than three months preceding the date of the Document.

(iii) In presenting actual performance the commodity pool operator may present the actual performance of the accounts directed by each such person for whom such performance is disclosed pursuant to paragraph (a)(5)(i) of this section on an individual basis or on a composite basis.

(A) The commodity pool operator must describe the material differences among those accounts, and

(B) If that performance is presented on a composite basis, the pool operator must describe how each composite was developed and must disclose material information from which the composite was drawn.

(6)(i) The extent of any ownership or beneficial interest in the pool held by:

(A) The commodity pool operator; (B) Any principal of the pool operator;

(C) The pool's commodity trading advisor; or

(D) Any principal of the trading advisor.

(ii) If any of the foregoing persons does not own any such interest in the pool, the pool operator must make a statement to that effect with respect to each such person.

(7) A complete description of each kind of expense which the commodity pool operator knows or should know has been incurred by the pool for its preceding fiscal year or is expected to be incurred by the pool in its current fiscal year, including, but not limited to, fees for management, trading advice, brokerage commissions, legal advice, accounting services and organizational services; Provided, however, That if any such information is contained in an Annual Report which accompanies the Disclosure Document pursuant to paragraph (f) of this section, the pool operator need not also include that information in the Disclosure Document.

(i) The pool operator must specify the actual dollar amount of each such expense for the pool's preceding fiscal year and, wherever possible, the estimated dollar amount of each such expense for the pool's current fiscal year.

(ii) Where any expense is determined by reference to a base amount term including, but not limited to, "net assets," "gross profits," "net profits" or "net gains," the pool operator must specifically define each such term.

(iii) Where any fee is based on an increase in the value of the pool, the pool operator must specify how the increase is calculated, the period of time during which the increase is calculated, the fee to be charged at the end of that period and the value of the pool at which payment of the fee com

mences.

(iv) Where any expense of the pool has been paid or is to be paid by a person other than the pool, the pool operator must disclose the nature and amount of that expense and the person who paid or who is expected to pay it.

(8)(i)(A) The minimum aggregate amount of funds that will be necessary for the pool to commence trading commodity interests, or

(B) If there is no such minimum amount, the pool operator must make a statement to that effect; and

(ii)(A) The maximum aggregate amount of funds that may be contributed to the pool, or

(B) If there is no such maximum amount, the pool operator must make a statement to that effect.

(iii)(A) The maximum period of time for which the pool will hold funds prior to the commencement of trading commodity interests, or

(B) If there is no such period of time, the pool operator must make a statement to that effect.

(iv) The disposition of those funds if the pool does not receive the necessary amount to commence trading, including the period of time within which the disposition will be made; and

(v) Where the pool operator will deposit or invest funds received prior to the commencement of trading by the pool. If the pool operator intends to place those funds in an income-generating account or obligation, it must disclose the person to whom that income will be paid.

(9)(i) The manner in which the pool will fulfill its margin requirements. If the pool will fulfill its margin require

ments with other than cash, the pool operator must disclose:

(A) The nature of such non-cash items, and

(B) If those items generate income, the person to whom that income will be paid.

(ii) The form in which pool funds not deposited as margin or paid as premiums will be held after the commencement of trading by the pool. If those funds will be held in assets other than cash, the pool operator must disclose:

(A) The nature of such non-cash assets, and

(B) If those assets generate income, the person to whom that income will be paid.

(iii) If pool funds not deposited as margin or paid as premiums will be held outside of the United States, its territories or possessions, the pool operator must specify where those funds will be held.

(10)(i)(A) A complete description of any restrictions upon the transferability of a participant's interest in the pool.

(B) If there are no such restrictions, the pool operator must make a statement to that effect.

(ii) A complete description of the manner in which a participant may redeem its interest in the pool. That description must specify:

(A) How the redemption value of a participant's interest will be calculated, including the costs associated therewith;

(B) The conditions under which a participant may redeem its interest, including the terms of any notification required; and

(C)(1) Any restrictions on the redemption of a participant's interest, or (2) If there are no such restrictions, the pool operator must make a statement to that effect.

(11) The extent to which a participant may be held liable for obligations of the pool in excess of the funds contributed by the participant for the purchase of an interest in the pool. (12)(i)(A) The pool's policies with respect to the payment of distributions from profits or capital.

(B) The pool's policies with respect to the frequency of such payments.

(ii) The Federal income tax effects of such payments for a participant, including a discussion of the Federal income tax laws applicable to the form of organization of the pool and to such payments therefrom. If a pool specifically is structured to accomplish certain Federal income tax objectives, the commodity pool operator must disclose that information and explain those objectives.

(13)(i) Any material administrative, civil or criminal action within the five years preceding the date of the Document against:

(A) The commodity pool operator; (B) Any principal of the pool operator;

(C) The pool's commodity trading advisor;

(D) Any principal of the trading advisor;

(E) The pool's futures commission merchant;

(F) Any principal of the pool's futures commission merchant;

(G) The pool's introducing broker, if applicable; and

(H) Any principal of the pool's introducing broker.

(ii) If there has been no such action against any of the foregoing persons, the pool operator must make a statement to that effect with respect to each such person.

(14) Any commission or other fee that is paid or may be paid, directly or indirectly, by the pool, the pool's operator, commodity trading advisor, or the principals thereof, to any person in connection with the solicitation of funds, securities or other property for the pool.

(15)(i) A statement whether trading in commodity interests will be done or is intended to be done for its own account by:

(A) The commodity pool operator; (B) Any principal of the pool operator;

(C) The pool's commodity trading advisor; or

(D) Any principal of the trading advisor.

(ii) If any of the foregoing persons will trade or intends to trade for its own account, for each such person the pool operator must further disclose whether participants will be permitted

to inspect the records of that person's trades.

(iii) If any of the foregoing persons will not trade or does not intend to trade for its own account, the pool operator must make a statement to that effect with respect to each such person.

(16) A statement that the commodity pool operator must provide all participants with monthly or quarterly (whichever applies) statements of account and with a certified annual report of financial condition.

(17)(i) The following Risk Disclosure Statement, to be prominently disclosed as, and the only language on, the first page of the Disclosure Document:

RISK DISCLOSURE STATEMENT

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.

IN SOME CASES, COMMODITY POOLS ARE SUBJECT ΤΟ SUBSTANTIAL CHARGES FOR MANAGEMENT, ADVISORY AND BROKERAGE FEES. IT MAY BE NECESSARY FOR THOSE POOLS THAT ARE SUBJECT ΤΟ THESE CHARGES ΤΟ MAKE SUBSTANTIAL TRADING PROFITS TO AVOID DEPLETION OR EXHAUSTION OF THEIR ASSETS. THIS DISCLOSURE DOCUMENT CONTAINS A COMPLETE DESCRIPTION OF EACH EXPENSE TO BE CHARGED THIS POOL.

THIS BRIEF STATEMENT CANNOT DISCLOSE ALL THE RISKS AND OTHER SIGNIFICANT ASPECTS OF PARTICIPATING IN A COMMODITY POOL. YOU SHOULD THEREFORE CAREFULLY STUDY THIS DISCLOSURE DOCUMENT AND COMMODITY TRADING BEFORE YOU DECIDE TO PARTICIPATE IN A COMMODITY POOL.

(ii) If the potential liability of a participant in the pool is greater than the amount of the participant's contribution for the purchase of an interest in the pool and profits earned thereon, whether distributed or not, the commodity pool operator must make the additional following statement in the Risk Disclosure Statement, to be prominently disclosed as the last paragraph thereof:

ALSO, BEFORE YOU DECIDE TO PARTICIPATE IN THIS POOL, YOU SHOULD NOTE THAT YOUR POTENTIAL LIABILITY AS A PARTICIPANT IN THIS POOL FOR TRADING LOSSES AND OTHER EXPENSES OF THE POOL IS NOT LIMITED TO THE AMOUNT OF YOUR CONTRIBUTION FOR THE PURCHASE OF AN INTEREST IN THE POOL AND ANY PROFITS EARNED THEREON. A COMPLETE DESCRIPTION OF THE LIABILITY OF A PARTICIPANT IN THIS POOL IS EXPLAINED MORE FULLY IN THIS DISCLOSURE DOCUMENT.

(18) The following Cautionary Statement, to be prominently disclosed on the cover page of the Document:

"THE COMMODITY FUTURES TRADING COMMISSION HAS NOT PASSED UPON THE MERITS OF PARTICIPATING IN THIS POOL NOR HAS THE COMMISSION PASSED ON THE ADEQUACY OR ACCURACY OF THIS DISCLOSURE DOCUMENT.”

(b)(1) If the commodity pool operator knows or should know that the Disclosure Document is materially inaccurate or incomplete in any respect, it must correct that defect and must distribute the correction to:

(i) All existing pool participants within 21 calendar days of the date upon which the pool operator first knows or has reason to know of the defect, and

(ii) Each previously solicited prospective pool participant prior to accepting or receiving funds, securities or other property from any such prospective participant.

The pool operator may furnish the correction by way of an amended Document, a sticker on the Document, or other similar means.

(2) The pool operator may not use the Document until such correction has been made.

(c) The commodity pool operator must date each Disclosure Document and amendment thereto as of the date it is first used.

(d) The commodity pool operator may not accept or receive funds, securities or other property from the prospective participant unless the pool operator first receives from the prospective participant an acknowledgement signed and dated by the prospective participant stating that the participant received a Disclosure Document for the pool.

(e)(1) Subject to paragraph (b) of this section, all information contained in the Disclosure Document must be current as of the date of the Document; Provided, however, Performance information may be current as of a date not more than three months preceding the date of the Document.

(2) No commodity pool operator may use a Disclosure Document dated more than six months preceding the date of its use.

(f) The commodity pool operator must attach to the Document the most current Account Statement and Annual Report for the pool required to be distributed in accordance with § 4.22.

(g)(1) The commodity pool operator must file with the Commission three copies of the Disclosure Document for each pool that it operates or that it intends to operate not less than 21 calendar days prior to the date the pool operator first intends to deliver the Document to a prospective participant in the pool. The pool operator must specify with the filing the date it first intends to deliver the Document to a prospective participant.

(2) The commodity pool operator must file with the Commission three copies of all subsequent amendments to the Disclosure Document for each pool that it operates or that it intends to operate within 21 calendar days of the date upon which the pool operator first knows or has reason to know of the defect requiring the amendment.

(h) This section does not relieve a commodity pool operator from any obligation under the Act or the regulations thereunder, including the obligation to disclose all material information to existing or prospective pool

participants even if the information is not specifically required by this section.

(Approved by the Office of Management and Budget under control number 30380005)

(Secs. 2(a)(1), 4c(a)-(d), 4d, 4f, 4g, 4k, 4m. 4n, 8a, 15 and 17, Commodity Exchange Act (7 U.S.C. 2, 4, 6c(a)–(d), 6f, 6g, 6k, 6m, 6n 12a, 19 and 21; 5 U.S.C. 552 and 552b)) [46 FR 26013, May 8, 1981; 46 FR 26761, May 15, 1981, as amended at 46 FR 63035, Dec. 30, 1981; 47 FR 57011, Dec. 22, 1982; 48 FR 35298, Aug. 3, 1983]

§ 4.22 Reporting to pool participants.

(a) Each commodity pool operator registered or required to be registered under the Act must periodically distribute to each participant in each pool that it operates, within 30 calendar days after the last date of the reporting period prescribed in paragraph (b) of this section, an Account Statement, which shall be presented in the form of a Statement of Income (Loss) and a Statement of Changes in Net Asset Value, for the prescribed period. These financial statements must be presented and computed in accordance with generally accepted accounting principles consistently applied. The Account Statement must be signed in accordance with paragraph (h) of this section.

(1) The portion of the Account Statement which must be presented in the form of a Statement of Income (Loss) must separately itemize the following information:

(i) The total amount of realized net gain or loss on commodity interest positions liquidated during the reporting period;

(ii) The change in unrealized net gain or loss on commodity interest positions during the reporting period;

(iii) The total amount of net gain or loss from all other transactions in which the pool engaged during the reporting period, including interest and dividends earned on funds not paid as premiums or used to margin the pool's commodity interest positions;

(iv) The total amount of all management fees' during the reporting period;

(v) The total amount of all advisory fees during the reporting period;

(vi) The total amount of all brokerage commissions during the reporting period;

(vii) The total amount of other fees for commodity interest and other investment transactions during the reporting period; and

(viii) The total amount of all other expenses incurred or accrued by the pool during the reporting period.

(2) The portion of the Account Statement that must be presented in the form of a Statement of Changes in Net Asset Value must separately itemize the following information:

(i) The net asset value of the pool as of the beginning of the reporting period;

(ii) The total amount of additions to the pool, whether voluntary or involuntary, made during the reporting period;

(iii) The total amount of withdrawals from and redemption of participation units in the pool, whether voluntary or involuntary, for the reporting period;

(iv) The total net income or loss of the pool during the reporting period;

(v) The net asset value of the pool as of the end of the reporting period; and (vi)(A) The net asset value per outstanding participation unit in the pool as of the end of the reporting period,

or

(B) The total value of the participant's interest or share in the pool as of the end of the reporting period.

(3) The Account Statement must also disclose any material business dealings between the pool, the pool's operator, commodity trading advisor, futures commission merchant, or the principals thereof that previously have not been disclosed in the pool's Disclosure Document or any amendment thereto, other Account Statements or Annual Reports.

(b) The Account Statement must be distributed at least monthly in the case of pools with net assets of more than $500,000 at the beginning of the pool's fiscal year, and otherwise at least quarterly; Provided, however, That an Account Statement for the last reporting period of the pool's fiscal year need not be distributed if the Annual Report required by paragraph (c) of this section is sent to pool

participants within 45 calendar days after the end of the fiscal year. The requirement to distribute an Account Statement shall commence as of the date the pool is formed as specified in paragraph (g)(1) of this section.

(c) Each commodity pool operator registered or required to be registered under the Act must distribute an Annual Report to each participant in each pool that it operates, and must file three copies of the Report with the Commission, within 90 calendar days after the end of the pool's fiscal year; Provided, however, That if during any calendar year the commodity pool operator did not operate a commodity pool, the pool operator must so notify the Commission within 30 calendar days after the end of such calendar year. The first fiscal year for which an Annual Report is due shall be the first fiscal year that begins on or after January 1, 1979. The Annual Report must be signed pursuant to paragraph (h) of this section and must contain the following:

(1) The net asset value of the pool as of the end of each of the pool's two preceding fiscal years.

(2)(i) The net asset value per outstanding participation unit in the pool as of the end of each of the pool's two preceding fiscal years, or

(ii) The total value of the participant's interest or share in the pool as of the end of each of the pool's two preceding fiscal years.

(3) A Statement of Financial Condition as of the close of the pool's fiscal year and preceding fiscal year.

(4) Statements of Income (Loss), Changes in Financial Position, and Changes in Ownership Equity, for the period between (i) the later of: (A) the date of the most recent Statement of Financial Condition delivered to the Commission pursuant to this paragraph (c), (B) January 1, 1979, or (C) the date of the formation of the pool, and (ii) the close of the pool's fiscal year, together with Statements of Income (Loss), Changes in Financial Position, and Changes in Ownership Equity for the corresponding period of the previous fiscal year.

(5) Appropriate footnote disclosure and such further material information