As you are no doubt aware, on October 10, Refco Inc. (“Refco”) publicly announced a fraud within the company involving an undisclosed affiliate transaction. Last week, Refco filed for bankruptcy. Below is a summary of the exposure to Refco of the CSFB/Tremont Investable Indices managed by CSFB/Tremont Index LLC. In summary, we believe the overall impact on our portfolios is expected to be minor.

1.   Service providers to HFIG vehicles

• Refco is not used as a service provider for any CSFB/Tremont Index LLC portfolio.

2.   Prime broker / custodian relationships

• To date, it has been determined that only one of our managers has material exposure to Refco Capital Markets Ltd. (“RCML”), a US regulated broker-dealer, as their prime broker (the “Fund”). We have been in contact with that Fund who has informed us that a significant portion of their assets was held with RCML. The bankruptcy papers that were filed by RCML list this fund as a general creditor. The manager of the Fund believes that the Fund's assets should be given priority over the other creditor's claims, and is utilizing legal means to actively pursue its case.  We anticipate that this situation will evolve over the course of the bankruptcy proceedings; however, it is currently unclear as to the amount or timing of any release of assets.  We will continue to monitor and review the situation as it evolves and will mark this Fund's Net Asset Value based on all relevant and available information.  This Fund currently represents approximately 0.7% of the Investable Index and 13.1% of Sector Invest Emerging Markets Index. Additional conversations with this fund about its situation and appropriate value are ongoing.

3.   Securities Exposures

• Several of our managers held long positions in Refco equity (mostly from IPO allocations). Some bond positions were also held. Only one of our Event Driven managers has reported a material exposure/loss to Refco securities, which reported losing approximately 1.5% last week largely due to the decline in value of Refco equity, most of which is now sold. Some of our other managers have reported small equity positions but the loss from these positions appears to be immaterial in terms of the underlying Event Driven Fund’s NAV performance.
• Not surprisingly, some of our Event Driven managers are now looking to purchase distressed Refco loans or bonds. We view these activities as business as usual for such managers and we hope they profit accordingly.

4.   OTC Derivatives Exposures

• We are currently unaware of any material OTC derivatives exposure in any of the Index Portfolio funds.

We will continue to update you on any new developments with respect to Refco.

Oliver Schupp

President, CSFB/Tremont Index LLC