<PAGE>
SG COWEN STANDBY RESERVE
FUND, INC.
AND
SG COWEN STANDBY TAX-EXEMPT
RESERVE FUND, INC.
<TABLE>
<S> <C>
[LOGO] [LOGO]
</TABLE>
<PAGE>
SG COWEN STANDBY RESERVE FUND, INC.
SG COWEN STANDBY TAX-EXEMPT RESERVE FUND, INC.
ANNUAL FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
<TABLE>
<S> <C>
Chairman's Letter ...................................... 1
Statements of Investments:
SG Cowen Standby Reserve Fund, Inc. .................. 3
SG 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
</TABLE>
<PAGE>
CHAIRMAN'S LETTER NOVEMBER 9, 1998
DEAR SHAREHOLDER:
We are pleased to report that the SG Cowen Standby Reserve Fund and the SG
Cowen Standby Tax-Exempt Reserve Fund generally produced yields in excess of
their peer groups for the annual period ended September 30, 1998. As of that
date, the annualized 7-day yields for SG Cowen Standby Reserve Fund and the SG
Cowen Standby Tax-Exempt Reserve Fund were 4.98% and 3.24%, respectively. In
comparison, the IBC Taxable First Tier Index and the IBC Tax-Free Fund Index
reflected 7-day returns of 4.87% and 3.21%, respectively.
MARKET ACTIVITY
For much of the fiscal year, investors expected the Federal Reserve Board to
raise short-term interest rates to slow down the U.S. economy. During late 1997
and early 1998, consumer spending was strong, housing was booming, the
unemployment rate was at its lowest point in three decades and the stock market
was soaring.
However, as 1998 progressed, it became increasingly apparent that the Asian
economic crisis was spreading to other parts of the world. The Russian economy
collapsed and investors became nervous about most emerging markets. Global
demand for U.S. Treasury securities increased, as investors sought a safe haven
for their money. The yield on the 30-year Treasury bond fell below 5%, as
long-term interest rates dipped below the federal funds rate. For the first time
since the 1990-1991 Persian Gulf War, the U.S. economy appeared likely to enter
a recession in 1999.
To combat that scenario, the Federal Reserve Board lowered the federal funds
rate, the rate banks charge each other for overnight loans, by 25 basis points
to 5.25% on September 29th, 1998. On October 15th, the Fed surprised investors
with another 25 basis point cut in the fed funds rate.
INVESTMENT REVIEW
For much of the fiscal year, the SG Cowen Standby Reserve Fund maturity was
somewhat longer than the average money market fund. We were consistent in our
view that the Federal Reserve Board would not raise short-term interest rates.
By extending its maturity in January and again during the summer, we were able
to lock in higher yields. However, by early September, the Fund's maturity
dropped to that of the index, as we were no longer being adequately compensated
in extra yield for the longer maturities. As of September 30, 1998, the SG Cowen
Standby Reserve Fund's average maturity was 59 days.
While both the SG Cowen Standby Reserve Fund and SG Cowen Standby Tax-Exempt
Reserve Fund are managed according to expectations regarding interest rates and
Fed policy, the SG Cowen Standby Tax-Exempt Reserve Fund involves additional
factors such as the supply and demand of securities and the liquidity needs of
investors. For example, in the tax-exempt market, a large percentage of notes
mature on July 1, flooding the market with cash. This causes yields to drop due
to increased demand. We attempted to avoid this problem by minimizing the number
of securities maturing at this time. As of September 30, 1998, the SG Cowen
Tax-Exempt Reserve Fund's average maturity was 40 days.
1
<PAGE>
The Internal Revenue Code requires us to inform you that 100% of the dividends
distributed by the SG Cowen Standby Tax-Exempt Reserve Fund during its fiscal
year ended September 30, 1998 were exempt from Federal personal income taxes.
After December 31, 1998, you will receive a breakdown of income by state earned
during the year.
In the interest of safety and liquidity, both funds are managed in a very
conservative manner. The SG Cowen Standby Reserve Fund invests exclusively in
the highest-rated categories of commercial paper, certificates of deposit and
floating rate notes. The SG Cowen Standby Tax-Exempt Reserve Fund is invested in
the highest-rated categories of tax-exempt and floating rate notes.
LOOKING AHEAD
Given the Federal Reserve Board's September 29th and October 15th actions, it
is clear that the Fed is very concerned about a tightening in credit
availability that could lead to a recession. Indeed, there are signs that the
economy is slowing: an uptick in unemployment, weak gains in payrolls, a
reduction in manufacturing activity and anemic corporate profit growth. Our
strategy will be to manage the funds consistent with a falling interest rate
environment.
As always, we appreciate your investment in the SG Cowen Reserve Funds. We
look forward to serving your investment needs in the future.
Sincerely,
[SIG]
Joseph M. Cohen
Chairman
2
<PAGE>
SG COWEN STANDBY RESERVE FUND, INC.
STATEMENT OF INVESTMENTS
SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
PRINCIPAL DESCRIPTION OF ANNUALIZED VALUE
AMOUNT SECURITY YIELD ON DATE
OF PURCHASE
<C> <S> <C> <C>
CERTIFICATE OF DEPOSIT - DOMESTIC -
3.39%
Bankers Trust New York Co.
$30,000,000 04-06-1999 5.70 % $ 29,996,921
20,000,000 05-21-1999 5.84 19,991,482
--------------
Total Certificate of Deposit -
Domestic
(Cost $49,988,403) $ 49,988,403
--------------
COMMERCIAL PAPER - 63.90%
Aetna Services
36,000,000 10-06-1998 5.68 $ 35,972,250
Associates Corp. of North America
30,000,000 11-02-1998 5.60 29,854,133
25,000,000 11-17-1998 5.65 24,820,486
BMW U.S. Capital Corp.
30,000,000 10-13-1998 5.64 29,944,900
BTR Dunlop Finance
25,000,000 11-12-1998 5.66 24,839,583
32,000,000 11-13-1998 5.65 31,789,778
Bear Stearns Companies, Inc.
2,500,000 11-04-1998 5.74 2,500,000
30,000,000 11-12-1998 5.68 29,807,500
20,000,000 12-02-1998 5.49 19,815,722
Coca Cola Enterprises, Inc.
40,000,000 11-12-1998 5.68 39,742,400
Countrywide Home Loans, Inc.
20,000,000 10-19-1998 5.65 19,944,500
Daimler-Benz North American Corp.
35,000,000 10-23-1998 5.65 34,882,789
27,000,000 12-03-1998 5.58 26,743,433
Fleet Funding Corp.
18,699,000 10-15-1998 5.62 18,658,932
Ford Motor Credit Co.
40,000,000 10-08-1998 5.57 40,000,000
24,000,000 11-10-1998 5.66 23,853,333
</TABLE>
SEE NOTES TO COMBINED FINANCIAL STATEMENTS
3
<PAGE>
SG COWEN STANDBY RESERVE FUND, INC.
STATEMENT OF INVESTMENTS - (CONTINUED)
SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
PRINCIPAL DESCRIPTION OF ANNUALIZED VALUE
AMOUNT SECURITY YIELD ON DATE
OF PURCHASE
<C> <S> <C> <C>
General Electric Capital Corp.
$30,000,000 10-14-1998 5.69 % $ 29,940,417
45,000,000 11-09-1998 5.58 44,734,313
General Motors Acceptance Corp.
35,000,000 10-07-1998 5.63 34,967,800
Goldman Sachs & Co.
40,000,000 02-25-1999 5.42 39,145,767
Merrill Lynch & Co., Inc.
35,000,000 11-04-1998 5.75 34,817,864
JP Morgan & Co., Inc.
31,000,000 10-01-1998 5.68 31,000,000
32,000,000 10-26-1998 5.62 31,877,556
Prudential Funding Corp.
32,000,000 10-15-1998 5.60 32,000,000
30,000,000 11-12-1998 5.65 29,807,850
Repeat Offering Securitisation
Entity Funding, Inc. (ROSE)
30,000,000 10-06-1998 5.66 29,977,000
Bank of Nova Scotia
17,500,000 10-01-1998 5.83 17,500,000
Sears Roebuck Acceptance Corp.
30,000,000 12-02-1998 5.50 30,000,000
Swedish Export Credit Corp.
40,000,000 03-29-1999 5.15 39,015,500
Union Bank of Switzerland, AG
35,000,000 10-01-1998 5.78 35,000,000
35,000,000 10-06-1998 5.66 34,973,264
Xerox Credit Corp.
15,000,000 10-06-1998 5.62 14,988,520
--------------
Total Commercial Paper
(Cost $942,915,590) $942,915,590
--------------
</TABLE>
SEE NOTES TO COMBINED FINANCIAL STATEMENTS
4
<PAGE>
SG COWEN STANDBY RESERVE FUND, INC.
STATEMENT OF INVESTMENTS - (CONTINUED)
SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
PRINCIPAL DESCRIPTION OF ANNUALIZED VALUE
AMOUNT SECURITY YIELD ON DATE
OF PURCHASE
<C> <S> <C> <C>
FLOATING RATE NOTES - 18.53%
Abbey National Treasury
$30,000,000 06-15-1999 5.4248 %(a) $ 29,976,769
American Express Centurion Bank
20,000,000 01-14-1999 5.565(a) 20,000,000
25,000,000 08-27-1999 5.4723(a) 25,000,000
Bankers Trust New York Co.
24,000,000 03-18-1999 5.39(b) 23,995,664
Caterpillar International Finance
Corp.
20,000,000 02-24-1999 5.6175(b) 19,998,957
General Motors Acceptance Corp.
35,000,000 10-06-1998 5.6375(b) 35,000,000
Key Bank Corp.
30,000,000 02-22-1999 5.5625(b) 29,994,837
NationsBank Corp.
30,000,000 07-02-1999 5.7087(b) 30,004,735
Norwest Corp.
30,000,000 09-20-1999 5.45(b) 30,000,000
WFP Tower B STEERS
29,471,073 12-08-1998 5.655(a) 29,471,073
--------------
Total Floating Rate Notes
(Cost $273,442,036) $273,442,035
--------------
MEDIUM TERM NOTES - 1.83%
International Business Machines Co.
27,000,000 06-04-1999 5.60 $ 26,981,011
--------------
Total Medium Term Notes
(Cost $26,981,012) $ 26,981,011
--------------
YANKEE CERTIFICATES OF DEPOSIT -
11.99%
Australia & New Zealand Bank
23,000,000 02-01-1999 5.53 $ 23,004,480
Banque Nationale De Paris
25,000,000 10-30-1998 5.66 25,000,874
</TABLE>
SEE NOTES TO COMBINED FINANCIAL STATEMENTS
5
<PAGE>
SG COWEN STANDBY RESERVE FUND, INC.
STATEMENT OF INVESTMENTS - (CONTINUED)
SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
PRINCIPAL DESCRIPTION OF ANNUALIZED VALUE
AMOUNT SECURITY YIELD ON DATE
OF PURCHASE
<C> <S> <C> <C>
Barclays Bank NY, PLC
$15,000,000 10-22-1998 5.91 % $ 14,999,481
Credit Agricole Indosuez
14,000,000 04-16-1999 5.48 14,009,600
National Bank of Canada
30,000,000 12-08-1998 5.58 30,000,000
Rabobank
40,000,000 07-30-1999 5.70 39,980,967
Royal Bank of Canada
30,000,000 02-26-1999 5.69 29,992,945
--------------
Total Yankee Certificates of
Deposit
(Cost $176,988,347) $176,988,347
</TABLE>
TOTAL INVESTMENTS
(Cost $1,470,315,386).............. 99.64%
Cash and Receivables, Less
Liabilities (net).................. 0.36
-------
Net Assets......................... 100.00%
-------
-------
- -------------
Notes:
(a) 1 Month Libor rate instruments reflect rate as of 09-30-1998
-
(b) 3 Month Libor rate instruments reflect rate as of 09-30-1998
-
SEE NOTES TO COMBINED FINANCIAL STATEMENTS
6
<PAGE>
SG COWEN STANDBY TAX-EXEMPT RESERVE FUND, INC.
STATEMENT OF INVESTMENTS
SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
PRINCIPAL DESCRIPTION OF BOND ANNUALIZED VALUE
AMOUNT YIELD ON DATE
OF PURCHASE
<C> <S> <C> <C>
$ 400,000 Alabama Special Care Facility
Montgomery Hospital Floating
Rate
Demand Note
Series 1985
(7-Day Put, 7-Day Change)
04-01-2015 3.50 %# $ 400,000
2,085,000 Alaska State Industrial
Development Authority Lot 6
(7-Day Put, 7-Day Change)
07-01-2001 3.65 # 2,085,000
1,000,000 Alaska State Housing Financing
Corporation
Series C, Floating Rate Demand
Note
(7-Day Put, 7-Day Change)
06-01-2026 3.50 # 1,000,000
3,000,000 Allegheny County, PA
Industrial Development
Authority
Pollution Control Revenue
Bonds, Series 1986
(Mandatory Put 10-01-1998)
05-01-2002 3.65 3,000,000
1,200,000 Arizona Health Facilities
Authority Revenue Bonds
(7-Day Put, 7-Day Change)
10-01-2015 3.55 # 1,200,000
2,500,000 Beaver County, PA Pollution
Control Revenue Bonds
Duquesne Light Co. Project
1994
(Mandatory Put 10-01-1998)
10-01-2029 3.50 2,500,000
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 4.05 # 1,750,000
600,000 Bexar County, TX Housing
Finance Corporation Park Hill
Project Series 88-B
(7-Day Put, 7-Day Change)
06-01-2005 3.55 # 600,000
</TABLE>
SEE NOTES TO COMBINED FINANCIAL STATEMENTS
7
<PAGE>
SG COWEN STANDBY TAX-EXEMPT RESERVE FUND, INC.
STATEMENT OF INVESTMENTS - (CONTINUED)
SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
PRINCIPAL DESCRIPTION OF BOND ANNUALIZED VALUE
AMOUNT YIELD ON DATE
OF PURCHASE
<C> <S> <C> <C>
$1,100,000 Billings, MT Industrial
Development Revenue
Adjustable Tender Notes
(7-Day Put, 7-Day Change)
12-01-2014 3.55 %# $1,100,000
1,500,000 Birmingham, AL General
Obligation Refunding Bonds
Series B
04-01-1999 3.60 1,513,819
3,000,000 Brazos River, TX Harbor
Navigation District Pollution
Control Revenue Bonds, Project
A
(Mandatory Put 11-19-1998)
03-01-2005 3.50 3,000,000
2,000,000 Burke County, GA Industrial
Development Authority
Pollution Control Revenue
Bonds, Oglethorpe Power
Project, Series A
(7-Day Put, 7-Day Change)
01-01-2016 3.50 # 2,000,000
3,000,000 Central Lake County, IL
General Obligation Water
Utility Improvement District
(Pre-refunded to 08-01-1999 @
100)
02-01-2019 3.35 3,097,299
1,000,000 Chicago, IL O'Hare
International Airport Revenue
Bonds American Airlines
Project
(Daily Put, Daily Change)
12-01-2017 4.20 # 1,000,000
1,300,000 Claiborne County, MS Pollution
Control Revenue Bonds National
Rural Electric/ Southern
Mississippi Electric Power
Association, Series 1985G-2
(Mandatory Put 10-14-1998)
12-01-2015 3.65 1,300,000
800,000 Clarksville, TN Public
Building Authority
Pooled Financial Series
(7-Day Put, 7-Day Change)
12-01-2000 3.50 # 800,000
6,080,000 Clayton County, GA Housing
Finance Authority
(7-Day Put, 7-Day Change)
01-01-2021 3.60 # 6,080,000
</TABLE>
SEE NOTES TO COMBINED FINANCIAL STATEMENTS
8
<PAGE>
SG COWEN STANDBY TAX-EXEMPT RESERVE FUND, INC.
STATEMENT OF INVESTMENTS - (CONTINUED)
SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
PRINCIPAL DESCRIPTION OF BOND ANNUALIZED VALUE
AMOUNT YIELD ON DATE
OF PURCHASE
<C> <S> <C> <C>
$2,400,000 Converse County, WY Pollution
Control Revenue Bonds
Pacific Corporation Project 88
(Mandatory Put 11-02-1998)
01-01-2014 3.30 % $2,400,000
2,100,000 Cornell Township, MI Economic
Development Corporation
Industrial Development Revenue
Bonds, Series 1990
(Mandatory Put 12-08-1998)
03-01-2015 3.45 2,100,000
3,500,000 Dallas-Fort Worth, TX Regional
Airport Refunding Revenue
Bonds
11-01-1998 3.58 3,502,011
800,000 DeKalb 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 3.55 # 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 3.65 # 2,000,000
3,200,000 Delaware Valley, PA Regional
Finance Authority Local
Government Revenue Bonds
Series A
(7-Day Put, 7-Day Change)
12-01-2017 and 12-01-2019 3.50 # 3,200,000
1,000,000 District of Columbia, Revenue
Bonds,
The American University Issue,
Series 1985A
(7-Day Put, 7-Day Change)
10-01-2015 3.60 # 1,000,000
</TABLE>
SEE NOTES TO COMBINED FINANCIAL STATEMENTS
9
<PAGE>
SG COWEN STANDBY TAX-EXEMPT RESERVE FUND, INC.
STATEMENT OF INVESTMENTS - (CONTINUED)
SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
PRINCIPAL DESCRIPTION OF BOND ANNUALIZED VALUE
AMOUNT YIELD ON DATE
OF PURCHASE
<C> <S> <C> <C>
$1,095,000 District of Columbia, Revenue
Bonds,
The American University Issue,
Series 1986A
(7-Day Put, 7-Day Change)
12-01-2015 3.60 %# $1,095,000
1,230,000 Florida Housing Finance
Agency-Reference Multi-Family
Housing EEE Carlton Project
(7-Day Put, 7-Day Change)
12-01-2008 3.65 # 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 3.70 # 3,200,000
1,000,000 Gillette, WY Campbell County
Pollution Control Revenue
Bonds, Pacificorp Project
(Mandatory Put 11-15-1998)
01-01-2018 3.50 1,000,000
1,000,000 Gillette, WY Campbell County
Pollution Control Revenue
Bonds, Pacificorp Project
(Mandatory Put 12-01-1998)
01-01-2018 3.25 1,000,000
1,000,000 Greensboro, NC General
Obligation Note
Public Improvements-Sewer
Project, Series B
(7-Day Put, 7-Day Change)
04-01-2007 3.55 # 1,000,000
2,000,000 Hamilton, OH Electrical
Systems Revenue Bonds
Electric, Light, and Power
Improvements, Series B
(Pre-refunded to 10-15-1998 @
102)
10-15-2022 3.65 2,043,211
5,000,000 Harris County, TX Industrial
Development Authority BayTank
Houston, Inc. Project
(7-Day Put, 7-Day Change)
02-01-2020 3.60 # 5,000,000
1,000,000 Hillsborough County, FL
Aviation Authority Revenue
Bonds, Tampa International
Airport Project Series B
(Pre-refunded to 10-01-1999 @
102)
10-01-2019 3.365 1,054,784
</TABLE>
SEE NOTES TO COMBINED FINANCIAL STATEMENTS
10
<PAGE>
SG COWEN STANDBY TAX-EXEMPT RESERVE FUND, INC.
STATEMENT OF INVESTMENTS - (CONTINUED)
SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
PRINCIPAL DESCRIPTION OF BOND ANNUALIZED VALUE
AMOUNT YIELD ON DATE
OF PURCHASE
<C> <S> <C> <C>
$1,000,000 Honolulu, HI City and County
Tax-Exempt Commercial Paper
10-26-1998 3.50 % $1,000,000
300,000 Illinois Health Facility
Authority Hospital Revenue
Bonds, Sisters of Charity
Project, Series E
(7-Day Put, 7-Day Change)
12-01-2015 3.55 # 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 3.55 # 500,000
2,000,000 Illinois Health Facility
Authority Hospital Revenue
Bonds, Alexian Brothers
Medical Center Project D
(Mandatory Put 10-29-1998)
01-01-2005 3.55 2,000,000
2,500,000 Independence, MO Water Utility
District Revenue Bonds Water
Utility Improvements
(Mandatory Put 10-09-1998)
11-01-2016 3.40 2,500,000
2,000,000 Indian River County, FL
Hospital District Revenue
Bonds Sunhealth Network
Project 1990
(Mandatory Put 11-02-1998)
10-01-2024 3.55 2,000,000
3,000,000 Indiana Municipal Power
Agency, Power Supply System
Revenue Bonds, Series A
(7-Day Put, 7-Day Change)
01-01-2018 3.55 # 3,000,000
4,000,000 Intermountain Power Agency of
Utah, Electric Light and Power
Improvements, Power Supply
Revenue Bonds Series 1985-E
(Mandatory Put 10-21-1998)
07-18-2019 3.55 4,000,000
</TABLE>
SEE NOTES TO COMBINED FINANCIAL STATEMENTS
11
<PAGE>
SG COWEN STANDBY TAX-EXEMPT RESERVE FUND, INC.
STATEMENT OF INVESTMENTS - (CONTINUED)
SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
PRINCIPAL DESCRIPTION OF BOND ANNUALIZED VALUE
AMOUNT YIELD ON DATE
OF PURCHASE
<C> <S> <C> <C>
$3,000,000 Jefferson County, KY Pollution
Control Revenue Bonds
Louisville Gas and Electric
Co. Project A
(Mandatory Put 01-27-1999)
09-01-2017 3.30 % $3,000,000
5,000,000 Jefferson Parish, LA Hospital
Service District #001 Hospital
Revenue Bonds, Jefferson
Medical Center
(7-Day Put, 7-Day Change)
01-01-2026 3.60 # 5,000,000
3,000,000 Johnson City, TN Health and
Education Facilities Board
Johnson City Medical Center
Project Revenue Bonds
(7-Day Put, 7-Day Change)
07-01-2003 3.60 # 3,000,000
2,185,000 Jordan, UT School District
General Obligation Refunding
Bonds, School Improvements
06-15-1999 3.65 2,190,179
3,000,000 King County, WA Sewer System
Revenue Notes Series A,
Commercial Paper
12-18-1998 3.55 3,000,000
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 3.75 # 2,700,000
1,820,000 Las Vegas, NV General
Obligation Notes Sewer System
Improvements
(Pre-refunded to 01-01-1999 @
102)
01-01-2001 3.75 1,870,079
2,000,000 Las Vegas, NV Valley Water
District General Obligation
Bonds
11-10-1998 3.50 2,000,000
4,000,000 Lincoln County, WY Pollution
Control Revenue Bonds
Pacificorp Project
(Mandatory Put 12-07-1998)
01-01-2016 3.55 4,000,000
</TABLE>
SEE NOTES TO COMBINED FINANCIAL STATEMENTS
12
<PAGE>
SG COWEN STANDBY TAX-EXEMPT RESERVE FUND, INC.
STATEMENT OF INVESTMENTS - (CONTINUED)
SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
PRINCIPAL DESCRIPTION OF BOND ANNUALIZED VALUE
AMOUNT YIELD ON DATE
OF PURCHASE
<C> <S> <C> <C>
$2,000,000 Long Island, NY Power
Authority Electric System
Revenue Bonds, Series 1
(7-Day Put, 7-Day Change)
05-01-2033 3.35 %# $2,000,000
1,000,000 Louisiana Public Facilities
Authority, Hospital Revenue CP
Program
(7-Day Put, 7-Day Change)
12-01-2000 4.00 # 1,000,000
1,900,000 Louisiana Public Facilities
Authority Revenue Bonds-Sister
of Charity Project Series E
(7-Day Put, 7-Day Change)
07-01-2023 3.55 # 1,900,000
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 3.60 # 4,000,000
1,200,000 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 3.65 # 1,200,000
4,200,000 Maryland State Health and
Higher Education Facilities
Authority Revenue Notes
(7-Day Put, 7-Day Change)
04-01-2035 3.60 # 4,200,000
650,000 Mason County, KY Pollution
Control Revenue Bonds Kentucky
Power-National Rural Electric
Project B-1
(7-Day Put, 7-Day Change)
10-15-2014 3.65 # 650,000
115,000 Michigan State Hospital
Finance Authority Revenue
Bonds, Hospital Equipment Loan
Program
(7-Day Put, 7-Day Change)
06-01-2001 3.50 # 115,000
</TABLE>
SEE NOTES TO COMBINED FINANCIAL STATEMENTS
13
<PAGE>
SG COWEN STANDBY TAX-EXEMPT RESERVE FUND, INC.
STATEMENT OF INVESTMENTS - (CONTINUED)
SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
PRINCIPAL DESCRIPTION OF BOND ANNUALIZED VALUE
AMOUNT YIELD ON DATE
OF PURCHASE
<C> <S> <C> <C>
$1,300,000 Michigan State Hospital
Finance Authority
Revenue Bonds, Hospital
Equipment Loan Program (7-Day
Put, 7-Day Change)
12-01-2023 3.55 %# $1,300,000
2,000,000 Regents of The University of
Michigan Tax-Exempt CP Notes,
Series B
12-09-1998 3.40 2,000,000
1,000,000 Milwaukee County, WI General
Obligation Notes for Public
Improvements Series A
(Pre-refunded to 12-01-1998 @
100)
12-01-2002 3.70 1,004,225
2,200,000 Missouri State Environmental
Improvement and Energy
Research Authority, Pollution
Control Revenue Bonds Union
Electric Project Series A
(Mandatory Put 10-15-1998)
06-01-2015 3.60 2,200,000
1,000,000 Missouri State Environmental
Improvement and Energy
Research Authority, Pollution
Control Revenue Bonds Union
Electric Project Series A
10-01-1999 3.45 1,032,619
700,000 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 3.65 # 700,000
3,000,000 Moffat County, CO Pollution
Control Revenue Bonds
Colorado-Ute Electric
Authority Project
(7-Day Put, 7-Day Change)
07-01-2010 3.65 # 3,000,000
4,665,000 Montgomery, AL Special Care
Facilities Authority Alabama
VHA Series G
(7-Day Put, 7-Day Change)
12-01-2030 3.60 # 4,665,000
</TABLE>
SEE NOTES TO COMBINED FINANCIAL STATEMENTS
14
<PAGE>
SG COWEN STANDBY TAX-EXEMPT RESERVE FUND, INC.
STATEMENT OF INVESTMENTS - (CONTINUED)
SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
PRINCIPAL DESCRIPTION OF BOND ANNUALIZED VALUE
AMOUNT YIELD ON DATE
OF PURCHASE
<C> <S> <C> <C>
$2,000,000 Montgomery, MD Consolidated
BANS
Series 95
10-15-1998 3.60 % $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 3.60 # 2,000,000
1,100,000 National Rural Utilities
Authority, Industrial
Development Board of the Town
of Chatom, AL, Alabama
Electric Co-Op Project
(Mandatory Put 02-18-1999)
03-01-2008 3.35 1,100,000
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 3.65 # 2,000,000
1,700,000 New Jersey Economic
Development Authority,
Pollution Control Revenue
Bonds, Public Service
Electrical and Gas Co, Project
Series A
(7-Day Put, 7-Day Change)
09-01-2012 3.375 # 1,700,000
1,000,000 New Jersey State Highway
Authority, Garden State
Parkway Toll Revenue Bonds
(Pre-refunded to 01-01-1999 @
102)
01-01-2004 3.53 1,029,031
350,000 New Mexico State Hospital
Equipment Revenue Bonds
(7-Day Put, 7-Day Change)
05-01-2009 3.55 # 350,000
1,200,000 New York State Dormitory
Authority Revenue Notes New
York Foundling Charitable
Corp.
(7-Day Put, 7-Day Change)
07-01-2012 3.30 # 1,200,000
</TABLE>
SEE NOTES TO COMBINED FINANCIAL STATEMENTS
15
<PAGE>
SG COWEN STANDBY TAX-EXEMPT RESERVE FUND, INC.
STATEMENT OF INVESTMENTS - (CONTINUED)
SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
PRINCIPAL DESCRIPTION OF BOND ANNUALIZED VALUE
AMOUNT YIELD ON DATE
OF PURCHASE
<C> <S> <C> <C>
$2,000,000 New York State Environmental
Quality Authority Revenue
Bonds, Series 1997-A
12-16-1998 3.45 % $2,000,000
3,000,000 New York, NY General
Obligation Bonds
Series B
(Daily Put, Daily Change)
10-01-2022 4.25 # 3,000,000
3,800,000 New York, NY General
Obligation Bonds
Series C
(Daily Put, Daily Change)
10-01-2023 4.25 # 3,800,000
3,000,000 North Carolina Educational
Facilities Finance Agency
Revenue Bonds, Elon College
Project
(7-Day Put, 7-Day Change)
01-01-2021 3.55 # 3,000,000
2,400,000 Ohio State Water Development
Authority Pollution Control
Revenue Bonds, State Match
Series
06-01-1999 3.60 2,415,500
1,280,000 Omaha, NE General Obligation
Bonds, Public Improvement
Projects
12-15-1998 3.80 1,281,787
2,400,000 Orange County, FL Health
Facilities Authority Revenue
Bonds, Pooled Hospital Loan
Program, Series 1985
(Mandatory Put 10-13-1998)
12-01-2025 3.65 2,400,000
1,200,000 Orange County, FL Health
Facilities Authority Revenue
Bonds, Pooled Hospital Loan
Program, Series 1985
(Mandatory Put 12-08-1998)
12-01-2025 3.50 1,200,000
2,000,000 Otero County, CO Industrial
Development Authority Citizens
Utilities Refunding Bonds
(Mandatory Put 11-08-1998)
08-01-2020 3.55 2,000,000
</TABLE>
SEE NOTES TO COMBINED FINANCIAL STATEMENTS
16
<PAGE>
SG COWEN STANDBY TAX-EXEMPT RESERVE FUND, INC.
STATEMENT OF INVESTMENTS - (CONTINUED)
SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
PRINCIPAL DESCRIPTION OF BOND ANNUALIZED VALUE
AMOUNT YIELD ON DATE
OF PURCHASE
<C> <S> <C> <C>
$2,300,000 Peninsula Ports, VA Port
Authority Revenue Bonds
Dominion Coal Terminal Project
A
(Mandatory Put 12-07-1998)
07-01-2016 3.375% $2,300,000
1,400,000 Pennsylvania State Higher
Educational Facilities
Authority Revenue Bonds,
Thomas Jefferson University
Project A
(Pre-refunded to 08-15-1999 @
100)
08-15-1999 3.42 1,428,321
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 3.70 # 1,000,000
1,500,000 Platte River Power Authority,
CO Electrical Power and Light
Revenue Bonds, Series S-1
(Mandatory Put 10-08-1998)
06-01-2018 3.65 1,500,000
1,000,000 Port Townsend, WA Industrial
Development Authority Port
Townsend Paper Corp. Project A
(7-day Put, 7-day Change)
03-01-2009 4.00 # 1,000,000
1,305,000 Portland, OR General
Obligation Revenue Bonds
Series B
06-01-1999 3.63 1,308,105
1,500,000 Rochester, MN Health Care
Facilities Revenue Bonds Mayo
Foundation/Mayo Medical Center
Series 88-F
(Mandatory Put 12-08-1998)
11-15-2017 3.55 1,500,000
3,000,000 Rockport, IN, Pollution
Control Revenue Notes
Indiana-Michigan Power
Company-Project B
(7-Day Put, 7-Day Change)
06-01-2025 3.55 # 3,000,000
</TABLE>
SEE NOTES TO COMBINED FINANCIAL STATEMENTS
17
<PAGE>
SG COWEN STANDBY TAX-EXEMPT RESERVE FUND, INC.
STATEMENT OF INVESTMENTS - (CONTINUED)
SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
PRINCIPAL DESCRIPTION OF BOND ANNUALIZED VALUE
AMOUNT YIELD ON DATE
OF PURCHASE
<C> <S> <C> <C>
$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 4.00 %# $1,000,000
1,600,000 Seattle, WA Municipal Light &
Power Revenue Bonds
(7-Day Put, 7-Day Change)
11-01-2018 3.50 # 1,600,000
500,000 Seattle, WA Water System
Revenue Bonds
(7-Day Put, 7-Day Change)
09-01-2025 3.50 # 500,000
2,200,000 Port of Seattle, Washington,
General Obligation Bonds
(7-Day Put, 7-Day Change)
01-01-2005 3.50 # 2,200,000
2,000,000 Port of Seattle, Washington,
General Obligation Bonds
Series A
11-02-1998 3.25 2,000,000
2,000,000 Port of Seattle, Washington,
General Obligation Bonds
Series A
11-02-1998 3.35 2,000,000
1,000,000 City of Sheridan, AR
Industrial
Development Revenue Bonds,
(H.H. Robertson Co. Project),
Series 1988A
(7-Day Put, 7-Day Change)
08-01-2014 4.05 # 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 3.80 # 50,000
2,740,000 Sunshine State, FL Government
Finance Commission Revenue
Bonds, Series 1986
(Mandatory Put 11-02-1998)
07-01-2016 3.45 2,740,000
</TABLE>
SEE NOTES TO COMBINED FINANCIAL STATEMENTS
18
<PAGE>
SG COWEN STANDBY TAX-EXEMPT RESERVE FUND, INC.
STATEMENT OF INVESTMENTS - (CONTINUED)
SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
PRINCIPAL DESCRIPTION OF BOND ANNUALIZED VALUE
AMOUNT YIELD ON DATE
OF PURCHASE
<C> <S> <C> <C>
$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 3.65 %# $1,705,000
2,000,000 Tennessee State School Bond
Authority Higher Education
Improvements, Series A
12-11-1998 3.40 2,000,000
650,000 Texas Higher Education
Authority, Inc.
Series B
(7-Day Put, 7-Day Change)
12-01-2025 3.60 # 650,000
940,000 Texas Hospital Equipment
Financing Authority Revenue
Bonds
(7-Day Put, 7-Day Change)
04-07-2005 4.60 # 940,000
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 3.65 # 1,200,000
3,370,000 Washington State Housing
Finance Commission
Multi-Family Mortgage Revenue
Refunding Bonds B
(7-Day Put, 7-Day Change)
10-01-2020 3.50 # 3,370,000
1,000,000 Washington State General
Obligation Revenue Bonds
(Pre-refunded to 05-01-1999 @
100)
05-01-2006 3.36 1,022,228
2,900,000 West Orange, FL Memorial
Hospital Tax District Revenue
Bonds, Health Hospital and
Nursing Home Improvements
Series A-1
(Mandatory Put 11-12-1998)
02-01-2022 3.50 2,900,000
</TABLE>
SEE NOTES TO COMBINED FINANCIAL STATEMENTS
19
<PAGE>
SG COWEN STANDBY TAX-EXEMPT RESERVE FUND, INC.
STATEMENT OF INVESTMENTS - (CONTINUED)
SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
PRINCIPAL DESCRIPTION OF BOND ANNUALIZED VALUE
AMOUNT YIELD ON DATE
OF PURCHASE
<C> <S> <C> <C>
$3,500,000 Wisconsin Health & Educational
Facilities Authority Revenue
ACES, Health Care Project A
(7-Day Put, 7-Day Change)
01-01-2027 3.55 %# $3,500,000
1,308,000 Wisconsin State General
Obligation Bonds Series 97-B
12-07-1998 3.45 1,308,000
2,500,000 Wisconsin State Transportation
Revenue Notes Series 1997-A
11-09-1998 3.50 2,500,000
------------
</TABLE>
TOTAL INVESTMENTS
(Cost $216,776,198)........... 99.41%
Cash and Receivables, less
Liabilities (net)............. 0.59%
-------
Net Assets.................... 100.00%
-------
-------
- -------------
Note: Variable Rate Instruments Reflect Rate As Of 09-30-1998
# -
96.63% of the investment values above are supported by Letters of Credit,
guarantees or other credit enhancements.
SEE NOTES TO COMBINED FINANCIAL STATEMENTS
20
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
SG COWEN STANDBY
SG COWEN STANDBY TAX-EXEMPT
RESERVE FUND, RESERVE FUND,
INC. INC.
<S> <C> <C>
ASSETS
Investments in securities,
at value - Note A (1) $1,470,315,386 $216,776,198
Cash 1,419,736 392,323
Interest receivable 7,635,479 1,285,116
Prepaid expenses 44,188 21,149
----------------- -----------------
TOTAL ASSETS 1,479,414,789 218,474,786
----------------- -----------------
LIABILITIES
Due to investment manager -
Note B 611,327 73,315
Accrued expenses 539,754 81,391
Dividends payable 2,624,745 255,890
----------------- -----------------
TOTAL LIABILITIES 3,775,826 410,596
----------------- -----------------
NET ASSETS $1,475,638,963 $218,064,190
----------------- -----------------
----------------- -----------------
Represented By:
Paid-in capital $1,477,352,790 $218,082,732
Accumulated net realized
loss on investments (1,713,827) (18,542)
----------------- -----------------
NET ASSETS AT VALUE,
applicable to 1,477,352,790
outstanding shares of $.01
par value Common Stock for
SRF and 218,082,732
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) $1,475,638,963 $218,064,190
----------------- -----------------
----------------- -----------------
Offering and redemption price
per share $ 1.00 $ 1.00
----------------- -----------------
----------------- -----------------
</TABLE>
SEE NOTES TO COMBINED FINANCIAL STATEMENTS
21
<PAGE>
STATEMENTS OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
SG COWEN STANDBY
SG COWEN STANDBY TAX-EXEMPT
RESERVE FUND, INC. RESERVE FUND, INC.
<S> <C> <C>
INVESTMENT INCOME
Interest income $82,329,386 $7,109,165
------------------- ----------
EXPENSES
Investment management fee -
Note B 7,259,032 988,377
Shareholder servicing costs
and custodian fee 1,603,590 117,241
Federal and State
registration fees 177,261 53,303
Professional fees 53,470 39,591
Directors' fees and expenses
- Note B 24,999 24,999
Prospectus and shareholders'
reports 175,515 27,028
Miscellaneous 78,086 11,987
------------------- ----------
Total Expenses 9,371,953 1,262,526
Less: Investment
management fee
waived - Note B - (197,675)
------------------- ----------
Net Expenses 9,371,953 1,064,851
------------------- ----------
Investment Income - net 72,957,433 6,044,314
Net realized (loss) on
investments (18,949) -
------------------- ----------
Net Increase in Net Assets
Resulting from Operations $72,938,484 $6,044,314
------------------- ----------
------------------- ----------
</TABLE>
SEE NOTES TO COMBINED FINANCIAL STATEMENTS
22
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SG COWEN STANDBY
SG COWEN STANDBY TAX-EXEMPT
RESERVE FUND, INC. RESERVE FUND, INC.
------------------------------ --------------------------
YEAR ENDED SEPTEMBER 30,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
OPERATIONS
Investment income - net $ 72,957,433 $ 60,027,267 $6,044,314 $5,554,691
Net realized gain (loss) on
investments (18,949 ) 70,086 - -
-------------- -------------- ------------ ------------
Net increase in net assets
resulting from operations 72,938,484 60,097,353 6,044,314 5,554,691
DIVIDENDS TO
SHAREHOLDERS FROM
Investment income - net (72,957,433 ) (60,027,267 ) (6,044,314 ) (5,554,691 )
COMMON STOCK
TRANSACTIONS
(NET) - NOTE C 138,191,127 235,452,289 30,851,116 16,157,580
-------------- -------------- ------------ ------------
Total increase in net assets 138,172,178 235,522,375 30,851,116 16,157,580
NET ASSETS
Beginning of year 1,337,466,785 1,101,944,410 187,213,074 171,055,494
-------------- -------------- ------------ ------------
End of year $1,475,638,963 $1,337,466,785 $218,064,190 $187,213,074
-------------- -------------- ------------ ------------
-------------- -------------- ------------ ------------
</TABLE>
SEE NOTES TO COMBINED FINANCIAL STATEMENTS
23
<PAGE>
SG COWEN STANDBY RESERVE FUND, INC. AND
SG COWEN STANDBY TAX-EXEMPT RESERVE FUND, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
GENERAL. SG Cowen Standby Reserve Fund, Inc. (SRF) and SG 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. Until July 1, 1998, Cowen & Co. ("Cowen") served as
investment manager and principal underwriter to the above-referenced Funds (the
"Funds"). On July 1, 1998, Cowen's business was combined with Societe Generale
Securities Corporation ("SGSC"), a subsidiary of Societe Generale ("SG"), to
form SG Cowen Securities Corporation ("SG Cowen") (the "Acquisition"). SG, a
leading international commercial and investment bank established in 1864, has a
global network of offices in over 80 countries. Since July 1, 1998, SG Cowen has
served as the new investment manager to the Funds, with the existing investment
management personnel of SG Cowen continuing to provide investment management
services to the Funds, and Funds Distributor, Inc. has served as the new
principal underwriter to the Funds. SG Cowen is also a selected dealer of the
Funds' shares. Additionally, effective as of July 1, 1998, the names of the
Funds have been changed, as indicated above, in order to reflect the Funds' new
management by SG Cowen. It is each Fund's policy to maintain a continuous net
asset value per share of $1.00; each Fund has adopted certain investment
portfolio valuation and dividend and distribution policies to enable it to do
so.
The Funds' 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 Fund values its investments at amortized cost,
which has been determined by the Board of Directors of each Fund to represent
the fair value of each Fund'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 Fund
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 Fund to continue to qualify
as a regulated investment company, if such qualification is in the best
interests of its shareholders, by complying with the provisions available to
certain investment companies, as defined in applicable sections of the Internal
Revenue Code, and to make distributions of taxable income sufficient to relieve
it from all, or substantially all, Federal income taxes.
At September 30, 1998, 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, 1998, SRF and STE had unused capital loss carryovers of
approximately $1,714,000 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 2006, and in fiscal 2000, 2001
and 2002, respectively.
24
<PAGE>
SG COWEN STANDBY RESERVE FUND, INC. AND
SG COWEN STANDBY TAX-EXEMPT RESERVE FUND, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS - (CONTINUED)
NOTE B - INVESTMENT MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES: Fees
paid by each Fund to SG 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 Fund's net assets. Effective as of June 1,
1998, the fee for SRF was reduced to .475% on net assets between $1.5 Billion
and $2.5 Billion, and .45% on net assets above $2.5 Billion. The Agreements
further provide that if the aggregate expenses of either Fund, exclusive of
interest, taxes, brokerage and, with the prior written consent of the necessary
state securities commissions, extraordinary expenses, exceed the expense
limitation of any state having jurisdiction over that Fund, SG Cowen will
reimburse the Fund for such excess. There was no expense reimbursement required
for either Fund for the year ended September 30, 1998, however, SG Cowen has
waived $197,675 of its investment management fee from STE during such year.
Directors who are not officers, directors, partners, stockholders or employees
of SG Cowen or its affiliates receive from each Fund a fee of $3,000 per annum
plus $500 per meeting attended and $375 for each audit committee attended and
reimbursement for travel and out-of-pocket expenses.
NOTE C - COMMON STOCK TRANSACTIONS: At September 30, 1998, 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,
1998 1997
<S> <C> <C>
Shares sold $ 6,868,735 $ 6,044,992
Dividends reinvested 69,445 57,167
----------- -----------
6,938,180 6,102,159
Shares redeemed (6,799,989) (5,866,707)
----------- -----------
Net increase $ 138,191 $ 235,452
----------- -----------
----------- -----------
</TABLE>
<TABLE>
<CAPTION>
STE
----------------------------------------------------
YEAR ENDED SEPTEMBER 30,
1998 1997
<S> <C> <C>
Shares sold $ 858,302 $ 786,951
Dividends reinvested 5,793 5,356
---------- ----------
864,095 792,307
Shares redeemed (833,244) (776,149)
---------- ----------
Net increase $ 30,851 $ 16,158
---------- ----------
---------- ----------
</TABLE>
25
<PAGE>
SG COWEN STANDBY RESERVE FUND, INC. AND
SG 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,
-----------------------------------------------------------
1998 1997 1996 1995 1994
----------- ----------- ----------- --------- ---------
<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 0.05 0.03
LESS DISTRIBUTIONS
Dividends from Net Investment Income (0.05) (0.05) (0.05) (0.05) (0.03)
----------- ----------- ----------- --------- ---------
NET ASSET VALUE
End of Year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
----------- ----------- ----------- --------- ---------
----------- ----------- ----------- --------- ---------
Total Return 5.13% 4.98% 4.97% 5.23% 3.14%
RATIOS / SUPPLEMENTAL DATA
Net Assets (000 omitted) $ 1,475,639 $ 1,337,467 $ 1,101,944 $ 890,888 $ 692,609
Ratio of Expenses to Average Net Assets 0.65% 0.69% 0.71% 0.71% 0.64%
Ratio of Net Investment Income to Average Net
Assets 5.03% 4.89% 4.89% 5.13% 3.11%
</TABLE>
26
<PAGE>
SG COWEN STANDBY RESERVE FUND, INC. AND
SG COWEN STANDBY TAX-EXEMPT RESERVE FUND, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS - (CONTINUED)
NOTE D - (continued)
<TABLE>
<CAPTION>
STE
----------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
----------------------------------------------------------
1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ----------
<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 0.03 0.02
LESS DISTRIBUTIONS
Dividends from Net Investment Income (0.03) (0.03) (0.03) (0.03) (0.02)
---------- ---------- ---------- ---------- ----------
NET ASSET VALUE
End of Year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Total Return 3.10% 3.11% 3.07% 3.19% 2.11%
RATIOS / SUPPLEMENTAL DATA
Net Assets (000 omitted) $ 218,064 $ 187,213 $ 171,055 $ 122,536 $ 120,704
Ratio of Expenses to Average Net Assets* 0.54% 0.56% 0.59% 0.61% 0.58%
Ratio of Net Investment Income to Average Net
Assets* 3.06% 3.07% 3.01% 3.14% 2.03%
INVESTMENT ADVISORY FEES WAIVED
Amount $ 197,675 $ 181,100 $ 156,993 $ 124,784 $ 130,483
Ratio to Average Net Assets 0.10% 0.10% 0.10% 0.10% 0.10%
</TABLE>
* NET OF WAIVER
27
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
STOCKHOLDERS AND BOARDS OF DIRECTORS
SG COWEN STANDBY RESERVE FUND, INC. AND
SG COWEN STANDBY TAX-EXEMPT RESERVE FUND, INC.
We have audited the accompanying statements of assets and liabilities of SG
Cowen Standby Reserve Fund, Inc. and SG Cowen Standby Tax-Exempt Reserve Fund,
Inc., including the statements of investments, as of September 30, 1998, 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 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, 1998, 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 SG
Cowen Standby Reserve Fund, Inc. and SG Cowen Standby Tax-Exempt Reserve Fund,
Inc. at September 30, 1998, 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.
[LOGO]
New York, New York
November 6, 1998
28
<PAGE>
SG COWEN STANDBY RESERVE FUND, INC.
AND
SG COWEN STANDBY TAX-EXEMPT RESERVE FUND, INC.
Financial Square
New York, NY 10005
DIRECTORS
<TABLE>
<S> <C>
JOSEPH M. COHEN, Chairman
JAMES H. DR. MARTIN J.
CAREY GRUBER
DR. PETER P. BURTON J. WEISS
GIL
</TABLE>
OFFICERS
JOSEPH M. COHEN, CHAIRMAN OF THE BOARD OF DIRECTORS AND CHIEF EXECUTIVE OFFICER
DAVID R. SARNS, PRESIDENT
CREIGHTON H. PEET, SENIOR INVESTMENT OFFICER, 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
SG Cowen Securities Corporation Investors Fiduciary
Financial Square Trust Co.
New York, NY 10005 P.O. Box 419111
Kansas City, MO 64141
DISTRIBUTOR TRANSFER AGENT
Funds Distributor, Inc. DST, Inc.
60 State Street, Suite 1300 210 West 10th Street
Boston, MA 02109 Kansas City, MO 64105
LEGAL COUNSEL INDEPENDENT AUDITORS
Willkie Farr & Gallagher Ernst & Young LLP
787 Seventh Avenue 787 Seventh Avenue
New York, NY 10019 New York, NY 10019
</TABLE>
CMB-RSRV
