<PAGE> PAGE 1
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012 A000001 CONTINENTAL STOCK TRANSFER & TRUST COMPANY
012 B000001 84-00034
012 C010001 NEW YORK
012 C020001 NY
012 C030001 10004
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<PAGE> PAGE 2
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SIGNATURE H. THOMAS WEBB III
TITLE PRESIDENT
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<PERIOD-START> JAN-01-1995
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<PAGE>
EXHIBIT 99.77B
To the Board of Directors of
First Carolina Investors, Inc.:
In planning and performing our audit of the financial statements of First
Carolina Investors, Inc. for the year ended December 31, 1995, 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 First Carolina Investors, Inc. 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 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 may 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
December 31, 1995.
This report is intended solely for the information and use of management and
the Securities and Exchange Commission.
/s/ KPMG Peat Marwick LLP
- -------------------------
KPMG Peat Marwick LLP
Charlotte, North Carolina
February 21, 1996
