Exhibit 99.02

     COMMODITY FUTURES TRADING COMMISSION AGENCY: Commodity Futures Trading
                                   Commission.
                                  17 CFR Part 4
  Statement of the Commodity Futures Trading Commission Regarding Disclosure by
   Commodity Pool Operators of Past Performance Records and Pool Expenses and
                              Request for Comments

                                   54 FR 5597

                                February 6, 1989

            ACTION: Interpretive Statement and Request for Comments.


         SUMMARY: The Commodity Futures Trading Commission is publishing this
interpretive statement and request for comments in order to assist commodity
pool operators in complying with requirements concerning the disclosure of past
performance records and pool expenses.

         DATE: Comments should be received on or before April 7, 1989.

         ADDRESS: Please submit written comments to the Office of the
Secretariat, Commodity Futures Trading Commission, 2033 K Street NW.,
Washington, DC 20581. FOR FURTHER INFORMATION CONTACT: Tobey W. Kaczensky,
Associate Director, Division of Trading and Markets, Commodity Futures Trading
Commission, 2033 K Street NW., Washington, DC 20581. Telephone: (202) 254-8955.

         TEXT: SUPPLEMENTARY INFORMATION: The Commodity Futures Trading
Commission ("CFTC" or "Commission") is today reminding commodity pool operators
("CPOs") who solicit participations, or accept or receive funds, securities or
other property in respect of participations, in publicly offered commodity pools
registered under the Securities Act of 1933 (the "Securities Act") nl or the
Securities Exchange Act of 1934 ("Exchange Act") n2 of certain disclosure
obligations under the Commodity Exchange Act (the "CEA"), n3 as more
particularly set forth in Part 4 of the CFTC's regulations. n4 This interpretive
statement and request for comments is being issued simultaneously with a
companion release of the Securities and Exchange Commission ("SEC") generally
addressing the same issues. n5 The CFTC, to the extent applicable, incorporates
by reference the views expressed by the SEC in its interpretive statement.
Commenters may wish to make the same submission to both agencies. The companion
statements reflect a continuing effort on behalf of the CFTC and the SEC to
maintain consistent, coordinated requirements for publicly offered commodity
pools.

         n l 15 U.S.C. 77a.

         n 2 15 U.S.C. 78a.

         n 3 7 U.S.C. 1.




         n 4 17 CFR Part 4 (hereinafter, all references to CFTC regulations will
use the appropriate CFR citation).

         n 5 This release principally addresses issues raised in the context of
public pools. However, given the fact that the CEA and CFTC regulations
thereunder generally apply equally to private pools and to public pools, the
views expressed herein, unless otherwise specified, also apply to private pools.

          I. Background

         Part 4 of the CFTC's regulations contains comprehensive disclosure
requirements for CPOs. n6 Among other things, Part 4 requires that a current
"Disclosure Document" be delivered to each prospective pool participant prior to
the solicitation of the participant or the participant's commitment of funds to
a pool. n7 This Disclosure Document also must be filed with the CFTC twenty-one
days prior to its first use. n8 Under Commission rules, pool disclosure
documents must address specifically the management policies of the pool and how
the pool will be traded and operated including, without limitation: the
five-year business background of its CPOs, CTAs and their respective principals;
the financial interests of such persons in the specific pool being offered; and
any actual or potential conflict of interest involving, or any material civil,
criminal or administrative action against, any CPO, CTA or the principals of
either within the preceding five years. Additionally, the document must
indicate: the minimum aggregate amount of funds that must be received before the
pool will commence trading; the responsibility, if any, of participants to
contribute additional capital; and the pool's policies concerning distributions
from profits or capital. n9

         n 6 The CEA defines a "commodity pool operator" as "any person engaged
in a business which is of the nature of an investment trust, syndicate, or
similar form of enterprise, and who, in connection therewith, solicits, accepts,
or receives from others, funds, securities, or property, either directly or
through capital contributions, the sale of stock or other forms of securities,
or otherwise, for the purpose of trading in any commodity for future delivery on
or subject to the rules of a contract market..." 7 U.S.C. 2. The CEA defines a
"commodity trading advisor" ("CTA") as "any person who, for compensation or
profit, engages in the business of advising others ... as to the value of or the
advisability of trading in any contract of sale of a commodity for future
delivery made or to be made on or subject to the rule of a contract market. . ."
7 U.S.C. 2.

         n 7 17 CFR 4.21 (a). A "pool" is defined as "any investment trust,
syndicate, or similar form of enterprise operated for the purpose of trading
commodity interests." 17 CFR 4.10(d).

         n 8 17 CFR 4.21(g).

         n 9 17 CFR 4.21(a)(8) and 4.21(a)(12).

         Part 4 of the CFTC's regulations also specifically requires disclosure
of the actual performance record (i.e., the past performance history) of the
pool's CPO, CTAs and their respective principals. n10 Such disclosures must
include the past performance history of all pools, public or private, as well as
that of individual accounts operated or traded by the CPO and its CTAs. Part 4
separately requires a complete description of each kind of expense that may be


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charged to a pool or its participants which specifies whether such expenses are
actual or estimated. n11

         n 1 0 17 CFR 4.21(a)(4) and 4.21(a)(5).

         n 1 1 17 CFR 4.21(a)(7). This requirement includes, without limitation,
an itemization of fees for management, trading advice, brokerage commissions,
legal advice, accounting services and organizational services. That Regulation
also requires the disclosure of any expense which has been or is to be paid by a
person other than the CPO. 17 CFR 4.21(a)(17)(iv). When any expense is
determined by reference to "net assets," "gross profits," "net profits" or "net
gains", the CPO must define that term. 17 CFR 4.21(a)(7)(ii).

         Part 4 also contains a specified risk disclosure statement which warns
that a pool participant may lose his or her entire interest in the pool and that
pools may be subject to significant charges so that substantial trading profits
may be required to avoid the depletion or exhaustion of pool assets. n12

         n 1 2 17 CFR 4.21(a)(17). The Risk Disclosure Statement must appear as
the only language on the page immediately following the cover page and must
contain specified language including, in part, the following statements:

         YOU SHOULD CAREFULLY CONSIDER WHETHER YOUR FINANCIAL CONDITION PERMITS
YOU TO PARTICIPATE IN A COMMODITY POOL. YOU MAY LOSE A SUBSTANTIAL PORTION OR
EVEN ALL OF THE MONEY YOU PLACE IN THE POOL.

         IN CONSIDERING WHETHER TO PARTICIPATE IN A COMMODITY POOL, YOU SHOULD
BE AWARE THAT TRADING COMMODITIES CAN QUICKLY LEAD TO LARGE LOSSES AS WELL AS
GAINS. SUCH TRADING LOSSES CAN SHARPLY REDUCE THE NET ASSET VALUE OF THE POOL
AND CONSEQUENTLY THE VALUE OF YOUR INTEREST IN THE POOL. ALSO, MARKET CONDITIONS
MAY MAKE IT DIFFICULT OR IMPOSSIBLE FOR THE POOL TO LIQUIDATE A POSITION.

         The National Futures Association ("NFA"), which is the self-regulatory
organization ("SRO") responsible, under CFTC oversight, for CPO and CTA
compliance with the CFTC's disclosure requirements, has adopted additional rules
approved by the CFTC that pertain to pool disclosures. For example, NFA rules
prohibit the use of promotional material which includes any reference to actual
past trading profits without a statement that "past results are not necessarily
indicative of future results * * * ." n13 NFA generally requires that this
statement be included in the disclosure document adjacent to the performance
table and the Commission believes that it should appear in bold face print and
in a prominent place immediately preceding the past performance tables required
by Part 4.

         n 1 3 NFA Compliance Rule 2-29(b)(5). Further, NFA Compliance Rule
2-29(g) includes disclosure documents within the definition of promotional
material. Moreover, NFA Compliance Rule 2-13 adopts the CFTC's Part 4
regulations by reference.


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         In any event, CFTC regulations expressly require that a CPO make all
material disclosures when offering pool participations. n14 As a consequence, to
assist CPOs, the CFTC is publishing these views on certain types of disclosures
which should be considered material in connection with past performance and pool
expense information required to be disclosed to pool participants in order that
such required disclosures are not misleading. Additionally, the CFTC is
requesting comment on matters related to the presentation of prior performance
data by CPOs and CTAs and the presentation of the fees, commissions and expenses
incurred by pools. Although the positions expressed in this release reflect the
CFTC's views regarding appropriate disclosure in pool disclosure documents, the
CFTC is interested in receiving comments on the interpretive positions and other
issues set forth herein. The CFTC, in consultation with the SEC, will review the
comments received in response to this release with a view toward determining
whether further action in addition to this statement is appropriate.

         n 1 4 A CPO is required to disclose all material information to
existing or prospective pool participants even if such information is not
otherwise specifically required by Part 4. 17 CFR 4.21(h).

         II. Commodity Pool Participation and Performance

         In recent years, the futures markets have grown both in volume and in
the diversity of products traded thereon, especially the financial, foreign
currency and equity-related products. The commodity pool is an increasingly
popular means of participation in these markets by the individual customer. In a
typical commodity pool, the promoter or CPO pools participants' funds and uses a
portion thereof to margin futures positions held by the pool. n15 Trading
decisions for the commodity pool generally are made by one or more CTAs selected
by the CPO.

         n 15 See 1 P. Johnson, Commodities Regulation @ 1.15, at 52 (1982). The
disclosure document provided to pool participants must meet applicable
registration, disclosure, antifraud and other requirements of the federal
securities laws as well as comply with the CEA and all applicable CFTC
regulations. n16 Persons who propose to offer participations in public commodity
pools should carefully review the requirement that, in addition to the specific
disclosures required by Part 4 of the CFTC's regulations, CPOs must disclose all
material information to existing and prospective pool participants. n 1 7

         n 1 6 See 7 U.S.C. 6m(2), 15 U.S.C. 77b(l) and 15 U.S.C. 78c(a)(10).

         n 1 7 See n. 14, supra.

         Certain recently published studies suggest that the actual performance
of CTAs employed by publicly held commodity pools was significantly poorer than
their previous performance as disclosed in the prior performance tables included
in those pools' disclosure documents. n 1 8 CFTC staff is currently reviewing
the study results and will investigate possible reasons for the differences in
performance reported by the authors if available data permits. To the extent
that significant differences exist between the past performance records required
to be disclosed in a particular pool disclosure document and the actual
subsequent performance of that pool, such differences may be the result of
differences between the trading and money management strategies of the current
pool and those of the pool or pools previously offered by the relevant


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CPO or CTAs. For example, it would not be uncommon for significant differences
to exist in the proportion of funds committed to margin futures positions and,
thus, in the ratio of trading margin to overall equity. n 1 9

         n 1 8 See Elton, Gruber and Rentzler, New Public Offerings, Information
and Investor Rationality: The Case of Publicly Offered Funds, 62 J. Bus. L. 1-15
(January 1988); see also Edwards, Commodity Pool Performance: Is the Information
Contained in Pool Prospectuses Useful?, Working Paper Series No. 16, Center for
the Study of Futures Markets, Columbia Business School (January 1988).

         n 1 9 Id.

         Pending completion of its review of the recently published studies, the
CFTC recommends that special attention be given to disclosures in the following
areas.

         III. Performance Reporting

         A. Length of Period Covered by Performance Tables

         As mentioned above, CFTC Regulation 4.21 requires that the disclosure
document provided to prospective pool participants include, among other things,
information with respect to the actual performance of previously operated
commodity pools and trading accounts of the CPO, the CTA, and their respective
principals. Such prior performance tables must be provided for at least the
lesser of three years or the life of the commodity pool or individual trading
account for which the performance data are provided. n 2 0 Beyond the required
three years, CPOs have discretion to elect to provide historical performance
data for additional time periods subject to the obligation to disclose all
material information and to the antifraud provisions of the CEA. n 2 1 Where
performance history in excess of the required three years is provided for either
the CPO or CTA, the CPO must ensure that the additional performance data is not
selected in such a way as to misrepresent the overall performance history of the
CPO or CTA. n22 In addition, where performance history for periods greater than
three years is shown, the CFTC staff generally has advised that at least five
years' performance or the entire performance history, if it is available, should
be presented. In this connection, the CFTC notes that a CPO is required to
maintain all pool records for at least five years. n 2 3

         n 2 0 17 CFR 4.21(a)(4)(i) and 4.21(a)(5)(i).

         n 2 1 See 17 CFR 4.21(a)(4), 17 CFR 4.21(h) and 7 U.S.C. 6o.

         n 2 2 17 CFR 4.21(a)(4), 4.21(a)(5) and 4.2l(h).

         n 23 17 CFR 4.23 and 1.31.

         Comment is requested as to whether the presentation of prior
performance data in excess of the currently required three years is useful to
participants in making the decision to purchase a pool participation. If so,
further comment is requested as to whether the CPO should be required to present
the performance history of the CPO and CTA for a longer period such as five
years or


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more, if such performance history is available. In addressing this issue,
commenters should discuss specifically those factors that would cause a
presentation covering more than three years to be relevant to potential
participants in a currently offered pool. The CFTC also requests comment
generally on the extent to which the presentation of prior performance may be
useful to persons in deciding whether to purchase an interest in a given pool
offering in view of the general nonpredictability of trading results.

         B. Periodic Reporting

         CFTC regulations require that the prior performance of a pool's CPO and
CTA be presented on at least a quarterly basis. n24 However, in the CFTC's view,
performance disclosure on a monthly basis may be more appropriate, particularly
when such monthly performance is volatile.

         n 24 17 CFR 4.21(a)(4)(ii) and 4.21(a)(5)(ii).

         The CFTC believes that a majority of CPOs and CTAs affiliated with
publicly offered commodity pools currently maintain records and present
performance history in their disclosure documents on a monthly basis. The CFTC
recommends that all CPOs and CTAs affiliated with, or contemplating an
affiliation with, a publicly offered commodity pool should, if not currently
doing so, consider maintaining records of past performance and presenting such
performance on a monthly basis. Moreover, to facilitate a pool participant's
review and analysis of prior performance presentations, all prior performance
tables for the CPO and its CTAs should be shown, to the extent possible, in a
consistent format. Comment is requested as to whether monthly performance
reporting should be required in all cases.

         C. Composite Performance

         CFTC regulations permit prior performance disclosure to be made on
either an individual or a composite basis. n25 If a composite presentation is
elected, separately captioned composites of previously traded public pools of
the CPO and its CTAs may be appropriate when differences between the performance
of such public pools and any private accounts are material. n26 Comment is
requested as to whether there should be a separate presentation of prior public
pool performance of the CPO and its CTAs in all cases or whether a textual
explanation of the differences in such account performance may be sufficient in
some circumstances. Specifically, the CFTC requests comment on whether
performance disclosure in public pool disclosure documents should be limited to
the prior performance of publicly offered pools or whether the performance of
publicly offered pools should be highlighted.

         n 25 17 CFR 4.21(a)(4)(iv) and 4.21(a)(5)(iii).

         n 26 The CFTC has been advised that such differences are likely if the
private account performance reflected proprietary trading. See also 17 CFR
4.21(a)(4)(iv)(B).

         To enable a participant better to evaluate prior performance
presentations, prior performance tables in a public pool disclosure document
should be accompanied by textual disclosure regarding any material differences
in trading objectives for the pools or trading accounts displayed in the prior
performance tables and those objectives for the pool for which


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the disclosure document is being distributed. n27 For example, specific
disclosure should be considered where the margin-to-equity ratio of the
commodity pools of trading accounts on which historical performance data are
based is materially different from that which will be permitted in the currently
offered commodity pool or where there are other material differences in how the
current pool will be traded.

         n 27 17 CFR 4.21(a)(4)(iii) and 4.21(a)(5)(iii)(A).

         Comments are requested concerning what other factors may be relevant to
properly interpreting the information contained in the prior performance tables.
Comments are also requested as to whether requiring monthly performance
disclosure and improving the rate of return calculations as discussed below
would be sufficient to address the issues raised above.

         D. Additions and Withdrawals and the Rate-of-Return Calculation The
CFTC's regulations require that CPOs and CTAs also present performance in terms
of the rate of return for the period contained in the performance table by
dividing net performance for the period by the beginning net asset value
("BNAV") for that period. n28 The CFTC chose this formula over more complex
measures in order to minimize computational and reporting burdens upon CPOs.
This approach assumes that additions or withdrawals are ordinarily made at the
beginning of a reporting period. However, as that may not be the case in
practice, this method may result in unjustifiably high or low rates of return.
If average daily equity ("ADE") were used as a divisor, or adjustments were made
to BNAV to achieve a closely equivalent result, the rate of return may be
affected less by the timing of additions and withdrawals. The CFTC staff has
accepted such alternate presentations where it has been demonstrated that timing
differences with respect to additions and withdrawals would materially distort
performance.

         n 28 17 CFR 4.21(a)(4)(ii) and 4.21(a)(5)(ii).

         The CFTC requests comment on the feasibility of requiring that rates of
return be computed by dividing net performance by ADE. The CFTC also requests
comment as to whether the use of BNAV still should be permitted when the effects
of using one measure in preference to the other would not materially affect the
rate of return. In this connection, comment is sought specifically on the
feasibility of establishing a standard which would provide guidance as to when
the use of BNAV would be permitted.

         IV. Disclosure of Fees, Commissions and Expenses

         CFTC regulations require a complete description on all expenses to be
charged to or incurred by a pool, including any interest paid with respect to
pool assets to a person other than the pool itself. n29 In order to facilitate
analysis of the fees and other expenses to be charged to a publicly offered
commodity pool, the CFTC believes that in addition to a narrative description,
CPOs should include a tabular presentation prior to the performance tables that
details the brokerage commissions, incentive, management and transaction fees,
as well as any other expenses attributable to the commodity pool that will be
paid directly or indirectly by participants.

         n 29 17 CFR 4.21(a)(7) and 4.21(a)(9).  See also 17 CFR 4.22(a).


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         The CFTC requests comment on whether it should require that this
discussion of expenses be supplemented with a pro forma presentation of prior
performance history which reflects the brokerage commissions and incentive and
management fees that would have been incurred if the fees and expenses charged
by commodity pools and trading accounts presented in the prior performance
tables were the same as those to be charged to the current pool. Such a pro
forma presentation should disclose the actual and pro forma net return achieved
for the last three years. Notwithstanding the foregoing, comment is also
requested as to whether this type of presentation, or other pro forma
presentations based on actual prior results, may cause participants to rely
unduly upon prior performance as an indicator of future performance.

         Further, comments are solicited as to whether additional disclosure
would assist prospective participants in assessing the extent to which expenses
charged to a pool could influence the pool's prospective performance. For
example, it may be useful to include in the disclosure document the amount by
which each unit of participant's net asset value must increase in the first year
of trading for the redemption value of that unit to equal the gross purchase
price paid to purchase it. Alternatively, the disclosure statement could include
a calculation of the net asset value per unit, net of sales commissions and
other expenses which will be deducted prior to the funds generated by the sale
of such participation unit being pooled for futures trading. In this connection,
commenters should address the problem of assessing prospectively the effect of
incentive fees.

         Commenters also are invited to address whether other disclosure
modifications are needed to make uniform the presentation of fees and expenses,
particularly because the rate of return formula is especially sensitive to the
timing of the deduction of such expenses.

         V. Conclusion

         Although this interpretive statement and the interpretive statement
published simultaneously herewith by the SEC represent the views of the
respective agencies with respect to certain information which may be material in
connection with disclosure documents filed with the CFTC for the offering of
participations in commodity pools, nothing in the statements should be construed
to diminish the obligation of CPOs and other CFTC registrants to comply with all
applicable disclosure requirements of the CEA and the CFTC's regulations
thereunder. Attention particularly is directed to the antifraud provisions of
the CEA which apply not only to statements made in documents filed with the
CFTC, but also to all statements or omissions made in connection with any pool
offering. n30 The CFTC expects to provide further guidance following review of
the comments received in response to this release and completion of the CFTC's
staff study. In this regard, the agency expects to consult with the SEC
concerning the comments to its companion release.

         n 30 CPOs are specifically reminded of the quarterly and annual
reporting obligations set forth in 17 CFR 4.22.


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* * * * *



                          List of Subjects in 17 Part 4



General Provisions, Definitions and Exemption, Commodity Pool Operators,
Commodity Trading Advisors, Advertising.

Issued this 1st day of February 1989.


Jean A. Webb,

Secretary to the Commission.
[FR Doc. 89-2681 Filed 2-3-89; 8:45 am]

BILLING CODE 6351-01-M




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