<PAGE>
ANNUAL REPORTS SEPTEMBER 30, 1999
SG COWEN STANDBY RESERVE
FUND, INC.
AND
SG COWEN STANDBY TAX-EXEMPT
RESERVE FUND, INC.
[LOGO]
[LOGO]
<PAGE>
SG COWEN STANDBY RESERVE FUND, INC.
SG COWEN STANDBY TAX-EXEMPT RESERVE FUND, INC.
ANNUAL FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
<TABLE>
<S> <C>
Chairman's Letter .......................................... 1
Statements of Investments:
SG Cowen Standby Reserve Fund, Inc. ...................... 3
SG Cowen Standby Tax-Exempt Reserve Fund, Inc. ........... 6
Statements of Assets and Liabilities ....................... 16
Statements of Operations ................................... 17
Statements of Changes in Net Assets ........................ 18
Notes to Financial Statements .............................. 19
Report of KPMG LLP, Independent Auditors ................... 23
</TABLE>
<PAGE>
CHAIRMAN'S LETTER NOVEMBER 5, 1999
DEAR SHAREHOLDER:
We are pleased to report that the SG Cowen Standby Reserve Fund and the SG
Cowen Standby Tax-Exempt Reserve Fund produced total returns that were higher
than their peer group averages for the year ended September 30, 1999. For the
fiscal year, the SG Cowen Standby Reserve Fund produced a total return of 4.67%.
In comparison, the IBC Taxable First Tier Index returned 4.50%. Meanwhile, the
SG Cowen Standby Tax-Exempt Reserve Fund produced a total return of 2.70% while
the IBC Tax-Free Fund Index returned 2.63%.
Because the Federal Reserve Board raised interest rates a quarter percentage
point on June 30 and again on August 24 in response to concerns about inflation,
money market yields were generally rising as the fiscal year came to a close. At
September 30, 1999, the annualized seven-day yield for the SG Cowen Standby
Reserve Fund was 4.83% versus 4.65% for the IBC Tax-Free Fund Index. The
annualized seven-day yield for the SG Cowen Standby Tax-Exempt Reserve Fund was
3.27% compared to 3.01% for the IBC Tax-Free Fund Index.
MARKET ACTIVITY
The Federal Reserve Board began the fiscal year by lowering the federal funds
rate from 5.50% to 4.75% in response to the global liquidity crisis arising from
Asia's economic woes. As late as December, the prevailing expectation was for
continued interest rate reductions in the first quarter of 1999 to combat what
was thought to be a slowing U.S. economy.
Instead, growth remained robust in the U.S. and the Fed remained on the
sidelines until June 30, when short-term rates were increased from 4.75% to 5%.
This first Fed tightening was somewhat surprising because inflation data was
still benign. The April, May and June Producer Price Index figures were 0.5%,
0.2% and -0.1%, respectively, while the six-month trend annualized was just
1.5%. The April, May and June Consumer Price Index figures were 0.7%, 0.0% and
0.0%, respectively, with a six-month trend annualized of 2.2%. Other data,
however, concerned the Fed, such as stronger-than-expected housing starts as
well as the rebound in energy prices. Given subsequent inflation data, the Fed
tightening in August was expected, with PPI and CPI on the rise.
INVESTMENT REVIEW
We believe we add value by shortening and lengthening the funds' maturities in
a timely fashion. For instance, both funds had lower-than-average maturities in
the middle of August prior to the Fed raising interest rates. A
shorter-than-average maturity allowed us to reinvest more quickly to attain
higher yields. Maturities were subsequently extended, locking in higher yields.
For example, in the SG Cowen Standby Reserve Fund, we extended maturities more
aggressively than the index by investing in commercial paper due after January
1, 2000. These securities, issued by companies wishing not to have maturities
due within a week or two of the New Year, offered attractive yields,
compensating investors for another potential Fed tightening. As a result, by
September 30, 1999 the SG Cowen Standby Reserve Fund's average maturity was 67
days compared to 62 days for its index.
1
<PAGE>
The SG Cowen Standby Tax-Exempt Reserve Fund's maturity was also lengthened,
but not until later in the period. On July 1, a significant percentage of the
tax-exempt notes issued by school districts and other municipalities matured,
flooding the market with cash. Although the Fed had just raised short-term
rates, the amount of cash in the market prevented tax-exempt yields from rising
accordingly. As a result, we continued to keep the portfolio's maturity short
until tax-exempt yields reacted to the Fed actions. In mid-July, the portfolio's
average maturity was only 30 days, 12 days short of the index. However, by
September 30, the SG Cowen Standby Tax-Exempt Reserve Fund's average maturity
was catching up at 47 days, 7 days short of its benchmark.
The Internal Revenue Code requires us to inform you that 100% of the dividends
distributed by the SG Cowen Standby Tax-Exempt Reserve Fund during its fiscal
year ended September 30, 1999 were exempt from Federal personal income taxes.
After December 31, 1999, you will receive a breakdown of income by state earned
during the year.
In the interest of safety and liquidity, both funds are managed in a very
conservative manner. The SG Cowen Standby Reserve Fund invests exclusively in
the highest rated categories of commercial paper, certificates of deposit and
floating rate notes. The SG Cowen Standby Tax-Exempt Reserve Fund is invested in
the highest rated categories of tax-exempt and floating rate notes.
LOOKING AHEAD
With the Producer Price Index for September reported at 1.1% and a six-month
annualized trend of 4.9%, the Federal Reserve Board's concerns about inflation
are well founded. As a result, the Fed is likely to continue to increase
short-term rates. Because a number of securities in both funds are maturing
soon, we believe that we will be able to take advantage of the rising interest
rate environment. At the same time, we will have ample liquidity at year-end to
handle any Y2K concerns.
As always, we appreciate your investment in the SG Cowen Standby Reserve
Funds. We look forward to serving your investment needs in the future.
Sincerely,
[SIG]
Joseph M. Cohen
Chairman
2
<PAGE>
SG COWEN STANDBY RESERVE FUND, INC.
STATEMENT OF INVESTMENTS
SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
PRINCIPAL DESCRIPTION OF ANNUALIZED VALUE
AMOUNT SECURITY YIELD ON DATE
OF PURCHASE
<C> <S> <C> <C>
COMMERCIAL PAPER - 73.37%
Akzo Nobel, Inc.
$30,000,000 10-18-1999 5.44% $ 29,924,633
American Express Centurion Bank
26,000,000 10-01-1999 5.33 26,000,000
28,000,000 02-17-2000 5.78 28,000,000
American General Finance
50,000,000 10-05-1999 5.38 49,970,611
Associates Corp. of North America
35,000,000 11-16-1999 5.44 34,763,419
30,000,000 12-20-1999 5.29 30,000,000
BMW U.S. Capital Corp.
29,000,000 10-01-1999 5.58 29,000,000
38,176,000 10-27-1999 5.39 38,030,422
BTR Dunlop Finance
35,000,000 10-20-1999 5.40 34,902,467
Banc One Corp.
30,000,000 12-28-1999 5.37 29,618,667
CIT Group Inc.
49,000,000 10-13-1999 5.38 48,913,760
Cargill Global Finance
20,000,000 10-13-1999 5.36 19,964,867
25,000,000 10-13-1999 5.37 24,956,083
DaimlerChrysler North American Holding
Corp.
50,000,000 10-25-1999 5.42 49,823,000
Deere Capital Corp.
23,000,000 10-06-1999 5.46 22,982,814
35,000,000 02-14-2000 5.76 35,000,000
Ford Motor Credit Co.
30,000,000 10-06-1999 5.37 29,978,000
17,000,000 01-24-2000 5.90 17,000,000
General Electric Capital Corp.
45,000,000 10-05-1999 5.37 45,000,000
20,000,000 11-17-1999 5.37 20,000,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
3
<PAGE>
SG COWEN STANDBY RESERVE FUND, INC.
STATEMENT OF INVESTMENTS - (CONTINUED)
SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
PRINCIPAL DESCRIPTION OF ANNUALIZED VALUE
AMOUNT SECURITY YIELD ON DATE
OF PURCHASE
<C> <S> <C> <C>
General Motors Acceptance Corp.
$35,000,000 12-15-1999 5.29% $ 35,000,000
Household Finance Corp.
50,000,000 10-13-1999 5.39 49,912,000
5,000,000 01-10-2000 5.78 5,000,000
15,000,000 01-10-2000 5.91 14,759,704
International Business Machines Credit
Corp.
30,000,000 02-07-2000 5.74 30,000,000
Koch Industries
50,000,000 10-01-1999 5.58 50,000,000
Pfizer, Inc.
15,000,000 10-19-1999 5.37 14,960,475
Prudential Funding Corp.
30,000,000 10-13-1999 5.37 29,947,200
20,000,000 12-15-1999 5.36 19,784,583
10,000,000 01-19-2000 5.79 10,000,000
Rabobank
6,000,000 10-01-1999 5.67 6,000,000
Sigma Finance, Inc.
30,000,000 02-25-2000 5.95 29,301,750
Swedish Export Credit Bank
50,000,000 10-01-1999 5.64 50,000,000
TransAmerica Finance Corp.
35,000,000 11-15-1999 5.44 34,767,251
--------------
Total Commercial Paper
(Cost $1,023,261,706) $1,023,261,706
--------------
FLOATING RATE NOTES - 6.45%
AT&T Corp.
30,000,000 07-13-2000 5.27(a) $ 29,995,193
Bear Stearns Companies, Inc.
30,000,000 03-30-2000 4.97(b) 30,000,000
30,000,000 09-14-2000 5.65(c) 30,000,000
--------------
Total Floating Rate Notes
(Cost $89,995,193) $ 89,995,193
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
4
<PAGE>
SG COWEN STANDBY RESERVE FUND, INC.
STATEMENT OF INVESTMENTS - (CONTINUED)
SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
PRINCIPAL DESCRIPTION OF ANNUALIZED VALUE
AMOUNT SECURITY YIELD ON DATE
OF PURCHASE
<C> <S> <C> <C>
MEDIUM TERM NOTES - 3.66%
Morgan Guaranty Trust
$30,000,000 06-02-2000 5.40% $ 30,000,000
Nationsbank Corporation
21,000,000 02-22-2000 5.12 20,992,363
--------------
Total Medium Term Notes
(Cost $50,992,363) $ 50,992,363
--------------
US GOVERNMENT AGENCY NOTES - 2.87%
Federal Home Loan Bank
40,000,000 03-03-2000 5.07 $ 40,000,000
--------------
Total US Government Agency Notes
(Cost $40,000,000) $ 40,000,000
--------------
YANKEE CERTIFICATES OF DEPOSIT -
13.04%
Canadian Imperial Bank of Canada
20,000,000 12-30-1999 5.41 $ 20,000,000
Deutsche Bank
30,000,000 05-18-2000 5.25 29,990,907
National Bank of Canada
40,000,000 03-23-2000 5.23 40,000,000
Rabobank
30,000,000 04-25-2000 5.09 29,991,807
UBS AG
30,000,000 02-23-2000 5.10 29,995,981
32,000,000 02-29-2000 5.20 31,998,726
--------------
Total Yankee Certificates of Deposit
(Cost $181,977,421) $ 181,977,421
--------------
</TABLE>
<TABLE>
<C> <S> <C> <C> <C>
TOTAL INVESTMENTS
(Cost $1,386,226,683)....... 99.39% $1,386,226,683
Cash and Receivables, Less
Liabilities (net)........... 0.61 8,444,145
------- --------------
Net Assets.................. 100.00% $1,394,670,828
======= ==============
</TABLE>
- -------------
<TABLE>
<C> <S>
Notes:
(a) - 1 Month Libor rate instruments reflect rate as of 09-30-1999
(b) - 3 Month Libor rate instruments reflect rate as of 09-30-1999
(c) - Daily Federal Funds rate instruments reflect rate as of
09-30-1999
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
5
<PAGE>
SG COWEN STANDBY TAX-EXEMPT RESERVE FUND, INC.
STATEMENT OF INVESTMENTS
SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
PRINCIPAL DESCRIPTION OF BOND ANNUALIZED VALUE
AMOUNT YIELD ON DATE
OF PURCHASE
<C> <S> <C> <C>
$ 200,000 Alabama Special Care Facility
Montgomery Hospital Floating Rate
Demand Note
Series 1985
(7-Day Put, 7-Day Change)
04-01-2015 3.77%# $ 200,000
2,000,000 Alaska State Industrial Development
Authority Lot 6
(7-Day Put, 7-Day Change)
07-01-2001 4.20 # 2,000,000
4,300,000 Allegheny County, PA Industrial
Development Authority Pollution
Control Revenue Bonds, Series C
(Daily Put, Daily Change)
07-01-2027 3.95 # 4,300,000
2,000,000 Austin, TX Utility Revenue Bonds
Series A
10-04-1999 3.35 2,000,000
2,900,000 Baltimore County, MD Metropolitan
District Revenue Bonds
Series 1995
02-17-2000 3.55 2,900,000
600,000 Bexar County, TX Housing Finance
Corporation Park Hill Project
Series 88-B
(7-Day Put, 7-Day Change)
06-01-2005 3.85 # 600,000
1,100,000 Billings, MT Industrial Development
Revenue Adjustable Tender Notes
(7-Day Put, 7-Day Change)
12-01-2014 3.70 # 1,100,000
1,000,000 Charlotte, NC Public Improvements
General Obligation Series A
(Pre-refunded to 10-01-2000 @ 102)
10-01-2008 3.75 1,049,893
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE>
SG COWEN STANDBY TAX-EXEMPT RESERVE FUND, INC.
STATEMENT OF INVESTMENTS - (CONTINUED)
SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
PRINCIPAL DESCRIPTION OF BOND ANNUALIZED VALUE
AMOUNT YIELD ON DATE
OF PURCHASE
<C> <S> <C> <C>
$2,000,000 Claiborne County, MS Pollution Control
Revenue Bonds National Rural Electric/
Southern Mississippi Electric Power
Association, Series 1985G-1
(Mandatory Put 11-02-1999)
12-01-2015 3.40% $ 2,000,000
700,000 Clarksville, TN Public Building
Authority Pooled Financial Series
(7-Day Put, 7-Day Change)
12-01-2000 3.65 # 700,000
1,015,000 Cohasset, MN Revenue Bonds Minnesota
Power and Light Project Series B
(Daily Put, Daily Change)
06-01-2013 3.95 # 1,015,000
2,100,000 Cornell Township, MI Economic
Development Corporation Industrial
Development Revenue Bonds,
Series 1990
(Mandatory Put 10-12-1999)
03-01-2015 3.35 2,100,000
800,000 DeKalb Private Hospital Authority,
Georgia, (Egleston Children's Hospital
at Emory University, Inc. Project)
Revenue Anticipation Certificates
Series 1994A
(7-Day Put, 7-Day Change)
03-01-2024 3.65 # 800,000
1,800,000 DeKalb County, GA Pollution Control
Revenue Bonds General Motors
Corporation Project
(7-Day Put, 7-Day Change)
11-01-2003 3.75 # 1,800,000
2,000,000 Delaware State Economic Development
Authority Industrial Development
Revenue Bonds Delmarva Power & Light
Co Gas Facilities Project C
(7-Day Put, 7-Day Change)
10-01-2028 3.90 # 2,000,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE>
SG COWEN STANDBY TAX-EXEMPT RESERVE FUND, INC.
STATEMENT OF INVESTMENTS - (CONTINUED)
SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
PRINCIPAL DESCRIPTION OF BOND ANNUALIZED VALUE
AMOUNT YIELD ON DATE
OF PURCHASE
<C> <S> <C> <C>
$1,500,000 Delaware Valley, PA Regional Finance
Authority Local Government Revenue
Bonds Series A
(7-Day Put, 7-Day Change)
12-01-2017 3.70%# $ 1,500,000
1,700,000 Delaware Valley, PA Regional Finance
Authority Local Government Revenue
Bonds Series A
(7-Day Put, 7-Day Change)
12-01-2019 3.70 # 1,700,000
1,800,000 Delta County, MI Economic Development
Authority Mead Escanaba Project
Series C
(Daily Put, Daily Change)
12-01-2023 3.90 # 1,800,000
800,000 District of Columbia General
Obligation Note Series B
(Pre-refunded to 06-01-2000 @ 102)
06-01-2010 3.80 834,783
1,000,000 District of Columbia, Revenue Bonds,
The American University Issue,
Series 1985A
(7-Day Put, 7-Day Change)
10-01-2015 3.80 # 1,000,000
1,095,000 District of Columbia, Revenue Bonds,
The American University Issue,
Series 1986A
(7-Day Put, 7-Day Change)
12-01-2015 3.80 # 1,095,000
1,230,000 Florida Housing Finance
Agency-Reference Multi-Family Housing
EEE Carlton Project
(7-Day Put, 7-Day Change)
12-01-2008 3.85 # 1,230,000
2,500,000 Georgia State General Obligation Note
University and College Improvements
09-01-2000 3.68 2,579,467
1,000,000 Greensboro, NC General Obligation Note
Public Improvements-Sewer Project,
Series B
(7-Day Put, 7-Day Change)
04-01-2007 3.70 # 1,000,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE>
SG COWEN STANDBY TAX-EXEMPT RESERVE FUND, INC.
STATEMENT OF INVESTMENTS - (CONTINUED)
SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
PRINCIPAL DESCRIPTION OF BOND ANNUALIZED VALUE
AMOUNT YIELD ON DATE
OF PURCHASE
<C> <S> <C> <C>
$3,500,000 Gwinnett County, GA Hospital Revenue
Bonds Hospital System Project B
(7-Day Put, 7-Day Change)
09-01-2027 3.77%# $ 3,500,000
1,200,000 Hartford, CT General Obligation Bonds,
Public School Improvements
11-15-1999 3.05 1,204,264
1,000,000 Hillsborough County, FL Aviation
Authority Revenue Bonds, Tampa
International Airport Project
Series B
(Pre-refunded to 10-01-1999 @ 102)
10-01-2019 3.365 1,020,000
3,000,000 Honolulu, HI City and County
Tax-Exempt Commercial Paper
(Mandatory Put 10-14-1999)
10-22-2000 3.30 3,000,000
3,000,000 Honolulu, HI City and County
Tax-Exempt Commericial Paper
02-17-2000 3.40 3,000,000
400,000 Illinois State Health Facility
Authority Hospital Revenue Bonds,
Decatur Memorial Hospital Project A
(7-Day Put, 7-Day Change)
11-15-2024 3.80 # 400,000
4,000,000 Illinois State Health Facility
Authority Hospital Revenue Bonds,
South Illinois Health Care Series B
(7-Day Put, 7-Day Change)
03-01-2021 3.80 # 4,000,000
1,000,000 Illinois State Sales Tax Revenue
Bonds, Series M
(Pre-refunded to 06-15-2000 @ 102)
06-15-2015 3.50 1,042,172
3,000,000 Indiana Municipal Power Agency, Power
Supply System Revenue Bonds, Series A
(7-Day Put, 7-Day Change)
01-01-2018 3.70 # 3,000,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
9
<PAGE>
SG COWEN STANDBY TAX-EXEMPT RESERVE FUND, INC.
STATEMENT OF INVESTMENTS - (CONTINUED)
SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
PRINCIPAL DESCRIPTION OF BOND ANNUALIZED VALUE
AMOUNT YIELD ON DATE
OF PURCHASE
<C> <S> <C> <C>
$2,000,000 Intermountain Power Agency of Utah,
Electric Light and Power Improvements,
Power Supply Revenue Bonds
Series 1985-B
(Mandatory Put 11-03-1999)
07-18-2019 3.40% $ 2,000,000
3,000,000 Jefferson County, KY Pollution Control
Revenue Bonds Louisville Gas and
Electric Co. Project A
(Mandatory Put 10-01-1999)
09-01-2017 3.25 3,000,000
5,000,000 Jefferson Parish, LA Hospital Service
District #001 Hospital Revenue Bonds,
Jefferson Medical Center
(7-Day Put, 7-Day Change)
01-01-2026 3.80 # 5,000,000
2,700,000 La Cygne, KS Environmental Improvement
Revenue Notes, Kansas City Power and
Light Co. Project
(7-Day Put, 7-Day Change)
03-01-2015 3.90 # 2,700,000
1,500,000 Las Vegas, NV Water District Revenue
Bonds (Pre-refunded to 08-01-2000 @
102)
08-01-2009 3.60 1,570,357
3,200,000 Long Island, NY Power Authority, New
York Electric Systems Revenue Bonds,
Sub-Series 3
11-01-1999 3.35 3,200,000
3,900,000 Louisiana Public Facilities Authority
Multi Family Housing Revenue Bonds,
(Willis Knighton Medical Center
Project)
Series 1988
(7-Day Put, 7-Day Change)
09-01-2023 4.00 # 3,900,000
1,000,000 Louisiana State General Obligation
Bond
Series A
08-01-2000 3.67 1,018,860
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
10
<PAGE>
SG COWEN STANDBY TAX-EXEMPT RESERVE FUND, INC.
STATEMENT OF INVESTMENTS - (CONTINUED)
SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
PRINCIPAL DESCRIPTION OF BOND ANNUALIZED VALUE
AMOUNT YIELD ON DATE
OF PURCHASE
<C> <S> <C> <C>
$1,200,000 Lynchburgh, VA Industrial Development
Authority Hospital Revenue Bonds, (VHA
Mid-Atlantic States, Inc. Capital
Asset Financing Project)
(7-Day Put, 7-Day Change)
12-01-2025 3.85%# $ 1,200,000
1,000,000 Maryland State General Obligation Bond
Public Improvements 2nd Series
08-01-2000 3.58 1,009,472
650,000 Mason County, KY Pollution Control
Revenue Bonds Kentucky Power-National
Rural Electric Project B-1
(7-Day Put, 7-Day Change)
10-15-2014 3.85 # 650,000
1,000,000 Massachusetts State General Obligation
Series D
(Pre-refunded to 10-01-1999 @ 102)
10-01-2009 3.00 1,020,000
1,000,000 Michigan State Strategic Limited Fund
Revenue Bond - Series A
(Daily Put, Daily Change)
09-01-2030 3.95 # 1,000,000
115,000 Michigan State Hospital Finance
Authority Revenue Bonds, Hospital
Equipment Loan Program
(7-Day Put, 7-Day Change)
06-01-2001 3.70 # 115,000
1,000,000 Michigan State Hospital Finance
Authority Revenue Bonds, Hospital
Equipment Loan Program - Series A
(7-Day Put, 7-Day Change)
12-01-2023 3.85 # 1,000,000
1,000,000 Missouri State Environmental
Improvement and Energy Research
Authority, Pollution Control Revenue
Bonds Union Electric Project Series A
10-01-1999 3.45 1,000,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
11
<PAGE>
SG COWEN STANDBY TAX-EXEMPT RESERVE FUND, INC.
STATEMENT OF INVESTMENTS - (CONTINUED)
SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
PRINCIPAL DESCRIPTION OF BOND ANNUALIZED VALUE
AMOUNT YIELD ON DATE
OF PURCHASE
<C> <S> <C> <C>
$ 600,000 Missouri State Environmental
Improvement and Energy Research
Authority, Pollution Control Revenue
Bonds National Rural Utilities Project
(7-Day Put, 7-Day Change)
12-15-2003 3.85%# $ 600,000
560,000 Mobile County, AL General Obligation
Warrants
(Pre-refunded to 02-01-2000 @ 102)
02-01-2003 3.50 576,124
3,000,000 Moffat County, CO Pollution Control
Revenue Bonds Colorado-Ute Electric
Authority Project
(7-Day Put, 7-Day Change)
07-01-2010 3.85 # 3,000,000
1,000,000 Montgomery County, PA Higher Education
Authority United Hospital District
Revenue Bonds - Series A
(Pre-refunded to 11-01-1999 @ 100)
11-01-2013 3.00 1,003,742
4,665,000 Montgomery, AL Special Care Facilities
Authority Alabama VHA Series G
(7-Day Put, 7-Day Change)
12-01-2030 3.85 # 4,665,000
2,000,000 Municipal Electric Authority of
Georgia, Revenue Bonds Project One,
Series 1994 D
(7-Day Put, 7-Day Change)
01-01-2022 3.75 # 2,000,000
3,000,000 Municipal Electric Authority of
Georgia, Revenue Bonds Project One,
Series 1985 B
(Mandatory Put 02-15-2000)
01-01-2020 3.45 3,000,000
5,000,000 New Hampshire Higher Education
Facility Authority, Veterans Housing
Authority Revenue Bonds Series E
(7-Day Put, 7-Day Change)
12-01-2025 3.85 # 5,000,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
12
<PAGE>
SG COWEN STANDBY TAX-EXEMPT RESERVE FUND, INC.
STATEMENT OF INVESTMENTS - (CONTINUED)
SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
PRINCIPAL DESCRIPTION OF BOND ANNUALIZED VALUE
AMOUNT YIELD ON DATE
OF PURCHASE
<C> <S> <C> <C>
$1,500,000 New York, NY General Obligation
Revenue Bonds Series 1994 H-3
(Mandatory Put 10-13-1999)
08-01-2022 3.40% $ 1,500,000
1,700,000 New York State Environmental Quality
Revenue Bonds
Series 1997A
01-26-2000 3.10 1,700,000
3,000,000 North Alabama Environmental Impact
Authority Revenue Bonds Pollution
Control, Reynolds Metals Company
Project
(Daily Put, Daily Change)
12-01-2001 3.80 # 3,000,000
3,000,000 North Carolina Educational Facilities
Finance Agency Revenue Bonds, Elon
College Project
(7-Day Put, 7-Day Change)
01-01-2021 3.65 # 3,000,000
4,200,000 Ohio State University Commercial Paper
Revenue Notes Series A
(Mandatory Put 10-19-1999)
01-15-2000 3.10 4,200,000
2,400,000 Orange County, FL Health Facilities
Authority Revenue Bonds, Pooled
Hospital Loan Program, Series 1985
(Mandatory Put 01-26-2000)
12-01-2025 3.60 2,400,000
1,000,000 Person County, NC Industrial
Facilities and Pollution Control
Finance Authority Revenue-Carolina
Power and Light Project Series A
(7-day Put, 7-day Change)
11-01-2019 3.95 # 1,000,000
1,000,000 Portland, OR South Park Housing
Project Revenue Bonds Series A
(7-day Put, 7-day Change)
12-01-2011 3.75 # 1,000,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
13
<PAGE>
SG COWEN STANDBY TAX-EXEMPT RESERVE FUND, INC.
STATEMENT OF INVESTMENTS - (CONTINUED)
SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
PRINCIPAL DESCRIPTION OF BOND ANNUALIZED VALUE
AMOUNT YIELD ON DATE
OF PURCHASE
<C> <S> <C> <C>
$2,000,000 Rhode Island State General Obligation
Notes Series B
(Pre-refunded to 10-15-1999 @ 102)
10-15-2001 3.05% $ 2,042,690
3,000,000 Port of Seattle, Washington,
General Obligation Bonds Series A
11-08-1999 3.40 3,000,000
3,800,000 Sunshine State, FL Government Finance
Commission Revenue Bonds,
Series 1986B
(Mandatory Put 11-09-1999)
07-01-2016 3.35 3,800,000
2,400,000 Sweetwater County, WY Pollution
Control Revenue Bonds Series 1998-A
(Mandatory Put 10-13-1999)
01-01-2017 3.30 2,400,000
1,705,000 Tarrant County, TX Housing Finance
Corporation Revenue Bonds,
Multi-Family Housing-SF Apartments
(7-Day Put, 7-Day Change)
11-01-2017 3.85 # 1,705,000
1,400,000 Tennessee State School Bond Authority,
Series A
10-01-1999 4.20 1,400,000
600,000 Texas Higher Education Authority, Inc.
Series B
(7-Day Put, 7-Day Change)
12-01-2025 3.80 # 600,000
2,540,000 Texas State Public Finance Authority
General Obligation Bonds - Series A
(Pre-refunded to 10-01-2000 @ 100)
10-01-2001 3.75 2,600,464
1,500,000 University of Delaware Housing and
Dining System Revenue Bonds, School
Improvements
11-01-1999 3.15 1,504,663
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
14
<PAGE>
SG COWEN STANDBY TAX-EXEMPT RESERVE FUND, INC.
STATEMENT OF INVESTMENTS - (CONTINUED)
SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
PRINCIPAL DESCRIPTION OF BOND ANNUALIZED VALUE
AMOUNT YIELD ON DATE
OF PURCHASE
<C> <S> <C> <C>
$1,000,000 University of Houston, TX College and
University Revenue Bonds, Series A
(Pre-refunded to 02-15-2000 @ 100)
02-15-2005 3.50% $ 1,014,199
1,000,000 University of Medicine and Dentistry
of New Jersey Series C, College
Improvements
(Pre-refunded to 12-01-1999 @ 102)
12-01-2001 3.13 1,026,208
1,200,000 University of North Carolina School of
Medicine and Ambulatory Care Clinic
Revenue Bonds
(7-Day Put, 7-Day Change)
07-01-2012 3.85 # 1,200,000
3,000,000 Washington State Health Care
Facilities Authority Revenue Bonds
Virginia Mason Hospital Project
Series B
(Daily Put, Daily Change)
02-15-2027 3.80 # 3,000,000
3,500,000 Wisconsin Health & Educational
Facilities Authority Revenue ACES,
Health Care - Series B
(7-Day Put, 7-Day Change)
01-01-2027 3.80 # 3,500,000
2,000,000 Wisconsin State Transportation Revenue
Notes Series 1997-A
02-16-2000 3.80 2,000,000
------------
</TABLE>
<TABLE>
<C> <S> <C> <C> <C>
TOTAL INVESTMENTS
(Cost $155,292,358)......... 99.35% $155,292,358
Cash and Receivables, Less
Liabilities (net)........... 0.65% 1,019,354
------- ------------
Net Assets.................. 100.00% $156,311,712
======= ============
</TABLE>
- -------------
<TABLE>
<C> <S>
Note: # - Variable Rate Instrument Reflects Rate As Of 09-30-1999
93.24% of the investment values above are supported by
Letters of Credit, guarantees or other credit enhancements.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
15
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
SG COWEN STANDBY
SG COWEN STANDBY TAX-EXEMPT
RESERVE FUND, INC. RESERVE FUND, INC.
<S> <C> <C>
ASSETS
Investments in securities, at value - Note A
(1) $1,386,226,683 $155,292,358
Cash 1,313,121 221,669
Interest receivable 9,205,108 976,171
Prepaid expenses 52,234 27,771
-------------- ------------
TOTAL ASSETS 1,396,797,146 156,517,969
-------------- ------------
LIABILITIES
Due to investment manager - Note B 581,756 51,796
Accrued expenses 251,399 55,784
Dividends payable 1,293,163 98,677
-------------- ------------
TOTAL LIABILITIES 2,126,318 206,257
-------------- ------------
NET ASSETS $1,394,670,828 $156,311,712
============== ============
Represented By:
Paid-in capital $1,396,421,590 $156,330,254
Accumulated net realized loss on investments (1,750,762) (18,542)
-------------- ------------
NET ASSETS AT VALUE, applicable to 1,396,421,590
outstanding shares of $.01 par value Common
Stock for SRF and 156,330,254 outstanding
shares of $.001 par value Common Stock for STE
(2,000,000,000 and 1,000,000,000 shares
authorized for SRF and STE, respectively) -
Note C $1,394,670,828 $156,311,712
============== ============
Offering and redemption price per share $ 1.00 $ 1.00
============== ============
</TABLE>
SEE NOTES FINANCIAL STATEMENTS
16
<PAGE>
STATEMENTS OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
SG COWEN
SG COWEN STANDBY
STANDBY TAX-EXEMPT
RESERVE FUND, INC. RESERVE FUND, INC.
<S> <C> <C>
INVESTMENT INCOME
Interest income $79,080,336 $5,896,705
----------- ----------
EXPENSES
Investment management fee - Note B 7,648,821 927,669
Shareholder servicing costs and custodian fee 945,910 95,333
Federal and state registration fees 70,858 41,502
Professional fees 40,254 31,587
Directors' fees and expenses - Note B 24,999 24,999
Prospectus and shareholders' reports 116,600 28,076
Miscellaneous 76,599 11,298
----------- ----------
Total expenses 8,924,041 1,160,464
Less: investment management fee
waived - Note B - 185,534
----------- ----------
Net expenses 8,924,041 974,930
----------- ----------
Investment income - net 70,156,295 4,921,775
Net realized loss on investments (36,935) -
----------- ----------
Net Increase in Net Assets Resulting from
Operations $70,119,360 $4,921,775
=========== ==========
</TABLE>
SEE NOTES FINANCIAL STATEMENTS
17
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SG COWEN STANDBY
SG COWEN STANDBY TAX-EXEMPT
RESERVE FUND, INC. RESERVE FUND, INC.
------------------------------------------ ------------------------------------------
YEAR ENDED SEPTEMBER 30,
----------------------------------------------------------------------------------------
1999 1998 1999 1998
<S> <C> <C> <C> <C>
OPERATIONS
Investment income -
net $ 70,156,295 $ 72,957,433 $ 4,921,775 $ 6,044,314
Net realized loss on
investments (36,935) (18,949) - -
-------------- -------------- ------------ ------------
Net increase in net
assets resulting
from operations 70,119,360 72,938,484 4,921,775 6,044,314
DIVIDENDS TO
SHAREHOLDERS FROM
Investment income -
net (70,156,295) (72,957,433) (4,921,775) (6,044,314)
COMMON STOCK
TRANSACTIONS
(NET) - NOTE C (80,931,200) 138,191,127 (61,752,478) 30,851,116
-------------- -------------- ------------ ------------
Total increase
(decrease) in net
assets (80,968,135) 138,172,178 (61,752,478) 30,851,116
NET ASSETS
Beginning of year 1,475,638,963 1,337,466,785 218,064,190 187,213,074
-------------- -------------- ------------ ------------
End of year $1,394,670,828 $1,475,638,963 $156,311,712 $218,064,190
============== ============== ============ ============
</TABLE>
SEE NOTES FINANCIAL STATEMENTS
18
<PAGE>
SG COWEN STANDBY RESERVE FUND, INC. AND
SG COWEN STANDBY TAX-EXEMPT RESERVE FUND, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
GENERAL. SG Cowen Standby Reserve Fund, Inc. ("SRF") and SG Cowen Standby
Tax-Exempt Reserve Fund, Inc. ("STE") are each separately registered under the
Investment Company Act of 1940, as amended ("Act"), as diversified, open-end
management companies. Until July 1, 1998, Cowen & Co. ("Cowen") served as
investment manager and principal underwriter to the above-referenced Funds (the
"Funds"). On July 1, 1998, Cowen's business was combined with Societe Generale
Securities Corporation ("SGSC"), a subsidiary of Societe Generale ("SG"), to
form SG Cowen Securities Corporation ("SG Cowen") (the "Acquisition"). SG, a
leading international commercial and investment bank established in 1864, has a
global network of offices in over 80 countries. Since July 1, 1998, SG Cowen has
served as the new investment manager to the Funds, with the existing investment
management personnel of SG Cowen continuing to provide investment management
services to the Funds, and Funds Distributor, Inc. has served as the new
principal underwriter to the Funds. SG Cowen is also a selected dealer of the
Funds' shares. Additionally, effective as of July 1, 1998, the names of the
Funds have been changed, as indicated above, in order to reflect the Funds' new
management by SG Cowen. It is each Fund's policy to maintain a continuous net
asset value per share of $1.00; each Fund has adopted certain investment
portfolio valuation and dividend and distribution policies to enable it to do
so.
The Funds' financial statements are prepared in accordance with generally
accepted accounting principles which may require the use of management estimates
and assumptions. Actual results could differ from those estimates.
(1) PORTFOLIO VALUATION: Each Fund values its investments at amortized cost,
which has been determined by the Board of Directors of each Fund to represent
the fair value of each Fund's investments.
(2) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are
recorded on a trade date basis. Realized gain and loss from securities
transactions are recorded on the identified cost basis. Interest income,
including amortization of premiums and discounts, is recorded on the accrual
basis. Cost of investments represents amortized cost.
(3) DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: It is the policy of each Fund
to declare dividends from net investment income on each business day; such
dividends are paid through the business day preceding the next to last Friday of
the month except for December. In December, income dividends will be paid
through the last business day of the month. Distributions from net realized
capital gains, if any, are declared and paid annually after the end of the
fiscal year in which earned. To the extent that net realized capital gains can
be offset by capital loss carryovers, it is the policy of each company not to
distribute such gains.
(4) FEDERAL INCOME TAXES: It is the policy of each Fund to continue to qualify
as a regulated investment company, if such qualification is in the best
interests of its shareholders, by complying with the provisions available to
certain investment companies, as defined in applicable sections of the Internal
Revenue Code, and to make distributions of taxable income sufficient to relieve
it from all, or substantially all, Federal income taxes.
At September 30, 1999, the aggregate cost of investments for Federal income
tax purposes was substantially the same as the cost for financial reporting
purposes (see the Statements of Investments).
At September 30, 1999, SRF and STE had unused capital loss carryovers of
approximately $1,750,000 and $19,000, respectively, available for Federal income
tax purposes to be applied against future securities profits, if any. If not
applied, the carryovers expire in fiscal 2001, 2006, and 2007 and in fiscal
2000, 2001 and 2002, respectively.
19
<PAGE>
SG COWEN STANDBY RESERVE FUND, INC. AND
SG COWEN STANDBY TAX-EXEMPT RESERVE FUND, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
NOTE B - INVESTMENT MANAGEMENT FEE AND OTHER TRANSACTIONS WITH
AFFILIATES: Fees paid by each Fund to SG Cowen pursuant to the provisions of
Investment Management Agreements are payable monthly, based on an annual rate of
.50 of 1%, of the average daily value of that Fund's net assets. Effective as of
June 1, 1998, the fee for SRF was reduced to .475% on net assets between $1.5
billion and $2.5 billion, and .45% on net assets above $2.5 billion. The
Agreements further provide that if the aggregate expenses of either Fund,
exclusive of interest, taxes, brokerage and, with the prior written consent of
the necessary state securities commissions, extraordinary expenses, exceed the
expense limitation of any state having jurisdiction over that Fund, SG Cowen
will reimburse the Fund for such excess. There was no expense reimbursement
required for either Fund for the year ended September 30, 1999, however, SG
Cowen has waived $185,534 of its investment management fee from STE during such
year.
Directors who are not officers, directors, partners, stockholders or employees
of SG Cowen or its affiliates receive from each Fund a fee of $3,000 per annum
plus $500 per meeting attended and $375 for each audit committee attended and
reimbursement for travel and out-of-pocket expenses.
NOTE C - COMMON STOCK TRANSACTIONS: At September 30, 1999, there were 2 billion
shares of $.01 par value Common Stock for SRF and 1 billion shares of $.001 par
value Common Stock of STE authorized.
Transactions in Common Stock were all at $1.00 per share and are summarized as
follows (000's omitted):
<TABLE>
<CAPTION>
SRF
--------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
1999 1998
<S> <C> <C>
Shares sold $ 7,197,347 $ 6,868,735
Dividends reinvested 71,487 69,445
----------- -----------
7,268,834 6,938,180
Shares redeemed (7,349,765) (6,799,989)
----------- -----------
Net increase
(decrease) $ (80,931) $ 138,191
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
STE
--------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
1999 1998
<S> <C> <C>
Shares sold $ 702,519 $ 858,302
Dividends reinvested 5,079 5,793
--------- ---------
707,598 864,095
Shares redeemed 769,350 (833,244)
--------- ---------
Net increase
(decrease) $ (61,752) $ 30,851
========= =========
</TABLE>
20
<PAGE>
SG COWEN STANDBY RESERVE FUND, INC. AND
SG COWEN STANDBY TAX-EXEMPT RESERVE FUND, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
NOTE D - FINANCIAL HIGHLIGHTS: Selected data for a share of Common Stock
outstanding throughout each year:
<TABLE>
<CAPTION>
SRF
------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
------------------------------------------------------------
1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of Year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.05 0.05 0.05 0.05 0.05
LESS DISTRIBUTIONS
Dividends from Net Investment Income (0.05) (0.05) (0.05) (0.05) (0.05)
---------- ---------- ---------- ---------- --------
NET ASSET VALUE
End of Year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========== ========== ========== ========
Total Return 4.67% 5.13% 4.98% 4.97% 5.23%
RATIOS / SUPPLEMENTAL DATA
Net Assets (000 omitted) $1,394,671 $1,475,639 $1,337,467 $1,101,944 $890,888
Ratio of Expenses to Average Net Assets 0.58% 0.65% 0.69% 0.71% 0.71%
Ratio of Net Investment Income to
Average Net Assets 4.58% 5.03% 4.89% 4.89% 5.13%
</TABLE>
21
<PAGE>
SG COWEN STANDBY RESERVE FUND, INC. AND
SG COWEN STANDBY TAX-EXEMPT RESERVE FUND, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
NOTE D - (continued)
<TABLE>
<CAPTION>
STE
----------------------------------------------------
YEAR ENDED SEPTEMBER 30,
----------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of Year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.03 0.03 0.03 0.03 0.03
LESS DISTRIBUTIONS
Dividends from Net Investment Income (0.03) (0.03) (0.03) (0.03) (0.03)
-------- -------- -------- -------- --------
NET ASSET VALUE
End of Year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total Return 2.70% 3.10% 3.11% 3.07% 3.19%
RATIOS / SUPPLEMENTAL DATA
Net Assets (000 omitted) $156,312 $218,064 $187,213 $171,055 $122,536
Ratio of Expenses to Average Net
Assets* 0.53% 0.54% 0.56% 0.59% 0.61%
Ratio of Net Investment Income to
Average Net Assets* 2.65% 3.06% 3.07% 3.01% 3.14%
INVESTMENT ADVISORY FEES WAIVED
Amount $185,534 $197,675 $181,100 $156,993 $124,784
Ratio to Average Net Assets 0.10% 0.10% 0.10% 0.10% 0.10%
</TABLE>
* NET OF WAIVER
22
<PAGE>
INDEPENDENT AUDITORS' REPORT
THE BOARD OF DIRECTORS AND SHAREHOLDERS
SG COWEN STANDBY RESERVE FUND, INC. AND
SG COWEN STANDBY TAX-EXEMPT RESERVE FUND, INC.
We have audited the accompanying statements of assets and liabilities,
including the statements of investments, of SG Cowen Standby Reserve Fund, Inc.
and SG Cowen Standby Tax-Exempt Reserve Fund, Inc. (the Funds) as of
September 30, 1999, and the related statements of operations, statements of
changes in net assets and financial highlights for the year then ended. These
financial statements and financial highlights are the responsibility of the
Funds' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits. The
statements of changes in net assets for the year ended September 30, 1998 and
financial highlights for each of the years in the four-year period ended
September 30, 1998 were audited by other auditors whose report thereon dated
November 6, 1998, expressed an unqualified opinion on those financial statements
and financial highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
September 30, 1999, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Funds as of September 30, 1999, the results of their operations, the changes in
their net assets, and their financial highlights for the year then ended, in
conformity with generally accepted accounting principles.
[LOGO]
New York, New York
November 5, 1999
23
<PAGE>
SG COWEN STANDBY RESERVE FUND, INC.
AND
SG COWEN STANDBY TAX-EXEMPT RESERVE FUND, INC.
560 Lexington Ave.
New York, NY 10022
DIRECTORS
<TABLE>
<S> <C> <C>
JOSEPH M. COHEN, Chairman
JAMES H. CAREY DR. MARTIN J. GRUBER BURTON J. WEISS
</TABLE>
OFFICERS
JOSEPH M. COHEN, CHAIRMAN OF THE BOARD OF DIRECTORS
HOAN NGUYEN-QUANG, PRESIDENT AND CHIEF EXECUTIVE OFFICER
PHILIP J. BAFUNDO, TREASURER AND CHIEF FINANCIAL OFFICER
CREIGHTON H. PEET, SENIOR INVESTMENT OFFICER
RODD M. BAXTER, SECRETARY
ALAN E. KOEPPLIN, INVESTMENT OFFICER
GORDON G. IFILL, ASSISTANT INVESTMENT OFFICER
IRWOOD SCHLACKMAN, CONTROLLER
<TABLE>
<S> <C>
INVESTMENT ADVISER CUSTODIAN
SG Cowen Securities Corporation Investors Fiduciary Trust Co.
560 Lexington Ave. P.O. Box 419111
New York, NY 10022 Kansas City, MO 64141
DISTRIBUTOR TRANSFER AGENT
Funds Distributor, Inc. DST, Inc.
60 State Street, Suite 1300 210 West 10th Street
Boston, MA 02109 Kansas City, MO 64105
LEGAL COUNSEL INDEPENDENT AUDITORS
Willkie Farr & Gallagher KPMG LLP
787 Seventh Avenue 757 Third Avenue
New York, NY 10019 New York, NY 10017
</TABLE>
CMB-RSRV
