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SIGNATURE JAMES COLANTINO
TITLE SENIOR ADMINISTRATOR
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
INDEPENDENT AUDITORS REPORT
The Board of Directors
Avalon Capital, Inc.
In planning and performing our audit of the financial statements of
Avalon Capital, Inc. (the Fund) for the year ended August 31, 1998
(on which we have issued our report dated October 16, 1998), we
considered its internal control, including control activities 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, and not to provide
assurance on the Funds 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 entitys 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 any internal control, errors 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 the Funds 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
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. However, we noted no matters involving the Funds
internal control and its operation, including controls for safeguarding
securities, that we consider to be material weaknesses as defined above
as of August 31, 1998.
This report is intended solely for the information and use of
management of Avalon Capital, Inc.
and the Securities and Exchange Commission.
October 16, 1998
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