<PAGE> 1
- --------------------------------------------------------------------------------
ANNUAL REPORTS SEPTEMBER 30, 1997
COWEN STANDBY RESERVE
FUND, INC.
AND
COWEN STANDBY TAX-EXEMPT
RESERVE FUND, INC.
[COWEN LOGO]
COWEN & COMPANY
- --------------------------------------------------------------------------------
<PAGE> 2
COWEN STANDBY RESERVE FUND, INC.
COWEN STANDBY TAX-EXEMPT RESERVE FUND, INC.
ANNUAL FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
Chairman's Letter............................................................. 1
Statements of Investments:
Cowen Standby Reserve Fund, Inc. ........................................... 3
Cowen Standby Tax-Exempt Reserve Fund, Inc. ................................ 7
Statements of Assets and Liabilities..........................................21
Statements of Operations......................................................22
Statements of Changes in Net Assets...........................................23
Notes to Combined Financial Statements........................................24
Report of Ernst & Young LLP, Independent Auditors.............................28
<PAGE> 3
CHAIRMAN'S LETTER NOVEMBER 14, 1997
Dear Shareholder:
We are pleased to report that the Cowen Standby Reserve Fund and the Cowen
Standby Tax-Exempt Reserve Fund both produced competitive yields throughout the
annual period ended September 30, 1997. This performance reflects your money
market managers' ability to make minor maturity adjustments within the
high-quality portfolios. On September 30, 1997, the annualized 7-day yields
provided by your Funds were 4.99% and 3.34%, respectively.
Market Activity
For virtually the entire year, investors have been preoccupied with whether
the Federal Reserve Board would tighten policy. However, the Fed raised the
Federal Funds rate--the rate banks charge each other for overnight loans--only
once. After the 0.25% rate hike on March 25th, the Fed Funds rate was kept
constant at 5.50%.
There were several reasons for the Fed's "inaction." For one, after the first
calendar quarter of 1997 in which the economy grew at almost a 5% rate, it
cooled in the second quarter to 3.3%. Third calendar quarter GDP growth was
3.5%. Secondly, inflation remains at a 30-year low. In fact, indicators show
that the rate of inflation is actually moving lower, not higher--which is
unusual. The Producer Price Index, a measure of wholesale inflation, was down on
a year-over-year basis for both July and August. The Consumer Price Index
numbers also indicate to us that inflation should register at a more modest rate
in 1997 than in 1996.
Finally, the U.S. has been operating in a period of full employment--when the
unemployment rate is still below 5%--without putting pressure on wages. Although
Federal Reserve Board Chairman Alan Greenspan has stated his concern that wages
will be putting pressure on the manufacturing sector, we do not see that trend.
Interestingly, even without official Fed action, the yield curve flattened
over the fiscal year, meaning that the difference between rates at the short-
and long-term end of the curve lessened. As the yield spread differential
narrowed along the quality scale, we held steadfast to our investment
philosophy of maintaining a high-quality portfolio for both Funds.
Investment Review
We started the fiscal year with the Cowen Standby Reserve Fund's maturity
longer than the average money market fund to lock in the higher yields available
at that time. We then moved to a neutral position with the average maturity
equal to that of the average money market fund just prior to the March 25th
meeting of the Federal Reserve Board. Given the ongoing anticipation of Fed
action, we stayed relatively neutral for the rest of the annual period, taking
certain brief opportunities to modestly lengthen maturity and benefit from
higher yields while limiting interest rate risk. As of September 30, 1997, the
Fund's average maturity was 54 days, which is in line with the maturity
benchmark for money market funds.
We maintained a similar strategy for the Cowen Standby Tax-Exempt Reserve Fund
for most of the first half of the fiscal year, moving to a neutral position
earlier in March in anticipation of both investor withdrawals
--
1
<PAGE> 4
for taxes and the pending rate increase. Then in the second half, we modulated
between a neutral to a just-shorter-than-the-benchmark maturity position in this
Fund. We briefly extended maturity to a high of 56 days from late June through
early July to lock in higher yields before the supply/demand phenomenon of those
weeks, which is caused by an influx of municipal securities maturing, made yield
levels temporarily less attractive. The Fund's average maturity on September 30,
1997 was 45 days, which is slightly shorter than the benchmark. The portfolio
continued to be broadly diversified with securities representing 37 states and
the District of Columbia.
In accordance with the requirements of the Internal Revenue Code, this is to
inform you that 100% of the dividends distributed by the Cowen Standby
Tax-Exempt Reserve Fund, Inc. during its fiscal year ended September 30, 1997
were exempt from Federal personal income taxes. After December 31, 1997, you
will receive a breakdown of income by state earned during the year.
Looking Ahead
We believe that our current environment of low inflation with modest economic
growth will keep the Federal Reserve Board on hold for the near term. We also
believe that the Fed recognizes certain trends that are keeping the U.S. in this
lengthy period of economic expansion. One trend is demographic, wherein the
aging baby boomer population is feeling more confident about their finances and
therefore spending more. The other trends are global, wherein competition is
limiting the pricing power of corporations, and technological, wherein
advancements are improving productivity. Recent economic evidence and market
activity would indicate to us that any need to raise rates has been delayed even
further.
With interest rates on hold and real yield levels high, our strategy for both
Funds going forward is to modestly extend the portfolios' average days to
maturity slightly to lock in higher yields. At the same time, we intend to
maintain the Funds' flexibility so that we are able to take advantage of
changing perceptions of the economy and its impact on interest rates.
As always, we appreciate your ongoing support of the Cowen Standby Reserve
Funds and look forward to serving your investment needs well into the future
with investment grade quality, competitive yields, liquidity and a high degree
of safety.
Sincerely,
/s/ JOSEPH M. COHEN
Joseph M. Cohen
Chairman
--
2
<PAGE> 5
COWEN STANDBY RESERVE FUND, INC.
STATEMENT OF INVESTMENTS
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
ANNUALIZED
PRINCIPAL DESCRIPTION OF YIELD ON DATE
AMOUNT SECURITY OF PURCHASE VALUE
<C> <S> <C> <C>
CERTIFICATE OF DEPOSIT - DOMESTIC - 1.50%
Bankers Trust New York Corp.
$20,000,000 01-08-1998 5.81% $ 19,996,884
--------------
Total Certificate of Deposit - Domestic
(Cost $19,996,884) $ 19,996,884
--------------
COMMERCIAL PAPER - 55.09%
ABN AMRO Bank
35,000,000 10-16-1997 5.65 $ 34,919,792
AKZO Nobel Inc.
10,000,000 10-02-1997 5.85 9,998,431
Alianz of American Finance Corporation
16,300,000 10-20-1997 5.66 16,252,599
American Honda Finance Corporation
20,000,000 10-31-1997 5.71 19,907,667
20,750,000 11-07-1997 5.69 20,631,639
24,000,000 12-11-1197 5.72 23,736,827
BMW U.S. Capital Corporation
32,500,000 10-17-1997 5.72 32,419,978
Canadian Imperial Bank of Commerce
30,000,000 11-17-1997 5.68 29,784,388
Countrywide Funding Corporation
25,000,000 12-08-1997 5.72 24,737,917
Daimler - Benz Corporation
30,000,000 12-03-1997 5.68 29,710,725
Ford Motor Credit Company
25,000,000 10-01-1997 5.72 25,000,000
GTE Corporation
30,000,000 10-29-1997 5.69 29,870,617
GE Capital Corporation
20,000,000 10-20-1997 5.65 20,000,000
Goldman Sachs Group, L.P.
4,100,000 10-01-1997 6.46 4,100,000
35,000,000 11-04-1997 5.74 34,816,872
Koch Industries, Inc.
40,000,000 10-01-1997 6.60 40,000,000
</TABLE>
See notes to combined financial statements
--
3
<PAGE> 6
COWEN STANDBY RESERVE FUND, INC.
STATEMENT OF INVESTMENTS - (continued)
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
ANNUALIZED
PRINCIPAL DESCRIPTION OF YIELD ON DATE
AMOUNT SECURITY OF PURCHASE VALUE
<C> <S> <C> <C>
COMMERCIAL PAPER - (CONTINUED)
Merrill Lynch & Company Inc.
$26,000,000 11-03-1997 5.72% $ 25,868,202
Nordbanken
30,000,000 10-01-1997 5.77 30,000,000
20,000,000 11-19-1997 5.68 19,850,006
PHH Corporation
35,000,000 11-19-1997 5.68 34,737,510
Riverwoods Funding
30,000,000 10-02-1997 5.64 29,995,400
Rose Asset Funding Company, Limited
20,000,000 10-22-1997 5.68 19,935,250
25,000,000 10-29-1997 5.70 24,892,472
11,547,000 11-28-1997 5.71 11,443,937
Sweden, Kingdom of
25,000,000 12-08-1997 5.72 24,740,278
Three Rivers Funding Corporation
40,577,000 10-17-1997 5.69 40,477,451
Toronto Dominion Bank
34,000,000 01-20-1998 5.76 33,422,368
Transamerica Corporation
30,575,000 10-08-1997 5.64 30,542,183
Union Bank of Switzerland
15,000,000 10-01-1997 6.46 15,000,000
--------------
Total Commercial Paper
(Cost $736,792,509) $ 736,792,509
--------------
EURO - DOLLAR DEPOSIT - 2.24%
West Deutsche Landesbanken
30,000,000 11-26-1997 5.63 30,000,796
--------------
Total Euro-Dollar Deposit
(Cost $30,000,796) $ 30,000,796
--------------
FLOATING RATE NOTES - 20.43%
American Express Credit Corporation
30,000,000 11-13-1997 5.62825(b) 30,000,000
Associates Corporation of North America
25,000,000 03-02-1998 5.7300(a) 24,992,462
</TABLE>
See notes to combined financial statements
--
4
<PAGE> 7
COWEN STANDBY RESERVE FUND, INC.
STATEMENT OF INVESTMENTS - (continued)
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
ANNUALIZED
PRINCIPAL DESCRIPTION OF YIELD ON DATE
AMOUNT SECURITY OF PURCHASE VALUE
<C> <S> <C> <C>
FLOATING RATE NOTES - (CONTINUED)
Bankers Trust New York Corp.
$30,000,000 04-03-1998 5.7300(d)% $ 29,995,575
Bear Stearns Companies Inc.
20,000,000 11-07-1998 5.66875(c) 20,000,000
40,000,000 09-16-1998 5.66875(c) 40,000,000
Dean Witter/Discover
25,000,000 08-03-1998 5.69625(b) 25,014,490
General Motors Acceptance Corporation
18,500,000 11-07-1997 5.79375(b) 18,501,406
Morgan Stanley Group
35,000,000 01-30-1998 5.59872(b) 35,000,000
PHH Corporation
20,000,000 08-28-1998 5.58625(b) 19,994,623
WFP Tower B STEERS
29,767,880 12-08-1997 5.8862(b) 29,767,861
--------------
Total Floating Rate Notes
(Cost $273,266,417) $ 273,266,417
--------------
MEDIUM TERM NOTES - 2.54%
Chrysler Financial Corp.
8,000,000 01-26-1998 5.41 7,989,869
General Motors Acceptance Corporation
26,000,000 10-30-1997 5.73 25,998,203
--------------
Total Medium Term Notes
(Cost $33,988,072) $ 33,988,072
--------------
YANKEE CERTIFICATES OF DEPOSIT - 17.50%
Abbey National PLC
25,000,000 11-26-1997 5.50 $ 24,996,279
Canadian Imperial Bank of Commerce
25,000,000 01-09-1998 5.65 25,000,000
Deustche Bank
25,000,000 11-20-1997 5.75 25,000,000
25,000,000 03-10-1998 5.86 24,995,806
Royal Bank of Canada
15,000,000 01-30-1998 5.80 14,993,160
30,000,000 05-12-1998 6.14 30,050,017
</TABLE>
See notes to combined financial statements
--
5
<PAGE> 8
COWEN STANDBY RESERVE FUND, INC.
STATEMENT OF INVESTMENTS - (continued)
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
ANNUALIZED
PRINCIPAL DESCRIPTION OF YIELD ON DATE
AMOUNT SECURITY OF PURCHASE VALUE
<C> <S> <C> <C>
YANKEE CERTIFICATES OF
DEPOSIT - (CONTINUED)
Societe Generale
$30,000,000 10-02-1997 5.54% $ 30,000,000
25,000,000 01-13-1998 5.10 24,996,868
Swiss Bank Corporation
19,000,000 07-02-1998 5.95 19,006,031
15,000,000 07-17-1998 5.84 14,998,190
--------------
Total Yankee Certificates of Deposit
(Cost $234,036,351) $ 234,036,351
--------------
TOTAL INVESTMENTS
(Cost $1,328,021,029)......... 99.30% $1,328,081,029
Cash and Receivables,
Less Payables (net)........... 0.70% 9,385,756
------ --------------
Net Assets.................... 100.00% $1,337,466,785
====== ==============
</TABLE>
- ---------------
Notes:
(a) -- Fed. Fund rate instruments reflect rate as of 09-30-1997
(b) -- 1 Month Libor rate instruments reflect rate as of 09-30-1997
(c) -- 3 Month Libor rate instruments reflect rate as of 09-30-1997
(d) -- Prime rate instruments reflect rate as of 09-30-1997
See notes to combined financial statements
--
6
<PAGE> 9
COWEN STANDBY TAX-EXEMPT RESERVE FUND, INC.
STATEMENT OF INVESTMENTS
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
ANNUALIZED
PRINCIPAL YIELD ON DATE
AMOUNT DESCRIPTION OF BOND OF PURCHASE VALUE
<C> <S> <C> <C>
$ 1,780,000 Adams County, CO G.O. School District
Number 012
12-15-1997 3.75% $ 1,782,657
400,000 Alabama Special Care Facility
Montgomery Hospital Floating Rate
Demand Note
Series 1985
(7-Day Put, 7-Day Change)
04-01-2015 4.10# 400,000
2,160,000 Alaska State Industrial Development Authority
Lot 6
(7-Day Put, 7-Day Change)
07-01-2001 4.15# 2,160,000
1,000,000 Alaska State Housing Financing Corporation
Series C, Floating Rate Demand Note
(7-Day Put, 7-Day Change)
06-01-2026 4.10# 1,000,000
1,000,000 Allegheny County, PA Industrial Development
Authority
Pollution Control Revenue Bonds, Series 1986
(Mandatory Put, 10-1-1997)
05-01-2002 3.70 1,000,000
1,200,000 Arizona Health Facilities Authority Revenue
Bonds
(7-Day Put, 7-Day Change)
10-01-2015 4.10# 1,200,000
3,000,000 Baltimore County, MD Pollution Control
Revenue Bonds
Baltimore Gas and Electric Project
(Mandatory Put 11-06-1997)
07-01-2011 3.65 3,000,000
1,750,000 City of Belleville, IL Industrial Development
Revenue Refunding Bonds,
(Wetterau Inc. Project), Series 1991
(7-Day Put, 7-Day Change)
12-01-2008 4.10# 1,750,000
</TABLE>
See notes to combined financial statements
--
7
<PAGE> 10
COWEN STANDBY TAX-EXEMPT RESERVE FUND, INC.
STATEMENT OF INVESTMENTS -- (continued)
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
ANNUALIZED
PRINCIPAL YIELD ON DATE
AMOUNT DESCRIPTION OF BOND OF PURCHASE VALUE
<C> <S> <C> <C>
$ 600,000 Bexar County, TX Housing Finance
Corporation Park Hill Project Series 88-B
(7-Day Put, 7-Day Change)
06-01-2005 4.20%# $ 600,000
1,100,000 Billings, MT Industrial Development Revenue
Note Adjustable Tender Notes
(7-Day Put, 7-Day Change)
12-01-2014 4.15# 1,100,000
1,000,000 Burke County, GA Development Authority
Pollution Control Revenue Bonds-Oglethorpe
Project Georgia Power Company (Mandatory
Put 12-01-1997)
01-01-2025 3.60 1,000,000
1,300,000 Burlington, KS Pollution Control Revenue Notes
Kansas City Power and Light Project Series A
(Mandatory Put 10-01-1997)
09-01-2015 3.75 1,300,000
1,800,000 Burlington, KS Pollution Control Revenue Notes
Kansas City Power and Light Project Series A
(Mandatory Put 10-07-1997)
09-01-2015 3.65 1,800,000
1,500,000 Burlington, KS Pollution Control Revenue Notes
Kansas City Power and Light Project Series B
(Mandatory Put 10-03-1997)
09-01-2015 3.90 1,500,000
3,150,000 Burlington, KS Pollution Control Revenue Notes
Kansas City Power and Light Project
(Mandatory Put 12-01-1997)
10-01-2017 3.65 3,150,000
2,300,000 Claiborne County, MS Pollution Control
Revenue Bonds National Rural
Electric/Southern Mississippi Electric Power
Association, Series 1985G-2
(Mandatory Put 11-03-1997)
12-01-2015 3.85 2,300,000
</TABLE>
See notes to combined financial statements
--
8
<PAGE> 11
COWEN STANDBY TAX-EXEMPT RESERVE FUND, INC.
STATEMENT OF INVESTMENTS -- (continued)
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
ANNUALIZED
PRINCIPAL YIELD ON DATE
AMOUNT DESCRIPTION OF BOND OF PURCHASE VALUE
<C> <S> <C> <C>
$ 1,100,000 Clark County, NV Airport Improvement
Revenue Bond Series A-1
(7-Day Put, 7-Day Change)
07-01-2025 4.10%# $ 1,100,000
500,000 Clark County, NV Industrial Development
Authority Nevada Power Company Series C
(7-Day Put, 7-Day Change)
10-01-2030 4.10# 500,000
1,100,000 Clarksville, TN Public Building Authority
Pooled Financial Series
(7-Day Put, 7-Day Change)
12-01-2000 4.10# 1,100,000
6,080,000 Clayton County, GA Housing Finance Authority
(7-Day Put, 7-Day Change)
01-01-2021 4.05# 6,080,000
2,000,000 State of Colorado General Fund Tax and
Revenue Anticipation Notes, Cash Flow
Management, Series 97-A
06-26-1998 3.85 2,009,186
3,000,000 State of Connecticut, Special Assessment
Unemployment Compensation Advance Fund
Revenue Bonds, (Connecticut Unemployment
Revenue Bonds) 1993 Series C
07-01-1998 3.90 3,000,000
1,805,000 Cook, Kane, and McHenry Counties, IL
Community College District, William Rainey
Harper College, GO Bond
12-01-1997 3.85 1,806,898
1,330,000 Dade County, FL Aviation Board Revenue
Bonds Port, Airport, and Marine Revenue
Refunding Notes Series C
10-01-1997 3.70 1,330,000
2,000,000 Dade County, FL Housing Finance Authority
Miami Children's Hospital Project
(7-Day Put, 7-Day Change)
09-01-2025 4.10# 2,000,000
</TABLE>
See notes to combined financial statements
--
9
<PAGE> 12
COWEN STANDBY TAX-EXEMPT RESERVE FUND, INC.
STATEMENT OF INVESTMENTS -- (continued)
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
ANNUALIZED
PRINCIPAL YIELD ON DATE
AMOUNT DESCRIPTION OF BOND OF PURCHASE VALUE
<C> <S> <C> <C>
$ 1,990,000 Dade County, FL Housing Finance Authority
Waterside Project Series 2
(7-Day Put, 7-Day Change)
08-01-2005 4.10%# $ 1,990,000
800,000 De Kalb Private Hospital Authority, Georgia
(Egleston Children's Hospital at Emory
University, Inc. Project) Revenue Anticipation
Certificates Series 1994A
(7-Day Put, 7-Day Change)
03-01-2024 4.15# 800,000
2,000,000 Delaware State Economic Development
Authority, Industrial Development Revenue Bonds
Delmarva Power & Light Co Gas Facilities
Project C
(7-Day Put, 7-Day Change)
10-01-2028 4.15# 2,000,000
1,400,000 Delaware State Economic Development
Authority, Industrial Development Revenue Bonds
Delmarva Power & Light Co Gas Facilities
(Daily Put, Daily Change)
10-01-2029 4.00# 1,400,000
1,000,000 Delaware State General Obligation Notes
05-01-1998 3.73 1,017,409
1,000,000 District of Columbia, Revenue Bonds
The American University Issue, Series 1985A
(7-Day Put, 7-Day Change)
10-01-2015 4.10# 1,000,000
1,095,000 District of Columbia, Revenue Bonds,
The American University Issue, Series 1986A
(7-Day Put, 7-Day Change)
12-01-2015 4.10# 1,095,000
3,400,000 District of Columbia, Revenue Bonds,
Georgetown University Issue, Series 1986D
(7-Day Put, 7-Day Change)
04-01-2017 4.05# 3,400,000
</TABLE>
See notes to combined financial statements
--
10
<PAGE> 13
COWEN STANDBY TAX-EXEMPT RESERVE FUND, INC.
STATEMENT OF INVESTMENTS -- (continued)
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
ANNUALIZED
PRINCIPAL YIELD ON DATE
AMOUNT DESCRIPTION OF BOND OF PURCHASE VALUE
<C> <S> <C> <C>
$ 1,090,000 District of Columbia General Obligation
Revenue Refunding Bonds, Series B
(Pre-refunded to 06-01-1998 @ 101.5)
06-01-2005 3.85% $ 1,126,452
1,800,000 District of Columbia General Obligation
Revenue Refunding Bonds, Series B
(Pre-refunded to 06-01-1998 @ 101.5)
06-01-2002 3.80 1,860,828
2,000,000 Fairfield-Suisun, CA Unified School District, Tax
and Revenue Anticipation Notes
10-09-1997 3.83 2,000,177
1,230,000 Florida Housing Finance Agency--Reference
Multi-Family Housing EEE Carlton Project
(7-Day Put, 7-Day Change)
12-01-2008 4.10# 1,230,000
3,200,000 Florida Housing Finance Agency--Reference
Multi-Family Hillsboro, Series D
(7-Day Put, 7-Day Change)
12-01-2009 4.25# 3,200,000
400,000 Florida State Municipal Power Agency Required
Power Supply, Electric Power & Light Revenue
(Pre-refunded to 10-01-1997 @ 102)
10-01-2000 3.70 408,000
2,000,000 Forth Worth, TX Water and Sewer System
Tax and Revenue Anticipation Notes, Series A,
Commercial Paper
11-03-1997 3.60 2,000,000
1,000,000 Greensboro, NC General Obligation Note
Public Improvements-Sewer Project, Series B
(7-Day Put, 7-Day Change)
04-01-2007 4.15# 1,000,000
700,000 Hanover, MA Bond Anticipation Notes
05-28-1998 3.95 701,320
</TABLE>
See notes to combined financial statements
--
11
<PAGE> 14
COWEN STANDBY TAX-EXEMPT RESERVE FUND, INC.
STATEMENT OF INVESTMENTS -- (continued)
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
ANNUALIZED
PRINCIPAL YIELD ON DATE
AMOUNT DESCRIPTION OF BOND OF PURCHASE VALUE
<C> <S> <C> <C>
$ 1,200,000 Hapeville, GA Development Authority
Industrial Development Revenue Notes,
Hapeville Hotel Limited Project
(Daily Put, Daily Change)
11-01-2015 3.85%# $ 1,200,000
1,050,000 Harris County, TX General Obligation
Unlimited Highway Toll Revenue
Pre-refunding Bonds
(Pre-refunded to 08-01-1998 @ 102)
08-01-2015 3.825 1,106,950
2,000,000 Harris County, TX Tax Anticipation Notes
02-27-1998 3.70 2,004,398
2,500,000 Harris County, TX Health Facilities
Development Corp. Revenue Bonds, St. Lukes
Episcopal Hospital Series B Health, Hospital,
and Nursing Home Revenues
(Daily Put, Daily Change)
02-15-2027 3.85# 2,500,000
300,000 Illinois Health Facility Authority Hospital
Revenue Bonds, Sisters of Charity Project
Series E
(7-Day Put, 7-Day Change)
12-01-2015 4.10# 300,000
500,000 Illinois Health Facility Authority Hospital
Revenue Bonds, Decatur Memorial Hospital
Project A
(7-Day Put, 7-Day Change)
11-15-2024 4.10# 500,000
3,000,000 Illinois State Physical Educational Authority
Revenue Notes, Pooled Finance Program
(Mandatory Put 10-01-1997)
12-01-2000 3.65 3,000,000
2,000,000 Indian River County, FL Hospital District
Revenue Bonds Sunhealth Network Project 1990
(Mandatory Put 12-01-1997)
10-01-2024 3.85 2,000,000
</TABLE>
See notes to combined financial statements
--
12
<PAGE> 15
COWEN STANDBY TAX-EXEMPT RESERVE FUND, INC.
STATEMENT OF INVESTMENTS -- (continued)
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
ANNUALIZED
PRINCIPAL YIELD ON DATE
AMOUNT DESCRIPTION OF BOND OF PURCHASE VALUE
<C> <S> <C> <C>
$ 2,000,000 City of Indianapolis, IN Multi-Family
Housing Revenue Refunding Bonds,
(Canal Square Project)
(7-Day Put, 7-Day Change)
12-01-2015 4.10%# $ 2,000,000
3,000,000 Intermountain Power Agency of Utah, Electric
Light and Power Improvements, Power Supply
Revenue Bonds Series 1985-E
(Mandatory Put 11-25-1997)
07-01-2009 3.70 3,000,000
2,000,000 Jefferson Parish, LA Hospital Service
District #001 Hospital Revenue Bonds,
Jefferson Medical Center
(7-Day Put, 7-Day Change)
01-01-2026 4.15# 2,000,000
2,700,000 La Cygne, KS Environmental Improvement
Revenue Notes, Kansas City Power
and Light Co. Project
(7-Day Put, 7-Day Change)
03-01-2015 4.25# 2,700,000
3,000,000 Los Angeles County, CA 1997-1998 Tax
Revenue Anticipation Notes, Series A,
Cash Flow Management
06-30-1998 3.85 3,013,989
1,100,000 Louisiana Public Facilities Authority,
Hospital Revenue CP Program
(7-Day Put, 7-Day Change)
12-01-2000 4.10# 1,100,000
450,000 Louisiana Public Facilities Authority
Revenue Bonds--College & University
Equipment and Capital Series A
(7-Day Put, 7-Day Change)
09-01-2010 4.10# 450,000
1,900,000 Louisiana Public Facilities Authority
Revenue Bonds--Sisters of Charity Project
Series E
(7-Day Put, 7-Day Change)
07-01-2023 4.10# 1,900,000
</TABLE>
See notes to combined financial statements
--
13
<PAGE> 16
COWEN STANDBY TAX-EXEMPT RESERVE FUND, INC.
STATEMENT OF INVESTMENTS -- (continued)
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
ANNUALIZED
PRINCIPAL YIELD ON DATE
AMOUNT DESCRIPTION OF BOND OF PURCHASE VALUE
<C> <S> <C> <C>
$ 4,000,000 Louisiana Public Facilities Authority
Multi Family Housing Revenue Bonds,
(Willis Knighton Medical Center Project)
Series 1988
(7-Day Put, 7-Day Change)
09-01-2023 4.10%# $ 4,000,000
200,000 Lynchburgh, VA Industrial Development
Authority Hospital Revenue Bonds, (VHA Mid-
Atlantic States, Inc. Capital Asset Financing
Project), Series 1985D
(7-Day Put, 7-Day Change)
12-01-2025 4.15# 200,000
2,000,000 Maricopa County, AZ Pollution Control
Corporation Pollution Control Revenue Bonds,
Southern California Edison Palo Verde Project
Series C
(Mandatory Put 10-09-1997)
12-01-2009 3.30 2,000,000
4,200,000 Maryland State Health and Higher Education
Facilities Authority Revenue Notes
(7-Day Put, 7-Day Change)
04-01-2035 4.10# 4,200,000
650,000 Mason County, KY Pollution Control Revenue
Bonds, Kentucky Power-National Rural Electric
Project Series B-1
(7-Day Put, 7-Day Change)
10-15-2014 4.10# 650,000
2,000,000 Massachusetts Bay Authority Tax Revenue
Anticipation Notes, Series C
10-22-1997 3.65 2,000,000
1,115,000 Memphis, TN General Obligation Notes
10-01-1997 3.50 1,115,000
1,560,000 Metropolitan Government of Nashville and
Davidson County, TN Electric Revenue Bonds
Series B
05-15-1998 3.90 1,568,430
</TABLE>
See notes to combined financial statements
--
14
<PAGE> 17
COWEN STANDBY TAX-EXEMPT RESERVE FUND, INC.
STATEMENT OF INVESTMENTS -- (continued)
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
ANNUALIZED
PRINCIPAL YIELD ON DATE
AMOUNT DESCRIPTION OF BOND OF PURCHASE VALUE
<C> <S> <C> <C>
$ 850,000 Metropolitan Nashville, TN Airport Authority
Special Facilities Revenue Bonds, American
Airlines Project Series A
(Daily Put, Daily Change)
10-01-2012 3.85%# $ 850,000
315,000 Michigan State Hospital Finance Authority
Revenue Bonds, Hospital Equipment Loan
Program
(7-Day Put, 7-Day Change)
06-01-2001 4.10# 315,000
1,900,000 Michigan State Hospital Finance Authority
Revenue Bonds, Hospital Equipment Loan
Program
(7-Day Put, 7-Day Change)
12-01-2023 4.15# 1,900,000
2,200,000 Missouri State Environmental Improvement
and Energy Research Authority, Pollution Control
Revenue Bonds (Mandatory Put 11-25-1997)
06-01-2015 3.70 2,200,000
2,500,000 Missouri State Environmental Improvement and
Energy Research Authority, Pollution Control
Revenue Bonds Union Electric Project Series A
(Mandatory Put 10-14-1997)
06-01-2015 3.65 2,500,000
800,000 Missouri State Environmental Improvement and
Energy Research Authority, Pollution Control
Revenue Bonds National Rural Utilities Project
(7-Day Put, 7-Day Change)
12-15-2003 4.10# 800,000
3,000,000 Moffat County, CO Pollution Control Revenue
Bonds Colorado-Ute Electric Authority Project
(7-Day Put, 7-Day Change)
07-01-2010 4.10# 3,000,000
</TABLE>
See notes to combined financial statements
--
15
<PAGE> 18
COWEN STANDBY TAX-EXEMPT RESERVE FUND, INC.
STATEMENT OF INVESTMENTS -- (continued)
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
ANNUALIZED
PRINCIPAL YIELD ON DATE
AMOUNT DESCRIPTION OF BOND OF PURCHASE VALUE
<C> <S> <C> <C>
$ 900,000 Montgomery County, PA Higher Education and
Health Authority, Hospital Revenue Bonds,
Bryn Mawr Hospital
(Pre-refunded to 12-01-1997 @ 102)
12-01-2019 3.65% $ 926,273
2,000,000 Municipal Electric Authority of Georgia,
Revenue Bonds Series A
(Mandatory Put 10-15-1997)
01-04-2009 3.75 2,000,000
2,000,000 Municipal Electric Authority of Georgia,
Revenue Bonds Project One, Series 1994 D
(7-Day Put, 7-Day Change)
01-01-2022 4.15# 2,000,000
1,200,000 National Rural Utilities Authority,
Industrial Development Board of the Town
of Chatom, AL Alabama Electric Co-Op project
(Mandatory Put 10-24-1997)
03-01-2008 3.75 1,200,000
2,000,000 National Rural Utilities Authority,
Industrial Development Board of the Town
of Chatom, AL Alabama Electric Co-Op project
(Mandatory Put 10-10-1997)
03-01-2008 3.90 2,000,000
2,000,000 New Hampshire Higher Education Facility
Authority, Veterans Housing Authority
Revenue Bonds Series E
(7-Day Put, 7-Day Change)
12-01-2025 4.15# 2,000,000
350,000 New Mexico State Hospital Equipment
Revenue Bonds
(7-Day Put, 7-Day Change)
05-01-2009 4.05# 350,000
2,500,000 New York City General Obligation Bonds
Subseries 1996-J3
(Mandatory Put 10-30-1997)
02-15-2016 3.75 2,500,000
</TABLE>
See notes to combined financial statements
--
16
<PAGE> 19
COWEN STANDBY TAX-EXEMPT RESERVE FUND, INC.
STATEMENT OF INVESTMENTS -- (continued)
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
ANNUALIZED
PRINCIPAL YIELD ON DATE
AMOUNT DESCRIPTION OF BOND OF PURCHASE VALUE
<C> <S> <C> <C>
$ 1,500,000 New York, NY Municipal Water Finance
Authority Water and Sewer System Revenue
Notes Tax-Exempt Commercial Paper
12-18-1997 3.75% $ 1,500,000
2,400,000 New York, NY Municipal Water Finance
Authority Water and Sewer System Revenue
Notes
(Daily Put, Daily Change)
06-15-2023 3.85# 2,400,000
1,000,000 New York State Dormitory Authority Revenue
Bonds St. Francis Center at the Knolls, Health,
Hospital and Nursing Home Revenue Projects
(Daily Put, Daily Change)
07-01-2023 3.95# 1,000,000
2,440,000 Norwalk, CA Redevelopment Agency
Tax-Allocation Refunding Notes Norwalk
Redevelopment Project 1
(Pre-refunded to 12-01-1997 @ 101.948)
12-01-2015 3.60 2,501,369
1,775,000 Oregon State Housing and Community Services
Dept. Revenue Bonds, Single-Family Mortgage
Program Series J
12-11-1997 3.55 1,775,000
1,000,000 Person County, NC Industrial Facilities and
Pollution Control Finance Authority
Revenue-Carolina Power and Light Project
Series A
(7-Day Put, 7-Day Change)
11-01-2019 4.20# 1,000,000
700,000 Pima County, AZ Industrial Development
Corporation Tucson Electric Corp. Series A
(7-Day Put, 7-Day Change)
06-15-2022 4.10# 700,000
1,500,000 Platte River Power Authority, CO
Electrical Power and Light Revenue Bonds,
Series S-1
(Mandatory Put 12-11-1997)
06-01-2018 3.70 1,500,000
</TABLE>
See notes to combined financial statements
--
17
<PAGE> 20
COWEN STANDBY TAX-EXEMPT RESERVE FUND, INC.
STATEMENT OF INVESTMENTS -- (continued)
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
ANNUALIZED
PRINCIPAL YIELD ON DATE
AMOUNT DESCRIPTION OF BOND OF PURCHASE VALUE
<C> <S> <C> <C>
$ 2,000,000 Racine, WI Unified School District Tax Revenue
Anticipation Notes, Cash Flow Management
08-24-1998 3.85% $ 2,006,867
1,950,000 Rochester, MN Health Care Facilities Revenue
Bonds Mayo Foundation/Mayo Medical Center
Series 88-F
(Mandatory Put 10-09-1997)
11-15-2017 3.50 1,950,000
3,000,000 Rockport, IN Pollution Control Revenue Notes
Indiana-Michigan Power Company-Project B
(7-Day Put, 7-Day Change)
06-01-2025 4.15# 3,000,000
1,000,000 Saint Claire County, AL Industrial Development
Revenue Bonds (National Cement
Company, Inc. Project)
(7-Day Put, 7-Day Change)
03-01-2005 4.10# 1,000,000
3,000,000 Salt Lake County, UT General Obligation Tax
and Revenue Anticipation Notes
12-31-1997 3.65 3,002,537
502,000 Scituate, MA General Obligation Note Water
and Sewer Utilities Improvement
11-01-1997 3.77 502,510
1,500,000 Seattle, WA Municipal Light & Power
Revenue Bonds Adjustable Series B
(Mandatory Put 10-01-1997)
05-01-2011 3.75 1,500,000
1,600,000 Seattle, WA Municipal Light & Power
Revenue Bonds
(7-Day Put, 7-Day Change)
11-01-2018 4.00# 1,600,000
5,000,000 Seattle, WA Water System Revenue Bonds
(7-Day Put, 7-Day Change)
09-01-2025 4.00# 5,000,000
2,500,000 Port of Seattle, Washington
General Obligation Bonds
(7-Day Put, 7-Day Change)
01-01-2005 4.10# 2,500,000
</TABLE>
See notes to combined financial statements
--
18
<PAGE> 21
COWEN STANDBY TAX-EXEMPT RESERVE FUND, INC.
STATEMENT OF INVESTMENTS -- (continued)
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
ANNUALIZED
PRINCIPAL YIELD ON DATE
AMOUNT DESCRIPTION OF BOND OF PURCHASE VALUE
<C> <S> <C> <C>
$ 1,000,000 City of Sheridan, AR Industrial Development
Revenue Bonds,
(H.H. Robertson Co. Project),
Series 1988A
(7-Day Put, 7-Day Change)
08-01-1998 4.10%# $ 1,000,000
50,000 South Carolina Jobs Economic Development
Authority, Industrial Development Revenue
Bonds, Series 1987A
(Daily Put, 7-Day Change)
11-01-2007 4.20# 50,000
2,000,000 Sweetwater County, WY Pollution Control
Revenue Bonds, Pacificorp Project
(Mandatory Put, 10-02-1997)
01-01-2017 3.65 2,000,000
1,705,000 Tarrant County, TX Housing Finance
Corporation Revenue Bonds,
Multi-Family Housing-SF Apartments
(7-Day Put, 7-Day Change)
11-01-2017 4.10# 1,705,000
700,000 Texas Higher Education Authority, Inc.
Series B
(7-Day Put, 7-Day Change)
12-01-2025 4.05# 700,000
960,000 Texas Hospital Equipment Financing Authority
Revenue Bonds
(7-Day Put, 7-Day Change)
04-07-2005 4.20# 960,000
2,000,000 Topeka, KS General Obligation Temporary
Notes
Cash Flow Management Series A
07-15-1998 3.75 2,003,801
1,200,000 University of North Carolina School of Medicine
and Ambulatory Care Clinic Revenue Bonds
(7-Day Put, 7-Day Change)
07-01-2012 4.00# 1,200,000
1,000,000 Washington State General Obligation Note
Refunding Bonds Series R-93-B-1
10-01-1997 3.75 1,000,000
</TABLE>
See notes to combined financial statements
--
19
<PAGE> 22
COWEN STANDBY TAX-EXEMPT RESERVE FUND, INC.
STATEMENT OF INVESTMENTS -- (continued)
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
ANNUALIZED
PRINCIPAL YIELD ON DATE
AMOUNT DESCRIPTION OF BOND OF PURCHASE VALUE
<C> <S> <C> <C>
$ 1,000,000 West Orange, FL Memorial Hospital Revenue
Bonds Subseries 1991A-1
(Mandatory Put 10-09-1997)
02-01-2022 3.60% $ 1,000,000
1,000,000 Wichita, KS Highway Improvement Authority
General Obligation Sales Tax Revenue Notes
Highway and Public Improvements
10-01-1997 3.626 1,000,000
2,100,000 Wisconsin Health & Educational Facilities
Authority Revenue ACES, Health Care
Project A
(7-Day Put, 7-Day Change)
06-01-2006 4.15# 2,100,000
2,000,000 Wisconsin State Transportation Revenue Notes
Series 1997-A
10-01-1997 3.70 2,000,000
-------------
TOTAL INVESTMENTS
(Cost $185,905,052)............... 99.30% $ 185,905,052
Cash and receivables, less
payables (net).................... 0.70% 1,308,022
------ -------------
Net Assets........................ 100.00% $ 187,213,074
====== =============
</TABLE>
- ---------------
Note: #-Variable Rate Instruments Reflect Rate as of 09-30-1997
85.15% of the investment values above are supported by Letters of Credit,
guarantees or other credit enhancements.
See notes to combined financial statements
--
20
<PAGE> 23
STATEMENTS OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
COWEN STANDBY
COWEN STANDBY TAX-EXEMPT
RESERVE FUND, INC. RESERVE FUND, INC.
<S> <C> <C>
ASSETS
Investments in securities, at value - Note A(1) $ 1,328,081,029 $ 185,905,052
Cash 3,350,670 408.426
Interest receivable 9,163,225 1,202,186
Prepaid expenses 56,991 24,191
--------------- -------------
TOTAL ASSETS 1,340,651,915 187,539,855
--------------- -------------
LIABILITIES
Due to investment manager - Note B 588,574 66,436
Accrued expenses 420,516 56,004
Dividends payable 2,176,040 204,341
--------------- -------------
TOTAL LIABILITIES 3,185,130 326,781
--------------- -------------
NET ASSETS $ 1,337,466,785 $ 187,213,074
=============== =============
Represented By:
Paid-in capital $ 1,339,161,662 $ 187,231,616
Accumulated net realized loss on investments (1,694,877) (18,542)
--------------- -------------
NET ASSETS AT VALUE, applicable to
1,339,161,662 outstanding shares of $.01 par
value Common Stock for SRF and 187,231,616
outstanding shares of $.001 par value Common
Stock for STE (2,000,000,000 and
1,000,000,000 shares authorized for SRF and
STE, respectively) $ 1,337,466,785 $ 187,213,074
=============== =============
Offering and redemption price per share $ 1.00 $ 1.00
=============== =============
</TABLE>
See notes to combined financial statements
--
21
<PAGE> 24
STATEMENTS OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
COWEN STANDBY
COWEN STANDBY TAX-EXEMPT
RESERVE FUND, INC. RESERVE FUND, INC.
<S> <C> <C>
INVESTMENT INCOME
Interest income $ 68,458,841 $ 6,563,358
------------ -----------
EXPENSES
Investment management fee - Note B 6,144,043 905,499
Shareholder servicing costs and custodian fee 1,926,897 151,035
Federal and State registration fees 127,084 56,555
Professional fees 70,500 36,504
Directors' fees and expenses - Note B 24,000 24,000
Prospectus and shareholders' reports 60,999 3,401
Miscellaneous 78,051 12,773
------------ -----------
Total Expenses $ 8,431,574 1,189,767
Less: Investment management fee
waived - Note B -- (181,100)
------------ -----------
Net Expenses 8,431,574 1,008,667
------------ -----------
Investment Income - net 60,027,267 5,554,691
Net realized gain on investments 70,086 --
------------ -----------
Net Increase in Net Assets Resulting From
Operations $ 60,097,353 $ 5,554,691
============ ===========
</TABLE>
See notes to combined financial statements
--
22
<PAGE> 25
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
COWEN STANDBY
COWEN STANDBY TAX-EXEMPT
RESERVE FUND, INC. RESERVE FUND, INC.
---------------------------------- -------------------------------
YEAR ENDED SEPTEMBER 30,
1997 1996 1997 1996
--------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
OPERATIONS
Investment
income - net $ 60,027,267 $ 51,046,194 $ 5,554,691 $ 4,712,178
Net realized gain on
investments 70,086 77,106 -- --
--------------- -------------- ------------- ------------
Net increase in net
assets resulting
from operations 60,097,353 51,123,300 5,554,691 4,712,178
DIVIDENDS TO
SHAREHOLDERS FROM
Investment
income - net (60,027,267) (51,046,194) (5,554,691) (4,712,178)
COMMON STOCK
TRANSACTIONS
(NET) - NOTE C 235,452,289 210,979,736 16,157,580 48,519,374
--------------- -------------- ------------- ------------
Total increase in net
assets 235,522,375 211,056,842 16,157,580 48,519,374
NET ASSETS
Beginning of year 1,101,944,410 890,887,568 171,055,494 122,536,120
--------------- -------------- ------------- ------------
End of year $ 1,337,466,785 $1,101,944,410 $ 187,213,074 $171,055,494
=============== ============== ============= ============
</TABLE>
See notes to combined financial statements
--
23
<PAGE> 26
COWEN STANDBY RESERVE FUND, INC. AND
COWEN STANDBY TAX-EXEMPT RESERVE FUND, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: General: Cowen Standby
Reserve Fund, Inc. (SRF) and Cowen Standby Tax-Exempt Reserve Fund, Inc. (STE)
are each separately registered under the Investment Company Act of 1940, as
amended ("Act"), as diversified, open-end management companies. Cowen & Company
("Cowen") serves as each company's Investment Manager and acts as the exclusive
distributor of each company's shares, which are sold without a sales charge. It
is each company's policy to maintain a continuous net asset value per share of
$1.00; each company has adopted certain investment portfolio valuation and
dividend and distribution policies to enable it to do so.
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which may require the use of management estimates
and assumptions. Actual results could differ from those estimates.
(1) Portfolio valuation: Each company values its investments at amortized
cost, which has been determined by the Board of Directors of each company to
represent the fair value of each company's investments.
(2) Securities transactions and investment income: Securities transactions are
recorded on a trade date basis. Realized gain and loss from securities
transactions are recorded on the identified cost basis. Interest income,
including amortization of premiums and discounts, is recorded on the accrual
basis. Cost of investments represents amortized cost.
(3) Dividends and distributions to shareholders: It is the policy of each
company to declare dividends from net investment income on each business day;
such dividends are 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. Distributions from net realized
capital gains, if any, are declared and paid annually after the end of the
fiscal year in which earned. To the extent that net realized capital gains can
be offset by capital loss carryovers, it is the policy of each company not to
distribute such gains.
(4) Federal income taxes: It is the policy of each company to continue to
qualify as a regulated investment company, if such qualification is in the best
interests of its shareholders, by complying with the provisions available to
certain investment companies, as defined in applicable sections of the Internal
Revenue Code, and to make distributions of taxable income sufficient to relieve
it from all, or substantially all, Federal income taxes.
At September 30, 1997, the aggregate cost of investments for Federal income
tax purposes was substantially the same as the cost for financial reporting
purposes (see the Statements of Investments).
At September 30, 1997, SRF and STE had unused capital loss carryovers of
approximately $1,695,000 and $19,000, respectively, available for Federal income
tax purposes to be applied against future securities profits, if any. If not
applied, the carryovers expire in fiscal 2001 and in fiscal 2000, 2001 and 2002,
respectively.
NOTE B - INVESTMENT MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES: Fees
paid by each company to Cowen pursuant to the provisions of Investment
Management Agreements are payable monthly, based on an annual rate of .50 of 1%,
of the average daily value of that company's net assets. The Agreements further
provide that if the aggregate expenses of either company, exclusive of interest,
taxes, brokerage and, with the prior written consent of the necessary state
securities commissions, extraordinary expenses, exceed the
--
24
<PAGE> 27
COWEN STANDBY RESERVE FUND, INC. AND
COWEN STANDBY TAX-EXEMPT RESERVE FUND, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS - (continued)
expense limitation of any state having jurisdiction over that company, Cowen
will reimburse the company for such excess. There was no expense reimbursement
required for either company for the year ended September 30, 1997, however,
Cowen has waived $181,100 of its Investment Management Fee from STE during such
period.
Directors who are not officers, directors, partners, stockholders or employees
of Cowen or its affiliates receive from each company a fee of $3,000 per annum
plus $500 per meeting attended and $375 for
each audit committee attended and reimbursement for travel and out-of-pocket
expenses.
NOTE C - COMMON STOCK TRANSACTIONS: At September 30, 1997, there were 2 billion
shares of $.01 par value Common Stock for SRF and 1 billion shares of $.001 par
value Common Stock of STE authorized.
Transactions in Common Stock were all at $1.00 per share and are summarized as
follows (000's omitted):
<TABLE>
<CAPTION>
SRF
--------------------------------------------------
YEAR ENDED SEPTEMBER 30,
1997 1996
<S> <C> <C>
Shares sold $ 6,044,992 $ 5,093,876
Dividends reinvested 57,167 48,575
----------- -----------
6,102,159 5,142,451
Shares redeemed (5,866,707) (4,931,471)
----------- -----------
Net increase $ 235,452 $ 210,980
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
STE
--------------------------------------------------
YEAR ENDED SEPTEMBER 30,
1997 1996
<S> <C> <C>
Shares sold $ 786,951 $ 729,409
Dividends reinvested 5,356 4,508
--------- ---------
792,307 733,917
Shares redeemed (776,149) (685,398)
--------- ---------
Net increase $ 16,158 $ 48,519
========= =========
</TABLE>
--
25
<PAGE> 28
COWEN STANDBY RESERVE FUND, INC. AND
COWEN STANDBY TAX-EXEMPT RESERVE FUND, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS - (continued)
NOTE D - FINANCIAL HIGHLIGHTS: Selected data for a share of Common Stock
outstanding throughout each year:
<TABLE>
<CAPTION>
SRF
-----------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
-----------------------------------------------------------------
1997 1996 1995 1994 1993
----------- ----------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of Year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.05 0.05 0.05 0.03 0.03
LESS DISTRIBUTIONS
Dividends from Net Investment Income (0.05) (0.05) (0.05) (0.03) (0.03)
----------- ----------- --------- --------- ---------
NET ASSET VALUE
End of Year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
=========== =========== ========= ========= =========
Total Return 4.98% 4.97% 5.23% 3.14% 3.07%
RATIOS/SUPPLEMENTAL DATA
Net Assets (000 omitted) $ 1,337,467 $ 1,101,944 $ 890,888 $ 692,609 $ 682,379
Ratio of Expenses to Average Net Assets 0.69% 0.71% 0.71% 0.64% 0.68%
Ratio of Net Investment Income to Average
Net Assets 4.89% 4.89% 5.13% 3.11% 3.00%
</TABLE>
--
26
<PAGE> 29
COWEN STANDBY RESERVE FUND, INC. AND
COWEN STANDBY TAX-EXEMPT RESERVE FUND, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS - (continued)
NOTE D - (continued)
<TABLE>
<CAPTION>
STE
-------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
-------------------------------------------------------------
1997 1996 1995 1994 1993
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of Year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.03 0.03 0.03 0.02 0.02
LESS DISTRIBUTIONS
Dividends from Net Investment Income (0.03) (0.03) (0.03) (0.02) (0.02)
--------- --------- --------- --------- ---------
NET ASSET VALUE
End of Year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ========= ========= ========= =========
Total Return 3.11% 3.07% 3.19% 2.11% 2.03%
RATIOS/SUPPLEMENTAL DATA
Net Assets (000 omitted) $ 187,213 $ 171,055 $ 122,536 $ 120,704 $ 116,618
Ratio of Expenses to Average Net Assets* 0.56% 0.59% 0.61% 0.58% 0.62%
Ratio of Net Investment Income to Average Net
Assets* 3.07% 3.01% 3.14% 2.03% 1.99%
INVESTMENT ADVISORY FEES WAIVED
Amount $ 181,100 $ 156,993 $ 124,784 $ 130,483 $ 119,582
Ratio to Average Net Assets 0.10% 0.10% 0.10% 0.10% 0.10%
*NET OF WAIVER
</TABLE>
--
27
<PAGE> 30
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Stockholders and Boards of Directors
Cowen Standby Reserve Fund, Inc. and
Cowen Standby Tax-Exempt Reserve Fund, Inc.
We have audited the accompanying statements of assets and liabilities of Cowen
Standby Reserve Fund, Inc. and Cowen Standby Tax-Exempt Reserve Fund, Inc.,
including the statements of investments, as of September 30, 1997, and the
related statements of operations for the year then ended, the statements of
changes in net assets for each of the two years in the period then ended and the
financial highlights (see Note D) for each of the five years in the period then
ended. These financial statements and financial highlights are the
responsibility of each Company's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform these audits to
obtain reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
September 30, 1997, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Cowen
Standby Reserve Fund, Inc. and Cowen Standby Tax-Exempt Reserve Fund, Inc. at
September 30, 1997, the results of their operations for the year then ended, the
changes in their net assets for each of the two years in the period then ended,
and the financial highlights for each of the five years in the period then
ended, in conformity with generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
New York, New York
October 31, 1997
--
28
<PAGE> 31
COWEN STANDBY RESERVE FUND, INC.
AND
COWEN STANDBY TAX-EXEMPT RESERVE FUND, INC.
Financial Square
New York, NY 10005
DIRECTORS
Joseph M. Cohen, Chairman
James H. Carey
Dr. Peter P. Gil
Dr. Martin J. Gruber
Gerald P. Kaminsky
Creighton H. Peet
Burton J. Weiss
OFFICERS
Joseph M. Cohen, Chairman of the Board of Directors and Chief Executive Officer
David R. Sarns, President
Creighton H. Peet, Treasurer and Chief Financial Officer
Rodd M. Baxter, Secretary
Gerald P. Kaminsky, Senior Investment Officer
Alan E. Koepplin, Investment Officer
Gordon G. Ifill, Assistant Investment Officer
Irwood Schlackman, Controller
<TABLE>
<S> <C>
INVESTMENT ADVISER CUSTODIAN
& DISTRIBUTOR & TRANSFER AGENT
Cowen & Company Investors Fiduciary Trust Company
Financial Square P.O. Box 419111
New York, NY 10005 Kansas City, MO 64141
LEGAL COUNSEL INDEPENDENT AUDITORS
Willkie Farr & Gallagher Ernst & Young LLP
One Citicorp Center 787 Seventh Avenue
153 East 53rd Street New York, NY 10019
New York, NY 10022
</TABLE>
CMB-RSRV
