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SIGNATURE PATRICK W.D. TURLEY
TITLE ATTORNEY
<TABLE> <S> <C>
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<CIK> 0000701570
<NAME> REA-GRAHAM FUNDS, INC.
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<NAME> REA-GRAHAM BALANCED FUND
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</TABLE>
McGLADREY & PULLEN, LLP
Certified Public Accountants and Consultants
The Board of Directors
Rea-Graham Balanced Fund
In planning and performing our audit of the financial statements
of Rea-Graham Balanced Fund series of Rea-Graham Funds, Inc. for
the year ended March 31, 1996, we considered its internal control
structure, 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
the internal control structure.
The management of Rea-Graham Balanced Fund is responsible for
establishing and maintaining an internal control structure. In
fulfilling this responsibility, estimates and judgments by
management are required to assess the expected benefits and
related costs of internal control structure policies and
procedures. Two of the objectives of an internal control
structure are to provide management with reasonable, but not
absolute, assurance that assets are safeguarded against loss from
unauthorized use or disposition and that transactions are
executed in accordance with management's authorization and
recorded properly to permit preparation of financial statements
in conformity with generally accepted accounting principles.
Because of inherent limitations in any internal control
structure, errors or irregularities may occur and not be
detected. Also, projection of any evaluation of the structure 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 structure would not
necessarily disclose all matters in the internal control
structure 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 the specific internal control structure
elements does not reduce to a relatively low level the risk that
errors or irregularities 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 structure, including
procedures for safeguarding securities, that we consider to be
material weaknesses as defined above as of March 31, 1996.
This report is intended solely for the information and use of
management and the Securities and Exchange Commission.
McGladrey & Pullen, LLP
New York, New York
April 19, 1996
