<PAGE> PAGE 1
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<PAGE> PAGE 2
022 A000003 BEAR STEARNS
022 C000003 108551
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022 A000004 LEHMAN BROTHERS INC.
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022 A000005 BELL HAVEN INVESTMENTS
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<PAGE> PAGE 3
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<PAGE> PAGE 4
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<PAGE> PAGE 5
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<PAGE> PAGE 6
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<PAGE> PAGE 7
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<PAGE> PAGE 8
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<PAGE> PAGE 9
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SIGNATURE VINCENT J. MALANGA
TITLE PRESIDENT
REPORT OF CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
Fundamental Funds, Inc.
In planning and performing our audit of the financial statements
of Fundamental Funds, Inc., a series fund consisting of the New
York Muni Fund (the "Fund") for the year ended December 31,
1997, we considered its internal control, including controls
over 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 Fund 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 safeguarding of assets against unauthorized
acquisition, use, or disposition.
Because of inherent limitations in internal control, errors or
fraud may occur and may 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
internal control elements 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.
We noted the following matter involving the internal control
and its operation that we consider to be a material weakness as
defined above. This condition was considered in determining the
nature, timing, and extent of the procedures to be performed in
our audit of the financial statements of the Fund for the year
ended December 31, 1997, and this report does not affect our
report thereon dated March 2, 1998 (except for note 8 as to
which the date is April 30, 1998). Procedures requiring the
Board of Directors to authorize payments to affiliates or on
behalf of affiliates to third parties were not in place, and
certain affiliate transactions not authorized by the Board of
Directors were recorded by the Fund as a result thereof. The
Board of Directors of the Fund directed that the affiliates
return all of the payments to the Funds or place them in escrow
pending their receipt of an opinion of an independent legal
counsel to the effect that the affiliates are entitled to
receive the payments.
This report is intended solely for the information and use of
management, the Board of Directors and the Securities and
Exchange Commission.
McGladrey & Pullen, LLP
New York, New York
March 2, 1998
