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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 for the year ended March 31, 1998, 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 Rea-Graham Balanced 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 irregularities
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 any
specific internal control component 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 internal control,
including procedures for safeguarding securities, that we consider to be
material weaknesses as defined above as of March 31, 1998.
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 24, 1998
