<PAGE>
ANNUAL REPORTS SEPTEMBER 30, 2000
SG COWEN STANDBY RESERVE
FUND, INC.
AND
SG COWEN STANDBY TAX-EXEMPT
RESERVE FUND, INC.
<TABLE>
<S> <C>
SG COWEN [SG LOGO APPEARS HERE]
</TABLE>
<PAGE>
SG COWEN STANDBY RESERVE FUND, INC.
SG COWEN STANDBY TAX-EXEMPT RESERVE FUND, INC.
ANNUAL FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
<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 ....................... 12
Statements of Operations ................................... 13
Statements of Changes in Net Assets ........................ 14
Notes to Financial Statements .............................. 15
Report of KPMG LLP, Independent Auditors ................... 20
</TABLE>
<PAGE>
CHAIRMAN'S LETTER NOVEMBER 9, 2000
DEAR SHAREHOLDER:
We are pleased to report that the SG Cowen Standby Reserve Fund and the SG
Cowen Standby Tax-Exempt Reserve Fund continued to produce yields exceeding
their peer group averages. As of September 30, 2000, the SG Cowen Standby
Reserve Fund's annualized 7-day yield was 6.07%. In comparison, the iMoneyNet
Taxable First Tier Index reflected a 7-day yield of 5.91%. Meanwhile, the SG
Cowen Standby Tax-Exempt Reserve Fund's 7-day yield was 4.10% while the
iMoneyNet Tax-Free Fund Index reflected a 7-day yield of 3.77%.
MARKET ACTIVITY
For most of the fiscal year, the U.S. economy was surging. Gross Domestic
Product rose at an annualized rate of 7.3% during the fourth quarter of 1999,
followed by 5.4% during the first quarter of 2000.
Because of concerns of higher inflation due to the fast pace of U.S. economic
growth, the Federal Reserve Board raised short-term interest rates four times
during the fiscal year. The Federal Reserve's most recent action was in May
2000 - a 50 basis point increase, bringing the federal funds rate to its current
level of 6.50% from 5.25% at the beginning of the fiscal year.
The Fed's efforts were apparently successful. By the third quarter of 2000,
U.S. economic growth began to decelerate. Housing starts decreased,
international trade activity eased, business inventories rose and employment
growth slowed. Despite rising energy prices, the growth of inflation had slowed
on a year over year basis for the third quarter.
Because of the federal budget surplus, the treasury department announced plans
to retire some of the long-term treasury debt. The prospect of reduced supply
helped cause long-term government bond yields to fall below 6%. As a result,
money market funds were in the unusual position of offering higher yields than
those offered by U.S. Treasury bonds.
INVESTMENT REVIEW
The Funds outperformed their respective indices because of our ability to
manage maturities. When we saw an opportunity to extend the average maturity of
the portfolios, we did so. And when we thought yields were inadequate, we would
shorten our weighted average maturity.
For example, investors expected the Fed to continue raising rates another 50
to 75 basis points after the May 2000 increase. Because short-term yields
reflected that expectation, we extended the average maturity in both portfolios.
The taxable fund increased its weighted average maturity from 33 days on April
3rd to 62 days on June 5th while the tax-exempt fund increased its maturity from
22 days on April 24th to 51 days on July 10th. Indeed, tax-exempt commercial
paper was unusually attractive during May, and we took advantage of higher
yields by purchasing longer-dated maturities in commercial paper, thereby
extending the average maturity of the portfolio.
During mid-summer, the Funds benefited from these longer maturities as market
yields began to ease. Investors focused on Alan Greenspan's optimism about the
possibility of a soft landing for the economy.
1
<PAGE>
Because we recognize that investors in money market funds are seeking safety
and liquidity, we manage both funds in a very conservative manner. The SG Cowen
Standby Reserve Fund invests in the highest rated categories of commercial
paper, certificates of deposit and floating rate notes. The SG Cowen Standby
Tax-Exempt Reserve Fund invests in top-rated tax-exempt and floating rate notes.
We do not search for higher returns by lowering our credit standards.
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, 2000 were exempt from federal income taxes. After
December 31, 2000, you will receive a breakdown of income by state earned during
the year.
LOOKING AHEAD
The market believes that the Fed no longer needs to continue to raise interest
rates to slow the economy, and we agree. Although the economy is clearly
slowing, the Fed has stated its belief that inflation risks persist. As a
result, we do not think that the Fed will lower interest rates anytime soon.
Although the Funds' assets have decreased due to the sale of the SG Cowen
private client brokerage division, which was completed in mid-October, we
continue to manage the portfolios using the same high standards, focusing on
safety and liquidity.
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]
Philippe H. Collas
Chairman
2
<PAGE>
SG COWEN STANDBY RESERVE FUND, INC.
STATEMENT OF INVESTMENTS
SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
PRINCIPAL DESCRIPTION OF ANNUALIZED VALUE
AMOUNT SECURITY YIELD ON DATE
OF PURCHASE
<C> <S> <C> <C>
COMMERCIAL PAPER - 69.86%
Allianz of America
$20,000,000 10-10-2000 6.75% $ 19,963,722
American General Finance Corp.
19,000,000 10-17-2000 6.64 18,941,770
30,000,000 01-03-2001 6.88 30,000,000
Associates Corp of North America
55,000,000 10-17-2000 6.64 54,831,700
CIT Group Inc.
30,000,000 10-10-2000 6.66 29,946,000
25,000,000 10-17-2000 6.64 24,923,500
Cargill Inc.
50,000,000 10-13-2000 6.66 49,883,181
DaimlerChrysler North American
Holding Corp.
34,000,000 01-29-2001 7.13 34,000,000
Deere & Co.
40,000,000 10-03-2000 6.68 39,978,333
20,000,000 10-04-2000 6.67 19,985,578
Deutsche Bank NY
25,000,000 10-18-2000 6.76 24,918,375
Ford Motor Credit Co.
60,000,000 10-13-2000 6.68 59,859,383
General Electric Capital Corp.
30,000,000 10-13-2000 6.66 29,929,908
25,000,000 10-17-2000 6.65 24,923,382
General Motors Acceptance Corp.
10,000,000 10-06-2000 6.67 9,989,183
32,000,000 10-17-2000 6.62 31,901,929
Goldman Sachs Group Inc.
60,000,000 10-13-2000 6.67 59,859,600
Household Finance Corp.
20,000,000 10-11-2000 6.73 20,000,000
Merrill Lynch & Company, Inc.
40,000,000 10-04-2000 6.76 39,970,933
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
3
<PAGE>
SG COWEN STANDBY RESERVE FUND, INC.
STATEMENT OF INVESTMENTS - (CONTINUED)
SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
PRINCIPAL DESCRIPTION OF ANNUALIZED VALUE
AMOUNT SECURITY YIELD ON DATE
OF PURCHASE
<C> <S> <C> <C>
National Australia Funding Delaware
$15,600,000 10-02-2000 6.80% $ 15,594,211
Prudential Funding
20,000,000 10-17-2000 6.64 19,938,800
Texaco, Inc.
26,000,000 10-17-2000 6.62 25,920,317
------------
Total Commercial Paper
(Cost $685,259,805) $685,259,805
------------
FLOATING RATE NOTES - 10.20%
American Express Centurion Bank
25,000,000 02-14-2001 5.86(a) $ 25,000,000
25,000,000 06-05-2001 6.63(a) 24,998,301
Bear Stearns Companies, Inc.
30,000,000 08-01-2001 6.64(b) 30,049,692
Merrill Lynch & Co. Inc.
20,000,000 05-21-2001 6.18(b) 20,010,159
------------
Total Floating Rate Notes
(Cost $100,058,152) $100,058,152
------------
MEDIUM TERM NOTES - 1.53%
AT&T Corp
15,000,000 01-16-2001 6.88 $ 14,996,797
------------
Total Medium Term Notes
(Cost $14,996,797) $ 14,996,797
------------
DOMESTIC CERTIFICATES OF DEPOSIT -
3.16%
US Bank NA Minnesota
31,000,000 04-12-2001 6.75 $ 31,000,000
------------
Total Domestic Certificates of
Deposit
(Cost $31,000,000) $ 31,000,000
------------
YANKEE CERTIFICATES OF DEPOSIT -
14.42%
ABN Amro Bank NV Chicago
18,500,000 12-18-2000 6.26 $ 18,498,093
23,000,000 03-02-2001 6.72 22,996,101
Bayerische Hypo Vereinsbank
50,000,000 04-06-2001 6.76 49,992,671
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
4
<PAGE>
SG COWEN STANDBY RESERVE FUND, INC.
STATEMENT OF INVESTMENTS - (CONTINUED)
SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
PRINCIPAL DESCRIPTION OF ANNUALIZED VALUE
AMOUNT SECURITY YIELD ON DATE
OF PURCHASE
<C> <S> <C> <C>
Deutsche Bank NY
$25,000,000 01-22-2001 6.54% $ 24,996,292
Nat West Bank PLC NY
25,000,000 01-18-2001 6.52 24,997,135
------------
Total Yankee Certificates of
Deposit
(Cost $141,480,292) $141,480,292
------------
</TABLE>
<TABLE>
<C> <S> <C> <C> <C>
TOTAL INVESTMENTS
(Cost $972,795,046)........... 99.17% $972,795,046
Cash and Receivables, Less
Liabilities................... 0.83 8,144,982
------- ------------
Net Assets.................... 100.00% $980,940,028
======= ============
</TABLE>
-------------
Notes:
(a) - 1 Month Libor rate instruments reflect rate as of 09-30-2000
(b) - 3 Month Libor rate instruments reflect rate as of 09-30-2000
SEE NOTES TO FINANCIAL STATEMENTS
5
<PAGE>
SG COWEN STANDBY TAX-EXEMPT RESERVE FUND, INC.
STATEMENT OF INVESTMENTS
SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
PRINCIPAL DESCRIPTION OF BOND ANNUALIZED VALUE
AMOUNT YIELD ON DATE
OF PURCHASE
<C> <S> <C> <C>
$ 100,000 Alabama Special Care Facility
Montgomery Hospital Floating
Rate
Demand Note
Series 1985
(Mandatory Put 10-04-2000)
04-01-2015 5.55% $ 100,000
100,000 Alabama Special Care Facility
Montgomery Hospital Floating
Rate
Demand Note
Series 1985
(7-Day Put, 7-Day Change)
04-01-2015 5.55 # 100,000
1,905,000 Alaska State Industrial
Development Authority Lot 6
(7-Day Put, 7-Day Change)
07-01-2001 5.95 # 1,905,000
3,000,000 Anne Arundel County, MD Port
Facility
(Mandatory Put 10-12-2000)
06-01-2013 4.05 3,000,000
600,000 Bexar County, TX Housing
Finance Corporation
Park Hill Project Series 88-B
(7-Day Put, 7-Day Change)
06-01-2005 5.60 # 600,000
1,100,000 Billings, MT Industrial
Development Revenue
Adjustable Tender Notes
(7-Day Put, 7-Day Change)
12-01-2014 5.45 # 1,100,000
1,030,000 Bloomington MN Port Authority
Tax
Increment Revenue Notes
Series A
02-01-2001 4.30 1,032,344
1,300,000 Braxos River, TX Nav Dist
Brazoria County Revenue Bonds
Series A
(Daily Put, Daily Change)
08-01-2022 5.65 # 1,300,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE>
SG COWEN STANDBY TAX-EXEMPT RESERVE FUND, INC.
STATEMENT OF INVESTMENTS - (CONTINUED)
SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
PRINCIPAL DESCRIPTION OF BOND ANNUALIZED VALUE
AMOUNT YIELD ON DATE
OF PURCHASE
<C> <S> <C> <C>
$4,000,000 Burke County, GA Development
Authority Pollution Control
Georgia Power 2nd Series
(Daily Put, Daily Change)
04-01-2025 5.60%# $ 4,000,000
650,000 Carrollton Texas Fmrs. Branch
Indpt. School District
Pre-refunded to 02-15-2001 @
100
02-15-2001 4.20 655,458
1,000,000 Charlotte, NC Public
Improvements General
Obligation Series A
(Pre-refunded to 10-01-2000 @
102)
10-01-2008 3.75 1,020,082
1,500,000 Columbia, AL Industrial
Development Board
Alabama Power Company
Series A
(Daily Put, Daily Change)
05-01-2022 5.60 # 1,500,000
2,300,000 Cuyahoga County, OH University
Hospital Cleveland
(Daily Put, Daily Change)
01-01-2016 5.40 # 2,300,000
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 5.70 # 2,000,000
1,420,000 District of Columbia, Revenue
Bonds,
The American University Issue,
Series 1985A
(7-Day Put, 7-Day Change)
10-01-2015 5.50 # 1,420,000
1,230,000 Florida Housing Finance
Agency-Reference
Multi-Family Housing EEE
Carlton Project
(7-Day Put, 7-Day Change)
12-01-2008 5.55 # 1,230,000
1,500,000 Fort Worth, TX City GO General
Purpose
Series B
02-15-2001 4.68 1,509,899
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE>
SG COWEN STANDBY TAX-EXEMPT RESERVE FUND, INC.
STATEMENT OF INVESTMENTS - (CONTINUED)
SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
PRINCIPAL DESCRIPTION OF BOND ANNUALIZED VALUE
AMOUNT YIELD ON DATE
OF PURCHASE
<C> <S> <C> <C>
$ 850,000 Fulton County, GA Hospital
Authority Revenue Health
System - Catholic Health East
-A
11-15-2000 4.15% $ 850,356
1,550,000 Illinois State Sales Tax
Revenue Bonds, Series N
(Pre-refunded to 06-15-2001 @
102)
06-15-2001 6.90 1,607,430
3,000,000 Intermountain Power Agency of
Utah,
Electric Light and Power
Improvements, Power Supply
Revenue Bonds Series 1985-B
10-05-2000 4.40 3,000,000
3,000,000 Jacksonville, FL Electric
Authority Revenue
Water & Sewr Systems
(7-Day Put, 7-Day Change)
10-01-2034 5.45 # 3,000,000
2,700,000 La Cygne, KS Environmental
Improvement RevenueNotes,
Kansas City Power and Light
Co. Project
(7-Day Put, 7-Day Change)
03-01-2015 5.60 # 2,700,000
3,000,000 Las Vegas, NV Water District
Revenue
Bonds Series 1997A
11-01-2000 4.35 3,000,000
2,000,000 Long Island, NY Power
Authority, New York
Electric Systems Revenue
Bonds,
Sub-Series 3
10-02-2000 4.05 2,000,000
1,200,000 Lynchburgh, VA, Industrial
Development
Authority Hospital Revenue
Bonds, (VHA
Mid-Alantic States, Inc.
Capital Asset
Financing Project),
Series 1985
(7-Day Put, 7-Day Change)
12-01-2025 5.70 # 1,200,000
3,000,000 Mankato, MN PCR Northern State
Power Authority
(7-Day Put, 7-Day Change)
03-01-2011 5.70 # 3,000,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE>
SG COWEN STANDBY TAX-EXEMPT RESERVE FUND, INC.
STATEMENT OF INVESTMENTS - (CONTINUED)
SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
PRINCIPAL DESCRIPTION OF BOND ANNUALIZED VALUE
AMOUNT YIELD ON DATE
OF PURCHASE
<C> <S> <C> <C>
$ 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 5.25%# $ 650,000
115,000 Michigan State Hospital
Finance
Authority Revenue Bonds,
Hospital
Equipment Loan Program
(7-Day Put, 7-Day Change)
06-01-2001 5.40 # 115,000
4,000,000 Michigan State Housing
Development Authority
Series 2000 A
(7-Day Put, 7-Day Change)
12-01-2016 5.50 # 4,000,000
2,400,000 Minneapolis & St. Paul, MN
Housing & Redevelopment
Authority
Health Care Systems
(Daily Put, Daily Change)
08-15-2025 5.70 # 2,400,000
500,000 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 5.25 # 500,000
1,360,000 Missouri State Health &
Education Facilities Revenue
Bonds
(Daily Put, Daily Change)
06-01-2026 5.65 # 1,360,000
3,000,000 Moffat County, CO Pollution
Control
Revenue Bonds Colorado-Ute
Electric
Authority Project
(7-Day Put, 7-Day Change)
07-01-2010 5.55 # 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, 2000
<TABLE>
<CAPTION>
PRINCIPAL DESCRIPTION OF BOND ANNUALIZED VALUE
AMOUNT YIELD ON DATE
OF PURCHASE
<C> <S> <C> <C>
$1,665,000 Montgomery, AL Special Care
Facilities
Authority Alabama VHA
Series G
(7-Day Put, 7-Day Change)
12-01-2030 5.70%# $ 1,665,000
2,000,000 Montgomery County, PA IDA PCR
(Mandatory Put 10-05-2000)
03-01-2034 4.10 2,000,000
2,000,000 Municipal Electric Authority
of Georgia,
Revenue Bonds Project One,
Series 1994 D
(7-Day Put, 7-Day Change)
01-01-2022 5.60 # 2,000,000
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 5.70 # 5,000,000
3,000,000 New Mexico State Tax & Revenue
Anticipation Notes Tax Exempt
Commercial Paper Series 1997A
06-29-2001 5.00 3,015,002
4,320,000 New York State Energy
Research & Development
Authority
Rochester Gas & Electric
Corporation
(7-Day Put, 7-Day Change)
08-01-2032 5.40 # 4,320,000
2,800,000 New York State Environmental
Quality Revenue Bonds Tax
Exempt Commercial Paper
Series 1997A
10-17-2000 4.25 2,800,000
3,000,000 North Carolina Educational
Facilities Finance
Agency Revenue Bonds, Elon
College Project
(7-Day Put, 7-Day Change)
01-01-2021 5.45 # 3,000,000
3,000,000 North Carolina Medical Care
Community Hospital Revenue
Bonds
Duke University Hospital
Project C
(7-Day Put, 7-Day Change)
06-01-2015 5.45 # 3,000,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
10
<PAGE>
SG COWEN STANDBY TAX-EXEMPT RESERVE FUND, INC.
STATEMENT OF INVESTMENTS - (CONTINUED)
SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
PRINCIPAL DESCRIPTION OF BOND ANNUALIZED VALUE
AMOUNT YIELD ON DATE
OF PURCHASE
<C> <S> <C> <C>
$4,000,000 Orlando, FL Water & Electric
Utility,
1999A
10-02-2000 4.05% $ 4,000,000
2,000,000 Otero County, CO Industrial
Development Revenue
Revenue Refunding Bonds
10-17-2000 4.00 2,000,000
2,000,000 Shelby County, TN G.O
Series A
(7-Day Put, 7-Day Change)
03-01-2028 5.65 # 2,000,000
2,000,000 Sunshine State, FL Government
Finance Commission Revenue
Bonds, Series 1986
10-03-2000 4.50 2,000,000
1,705,000 Tarrant County, TX Housing
Finance
Corporation Revenue Bonds,
Multi-Family
Housing-SF Apartments
(7-Day Put, 7-Day Change)
11-01-2017 5.55 # 1,705,000
2,540,000 Texas State Public Finance
Authority General Obligation
Bonds
(Pre-refunded to 10-01-2000 @
100)
10-01-2001 3.75 2,540,164
------------
</TABLE>
<TABLE>
<C> <S> <C> <C> <C>
TOTAL INVESTMENTS
(Cost $98,200,735)............ 99.54% $ 98,200,735
Cash and Receivables, Less
Liabilities 0.46 457,737
------- ------------
Net Assets.................... 100.00% $ 98,658,472
======= ============
</TABLE>
-------------
Note: # Variable Rate Instrument Reflects Rate As Of 09-30-2000
-
100% of the investment values above are supported by Letters of Credit,
guarantees or other credit enhancements.
SEE NOTES TO FINANCIAL STATEMENTS
11
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2000
<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) $972,795,046 $98,200,735
Cash 657,994 -
Interest receivable 9,394,208 640,324
Prepaid expenses 36,007 9,783
------------ -----------
TOTAL ASSETS 982,883,255 98,850,842
------------ -----------
LIABILITIES
Due to custodian - 33,820
Due to investment manager -
Note B 422,966 31,276
Accrued expenses 179,668 38,799
Dividends payable 1,340,593 88,475
------------ -----------
TOTAL LIABILITIES 1,943,227 192,370
------------ -----------
NET ASSETS $980,940,028 $98,658,472
============ ===========
Represented By:
Paid-in capital $980,940,028 $98,677,014
Accumulated net realized
loss on investments - (18,542)
------------ -----------
NET ASSETS AT VALUE,
applicable to 980,940,028
outstanding shares of $.01
par value Common Stock for
SRF and 98,677,014
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 $980,940,028 $98,658,472
============ ===========
Offering and redemption price
per share $ 1.00 $ 1.00
============ ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
12
<PAGE>
STATEMENTS OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
SG COWEN
SG COWEN STANDBY
STANDBY TAX-EXEMPT
RESERVE FUND, INC. RESERVE FUND, INC.
<S> <C> <C>
INVESTMENT INCOME
Interest income $86,991,675 $5,470,950
----------- ----------
EXPENSES
Investment management fee -
Note B 7,141,925 704,040
Shareholder servicing costs
and custodian fee 772,043 67,392
Federal and state
registration fees 79,376 38,147
Professional fees 40,991 20,541
Directors' fees and
expenses - Note B 19,271 19,271
Prospectus and shareholders'
reports 51,807 8,329
Miscellaneous 77,308 10,124
----------- ----------
Total expenses 8,182,721 867,844
Less: investment
management fee
waived - Note B - 140,808
----------- ----------
Net expenses 8,182,721 727,036
----------- ----------
Investment income - net,
representing net increase
in net assets resulting
from operations $78,808,954 $4,743,914
=========== ==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
13
<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,
--------------------------------------------------------------
2000 1999 2000 1999
<S> <C> <C> <C> <C>
OPERATIONS
Investment income - net $ 78,808,954 $ 70,156,295 $ 4,743,914 $ 4,921,775
Net realized loss on investments - (36,935) - -
-------------- -------------- ------------ ------------
Net increase in net assets resulting from
operations 78,808,954 70,119,360 4,743,914 4,921,775
DIVIDENDS TO
SHAREHOLDERS FROM
Investment income - net (78,808,954) (70,156,295) (4,743,914) (4,921,775)
COMMON STOCK
TRANSACTIONS
(NET) - NOTE C (415,481,562) (80,931,200) (57,653,240) (61,752,478)
CONTRIBUTION BY INVESTMENT ADVISOR - NOTE B 1,750,762 - - -
-------------- -------------- ------------ ------------
Total decrease in net assets (413,730,800) (80,968,135) (57,653,240) (61,752,478)
NET ASSETS
Beginning of year 1,394,670,828 1,475,638,963 156,311,712 218,064,190
-------------- -------------- ------------ ------------
End of year $ 980,940,028 $1,394,670,828 $ 98,658,472 $156,311,712
============== ============== ============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
14
<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"). SG, a leading international
commercial and investment bank established in 1864, has a global network of
offices in over 80 countries. From July 1, 1998 through December 31, 1999 SG
Cowen through its SG Cowen Asset Management Division served as the investment
manager to the Funds, with the existing investment management personnel of Cowen
continuing to provide investment management services to the Funds. In January
2000 as a result of an internal reorganization, the SG Cowen Asset Management
Division of SG Cowen was transferred to SG Cowen Asset Management, Inc.
("SGCAM"). All officers and employees engaged in providing investment advisory
services to the Funds with SG Cowen have become officers and employees of SGCAM
and they continue to provide the same services to the Funds. Since July 1, 1998
Funds Distributor, Inc. has served as 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 were changed, as indicated above, in
order to reflect the Funds' new management. 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 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 are 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.
15
<PAGE>
SG COWEN STANDBY RESERVE FUND, INC. AND
SG COWEN STANDBY TAX-EXEMPT RESERVE FUND, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
At September 30, 2000, 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, 2000, STE had an unused capital loss carryover of
approximately $6,000, available for Federal income tax purposes to be applied
against future securities profits, if any. If not applied, the carryovers expire
in fiscal 2001 and 2002.
NOTE B - INVESTMENT MANAGEMENT FEE AND OTHER TRANSACTIONS WITH
AFFILIATES: Fees paid by each Fund to SGCAM 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, SGCAM will
reimburse the Fund for such excess. There was no expense reimbursement required
for either Fund for the year ended September 30, 2000, however, SGCAM has waived
$140,808 of its investment management fee from STE during such year. During the
year ended September 30, 2000, SCGAM contributed $1,750,762 to SRF for trading
losses incurred during the year ended September 30, 1993.
Directors who are not officers, directors, partners, stockholders or employees
of SGCAM 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, 2000, 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):
16
<PAGE>
SG COWEN STANDBY RESERVE FUND, INC. AND
SG COWEN STANDBY TAX-EXEMPT RESERVE FUND, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
<TABLE>
<CAPTION>
SRF
--------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
2000 1999
<S> <C> <C>
Shares sold $ 8,077,124 $ 7,197,347
Dividends reinvested 78,789 71,487
----------- -----------
8,155,913 7,268,834
Shares redeemed (8,571,395) (7,349,765)
----------- -----------
Net decrease $ (415,482) $ (80,931)
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
STE
--------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
2000 1999
<S> <C> <C>
Shares sold $ 654,046 $ 702,519
Dividends reinvested 4,754 5,079
--------- ---------
658,800 707,598
Shares redeemed (716,453) (769,350)
--------- ---------
Net decrease $ (57,653) $ (61,752)
========= =========
</TABLE>
17
<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,
--------------------------------------------------------------
2000 1999 1998 1997 1996
---------- ---------- ---------- ---------- ----------
<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 0.06 0.05 0.05 0.05 0.05
LESS DISTRIBUTIONS
Dividends from Net Investment Income (0.06) (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 5.67% 4.67% 5.13% 4.98% 4.97%
RATIOS / SUPPLEMENTAL DATA
Net Assets (000 omitted) $ 980,940 $1,394,671 $1,475,639 $1,337,467 $1,101,944
Ratio of Expenses to Average Net
Assets 0.57% 0.58% 0.65% 0.69% 0.71%
Ratio of Net Investment Income to
Average Net Assets 5.49% 4.58% 5.03% 4.89% 4.89%
</TABLE>
18
<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,
----------------------------------------------------
2000 1999 1998 1997 1996
-------- -------- -------- -------- --------
<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 3.45% 2.70% 3.10% 3.11% 3.07%
RATIOS / SUPPLEMENTAL DATA
Net Assets (000 omitted) $ 98,658 $156,312 $218,064 $187,213 $171,055
Ratio of Expenses to Average Net
Assets* 0.52% 0.53% 0.54% 0.56% 0.59%
Ratio of Net Investment Income to
Average Net Assets* 3.36% 2.65% 3.06% 3.07% 3.01%
INVESTMENT ADVISORY FEES WAIVED
Amount $140,808 $185,534 $197,675 $181,100 $156,993
Ratio to Average Net Assets 0.10% 0.10% 0.10% 0.10% 0.10%
</TABLE>
* NET OF WAIVER
19
<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, 2000, and the related statements of operations for the year then
ended and the statements of changes in net assets and financial highlights for
each of the two years in the period 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 financial highlights for each of
the years in the three-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 highlights.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. 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, 2000, 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, 2000, the results of their operations for the year
then ended, the changes in their net assets, and their financial highlights for
each of the two years in the period then ended, in conformity with accounting
principles generally accepted in the United States of America.
[KPMG LLP SIG]
New York, New York
November 3, 2000
20
<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>
PHILIPPE H. COLLAS, Chairman
JAMES H. CAREY DR. MARTIN J. GRUBER BURTON J. WEISS
</TABLE>
OFFICERS
PHILIPPE H. COLLAS, CHAIRMAN OF THE BOARD OF DIRECTORS
HOAN NGUYEN-QUANG, PRESIDENT AND CHIEF EXECUTIVE OFFICER
PHILIP J. BAFUNDO, TREASURER AND CHIEF FINANCIAL 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 Asset Management, Inc. State Street Bank and 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
