<PAGE> 1
As filed with the Securities and Exchange Commission on
January 28, 1997 (to be effective February 1, 1997)
Securities Act File No. 2-73131
Investment Company Act File No. 811-3220
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
---
---
Pre-Effective Amendment No.
Post-Effective Amendment No. 16 --- X
---
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
---
---
Amendment No. 17 X
(Check appropriate box or boxes) ---
COWEN STANDBY RESERVE FUND, INC.
.................................................................
(Exact Name of Registrant as Specified in Charter)
Financial Square
New York, New York 10005
.................. ..............
(address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (212) 495-6000
Rodd M. Baxter, Esq.
Cowen Standby Reserve Fund, Inc.
Financial Square
New York, New York 10005-3597
...........................................
(Name and Address of Agent for Service)
Copies to: Jon S. Rand, Esq.
Willkie, Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022
<PAGE> 2
It is proposed that this filing will become effective (check appropriate box):
Immediately upon filing pursuant to paragraph (b), or
- ---
X on February 1, 1997 pursuant to paragraph (b), or
- ---
60 days after filing pursuant to paragraph (a), or
- ---
on pursuant to paragraph (a) of Rule 485
- --- ----------
DECLARATION PURSUANT TO RULE 24F-2
An indefinite number of shares of Common Stock of the Registrant have been
registered pursuant to Rule 24f-2 under the Investment Company Act of 1940. The
Rule 24f-2 Notice for the Registrant's most recent fiscal year was filed on
November 5, 1996.
<PAGE> 3
COWEN STANDBY RESERVE FUND, INC.
FORM N-IA
CROSS REFERENCE SHEET
Part A
Item No. Prospectus Heading
- -------- ------------------
1. Cover Page......................... Cover Page
2. Synopsis........................... The Fund's Expenses
3. Financial Highlights............... Financial Highlights
Cowen Standby Reserve
Fund, Inc.
4. General Description of
Registrant...................... Cover Page;
Investment
Objective and Policies-
Cowen Standby Reserve
Fund, Inc.
Additional Information
5. Management of the Fund............. Management of the Funds
5.a.Management's Discussion of ....... Not Applicable
Fund's Performance
6. Capital Stock and Other
Securities........................ Dividends and Distributions;
Taxes; Additional Information
<PAGE> 4
Part A
Item No. Prospectus Heading
- -------- ------------------
7. Purchase of Securities
Being Offered..................... Purchase of Shares;
Automatic Transactions;
Management of the Funds
8. Redemption or Repurchase........... Redemption of Shares;
Automatic Transactions
9. Pending Legal Proceedings.......... Not applicable
Part B Heading in Statement of
Item No. Additional Information
10. Cover Page........................ Cover Page
11. Table of Contents................. Contents
12. General Information and
History...................... See Prospectus--
"Description of Shares"
13. Investment Objectives and
Policies..................... Investment Objective
and Policies -
Cowen Standby Reserve
Fund, Inc.;
Investment Objective
and Policies Applic-
able to Both Funds
14. Management of the Fund............ Management of the Fund
15. Control Persons and
Principal Holders of
Securities................... See Prospectus--
"Management of the
Funds"; Management of the
Fund
<PAGE> 5
Part B Heading in Statement of
Item No. Additional Information
- -------- ----------------------
16. Investment Advisory and
Other Services............... Management of the
Fund ; See Prospectus--
"Management of the
Funds"
17. Broker Allocation
and Other Practices.......... Investment Objectives
and Policies-
Cowen Standby Reserve
Fund, Inc.;
Investment Objective
and Policies Applicable
to Both Funds
18. Capital Stock and Other
Securities................... See Prospectus--
"Dividends and
Distributions"; "Taxes" and
"Additional Information"
19. Purchase, Redemption and Additional Purchase
Pricing of Securities and Redemption
Being Offered................ Information
20. Tax Status......................... See Prospectus--
"Dividends and Distribu-
tions" and "Taxes";
Additional Information
Concerning Taxes
21. Underwriters....................... Additional Purchase and
Redemption Information;
See Prospectus--"Management
of the Funds"
22. Calculations
of Yield Quotations of
Money Market Funds........... Determination of Yield
23. Financial Statements............... Financial Statements
<PAGE> 6
PROSPECTUS FEBRUARY 1, 1997
------------------------
COWEN STANDBY RESERVE FUND, INC.
AND
COWEN STANDBY TAX-EXEMPT RESERVE FUND, INC.
FINANCIAL SQUARE, NEW YORK, NEW YORK 10005, 800-262-7116 (212)
495-6724
------------------------
Cowen Standby Reserve Fund, Inc. ("CSRF") is a money market mutual fund
whose investment objective is the maximization of current income to the extent
consistent with the preservation of capital and the maintenance of liquidity.
Cowen Standby Tax-Exempt Reserve Fund, Inc. ("CSTXRF") is a money market
mutual fund whose investment objective is the maximization of current income
that is exempt from federal income taxes to the extent consistent with the
preservation of capital and the maintenance of liquidity.
CSRF and CSTXRF are each referred to in this Prospectus as a "Fund", and
collectively as the "Funds".
Shares of the Funds are sold and redeemed at net asset value without the
imposition of a sales or redemption charge by either Fund.
THE FUNDS ARE NOT INSURED BY THE U.S. GOVERNMENT AND THERE IS NO GUARANTEE
THAT THE SHARES OF THE FUNDS WILL MAINTAIN A CONSTANT NET ASSET VALUE.
This Prospectus briefly sets forth certain information about the Funds that
investors should know before investing. Investors are advised to read this
Prospectus and retain it for future reference.
Additional information about each Fund, contained in its Statement of
Additional Information, has been filed with the Securities and Exchange
Commission ("SEC") and is available to investors without charge by calling the
Funds' distributor at (212) 495-6724 or by contacting any account representative
at Cowen & Company ("Cowen"). The Statement of Additional Information bears the
same date as this Prospectus and is incorporated by reference into this
Prospectus.
------------------------
COWEN & COMPANY
PRINCIPAL UNDERWRITER
------------------------
- --------------------------------------------------------------------------------
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> 7
COWEN STANDBY RESERVE FUND, INC.
FINANCIAL HIGHLIGHTS
The following table has been audited by Ernst & Young LLP, the Fund's
independent auditors, whose report thereon for each of the five years in the
period ended September 30, 1996, appears in the Fund's annual report to
shareholders which is incorporated by reference in the Statement of Additional
Information. This information should be read in conjunction with the financial
statements and related notes which also appear in CSRF's annual report to
shareholders as of September 30, 1996. The information appearing herein for each
of the years prior to September 30, 1992, also has been audited by Ernst & Young
LLP, whose report thereon was unqualified.
PER SHARE INCOME AND CAPITAL CHANGES
For a share of Common Stock outstanding throughout each year.
<TABLE>
<CAPTION>
SRF
-----------------------------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
-----------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989
---------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Year... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- -------- -------- -------- -------- -------- -------- --------
Income from Investment
Operations:
Net Investment
Income............ .05 .05 .03 .03 .04 .06 .08 .08
Less Distributions:
Dividends from net
investment
income............ (.05) (.05) (.03) (.03) (.04) (.06) (.08) (.08)
---------- -------- -------- -------- -------- -------- -------- --------
Net Asset Value, End
of Year............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ======== ======== ======== ======== ======== ======== ========
Total Return.......... 4.97% 5.23% 3.14% 3.07% 4.16% 6.33% 8.06% 8.81%
Ratios/Supplemental
Data
Net Assets (000
omitted).......... $1,101,944 $890,888 $692,609 $682,379 $667,366 $605,212 $617,137 $474,475
Ratio of Expenses to
Average Net
Assets............ .71% .71% .64% .68% .70% .71% .63% .66%
Ratio of Net
Investment Income
to Average Net
Assets............ 4.89% 5.13% 3.11% 3.00% 4.06% 6.15% 7.74% 8.49%
<CAPTION>
1988 1987
-------- --------
<S> <C<C> <C>
Net Asset Value,
Beginning of Year... $ 1.00 $ 1.00
-------- --------
Income from Investment
Operations:
Net Investment
Income............ .07 .06
Less Distributions:
Dividends from net
investment
income............ (.07) (.06)
-------- --------
Net Asset Value, End
of Year............. $ 1.00 $ 1.00
======== ========
Total Return.......... 6.80% 5.80%
Ratios/Supplemental
Data
Net Assets (000
omitted).......... $348,097 $370,987
Ratio of Expenses to
Average Net
Assets............ .68% .70%
Ratio of Net
Investment Income
to Average Net
Assets............ 6.67% 5.72%
</TABLE>
2
<PAGE> 8
YIELD
For the seven-day period ended January 9, 1997, the Company's yield was
4.47%. At January 9, 1997, CSRF's average portfolio maturity was 64 days. CSRF's
Statement of Additional Information describes the method used to calculate its
yield.
EXPENSES
The following table lists the costs that an investor will incur, either
directly or indirectly, as a shareholder of CSRF, based upon CSRF's projected
annual operating expenses:
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum sales charge imposed on purchases (as a
percentage of offering price)...................... None
Maximum sales charge imposed on reinvested
dividends.......................................... None
Maximum deferred sales charge........................ None
Redemption fees...................................... None
Exchange fee......................................... None
ANNUAL CSRF EXPENSES
(as a percentage of average net assets)
Management fees...................................... .50%
12b-1 fees........................................... None
Other expenses....................................... .21%
----
Total CSRF Operating Expenses............................. .71%
====
</TABLE>
The nature of the services for which CSRF pays the management fees is
described under "Management of the Funds." "Other expenses" in the above table
include fees for shareholder services, custodial fees, legal and accounting
fees, printing costs and registration fees all for the Funds current fiscal year
ended September 30, 1996.
Example
The following example demonstrates the projected dollar amount of total
cumulative expenses that would be incurred over various periods with respect to
a hypothetical investment in CSRF. These amounts are based upon payment by CSRF
of operating expenses at the levels set forth in the table above, and are also
based upon the following assumptions:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on
a $1,000 investment assuming (1) 5%
annual return and (2) redemption at
the end of each time period*.......... $7 $23 $41 $ 91
</TABLE>
- ------------
* This example should not be considered a representation of past or future
expenses, and actual expenses may be greater or less than those shown.
Moreover, while this table assumes a 5% annual return, CSRF's actual
performance will vary and may result in an actual return greater or less than
5%.
The purpose of this table is to assist the investor in understanding the
various costs and expenses that an investor in CSRF will bear directly or
indirectly.
3
<PAGE> 9
COWEN STANDBY TAX-EXEMPT RESERVE FUND, INC.
FINANCIAL HIGHLIGHTS
The following table has been audited by Ernst & Young LLP, the Fund's
independent auditors, whose report thereon for each of the five years in the
period ended September 30, 1996, appears in the Company's annual report to
shareholders which is incorporated by reference in the Statement of Additional
Information. This information should be read in conjunction with the financial
statements and related notes which also appear in CSTXRF's annual report to
shareholders as of September 30, 1996. The information appearing herein for each
of the years prior to September 30, 1992, also has been audited by Ernst & Young
LLP, whose report thereon was unqualified.
PER SHARE INCOME AND CAPITAL CHANGES
For a share of Common Stock outstanding throughout each year.
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-----------------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of
Year............... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Income from
Investment
Operations:
Net Investment
Income........... .03 .03 .02 .02 .03 .04 .05 .06 .05 .04
Less Distributions:
Dividends from net
investment
income........... (.03) (.03) (.02) (.02) (.03) (.04) (.05) (.06) (.05) (.04)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net Asset Value, End
of Year............ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ========= ========= ========= ========= ========= ========= ========= ========= =========
Total Return........ 3.07% 3.19% 2.11% 2.03% 2.97% 4.50% 5.48% 5.88% 4.61% 3.94%
Ratios/Supplemental
Data:
Net Assets (000
omitted)......... $171,055 $122,536 $120,704 $116,618 $118,389 $107,838 $ 89,371 $ 84,629 $ 67,885 $ 64,102
Ratio of Expenses
to Average Net
Assets........... .59% .61% .58% .62% .61% .60% .62% .59% .57% .44%
Ratio of Net
Investment Income
to Average Net
Assets........... 3.01% 3.14% 2.03% 1.99% 2.87% 4.37% 5.35% 5.73% 4.55% 3.89%
Investment advisory
fees waived:
Amount............. $156,993 $124,784 $130,483 $119,582 $130,414 $105,431 $ 88,632 $132,101 $200,930 $275,072
Ratio of Average
Net Assets....... .10% .10% .10% .10% .10% .10% .10% .17% .30% .42%
</TABLE>
YIELD
For the seven-day period ended January 9, 1997 CSTXRF's yield was 2.78%. At
January 9, 1997, CSTXRF's average portfolio maturity was 58 days. CSTXRF's
Statement of Additional Information describes the methods used to calculate its
yield.
4
<PAGE> 10
EXPENSES
The following table lists the costs that an investor will incur, either
directly or indirectly, as a shareholder of CSTXRF, based upon CSTXRF's
projected annual operating expenses:
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum sales charge imposed on purchases (as a
percentage of offering price)...................... None
Maximum sales charge imposed on reinvested
dividends.......................................... None
Maximum deferred sales charge........................ None
Redemption fees...................................... None
Exchange fee......................................... None
ANNUAL CSTXRF EXPENSES
(as a percentage of average net assets)
Management fees...................................... .50%
12b-1 fees........................................... None
Other expenses....................................... .19%
----
Total CSTXRF Operating Expenses...................... .69%
====
</TABLE>
The nature of the services for which CSTXRF pays the management fees is
described under "Management of the Funds." Since CSTXRF's inception, Cowen has
voluntarily waived a portion of its investment management fee. However, as there
can be no assurance that Cowen will continue such a waiver, the table reflects
the amount of management fee computed at the rate provided for in the Investment
Management Agreement. "Other expenses" in the above table include fees for
shareholder services, custodial fees, legal and accounting fees, printing costs
and registration fees all for the Fund's current fiscal year ended September 30,
1996.
Example
The following example demonstrates the projected dollar amount of total
cumulative expenses that would be incurred over various periods with respect to
a hypothetical investment in CSTXRF. These amounts are based upon payment by
CSTXRF of operating expenses at the levels set forth in the table above, and are
also based upon the following assumptions:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following
expenses on a $1,000 investment
assuming (1) 5% annual return and
(2) redemption at the end of each
time period*..................... $7 $23 $39 $ 88
</TABLE>
5
<PAGE> 11
- ------------
* This example should not be considered a representation of past or future
expenses, and actual expenses may be greater or less than those shown.
Moreover, while this table assumes a 5% annual return, CSTXRF's actual
performance will vary and may result in an actual return greater or less than
5%.
The purpose of this table is to assist the investor in understanding the
various costs and expenses that an investor in CSTXRF will bear directly or
indirectly.
INVESTMENT OBJECTIVE AND POLICIES
COWEN STANDBY RESERVE FUND, INC.
IN GENERAL
CSRF is a no-load, diversified, open-end investment company whose objective
is the maximization of current income to the extent consistent with the
preservation of capital and the maintenance of liquidity. This objective may be
changed only with the approval of the shareholders.
CSRF will attempt to achieve its investment objective by investing in a
portfolio of short-term "money market" instruments consisting of United States
Treasury Securities, other obligations issued or guaranteed by the United States
government, its agencies or instrumentalities, marketable certificates of
deposit, including those issued by domestic banks, London branches of domestic
banks, domestic branches of foreign banks and savings and loan and similar
associations, banker's acceptances, repurchase agreements and high grade
commercial paper.
There can be no assurance that CSRF will achieve its investment objective.
The following is a brief description of the kinds of instruments in which CSRF
will invest:
Government Obligations. United States government, agency and
instrumentality securities in which CSRF may invest include Treasury Bills,
Treasury Notes and Treasury Bonds; other obligations which are supported by the
full faith and credit of the United States Treasury, such as Government National
Mortgage Association pass-through certificates; obligations which are supported
by the right of the issuer to borrow from the Treasury, such as securities of
Federal Home Loan Banks; and obligations which are supported only by the credit
of the instrumentality, such as Federal National Mortgage Association bonds.
Bank Instruments. Certificates of deposit ("CDs") and bankers' acceptances
("BAs") in which CSRF may invest generally are limited to those instruments
issued by domestic or foreign commercial banks, savings and loan associations
and similar institutions having total assets in excess of $1 billion. CDs are
short-term negotiable obligations of commercial banks, and BAs are time drafts
drawn on commercial banks by borrowers usually in connection with international
transactions. CSRF will concentrate its investments in the banking industry,
investing in CD's and BA's of domestic branches of United States banks, London
branches of United States banks and domestic branches of foreign banks.
Commercial Paper. Commercial paper purchased by CSRF is limited to direct
obligations of issuers that at the time of purchase are rated A-1 or A-1+ by
Standard & Poor's Corporation ("S&P")
6
<PAGE> 12
or Prime-1 by Moody's Investors Service, Inc. ("Moody's") or, if unrated, are
issued by companies having an outstanding unsecured debt issue currently rated
Aa or better by Moody's or AA or better by S&P. Included among the commercial
paper CSRF may purchase is paper that may be purchased or sold only in private
transactions; CSRF's investments in such commercial paper will be subject to
CSRF's limitation on investments in securities with contractual or other
restriction on resale. See "Special Considerations" below. A discussion of the
Moody's and S&P rating categories is contained in the Statement of Additional
Information.
Medium Term Notes. Medium term notes are issued by banks and business
corporations. They are unsecured debt instruments evidencing an obligation to
pay a stated principal amount at a stated maturity date more than 270 days from
issuance. CSRF will not purchase medium term notes maturing more than one year
after the date of purchase. It will purchase medium term notes only if they are
rated in one of the two highest categories by S&P, Moody's, Duff & Phelps, Inc.,
Fitch Investor Services, Inc., IBCA Limited and Thomson Bankwatch. See the
Statement of Additional Information for a discussion of these rating categories.
CERTAIN PORTFOLIO STRATEGIES
Repurchase Agreements. Under a repurchase agreement, CSRF may acquire an
underlying debt instrument for a relatively short period subject to an
obligation of the seller to repurchase and the Company to resell the instrument
at a fixed price and time, thereby determining the yield during the Company's
holding period. This results in a fixed rate of return insulated from market
fluctuations during such period. Under the Investment Company Act of 1940 (the
"1940 Act"), repurchase agreements are considered loans by CSRF. CSRF will enter
into repurchase agreements with domestic banks or dealers with respect to
securities of the type in which it invests. The obligation of the seller to
repurchase the instrument at the agreed-upon price and time is in effect secured
by the value of the instrument. If a seller defaults on its obligation to
repurchase the underlying security, CSRF will incur a loss to the extent that
the proceeds it realizes on the sale of the collateral are less than the
repurchase price of the instrument. Furthermore, should the defaulting seller
file for bankruptcy, CSRF could incur certain costs in establishing its right to
dispose of the collateral or experience delays or be subject to limitations in
its realization thereon.
SPECIAL CONSIDERATIONS
While CSRF will invest in obligations of foreign banks or London branches
of United States banks only if the investment manager deems the instruments to
present minimal credit risks, such investments may nevertheless entail risks
that are different from investments in domestic obligations of United States
banks due to differences in political, regulatory and economic systems and
conditions. Such risks include future political and economic developments and
the possible imposition of withholding taxes on interest income, possible
establishment of exchange controls or the adoption of other foreign governmental
restrictions which might adversely affect the payment of principal and interest
on such obligations. In addition, London branches of United States banks and
domestic branches of foreign banks may be
7
<PAGE> 13
subject to less stringent reserve requirements and to different accounting,
auditing, reporting and recordkeeping standards than those applicable to
domestic branches of United States Banks.
In general, immediately after the acquisition of any security (other than
government obligations), not more than 5% of CSRF's assets may be invested at
any time in the obligations (including repurchase agreements) of a single
issuer. Immediately after the acquisition of any put with respect to a portfolio
security, CSRF may not have more than 5% of its total assets invested in or
subject to puts from the same institution. In addition, CSRF may invest up to an
aggregate of 10% of its total assets in securities with contractual or other
restrictions on resale and other instruments which are not readily marketable
and repurchase agreements maturing in more than seven days from the date of
acquisition. CSRF is also authorized to borrow in an amount of up to 10% of its
total assets for temporary or emergency purposes, and to pledge its assets to
the same extent in connection with such borrowings. Finally, CSRF may attempt to
increase yields by trading to take advantage of short-term market rates which
may result in high portfolio turnover. A more detailed description of these
policies, together with an enumeration of additional investment restrictions
which CSRF has adopted and which cannot be changed without the approval of the
holders of a majority of CSRF's outstanding shares, is contained in its
Statement of Additional Information.
Investors should also be aware that CSRF's portfolio will be affected by
general changes in interest rates which will result in increases or decreases in
the value of the obligations held by CSRF. The market value of the obligations
in CSRF's portfolio can be expected to vary inversely to changes in prevailing
interest rates.
COWEN STANDBY TAX-EXEMPT RESERVE FUND, INC.
IN GENERAL
CSTXRF is a no-load, diversified, open-end management investment company
whose objective is the maximization of current interest income that is exempt
from federal income taxes to the extent consistent with the preservation of
capital and the maintenance of liquidity. This objective may be changed only
with the approval of the shareholders. There can be, of course, no assurance
that CSTXRF will achieve its investment objective.
At least 80% of CSTXRF's assets will be invested in short-term tax-exempt
debt obligations issued by or on behalf of states, territories and possessions
of the United States, the District of Columbia and their respective authorities,
agencies, instrumentalities and political sub-divisions ("Municipal
Securities"). CSTXRF will invest in Municipal Securities only if they are
determined to be of high quality and to present minimal credit risk pursuant to
guidelines established by the Fund's Board of Directors. Municipal Securities in
which CSTXRF may invest include: (a) commercial paper, which typically
represents short-term, unsecured, negotiable promissory notes, issued to meet
seasonal working capital needs of municipalities or to provide interim
construction financing; (b) notes used to provide for short-term capital needs,
usually with a maturity of one year or less, such as Tax Anticipation, Bond
Anticipation and Revenue Anticipation Notes and other short-term loans; and (c)
bonds classified
8
<PAGE> 14
principally as (i) General Obligation Bonds, which are used to finance public
projects and are secured by the issuer's taxing power for the payment of
principal and interest and (ii) Revenue Bonds issued to finance a specific,
revenue-generating capital project and payable only from the proceeds of the
specific revenue source. CSTXRF may invest in commercial paper rated A-2 or
higher by Standard & Poor's Corporation ("S&P") or Prime-2 or higher by Moody's
Investors Service, Inc. ("Moody's"); notes rated SP-2 or higher by S&P or MIG-2
or higher by Moody's or rated VMIG-2 or higher by Moody's in the case of
variable rate demand obligations and bonds rated AA or higher by S&P or Aa or
higher by Moody's. CSTXRF may also purchase Municipal Securities which, if
unrated, are issued by entities having an outstanding unsecured debt issue
currently rated Aa or better by Moody's or AA or better by S&P.
Up to 25% of the assets of CSTXRF may be invested at any time in the debt
obligations of a single issuer. Immediately after the acquisition of any put
with respect to a portfolio security, as to 75% of its portfolio, CSTXRF may not
have more than 5% of its total assets invested in securities issued by or
subject to puts from the same institution, except that up to 10% of total assets
may be invested in securities subject to guarantees or unconditional puts from a
single institution. The identification of the issuer of a Municipal Security
depends upon the terms and conditions of the security. If the assets and
revenues of an agency, authority, instrumentality or other political subdivision
are separated by those of the government creating the issuing entity and a
security is backed only by assets and revenues of the entity, the entity would
be deemed to be the sole issuer of the security. Similarly, in the case of a
private activity bond, if that bond is backed only by the assets and revenues of
the non-governmental user then the non-governmental user would be deemed to be
the sole issuer. If, however, the creating government or some other entity
guarantees a security, such a guarantee would be considered a separate security
and would be treated as an issue of such government or other entity. In
addition, CSTXRF may invest up to an aggregate of 10% of its total assets in
securities with contractual or other restrictions on resale and other
instruments that are not readily marketable including repurchase agreements
providing for settlement in more than seven days. CSTXRF is also authorized to
borrow and to enter into reverse repurchase transactions in an amount up to 10%
of its total assets for temporary or emergency purposes including meeting
redemption requests, but not for leverage, and to pledge its assets to the same
extent in connection with such borrowings. Whenever borrowings exceed 5% of the
value of CSTXRF's assets, CSTXRF will not make any additional investments.
Finally, CSTXRF may attempt to increase yields by trading to take advantage of
short-term market rates which may result in high portfolio turnover. A more
detailed description of these policies, together with an enumeration of
additional investment restrictions which CSTXRF has adopted and which cannot be
changed without the approval of the holders of a majority of CSTXRF's
outstanding shares, is contained in its Statement of Additional Information.
It should also be noted that securities in which CSTXRF will invest may not
yield as high a level of current income as longer term or lower rated securities
which generally have less liquidity and greater fluctuation.
9
<PAGE> 15
CERTAIN PORTFOLIO STRATEGIES
Variable Rate Demand Notes. Municipal Securities purchased by CSTXRF may
include variable rate demand notes issued by industrial development authorities
and other governmental entities. Although variable rate demand notes are
frequently not rated by credit rating agencies, unrated notes purchased by
CSTXRF will be determined by CSTXRF's investment manager to be of comparable
quality at the time of purchase to instruments rated "high quality" (i.e.,
within the two highest ratings) by any major rating service. CSTXRF may invest
in variable rate demand notes carrying stated maturities in excess of one year
at the date of purchase by CSTXRF if such variable rate demand notes carry
demand features permitting CSTXRF to redeem at any time or, under certain
conditions, at specified periodic intervals, not exceeding one year, in either
case upon such notice as is deemed appropriate by the SEC or its staff,
currently not more than seven days. Frequently such obligations are secured by
irrevocable letters of credit or other credit support arrangements provided by
banks. The quality of the underlying creditor or of the bank, as the case may
be, must, as determined by CSTXRF's investment manager, also be equivalent to
the quality standards set forth above. In addition, while there is no active
secondary market with respect to a particular variable rate demand note
purchased by CSTXRF, CSTXRF may, upon the seven days notice specified in the
note, demand payment of the principal of and accrued interest on the note. The
absence of such an active secondary market, however, could make it difficult for
CSTXRF to dispose of the variable rate demand note involved, in the event the
issuer of the note defaulted on its payment obligations, and CSTXRF could, for
this or other reasons, suffer a loss of principal and interest.
CSTXRF may invest in participating interests purchased from banks in
variable rate Municipal Securities (such as industrial development bonds) owned
by banks. If necessary in the opinion of CSTXRF's investment manager,
participation interests will carry a liquidity feature permitting CSTXRF to
tender them back to the bank or will be backed by an irrevocable letter of
credit or guarantee of a bank which CSTXRF's investment manager has determined
to be equivalent to the quality standards set forth above.
When-Issued Securities. CSTXRF may also purchase Municipal Securities on a
"when-issued" basis. CSTXRF will enter into a when-issued transaction for the
purpose of acquiring portfolio securities and not for the purpose of leverage.
When-issued securities are securities purchased for delivery beyond the normal
settlement date at a stated price and yield. CSTXRF will generally not pay for
such securities or start earning interest on them until they are received; thus,
they involve a form of leveraging. Securities purchased on a when-issued basis
are recorded as an asset and are subject to changes in value, both before and
after delivery, based upon changes in the general level of interest rates and
other market factors. Although CSTXRF may purchase when-issued securities
without limit, CSTXRF expects that commitments to purchase when-issued
securities normally will not exceed 25% of the value of its total assets and
that a commitment by the Fund to purchase when-issued securities will not exceed
45 days. Due to fluctuations in the value of Municipal Securities purchased on a
when-issued basis, the yields obtained on such securities may be higher or lower
than the yields available in the market on the dates when the investments are
actually delivered to CSTXRF.
10
<PAGE> 16
Stand-By Commitments. CSTXRF may acquire "stand-by commitments" (sometimes
referred to as "puts") with respect to Municipal Securities held in its
portfolio. Under a stand-by commitment, a dealer agrees to purchase, at the
Fund's option, specified Municipal Securities at a specified price. CSTXRF
intends to enter into stand-by commitments only with dealers, banks and
broker-dealers which, in the opinion of CSTXRF's investment manager, present
minimal credit risks. If CSTXRF's investment manager deems it necessary or
advisable, CSTXRF may pay for a stand-by commitment either separately in cash or
by paying a higher price for portfolio securities which are acquired subject to
the commitment (thus reducing the yield to maturity otherwise available for the
same securities). In evaluating the creditworthiness of the issuer of a stand-by
commitment, the investment manager will review periodically the issuer's assets,
liabilities, contingent claims and other relevant financial information. CSTXRF
will acquire stand-by commitments solely to facilitate portfolio liquidity and
does not intend to exercise its rights thereunder for trading purposes.
Reverse Repurchase Agreements. CSTXRF may borrow funds for temporary
purposes and not for leverage by agreeing to sell portfolio securities to
financial institutions such as banks and broker-dealers and to repurchase them
at a mutually agreed-upon date and price (a "reverse repurchase agreement"). At
the time CSTXRF enters into a reverse repurchase agreement it will place in a
segregated custodial account cash, United States government securities or
high-grade debt obligations having a value equal to the repurchase price
(including accrued interest). Reverse repurchase agreements involve the risk
that the market value of the securities sold by CSTXRF may decline below the
repurchase price of those securities. Repurchase agreements are considered to be
loans and reverse repurchase agreements are considered to be borrowings by
CSTXRF under the 1940 Act.
Taxable Investments. Under certain circumstances, CSTXRF may for temporary
defensive or other purposes invest in certain short-term taxable securities when
CSTXRF's investment manager believes that it would be in the best interests of
CSTXRF's investors to do so. Taxable securities in which CSTXRF may invest on a
short-term basis are obligations of the United States government, its agencies
or instrumentalities, including repurchase agreements with banks or securities
dealers involving such securities; time deposits maturing in not more than seven
days; other debt securities rated within the two highest ratings assigned by
Moody's, S&P, Duff & Phelps, Inc., Fitch Investor Services, Inc., IBCA Limited
and Thomson Bankwatch; commercial paper rated in the highest grade by Moody's or
S&P; and bank obligations including certificates of deposit issued by domestic
branches of United States banks with assets of $1 billion or more. At no time
will more than 20% of CSTXRF's total assets be invested in taxable short-term
securities unless CSTXRF's investment manager has determined to adopt
temporarily a defensive investment policy in the face of adverse market
conditions affecting the market for Municipal Securities in general.
SPECIAL CONSIDERATIONS
In seeking to achieve its investment objective CSTXRF may invest all or any
part of its assets in Municipal Securities which are industrial development
bonds. Moreover, although CSTXRF does not currently intend to do so on a regular
basis, it may invest more than 25% of its assets in Municipal Securities the
interest on which is paid solely from revenues of economically related projects,
if such
11
<PAGE> 17
investment is deemed necessary or appropriate by CSTXRF's investment manager. To
the extent that CSTXRF's assets are concentrated in Municipal Securities payable
from revenues on economically related projects and facilities, CSTXRF will be
subject to the peculiar risks presented by such projects to a greater extent
than it would be if CSTXRF's assets were not so concentrated.
INVESTMENT OBJECTIVES AND POLICIES APPLICABLE TO BOTH FUNDS
Lending of Portfolio Securities. Each Fund has the ability to lend
securities from its portfolio to brokers, dealers and other financial
organizations. Such loans, if and when made, may not exceed 20% of that Fund's
total assets taken at value. Loans of portfolio securities by a Fund will be
collateralized by cash, letters of credit or securities issued or guaranteed by
the United States government or its agencies, which are maintained at all times
in an amount equal to at least 100% of the current market value of the loaned
securities.
Portfolio securities of each Fund are valued on the basis of amortized
cost. In connection with its use of amortized cost valuation, each Fund limits
the dollar-weighted average maturity of its portfolio to not more than 90 days
and does not purchase any instrument with a remaining maturity of more than 397
calendar days, except that securities subject to liquidity puts may bear longer
maturities. The Funds follow these policies in order to maintain a constant net
asset value of $1.00 per share, although there is no assurance they can do so on
a continuing basis.
MANAGEMENT OF THE FUNDS
BOARDS OF DIRECTORS
The business and affairs of each of the Funds are managed under the
direction of their respective Boards of Directors. By virtue of the
responsibilities assumed by Cowen under the Investment Management Agreements,
neither Fund will require executive employees other than its officers, none of
whom will devote full time to the affairs of that Fund.
INVESTMENT MANAGER
Cowen, an investment adviser and broker-dealer registered with the SEC,
serves as the Funds' investment manager. Cowen is a member of the New York,
American and other principal national securities exchanges and of the National
Association of Securities Dealers, Inc. ("NASD"). Cowen's principal address is
Financial Square, New York, New York 10005.
Pursuant to the Investment Management Agreements between Cowen and the
Funds, Cowen has agreed to be responsible for each Fund's investment program.
Subject to the supervision and direction of the Funds' Boards of Directors,
Cowen manages each Fund's portfolio in accordance with the stated policies of
that Fund. Cowen makes investment decisions for each Fund and places the
purchase and sale orders for portfolio transactions. Cowen also furnishes each
Fund statistical and research data, clerical help, accounting, data processing,
bookkeeping, internal auditing and certain legal and other
12
<PAGE> 18
services required by that Fund, prepares reports to shareholders of each Fund,
tax returns, reports to and filings with the SEC and state Blue Sky authorities,
calculates the net asset value of shares of each Fund and generally assists in
all aspects of the Funds' operations. For the services provided pursuant to the
Investment Management Agreement, Cowen is entitled to receive from each Fund a
fee, computed daily and payable monthly, at the annual rate of .50 of 1.00% of
that Fund's average daily net assets. Cowen compensates certain securities
dealers whose customers are shareholders of either Fund for providing
administrative services to those shareholders that would otherwise be provided
by Cowen. Such compensation is paid solely from Cowen's resources and is not
paid directly or indirectly by either Fund.
DISTRIBUTOR
Cowen acts as distributor of the Funds' shares. No compensation is payable
by either Fund to Cowen for its distribution services.
CUSTODIAN AND TRANSFER AND DIVIDEND AGENT
Investors Fiduciary Trust Company ("IFTC"), a subsidiary of State Street
Boston Corp., serves as the custodian of the Funds' investments and as transfer
and dividend agent. Communications to IFTC should be directed to P.O. Box
419111, Kansas City, MO 64141.
PURCHASE OF SHARES
Each Fund's shares are sold on a continuous basis on each day that such
Fund's net asset value is calculated, at their net asset value next determined
after an order and payment for shares in the form of Federal Funds have been
received. The minimum initial investment and subsequent investments must be in
the amount of at least $500, with the exception of purchases of Fund shares
through retirement plans for Self-Employed Persons and Individual Retirement
Accounts which require minimum initial investments and subsequent investments in
the amount of at least $100. Each Fund reserves the right at any time to vary
the initial and subsequent investment minimums, and has established a lower
minimum for investments under the Automatic Transaction program described below.
To invest in a Fund, a person who has, or who wishes to have, an account at
Cowen need only direct his representative to invest in that Fund in order to
become a shareholder in that Fund. There is no charge for establishing or
maintaining such account. A person who does not have, and does not intend to
establish, an account at Cowen may invest in either Fund by instructing his own
broker/dealer to purchase shares for him or by contacting the Fund directly at
1-800-309-1111. Persons who are interested in purchasing shares of the Funds by
Federal wire should contact the Fund directly at 1-800-262-7116. Such
broker/dealer must be a member of the NASD, or a foreign non-member of the NASD,
which has entered into a Sales Agreement with Cowen with respect to the stock of
that Fund. Cowen reserves the right to reject any purchase order. From time to
time, Cowen's registered representatives and those of other broker-dealers that
enter into selected dealer agreements with Cowen and sell shares of the Funds
will receive non-cash compensation in the form of gifts or prizes such as
merchandise or trips.
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<PAGE> 19
In the case of orders from its customers or customers of its correspondents
for purchase of shares paid for other than in Federal Funds. Cowen will complete
the conversion into, or itself advance at no charge, Federal Funds on the day
following receipt of an order. Investors whose payments are received in or
converted into Federal Funds by Cowen or Federal wires received by Cowen not
later than 2:00 P.M., New York time, will become shareholders on that day.
Investors whose payments are received in or converted into Federal Funds or
Federal wires received by Cowen after 2:00 P.M., New York time, by Cowen will
become shareholders on the following business day. A shareholder will begin to
accrue daily dividends the day after becoming a shareholder. Cowen will provide
each shareholder with written confirmations monthly of each purchase and sale
transaction effected for his account during the period, including the automatic
reinvestment of dividends in additional shares of a Fund.
Exchange Privilege. Shares of either Fund may be exchanged for shares of
the other Fund and/or the following mutual funds for which Cowen serves as
distributor.
- Cowen Intermediate Fixed Income Fund, a fund that seeks current income
and stability of principal, by investing primarily in high quality
intermediate term fixed income securities. This fund is a series of Cowen
Funds, Inc.
- Cowen Government Securities Fund, a fund that seeks total return
consisting of current income and appreciation of capital through
investing primarily in securities issued or guaranteed by the U.S.
Government, its agencies, authorities or instrumentalities. This fund is
a series of Cowen Funds, Inc.
- Cowen Income + Growth Fund, Inc., a fund that seeks a high level of
dividend income, to the extent consistent with prudent investment
management, by investing primarily in income producing equity securities.
- Cowen Opportunity Fund, a fund whose investment objective is appreciation
of capital through investing primarily in small capitalization issuers.
This fund is a series of Cowen Funds, Inc.
Shares of these mutual funds are available only to investors residing in
states where these mutual funds are qualified for sale. They are sold pursuant
to separate prospectuses that may be obtained through any Cowen account
representative, through account representatives of Cowen Correspondents, or
through any other member of the NASD, or foreign non-member of the NASD, which
has entered into a Sales Agreement with Cowen with respect to such funds. A
shareholder may effect exchanges among these mutual funds and a Fund on the
basis of relative net asset values without imposition of a sales charge;
provided, however, that where shares of a Fund acquired through a direct
purchase are exchanged for shares of Cowen Intermediate Fixed Income Fund or
Cowen Government Securities Fund, Cowen Income + Growth Fund, Inc., or Cowen
Opportunity Fund, the appropriate sales charge will be imposed at the time of
the exchange. An exchange of shares is treated for federal income tax purposes
as a redemption (sale) of shares given in exchange by the shareholder and an
exchanging shareholder may, therefore, realize a taxable gain or loss in
connection with the exchange. The exchange privilege is subject to termination
and its terms are subject to change upon 60 days' notice to shareholders.
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<PAGE> 20
On May 16, 1994, Cowen Income + Growth Fund, Inc. and Cowen Opportunity
Fund and on July 11, 1994, Cowen Government Securities Fund and Cowen
Intermediate Fixed Income Fund (collectively, the "non-money market funds")
began offering three classes of shares (Class A, B and C shares). Shareholders
of CSRF and CSTXRF (collectively, the "money market funds") may not exchange
their shares for Class A or Class B shares, and if eligible, Class C shares, of
the non-money market funds, unless the money market fund shares being exchanged
were acquired through an exchange from a non-money market fund and not by a
direct purchase; if those shares were acquired by exchange from a non-money
market fund, they may be exchanged only for shares of the same class that the
shareholder previously held. In cases where shares of the non-money market fund
previously held were acquired prior to May 16, 1994, corresponding shares of the
money market fund may be exchanged only for Class A shares (or Class C shares,
if eligible) of a non-money market fund.
REDEMPTION OF SHARES
PROCEDURES APPLICABLE TO ALL REDEMPTIONS
Each Fund will redeem its shares without charge on any day that such Fund's
net asset value is calculated at the net asset value per share next determined
after receipt of a redemption order in proper form by Cowen or IFTC. While each
Fund intends to use its best efforts to maintain its net asset value per share
at $1.00, the proceeds paid upon redemption may be more or less than the amount
invested depending upon a share's net asset value at the time of redemption.
Any redemption request received by Cowen prior to 2:00 P.M., New York time,
will earn that day's dividend, and will be transmitted to IFTC on that day; the
proceeds of such redemptions normally will be credited to the investor's account
at Cowen on the next business day. Shares redeemed pursuant to requests at or
after 2:00 P.M., New York time, will be effected on and dividends earned through
the next business day and the proceeds of such redemptions normally will be
credited to the investor's account at Cowen on the second business day
thereafter, but in any event payment will be made within seven days thereafter.
However, proceeds of any redemptions will not be sent until the check (including
a certified or cashier's check) used for investment has been cleared for payment
by the investor's bank, which may take up to 15 days. Pending such clearance,
Cowen will hold redemption proceeds in the investor's brokerage account under
circumstances resulting in no earnings to the investor.
Each Fund may suspend the right of redemption or postpone the date of
payment upon redemption (as well as suspend or postpone the recordation of the
transfer of its shares) for such periods as are permitted under the 1940 Act.
Each Fund reserves the right to redeem shares in any account at their net asset
value if the value of the account is $500 or less. The shareholder having the
account will first be notified in writing that its account has a value of $500
or less and will be allowed 30 days to make an additional investment before the
redemption is processed by the Fund.
REGULAR REDEMPTION PROVISIONS
Cowen generally will effect redemptions of shares upon oral instruction
received from a shareholder. It is the Funds' policy that the Redeeming
Shareholder bear the risk of loss in the event of a
15
<PAGE> 21
fraudulent oral redemption instruction; the staff of the SEC is considering the
propriety of this policy. If shares are to be redeemed pursuant to an order sent
to IFTC by the shareholder, IFTC will require written redemption instructions
signed by the shareholder of record, which signature must be guaranteed by a
commercial bank or trust company located or having a correspondent in New York
City, or by a member firm of the New York Stock Exchange. If certificates have
been issued representing the shares to be redeemed, such certificates must also
be endorsed, or a duly executed stock power must be furnished, with signature
guaranteed as discussed above, and must be submitted to Cowen or IFTC with the
redemption request. Cowen or IFTC may require further documentation if the
shareholder is a corporation, partnership, trust, estate or other entity. Cowen
and certain other dealers may impose a charge in connection with redemptions
effected by federal wire.
CHECK REDEMPTION PRIVILEGE
An investor may designate on an Application for Checks, or by later written
request, that a Fund of which he is a shareholder provide him with redemption
checks drawn on the Fund's account at IFTC. These checks will be sent only to
the person in whose name the account is registered and only to the address of
record. The Application must be manually signed by the registered owner(s).
Shareholders having jointly-owned accounts may authorize checks to be drawn with
the signature of only one of the owners. Checks may be payable to the order of
any person in an amount of $100 or more. Dividends are earned until the check
clears. After clearance, the check will be returned to the investor.
Shareholders should be aware that use of the check redemption procedure does not
give rise to a banking relationship between the shareholder and IFTC, which will
be acting solely as transfer agent for the Fund. When a check is presented to
IFTC for payment, IFTC, as the investor's agent, will cause the appropriate Fund
to redeem a sufficient number of shares from the investor's account to cover the
amount of the check. However, investors will be subject to the same rules and
regulations that IFTC applies to checking accounts and the other restrictions
set forth herein. There is no charge to the investor for this checking service.
Cowen representatives, upon request, will provide shareholders with the forms
which must be completed in order to avail themselves of this method of
redemption. Shareholders may also obtain these forms by writing to IFTC, P.O.
Box 419111 Kansas City, MO 46141.
Shares for which stock certificates have been issued may not be redeemed by
check. If an investor's account is not adequate to cover the amount of the
check, the check will be returned marked insufficient funds. Checks should not
be used to close an account.
The check redemption privilege may be modified or terminated at any time by
either Fund or by IFTC.
NET ASSET VALUE
Each Fund's net asset value per share for purposes of pricing purchase and
redemption orders is determined as of 2:00 P.M., New York time, Monday through
Friday, except (i) on days on which changes in the value of that Fund's
portfolio securities will not materially affect the current net asset value of
the shares; (ii) on days during which no security is tendered for redemption and
no order to purchase or sell the stock is received by the Funds; and (iii) on
New Year's Day, Washington's Birthday
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<PAGE> 22
(third Monday in February), Good Friday, Memorial Day (last Monday in May),
Independence Day, Labor Day, Thanksgiving Day and Christmas Day, and on the
preceding Friday or subsequent Monday when one of these holidays falls on a
Saturday or Sunday, respectively. Net asset value is computed by dividing the
value of the net assets of a Fund (i.e., the value of assets less liabilities)
by the total number of shares outstanding. Expenses and fees of each Fund,
including the Investment Manager's fee, are accrued daily and taken into account
for the purpose of determining net asset value. Although investments of each
Fund will be valued on the basis of amortized cost, the Funds will also monitor
the value of their portfolios by reference to fair market value computation.
AUTOMATIC TRANSACTIONS
For a shareholder who so elects, free credit balances in the shareholder's
securities account at Cowen will automatically be invested in shares of a Fund
daily, so long as the free credit balances are in excess of $100. In addition,
free credit balances in excess of $1.00 but below such minimum Fund requirements
will automatically be invested at the end of each week. For a participant in the
program, redemption of shares of the Fund will be effected automatically on each
business day to satisfy the debit balances in the shareholder's securities
account at Cowen. Shareholders who are investors in both CSRF and CSTXRF must
designate which Fund they consider their primary account at Cowen. Free credit
balances in a shareholder's securities account at Cowen will be automatically
invested into the primary account and debit balances will be satisfied from the
primary account before the remaining account.
No fee is charged with respect to these automatic transactions. Cowen
reserves the right, however, upon notification to all participants, to impose a
fee in the future.
DIVIDENDS AND DISTRIBUTIONS
Each Fund's net investment income (other than net realized short-term
capital gains) will be declared daily and paid monthly as a dividend to
shareholders of record at the close of business on the day of declaration.
Shares begin accruing dividends on the day after the purchase order for the
shares becomes effective and continue to accrue dividends through, and
including, the day the redemption order for the shares is effected. Dividends
are reinvested automatically in additional shares of the same Fund at net asset
value or, at a shareholder's option, are paid in cash. Distributions of net
realized long and short-term capital gains, if any, will be distributed
annually. Income dividends will be paid through the business day preceding the
next to last Friday of the month except for December. In December, income
dividends will be paid through the last business day of the month.
TAXES
BOTH FUNDS
For their taxable years ended September 30, 1996, each of the Funds
qualified as a regulated investment company for purposes of the Internal Revenue
Code of 1986, as amended (the "Code"). They intend to so qualify in each
succeeding year. As a regulated investment company, each Fund will pay no
federal income tax on its net investment income and net capital gains, if any,
that it distributes to
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<PAGE> 23
its shareholders, provided that it meets certain distribution requirements. Each
Fund will be subject to a non-deductible excise tax of 4% of the amount by which
it fails to distribute specified amounts of ordinary income and capital gains
during each calendar year. Each Fund intends to make such distributions as are
necessary to avoid the application of this tax.
Except as otherwise provided below, dividends paid from taxable net
investment income and distributions of net short-term capital gains, if any,
will be taxable to shareholders as ordinary income, whether received in cash or
reinvested in additional shares of a Fund. Because the Funds are not expected to
realize long-term capital gains, it is unlikely that any portion of the
dividends or distributions paid by a Fund will be taxable to shareholders as
long-term capital gains. The Funds' dividends will not qualify for the
dividends-received deduction for corporations. Statements as to the tax status
of each shareholder's dividends and distributions will be mailed annually by
IFTC. Shareholders should consult their tax advisers about any state and local
taxes that may apply to dividends and distributions received.
SPECIAL CONSIDERATIONS FOR CSRF
Dividends paid by CSRF may be subject to tax by certain states, even though
the interest on United States government obligations, from which such dividends
are derived, would be exempt from state income tax if received directly by the
shareholders.
SPECIAL CONSIDERATIONS FOR CSTXRF
CSTXRF will designate and pay exempt-interest dividends derived from
interest earned on qualifying Municipal Obligations. Such exempt-interest
dividends may be excluded by shareholders from their gross income for Federal
income tax purposes although (1) all or a portion of such exempt-interest
dividends will be a specific preference item for purposes of the Federal
individual and corporate alternative minimum tax to the extent they are derived
from certain types of private activity bonds issued after August 7, 1986 and (2)
all exempt-interest dividends will be a component of the "current earnings"
adjustment item for purposes of the Federal corporate alternative minimum tax.
In addition, corporate shareholders may incur a greater Federal "environmental
tax" liability through receipt of dividends and distributions from CSTXRF.
The exemption of interest income for federal income tax purposes in most
cases does not result in an exemption under the tax laws of any state or local
authority. CSTXRF will notify shareholders annually as to the percentage of
interest exempt from federal taxes earned by CSTXRF with respect to those states
or possessions in which the Fund had investments. CSTXRF will also notify
shareholders annually as to the percentage of the shareholder's income from
CSTXRF exempt from Federal personal and corporate income taxes and the
percentage, if any, subject to such taxes. These notices also designate the
amount of exempt-interest dividends which are a specific preference item for
purposes of the Federal individual and corporate alternative minimum taxes.
Shareholders who are subject to tax in states or localities should consult their
own tax advisers about the taxation of distributions from CSTXRF by such states
and localities.
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<PAGE> 24
ADDITIONAL INFORMATION
CSRF was incorporated on June 19, 1981 as Standby Reserve Fund, Inc. under
the laws of the State of Maryland, commenced operations on October 22, 1981 and
has authorized capital of 2,000,000,000 shares of common stock, $.01 par value
per share. On December 15, 1992, the Board of Directors of Standby Reserve Fund,
Inc. authorized the Fund to conduct business under the name Cowen Standby
Reserve Fund, Inc.
CSTXRF was incorporated on June 5, 1985 as the Standby Tax-Exempt Reserve
Fund, Inc. under the laws of the State of Maryland, commenced operations on
April 1, 1986 and has authorized capital of 1,000,000,000 shares of common
stock, $.001 par value per share. On December 15, 1992, the Board of Directors
authorized Standby Tax-Exempt Reserve Fund, Inc. to conduct business under the
name Cowen Standby Tax-Exempt Reserve Fund, Inc.
Shareholders of each Fund are entitled to one vote for each full share held
and fractional votes for fractional shares held.
General inquiries regarding the Funds may be directed to the Funds'
distributor at (212) 495-6000, or to a Cowen account representative.
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus and in either
Fund's official sales literature in connection with the offering of that Fund's
shares, and, if given or made, such other information or representations must
not be relied upon as having been authorized by a Fund. This Prospectus does not
constitute an offer in any state in which, or to any person to whom, such offer
may not lawfully be made.
Although each Fund is offering only its own shares, it is possible that a
Fund might become liable for any material misstatement or omission in the
Prospectus about the other Fund. However, each Fund has acknowledged that it,
and not the other Fund, is liable for any material misstatement or omission
about it in the Prospectus. The Board of Directors of each Fund has considered
this factor in approving its use of a single combined Prospectus.
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<PAGE> 25
- ---
- -
- -
- -
- --- ---
CONTENTS
<TABLE>
<S> <C>
--Cowen Standby Reserve Fund, Inc.
Financial Highlights.............. 2
--Cowen Standby Tax-Exempt Reserve
Fund, Inc.
Financial Highlights.............. 4
Investment Objective and Policies
--Cowen Standby Reserve Fund,
Inc. ............................. 6
--Cowen Standby Tax-Exempt Reserve
Fund, Inc......................... 8
-- Investment Objectives and Policies
Applicable to Both Funds.......... 12
Management of the Funds................ 12
Purchase of Shares..................... 13
Redemption of Shares................... 15
Automatic Transactions................. 17
Dividends and Distributions............ 17
Taxes.................................. 17
Additional Information................. 19
</TABLE>
NO PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE
ANY REPRESENTATIONS OTHER THAN
THOSE CONTAINED IN THIS
PROSPECTUS, THE STATEMENT OF
ADDITIONAL INFORMATION OR THE
FUND'S OFFICIAL SALES LITERATURE
IN CONNECTION WITH THE OFFERING
OF THE FUND'S SHARES AND, IF
GIVEN OR MADE, SUCH OTHER
INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED ON AS HAVING
BEEN AUTHORIZED BY THE FUND.
THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER IN ANY STATE
IN WHICH, OR TO ANY PERSON TO
WHOM, SUCH OFFER MAY NOT
LAWFULLY BE MADE.
I,2
- ---
- ---
- ---
- -
- -
- -
(LOGO)
COWEN STANDBY
RESERVE
FUND, INC.
------------------------------------------------------------------
COWEN STANDBY
TAX-EXEMPT
RESERVE FUND, INC.
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Prospectus Dated
February 1, 1997
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Part C
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C to this Registration Statement.
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STATEMENT OF ADDITIONAL INFORMATION
FEBRUARY 1, 1997
COWEN STANDBY RESERVE FUND, INC.
FINANCIAL SQUARE, NEW YORK, NEW YORK 10005
(212) 495-6724, (800) 262-7116
CONTENTS
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PAGE
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Investment Objective and Policies ............................... 2
Management of the Fund .......................................... 6
Additional Purchase and Redemption Information .................. 9
Additional Information Concerning Taxes ......................... 9
Dividends ...................................................... 10
Determination of Yield .......................................... 10
Auditors and Counsel ............................................ 11
Financial Statements............................................. 11
Appendix - Description of Commercial Paper,
Medium Term Note Ratings and Bond Ratings................ 12
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This Statement of Additional Information is meant to be read in
conjunction with the Prospectus of Cowen Standby Reserve Fund, Inc. (the "Fund")
dated February 1, 1997, and is incorporated by reference in its entirety into
that Prospectus. Because this Statement of Additional Information is not itself
a prospectus, no investment in shares of the Fund should be made solely upon the
information contained herein. Copies of the Fund's Prospectus may be obtained by
calling Cowen & Company ("Cowen"), the Fund's principal underwriter, at (212)
495-6724 or by contacting any Cowen account representative.
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INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is the maximization of current
income to the extent consistent with the preservation of capital and the
maintenance of liquidity. The following policies supplement the descriptions of
the Fund's investment objectives and policies in the Prospectus.
United States Government, Agency and Instrumentality Securities
The Fund has the ability to invest in agency obligations which are
supported only by the credit of the instrumentality, such as Federal National
Mortgage Association bonds. Because the United States government is not
obligated by law to provide financial support to an instrumentality it sponsors,
the Fund will invest in obligations issued by such an instrumentality only when
Cowen determines that the credit risk with respect to the instrumentality does
not make its securities unsuitable for investment by the Fund.
Bank Obligations
Bank obligations will include United States dollar denominated
instruments issued or supported by the credit of United States or foreign banks
or savings institutions. The Fund's investments in the obligations of London
branches of United States banks and domestic branches of foreign banks may
subject the Fund to investment risks that are different in some respects from
those of investments in obligations of United States issuers. For example, there
may be less publicly available information about such entities than about
domestic banks and their domestic branches. The Fund will acquire securities
issued by London branches of United States banks or domestic branches of foreign
banks only when the Fund's investment manager believes that the risk associated
with such instruments is minimal. The Fund limits its purchase of certificates
of deposit of domestic branches of foreign banks to those sold by banks
organized in Canada, France, Germany, Japan, the Netherlands, Switzerland and
the United Kingdom.
Repurchase Agreements
The Fund may purchase debt instruments and concurrently enter into
repurchase agreements with sellers of the securities. Repurchase agreements are
contracts under which the buyer of a security simultaneously commits to resell
the security to the seller at an agreed-upon price on a specified date. However,
the Fund will not enter into repurchase agreements maturing in more than seven
days in an amount which, when added to any other securities which are restricted
as to resale or securities without readily available market quotations, would
exceed 10% of the Fund's total assets.
The Fund will enter into repurchase agreements with respect to its
portfolio securities with member banks of the Federal Reserve System or certain
non-bank dealers. Under each repurchase agreement, the selling institution will
be required to maintain collateral deposits
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equal at all times to the value of the securities subject to the repurchase
agreement at not less than their repurchase price. Repurchase agreements could
involve certain risks in the event of default or insolvency of the other party,
including possible delays or restrictions upon the Fund's ability to dispose of
the underlying securities. Cowen, acting under the supervision of the Fund's
Board of Directors, reviews the creditworthiness of those non-bank dealers and
member banks of the Federal Reserve System with whom the Fund enters into
repurchase agreements to evaluate these risks.
Lending of Portfolio Securities
The Fund may from time to time lend securities from its portfolio to
brokers, dealers and financial institutions and receive collateral consisting of
cash or securities issued or guaranteed by the United States Government which
will be maintained at all times in an amount equal to at least 100% of the
current market value of the loaned securities. The Fund continues to be entitled
to the interest payable on the loaned securities and, in addition, receives
interest on the amount of the loan at a rate negotiated with the borrower. Such
loans will be terminable at any time. No such loans will be made to the Fund's
investment manager or its affiliates. The Fund may pay reasonable fees to
persons unaffiliated with the Fund in connection with arranging such loans.
Other Investment Limitations
The following investment limitations may not be changed without the
affirmative vote of the holders of a majority of the Fund's outstanding shares.
Such majority is defined as the lesser of (a) 67% of the Fund's shares present
at a meeting, if the holders of more than 50% of the outstanding shares are
present in person or by proxy or (b) more than 50% of the Fund's outstanding
shares.
The Fund may not:
1. Purchase common stocks, preferred stocks, warrants, other equity
securities, state bonds municipal bonds or industrial revenue bonds;
2. Borrow money except from banks for temporary or emergency purposes
including meeting redemption requests which might otherwise require the untimely
disposition of securities. Borrowing in the aggregate may not exceed 10%, and
borrowing for purposes other than meeting redemptions may not exceed 5%, of the
value of the Fund's total assets (including the amount borrowed) valued at the
lesser of cost or market less liabilities (not including the amount borrowed) at
the time the borrowing is made. The borrowings will be repaid before any
additional investments are made;
3. Pledge, hypothecate, mortgage or otherwise encumber its assets,
except in an amount up to 10% of the value of its net total assets but only to
secure borrowings for temporary or emergency purposes;
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4. Sell securities short or purchase securities on margin;
5. Write or purchase put or call options;
6. Underwrite the securities of other issuers or purchase securities
with contractual or other restrictions on resale;
7. Purchase or sell real estate, real estate investment trust
securities, commodities or commodity contracts or oil and gas interests;
8. Make loans to others except through purchasing qualified debt
obligations, loaning portfolio securities (see item 13, below), and entering
into repurchase agreements referred to under "Investment Objective and Policies"
(see also item 14, below);
9. Subject to the diversification requirements of Section 5 of the
Investment Company Act of 1940 (the "1940 Act"), invest more than 15% of its
assets in the obligations (including repurchase agreements) of any one bank, or
invest more than 5% of its assets in the commercial paper of any one issuer;
10. Invest more than 25% of its assets in the securities of issuers in
any single industry, provided that there shall be no limitation on the purchase
of obligations issued or guaranteed by the United States government, its
agencies or instrumentalities, certificates of deposit and bankers acceptances;
11. Invest in companies for the purpose of exercising control;
12. Invest in securities of other investment companies, except as they
may be acquired as part of a merger, consolidation or acquisition of assets;
13. Lend its portfolio securities in excess of 20% of its total assets,
taken at their value. Any loans of portfolio securities will be made according
to guidelines established by the Securities and Exchange Commission and the
Fund's Board of Directors, including maintenance of collateral of the borrower
equal at all times to the current market value of the securities loaned;
14. Invest more than 10% of its assets in unmarketable securities,
including restricted securities, other unmarketable securities, and repurchase
agreements maturing in more than seven days from the date of acquisition;
If a percentage restriction is adhered to at the time of an
investment, a later increase or decrease in percentage resulting from a change
in values or assets will not constitute a violation of such restriction.
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Portfolio Valuation
The Fund's portfolio securities are valued on the basis of amortized
cost. Under this method of valuation, the Fund will initially value the
portfolio securities at cost. If the security was purchased at a discount, the
Fund will thereafter assume a constant proportional increase in value until
maturity. If the security was purchased at a premium, the Fund will thereafter
assume a constant proportional decrease in value until maturity. The Fund's
Board of Directors has established procedures reasonably designed to stabilize
the net asset value per share for the purposes of sales and redemptions at
$1.00. These procedures include periodic review, as the Board deems appropriate,
of the relationship between the amortized cost value per share and a net asset
value per share based upon available indications of market value. In the event
the difference between the two exceeds 1/2 of 1%, the Board will promptly
consider what action, if any, should be taken. The Board will also take such
action as it deems appropriate to eliminate or to reduce to the extent
reasonably practicable, any material dilution or other unfair results which
might arise from differences between the two. Such action may include redemption
in kind, selling portfolio instruments prior to maturity, shortening the average
portfolio maturity, withholding dividends or utilizing a net asset value per
share as determined by using available market quotations.
In connection with its use of amortized cost valuation, the Fund will
limit its investments to instruments the Board determines present minimal credit
risks and which are of high quality as determined by any major rating service,
or in the case of any instrument not so rated, of comparable quality as
determined by the Board of Directors. In addition, the Fund will not purchase
any instrument with a remaining maturity of more than 397 calendar days and will
maintain a dollar-weighted average portfolio maturity of 90 days or less. Should
the disposition of a portfolio security result in a dollar-weighted average
maturity of more than 90 days, the Fund would invest its available cash in such
a manner as to reduce the maturity to 90 days or less as soon as reasonably
practicable.
Portfolio Transactions
Purchase and sales of portfolio securities usually will be principal
transactions. Portfolio securities normally will be purchased directly from the
issuer or from an underwriter or market maker for the securities. There usually
will be no brokerage commissions paid by the Fund for such purchases and the
Fund has paid no brokerage commissions since its inception. Purchases of
portfolio securities from underwriters, if any, will include a commission or
concession paid by the issuer to the underwriters and purchases from dealers
serving as market makers will be made at a discount from the retail price of the
securities. While Cowen generally seeks competitive spreads or commissions, the
Fund will not necessarily be paying the lowest spread or commission available on
each transaction.
Allocation of transactions, including their frequency, to various
dealers is determined by Cowen in its best judgment and in a manner deemed fair
and reasonable to shareholders. The primary consideration is prompt execution of
orders in an effective manner at the most favorable price. Subject to this
consideration, dealers who provide supplemental investment
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research to Cowen may receive orders for transactions by the Fund. Information
so received will supplement but will not replace that to be provided by Cowen,
and Cowen's fees are not reduced as a consequence of the receipt of such
supplemental information. Such information may be useful to Cowen in serving
both the Fund and other clients and, conversely, supplemental information
obtained by the placement of business of other clients may be useful to Cowen in
carrying out its obligations to the Fund.
The Fund may attempt to increase yields by trading to take advantage
of short-term market variations. The Fund's annual portfolio turnover will be
relatively high although for regulatory reporting purposes, turnover is expected
to be zero. The Fund intends to derive not more than 30% of its gross income
from the sale of assets held less than three months.
MANAGEMENT OF THE FUND
Board of Directors
The names of the directors and executive officers of the Funds, their
addresses, principal occupations during the past five years and other
affiliations are set forth below. Each Director who is an "interested person" of
the Funds, as defined in the 1940 Act, is indicated by an asterisk; unless noted
otherwise, the business address of each such individual is Financial Square, New
York, New York 10005. Each of the directors is also a director of one or more
investment companies of which Cowen is Investment Manager.
Directors of the Fund
James H. Carey, Director, age 63. Managing Director of Briarcliff
Financial Associates, Inc. (since June, 1991) and Chief Executive Officer,
Director and Treasurer of National Capital Benefits Corporation (since March,
1994). Mr. Carey is also a Director of Airborne Freight Corporation, Jonathan
Woodner Company, NCB Insurance Limited (Bermuda), The Midland Company, The
Murray & Isabella Rayburn Foundation and the U.S. Committee for UNICEF. Prior
thereto he was President and Chief Executive Officer, The Berkshire Bank (May
1989 to June 1991). His address is 44 Sleepy Hollow Road, Briarcliff Manor, New
York 10510.
*Joseph M. Cohen, Chairman and Chief Executive Officer of the Fund, age
58. Principal Executive Officer and since March 1991 Class I Limited Partner of
Cowen and Chairman and President of Cowen Incorporated, the sole general partner
of Cowen. Prior thereto he was the Managing General Partner of Cowen. Director,
Chairman and Chief Executive Officer of the Cowen Mutual Funds.
Until December 15, 1992, he was also President of the Fund and the Cowen Mutual
Funds.
Dr. Peter P. Gil, Director, age 73. Director, Arthur D. Little
Management Institute Board since 1991 and currently Acting Dean of the
Institute; Trustee and Executive Committee Member, Plimoth Plantation,
(Plymouth, Mass.); Member of the Dominion Bridge Corporation's Technology
Committee. From July 1988 to July 1994, Dr. Gil served in a variety of senior
administrative positions at the Sloan School of Management, Massachusetts
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Institute of Technology, as Director, Management of Technology Program, the
Senior Executive Program, External Relations of the School; and Senior Lecturer.
Prior to July 1988 he was Associate Dean of the School. His address is 79 Main
Street, New Castle, New Hampshire 03854-0651.
Dr. Martin J. Gruber, Director, age 58. Chairman, Department of Finance
and Nomura Professor of Finance, Leonard N. Stern School of Business
Administration, New York University. He is also a Director of BT Pyramid Mutual
Funds, Japan Equity Fund, Inc., and the Taiwan Equity Fund, Inc.; and a Trustee
of BT Leadership Trust and the T.I.A.A. Board. His address is New York
University, 44 West 4th Street, New York, New York 10012.
*Gerald P. Kaminsky, Class I Limited Partner of Cowen and Managing
Director of Cowen Incorporated, age 57. Prior to that time, he was a General
Partner of Cowen since April, 1989. From April, 1986 to April, 1989 he was a
Special Limited Partner of Cowen. Mr. Kaminsky is a Senior Investment Officer of
the Funds.
and Director, age 58. Class I Limited Partner of Cowen and Managing Director of
Cowen Incorporated. Prior to that time he was a General Partner of Cowen.
Burton J. Weiss, Director, age 65. Self-employed consultant since March,
1988. His address is 103 Marin Drive, Chapel Hill, North Carolina 27516.
Officers of the Funds Not Noted Above
Rodd M. Baxter, Secretary. General Counsel of Cowen Asset Management and
Director of Cowen. His address is Financial Square, New York, New York 10005.
Gordon G. Ifill, Assistant Investment Officer. Portfolio Manager of
Cowen Asset Management. His address is Financial Square, New York, New York
10005.
Alan Koepplin, Investment Officer. Senior Vice President of Cowen Asset
Management. His address is Financial Square, New York, New York 10005.
David Sarns, President. Chief Administrative Officer and Class I Limited
Partner of Cowen and Managing Director of Cowen Incorporated. His address is
Financial Square, New York, New York 10005.
Irwood Schlackman, Controller. Mutual Fund Administrator of Cowen. His
address is Financial Square, New York, New York 10005.
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Compensation
No officer, director, partner or employee of Cowen or its affiliates
will receive any compensation from the Fund for serving as an officer or
director of the Fund. Directors who are not officers, directors, partners,
stockholders or employees of Cowen or its affiliates receive a fee of $3,000 per
annum plus $500 per meeting and $375 for each audit commitee meeting attended
and reimbursement for travel and out-of-pocket expenses. For the fiscal years
ended September 30, 1994, 1995, and 1996, such fees and expenses totaled
$20,528, $20,897 and $20,999 respectively. To the knowledge of the Fund and
Cowen, no shareholder beneficially owned 5% or more of the Fund's outstanding
common stock, and none of the Fund's directors and officers, either individually
or as a group, beneficially owned more than 1% of the Fund's outstanding stock
as of the close of business on January 13, 1997.
Compensation Table
Annual Total
Pension or Compensation
Retirement From
Aggregate Benefits Estimated Registrant
Compensation Accrued as Benefits and Fund
Name of From Part of Fund Upon Complex Paid
Person Registrant Expenses Retirement to Directors*
James H. Carey $5,000 -0- -0- $20,000
Peter Gil $5,000 -0- -0- $20,000
Martin J. Gruber $5,000 -0- -0- $20,000
Burton J. Weiss $5,000 -0- -0- $20,000
*There are six funds in the complex.
Investment Manager
Cowen serves as investment manager to the Fund pursuant to an
investment management agreement (the "Investment Management Agreement"). Cowen,
a limited partnership, is controlled by its general partner, Cowen Incorporated.
Cowen Incorporated is controlled by Mr. Joseph M. Cohen. The services provided
by, and the fees payable by the Fund to Cowen under the Investment Management
Agreement are described in the Prospectus.
Cowen has agreed that if in any fiscal year the aggregate expenses of
the Fund (including fees pursuant to the Investment Management Agreement, but
excluding interest, taxes, brokerage expenses, and, with the prior written
consent of the necessary state securities commissions, extraordinary expenses)
exceed the applicable expense limitation of any state having jurisdiction over
the Fund, Cowen will reimburse such excess expense. Cowen's expense
reimbursement obligation is limited to the amount of the fees it receives under
the Agreement, unless a higher amount of reimbursement were to be required under
applicable
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state law or regulations. Such expense reimbursement, if any, will be estimated,
reconciled and paid on a monthly basis. The most stringent state expense
limitation applicable to the Fund presently requires reimbursement of expenses
in any year that such expenses exceed 2 1/2% of the first $30 million of average
net assets, 2% of the next $70 million of average net assets, and 1 1/2% of
average net assets in excess of $100 million, provided that in no event shall
the amount of expense reimbursement required be greater than the investment
advisory fee. There was no reimbursement required under the expense limitation
for the fiscal year ended September 30, 1996. For the fiscal years ended
September 30, 1994, 1995, and 1996 Cowen received fees for services rendered to
the Fund of $3,605,556, $3,924,438 and $5,266,603 respectively.
Custodian and Transfer and Dividend Agent
As custodian of the Fund's assets, Investors Fiduciary Trust Company,
a subsidiary of State Street Boston Corp., (i) maintains a separate account or
accounts in the name of the Fund, (ii) holds and transfers portfolio securities
on account of the Fund, (iii) makes receipts and disbursements of money on
behalf of the Fund and (iv) collects and receives all income and other payments
and distributions on account of the Fund's portfolio securities.
As the Fund's transfer and dividend disbursing agent, Investors
Fiduciary Trust Company (i) issues and redeems shares of the Fund, (ii)
addresses and mails all communications by the Fund to its shareholders and (iii)
maintains shareholder accounts.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Shares of the Fund are distributed by Cowen on a best efforts basis.
The Fund offers its shares continually and without a sales load. Information on
how to purchase and redeem Fund shares and how such shares are priced is
included in the Prospectus. The issuance of shares is recorded on the books of
the Fund, and share certificates are not issued unless expressly requested in
writing. Certificates are not issued for fractional shares.
Under the 1940 Act the Fund may suspend the right of redemption or
postpone the date of payment upon redemption for any period during which the New
York Stock Exchange is closed, other than customary weekend and holiday
closings, or during which trading on said Exchange is restricted, or during
which (as determined by the SEC by rule or regulation) an emergency exists as a
result of which disposal or valuation of portfolio securities is not reasonably
practicable, or for such other periods as the Securities and Exchange Commission
may permit. (The Fund may also suspend or postpone the recordation of the
transfer of its shares upon the occurrence of any of the foregoing conditions.)
ADDITIONAL INFORMATION CONCERNING TAXES
The Fund has qualified, and intends to continue to qualify each year,
as a regulated investment company. As such, the Fund will not be subject to
federal income tax on its net investment income and net capital gains, if any,
that it distributes to its shareholders, provided
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that it distributes at least 90% of its net investment income in each taxable
year. To qualify as a regulated investment company, the Fund may have to
restrict the degree to which it engages in short-term trading. Depending upon
the extent to which it is, or is deemed to be, conducting business in certain
states and localities, the Fund may be subject to taxation in such states or
localities.
In general, if a shareholder fails to furnish a correct taxpayer
identification number, fails to report dividend and interest income in full, or
fails to certify that he has provided a correct taxpayer identification number
and that he is not subject to withholding, the Fund may withhold a 31% federal
backup withholding tax on dividends, capital gains distributions and the
proceeds of redemptions. An individual's taxpayer identification number is his
social security number. The backup withholding tax is not an additional tax and
may be credited against a shareholder's regular federal income tax liability.
While the Fund does not expect to realize net long-term capital gains,
any such gains realized will be distributed annually. Such distributions will be
taxable to shareholders as long-term capital gain, regardless of how long a
shareholder has held Fund shares, and will be designated as capital gain
dividends in a written notice mailed by the Fund to shareholders not later than
60 days after the close of the Fund's taxable year.
Foreign countries may impose withholding and other taxes on interest
paid to the Fund with respect to its foreign investments. However, certain of
such foreign countries may have entered into tax conventions with the United
States which reduce or eliminate such taxes.
The foregoing is only a summary of certain tax considerations
generally affecting the Fund and its shareholders, and is not intended as a
substitute for careful tax planning. Investors are urged to consult their tax
advisers with specific reference to their own tax situations.
DIVIDENDS
Net investment income for dividend purposes consists of interest
accrued and discount earned (both original issue and market), if any, for the
applicable dividend period less amortization of market premium and applicable
expenses for such period.
DETERMINATION OF YIELD
The Fund will make available on each business day a "yield quotation",
which is a computation of the yield on its portfolio. The yield for the Fund is
calculated by determining the net change in the value of a hypothetical
preexisting account in the Fund having a balance of one share at the beginning
of a seven calendar day period for which yield is to be quoted, dividing the net
change by the value of the account at the beginning of the period to obtain the
base period return, and annualizing the results (i.e., multiplying the base
period return by 365/7). The net change in the value of the account reflects the
value of additional shares purchased with dividends declared on the original
share and any such additional shares, but does not include realized gains and
losses or unrealized appreciation and depreciation. The
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Fund may also calculate an effective annualized yield quotation computed on a
compound basis by adding 1 to the base period return (calculated as described
above), raising that sum to a power equal to 365 divided by 7, and subtracting
1.
Current yield will fluctuate from time to time and is not necessarily
representative of future results. Current yield information may be useful in
reviewing the Fund's performance, but because current yield will fluctuate such
information may not provide a basis for comparison with bank deposits, or other
investments which pay a fixed yield for a stated period of time. The current
yield of the Fund is affected by the kind and quality of the instruments in the
Fund's portfolio, its portfolio maturity, and its operating expenses. An
investor's principal is not guaranteed by the Fund.
Investors should recognize that in periods of declining interest rates
the Fund's yield will tend to be somewhat higher than prevailing market rates,
and in periods of rising interest rates the Fund's yield will tend to be
somewhat lower. Also, when interest rates are falling, the inflow of net new
money to the Fund from the continuous sale of its shares will likely be invested
in portfolio instruments producing lower yields than the balance of the Fund's
portfolio, thereby reducing the current yield of the Fund. In periods of rising
interest rates, the opposite can be expected to occur.
On occasion, the Fund may compare its yield to the Donaghue's Money
Fund Average (First Tier), an average compiled by Donaghue's Money Fund Report,
a widely recognized independent publication that monitors the performance of
money market mutual funds. As with yield quotations, yield comparisons should
not be considered as representative of the Fund's yields for any future period.
AUDITORS AND COUNSEL
Ernst & Young LLP, 787 Seventh Avenue, New York, New York 10019, has
been selected as the Fund's independent auditor.
Willkie Farr & Gallagher, 153 East 53rd Street, New York, New York
10022, serves as counsel for the Fund.
FINANCIAL STATEMENTS
The Fund hereby incorporates by reference the financial statements and
related notes and the report of Ernst & Young LLP thereon included in the Fund's
Annual Report to Shareholders for the fiscal year ended September 30, 1996. The
Fund will provide a copy of the Annual Report to each person who requests a copy
of this Statement of Additional Information. The Fund will also furnish a copy
of the Annual Report without charge to any Shareholder upon request directed to
the Fund at the address or telephone number given on the cover page of this
Statement of Additional Information.
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APPENDIX
Description of the two highest grades of rating of commercial paper,
medium term note, and bonds of Standard & Poor's Corporation ("S&P"), Moody's
Investors Service, Inc. ("Moody's"), Fitch Investors Service, Inc. ("Fitch"),
Duff & Phelps, Inc. ("Duff"), Thomson Bankwatch ("Thomson"), and IBCA Limited
("IBCA"). The Fund does not purchase or hold instruments rated below these two
grades.
COMMERCIAL PAPER
S&P
The rating A-1+ is the highest commercial paper rating assigned by S&P.
Commercial paper rated A-1 by S&P indicates a very strong degree of safety
regarding timely payments. Commercial paper rated A-1+ are those with an
"overwhelming degree of credit protection". Long-term senior debt of the same
issuer is rated "A" or better. The issuer has access to at least two additional
channels of borrowing. Basic earnings and cash flow have an upward trend with
allowance made for unusual circumstances. Typically, the issuer's industry is
well established and the issuer has a strong position within the industry. The
reliability and quality of management are unquestioned. Capacity for timely
payment on issues with an A-2 designation is strong. Relative strength or
weakness of the above factors determine whether the issuer's commercial paper is
rated A-1+ or A-1 (which constitute the top grade), or A-2.
Moody's
The rating Prime-1 ("P-1") is the highest commercial paper rating
assigned by Moody's. Among the factors considered by Moody's in assigning
ratings are the following: (1) evaluation of the management of the issuer; (2)
economic evaluation of the issuer's industry or industries and an appraisal of
speculative type risks which may be inherent in certain areas; (3) evaluation of
the issuer's products in relation to competition and customer acceptance; (4)
liquidity; (5) amount and quality of long term debt; (6) trend of earnings over
a period of ten years; (7) financial strength of parent company and the
relationships which exist with the issuer; and (8) recognition by the management
of obligations which may be present or may arise as a result of public interest
questions and preparations to meet such obligations. Issuers of P-1 paper must
have a superior capacity for repayment of short term promissory obligations and
ordinarily will be evidenced by leading market positions in well established
industries, high rates of return of funds employed, conservative capitalization
structures with moderate reliance on debt and ample asset protection, broad
margins in earnings coverage of fixed financial charges and high internal cash
generation, and well established access to a range of financial markets and
assured sources of alternate liquidity. Issues rated Prime-2 ("P-2") have a
strong capacity for repayment of short-term promissory obligations. This
ordinarily will be evidenced by many of the characteristics cited above but to a
lesser degree. Earnings trends and coverage ratios, while sound, will be more
subject to variation. Capitalization characteristics, while still appropriate,
may be more affected by external conditions. Ample alternate liquidity is
maintained.
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Fitch
The rating Fitch-1 (Highest Grade) is the highest commercial paper
rating assigned by Fitch. Paper rated Fitch-1 is regarded as having the
strongest degree of assurance for timely payment. The rating Fitch-2 (Very Good
Grade) is the second highest commercial paper rating assigned by Fitch; it
reflects an assurance of timely payment only slightly less in degree than the
strongest issues.
Duff
The highest category of Duff ratings includes Duff 1+, Duff 1 and Duff
1-. Duff 1+ indicates the highest certainty of timely payment. Short-term
liquidity, including internal operating factors and/or access to alternative
sources of funds, is outstanding, and safety is just below risk-free U.S.
Treasury short-term obligations. Duff 1 indicates very high certainty of timely
payment. Liquidity factors are excellent and supported by good fundamental
protection factors. Risk factors are minor. Duff 1- indicates high certainty of
timely payment. Liquidity factors are strong and supported by good fundamental
protection factors. Risk factors are very small. Duff 2 (Good Grade) indicates
good certainty of timely payment. Liquidity factors are strong and supported by
good fundamental protection factors. Risk factors are small.
Thomson
The highest Thomson short-term rating is TBW-1, which indicates a very
high degree of likelihood that principal and interest will be paid on a timely
basis. Thomson assigns its second highest rating, TBW-2, to short term paper if,
in Thomson's judgment, while the degree of safety regarding timely repayment of
principal and interest is strong, the relative degree of safety is not as high
as for issues rated TBW-1.
IBCA
The highest category of IBCA short term ratings is A1+, assigned to
obligations believed to be supported by the highest capacity for timely
repayment. The second category, A1, is assigned to obligations supported by a
strong capacity for timely repayment.
MEDIUM TERM NOTE RATINGS
Medium Term Notes are rated by the same rating agencies which rate
commercial paper. The Fund does not intend to purchase Medium Term Notes unless
they are rated in one of the two highest categories, as indicated above under
"Commercial Paper".
-13-
<PAGE> 40
BOND RATINGS
S&P
Bonds rated AA by S&P are judged by S&P to be high grade obligations,
and in the majority of instances differ only in small degrees from issues rated
AAA. Bonds rated AAA are considered by S&P to be the highest grade obligations
and possess the ultimate degree of protection as to principal and interest.
Moody's
Bonds rated AA by Moody's are judged by Moody's to be of high quality by
all standards. Together with the AAA group they are generally known as
high-grade bonds. They are rated lower than AAA bonds because margins of
protection may not be as large or fluctuations of protective elements may be of
greater amplitude or there may be other elements present which make the
long-term risks appear somewhat larger.
Fitch
Bonds rated AAA by Fitch are judged by Fitch to be strictly high grade,
broadly marketable, suitable for investment by trustees and fiduciary
institutions and liable to only slight market fluctuations other than through
changes in the money rate. The prime feature of an AAA bond is a showing of
earnings several times or many times interest requirements, with such stability
of applicable earnings that safety is beyond reasonable question whatever
changes occur in conditions. Bonds rated AA by Fitch are judged by Fitch to be
of safety virtually beyond question and are readily salable, whose merits are
not unlike those of the AAA class, but whose margin of safety is less strikingly
broad. The issue may be the obligation of a small company, strongly secured but
influenced as to rating by the lesser financial power of the enterprise and more
local type of market.
Duff
Bonds rated AAA by Duff represent Duff's judgment of highest credit
quality. The risk factors are negligible, being only slightly more than for
risk-free U.S. Treasury debt. An AA rating (including AA+, AA and AA-) from Duff
indicates Duff's judgment of high credit quality. Risk is modest but may vary
slightly from time to time because of economic conditions.
Thomson
The highest Thomson rating, A, indicates that the company possesses an
exceptionally strong balance sheet and earnings record, translating into an
excellent reputation and very good access to its natural money markets. If
weakness or vulnerability exists in any aspect of the company's business, it is
entirely mitigated by the strengths of the organization. The second highest
Thomson rating, A/B, indicates that the company is financially very solid with a
-14-
<PAGE> 41
favorable track record and no readily apparent weakness. Its overall risk
profile, while low, is not quite as favorable as for companies in the highest
rating category.
IBCA
IBCA assigns its highest rating, AAA, to obligations for which it
believes there is the lowest expectation of investment risk. Capacity for timely
repayment of principal and interest is substantial such that adverse changes in
business, economic or financial conditions are unlikely to increase investment
risk significantly. The second highest rating, AA, is assigned to obligations
for which there is very low expectation of investment risk. Capacity for timely
repayment of principal and interest is substantial. Adverse changes in business,
economic, or financial conditions may increase investment risk albeit not very
significantly.
-15-
<PAGE> 42
PART C
OTHER INFORMATION
Item 24: Financial Statements and Exhibits
(a) Financial Statements included in Registration Statement:
(i) Financial Highlights included in Part A.
(ii) Incorporated by reference under "Financial
Statements" in Part B is the Annual Report to
Shareholders for the fiscal year ended September
30, 1996, which includes the Statement of
Investments and Statement of Assets and
Liabilities as of September 30, 1996; Statement of
Operations for the year ended September 30, 1996;
Statement of Changes in Net Assets for the years
ended September 30, 1995 and 1996; Notes to
Financial Statements; and Report of Ernst & Young
LLP, Independent Auditors, dated October 29, 1996.
(b) Exhibits:
Exhibit No. Description of Exhibits
- ----------- -----------------------
1.A. Articles of Incorporation of Registrant, June 15, 1981
1.B. Articles of Amendment, Sept. 14, 1981
1.C. Articles of Revival of Registrant, Nov. 11, 1992
2.A. Amended and Restated By-Laws, Oct. 28, 1987
2.B. Amendment to the By-Laws, Dec. 15, 1992
3 Not applicable
4 Not applicable
5 Investment Management Agreement, March 29, 1988
6 Distribution Agreement, Oct. 15, 1981
7 Not applicable
8 Custody Agreement with Investors Fiduciary
Trust Company, May 8, 1988
9 Transfer Agency Agreement with Investors Fiduciary
Trust Company, May 6, 1988
C-1
<PAGE> 43
10. A. Opinion and consent of Venable, Baetjer and Howard, Oct.
19, 1981
10. B. Opinion and consent of Willkie Farr & Gallagher, Oct. 20,
1981
11 Consent of Independent Auditors, Jan. 24, 1997
12 Not applicable
13 Not applicable
14 Not applicable
15 Not applicable
Item 25. Persons Controlled by or Under Common Control with
Registrant
None
Item 26. Number of Holders of Securities
Number of Record Holders
Title of Class as of January 9, 1997
-------------- ----------------------
Common Stock, par value $.01
per share ................... 76,857
Item 27. Indemnification
Reference is hereby made to Registrant's Registration Statement filed
on July 1, 1981, as amended on October 21, 1981.
C-2
<PAGE> 44
Items 28 and 29. Business and Other Connections of Investment
Manager; and Principal Underwriter
Cowen & Company ("Cowen") serves as Investment Manager to Registrant
and is the principal underwriter and distributor of the Registrant's shares.
Cowen is also the Investment Manager, principal underwriter and distributor of
shares of Cowen Income + Growth Fund, Inc. ("CI+G"), Cowen Standby Tax-Exempt
Reserve Fund, Inc. ("CSTXRF"), and the series of stock representing the Cowen
Opportunity Fund, Cowen Intermediate Fixed Income Fund ("CIFIF") and Cowen
Government Securities Fund ("CGSF") portfolios of Cowen Funds, Inc. ("CFI").
Listed on the following pages are the names of all of the Partners of Cowen as
of December 31, 1996, their positions with the Registrant, if any, and under the
heading "Other Business Activities and Principal Business Addresses", any
business, profession, vocation or employment of a substantial nature (other than
business of Cowen) in which they have been engaged for their own account or in
the capacity of director, officer, employee, partner or trustee during the past
two fiscal years of the Registrant (referred to on the following pages as
"CSRF").
C-3
<PAGE> 45
<TABLE>
<CAPTION>
OTHER BUSINESS
NAME, CLASS OF PARTNER POSITION, IF ANY, WITH FUND LISTED BELOW ACTIVITIES AND
AND PRINCIPAL BUSINESS --------------------------------------------------- PRINCIPAL BUSINESS
BUSINESS ADDRESS CSRF CSTXRF CI+G CFI ADDRESS
- ------------------------- ------------ ------------ ------------ ------------ -----------------------
<S> <C> <C> <C> <C> <C>
GENERAL PARTNER
Cowen Incorporated (1)
CLASS I LIMITED PARTNERS
Anthony J. Aliberti (1)...... Since 1/1/96 -- Cowen
Incorporated (1) -- MD
Richard A. Altschuler (3).... Since 3/30/92 -- Cowen
Incorporated (1) -- MD
Michael H. Bassett (1)....... Since 3/30/92 -- Cowen
Incorporated (1) -- MD
William A. Belfiore (1)...... Since 1/1/96 -- Cowen
Incorporated (1) -- MD
Anthony R.Bergamaschi (1).... Since 3/30/92 -- Cowen
Incorporated (1) -- MD
Christopher A. Beyer (1)..... Since 3/30/94 -- Cowen
Incorporated (1) -- MD
Andrew C. Brosseau (3)....... Since 1/1/96 -- Cowen
Incorporated (1) -- MD
Kennedy M. Buckley (1)....... Since 3/30/92 -- Cowen
Incorporated (1) -- MD
Richard S. Chu (3)........... Since 3/30/91 -- Cowen
Incorporated (1) -- MD
William R. Church (1)........ V, SI V, SI Since 3/30/91 -- Cowen
Incorporated (1) -- MD
Jarrod M. Cohen (1).......... Since 3/30/93 -- Cowen
Incorporated (1) -- MD
Joseph M. Cohen (1).......... C, D C, D C, D C, D Since 3/30/91 -- Cowen
Incorporated (1) -- P, D
Peter E. Cohen (1)........... Since 3/30/93 -- Cowen
Incorporated (1) -- MD
Terrence R. Connelly (1)..... Since 1/1/96 -- Cowen
Incorporated (1) -- MD
Philip A. Conti (1).......... Since 3/30/92 -- Cowen
Incorporated (1) -- MD
Arthur Cowen, III (1)........ ETC Enterprises, Inc. (8)
P; Since 3/30/91 Cowen
Incorporated (1) -- MD
Nancy M. Crowell (6)......... Since 3/30/92 -- Cowen
Incorporated (1) -- MD
John P. Dunphy (1)........... Since 3/30/92 -- Cowen
Incorporated (1) -- MD
James R. Dwyer (1)........... Since 3/30/92 -- Cowen
Incorporated (1) -- MD
</TABLE>
C-4
<PAGE> 46
<TABLE>
<CAPTION>
OTHER BUSINESS
NAME, CLASS OF PARTNER POSITION, IF ANY, WITH FUND LISTED BELOW ACTIVITIES AND
AND PRINCIPAL --------------------------------------------------- PRINCIPAL BUSINESS
BUSINESS ADDRESS CSRF CSTXRF CI+G CFI ADDRESS
- ------------------------- ------------ ------------ ------------ ------------ -----------------------
<S> <C> <C> <C> <C> <C>
Alec D. Green(7).............. Since 1/1/96 -- Cowen
Incorporated (1) -- MD
Edward I. Herbst (1).......... Since 3/30/91 -- Cowen
Incorporated (1) -- MD
Thomas L. Hyde (1)............ Since 3/30/93 -- Cowen
Incorporated (1) -- MD
Gerald P. Kaminsky (1)........ D, SI D, SI Since 3/30/91 -- Cowen
Incorporated (1) -- MD
Thomas King (3)............... Since 3/30/92 -- Cowen
Incorporated (1) -- MD
Albert F. Laub (3)............ Since 3/30/91 -- Cowen
Incorporated (1) -- MD
William D. Lautman (1)........ Since 3/30/93 -- Cowen
Incorporated (1) -- MD
Daniel T. Lemaitre (3)........ Since 3/30/92 -- Cowen
Incorporated (1) -- MD
Dana T. Lerch (1)............. Since 3/30/92 -- Cowen
Incorporated (1) -- MD
Maria F. Lewis-Kussmaul (3)... Since 3/30/93 -- Cowen
Incorporated (1) -- MD
Stuart S. Lovejoy (1)......... Since 1/1/96 -- Cowen
Incorporated (1) -- MD
Arthur S. Lutzke (1).......... Since 3/30/91 -- Cowen
Incorporated (1) -- MD
David E. Mack (1)............. Since 3/30/91 -- Cowen
Incorporated (1) -- MD
Stephen Malfitano (1)......... Since 3/30/94 -- Cowen
Incorporated (1) -- MD
Joseph M. Marinaro (1)........ Since 3/30/96 -- Cowen
Incorporated (1) -- MD
William O. Matthews (1)....... Since 3/30/91 -- Cowen
Incorporated (1) -- MD
William K. McCormick (5)...... Since 3/30/91 -- Cowen
Incorporated (1) -- MD
Carl A. Merz (1).............. Since 3/30/92 -- Cowen
Incorporated (1) -- MD
Raymond K. Moran (3).......... Since 3/30/91 -- Cowen
Incorporated (1) -- MD
</TABLE>
C-5
<PAGE> 47
<TABLE>
<CAPTION>
OTHER BUSINESS
NAME, CLASS OF PARTNER POSITION, IF ANY, WITH FUND LISTED BELOW ACTIVITIES AND
AND PRINCIPAL --------------------------------------------------- PRINCIPAL BUSINESS
BUSINESS ADDRESS CSRF CSTXRF CI+G CFI ADDRESS
- ------------------------- ------------ ------------ ------------ ------------ -----------------------
<S> <C> <C> <C> <C> <C>
Jerrold B. Newman (6).... Since 3/30/92 -- Cowen
Incorporated (1) -- MD
Donald F. Novell (1)..... Since 3/30/94 -- Cowen
Incorporated (1) -- MD
Gary S. Pardo (1)........ Since 3/30/93 -- Cowen
Incorporated (1) -- MD
Elizabeth T. Pawel (1)... Since 1/1/96 -- Cowen
Incorporated (1) -- MD
Drew Peck................ Since 1/1/96 -- Cowen
Incorporated (1) -- MD
Creighton H. Peet (1).... D, T D, T V, SI, T V, SI, T Since 3/30/91 -- Cowen
Incorporated (1) -- MD
Antonio G. Pinto (1)..... Since 3/30/91 -- Cowen
Incorporated (1) -- MD
Edward M. Posner (1)..... Since 3/30/91 -- Cowen
Incorporated (1) -- MD
Peter J. Power (1)....... Since 3/30/92 -- Cowen
Incorporated (1) -- MD
Paul S. Raniolo (1)...... Since 3/30/93 -- Cowen
Incorporated (1) -- MD
William Rechter (1)...... SI SI Since 3/30/92 -- Cowen
Incorporated (1) -- MD
Stephen E. Reilly (3).... Since 3/30/91 -- Cowen
Incorporated (1) -- MD
Todd B. Robbins (1)...... Since 3/30/93 -- Cowen
Incorporated (1) -- MD
Richard L. Rugani
(1 and 3).............. Since 3/30/92 -- Cowen
Incorporated (1) -- MD
David R. Sarns (1)....... P P P P Since 3/30/93 -- Cowen
Incorporated (1) -- MD
Ravi P. Singh (1)........ Since 3/30/93 -- Cowen
Incorporated (1) -- MD
Arthur J. Stavaridis
(1 and 3).............. Since 3/30/92 -- Cowen
Incorporated (1) -- MD
David K. Stone (3)....... Since 3/30/93 -- Cowen
Incorporated (1) -- MD
Richard S. Striefler (1). Since 3/30/93 -- Cowen
Incorporated (1) -- MD
Franklyn Theis (3)....... Since 3/30/92 -- Cowen
Incorporated (1) -- MD
</TABLE>
C-6
<PAGE> 48
<TABLE>
<CAPTION>
OTHER BUSINESS
NAME, CLASS OF PARTNER POSITION, IF ANY, WITH FUND LISTED BELOW ACTIVITIES AND
AND PRINCIPAL --------------------------------------------------- PRINCIPAL BUSINESS
BUSINESS ADDRESS CSRF CSTXRF CI+G CFI ADDRESS
- --------------------------- ------------ ------------ ------------ ------------ -----------------------
<S> <C> <C> <C> <C> <C>
Robert Valdez (6).......... Since 3/30/94 -- Cowen
Incorporated (1) -- MD
Cai Von Rumohr (3)......... Since 3/30/91 -- Cowen
Incorporated (1) -- MD
Harold Vogel (1)........... Since 1/1/96 -- Cowen
Incorporated (1) -- MD
Stephen R. Weber (3)....... Since 3/30/91 -- Cowen
Incorporated (1) -- MD
Miriam C. Willard (1)...... Since 1/1/96 -- Cowen
Incorporated (1) -- MD
Jonathan H. Zauderer (1)... Since 1/1/96 -- Cowen
Incorporated (1) -- MD
Michael Zolezzi (6)........ Since 3/30/94 -- Cowen
Incorporated (1) -- MD
</TABLE>
<TABLE>
<CAPTION>
LIMITED PARTNERS
- -------------------------
<S> <C> <C> <C> <C> <C>
Jacques Coe (4).......... None
George N. Cowen (4)...... None
Richard B. Frackman (1).. None
John B. Greene (5)....... None
Joseph V. Perri (1)...... None
Charles L. Wood (2)...... None
</TABLE>
- ---------------
(1) Financial Square, New York, New York 10005
(2) Texaco Heritage Plaza, 111 Bagby St., #2350, Houston, Texas 77002
(3) Two International Place, Boston, Massachusetts 02110
(4) West Building, 31st Floor, 280 Park Avenue, New York, New York 10017
(5) Courthouse Plaza Northeast, Dayton, Ohio 45402
C-7
<PAGE> 49
(6) Four Embarcadero Center, Suite 1200, San Francisco, California 94111
(7) One Angel Court, London, England ECZR, 7HJ
(8) 30 West 75th Street, New York, New York 10023
<TABLE>
<S> <C> <C>
P -- President
C -- Chairman of the Board
D -- Director
V -- Vice President
T -- Treasurer
S -- Secretary
SI -- Senior Investment Officer
AS -- Assistant Secretary
MD -- Managing Director
</TABLE>
C-8
<PAGE> 50
Item 29(c).
Not Applicable
Item 30. Location of Accounts and Records
(1) Cowen Standby Reserve Fund, Inc.
Financial Square
New York, New York 10005
(2) Investors Fiduciary Trust Company
127 West 10th Street
Kansas City, Missouri 64105
Item 31. Management Service
Not applicable.
Item 32. Undertakings
Not applicable.
C-9
<PAGE> 51
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, the Registrant has duly caused this
Amendment to be signed on its behalf by the undersigned, thereto duly
authorized, in the City of New York, and State of New York, on the 27 day of
January, 1997.
COWEN STANDBY RESERVE FUND, INC.
/s/ Joseph M. Cohen
by Creighton H. Peet,
Attorney-in-Fact
Joseph M. Cohen, Chairman
Pursuant to the requirements of the Securities Act of 1933, and
the Investment Company Act of 1940, the Registrant certifies that it meets all
of the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933, and has duly caused this Amendment
to the Registration Statement to be signed on its behalf by the undersigned,
thereto duly authorized, in the City of New York, and State of New York, on the
27 day of January, 1997.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Joseph M. Cohen Chairman (Chief January 27, 1997
by Creighton H. Peet, Executive Officer)
Attorney-in-Fact and Director
Joseph M. Cohen
/s/ James H. Carey Director January 27, 1997
by Creighton H. Peet,
Attorney-in-Fact
James H. Carey
/s/ Peter P. Gil Director January 27, 1997
by Creighton H. Peet,
Attorney-in-Fact
Peter P. Gil
/s/ Martin J. Gruber Director January 27, 1997
by Creighton H. Peet,
Attorney-in-Fact
Martin J. Gruber
/s/ Gerald P. Kaminsky Director January 27, 1997
by Creighton H. Peet,
Attorney-in-Fact
Gerald P. Kaminsky
/s/ Creighton H. Peet Treasurer (Chief January 27, 1997
- --------------------- Financial Officer)
Creighton H. Peet and Director
</TABLE>
C-10
<PAGE> 52
<TABLE>
<S> <C> <C>
/s/ Burton J. Weiss Director January 27, 1997
by Creighton H. Peet,
Attorney-in-Fact
Burton J. Weiss
</TABLE>
C-11
<PAGE> 53
INDEX TO EXHIBITS
Exhibit No. Description of Exhibits
- ----------- -----------------------
1.A. Articles of Incorporation of Registrant, June 15, 1981
1.B. Articles of Amendment, Sept. 14, 1981
1.C. Articles of Revival of Registrant, Nov. 11, 1992
2.A. Amended and Restated By-Laws, Oct. 28, 1987
2.B. Amendment to the By-Laws, Dec. 15, 1992
5 Investment Management Agreement, March 29, 1988
6 Distribution Agreement, Oct. 15, 1981
8 Custody Agreement with Investors Fiduciary
Trust Company, May 8, 1988
9 Transfer Agency Agreement with Investors Fiduciary
Trust Company, May 6, 1988
10. A. Opinion and consent of Venable, Baetjer and Howard, Oct.
19, 1981
10. B. Opinion and consent of Willkie Farr & Gallagher, Oct.
20, 1981
11 Consent of Independent Auditors, Jan. 24, 1997
<PAGE> 1
ARTICLES OF INCORPORATION
OF
EAST RIVER CASH RESERVES, INC.
THIS IS TO CERTIFY:
FIRST. The undersigned, Faith Colish, Attorney-at-Law, 598 Madison Avenue, New
York, New York, 10022 being at least 18 years of age does make and file these
Articles of Incorporation in writing and does hereby certify as follows for the
purposes of establishing a corporation for the transaction of the business and
promotion and conduct of the objects and purposes hereinafter stated, under the
provisions and subject to the requirements of the Maryland General Corporation
Law.
SECOND. The name of the corporation is EAST RIVER CASH
RESERVES, INC. (hereinafter called the "Corporation").
THIRD. The purpose or purposes for which the Corporation is formed and
the nature of the business or objects to be transacted, promoted or carried
on by the Corporation are as follows:
A. To conduct, operate, and carry on the business of an investment
company.
B. To subscribe for, invest in, purchase or otherwise acquire, to own, hold,
sell, exchange, pledge or otherwise dispose of, debt securities of every nature
and kind, including, without limitation, bonds, debentures, or obligations or
evidences of indebtedness or ownership issued or created by any and all
associations, trusts or corporations, public or private, whether created,
established or organized under the laws of the United States, and of the States,
or any territory or district or colony or possession thereof, including, without
limitation, all types of securities and obligations issued by the United States
Treasury and other agencies or instrumentalities of the United States
Government, or under the laws of any foreign country, and also foreign and
domestic government and municipal obligations, foreign and domestic bank
certificates of deposit, bank acceptances, commercial paper and secured call
loans; to pay for the same in cash or by the issue of stock, bonds or notes of
this Corporation or otherwise; and while owning and holding any such securities,
to exercise all the rights, powers and privileges of an owner, including the
right to transfer and convey the said securities to one or more persons, firms,
associations or corporations subject to voting trusts or other agreements
placing in such persons voting or other powers in respect of said securities; to
borrow money or otherwise
<PAGE> 2
obtain credit and to secure the same by mortgaging, pledging or otherwise
subjecting as security the assets of this Corporation; and to have all the
powers of a corporation under the applicable corporation laws, as in effect from
time to time, of the State of Maryland.
C. To issue, sell, repurchase, redeem, retire, cancel, acquire, hold, resell,
reissue, dispose of, transfer, and otherwise deal in, shares of Common Stock of
the Corporation, including shares of Common Stock of the Corporation in
fractional denominations, and to apply to any such repurchase, redemption,
retirement, cancellation or acquisition of shares of Common Stock of the
Corporation any funds or property of the Corporation whether capital or surplus
or otherwise, to the full extent now or hereafter permitted by the laws of the
State of Maryland.
D. To conduct its business, promote its purposes and carry on its operations in
any and all of its branches and maintain offices both within and without the
State of Maryland, in any States of the United States of America in the District
of Colombia and in any other parts of the world.
E. To do all and everything necessary, suitable, convenient, or proper for the
conduct, promotion, and attainment of any of the businesses and purposes herein
specified or which at any time may be incidental thereto or may appear conducive
to or expedient for the accomplishment of any of such businesses and purposes
and which might be engaged in or carried on by a corporation incorporated or
organized under the General Corporation Law, and to have and exercise all of the
powers conferred by the laws of the State of Maryland upon corporations
incorporated or organized under the General Corporation Law.
F. In these provisions, purposes shall also be construed as powers, and powers
shall also be construed as purposes, and the enumeration of specific purposes or
powers shall not be construed to limit other statements of purposes or powers or
those purposes or powers which this Corporation may otherwise have under
applicable law, all of the same being separate and cumulative; and all of the
same may be carried on, promoted and pursued, transacted or exercised in any
place whatsoever.
The foregoing objects and purposes shall not be construed to limit or restrict
in any manner the meaning of general terms or the general powers of the
Corporation now or hereinafter conferred by the laws of the State of Maryland,
nor shall the expression of one thing be deemed to exclude another, though it be
of like nature, not expressed.
<PAGE> 3
FOURTH. The Corporation's principal office in the State of Maryland is located
at 25 South Charles Street, in the City of Baltimore. The name and address of
this Corporation's resident agent is the Corporation Trust Incorporated, 25
South Charles Street, Baltimore, Maryland.
FIFTH. A. The total number of shares of capital stock which the
Corporation is authorized to issue is 1,000,000,000, shares of Common
Stock of the par value of $ .01 per share and the aggregate par value of
$10,000,000.
B. The Corporation may issue shares of its Common Stock in fractional
denominations to the same extent as its whole shares, and shares in fractional
denominations shall be shares of Common Stock having proportionately to the
respective fractions represented thereby all the rights of whole shares,
including, without limitation, the right to vote, the right to receive dividends
and distributions and the right to participate upon liquidation of the
Corporation.
C. All shares of the Common Stock of the Corporation now or hereafter authorized
shall be "subject to redemption" and "redeemable", in the sense used in the
General Corporation Law authorizing the formation of corporations, at the
redemption or purchase price for any such shares, determined in the manner set
out in these Articles of Incorporation or in any amendment thereto; provided,
however, that the Corporation shall have the right, at its option, to refuse to
redeem the shares of stock at less than the par value thereof. In the absence of
any specification as to the purpose for which shares of the Common Stock of the
Corporation are redeemed, shares so redeemed shall be deemed to be "purchased
for retirement" in the sense contemplated by the laws of the State of Maryland
and the number of the authorized shares of the Common Stock of the Corporation
shall not be reduced by the number of any shares repurchased by it.
SIXTH. There shall be not less than three directors and not more than 11
directors, provided, however, that until the Corporation shall have not more
than one shareholder, it shall have only one director. The name of the
individual who shall act as director until the first annual meeting of
stockholders or until his successor is duly chosen and qualified shall be
Michael M. Senft.
SEVENTH. Any determination made in good faith and, so far as accounting matters
are involved, in accordance with generally accepted accounting principles, by or
pursuant to the direction of the Board of
<PAGE> 4
Directors, as to: the amount of the assets, debts, obligations, or liabilities
of the Corporation; the amount of any reserves or charges set up and the
propriety thereof; the time of or purpose for creating such reserves or charges;
the use, alteration or cancellation of any reserves or charges (whether or not
any debt, obligation or liability for which such reserves or charges shall have
been created shall have been paid or discharged or shall be then or thereafter
required to be paid or discharged); the price or closing bid or asked price of
any investment owned or held by the corporation; the market value of any
investment or fair value of any other asset of the Corporation; the number of
shares of the Corporation outstanding; the estimated expense to the Corporation
in connection with purchases of its shares; the ability to liquidate investments
in orderly fashion; the extent to which it is practicable to deliver a
cross-section of the portfolio of the Corporation in payment for any such
shares, or as to any other matters relating to the issue, sale, purchase and/or
other acquisition or disposition of investments or shares of the Corporation,
shall be final and conclusive, and shall be binding upon the Corporation and all
holders of its shares, past, present and future, and shares of the Corporation
are issued and sold on the condition and understanding that any and all such
determinations shall be binding as aforesaid.
EIGHTH. The Corporation shall have perpetual existence.
NINTH. The private property of the stockholders shall not be subject to
the payment of corporate debts to any extent whatever.
TENTH. No preemptive rights shall accrue to any stockholder of the
Corporation or to any holder of other securities issued by the Corporation.
ELEVENTH. The following additional provisions not inconsistent with law
are hereby established for the purpose of defining, limiting and regulating
the powers of the Corporation and of its directors and stockholders:
A. The Board of Directors may, at any time and from time to time, contract for
investment advisory services, management services, distribution services, or
administrative services with such person, association, corporation or firm as
the Board of Directors may deem desirable, every such contract to comply with
such requirements and restrictions as may be set forth in the By-Laws of this
Corporation as from time to time amended; and any such contract may contain such
other terms interpretative of or in addition to said requirements and
restrictions as the Board of Directors may determine. The fact that any or any
of the directors and officers of this Corporation are also shareholders
partners, directors, officers or affiliates
<PAGE> 5
of the other party to any such contract or may be shareholders, trustees,
directors, officers, partners or affiliates of some other corporation, firm or
association with which such an investment advisory contract, management
contract, distributor's contract, or administrative services contract may
hereafter be made, shall not affect the validity of any such contract or
disqualify any officer or director of this Corporation from voting upon or
executing the same or create any liability or accountability based on adverse
interest in connection with any such contract, provided that any such interest
be disclosed to the directors prior to their action thereon.
B. Whenever, under the Maryland General Corporation Law, in the absence of an
express provision herein to the contrary, action by the Corporation would
require authorization by vote of more than a simple majority of the shares
entitled to vote thereon, such action may be authorized or taken by the
concurrence of a majority of the votes entitled to vote thereon, and when so
authorized or taken such action shall be valid and effective. Nothing herein
shall be construed to require a greater number of votes than would otherwise be
required by laws applicable to the Corporation for the authorization of any
action by the Corporation.
C. The Board of Directors may alter, amend or repeal the By-Laws of this
Corporation except with respect to any provision thereof which by law, by these
Articles of Incorporation or by the By-Laws requires action by the stockholders.
D. Assets of this Corporation may be held by or deposited with a bank or trust
company or other organization as custodian, pursuant to such requirements as may
be prescribed from time to time by the By-Laws of this Corporation and by the
Board of Directors pursuant to said By-Laws.
E. Any authorized but unissued stock, as well as any treasury stock, may be sold
for cash or for securities from time to time, by authority of the Board of
Directors, without first being offered to the existing stockholders, at a price
to net the Corporation not less than its net asset value determined as
hereinafter provided or its par value, whichever is higher. Anything herein to
the contrary notwithstanding, any part of the shares from time to time
authorized may (subject to any votes of the stockholders determining the terms
and manner of disposition of any such additional shares) from time to time be
issued to and among the stockholders by way of a stock dividend for such cash or
property in the possession of the Corporation as surplus as the Board of
Directors may determine, or may from time to time be issued and disposed of
through an offering to stockholders in proportion to their holdings for cash at
not less than the net asset value; provided that
<PAGE> 6
no shares shall be so issued to stockholders for cash in an amount less than the
par value of such shares, and no shares shall be issued as a stock dividend
except to the extent of cash or property in the possession of the Corporation as
surplus not less in value than the par value of the shares so to be issued.
F. The Board of Directors or any officer or officers or agent or agents of this
Corporation designated from to time for this purpose by the Board shall
determine the value of all the assets of this Corporation at such times as the
Board of Directors shall designate, and the value of such assets so determined,
less total liabilities of this Corporation (exclusive of capital stock and
surplus) divided by the number of shares outstanding shall be the net asset
value of a share until a new asset value is determined by the Board or such
officers or agents. In determining for the purposes of these Articles of
Incorporation the total value of the assets of the Corporation at any time,
investments and any other assets of the Corporation shall be valued in such a
manner as may be determined from time to time by the Board of Directors.
G. The Corporation shall redeem such of its shares as are offered by a
stockholder for redemption, upon presentation of a duly executed written
request, together with the certificate, if any, for the shares, duly endorsed,
with a proper signature guarantee, at the principal offices of the Corporation,
or of any agent appointed for such purpose by the Corporation, at a price equal
to the net asset value next determined and in accordance with these Articles of
Incorporation and applicable laws, rules and regulations. Such redemptions shall
be subject to any applicable laws, rules and regulations and to any procedures
described in the then current prospectus of the Corporation (if any) and any
applicable rules, not inconsistent herewith, established by the Board of
Directors of the Corporation. The right of redemption may be suspended or the
payment date postponed: (1) for any period (a) during which the New York Stock
Exchange is closed for other than customary weekend and holiday closings, or (b)
during which trading on the New York Stock Exchange is restricted; (2) for any
period during which an emergency exists as a result of which (a) the disposal by
the Corporation of investments owned by it is not reasonably practicable, or (b)
it is not reasonably practicable for the Corporation fairly to determine the
value of its net assets or (3) as determined by the Securities and Exchange
Commission; (4) for any period when an emergency as defined by the rules of the
Commission exists; or (5) during any period when the Commission has, by order,
permitted such suspension. In case of a suspension of the right of redemption,
the stockholder may withdraw his request, and his certificate, if any, from
<PAGE> 7
deposit, or he will receive payment of the net asset value determined next after
the suspension has been terminated. Payments for such shares purchased or
redeemed shall be made in cash within seven days after receipt of the duly
executed written request, together with the certificate, if any, for shares,
duly endorsed, with a proper signature guarantee.
H. Upon the following terms and conditions, the Corporation reserves the right
at any time or from time to time to redeem any shares of the capital stock of
the Corporation held in any shareholder account having an aggregate net asset
value of less than $500.00. Upon the exercise of such redemption right, the
Corporation shall mail to each such shareholder at his address as it appears in
the stock books of the Corporation a written notice of redemption, which notice
shall specify a date at least thirty days after the date of such mailing upon
which such redemption shall be effective and shall set forth the other terms and
conditions of such redemption. All shares of such shareholder shall be redeemed
on the effective date at their net asset value on such date; provided, however,
that if prior to such effective date such account shall be increased so that it
has an aggregate net asset value of at least $500 and if such increase shall
continue through the effective date, then such notice of redemption shall be
null and void and all such shares shall be and remain outstanding and in full
force and effect, subject to redemption by the Corporation upon notice as herein
provided if the aggregate net asset value of such account shall at any time
thereafter fall below $500.
TWELFTH. Meetings of stockholders may be held outside the State of Maryland, at
such place as is provided in, or fixed by the Board of Directors pursuant to,
the By-Laws. The books of the Corporation may be kept (subject to any provision
contained in the statutes) outside the State of Maryland at such place or places
as may be designated from time to time by the Board of Directors or in the
By-Laws of the Corporation.
THIRTEENTH. The Corporation reserves the right to amend, alter, change or repeal
any provision contained in these Articles of Incorporation, in the manner now or
hereafter prescribed by statute and all rights conferred upon stockholders
herein are granted subject to this reservation.
IN WITNESS WHEREOF, the undersigned has signed these Articles of Incorporation
this 15th day of June, 1981, and acknowledge the same to be my act.
/s/ Faith Colish, Sole Incorporator
<PAGE> 1
ARTICLES OF AMENDMENT
OF
EAST RIVER CASH RESERVES, INC.
Changing its name to:
STANDBY RESERVE FUND, INC.
approved and received by the State Department of Assessments and Taxation of
Maryland, September 14, 1981 at 8:30 o'clock A.M. as in conformity with law and
ordered recorded.
Recorded in Liber 2518, folio 3092 one of the Charter Records of the State
Department of Assessments and Taxation of Maryland.
Recording fee paid: $ 20.00
To the clerk of the Superior Court of Baltimore City
IT IS HEREBY CERTIFIED, that the within instrument, together with all
indorsements thereon, has been received, approved and recorded by the State
Department of Assessments and Taxation of Maryland.
AS WITNESS my hand and seal of the said Department of Baltimore.
(SEAL)
EAST RIVER CASH RESERVES, INC.
ARTICLES OF AMENDMENT
East River Cash Reserves, Inc., a Maryland corporation having its principal
office in Baltimore, Maryland (hereinafter call the Corporation) hereby
certifies to the State Department of Assessments and taxation of Maryland, that:
FIRST: Article SECOND of the charter of the Corporation is hereby
amended to change the name of the Corporation from "East River Cash
Reserves, Inc.: to "Standby Reserve Fund, Inc."
SECOND: The amendment to the charter of the Corporation herein made was duly
approved by vote at a meeting duly convened and held on August 27, 1981; and
that at the time of the approval by the directors there were
<PAGE> 2
no shares of stock of the Corporation entitled to vote on the matter outstanding
or subscribed for.
IN WITNESS WHEREOF, East River Cash Reserves, Inc. has caused
these articles to be signed in its name and on its behalf by its President and
witnessed by its Secretary on September 11, 1981.
EAST RIVER CASH RESERVES, INC. /s/ Michael M. Senft, President
Witness: /s/ Faith Colish, Secretary
THE UNDERSIGNED, President of East River Cash Reserves, Inc., who executed on
behalf of said corporation the foregoing Articles of Amendment, of which this
certificate is made a part, hereby acknowledges, in the name and on behalf of
said corporation, the foregoing Articles of Amendment to be the corporate act of
said corporation and further certifies that, to the best of his knowledge,
information and belief, the matters and facts set forth therein with respect to
the approval thereof are true in all material respects, under the penalties of
perjury.
/s/ Michael M. Senft
<PAGE> 1
STANDBY RESERVE FUND, INC.
ARTICLES OF REVIVAL
STANDBY RESERVE FUND, INC., a Maryland corporation having its principal office
in Baltimore City, Maryland (hereinafter referred to as the "Corporation"),
hereby certifies to the State Department of Assessments and Taxation of Maryland
that:
FIRST: These Articles of Revival are for the purpose of reviving the Charter of
the Corporation,
SECOND: The name of the Corporation at the time of the forfeiture of its Charter
was STANDBY RESERVE FUND, INC.
THIRD: The name which the Corporation will use after the revival of its Charter
pursuant to these Articles of Revival shall be STANDBY RESERVE FUND, INC., which
name complies with the provisions of the Corporations and Associations Article
of the Annotated Code of Maryland with respect to corporate names.
FOURTH: The name and post office address of the resident agent of the
Corporation in the State of Maryland is The Corporation Trust Company
Incorporated, 32 South Street, Baltimore, Maryland 21202. Said resident agent is
a citizen actually residing in this State.
FIFTH: Prior to the filing of these Articles of Revival, the Corporation has:
(a) Filed all annual reports required to be filed by the Corporation or which
would have been required to be filed by the Corporation if its Charter had not
been forfeited;
(b) Paid all fees required by law; and
(c) Paid all unemployment insurance contributions or reimbursement payments, all
State and local taxes (except taxes on real estate) and all interest and
penalties due by the Corporation or which would have become due if its Charter
had not been forfeited, whether or not barred by limitations.
IN WITNESS WHEREOF, the Corporation has caused these Articles of Revival to be
signed and acknowledged in its name and on its behalf by three of its last
acting directors and its corporate seal to be hereunto affixed
<PAGE> 2
all as of this 11 th day of November, 1992.
STANDBY RESERVE FUND, INC.
/s/ Joseph M. Cohen Lasting Acting Director
/s/ Martin J. Gruber Lasting Acting Director
/s/ Peter P. Gil Lasting Acting Director
The last acting president, vice president, secretary, and treasurer are unable
or unwilling to sign and acknowledge these Articles of Revival; therefor, the
undersigned who represent the lesser of a majority or 3 of the last acting
directors of the Corporation severally acknowledge these Articles of Revival to
be their act.
Dated: November 11 , 1992
/s/ Joseph M. Cohen Lasting Acting Director
/s/ Martin J. Gruber Lasting Acting Director
/s/ Peter P. Gil Lasting Acting Director
AFFIDAVIT FOR REVIVAL OF A CHARTER
I, Joseph M. Cohen of New York, New York, Last Acting Director of STANDBY
RESERVE FUND, INC, hereby declare that the previously mentioned corporation had
paid all unemployment insurance contributions or reimbursement payments, all
State and local taxes except taxes on real estate, and all interest and
penalties due by the corporation or which would have become due if the charter
had not been forfeited, whether or not barred by limitations.
/s/ Joseph M. Cohen
I hereby certify that on November 6, 1992, before me, the subscriber, a notary
public of the State of New York, in and for the County of New York, personally
appeared Joseph M. Cohen and made oath under the penalties of perjury that the
matters and facts set forth in this affidavit are true to the best of his
knowledge, information and belief.
/s/ Fran Victory
<PAGE> 3
AFFIDAVIT FOR REVIVAL OF A CHARTER
I, Martin J. Gruber of New York. New York, Last Acting Director of STANDBY
RESERVE FUND, INC, hereby declare that the previously mentioned corporation has
paid all unemployment insurance contributions or reimbursement payments, all
State and local taxes except taxes on real estate, and all interest and
penalties due by the corporation or which would have become due if the charter
had not been forfeited, whether or not barred by limitations.
/s/ Martin J. Gruber
I hereby certify that on November l , 1992. before me, the subscriber, a notary
public of the State of New York, in and for the County of New York , personally
appeared Martin J. Gruber and made oath under the penalties of perjury that the
matters and facts set forth in this affidavit are true to the best of his
knowledge, information and belief.
/s/ Fran Victory
AFFIDAVIT FOR REVIVAL OF A CHARTER
I, Peter P. Gil of New Castle, New Hampshire, Last Acting Director of STANDBY
RESERVE FUND, INC., hereby declare that the previously mentioned corporation has
paid all unemployment insurance contributions or reimbursement payments, all
State and local taxes except taxes on real estate, and all interest and
penalties due by the corporation or which would become due if the charter had
not been forfeited, whether or not barred by limitations.
/s/ Peter P. Gil
I hereby certify that on November 9, 1992, before me, the subscriber, a notary
public of The Commonwealth of Massachusetts, in and for the County of Middlesex,
personally appeared Peter P. Gil and made oath under the penalties of perjury
that the matters and facts set forth in this affidavit are true to the best of
his knowledge, information and belief.
/s/ Josephine M. DiCicco
<PAGE> 1
AMENDED AND RESTATED BY-LAWS
OF
STANDBY RESERVE FUND, INC.
(A Maryland Corporation)
ARTICLE I STOCKHOLDERS
1. CERTIFICATES REPRESENTING STOCK. Certificates representing shares of stock
shall set forth thereon the statements prescribed by Section 2-211 of the
General Corporation Law of Maryland ("General Corporation Law") and by any other
applicable provision of law and shall be signed by the President or a Vice
President and countersigned by the Secretary or an Assistant Secretary or the
Treasurer or an Assistant Treasurer and may be sealed with the corporate seal.
The signatures of any such officers may be either manual or facsimile signatures
and the corporate seal maybe either facsimile or any other form of seal. In case
any such officer who has signed manually or by facsimile any such certificate
ceases to be such officer before the certificate is issued, it nevertheless may
be issued by the corporation with the same effect as if the officer had not
ceased to be such officer as of the date of its issue. No certificate
representing shares of stock shall be issued for any share of stock until such
share is fully paid, except as otherwise authorized in Section 2-207 of the
General Corporation Law. The corporation may issue a new certificate of stock in
place of any certificate theretofore issued by it, alleged to have been lost,
stolen or destroyed, and the Board of Directors may require, in its discretion,
the owner of any such certificate or his legal representative to give bond, with
sufficient surety, to the corporation to indemnify it against any loss or claim
that may arise by reason of the issuance of a new certificate.
2. SHARE TRANSFERS. Upon compliance with provisions restricting the
transferability of shares of stock, if any, transfers of shares of stock of the
corporation shall be made only on the stock transfer books of the corporation by
the record holder thereof or by his attorney "hereunto authorized by power of
attorney duly executed and filed with the Secretary of the Corporation or with a
transfer agent or a registrar, if any, and on surrender of the certificate or
certificates for such shares of stock properly endorsed and the payment of all
taxes due thereon.
3. RECORD DATE FOR STOCKHOLDERS. The Board of Directors may fix, in advance, a
date as the record date for the purpose of determining stockholders entitled to
notice of, or to vote at, any meeting of stockholders, or stockholders entitled
to receive payment of any dividend
<PAGE> 2
or the allotment of any rights or in order to make a determination of
stockholders for any other proper purpose. Such date, in any case, shall be not
more than 90 days, and in case of a meeting of stockholders not less than 10
days, prior to the date on which the meeting or particular action requiring such
determination of stockholders is to be held or taken. In lieu of fixing a record
date, the Board of Directors may provide that the stock transfer books shall be
closed for a stated period but not to exceed 20 days. If the stock transfer
books are closed for the purpose of determining stockholders entitled to notice
of, or to vote at, a meeting of stockholders, such books shall be closed for at
least 10 days immediately preceding such meeting. If no record date is fixed and
the stock transfer books are not closed for the determination of stockholders
(1) The record date for the determination of stockholders entitled to notice of,
or to vote at, a meeting of stockholders shall be at the close of business on
the day on which the notice of meeting is mailed or the day 30 days before the
meeting, whichever is the closer date to the meeting; and (2)The record date for
the determination of stockholders entitled to receive payment of a dividend or
an allotment of any rights shall be at the close of business on the day on which
the resolution of the Board of Directors declaring the dividend or allotment of
rights is adopted, provided that the payment or allotment date shall not be more
than 60 days after the date on which the resolution is adopted.
4. MEANING OF CERTAIN TERMS As used herein in respect of the right to notice of
a meeting of stockholders or a waiver therefor to participate or vote thereat or
to consent or dissent in writing in lieu of a meeting, as the case may be, the
term "share of stock" or "shares of stock" or "stockholder" or
"stockholders"refers to an outstanding share or shares of stock and to a holder
or holders of record of outstanding shares of stock when the corporation is
authorized to issue only one class of shares of stock and said reference also is
intended to include any outstanding share or shares of stock and any holder or
holders of record of outstanding shares of stock of any class or series upon
which or upon whom the Charter confers such rights where there are two or more
classes or series of shares or upon which or upon whom the General Corporation
Law confers such rights notwithstanding that the Charter may provide for more
than one class or series of shares of stock, one or more of which are limited or
denied such rights thereunder.
5. STOCKHOLDER MEETINGS.
A. ANNUAL MEETINGS. No annual meeting of stockholders of the corporation shall
be held unless required by applicable law or otherwise
<PAGE> 3
determined by the Board of Directors.
B. PLACE AND TIME. Stockholder meetings shall be held at such place,
either within the State of Maryland or at such other place within the United
States, and at such date or dates as the directors from time to time may fix.
C. CALL. Stockholder meetings may be called by the Board of Directors
or the President and shall be called by the Secretary for the purpose of
removing a Director whenever the holders of shares entitled to at least ten
percent of all the votes entitled to be cast at such meeting shall make a duly
authorized request that such meeting be called and for all other purposes
whenever the holders of shares entitled to at least twenty-five percent of all
the votes entitled to be cast at such meeting shall make a duly authorized
request that such meeting be called.
D. NOTICE OR ACTUAL OR CONSTRUCTIVE WAIVER OF NOTICE. Written printed notice of
all meetings shall be given by the Secretary and shall state the time and place
of the meeting. The notice of a meeting shall state in all instances the purpose
or purposes for which the meeting is called. Written or printed notice of any
meeting shall be given to each stockholder either by mail or by presenting it to
him personally or by leaving it at his residence or usual place of business not
less than ten days and not more than ninety days before the date of the meeting,
unless any provisions of the General Corporation Law shall prescribe a different
elapsed period of time, to each stockholder at his address appearing on the
books of the corporation or the address supplied by him for the purpose of
notice. If mailed, notice shall be deemed to be given when deposited in the
United States mail addressed to the stockholder at his post office address as it
appears on the records of the corporation with postage thereon prepaid. Whenever
any notice of the time, place or purpose of any meeting of stockholders is
required to be given under the provisions of these by-laws, or of the General
Corporation Law, a waiver thereof in writing, signed by the stockholder and
filed with the records of the meeting, whether before or after the holding
thereof, or actual attendance or representation at the meeting shall be deemed
equivalent to the giving of such notice to such stockholder. The foregoing
requirements of notice also shall apply, whenever the corporation shall have any
class of stock which is not entitled to vote, to holders of stock who are not
entitled to vote at the meeting, but who are entitled to notice thereof and to
dissent from any action taken thereat.
E. STATEMENT OF AFFAIRS. The President of the corporation or, if the Board of
Directors shall determine otherwise, some other executive
<PAGE> 4
officer thereof, shall prepare or cause to be prepared annually a full and
correct statement of the affairs of the corporation, including a balance sheet
and a financial statement of operations for the preceding fiscal year, which
shall be filed at the principal office of the corporation in the State of
Maryland.
F. CONDUCT OF MEETING. Meetings of the stockholders shall be presided over by
one of the following officers in the order of seniority and if present and
acting: the President, the Chairman of the Board, a Vice President or, if none
of the foregoing is in office and present and acting, by a chairman to be chosen
by the shareholders. The Secretary of the corporation or, in his absence, an
Assistant Secretary, shall act as secretary of every meeting, but if neither the
Secretary nor an Assistant Secretary is present the chairman of the meeting
shall appoint a secretary of the meeting.
G. PROXY REPRESENTATION. Every stockholder may authorize another person or
persons to act for him by proxy in all matters in which a stockholder is
entitled to participate, whether for the purpose of determining his presence at
a meeting, or whether by waiving notice of any meeting, voting or participating
at a meeting, expressing consent or dissent without a meeting or otherwise.
Every proxy shall be executed in writing by the stockholder or by his duly
authorized attorney-in-fact and filed with the Secretary of the corporation. No
unrevoked proxy shall be valid after eleven months from the date of its
execution, unless a longer time is expressly provided therein.
H. INSPECTORS OF ELECTION. The directors, in advance of any meeting, may, but
need not, appoint one or more inspectors to act at the meeting or any
adjournment thereof. If an inspector or inspectors are not appointed, the person
presiding at the meeting may, but need not, appoint one or more inspectors. In
case any person who may be appointed as an inspector fails to appear or act, the
vacancy may be filled by appointment made by the directors in advance of the
meeting or at the meeting by the person presiding thereat. Each inspector, if
any, before entering upon the discharge of his duties, shall take and sign an
oath to execute faithfully the duties of inspector at such meeting with strict
impartiality and according to the best of his ability. The inspectors, if any,
shall determine the number of shares outstanding and the voting power of each,
the shares represented at the meeting, the existence of a quorum and the
validity and effect of proxies, and shall receive votes, ballots or consents,
hear and determine all challenges and questions arising in connection with the
right to vote, count and tabulate all votes, ballots or consents, determine the
result and do such
<PAGE> 5
acts as are proper to conduct the election or vote with fairness to all
stockholders. On request of the person presiding at the meeting or any
stockholder, the inspector or inspectors, if any, shall make a report in writing
of any challenge, question or matter determined by him or them and execute a
certificate of any fact found by him or them.
I. VOTING. Each share of stock shall entitle the holder thereof to one vote,
except in the election of directors, at which each said vote may be cast for as
many persons as there are directors to be elected. Except for election of
directors, a majority of the votes cast at a meeting of stockholders, duly
called and at which a quorum is present, shall be sufficient to take or
authorize action upon any matter which may come before a meeting, unless more
than a majority of votes cast is required by the corporation s Articles of
Incorporation. A plurality of all the votes cast at a meeting at which a quorum
is present shall be sufficient to elect a director.
J. INFORMAL ACTION. Any action required or permitted to be taken at a meeting of
stockholders may be taken without a meeting if a consent in writing, setting
forth such action, signed by all the stockholders entitled to vote on the
subject matter thereof and any other stockholders entitled to notice of a
meeting of stockholders (but not to vote thereat) have waived in writing any
rights which they may have to dissent from such action and such consent and
waiver are filed with the records of the corporation.
ARTICLE II BOARD OF DIRECTORS
1. FUNCTIONS AND DEFINITION. The business and affairs of the
corporation shall be managed under the direction of a Board of Directors.
The use of the phrase "entire board" herein refers to the total number of
directors which the corporation would have if there were no vacancies.
2. QUALIFICATIONS AND NUMBER. Each director shall be a natural person of full
age. A director need not be a stockholder, a citizen of the United States or a
resident of the State of Maryland. The initial Board of Directors shall consist
of two persons. Thereafter, the number of directors constituting the entire
board shall never be less than three or the number of stockholders, whichever is
less. At any regular meeting or at any special meeting called for that purpose,
majority of the entire Board of Directors may increase or decrease the number of
directors, provided that the number thereof shall never be less than three or
the number of stockholders, whichever is less, nor more than eleven and further
provided that the tenure of office of a director shall not be affected by any
decrease in the number of
<PAGE> 6
directors.
3. ELECTION AND TERM. The first Board of Directors shall consist of the
directors named in the Articles of Incorporation and shall hold office until the
first meeting of stockholders or until their successors have been elected and
qualified. Thereafter, directors who are elected at a meeting of stockholders,
and directors who are elected in the interim to fill vacancies and newly created
directorships, shall hold office until their successors have been elected and
qualified. Newly created directorships and any vacancies in the Board of
Directors by the stockholders, may be filled by the Board of Directors, subject
to the provisions of the Investment Company Act of 1940. Newly created
directorships filled by the Board of Directors shall be by action of a majority
of the entire board of Directors. All other vacancies to be filled by the Board
of Directors may be filled by a majority of the remaining members of the Board
of Directors, although such majority is less than a quorum thereof.
4. MEETINGS.
A. TIME. Meetings shall be held at such time as the Board shall fix,
except that the first meeting of a newly elected Board shall be held as soon
after its elect on as the directors conveniently may assemble.
B. PLACE. Meetings shall be held at such place within or without the
State of Maryland as shall be fixed by the Board.
C. CALL. No call shall be required for regular meetings for which the time
and place have been fixed. Special meetings may be called by or at the
direction of the President or of a majority of the directors in office.
D. NOTICE OR ACTUAL OR CONSTRUCTIVE WAIVER. Whenever any notice of the time,
place or purpose of any meeting of directors or any committee thereof is
required to be given under the provisions of the General Corporation Law or of
these by-laws, a waiver thereof in writing, signed by the director or committee
member entitled to such notice and filed with the records of the meeting,
whether before or after the holding thereof, or actual attendance at the meeting
shall be deemed equivalent to the giving of such notice to such director or such
committee member.
E. QUORUM AND ACTION. A majority of the entire Board of Directors shall
constitute a quorum except when a vacancy or vacancies prevents such majority,
whereupon a majority of the directors in office shall constitute a quorum,
provided such majority shall constitute at least
<PAGE> 7
one-third of the entire Board and, in no event, less than two directors. A
majority of the directors present, whether or not a quorum is present, may
adjourn a meeting to another time and place. Except as herein otherwise provided
and, except as in the General Corporation Law otherwise provided, the action of
a majority of the directors present at a meeting at which a quorum is present
shall be the action of the Board of Directors.
F. CHAIRMAN OF THE MEETING. The Chairman of the Board, if any and if present and
acting, or the President or any other director chosen by the Board, shall
preside at all meetings.
5. REMOVAL OF DIRECTORS. Any or all of the directors may be removed for cause or
without cause by the stockholders, who may elect a successor or successors to
fill any resulting vacancy or vacancies for the unexpired term of the removed
director or directors.
6. COMMITTEES. The Board of Directors may appoint from among its members an
Executive Committee and other committees composed of two or more directors and
may delegate to such committee or committees, in the intervals between meetings
of the Board of Directors, any or all of the powers of the Board of Directors in
the management of the business and affairs of the corporation, except the power
to amend the by-laws, to approve any consolidation, merger, share exchange or
transfer of assets, to declare dividends, to issue stock or to recommend to
stockholders any action requiring the stockholders' approval. In the absence of
any member of any such committee, the members thereof present at any meeting,
whether or not they constitute a quorum, may appoint a member of the Board of
Directors to act in the place of such absent member
7. INFORMAL ACTION Any action required or permitted to betaken at any meeting of
the Board of Directors or of any committee thereof may be taken without a
meeting, if a written consent to such action is signed by all members of the
Board of Directors or any such committee, as the case may be, and such written
consent is filed with the minutes of the proceedings of the Board or any such
committee. Members of the Board of Directors or any committee designated thereby
may participate in a meeting of such Board or committee by means of a conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other at the same time participation
by such means shall constitute presence in person at a meeting.
ARTICLE III OFFICERS
<PAGE> 8
The corporation may have a Chairman of the Board and shall have a President, a
Secretary and a Treasurer, who shall be elected by the Board of Directors, and
may have such other officers, assistant officers and agents as the Board of
Directors shall authorize from time to time. Any two or more offices, except
those of President and Vice-President, may be held by the same person, but no
person shall execute, acknowledge or verify any instrument in more than one
capacity, if such instrument is required by law to be executed, acknowledged or
verified by two or more officers. Any officer or agent may be removed by the
Board of Directors whenever, in its judgment, the best interests of the
corporation will be served thereby.
ARTICLE IV PRINCIPAL OFFICE - RESIDENT AGENT - STOCK LEDGER
The address of the principal office of the corporation in the State of Maryland
prescribed by the General Corporation law is 32 South Street, c/o The
Corporation Trust Incorporated, Baltimore, Maryland 21202. The name and address
of the resident agent in the state of Maryland prescribed by the General
Corporation Law are: The Corporation Trust Incorporated, 32 South Street,
Baltimore, Maryland 21202.The corporation shall maintain, at its principal
office in the State of Maryland prescribed by the General Corporation Law or at
the business office or an agency of the corporation, an original or duplicate
stock ledger containing the names and addresses of all stockholders and the
number of shares of each class held by each stockholder. Such stock ledger may
be in written form or any other form capable of being converted into written
form within a reasonable time for visual inspection. The corporation shall keep
at said principal office in the State of Maryland the original or a certified
copy of the by-laws, including all amendments thereto, and shall duly file
thereat the annual statement of affairs of the corporation prescribed by Section
2-314 of the General Corporation Law.
ARTICLE V CORPORATE SEAL
The corporate seal shall have inscribed thereon the name of the corporation and
shall be in such form and contain such other words and/or figures as the Board
of Directors shall determine or the law require.
ARTICLE VI FISCAL YEAR
The fiscal year of the corporation shall be fixed, and shall be subject to
change, by the Board of Directors.
<PAGE> 9
ARTICLE VII CONTROL OVER BY-LAWS
The power to make, alter, amend and repeal the by-laws is vested in the Board of
Directors of the corporation.
ARTICLE VIII INDEMNIFICATION
Notwithstanding any provision in the Maryland General Corporation Law or the
Corporation's Articles of Incorporation:
In the event that a claim for indemnification is asserted by a director, officer
or controlling person of the corporation in connection with the registered
securities of the corporation, the corporation will not make such
indemnification unless (i) the corporation has submitted, before a court or
other body, the questions of whether the person to be indemnified was liable by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of duties, and has obtained a financial decision on the merits that
such person was not liable by reason of such conduct or (ii) in the absence of
such decision, the corporation shall have obtained a reasonable determination,
base upon a review of the facts, that such person was not liable by virtue of
such conduct, by (a) the vote of a majority of directors who ate neither
interested ,persons as such term is defined in the Investment Company Act of
1940, nor parties to the proceeding or (b) an independent legal counsel in a
written opinion. The corporation will not advance attorneys' fees or other
expenses incurred by the person to be indemnified unless the corporation shall
have (i) received an undertaking by or on behalf of such person to repay the
advance unless it is ultimately determined that such person is entitled to
indemnification and one of the following conditions shall have occurred (x) such
person shall provide security for his undertaking, (y) the corporation shall be
insured against losses arising by reason of any lawful advances or (z) a
majority of the disinterested, non-party directors of the corporation, or an
independent legal counsel in a written opinion, shall have determined that based
on a review of readily available facts there is reason to believe that such
person ultimately will be found entitled to indemnification.
Dated: October 28 , 1987
<PAGE> 1
CERTIFICATE OF
AMENDMENT OF BY-LAWS OF
COWEN STANDBY RESERVE FUND, INC.
The undersigned, Faith Colish, hereby certifies as follows:
1. I am the Secretary of Cowen Standby Reserve Fund, Inc. (the "Corporation"), a
corporation organized under the Laws of the State of Maryland.
2. Effective December 15, 1992, the first sentence of Article III of the
Corporation's By-Laws was amended to read in its entirety as follows: "The
corporation shall have a Chairman, who shall be the Chief Executive Officer of
the corporation, a President, who shall be the Chief Operating Officer of the
corporation, a Secretary, and a Treasurer, all of whom shall be elected by the
Board of Directors and may have such other officers, assistant officers and
agents as the Board of Directors shall authorize from time to time."
IN WITNESS WHEREOF, I have executed this Certificate as of this 22nd day of
January, 1993.
/s/ FAITH COLISH
Secretary
<PAGE> 1
INVESTMENT MANAGEMENT AGREEMENT
March 29, 1991
Cowen & Co.
Financial Square
New York New York 10005
Dear Sirs:
Standby Reserve Fund, Inc. (the "Fund"), a corporation organized under the laws
of the State of Maryland, herewith confirms its agreement with Cowen & Co.
("Cowen"), as follows:
The Fund desires to employ its capital by investing and reinvesting the same in
investments of the type and in accordance with the limitations specified in its
Articles of Incorporation and in its Prospectus as from time to time in effect
copies of which have been or will be submitted to such and in such manner and to
such extent as may from time to time be approved by the Directors of the Fund.
The Fund desires to employ Cowen as its investment manager.
1. Services as Investment Manager.
Subject to the direction and control of the Directors of the Fund. Cowen will
assist in supervising all aspects of the Fund's operations. In this connection
it is understood that Cowen will from time to time employ or associate with
itself such person or persons as Cowen may believe to be particularly fitted to
assist it in the performance of this Investment Management Agreement (the
"Agreement"), it being understood that the compensation of such person or
persons shall be paid by Cowen and that no obligation may be incurred on the
Fund's behalf in any such respect. Cowen, a limited partnership formed under the
laws of the State of New York, will notify the Fund of any change in its
membership within a reasonable time after such change.
Subject to the supervision and approval the Directors of the Fund, Cowen will
provide investment management of the Fund's portfolio in accordance with the
Fund's investment objectives and policies as stated in its Prospectus as from
time to time in effect. In connection therewith. Cowen will provide investment
research and supervision of the Fund's investment and conduct a continuous
program of investment, evaluation and, if appropriate, sale and reinvestment of
the Fund's assets. Cowen will furnish
<PAGE> 2
to the Fund such statistical information, with respect to the investments which
the Fund may hold or contemplate purchasing, as the Fund may reasonably request.
The Fund has to be kept in touch with important developments materially
affecting its portfolio and shall expect Cowen, on its own initiative, to
furnish to the Fund from time to time such information as Cowen may believe
appropriate for this purpose. Cowen shall exercise its best judgment in
rendering these services.
Cowen also will supply office facilities (which may be in Cowen's own offices);
statistical and research data; data processing services clerical, accounting and
bookkeeping services; internal auditing and legal services; internal executive
and administrative services; stationery and office supplies; preparation of
reports to shareholders of the Fund; preparation of tax returns, reports to and
filings with the Securities and Exchange Commission and state Blue Sky
authorities; calculation of the net asset value of shares of the Fund; and
general assistance in all aspects of the Fund's operations.
The Fund understands that Cowen my, to the future act as investment manager,
investment adviser, subinvestment adviser and/or administrator to other
investment companies and the Fund has no objection to Cowen so acting. The Fund
further understands that Cowen now acts and will continue to act as investment
adviser to various fiduciary or other managed accounts, ant the Fund has no
objection to Cowen's so acting. In addition it is understood that the persons
employed by Cowen to assist in the performance of its duties hereunder will not
devote their full time to such service and nothing contained herein shall be
deemed to limit or restrict the right of Cowen or any affiliate of Cowen to
engage in and devote time and attention to other businesses to render services
of whatever kind or nature.
2. Fees; Expenses; Expense Reimbursement.
In consideration of services rendered pursuant to this Agreement, the Fund will
pay Cowen on the first business day of each month a fee at an annual rate of .50
of 1.00% of the Fund's average daily assets. Net asset value shall be computed
at least once a day. The fee for the period from the day of the month this
Agreement is entered into until the end of that month shall be pro-rated
according to the proportion which such period bears to the full monthly period.
Upon any termination of this Agreement before the end of any month, the fee for
such part of a month shall be pro-rated according to the proportion which such
period bears to the full monthly period and shall be payable upon the date of
termination of this Agreement.
<PAGE> 3
For the purpose of determining fees payable to Cowen, the value of the Fund's
net assets shall be computed in the manner specified is the Fund's Prospectus as
from time to time in effect.
Cowen will bear all expenses in connection with the performance of its services
under this Agreement. The Fund will bear other expenses to be incurred in its
operation including taxes, interest, brokerage fees and commissions, if any,
fees of directors who are not partners, officers or employees of Cowen;
Securities and Exchange Commission fees and state Blue Sky qualification fees;
management, advisory and administration fees; charges of custodians, transfer
and dividend disbursing agents; certain insurance premiums outside auditing and
legal expenses costs of maintenance of corporate existence, costs allocable to
investor services, including allocated telephone and personnel expenses
typesetting and printing of prospectuses for regulatory purposes and for
distribution to shareholders; costs of shareholders' reports and meetings of the
officers, Directors or shareholder of the Fund; and any extraordinary expenses.
If in any fiscal year the aggregate expenses of the Fund (including fees
pursuant to this Agreement, but excluding interest, taxes, brokerage and, with
the prior written consent of the necessary state securities commissions,
extraordinary expenses) exceed the expense limitations of any state having
jurisdiction over the Fund, Cowen will reimburse the Fund for such excess
expense. The expense reimbursement obligation of Cowen is limited to the amount
of its fees hereunder. Such expense reimbursement, if any, will be estimated,
reconciled and paid on a monthly basis.
3. Limitation of Liability.
Cowen shall not be liable as a result of any error of judgment or mistake of law
for any loss suffered by the Fund in connection with the matters to which this
Agreement relates, except for a 1055 resulting from willful misfeasance, bad
faith or gross negligence on its part in the performance of its duties or from
reckless disregard by it of its obligations and duties under this Agreement. Any
person, even trough also a partner, officer, employee, or agent of Cowen who may
be or become a Director, officer, employee or agent of the Fund, shall be
deemed, when rendering services to the Fund or acting on any business of the
Fund, to be rendering such services to or acting solely for the Fund and not as
a Director, officer, employee, or agent or one under the control or direction of
Cowen even though paid by it.
4. Term
<PAGE> 4
This Agreement shall become effective on the date first written above and shall
continue until the second anniversary of that date and thereafter shall continue
so long as such continuance is specifically approved at least annually by (i)
the Directors of the Fund or (ii) by a vote of a majority (as defined in the
Investment Company Act of 1940, as amended) of the Fund's outstanding voting
securities, provided that in either event the continuance is also approved by a
majority of the Directors who are not interested persons (as defined in said
Act) of any party to this Agreement, (by vote cast in person at a meeting called
for the purpose of voting such approval). This Agreement is terminable, with our
penalty, on not less than 60 days' notice, by the Directors of the Fund or by
vote of holders of a majority of the Fund's shares or, upon not less than 90
days' notice, by Cowen. This Agreement will also terminate automatically in the
event of its assignment (as defined in said Act).
If the foregoing is in accordance with your understanding, will you kindly so
indicate by signing and returning to us the enclosed copy hereof.
Very truly yours,
STANDBY RESERVE FUND, INC.
By: /s/ Stuart Goodman, Treasurer
Accepted: COWEN & COMPANY
By: COWEN INCORPORATED, GENERAL PARTNER
By: /s/ Creighton H. Peet, Managing Director
<PAGE> 1
DISTRIBUTION AGREEMENT
STANDBY RESERVE FUND, INC.
October 15, 1981
Cowen & Co.
One Battery Park Plaza
New York, New York 10004
Gentlemen:
This is to confirm that, in consideration of the agreements hereinafter
contained, the undersigned Standby Reserve Fund, Inc. (the "Fund"), a Maryland
corporation, has agreed that Cowen & Co. shall be, for the period of this
Agreement, the distributor of shares of Common Stock of the Fund.
1. Services as Distributor.
1.1 Cowen & Co. will act as agent for the distribution of shares of the Fund
covered by the registration statement and prospectus then in effect under the
Securities Act of 1933.
1.2 Cowen & Co. agrees to use its best efforts to solicit orders for the sale of
shares of the Fund and will undertake such advertising and promotion as it
believes reasonable in connection with such solicitation.
1.3 All activities by Cowen & Co. as distributor of the Fund's shares shall
comply with all applicable laws, rules and regulations, including, without
limitation, all rules and regulations made or adopted pursuant to the Investment
Company Act of 1940 by the Securities and Exchange Commission or any securities
association registered under the Securities Exchange Act of 1934.
1.4 Cowen & Co. will provide one or more persons, during normal business hours,
to respond to telephone questions with respect to the Fund.
1.5 Cowen & Co. will transmit any orders received by it for purchase or
redemption of shares of the Fund to Cowen & Co.
1.6 Whenever in their judgment such action is warranted by market, economic or
political conditions, or by abnormal circumstances of any kind,
<PAGE> 1
CUSTODY AGREEMENT
THIS AGREEMENT made the 8th day of May, 1988, by and between INVESTORS FIDUCIARY
TRUST COMPANY, a trust company chartered under the laws of the state of
Missouri, having its trust office located at 127 West 10th Street, 14th Floor,
Kansas City, Missouri 64105 ("Custodian"), and STANDBY RESERVE FUND, INC. a
Maryland corporation, having its principal office and place of business at
Financial Square, New York, New York 10005 ("Fund").
WITNESSETH:
WHEREAS, the Fund has issued its Common Stock, $.01 par value per share with the
proceeds of the sale allocated to the Fund's investment program; and WHEREAS,
Fund desires to appoint Investors Fiduciary Trust Company as Custodian of the
securities and monies of the Fund; and WHEREAS, Investors Fiduciary Trust
Company is willing to accept such appointment; NOW THEREFORE, for and in
consideration of the mutual promises contained herein, the parties hereto,
intending to be legally bound, mutually covenant and agree as follows:
1. APPOINTMENT OF CUSTODIAN
Fund hereby constitutes and appoints Custodian as custodian of the
securities and monies at any time owned by the Fund;
2. DELIVERY OF CORPORATE DOCUMENTS
Fund has delivered or will deliver to Custodian prior to the effective date of
this Agreement, copies of the following documents and all amendments or
supplements thereto, properly certified or authenticated:
A. Resolutions of the Board of Directors of Fund appointing Custodian as
custodian hereunder and approving the form of this Agreement; and
B. Resolutions of the Board of Directors of Fund designating certain persons to
give instructions on behalf of Fund to Custodian and authorizing Custodian to
rely upon written instructions over their signatures.
3. DUTIES AND RESPONSIBILITIES OF CUSTODIAN
A. Delivery of Assets
<PAGE> 2
Fund will deliver or cause to be delivered to Custodian on the effective date of
this Agreement, or as soon thereafter as practicable, and from time to time
thereafter, all portfolio securities acquired by it and monies then owned by it
except as permitted by the Investment Company Act of 1940 or from time to time
coming into its possession during the time of this Agreement shall continue in
effect. Custodian shall have no responsibility or liability whatsoever for or on
account of securities or monies not so delivered. All securities so delivered to
Custodian (other than bearer securities) shall be registered in the name of Fund
or its nominee, or of a nominee of Custodian, or shall be properly endorsed and
in form for transfer satisfactory to Custodian.
B. Delivery of Accounts and Records
Fund shall turn over to Custodian all of the Fund's relevant accounts and
records previously maintained by it. Custodian shall be entitled to rely
conclusively on the completeness and correctness of the accounts and records
turned over to it by Fund, and Fund shall indemnify and hold Custodian harmless
of and from any and all expenses, damages and losses whatsoever arising out of
or in connection with any error, omission, inaccuracy or other deficiency of
such accounts and records or in the failure of Fund to provide any portion of
such or to provide any information needed by the Custodian knowledgeably to
perform its function hereunder.
C. Delivery of Assets to Third Parties
Custodian will receive delivery of and keep safely the assets of Fund delivered
to it from time to time. Custodian will not deliver, assign, pledge or
hypothecate any such assets to any person except as permitted by the provisions
of this Agreement or any agreement executed by it according to the terms of
section 3.S. of this Agreement. Upon delivery of any such assets to a
subcustodian pursuant to Section 3.S.2 of this agreement, Custodian will create
and maintain records identifying those assets which have been delivered to the
subcustodian as belonging to Fund. The Custodian is responsible for the
securities and monies of Fund only until they have been transmitted to and
received by other persons as permitted under the terms of this Agreement, except
for securities and monies transmitted to a subcustodian as provided for by
section 3.S., for which Custodian remains responsible. Custodian shall be
responsible only for the monies and securities of Fund held by it or its
nominees or Subcustodians under this Agreement. Custodian may participate
directly or indirectly through a subcustodian in the Depository Trust Company or
<PAGE> 3
Treasury/Federal Reserve Book Entry System (as such entity is defined at 17 CFR
Section 270.17f-4(b) or other depository approved by the Fund).
D. Registration of Securities
Custodian will hold stocks and other registerable portfolio securities of Fund
registered in the name of Fund or in the name of any nominee of Custodian for
whose fidelity and liability Custodian will be fully responsible, or in street
certificate form, so-called, with or without any indication of fiduciary
capacity. Unless otherwise instructed, Custodian will register all such
portfolio securities in the name of its authorized nominee. All securities, and
the ownership thereof by Fund, which are held by Custodian hereunder, however,
shall at all times be identifiable on the records of the Custodian. The Fund
agrees to hold Custodian and its nominee harmless for any liability as a record
holder of securities held in custody.
E. Exchange of Securities
Upon receipt of instructions as defined herein in Section 4.A, Custodian will
exchange, or cause to be exchanged, portfolio securities held by it for the
account of Fund for other securities or cash issued or paid in connection with
any reorganization, recapitalization, merger, consolidation, split-up of shares,
change of par value, conversion or otherwise, and will deposit any such
securities in accordance with the terms of any reorganization or protective
plan. Without instructions, Custodian is authorized to exchange securities held
by it in temporary form for securities in definitive form, to effect an exchange
of shares when the par value of the stock is changed, and, upon receiving
payment therefor, to surrender bonds or other securities held by it at maturity
or when advised of earlier call for redemption, except that Custodian shall
receive instructions prior to surrendering any convertible security.
F. Purchases of Investments of the Fund
Fund will, on each business day on which a purchase of securities shall be made
by it, deliver to Custodian instructions which shall specify with respect to
each such purchase:
1. The name of the issuer and description of the security;
2. The number of shares or the principal amount purchased, and accrued
interest, if any;
<PAGE> 4
3. The trade date;
4. The settlement date;
5. The purchase price per unit and the brokerage commission, taxes and other
expenses payable in connection with the purchase;
6. The total amount payable upon such purchase; and
7. The name of the person from whom or the broker or dealer through whom the
purchase was made; and
In accordance with such instructions, Custodian will pay for out of monies held
for the account of the Fund, but only insofar as monies are available therein
for such purpose, and receive the portfolio securities so purchased by or for
the account of the Fund except that Custodian may in its sole discretion advance
funds to the Fund which may result in an overdraft because the monies held by
the Custodian in the account of the Fund are insufficient to pay the total
amount payable upon such purchase. Such payment will be made only upon receipt
by Custodian of the securities so purchased in form for transfer satisfactory to
Custodian.
G. Sales and Deliveries of Investments of the Fund Other than Options and
Futures
Fund will, on each business day on which a sale of investment securities of Fund
has been made, deliver to Custodian instructions specifying with respect to each
such sale:
1. The name of the issuer and description of the securities;
2. The number of shares or principal amount sold, and accrued interest, if any;
3. The date on which the securities sold were purchased or other information
identifying the securities sold and to be delivered;
4. The trade date;
5. The settlement date;
6. The sale price per unit and the brokerage commission, taxes or other
<PAGE> 5
expenses payable in connection with such sale;
7. The total amount to be received by Fund upon such sale; and
8. The name an address of the broker or dealer through whom or person to whom
the sale was made.
In accordance with such instructions, Custodian will deliver or cause to be
delivered the securities thus designated as sold for the account of the Fund to
the broker or other person specified in the instructions relating to such sale,
such delivery to be made only upon receipt of payment therefor in such form as
is satisfactory to Custodian, with the understanding that Custodian may deliver
or cause to be delivered securities for payment in accordance with the customs
prevailing among dealers in securities.
H. Purchases or Sales of Security Options, Options on Indices and Security Index
Futures Contracts
Fund will, on each business day on which a purchase or sale of the following
options and/or futures shall be made by it, deliver to Custodian instructions
which shall specify with respect to each such purchase or sale:
1. Security Options
a. The underlying security;
b. The price at which purchased or sold; c. The expiration date;
d. The number of contracts;
e. The exercise price;
f. Whether the transaction is an opening, exercising, expiring or closing
transaction;
g. Whether the transaction involves a put or call;
h. Whether the option is written or purchased;
i. Market on which option traded;
j. Name and address of the broker or dealer through whom the sale or
purchase was made.
<PAGE> 6
2. Options on Indices
a. The index;
b. The price at which purchased or sold;
c. The exercise price;
d. The premium;
e. The multiple;
f. The expiration date;
h. Whether the transaction is an opening, exercising, expiring or closing
transaction;
i. Whether the transaction involves a put or call;
j. Whether the option is written or purchased;
k. The name and address of the broker or dealer through whom the sale or
purchase was made, or other applicable settlement instructions.
3. Security Index Future Contracts
a. The last trading date specified in the contract and, when available, the
closing level, thereof;
b. The index level on the date the contract is entered into;
c. The multiple;
d. Any margin requirements; and
e. The need for a segregated margin account (in addition to instructions, and if
not already in the possession of Custodian, Fund shall deliver a substantially
complete and executed custodial safekeeping account and procedural agreement
which shall be incorporated by reference into this Custody Agreement).
f. The name and address of the futures commission merchant through
<PAGE> 7
whom the sale or purchase was made, or other applicable settlement instructions.
4. Option on Index Future Contracts
a. The underlying index future contract;
b. The premium;
c. The expiration date;
d. The number of options;
e. The exercise price;
f. Whether the transaction involves an opening, exercising, expiring or closing
transaction;
g. Whether the transaction involves a put or call;
h. Whether the option is written or purchased
i. The market on which the option is traded.
I. Securities Pledged or Loaned
If specifically allowed for in the Registration Statement of Fund:
1. Upon receipt of instructions, Custodian will release or cause to be released
securities held in custody to the pledgee designated in such instructions by way
of pledge or hypothecation to secure any loan incurred by Fund; provided,
however, that the securities shall be released only upon payment to Custodian of
the monies borrowed, except that in cases where additional collateral is
required to secure a borrowing already made, further securities may be released
or caused to be released for that purpose upon receipt of instructions. Upon
receipt of instructions, Custodian will pay, but only from funds available for
such purpose, any such loan upon redelivery to it of the securities pledged or
hypothecated therefor and upon surrender of the note or notes evidencing such
loan.
2. Upon receipt of instructions, Custodian will release securities held in
custody to the borrower designated in such instructions; provided, however, that
the securities will be released only upon deposit with
<PAGE> 8
Custodian of full cash collateral as specified in such instructions, and that
Fund will retain the right to any dividends, interest or distribution on such
loaned securities. Upon receipt of instructions and the loaned securities,
Custodian will release the cash collateral to the borrower.
J. Routine Matters
Custodian will, in general, attend to all routine and mechanical matters in
connection with the sale, exchange, substitution, purchase, transfer, or other
dealings with securities or other property of Fund except as may be otherwise
provided in this Agreement or directed from time to time by the Board of
Directors of Fund.
K. Deposit Account
Custodian will open and maintain a special purpose deposit account or accounts
in the name of Custodian ("Account"), subject only to draft or order by
Custodian upon receipt of instructions. All monies received by Custodian from or
for the account of the Fund shall be deposited in one or more said accounts
which have been identified as being account(s) to hold assets allocated to the
Fund barring events not in the control of the Custodian such as strikes,
lockouts or labor disputes, riots, war or equipment or transmission failure or
damage, fire, flood, earthquake or other natural disaster, action or inaction of
governmental authority or other causes beyond its control, at 9:00 a.m., Kansas
City time, on the second business day after deposit of any check into the Fund's
account(s). Custodian may open and maintain an Account in such other banks or
trust companies as may be designated by it or by properly authorized resolution
of the Board of Directors of Fund, such Account, however, to be in the name of
Custodian and subject only to its draft or order.
L. Income and other Payments to Fund
Custodian will:
1. Collect, claim and receive and deposit for the account of Fund all income and
other payments which become due and payable on or after the effective date of
this Agreement with respect to the securities deposited under this Agreement,
and credit the account of the Fund with such income when received;
2. Execute ownership and other certificates and affidavits for all federal,
state and local tax purposes in connection with the collection of bond and
<PAGE> 9
note coupons; and
3. Take such other action as may be necessary or proper in connection
with:
a. the collection, receipt and deposit of such income and other payments,
including but not limited to the presentation for payment of:
1. all coupons and other income items requiring presentation; and
2. all other securities which may mature or be called, redeemed, retired or
otherwise become payable and regarding which the Custodian has actual knowledge,
or notice of which is contained in publications of the type to which it normally
subscribes for such purpose; and
b. the endorsement for collection, in the name of Fund, of all checks, drafts or
other negotiable instruments. Custodian, however, will not be required to
institute suit or take other extraordinary action to enforce collection except
upon receipt of instructions and upon being indemnified to its satisfaction
against the costs and expenses of such suit or other actions. Custodian will
receive, claim and collect all stock dividends, rights and other similar items
and will deal with the same pursuant to instructions. Unless prior instructions
have been received to the contrary, Custodian will, without further
instructions, sell any rights held for the account of the particular Fund on the
last trade date prior to the date of expiration of such rights.
M. Payment of Dividends and other Distributions
On or before the declaration of any dividend or other distribution on the shares
of any class of Capital Stock of Fund ("Shares") by the Board of Directors of
Fund, Fund shall deliver to Custodian instructions with respect thereto,
including a copy of the Resolution of said Board of Directors certified by the
Secretary or an Assistant Secretary of Fund wherein there shall be set forth the
record date as of which shareholders entitled to receive such dividend or other
distribution shall be determined, the date of payment of such dividend or
distribution, and the amount payable per share on such dividend or distribution.
For purposes of the foregoing, it shall be sufficient for the Fund to furnish a
copy of the Resolution of the Board of Directors specifying procedures by which
the record date, payment date and amount of dividend or other distribution shall
be determined, and authorizing officers of the Fund to act in accordance with
such procedures. Except if the ex-dividend date and the reinvestment date of any
dividend
<PAGE> 10
are the came, in which case funds shall remain in the Custody Account,
on the date specified in such Resolution for the payment of such dividend or
other distribution, Custodian will pay out of the monies held for the account of
the Fund, insofar as the same shall be available for such purposes, and credit
to the account of the Dividend Disbursing Agent for Fund, such amount as may be
necessary to pay the amount per share payable in cash on the Shares issued and
outstanding on the record date established by such Resolution.
N. Shares of Fund Repurchased or Redeemed by Fund
Whenever any Fund Shares are repurchased or redeemed by Fund, Fund or its agent
shall advise Custodian of the class of shares redeemed or repurchased and the
aggregate dollar amount to be paid for such shares and shall confirm such advice
in writing. Upon receipt of such advice, Custodian shall charge such aggregate
dollar amount to the custody account of the Fund and either deposit the same in
the account maintained for the purpose of paying for the repurchase or
redemption of such Shares or deliver the same in accordance with such advice.
Custodian shall not have any duty or responsibility to determine that Fund
Shares repurchased or redeemed by Fund have been removed from the proper
shareholder account or accounts or that the proper number of such shares have
been cancelled and removed from the shareholder records.
O. Shares of Fund Purchased from Fund
Whenever the Shares are purchased from Fund, Fund will deposit or cause to be
deposited with Custodian the amount received for such shares, and will notify
Custodian of the class of shares purchased and to which the proceeds are to be
allocated. Custodian shall not have any duty or responsibility to determine that
Fund Shares purchased from Fund have been added to the proper shareholder
account or accounts or that the proper number of such shares have been added to
the shareholder records.
P. Proxies and Notices
Custodian will promptly deliver or mail or have delivered or mailed to Fund all
proxies properly signed, all notices of meetings, all proxy statements and other
notices, requests or announcements affecting or relating to securities held by
Custodian for Fund and will, upon receipt of instructions, execute and deliver
or cause its nominee to execute and deliver or mail or have delivered or mailed
such proxies or other authorizations as may be
<PAGE> 11
required. Except as provided by this Agreement or pursuant to instructions
hereafter received by Custodian, neither it nor its nominee will exercise any
power inherent in any such securities, including any power to vote the same, or
execute any proxy, power of attorney, or other similar instrument voting any of
such securities, or give any consent, approval or waiver with respect thereto,
or take any other similar action.
Q. Disbursements
Custodian will pay or cause to be paid insofar as funds are available for the
purpose, bills, statements and other obligations of Fund (including but not
limited to obligations in connection with the conversion, exchange or surrender
of securities owned by Fund, interest charges, dividend disbursements, taxes,
management fees, custodian fees, legal fees, auditors fees, transfer agents'
fees, brokerage commissions, compensation to personnel, and other operating
expenses of Fund) pursuant to instructions of Fund setting forth the account, if
more than one, from which payment is to be made, the name of the person to whom
payment is to be made, the amount of the payment, and the purpose of the
payment.
R. Daily Statement of Accounts
Custodian will, within a reasonable time, render to Fund as of the close of
business on each day, a detailed statement of the amounts received or paid and
of securities received or delivered for the account of the Fund during said day.
Custodian will, from time to time, upon request by Fund, render a detailed
statement of the securities and monies held for the Fund under this Agreement,
and Custodian will maintain such books and records as are necessary to enable it
to do so and will permit such persons as are authorized by Fund including Fund's
independent public accountants, access to such records or confirmation of the
contents of such records; and if demanded, will permit federal and state
regulatory agencies to examine the securities, books and records. Upon the
written instructions of Fund or as demanded by federal or state regulatory
agencies, Custodian will instruct any subcustodian to give such persons as are
authorized by Fund including Fund's independent public accountants, access to
such records or confirmation of the contents of such records; and if demanded,
to permit federal and state regulatory agencies to examine the books, records
and securities held by subcustodian which relate to Fund.
S. Appointment of Subcustodians
1. Notwithstanding any other provisions of this Agreement, monies or
<PAGE> 12
securities of Fund may be held in Custodian's own custody or in the custody of
one or more other banks or trust companies selected by Custodian. Any such
subcustodian must have the qualifications required for custodian under the
Investment Company Act of 1940, as amended. The subcustodian may participate
directly or indirectly in the Depository Trust Company or Treasury/Federal
Reserve Book Entry System (as such entity is defined at 17 CFR Sec.
270.17f-4(b)) or other depository approved by the Fund. Neither Custodian nor
subcustodian will be entitled to reimbursement by Fund for any fees or expenses
of any subcustodian. The appointment of a subcustodian will not relieve
Custodian of any of its obligations hereunder.
2. Notwithstanding any other provisions of this Agreement, Fund's foreign
securities (as defined in Rule 17f-5(c)(1) under the Investment Company Act of
1940) and Fund's cash or cash equivalents, in amounts reasonably necessary to
effect Fund's foreign securities transactions, may be held in the custody of one
or more banks or trust companies acting as Subcustodians, according to Section
3.S.1; and thereafter, pursuant to a written contract or contracts as approved
by Fund's Board of Directors, may be transferred to an account maintained by
such subcustodian with an eligible foreign custodian, as defined in Rule
17f-5(c)(2), provided that any such arrangement involving a foreign custodian
shall be in accordance with the provisions of Rule 17f-5 under the Investment
Company Act of 1940 as that Rule may be amended from time to time. 3. Custodian
shall be responsible for insuring that any subcustodian has appropriately
segregated assets of the Fund.
T. Adoption of Procedures
Custodian and Fund may from time to time adopt procedures as they agree upon,
and Custodian may conclusively assume that no procedure approved by Fund, or
directed by Fund, conflicts with or violates any requirements of its prospectus,
"Articles of Incorporation," Bylaws, or any rule or regulation of any regulatory
body or governmental agency. Fund will be responsible to notify Custodian of any
changes in statutes, regulations, rules or policies which might necessitate
changes in Custodian's responsibilities or procedures.
U. Overdrafts
If Custodian shall in its sole discretion advance funds to the account of the
Fund which results in an overdraft because the monies held by Custodian on
behalf of the Fund are insufficient to pay the total amount payable upon
<PAGE> 13
a purchase of securities as specified in Fund's instructions or for some other
reason, the amount of the overdraft shall be payable out of the account of the
Fund to IFTC upon demand and shall bear a reasonable interest rate determined by
Custodian from the date advanced until the date of payment.
V. Accounts and Records Property of Fund
Custodian acknowledges that all of the accounts and records maintained by
Custodian pursuant to this Agreement are the property of Fund, and will be made
available to Fund for inspection or reproduction within a reasonable period of
time, upon demand. Custodian will assist Fund's independent auditors, or upon
approval of Fund, or upon demand, any regulatory body having jurisdiction over
the Fund or Custodian, in any requested review of Fund's accounts and records
but shall be reimbursed for all expenses and employee time invested in any such
review outside of routine and normal periodic reviews. Upon receipt from Fund of
the necessary information, Custodian will supply necessary data for Fund's
completion of any necessary tax returns, questionnaires, periodic reports to
Shareholders and such other reports and information requests as Fund and
Custodian shall agree upon from time to time.
4. INSTRUCTIONS
A. The term "instructions", as used herein, means written or oral instructions
to Custodian from a designated representative of Fund. Certified copies of
resolutions of the Board of Directors of Fund naming one or more designated
representatives to give instructions in the name and on behalf of Fund, may be
received and accepted from time to time by Custodian as conclusive evidence of
the authority of any designated representative to act for Fund and may be
considered to be in full force and effect (and Custodian will be fully protected
in acting in reliance thereon) until receipt by Custodian of notice to the
contrary. Unless the resolution delegating authority to any person to give
instructions specifically requires that the approval of anyone else will first
have been obtained, Custodian will be under no obligation to inquire into the
right of the person giving such instructions to do so. Notwithstanding any of
the foregoing provisions of this Section 4, no authorizations or instructions
received by Custodian from Fund, will be deemed to authorize or permit any
Director, Trustee, officer, employee, or agent of Fund to withdraw any of the
securities or similar investments of Fund upon the mere receipt of such
authorization or instructions from such director trustee, officer, employee or
agent. Notwithstanding any other provision of this Agreement, Custodian, upon
<PAGE> 14
receipt (and acknowledgment if required at the discretion of Custodian) of the
instructions of a designated representative of Fund will undertake to deliver
for the account of the Fund monies, (provided such monies are on hand or
available) in connection with transactions for the account of the Fund and to
wire transfer such monies to such broker, dealer, subcustodian, bank or other
agent specified in such instructions by a designated representative of Fund.
B. No later than the next business day immediately following each oral
instruction, Fund will send Custodian written confirmation of such oral
instruction. At Custodian's sole discretion, Custodian may record on tape, or
otherwise, any oral instruction whether given in person or via telephone, each
such recording identifying the parties, the date and the time of the beginning
and ending of such oral instruction.
5. LIMITATION OF LIABILITY OF CUSTODIAN
A. Custodian shall hold harmless and indemnify Fund from and against any loss or
liability arising out of Custodian's failure to comply with the terms of this
Agreement or arising out of Custodian's negligence, willful misconduct, or bad
faith. Custodian shall not be liable for consequential damages. Custodian may
request and obtain the advice and opinion of counsel for Fund, or of its own
counsel with respect to questions or matters of law, and it shall be without
liability to Fund for any action taken or omitted by it in good faith, in
conformity with such advice or opinion. If IFTC reasonably believes that it
could not prudently act according to the instructions of the Fund or the Fund's
counsel, it may in its discretion, with notice to the Fund, not act according to
such instructions.
B. Custodian may rely upon the advice of Fund and upon statements of Fund's
accountants and other persons believed by it, in good faith, to be expert in
matters upon which they are consulted, and Custodian shall not be liable for any
actions taken, in good faith, upon such statements.
C. If Fund requires Custodian in any capacity to take, with respect to any
securities, any action which involves the payment of money by it, or which in
Custodian's opinion might make it or its nominee liable for payment of monies or
in any other way, Custodian, upon notice to Fund given prior to such actions,
shall be and be kept reasonably indemnified by Fund in an amount and form
satisfactory to Custodian against any liability on account of such action.
D. Custodian shall be entitled to receive, and Fund agrees to pay to
<PAGE> 15
Custodian, on demand, reimbursement for such cash disbursements, costs and
expenses as may be agreed upon from time to time by Custodian and Fund.
E. Custodian shall be protected in acting as custodian hereunder upon any
instructions, advice, notice, request, consent, certificate or other instrument
or paper reasonably appearing to it to be genuine and to have been properly
executed and shall, unless otherwise specifically provided herein, be entitled
to receive as conclusive proof of any fact or matter required to be ascertained
from Fund hereunder, a certificate signed by the Fund's President, or other
officer specifically authorized for such purpose.
F. Without limiting the generality of the foregoing, Custodian shall be under no
duty or obligation to inquire into, and shall not be liable for: 1. The validity
of the issue of any securities purchased by or for Fund, the legality of the
purchase thereof or evidence of ownership required by Fund to be received by
Custodian, or the propriety of the decision to purchase or amount paid therefor;
2. The legality of the sale of any securities by or for Fund, or the propriety
of the amount for which the same are sold; 3. The legality of the issue or sale
of any shares of the Capital Stock of Fund, or the sufficiency of the amount to
be received therefor; 4. The legality of the repurchase or redemption of any
shares of Fund Shares, or the propriety of the amount to be paid therefor; or 5.
The legality of the declaration of any dividend by Fund, or the legality of the
issue of any Fund Shares in payment of any stock dividend.
G. Custodian shall not be liable for, or considered to be Custodian of, any
money represented by any check, draft, wire transfer, clearing house funds,
uncollected funds, or instrument for the payment of money received by it on
behalf of Fund, until Custodian actually receives such money, provided only that
it shall advise Fund promptly if it fails to receive any such money in the
ordinary course of business, and use its best efforts and cooperate with Fund
toward the end that such money shall be received.
H. Except for any Subcustodians appointed under section 3.S., Custodian shall
not be responsible for loss occasioned by the acts, neglects, defaults or
insolvency of any broker, bank, trust company, or any other person with whom
Custodian may deal in the absence of negligence, misconduct, or bad faith on the
part of Custodian.
I. Notwithstanding anything herein to the contrary, Custodian may, and with
respect to any foreign subcustodian appointed under Section 3.S.2 must, provide
Fund for its approval, agreements with banks or trust
<PAGE> 16
companies which will act as Subcustodians for Fund pursuant to Section 3.S of
this Agreement.
J. Custodian may advance, or cause to be advanced, to Fund monies as a result of
orders or instructions of Fund or procedures for purposes pursuant to this
Agreement, including, among others, payments for securities, options or futures
purchased, return of securities loaned, pledged or sold pursuant to repurchase
or redemption of Fund Shares, payment of Custodian's fees, or where Custodian
shall incur or be assessed any taxes, charges, expenses, assessments, claims or
liabilities for which Custodian is entitled to be reimbursed or indemnified
under this Agreement (collectively the "Liabilities"). To further secure
Custodian's right to repayment of the Liabilities, Fund herewith grants to
Custodian a security interest in the property of the Fund to which such
obligation(s) relate(s) at any time held by, or for the account of, or under the
control of, Custodian.
6. COMPENSATION
Fund will pay to Custodian such compensation as is stated in the Fee Schedule
attached hereto as Exhibit A which may be changed from time to time as agreed to
in writing by Custodian and Fund. Custodian may charge such compensation against
monies held by it for the account of the Fund to which such obligation(s)
relate(s). Custodian will also be entitled, notwithstanding the provisions of
Sections 5.C. or 5.D. hereof, to charge against any monies held by it for the
account of the Fund to which such obligation(s) relate(s) the amount of any
loss, damage, liability or expense for which it shall be entitled to
reimbursement under the provisions of this Agreement including fees or expenses
due to IFTC for other services provided to the Fund by the Custodian. Custodian
will not be entitled to reimbursement by Fund for any loss or expenses of any
subcustodian.
7. TERMINATION
The term of this Agreement shall be one year. Either party to this Agreement may
terminate the same by notice in writing, delivered or mailed, postage prepaid,
to the other party hereto and received not less than ninety (90) days prior to
the date upon which such termination will take effect. Upon termination of this
Agreement, Fund will pay to Custodian such compensation for its reimbursable
disbursements, costs and expenses paid or incurred to such date and Fund will
use its best efforts to obtain a successor custodian. Unless the holders of a
"majority" (as that term is defined under the Investment Company Act of 1940) of
the outstanding shares of "Capital Stock" of Fund vote to have the securities,
<PAGE> 17
funds and other properties of the Fund held under this Agreement delivered and
paid over to some other person, firm or corporation specified in the vote,
having not less the Two Million Dollars ($2,000,000) aggregate capital, surplus
and undivided profits, as shown by its last published report, and meeting such
other qualifications for Custodian as set forth in the Bylaws of Fund, the Board
of Directors of Fund will, forthwith upon giving or receiving notice of
termination of this Agreement, appoint as successor custodian a bank or trust
company having such qualifications. Nothing hereinabove shall impose a duty upon
the Fund to call for a vote of its shareholders with respect to whether to
terminate the Agreement. Custodian will, upon termination of this Agreement
deliver to the successor custodian so specified or appointed, at Custodian's
office, all securities then held for the Fund by Custodian hereunder, duly
endorsed and in form for transfer, all funds and other properties of Fund
deposited with or held by Custodian hereunder, or will co-operate in effecting
changes in book-entries at the Depository Trust Company or in the
Treasury/Federal Reserve Book-Entry System pursuant to 31 CFR Sec. 306.118 In
the event no such vote has been adopted by the stockholders of Fund and no
written order designating a successor custodian has been delivered to Custodian
on or before the date when such termination becomes effective, then Custodian
will deliver the securities, funds and properties held for the Fund to a bank or
trust company at the selection of Custodian and meeting the qualifications for
custodian, if any, set forth in the Bylaws of Fund and having not less that Two
Million Dollars ($2,000,000) aggregate capital, surplus and undivided profits,
as shown by its last published report. Upon either such delivery to a successor
custodian, Custodian will have no further obligations or liabilities under this
Agreement. Thereafter such bank or trust company will be the successor custodian
under this Agreement and will be entitled to reasonable compensation for its
services. In the event that no such successor custodian can be found, Fund will
submit to its shareholders before permitting delivery of the cash and securities
owned by Fund to anyone other than a successor custodian, the question of
whether the Fund will be liquidated or function without a custodian.
Notwithstanding the foregoing requirement as to delivery upon termination of
this Agreement, Custodian may make any other delivery of the securities, funds
and property of the Fund permitted by the Investment Company Act of 1940, Fund's
Certificate of Incorporation and Bylaws then in effect or apply to a court of
competent jurisdiction for the appointment of a successor custodian.
8. NOTICES
Notices, requests, instructions and other writings received by Fund at
<PAGE> 18
Financial Square, New York, New York 10005 or at such other address as Fund may
have designated to Custodian in writing, will be deemed to have been properly
given to Fund hereunder; and notices, requests, instructions and other writings
received by Custodian at its offices at 127 West 10th Street, 14th Floor, Kansas
City, Missouri 64105, or to such other address as it may have designated to Fund
in writing, will be deemed to have been properly given to Custodian hereunder.
Until further notice is given to the Custodian, all notices and writings to be
delivered to the Fund by Custodian shall be given to Mr. Irwood Schlackman, c/o
Cowen & Co., Financial Square, New York, New York 10005 and IFTC shall on a best
efforts basis also give a copy to Mr. Stuart F. Goodman at the same address.
9. MISCELLANEOUS
A. This Agreement is executed and delivered in the State of Missouri and
shall be governed by the laws of said state.
B. All the terms and provisions of this Agreement shall be binding upon,
inure to the benefit of, and be enforceable by the respective successor and
assigns of the parties hereto.
C. No provisions of the Agreement may be amended or modified, in any
manner except by a written agreement properly authorized and executed by
both parties hereto.
D. The captions in this Agreement are included for convenience of
reference only, and in no way define or delimit any of the provisions hereof
or otherwise affect their construction or effect.
E. This Agreement shall become effective at the opening of business on the
9th day of May, 1988.
F. This Agreement may be executed simultaneously in two or more counterparts,
each of which will be deemed an original but all of which together will
constitute one and the same instrument.
G. If any part, term or provision of this Agreement is by the courts held to be
illegal, in conflict with any law or otherwise invalid, the remaining portion or
portions shall be considered severable and not be affected, and the rights and
obligations of the parties shall be construed and enforced as if the Agreement
did not contain the particular part, term or provision held to be illegal or
invalid.
<PAGE> 19
H. Custodian will not release the identity of Fund to an issuer which requests
such information pursuant to the Shareholder Communications Act of 1985 for the
specific purpose of direct communications between such issuer and Fund unless
the Fund directs the Custodian otherwise.
I. This Agreement may not be assigned by either party without prior
written consent of the other party.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their duly respective authorized officers.
INVESTORS FIDUCIARY TRUST COMPANY
By: /s/ Christopher E. Black, Vice President
ATTEST: /s/ Cheryl J. Naegler, Assistant Secretary
STANDBY RESERVE FUND, INC.
By: /s/ Stuart Goodman, Treasurer
ATTEST: /s/ Faith Colish, Secretary
<PAGE> 1
AGENCY AGREEMENT
THIS AGREEMENT made the 6th day of May, 1988, by and between STANDBY RESERVE
FUND, INC. a corporation existing under the laws of the State of Maryland,
having its principal place of business at Financial Square, New York, New York
10005 ("Fund"), and INVESTORS FIDUCIARY TRUST COMPANY, a state chartered trust
company organized and existing under the laws of the State of Missouri, having
its principal place of business at 127 West 10th Street, Kansas City, Missouri
64105 ("IFTC"):
WITNESSETH:
WHEREAS, the Fund has issued or intends to issue one or more series of its
Common Stock, $.01 par value per share, with the proceeds of the sale allocated
to the Fund's investment program; and
WHEREAS, Fund desires to appoint IFTC as Transfer Agent and Dividend Disbursing
Agent with respect to its common stock, and IFTC desires to accept such
appointment;
NOW, THEREFORE, in consideration of the mutual covenants herein contained, the
parties hereto agree as follows:
1. Documents to be Filed with Appointment
In connection with the appointment of IFTC as Transfer Agent and Dividend
Disbursing Agent for Fund, there will be filed with IFTC the following
documents:
A. A certified copy of the resolutions of the Board of Directors of Fund
appointing IFTC as Transfer Agent and Dividend Disbursing Agent, approving the
form of this Agreement, and designating certain persons to sign stock
certificates, if any, and give written instructions and requests on behalf of
Fund;
B. A certified copy of the Articles of Incorporation of Fund and all
amendments thereto;
C. A certified copy of the Bylaws of Fund;
D. Copies of Registration Statements and amendments thereto, filed with the
Securities and Exchange Commission.
<PAGE> 2
E. Specimens of all forms of outstanding stock certificates, in the forms
approved by the Board of Directors of Fund, with a certificate of the Secretary
of Fund, as to such approval;
F. Specimens of the signatures of the officers of the Fund authorized to sign
stock certificates and individuals authorized to sign written instructions and
requests;
G. An opinion of counsel for Fund with respect to:
(1) Fund's organization and existence under the laws of its state of
organization,
(2) Status of all shares of stock of Fund covered by the appointment under the
Securities Act of 1933, as amended, and any other applicable federal or state
statute and
(3) That all issued shares are, and all unissued shares will be, when issued,
validly issued, fully paid and nonassessable.
2. Certain Representations and Warranties of IFTC
IFTC represents and warrants to Fund that:
A. It is a trust company duly organized and existing and in good standing under
the laws of Missouri.
B. It is duly qualified to carry on its business in the State of Missouri.
C. It is empowered under applicable laws and by its Articles of Incorporation
and bylaws to enter into and perform the services contemplated in this
Agreement.
D. It is registered as a transfer agent to the extent required under the
Securities Exchange Act of 1934.
E. All requisite corporate proceedings have been taken to authorize it to enter
into and perform this Agreement.
F. It has and will continue to have and maintain the necessary facilities,
equipment and personnel to perform its duties and obligations under this
Agreement.
<PAGE> 3
3. Certain Representations and Warranties of Fund
Fund represents and warrants to IFTC that:
A. It is a corporation duly organized and existing and in good standing under
the laws of the State of Maryland.
B. It is an open-end diversified management investment company registered under
the Investment Company Act of 1940, as amended.
C. A registration statement under the Securities Act of 1933 has been filed and
will be effective with respect to all shares of Fund being offered for sale.
D. All requisite steps have been or will be taken as necessary to qualify Fund's
shares for sale in all applicable states.
E. Fund is empowered under applicable laws and by its charter and bylaws to
enter into and perform this Agreement.
4. Scope of Appointment
A. Subject to the conditions set forth in this Agreement, Fund hereby employs
and appoints IFTC as Transfer Agent and Dividend Disbursing Agent on or about
May 6, 1988 or in accordance with the Fund's Registration Statement.
B. IFTC hereby accepts such employment and appointment and agrees that it will
act as Fund's Transfer Agent and Dividend Disbursing Agent. IFTC agrees that it
will also act as agent in connection with Fund's periodic withdrawal payment
accounts and other open accounts or similar plans for shareholders, if any.
C. IFTC agrees to provide the necessary facilities, equipment and personnel to
perform its duties and obligations hereunder in accordance with industry
practice.
D. Fund agrees to use its best efforts to deliver to IFTC in Kansas City,
Missouri, as soon as they are available, all of its shareholder account records.
E. Subject to the provisions of Sections 19. and 20. hereof, IFTC agrees
<PAGE> 4
that it will perform all of the usual and ordinary services of Transfer Agent
and Dividend Disbursing Agent and as Agent for the various shareholder accounts,
including, without limitation, the following: issuing, transferring and
cancelling stock certificates, maintaining all shareholder accounts (including,
determining that (i) Fund shares purchased from Fund have been added to the
proper shareholder account or accounts and (ii) Fund shares repurchased or
redeemed by Fund have been removed from the proper shareholder account or
accounts and (iii) the proper number of shares have been added, removed or
cancelled from the Fund's shareholder records), preparing shareholder meeting
lists, mailing proxies, receiving and tabulating proxies, mailing shareholder
reports and prospectuses, withholding taxes on nonresident alien and foreign
corporation accounts, for pension and deferred income, backup withholding or
other instances agreed upon by the parties, preparing and mailing checks for
disbursement of income dividends and capital gains distributions, preparing and
filing U.S. Treasury Department Form 1099 for all shareholders, preparing and
mailing confirmation forms to shareholders and dealers with respect to all
purchases and liquidations of Fund shares and other transactions in shareholder
accounts for which confirmations are required, recording reinvestments of
dividends and distributions in Fund shares, recording redemptions of Fund shares
and preparing and mailing checks for payments upon redemption and for
disbursements to withdrawal plan holders.
F. Whenever any Fund shares are repurchased or redeemed by Fund, IFTC shall
advise the Fund's custodian of the stock so repurchased or redeemed, the
aggregate dollar amount to be paid for such shares, and shall confirm such
advice in writing.
G. Whenever Fund shares are purchased from Fund, IFTC will deposit with the
Fund's custodian the amount received for such shares into the account of the
Fund.
H. IFTC agrees to generate reports which provide certain information for blue
sky reporting by the Fund at least on a monthly basis within five business days
after the end of the month.
5. Limit of Authority
Unless otherwise expressly limited by the resolution of appointment or by
subsequent action by the Fund, the appointment of IFTC as Transfer Agent will be
construed to cover the full amount of authorized stock of the class or classes
for which IFTC is appointed as the same will, from time to time, be constituted
and any subsequent increases in such authorized amount.
<PAGE> 5
In case of such increase Fund will file with IFTC:
A. If the appointment of IFTC was theretofore expressly limited, a certified
copy of a resolution of the Board of Directors of Fund increasing the
authority of IFTC;
B. A certified copy of the amendment to the Articles of Incorporation of Fund
authorizing the increase of stock;
C. A certified copy of the order or consent of each governmental or regulatory
authority required by law to consent to the issuance of the increased stock, and
an opinion of-counsel that the order or consent of no other governmental or
regulatory authority is required;
D. Opinion of counsel for Fund stating:
(1) The status of the additional shares of stock of Fund under the Securities
Act of 1933, as amended, and any other applicable federal or state statute; and
(2) That the additional shares are, or when issued will be, validly issued,
fully paid and nonassessable.
6. Compensation and Expenses
A. In consideration for its services hereunder as Transfer Agent and Dividend
Disbursing Agent, Fund will pay to IFTC from time to time a reasonable
compensation for all services rendered as Agent, and also, all its reasonable
out-of-pocket expenses, charges, counsel fees, and other disbursements incurred
in connection with the agency. Such compensation will be set forth in a separate
schedule to be agreed to by Fund and IFTC, a copy of which is attached hereto
and incorporated herein by reference as though fully set out at this point. If
and as permitted by applicable law, IFTC may charge against any monies held
under this Agreement, the amount of any compensation, expense, loss, or
liability for which IFTC shall be entitled to reimbursement under this Agreement
on account of services performed for the Fund.
B. Fund agrees to promptly reimburse IFTC for all reasonable out-of-pocket
expenses or advances incurred by IFTC in connection with the performance of
services under this Agreement, for postage (and first class mail insurance in
connection with mailing stock certificates),
<PAGE> 6
envelopes, check forms, continuous forms, forms for reports and statements,
stationery, and other similar items, telephone and telegraph charges incurred in
answering inquiries from dealers or shareholders, microfilm used each year to
record the previous year's transaction in shareholder accounts and computer
tapes used for permanent storage of records and cost of insertion of materials
in mailing envelopes by outside firms.
7. Operation of IFTC System
A. In connection with the performance of its services under this Agreement, IFTC
is responsible for such items as:
(1) The accuracy of entries in IFTC's records reflecting orders and instructions
received by IFTC from dealers, shareholders, Fund or its principal underwriter;
(2) The availability and the accuracy of shareholder lists, shareholder account
verifications, confirmations and other shareholder account information to be
produced from its records or data;
(3) The accurate and timely issuance of dividend and distribution checks in
accordance with instructions received from Fund;
(4) The accuracy of redemption transactions and payments in accordance with
redemption instructions received from dealers, shareholders or Fund;
(5) The deposit daily in the appropriate special bank account established for
the Fund of all checks and payments received from dealers or shareholders for
investment in shares;
(6) The requiring of proper forms of instructions, signatures and signature
guarantees and any necessary documents supporting the legality of transfers,
redemptions and other shareholder account transactions, all in conformance with
IFTC's present procedures with such changes as may be required or approved by
Fund; and
(7) The maintenance of a current duplicate set of Fund's essential records at a
secure distant location, in a form available and usable forthwith in the event
of any breakdown or disaster disrupting its main operation.
8. Indemnification
<PAGE> 7
A. Except to the extent that IFTC is covered by and receives payment from any
insurance required hereunder, IFTC will not be responsible for, and Fund will
hold harmless and indemnify IFTC from and against any loss by or liability to
the Fund or a third party, including attorney's fees, in connection with any
claim or suit asserting any such liability arising out of or attributable to
actions taken or omitted by IFTC pursuant to this Agreement, unless IFTC has
acted negligently or in bad faith or in a manner constituting willful
misconduct. The matters covered by this indemnification include but are not
limited to those of Section 14 hereof.
Fund will be responsible for, and will have the right to conduct or control the
defense of any litigation asserting liability against which IFTC is indemnified
hereunder. IFTC will not be under any obligation to prosecute or defend any
action or suit in respect of the agency relationship hereunder, which, in its
opinion, may involve it in expense or liability, unless Fund will, as often as
requested, furnish IFTC with reasonable, satisfactory security and indemnity
against such expense or liability.
B. IFTC will hold harmless and indemnify Fund from and against any loss or
liability arising out of IFTC's failure to comply with the terms of this
Agreement or in breach of any representation or warranty of IFTC arising out of
IFTC's negligence, misconduct, or bad faith.
9. Certain Covenants of IFTC and Fund
A. All requisite steps will be taken by Fund from time to time when and as
necessary to qualify the Fund's shares for sale in all states in which Fund's
shares shall at the time be offered for sale and require qualification. If at
any time Fund will receive notice of any stop order or other proceeding in any
such state affecting such registration or the sale of Fund's shares, or of any
stop order or other proceeding under the Federal securities laws affecting the
sale of Fund's shares, Fund will give prompt notice thereof to IFTC.
B. IFTC hereby agrees to perform such transfer agency functions as are attached
hereto as Exhibit A and establish and maintain facilities and procedures
reasonably acceptable to Fund for safekeeping of stock certificates, check
forms, and facsimile signature imprinting devices, if any; and for the
preparation or use, and for keeping account of, such certificates, forms and
devices, and to carry insurance as specified in Exhibit B which will not be
lowered without notice to Fund.
C. To the extent required by Section 31 of the Investment Company Act of
<PAGE> 8
1940 as amended and Rules thereunder, IFTC agrees that all records maintained by
IFTC relating to the services to be performed by IFTC under this Agreement are
the property of Fund and will be preserved and will be surrendered promptly to
Fund on request.
D. IFTC agrees to furnish Fund semiannual reports of its financial condition,
consisting of a balance sheet, earnings statement and any other financial
information reasonably requested by Fund. The annual financial statements will
be certified by IFTC's certified public accountants.
E. IFTC represents and agrees that it will use its best efforts to keep current
on the trends of the investment company industry relating to shareholder
services and will use its best efforts to continue to modernize and improve its
system without additional cost to Fund.
F. IFTC will permit Fund and its authorized representatives to make periodic
inspections of its operations at reasonable time during business hours.
10. Recapitalization or Readjustment
In case of any recapitalization, readjustment or other change in the capital
structure of Fund requiring a change in the form of stock certificates, IFTC
will issue or register certificates in the new form in exchange for, or in
transfer of, the outstanding certificates in the old form, upon receiving:
A. Written instructions from an officer of Fund;
B. Certified copy of the amendment to the Articles of Incorporation or other
document effecting the change;
C. Certified copy of the order or consent of each governmental or regulatory
authority, required by law to the issuance of the stock in the new form, and an
opinion of counsel that the order or consent of no other government or
regulatory authority is required;
D. Specimens of the new certificates in the form approved by the Board of
Directors of Fund, with a certificate of the Secretary of Fund as to such
approval;
E. Opinion of counsel for Fund stating:
(1) The status of the shares of stock of Fund in the new form under the
<PAGE> 9
Securities Act of 1933, as amended and any other applicable federal or state
statute; and
(2) That the issued shares in the new form are, and all unissued shares will be,
when issued, validly issued, fully paid and nonassessable.
11. Stock Certificates
Fund will furnish IFTC with a sufficient supply of blank stock certificates and
from time to time will renew such supply upon the request of IFTC. Such
certificates will be signed manually or by facsimile signatures of the officers
of Fund authorized by law and by bylaws to sign stock certificates, and if
required, will bear the corporate seal or facsimile thereof.
12. Death, Resignation or Removal of Signing Officer
Fund will file promptly with IFTC written notice of any change in the officers
authorized to sign stock certificates, written instructions or requests,
together with two signature cards bearing the specimen signature of each newly
authorized officer. In case any officer of Fund who will have signed manually or
whose facsimile signature will have been affixed to blank stock certificates
will die, resign, or be removed prior to the issuance of such certificates, IFTC
may issue or register such stock certificates as the stock certificates of Fund
notwithstanding such death, resignation, or removal, until specifically directed
to the contrary by Fund in writing. In the absence of such direction, Fund will
file promptly with IFTC such approval, adoption, or ratification as may be
required by law.
13. Future Amendments of Charter and Bylaws
Fund will promptly file with IFTC copies of all material amendments to its
Articles of Incorporation or bylaws made after the date of this Agreement.
14. Instructions, Opinion of Counsel and Signatures
At any time IFTC may apply to any officer of Fund for instructions, and may
consult with legal counsel for Fund or its own legal counsel at the expense of
Fund, with respect to any matter arising in connection with the agency and it
will not be liable for any action taken or omitted by it in good faith in
reliance upon such instructions or upon the opinion of such counsel. IFTC will
be protected in acting upon any paper or document reasonably believed by it to
be genuine and to have been signed by the proper person or persons and will not
be held to have notice of any change of authority of
<PAGE> 10
any person, until receipt of written notice thereof from Fund. It will also be
protected in recognizing stock certificates which it reasonably believes to bear
the proper manual or facsimile signatures of the officers of Fund, and the
proper countersignature of any former Transfer Agent or Registrar, or of a
co-Transfer Agent or co-Registrar.
15. Papers Subject to Approval of Counsel
The acceptance by IFTC, of its appointment as Transfer Agent and Dividend
Disbursing Agent and all documents filed in connection with such appointment and
thereafter in connection with the agencies, will be subject to the approval of
IFTC's in-house legal counsel (which approval will be not unreasonably
withheld). For the purpose of securing IFTC's approval, Fund agrees to forward
to IFTC a copy of any document that Fund intends to file with any regulatory
authority which refers to the appointment of IFTC as the Fund's Transfer Agent
and Dividend Disbursing Agent. If IFTC or its legal counsel disapproves or
otherwise objects to the use of its name in such document it shall notify the
Fund in writing of its disapproval or objection within a reasonable time after
receiving such document for review, but in any event not less than one business
day before such document must be filed with such regulatory authority.
16. Certification of Documents
The required copy of the Articles of Incorporation of Fund and copies of all
amendments thereto will be certified by the Secretary of State (or other
appropriate official) of the State of Incorporation, and if such Articles of
Incorporation and amendments are required by law to be also filed with a county,
city or other officer of official body, a certificate of such filing will appear
on the certified copy submitted to IFTC. A copy of the order or consent of each
governmental or regulatory authority required by law to the issuance of the
stock will be certified by the Secretary or Clerk of such governmental or
regulatory authority, under proper seal of such authority. The copy of the
Bylaws and copies of all amendments thereto, and copies of resolutions of the
Board of Directors of Fund, will be certified by the Secretary or an Assistant
Secretary of Fund under the corporate seal.
17. Records
IFTC will maintain customary records in connection with its agency, and
particularly will maintain those records required to be maintained pursuant to
subparagraph (2) (iv) of paragraph (b) of Rule 31a-1, 31a-2 and 31a-3 under the
Investment Company Act of 1940, if any.
<PAGE> 11
18. Disposition of Books, Records and Cancelled Certificates
IFTC will send periodically to Fund, or to where designated by the Secretary or
an Assistant Secretary of Fund, all books, documents, and all records no longer
deemed needed for current purposes and stock certificates which have been
cancelled in transfer or in exchange, upon the understanding that such books,
documents, records, and stock certificates will not be destroyed by Fund without
the consent of IFTC (which consent will not be unreasonably withheld), but will
be safely stored for possible future reference.
19. Provisions Relating to IFTC as Transfer Agent
A. IFTC will make original issues of stock certificates upon written request of
an officer of Fund and upon being furnished with a certified copy of a
resolution of the Board of Directors authorizing such original issue, an opinion
of counsel as outlined in paragraphs 1.D. and G. of this Agreement, any
documents required by paragraphs 5. or 10. of this Agreement, and necessary
funds for the payment of any original issue tax.
B. Before making any original issue of certificates Fund will furnish IFTC with
sufficient funds to pay all required taxes on the original issue of the stock,
if any. Fund will furnish IFTC such evidence as may be required by IFTC to show
the actual value of the stock. If no taxes are payable IFTC will be furnished
with an opinion of outside counsel to that effect.
C. Shares of stock will be transferred and new certificates issued in transfer,
or shares of stock accepted for redemption and funds remitted therefor, upon
surrender of the old certificates in form deemed by IFTC properly endorsed for
transfer or redemption accompanied by such documents as IFTC may deem necessary
to evidence that authority of the person making the transfer or redemption, and
bearing satisfactory evidence of the payment of any applicable stock transfer
taxes. IFTC reserves the right to refuse to transfer or redeem shares until it
is satisfied that the endorsement or signature on the certificate or any other
document is valid and genuine, and for that purpose it may require a guaranty of
signature by a firm having membership in the New York Stock Exchange, Midwest
Stock Exchange, American Stock Exchange Securities Corporation, Pacific Coast
Stock Exchange, or any other exchange acceptable to IFTC or by a bank or trust
company approved by it. IFTC also reserves the right to refuse to transfer or
redeem shares until it is satisfied that the requested transfer or redemption is
legally authorized, and
<PAGE> 12
it will incur no liability for the refusal in good faith to make transfers or
redemptions which, in its judgment, are improper or unauthorized. IFTC may, in
effecting transfers or redemptions, rely upon Simplification Acts or other
statutes which protect it and Fund in not requiring complete fiduciary
documentation. In cases in which IFTC is not directed or otherwise required to
maintain the consolidated records of shareholder's accounts, IFTC will not be
liable for any loss which may arise by reason of not having such records,
provided that such loss could not have been prevented by the exercise of
ordinary diligence. IFTC will be under no duty to use a greater degree of
diligence by reason of not having such records.
D. When mail is used for delivery of stock certificates IFTC will forward stock
certificates in "nonnegotiable" form by first class or registered mail and stock
certificates in "negotiable" form by registered mail, all such mail deliveries
to be covered while in transit to the addressee by insurance arranged for by
IFTC.
E. IFTC will issue and mail subscription warrants, certificates representing
stock dividends, exchanges or split ups, or act as Conversion Agent upon
receiving written instructions from any authorized officer of Fund pursuant to
section 1.A. hereunder and such other documents as IFTC deems necessary.
F. IFTC will issue, transfer, and split up certificates and will issue
certificates of stock representing full shares upon surrender of scrip
certificates aggregating one full share or more when presented to IFTC for that
purpose upon receiving written instructions from an officer of Fund and such
other documents as IFTC may deem necessary.
G. IFTC may issue new certificates in place of certificates represented to have
been lost, destroyed, stolen or otherwise wrongfully taken upon receiving
instructions from Fund and indemnity satisfactory to IFTC and Fund, and may
issue new certificates in exchange for, and upon surrender of, mutilated
certificates. Such instructions from Fund will be in such form as will be
approved by the Board of Directors of Fund and will be in accordance with the
provisions of law and the bylaws of Fund governing such matter.
H. IFTC will supply a list of the holders of each series of stock to Fund for
any meeting of shareholders called by the Fund upon receiving a request from an
officer of Fund. It will also supply lists at such other times as may be
requested by an officer of Fund.
<PAGE> 13
I. Upon receipt of written instructions of an officer of Fund, IFTC will address
and mail notices to shareholders.
J. In case of any request or demand for the inspection of the stock books of
Fund or any other books in the possession of IFTC, IFTC will endeavor to notify
Fund and to secure instructions as to permitting or refusing such inspection.
IFTC reserves the right, however, to exhibit the stock books or other books to
any person in case it is advised by its counsel that it may be held responsible
for the failure to exhibit the stock books or other books to such person.
20. Provisions Relating to Dividend Disbursing Agency
A. IFTC will, at the expense of Fund, provide a special form of check containing
the imprint of any device or other matter desired by Fund. Said checks must,
however, be of a form and size convenient for use by IFTC.
B. If Fund desires to include additional printed matter, financial statements,
etc., with the dividend checks, the same will be furnished IFTC within a
reasonable time prior to the date of mailing of the dividend checks, at the
expense of Fund.
C. If Fund desires its distributions mailed in any special form of envelopes,
sufficient supply of the same will be furnished to IFTC but the size and form of
said envelopes will be subject to the approval of IFTC. If stamped envelopes are
used, they must be furnished by Fund; or if postage stamps are to be affixed to
the envelopes, the stamps or the cash necessary for such stamps must be
furnished by Fund.
D. IFTC will maintain one or more deposit accounts as Agent for the Fund, into
which the funds for payment of dividends, distributions, redemptions or other
disbursements provided for hereunder with respect to the Fund's stock will be
deposited, and against which checks for amounts payable from will be drawn.
E. IFTC is authorized and directed to stop payment of checks theretofore issued
hereunder, but not presented for payment, when the payees thereof allege either
that they have not received the checks or that such checks have been mislaid,
lost, stolen, destroyed or through no fault of theirs, are otherwise beyond
their control, and cannot be produced by them for presentation and collection,
and, to issue and deliver duplicate checks in replacement thereof.
<PAGE> 14
21. Termination of Agreement
A. This Agreement may be terminated by either party upon receipt of ninety (90)
days written notice from the other party.
B. Fund, in addition to any other rights and remedies, shall have the right to
terminate this Agreement forthwith upon the occurrence at any time of any of the
following events:
(1) Any interruption or cessation of operations by IFTC or its assigns which
materially interferes with the business operation of Fund;
(2) The bankruptcy of IFTC or its assigns or the appointment of a receiver for
IFTC or its assigns;
(3) Any merger, consolidation or sale of substantially all the assets of IFTC
or its assigns;
(4) The acquisition of a controlling interest in IFTC or its assigns, by any
broker, dealer, investment adviser or investment company except as may presently
exist; or
(5) Failure by IFTC or its assigns to perform its duties in accordance with the
Agreement, which failure materially adversely affects the business operations of
Fund and which failure continues for thirty (30) days after receipt of written
notice from Fund.
C. If at any time this Agreement will be terminated by Fund pursuant to clause
(1), (2) or (5) of Section 21.B., IFTC will assign this Agreement to DST Systems
Inc. who will assume the duties and obligations agreed to by IFTC under the same
terms and conditions expressed herein.
D. In the event of termination, Fund will promptly pay IFTC all amounts
due to IFTC hereunder.
22. Assignment
A. Neither this Agreement nor any rights or obligations hereunder may be
assigned by IFTC without the written consent of Fund; provided, however, no
assignment will relieve IFTC of any of its obligations hereunder.
B. This Agreement will inure to the benefit of and be binding upon the
<PAGE> 15
parties and their respective successors and assigns.
23. Confidentiality
A. IFTC agrees that, except as provided in the last sentence of Section 19.J
hereof, or as otherwise required by law, IFTC will keep confidential all records
of and information in its possession relating to Fund or its shareholders or
shareholder accounts and will not disclose the same to any person except at the
request or with the consent of Fund.
B. Fund agrees to keep confidential all financial statements and other financial
records (other than statements and records relating solely to Fund's business
dealings with IFTC) and all manuals, systems and other technical information and
data, not publicly disclosed, relating to IFTC's operations and programs
furnished to it by IFTC pursuant to this Agreement and will not disclose the
same to any person except at the request or with the consent of IFTC.
24. Survival of Representations and Warranties
A. All representations and warranties by either party herein contained will
survive the execution and delivery of this Agreement.
25. Miscellaneous
A. This Agreement is executed and delivered in the State of Missouri and shall
be governed by the laws of said state.
B. All the terms and provisions of this Agreement shall be binding upon, inure
to the benefit of, and be enforceable by the respective successor and assigns of
the parties hereto.
C. No provisions of the Agreement may be amended or modified, in any manner
except by a written agreement properly authorized and executed by both parties
hereto.
D. The captions in this Agreement are included for convenience of reference
only, and in no way define or delimit any of the provisions hereof or otherwise
affect their construction or effect.
E. This Agreement may be executed simultaneously in two or more counterparts,
each of which shall be deemed an original but all of which together shall
constitute one and the same instrument.
<PAGE> 16
F. If any part, term or provision of this Agreement is by the court held to be
illegal, in conflict with any law or otherwise invalid, the remaining portion or
portions shall be considered severable and not be affected, and the rights and
obligations of the parties shall be construed and enforced as if the Agreement
did not contain the particular part, term or provision held to be illegal or
invalid.
G. Notices, requests, instructions and other writings received by Fund at
Financial Square, New York, New York 10005, or at such address as Fund may have
designated to IFTC in writing, will be deemed to have been properly given to
Fund hereunder; and notices, requests, instructions and other writings received
by IFTC at its offices at 127 West 10th Street, 14th Floor, Kansas City,
Missouri 64105, or 111 West 10th Street, Kansas City, Missouri 64105 or to such
other address as it may have designated to Fund in writing, will be deemed to
have been properly given to IFTC hereunder. Until further notice is given to
IFTC, all notices and writings to be delivered to the Fund by IFTC shall be
given to Mr. Irwood Schlackman, c/o Cowen & Co., Financial Square, New York, New
York 10005 and IFTC shall on a best efforts basis also give a copy to Mr. Stuart
F. Goodman, c/o Cowen & Co., Financial Square, New York, New York 10005.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their respective duly authorized officers.
INVESTORS FIDUCIARY TRUST COMPANY
/s/ Christopher E. Black, Vice President
ATTEST:
/s/ Cheryl J. Naegler, Assistant Secretary
STANDBY RESERVE FUND, INC.
/s/ Stuart Goodman, Treasurer
ATTEST:
/s/ Faith Colish, Secretary Exhibit A
TRANSFER AGENCY SERVICES AND SYSTEMS FEATURES
<PAGE> 17
Functions
A. Issuance of stock certificates B. Recording of noncertificate shares C.
Purchase, redemptions, exchanges, transfers and legals D. Changes of address,
etc. E. Daily balancing of fund F. Dividend calculation and disbursement G.
Mailing of quarterly, semi-annual or annual reports H. Filing of 1099/1042
information to shareholders and government I. Provide N-SAR information J.
Systematic withdrawal plans K. Preauthorized checks L. Purchase reminders M.
Reconcilement of dividend and disbursement accounts N. Provide research and
correspondence to shareholder's inquiries O. Daily communication of reports to
funds P. Provide listings, labels and other special reports Q. Proxy issuance
and tabulation R. Annual statements of shareholders on microfilm S. Blue-sky
reports T. Wire order processing
Exhibit B
INSURANCE COVERAGE
Insurance coverages maintained by IFTC effective January 1, 1988.
Description of Policy:
Brokers Blanket Bond, Standard Form 14
Covering losses caused by dishonesty of employees, physical loss of securities
on or outside of premises while in possession of authorized person, loss caused
by forgery or alteration of checks or similar instruments.
Coverage: 75,000,000
Errors and Omissions Insurance
Covering replacement of destroyed records and computer errors and omissions.
Coverage: $10,000,000
Special Forgery Bond
Covering losses through forgery or alteration of checks or drafts of
<PAGE> 18
customer processed by insured but drawn on or against them.
Coverage: $500,000
Mail Insurance (applies to all full service operations)
Provides indemnity for security lost in the mails.
Coverage:
$10,000,000 nonnegotiable securities mailed to domestic locations via
registered mail.
$1,000,000 negotiable securities mailed to domestic locations via first-class
or certified mail.
$1,000,000 nonnegotiable securities mailed to foreign locations via registered
mail.
$1,000,000 negotiable securities mailed to all locations via registered mail.
<PAGE> 1
VENABLE, BAETJER AND HOWARD ATTORNEYS AT LAW
1800 MERCANTILE BANK & TRUST BUILDING
2 HOPKINS PLAZA
BALTIMORE, MARYLAND 21201
October 19, 1981
Standby Reserve Fund, Inc.
100 Wall Street
New York, New York 10004
Dear Sirs:
In connection with the proposed public offering of shares (the "Share") of the
Capital Stock, par value $.01 per share, of Standby Reserve Fund, Inc. (the
"Fund"), we have examined the following documents, as amended: (a) the Fund's
Articles of Incorporation;(b) the By-Laws; (c) the form of prospectus proposed
to be included in Amendment No. 1 to the Fund's Registration Statement on Form
N-1 (the "Prospectus"); (d) the minutes of action by the then sole director of
the Fund on June 22, 1981, September 1, 1981, September 25, 1981 and October 5,
1981; (e) a certificate of the Treasurer of the Fund evidencing receipt of
$100,000 in full payment for 100,000 shares of the Fund's common stock issued to
Cowen & Co.; and (f) a certificate dated October 16, 1981 from the State
Department of Assessments and Taxation of Maryland evidencing that as of said
date the Fund, was a corporation duly incorporated and existing under the laws
of said State.
We have also made such further investigation and examination as we have deemed
necessary for the purpose of this opinion. We have necessarily relied upon and
have assumed the genuineness of the signature on and the current authenticity of
all documents furnished to us by the Secretary of the Fund and its counsel.
Based upon the foregoing, it is our opinion that the Fund is a corporation duly
organized and validly existing under the laws of the State of Maryland and that
the Shares, when issued and paid for in accordance with the terms of the
offering, as set forth in the Prospectus, will be, when the Registration
Statement relating to the Shares shall have become effective, legally issued,
fully paid and nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the said
Registration Statement and as an exhibit to any application made by or on
<PAGE> 2
behalf of the Fund or any Distributor or dealer in connection with the
registration or qualification of the Fund or the Shares under the securities
laws of any state or other jurisdiction.
Very truly yours,
/s/ Venable, Baetjer and Howard
<PAGE> 1
WILLKIE FARR & GALLAGHER
ONE CITICORP CENTER
153 EAST 53RD STREET
NEW YORK, NY 10022
(212) 935-8000
October 20, 1981
Standby Reserve Fund, Inc.
One Battery Park Plaza
New York, New York 10004
Gentlemen:
We have acted as counsel to Standby Reserve Fund, Inc. (the "Fund") in
connection with the preparation of a Registration Statement on Form N-1 (the
"Registration Statement")covering shares of Common Stock, par value $.01 per
share, of the Fund (the "Shares").
We have examined copies of the Certificate of Incorporation and By-Laws of the
Fund, as amended to date, the Registration Statement, and such other corporate
records and documents, including the minutes of the meetings and consents of the
shareholders and the Board of Directors of the Fund, as we have deemed necessary
for the purpose of this opinion. We have also examined such other documents,
papers, statutes and authorities as we deemed necessary to form a basis for the
opinion hereinafter expressed. In our examinations of such material we have
assumed the genuineness of all signatures and the conformity to original
documents of all copies submitted to us. As to various questions of fact
material to such opinion, we have relied upon statements and certificates of
officers and representatives of the Fund and others. As to matters governed by
the laws of the State of Maryland, we have relied on the opinion of Messrs.
Venable, Baetjer and Howard that is attached hereto. Based upon the foregoing,
we are of the opinion that:
The Shares, when issued and paid for in accordance with the terms of the
offering, as set forth in the Prospectus included as part of the Registration
Statement, will be, when the Registration Statement shall have become effective,
legally issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the said
Registration Statement and to the reference to us in the Prospectus included in
said Registration Statement, and to the filing of this opinion as
<PAGE> 2
an exhibit to any application made by or on behalf of the Fund or any
distributor or dealer in connection with the registration or qualification of
the Fund or its Common Stock under the securities laws of any state or other
jurisdiction.
Very truly yours,
/s/ Willkie Farr & Gallagher
<PAGE> 1
EXHIBIT 11
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Financial
Highlights", "Auditors and Counsel" and "Financial Statements" and to the
incorporation by reference of our report dated October 29, 1996 in this
Registration Statement (Form N-1A No. 2-73131) of Cowen Standby Reserve Fund,
Inc.
ERNST & YOUNG LLP
New York, New York
January 24, 1997
