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<PAGE> PAGE 3
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<PAGE> PAGE 4
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<PAGE> PAGE 5
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<PAGE> PAGE 7
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<PAGE> PAGE 11
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<PAGE> PAGE 12
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<PAGE> PAGE 13
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<PAGE> PAGE 15
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SIGNATURE MARIANTHE S. MEWKILL
TITLE TREASURER
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<NAME> SMITH BREEDEN SHORT DURATION US GOVT FUND
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<NAME> SMITH BREEDEN INT. DURATION US GOVT FUND
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</TABLE>
REPORT ON INTERNAL CONTROLS
To the Board of Trustees and Shareholders of Smith Breeden Short Duration
U.S. Government Fund of the Smith Breeden Series Fund:
In planning and performing our audit of the financial statements of the
Smith Breeden Short Duration U.S. Government Fund (the "Fund") for the year
ended March 31, 1998 (on which we have issued our report dated May 15, 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 Fund's 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 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 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 Fund's 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 Fund's internal control and its operation, including controls
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, the
Board of Trustees of Smith Breeden, and the Securities and Exchange
Commission.
DELOITTE & TOUCHE LLP
May 15, 1998
REPORT ON INTERNAL CONTROLS
To the Board of Trustees and Shareholders of Smith Breeden Intermediate
Duration U.S. Government Fund of the Smith Breeden Series Fund:
In planning and performing our audit of the financial statements of the
Smith Breeden Intermediate Duration U.S. Government Fund (the "Fund") for
the year ended March 31, 1998 (on which we have issued our report dated
May 15, 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 Fund's 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
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 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 Fund's 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 Fund's internal control and its operation, including
controls 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, the
Board of Trustees of Smith Breeden, and the Securities and Exchange Commission.
DELOITTE & TOUCHE LLP
May 15, 1998