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4. Sales Commissions and Fees
a. Currency Fund
LTD created the "InverWorld Currency Fund" (Currency Fund)
to offer its clients access to the international currency market.
Clients purchased units in the Currency Fund in $1,000 increments
with a $20,000 minimum. LTD deposited the funds in a foreign
bank, which decided in which currencies the funds that LTD placed
with it would be invested.
The client's yield on the fund was based on any increase in
the value per share over the term of the investment. No periodic
dividend or interest was paid. LTD's role was to act as
"Manager" of the Currency Fund. LTD and INC received clients’
funds, transferred them for management by the European banks, and
issued a periodic statement of the client's allocated share of
the Fund, using values determined by the fund managers in Europe.
Funds that were "placed" by LTD’s clients in the Currency Fund
were not always placed by LTD in foreign institutions. During
the taxable year ended June 30, 1988, funds in the Currency Fund
were invested in cash accounts, money market accounts, and
investment accounts managed by Merrill Lynch and Lombard Odier &
Lir (Lombard). During the taxable year ended June 30, 1989,
funds in the Currency Fund were invested in Euro-deposits, Pace
investments, loans, and investment accounts managed by Bear
Stearns, Merrill Lynch, and Lombard.
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