<PAGE> 1
As filed with the Securities and Exchange Commission on
January 27, 1998 (to be effective February 1, 1998)
Securities Act File No. 2-73131
Investment Company Act File No. 811-3220
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
---
---
Pre-Effective Amendment No.
Post-Effective Amendment No. 17 --- X
---
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
---
---
Amendment No. 18 X
(Check appropriate box or boxes) ---
COWEN STANDBY RESERVE FUND, INC.
.................................................................
(Exact Name of Registrant as Specified in Charter)
Financial Square
New York, New York 10005
.................. ..............
(address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (212) 495-6000
Rodd M. Baxter, Esq.
Cowen Standby Reserve Fund, Inc.
Financial Square
New York, New York 10005-3597
...........................................
(Name and Address of Agent for Service)
Copies to: Jon S. Rand, Esq.
Willkie, Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022
<PAGE> 2
It is proposed that this filing will become effective (check appropriate box):
Immediately upon filing pursuant to paragraph (b), or
- ---
X on February 1, 1998 pursuant to paragraph (b), or
- ---
60 days after filing pursuant to paragraph (a), or
- ---
on pursuant to paragraph (a) of Rule 485
- --- ----------
DECLARATION PURSUANT TO RULE 24F-2
An indefinite number of shares of Common Stock of the Registrant have been
registered pursuant to Rule 24f-2 under the Investment Company Act of 1940. The
Rule 24f-2 Notice for the Registrant's most recent fiscal year was filed on
November 28, 1997.
<PAGE> 3
COWEN STANDBY RESERVE FUND, INC.
FORM N-IA
CROSS REFERENCE SHEET
Part A
Item No. Prospectus Heading
- -------- ------------------
1. Cover Page......................... Cover Page
2. Synopsis........................... The Fund's Expenses
3. Financial Highlights............... Financial Highlights
Cowen Standby Reserve
Fund, Inc.
4. General Description of
Registrant...................... Cover Page;
Investment
Objective and Policies-
Cowen Standby Reserve
Fund, Inc.
Additional Information
5. Management of the Fund............. Management of the Funds
5.a.Management's Discussion of ....... Not Applicable
Fund's Performance
6. Capital Stock and Other
Securities........................ Dividends and Distributions;
Taxes; Additional Information
<PAGE> 4
Part A
Item No. Prospectus Heading
- -------- ------------------
7. Purchase of Securities
Being Offered..................... Purchase of Shares;
Automatic Transactions;
Management of the Funds
8. Redemption or Repurchase........... Redemption of Shares;
Automatic Transactions
9. Pending Legal Proceedings.......... Not applicable
Part B Heading in Statement of
Item No. Additional Information
10. Cover Page........................ Cover Page
11. Table of Contents................. Contents
12. General Information and
History...................... See Prospectus--
"Description of Shares"
13. Investment Objectives and
Policies..................... Investment Objective
and Policies -
Cowen Standby Reserve
Fund, Inc.;
Investment Objective
and Policies Applic-
able to Both Funds
14. Management of the Fund............ Management of the Fund
15. Control Persons and
Principal Holders of
Securities................... See Prospectus--
"Management of the
Funds"; Management of the
Fund
<PAGE> 5
Part B Heading in Statement of
Item No. Additional Information
- -------- ----------------------
16. Investment Advisory and
Other Services............... Management of the
Fund ; See Prospectus--
"Management of the
Funds"
17. Broker Allocation
and Other Practices.......... Investment Objectives
and Policies-
Cowen Standby Reserve
Fund, Inc.;
Investment Objective
and Policies Applicable
to Both Funds
18. Capital Stock and Other
Securities................... See Prospectus--
"Dividends and
Distributions"; "Taxes" and
"Additional Information"
19. Purchase, Redemption and Additional Purchase
Pricing of Securities and Redemption
Being Offered................ Information
20. Tax Status......................... See Prospectus--
"Dividends and Distribu-
tions" and "Taxes";
Additional Information
Concerning Taxes
21. Underwriters....................... Additional Purchase and
Redemption Information;
See Prospectus--"Management
of the Funds"
22. Calculations
of Yield Quotations of
Money Market Funds........... Determination of Yield
23. Financial Statements............... Financial Statements
<PAGE> 6
PROSPECTUS FEBRUARY 1, 1998
------------------------
COWEN STANDBY RESERVE FUND, INC.
AND
COWEN STANDBY TAX-EXEMPT RESERVE FUND, INC.
FINANCIAL SQUARE, NEW YORK, NEW YORK 10005, 800-262-7116 (212)
495-6724
------------------------
Cowen Standby Reserve Fund, Inc. ("CSRF") is a money market mutual fund
whose investment objective is the maximization of current income to the extent
consistent with the preservation of capital and the maintenance of liquidity.
Cowen Standby Tax-Exempt Reserve Fund, Inc. ("CSTXRF") is a money market
mutual fund whose investment objective is the maximization of current income
that is exempt from federal income taxes to the extent consistent with the
preservation of capital and the maintenance of liquidity.
CSRF and CSTXRF are each referred to in this Prospectus as a "Fund", and
collectively as the "Funds".
Shares of the Funds are sold and redeemed at net asset value without the
imposition of a sales or redemption charge by either Fund.
THE FUNDS ARE NOT INSURED BY THE U.S. GOVERNMENT AND THERE IS NO GUARANTEE
THAT THE SHARES OF THE FUNDS WILL MAINTAIN A CONSTANT NET ASSET VALUE.
This Prospectus briefly sets forth certain information about the Funds that
investors should know before investing. Investors are advised to read this
Prospectus and retain it for future reference.
Additional information about each Fund, contained in its Statement of
Additional Information, has been filed with the Securities and Exchange
Commission ("SEC") and is available to investors without charge by calling the
Funds' distributor at (212) 495-6724 or by contacting any account representative
at Cowen & Company ("Cowen"). The Statement of Additional Information bears the
same date as this Prospectus and is incorporated by reference into this
Prospectus.
------------------------
COWEN & COMPANY
PRINCIPAL UNDERWRITER
------------------------
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE> 7
COWEN STANDBY RESERVE FUND, INC.
FINANCIAL HIGHLIGHTS
The following table has been audited by Ernst & Young LLP, the Fund's
independent auditors, whose report thereon for each of the five years in the
period ended September 30, 1997, appears in the Fund's annual report to
shareholders which is incorporated by reference in the Statement of Additional
Information. This information should be read in conjunction with the financial
statements and related notes which also appear in CSRF's annual report to
shareholders as of September 30, 1997. The information appearing herein for each
of the years prior to September 30, 1993, also has been audited by Ernst & Young
LLP, whose report thereon was unqualified.
PER SHARE INCOME INFORMATION
For a share of Common Stock outstanding throughout each year.
<TABLE>
<CAPTION>
SRF
-------------------------------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
-------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990
---------- ---------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Year... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- ---------- -------- -------- -------- -------- -------- --------
Income from Investment
Operations:
Net Investment
Income............ .05 .05 .05 .03 .03 .04 .06 .08
Less Distributions:
Dividends from net
investment
income............ (.05) (.05) (.05) (.03) (.03) (.04) (.06) (.08)
---------- ---------- -------- -------- -------- -------- -------- --------
Net Asset Value, End
of Year............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ========= ======== ======== ======== ======== ======== ========
Total Return.......... 4.98% 4.97% 5.23% 3.14% 3.07% 4.16% 6.33% 8.06%
Ratios/Supplemental
Data
Net Assets (000
omitted).......... $1,337,467 $1,101,944 $890,888 $692,609 $682,379 $667,366 $605,212 $617,137
Ratio of Expenses to
Average Net
Assets............ .69% .71% .71% .64% .68% .70% .71% .63%
Ratio of Net
Investment Income
to Average Net
Assets............ 4.89% 4.89% 5.13% 3.11% 3.00% 4.06% 6.15% 7.74%
<CAPTION>
1989 1988
-------- --------
<S> <C<C> <C>
Net Asset Value,
Beginning of Year... $ 1.00 $ 1.00
-------- --------
Income from Investment
Operations:
Net Investment
Income............ .08 .07
Less Distributions:
Dividends from net
investment
income............ (.08) (.07)
-------- --------
Net Asset Value, End
of Year............. $ 1.00 $ 1.00
======== ========
Total Return.......... 8.81% 6.80%
Ratios/Supplemental
Data
Net Assets (000
omitted).......... $474,475 $348,097
Ratio of Expenses to
Average Net
Assets............ .66% .68%
Ratio of Net
Investment Income
to Average Net
Assets............ 8.49% 6.67%
</TABLE>
2
<PAGE> 8
YIELD
For the seven-day period ended January 5, 1998, the Company's yield was
5.20%. At January 5, 1998, CSRF's average portfolio maturity was 59 days. CSRF's
Statement of Additional Information describes the method used to calculate its
yield.
EXPENSES
The following table lists the costs that an investor will incur, either
directly or indirectly, as a shareholder of CSRF, based upon CSRF's projected
annual operating expenses:
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum sales charge imposed on purchases (as a
percentage of offering price)...................... None
Maximum sales charge imposed on reinvested
dividends.......................................... None
Maximum deferred sales charge........................ None
Redemption fees...................................... None
Exchange fee......................................... None
ANNUAL CSRF EXPENSES
(as a percentage of average net assets)
Management fees...................................... .50%
12b-1 fees........................................... None
Other expenses....................................... .19%
----
.69%=====
Total CSRF Operating Expenses.............................
</TABLE>
The nature of the services for which CSRF pays the management fees is
described under "Management of the Funds." "Other expenses" in the above table
include actual fees for shareholder services, custodial fees, legal and
accounting fees, printing costs and registration fees all for the Fund's fiscal
year ended September 30, 1997.
Example
The following example demonstrates the projected dollar amount of total
cumulative expenses that would be incurred over various periods with respect to
a hypothetical investment in CSRF. These amounts are based upon payment by CSRF
of operating expenses at the levels set forth in the table above, and are also
based upon the following assumptions:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on
a $1,000 investment assuming (1) 5%
annual return and (2) redemption at
the end of each time period*.......... $7 $22 $38 $ 86
</TABLE>
- ------------
* This example should not be considered a representation of past or future
expenses, and actual expenses may be greater or less than those shown.
Moreover, while this table assumes a 5% annual return, CSRF's actual
performance will vary and may result in an actual return greater or less than
5%.
The purpose of this table is to assist the investor in understanding the
various costs and expenses that an investor in CSRF will bear directly or
indirectly.
3
<PAGE> 9
COWEN STANDBY TAX-EXEMPT RESERVE FUND, INC.
FINANCIAL HIGHLIGHTS
The following table has been audited by Ernst & Young LLP, the Fund's
independent auditors, whose report thereon for each of the five years in the
period ended September 30, 1997, appears in the Fund's annual report to
shareholders which is incorporated by reference in the Statement of Additional
Information. This information should be read in conjunction with the financial
statements and related notes which also appear in CSTXRF's annual report to
shareholders as of September 30, 1997. The information appearing herein for each
of the years prior to September 30, 1993, also has been audited by Ernst & Young
LLP, whose report thereon was unqualified.
PER SHARE INCOME INFORMATION
For a share of Common Stock outstanding throughout each year.
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-----------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of
Year............... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Income from
Investment
Operations:
Net Investment
Income........... .03 .03 .03 .02 .02 .03 .04 .05 .06 .05
Less Distributions:
Dividends from net
investment
income........... (.03) (.03) (.03) (.02) (.02) (.03) (.04) (.05) (.06) (.05)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net Asset Value, End
of Year............ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ========= ========= ========= ========= ========= ========= ========= ========= =========
Total Return........ 3.11% 3.07% 3.19% 2.11% 2.03% 2.97% 4.50% 5.48% 5.88% 4.61%
Ratios/Supplemental
Data:
Net Assets (000
omitted)......... $187,213 $171,055 $122,536 $120,704 $116,618 $118,389 $107,838 $ 89,371 $ 84,629 $ 67,885
Ratio of Expenses
to Average Net
Assets........... 0.56% .59% .61% .58% .62% .61% .60% .62% .59% .57%
Ratio of Net
Investment Income
to Average Net
Assets........... 3.07% 3.01% 3.14% 2.03% 1.99% 2.87% 4.37% 5.35% 5.73% 4.55%
Investment advisory
fees waived:
Amount............. $181,100 $156,993 $124,784 $130,483 $119,582 $130,414 $105,431 $ 88,632 $132,101 $200,930
Ratio of Average
Net Assets....... 0.10% .10% .10% .10% .10% .10% .10% .10% .17% .30%
</TABLE>
YIELD
For the seven-day period ended January 5, 1998 CSTXRF's yield was 3.28%. At
January 5, 1998, CSTXRF's average portfolio maturity was 45 days. CSTXRF's
Statement of Additional Information describes the methods used to calculate its
yield.
4
<PAGE> 10
EXPENSES
The following table lists the costs that an investor will incur, either
directly or indirectly, as a shareholder of CSTXRF, based upon CSTXRF's
projected annual operating expenses:
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum sales charge imposed on purchases (as a
percentage of offering price)...................... None
Maximum sales charge imposed on reinvested
dividends.......................................... None
Maximum deferred sales charge........................ None
Redemption fees...................................... None
Exchange fee......................................... None
ANNUAL CSTXRF EXPENSES
(as a percentage of average net assets)
Management fees...................................... .50%
12b-1 fees........................................... None
Other expenses....................................... .16%
----
.66%=====
Total CSTXRF Operating Expenses...........................
</TABLE>
The nature of the services for which CSTXRF pays the management fees is
described under "Management of the Funds." Since CSTXRF's inception, Cowen has
voluntarily waived a portion of its investment management fee. However, as there
can be no assurance that Cowen will continue such a waiver, the table reflects
the amount of management fee computed at the rate provided for in the Investment
Management Agreement. "Other expenses" in the above table include actual fees
for shareholder services, custodial fees, legal and accounting fees, printing
costs and registration fees all for the Fund's fiscal year ended September 30,
1997.
Example
The following example demonstrates the projected dollar amount of total
cumulative expenses that would be incurred over various periods with respect to
a hypothetical investment in CSTXRF. These amounts are based upon payment by
CSTXRF of operating expenses at the levels set forth in the table above, and are
also based upon the following assumptions:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following
expenses on a $1,000 investment
assuming (1) 5% annual return and
(2) redemption at the end of each
time period*..................... $7 $21 $37 $ 82
</TABLE>
5
<PAGE> 11
- ------------
* This example should not be considered a representation of past or future
expenses, and actual expenses may be greater or less than those shown.
Moreover, while this table assumes a 5% annual return, CSTXRF's actual
performance will vary and may result in an actual return greater or less than
5%.
The purpose of this table is to assist the investor in understanding the
various costs and expenses that an investor in CSTXRF will bear directly or
indirectly.
INVESTMENT OBJECTIVE AND POLICIES
COWEN STANDBY RESERVE FUND, INC.
IN GENERAL
CSRF is a no-load, diversified, open-end investment company whose objective
is the maximization of current income to the extent consistent with the
preservation of capital and the maintenance of liquidity. This objective may be
changed only with the approval of the shareholders.
CSRF will attempt to achieve its investment objective by investing in a
portfolio of short-term "money market" instruments consisting of United States
Treasury Securities, other obligations issued or guaranteed by the United States
government, its agencies or instrumentalities, marketable certificates of
deposit, including those issued by domestic banks, London branches of domestic
banks, domestic branches of foreign banks and savings and loan and similar
associations, banker's acceptances, repurchase agreements and high grade
commercial paper.
There can be no assurance that CSRF will achieve its investment objective.
The following is a brief description of the kinds of instruments in which CSRF
will invest:
Government Obligations. United States government, agency and
instrumentality securities in which CSRF may invest include Treasury Bills,
Treasury Notes and Treasury Bonds; other obligations which are supported by the
full faith and credit of the United States Treasury, such as Government National
Mortgage Association pass-through certificates; obligations which are supported
by the right of the issuer to borrow from the Treasury, such as securities of
Federal Home Loan Banks; and obligations which are supported only by the credit
of the instrumentality, such as Federal National Mortgage Association bonds.
Bank Instruments. Certificates of deposit ("CDs") and bankers' acceptances
("BAs") in which CSRF may invest generally are limited to those instruments
issued by domestic or foreign commercial banks, savings and loan associations
and similar institutions having total assets in excess of $1 billion. CDs are
short-term negotiable obligations of commercial banks, and BAs are time drafts
drawn on commercial banks by borrowers usually in connection with international
transactions. CSRF will concentrate its investments in the banking industry,
investing in CD's and BA's of domestic branches of United States banks, London
branches of United States banks and domestic branches of foreign banks.
Commercial Paper. Commercial paper purchased by CSRF is limited to direct
obligations of issuers that at the time of purchase are rated A-1 or A-1+ by
Standard & Poor's Corporation ("S&P")
6
<PAGE> 12
or Prime-1 by Moody's Investors Service, Inc. ("Moody's") or, if unrated, are
issued by companies having an outstanding unsecured debt issue currently rated
Aa or better by Moody's or AA or better by S&P. Included among the commercial
paper CSRF may purchase is paper that may be purchased or sold only in private
transactions; CSRF's investments in such commercial paper will be subject to
CSRF's limitation on investments in securities with contractual or other
restriction on resale. See "Special Considerations" below. A discussion of the
Moody's and S&P rating categories is contained in the Statement of Additional
Information.
Medium Term Notes. Medium term notes are issued by banks and business
corporations. They are unsecured debt instruments evidencing an obligation to
pay a stated principal amount at a stated maturity date more than 270 days from
issuance. CSRF will not purchase medium term notes maturing more than one year
after the date of purchase. It will purchase medium term notes only if they are
rated in one of the two highest categories by S&P, Moody's, Duff & Phelps, Inc.,
Fitch Investor Services, Inc., IBCA Limited and Thomson Bankwatch. See the
Statement of Additional Information for a discussion of these rating categories.
CERTAIN PORTFOLIO STRATEGIES
Variable and Floating Rate Notes. CSRF may acquire variable and floating
rate notes. A variable rate note is one whose terms provide for the adjustment
of its interest rate on set dates and which, upon such adjustment, can
reasonably be expected to have a market value that approximates its par value. A
floating rate note is one whose terms provide for the adjustment of its interest
rate whenever a specified interest rate changes and which, at any time, can
reasonably be expected to have a market value that approximates its par value.
Such notes are frequently not rated by credit rating agencies; however, unrated
variable and floating rate notes purchased by CSRF will be determined by Cowen
under guidelines established by CSRF's Board of Directors to be of comparable
quality at the time of purchase to rated instruments eligible for purchase.
Although there may be no active secondary market with respect to a particular
variable or floating rate note purchased by CSRF, it may resell a note at any
time to a third party. The absence of an active secondary market, however, could
make it difficult for CSRF to dispose of a variable or floating rate note in the
event the issuer of the note defaulted on its payment obligations and CSRF
could, as a result or for other reasons, suffer a loss to the extent of the
default. Variable or floating rate notes may be secured by bank letters of
credit.
Repurchase Agreements. Under a repurchase agreement, CSRF may acquire an
underlying debt instrument for a relatively short period subject to an
obligation of the seller to repurchase and the Company to resell the instrument
at a fixed price and time, thereby determining the yield during the Company's
holding period. This results in a fixed rate of return insulated from market
fluctuations during such period. Under the Investment Company Act of 1940 (the
"1940 Act"), repurchase agreements are considered loans by CSRF. CSRF will enter
into repurchase agreements with domestic banks or dealers with respect to
securities of the type in which it invests. The obligation of the seller to
repurchase the instrument at the agreed-upon price and time is in effect secured
by the value of the instrument. If a seller defaults on its obligation to
repurchase the underlying security, CSRF will incur a loss to the extent that
the proceeds it realizes on the sale of the collateral are less than the
repurchase
7
<PAGE> 13
price of the instrument. Furthermore, should the defaulting seller file for
bankruptcy, CSRF could incur certain costs in establishing its right to dispose
of the collateral or experience delays or be subject to limitations in its
realization thereon.
SPECIAL CONSIDERATIONS
While CSRF will invest in obligations of foreign banks or London branches
of United States banks only if the investment manager deems the instruments to
present minimal credit risks, such investments may nevertheless entail risks
that are different from investments in domestic obligations of United States
banks due to differences in political, regulatory and economic systems and
conditions. Such risks include future political and economic developments and
the possible imposition of withholding taxes on interest income, possible
establishment of exchange controls or the adoption of other foreign governmental
restrictions which might adversely affect the payment of principal and interest
on such obligations. In addition, London branches of United States banks and
domestic branches of foreign banks may be subject to less stringent reserve
requirements and to different accounting, auditing, reporting and recordkeeping
standards than those applicable to domestic branches of United States Banks.
In general, immediately after the acquisition of any security (other than
government obligations), not more than 5% of CSRF's assets may be invested at
any time in the obligations (including repurchase agreements) of a single
issuer. Immediately after the acquisition of any put with respect to a portfolio
security, CSRF may not have more than 5% of its total assets invested in or
subject to puts from the same institution. In addition, CSRF may invest up to an
aggregate of 10% of its total assets in securities with contractual or other
restrictions on resale and other instruments which are not readily marketable
and repurchase agreements maturing in more than seven days from the date of
acquisition. CSRF is also authorized to borrow in an amount of up to 10% of its
total assets for temporary or emergency purposes, and to pledge its assets to
the same extent in connection with such borrowings. Finally, CSRF may attempt to
increase yields by trading to take advantage of short-term market rates which
may result in high portfolio turnover. A more detailed description of these
policies, together with an enumeration of additional investment restrictions
which CSRF has adopted and which cannot be changed without the approval of the
holders of a majority of CSRF's outstanding shares, is contained in its
Statement of Additional Information.
Investors should also be aware that CSRF's portfolio will be affected by
general changes in interest rates which will result in increases or decreases in
the value of the obligations held by CSRF. The market value of the obligations
in CSRF's portfolio can be expected to vary inversely to changes in prevailing
interest rates.
COWEN STANDBY TAX-EXEMPT RESERVE FUND, INC.
IN GENERAL
CSTXRF is a no-load, diversified, open-end management investment company
whose objective is the maximization of current interest income that is exempt
from federal income taxes to the extent
8
<PAGE> 14
consistent with the preservation of capital and the maintenance of liquidity.
This objective may be changed only with the approval of the shareholders. There
can be, of course, no assurance that CSTXRF will achieve its investment
objective.
At least 80% of CSTXRF's assets will be invested in short-term tax-exempt
debt obligations issued by or on behalf of states, territories and possessions
of the United States, the District of Columbia and their respective authorities,
agencies, instrumentalities and political sub-divisions ("Municipal
Securities"). CSTXRF will invest in Municipal Securities only if they are
determined to be of high quality and to present minimal credit risk pursuant to
guidelines established by the Fund's Board of Directors. Municipal Securities in
which CSTXRF may invest include: (a) commercial paper, which typically
represents short-term, unsecured, negotiable promissory notes, issued to meet
seasonal working capital needs of municipalities or to provide interim
construction financing; (b) notes used to provide for short-term capital needs,
usually with a maturity of one year or less, such as Tax Anticipation, Bond
Anticipation and Revenue Anticipation Notes and other short-term loans; and (c)
bonds classified principally as (i) General Obligation Bonds, which are used to
finance public projects and are secured by the issuer's taxing power for the
payment of principal and interest and (ii) Revenue Bonds issued to finance a
specific, revenue-generating capital project and payable only from the proceeds
of the specific revenue source. CSTXRF may invest in commercial paper rated A-2
or higher by Standard & Poor's Corporation ("S&P") or Prime-2 or higher by
Moody's Investors Service, Inc. ("Moody's"); notes rated SP-2 or higher by S&P
or MIG-2 or higher by Moody's or rated VMIG-2 or higher by Moody's in the case
of variable rate demand obligations and bonds rated AA or higher by S&P or Aa or
higher by Moody's. CSTXRF may also purchase Municipal Securities which, if
unrated, are issued by entities having an outstanding unsecured debt issue
currently rated Aa or better by Moody's or AA or better by S&P.
Up to 25% of the assets of CSTXRF may be invested at any time in the debt
obligations of a single issuer. Immediately after the acquisition of any put
with respect to a portfolio security, as to 75% of its portfolio, CSTXRF may not
have more than 5% of its total assets invested in securities issued by or
subject to puts from the same institution, except that up to 10% of total assets
may be invested in securities subject to guarantees or unconditional puts from a
single institution. The identification of the issuer of a Municipal Security
depends upon the terms and conditions of the security. If the assets and
revenues of an agency, authority, instrumentality or other political subdivision
are separated by those of the government creating the issuing entity and a
security is backed only by assets and revenues of the entity, the entity would
be deemed to be the sole issuer of the security. Similarly, in the case of a
private activity bond, if that bond is backed only by the assets and revenues of
the non-governmental user then the non-governmental user would be deemed to be
the sole issuer. If, however, the creating government or some other entity
guarantees a security, such a guarantee would be considered a separate security
and would be treated as an issue of such government or other entity. In
addition, CSTXRF may invest up to an aggregate of 10% of its total assets in
securities with contractual or other restrictions on resale and other
instruments that are not readily marketable including repurchase agreements
providing for settlement in more than seven days. CSTXRF is also authorized to
borrow and to enter into reverse repurchase transactions in an amount up to 10%
of its total assets for temporary or emergency purposes including meeting
redemption requests, but not for leverage, and to pledge its assets to the same
extent
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<PAGE> 15
in connection with such borrowings. Whenever borrowings exceed 5% of the value
of CSTXRF's assets, CSTXRF will not make any additional investments. Finally,
CSTXRF may attempt to increase yields by trading to take advantage of short-term
market rates which may result in high portfolio turnover. A more detailed
description of these policies, together with an enumeration of additional
investment restrictions which CSTXRF has adopted and which cannot be changed
without the approval of the holders of a majority of CSTXRF's outstanding
shares, is contained in its Statement of Additional Information.
It should also be noted that securities in which CSTXRF will invest may not
yield as high a level of current income as longer term or lower rated securities
which generally have less liquidity and greater fluctuation.
CERTAIN PORTFOLIO STRATEGIES
Variable Rate Demand Notes. Municipal Securities purchased by CSTXRF may
include variable rate demand notes issued by industrial development authorities
and other governmental entities. Although variable rate demand notes are
frequently not rated by credit rating agencies, unrated notes purchased by
CSTXRF will be determined by CSTXRF's investment manager to be of comparable
quality at the time of purchase to instruments rated "high quality" (i.e.,
within the two highest ratings) by any major rating service. CSTXRF may invest
in variable rate demand notes carrying stated maturities in excess of one year
at the date of purchase by CSTXRF if such variable rate demand notes carry
demand features permitting CSTXRF to redeem at any time or, under certain
conditions, at specified periodic intervals, not exceeding one year, in either
case upon such notice as is deemed appropriate by the SEC or its staff,
currently not more than seven days. Frequently such obligations are secured by
irrevocable letters of credit or other credit support arrangements provided by
banks. The quality of the underlying creditor or of the bank, as the case may
be, must, as determined by CSTXRF's investment manager, also be equivalent to
the quality standards set forth above. In addition, while there is no active
secondary market with respect to a particular variable rate demand note
purchased by CSTXRF, CSTXRF may, upon the seven days notice specified in the
note, demand payment of the principal of and accrued interest on the note. The
absence of such an active secondary market, however, could make it difficult for
CSTXRF to dispose of the variable rate demand note involved, in the event the
issuer of the note defaulted on its payment obligations, and CSTXRF could, for
this or other reasons, suffer a loss of principal and interest.
CSTXRF may invest in participating interests purchased from banks in
variable rate Municipal Securities (such as industrial development bonds) owned
by banks. If necessary in the opinion of CSTXRF's investment manager,
participation interests will carry a liquidity feature permitting CSTXRF to
tender them back to the bank or will be backed by an irrevocable letter of
credit or guarantee of a bank which CSTXRF's investment manager has determined
to be equivalent to the quality standards set forth above.
When-Issued Securities. CSTXRF may also purchase Municipal Securities on a
"when-issued" basis. CSTXRF will enter into a when-issued transaction for the
purpose of acquiring portfolio securities and not for the purpose of leverage.
When-issued securities are securities purchased for delivery beyond
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<PAGE> 16
the normal settlement date at a stated price and yield. CSTXRF will generally
not pay for such securities or start earning interest on them until they are
received; thus, they involve a form of leveraging. Securities purchased on a
when-issued basis are recorded as an asset and are subject to changes in value,
both before and after delivery, based upon changes in the general level of
interest rates and other market factors. Although CSTXRF may purchase
when-issued securities without limit, CSTXRF expects that commitments to
purchase when-issued securities normally will not exceed 25% of the value of its
total assets and that a commitment by the Fund to purchase when-issued
securities will not exceed 45 days. Due to fluctuations in the value of
Municipal Securities purchased on a when-issued basis, the yields obtained on
such securities may be higher or lower than the yields available in the market
on the dates when the investments are actually delivered to CSTXRF.
Stand-By Commitments. CSTXRF may acquire "stand-by commitments" (sometimes
referred to as "puts") with respect to Municipal Securities held in its
portfolio. Under a stand-by commitment, a dealer agrees to purchase, at the
Fund's option, specified Municipal Securities at a specified price. CSTXRF
intends to enter into stand-by commitments only with dealers, banks and
broker-dealers which, in the opinion of CSTXRF's investment manager, present
minimal credit risks. If CSTXRF's investment manager deems it necessary or
advisable, CSTXRF may pay for a stand-by commitment either separately in cash or
by paying a higher price for portfolio securities which are acquired subject to
the commitment (thus reducing the yield to maturity otherwise available for the
same securities). In evaluating the creditworthiness of the issuer of a stand-by
commitment, the investment manager will review periodically the issuer's assets,
liabilities, contingent claims and other relevant financial information. CSTXRF
will acquire stand-by commitments solely to facilitate portfolio liquidity and
does not intend to exercise its rights thereunder for trading purposes.
Reverse Repurchase Agreements. CSTXRF may borrow funds for temporary
purposes and not for leverage by agreeing to sell portfolio securities to
financial institutions such as banks and broker-dealers and to repurchase them
at a mutually agreed-upon date and price (a "reverse repurchase agreement"). At
the time CSTXRF enters into a reverse repurchase agreement it will place in a
segregated custodial account cash, United States government securities or
high-grade debt obligations having a value equal to the repurchase price
(including accrued interest). Reverse repurchase agreements involve the risk
that the market value of the securities sold by CSTXRF may decline below the
repurchase price of those securities. Repurchase agreements are considered to be
loans and reverse repurchase agreements are considered to be borrowings by
CSTXRF under the 1940 Act.
Taxable Investments. Under certain circumstances, CSTXRF may for temporary
defensive or other purposes invest in certain short-term taxable securities when
CSTXRF's investment manager believes that it would be in the best interests of
CSTXRF's investors to do so. Taxable securities in which CSTXRF may invest on a
short-term basis are obligations of the United States government, its agencies
or instrumentalities, including repurchase agreements with banks or securities
dealers involving such securities; time deposits maturing in not more than seven
days; other debt securities rated within the two highest ratings assigned by
Moody's, S&P, Duff & Phelps, Inc., Fitch Investor Services, Inc., IBCA Limited
and Thomson Bankwatch; commercial paper rated in the highest grade by Moody's or
S&P; and bank obligations including certificates of deposit issued by domestic
branches of United States
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<PAGE> 17
banks with assets of $1 billion or more. At no time will more than 20% of
CSTXRF's total assets be invested in taxable short-term securities unless
CSTXRF's investment manager has determined to adopt temporarily a defensive
investment policy in the face of adverse market conditions affecting the market
for Municipal Securities in general.
SPECIAL CONSIDERATIONS
In seeking to achieve its investment objective CSTXRF may invest all or any
part of its assets in Municipal Securities which are industrial development
bonds. Moreover, although CSTXRF does not currently intend to do so on a regular
basis, it may invest more than 25% of its assets in Municipal Securities the
interest on which is paid solely from revenues of economically related projects,
if such investment is deemed necessary or appropriate by CSTXRF's investment
manager. To the extent that CSTXRF's assets are concentrated in Municipal
Securities payable from revenues on economically related projects and
facilities, CSTXRF will be subject to the peculiar risks presented by such
projects to a greater extent than it would be if CSTXRF's assets were not so
concentrated.
INVESTMENT STRATEGIES AND POLICIES APPLICABLE TO BOTH FUNDS
Lending of Portfolio Securities. Each Fund has the ability to lend
securities from its portfolio to brokers, dealers and other financial
organizations. Such loans, if and when made, may not exceed 20% of that Fund's
total assets taken at value. Loans of portfolio securities by a Fund will be
collateralized by cash, letters of credit or securities issued or guaranteed by
the United States government or its agencies, which are maintained at all times
in an amount equal to at least 100% of the current market value of the loaned
securities.
Portfolio securities of each Fund are valued on the basis of amortized
cost. In connection with its use of amortized cost valuation, each Fund limits
the dollar-weighted average maturity of its portfolio to not more than 90 days
and does not purchase any instrument with a remaining maturity of more than 397
calendar days, except that securities subject to liquidity puts may bear longer
maturities. The Funds follow these policies in order to maintain a constant net
asset value of $1.00 per share, although there is no assurance they can do so on
a continuing basis.
Year 200 Risks. Like other mutual funds, the Funds could be adversely
affected if the computer systems used by Cowen and other service providers do
not properly process and calculate date-related information from and after
January 1, 2000. This is commonly known as the 'Year 2000 Problem.' Cowen is
taking steps that it believes are reasonably designed to address the Year 2000
Problem with respect to the computer systems that it uses and to obtain
satisfactory assurances that comparable steps are being taken by the Funds'
other major service providers. At this time, however, there can be no assurance
that these steps will be sufficient to avoid any adverse impact on the Funds.
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<PAGE> 18
MANAGEMENT OF THE FUNDS
BOARDS OF DIRECTORS
The business and affairs of each of the Funds are managed under the
direction of their respective Boards of Directors. By virtue of the
responsibilities assumed by Cowen under the Investment Management Agreements,
neither Fund will require executive employees other than its officers, none of
whom will devote full time to the affairs of that Fund.
INVESTMENT MANAGER
Cowen, an investment adviser and broker-dealer registered with the SEC,
serves as the Funds' investment manager. Cowen is a member of the New York,
American and other principal national securities exchanges and of the National
Association of Securities Dealers, Inc. ("NASD"). Cowen's principal address is
Financial Square, New York, New York 10005.
Pursuant to the Investment Management Agreements between Cowen and the
Funds, Cowen has agreed to be responsible for each Fund's investment program.
Subject to the supervision and direction of the Funds' Boards of Directors,
Cowen manages each Fund's portfolio in accordance with the stated policies of
that Fund. Cowen makes investment decisions for each Fund and places the
purchase and sale orders for portfolio transactions. Cowen also furnishes each
Fund statistical and research data, clerical help, accounting, data processing,
bookkeeping, internal auditing and certain legal and other services required by
that Fund, prepares reports to shareholders of each Fund, tax returns, reports
to and filings with the SEC and state Blue Sky authorities, calculates the net
asset value of shares of each Fund and generally assists in all aspects of the
Funds' operations. For the services provided pursuant to the Investment
Management Agreement, Cowen is entitled to receive from each Fund a fee,
computed daily and payable monthly, at the annual rate of .50 of 1.00% of that
Fund's average daily net assets. Cowen compensates certain securities dealers
whose customers are shareholders of either Fund for providing administrative
services to those shareholders that would otherwise be provided by Cowen. Such
compensation is paid solely from Cowen's resources and is not paid directly or
indirectly by either Fund.
DISTRIBUTOR
Cowen acts as distributor of the Funds' shares. No compensation is payable
by either Fund to Cowen for its distribution services.
CUSTODIAN AND TRANSFER AND DIVIDEND AGENT
Investors Fiduciary Trust Company ("IFTC"), a subsidiary of State Street
Boston Corp., serves as the custodian of the Funds' investments. Beginning March
1, 1998 DST Systems, Inc. ("DST") will serve as transfer and dividend agent.
Communications to DST should be directed to 210 West 10th Street, Kansas City,
MO 64105. IFTC will serve as the Fund's transfer and dividend agent until March
1, 1998. Communications to IFTC should be directed to P.O. Box 419111, Kansas
City, Missouri 64105.
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PURCHASE OF SHARES
Each Fund's shares are sold on a continuous basis on each day that such
Fund's net asset value is calculated, at their net asset value next determined
after an order and payment for shares in the form of Federal Funds have been
received. The minimum initial investment and subsequent investments must be in
the amount of at least $500, with the exception of purchases of Fund shares
through retirement plans for Self-Employed Persons and Individual Retirement
Accounts which require minimum initial investments and subsequent investments in
the amount of at least $100. Each Fund reserves the right at any time to vary
the initial and subsequent investment minimums, and has established a lower
minimum for investments under the Automatic Transaction program described below.
To invest in a Fund, a person who has, or who wishes to have, an account at
Cowen need only direct his representative to invest in that Fund in order to
become a shareholder in that Fund. There is no charge for establishing or
maintaining such account. A person who does not have, and does not intend to
establish, an account at Cowen may invest in either Fund by instructing his own
broker/dealer to purchase shares for him or by contacting the Fund directly at
1-800-309-1111. Persons who are interested in purchasing shares of the Funds by
Federal wire should contact the Fund directly at 1-800-262-7116. Such
broker/dealer must be a member of the NASD, or a foreign non-member of the NASD,
which has entered into a Sales Agreement with Cowen with respect to the stock of
that Fund. Cowen reserves the right to reject any purchase order. From time to
time, Cowen's registered representatives and those of other broker-dealers that
enter into selected dealer agreements with Cowen and sell shares of the Funds
will receive non-cash compensation in the form of gifts or prizes such as
merchandise or trips.
In the case of orders from its customers or customers of its correspondents
for purchase of shares paid for other than in Federal Funds. Cowen will complete
the conversion into, or itself advance at no charge, Federal Funds on the day
following receipt of an order. Investors whose payments are received in or
converted into Federal Funds by Cowen or Federal wires received by Cowen not
later than 2:00 P.M., New York time, will become shareholders on that day.
Investors whose payments are received in or converted into Federal Funds or
Federal wires received by Cowen after 2:00 P.M., New York time, by Cowen will
become shareholders on the following business day. A shareholder will begin to
accrue daily dividends the day after becoming a shareholder. Cowen will provide
each shareholder with written confirmations monthly of each purchase and sale
transaction effected for his account during the period, including the automatic
reinvestment of dividends in additional shares of a Fund.
Exchange Privilege. Shares of either Fund may be exchanged for shares of
the other Fund and/or the following mutual funds for which Cowen serves as
distributor.
- Cowen Intermediate Fixed Income Fund, a fund that seeks current income
and stability of principal, by investing primarily in high quality
intermediate term fixed income securities. This fund is a series of Cowen
Funds, Inc.
- Cowen Government Securities Fund, a fund that seeks total return
consisting of current income and appreciation of capital through
investing primarily in securities issued or guaranteed by the
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<PAGE> 20
U.S. Government, its agencies, authorities or instrumentalities. This fund is a
series of Cowen Funds, Inc.
- Cowen Income + Growth Fund, Inc., a fund that seeks a high level of
dividend income, to the extent consistent with prudent investment
management, by investing primarily in income producing equity securities.
- Cowen Opportunity Fund, a fund whose investment objective is appreciation
of capital through investing primarily in small capitalization issuers.
This fund is a series of Cowen Funds, Inc.
- Cowen Large Cap Value Fund, a fund that seeks capital appreciation by
investing primarily in equity securities deemed to be undervalued.
Current income from dividends is a secondary objective. The fund is a
series of Cowen Series Funds, Inc.
Shares of these mutual funds are available only to investors residing in
states where these mutual funds are qualified for sale. They are sold pursuant
to separate prospectuses that may be obtained through any Cowen account
representative, through account representatives of Cowen Correspondents, or
through any other member of the NASD, or foreign non-member of the NASD, which
has entered into a Sales Agreement with Cowen with respect to such funds. A
shareholder may effect exchanges among these mutual funds and a Fund on the
basis of relative net asset values without imposition of a sales charge;
provided, however, that where shares of a Fund acquired through a direct
purchase are exchanged for shares of Cowen Intermediate Fixed Income Fund or
Cowen Government Securities Fund, Cowen Income + Growth Fund, Inc., or Cowen
Opportunity Fund (collectively the "non-money market funds"), the appropriate
sales charge will be imposed at the time of the exchange. An exchange of shares
is treated for federal income tax purposes as a redemption (sale) of shares
given in exchange by the shareholder and an exchanging shareholder may,
therefore, realize a taxable gain or loss in connection with the exchange. The
exchange privilege is subject to termination and its terms are subject to change
upon 60 days' notice to shareholders.
The non-money market funds offer three classes of shares (Class A, B and C
shares). Shareholders of CSRF and CSTXRF (collectively, the "money market
funds") may not exchange their shares for Class A or Class B shares, and if
eligible, Class C shares, of the non-money market funds, unless the money market
fund shares being exchanged were acquired through an exchange from a non-money
market fund and not by a direct purchase; if those shares were acquired by
exchange from a non-money market fund, they may be exchanged only for shares of
the same class that the shareholder previously held. In cases where shares of
the non-money market fund previously held were acquired prior to May 16, 1994,
corresponding shares of the money market fund may be exchanged only for Class A
shares (or Class C shares, if eligible) of a non-money market fund.
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<PAGE> 21
REDEMPTION OF SHARES
PROCEDURES APPLICABLE TO ALL REDEMPTIONS
Each Fund will redeem its shares without charge on any day that such Fund's
net asset value is calculated at the net asset value per share next determined
after receipt of a redemption order in proper form by Cowen or DST/(IFTC, prior
to March 1, 1998). While each Fund intends to use its best efforts to maintain
its net asset value per share at $1.00, the proceeds paid upon redemption may be
more or less than the amount invested depending upon a share's net asset value
at the time of redemption.
Any redemption request received by Cowen prior to 2:00 P.M., New York time,
will earn that day's dividend, and will be transmitted to DST on that day; the
proceeds of such redemptions normally will be credited to the investor's account
at Cowen on the next business day. Shares redeemed pursuant to requests at or
after 2:00 P.M., New York time, will be effected on and dividends earned through
the next business day and the proceeds of such redemptions normally will be
credited to the investor's account at Cowen on the second business day
thereafter, but in any event payment will be made within seven days thereafter.
However, proceeds of any redemptions will not be sent until the check (including
a certified or cashier's check) used for investment has been cleared for payment
by the investor's bank, which may take up to 15 days. Pending such clearance,
Cowen will hold redemption proceeds in the investor's brokerage account under
circumstances resulting in no earnings to the investor.
Each Fund may suspend the right of redemption or postpone the date of
payment upon redemption (as well as suspend or postpone the recordation of the
transfer of its shares) for such periods as are permitted under the 1940 Act.
Each Fund reserves the right to redeem shares in any account at their net asset
value if the value of the account is $500 or less. The shareholder having the
account will first be notified in writing that its account has a value of $500
or less and will be allowed 30 days to make an additional investment before the
redemption is processed by the Fund.
REGULAR REDEMPTION PROVISIONS
Cowen generally will effect redemptions of shares upon oral instruction
received from a shareholder. It is the Funds' policy that the Redeeming
Shareholder bear the risk of loss in the event of a fraudulent oral redemption
instruction; the staff of the SEC is considering the propriety of this policy.
If shares are to be redeemed pursuant to an order sent to DST by the
shareholder, DST will require written redemption instructions signed by the
shareholder of record, which signature must be guaranteed by a commercial bank
or trust company located or having a correspondent in New York City, or by a
member firm of the New York Stock Exchange. If certificates have been issued
representing the shares to be redeemed, such certificates must also be endorsed,
or a duly executed stock power must be furnished, with signature guaranteed as
discussed above, and must be submitted to Cowen or DST with the redemption
request. Cowen or DST may require further documentation if the shareholder is a
corporation, partnership, trust, estate or other entity. Cowen and certain other
dealers may impose a charge in connection with redemptions effected by federal
wire.
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<PAGE> 22
CHECK REDEMPTION PRIVILEGE
An investor may designate on an Application for Checks, or by later written
request, that a Fund of which he is a shareholder provide him with redemption
checks drawn on the Fund's account at DST/ (IFTC, prior to March 1, 1998). These
checks will be sent only to the person in whose name the account is registered
and only to the address of record. The Application must be manually signed by
the registered owner(s). Shareholders having jointly-owned accounts may
authorize checks to be drawn with the signature of only one of the owners.
Checks may be payable to the order of any person in an amount of $100 or more.
Dividends are earned until the check clears. After clearance, the check will be
returned to the investor. Shareholders should be aware that use of the check
redemption procedure does not give rise to a banking relationship between the
shareholder and DST, which will be acting solely as transfer agent for the Fund.
When a check is presented to DST for payment, DST, as the investor's agent, will
cause the appropriate Fund to redeem a sufficient number of shares from the
investor's account to cover the amount of the check. However, investors will be
subject to the same rules and regulations that DST applies to checking accounts
and the other restrictions set forth herein. There is no charge to the investor
for this checking service. Cowen representatives, upon request, will provide
shareholders with the forms which must be completed in order to avail themselves
of this method of redemption. Shareholders may also obtain these forms by
writing to DST, 210 West 10th Street, Kansas City, MO 64105 (IFTC, prior to
March 1, 1998).
Shares for which stock certificates have been issued may not be redeemed by
check. If an investor's account is not adequate to cover the amount of the
check, the check will be returned marked insufficient funds. Checks should not
be used to close an account. The check redemption privilege may be modified or
terminated at any time by either Fund or by DST.
NET ASSET VALUE
Each Fund's net asset value per share for purposes of pricing purchase and
redemption orders is determined as of 2:00 P.M., New York time, Monday through
Friday, except (i) on days on which changes in the value of that Fund's
portfolio securities will not materially affect the current net asset value of
the shares; (ii) on days during which no security is tendered for redemption and
no order to purchase or sell the stock is received by the Funds; and (iii) on
New Year's Day, Martin Luther King Day (third Monday in January), Washington's
Birthday (third Monday in February), Good Friday, Memorial Day (last Monday in
May), Independence Day, Labor Day, Thanksgiving Day and Christmas Day, and on
the preceding Friday or subsequent Monday when one of these holidays falls on a
Saturday or Sunday, respectively. Net asset value is computed by dividing the
value of the net assets of a Fund (i.e., the value of assets less liabilities)
by the total number of shares outstanding. Expenses and fees of each Fund,
including the Investment Manager's fee, are accrued daily and taken into account
for the purpose of determining net asset value. Although investments of each
Fund will be valued on the basis of amortized cost, the Funds will also monitor
the value of their portfolios by reference to fair market value computation.
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<PAGE> 23
AUTOMATIC TRANSACTIONS
For a shareholder who so elects, free credit balances in the shareholder's
securities account at Cowen will automatically be invested in shares of a Fund
daily, so long as the free credit balances are in excess of $100. In addition,
free credit balances in excess of $1.00 but below such minimum Fund requirements
will automatically be invested at the end of each week. For a participant in the
program, redemption of shares of the Fund will be effected automatically on each
business day to satisfy the debit balances in the shareholder's securities
account at Cowen. Shareholders who are investors in both CSRF and CSTXRF must
designate which Fund they consider their primary account at Cowen. Free credit
balances in a shareholder's securities account at Cowen will be automatically
invested into the primary account and debit balances will be satisfied from the
primary account before the remaining account.
No fee is charged with respect to these automatic transactions. Cowen
reserves the right, however, upon notification to all participants, to impose a
fee in the future.
DIVIDENDS AND DISTRIBUTIONS
Each Fund's net investment income (other than net realized short-term
capital gains) will be declared daily and paid monthly as a dividend to
shareholders of record at the close of business on the day of declaration.
Shares begin accruing dividends on the day after the purchase order for the
shares becomes effective and continue to accrue dividends through, and
including, the day the redemption order for the shares is effected. Dividends
are reinvested automatically in additional shares of the same Fund at net asset
value or, at a shareholder's option, are paid in cash. Distributions of net
realized capital gains, if any, will be distributed annually. Income dividends
will be paid through the business day preceding the next to last Friday of the
month except for December. In December, income dividends will be paid through
the last business day of the month.
TAXES
BOTH FUNDS
For their taxable years ended September 30, 1997, each of the Funds
qualified as a regulated investment company for purposes of the Internal Revenue
Code of 1986, as amended (the "Code"). They intend to so qualify in each
succeeding year. As a regulated investment company, each Fund will pay no
federal income tax on its net investment income and net capital gains, if any,
that it distributes to its shareholders, provided that it meets certain
distribution requirements. Each Fund will be subject to a non-deductible excise
tax of 4% of the amount by which it fails to distribute specified amounts of
ordinary income and capital gains during each calendar year. Each Fund intends
to make such distributions as are necessary to avoid the application of this
tax.
Except as otherwise provided below, dividends paid from taxable net
investment income and distributions of net short-term capital gains, if any,
will be taxable to shareholders as ordinary income, whether received in cash or
reinvested in additional shares of a Fund. Because the Funds are not expected to
realize capital gains, it is unlikely that any portion of the dividends or
distributions paid by a Fund will be taxable to shareholders as mid-term or
long-term capital gains. The Funds' dividends will
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<PAGE> 24
not qualify for the dividends-received deduction for corporations. Statements as
to the tax status of each shareholder's dividends and distributions will be
mailed annually by IFTC. Shareholders should consult their tax advisers about
any state and local taxes that may apply to dividends and distributions
received.
SPECIAL CONSIDERATIONS FOR CSRF
Dividends paid by CSRF may be subject to tax by certain states, even though
the interest on United States government obligations, from which such dividends
are derived, would be exempt from state income tax if received directly by the
shareholders.
SPECIAL CONSIDERATIONS FOR CSTXRF
CSTXRF will designate and pay exempt-interest dividends derived from
interest earned on qualifying Municipal Obligations. Such exempt-interest
dividends may be excluded by shareholders from their gross income for Federal
income tax purposes although (1) all or a portion of such exempt-interest
dividends will be a specific preference item for purposes of the Federal
individual and corporate alternative minimum tax to the extent they are derived
from certain types of private activity bonds issued after August 7, 1986 and (2)
all exempt-interest dividends will be a component of the "current earnings"
adjustment item for purposes of the Federal corporate alternative minimum tax.
In addition, corporate shareholders may incur a greater Federal "environmental
tax" liability through receipt of dividends and distributions from CSTXRF.
The exemption of interest income for federal income tax purposes in most
cases does not result in an exemption under the tax laws of any state or local
authority. CSTXRF will notify shareholders annually as to the percentage of
interest exempt from federal taxes earned by CSTXRF with respect to those states
or possessions in which the Fund had investments. CSTXRF will also notify
shareholders annually as to the percentage of the shareholder's income from
CSTXRF exempt from Federal personal and corporate income taxes and the
percentage, if any, subject to such taxes. These notices also designate the
amount of exempt-interest dividends which are a specific preference item for
purposes of the Federal individual and corporate alternative minimum taxes.
Shareholders who are subject to tax in states or localities should consult their
own tax advisers about the taxation of distributions from CSTXRF by such states
and localities.
ADDITIONAL INFORMATION
CSRF was incorporated on June 19, 1981 as Standby Reserve Fund, Inc. under
the laws of the State of Maryland, commenced operations on October 22, 1981 and
has authorized capital of 2,000,000,000 shares of common stock, $.01 par value
per share. On December 15, 1992, the Board of Directors of Standby Reserve Fund,
Inc. authorized the Fund to conduct business under the name Cowen Standby
Reserve Fund, Inc.
CSTXRF was incorporated on June 5, 1985 as the Standby Tax-Exempt Reserve
Fund, Inc. under the laws of the State of Maryland, commenced operations on
April 1, 1986 and has authorized capital of 1,000,000,000 shares of common
stock, $.001 par value per share. On December 15, 1992, the Board of
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<PAGE> 25
Directors authorized Standby Tax-Exempt Reserve Fund, Inc. to conduct business
under the name Cowen Standby Tax-Exempt Reserve Fund, Inc.
Shareholders of each Fund are entitled to one vote for each full share held
and fractional votes for fractional shares held.
General inquiries regarding the Funds may be directed to the Funds'
distributor at (212) 495-6000, or to a Cowen account representative.
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus and in either
Fund's official sales literature in connection with the offering of that Fund's
shares, and, if given or made, such other information or representations must
not be relied upon as having been authorized by a Fund. This Prospectus does not
constitute an offer in any state in which, or to any person to whom, such offer
may not lawfully be made.
Although each Fund is offering only its own shares, it is possible that a
Fund might become liable for any material misstatement or omission in the
Prospectus about the other Fund. However, each Fund has acknowledged that it,
and not the other Fund, is liable for any material misstatement or omission
about it in the Prospectus. The Board of Directors of each Fund has considered
this factor in approving its use of a single combined Prospectus.
20
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CONTENTS
<TABLE>
<S> <C>
--Cowen Standby Reserve Fund, Inc.
Financial Highlights.............. 2
--Cowen Standby Tax-Exempt Reserve
Fund, Inc.
Financial Highlights.............. 4
Investment Strategies and Policies
--Cowen Standby Reserve Fund,
Inc. ............................. 6
--Cowen Standby Tax-Exempt Reserve
Fund, Inc......................... 8
-- Investment Objectives and Policies
Applicable to Both Funds.......... 12
Management of the Funds................ 13
Purchase of Shares..................... 14
Redemption of Shares................... 16
Automatic Transactions................. 18
Dividends and Distributions............ 18
Taxes.................................. 18
Additional Information................. 19
</TABLE>
NO PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE
ANY REPRESENTATIONS OTHER THAN
THOSE CONTAINED IN THIS
PROSPECTUS, THE STATEMENT OF
ADDITIONAL INFORMATION OR THE
FUND'S OFFICIAL SALES LITERATURE
IN CONNECTION WITH THE OFFERING
OF THE FUND'S SHARES AND, IF
GIVEN OR MADE, SUCH OTHER
INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED ON AS HAVING
BEEN AUTHORIZED BY THE FUND.
THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER IN ANY STATE
IN WHICH, OR TO ANY PERSON TO
WHOM, SUCH OFFER MAY NOT
LAWFULLY BE MADE.
I,2
===
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(LOGO)
COWEN STANDBY
RESERVE
FUND, INC.
------------------------------------------------------------------
COWEN STANDBY
TAX-EXEMPT
RESERVE FUND, INC.
-----------------------
Prospectus Dated
February 1, 1998
<PAGE> 27
STATEMENT OF ADDITIONAL INFORMATION
FEBRUARY 1, 1998
COWEN STANDBY RESERVE FUND, INC.
FINANCIAL SQUARE, NEW YORK, NEW YORK 10005
(212) 495-6724, (800) 262-7116
CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Investment Objective and Policies ............................... 2
Management of the Fund .......................................... 6
Additional Purchase and Redemption Information .................. 9
Additional Information Concerning Taxes ......................... 9
Dividends ...................................................... 10
Determination of Yield .......................................... 10
Auditors and Counsel ............................................ 11
Financial Statements............................................. 11
Appendix - Description of Commercial Paper,
Medium Term Note Ratings and Bond Ratings................ 12
</TABLE>
This Statement of Additional Information is meant to be read in
conjunction with the Prospectus of Cowen Standby Reserve Fund, Inc. (the "Fund")
dated February 1, 1998, and is incorporated by reference in its entirety into
that Prospectus. Because this Statement of Additional Information is not itself
a prospectus, no investment in shares of the Fund should be made solely upon the
information contained herein. Copies of the Fund's Prospectus may be obtained by
calling Cowen & Company ("Cowen"), the Fund's principal underwriter, at (212)
495-6724 or by contacting any Cowen account representative.
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<PAGE> 28
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is the maximization of current
income to the extent consistent with the preservation of capital and the
maintenance of liquidity. The following policies supplement the descriptions of
the Fund's investment objectives and policies in the Prospectus.
United States Government, Agency and Instrumentality Securities
The Fund has the ability to invest in agency obligations which are
supported only by the credit of the instrumentality, such as Federal National
Mortgage Association bonds. Because the United States government is not
obligated by law to provide financial support to an instrumentality it sponsors,
the Fund will invest in obligations issued by such an instrumentality only when
Cowen determines that the credit risk with respect to the instrumentality does
not make its securities unsuitable for investment by the Fund.
Bank Obligations
Bank obligations will include United States dollar denominated
instruments issued or supported by the credit of United States or foreign banks
or savings institutions. The Fund's investments in the obligations of London
branches of United States banks and domestic branches of foreign banks may
subject the Fund to investment risks that are different in some respects from
those of investments in obligations of United States issuers. For example, there
may be less publicly available information about such entities than about
domestic banks and their domestic branches. The Fund will acquire securities
issued by London branches of United States banks or domestic branches of foreign
banks only when the Fund's investment manager believes that the risk associated
with such instruments is minimal. The Fund limits its purchase of certificates
of deposit of domestic branches of foreign banks to those sold by banks
organized in Canada, France, Germany, Japan, the Netherlands, Switzerland and
the United Kingdom.
Repurchase Agreements
The Fund may purchase debt instruments and concurrently enter into
repurchase agreements with sellers of the securities. Repurchase agreements are
contracts under which the buyer of a security simultaneously commits to resell
the security to the seller at an agreed-upon price on a specified date. However,
the Fund will not enter into repurchase agreements maturing in more than seven
days in an amount which, when added to any other securities which are restricted
as to resale or securities without readily available market quotations, would
exceed 10% of the Fund's total assets.
The Fund will enter into repurchase agreements with respect to its
portfolio securities with member banks of the Federal Reserve System or certain
non-bank dealers. Under each repurchase agreement, the selling institution will
be required to maintain collateral deposits
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<PAGE> 29
equal at all times to the value of the securities subject to the repurchase
agreement at not less than their repurchase price. Repurchase agreements could
involve certain risks in the event of default or insolvency of the other party,
including possible delays or restrictions upon the Fund's ability to dispose of
the underlying securities. Cowen, acting under the supervision of the Fund's
Board of Directors, reviews the creditworthiness of those non-bank dealers and
member banks of the Federal Reserve System with whom the Fund enters into
repurchase agreements to evaluate these risks.
Lending of Portfolio Securities
The Fund may from time to time lend securities from its portfolio to
brokers, dealers and financial institutions and receive collateral consisting of
cash or securities issued or guaranteed by the United States Government which
will be maintained at all times in an amount equal to at least 100% of the
current market value of the loaned securities. The Fund continues to be entitled
to the interest payable on the loaned securities and, in addition, receives
interest on the amount of the loan at a rate negotiated with the borrower. Such
loans will be terminable at any time. No such loans will be made to the Fund's
investment manager or its affiliates. The Fund may pay reasonable fees to
persons unaffiliated with the Fund in connection with arranging such loans.
Other Investment Limitations
The following investment limitations may not be changed without the
affirmative vote of the holders of a majority of the Fund's outstanding shares.
Such majority is defined as the lesser of (a) 67% of the Fund's shares present
at a meeting, if the holders of more than 50% of the outstanding shares are
present in person or by proxy or (b) more than 50% of the Fund's outstanding
shares.
The Fund may not:
1. Purchase common stocks, preferred stocks, warrants, other equity
securities, state bonds municipal bonds or industrial revenue bonds;
2. Borrow money except from banks for temporary or emergency purposes
including meeting redemption requests which might otherwise require the untimely
disposition of securities. Borrowing in the aggregate may not exceed 10%, and
borrowing for purposes other than meeting redemptions may not exceed 5%, of the
value of the Fund's total assets (including the amount borrowed) valued at the
lesser of cost or market less liabilities (not including the amount borrowed) at
the time the borrowing is made. The borrowings will be repaid before any
additional investments are made;
3. Pledge, hypothecate, mortgage or otherwise encumber its assets,
except in an amount up to 10% of the value of its net total assets but only to
secure borrowings for temporary or emergency purposes;
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<PAGE> 30
4. Sell securities short or purchase securities on margin;
5. Write or purchase put or call options;
6. Underwrite the securities of other issuers or purchase securities
with contractual or other restrictions on resale;
7. Purchase or sell real estate, real estate investment trust
securities, commodities or commodity contracts or oil and gas interests;
8. Make loans to others except through purchasing qualified debt
obligations, loaning portfolio securities (see item 13, below), and entering
into repurchase agreements referred to under "Investment Objective and Policies"
(see also item 14, below);
9. Subject to the diversification requirements of Section 5 of the
Investment Company Act of 1940 (the "1940 Act"), invest more than 15% of its
assets in the obligations (including repurchase agreements) of any one bank, or
invest more than 5% of its assets in the commercial paper of any one issuer;
10. Invest more than 25% of its assets in the securities of issuers in
any single industry, provided that there shall be no limitation on the purchase
of obligations issued or guaranteed by the United States government, its
agencies or instrumentalities, certificates of deposit and bankers acceptances;
11. Invest in companies for the purpose of exercising control;
12. Invest in securities of other investment companies, except as they
may be acquired as part of a merger, consolidation or acquisition of assets;
13. Lend its portfolio securities in excess of 20% of its total assets,
taken at their value. Any loans of portfolio securities will be made according
to guidelines established by the Securities and Exchange Commission and the
Fund's Board of Directors, including maintenance of collateral of the borrower
equal at all times to the current market value of the securities loaned;
14. Invest more than 10% of its assets in unmarketable securities,
including restricted securities, other unmarketable securities, and repurchase
agreements maturing in more than seven days from the date of acquisition;
If a percentage restriction is adhered to at the time of an
investment, a later increase or decrease in percentage resulting from a change
in values or assets will not constitute a violation of such restriction.
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<PAGE> 31
Portfolio Valuation
The Fund's portfolio securities are valued on the basis of amortized
cost. Under this method of valuation, the Fund will initially value the
portfolio securities at cost. If the security was purchased at a discount, the
Fund will thereafter assume a constant proportional increase in value until
maturity. If the security was purchased at a premium, the Fund will thereafter
assume a constant proportional decrease in value until maturity. The Fund's
Board of Directors has established procedures reasonably designed to stabilize
the net asset value per share for the purposes of sales and redemptions at
$1.00. These procedures include periodic review, as the Board deems appropriate,
of the relationship between the amortized cost value per share and a net asset
value per share based upon available indications of market value. In the event
the difference between the two exceeds 1/2 of 1%, the Board will promptly
consider what action, if any, should be taken. The Board will also take such
action as it deems appropriate to eliminate or to reduce to the extent
reasonably practicable, any material dilution or other unfair results which
might arise from differences between the two. Such action may include redemption
in kind, selling portfolio instruments prior to maturity, shortening the average
portfolio maturity, withholding dividends or utilizing a net asset value per
share as determined by using available market quotations.
In connection with its use of amortized cost valuation, the Fund will
limit its investments to instruments the Board determines present minimal credit
risks and which are of high quality as determined by any major rating service,
or in the case of any instrument not so rated, of comparable quality as
determined by the Board of Directors. In addition, the Fund will not purchase
any instrument with a remaining maturity of more than 397 calendar days and will
maintain a dollar-weighted average portfolio maturity of 90 days or less. Should
the disposition of a portfolio security result in a dollar-weighted average
maturity of more than 90 days, the Fund would invest its available cash in such
a manner as to reduce the maturity to 90 days or less as soon as reasonably
practicable.
Portfolio Transactions
Purchase and sales of portfolio securities usually will be principal
transactions. Portfolio securities normally will be purchased directly from the
issuer or from an underwriter or market maker for the securities. There usually
will be no brokerage commissions paid by the Fund for such purchases and the
Fund has paid no brokerage commissions since its inception. Purchases of
portfolio securities from underwriters, if any, will include a commission or
concession paid by the issuer to the underwriters and purchases from dealers
serving as market makers will be made at a discount from the retail price of the
securities. While Cowen generally seeks competitive spreads or commissions, the
Fund will not necessarily be paying the lowest spread or commission available on
each transaction.
Allocation of transactions, including their frequency, to various
dealers is determined by Cowen in its best judgment and in a manner deemed fair
and reasonable to shareholders. The primary consideration is prompt execution of
orders in an effective manner at the most favorable price. Subject to this
consideration, dealers who provide supplemental investment
-5-
<PAGE> 32
research to Cowen may receive orders for transactions by the Fund. Information
so received will supplement but will not replace that to be provided by Cowen,
and Cowen's fees are not reduced as a consequence of the receipt of such
supplemental information. Such information may be useful to Cowen in serving
both the Fund and other clients and, conversely, supplemental information
obtained by the placement of business of other clients may be useful to Cowen in
carrying out its obligations to the Fund.
The Fund may attempt to increase yields by trading to take advantage
of short-term market variations. The Fund's annual portfolio turnover will be
relatively high although for regulatory reporting purposes, turnover is expected
to be zero. The Fund intends to derive not more than 30% of its gross income
from the sale of assets held less than three months.
MANAGEMENT OF THE FUND
Board of Directors
The names of the directors and executive officers of the Funds, their
addresses, principal occupations during the past five years and other
affiliations are set forth below. Each Director who is an "interested person" of
the Funds, as defined in the 1940 Act, is indicated by an asterisk; unless noted
otherwise, the business address of each such individual is Financial Square, New
York, New York 10005. Each of the directors is also a director of one or more
investment companies of which Cowen is Investment Manager.
Directors of the Fund
James H. Carey, Director, age 64. Managing Director of Briarcliff
Financial Associates, Inc. (since June, 1991) and former Chief Executive
Officer, Director and Treasurer of National Capital Benefits Corporation
(since March, 1994). Mr. Carey is also a Director of Airborne Freight
Corporation, Jonathan Woodner Company, former Director of NCB Insurance Limited
(Bermuda), Director of The Midland Company, The Murray & Isabella Rayburn
Foundation, Nantucket Industries, Inc. and Vice Chairman of the U.S. Committee
for UNICEF. Prior thereto he was President and Chief Executive Officer, The
Berkshire Bank (May 1989 to June 1991). His address is 44 Sleepy Hollow Road,
Briarcliff Manor, New York 10510.
*Joseph M. Cohen, Chairman and Chief Executive Officer of the Fund, age
59. Principal Executive Officer and since March 1991 Class I Limited Partner of
Cowen and Chairman and President of Cowen Incorporated, the sole general partner
of Cowen. Prior thereto he was the Managing General Partner of Cowen. Director,
Chairman and Chief Executive Officer of the Cowen Mutual Funds.
Until December 15, 1992, he was also President of the Fund and the Cowen Mutual
Funds.
Dr. Peter P. Gil, Director, age 74. Director, Arthur D. Little
Management Institute Board since 1991, former Executive Board Member and
currently Acting Dean of the Institute; Trustee and Executive Committee Member,
Plimoth Plantation, (Plymouth, Mass.). From July 1988 to July 1994, Dr. Gil
served in a variety of senior administrative positions at the Sloan School of
Management, Massachusetts
-6-
<PAGE> 33
Institute of Technology, as Director, Management of Technology Program, the
Senior Executive Program, External Relations of the School; and Senior Lecturer.
Prior to July 1988 he was Associate Dean of the School. His address is 79 Main
Street, New Castle, New Hampshire 03854-0651.
Dr. Martin J. Gruber, Director, age 59. Former Chairman, Department of
Finance and Nomura Professor of Finance, Leonard N. Stern School of Business
Administration, New York University. He is also a Trustee of BT Pyramid Mutual
Funds, Director of Japan Equity Fund, Inc., and the Taiwan Equity Fund, Inc.;
and a Trustee of BT Leadership Trust and the T.I.A.A. Board. His address is New
York University, 44 West 4th Street, New York, New York 10012.
*Gerald P. Kaminsky, Class I Limited Partner of Cowen and Managing
Director of Cowen Incorporated, age 58. Prior to that time, he was a General
Partner of Cowen since April, 1989. From April, 1986 to April, 1989 he was a
Special Limited Partner of Cowen. Mr. Kaminsky is a Senior Investment Officer of
the Funds.
and Director, age 58. Class I Limited Partner of Cowen and Managing Director of
Cowen Incorporated. Prior to that time he was a General Partner of Cowen.
Burton J. Weiss, Director, age 66. Self-employed consultant since March,
1988. His address is 103 Marin Drive, Chapel Hill, North Carolina 27516.
Officers of the Funds Not Noted Above
Rodd M. Baxter, Secretary. General Counsel of Cowen Asset Management and
Director of Cowen. His address is Financial Square, New York, New York 10005.
Gordon G. Ifill, Assistant Investment Officer. Portfolio Manager of
Cowen Asset Management. His address is Financial Square, New York, New York
10005.
Alan Koepplin, Investment Officer. Senior Vice President of Cowen Asset
Management and Director of Cowen. His address is Financial Square, New York, New
York 10005.
David Sarns, President. Chief Administrative Officer and Class I Limited
Partner of Cowen and Managing Director of Cowen Incorporated. His address is
Financial Square, New York, New York 10005.
Irwood Schlackman, Controller. Mutual Fund Administrator of Cowen. His
address is Financial Square, New York, New York 10005.
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<PAGE> 34
Compensation
No officer, director, partner or employee of Cowen or its affiliates
will receive any compensation from the Fund for serving as an officer or
director of the Fund. Directors who are not officers, directors, partners,
stockholders or employees of Cowen or its affiliates receive a fee of $3,000 per
annum plus $500 per meeting and $375 for each audit committee meeting attended
and reimbursement for travel and out-of-pocket expenses. For the fiscal years
ended September 30, 1995, 1996, and 1997, such fees and expenses totaled
$20,897, $20,999 and $24,000 respectively. To the knowledge of the Fund and
Cowen, no shareholder beneficially owned 5% or more of the Fund's outstanding
common stock, and none of the Fund's directors and officers, either individually
or as a group, beneficially owned more than 1% of the Fund's outstanding stock
as of the close of business on January 13, 1998.
Compensation Table
Annual Total
Pension or Compensation
Retirement From
Aggregate Benefits Estimated Registrant
Compensation Accrued as Benefits and Fund
Name of From Part of Fund Upon Complex Paid
Person Registrant Expenses Retirement to Directors*
James H. Carey $5,750 -0- -0- $28,750
Peter Gil $5,750 -0- -0- $28,750
Martin J. Gruber $5,750 -0- -0- $28,750
Burton J. Weiss $5,750 -0- -0- $28,750
*There are seven funds in the complex.
Investment Manager
Cowen serves as investment manager to the Fund pursuant to an
investment management agreement (the "Investment Management Agreement"). Cowen,
a limited partnership, is controlled by its general partner, Cowen Incorporated.
Cowen Incorporated is controlled by Mr. Joseph M. Cohen. The services provided
by, and the fees payable by the Fund to Cowen under the Investment Management
Agreement are described in the Prospectus.
Cowen has agreed that if in any fiscal year the aggregate expenses of
the Fund (including fees pursuant to the Investment Management Agreement, but
excluding interest, taxes, brokerage expenses, and, with the prior written
consent of the necessary state securities commissions, extraordinary expenses)
exceed the applicable expense limitation of any state having jurisdiction over
the Fund, Cowen will reimburse such excess expense. Cowen's expense
reimbursement obligation is limited to the amount of the fees it receives under
the Agreement, unless a higher amount of reimbursement were to be required under
applicable
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<PAGE> 35
state law or regulations. Such expense reimbursement, if any, will be estimated,
reconciled and paid on a monthly basis. In no event shall the amount of expense
reimbursement required be greater than the investment advisory fee. There was
no reimbursement required under the expense limitation for the fiscal year
ended September 30, 1996. For the fiscal years ended September 30, 1995, 1996,
and 1997 Cowen received fees for services rendered to the Fund of $3,924,438,
$5,266,603 and $6,144,043 respectively.
Custodian and Transfer and Dividend Agent
As custodian of the Fund's assets, Investors Fiduciary Trust Company,
a subsidiary of State Street Boston Corp., (i) maintains a separate account or
accounts in the name of the Fund, (ii) holds and transfers portfolio securities
on account of the Fund, (iii) makes receipts and disbursements of money on
behalf of the Fund and (iv) collects and receives all income and other payments
and distributions on account of the Fund's portfolio securities.
As the Fund's transfer and dividend disbursing agent, DST Systems,
Inc. (prior to March 1, 1998 Investors Fiduciary Trust Company) (i) issues and
redeems shares of the Fund, (ii) addresses and mails all communications by the
Fund to its shareholders and (iii) maintains shareholder accounts.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Shares of the Fund are distributed by Cowen on a best efforts basis.
The Fund offers its shares continually and without a sales load. Information on
how to purchase and redeem Fund shares and how such shares are priced is
included in the Prospectus. The issuance of shares is recorded on the books of
the Fund, and share certificates are not issued unless expressly requested in
writing. Certificates are not issued for fractional shares.
Under the 1940 Act the Fund may suspend the right of redemption or
postpone the date of payment upon redemption for any period during which the New
York Stock Exchange is closed, other than customary weekend and holiday
closings, or during which trading on said Exchange is restricted, or during
which (as determined by the SEC by rule or regulation) an emergency exists as a
result of which disposal or valuation of portfolio securities is not reasonably
practicable, or for such other periods as the Securities and Exchange Commission
may permit. (The Fund may also suspend or postpone the recordation of the
transfer of its shares upon the occurrence of any of the foregoing conditions.)
ADDITIONAL INFORMATION CONCERNING TAXES
The Fund has qualified, and intends to continue to qualify each year,
as a regulated investment company. As such, the Fund will not be subject to
federal income tax on its net investment income and net capital gains, if any,
that it distributes to its shareholders, provided
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<PAGE> 36
that it distributes at least 90% of its net investment income in each taxable
year. To qualify as a regulated investment company, the Fund may have to
restrict the degree to which it engages in short-term trading. Depending upon
the extent to which it is, or is deemed to be, conducting business in certain
states and localities, the Fund may be subject to taxation in such states or
localities.
In general, if a shareholder fails to furnish a correct taxpayer
identification number, fails to report dividend and interest income in full, or
fails to certify that he has provided a correct taxpayer identification number
and that he is not subject to withholding, the Fund may withhold a 31% federal
backup withholding tax on dividends, capital gains distributions and the
proceeds of redemptions. An individual's taxpayer identification number is his
social security number. The backup withholding tax is not an additional tax and
may be credited against a shareholder's regular federal income tax liability.
While the Fund does not expect to realize net capital gains, any such
gains realized will be distributed annually. Such distributions will be taxable
to shareholders as capital gains, regardless of how long a shareholder has held
Fund shares, and will be designated as capital gain dividends in a written
notice mailed by the Fund to shareholders not later than 60 days after the close
of the Fund's taxable year.
Foreign countries may impose withholding and other taxes on interest
paid to the Fund with respect to its foreign investments. However, certain of
such foreign countries may have entered into tax conventions with the United
States which reduce or eliminate such taxes.
The foregoing is only a summary of certain tax considerations
generally affecting the Fund and its shareholders, and is not intended as a
substitute for careful tax planning. Investors are urged to consult their tax
advisers with specific reference to their own tax situations.
DIVIDENDS
Net investment income for dividend purposes consists of interest
accrued and discount earned (both original issue and market), if any, for the
applicable dividend period less amortization of market premium and applicable
expenses for such period.
DETERMINATION OF YIELD
The Fund will make available on each business day a "yield quotation",
which is a computation of the yield on its portfolio. The yield for the Fund is
calculated by determining the net change in the value of a hypothetical
preexisting account in the Fund having a balance of one share at the beginning
of a seven calendar day period for which yield is to be quoted, dividing the net
change by the value of the account at the beginning of the period to obtain the
base period return, and annualizing the results (i.e., multiplying the base
period return by 365/7). The net change in the value of the account reflects the
value of additional shares purchased with dividends declared on the original
share and any such additional shares, but does not include realized gains and
losses or unrealized appreciation and depreciation. The
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<PAGE> 37
Fund may also calculate an effective annualized yield quotation computed on a
compound basis by adding 1 to the base period return (calculated as described
above), raising that sum to a power equal to 365 divided by 7, and subtracting
1.
Current yield will fluctuate from time to time and is not necessarily
representative of future results. Current yield information may be useful in
reviewing the Fund's performance, but because current yield will fluctuate such
information may not provide a basis for comparison with bank deposits, or other
investments which pay a fixed yield for a stated period of time. The current
yield of the Fund is affected by the kind and quality of the instruments in the
Fund's portfolio, its portfolio maturity, and its operating expenses. An
investor's principal is not guaranteed by the Fund.
Investors should recognize that in periods of declining interest rates
the Fund's yield will tend to be somewhat higher than prevailing market rates,
and in periods of rising interest rates the Fund's yield will tend to be
somewhat lower. Also, when interest rates are falling, the inflow of net new
money to the Fund from the continuous sale of its shares will likely be invested
in portfolio instruments producing lower yields than the balance of the Fund's
portfolio, thereby reducing the current yield of the Fund. In periods of rising
interest rates, the opposite can be expected to occur.
On occasion, the Fund may compare its yield to the Donaghue's Money
Fund Average (First Tier), an average compiled by Donaghue's Money Fund Report,
a widely recognized independent publication that monitors the performance of
money market mutual funds. As with yield quotations, yield comparisons should
not be considered as representative of the Fund's yields for any future period.
AUDITORS AND COUNSEL
Ernst & Young LLP, 787 Seventh Avenue, New York, New York 10019, has
been selected as the Fund's independent auditor.
Willkie Farr & Gallagher, 153 East 53rd Street, New York, New York
10022, serves as counsel for the Fund.
FINANCIAL STATEMENTS
The Fund hereby incorporates by reference the financial statements and
related notes and the report of Ernst & Young LLP thereon included in the Fund's
Annual Report to Shareholders for the fiscal year ended September 30, 1997. The
Fund will provide a copy of the Annual Report to each person who requests a copy
of this Statement of Additional Information. The Fund will also furnish a copy
of the Annual Report without charge to any Shareholder upon request directed to
the Fund at the address or telephone number given on the cover page of this
Statement of Additional Information.
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<PAGE> 38
APPENDIX
Description of the two highest grades of rating of commercial paper,
medium term note, and bonds of Standard & Poor's Corporation ("S&P"), Moody's
Investors Service, Inc. ("Moody's"), Fitch Investors Service, Inc. ("Fitch"),
Duff & Phelps, Inc. ("Duff"), Thomson Bankwatch ("Thomson"), and IBCA Limited
("IBCA"). The Fund does not purchase or hold instruments rated below these two
grades.
COMMERCIAL PAPER
S&P
The rating A-1+ is the highest commercial paper rating assigned by S&P.
Commercial paper rated A-1 by S&P indicates a very strong degree of safety
regarding timely payments. Commercial paper rated A-1+ are those with an
"overwhelming degree of credit protection". Long-term senior debt of the same
issuer is rated "A" or better. The issuer has access to at least two additional
channels of borrowing. Basic earnings and cash flow have an upward trend with
allowance made for unusual circumstances. Typically, the issuer's industry is
well established and the issuer has a strong position within the industry. The
reliability and quality of management are unquestioned. Capacity for timely
payment on issues with an A-2 designation is strong. Relative strength or
weakness of the above factors determine whether the issuer's commercial paper is
rated A-1+ or A-1 (which constitute the top grade), or A-2.
Moody's
The rating Prime-1 ("P-1") is the highest commercial paper rating
assigned by Moody's. Among the factors considered by Moody's in assigning
ratings are the following: (1) evaluation of the management of the issuer; (2)
economic evaluation of the issuer's industry or industries and an appraisal of
speculative type risks which may be inherent in certain areas; (3) evaluation of
the issuer's products in relation to competition and customer acceptance; (4)
liquidity; (5) amount and quality of long term debt; (6) trend of earnings over
a period of ten years; (7) financial strength of parent company and the
relationships which exist with the issuer; and (8) recognition by the management
of obligations which may be present or may arise as a result of public interest
questions and preparations to meet such obligations. Issuers of P-1 paper must
have a superior capacity for repayment of short term promissory obligations and
ordinarily will be evidenced by leading market positions in well established
industries, high rates of return of funds employed, conservative capitalization
structures with moderate reliance on debt and ample asset protection, broad
margins in earnings coverage of fixed financial charges and high internal cash
generation, and well established access to a range of financial markets and
assured sources of alternate liquidity. Issues rated Prime-2 ("P-2") have a
strong capacity for repayment of short-term promissory obligations. This
ordinarily will be evidenced by many of the characteristics cited above but to a
lesser degree. Earnings trends and coverage ratios, while sound, will be more
subject to variation. Capitalization characteristics, while still appropriate,
may be more affected by external conditions. Ample alternate liquidity is
maintained.
-12-
<PAGE> 39
Fitch
The rating Fitch-1 (Highest Grade) is the highest commercial paper
rating assigned by Fitch. Paper rated Fitch-1 is regarded as having the
strongest degree of assurance for timely payment. The rating Fitch-2 (Very Good
Grade) is the second highest commercial paper rating assigned by Fitch; it
reflects an assurance of timely payment only slightly less in degree than the
strongest issues.
Duff
The highest category of Duff ratings includes Duff 1+, Duff 1 and Duff
1-. Duff 1+ indicates the highest certainty of timely payment. Short-term
liquidity, including internal operating factors and/or access to alternative
sources of funds, is outstanding, and safety is just below risk-free U.S.
Treasury short-term obligations. Duff 1 indicates very high certainty of timely
payment. Liquidity factors are excellent and supported by good fundamental
protection factors. Risk factors are minor. Duff 1- indicates high certainty of
timely payment. Liquidity factors are strong and supported by good fundamental
protection factors. Risk factors are very small. Duff 2 (Good Grade) indicates
good certainty of timely payment. Liquidity factors are strong and supported by
good fundamental protection factors. Risk factors are small.
Thomson
The highest Thomson short-term rating is TBW-1, which indicates a very
high degree of likelihood that principal and interest will be paid on a timely
basis. Thomson assigns its second highest rating, TBW-2, to short term paper if,
in Thomson's judgment, while the degree of safety regarding timely repayment of
principal and interest is strong, the relative degree of safety is not as high
as for issues rated TBW-1.
IBCA
The highest category of IBCA short term ratings is A1+, assigned to
obligations believed to be supported by the highest capacity for timely
repayment. The second category, A1, is assigned to obligations supported by a
strong capacity for timely repayment.
MEDIUM TERM NOTE RATINGS
Medium Term Notes are rated by the same rating agencies which rate
commercial paper. The Fund does not intend to purchase Medium Term Notes unless
they are rated in one of the two highest categories, as indicated above under
"Commercial Paper".
-13-
<PAGE> 40
BOND RATINGS
S&P
Bonds rated AA by S&P are judged by S&P to be high grade obligations,
and in the majority of instances differ only in small degrees from issues rated
AAA. Bonds rated AAA are considered by S&P to be the highest grade obligations
and possess the ultimate degree of protection as to principal and interest.
Moody's
Bonds rated AA by Moody's are judged by Moody's to be of high quality by
all standards. Together with the AAA group they are generally known as
high-grade bonds. They are rated lower than AAA bonds because margins of
protection may not be as large or fluctuations of protective elements may be of
greater amplitude or there may be other elements present which make the
long-term risks appear somewhat larger.
Fitch
Bonds rated AAA by Fitch are judged by Fitch to be strictly high grade,
broadly marketable, suitable for investment by trustees and fiduciary
institutions and liable to only slight market fluctuations other than through
changes in the money rate. The prime feature of an AAA bond is a showing of
earnings several times or many times interest requirements, with such stability
of applicable earnings that safety is beyond reasonable question whatever
changes occur in conditions. Bonds rated AA by Fitch are judged by Fitch to be
of safety virtually beyond question and are readily salable, whose merits are
not unlike those of the AAA class, but whose margin of safety is less strikingly
broad. The issue may be the obligation of a small company, strongly secured but
influenced as to rating by the lesser financial power of the enterprise and more
local type of market.
Duff
Bonds rated AAA by Duff represent Duff's judgment of highest credit
quality. The risk factors are negligible, being only slightly more than for
risk-free U.S. Treasury debt. An AA rating (including AA+, AA and AA-) from Duff
indicates Duff's judgment of high credit quality. Risk is modest but may vary
slightly from time to time because of economic conditions.
Thomson
The highest Thomson rating, A, indicates that the company possesses an
exceptionally strong balance sheet and earnings record, translating into an
excellent reputation and very good access to its natural money markets. If
weakness or vulnerability exists in any aspect of the company's business, it is
entirely mitigated by the strengths of the organization. The second highest
Thomson rating, A/B, indicates that the company is financially very solid with a
-14-
<PAGE> 41
favorable track record and no readily apparent weakness. Its overall risk
profile, while low, is not quite as favorable as for companies in the highest
rating category.
IBCA
IBCA assigns its highest rating, AAA, to obligations for which it
believes there is the lowest expectation of investment risk. Capacity for timely
repayment of principal and interest is substantial such that adverse changes in
business, economic or financial conditions are unlikely to increase investment
risk significantly. The second highest rating, AA, is assigned to obligations
for which there is very low expectation of investment risk. Capacity for timely
repayment of principal and interest is substantial. Adverse changes in business,
economic, or financial conditions may increase investment risk albeit not very
significantly.
-15-
<PAGE> 42
Part C
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C to this Registration Statement.
<PAGE> 43
PART C
OTHER INFORMATION
Item 24: Financial Statements and Exhibits
(a) Financial Statements included in Registration Statement:
(i) Financial Highlights included in Part A.
(ii) Incorporated by reference under "Financial
Statements" in Part B is the Annual Report to
Shareholders for the fiscal year ended September
30, 1997, which includes the Statement of
Investments and Statement of Assets and
Liabilities as of September 30, 1997 Statement of
Operations for the year ended September 30, 1997;
Statement of Changes in Net Assets for the years
ended September 30, 1996 and 1997; Notes to
Financial Statements; and Report of Ernst & Young
LLP, Independent Auditors, dated October 31, 1997.
(b) Exhibits:
Exhibit No. Description of Exhibits
- ----------- -----------------------
1.A. Articles of Incorporation of Registrant, June 15, 1981(a)
1.B. Articles of Amendment, Sept. 14, 1981(a)
1.C. Articles of Revival of Registrant, Nov. 11, 1992(a)
2.A. Amended and Restated By-Laws, Oct. 28, 1987(a)
2.B. Amendment to the By-Laws, Dec. 15, 1992(a)
3 Not applicable
4 Not applicable
5 Investment Management Agreement, March 29, 1988(a)
6 Distribution Agreement, Oct. 15, 1981(a)
7 Not applicable
8 Custody Agreement with Investors Fiduciary
Trust Company, May 8, 1988(a)
9 Transfer Agency Agreement with Investors Fiduciary
Trust Company, May 6, 1988(a)
C-1
<PAGE> 44
10. A. Opinion and consent of Venable, Baetjer and Howard, Oct.
19, 1981(a)
10. B. Opinion and consent of Willkie Farr & Gallagher, Oct. 20,
1981(a)
11 Consent of Independent Auditors, Jan. 26, 1998
12 Not applicable
13 Not applicable
14 Not applicable
15 Not applicable
(a) Previously filed January 28, 1997
Item 25. Persons Controlled by or Under Common Control with
Registrant
None
Item 26. Number of Holders of Securities
Number of Record Holders
Title of Class as of January 5, 1998
-------------- ----------------------
Common Stock, par value $.01
per share ................... 84,003
Item 27. Indemnification
Reference is hereby made to Registrant's Registration Statement filed
on July 1, 1981, as amended on October 21, 1981.
C-2
<PAGE> 45
Items 28 and 29. Business and Other Connections of Investment
Manager; and Principal Underwriter
Cowen & Company ("Cowen") serves as Investment Manager to Registrant
and is the principal underwriter and distributor of the Registrant's shares.
Cowen is also the Investment Manager, principal underwriter and distributor of
shares of Cowen Income + Growth Fund, Inc. ("CI+G"), Cowen Standby Tax-Exempt
Reserve Fund, Inc. ("CSTXRF"), the series of stock representing Cowen Large Cap
Value Fund ("CLCVF") the sole portfolio of Cowen Series Funds, Inc. ("CSF") and
the series of stock, representing the Cowen Opportunity Fund, Cowen Intermediate
Fixed Income Fund ("CIFIF") and Cowen Government Securities Fund ("CGSF")
portfolios of Cowen Funds, Inc. ("CFI"). Listed on the following pages are the
names of all of the Partners of Cowen as of December 31, 1997, their positions
with the Registrant, if any, and under the heading "Other Business Activities
and Principal Business Addresses", any business, profession, vocation or
employment of a substantial nature (other than business of Cowen) in which they
have been engaged for their own account or in the capacity of director, officer,
employee, partner or trustee during the past two fiscal years of the Registrant
(referred to on the following pages as "CSRF").
C-3
<PAGE> 46
<TABLE>
<CAPTION>
OTHER BUSINESS
NAME, CLASS OF PARTNERS POSITION IF WITH FUNDS LISTED BELOW ACTIVITIES AND
AND PRINCIPAL ------------------------------------------- PRINCIPAL BUSINESS
BUSINESS ADDRESS CSRF CSTXRF CI+G CFI CSF ADDRESS
- ------------------------- -------- --------- ------- ------ ------- ------------------------
<S> <C> <C> <C> <C> <C> <C>
GENERAL PARTNER
Cowen Incorporated (1)
CLASS I LIMITED PARTNERS
Anthony J. Aliberti (1)...... Since 1/1/96 -- Cowen Incorporated
(1) -- MD
Domingo Alonso (1)........... Since 1/1/97 -- Cowen Incorporated
(1) -- MD
Richard A. Altschuler (3).... Since 1/1/96 -- Cowen Incorporated
(1) -- MD
Joseph Augustine (1)......... Since 1/1/97 -- Cowen Incorporated
(1) -- MD
Alice C. Avanian (3)......... Since 1/1/97 -- Cowen Incorporated
(1) -- MD
Michael H. Bassett (1)....... Since 3/30/92 -- Cowen Incorporated
(1) -- MD
William A. Belfiore (1)...... Since 1/1/96 -- Cowen Incorporated
(1) -- MD
Anthony R. Bergamaschi (1)... Since 3/30/92 -- Cowen Incorporated
(1) -- MD
Christopher A. Beyer (1)...... Since 3/30/94 -- Cowen Incorporated
(1) -- MD
Andrew C. Brosseau (3)....... Since 1/1/96 -- Cowen Incorporated
(1) -- MD
Kennedy M. Buckley (1)....... Since 3/30/92 -- Cowen Incorporated
(1) -- MD
Richard S. Chu (3)........... Since 3/30/91 -- Cowen Incorporated
(1) -- MD
William R. Church (1)....... V,SI V,SI V,SI Since 3/30/91 -- Cowen Incorporated
(1) -- MD
Jarrod M. Cohen (1).......... Since 3/30/92 -- Cowen Incorporated
(1) -- MD
Jon M. Cohen (1)............. Since 1/1/97 -- Cowen Incorporated
(1) -- MD
Joseph M. Cohen (1).......... C, D C, D C, D C, D C Since 3/30/91 -- Cowen Incorporated
(1) -- P,D
Peter E. Cohen (1)............ Since 3/30/93 -- Cowen Incorporated
(1) -- MD
Terrence R. Connelly (1)..... Since 1/1/96 -- Cowen Incorporated
(1) -- MD
Philip A. Conti (1).......... Since 3/30/92 -- Cowen Incorporated
(1) -- MD
Arthur Cowen, III (1)........ ETC Enterprises, Inc. (8); Since
3/30/91 Cowen Incorporated
(1) -- MD
Nancy M. Crowell (6)......... Since 3/30/92 -- Cowen Incorporated
(1) -- MD
</TABLE>
C-4
<PAGE> 47
<TABLE>
<CAPTION>
OTHER BUSINESS
NAME, CLASS OF PARTNERS POSITION IF WITH FUNDS LISTED BELOW ACTIVITIES AND
AND PRINCIPAL --------------------------------------------------- PRINCIPAL BUSINESS
BUSINESS ADDRESS CSRF CSTXRF CI+G CFI CSF ADDRESS
- ------------------------- -------- --------- ---------- --------- --------- --------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Howard Dingley (7)............ Since 1/1/97--Cowen Incorporated (1)-
-MD
Kenneth Dowd (1).............. Since 1/1/97--Cowen Incorporated (1)-
-MD
John P. Dunphy (1)............ Since 3/30/92--Cowen Incorporated
(1)--MD
Alec D. Green (7)............. Since 1/1/96--Cowen Incorporated
(1)--MD
Jeremiah Harrington (1)....... Since 1/1/97--Cowen Incorporated
(1)--MD
Guy E. Heald (3).............. Since 1/1/97--Cowen Incorporated
(1)--MD
William F. Herbert (3)........ Since 1/1/97--Cowen Incorporated
(1)--MD
Edward I. Herbst (1).......... Since 3/30/91--Cowen Incorporated
(1)--MD
James M. Hesburgh (1)......... Since 1/1/97--Cowen Incorporated
(1)--MD
Thomas L. Hgyde (1)........... Since 3/30/93--Cowen Incorporated
(1)--MD
Cornelius Howe (1)............ Since 1/1/97--Cowen Incorporated
(1)--MD
Gerald P. Kaminsky ........... D,SI D,SI Since 3/30/91--Cowen Incorporated
(1)--MD
Kurt B. Karmin (2)............ Since 1/1/97--Cowen Incorporated
(1)--MD
James C. Kedersha (3)......... Since 1/1/97--Cowen Incorporated
(1)--MD
Jamie Kiggen (3).............. Since 1/1/97--Cowen Incorporated
(1)--MD
Jeffrey B. Kiley (1).......... Since 1/1/97--Cowen Incorporated
(1)--MD
Christopher D. Kirby (6)...... Since 1/1/97--Cowen Incorporated
(1)--MD
Albert F. Laub (3)............ Since 3/30/91--Cowen Incorporated
(1)--MD
Daniel T. Lamaitre (3)........ Since 3/30/92--Cowen Incorporated
(1)--MD
Maria F. Lewis-Kussmaul (3)... Since 3/30/93--Cowen Incorporated
(1)--MD
Stuart S. Lovejoy (1)......... Since 1/1/96--Cowen Incorporated
(1)--MD
Arthur S. Lutzke (1).......... Since 3/30/93--Cowen Incorporated
(1)--MD
David E. Mack (1)............. Since 3/30/91--Cowen Incorporated
(1)--MD
Joseph A. Majike, Jr. (3)..... Since 1/1/97--Cowen Incorporated
(1)--MD
</TABLE>
C-5
<PAGE> 48
<TABLE>
<CAPTION>
OTHER BUSINESS
NAME, CLASS OF PARTNERS POSITION IF WITH FUNDS LISTED BELOW ACTIVITIES AND
AND PRINCIPAL ------------------------------------------------- PRINCIPAL BUSINESS
BUSINESS ADDRESS CSRF CSTXRF CI+G CFI CSF ADDRESS
- ------------------------- -------- --------- ---------- --------- --------- ---------------------------------
<S> <C> <C> <C> <C> <C> <C>
Stephen Malfitano (1).... Since 3/30/94--Cowen Incorporated
(1)--MD
Joseph M. Marinaro (1)... Since 3/30/96--Cowen Incorporated
(1)--MD
Paul Marsh (1)........... Since 1/1/97--Cowen Incorporated
(1)--MD
William O. Matthews(1)... Since 3/30/931--Cowen Incorporated
(1)--D
William K. McCormick (5). Since 3/30/91--Cowen Incorporated
(1)--MD
Malcolm G. McDonald (3).. Since 1/1/97--Cowen Incorporated
(1)--MD
Kelly McGowen (1)........ Since 1/1/97--Cowen Incorporated
(1)--MD
Carl A. Mertz (1)........ Since 3/30/92--Cowen Incorporated
(1)--MD
Kathleen Miner (3)....... Since 1/1/97--Cowen Incorporated
(1)--MD
George G. Montgomery (6). Since 1/1/97--Cowen Incorporated
(1)--MD
Raymond K. Moran (3)..... Since 3/30/91--Cowen Incorporated
(1)--Cowen Incorporated MD
Adele M. Morrissette (1). Since 1/1/97--Cowen Incorporated
(1)--MD
Michael G. Mullen (3).... Since 1/1/97--Cowen Incorporated
(1)--MD
Jerrold B. Newman (6).... Since 3/30/92--Cowen Incorporated
(1)--MD
Donald F. Novell (1)..... Since 3/30/93--Cowen Incorporated
(1)--MD
Gary S. Pardo (1)........ Since 3/30/96--Cowen Incorporated
(1)--MD
Susan M. Passoni (3)..... Since 1/1/97--Cowen Incorporated
(1)--MD
Elizabeth T. Pawel (1)... Since 3/30/96--Cowen Incorporated
(1)--MD
Drew Peck................ Since 3/30/96--Cowen Incorporated
(1)--MD
Creighton H. Peet (1).... D,T D,T V,SI,T V,SI,T T Since 3/30/91--Cowen Incorporated
(1)--MD
Antonio G. Pinto (1)..... Since 3/30/91--Cowen Incorporated
(1)--MD
Edward M. Posner (1)..... Since 3/30/92--Cowen Incorporated
(1)--MD
Peter J. Power (1)....... Since 3/30/92-Cowen Incorporated
(1)--MD
Charles J. Pradilla (1).. Since 1/1/97--Cowen Incorporated
(1)--MD
</TABLE>
C-6
<PAGE> 49
<TABLE>
<CAPTION>
OTHER BUSINESS
NAME, CLASS OF PARTNERS POSITION IF WITH FUNDS LISTED BELOW ACTIVITIES AND
AND PRINCIPAL --------------------------------------------------- PRINCIPAL BUSINESS
BUSINESS ADDRESS CSRF CSTXRF CI+G CFI CSF ADDRESS
- ------------------------- -------- --------- ---------- --------- --------- ---------------------------------
<S> <C> <C> <C> <C> <C> <C>
William Rechter (1)........ SI SI Since 3/30/92--Cowen Incorporated
(1)--MD
Stephen E. Reilly (3)...... Since 3/30/93--Cowen Incorporated
(1)--MD
Todd B. Robbins (1)........ Since 3/30/93--Cowen Incorporated
(1)--MD
Richard Lrugani (1 and 3).. Since 3/30/92--Cowen Incorporated
(1)--MD
David R. Sarns (1)......... P P P P P Since 3/30/93--Cowen Incorporated
(1)--MD
Stephen M. Scala (3)....... Since 1/1/97--Cowen Incorporated
(1)--MD
Thomas R. Schwartz (1)..... Since 1/1/97--Cowen Incorporated
(1)--MD
Kenneth Sheinberg (1)...... Since 1/1/97--Cowen Incorporated
(1)--MD
Hugh T. Shytle (3)......... Since 1/1/97--Cowen Incorporated
(1)--MD
Arthur J. Stavaridis
(1 and 3).................. Since 3/30/92--Cowen Incorporated
(1)--MD
David K. Stone (3)......... Since 3/30/93--Cowen Incorporated
(1)-MD
Robert W. Stone (3)........ Since 1/1/97--Cowen Incorporated
(1)--MD
Alan Streeter (1).......... Since 1/1/97--Cowen Incorporated
(1)--MD
Richard S. Striefler (1)... Since 3/30/93--Cowen Incorporated
(1)--MD
Franklyn Theis (3)......... Since 3/30/92--Cowen Incorporated
(1)--MD
Robert Valdez (6).......... Since 3/30/94--Cowen Incorporated
(1)--MD
Cai Von Rumohr (3)......... Since 3/30/91--Cowen Incorporated
(1)--MD
Hans C. Vitzthum (3)........ Since 1/1/97--Cowen Incorporated
(1)--MD
Harold Vogen (1)........... Since 1/1/96--Cowen Incorporated
(1)--MD
Robert S. Walterman (4).... Since 1/1/97--Cowen Incorporated
(1)--MD
Stephen R. Weber (3)....... Since 3/30/91--Cowen Incorporated
(1)--MD
Miriam C. Willard (1)...... Since 1/1/96--Cowen Incorporated
(1)--MD
Jonathan H. Zauderer (1)... Since 1/1/96--Cowen Incorporated
(1)--MD
Michael Zolezzi (6)........ Since 3/30/94--Cowen Incorporated
(1)--MD
</TABLE>
C-7
<PAGE> 50
<TABLE>
<CAPTION>
OTHER BUSINESS
NAME, CLASS OF PARTNERS POSITION IF WITH FUNDS LISTED BELOW ACTIVITIES AND
AND PRINCIPAL --------------------------------------------------- PRINCIPAL BUSINESS
BUSINESS ADDRESS CSRF CSTXRF CI+G CFI CSF ADDRESS
- ------------------------- -------- --------- ---------- --------- --------- -----------------------
<S> <C> <C> <C> <C> <C> <C>
LIMITED PARTNERS
George N. Cowen (4)...... None
Richard B. Frackman (1).. None
John B. Greene (5)....... None
Joseph V. Perri (1)...... None
Charles L. Wood (2)...... None
</TABLE>
- -------------------------
(1) Financial Square, New York, New York 10005
(2) Texaco Heritage Plaza, 111 Bagby St., #2350, Houston, Texas
(3) Two International Place, Boston, Massachusetts 02110
(4) West Building, 31st Floor, 280 Park Avenue, New York, New York 10017
(5) Courthouse Plaza Northeast, Dayton, Ohio 45402
(6) Four Embarcadero Center, Suite 1200, San Francisco, California 9411
(7) One Angel Court, London, England ECZR, 7HJ
(8) 30 West 75th Street, New York, New York 10023
P-- President
C-- Chairman of the Board
D-- Director
V-- Vice President
T-- Treasurer
S-- Secretary
SI-- Senior Investment Officer
AS-- Assistant Secretary
MD-- Managing Director
C-8
<PAGE> 51
Item 29(c).
Not Applicable
Item 30. Location of Accounts and Records
(1) Cowen Standby Reserve Fund, Inc.
Financial Square
New York, New York 10005
(2) Investors Fiduciary Trust Company
127 West 10th Street
Kansas City, Missouri 64105
Item 31. Management Service
Not applicable.
Item 32. Undertakings
Not applicable.
C-9
<PAGE> 52
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, the Registrant has duly caused this
Amendment to be signed on its behalf by the undersigned, thereto duly
authorized, in the City of New York, and State of New York, on the 27th day of
January, 1998.
COWEN STANDBY RESERVE FUND, INC.
/s/ Joseph M. Cohen
by Rodd M. Baxter,
Attorney-in-Fact
Joseph M. Cohen, Chairman
Pursuant to the requirements of the Securities Act of 1933, and
the Investment Company Act of 1940, the Registrant certifies that it meets all
of the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933, and has duly caused this Amendment
to the Registration Statement to be signed on its behalf by the undersigned,
thereto duly authorized, in the City of New York, and State of New York, on the
day of January, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Joseph M. Cohen Chairman (Chief January 27, 1998
by Rodd M. Baxter, Executive Officer)
Attorney-in-Fact and Director
Joseph M. Cohen
/s/ James H. Carey Director January 27, 1998
by Rodd M. Baxter,
Attorney-in-Fact
James H. Carey
/s/ Peter P. Gil Director January 27, 1998
by Rodd M. Baxter,
Attorney-in-Fact
Peter P. Gil
/s/ Martin J. Gruber Director January 27, 1998
by Rodd M. Baxter,
Attorney-in-Fact
Martin J. Gruber
/s/ Gerald P. Kaminsky Director January 27, 1998
by Rodd M. Baxter,
Attorney-in-Fact
Gerald P. Kaminsky
/s/ Creighton H. Peet Treasurer (Chief January 27, 1998
by Rodd M. Baxter Financial Officer)
Attorney-in-fact and Director
- -----------------------
Creighton H. Peet
</TABLE>
C-10
<PAGE> 53
<TABLE>
<S> <C> <C>
/s/ Burton J. Weiss Director January 27, 1998
by Rodd M. Baxter,
Attorney-in-Fact
Burton J. Weiss
</TABLE>
C-11
<PAGE> 54
INDEX TO EXHIBITS
Exhibit No. Description of Exhibits
- ----------- -----------------------
11 Consent of Independent Auditors, Jan. 26, 1998
<PAGE> 1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Financial
Highlights", "Auditors and Counsel" and "Financial Statements" and to the
incorporation by reference of our report dated October 31, 1997 in this
Registration Statement (Form N-1A No. 2-73131) of Cowen Standby
Reserve Fund, Inc.
ERNST & YOUNG LLP
New York, New York
January 26, 1998
