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SIGNATURE PHILIP J. BAFUNDO
TITLE TREASURER
To the Board of Directors and Shareholders of
SG Cowen Standby Reserve Fund, Inc. and
SG Cowen Standby Tax-Exempt Reserve Fund, Inc.:
In planning and performing our audits of the financial statements of SG
Cowen Standby Reserve Fund, Inc. and SG Cowen Standby Tax-Exempt
Reserve Fund, Inc. (the "Funds") for the year ended September 30, 1999,
we considered its internal control, including procedures 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
internal control.
The management of the Funds 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, error 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 internal control would not necessarily disclose all
matters in 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 misstatements caused by error 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 internal control and its operation,
including procedures for safeguarding securities, that we consider to be
material weaknesses as defined above as of September 30, 1999.
This report is intended solely for the information and use of management,
the Board of Directors of SG Cowen Standby Reserve Fund, Inc. and SG
Cowen Standby Tax-Exempt Reserve Fund, Inc and the Securities and
Exchange Commission and is not intended to be and should not be
used by anyone other than these specified parties.
Very truly yours,
New York, New York KPMG LLP
November 12, 1999