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SIGNATURE CREIGHTON H. PEET
TITLE TREASURER
Report of Independent Auditors
To the Shareholders and Board of Directors of
SG Cowen Standby Reserve Fund, Inc.
In planning and performing our audit of the financial statements of
SG Cowen Standby Reserve Fund,
Inc. for the year ended September 30, 1998, we considered its
internal control, including control
activities for safeguarding securities, in order to determine
our auditing procedures for the purpose of
expressing our opinion on the financial statements and to comply
with the requirements of Form N-SAR,
not to provide assurance on the internal control.
The management of SG Cowen Standby Reserve Fund, Inc. is responsible
for establishing and
maintaining internal control. In fulfilling this responsibility,
estimates and judgments by management
are required to assess the expected benefits and related costs of controls.
Generally, controls that are
relevant to an audit pertain to the entity's objective of preparing
financial statements for external
purposes that are fairly presented in conformity with generally
accepted accounting principles. Those
controls include the safeguarding of assets against unauthorized
acquisition, use or disposition.
Because of inherent limitations in internal control, errors or fraud
may occur and not be detected. Also,
projection of any evaluation of internal control to future periods
is subject to the risk that it may become
inadequate because of changes in conditions or that the effectiveness
of the design and operation may
deteriorate.
Our consideration of the internal control would not necessarily disclose
all matters in the internal control
that might be material weaknesses under standards established by the
American Institute of Certified
Public Accountants. A material weakness is a condition in which the
design or operation of one or more
of the internal control components does not reduce to a relatively
low level the risk that errors or fraud
in amounts that would be material in relation to the financial statements
being audited may occur and
not be detected within a timely period by employees in the normal
course of performing their assigned
functions. However, we noted no matters involving the internal control
and its operation, including
controls for safeguarding securities, that we consider to be material
weaknesses as defined above at
September 30, 1998.
This report is intended solely for the information and use of the board
of directors and management of
SG Cowen Standby Reserve Fund, Inc. and the Securities and Exchange
Commission.
ERNST & YOUNG LLP
November 6, 1998
