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AIMA’s Illustrative Questionnaire for Due Diligence Review of Managed Futures Fund Managers/Commodity Trading Advisors (CTAs) © Alternative Investment Management Association (AIMA), April 2000

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The purpose of this document is to serve as a guide to investors in their review and assessment of managed futures fund managers/CTAs. This due diligence questionnaire is an unavoidable process that investors must follow in order to choose a manager.It is most important to understand clearly what you plan to invest in. You will also have to:

identify the markets covered, understand what takes place in the portfolio, understand the instruments used and how they are used, understand how the strategy is operated,identify the sources of return, understand how ideas are generated, check the risk control mechanism,know the people you invest with professionally and, sometimes, personally.

Not all of the following questions are applicable to all managers but we recommend that you ask as many questions as possible beforemaking a decision.

IMPORTANTThe copyright in this questionnaire belongs to AIMA. You may copy the questionnaire for your own company'suse and may distribute it (unamended or amended) for the purposes of a due diligence review, but you may not

distribute or copy it for any other purpose or to any other person, including any representative of the media,without the prior written consent of AIMA which will only be given in exceptional circumstances. If you wish to

share the questionnaire with others, please provide their details to AIMA.

DISCLAIMERWhilst AIMA has used all reasonable efforts to produce a questionnaire of general application in connection with a due diligence appraisal of

managed futures fund managers/CTAs, in any particular case an investor is likely to have his own individual requirements and each managed futuresfund manager/CTA his own characteristics. As a result, prior to any individual investor sending out the questionnaire, it is strongly recommended that

the questions are reviewed and, where necessary, amended to suit his own requirements and his state of knowledge of the managed futures fundmanager's/CTA’s operations.

In addition, responses to the questionnaire should not be relied upon without review and, where considered appropriate, further investigation. In order to obtain the best possible information on any specific managed futures fund manager additional questions should be raised to clarify any pointof uncertainty, and where practicable verbal examination should be undertaken. In particular, AIMA recommends that in respect of special areas of

concern, such as fund performance or risk profile, independent third party data should, if possible, be obtained in order to verify these facts.Accordingly, none of AIMA, its officers, employees or agents make any representation or warranty, express or implied, as to the adequacy,

completeness or correctness of the questionnaire. No liability whatsoever is accepted by AIMA, its officers, employees or agents for any losshowsoever arising from any use of this questionnaire or its contents or otherwise arising in connection therewith.

This questionnaire has been developed for Managed Futures Fund Managers/CTAs only and incorporates the input of leading U.S. CTAs andCommodity Pool Operators (CPOs). It is not intended for managers implementing securities-based strategies. A separate questionnaire relating to

hedge fund managers is available from AIMA.

Other AIMA questionnaires available for selection of: Fund of Funds Custody and Administration

Fund of Funds ManagersFund Administration (excl. Fund of Funds) for Investors Fund Administration (excl. Fund of Funds) for Managers

Hedge Fund ManagersPrime Brokers


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Items

Background

Performance and Statistics

Methodology

Portfolio and Accounts

Execution and Trading

Risk Management

Research

Administration, Operations and Fees

Legal

Published byAlternative Investment Management Association (AIMA) Lower Ground Floor, 10 Stanhope Gate, Mayfair, London W1K 1AL Tel +44 (0)20 7659 9920 Fax +44 (0)20 7659 9921 www.aima.org


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BACKGROUNDORGANISATION Company name: Integra Investment Management L.P

Form of organisation (limited partnership, corporation, etc.):

Limited Partnership

Address: 301 Yamato Road. Suite 3115. Boca Raton, Florida. 33431

Telephone: 561-995-9997 - Fax: 561-995-7677 - E-mail: [email protected]/web-site N.A.

How many employees does the firm currently have? 14

What is the greatest and least number of employees the firm has had in the last 3 years? Explain any significant employee turnover:

Least-3 Most-14 One employee has retired

Richard A. Scalone/ Gregory Panagos

Steven Redling

Keith Lasota/ Steven Redling/ Carmelyn Winkler

Bruce Levinson / Hunt Financial Ventures / Marcela Cartagena

Phuong Le/ Michael Tari

Phuong Le/ Luisa Campuzano/ Grace Brabham

List the names of senior managers in charge of the following areas:

Trading: Research and development: Marketing and business development: Administration: Programming: Compliance, reporting, performance: Trading assisstants): Keith Lasota/ Antony Hine/ Erik Woldman/ Brian Rich


Provide a brief background of the registered principals and senior managers (education, career background, etc.). Have any principals or senior managers left the firm since inception? If yes, please explain:

Richard A. Scalone is the Managing Director and Chief Trader of Integra Investment Management L.P,. Mr. Scalone began his trading career over 17 years ago after he graduated from Columbia University in 1988 with a BA. degree in economics. The majority of his experience came from his tenure at Chemical/Chase Bank in New York. He has traded every product from the simplistic overnight Fed Funds and cash F/X, to the complex Forward/Forwards, Interest Rate Swaps, and option strategies. He has worked on an Overnight Liquidity Desk, a Treasury Funding Desk, as well as managing a Forward Desk, a Foreign Exchange Desk, and a Proprietary Trading Desk. Mr. Scalone has also traded Equities, Equity Futures, and derivatives thereof. Mr. Scalone spent his final bank years at ABN/Amro as a proprietary trader while managing their Forward Desk. Since leaving ABN, Mr. Scalone has co-managed monies for Societe Generale and HWF Capital while trading his own entity, the Integra Fund. Mr. Scalone has managed large sums of capital for several major institutions and has consistently had profitable returns.

Keith Lasota has over 23 years investment experience and has been with Integra since inception. While overseeing the operations of the Integra funds he is responsible for managing the firm’s personnel, marketing and client service. Prior to joining Integra, Mr. Lasota spent 18 years at the Chicago Board of Trade, where he established and managed several floor operations. Mr. Lasota also worked as a trader and broker in a variety of pits, as well as trading cash markets off the floor. Mr. Lasota maintains a Series 3 registration.

Clark K. Hunt is the Chief Executive Officer of Shoreline Management Group, LLLP. Through Shoreline, Mr. Hunt provides advisory and management consulting services to a diverse group of companies in the financial services industry. Mr. Hunt is also a Managing Director of HFV Management, L.P. and Arbitex Asset Management, L.P. Since 1993, Mr. Hunt has founded various investment management firms, including SMG, in both the hedge fund and traditional money management businesses. Mr. Hunt began his investment career as an analyst at Goldman, Sachs & Co. in New York and Los Angeles, where he participated in financing transactions including mergers, acquisitions, initial public offerings, cross-currency swaps and leveraged buy-outs. Mr. Hunt attended Southern Methodist University, where he graduated first in his class with a Bachelor of Business Administration degree and was a two-time recipient of the University’s highest academic award, the Provost Award for Outstanding Scholar. Mr. Hunt was captain of Southern Methodist University’s nationally ranked soccer team and was twice named a first team Academic All American.

No principals or senior managers have left the fund since inception.

Provide details of the firm’s current ownership structure and any changes in the last 3 years. Are there any pending plans for further ownership changes?

Mr. Scalone was sole owner of Integra until April of 2002 when he took on two partners that currently own percentages based on a sliding scale associated to AUM. There are no pending plans for further ownership changes.

What is the firm’s approximate net worth? Is the firm subject to any minimum net worth requirements or covenants?

N.A.

List all branch or affiliated offices, if any: N.A.

List the name, location, and function of any non-employee representatives being used:

Anchor Asset Management- 3rd party marketing agent

Yes

Yes

No

No

- Has the firm ever been registered as any of the following?

Commodity Pool Operator (CPO): Commodity Trading Advisor (CTA): Futures Commission Merchant (FCM): Introducing Broker (IB): Registered Investment Advisor (RIA): Other (please specify):

No


N.A.

Yes

Yes

No

Yes

Yes

No

No

No

- Has the firm or any of its officers ever been associated or connected with any:

Bank:CPO:Other CTA: FCM: Hedge Fund: IB:RIA:Other investment management activity (please specify): If yes, please explain:

CFTC: 3-11-1999

NFA: 3-11-1999 With which regulatory authority is the firm registered? Date of registration: Are all employees registered with the same authority? The principals are registered.

List any professional affiliations and memberships of the firm and its principals:

N.A.

List the firm’s accountant/CPA, auditors, and attorneys:

Accountant: Kaufman & Rossin Auditor: KPMG Attorney: Andrews & Kurth L.L.P.

Do any of the firm’s principals have other significant business involvements? If yes, please describe them and indicate how much professional time is dedicated to each?

There are three principals. Two of them are essentially silent partners that have no direct involvement in the day to day operations of the fund. The third principal is Richard Scalone and he does not have any other business involvements. His focus is 100% involved with the Integra funds.

Has an independent auditor ever reviewed the performance record? If yes, please enclose a copy of the most recent Audit Report.

Yes. Audits have been conducted every year the fund has been existence. The most recent audit was for 2004 and was conducted by KPMG. Please see the attached file: IIL_2004 Audit.

Has the performance record been included in any public fund prospectus in the past five years? Was there a “comfort letter” given in respect of the record?

No

Are there any issues from the firm’s most recent regulatory review (NFA, SEC, CFTC, etc.) currently unresolved? If yes, please provide a detailed explanation:

No

Does the firm have a current CFTC Reg. 4.21 Disclosure Document or a Reg. 4.7 Disclosure Document? If yes, please provide a copy:

The domestic entity (Integra Fund L.P.) is registered 4.7. The offshore entity (Integra Investors Limited) is registered 1896. They are attached as files: IF_LP PM & II_Ltd_PPM

How soon is the next update due to the firm’s Disclosure Document? Are any material disclosure changes anticipated?

May 2006 No.

Does the firm publish any newsletters or other publications? If yes, please provide copies.

Yes. The fund produces a monthly letter. They are attached as files: Nov05 and Dec05.

Provide two samples of reports typically sent to clients: Yes. They are attached as files: Client Report Example 1&2.

If not confidential, please provide a partial list of existing clients with an indication of how long they have been clients. Please also show the amount of assets managed for them currently, as well as at the beginning of the last four fiscal years:

Mark Griffiths: October-1999 Initial Investment: $15,000 Beginning 2000: $14,823 Beginning 2001: $13,938 Beginning 2002: $123,593 Beginning 2003: $110,470 Beginning 2004: $121,481 Beginning 2005: $140,636 Current: $153,387


Investor A. (Confidential) April-2002 Initial Investment: $4,165,785 Beginning 2003: $6,980,540 Current: $8,563,562

Investor B. (Confidential) April-2002 Initial Investment: $2,104,436 Beginning 2003: $3,526,371 Current: $4,666,743

Provide three client references: J.P. Morgan Chase-Scott Gallopo: 212-834-4610 UBS –Brian McDermott: 203-719-4042 HFV-Clark Hunt: 214-720-1675

What is the greatest percentage of assets under management represented by any single client?

31%

Does the firm manage an account for any government pension plans or entities?

No

Which investor groups does the firm primarily target? Fund of Funds, Institutions, Pension Funds, Endowments and High Net Worth individuals.

Does the firm permit “feeder funds” into its own investment products?

Yes

Has the firm made any future capacity commitments in terms of the right to place additional assets under the firm’s management?

Yes

PERFORMANCE & STATISTICS

Attach 13-column composite performance tables for all accounts traded pursuant to each of the firm’s programmes (if available – see below):

Please see the attached file named: All accounts AUMList assets under management (and percentage of total assets) for each of the following:

Public funds: Private pools: Individual accounts: Institutional accounts: Proprietary accounts: Total assets under management:

If 13-column tables are not attached, attach a schedule showing month-end assets under management for each programme since inception. Please see the attached file named: All accounts AUM

Is the performance record actual or hypothetical? Actual

Is the performance record in any respect derived or excerpted?

No

Is proprietary (and, presumably, non-fee-paying) capital included in the performance record? If yes, what amount?

Yes. $250,000.

Are there any material differences among the accounts included in the composite tables?

No

Are “exempt accounts” included or excluded from the performance record?

Included

Does the performance record reflect the full brokerage charged to the client or have certain fund sponsors identified a portion of such brokerage as excludable from the firm’s performance calculations?

Yes

List all markets now traded which are not included in the past five years’ performance:

None

What was the peak of assets under management? US$:

$530,000,000


Date: 12-1-2005

Has the firm ever voluntarily returned assets to investors? If so, when, how much and why?

No

18432

How many separately managed accounts are currently open, grouped by size?

$0 to $250,000: $250,001 to $1,000,000: $1,000,001 to $5,000,000: $5,000,001 to $10,000,000: $10,000,001 to $20,000,000: $20,000,001 +: Total: 18

What percentage of the assets under management consists of “notional equity”?

100%

What is the current equity value and starting date of the oldest continuously traded account?

June 1999 $369,941

Does the performance record include interest income? If yes, explain basis of inclusion.

Yes. Any and all income generated from AUM is considered part of the return and hence must be included in the Net numbers.

Have any agreements or understandings been reached with the CFTC/NFA regarding any aspects of the performance record?

No

Are there any pro forma adjustments included in the performance record? If so, how are these calculated?

No

What is the average number of round-turns traded per $1million per year in each programme?

3000 per $1 million per year.

Approximately how many trades are made in each market, each year, in each programme?

That varies depending on market conditions.

Does trading frequency tend to increase/decrease during profitable/unprofitable periods?

Trading will typically increase during both profitable and unprofitable periods due to our methodology of using options to express our positions. As the market moves favourably for our positions, and the unrealized P&L increases due to the increase in the delta of the position, trading will increase to protect or “lock-in” the unrealized P&L. With unprofitable trades, or potentially unprofitable trades, unfavourable market movement will necessitate a more active trading scenario once again due to the fact that we actively trade the delta hedges of the position. We may also look to adjust the overall position by rolling the strikes or cutting certain positions, thus increasing our trading activity. The increase in trading during unprofitable periods is not a function of trying to implement more trades to try and make the losses back but rather a direct result of our methodology of protecting principal through the diligent analysis of the market and the positions and once again, actively trading the delta hedges of the position.

What is the average annual commission as a percentage of assets included in the performance record for each programme? Does this vary significantly from year to year?

5%

It has not.

What is the average management and performance fee structure included in the performance record?

Management fee: 2% Performance fee: 20%

Do fees and/or commissions vary significantly from year to year? If so, by how much?

No

What is the average percentage of winning and losing trades in each programme since inception? Are these percentages materially different to the past 12 months? If yes, please explain:

This is not a black and white answer as our positions are not as simplistic as “We think the bonds are going higher so we will buy the bond.” Since the entities we trade are almost all correlated we trade the cumulative portfolio rather than each component that makes up our portfolio. All of our longer term views are expressed through options, subsequently; much of the trading related to the deltas of these positions cannot be broken down as individual trades. Also, additional trades may be established in a different yet correlated entity to protect or hedge our original position. The above process makes it almost impossible to breakdown what an average gain or loss would be per trade.


Since adjusting our risk matrix in the fall of 2002 the profitable percentage of “winning trades” or what we refer to as, effectively managed portfolio sectors, has increased from the prior time period, validating what we were attempting to achieve.

Please refer to the above response as the same answer applies to this question. What is the average gain per winning trade and average loss per losing trade?

$ per contract: As a % of equity:

1-3 months

1-3 months

What is the average holding period for: All trades: Winning trades: Losing trades:

1-3 months

What is the maximum amount of equity that the firm estimates can be traded in each programme?

The target size for the Integra Funds is $1 billion, although we continuously evaluate the fund’s ability to garner targeted returns relative to AUM.

What is the annualised standard deviation, Sharpe Ratio and compound annual rate of return for each programme? How do these compare with the firm’s objectives?

In October of 2002 Integra adjusted the risk parameters of the fund. We modified the firms objectives for the following criteria and the corresponding results are shown: From 6-99 Since Oct-02 Objective Sharpe: .62 2.92 Above 1.50 Annualised Return: 9.59% 12.43% 10% -15% Annualised Standard Dev: 10.35% 3.33% Below 6.00%

List the three largest drawdowns as percentages of equity for each programme. Please also explain why each drawdown occurred, and show the recovery periods:

The following are the three largest draw-downs: 18.78%. October 1999-March 2001.Recovery period: 3 months. This drawdown was the result of our largest investor, at the time, redeeming from the fund. This redemption was roughly 40% of the AUM at the time. The existing positions at that time were longer duration options trades and a decision was made to maintain these positions rather than to reduce the holdings or cut them altogether. The reason for this was that the position was one that we felt very strongly in and if we had cut the position there would have been a significant effect on the returns for the remaining investors as we would have had to “pay away” the bid-offer spreads. The decision was ultimately the correct one from a fiduciary standpoint regarding our remaining investors as it was still a manageable position and it eventually matured as a profitable trade and was the major contributor to the recovery period of April, May, and June of 2001. Measures have been instituted to eliminate this situation from occurring again through the implementation of a more reasonable redemption notification. We originally had a 15 minimal notice prior to the end of the month, where as we now require a 45 day notice prior to the appropriate redemption date. The duration of options trades are typically 45 days or less and therefore any position will typically mature before a redemption request therefore eliminating the need to cut or reduce a holding due to a redemption.

2.) 13.82%. March 2002- September 2002. Recovery period: 16 monthsUnfortunately, two unusual circumstances surfaced at the same time in July and August of 2002. During the third quarter of last year, Integra’s' investment portfolio included two trades which proved to be quite costly. The first trade was a July put spread in the S&P futures. This position bet that equities would retreat between 4% and 12%. Our fundamental analysis concluded that equities should still trade lower. All additional analysis supported this view. However, the pitfall to the trade came within our analysis of history. Excluding one data point, the Oct 1987 crash, the S&P's had not been down more than 12% in any one month since 1940. From this analysis we set a floor to our trade parameters at down 12% with less than 3 weeks until expiration, while keeping in mind that if the S&P's collapsed we could easily hedge the delta and eliminate some, if not all of the risk associated with the trade. Unfortunately, the S&P's proceeded to drop roughly 12% by the 18th of the month. This in itself was not the problem as with 1 day remaining the trade was only down 2% because of the fact that the floor was set at down 12% and that was exactly where the market was. (Obviously the loss was a mark to market loss). The real


problem came the next day on expiration Friday, July 19th 2002. The market fell another 4% and that coupled with managing the position put the loss of the trade at approximately 5%. The second trade that cost the Fund in the third quarter was eerily similar to the first from a historical perspective. The trade was a call spread on the Red September Eurodollar contracts. That was structured to take advantage of the credit markets rallying between 20 and 100 basis points in a one-month period of time with a ceiling above 100 basis points. History dictated that in only one month since the inception of Eurodollar futures contracts, had the contract rallied by more than 100 basis points from the months open. Not only did the contract rally through our ceiling but also hedging the position became increasingly more difficult as volatility exploded to more than 10 standard deviations from the norm, to levels never seen before. The combination of these two catastrophic market events proved very costly as the fund dropped 10 percent for the two-month period of July-August 2002. However, there are several positives that resulted from the aforementioned debacle. First, the capital preservation aspect associated with the inherent risk controls associated with our methodology worked quite well. From the outset of our S&P trade until expiration the S&P itself dropped close to 16%, we lost 5%. In respect to the credit market trade, we limited the loss to 5% in a market that dropped 32%. Second, the methodology was tested under the most adverse of market conditions and not only did we survive but we rebounded 3% in the fourth quarter and have started the first quarter of 2003 positively. Finally, we have adjusted our risk matrix to reduce if not eliminate the exposure previously experienced.

2.35% October 2001-November 2001. Recovery period: 2 Months. This drawdown was simply one losing month.

What were the three longest drawdowns for each programme? Please explain:

1.) 17 months 2.) 6 months 3.) 1 month Please refer to the explanations above.

($990,455) 6.6%

10-2003

What were the largest withdrawals in each programme since inception?

Date:% of equity: Reasons: The investor wanted his money for another business venture.

Has the firm ever permitted a client to intervene during the course of a relationship to adjust leverage or portfolio structure? If yes, please explain:

No

What do you believe is the most important performance measurement with respect to each programme?

Since adjusting our risk matrix in October 2002, Integra has strived to be a low Beta fund, so Integra should be measured based on a Sharpe Ratio adjusted rate of return. As such, it would be best to benchmark Integra against other hedge funds within this category.

What is the projected growth in assets under management over the next twelve months?

We project assets to reach $1.5 billion in the next 12 months.

Have there been any material leverage or other adjustments in the past five years, and how have such adjustments affected the performance record?

We did adjust our risk parameters in October of 2002 in response to unacceptable swings in our return matrix. Since implementing these adjustments the fund has increased the percentage of positive to negative months from 60% to 91%. Our average loss in down months dropped from -3.26% to -1.41% and our annualised Sharpe ratio increased from .62 to 2.92

METHODOLOGY

100%

How would you characterise the firm’s basic trading approach (in %)?

Discretionary: Systematic: Other, please explain:

34%

33%

How would you characterise the firm’s main decision-making inputs (in %)?

Fundamental: Technical: Other, please explain: 33% Market position is the other determining factor.


Do you believe that one trader can have materially better systems than another? Please explain:

No relative to discretionary systems. It is our belief that the systems are essentially equal or parallel and that it is the portfolio manager and the methodology of the portfolio manager that separates one system from another.

What other advisors would you compare your firm to as most similar? In what respects?

None that we know of.

Which components of the firm’s system, if any, do you regard as proprietary (no details necessary)?

The trading philosophy and the trading methodology.

Why are major financial institutions, with their extensive resources, not implementing the same programmes as the firm in their proprietary trading?

For the most part they are, but proprietary trading relies on the individual(s) not the institution. Institutions can have the same programmes often at a lower cost by investing in the individual fund managers. This is the case with Integra where several institutions have allocated monies to Integra.

Are there any “relative value” or “arbitrage” aspects to the programme?

No

Are calendar spreads or inter-market spreads used? Yes

How would you characterise the firm’s trading methodology (in %)?

Trend Following1.Regression analysis:2.Moving Average:3.Breakout systems:4.Pattern recognition:5.Oscillators;6.Other (please explain):Cyclical:Countertrend:Special Situtation:Arbitrage:Market Neutral:Other (please explain):

Other-100% The funds methodology is more discretionary, opportunistic. The investment methodology starts with a fundamental view that is derived from diligent analysis. This fundamental view is then put through our technical analysis whereupon a confirmation or rejection of the trade idea is determined. If confirmed, an assessment of market position is made as the final factor in determining whether a trade should be established. It should be pointed out that if any one of the three factors can not support the others no position is established. After all analysis supports our view the second stage of the investment process begins. As Integra expresses the majority of its trade ideas through the use of options, how the trade is expressed is equally as important as the view itself. The use of options helps both in risk management and trade expression. Integra utilizes a tedious analysis of history as well as any forthcoming influencing factors that could affect the market to decide option strikes, tenure, and how much capital to extend for each position.

How, if at all, is “game theory” incorporated into the firm’s trading strategies?

No formal incorporation of “game theory” is used, but as in all trading there is a level of market sentiment and position that will have an effect on market movement. Integra does incorporate market position and sentiment into the third and final stage of our market analysis that is used to determine wether a position will be established.

If the firm operates different programmes, are they managed by “independent account control” or are positions aggregated for Speculative Position Limit purposes?

Currently Integra has sixteen managed accounts outside of our main structure that are managed by “independent account control.” The positions are not aggregated for speculative position limit purposes.

Do all the programmes use the same trading methodology? If not, please explain.

Yes

Describe the firm’s broad trading philosophy, strategy and core principles in as much detail as possible.

The general Philosophy of Integra is one that has a primary objective to identify superior risk adjusted investment opportunities utilizing fundamental, technical and market position analysis. In turn, creating a balanced portfolio of short and long positions geared to minimize risk and maximize returns throughout all market cycles. Our philosophy is to ensure protection of principal while maximizing capital appreciation. We believe the most effective way to accomplish this goal is to utilize a strategy that is created of multiple systems. Over the past 17 years of profitable


trading, we have learned that it is an amalgamation of successful analyses that produce positive results. Our methodology uses a combination of fundamentals, overlaid with technical analysis, pooled with market timing and position. The utilization of all of these tools allows for the in-depth diligence that is required for the Integra Fund to initiate a trade or trading strategy.

Although Integra, on the surface, may seem somewhat similar to traditional Global Macro funds, there are several key differences that we believe distinguishes our fund from the others. The key to understanding these differences rests in our methodology and our risk management. Within our methodology, Integra trades a very focused number of entities that consist predominately of the G7 currencies and US fixed income products. Trading a more focused group of entities allows Integra to more effectively trade and manage the portfolio. Also, Integra expresses all of its long term views through options strategies. Options offer the following distinct benefits: 1.) Options have a fixed cost; thus, coupling them with stop-losses produces an initial defined risk that is less than taking outright positions in the underlying instruments. 2.) Options afford Integra’s positions better survivability and sustainability. 3.) Options allow the trade to mature into a leveraged position as a direct result of the success of the trade. 4.) Options permit Integra to rapidly adjust the overall portfolio in order to capitalize on varying market environments.

Regarding view or idea development, Integra adheres to a rigorous 3-step methodology. 1) Integra formulates an initial view on a respective financial instrument based on stringent fundamental analysis. Internal research results, based on daily economic releases, along with daily, weekly and monthly research reports, provided by some of the of the top research firms on Wall Street, are reviewed for investment themes. Once the fundamental analysis confirms a view, Integra moves to the second step. 2) Integra develops a comprehensive technical analysis of the view in question. This analysis includes traditional charting methods, such as Fibonacci, Elliot Wave, RSI, Stochastics, Bar Charting, Candlestick Charts, and Point and Figure Charts, as well as a unique proprietary analysis. If technical analysis confirms the fundamental view Integra moves to the third step. 3) Integra assesses the market position. This is accomplished through analysis of IMM position reports provided by several firms including Deutsche Bank, UBS and JP Morgan Chase. Additionally, market position information is also gleaned from numerous contacts at various institutions and other hedge fund managers.

Before a view can be implemented, market position analysis must indicate that the fundamental/technical view should be pursued.

The core principles of Integra are appreciation of assets with an emphasis on the preservation of capital. Within this, it has always been the concept that it is a privilege to manage someone else’s money and that the successful methodology that inspired Richard to start his own fund combined with a high degree of integrity, would provide a viable, attractive investment vehicle.

Describe the development of the firm’s trading methodology. Please include all material modifications made to the methodology over the period of the performance record:

The trading methodology of Integra has been created over 17 years of practical application by Richard Scalone during his career trading for some of the top names on wall street including J.P. Morgan Chase and ABN AMRO as well as his own fund, the Integra Fund. His trading background was the perfect progression for a trader in as much that he started trading the most basic of products, the over night fed funds, followed by fixed date products, FX forwards, FX spot, eventually running the spot and forwards desks, than trading and running a proprietary desk.

The only modification made to the fund was not to the methodology but to the risk management of the methodology.


In the fourth quarter of 2002, we modified the way the Integra funds managed risk and made several distinct internal changes. These changes were our response to the undesirable profit and loss swings in the third quarter resulting from volatility exposure. The first change was to reduce potential short optionality in instruments with ample liquidity under normal market circumstances that experience greatly reduced liquidity in unusual periods of time. The second change was to spread the responsibility of risk management to several different individuals including those who were not responsible for establishing the positions. The third change consisted of eliminating several instruments with unacceptable volatility skews from our traded portfolio. Finally, we reduced the overall leverage factor of the portfolio by as much as 50%.

What do you believe gives the firm a competitive advantage or an “edge”?

All of the Fund’s returns can be traced to the market experience and insights of its chief trader and the 17 years he has spent studying and trading the markets. His trading background was the perfect progression for someone to learn the markets from bottom to top in as much that he started trading the most basic of products, the over night fed funds followed by fixed date products, FX forwards, FX spot, eventually running the spot and forwards desks, than trading and running a proprietary desk. Because of this thorough background, his ability to assimilate information more effectively and implement the best trades from this information gives him an advantage over traders with a lesser background. The broad scope of his experience in a variety of markets also prevents the funds progress to be limited to one set of market conditions. Instead, Integra can potentially capitalize on all market conditions. Integra effectively implements its positions by creating the most preferential options pricing by garnering bids and offers through numerous banking counterparties. Position analysis is gleaned from banking institutions and their analysis as well as through Mr. Scalone’s numerous contacts within the banks themselves. Throughout his career Mr. Scalone has consistently generated positive returns while trading through bull markets, bear markets, market crashes, the EMS crisis, wars, and periods of irrational, volatile markets due to a variety of causes. This experience is invaluable. The final piece of Integra’s edge lies in the trade expression itself. 100% of Integra’s longer-term positions are expressed through options. This allows for larger positions to be implemented using less capital. Options allow Integra the staying power to maintain a view in an entity that might not be able to be achieved in an outright directional view due to “normal” price fluctuations. The many different aspects of options also allow for a myriad of trade management opportunities that, once again, outweigh the benefits of outright directional positions.

What are the strengths and weaknesses of the firm’s trading methodology?

The primary strength of the Fund lies in the abilities of its Chief Trader Richard Scalone. Within this Richard’s background and training allow him to effectively implement his methodology. The trading methodology comes from the basis that as a discretionary strategy, it is able to continuously adapt and evolve to changing market conditions much quicker than systematic trading models.

The trade expression and the use of options is a great strength for the fund because of the following reasons: 1.) Options have a fixed cost; thus, coupling them with stop-losses produces an initial defined risk that is less than taking outright positions in the underlying instruments. 2.) Options afford Integra’s positions better survivability and sustainability. 3.) Options allow the trade to mature into a leveraged position as a direct result of the success of the trade. 4.) Options permit Integra to rapidly adjust the overall portfolio in order to capitalize on varying market environments.

The Fund’s main weakness would be that currently the trading methodology can only be fully executed by the Chief Trader.

What makes the firm’s trading methodology different from other CTAs?

Integra is a low beta global macro fund that trades cash currencies vs. CTA’s that typically have much higher volatility skews that trade currency futures. The benefit to


Integra is that the spot markets are accessible 24 hrs a day with ample liquidity vs. the futures markets which are not. The futures that we do trade are the most liquid markets with near 24 hour access. Integra’s view development and its 3 step investment process along with the trade expression using options are all different from most CTAs.

How do you determine the programmes’ commitment to different market sectors?

Capital is committed to those sectors with the opportunities that offer the highest potential for success based on careful fundamental and technical analysis. There is no requirement to allocate trades to differing sectors.

How frequently do you alter the programmes’ commitment to different market sectors?

There is no defined commitment to any market sector.

Do you alter the programme during drawdowns? As a result of drawdowns?

No. However, there have been some refinements to components of the programme, specifically the risk matrix in October of 2002, which was in response to drawdowns as a result of volatility exposure.

During drawdowns, does the firm tend to increase or decrease the scope of its discretionary decision-making and non-systematic responses?

Decrease.

Did one or more of the current principals develop the firm’s trading methodology? If not, who did?

Yes. Richard Scalone.

Could the unavailability of any of the firm’s principals influence the trading methodology?

Only if it were to be over a significant period of time combined with the inability to communicate with the Portfolio Manager.

Does the firm own the trading methodology currently being used? If not, who does?

Yes

Are there any patents, trademarks, etc. held by the firm or any of its principals?

No

Describe the three worst trading experiences the firm has had, and explain how they influenced the evolution of the firm’s trading methodology.

The first trade was when our largest investor at the time redeemed from the fund. This redemption was roughly 40% of the AUM at the time. The existing positions at that time were longer duration options trades and a decision was made to maintain these positions rather than to reduce the holdings or cut them altogether. The reason for this was that the position was one that we felt very strongly in and we if we had cut the position there would have been a significant effect on the returns for the remaining investors as we would have had to “pay away” the bid-offer spreads. The decision was ultimately the correct one from a fiduciary standpoint regarding our remaining investors as it was still a manageable position and it eventually matured as a profitable trade and was the major contributor to the recovery period of April, May, and June of 2001. None the less, it still remains as the first and worst trading experience for Integra as it has continued to be an issue for everyone looking at Integra. Although it was one of the worst trading experiences for the fund, the old adage of “what does not kill you makes you stronger”,and smarter from my view, truly is applicable as the experience demonstrated how the methodology would work successfully in adverse conditions. It also helped Integra mature as an entity. Measures have been instituted to eliminate this situation from occurring again through the implementation of a more reasonable redemption notification. We originally had a 15 minimal notice prior to the end of the month, where as we now require a 45 day notice prior to the appropriate redemption date. This will help to minimie the effect of any addition or withdrawl requests.

The second trade was a put spread in the S&P futures. This position bet that equities would retreat between 4% and 12%. Our fundamental analysis clearly showed that equities were still headed lower. All additional analysis supported this view. However, the pitfall to the trade came within our analysis of history. Excluding one data point, the Oct 1987 crash, the S&P's had not been down more than 12% in any one month since 1940. From this analysis we set a floor to our trade parameters at down 12% with less than 3 weeks until expiration, while keeping in mind that if the S&P's collapsed we could easily hedge the delta and eliminate some, if not all of the risk associated with the trade. Unfortunately, the S&P's proceeded to drop roughly 12% by the 18th of the month. This in itself was not the problem as with 1 day remaining the trade itself was only down 2% because of the fact that the floor was set at down 12% and that was exactly where the market was. (Obviously the loss was a mark to market loss). The real problem came the next day on expiration Friday, July 19th


2002. The market fell another 5% and that coupled with managing the position put the loss of the trade at approximately 5%.

The third trade was a call spread on the Red September Eurodollar contracts. The trade was structured to take advantage of the credit markets rallying between 20 and 100 basis points in a one-month period of time with a ceiling above 100 basis points. History showed that the contract had rallied by more than 100 basis points from the months open only once since the inception of Eurodollar futures contracts. Not only did the contract rally through our ceiling but also hedging the position became increasingly more difficult as volatility exploded to more than 10 standard deviations from the norm, to levels never seen before.

The experience from the second and third trades led to modification of the way Integra managed risk. These changes were our response to the undesirable profit and loss swings resulting from volatility exposure. The first change was to reduce potential short optionality in instruments with ample liquidity under normal market circumstances that experience greatly reduced liquidity in unusual periods of time. The second change was to spread the responsibility of risk management to several different individuals including those who were not responsible for establishing the positions. Finally, several instruments with unacceptable volatility skews were eliminated from our traded portfolio

N.A.If the firm’s trading methodology is computerised and systematic:

Is the trading system ever overridden? If yes, under what circumstances? Does the trading system ever add to or reduce profitable or losing positions? If yes, under what circumstances? Are there maximum additions? If so, how is the maximum determined? Are multiple trading systems used? If yes, please explain: Does the firm apply the same system to all markets or are there different systems for each?What technical or fundamental information is considered important for a trade entry signal? Are entry and exit signals generated by the same trading system? If not, please explain how they are generated differently. Does the trading methodology differ frm market to market? If yes, please describe what the difference is based on? Is the trading system always with long or short, or is there also a neutral zone? Please explain: How frequently are changes made to the trading system? Please explain the development and implementation process: Is the firm’s research focused on developing new trading systems or on further refining the existing systems?

Is the “cost of carry” a factor in the current methodology?

To a small extent, but the “Cost of Carry” is taken into consideration in the decision making process.

Which of the following activities are influenced by subjective judgement? Please answer by Yes or No, and indicate a % where applicable:

Portfolio structure: Yes 100%


Yes 100%

Yes 100%

Yes 100%

Yes 100%

Yes 100%

Yes 100%

Yes 100%

No

Trade entry: Trade exit: Stops: Position size: Overall leverage: Selection of contract maturity: Addition to or reduction of winning or losing positions: Decision to halt trading: Other (please specify):

If fundamental information is used, what are its sources?

Bloomberg, various industry reports, and a constant flow of information through the multitude of major financial institutions we deal with. Subscription services. Periodicals.

How would the firm approach sudden and unexpected illiquidity in any of the markets traded?

Through our trading methodology of using options to express position views sudden and unexpected illiquidity would not typically impact the positions. Also, the trading of highly liquid 24 hour accessible markets limits these potential risks. Integra modified its risk matrix and the markets it does trade to limit these very issues. In the case of a one off event of some kind, I feel Integra would be better positioned than most.

Do you permit fundamental factors to influence risk management (e.g. liquidating or reducing certain positions before a G-7 meeting)?

Yes

Are any filters used when selecting trades? If yes, please explain:

Before implementing any trade a series of steps or “filters” is used. It must pass the fundamental breakdown, the technical breakdown, and the market position breakdown. There is also an assessment of reward to risk. These are our filters.

Has the firm made any leverage adjustments in the past? If yes, why? When and how were they implemented?

Yes. In the fourth quarter of 2002. These changes were our response to the undesirable profit and loss swings resulting from volatility exposure. Integra reduced the leverage used when establishing new positions in coordination with a modification to our risk matrix by as much as 50%.

Has the firm made any specific modifications intended to reduce volatility? If yes, why? When and how were they implemented?

Yes. In the fourth quarter of 2002, we modified the way the Integra funds managed risk and made several distinct internal changes. These changes were our response to the undesirable profit and loss swings resulting from volatility exposure. The first change was to reduce potential short optionality in instruments with ample liquidity under normal market circumstances that experience greatly reduced liquidity in unusual periods of time. The second change was to spread the responsibility of risk management to several different individuals including those who were not responsible for establishing the positions. Finally, several instruments with unacceptable volatility skews were eliminated from our traded portfolio.

Will the firm modify a trading methodology or portfolio at particular clients’ request? If yes, please explain:

No

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

No

Of the techniques below, which are used in the firm’s trading methodology?

Moving averages of prices: Chart patterns (head & shoulders, triangles, flags, etc.): Momentum oscillators (rate of change of price or volume): Point and figure; Support and resistance: Volume or open interest: Spread relationships: Statistical probabilities: Penetration identification: Overbought/oversold indicators: Cyclical analysis: Seasonal analysis: Fundamental or economic analysis: No


Bottom up analysis: Top down analysis:

If the trading methodology involves a neural network, what are its main inputs?

N.A.

Yes-varies

Yes-varies

Yes-varies

Yes-varies

Yes-varies

Yes-varies

Yes-varies

Yes-varies

Are any of the methods below used to close out profitable positions? Please indicate by Yes or No, and %:

Trend reversal: Trailing stops: Overbought/oversold indicators: Volatility: Price patterns: Volume/open interest: Spread relationships: Change in fundamentals: Other (please explain):

Does the trading system have a long or short bias? NoHas the trading method been adjusted, or have the markets traded changed due to increased assets under management? If yes, please explain:

No

Do you believe that the firm’s performance is likely to be non-correlated with other trading advisors? If yes, please explain:

Yes. Due to the fact that it is 100% proprietary I would expect there to be little correlation to anyone over a period of time.

What are the firm’s rate or return, volatility, and Sharpe Ratio objectives?

ROR: 12-14% Volatility: We look to have a Beta between .3 and -.3 Sharpe: Above 1.50

What is the firm’s S&P non-correlation objective? Integra does not have a correlation or non-correlation objective regarding the S&P.

Does the trading methodology work better in some markets than in others? If yes, please explain:

Our methodology is extremely flexible. We are capable of achieving our return goals within a variety of markets. With that said, the methodology works best in trending markets with a moderate degree of volatility.

Are certain markets excluded from the portfolios? If yes, please explain:

Yes. Markets that are illiquid or are not easily accessible can be excluded.

Are there liquidity, regulatory or other requirements for the inclusion of markets in the firm’s portfolios? If yes, please explain:

Yes. All markets that Integra will trade must have substantial liquidity and if possible be accessible near 24 hours a day. This has become a mandatory aspect of trade selection because of some issues that had risen due to illiquidity.

In which kind of markets does the trading methodology perform best and worst? Bull markets Bear markets Congested markets

Bull and bear markets, but not congested markets: The same in all market conditions: High volatility markets: Low volatility markets: Other (please explain):

Our methodology is unique in that it is not necessary to have any particular scenario in a market to perform well. Our methodology performs worst in a scenario where a market experiences excessive volatility around a particular option strike over time.

Are agricultural commodities a significant component in any of the firm’s portfolios?

No

Does the firm’s methodology permit or require making or taking develiery of physical commodities?

No

Does the firm trade “cash” securities (stocks and bonds)? Why would or would not the firm’s programme be effective in doing so?

No

What was the firm’s response to the introduction of the Euro?

The introduction of the Euro occurred in January 1999 and our fund began trading in June 1999.

Will increasingly competitive markets affect the performance of firm’s programmes? Will they affect

No. We do not feel that more competitive markets will significantly affect managed futures in respect to the fact that as the markets become more competitive so to will


managed futures in general? the traders adjust their styles to keep up with the markets.

Do you perceive any basic and significant changes in the managed futures industry over the past five years?

Yes. Increasingly tighter regulatory issues will continue to make the industry a more secure, safer investment vehicle for everyone which is good for the legitimate players.

Does the firm offer “overlay” as well as “standard” programmes? If so, please explain the difference:

Not at this time.

Does the firm use third-party research or valuation service providers?

Yes, through our FCM’s and accountants, however, we do not use outside providers.

PORTFOLIO & ACCOUNTS

10% 5%

50% *Cash Currencies 33%

Which of the following instruments are traded and in what percentages?

Exchange-traded futures: Exchange-traded options: EFPs:OTC forwards: OTC options: Swaps: * Cash debt instruments: Cash equities: 2%

Attach a complete list of all markets traded in each of the above categories. With respect to all OTC, swap, and cash markets, please list the counterparts used in each market:

FX spot and options primarily in G-7 currencies and USD/MEX. Exchange-traded futures and options primarily in the U.S. credit markets. Equity Indices primarily in the US. Cash equities: U.S. Stocks.

Integra typically trades vanilla spreads.

Integra uses them as both stand alone trades as well as hedges for other trades.

If options are traded, please explain which types: Covered only, naked, as part of a hedging strategy, “exotic”, etc.: How they are used: How they are revalued:

They are revalued using markets provided by the clearing entities holding those positions.

If options are traded, what option-related volatility measures are incorporated into the programme?

Integra analyzes the “Greeks” of the portfolio and compares actual pricing to the system pricing. P&L horizons are assed by shifting time forward in varying increments and shocking the underlying asset values by 3%. We then revalue the overall portfolio using independent option models provided by FINCAD as well as options systems provided by our banking affiliates. This is done bi-weekly or more often as if necessary. Integra takes into account all factors that drive current and future options pricing. This is done by an off premise risk manager as well as internally by the fund manger and his associates.

Do the markets traded vary according to the account size? If yes, please explain:

Yes. Due to margin requirements, a smaller account might not be able to participate in all of the markets currently traded by that of a larger account.

How are the markets included in each portfolio selected?

The markets included must first meet the criteria requirements including accessibility i.e. near 24 hour access, and liquidity. As long as they have been approved along this criterion the other factor determining inclusion into the portfolio is the opportunity these markets offer from the methodology standpoint of fundamental, technical, and market position analysis.

Can a portfolio be customised according to specific customer requirements?

Yes

Do customised accounts appear in the firm’s composite performance record?

No

What is the minimum account size? What is the minimum optimal account size?

25 million (for managed accounts) 25 million (for managed accounts)

Primarily G-7 currencies Credit markets. Primarily in the U.S.

For each programme, what would a $1 million portfolio look like? For example,

Which markets would be included? How many contracts of each market would be included?

That would depend on the trade opportunities at the time of the portfolio creation. An example of a portfolio for a 5 million dollar portfolio could be created upon request.

Which criteria are considered in portfolio selection (risk, Reward to Risk


performance, liquidity, volume, open interest, etc.)? Fundamentals Technicals Liquidity Market Position

N.A.

The capacity of the markets traded by Integra’s methodology is quite large. It is in excess of 3-5 billion. The point is that Integra will continuously evaluate the funds abilty to produce returns relative to the asset growth of the fund.

Position limits: Describe any past problems with Position Limits. Which markets or exchanges were involved? How much money could be managed under the current trading methodology without being restricted by Position Limits? If, or when, Position Limits are reached, how will the firm modify its methodology?

N.A.

Do you believe that most trading advisors’ rates of return decrease as assets under management increase? Why? What about your firm’s programmes?

At some point it is only natural that any funds ROR will decrease as their asset base grows beyond capacity. A simple fact is that certain methodologies trade certain markets where there are capacity issues. Particularly commodities. Integra is currently in a different situation in that as Integra’s AUM increases, the return will benefit from a dilution of our fixed costs relative to AUM. As the fund grows there will be an ongoing assessment of returns vs AUM. Since Integra primarily trades spot currencies and the most liquid bond markets, our capacity will close the fund to new investors before the deterioration of returns takes affect. There will be an ongoing evaluation of growth vs. return to determine what level this will be.

EXECUTION & TRADING

How are positions established for new accounts, liquidated for terminating accounts, or adjusted for existing accounts to reflect material changes in account equity? Please explain in detail:

Existing positions may be increased with new capital additions only if the reward to risk parameters remains viable. Because of the natural turnover of positions due to our methodology, and the tenure of the average trade, it will only be necessary to increase any new positions proportionately to the capital additions. For terminating accounts as well as material changes in account equity, the adjustment in positions should be seamless as the redemption notice of 45 days prior to the end of the month the redemption is requested will limit the effect of additions and withdrawls due to the average tenure of the existing positions. (They typically are 2 months or less.)

Does the firm’s trading staff trade 24 hours per day? If yes, please explain. Do they trade from the office premises or elsewhere? How many staff are involved in each shift, and what are their functions?

Yes. Integra trades predominately in markets that have near 24 hour access. It is one of the criteria used when choosing markets to include in the portfolio. Time differences are managed through the use of multiple brokers in the differing time zones, Asia, Europe and the United States. These brokers are left with specific instructions regarding working orders and call levels for market levels and pertinent news events to call either the Chief trader or his assistant. The Chief Trader and his assistants have fully functional trading platforms at their respective homes as well as on their laptops.

How are executed trades allocated to accounts? Please explain in detail, partiulclarly with respect to split fills. Are any positions allocated as of the end of the trading day rather than prior to or at the time of order entry?

All trades are allocated at the time of execution based on predetermined guidelines splitting trades based on the percentage of assets in each programme. In the case of fills that cannot be allocated exactly on a percentage basis, the “odd lot” will be allocated to each account on a consistent, rolling basis.

What is the firm’s policy with respect to trading and system errors? Please explain in detail.

Integra has a policy where errors are offset immediately upon discovery.

Have there been any major “out-trades”? If so, please describe.

No.

Limit, Stop, and Market orders.

Yes. It varies on the positions as well as the market conditions.

Depending on what markets and what time of day it is orders may be placed directly to the floor, through electronic trading platforms, or through an order desk.

Large orders can be “broken up” through the use of different executing brokers if it is felt that it would be advantageous to the execution of the order.

- Trading Orders: What types of trading orders are used? Are different types of orders used for entry and exit? Please explain: Are orders entered onto a trading desk or relayed directly to the exchange floor? Are large orders broken up? If yes, please explain how: Does the firm use give-ups for futures? If yes, please provide a complete list of executing brokers used and give-up fees charged by those brokers. If no, please provide a complete list of executing brokers

Yes. Deutsche Bank is our clearing broker, and we use the following executing brokers in addition to Deutsche Bank:


Fimat: $.60 O’Conner: $.60

used:If the firm uses a Prime Broker for FX, please describe the structure and any fees charged:

We currently use UBS as our FX prime broker with “spokes” at: Deutsche Bank AIG Soc Gen Goldman Sachs J.P. Morgan Chase Statestreet RBS Merrill Lynch Citi Bank Fimat ABNThere is a sliding “give-in” fee charged by UBS.

Staff do not trade:

Only Richard Scalone, the portfolio manager, can trade the Portfolio.

- What is the firm’s policy with respect to trading by: 1. Staff:2. Principals: 3. The firm itself:

N.A.

Does the firm have any special relationship or affiliation with any FCM?

No

If the firm trades EFPs, describe the manner in which appropriate documentation is maintained:

No

If the firm trades EFPs, please list all markets in which they are traded. Please also list the counterparts with whom they are traded:

No

RISK MANAGEMENT

Describe the firm’s overall risk management principles and approach:

The only true risk to the fund rests in its trading discretion. As a discretionary fund having the majority of its risks in options on G 7 entities many of the concerns of the different risk categories are mitigated. The majority of Integra’s exposure lies in the premiums extended for the original trades. These sums are typically a very small percentage of AUM. There are usually no liquidity, credit, legal, etc… concerns. However, as the optionality can occasionally create a short volatility position, it is this where the fund exhibits its greatest possible risk. For example, if normally liquid entities such as S+P contracts, Eurodollar futures, or G7 currencies have extreme volatility, similar to what one sees during a stock market crash, the risk associated with the fund can become somewhat elevated. Several steps have been taken recently to alleviated concerns generated by unusual market circumstances. Reducing our overall leverage factor by as much as 50% and maintaining smaller positions in entities that have demonstrated such potential patterns have, and will lessen the risks associated with these entities. Additionally, the complete elimination of several potentially problematic entities will help eliminate potential risk issues. Finally, following a stringent stop loss criteria to all existing delta positions helps alleviate the potential problems associated with traditional “blow ups”.

How does the firm calculate risk?

Risk is managed on an intra-day basis by the manager by analyzing the “Greeks” of the portfolio and comparing actual pricing to the system pricing. P&L horizons are assed by shifting time forward in varying increments and shocking the underlying asset values by 3%. We then revalue the overall portfolio using independent option models provided by FINCAD as well as options systems provided by our banking affiliates. This is done bi-weekly or more often as if necessary. This is done by an off premise risk manager as well as internally by the fund manger and his associates.

Is the risk calculated for each trade? If yes, please explain:

Yes. The risk is calculated using position size, trade cost or price, and predetermined levels that necessitate stop losses or hedging. Through the implementation of positions through options the risk can initially be calculated by the premiums associated with the trade.

Do all the programmes use the same risk management Yes


methodology? If not, please explain:

Is “value at risk” used in the firm’s programme? If so, how do you assess the value at risk of your different market positions and what confidence level do you use?

Integra does not use VAR in the traditional sense however, through the use of options to express positions Integra measures the VAR of the portfolio by the premiums extended for the positions initiated. Integra uses Fox-online and Bloomberg to asses the dynamics of the portfolio as well as receiving risk reports from our offsite risk manager. We do not use confidence levels.

What determines the amount of leverage used?

Once again through the use of options, the amount of leverage initially used for all trades is the premium paid. This is a very small percentage of AUM. The only way the leverage of a trade will increase is if the trade becomes successful. As it does, the leverage will increase as the delta of the position increases. This will continue to a point at which time the delta hedging of the position begins to “lock in” profits or neutralize the effect of the underlying price action.

The amount of leveraged used is always going to be negligible at the initiation of a trade as we express the vast majority of our trades through options and the initial premium paid is typically a very small percentage of AUM. The only way the leverage of a trade will increase is if the trade becomes successful. As it does, the leverage will increase as the delta of the position increases. The highest leverage figure during our best period of returns was close to 5x.

Because the premium extended at the onset of a trade is such a small percentage of AUM the lowest leverage factor would be close to zero

How much leverage (% of margin to equity) is used in each programme?

Highest: Lowest: Average:

The average leverage factor runs around 2x

The use of options for position expression makes the answer to this question unique. Since positions are established with very little premium, the initial investment in any one market is minimal. It is what happens as the trade matures that defines the risk associated to a particular trade. There have been situations where a portfolio consisted of a number of positions that have all been out-of-the money, in other words, the risk was split equally. Eventually just one of the underlying markets moved favourably for our portfolio, in essence raising the percentage of risk for that trade to many times those of the others. This is ultimately a derivative of the success of a position, and the subsequent hedging that is done to protect these profits and reduce the risk in the trade is initiated.

What is the percentage of risk invested in any single market? - Highest: - Lowest: - Average: - How is this percentage determined?

The initial percentage of risk is the premium extended for any trade.

Are “higher leverage” and “lower leverage” versions of the same programme offered? If yes, please explain how they are structured?

Yes. Specifically managed accounts. The notional capital of the accounts would simply be leveraged to whatever degree the client wishes.

Does the firm impose limits on the amount of margin committed to different markets, sectors, or portfolios?

No

How does the firm react if the volume and/or open interest of a market in which a position is held are suddenly reduced significantly?

An evaluation will be conducted to determine the reasoning behind any such event and any necessary adjustments to the positions or portfolio will be made.

Does adding or reducing a position in one market ever influence the size of positions held in other markets? If yes, please explain:

Yes. As Integra’s portfolio is integrated by all of the positions held, any increase or reduction in one market could very likely influence the size of other positions held.

Does the firm calculate and analyse the historical or contemporary correlation between markets? If yes, how does such analysis influence portfolio design?

Yes, we always look at these correlations, but not so much that it influences the portfolio design but rather as another tool to maintain its edge in evaluating trade ideas and managing hedges.

Does the firm establish position limits for correlated market groups? If yes, please explain:

Not at this time. Due to the trading methodology of Integra and the inherent diversification of markets traded, there has never been a concentration of positions established in any one market group that would require these types of limits.

Are there a minimum number of markets in which the firm always holds positions in order to achieve a minimal portfolio diversification effect?

No. Please refer to the response to the previous question.

If stops are used, please answer the following questions:

On what principles are stops calculated? How often are stops adjusted? Is the method of establishing stops based

The fund utilizes stringent stop loss orders 100% of the time on the delta trading of all existing positions, whenever the markets are available. If a market on a traded entity is not available, as is the case with many of the options, stop losses are placed on the deltas associated with those particular positions. In addition to stop loss orders the fund also utilizes call levels on all open positions 24 hours a day.


As market conditions dictate.

Yes.

No.

No.

Yes.

on any of the following? 1. Price stops: 2. Time stops: 3. Volatility stops: 4. Money management stops: 5. Other (please specify):

If a stop is reached, is the entire position closed out at one time, or is the position reduced gradually? Since the majority of Integra’s positions are expressed through options the use of

stops is typically a protective instrument used with the delta hedging of the position and it will typically be a portion of the overall hedge used to gradually reduce the hedge.

How are positions adjusted when there is a significant increase or decrease in equity due to trading profits or losses?

Because of Integra’s methodology of expressing trades through options the traditional practice of increasing or reducing positions is not applicable to Integra. With the success of an established position it will naturally increase in size due to the increase in the delta of the option. Additional positions may also be established to “lock in” profits. Regarding unsuccessful trades, positions may be decreased directly by exiting some or all of the position or by implementing additional trades or trading the delta of the position to “hedge” or adjust the exposure of the position.

Are there any circumstances under which all positions in the portfolio will be closed?

Yes. If the fund were to be down 15% or more, measures would be taken to reduce and eventually eliminate all positions.

At what percent drawdown would the firm either stop trading or recommend that an account be closed?

Yes. If the fund were to be down 5% or more, measures would be taken to reduce and eliminate all positions. It should be noted that Integra would be actively reducing and eliminating positions well before breaching a down 5% level.

Does the methodology react to volatility changes in the markets? If yes, please explain how.

Because Integra expresses all of its positions through options, volatility becomes a very large component of our decision making process. As options pricing is directly related to volatility, our positions size would change during volatile periods of time. When volatility is high we would hold fewer positions and those positions would be smaller in size. The opposite would be true in periods of low volatility.

Yes. Integra trades predominately in markets that have near 24 hour access. It is one of the criteria used when choosing markets to include in the portfolio. Time differences are managed through the use of multiple brokers in the differing time zones, Asia. Europe and the United States. These brokers are left with specific instructions regarding working orders and call levels for market levels and pertinent news events to call either the Chief trader or his assistant. There is full coverage after hours with both the Chief Trader and his assistant having fully functional trading platforms at their respective homes as well as on their laptops. Coverage is split with an overlap of office hours with the assistant trader covering the markets during the early morning hours until the Chief Trader comes in.

Does the firm trade on exchanges that are open outside local office hours? If yes:

How is the time difference managed? Are there routines in place to minimise the risk of adverse price movements, or price gaps which are due to price movements that occur outside local office hours?

What is the estimated maximum risk on a total portfolio? Please describe the method by which such risk is measured:

Due to Integra’s methodology of expressing its positions through options, the issues regarding maximum risk are initially defined by the premiums extended for the portfolio. The risk will only increase if the positions become successful and the values of the options increase. Delta hedging of all positions will typically reduce the risk exposure of the portfolio, but can on occasion, increase the risk levels if there volatile swings around a strike price, necessitating an increase in the trading of the hedges. Determining the overall portfolio risk is not as simple as establishing a trade at a price and determining the stop loss level with an overall risk correlation.

What is the firm’s cash management method? Does this create an additional source of risk?

We currently hold our monies in cash with our clearing brokers, including Deutsche Bank, and they do not create a source of additional risk.

RESEARCHDescribe the firm’s efforts to improve its trading methodology through on-going research?

We continually evaluate the trading methodology through the analysis of: The positions and where the profits and losses come from. The reward to risk matrix and how it is performing relative to expectations. The ongoing evaluation of market correlations and their reliability and consistency.

What is the firm’s current annual research budget? Minimal How much money has the firm invested in research since its inception?

Minimal


Has the firm or any of its research staff published any research or academic papers? If yes, please provide details:

No

Does the firm use any external parties or resources for research? If yes, please explain.

We receive a plethora of research material from a number of the top names on wall street as well as numerous periodicals.

ADMINISTRATION, OPERATIONS AND FEES Describe detailed backup procedures in the event that the firm’s offices, trading facilities or computer system became unexpectedly non-operational or inaccessible.

All workstations, servers and peripherals use UPS (Uninterrupted Power Supply) and are automatically backed up daily to an external storage device and on DVD-RW media discs that are uploaded to two active “hot sites” at the home offices of Richard Scalone and Keith Lasota. These sites are currently being used on a daily basis as trading is done from both locations throughout Asia and London trading hours. All the trading tools, software have been installed on workstations at these home offices. In addition, portfolio managers have portable laptops with all necessary hardware, software and programs that allow full market access while off-site. There is T1 line with a DSL back up line and 3 back up lines for traditional phone connectivity. All accounts held at various brokers are accessible via the internet from anywhere there is a connection to internet.

Does the firm maintain a detailed Operations Manual? NoWhat insurance coverage does the firm maintain? Please provide a schedule showing coverage:

Errors and omissions coverage. $15 million.

Are the operations of the firm dependent on one person or a limited number of people?

The trading aspect of the fund is reliant on Richard Scalone. All other aspects of the running of the fund are not reliant on just one person.

Are there a minimum number of personnel needed for the firm’s operations?

Yes

Have there been any significant operational or administrative “bottlenecks” or difficulties in the past five years?

No

Are new investments currently being accepted in the form of:

Separately managed accounts: Pools and funds: Both of the above:

Both of the above

Is the client free to choose a clearing firm and to negotiate the account terms directly with them?

This is negotiable

Which clearing firms does the firm currently use? Deutsche Bank/ UBS

2% Quarterly

20% Quarterly

What fees do the firm charge? Do they vary? If so, please explain:

Management fee (include frequency of payment): Performance fee (include frequency of payment): If a “hurdle rate” is included in the Performance fee calculation, is it a “hard” or a “soft” hurdle?

N.A.

Does the firm charge all customers the same fees? If not, on what basis are fees waived or modified?

No. Account size, potential lock-ups.

Does the firm share its fees with any third parties? No

Are there any present plans to relocate the firm’s offices No

Does the firm have a lockup period or any special requirements for withdrawal?

No.


Does the firm or any of its officers or employees receive, directly or indirectly, any rebate on brokerage commissions? If yes, please explain on what basis, and from which brokerage firms:

No

Has the firm ever been required to restate NAVs, fees or other calculations? If yes, please explain:

No

LEGALDoes the firm hire traders from other investment management firms?

No

Has the firm had any disputes over non-compete, non-disclosure or similar covenants?

No

Are any of the firm’s employees subject to non-competes, “golden handcuffs”, etc.?

No

Does the firm have any existing marketing or consulting agreements?

Yes

Has the firm appeared in any recent advertisement or newspaper or magazine articles?

Yes. Richard Scalone was featured in the April issue of Futures magazine as the ‘Trader Profile’.

Have there ever been any criminal, civil or administrative proceedings against the firm or any of its principals, or any similar such matters including reparations, arbitrations and negotiated settlements?

No

Does the firm maintain a written Compliance Manual? If yes, please provide a copy.

No

Does the firm or any affiliate ever take “custody” of client assets?

No

Does the firm or any affiliate ever deduct its fees directly from any client accounts?

No

What is the firm’s liability/indemnity standard? That which is permitted by state law.

Does the firm make use of “soft dollars”? No

Please attach copies of the following documents and forms where applicable: Management/Advisory Agreement---------------------------NACorporate brochure, and other marketing literature:----See attachments: Integra Presentation & Integra Presentation 2.4 Disclosure Document-------------------------------------------See attachments: IF_LP_PPM and II_Ltd_PPM Newsletters or other publications.---------------------------See attachments Oct05 and Nov05 Client Reports----------------------------------------------------See attachment: Client Report Example 1& 2 Client References----------------------------------------------- See attachment: Client Referrals All accounts AUM ---------------------------------------------- See attachment: All accts_AUM Compliance Manual.-------------------------------------------- NA

Please state the name and title of the officer at your firm who has prepared and reviewed this questionnaire.

Signature: Name: Keith Lasota Date: 12-1-2005Position: Vice President

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