<PAGE> PAGE 1
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007 C020100 SMITH BREEDEN MARKET TRACKING FUND
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010 A00AA01 SMITH BREEDEN ASSOCIATES, INC
010 C01AA01 CHAPEL HILL
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011 A00AA01 FUND/PLAN BROKER SERVICES, INC.
011 B00AA01 8-41540
011 C01AA01 CONSHOHOCKEN
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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
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> MAR-31-1996
<INVESTMENTS-AT-COST> 4734822
<INVESTMENTS-AT-VALUE> 4748353
<RECEIVABLES> 36715
<ASSETS-OTHER> 100533
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 4885601
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 89067
<TOTAL-LIABILITIES> 89067
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 4416541
<SHARES-COMMON-STOCK> 388529
<SHARES-COMMON-PRIOR> 194047
<ACCUMULATED-NII-CURRENT> 12594
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 299125
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 38274
<NET-ASSETS> 4766534
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 199564
<OTHER-INCOME> 0
<EXPENSES-NET> 27936
<NET-INVESTMENT-INCOME> 171628
<REALIZED-GAINS-CURRENT> 709594
<APPREC-INCREASE-CURRENT> (66654)
<NET-CHANGE-FROM-OPS> 814568
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 159034
<DISTRIBUTIONS-OF-GAINS> 371974
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 183531
<NUMBER-OF-SHARES-REDEEMED> 32004
<SHARES-REINVESTED> 42520
<NET-CHANGE-IN-ASSETS> 2659188
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (38496)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 21727
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 142036
<AVERAGE-NET-ASSETS> 3194147
<PER-SHARE-NAV-BEGIN> 10840
<PER-SHARE-NII> 0.615
<PER-SHARE-GAIN-APPREC> 2.768
<PER-SHARE-DIVIDEND> (0.583)
<PER-SHARE-DISTRIBUTIONS> (1.370)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.27
<EXPENSE-RATIO> 0.90
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
The Board of Trustees,
Smith Breeden Market Tracking Fund of the Smith Breeden Trust:
In planning and performing our audit of the financial statements of Smith
Breeden Market Tracking Fund of the Smith Breeden Trust for the year
ended March 31, 1996 (on which we have issued our report dated May
10, 1996), 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 Market Tracking Fund of the Smith
Breeden Trust 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,
1996.
This report is intended solely for the information and use of the Board of
Trustees, management and the Securities and Exchange Commission.
May 10, 1996
