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SIGNATURE PAUL GANNON
TITLE VICE-PRESIDENT
<PAGE> 1
Report of Independent Auditors
To the Trustees and Shareholders of
The Baupost Fund
In planning and performing our audit of the financial statements of The Baupost
Fund for the year ended October 31, 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 internal control.
The management of The Baupost 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 the safeguarding of assets against
unauthorized acquisition, use or disposition.
Because of inherent limitations in 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 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 specific 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 internal control and
its operation, including controls for safeguarding securities, that we consider
to be material weaknesses as defined above at October 31, 1998.
This report is intended solely for the information and use of the trustees and
management of The Baupost Fund and the Securities and Exchange Commission and is
not intended to be and should not be used by anyone other than these specified
parties.
ERNST & YOUNG LLP
Boston, Massachusetts
December 4, 1998
