG Cowen, dated April 30, 1990,
under which net commissions and fees earned by SG Cowen in its capacity as
underwriter to the Company and SoGen International Fund, Inc., are remitted to
SGAM Corp. In consideration for certain services provided by SG Cowen, SGAM
Corp. pays SG Cowen a $25,000 per annum fee, payable monthly, and reimburses SG
Cowen for certain expenses incurred on behalf of SGAM Corp. For SGAM Corp.'s
fiscal year ended, December 31, 1997,such commissions and fees with respect to
the Company amounted to $1,474,373, and the related reimbursement for services
amounted to $9,929. For SGAM Corp.'s fiscal year ended, December 31, 1997, such
commissions and fees with respect to SoGen International Fund, Inc. amounted to
$3,932,478, and the related reimbursement for services amounted to $37,576.
The investment advisory and underwriting contracts continue in effect from
year to year so long as the continuance of each contract is specifically
approved at least annually by the Board of Directors or by a vote of a majority
of the outstanding voting securities of each Fund (as defined on page 14). In
addition, the terms of each contract and the renewals thereof must be approved
annually by the vote of a majority of the directors who are not "interested
persons" (as defined in the 1940 Act) of SGAM Corp., SG Cowen or the Company.
Each contract will terminate automatically in the event of its assignment (as
defined in the 1940 Act) and may be terminated, without penalty, on sixty days'
written notice at the option of either party thereto or by a vote of a majority
of the outstanding voting securities of a Fund.
COMPUTATION OF NET ASSET VALUE
Each Fund computes its net asset value once daily as of the close of trading
on each day the New York Stock Exchange is open for trading. The Exchange is
closed on the following days: New Year's Day, Rev. Dr. Martin Luther King, Jr.
Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. The net asset value per share is computed
by dividing the total current value of the assets of a Fund, less its
liabilities, by the total number of shares outstanding at the time of such
computation.
The Money Fund values its portfolio instruments at amortized cost, which
means that they are valued at their acquisition cost, as adjusted for
amortization of premium or discount, rather than at current market value.
Calculations are made to compare the value of the Fund's investments valued at
amortized cost with market values. Market valuations are obtained by using
actual quotations provided by market makers, estimates of market value, or
values obtained from yield data relating to classes of money market instruments
published by reputable sources at the mean between the bid and asked prices for
the instruments. The amortized cost method of valuation seeks to maintain a
stable $1.00 per share net asset value
SAI-26
<PAGE>
even where there are fluctuations in interest rates that affect the value of
portfolio instruments. Accordingly, this method of valuation can in certain
circumstances lead to a dilution of a shareholder's interest. If a deviation of
1/2 of 1% or more were to occur between the net asset value per share
calculated by reference to market values and the Money Fund's $1.00 per share
net asset value or if there were any other deviation which the Board of
Directors believed would result in a material dilution to shareholders or
purchasers, the Board of Directors would promptly consider what action, if any,
should be initiated. If the Money Fund's net asset value per share (computed
using market values) declined, or were expected to decline, below $1.00, the
Board of Directors might temporarily reduce or suspend dividend payments in an
effort to maintain the net asset value at $1.00 per share. As a result of such
reduction or suspension of dividends or other action by the Board of Directors,
an investor would receive less income during a given period than if such a
reduction or suspension had not taken place. Such action could result in
investors receiving no dividend for the period during which they hold their
shares and receiving, upon redemption, a price per share lower than that which
they paid. On the other hand, if the Money Fund's net asset value per share
(computed using market values) were to increase, or were anticipated to
increase above $1.00, the Board of Directors might supplement dividends in an
effort to maintain the net asset value at $1.00 per share.
A portfolio security, other than a bond, which is traded on a U.S. national
securities exchange or a securities exchange abroad is normally valued at the
price of the last sale on the exchange as of the close of business on the date
on which assets are valued. If there are no sales on such date, such portfolio
securities will be valued at the mean between the closing bid and asked prices.
Securities, other than bonds, traded in the over-the-counter market are valued
at the mean between the last bid and asked prices prior to the time of
valuation, except if such unlisted security is among the NASDAQ designated
"Tier 1" securities in which case it is valued at its last sale price. All
bonds, whether listed on an exchange or traded in the over-the-counter market,
for which market quotations are readily available are valued at the mean
between the last bid and asked prices received from dealers in the over-the-
counter market in the United States or abroad, except that when no asked price
is available, bonds are valued at the last bid price alone. Short-term
investments maturing in sixty days or less are valued at cost plus interest
earned, which approximates value. Securities for which current market
quotations are not readily available are valued at fair value as determined in
good faith by the Company's Board of Directors. A make-up sheet showing the
computation of the total offering price, using as a basis the value of the
Company's portfolio securities and other assets and its outstanding securities
as of March 31, 1998, appears as the Statement of Assets and Liabilities for
the Company and SoGen International Fund, Inc. on page 18 and 19, respectively,
of the March 31, 1998 Annual Report to Shareholders.
HOW TO PURCHASE SHARES
The methods of buying and selling shares and the sales charges applicable to
purchases of shares of a Fund are described in the Company's Prospectus.
As stated in the Prospectus, shares of the International Fund, Overseas Fund
and Gold Fund may be purchased at net asset value by various persons associated
with the Company, SG Cowen, SGAM Corp., branches of Societe Generale, certain
firms providing services to the Company or affiliates thereof for the purpose
of promoting good will with employees and others with whom the Company has
business relationships, as well as in other special
SAI-27
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circumstances. Shares are offered to other persons at net asset value in
circumstances where there are economies of selling efforts and sales related
expenses with respect to offers to certain investors.
TAX STATUS
Each Fund intends to qualify annually as a "regulated investment company"
under the Code. In order to qualify as a regulated investment company for a
taxable year, a Fund must, among other things, (a) derive at least 90% of its
gross income from dividends, interest, payments with respect to securities
loans, gains from the sale or other disposition of stock, securities or foreign
currencies and other income derived with respect to the business of investing
in such stock, securities or currencies; (b) diversify its holdings so that, at
the end of each fiscal quarter, (i) at least 50% of the market value of its
assets is represented by cash, cash items, U.S. government securities,
securities of other regulated investment companies and other securities, with
such other securities of any one issuer qualifying only if the Fund's
investment is limited to an amount not greater than 5% of the Fund's assets or
10% of the voting securities of the issuer, and (ii) not more than 25% of the
value of its assets is invested in the securities of any one issuer (other than
U.S. government securities or securities of other regulated investment
companies); and (c) distribute at least 90% of its investment company taxable
income (which includes, among other items, dividends, interest and net short-
term capital gains in excess of net long-term capital losses) for the year.
As a regulated investment company, each Fund generally will not be subject to
U.S. federal income tax on its investment company taxable income and net
capital gains (the excess of net long-term capital gains over net short-term
capital losses), if any, that it distributes to shareholders. Each Fund intends
to distribute to its shareholders, at least annually, substantially all of its
investment company taxable income and net capital gains. Amounts not
distributed on a timely basis in accordance with a calendar year distribution
requirement are subject to a non-deductible 4% excise tax. To prevent
imposition of the excise tax, each Fund must distribute during each calendar
year an amount equal to the sum of (1) at least 98% of its ordinary income (not
taking into account any capital gains or losses) for the calendar year, (2) at
least 98% of its capital gains in excess of its capital losses (adjusted for
certain ordinary losses) for the one-year period ending on October 31 of the
calendar year, and (3) any ordinary income and capital gains for previous years
that were not distributed during those years. A distribution will be treated as
paid on December 31 of the current calendar year if it is declared by a Fund in
October, November or December with a record date in such a month and paid by
the Fund during January of the following calendar year. Such distributions will
be taxable to shareholders in the calendar year in which the distributions are
declared, rather than the calendar year in which the distributions are
received. To prevent application of the excise tax, each Fund intends to make
its distributions in accordance with the calendar year distribution
requirement.
Different tax treatment, including a penalty on pre-retirement distributions,
is accorded accounts maintained as IRAs. Shareholders should consult their tax
advisors for more information.
Dividends paid out of a Fund's investment company taxable income will be
taxable to a U.S. shareholder as ordinary income. To the extent that a portion
of a Fund's income consists
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of dividends paid by U.S. corporations, a portion of the dividends paid by the
Fund may be eligible for the corporate dividends-received deduction. It is
expected that a small portion of the dividends paid by the International Fund,
Overseas Fund and Gold Fund will so qualify. Distributions of net capital
gains, if any, designated as capital gains distributions are taxable to
individual shareholders at a maximum 20% capital gains rate, regardless of how
long the shareholder has held the Fund's shares, and are not eligible for the
dividends-received deduction. Shareholders receiving distributions in the form
of additional shares, rather than cash, generally will have a cost basis in
each such share equal to the net asset value of a share of the Fund on the
reinvestment date. Shareholders will be notified annually as to the U.S.
federal tax status of distributions, and shareholders receiving distributions
in the form of additional shares will receive a report as to the net asset
value of those shares.
Investments by a Fund in zero coupon securities will result in income to the
Fund equal to a portion of the excess of the face value of the securities over
their issue price (the "original issue discount") each year that the securities
are held, even though the Fund receives no interest payments. This income is
included in determining the amount of income which the Fund must distribute to
maintain its status as a regulated investment company and to avoid the payment
of federal income tax and the 4% excise tax. If a Fund invests in certain high
yield original issue discount obligations issued by U.S. corporations, a
portion of the original issue discount accruing on such an obligation may be
eligible for the corporate dividends-received deduction. In such event, a
portion of the dividends of investment company taxable income received from the
Fund by its corporate shareholders may be eligible for this corporate
dividends-received deduction if so designated by the Fund in a written notice
to shareholders. For the fiscal year ended March 31, 1998, the percentages of
net investment income that qualified for the dividends-received deduction for
the International Fund, Overseas Fund, Gold Fund and Money Fund were 6.79%,
0.34%, 28.96% and 0.00%, respectively.
Certain foreign currency contracts in which the International Fund, Overseas
Fund and Gold Fund may invest are "section 1256 contracts." Gains or losses on
section 1256 contracts generally are considered 60% long-term and 40% short-
term capital gains or losses; however, foreign currency gains or losses (as
discussed below) arising from certain section 1256 contracts may be treated as
ordinary income or loss. Also, section 1256 contracts held by a Fund at the end
of each taxable year (and, generally, for purposes of the 4% excise tax, on
October 31 of each year) are "marked-to-market" (that is, treated as sold at
fair market value), resulting in unrealized gains or losses being treated as
though they were realized.
Generally, the hedging transactions undertaken by the International Fund,
Overseas Fund and Gold Fund may result in "straddles" for U.S. federal income
tax purposes. The straddle rules may affect the character of gains (or losses)
realized by these Funds. In addition, losses realized by these Funds on
positions that are part of a straddle may be deferred under the straddle rules,
rather than being taken into account in calculating the taxable income for the
taxable year in which the losses are realized. Because only a few regulations
implementing the straddle rules have been promulgated, the tax consequences to
these Funds of engaging in hedging transactions are not entirely clear. Hedging
transactions may increase the amount of short-term capital gains realized by a
Fund which is taxed as ordinary income when distributed to shareholders.
The International Fund, Overseas Fund and Gold Fund may make one or more of
the elections available under the Code which are applicable to straddles. If
any of these Fund
SAI-29
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makes any of the elections, the amount, character and timing of the recognition
of gains or losses from the affected straddle positions will be determined
under rules that vary according to the election(s) made. The rules applicable
under certain of the elections may operate to accelerate the recognition of
gains or losses from the affected straddle positions.
Because the straddle rules may affect the character of gains or losses, defer
losses and/or accelerate the recognition of gain or losses from the affected
straddle positions, the amount which may be distributed to shareholders, and
which will be taxed to them as ordinary income or long-term capital gains, may
be increased or decreased as compared to a fund that did not engage in such
hedging transactions.
Notwithstanding any of the foregoing, a Fund may recognize gain (but not
loss) from a constructive sale of certain "appreciated financial positions" if
the Fund enters into a short sale, offsetting notional principal contract or
forward contract transaction with respect to the appreciated position or
substantially identical property. Appreciated financial positions subject to
this constructive sale treatment are interests (including options and forward
contracts and short sales) in stock, partnership interests, certain actively
traded trust instruments and certain debt instruments. Constructive sale
treatment does not apply to certain transactions closed in the 90-day period
ending with the 30th day after the close of the taxable year, if certain
conditions are met.
If a Fund enters into a short sale of property that becomes substantially
worthless, the Fund will recognize gain at that time as though it had closed
the short sale. Future Treasury regulations may apply similar treatment to
other transactions with respect to property that becomes substantially
worthless.
Under the Code, gains or losses attributable to fluctuations in exchange
rates which occur between the time a Fund accrues receivables or liabilities
denominated in a foreign currency and the time the Fund actually collects such
receivables, or pays such liabilities, generally are treated as ordinary income
or ordinary loss. Similarly, on disposition of debt securities denominated in a
foreign currency and on disposition of certain foreign currency contracts,
gains or losses attributable to fluctuations in the value of foreign currency
between the date of acquisition of the security or contract and the date of
disposition also are treated as ordinary gain or loss. These gains or losses,
referred to under the Code as "section 988" gains or losses, may increase or
decrease the amount of a Fund's investment company taxable income to be
distributed to its shareholders as ordinary income.
Upon the sale or other disposition of shares of a Fund, a shareholder may
realize a capital gain or loss which may be eligible for reduced federal tax
rates, generally depending upon the shareholder's holding period for the
shares. Any loss realized on a sale or exchange will be disallowed to the
extent the shares disposed of are replaced (including shares acquired pursuant
to a dividend reinvestment plan) within a period of 61 days beginning 30 days
before and ending 30 days after disposition of the shares. In such a case, the
basis of the shares acquired will be adjusted to reflect the disallowed loss.
Any loss realized by a shareholder on a disposition of Fund shares held by the
shareholder for six months or less will be treated as a long-term capital loss
to the extent of any distributions of net capital gains received by the
shareholder with respect to such shares.
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Under certain circumstances the sales charge incurred in acquiring shares of
a Fund may not be taken into account in determining the gain or loss on the
disposition of those shares. This rule applies if shares of a Fund are
exchanged within 90 days after the date they were purchased and the new shares
are acquired without a sales charge or at a reduced sales charge. In that case,
the gain or loss recognized on the exchange will be determined by excluding
from the tax basis of the shares exchanged, all or a portion of the amount of
the sales charge that was imposed on the acquisition of those shares. This
exclusion applies to the extent that the otherwise applicable sales charge with
respect to the newly acquired shares is reduced as a result of having incurred
the initial sales charge. The portion of the initial sales charge that is
excluded from the basis of the exchanged shares is instead treated as an amount
paid for the new shares.
The International Fund, Overseas Fund and Gold Fund may be subject to foreign
withholding taxes on income and gains derived from their investments outside
the United States. Such taxes would reduce the yield on the Funds' investments.
Tax treaties between certain countries and the United States may reduce or
eliminate such taxes. If more than 50% of the value of a Fund's total assets at
the close of any taxable year consists of stocks or securities of foreign
corporations, the Fund may elect, for U.S. federal income tax purposes, to
treat any foreign country income or withholding taxes paid by the Fund that can
be treated as income taxes under U.S. income tax principles, as paid by its
shareholders. For any year that either Fund makes such an election, each of its
shareholders will be required to include in his income (in addition to taxable
dividends actually received) his allocable share of such taxes paid by the
Fund, and will be entitled, subject to certain limitations, to credit his
portion of these foreign taxes against his U.S. federal income tax due, if any,
or to deduct it (as an itemized deduction) from his U.S. taxable income, if
any.
Generally, a credit for foreign taxes is subject to the limitation that it
may not exceed the shareholder's U.S. tax attributable to his foreign source
taxable income. With respect to the International Fund, Overseas Fund and Gold
Fund, if the pass through election described above is made, the source of the
electing Fund's income flows through to its shareholders. Certain gains from
the sale of securities and certain currency fluctuation gains will not be
treated as foreign source taxable income. In addition, this foreign tax credit
limitation must be applied separately to certain categories of foreign source
income, one of which is foreign source "passive income." For this purpose,
foreign "passive income" includes dividends, interest, capital gains and
certain foreign currency gains. As a consequence, certain shareholders may not
be able to claim a foreign tax credit for the full amount of their
proportionate share of foreign taxes paid by the Fund. The foreign tax credit
limitation rules do not apply to certain electing individual taxpayers who have
limited creditable foreign taxes and no foreign source income other than
passive investment-type income. The foreign tax credit is eliminated with
respect to foreign taxes withheld on dividends if the dividend paying shares
are held by the Fund for less than 16 days (46 days in the case of preferred
shares) during the 30-day period (90-day period for preferred shares) beginning
15 days (45 days for preferred shares) before the shares become ex-dividend.
The foreign tax credit can be used to offset only 90% of the alternative
minimum tax (as computed under the Code for purposes of this limitation)
imposed on corporations and individuals. If a Fund is not eligible to make the
pass-through election described above, the foreign taxes it pays will reduce
its income, and distributions by the Fund will be treated as U.S. source
income. Each shareholder will be notified within 60 days after the close of the
Fund's taxable year whether, pursuant to the
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election described above, the foreign taxes paid by the Fund will be treated as
paid by its shareholders for that year and, if so, such notification will
designate (i) such shareholder's portion of the foreign taxes paid to such
country and (ii) the portion of the Fund's dividends and distributions that
represents income derived from sources within such country.
Investments by a Fund in stock of certain foreign corporations which generate
largely passive investment-type income, or which hold a significant percentage
of assets which generate such income (referred to as "passive foreign
investment companies" or "PFICs"), are subject to special tax rules designed to
prevent deferral of U.S. taxation of the Fund's share of the PFIC's earnings.
In the absence of certain elections to report these earnings on a current
basis, regardless of whether the Fund actually receives any distributions from
the PFIC, a Fund would be required to report certain "excess distributions"
from, and any gain from the disposition of stock of the PFIC, as ordinary
income. This ordinary income would be allocated ratably to a Fund's holding
period for the stock. Any amounts allocated to prior taxable years would be
taxable to the Fund at the highest rate of tax applicable in that year,
increased by an interest charge determined as though the amounts were
underpayments of tax. Amounts allocated to the year of the distribution or
disposition would be included in a Fund's net investment income for that year
and, to the extent distributed as a dividend to the Fund's shareholders, would
not be taxable to the Fund.
A Fund may elect to mark to market its foreign investment company stock,
resulting in the stock being treated as sold at fair market value on the last
business day of each taxable year. Any resulting gain would be reported as
ordinary income; any resulting loss and any loss from an actual disposition of
the stock would be reported as ordinary loss to the extent of any net gains
reported in prior years. Alternatively, the Fund may be able to make an
election, in lieu of being taxable in the manner described above, to include
annually in income its pro rata share of the ordinary earnings and net capital
gain of the foreign investment company, regardless of whether it actually
received any distributions from the foreign company. These amounts would be
included in the Fund's investment company taxable income and net capital gain
which, to the extent distributed by the Fund as ordinary or capital gain
dividends, as the case may be, would not be taxable to the Fund. In order to
make this election, the Fund would be required to obtain certain annual
information from the foreign investment companies in which it invests, which in
many cases may be difficult to obtain.
Each Fund may be required to withhold U.S. federal income tax at the rate of
31% of all taxable distributions payable to shareholders who fail to provide
the Fund with their correct taxpayer identification number or to make required
certifications, or who have been notified by the IRS that they are subject to
backup withholding. Corporate shareholders and certain shareholders specified
in the Code generally are exempt from such backup withholding. Backup
withholding is not an additional tax. Any amounts withheld may be credited
against the shareholder's U.S. federal income tax liability.
Since, at the time of an investor's purchase of a Fund's shares, a portion of
the per share net asset value by which the purchase price is determined may be
represented by realized or unrealized appreciation in the Fund's portfolio or
undistributed income of the Fund, subsequent distributions (or a portion
thereof) on such shares may in reality represent a return of his capital.
However, such a subsequent distribution would be taxable to such investor even
if the net asset value of his shares is, as a result of the distributions,
reduced below his cost for such shares. Prior to purchasing shares of the Fund,
an investor should carefully consider
SAI-32
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such tax liability which he might incur by reason of any subsequent
distributions of net investment income and capital gains.
Fund shareholders may be subject to state, local and foreign taxes on their
Fund distributions and redemptions of Fund shares. Also, the tax consequences
to a foreign shareholder of an investment in a Fund may be different from those
described above. Shareholders are advised to consult their own tax advisers
with respect to the particular tax consequences to them of an investment in a
Fund.
BROKERAGE ALLOCATION
SGAM Corp. is responsible for selecting members of securities exchanges,
brokers and dealers (such members, brokers and dealers being hereinafter
referred to as "brokers") for the execution of a Fund's portfolio transactions
and, when applicable, the negotiation of commissions in connection therewith.
Purchase and sale orders are usually placed with brokers who are selected by
SGAM Corp. as being able to achieve "best execution" of such orders. "Best
execution" means prompt and reliable execution at the most favorable securities
price, taking into account the other considerations as hereinafter set forth.
The determination of what may constitute best execution of a securities
transaction by a broker involves a number of considerations, including, without
limitation, the overall direct net economic result to a Fund (involving both
price paid or received and any commissions and other costs paid), the
efficiency with which the transaction is effected, the ability to effect the
transaction at all where a large block is involved, availability of the broker
to stand ready to execute possibly difficult transactions in the future, and
the financial strength and stability of the broker. Such considerations are
judgmental and are weighed by SGAM Corp. in determining the overall
reasonableness of brokerage commissions. While there is no commitment or
understanding to do so, subject to its policy of obtaining best execution, a
Fund may use affiliates of Societe Generale as brokers in the purchase and sale
of securities. For the fiscal years ended March 31, 1996, 1997 and 1998, the
Company paid SG Cowen and affiliates of Societe Generale $44,749, $67,054 and
$69,602, respectively, in such brokerage commissions for transactions effected
on various exchanges. Such commissions paid for the fiscal year ended March 31,
1998 represented 5.2% of the aggregate brokerage commissions paid by the
Company during such period and was paid in connection with transactions
representing 4.4% of the aggregate dollar amount of all transactions effected
by the Company (including principal transactions for which no direct brokerage
commissions are paid).
For the fiscal years ended March 31, 1996, 1997 and 1998, SoGen International
Fund, Inc. paid SG Cowen and affiliates of Societe Generale $108,724, $124,672
and $103,244, respectively, in such brokerage commissions for transactions
effected on various exchanges. Such commissions paid for the fiscal year ended
March 31, 1998 represented 4.5% of the aggregate brokerage commissions paid by
the Company during such period and was paid in connection with transactions
representing 3.1% of the aggregate dollar amount of all transactions effected
by the Company (including principal transactions for which no direct brokerage
commissions are paid).
SAI-33
<PAGE>
SG Cowen may not, acting as principal, sell any security or other property
to, or purchase any security or other property from, a Fund, except to the
extent that such purchase or sale may be permitted by an order, rule or
regulation of the Securities and Exchange Commission.
SGAM Corp. is authorized to allocate brokerage and principal business to
brokers other than SG Cowen (but not excluding other affiliates of Societe
Generale) who have provided brokerage and research services, as such services
are defined in Section 28(e) of the Securities Exchange Act of 1934, as amended
(the "1934 Act"), for the Company and/or other accounts, if any, for which SGAM
Corp. exercises investment discretion (as defined in Section 3(a)(35) of the
1934 Act) and, as to transactions as to which fixed minimum commission rates
are not applicable, to cause a Fund to pay a commission for effecting a
securities transaction in excess of the amount another broker would have
charged for effecting the transaction, if SGAM Corp. in making the selection in
question determines in good faith that such amount of commission is reasonable
in relation to the value of the brokerage and research services provided by
such broker, viewed in terms of either that particular transaction or of SGAM
Corp.'s overall responsibilities with respect to a Fund and the other accounts
as to which it exercises investment discretion. In reaching such determination,
SGAM Corp. is not required to place or attempt to place a specific dollar value
on the research or execution services of a broker or on the portion of any
commission reflecting either of said services. In demonstrating that such
determinations were made in good faith, SGAM Corp. must be prepared to show
that all commissions were allocated and paid for purposes contemplated by a
Fund's brokerage policy; that the research services provide lawful and
appropriate assistance to SGAM Corp. in the performance of its investment
decision-making responsibilities; and that the commissions paid were within a
reasonable range. The determination that commissions were within a reasonable
range will be based on any available information as to the level of commissions
known to be charged by other brokers on comparable transactions, but there will
be taken into account the Company's policies that (i) obtaining a low
commission is deemed secondary to obtaining a favorable securities price, since
it is recognized that usually it is more beneficial to a Fund to obtain a
favorable price than to pay the lowest commission, and (ii) the quality,
comprehensiveness and frequency of research studies which are provided for SGAM
Corp. are useful to SGAM Corp. in performing its services under the investment
advisory contracts with the Company. Research services provided by brokers to
SGAM Corp. are considered to be in addition to, and not in lieu of, services
required to be performed by SGAM Corp. under such investment advisory
contracts. Research services provided by brokers include written reports,
responses to specific inquiries and interviews with analysts. These services
also include invitations to meetings arranged by such brokers with the
management of companies in the Funds' portfolios or in which the Funds may
invest.
Consistent with the Conduct Rules of the National Association of Securities
Dealers, Inc. and subject to obtaining prices at least as favorable as those
provided by other qualified brokers, SGAM Corp. may consider sales of shares of
a Fund as a factor in the selection of brokers to execute portfolio
transactions.
Each Fund has been advised by SGAM Corp. that it may combine brokerage orders
for the Fund with orders from its other clients (including the other Funds)
when placing such orders with brokers for execution. In the event orders are
placed for a Fund and one or more other clients for the purchase or sale of the
same security, the Fund and each such other client may share in each
transaction in the proportion that each customer's order bears to the aggregate
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of such orders. The Funds' orders are accorded priority over those received
from SGAM Corp. for its own account or from any of its officers, directors or
employees.
While SGAM Corp. is primarily responsible for the allocation of each Fund's
portfolio transactions to brokers, its policies and practices in this regard
must be consistent with the foregoing and are periodically reviewed by the
Company's Board of Directors. In this connection, the directors periodically
review and discuss with SGAM Corp. the commissions paid by each Fund and, in
transactions where a Fund pays commissions which are in excess of the
commissions other brokers would have charged, SGAM Corp.'s determinations that
such higher commissions are reasonable in relation to the value of the
brokerage and research services. According to the Company's records, the amount
of brokerage commissions paid by the Company during the fiscal year ended March
31, 1998, which was attributable to research services was $1,312,827, in
connection with transactions amounting to $500,043,313. During the fiscal years
ended March 31, 1998, 1997 and 1996, the Company paid total brokerage
commissions of $1,335,957, $1,028,722, and $924,146, respectively. The amount
of brokerage commissions paid by SoGen International Fund, Inc. during the
fiscal year ended March 31, 1998, which was attributable to research services
was $2,227,348, in connection with transactions amounting to $1,392,188,983.
During the fiscal years ended March 31, 1998, 1997 and 1996, SoGen
International Fund, Inc. paid total brokerage commissions of $2,286,967,
$2,138,878 and $2,468,233, respectively.
CUSTODY OF PORTFOLIO
Domestic portfolio securities of each Fund are held pursuant to a custodian
agreement between the Company and Investors Fiduciary Trust Company, 127 West
10th Street, Kansas City, MO 64105. Certain of such securities may be deposited
in the book-entry system operated by the Federal Reserve System or with the
Depository Trust Company. The Company's sub-custodian, State Street Bank and
Trust, holds domestic securities issued in physical form. Pursuant to a Global
Custody Agreement between the Company and The Chase Manhattan Bank ("Chase"), 4
Chase MetroTech Center, Brooklyn, NY 11245, foreign securities may be held by
certain foreign sub-custodians which are participants in the Global Investor
Services Division of Chase and in certain foreign branches of Chase.
INDEPENDENT AUDITORS
The Company's independent auditors are KPMG Peat Marwick LLP, Certified
Public Accountants, 757 Third Avenue, New York, NY 10017. KPMG Peat Marwick LLP
audits each Fund's annual financial statements and renders its report thereon,
which is included in the Annual Report to Shareholders.
FINANCIAL STATEMENTS
The Company's financial statements and notes thereto appearing in the March
31, 1998 Annual Report to Shareholders and the report thereon of KPMG Peat
Marwick LLP, Certified Public Accountants, appearing therein, are incorporated
by reference in this Statement of Additional Information. SoGen International
Fund, Inc.'s financial statements and notes thereto appearing in the March 31,
1998 Annual Report to Shareholders and the report thereon of KPMG Peat Marwick
LLP, Certified Public Accountants, appearing therein, are incorporated by
reference in this Statement of Additional Information. The Company will
furnish, without charge, a copy of either such Annual Report to Shareholders on
request. All such requests should be directed to the Secretary of the Company,
at 1221 Avenue of the Americas, New York, NY 10020.
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APPENDIX
RATINGS OF INVESTMENT SECURITIES
The rating of a rating service represents the service's opinion as to the
credit quality of the security being rated. However, the ratings are general
and are not absolute standards of quality or guarantees as to the
creditworthiness of an issuer. Consequently, the Funds' investment adviser
believes that the quality of debt securities in which a Fund invests should be
continuously reviewed. A rating is not a recommendation to purchase, sell or
hold a security, because it does not take into account market value or
suitability for a particular investor. When a security has received a rating
from more than one service, each rating should be evaluated independently.
Ratings are based on current information furnished by the issuer or obtained by
the ratings services from other sources which they consider reliable. Ratings
may be changed, suspended or withdrawn as a result of changes in or
unavailability of such information, or for other reasons.
The following is a description of the characteristics of ratings used by
Moody's Investors Service, Inc. ("Moody's") and Standard & Poor's Corporation
("S&P").
MOODY'S 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 "giltedge."
Interest payments are protected by a large or by an exceptionally stable margin
and principal is secure. Although the various protective elements are likely to
change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such bonds.
Aa--Bonds rated Aa are judged to be 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 bonds or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make the long-
term risk appear somewhat larger than in Aaa bonds.
A--Bonds 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.
Baa--Bonds 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.
Ba--Bonds rated Ba are judged to have speculative elements; their future
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded during
both good and bad times over the future. Uncertainty of position characterizes
bonds in this class.
B--Bonds rated B generally lack characteristics of the desirable investment.
Assurance of interest and principal payments or of maintenance of other terms
of the contract over any long period of time may be small.
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Caa--Bonds rated Caa are of poor standing. Such bonds may be in default or
there may be present elements of danger with respect to principal or interest.
Ca--Bonds rated Ca represent obligations which are speculative in a high
degree. Such bonds are often in default or have other marked shortcomings.
S&P RATINGS.
AAA--Bonds rated AAA have the highest rating. Capacity to pay principal and
interest is extremely strong.
AA--Bonds rated AA have a very strong capacity to pay principal and interest
and differ from AAA bonds only in small degree.
A--Bonds rated A have a strong capacity to pay principal and interest,
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
principal and interest. Whereas they normally exhibit protection parameters,
adverse economic conditions or changing circumstances are more likely to lead
to a weakened capacity to pay principal and interest for bonds in this capacity
than for bonds in higher rated categories.
BB--B--CCC--CC--Bonds A-1--A-rated BB, B, CCC and CC are regarded, on
balance, as predominantly speculative with respect to the issuer's capacity to
pay interest and repay principal in accordance with the terms of the
obligation.
BB indicates the lowest degree of speculation among such bonds and CC the
highest degree of speculation. Although such bonds will likely have some
quality and protective characteristics, these are outweighed by large
uncertainties or major risk of exposures to adverse conditions.
SAI-37
