<PAGE> PAGE 1
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000 C000000 0000879949
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000 F000000 Y
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000 J000000 A
001 A000000 SMITH BREEDEN SHORT DURATION U.S GOV'T FUND
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002 B000000 CHAPEL HILL
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011 A00AA01 FUND/PLAN BROKER SERVICES, INC.
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<PAGE> PAGE 2
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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 6
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<PAGE> PAGE 7
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<PAGE> PAGE 8
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<PAGE> PAGE 9
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SIGNATURE MARIANTHE S. MEWKILL
TITLE TREASURER
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 001
<NAME> SMITH BREEDEN SHORT DURATION US GOV'T FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-END> MAR-31-1995
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 0
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 26407928
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 0
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 15327100
<OTHER-INCOME> 0
<EXPENSES-NET> 1660218
<NET-INVESTMENT-INCOME> 13666882
<REALIZED-GAINS-CURRENT> (6464271)
<APPREC-INCREASE-CURRENT> 8760104
<NET-CHANGE-FROM-OPS> 15962715
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 13666882
<DISTRIBUTIONS-OF-GAINS> 680487
<DISTRIBUTIONS-OTHER> 223040797
<NUMBER-OF-SHARES-SOLD> 10000237
<NUMBER-OF-SHARES-REDEEMED> 36543977
<SHARES-REINVESTED> 135812
<NET-CHANGE-IN-ASSETS> (263203041)
<ACCUMULATED-NII-PRIOR> 756067
<ACCUMULATED-GAINS-PRIOR> (1852901)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1420528
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1860457
<AVERAGE-NET-ASSETS> 229633429
<PER-SHARE-NAV-BEGIN> 9.97
<PER-SHARE-NII> 0.515
<PER-SHARE-GAIN-APPREC> 0.134
<PER-SHARE-DIVIDEND> 0.515
<PER-SHARE-DISTRIBUTIONS> 0.027
<RETURNS-OF-CAPITAL> 10.08
<PER-SHARE-NAV-END> 0.00
<EXPENSE-RATIO> 0.67
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
The Board of Trustees,
Smith Breeden Short Duration U.S. Government Fund:
In planning and performing our audit of the financial statements of Smith
Breeden Short Duration U.S. Government Fund for the year ended March
31, 1995 (on which we have issued our report dated May 12, 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 Smith Breeden Short Duration U.S. Government Fund
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 that 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 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 March 31, 1995.
This report is intended solely for the information and use of the Board of
Trustees, management and the Securities and Exchange Commission.
May 12, 1995
