U.S. COMMODITY FUTURES TRADING COMMISSION

Three Lafayette Centre 

1155 21st Street, NW, Washington, DC 20581 

Telephone: (202) 418-5430 

Facsimile: (202) 418-5536

Division of Clearing and 

Intermediary Oversight

To: All Commodity Pool Operators 

Attention: Chief Financial Officer 

Subject: CFTC Observations on Annual Reports for Commodity Pools 

Date: January 22, 2004 

This is the sixth annual letter that the Division of Clearing and Intermediary Oversight 

(“DCIO”) of the Commodity Futures Trading Commission (“CFTC” or “Commission”) has 

issued to assist commodity pool operators (“CPOs”) and public accountants with the preparation 

and filing of annual financial reports required under the Commission’s rules and the Commodity 

Exchange Act (“CEAct”) by sharing certain observations gleaned from the prior year reports and 

certain other information about relevant developments during the past year.1

 Similar letters from 

prior years are available at the CFTC Web site: http://www.cftc.gov/tm/tmcompliance.htm. 

This letter highlights several accounting and reporting topics, lists recent registration and 

other regulatory changes affecting CPOs and commodity trading advisors (“CTAs”), and notes 

common deficiencies observed by the National Futures Association (“NFA”) during its review of 

2002 annual reports. CPOs, including those which operate in non-U.S. jurisdictions, are 

welcome and encouraged to provide this letter to their public accountants.

I. Accounting and Reporting Topics 

A) Applicability of GAAP to Commodity Pools’ Annual Financial Statements 

CPOs and public accountants should be familiar with the Commission’s regulations in 

preparing and filing commodity pool annual financial statements, particularly the financial 

reporting requirements of Rules 4.22(c), (d) and (e). CPOs and public accountants also should 

be familiar with the interpretative letters issued by DCIO staff that impact commodity pool 

financial reporting requirements.2

 One such letter is CFTC Interpretative Letter 94-3, Special 

Allocations of Investment Partnership Equity, which addresses how a CPO should report a 

special allocation of partnership equity to the general partner of an investment partnership in the 

financial statements of a commodity pool. This document is available on the Commission’s Web 

site at http://www.cftc.gov/tm/tmcompliance.htm. Staff letters, including DCIO staff letters, 

from 1995 forward are available at the CFTC Web site, http://www.cftc.gov/opa/opaletters.htm. 

 

1

 The Commission’s rules are found in Title 17 of the Code of Federal Regulations. The Act and Commission rules 

can be accessed through the Commission’s Web site, at: http://www.cftc.gov/cftc/cftclawreg.htm. 

2

 As of July 1, 2002, a reorganization of Commission staff became effective. For purposes of this letter, the term 

“DCIO” includes the Division of Clearing and Intermediary Oversight and its predecessor, the Division of Trading 

and Markets, as the context requires. 

Thomas J. Smith 

Associate Director and 

Chief Accountant
2 

Commission rules require that commodity pool annual financial statements be prepared 

in accordance with United States generally accepted accounting principles (“GAAP”), applied on 

a consistent basis,3 including disclosing risk concentrations (e.g., market and credit risk), related 

party transactions, and recognizing the impairment of investment values. Accordingly, CPOs 

and public accountants should be familiar with the requirements for commodity pool financial 

statements that have been issued by the American Institute of Certified Public Accountants 

(“AICPA”). 

GAAP requires that all significant accounting policies followed by an enterprise be 

disclosed in the notes to its financial statements (Accounting Principles Board Opinion 22). For 

commodity pools, one of the most significant, if not the most significant, accounting policy is 

how fair values of investments are determined. Accordingly, CPOs are reminded that such 

disclosures are required and should quantify values arrived at by the valuation methods specified 

in the AICPA Audit and Accounting Guide, Audits of Investment Companies, paragraphs 2.28 

through 2.39. 

The requirement that commodity pool annual financial statements be prepared in 

accordance with GAAP is applicable to pools that are required to distribute annual certified 

financial statements to pool participants, as well as to certain pools that, while required to 

distribute annual financial statements to pool participants, are permitted by Commission rule to 

elect to distribute unaudited financial statements. In reviewing prior years’ audited and 

unaudited annual financial statements, instances were noted where CPOs filed pool financial 

statements that failed to comply with GAAP. If a commodity pool’s annual financial statements 

do not fully comply with GAAP, the CPO may be required to revise the pool’s financial 

statements and distribute the revised statements to the participants and refile a copy with NFA. 

B) Non-U.S. GAAP Reporting 

DCIO staff has provided limited relief to CPOs of offshore pools to prepare and present 

pool financial statements following accounting principles other than U.S. GAAP. The non-U.S. 

GAAP most commonly used in the preparation of pool financial statements include International, 

United Kingdom and Irish accounting standards. The Division’s relief was conditioned upon the 

offshore pools following certain key elements of U.S. GAAP standards, including: 1) reporting 

of both realized and unrealized gains and losses through the statement of operations, 2) preparing 

a condensed schedule of investments,4

 and 3) reporting special allocations of partnership equity 

in accordance with CFTC Interpretative Letter 94-3. 

DCIO staff intends to continue to review CPOs’ requests for relief from U.S. GAAP 

requirements on a case-by-case basis, provided the CPOs prepare an analysis that both indicates 

and quantifies the differences between a non-U.S. GAAP report and a U.S. GAAP report. For 

further information on non-U.S. GAAP reports, please contact Ronald Carletta, Supervisory 

Auditor, or Al Goll, Auditor, at the phone numbers or addresses listed in Appendix A. 

 

3

 See Commission Rules 4.22(d), 4.12(b)(2)(iii)(B), and 4.7(b)(3)(ii). 

4

 As required by Statement of Position (“SOP”) 95-2, subsequently amended by SOP 01-1 and SOP 03-4. 
3 

C) Reporting of Investments in Futures Contracts in the Condensed Schedule of 

Investments 

The AICPA recently issued requirements on how commodity pools should report futures 

contracts in the schedule of investments. Specifically, SOP 03-4, which was issued by the 

AICPA on December 29, 2003, requires a commodity pool to disclose the number of contracts, 

range of expiration dates, and cumulative unrealized gains (or losses) on open futures contracts 

of a particular underlying (such as wheat, cotton, specified equity index, or U.S. Treasury 

Bonds), regardless of exchange, delivery location, or delivery date, if the cumulative unrealized 

gains (or losses) on the open futures contracts exceed five percent of the pool’s net assets. SOP 

03-4 further provides that a CPO may not net long and short positions in futures contracts based 

upon the same underlying in determining whether the cumulative unrealized gains (or losses) of 

the open futures contracts exceed five percent of the pool’s net assets. SOP 03-4 also requires a 

commodity pool, among other things: 

• To disclose in the condensed schedule of investments the range of expiration or maturity 

dates and fair values of derivative instruments other than futures contracts based on 

whether the fair value of a specific type of derivative and underlying (for example, equity 

index of a particular stock exchange, U.S. Treasury Bond, natural gas, etc.) exceeds, on a 

gross basis, 5 percent of the pool’s net assets, regardless of counterparty. 

• To disclose the name, investment objective, and redemption restrictions of any 

investment in a nonregistered investment partnership that exceeds five percent of the 

pool’s net asset value. (See Section D Fund-of-Funds Disclosures below for additional 

Part 4 requirements for pools that operate as funds-of-funds.) 

• To calculate required ratios for average net assets, expenses and net investment income as 

detailed in SOP 03-4. 

SOP 03-4 is effective for fiscal years ending after December 15, 2003. Accordingly, 

CPOs issuing annual commodity pool financial statements for years ending after December 15, 

2003 must comply with SOP 03-4. 

D) Fund-of-Funds Disclosures 

Effective for annual financial statements issued for fiscal years ending on or after 

December 15, 2003, GAAP requires a commodity pool that invests over 5 percent of its net 

assets in nonregistered investment partnerships to disclose certain information about such 

investments. Specifically, SOP 03-4 requires the disclosure of the name and investment 

objectives of such nonregistered investment partnership, as well as any restrictions imposed upon 

redemptions. By requiring such disclosures, GAAP recognizes that a pool’s financial statements 

should provide information about investments in other funds to which the pool devotes 

significant portions of its capital. 

In previous years, CPOs have been required to report amounts of income and fees for 

nonregistered investment partnerships in which they invested significant portions of their capital 

(i.e., 10 percent or more of the pool’s net assets). The 10 percent reporting threshold was based 
4 

on CFTC Rule 4.10(d)(5), which defines an investee fund as a “major investee fund” by using 

such measurement. The Division, however, is revising the reporting threshold to require a CPO 

to disclose amounts of income and fees associated with investments in nonregistered investment 

partnerships that exceed five percent of the pool’s net assets. The five percent threshold is 

consistent with the reporting thresholds set forth in SOP 95-2 and SOP 03-4 for nonregistered 

investment partnerships. See Attachment B for an illustration of how such information may be 

reported. 

E) Master-Feeder Structures 

Paragraph 7.06 of the AICPA Audit and Accounting Guide, Audits of Investment 

Companies, permits nonpublic feeder pools either to follow the disclosure and reporting 

provisions of SOP 95-2 or to present a complete set of master financial statements with each 

feeder financial statement. CPOs who elect to present a complete set of master financial 

statements with each feeder financial statement are encouraged to bind the two reports together 

as a single document and to distribute it to the participants and file a copy with NFA. If that is 

not possible, an acceptable alternative is to staple the back cover of the feeder annual report to 

the front cover of the master annual report for at least the copy filed with NFA. This would help 

ensure that reports are reviewed as a complete unit. 

F) Audit Opinion 

Commission and NFA staff have noted that the audit opinions on some pools’ fiscal year 

2002 financial statements took exception because CPOs omitted the required condensed schedule 

of investments or failed to identify by name investments for which specific disclosure is required 

by GAAP. In such situations, NFA directed the CPO to revise the financial statements to include 

the disclosures required by GAAP or Commission rules and to distribute the revised financial 

statements to pool participants. 

G) New Pools – Initial Annual Reports 

 A CPO that commences operation of a commodity pool is required to prepare an annual 

report for the pool within 90 days of the pool’s year-end, even if the pool did not operate for a 

full 12-month period. A pool is deemed to commence operations upon the initiation of 

investment activities on behalf of participants, and not solely upon the receipt of participants’ 

contributions. 

The Commission may grant a CPO an exemption from the requirement to prepare a 

certified annual report as of the pool’s initial year-end date in cases where a pool commences 

operations within three months of the end of its fiscal year. The exemption generally is 

conditioned upon the CPO commencing operation of the pool within three months of the end of 

its initial year-end date and the CPO filing with NFA and distributing to pool participants yearend unaudited pool financial statements that are prepared in accordance with GAAP and 

otherwise complying with Commission rules. The exemption is further conditioned upon the 

CPO filing a certified annual report as of the date of the pool’s second year-end and must include 
5 

an income statement covering the period from the commencement of operations of the pool 

through the date of the pool’s second year-end date. For the full requirements for such an 

exemption, please contact Kevin Walek, Assistant Director, at mailto:kwalek@cftc.gov, or (202) 

418-5463. 

 

H) Final Annual Reports 

Commission Rule 4.22(c) requires a CPO to file with NFA and to distribute to pool 

participants a final annual report whenever a pool ceases trading. The final report should be in 

the same format and include the same information as an annual financial report, even if the final 

report is not for a full 12-month period. If the final distribution of pool assets has not been made 

as of the balance sheet date, a subsequent event note to the financial statements should disclose 

the date on which all pool assets were subsequently, or are expected to be, distributed to the 

participants. A CPO should clearly state when it intends a report to be a final report. A legend 

on the cover of the report is an effective way to do so. 

The final report is due within 90 calendar days after the end of the pool's fiscal year or 

the permanent cessation of trading, whichever is earlier, but in no event longer than 90 days after 

the assets are distributed to pool participants. 

II. Recent Rule Changes to Part 4 of the Commission’s Regulations 

On August 8, 2003, the Commission published amendments to certain of its rules 

governing CPOs and CTAs. The following is a brief summary of the amendments. Persons 

wishing to obtain more detailed information concerning the rule amendments should review the 

final rulemaking published in the Federal Register, and available on the Commission’s Web site: 

http://www.cftc.gov/foia/fedreg03/foi030808a.htm

A) Rule Amendments Impacting Pool Annual Financial Reports

• Permitting electronic distribution of account statements and annual reports to pool 

participants. The CFTC amended Rule 4.22 to permit CPOs to distribute periodic 

account statements and annual reports to pool participants by electronic means. Prior 

to transmission of any account statement or annual report to a pool participant by 

means of electronic media, a CPO must disclose to the participant that it intends to 

distribute these documents electronically, absent objection from the participant no 

later than 10 business days following the participant’s receipt of the disclosure. 

Although electronic distribution of the annual report to participants is permitted, Rule 

4.22(j)(1)(ii) requires that the annual report the CPO files with NFA must be 

manually signed. 

• Modifying authorized signatories for the required oath or affirmation. The 

Commission revised the list of permitted signatories in the Part 4 rules to 

accommodate other organizational structures under which CPOs and CTAs operate – 

e.g., limited liability companies. The required oath or affirmation that a pool operator 
6 

must include with its account statements and annual reports must now be signed by “a 

representative duly authorized to bind the pool operator.” 

• Eliminating duplicative regulatory requirements for “master/feeder fund” 

structures. Rules 4.21 and 4.22 have been revised to indicate that, for purposes of 

delivery of disclosure documents, account statements, and annual reports, including 

those provided under Rules 4.7 or 4.12(b), the term “prospective pool participant” 

does not include a commodity pool operated by a CPO that is the same as, or that 

controls, is controlled by, or is under common control with, the CPO of the offered 

pool. However, the annual report of a feeder fund must contain financial statements 

that include the required information concerning the operations of the master fund. 

B) Registration and Other Regulatory Changes for Commodity Pool Operators and 

Commodity Trading Advisors. 

• Eliminating trading and marketing restrictions under Rule 4.5. Rule 4.5 excludes 

from the definition of CPO certain otherwise-regulated persons, such as registered 

investment companies, state-regulated insurance companies, banks and trust 

companies, in connection with their operation of certain collective investment 

vehicles. Rule 4.5 qualifying persons are no longer restricted in the amount of futures 

transactions they can enter into to qualify for the exclusion, or be prevented from 

marketing themselves as a vehicle for trading commodity interests. Rule 4.5 

qualifying persons must disclose in writing to each participant that the pool is 

operated by a person who is not subject to registration or regulation as a CPO under 

the CEAct. 

• Providing additional exemptions from CPO and CTA registration requirements.

New Rules 4.13(a)(3) and (4) provide additional relief from CPO registration 

respectively, for operators of pools that: (a) are offered to certain sophisticated 

persons and have limited futures activity, or that restrict participation to specified 

Qualified Eligible Persons (QEPs) under Rule 4.7. 

Rule 4.13(a)(3) allows a pool operator to claim relief from registration according to 

the following criteria: (1) interests in the pool are exempt from registration under the 

Securities Act of 1933 (’33 Act) and are not marketed to the public in the United 

States; (2) the pool may not commit more than 5 percent of the liquidation value of 

the pool’s portfolio to establish commodity interest positions or have a notional value 

of its commodity interest positions that exceeds 100 percent of the liquidation value 

of the pool’s portfolio; and (3) the pool may include only participants who the CPO 

reasonably believes are “accredited investors,” certain family trusts formed by 

accredited investors, “knowledgeable employees,” and persons who are 

Qualified Eligible Persons (“QEPs”) under Rule 4.7(a)(2)(viii)(A). (Accredited 

investor is defined in Rule 501(a) of the ’33 Act and knowledgeable employee is 

defined in the Investment Company Act of 1940 (ICA), 17 CFR 270.3c-5 (2003).) 

A new Appendix A to Part 4 has been added to provide guidance to operators of 

funds-of-funds in determining their eligibility for exemption under Rule 4.13(a)(3). 
7 

Rule 4.13(a)(4) provides an exemption from CPO registration where: (1) interests in 

the pool are exempt from registration under the ’33 Act, and are offered and sold 

without marketing in the United States; and (2) the CPO reasonably believes that 

natural person participants are QEPs under Rule 4.7(a)(2), and non-natural person 

participants are QEPs under Rule 4.7 or accredited investors. 

Rule 4.14(a)(8)(i)(D) provides CTA registration relief for advisors that provide 

investment advice solely to commodity pools that meet the requirements of the new 

CPO registration exemptions discussed above. Rule 4.14(a)(8) also contains other, 

new CTA registration exemptions. 

• Facilitating communications by CPOs and CTAs with prospective and existing pool 

participants and clients. Rules 4.21 and 4.31 previously required that CPOs and 

CTAs deliver a disclosure document to prospective participants or clients prior to 

soliciting their participation in a pool or trading program. These rules now permit 

CPOs and CTAs to provide certain information in advance of distributing a disclosure 

document, as long as the information is consistent with the disclosure document and 

the disclosure document is provided by no later than the time the CPO delivers a 

subscription agreement for the pool to the prospective participant, or the CTA 

delivers an advisory agreement to direct or guide the client's account. 

• Rate of Return Calculations. A new Appendix B to Part 4 provides guidance 

concerning alternative methods by which CPOs and CTAs may calculate the rate of 

return information required by Rules 4.25(a)(7)(i)(F) and 4.35(a)(6)(i)(F). 

 

C) Effect of Claiming Recent Part 4 Relief on Currently Registered CPOs 

A CPO who withdraws from registration because it has claimed relief under Rules 

4.13(a)(3) or (4) remains subject to the annual report requirement of Rule 4.22(c), as has been 

the case with CPOs who have withdrawn from registration for any other reason. The 

Commission believes that when a CPO leaves direct CFTC oversight, the CPO's pool 

participants should get all of the information they are entitled to under Commission regulations 

up to that time. Accordingly, CPOs generally will not be permitted to withdraw their CFTC 

registration until they file an annual report for the last year for each pool that was operated 

subject to direct CFTC oversight and the annual reports have been reviewed by NFA. 

The relief under Rules 4.13(a)(3) or (4) is available to CPOs on a pool-by-pool basis. A 

registered CPO may take advantage of this relief for its existing pools that meet the criteria for 

the relief; however, the CPO remains subject to the requirement to file final annual reports for 

these pools for the last year that the pools were operated subject to direct CFTC oversight. 

D) Effect of Remaining Registered as a CPO 

If a person who is eligible for exemption from registration as a CPO under 4.13 

nonetheless registers as a CPO, the person must comply with the Part 4 rules. This includes the 

filing deadlines for a pool’s annual report. 
8 

III. Common Deficiencies Noted During NFA’s Review of 2002 Annual Reports 

In order to avoid some of the most common and easily remedied deficiencies, CPOs 

should do the following: 

• File one copy of the annual report with NFA at the address set forth in 

Attachment A below. CPOs are no longer required to file copies of any such 

reports with the CFTC. In addition, applications for extensions of time to 

distribute annual reports that do not exceed 90 days from the due date need be 

filed only with NFA. Furthermore, claims for exemption also need be filed only 

with NFA. Any commodity pool related documents received by the Commission 

will be forwarded to NFA for review and processing. 

• Distribute the annual report and file one copy with NFA as soon as possible, but 

no later than the due date. For pools with a December 31, 2003 year-end, the due 

date is Tuesday, March 30, 2004 (unless an extension of time has been requested 

and granted). CPOs operating a “fund-of-funds” pool should review the 

streamlined procedures described in Rule 4.22(f)(2) for claiming an extension of 

the due date. Remember, 2004 is a leap year and reports are expected to be filed 

with NFA on or before the 90th (or 150th) day after the pool’s year-end, not simply 

post-marked on the due date. 

• Include a signed oath or affirmation, as required by Rule 4.22(h), with each copy 

of the annual report filed with NFA and distributed to all pool participants. 

Omitting or not signing the oath continues to be a common deficiency in annual 

financial report filings. Binding the oath as part of the report package or attaching 

it to the cover page are best practices followed by a number of CPOs. 

• If the pool is operating under the exemptions granted in Rule 4.7 or Rule 4.12, 

include a notation of that fact on the cover page of the report consistent with the 

requirements of those regulations. 

• Report special allocations of partnership equity as required by CFTC 

Interpretative Letter 94-3, Special Allocations of Investment Partnership Equity 

(this topic is discussed above).

• Net Asset Value: 

o For unitized pools, include information concerning net asset value per 

outstanding participation unit in the pool as of the end of each of the pool’s two 

preceding years. 

o For non-unitized pools, provide to each participant the total value of that 

participant’s interest or share in the pool as of the end of each of the pool’s two 

preceding fiscal years. For the report filed with NFA, provide a schedule listing 

each participant’s balances for those years. A code for each participant may be 

used in lieu of the participant’s name. Of course, participants should not receive 

financial information concerning other participants. 
9 

• If the annual report is unaudited (pursuant to the exemption of Rule 4.7): 

o The pool operator must make a statement to that effect on the cover page of 

each report and state that a certified audit will be provided on request of the 

owners of a majority of the units of participation in the pool who are unaffiliated 

with the CPO. 

o The annual report must nonetheless be presented and computed in accordance 

with GAAP applied on a consistent basis. This includes the requirements of 

AICPA SOP 95-2, as amended by SOPs 01-1 and 03-4, and CFTC Interpretative 

Letter 94-3. 

o The annual report must include all other appropriate footnote disclosures. 

IV. DCIO and NFA Contact Information 

If a CPO or a public accountant has any questions, please feel free to contact DCIO staff 

or NFA staff listed in Attachment A to this letter. 

 Very truly yours, 

 

 Thomas J. Smith 

 Associate Director and 

 Chief Accountant 
10 

ATTACHMENT A

ADDRESSES OF CFTC’s DIVISION OF CLEARING 

AND INTERMEDIARY OVERSIGHT OFFICES

Regional Offices Contacts Location of CPO’s Principal Office

Eastern Region

140 Broadway, 19th Floor 

New York NY 10005-1146 

FAX: (646)-746-9937 

Ronald A. Carletta 

Phone: (646)-746-9726 

E-Mail: rcarletta@cftc.gov

Al Goll 

Phone: (646)-746-9723 

E-Mail: agoll@cftc.gov

All states east of the Mississippi 

River, except Illinois, Indiana, 

Michigan, Ohio, and Wisconsin. 

Any location outside of the United 

States 

Central Region

525 West Monroe Street 

Suite 1100 

Chicago, IL 60661

John S. Dixon 

Phone: 312-596-0573 

FAX: 312-596-0713 

E-Mail: jdixon@cftc.gov

Illinois, Indiana, Michigan, Ohio, and 

Wisconsin 

Southwest Region

4900 Main Street 

Suite 721 

Kansas City, MO 64112

Ralph L. White 

Phone: 816-931-9502 

FAX: 816-931-9643 

E-Mail: rwhite@cftc.gov

All states west of the Mississippi 

River 

NFA ADDRESS 

Patricia Cushing 

Associate Director 

Compliance Department 

National Futures Association 

200 West Madison, 16th Floor 

Chicago, IL 60606 

Phone: 312-781-1300 

E-Mail: pcushing@nfa.futures.org

FAX: 312-220-9003 

Web site: http://www.nfa.futures.org/
11 

ATTACHMENT B

ILLUSTRATION – Condensed Schedule of Investments and Fund–of–Funds Disclosures 

Condensed Schedule of Investments December 31, 2003 

Principal 

Amount, Shares 

or No. of 

Contracts

Description Fair Value Expiration dates No. of 

Contracts

 DEBT SECURITIES (41.2%) 

 United States (21.4%) 

 Airlines (6.0%) 

$3,000,000 Flight Airlines Inc 12%, 7/15/07 $3,000,000 

 Government (15.4%) 

$3,000,000 US Treasury Bond, 4.50%, 11/15/07 3,031,791 

 US Treasury Bonds, 3.00%-4.75%, 

 1/30/05-7/15/07 

4,686,175 

 7,717,966 

 Total United States (cost $15,015,200) 10,717,966 

 Mexico (19.8%) 

 Government 

 United Mexican States, 8.625%-

 9.125% 3/12/08-12/7/09 

 (cost $10,000,000) 

9,922,224 

 TOTAL DEBT SECURITIES (cost 

$25,015,200) 

20,640,190 

 INTEREST IN INVESTMENT PARTNERSHIP5

 (20.0%) (cost 

$8,000,000) 

 

 Hejmet Fund Ltd. A Cayman Islands company 

(20% owned) 

2,500,000 

 Carron Int’l. Fund, a Bermuda company (25% 

owned) 

2,600,000 

 Marvelous Fund NV, a Netherlands Antilles 

company (35% owned) (XYZ Hedge Fund LP owns 

6,000 shares, valued at $9,000,000 of Leisure Cruises 

Inc., which is a US Company in the travel industry. The 

partnership’s share of this investment is valued at 

$3,150,000 as of December 31, 200x)

2,800,000 

 Ten other funds 2,100,000 

 TOTAL INVESTMENT PARTNERSHIPS 10,000,000 

 TOTAL INVESTMENTS (61.3%) (cost 

$33,015,200) 

$30,640,190 

 FUTURES CONTRACTS (12.5%) 

 Financial (5.2%) 

 Eurodollar (5.2%) $2,611,825 Feb-Apr 200X 122 

 Indices (5.6%) 

 S&P 500 (5.6%) 2,788,000 Mar-May 200X 89 

 Metals (1.7%) 840,000 

 TOTAL FUTURES CONTRACTS $6,239,825 

 FORWARDS (11.5%) 

 Argentinean Peso (5.8%) $2,910,000 Oct-Nov 200X 

 Other currencies (5.7%) 2,876,315 

 TOTAL FORWARDS $5,786,315 

 

5

 See Note X. Investments, for additional disclosures on Investment Partnerships 
12 

Note X. Investments 

As of December 31, 2003, ABC Fund invested in other funds, none of which were related 

parties. 

The following table summarizes ABC Fund’s investments in other funds as of December 31, 

2003. Funds in which ABC Fund invested more than 5% of its net assets are individually 

identified, while smaller investments in three other funds are aggregated. The management 

agreements of the investee funds provide for compensation to the managers in the form of fees 

ranging from 1% to 3% annually of net assets and performance incentive fees ranging from 5% 

to 25% of net profits earned. 

Investment % of ABC’s 

Net Assets

Fair Value Income 

 (Loss) 

 Fees

 Mgnt Incentive

Investment 

Objective

Redemptions 

Permitted

Hejmat 

Fund Ltd. 

5.0 $ 2,500,000 $200,000 $ 25,000 $ 30,000 Emerging market Quarterly 

Carron 

Int’l Fund 

5.2 2,600,000 210,000 26,000 42,000 Sector investment Monthly 

Marvelous 

Fund NV 

5.6 2,800,000 (30,000) 28,000 0 International 

equity 

Semi-Annual 

Other 

funds: 

4.2 2,100,000 100,000 24,000 25,000 Other MonthlyAnnually 

 Total 20.0% $10,000,000 $480,000 $103,000 $97,000 

An alternative illustrative table, for unusual cases, where the fee information cannot be obtained 

is shown below: 

Investment % of ABC’s 

Net Assets

Fair Value Income 

 (Loss) 

 Fees

 Mgnt Incentive

Investment 

Objective

Redemptions 

Permitted

Hejmat 

Fund Ltd. 

5.0 $ 2,500,000 $200,000 $ 25,000 $ 30,000 Emerging market Quarterly 

Carron 

Int’l Fund 

5.2 2,600,000 210,000 26,000 42,000 Sector investment Monthly 

Other 

funds: 

4.2 2,100,000 100,000 24,000 25,000 Other Monthly-Annually 

Subtotal 14.4 7,200,000 510,000 $75,000 $97,000 

Marvelous 

Fund NV 

5.6 2,800,000 (30,000) * * International 

equity 

Semi-Annual 

 Total 20.0% $10,000,000 $480,000 

* = The fund operator is not able to obtain the specific fee amounts for this fund and does not know what those 

amounts are. However, management fees are computed based on 1% per year of net asset balances at the beginning 

of each month; incentive fees are computed based on 20% per year of net income.